UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2016
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
CU BANCORP
(Exact name of registrant as specified in its charter)
Commission File Number 001-35683
California | 90-0779788 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
818 West 7th Street, Suite 220 Los Angeles, California |
90017 | |
(Address of principal executive offices) | (Zip Code) |
(213) 430-7000
(Registrants telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer | ¨ | Accelerated Filer | x | |||
Non Accelerated Filer | ¨ | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of August 2, 2016 the number of shares outstanding of the registrants no par value Common Stock was 17,671,272.
CU BANCORP
June 30, 2016 FORM 10-Q
PART I. FINANCIAL INFORMATION |
| |||||
ITEM 1. |
Financial Statements |
| ||||
Consolidated Balance Sheets |
||||||
June 30, 2016 (Unaudited) and December 31, 2015 |
2 | |||||
Consolidated Statements of Income |
||||||
Three and Six Months Ended June 30, 2016 and 2015 (Unaudited) |
3 | |||||
Consolidated Statements of Comprehensive Income |
||||||
Three and Six Months Ended June 30, 2016 and 2015 (Unaudited) |
4 | |||||
Consolidated Statements of Changes in Shareholders Equity |
||||||
Six Months Ended June 30, 2016 (Unaudited) |
5 | |||||
Consolidated Statements of Cash Flows |
||||||
Six Months Ended June 30, 2016 and 2015 (Unaudited) |
6 | |||||
Notes to the Consolidated Financial Statements (Unaudited) |
8 | |||||
ITEM 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
40 | ||||
Overview |
42 | |||||
Results of Operations |
46 | |||||
Financial Condition |
56 | |||||
Liquidity |
61 | |||||
Dividends |
63 | |||||
Regulatory Matters |
64 | |||||
ITEM 3. |
Quantitative and Qualitative Disclosures About Market Risk |
67 | ||||
ITEM 4. |
Controls and Procedures |
69 | ||||
PART II. OTHER INFORMATION |
| |||||
ITEM 1. |
Legal Proceedings |
70 | ||||
ITEM 1A. |
Risk Factors |
70 | ||||
ITEM 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
70 | ||||
ITEM 3. |
Defaults Upon Senior Securities |
70 | ||||
ITEM 4. |
Mine Safety Disclosures |
70 | ||||
ITEM 5. |
Other Information |
70 | ||||
ITEM 6. |
Exhibits |
70 | ||||
Signatures |
71 |
Page 1 of 71
CU BANCORP
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
June 30, 2016 |
December 31, 2015 |
|||||||
(Unaudited) | (Audited) | |||||||
ASSETS |
||||||||
Cash and due from banks |
$ | 42,659 | $ | 50,960 | ||||
Interest earning deposits in other financial institutions |
194,681 | 171,103 | ||||||
|
|
|
|
|||||
Total cash and cash equivalents |
237,340 | 222,063 | ||||||
Certificates of deposit in other financial institutions |
54,410 | 56,860 | ||||||
Investment securities available-for-sale, at fair value |
334,113 | 315,785 | ||||||
Investment securities held-to-maturity, at amortized cost |
40,595 | 42,036 | ||||||
|
|
|
|
|||||
Total investment securities |
374,708 | 357,821 | ||||||
Loans |
1,951,111 | 1,833,163 | ||||||
Allowance for loan loss |
(18,476 | ) | (15,682 | ) | ||||
|
|
|
|
|||||
Net loans |
1,932,635 | 1,817,481 | ||||||
Premises and equipment, net |
4,647 | 5,139 | ||||||
Deferred tax assets, net |
14,455 | 17,033 | ||||||
Other real estate owned, net |
| 325 | ||||||
Goodwill |
64,603 | 64,603 | ||||||
Core deposit and leasehold right intangibles, net |
6,932 | 7,671 | ||||||
Bank owned life insurance |
50,561 | 49,912 | ||||||
Accrued interest receivable and other assets |
36,142 | 35,734 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 2,776,433 | $ | 2,634,642 | ||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
LIABILITIES |
||||||||
Non-interest bearing demand deposits |
$ | 1,337,550 | $ | 1,288,085 | ||||
Interest bearing transaction accounts |
259,103 | 261,123 | ||||||
Money market and savings deposits |
747,490 | 679,081 | ||||||
Certificates of deposit |
51,598 | 58,502 | ||||||
|
|
|
|
|||||
Total deposits |
2,395,741 | 2,286,791 | ||||||
Securities sold under agreements to repurchase |
25,782 | 14,360 | ||||||
Subordinated debentures, net |
9,777 | 9,697 | ||||||
Accrued interest payable and other liabilities |
18,674 | 16,987 | ||||||
|
|
|
|
|||||
Total Liabilities |
2,449,974 | 2,327,835 | ||||||
|
|
|
|
|||||
Commitments and Contingencies (Note 13) |
||||||||
SHAREHOLDERS EQUITY |
||||||||
Serial Preferred Stock authorized, 50,000,000 shares: Series A, non-cumulative perpetual preferred stock, $1,000 per share liquidation preference, 16,400 shares authorized, 16,400 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively |
17,086 | 16,995 | ||||||
Common stock authorized, 75,000,000 shares no par value, 17,668,381 and 17,175,389 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively |
234,141 | 230,688 | ||||||
Additional paid-in capital |
25,209 | 23,017 | ||||||
Retained earnings |
49,245 | 36,923 | ||||||
Accumulated other comprehensive income (loss) |
778 | (816 | ) | |||||
|
|
|
|
|||||
Total Shareholders Equity |
326,459 | 306,807 | ||||||
|
|
|
|
|||||
Total Liabilities and Shareholders Equity |
$ | 2,776,433 | $ | 2,634,642 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Page 2 of 71
CU BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Interest Income |
||||||||||||||||
Interest and fees on loans |
$ | 23,165 | $ | 20,644 | $ | 45,743 | $ | 40,550 | ||||||||
Interest on investment securities |
1,415 | 1,051 | 2,647 | 2,231 | ||||||||||||
Interest on interest bearing deposits in other financial institutions |
417 | 246 | 856 | 448 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Interest Income |
24,997 | 21,941 | 49,246 | 43,229 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Interest Expense |
||||||||||||||||
Interest on interest bearing transaction accounts |
99 | 98 | 198 | 198 | ||||||||||||
Interest on money market and savings deposits |
484 | 408 | 995 | 791 | ||||||||||||
Interest on certificates of deposit |
31 | 46 | 64 | 97 | ||||||||||||
Interest on securities sold under agreements to repurchase |
14 | 7 | 25 | 12 | ||||||||||||
Interest on subordinated debentures |
120 | 109 | 237 | 216 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Interest Expense |
748 | 668 | 1,519 | 1,314 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Interest Income |
24,249 | 21,273 | 47,727 | 41,915 | ||||||||||||
Provision for loan losses |
1,063 | 683 | 1,685 | 2,126 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Interest Income After Provision For Loan Losses |
23,186 | 20,590 | 46,042 | 39,789 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-Interest Income |
||||||||||||||||
Gain on sale of SBA loans, net |
485 | 215 | 1,039 | 638 | ||||||||||||
Deposit account service charge income |
1,222 | 1,153 | 2,411 | 2,294 | ||||||||||||
Other non-interest income |
1,268 | 1,727 | 2,345 | 2,771 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Non-Interest Income |
2,975 | 3,095 | 5,795 | 5,703 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-Interest Expense |
||||||||||||||||
Salaries and employee benefits (includes stock based compensation expense of $891 and $807 for the three months, and $1,725 and $1,320 for the six months ended June 30, 2016 and 2015, respectively) |
9,921 | 9,280 | 20,074 | 18,431 | ||||||||||||
Occupancy |
1,439 | 1,415 | 2,875 | 2,835 | ||||||||||||
Data processing |
635 | 635 | 1,253 | 1,276 | ||||||||||||
Legal and professional |
651 | 656 | 1,126 | 1,502 | ||||||||||||
FDIC deposit assessment |
359 | 351 | 709 | 684 | ||||||||||||
Merger expenses |
| 112 | | 352 | ||||||||||||
OREO loss and expenses |
4 | 20 | 83 | 26 | ||||||||||||
Office services expenses |
320 | 407 | 723 | 821 | ||||||||||||
Other operating expenses |
1,760 | 2,036 | 3,433 | 3,898 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Non-Interest Expense |
15,089 | 14,912 | 30,276 | 29,825 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Income Before Provision for Income Tax Expense |
11,072 | 8,773 | 21,561 | 15,667 | ||||||||||||
Provision for income tax expense |
4,427 | 3,506 | 8,629 | 6,201 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Income |
6,645 | 5,267 | 12,932 | 9,466 | ||||||||||||
Preferred stock dividends and discount accretion |
307 | 312 | 610 | 584 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Income available to common shareholders |
$ | 6,338 | $ | 4,955 | $ | 12,322 | $ | 8,882 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings Per Share |
||||||||||||||||
Basic earnings per share |
$ | 0.37 | $ | 0.30 | $ | 0.72 | $ | 0.54 | ||||||||
Diluted earnings per share |
$ | 0.36 | $ | 0.29 | $ | 0.71 | $ | 0.53 |
The accompanying notes are an integral part of these consolidated financial statements.
Page 3 of 71
CU BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net Income |
$ | 6,645 | $ | 5,267 | $ | 12,932 | $ | 9,466 | ||||||||
Other Comprehensive Income, net of tax: |
||||||||||||||||
Net change in unrealized gain (loss) on available-for-sale investment securities, net of tax |
825 | (749 | ) | 1,594 | (238 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other Comprehensive Income (Loss) |
825 | (749 | ) | 1,594 | (238 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive Income |
$ | 7,470 | $ | 4,518 | $ | 14,526 | $ | 9,228 | ||||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Page 4 of 71
CU BANCORP
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the Six Months Ended June 30, 2016
(Unaudited)
(Dollars in thousands)
Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||
Issued and Outstanding Shares |
Amount | Issued and Outstanding Shares |
Amount | Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Total Shareholders Equity |
|||||||||||||||||||||||||
Balance at December 31, 2015 |
16,400 | $ | 16,995 | 17,175,389 | $ | 230,688 | $ | 23,017 | $ | 36,923 | $ | (816 | ) | $ | 306,807 | |||||||||||||||||
Net issuance of restricted stock |
| | 109,809 | | | | | | ||||||||||||||||||||||||
Exercise of stock options |
| | 396,964 | 3,453 | | | | 3,453 | ||||||||||||||||||||||||
Stock based compensation expense |
| | | | 1,725 | | | 1,725 | ||||||||||||||||||||||||
Restricted stock repurchase |
| | (13,781 | ) | | (305 | ) | | | (305 | ) | |||||||||||||||||||||
Excess tax benefit stock based compensation |
| | | | 772 | | | 772 | ||||||||||||||||||||||||
Preferred stock dividends and discount accretion |
| 91 | | | | (610 | ) | | (519 | ) | ||||||||||||||||||||||
Net income |
| | | | | 12,932 | | 12,932 | ||||||||||||||||||||||||
Other comprehensive income |
| | | | | | 1,594 | 1,594 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at June 30, 2016 |
16,400 | $ | 17,086 | 17,668,381 | $ | 234,141 | $ | 25,209 | $ | 49,245 | $ | 778 | $ | 326,459 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Page 5 of 71
CU BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30, |
||||||||
2016 | 2015 | |||||||
Cash flows from operating activities: |
||||||||
Net income: |
$ | 12,932 | $ | 9,466 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Provision for loan losses |
1,685 | 2,126 | ||||||
Provision for unfunded loan commitments |
117 | 87 | ||||||
Stock based compensation expense |
1,725 | 1,320 | ||||||
Depreciation |
717 | 702 | ||||||
Net accretion of discounts/premiums for loans acquired and deferred loan fees/costs |
(4,392 | ) | (4,121 | ) | ||||
Net amortization from investment securities |
1,991 | 1,536 | ||||||
Increase in bank owned life insurance |
(649 | ) | (613 | ) | ||||
Amortization of core deposit intangibles |
642 | 842 | ||||||
Amortization of time deposit premium |
(2 | ) | (10 | ) | ||||
Net (accretion) amortization of leasehold right intangible asset and liabilities |
(57 | ) | 7 | |||||
Accretion of subordinated debenture discount |
80 | 80 | ||||||
Loss on sale of OREO |
14 | | ||||||
Gain on sale of SBA loans, net |
(1,039 | ) | (638 | ) | ||||
Decrease in deferred tax assets |
1,421 | 435 | ||||||
Decrease (increase) in accrued interest receivable and other assets |
364 | (664 | ) | |||||
Increase (decrease) in accrued interest payable and other liabilities |
1,135 | (395 | ) | |||||
Net excess in tax benefit on stock compensation |
(772 | ) | (451 | ) | ||||
Increase in fair value of derivative swap liability |
588 | 213 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities |
16,500 | 9,922 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Purchases of investment securities |
(51,924 | ) | (9,112 | ) | ||||
Proceeds from repayment and maturities from investment securities |
35,799 | 19,780 | ||||||
Loans originated, net of principal payments |
(111,409 | ) | (84,134 | ) | ||||
Purchases of premises and equipment |
(225 | ) | (515 | ) | ||||
Proceeds from sale of OREO |
311 | | ||||||
Net decrease in certificates of deposit in other financial institutions |
2,450 | 13,839 | ||||||
Purchase of bank owned life insurance |
| (10,000 | ) | |||||
|
|
|
|
|||||
Net cash used in investing activities |
(124,998 | ) | (70,142 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Net increase in Non-interest bearing demand deposits |
49,465 | 102,090 | ||||||
Net (decrease) increase in Interest bearing transaction accounts |
(2,020 | ) | 45,455 | |||||
Net increase in Money market and savings deposits |
68,409 | 47,544 | ||||||
Net decrease in Certificates of deposit |
(6,902 | ) | (5,254 | ) | ||||
Net increase in Securities sold under agreements to repurchase |
11,422 | 5,013 | ||||||
Net proceeds from stock options exercised |
3,453 | 1,020 | ||||||
Restricted stock repurchase |
(305 | ) | (504 | ) | ||||
Dividends paid on preferred stock |
(519 | ) | (101 | ) | ||||
Net excess in tax benefit on stock compensation |
772 | 451 | ||||||
|
|
|
|
|||||
Net cash provided by financing activities |
123,775 | 195,714 | ||||||
|
|
|
|
|||||
Net increase in cash and cash equivalents |
15,277 | 135,494 | ||||||
Cash and cash equivalents, beginning of period |
222,063 | 132,586 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of period |
$ | 237,340 | $ | 268,080 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
Page 6 of 71
CU BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30, |
||||||||
2016 | 2015 | |||||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid for interest |
$ | 1,574 | $ | 1,348 | ||||
Net cash paid for taxes |
$ | 2,347 | $ | 4,060 | ||||
Supplemental disclosures of non-cash investing activities: |
||||||||
Net change in unrealized gain (loss) on available-for-sale investment securities, net of tax |
$ | 1,594 | $ | (238 | ) | |||
Loans transferred to other real estate owned |
$ | | $ | 850 |
Page 7 of 71
CU BANCORP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
(Unaudited)
Note 1 - Basis of Financial Statement Presentation
CU Bancorp (the Company) is a bank holding company whose operating subsidiary is California United Bank. As a bank holding company, CU Bancorp is subject to regulation of the Federal Reserve Board (FRB). The term Company, as used throughout this document, refers to the consolidated financial statements of CU Bancorp and California United Bank.
California United Bank (the Bank) is a full-service commercial business bank offering a broad range of banking products and services including: deposit services, lending and cash management to small and medium-sized businesses, to non-profit organizations, to business principals and entrepreneurs, to the professional community, including attorneys, certified public accountants, financial advisors, healthcare providers and investors. The Bank opened for business in 2005. Its current headquarters office is located in Los Angeles, California. As a state chartered non-member bank, the Bank is subject to regulation by the California Department of Business Oversight (DBO) and the Federal Deposit Insurance Corporation (FDIC). The deposits of the Bank are insured by the FDIC to the maximum amount allowed by law.
The consolidated financial statements include the accounts of the Company and the Bank. Significant intercompany items have been eliminated in consolidation. The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).
CU Bancorp is the common shareholder of Premier Commercial Statutory Trust I, Premier Commercial Statutory Trust II, and Premier Commercial Statutory Trust III, entities which were acquired in the merger with Premier Commercial Bancorp (PC Bancorp). These trusts were established for the sole purpose of issuing trust preferred securities and do not meet the criteria for consolidation. For more detail, see Note 8 Borrowings and Subordinated Debentures.
Certain information and footnote disclosures presented in the annual consolidated financial statements are not included in the interim consolidated financial statements. Accordingly, the accompanying unaudited interim consolidated financial statements should be read in conjunction with the 2015 Annual Report on Form 10-K. In the opinion of management, the accompanying interim consolidated financial statements contain all necessary adjustments of a normal recurring nature, to present fairly the consolidated financial position of the Company and the results of its operations for the interim periods presented.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In addition, these accounting principles require the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements.
Estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan loss and various assets and liabilities measured at fair value. While management uses the most current available information to recognize losses on loans, future additions to the allowance for loan loss may be necessary based on, among other factors, changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Companys allowance for loan loss. Regulatory agencies may require the Company to recognize changes to the allowance for loan loss based on their judgment about information available to them at the time of their examination.
Page 8 of 71
Business Segments
The Company is organized and operates as a single reporting segment, principally engaged in commercial business banking. The Company conducts its lending and deposit operations through nine full service branch offices located in Los Angeles, Orange, Ventura and San Bernardino counties.
Note 2 - Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), which replaced existing revenue recognition guidance for contracts to provide goods or services to customers and amended existing guidance related to recognition of gains and losses on the sale of certain nonfinancial assets such as real estate. ASU 2014-09 established a principles-based approach to recognizing revenue that applies to all contracts other than those covered by other authoritative GAAP guidance. Quantitative and qualitative disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows were also required. ASU 2014-09 was to be effective for interim and annual periods beginning after December 15, 2016 and was to be applied on either a modified retrospective or full retrospective basis. In August 2015, the FASB issued ASU 2015-14 which defers the original effective date for all entities by one year. Public business entities should apply the guidance in ASU 2015-14 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Financial InstrumentsOverall: Recognition and Measurement of Financial Assets and Financial Liabilities. Changes to the current GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged. The classification and measurement guidance will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities can early adopt the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. Early adoption of these provisions can be elected for all financial statements of fiscal years and interim periods that have not yet been issued or that have not yet been made available for issuance. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. By definition, a short-term lease is one in which: (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect an accounting policy by class of underlying asset under which right-of-use assets and lease liabilities are not recognized and lease payments are generally recognized as expense over the lease term on a straight-line basis. This change will result in lessees recognizing right-of-use assets and lease liabilities for most leases currently accounted for as operating leases under the legacy lease accounting guidance. Examples of changes in the new guidance affecting both lessees and lessors include: (a) defining initial direct costs to only include those incremental costs that would not have been incurred if the lease had not been entered into, (b) requiring related party leases to be accounted for based on their legally enforceable terms and conditions, (c) eliminating the additional requirements that must be applied today to leases involving real estate and (d) revising the circumstances under which the transfer contract in a sale-leaseback transaction should be accounted for as the sale of an asset by the seller-lessee and the purchase of an asset by the buyer-lessor. In addition, both lessees and lessors are subject to new disclosure requirements. ASU 2016-02 is effective for public entities for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to reduce the complexity of certain aspects of the accounting for employee share-based payment transactions. As a result of this ASU, changes applicable to all entities include: 1) The threshold to qualify for equity classification would permit withholding up to the maximum individual statutory tax rate in the applicable jurisdictions. Also, the ASU provides that cash paid by an employer when directly withholding shares for tax-withholding purposes would be classified as a financing activity on the statement of cash flows; 2) An entity would be allowed to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur; 3) All excess tax benefits and tax deficiencies would be recognized as income tax expense or
Page 9 of 71
benefit in the income statement. An entity also would recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Further, excess tax benefits would not be separated from other income tax cash flows and thus would be classified along with other cash flows as an operating activity. ASU 2016-09 is effective for public entities for interim and annual periods beginning after December 15, 2016. The Company does not expect a material impact of this ASU on its consolidated financial statements.
On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. Current expected credit losses (CECL) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees, and net investments in leases, as well as reinsurance and trade receivables. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses (ECL) should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating ECL. ASU 2016-13 is effective for public entities for interim and annual periods beginning after December 15, 2019. Early application of the guidance will be permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
Page 10 of 71
Note 3 - Computation of Book Value and Tangible Book Value per Common Share
Book value per common share was calculated by dividing total shareholders equity less preferred stock, by the number of common shares issued and outstanding. Tangible book value per common share was calculated by dividing tangible common equity, by the number of common shares issued and outstanding. The tables below present the computation of book value and tangible book value per common share as of the dates indicated (dollars in thousands, except share and per share data):
June 30, 2016 |
December 31, 2015 |
|||||||
Total Shareholders Equity |
$ | 326,459 | $ | 306,807 | ||||
Less: Preferred stock |
17,086 | 16,995 | ||||||
Less: Goodwill |
64,603 | 64,603 | ||||||
Less: Core deposit and leasehold right intangibles, net |
6,932 | 7,671 | ||||||
|
|
|
|
|||||
Tangible common equity |
$ | 237,838 | $ | 217,538 | ||||
|
|
|
|
|||||
Common shares issued and outstanding |
17,668,381 | 17,175,389 | ||||||
Book value per common share |
$ | 17.51 | $ | 16.87 | ||||
|
|
|
|
|||||
Tangible book value per common share |
$ | 13.46 | $ | 12.67 | ||||
|
|
|
|
Note 4 - Computation of Earnings per Common Share
Basic and diluted earnings per common share were determined by dividing net income available to common shareholders by the applicable basic and diluted weighted average common shares outstanding. The following table shows weighted average basic common shares outstanding, potential dilutive shares related to stock options, unvested restricted stock, and weighted average diluted shares for the periods indicated (dollars in thousands, except share and per share data):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net Income |
$ | 6,645 | $ | 5,267 | $ | 12,932 | $ | 9,466 | ||||||||
Less: Preferred stock dividends and discount accretion |
307 | 312 | 610 | 584 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Income available to common shareholders |
$ | 6,338 | $ | 4,955 | $ | 12,322 | $ | 8,882 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average basic common shares outstanding |
17,210,433 | 16,481,527 | 17,125,930 | 16,445,118 | ||||||||||||
Dilutive effect of potential common share issuances from stock options and restricted stock |
250,774 | 442,684 | 274,960 | 441,102 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average diluted common shares outstanding |
17,461,207 | 16,924,211 | 17,400,890 | 16,886,220 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income per common share |
||||||||||||||||
Basic |
$ | 0.37 | $ | 0.30 | $ | 0.72 | $ | 0.54 | ||||||||
Diluted |
$ | 0.36 | $ | 0.29 | $ | 0.71 | $ | 0.53 | ||||||||
Anti-dilutive shares not included in the calculation of diluted earnings per share |
| 64,500 | 1,500 | 64,889 |
Page 11 of 71
Note 5 - Investment Securities
The investment securities portfolio has been classified into two categories: available-for-sale (AFS) and held-to-maturity (HTM).
The following tables present the amortized cost, gross unrealized gains and losses, and fair values of investment securities by major category as of the dates indicated (dollars in thousands):
Gross Unrealized | ||||||||||||||||
June 30, 2016 |
Amortized Cost |
Gains | Losses | Fair Market Value |
||||||||||||
Available-for-sale: |
||||||||||||||||
U.S. Govt Agency and Sponsored Agency - Note Securities |
$ | 1,006 | $ | 2 | $ | | $ | 1,008 | ||||||||
U.S. Govt Agency - SBA Securities |
94,655 | 616 | 308 | 94,963 | ||||||||||||
U.S. Govt Agency - GNMA Mortgage-Backed Securities |
27,416 | 191 | 100 | 27,507 | ||||||||||||
U.S. Govt Sponsored Agency - CMO & Mortgage-Backed Securities |
130,708 | 1,305 | 208 | 131,805 | ||||||||||||
Corporate Securities |
506 | 1 | | 507 | ||||||||||||
Asset Backed Securities |
7,498 | | 282 | 7,216 | ||||||||||||
U.S. Treasury Notes |
70,981 | 126 | | 71,107 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total available-for-sale |
332,770 | 2,241 | 898 | 334,113 | ||||||||||||
Held-to-maturity: |
||||||||||||||||
Municipal Securities |
40,595 | 855 | | 41,450 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total held-to-maturity |
40,595 | 855 | | 41,450 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total investment securities |
$ | 373,365 | $ | 3,096 | $ | 898 | $ | 375,563 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross Unrealized | ||||||||||||||||
December 31, 2015 |
Amortized Cost |
Gains | Losses | Fair Market Value |
||||||||||||
Available-for-sale: |
||||||||||||||||
U.S. Govt Agency and Sponsored Agency - Note Securities |
$ | 1,014 | $ | | $ | | $ | 1,014 | ||||||||
U.S. Govt Agency - SBA Securities |
93,674 | 399 | 583 | 93,490 | ||||||||||||
U.S. Govt Agency - GNMA Mortgage-Backed Securities |
30,916 | 202 | 418 | 30,700 | ||||||||||||
U.S. Govt Sponsored Agency - CMO & Mortgage-Backed Securities |
97,693 | 250 | 789 | 97,154 | ||||||||||||
Corporate Securities |
4,016 | 7 | | 4,023 | ||||||||||||
Municipal Securities |
1,010 | 1 | | 1,011 | ||||||||||||
Asset Backed Securities |
7,890 | | 243 | 7,647 | ||||||||||||
U.S. Treasury Notes |
80,981 | | 235 | 80,746 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total available-for-sale |
317,194 | 859 | 2,268 | 315,785 | ||||||||||||
Held-to-maturity: |
||||||||||||||||
Municipal Securities |
42,036 | 335 | 32 | 42,339 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total held-to-maturity |
42,036 | 335 | 32 | 42,339 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total investment securities |
$ | 359,230 | $ | 1,194 | $ | 2,300 | $ | 358,124 | ||||||||
|
|
|
|
|
|
|
|
Page 12 of 71
The Companys investment securities portfolio at June 30, 2016 consists of A-rated or above investment-grade securities. At June 30, 2016 and December 31, 2015, securities with a market value of $194 million and $197 million, respectively, were pledged as collateral for securities sold under agreements to repurchase, public deposits, outstanding standby letters of credit, bankruptcy deposits, and other purposes as required by various statutes and agreements. See Note 8 Borrowings and Subordinated Debentures.
The following tables present the gross unrealized losses and fair values of AFS and HTM investment securities that were in unrealized loss positions, summarized and classified according to the duration of the loss period as of the dates indicated (dollars in thousands).
< 12 Continuous Months |
> 12 Continuous Months |
Total | ||||||||||||||||||||||
June 30, 2016 |
Fair Value |
Gross Unrealized Loss |
Fair Value |
Gross Unrealized Loss |
Fair Value |
Gross Unrealized Loss |
||||||||||||||||||
Available-for-sale investment securities: |
||||||||||||||||||||||||
U.S. Govt. Agency SBA Securities |
$ | 40,936 | $ | 264 | $ | 5,224 | $ | 44 | $ | 46,160 | $ | 308 | ||||||||||||
U.S. Govt. Agency GNMA Mortgage-Backed Securities |
6,384 | 22 | 10,496 | 78 | 16,880 | 100 | ||||||||||||||||||
U.S. Govt. Sponsored Agency CMO & Mortgage-Backed Securities |
15,004 | 75 | 14,240 | 133 | 29,244 | 208 | ||||||||||||||||||
Asset Backed Securities |
| | 7,216 | 282 | 7,216 | 282 | ||||||||||||||||||
U.S Treasury Notes |
| | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total available-for-sale investment securities |
$ | 62,324 | $ | 361 | $ | 37,176 | $ | 537 | $ | 99,500 | $ | 898 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
< 12 Continuous Months |
> 12 Continuous Months |
Total | ||||||||||||||||||||||
December 31, 2015 |
Fair Value |
Gross Unrealized Loss |
Fair Value |
Gross Unrealized Loss |
Fair Value |
Gross Unrealized Loss |
||||||||||||||||||
Available-for-sale investment securities: |
||||||||||||||||||||||||
U.S. Govt. Agency SBA Securities |
$ | 53,852 | $ | 428 | $ | 7,935 | $ | 154 | $ | 61,787 | $ | 582 | ||||||||||||
U.S. Govt. Agency GNMA Mortgage-Backed Securities |
5,417 | 47 | 14,296 | 371 | 19,713 | 418 | ||||||||||||||||||
U.S. Govt. Sponsored Agency CMO & Mortgage-Backed Securities |
67,475 | 564 | 10,024 | 225 | 77,499 | 789 | ||||||||||||||||||
Asset Backed Securities |
2,928 | 54 | 4,719 | 190 | 7,647 | 244 | ||||||||||||||||||
U.S Treasury Notes |
80,745 | 235 | | | 80,745 | 235 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total available-for-sale investment securities |
$ | 210,417 | $ | 1,328 | $ | 36,974 | $ | 940 | $ | 247,391 | $ | 2,268 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Held-to-maturity investment securities: |
||||||||||||||||||||||||
Municipal Securities |
$ | 5,669 | $ | 16 | $ | 2,392 | $ | 16 | $ | 8,061 | $ | 32 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total held-to-maturity investment securities |
$ | 5,669 | $ | 16 | $ | 2,392 | $ | 16 | $ | 8,061 | $ | 32 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized losses in each of the above categories are associated with the general fluctuation of market interest rates and are not an indication of any deterioration in the credit quality of the security issuers. Further, the Company does not intend to sell these securities and is not more-likely-than-not to be required to sell the securities before the recovery of its amortized cost basis. Accordingly, the Company had no securities that were classified as other-than-temporarily impaired at June 30, 2016 or December 31, 2015, and did not recognize any impairment charges in the consolidated statements of income.
Page 13 of 71
The amortized cost, fair value and the weighted average yield of debt securities at June 30, 2016, are reflected in the table below (dollars in thousands). Maturity categories are determined as follows:
| U.S. Govt. Agency, U.S. Treasury Notes and U.S. Govt. Sponsored Agency bonds and notes maturity date |
| U.S. Govt. Sponsored Agency CMO or Mortgage-Backed Securities, U.S. Govt. Agency GNMA Mortgage-Backed Securities, Asset Backed Securities and U.S. Gov. Agency SBA Securities estimated cash flow taking into account estimated pre-payment speeds |
| Investment grade Corporate Bonds and Municipal Securities the earlier of the maturity date or the expected call date |
Although, U.S. Government Agency and U.S. Government Sponsored Agency Mortgage-Backed and CMO securities have contractual maturities through 2048, the expected maturity will differ from the contractual maturities because borrowers or issuers may have the right to prepay such obligations without penalties.
June 30, 2016 | ||||||||||||
Maturities Schedule of Securities (Dollars in thousands) |
Amortized Cost |
Fair Value | Weighted Average Yield |
|||||||||
Available-for-sale: |
||||||||||||
Due through one year |
$ | 82,217 | $ | 82,409 | 1.20 | % | ||||||
Due after one year through five years |
146,221 | 146,553 | 1.45 | % | ||||||||
Due after five years through ten years |
75,381 | 75,909 | 1.99 | % | ||||||||
Due after ten years |
28,951 | 29,242 | 2.52 | % | ||||||||
|
|
|
|
|
|
|||||||
Total available-for-sale |
$ | 332,770 | $ | 334,113 | 1.60 | % | ||||||
Held-to-maturity: |
||||||||||||
Due through one year |
$ | 2,912 | $ | 2,926 | 1.53 | % | ||||||
Due after one year through five years |
33,817 | 34,494 | 1.55 | % | ||||||||
Due after five years through ten years |
3,866 | 4,030 | 1.93 | % | ||||||||
|
|
|
|
|
|
|||||||
Total held-to-maturity |
$ | 40,595 | $ | 41,450 | 1.59 | % | ||||||
|
|
|
|
|
|
|||||||
Total investment securities |
$ | 373,365 | $ | 375,563 | 1.60 | % | ||||||
|
|
|
|
|
|
The weighted average yields in the above table are based on effective rates of net book balances at the end of the period.
Investment in Federal Home Loan Bank (FHLB) Common Stock
The Companys investment in the common stock of the FHLB of San Francisco is carried at cost and was $9.2 million at June 30, 2016 and $8.0 million at December 31, 2015. The investment in FHLB stock is included in accrued interest receivable and other assets in the consolidated balance sheets and is periodically evaluated for impairment. Based on the capital adequacy of the FHLB and its overall financial condition, no impairment losses have been recorded.
See Note 8 - Borrowings and Subordinated Debentures for a detailed discussion regarding the Companys borrowings and the requirements to purchase FHLB common stock. See Note 5 - Investment Securities in the Companys Form 10-K for the year ended December 31, 2015 for additional discussion on the Companys evaluation and accounting for its investment in FHLB common stock.
Page 14 of 71
Note 6 - Loans
The following table presents the composition of the Companys loan portfolio as of the dates indicated (dollars in thousands):
June 30, 2016 |
December 31, 2015 |
|||||||
Commercial and Industrial Loans: |
$ | 522,074 | $ | 537,368 | ||||
Loans Secured by Real Estate: |
||||||||
Owner-Occupied Nonresidential Properties |
425,515 | 407,979 | ||||||
Other Nonresidential Properties |
582,204 | 533,168 | ||||||
Construction, Land Development and Other Land |
165,963 | 125,832 | ||||||
1-4 Family Residential Properties |
121,971 | 114,525 | ||||||
Multifamily Residential Properties |
86,942 | 71,179 | ||||||
|
|
|
|
|||||
Total Loans Secured by Real Estate |
1,382,595 | 1,252,683 | ||||||
|
|
|
|
|||||
Other Loans: |
46,442 | 43,112 | ||||||
|
|
|
|
|||||
Total Loans |
$ | 1,951,111 | $ | 1,833,163 | ||||
|
|
|
|
Loan balances in the table above include net deferred fees and net discounts for a total of $18 million and $22 million as of June 30, 2016 and December 31, 2015, respectively.
Small Business Administration Loans
Included in the loan portfolio is $32 million in loans that were originated under the guidelines of the Small Business Administration (SBA) program of which $6 million is guaranteed. The total portfolio of the SBA contractual loan balances serviced by the Company at June 30, 2016 was $113 million, of which $81 million has been sold.
At June 30, 2016, there were no loans classified as held for sale. At June 30, 2016, the balance of SBA 7a loans originated during the quarter is $728 thousand, of which $546 thousand is guaranteed by the SBA. The Company does not currently plan on selling these loans, but it may choose to do so in the future.
Page 15 of 71
Allowance for Loan Loss
The following table is a summary of the activity for the allowance for loan loss for the periods indicated (dollars in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Allowance for loan loss at beginning of period |
$ | 16,545 | $ | 13,247 | $ | 15,682 | $ | 12,610 | ||||||||
Provision for loan losses |
1,063 | 683 | 1,685 | 2,126 | ||||||||||||
Net (charge-offs) recoveries: |
||||||||||||||||
Charge-offs |
(20 | ) | (1 | ) | (20 | ) | (891 | ) | ||||||||
Recoveries |
888 | 195 | 1,129 | 279 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (charge-offs) recoveries |
868 | 194 | 1,109 | (612 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Allowance for loan loss at end of period |
$ | 18,476 | $ | 14,124 | $ | 18,476 | $ | 14,124 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (charge-offs) recoveries to average loans |
0.05 | % | 0.01 | % | 0.06 | % | (0.04 | )% |
June 30, 2016 |
December 31, 2015 |
|||||||
Allowance for loan loss to total loans |
0.95 | % | 0.82 | % | ||||
Allowance for loan loss to total loans accounted for at historical cost, which excludes loans and the related allowance for loans acquired through acquisition |
1.22 | % | 1.33 | % |
Page 16 of 71
The following tables present, by portfolio segment, the changes in the allowance for loan loss and the recorded investment in loans as of the dates and for the periods indicated (dollars in thousands):
Commercial and Industrial |
Construction, Land Development and Other Land |
Commercial and Other Real Estate |
Other | Total | ||||||||||||||||
Three Months Ended June 30, 2016 |
||||||||||||||||||||
Allowance for loan loss Beginning balance |
$ | 6,725 | $ | 2,711 | $ | 6,374 | $ | 735 | $ | 16,545 | ||||||||||
Provision for loan losses |
789 | 13 | 192 | 69 | 1,063 | |||||||||||||||
Net (charge-offs) recoveries: |
||||||||||||||||||||
Charge-offs |
(20 | ) | | | | (20 | ) | |||||||||||||
Recoveries |
887 | | 1 | | 888 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net recoveries |
867 | | 1 | | 868 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 8,381 | $ | 2,724 | $ | 6,567 | $ | 804 | $ | 18,476 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Three Months Ended June 30, 2015 |
||||||||||||||||||||
Allowance for loan loss Beginning balance |
$ | 5,737 | $ | 1,763 | $ | 5,439 | $ | 308 | $ | 13,247 | ||||||||||
Provision for loan losses |
314 | (156 | ) | 359 | 166 | 683 | ||||||||||||||
Net (charge-offs) recoveries: |
||||||||||||||||||||
Charge-offs |
(1 | ) | | | | (1 | ) | |||||||||||||
Recoveries |
194 | | 1 | | 195 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net recoveries |
193 | | 1 | | 194 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 6,244 | $ | 1,607 | $ | 5,799 | $ | 474 | $ | 14,124 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commercial and Industrial |
Construction, Land Development and Other Land |
Commercial and Other Real Estate |
Other | Total | ||||||||||||||||
Six Months Ended June 30, 2016 |
||||||||||||||||||||
Allowance for loan loss Beginning balance |
$ | 5,924 | $ | 2,076 | $ | 6,821 | $ | 861 | $ | 15,682 | ||||||||||
Provision for loan losses |
1,350 | 648 | (256 | ) | (57 | ) | 1,685 | |||||||||||||
Net (charge-offs) recoveries: |
||||||||||||||||||||
Charge-offs |
(20 | ) | | | | (20 | ) | |||||||||||||
Recoveries |
1,127 | | 2 | | 1,129 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net recoveries |
1,107 | | 2 | | 1,109 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 8,381 | $ | 2,724 | $ | 6,567 | $ | 804 | $ | 18,476 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Six Months Ended June 30, 2015 |
||||||||||||||||||||
Allowance for loan loss Beginning balance |
$ | 5,864 | $ | 1,684 | $ | 4,802 | $ | 260 | $ | 12,610 | ||||||||||
Provision for loan losses |
995 | (77 | ) | 994 | 214 | 2,126 | ||||||||||||||
Net (charge-offs) recoveries: |
||||||||||||||||||||
Charge-offs |
(891 | ) | | | | (891 | ) | |||||||||||||
Recoveries |
276 | | 3 | | 279 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net (charge-offs) recoveries |
(615 | ) | | 3 | | (612 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 6,244 | $ | 1,607 | $ | 5,799 | $ | 474 | $ | 14,124 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Page 17 of 71
The following tables present both the allowance for loan loss and the associated loan balance classified by loan portfolio segment and by credit evaluation methodology (dollars in thousands):
Commercial and Industrial |
Construction, Land Development and Other Land |
Commercial and Other Real Estate |
Other | Total | ||||||||||||||||
June 30, 2016 |
||||||||||||||||||||
Allowance for loan loss: |
||||||||||||||||||||
Individually evaluated for impairment |
$ | 641 | $ | | $ | | $ | | $ | 641 | ||||||||||
Collectively evaluated for impairment |
7,740 | 2,724 | 6,567 | 804 | 17,835 | |||||||||||||||
Purchased credit impaired (loans acquired with deteriorated credit quality) |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Allowance for Loan Loss |
$ | 8,381 | $ | 2,724 | $ | 6,567 | $ | 804 | $ | 18,476 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loans receivable: |
||||||||||||||||||||
Individually evaluated for impairment |
$ | 1,647 | $ | | $ | 256 | $ | | $ | 1,903 | ||||||||||
Collectively evaluated for impairment |
520,093 | 165,963 | 1,214,847 | 46,442 | 1,947,345 | |||||||||||||||
Purchased credit impaired (loans acquired with deteriorated credit quality) |
334 | | 1,529 | | 1,863 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Loans Receivable |
$ | 522,074 | $ | 165,963 | $ | 1,216,632 | $ | 46,442 | $ | 1,951,111 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commercial and Industrial |
Construction, Land Development and Other Land |
Commercial and Other Real Estate |
Other | Total | ||||||||||||||||
December 31, 2015 |
||||||||||||||||||||
Allowance for loan loss: |
||||||||||||||||||||
Individually evaluated for impairment |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Collectively evaluated for impairment |
5,924 | 2,076 | 6,821 | 861 | 15,682 | |||||||||||||||
Purchased credit impaired (loans acquired with deteriorated credit quality) |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Allowance for Loan Loss |
$ | 5,924 | $ | 2,076 | $ | 6,821 | $ | 861 | $ | 15,682 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loans receivable: |
||||||||||||||||||||
Individually evaluated for impairment |
$ | 558 | $ | | $ | 649 | $ | | $ | 1,207 | ||||||||||
Collectively evaluated for impairment |
536,333 | 125,832 | 1,124,667 | 43,112 | 1,829,944 | |||||||||||||||
Purchased credit impaired (loans acquired with deteriorated credit quality) |
477 | | 1,535 | | 2,012 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Loans Receivable |
$ | 537,368 | $ | 125,832 | $ | 1,126,851 | $ | 43,112 | $ | 1,833,163 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Page 18 of 71
Credit Quality of Loans
The Company utilizes an internal loan classification system as a means of reporting problem and potential problem loans. Under the Companys loan risk rating system, loans are classified as Pass, with problem and potential problem loans as Special Mention, Substandard, Doubtful and Loss. Individual loan risk ratings are updated continuously or at any time the situation warrants. In addition, management regularly reviews problem loans to determine whether any loan requires a classification change, in accordance with the Companys policy and applicable regulations. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The internal loan classification risk grading system is based on experiences with similarly graded loans.
The Companys internally assigned grades are as follows:
| Pass loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral. There are several different levels of Pass rated credits, including Watch which is considered a transitory grade for pass rated loans that require greater monitoring. Loans not meeting the criteria of special mention, substandard, doubtful or loss that have been analyzed individually as part of the above described process are considered to be pass-rated loans. |
| Special Mention loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected. Special Mention loans do not currently expose the Company to sufficient risk to warrant classification as a Substandard, Doubtful or Loss classification, but possess weaknesses that deserve managements close attention. |
| Substandard loans that have a well-defined weakness based on objective evidence and can be characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. |
| Doubtful loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. |
| Loss loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted. |
The following tables present the risk category of loans by class of loans based on the most recent internal loan classification as of the dates indicated (dollars in thousands):
Commercial and Industrial |
Construction, Land Development and Other Land |
Commercial and Other Real Estate |
Other | Total | ||||||||||||||||
June 30, 2016 |
||||||||||||||||||||
Pass |
$ | 460,117 | $ | 165,963 | $ | 1,190,670 | $ | 43,504 | $ | 1,860,254 | ||||||||||
Special Mention |
17,621 | | 4,001 | | 21,622 | |||||||||||||||
Substandard |
44,336 | | 21,961 | 2,938 | 69,235 | |||||||||||||||
Doubtful |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 522,074 | $ | 165,963 | $ | 1,216,632 | $ | 46,442 | $ | 1,951,111 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2015 |
||||||||||||||||||||
Pass |
$ | 503,006 | $ | 125,832 | $ | 1,101,548 | $ | 40,132 | $ | 1,770,518 | ||||||||||
Special Mention |
16,041 | | 6,494 | 43 | 22,578 | |||||||||||||||
Substandard |
18,321 | | 18,809 | 2,937 | 40,067 | |||||||||||||||
Doubtful |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 537,368 | $ | 125,832 | $ | 1,126,851 | $ | 43,112 | $ | 1,833,163 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Page 19 of 71
Aging Analysis of Past Due and Non-Accrual Loans
The following tables present an aging analysis of the recorded investment of past due loans and non-accrual loans as of the dates indicated (dollars in thousands):
31-60 Days Past Due |
61-90 Days Past Due |
Greater than 90 Days Past Due and Accruing |
Total Past Due and Accruing |
Total Non Accrual |
Current | Total Loans | ||||||||||||||||||||||
June 30, 2016 |
||||||||||||||||||||||||||||
Commercial and Industrial |
$ | 131 | $ | 7 | $ | | $ | 138 | $ | 1,979 | $ | 519,957 | $ | 522,074 | ||||||||||||||
Construction, Land Development and Other Land |
| | | | | 165,963 | 165,963 | |||||||||||||||||||||
Commercial and Other Real Estate |
| | | | 598 | 1,216,034 | 1,216,632 | |||||||||||||||||||||
Other |
| | | | | 46,442 | 46,442 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 131 | $ | 7 | $ | | $ | 138 | $ | 2,577 | $ | 1,948,396 | $ | 1,951,111 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
31-60 Days Past Due |
61-90 Days Past Due |
Greater than 90 Days Past Due and Accruing |
Total Past Due and Accruing |
Total Non Accrual |
Current | Total Loans | ||||||||||||||||||||||
December 31, 2015 |
||||||||||||||||||||||||||||
Commercial and Industrial |
$ | | $ | | $ | | $ | | $ | 1,032 | $ | 536,336 | $ | 537,368 | ||||||||||||||
Construction, Land Development and Other Land |
| | | | | 125,832 | 125,832 | |||||||||||||||||||||
Commercial and Other Real Estate |
| | | | 1,019 | 1,125,832 | 1,126,851 | |||||||||||||||||||||
Other |
| | | | | 43,112 | 43,112 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | | $ | | $ | | $ | | $ | 2,051 | $ | 1,831,112 | $ | 1,833,163 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 20 of 71
Impaired Loans
Impaired loans are evaluated by comparing the fair value of the collateral, if the loan is collateral dependent, and the present value of the expected future cash flows discounted at the loans effective interest rate, if the loan is not collateral dependent.
A valuation allowance is established for an impaired loan when the realizable value of the loan is less than the recorded investment. In certain cases, portions of impaired loans are charged-off to realizable value instead of establishing a valuation allowance and are included, when applicable, in the table below as impaired loans with no specific allowance recorded. The valuation allowance disclosed below is included in the allowance for loan loss reported in the consolidated balance sheets as of June 30, 2016 and December 31, 2015.
The following tables present, by loan portfolio segment, the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable, for the dates and periods indicated (dollars in thousands). This table excludes purchased credit impaired loans (loans acquired in acquisitions with deteriorated credit quality) of $1.9 million and $2.0 million at June 30, 2016 and December 31, 2015, respectively.
June 30, 2016 | December 31, 2015 | |||||||||||||||||||||||
Recorded Investment |
Unpaid Principal Balance |
Related Allowance |
Recorded Investment |
Unpaid Principal Balance |
Related Allowance |
|||||||||||||||||||
With no specific allowance recorded: |
||||||||||||||||||||||||
Commercial and Industrial |
$ | 700 | $ | 1,106 | $ | | $ | 558 | $ | 1,027 | $ | | ||||||||||||
Commercial and Other Real Estate |
256 | 289 | | 649 | 692 | | ||||||||||||||||||
With an allowance recorded: |
||||||||||||||||||||||||
Commercial and Industrial |
947 | 990 | 641 | | | | ||||||||||||||||||
Total |
||||||||||||||||||||||||
Commercial and Industrial |
1,647 | 2,096 | 641 | 558 | 1,027 | | ||||||||||||||||||
Commercial and Other Real Estate |
256 | 289 | | 649 | 692 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 1,903 | $ | 2,385 | $ | 641 | $ | 1,207 | $ | 1,719 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||||||
Average Recorded Investment |
Interest Income Recognized |
Average Recorded Investment |
Interest Income Recognized |
Average Recorded Investment |
Interest Income Recognized |
Average Recorded Investment |
Interest Income Recognized |
|||||||||||||||||||||||||
With no specific allowance recorded: |
||||||||||||||||||||||||||||||||
Commercial and Industrial |
$ | 545 | $ | | $ | 2,053 | $ | | $ | 400 | $ | | $ | 1,562 | $ | | ||||||||||||||||
Commercial and Other Real Estate |
256 | | 103 | | 461 | | 106 | | ||||||||||||||||||||||||
With a specific allowance recorded: |
||||||||||||||||||||||||||||||||
Commercial and Industrial |
316 | | 1,357 | | 158 | | 1,342 | | ||||||||||||||||||||||||
Commercial and Other Real Estate |
| | 619 | | | | 619 | | ||||||||||||||||||||||||
Total: |
||||||||||||||||||||||||||||||||
Commercial and Industrial |
861 | | 3,410 | | 558 | | 2,904 | | ||||||||||||||||||||||||
Commercial and Other Real Estate |
256 | | 722 | | 461 | | 725 | | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | 1,117 | $ | | $ | 4,132 | $ | | $ | 1,019 | $ | | $ | 3,629 | $ | | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 21 of 71
The following is a summary of additional information pertaining to impaired loans for the periods indicated (dollars in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Interest foregone on impaired loans |
$ | 22 | $ | 88 | $ | 46 | $ | 138 | ||||||||
Cash collections applied to reduce principal balance |
$ | 28 | $ | 19 | $ | 52 | $ | 19 | ||||||||
Interest income recognized on cash collections |
$ | | $ | | $ | | $ | |
Troubled Debt Restructuring
The Companys loan portfolio contains certain loans that have been modified in a Troubled Debt Restructuring (TDR), where economic concessions have been granted to borrowers experiencing financial difficulties. Loans are restructured in an effort to maximize collections. Economic concessions can include: reductions to the stated interest rate, payment extensions, principal forgiveness or other actions.
The modification process includes evaluation of impairment based on the present value of expected future cash flows, discounted at the effective interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the loan collateral. In these cases, management uses the current fair value of the collateral, less selling costs, to evaluate the loan for impairment. If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs and unamortized premium or discount) impairment is recognized through a specific allowance or a charge-off.
The following tables include the recorded investment and unpaid principal balances for troubled debt restructured loans at June 30, 2016 and December 31, 2015 (dollars in thousands). These tables include TDR loans that were purchased credit impaired (PCI). TDR loans that are non-PCI loans are included in the Impaired Loans tables above. As of June 30, 2016, there were two PCI loans that are considered to be TDR loans with a recorded investment of $127 thousand and unpaid principal balances of $301 thousand.
As of and for the Three Months Ended June 30, 2016 |
As of and for the Six Months Ended June 30, 2016 |
|||||||||||||||||||||||
Recorded Investment |
Unpaid Principal Balance |
Interest Income Recognized |
Recorded Investment |
Unpaid Principal Balance |
Interest Income Recognized |
|||||||||||||||||||
Commercial and Industrial |
$ | 377 | $ | 591 | $ | | $ | 377 | $ | 591 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 377 | $ | 591 | $ | | $ | 377 | $ | 591 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
As of and for the Three Months Ended June 30, 2015 |
As of and for the Six Months Ended June 30, 2015 |
|||||||||||||||||||||||
Recorded Investment |
Unpaid Principal Balance |
Interest Income Recognized |
Recorded Investment |
Unpaid Principal Balance |
Interest Income Recognized |
|||||||||||||||||||
Commercial and Industrial |
$ | 474 | $ | 678 | $ | | $ | 474 | $ | 678 | $ | | ||||||||||||
Commercial and Other Real Estate |
103 | 107 | | 103 | 107 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 577 | $ | 785 | $ | | $ | 577 | $ | 785 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Page 22 of 71
As of and for the Twelve Months Ended December 31, 2015 |
||||||||||||
Recorded Investment |
Unpaid Principal Balance |
Interest Income Recognized |
||||||||||
Commercial and Industrial |
$ | 627 | $ | 1,363 | $ | | ||||||
|
|
|
|
|
|
|||||||
Total |
$ | 627 | $ | 1,363 | $ | | ||||||
|
|
|
|
|
|
There were no loans modified or restructured during the three or six months ended June 30, 2016 or June 30, 2015.
There have been no payment defaults in the three or six months ended June 30, 2016 or June 30, 2015 subsequent to modification on troubled debt restructured loans that have been modified within the last twelve months.
Loans are restructured in an effort to maximize collections. Impairment analyses are performed on the Companys troubled debt restructured loans in conjunction with the normal allowance for loan loss process. The Companys troubled debt restructured loans are analyzed to ensure adequate cash flow or collateral supports the outstanding loan balance.
There were no commitments to lend additional funds to borrowers whose terms have been modified in troubled debt restructurings at June 30, 2016 or December 31, 2015.
Loans Acquired Through Acquisition
The following table reflects the accretable net discount for acquired loans for the periods indicated (dollars in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Balance, beginning of period |
$ | 13,470 | $ | 20,078 | $ | 14,610 | $ | 21,402 | ||||||||
Accretion, included in interest income |
(1,517 | ) | (1,461 | ) | (2,650 | ) | (2,677 | ) | ||||||||
Reclassifications to non-accretable yield |
(25 | ) | (362 | ) | (32 | ) | (470 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, end of period |
$ | 11,928 | $ | 18,255 | $ | 11,928 | $ | 18,255 | ||||||||
|
|
|
|
|
|
|
|
The above table reflects the fair value adjustment on the loans acquired from mergers that will be amortized to loan interest income based on the effective yield method over the remaining life of the loans. These amounts do not include the fair value adjustments on the purchased credit impaired loans acquired from mergers.
Purchased Credit Impaired Loans
PCI loans are acquired loans with evidence of deterioration of credit quality since origination and it is probable at the acquisition date, that the Company will not be able to collect all contractually required amounts.
When the timing and/or amounts of expected cash flows on such loans are not reasonably estimable, no interest is accreted and the loan is reported as a non-accrual loan; otherwise, if the timing and amounts of expected cash flows for PCI loans are reasonably estimable, then interest is accreted and the loans are reported as accruing loans.
The non-accretable difference represents the difference between the undiscounted contractual cash flows and the undiscounted expected cash flows, and also reflects the estimated credit losses in the acquired loan portfolio at the acquisition date and can fluctuate due to changes in expected cash flows during the life of the PCI loans.
Page 23 of 71
The following table reflects the outstanding balance and related carrying value of PCI loans as of the dates indicated (dollars in thousands):
June 30, 2016 | December 31, 2015 | |||||||||||||||
Unpaid Principal Balance |
Carrying Value |
Unpaid Principal Balance |
Carrying Value |
|||||||||||||
Commercial and Industrial |
$ | 657 | $ | 334 | $ | 2,331 | $ | 477 | ||||||||
Commercial and Other Real Estate |
2,216 | 1,529 | 2,250 | 1,535 | ||||||||||||
Other |
| | 61 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 2,873 | $ | 1,863 | $ | 4,642 | $ | 2,012 | ||||||||
|
|
|
|
|
|
|
|
The following table reflects the activities in the accretable net discount for PCI loans for the period indicated (dollars in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Balance, beginning of period |
$ | 226 | $ | 305 | $ | 246 | $ | 324 | ||||||||
Accretion, included in interest income |
(21 | ) | (19 | ) | (41 | ) | (38 | ) | ||||||||
Reclassifications from non-accretable yield |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, end of period |
$ | 205 | $ | 286 | $ | 205 | $ | 286 | ||||||||
|
|
|
|
|
|
|
|
Note 7 Qualified Affordable Housing Project Investments
The Companys investment in Qualified Affordable Housing Projects that generate Low Income Housing Tax Credits (LIHTC) was $3.5 million at June 30, 2016 and $3.7 million at December 31, 2015. The funding liability for the LIHTC at June 30, 2016 was $702 thousand compared to $1.1 million at December 31, 2015. The amount of tax credits and other tax benefits recognized was $143 thousand and $287 thousand for the three and six months ended June 30, 2016 and $145 thousand and $290 thousand for the three and six months ended June 30, 2015, respectively. Further, the amount of amortization expense included in the provision for income taxes was $112 thousand and $224 thousand for the three and six months ended June 30, 2016 and $114 thousand and $229 thousand for the three and six months ended June 30, 2015, respectively. These investments and related tax credits are described more fully in Note 11 Qualified Affordable Housing Project Investments in the Companys Form 10-K for the year ended December 31, 2015.
Page 24 of 71
Note 8 - Borrowings and Subordinated Debentures
Securities Sold Under Agreements to Repurchase
The Company enters into certain transactions, the legal form of which are sales of securities under agreements to repurchase (Repos) at a later date at a set price. Securities sold under agreements to repurchase generally mature within 1 day to 180 days from the issue date and are routinely renewed.
As discussed in Note 5 Investment Securities, the Company has pledged certain investments as collateral for these agreements. Securities with a fair value of $58 million and $47 million were pledged to secure the Repos at June 30, 2016 and December 31, 2015, respectively.
The tables below describe the terms and maturity of the Companys securities sold under agreements to repurchase as of the dates indicated (dollars in thousands):
June 30, 2016 | ||||||||||||||||
Date Issued |
Amount | Interest Rate | Original Term |
Maturity Date | ||||||||||||
June 30, 2016 |
$ | 25,782 | 0.11% 0.25 | % | 1 day | July 1, 2016 | ||||||||||
|
|
|||||||||||||||
Total |
$ | 25,782 | 0.23 | % | ||||||||||||
|
|
|||||||||||||||
December 31, 2015 | ||||||||||||||||
Date Issued |
Amount | Interest Rate | Original Term |
Maturity Date | ||||||||||||
December 31, 2015 |
$ | 14,360 | 0.08% 0.25 | % | 4 days | January 4, 2016 | ||||||||||
|
|
|||||||||||||||
Total |
$ | 14,360 | 0.19 | % | ||||||||||||
|
|
FHLB Borrowings
The Company maintains a secured credit facility with the FHLB, allowing the Company to borrow on an overnight and term basis. The Companys credit facility with the FHLB is $685 million, which represents approximately 25% of the Banks total assets, as reported by the Bank in its March 31, 2015 Federal Financial Institution Examination Council (FFIEC) Call Report.
As of June 30, 2016, the Company had $917 million of loan collateral pledged with the FHLB which provides $608 million in borrowing capacity. The Company has $18 million in investment securities pledged with the FHLB to support this credit facility. In addition, the Company must maintain an investment in the capital stock of the FHLB. Under the FHLB Act, the FHLB has a statutory lien on the FHLB capital stock that the Company owns and the FHLB capital stock serves as further collateral under the borrowing line.
The Company had no outstanding advances (borrowings) with the FHLB as of June 30, 2016 or December 31, 2015.
Subordinated Debentures
The following table summarizes the terms of each issuance of subordinated debentures outstanding as of June 30, 2016:
Series |
Amount (in thousands) |
Issuance Date |
Maturity Date |
Rate Index | Current Rate |
Next Reset Date |
||||||||||||||||||
Trust I |
$ | 6,186 | 12/10/04 | 03/15/35 | 3 month LIBOR + 2.05% | 2.703 | % | 09/15/16 | ||||||||||||||||
Trust II |
3,093 | 12/23/05 | 03/15/36 | 3 month LIBOR + 1.75% | 2.403 | % | 09/15/16 | |||||||||||||||||
Trust III |
3,093 | 06/30/06 | 09/18/36 | 3 month LIBOR + 1.85% | 2.503 | % | 09/15/16 | |||||||||||||||||
|
|
|||||||||||||||||||||||
Subtotal |
12,372 | |||||||||||||||||||||||
Unamortized fair value adjustment |
(2,595 | ) | ||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Net |
$ | 9,777 | ||||||||||||||||||||||
|
|
Page 25 of 71
The Company had an aggregate outstanding contractual balance of $12.4 million in subordinated debentures at June 30, 2016. These subordinated debentures were acquired as part of the PC Bancorp merger and were issued to trusts originally established by PC Bancorp, which in turn issued trust preferred securities. These subordinated debentures were issued in three separate series. Each issuance had a maturity of 30 years from their approximate date of issue. All three subordinated debentures are variable rate instruments that reprice quarterly based on the three month London Interbank Offered Rate (LIBOR) plus a margin (see tables above). All three subordinated debentures had their interest rates reset in June 2016 at the current three month LIBOR plus their index, and will continue to reprice quarterly through their maturity date. All three subordinated debentures are currently callable at par with no prepayment penalties.
Under Dodd Frank, trust preferred securities are excluded from Tier 1 capital, unless such securities were issued prior to May 19, 2010 by a bank holding company with less than $15 billion in assets. CU Bancorp assumed approximately $12.4 million of junior subordinated debt securities issued to various business trust subsidiaries of PC Bancorp and funded through the issuance of approximately $12.0 million of floating rate capital trust preferred securities. These junior subordinated debt securities were issued prior to May 19, 2010. Because CU Bancorp has less than $15 billion in assets, the trust preferred securities that CU Bancorp assumed from PC Bancorp continue to be included in Tier 1 capital, subject to a limit of 25% of Tier 1 capital elements.
Interest payments made by the Company on subordinated debentures are considered dividend payments under FRB regulations. Notification to the FRB is required prior to the Company declaring and paying a dividend during any period in which the Companys quarterly net earnings are insufficient to fund the dividend amount. This notification requirement is included in regulatory guidance regarding safety and soundness surrounding capital and includes other non-financial measures such as asset quality, financial condition, capital adequacy, liquidity, future earnings projections, capital planning and credit concentrations. Should the FRB object to the dividend payments, the Company would be precluded from paying interest on the subordinated debentures after giving notice within 15 days before the payment date. Payments would not commence until approval is received or the Company no longer needs to provide notice under applicable guidance. The Company has the right, assuming no default has occurred, to defer payments of interest on the subordinated debentures at any time for a period not to exceed 20 consecutive quarters. The Company has not deferred any interest payments.
Note 9 - Derivative Financial Instruments
The Company is exposed to certain risks relating to its ongoing business operations and utilizes interest rate swap agreements (swaps) as part of its asset/liability management strategy to help manage its interest rate risk position. The Company has two counterparty banks.
Derivative Financial Instruments Acquired from 1st Enterprise Bank
At June 30, 2016, the Company has twelve interest rate swap agreements with customers and twelve offsetting interest-rate swaps with a counterparty bank. The swap agreements are not designated as hedging instruments. The purpose of entering into offsetting derivatives not designated as a hedging instrument is to provide the Company a variable-rate loan receivable and provide the customer the financial effects of a fixed-rate loan without creating significant interest rate risk in the Companys earnings.
The structure of the swaps is as follows: The Company enters into a swap with its customers to allow them to convert variable rate loans to fixed rate loans, and at the same time, the Company enters into a swap with the counterparty bank to allow the Company to pass on the interest-rate risk associated with fixed rate loans. The net effect of the transaction allows the Company to receive interest on the loan from the customer at a variable rate based on LIBOR plus a spread. The changes in the fair value of the swaps primarily offset each other and therefore should not have a significant impact on the Companys results of operations. The interest rate swap derivatives acquired from 1st Enterprise Bank are subject to a master netting arrangement with one counterparty bank. None of the derivative assets and liabilities are offset in the balance sheet.
The Company believes the risk of loss associated with counterparty borrowers relating to interest rate swaps is mitigated as the loans with swaps are underwritten to take into account potential additional exposure, although there can be no assurances in this regard since the performance of the swaps is subject to market and counterparty risk. At June 30, 2016 and December 31, 2015, the total notional amount of the Companys swaps with the counterparty bank was $27 million and $28 million, respectively.
Page 26 of 71
The following tables present the fair values of the asset and liability of the Companys derivative instruments acquired from 1st Enterprise Bank as of the dates and periods indicated (dollars in thousands):
June 30, 2016 |
December 31, 2015 |
|||||||
Interest rate swap contracts fair value |
$ | 1,721 | $ | 881 | ||||
|
|
|
|
|||||
Balance sheet location |
|
Accrued Interest Receivable and Other Assets |
|
|
Accrued Interest Receivable and Other Assets |
| ||
June 30, 2016 |
December 31, 2015 |
|||||||
Interest rate swap contracts fair value |
$ | 1,721 | $ | 881 | ||||
|
|
|
|
|||||
Balance sheet location |
|
Accrued Interest Payable and Other Liabilities |
|
|
Accrued Interest Payable and Other Liabilities |
|
Derivative Financial Instruments Acquired from PC Bancorp
At June 30, 2016, the Company also has nineteen pay-fixed, receive-variable, interest rate swaps with one counterparty bank that are designed to convert fixed rate loans into variable rate loans.
The following table presents the notional amount and the fair values of the asset and liability of the Companys derivative instruments acquired from PC Bancorp as of the dates indicated (dollars in thousands):
Fair Value Hedges | ||||||||
June 30, 2016 |
December 31, 2015 |
|||||||
Total interest rate contracts notional amount |
$ | 25,350 | $ | 25,938 | ||||
|
|
|
|
|||||
Derivatives not designated as hedging instruments: |
||||||||
Interest rate swap contracts fair value |
$ | 222 | $ | 313 | ||||
Derivatives designated as hedging instruments: |
||||||||
Interest rate swap contracts fair value |
1,190 | 1,351 | ||||||
|
|
|
|
|||||
Total interest rate contracts fair value |
$ | 1,412 | $ | 1,664 | ||||
|
|
|
|
|||||
Balance sheet location |
|
Accrued Interest Payable and Other Liabilities |
|
|
Accrued Interest Payable and Other Liabilities |
|
Page 27 of 71
The Effect of Derivative Instruments on the Consolidated Statements of Income
The following table summarizes the effect of derivative financial instruments on the consolidated statements of income for the periods indicated (dollars in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Derivatives not designated as hedging instruments: |
||||||||||||||||
Interest rate swap contracts loans |
||||||||||||||||
Increase in fair value of interest rate swap contracts |
$ | 52 | $ | 57 | $ | 91 | $ | 84 | ||||||||
Payments on interest rate swap contracts on loans |
(60 | ) | (66 | ) | (122 | ) | (132 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net decrease in other non-interest income |
(8 | ) | (9 | ) | (31 | ) | (48 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Derivatives designated as hedging instruments: |
||||||||||||||||
Interest rate swap contracts loans |
||||||||||||||||
Increase in fair value of interest rate swap contracts |
$ | 139 | $ | 356 | $ | 162 | $ | 441 | ||||||||
Increase (decrease) in fair value of hedged loans |
71 | (73 | ) | 284 | 88 | |||||||||||
Payment on interest rate swap contracts on loans |
(224 | ) | (285 | ) | (454 | ) | (571 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net decrease in interest income on loans |
$ | (14 | ) | $ | (2 | ) | $ | (8 | ) | $ | (42 | ) | ||||
|
|
|
|
|
|
|
|
Under all of the Companys interest rate swap contracts, the Company is required to pledge and maintain collateral for the credit support under these agreements. At June 30, 2016, the Company has pledged $2.6 million in investment securities, $2.7 million in certificates of deposit, for a total of $5.3 million, as collateral under the swap agreements.
Page 28 of 71
Note 10 Balance Sheet Offsetting
Assets and liabilities relating to certain financial instruments, including derivatives, and securities sold under repurchase agreements (Repos), may be eligible for offset in the consolidated balance sheets as permitted under accounting guidance. The Companys interest rate swap derivatives are subject to a master bilateral netting and offsetting arrangement under specific conditions as defined within a master agreement governing all interest rate swap contracts that the Company and the counterparty banks have entered into. In addition, the master agreement under which the interest rate contracts have been written require the pledging of assets by the Company based on certain risk thresholds. The Company has pledged a certificate of deposit and investment securities as collateral under the swap agreements. The pledged collateral under the swap agreements are reported in the Companys consolidated balance sheets, unless the Company defaults under the master agreement. The Company currently does not net or offset the interest rate swap contracts in its consolidated balance sheets, as reflected within the table below.
The Companys securities sold under repurchase agreements represent transactions the Company has entered into with several deposit customers. These transactions represent the sale of securities on an overnight or on a term basis to our deposit customers under an agreement to repurchase the securities from the customers the next business day or at maturity. There is an individual contract for each customer with only one transaction per customer. There is no master agreement that provides for the netting arrangement or the offsetting of these individual transactions or for the netting of collateral positions. The Company does not net or offset the Repos in its consolidated balance sheets as reflected within the table below.
The table below presents the Companys financial instruments that may be eligible for offsetting which include securities sold under agreements to repurchase that have no enforceable master netting arrangement and derivative securities that could be offset in the consolidated financial statements due to an enforceable master netting arrangement (dollars in thousands):
Gross Amounts Recognized in the Consolidated Balance Sheets |
Gross Amounts Offset in the Consolidated Balance Sheets |
Net Amounts of Assets / Liabilities Presented in the Consolidated Balance Sheets |
Gross Amounts Not Offset in the Consolidated Balance Sheets |
Net Amount (Collateral over liability balance required to be pledged) |
||||||||||||||||||||
Financial Instruments |
Collateral Pledged |
|||||||||||||||||||||||
June 30, 2016 |
||||||||||||||||||||||||
Financial Assets: |
||||||||||||||||||||||||
Interest rate swap contracts fair value (See Note 9 Derivative Financial Instruments) |
$ | 1,721 | $ | | $ | 1,721 | $ | 1,721 | $ | | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 1,721 | $ | | $ | 1,721 | $ | 1,721 | $ | | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Financial Liabilities: |
||||||||||||||||||||||||
Interest rate swap contracts fair value (See Note 9 Derivative Financial Instruments) |
$ | 3,133 | $ | | $ | 3,133 | $ | 3,133 | $ | 5,362 | $ | 2,229 | ||||||||||||
Securities sold under agreements to repurchase (See Note 8 Borrowings and Subordinated Debentures) |
25,782 | | 25,782 | 25,782 | 57,525 | 31,743 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 28,915 | $ | | $ | 28,915 | $ | 28,915 | $ | 62,887 | $ | 33,972 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Page 29 of 71
Gross Amounts Recognized in the Consolidated Balance Sheets |
Gross Amounts Offset in the Consolidated Balance Sheets |
Net Amounts of Assets / Liabilities Presented in the Consolidated Balance Sheets |
Gross Amounts Not Offset in the Consolidated Balance Sheets |
Net Amount (Collateral over liability balance required to be pledged) |
||||||||||||||||||||
Financial Instruments |
Collateral Pledged |
|||||||||||||||||||||||
December 31, 2015 |
||||||||||||||||||||||||
Financial Assets: |
||||||||||||||||||||||||
Interest rate swap contracts fair value (See Note 9 Derivative Financial Instruments) |
$ | 881 | $ | | $ | 881 | $ | 881 | $ | | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 881 | $ | | $ | 881 | $ | 881 | $ | | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Financial Liabilities: |
||||||||||||||||||||||||
Interest rate swap contracts fair value (See Note 9 Derivative Financial Instruments) |
$ | 2,545 | $ | | $ | 2,545 | $ | 2,545 | $ | 4,759 | $ | 2,214 | ||||||||||||
Securities sold under agreements to repurchase (See Note 8 Borrowings and Subordinated Debentures) |
14,360 | | 14,360 | 14,360 | 46,596 | 32,236 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 16,905 | $ | | $ | 16,905 | $ | 16,905 | $ | 51,355 | $ | 34,450 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Note 11 - Stock Options and Restricted Stock
Equity Compensation Plans
The Companys 2007 Equity and Incentive Plan (Equity Plan) was adopted by the Company in 2007 and replaced two prior equity compensation plans. The Equity Plan provides for significant flexibility in determining the types and terms of awards that may be made to participants. The Equity Plan was revised and approved by the Companys shareholders in 2011 and adopted by the Company as part of the Bank holding company reorganization. This plan is designed to promote the interest of the Company in aiding the Company to attract and retain employees, officers and non-employee directors who are expected to contribute to the future success of the organization. The Equity Plan is intended to provide participants with incentives to maximize their efforts on behalf of the Company through stock-based awards that provide an opportunity for stock ownership. This plan provides the Company with a flexible equity incentive compensation program, which allows the Company to grant stock options, restricted stock, restricted stock award units and performance units. Certain options and share awards provide for accelerated vesting, if there is a change in control, as defined in the Equity Plan. These plans are described more fully in Note 16 - Stock Options and Restricted Stock in the Companys Form 10-K for the year ended December 31, 2015.
At June 30, 2016, future compensation expense related to unvested restricted stock grants are reflected in the table below (dollars in thousands):
Future Restricted Stock Expense |
||||
Remainder of 2016 |
$ | 1,691 | ||
2017 |
1,676 | |||
2018 |
641 | |||
2019 |
173 | |||
Thereafter |
31 | |||
|
|
|||
Total |
$ | 4,212 | ||
|
|
At June 30, 2016, the weighted-average period over which the total compensation cost related to unvested restricted stock grants not yet recognized is 2.7 years. There was no future compensation expense related to unvested stock options as of June 30, 2016. All stock options outstanding at June 30, 2016 are vested.
Page 30 of 71
Stock Options
No stock options have been granted by the Company since 2010.
The following table summarizes the share option activity under the plans as of the date and for the period indicated:
Shares | Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (in years) |
Aggregate Intrinsic Value (in thousands) |
|||||||||||||
Outstanding stock options at December 31, 2015 |
557,471 | $ | 10.57 | 0.8 | $ | 8,248 | ||||||||||
Granted |
| |||||||||||||||
Exercised |
(396,964 | ) | ||||||||||||||
Forfeited |
| |||||||||||||||
Expired |
(4,500 | ) | ||||||||||||||
|
|
|||||||||||||||
Outstanding stock options at June 30, 2016 |
156,007 | $ | 14.99 | 1.0 | $ | 1,189 | ||||||||||
|
|
|||||||||||||||
Exercisable options at June 30, 2016 |
156,007 | $ | 14.99 | 1.0 | $ | 1,189 | ||||||||||
Unvested options at June 30, 2016 |
| $ | | | $ | |
The total intrinsic value of options exercised during the three months ended June 30, 2016 and 2015 was $2.7 million and $697 thousand, and during the six months ended June 30, 2016 and 2015, was $5.6 million and $1.3 million, respectively.
Restricted Stock
The weighted-average grant-date fair value per share in the table below is calculated by taking the total aggregate cost of the restricted shares issued divided by the number of shares of restricted stock issued. The aggregate cost of the restricted stock was calculated by multiplying the number of shares granted at each of the grant dates by the closing stock price of the Companys common stock on the date of the grant. The following table summarizes the restricted stock activity under the Equity Plan for the period indicated:
Number of Shares | Weighted-Average Grant-Date Fair Value per Share |
|||||||
Restricted Stock: |
||||||||
Unvested at December 31, 2015 |
311,458 | $ | 19.29 | |||||
Granted |
113,809 | 22.87 | ||||||
Vested |
(37,575 | ) | 18.95 | |||||
Cancelled and forfeited |
(4,000 | ) | 19.52 | |||||
|
|
|||||||
Unvested at June 30, 2016 |
383,692 | $ | 20.58 | |||||
|
|
Restricted stock compensation expense was $891 thousand and $807 thousand for the three month period ended June 30, 2016 and 2015, and $1.7 million and $1.3 million for the six month period ended June 30, 2016 and 2015, respectively. Restricted stock awards reflected in the table above are valued at the closing stock price on the date of grant and are expensed to stock based compensation expense over the period for which the related service is performed. In 2015, the Company granted 40,000 shares of Restricted Stock Unit (RSU) under the Equity Plan to one of its executive officers. Such grant is reflected in the table above. The shares of common stock underlying the 40,000 shares of RSU will not be issued until the RSUs vest and are not included in the Companys shares issued and outstanding as of June 30, 2016. The RSUs are valued at the closing stock price on the date of grant and are expensed to stock based compensation expense over the period for which the related service is performed.
Page 31 of 71
Note 12 Shareholders Equity
Common Stock
Holders of shares of the Companys common stock are entitled to one vote for each share held of record on all matters voted upon by shareholders. Furthermore, the holders of the Companys common stock have no preemptive rights to subscribe for new issue securities, and shares of the Companys common stock are not subject to redemption, conversion, or sinking fund provisions.
With respect to the payment of dividends, after the preferential dividends upon all other classes and series of stock entitled thereto have been paid or declared and set apart for payment, then the holders of the Companys common stock are entitled to such dividends as may be declared by the Companys board of directors out of funds legally available under the laws of the State of California.
Upon the Companys liquidation or dissolution, the assets legally available for distribution to holders of the Companys shares of common stock, after payment of all the Companys obligations and payment of any liquidation preference of all other classes and series of stock entitled thereto, including the Companys preferred stock, are distributable ratably among the holders of the Companys common stock.
During 2016, the Company issued 396,964 shares of stock from the exercise of stock options for a total value of $3.5 million. The Company also issued 113,809 shares of restricted stock to the Companys directors and employees, cancelled 4,000 shares of unvested restricted stock related to employee turnover and cancelled 13,781 shares of restricted stock that had a value of $305 thousand when employees elected to pay their tax obligation via the repurchase of the stock by the Company. The net issuance of restricted stock for 2016 was 96,028 shares. The Equity Plan, as amended, allows employees to make an election to have a portion of their restricted stock that became vested during the year repurchased by the Company to provide funds to pay the employees tax obligation related to the vesting of the stock.
Preferred Stock
The Company completed the merger with 1st Enterprise on November 30, 2014. As part of the Merger Agreement, 16,400 shares of preferred stock issued by 1st Enterprise as part of the Small Business Lending Fund (SBLF) program of the United States Department of the Treasury was converted into 16,400 CU Bancorp preferred shares with substantially identical terms. CU Bancorp Preferred Stock has a liquidation preference amount of $1 thousand per share, designated as the Companys Non-Cumulative Perpetual Preferred Stock, Series A. The U.S. Department of the Treasury is the sole holder of all outstanding shares of CU Bancorp Preferred Stock. The CU Bancorp Preferred Stock had an estimated life of four years and the fair value was $16 million at the merger date, resulting in a net discount of $479 thousand. The life-to-date and the year-to-date accretion on the net discount as of June 30, 2016 are $1.2 million and $91 thousand, respectively. The net carrying value of the CU Bancorp Preferred Stock is $17 million ($16 million plus of $0.7 million net premium) as of June 30, 2016.
Dividends on the Companys Series A Preferred Stock are payable quarterly in arrears if authorized and declared by the Companys board of directors out of legally available funds, on a non-cumulative basis, on the $1 thousand per share liquidation preference amount. Dividends are payable on January 1, April 1, July 1 and October 1 of each year. The current coupon dividend rate was adjusted to 9% on March 1, 2016 through perpetuity. However, the dividend yield through November 30, 2018 approximates 7% as a result of business combination accounting. Dividends on the Series A Preferred Stock are non-cumulative. There is no sinking fund with respect to dividends on the Series A Preferred Stock. So long as the Companys Series A Preferred Stock remains outstanding, the Company may declare and pay dividends on the common stock only if full dividends on all outstanding shares of Series A Preferred Stock for the most recently completed dividend period have been or are contemporaneously declared and paid. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, holders of the Series A Preferred Stock will be entitled to receive for each share of Series A Preferred Stock, out of the Companys assets or proceeds available for distribution to the Companys shareholders, subject to any rights of the Companys creditors, before any distribution of assets or proceeds is made to or set aside for the holders of the common stock, payment of an amount equal to the sum of (i) the $1 thousand liquidation preference amount per share and (ii) the amount of any accrued and unpaid dividends on the Series A Preferred Stock. To the extent the assets or proceeds available for distribution to shareholders are not sufficient to fully pay the liquidation payments owing to the holders of the Series A Preferred Stock and the holders of any other class or series of the stock ranking equally with the Series A Preferred Stock, the holders of the Series A Preferred Stock and such the Companys stock will share ratably in the distribution. Holders of the Series A Preferred Stock have no right to exchange or convert their shares into common stock or any other securities and do not have voting rights.
Page 32 of 71
Other Comprehensive Income (Loss)
The following table presents the changes in accumulated other comprehensive income (loss) by component for the periods indicated (dollars in thousands):
Before Tax | Tax Effect | Net of Tax | ||||||||||
Three Months Ended June 30, 2016 |
||||||||||||
Net unrealized gains (losses) on investment securities: |
||||||||||||
Beginning balance |
$ | (81 | ) | $ | 34 | $ | (47 | ) | ||||
Net unrealized gains arising during the period |
1,423 | (598 | ) | 825 | ||||||||
|
|
|
|
|
|
|||||||
Ending balance |
$ | 1,342 | $ | (564 | ) | $ | 778 | |||||
|
|
|
|
|
|
|||||||
Before Tax | Tax Effect | Net of Tax | ||||||||||
Three Months Ended June 30, 2015 |
||||||||||||
Net unrealized gains (losses) on investment securities: |
||||||||||||
Beginning balance |
$ | 1,215 | $ | (514 | ) | $ | 701 | |||||
Net unrealized gains arising during the period |
(1,297 | ) | 548 | (749 | ) | |||||||
|
|
|
|
|
|
|||||||
Ending balance |
$ | (82 | ) | $ | 34 | $ | (48 | ) | ||||
|
|
|
|
|
|
|||||||
Before Tax | Tax Effect | Net of Tax | ||||||||||
Six Months Ended June 30, 2016 |
||||||||||||
Net unrealized gains (losses) on investment securities: |
||||||||||||
Beginning balance |
$ | (1,409 | ) | $ | 593 | $ | (816 | ) | ||||
Net unrealized gains arising during the period |
2,751 | (1,157 | ) | 1,594 | ||||||||
|
|
|
|
|
|
|||||||
Ending balance |
$ | 1,342 | $ | (564 | ) | $ | 778 | |||||
|
|
|
|
|
|
|||||||
Before Tax | Tax Effect | Net of Tax | ||||||||||
Six Months Ended June 30, 2015 |
||||||||||||
Net unrealized gains (losses) on investment securities: |
||||||||||||
Beginning balance |
$ | 333 | $ | (143 | ) | $ | 190 | |||||
Net unrealized gains arising during the period |
(415 | ) | 177 | (238 | ) | |||||||
|
|
|
|
|
|
|||||||
Ending balance |
$ | (82 | ) | $ | 34 | $ | (48 | ) | ||||
|
|
|
|
|
|
Note 13 - Commitments and Contingencies
Litigation
From time to time the Company is a party to claims and legal proceedings arising in the ordinary course of business. The Company accrues for any probable loss contingencies that are estimable and discloses any material losses. As of June 30, 2016, there were no legal proceedings against the Company the outcome of which are expected to have a material adverse impact on the Companys financial position, results of operations or cash flows, as a whole.
Financial Instruments with Off Balance Sheet Risk
See Note 21 Commitments and Contingencies in the Companys Form 10-K for the year ended December 31, 2015. Financial instruments with off balance sheet risk include commitments to extend credit of $871 million and $806 million at June 30, 2016 and December 31, 2015, respectively. Included in the aforementioned commitments were standby letters of credit outstanding of $87 million and $73 million at June 30, 2016 and December 31, 2015. The Company also has a reserve for estimated losses on unfunded loan commitments of $726 thousand and $608 thousand at June 30, 2016 and December 31, 2015, respectively. These balances are included in other liabilities on the consolidated balance sheets.
Page 33 of 71
Note 14 - Fair Value Information
Fair Value Measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date. ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including both those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis and a non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value, and for estimating the fair value of financial assets and financial liabilities not recorded at fair value, are discussed below.
In accordance with accounting guidance, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are as follows:
| Level 1 Observable unadjusted quoted market prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. |
| Level 2 Significant other observable market based inputs, other than Level 1 prices such as quoted prices for similar assets or liabilities or unobservable inputs that are corroborated by market data. This includes quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data, either directly or indirectly. This would include those financial instruments that are valued using models or other valuation methodologies where substantially all of the assumptions are observable in the marketplace, can be derived from observable market data or are supported by observable levels at which transactions are executed in the marketplace. |
| Level 3 Significant unobservable inputs that reflect a reporting entitys evaluation about the assumptions that market participants would use in pricing an asset or liability. Assets measured utilizing level 3 are for positions that are not traded in active markets or are subject to transfer restrictions, and or where valuations are adjusted to reflect illiquidity and or non-transferability. These assumptions are not corroborated by market data. This is comprised of financial instruments whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are generally less readily observable from objective sources. Management uses a combination of reviews of the underlying financial statements, appraisals and managements judgment regarding credit quality to determine the value of the financial asset or liability. |
A financial instruments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Management maximizes the use of observable inputs and attempts to minimize the use of unobservable inputs when determining fair value measurements. The following is a description of both the general and specific valuation methodologies used for certain instruments measured at fair value, as well as the general classification of these instruments pursuant to the valuation hierarchy.
Investment Securities Available-for-Sale and Held-to-Maturity: The fair value of securities available-for-sale and held-to-maturity may be determined by obtaining quoted prices in active markets, when available, from nationally recognized securities exchanges (Level 1 financial assets). If quoted market prices are not available, the fair value is determined by matrix pricing, which is a mathematical technique widely used in the securities industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities relationship to other benchmark quoted securities which are observable market inputs (Level 2 financial assets). Debt securities pricing is generally obtained from one of the matrix pricing models developed from one of the three national pricing agencies. In cases where significant credit valuation adjustments are incorporated into the estimation of fair value, reported amounts are classified as Level 3 financial assets.
Securities classified as available-for-sale are accounted for at their current fair value rather than amortized historical cost. Unrealized gains or losses are excluded from net income and reported as an amount net of taxes as a separate component of accumulated other comprehensive income included in shareholders equity. Securities classified as held-to-maturity are accounted for at their amortized historical cost.
Page 34 of 71
The Company considers the inputs utilized to fair value the available-for-sale and held-to-maturity investment securities to be observable market inputs and classified these financial assets within the Level 2 fair value hierarchy. Management bases the fair value for these investments primarily on third party price indications provided by independent pricing sources utilized by the Companys bond accounting system to obtain market pricing on its individual securities. Vining Sparks, who provides the Company with its bond accounting system, utilizes pricing from three independent third party pricing sources for pricing of securities. These third party pricing sources utilize quoted market prices, or when quoted market prices are not available, the fair values are estimated using nationally recognized third-party vendor pricing models, of which the inputs are observable. However, the fair value reported may not be indicative of the amounts that could be realized in an actual market exchange.
The fair value of the Companys U.S. Agency and available-for-sale and held-to-maturity investment securities are calculated using an option adjusted spread model from one of the nationally recognized third-party pricing models. Depending on the assumptions used and the treasury yield curve and other interest rate assumptions, the fair value could vary significantly in the near term.
Loans: The fair value for loans is estimated by discounting the expected future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities. Loans are segregated by type such as commercial and industrial, commercial real estate, construction and other loans with similar credit characteristics and are further segmented into fixed and variable interest rate loan categories. Expected future cash flows are projected based on contractual cash flows, adjusted for estimated credit losses and estimated prepayments. The inputs utilized in determining the fair value of loans are unobservable and accordingly, these financial assets are classified within Level 3 of the fair value hierarchy.
Impaired Loans: The fair value of impaired loans is determined based on an evaluation at the time the loan is originally identified as impaired, and periodically thereafter, at the lower of cost or fair value. Fair value on impaired loans is measured based on the value of the collateral securing these loans, less costs to sell, if the loan is collateral dependent, or based on the cash flows for non-collateral dependent loans discounted at the loans original effective rate. Collateral dependent loans may be secured by either real estate and/or business assets including equipment, inventory and/or accounts receivable and is determined based on appraisals performed by qualified licensed appraisers hired by the Company. Appraised and reported values may be discounted based on managements historical knowledge, changes in market conditions from the time of valuation, and/or managements expertise and knowledge of the client and clients business. Such discounts are typically significant and unobservable. For unsecured loans, the estimated future discounted cash flows of the business or borrower, are used in evaluating the fair value. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above. The inputs utilized in determining the fair value of impaired loans are unobservable and accordingly, these financial assets are classified within Level 3 of the fair value hierarchy.
Interest Rate Swap Contracts: The fair value of the interest rate swap contracts are provided by independent third party vendors that specialize in interest rate risk management and fair value analysis using a model that utilizes current market data to estimate cash flows of the interest rate swaps utilizing the future London Interbank Offered Rate (LIBOR) yield curve for accruing and the future Overnight Index Swap Rate (OIS) yield curve for discounting through the maturity date of the interest rate swap contract. The future LIBOR yield curve is the primary input in the valuation of the interest rate swap contracts. Both the LIBOR and OIS yield curves are readily observable in the marketplace. Accordingly, the interest rate swap contracts are classified within Level 2 of the fair value hierarchy.
Other Real Estate Owned: The fair value of other real estate owned is generally based on real estate appraisals (unless more current market information is available) less estimated costs to sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant. The inputs utilized in determining the fair value of other real estate owned are unobservable and accordingly, these financial assets are classified within Level 3 of the fair value hierarchy.
SBA Servicing Asset: A servicing asset is recorded at fair value upon the sale of an SBA loan. The fair value of this asset is based on the estimated discounted future cash flows utilizing market based discount rates and estimated prepayment speeds. The discount rate was based on the current U.S. Treasury yield curve, plus a spread for marketplace risk associated with these assets. Prepayment speeds were selected based on the historical prepayments of similar SBA pools. The prepayment speeds determine the timing of the cash flows. The SBA servicing asset is amortized over the contractual life of the loans based on
Page 35 of 71
an effective yield approach. In addition, the Companys servicing asset is evaluated regularly for impairment by discounting the estimated future cash flows using market-based discount rates and prepayment speeds. If the calculated present value of the servicing asset declines below the Companys current carrying value, the servicing asset is written down to its present value. Based on the Companys methodology in its valuation of the SBA servicing asset, the current carrying value is estimated to approximate the fair value. The inputs utilized in determining the fair value of SBA servicing asset are unobservable and accordingly, these financial assets are classified within Level 3 of the fair value hierarchy.
Non-Maturing Deposits: The fair values for non-maturing deposits (deposits with no contractual termination date), which include non-interest bearing demand deposits, interest bearing transaction accounts, money market deposits and savings accounts are equal to their carrying amounts, which represent the amounts payable on demand. Because the carrying value and fair value are by definition identical, and accordingly non-maturity deposits are classified within Level 1 of the fair value hierarchy, these balances are not listed in the following tables.
Maturing Deposits: The fair values of fixed maturity certificates of deposit (time deposits) are estimated using a discounted cash flow calculation that applies current market deposit interest rates to the Companys current certificates of deposit interest rates for similar term certificates. The inputs utilized in determining the fair value of maturing deposits are observable and accordingly, these financial liabilities are classified within Level 2 of the fair value hierarchy.
Securities Sold under Agreements to Repurchase (Repos): The fair value of securities sold under agreements to repurchase is estimated based on the discounted value of future cash flows expected to be paid on the deposits. The carrying amounts of Repos with maturities of 90 days or less approximate their fair values. The fair value of Repos with maturities greater than 90 days is estimated based on the discounted value of the contractual future cash flows. The inputs utilized in determining the fair value of securities sold under agreements to repurchase are observable and accordingly, these financial liabilities are classified within Level 2 of the fair value hierarchy.
Subordinated Debentures: The fair value of the three variable rate subordinated debentures (debentures) is estimated using a discounted cash flow calculation that applies the three month LIBOR plus the margin index at June 30, 2016, to the cash flows from the debentures, based on the actual interest rate the debentures were accruing at June 30, 2016. Because all three of the debentures re-priced on June 15, 2016 based on the current three month LIBOR index rate plus the index margin at that date, and with relatively little to no change in the three month LIBOR index rate from the re-pricing date through June 30, 2016, the current face value of the debentures and their calculated fair value are approximately equal. The inputs utilized in determining the fair value of subordinated debentures are observable and accordingly, these financial liabilities are classified within Level 2 of the fair value hierarchy.
Fair Value of Commitments: Loan commitments that are priced on an index plus a margin to a market rate of interest are reported at the carrying value of the loan commitment. Loan commitments on which the committed fixed interest rate is less than the current market rate were insignificant at June 30, 2016 and December 31, 2015.
Page 36 of 71
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes the financial assets and financial liabilities measured at fair value on a recurring basis as of the dates indicated, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (dollars in thousands):
Fair Value |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
Financial Assets June 30, 2016 |
||||||||||||||||
Investment securities available-for-sale |
$ | 334,113 | $ | | $ | 334,113 | $ | | ||||||||
Interest Rate Swap Contracts |
1,721 | | 1,721 | | ||||||||||||
Financial Liabilities June 30, 2016 |
||||||||||||||||
Interest Rate Swap Contracts |
$ | 3,133 | $ | | $ | 3,133 | $ | | ||||||||
Financial Assets December 31, 2015 |
||||||||||||||||
Investment securities available-for-sale |
$ | 315,785 | $ | | $ | 315,785 | $ | | ||||||||
Interest Rate Swap Contracts |
881 | | 881 | | ||||||||||||
Financial Liabilities December 31, 2015 |
||||||||||||||||
Interest Rate Swap Contracts |
$ | 2,545 | $ | | $ | 2,545 | $ | |
At June 30, 2016 and at December 31, 2015 the Company had no financial assets or liabilities that were measured at fair value on a recurring basis that required the use of significant unobservable inputs (Level 3). Additionally, there were no transfers of assets either between Level 1 and Level 2 nor in or out of Level 3 of the fair value hierarchy for assets measured on a recurring basis for the period ended June 30, 2016.
Page 37 of 71
Assets Measured at Fair Value on a Non-recurring Basis
The Company may be required periodically, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis, that is, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These include assets that are measured at the lower of cost or fair value that were recognized at fair value below cost at the end of or during the period.
There were no transfers of assets either between Level 1 and Level 2 nor in or out of Level 3 of the fair value hierarchy for assets measured on a non-recurring basis during the three or six months ended June 30, 2016.
The following table presents the balances of assets and liabilities measured at fair value on a non-recurring basis by caption and by level within the fair value hierarchy as of the dates indicated (dollars in thousands):
Fair Value |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
Financial Assets June 30, 2016 |
||||||||||||||||
Collateral dependent impaired loans with specific valuation allowance and/or partial charge-offs (non-purchased credit impaired loans) |
$ | 306 | $ | | $ | | $ | 306 | ||||||||
Other real estate owned |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 306 | $ | | $ | | $ | 306 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Assets December 31, 2015 |
||||||||||||||||
Collateral dependent impaired loans with specific valuation allowance and/or partial charge-offs (non-purchased credit impaired loans) |
$ | | $ | | $ | | $ | | ||||||||
Other real estate owned |
325 | | | 325 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 325 | $ | | $ | | $ | 325 | ||||||||
|
|
|
|
|
|
|
|
The following table presents the significant unobservable inputs used in the fair value measurements for Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of the dates indicated (dollars in thousands):
Fair Value |
Valuation Methodology |
Valuation Model and/or Factors |
Unobservable Input Values |
|||||||||||||
Financial Assets June 30, 2016 |
||||||||||||||||
Collateral dependent impaired loans with specific valuation allowance and/or partial charge-off |
$ | 221 | |
Credit loss estimate of aged accounts receivable collateral |
|
|
Credit loss factors on aging of accounts receivable collateral |
|
40 | % | ||||||
85 | Auction estimate | |
Sales approach Estimated selling costs |
|
10 | % | ||||||||||
|
|
|||||||||||||||
Total |
$ | 306 | ||||||||||||||
|
|
|||||||||||||||
Financial Assets December 31, 2015 |
||||||||||||||||
Collateral dependent impaired loans with specific valuation allowance and/or partial charge-off |
$ | | | | | |||||||||||
Other real estate owned |
$ | 325 | |
Broker opinion of value |
|
|
Sales approach Estimated selling costs |
|
6 | % | ||||||
|
|
|||||||||||||||
Total |
$ | 325 | ||||||||||||||
|
|
Page 38 of 71
Fair Value of Financial Assets and Liabilities
ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or on a non-recurring basis. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to develop the estimates of fair value. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company could have realized in a current market exchange as of June 30, 2016 and December 31, 2015. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The description of the valuation methodologies used for assets and liabilities measured at fair value and for estimating fair value for financial instruments not recorded at fair value has been described above.
The table below presents the carrying amounts and fair values of financial instruments based on their fair value hierarchy indicated (dollars in thousands):
Fair Value Measurements | ||||||||||||||||||||
Carrying Amount |
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||||||
June 30, 2016 |
||||||||||||||||||||
Financial Assets |
||||||||||||||||||||
Investment securities available-for-sale |
$ | 334,113 | 334,113 | $ | | $ | 334,113 | $ | | |||||||||||
Investment securities held-to-maturity |
40,595 | 41,450 | | 41,450 | | |||||||||||||||
Loans, net |
1,932,635 | 1,972,144 | | | 1,972,144 | |||||||||||||||
Interest rate swap contracts |
1,721 | 1,721 | | 1,721 | | |||||||||||||||
Financial Liabilities |
||||||||||||||||||||
Certificates of deposit |
51,598 | 51,598 | | 51,598 | | |||||||||||||||
Securities sold under agreements to repurchase |
25,782 | 25,782 | | 25,782 | | |||||||||||||||
Subordinated debentures |
9,777 | 12,372 | | 12,372 | | |||||||||||||||
Interest rate swap contracts |
3,133 | 3,133 | | 3,133 | | |||||||||||||||
December 31, 2015 |
||||||||||||||||||||
Financial Assets |
||||||||||||||||||||
Investment securities available-for-sale |
$ | 315,785 | 315,785 | $ | | $ | 315,785 | $ | | |||||||||||
Investment securities held-to-maturity |
42,036 | 42,339 | | 42,339 | | |||||||||||||||
Loans, net |
1,817,481 | 1,851,220 | | | 1,851,220 | |||||||||||||||
Interest rate swap contracts |
881 | 881 | | 881 | | |||||||||||||||
Financial Liabilities |
| |||||||||||||||||||
Certificates of deposit |
58,502 | 58,502 | | 58,502 | | |||||||||||||||
Securities sold under agreements to repurchase |
14,360 | 14,360 | | 14,360 | | |||||||||||||||
Subordinated debentures |
9,697 | 12,372 | | 12,372 | | |||||||||||||||
Interest rate swap contracts |
2,545 | 2,545 | | 2,545 | |
Note 15 Subsequent Events
We have evaluated events that have occurred subsequent to June 30, 2016 and have concluded there are no subsequent events that would require disclosure or recognition in the accompanying interim consolidated financial statements.
Page 39 of 71
ITEM 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
See Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 below relating to forward-looking statements included in this report.
The following is managements discussion and analysis of the major factors that influenced the results of the operations and financial condition of CU Bancorp, (the Company) for the current period. This analysis should be read in conjunction with the audited financial statements and accompanying notes included in the Companys 2015 Annual Report on Form 10-K and with the unaudited financial statements and notes as set forth in this report.
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
We have made forward-looking statements in this document about the Company, for which the Company claims the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.
The Companys forward-looking statements include descriptions of plans or objectives of management for future operations, products or services, and forecasts of its revenues, earnings or other measures of economic performance. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words believe, expect, intend, estimate, anticipate, project, assume, plan, predict or words of similar meaning, or future or conditional verbs such as will, would, should, could or may.
We make forward-looking statements as set forth above and regarding projected sources of funds, availability of acquisition and growth opportunities, dividends, adequacy of our allowance for loan losses and provision for loan losses, our loan portfolio and subsequent charge-offs. Forward-looking statements involve substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. There are many factors that could cause actual results to differ materially from those contemplated by these forward-looking statements. Risks and uncertainties that could cause our financial performance to differ materially from our goals, plans, expectations and projections expressed in forward-looking statements include those set forth in our filings with the SEC, Item 1A of our Annual Report on Form 10-K, and the following:
| Current and future economic and market conditions in the United States generally or in the communities we serve, including the effects of declines in property values, high unemployment rates and overall slowdowns in economic growth should these events occur. |
| The effects of trade, monetary and fiscal policies and laws. |
| Possible losses of businesses and population in Los Angeles, Orange, Ventura, San Bernardino or Riverside Counties. |
| Loss of customer checking and money-market account deposits as customers pursue other higher-yield investments, particularly in a rising interest rate environment. |
| Possible changes in consumer and business spending and saving habits and the related effect on our ability to increase assets and to attract deposits. |
| Competitive market pricing factors. |
| Deterioration in economic conditions that could result in increased loan losses. |
| Risks associated with concentrations in real estate related loans. |
| Risks associated with concentrations in deposits. |
| Loss of significant customers. |
| Market interest rate volatility. |
| Possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans. |
| Changes in the speed of loan prepayments, loan origination and sale volumes, loan loss provisions, charge offs or actual loan losses. |
| Compression of our net interest margin. |
| Stability of funding sources and continued availability of borrowings to the extent necessary. |
Page 40 of 71
| Changes in legal or regulatory requirements or the results of regulatory examinations that could restrict growth. |
| The inability of our internal disclosure controls and procedures to prevent or detect all errors or fraudulent acts. |
| Inability of our framework to manage risks associated with our business, including operational risk and credit risk, to mitigate all risk or loss to us. |
| Our ability to keep pace with technological changes, including our ability to identify and address cyber-security risks such as data security breaches, denial of service attacks, hacking and identity theft. |
| The effects of man-made and natural disasters, including earthquakes, floods, droughts, brush fires, tornadoes and hurricanes. |
| The effect of labor and port slowdowns on small businesses. |
| Risks of loss of funding for the Small Business Administration (SBA), or SBA loan programs, or changes in those programs. |
| Lack of take-out financing or problems with sales or lease-up with respect to our construction loans. |
| Our ability to recruit and retain key management and staff. |
| Availability of, and competition for, acquisition opportunities. |
| Significant decline in the market value of the Company that could result in an impairment of goodwill. |
| Regulatory limits on the Banks ability to pay dividends to the Company. |
| The uncertainty of obtaining regulatory approval for various merger and acquisition opportunities. |
| New accounting pronouncements. |
| The impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and related rules and regulations on the Companys business operations and competitiveness. |
| Our ability to comply with applicable capital and liquidity requirements (including the finalized Basel III capital standards), including our ability to generate capital internally or raise capital on favorable terms. |
| Increased regulation of the securities markets, including the securities of the Company, whether pursuant to the Sarbanes-Oxley Act of 2002, or otherwise. |
| The effects of any damage to our reputation resulting from developments related to any of the items identified above. |
Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. You should consider any forward looking statements in light of this explanation, and we caution you about relying on forward-looking statements.
For a more complete discussion of these risks and uncertainties, see the Companys Annual Report on Form 10-K for the year ended December 31, 2015 and particularly, Item 1A, titled Risk Factors.
Page 41 of 71
OVERVIEW
CU Bancorp (the Company) is a bank holding company whose operating subsidiary is California United Bank. As a bank holding company, CU Bancorp is subject to regulation of the Federal Reserve Board (FRB). The term Company, as used throughout this document, refers to the consolidated financial statements of CU Bancorp and California United Bank.
California United Bank (the Bank) is a full-service commercial business bank offering a broad range of banking products and services including: deposit services, lending and cash management to small and medium-sized businesses in Los Angeles, Orange, Ventura, San Bernardino and Riverside counties, to non-profit organizations, to business principals and entrepreneurs, to the professional community, including attorneys, certified public accountants, financial advisors, healthcare providers and investors. The Bank opened for business in 2005, with its current headquarters office located in Los Angeles, California. As a state chartered non-member bank, the Bank is subject to regulation by the California Department of Business Oversight, (the DBO) and the Federal Deposit Insurance Corporation (FDIC). The deposits of the Bank are insured by the FDIC, to the maximum amount allowed by law.
Total assets increased $142 million or 5% from December 31, 2015 to $2.8 billion mainly due to deposit growth of $109 million and net income of $13 million. Loan growth during the six months ended June 30, 2016 was concentrated primarily in Other Nonresidential Property loans of $49 million, Construction, Land Development and Other Land loans of $40 million and Owner-Occupied Nonresidential Properties of $18 million. Funding the Companys loan growth for the six months ended June 30, 2016 were increases in non-interest bearing demand deposits of $49 million and money market and savings deposits of $68 million. At both June 30, 2016 and December 31, 2015, non-interest bearing deposits represented 56% of total deposits. Tangible book value per common share was $13.46, $12.67 and $11.97 at June 30, 2016, December 31, 2015 and June 30, 2015, respectively.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.
Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions, and other subjective assessments. We have identified several accounting policies that, due to judgments, estimates, and assumptions inherent in those policies, are essential to an understanding of our consolidated financial statements. These policies relate to the accounting for business combinations, evaluation of goodwill for impairment, methodologies that determine our allowance for loan loss, the valuation of impaired loans, the classification and valuation of investment securities, accounting for derivatives financial instruments and hedging activities, and accounting for income taxes.
Our critical accounting policies are described in greater detail in our 2015 Annual Report on Form 10-K, Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies and Estimates. We believe that our most critical accounting policies upon which our financial condition depends, and which involve the most complex or subjective decisions or assessment, are as follows:
Business Combinations
The Company has a number of fair value adjustments recorded within the consolidated financial statements at June 30, 2016 that relate to the business combinations with California Oaks State Bank COSB, Premier Commercial Bancorp PC Bancorp and 1st Enterprise Bank 1st Enterprise on December 31, 2010, July 31, 2012 and November 30, 2014, respectively. These fair value adjustments include goodwill, fair value adjustments on loans, core deposit intangible assets, other intangible assets, fair value adjustments to acquired lease obligations, fair value adjustments to certificates of deposit and fair value adjustments on derivatives. The assets and liabilities acquired through acquisitions have been accounted for at fair value as of the date of the acquisition. The goodwill that was recorded on the transactions represented the excess of the purchase price over the fair value of net assets acquired. Goodwill is not amortized and is reviewed for impairment on October 1st of each year. If an event occurs or circumstances change that result in the Companys fair value declining below its book value, the Company would perform an impairment analysis at that time.
Page 42 of 71
Based on the Companys 2015 goodwill impairment analysis, no impairment to goodwill has occurred. The Company is a sole reporting unit for evaluation of goodwill.
The core deposit intangibles on non-maturing deposits, which represent the intangible value of depositor relationships resulting from deposit liabilities assumed through acquisitions, are being amortized over the projected useful lives of the deposits. The weighted average remaining life of the core deposit intangible is estimated at approximately 6 years at June 30, 2016. Core deposit intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Loans acquired through acquisition are recorded at fair value at acquisition date without a carryover of the related Allowance. Purchased Credit Impaired (PCI) loans are acquired loans with evidence of deterioration of credit quality since origination and it is probable, at the acquisition date, that the Company will not be able to collect all contractually required amounts. When the timing and/or amounts of expected cash flows on such loans are not reasonably estimable, no interest is accreted and the loan is reported as a non-accrual loan; otherwise, if the timing and amounts of expected cash flows for PCI loans are reasonably estimable, then interest is accreted and the loans are reported as accruing loans. The non-accretable difference represents the difference between the undiscounted contractual cash flows and the undiscounted expected cash flows, and also reflects the estimated credit losses in the acquired loan portfolio at the acquisition date and can fluctuate due to changes in expected cash flows during the life of the PCI loans. For non-PCI loans, loan fair value adjustments consist of an interest rate premium or discount and a credit component on each individual loan and are amortized to loan interest income based on the effective yield method over the remaining life of the loans. Subsequent decreases to the expected cash flows for both PCI and non-PCI loans will result in a provision for loan losses.
Allowance for Loan Loss
The allowance for loan loss (Allowance) is established by a provision for loan losses that is charged against income, increased by charges to expense and decreased by charge-offs (net of recoveries). Loan charge-offs are charged against the Allowance when management believes the collectability of loan principal becomes unlikely. Subsequent recoveries, if any, are credited to the Allowance.
The Allowance is an amount that management believes will be adequate to absorb estimated charge-offs related to specifically identified loans, as well as probable loan charge-offs inherent in the balance of the loan portfolio, based on an evaluation of the collectability of existing loans and prior loss experience. Management carefully monitors changing economic conditions, the concentrations of loan categories and collateral, the financial condition of the borrowers, the history of the loan portfolio, as well as historical peer group loan loss data to determine the adequacy of the Allowance. The Allowance is based upon estimates, and actual charge-offs may vary from the estimates. No assurance can be given that adverse future economic conditions will not lead to delinquent loans, increases in the provision for loan losses and/or charge-offs. These evaluations are inherently subjective, as they require estimates that are susceptible to significant revisions as conditions change. In addition, regulatory agencies, as an integral part of their examination process, may require changes to the Allowance based on their judgment about information available at the time of their examinations. Management believes that the Allowance as of June 30, 2016 is adequate to absorb known and probable losses in the loan portfolio.
The Allowance consists of specific and general components. The specific component relates to loans that are categorized as impaired. For loans that are categorized as impaired, a specific allowance is established when the realizable value of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on the type of loan and historical charge-off experience adjusted for qualitative factors.
While the general allowance covers all non-impaired loans and is based on historical loss experience adjusted for the various qualitative factors, the change in the Allowance from one reporting period to the next may not directly correlate to the rate of change of nonperforming loans for the following reasons:
| A loan moving from the impaired performing status to an impaired non-performing status does not mandate an automatic increase in allowance. The individual loan is evaluated for a specific allowance requirement when the loan moves to the impaired status, not when the loan moves to non-performing status. In addition, the impaired loan is reevaluated at each subsequent reporting period. Impairment is measured based on the present value of the expected future cash flows discounted at the loans effective interest rate, except that as a practical expedient, the Company may measure impairment based on the loans observable market price or the fair value of the collateral if the loan is collateral dependent. |
Page 43 of 71
| Not all impaired loans require a specific allowance. The payment performance of the borrower may require an impaired classification, but the collateral evaluation may support adequate collateral coverage. For a number of impaired loans in which borrower performance is in question, the collateral coverage may be sufficient. In those instances, neither a general allowance nor a specific allowance is assessed. |
Investment Securities
The Company currently classifies its investment securities under the available-for-sale and held-to-maturity classifications. Under the available-for-sale classification, securities can be sold in response to certain conditions, such as changes in interest rates, changes in the credit quality of the securities, when the credit quality of a security does not conform with current investment policy guidelines, fluctuations in deposit levels or loan demand or need to restructure the portfolio to better match the maturity or interest rate characteristics of liabilities with assets. Securities classified as available-for-sale are accounted for at their current fair value rather than amortized cost. Unrealized gains or losses are excluded from net income and reported as a separate component of accumulated other comprehensive income (loss) included in shareholders equity. Under the held-to-maturity classification, if the Company has the intent and the ability at the time of purchase to hold these securities until maturity, they are classified as held-to-maturity and are stated at amortized cost.
As of each reporting date, the Company evaluates the securities portfolio to determine if there has been an other-than-temporary impairment (OTTI) on each of the individual securities in the investment securities portfolio. If it is probable that the Company will be unable to collect all amounts due according to the contractual terms of a debt security not impaired at acquisition, an OTTI shall be considered to have occurred. Once an OTTI is considered to have occurred, the credit portion of the loss is required to be recognized in current earnings, while the non-credit portion of the loss is recorded as a separate component of shareholders equity.
In estimating whether an other-than-temporary impairment loss has occurred, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, (iii) the current liquidity and volatility of the market for each of the individual security categories, (iv) the current slope and shape of the Treasury yield curve, along with where the economy is in the current interest rate cycle, (v) the spread differential between the current spread and the long-term average spread for that security category, (vi) the projected cash flows from the specific security type, (vii) any financial guarantee and financial condition of the guarantor and (viii) the intent and ability of the Company to retain its investment in the issue for a period of time sufficient to allow for any anticipated recovery in fair value.
If its determined that an OTTI exists on a debt security, the Company then determines if (a) it intends to sell the security or (b) it is more likely than not that it will be required to sell the security before its anticipated recovery. If either of the conditions is met, the Company will recognize the amount of the OTTI in earnings equal to the difference between the securitys fair value and its adjusted cost basis. If neither of the conditions is met, the Company determines (a) the amount of the impairment related to credit loss and (b) the amount of the impairment due to all other factors. The difference between the present value of the cash flows expected to be collected and the amortized cost basis is the credit loss. The credit loss is the portion of the other-than-temporary impairment that is recognized in earnings and is a reduction to the cost basis of the security. The portion of total impairment related to all other factors is included in other comprehensive income. Significant judgment is required in this analysis that includes, but is not limited to assumptions regarding the collectability of principal and interest, future default rates, future prepayment speeds, the amount of current delinquencies that will result in defaults and the amount of eventual recoveries expected on the underlying collateral.
Realized gains and losses on sales of securities are recognized in earnings at the time of sale and are determined on a specific-identification basis. Purchase premiums and discounts are recognized in interest income using the interest method over the expected maturity term of the securities. For mortgage-backed securities, the amortization or accretion is based on estimated average lives of the securities. The lives of these securities can fluctuate based on the amount of prepayments received on the underlying collateral of the securities. The amount of prepayments varies from time to time based on the interest rate environment and the rate of turnover of mortgages.
Page 44 of 71
Derivative Financial Instruments and Hedging Activities
All derivative instruments (interest rate swap contracts) were recognized on the consolidated balance sheet at their current fair value. For derivatives designated as fair value hedges, changes in the fair value of the derivative and hedged item related to the hedged risk are recognized in earnings. Accounting Standards Codification (ASC) Topic 815 establishes the accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. ASC Topic 815 requires that changes in the derivatives fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Accounting for qualifying hedges allows a derivatives gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting.
On the date a derivative contract is entered into by the Company, the Company will designate the derivative contract as either a fair value hedge (i.e. a hedge of the fair value of a recognized asset or liability), a cash flow hedge (i.e. a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability), or a stand-alone derivative (i.e. an instrument with no hedging designation). For a derivative designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the income statement when the hedged item affects earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as other non-interest income. At inception and on an ongoing basis, the derivatives that are used in hedging transactions are evaluated as to how effective they are in offsetting changes in fair values or cash flows of hedged items.
The Company will discontinue hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting change in the fair value of the hedged item, the derivative expires or is sold, is terminated, or management determines that designation of the derivative as a hedging instrument is no longer appropriate. When hedge accounting is discontinued, the Company will continue to carry the derivative on the balance sheet at its fair value (if applicable), but will no longer adjust the hedged asset or liability for changes in fair value. The adjustments of the carrying amount of the hedged asset or liability will be accounted for in the same manner as other components of the carrying amount of that asset or liability, and the adjustments are amortized to interest income over the remaining life of the hedged item upon the termination of hedge accounting.
Income Taxes
The Company provides for current federal and state income taxes payable and for deferred taxes that result from differences between financial accounting rules and tax laws governing the timing of recognition of various income and expense items. The Company recognizes deferred income tax assets and liabilities for the future tax effects of such temporary differences based on the difference between the financial statement and tax bases of the existing assets and liabilities using the statutory rate expected in the years in which the differences are expected to reverse. The effect on deferred taxes of any enacted change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established to the extent necessary to reduce the deferred tax asset to the level at which it is more likely than not that the tax assets or benefits will be realized. Realization of tax benefits for deductible temporary differences and loss carryforwards depends on having sufficient taxable income of an appropriate character within the carryback and carryforward period and that current tax law will allow for the realization of those tax benefits.
The Company is required to account for uncertainty associated with the tax positions it has taken or expects to be taken on past, current and future tax returns. Where there may be a degree of uncertainty as to the tax realization of an item, the Company may only record the tax effects (expense or benefits) from an uncertain tax position in the consolidated financial statements if, based on its merits, the position is more likely than not to be sustained on audit by the taxing authorities. Management does not believe that it has any material uncertain tax positions taken to date that are not more likely than not to be realized. Interest and penalties related to uncertain tax positions are recorded as part of other operating expense.
Page 45 of 71
RESULTS OF OPERATIONS
Key Performance Measures
The following table presents key performance measures for the periods indicated and the dollar and percentage changes between the periods (dollars in thousands, except per share data):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
Amounts | Increase (Decrease) |
Amounts | Increase (Decrease) |
|||||||||||||||||||||||||||||
2016 | 2015 | $ | % | 2016 | 2015 | $ | % | |||||||||||||||||||||||||
Net Income Available to Common Shareholders |
$ | 6,338 | $ | 4,955 | $ | 1,383 | 27.91 | % | $ | 12,322 | $ | 8,882 | $ | 3,440 | 38.73 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Earnings per share |
||||||||||||||||||||||||||||||||
Basic |
$ | 0.37 | $ | 0.30 | $ | 0.07 | 23.33 | % | $ | 0.72 | $ | 0.54 | $ | 0.18 | 33.33 | % | ||||||||||||||||
Diluted |
$ | 0.36 | $ | 0.29 | $ | 0.07 | 24.14 | % | $ | 0.71 | $ | 0.53 | $ | 0.18 | 33.96 | % | ||||||||||||||||
Return on average assets (1) |
0.92 | % | 0.82 | % | 0.10 | % | 12.20 | % | 0.90 | % | 0.76 | % | 0.14 | % | 18.42 | % | ||||||||||||||||
Return on average tangible common equity (2) |
10.93 | % | 10.00 | % | 0.93 | % | 9.30 | % | 10.85 | % | 9.13 | % | 1.72 | % | 18.84 | % | ||||||||||||||||
Net interest margin (3) |
3.81 | % | 3.87 | % | (0.06 | )% | (1.55 | )% | 3.79 | % | 3.91 | % | (0.12 | )% | (3.07 | )% | ||||||||||||||||
Efficiency ratio (4) |
55.42 | % | 61.20 | % | (5.78 | )% | (9.44 | )% | 56.56 | % | 62.63 | % | (6.07 | )% | (9.69 | )% |
(1) | Return on average assets is calculated by dividing net income available to common shareholders by the average assets for the period. |
(2) | Return on average tangible common equity is calculated by dividing the Companys net income available to common shareholders by average tangible common equity for the period. See the tables for return on average tangible common equity calculation and reconciliation to average common equity. |
(3) | Net interest margin represents net interest income as a percent of interest earning assets. |
(4) | Efficiency ratio represents non-interest expense as a percent of net interest income plus non-interest income, excluding gain on sale of securities, net. |
Average Tangible Common Equity (TCE) Calculation and Reconciliation to Total Average Shareholders Equity
The Company utilizes the term TCE, a non-GAAP financial measure. The Companys management believes TCE is useful because it is a measure utilized by both regulators and market analysts in evaluating the Companys financial condition and capital strength. TCE represents common shareholders equity less goodwill and certain intangible assets. Return on Average Tangible Common Equity represents annualized net income available to common shareholders as a percent of average tangible common equity. A calculation of the Companys Return on Average Tangible Common Equity is provided in the table below for the periods indicated (dollars in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Average Tangible Common Equity Calculation |
||||||||||||||||
Total average shareholders equity |
$ | 322,033 | $ | 287,930 | $ | 317,522 | $ | 285,430 | ||||||||
Less: Average serial preferred stock |
17,126 | 16,331 | 17,107 | 16,209 | ||||||||||||
Less: Average goodwill |
64,603 | 63,950 | 64,603 | 63,963 | ||||||||||||
Less: Average core deposit and leasehold right intangibles |
7,144 | 8,887 | 7,330 | 9,120 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Average Tangible Common Equity |
$ | 233,160 | $ | 198,762 | $ | 228,482 | $ | 196,138 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Annualized Net Income Available to Common Shareholders |
$ | 25,491 | $ | 19,874 | $ | 24,779 | $ | 17,911 | ||||||||
Return on Average Tangible Common Equity |
10.93 | % | 10.00 | % | 10.85 | % | 9.13 | % |
Page 46 of 71
Operations Performance Summary
Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015
Net income available to common shareholders for the three months ended June 30, 2016 was $6.3 million, or $0.36 per diluted share, compared to $5.0 million, or $0.29 per diluted share for the three months ended June 30, 2015. The $1.3 million increase, or 28%, was primarily due to a $2.5 million increase in loan interest income, which is the result of the Companys strong organic loan growth since the prior period. In addition, the Company recorded no merger expenses during the period, compared to $112 thousand for the three months ended June 30, 2015. Non-interest income decreased by $120 thousand or 3.9% and non-interest expense had a modest increase of $177 thousand, or 1.2%. Salaries and other benefits expense increased $557 thousand, or 6.6%, as the Companys active full-time equivalent employees grew to 280 at June 30, 2016, an increase of 17 from June 30, 2015. Increase in salaries and other benefits were offset by a decrease of $276 in other operating expenses, the largest of which was a $101 thousand reduction in the amortization of the core deposit intangibles. The increase in income tax expense is directionally consistent with the increase in profitability while the effective tax rates are comparable for both periods.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Net income available to common shareholders for the six months ended June 30, 2016 was $12 million, or $0.71 per diluted share, compared to $8.9 million, or $0.53 per diluted share for the six months ended June 30, 2015. The $3.4 million increase, or 38.7%, was primarily due to a $5.2 million increase in loan interest income driven by a 13% increase in average loan balance since the prior period. Non-interest income increased slightly by $92 thousand or 1.6% while non-interest expense had an increase of $451 thousand, or 1.5%. Salaries and other benefits expense increased $1.2 million, or 7.2%, as the Companys active full-time equivalent employees grew to 280 at June 30, 2016, an increase of 17 from June 30, 2015, although seven employees joined the Company near the end of the second quarter of 2016. Increase in salaries and other benefits were offset by a decrease of $376 thousand in legal and professional expenses, a $352 thousand decrease in merger expense, and a $465 thousand decrease in other operating expense, the largest of which was a $202 thousand reduction in the amortization of the core deposit intangibles. The increase in income tax expense is directionally consistent with the increase in profitability while the effective tax rates are comparable for both periods.
Page 47 of 71
Average Balances, Interest Income and Expense, Yields and Rates
Three and Six Months Ended June 30, 2016 and 2015
The following tables present the Companys average balance sheets, together with the total dollar amounts of interest income and interest expense and the weighted average interest yield/rate for the periods presented. All average balances are daily average balances (dollars in thousands).
Three Months Ended | ||||||||||||||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||||||||||||||
Average Balance |
Interest | Average Yield/Rate (6) |
Average Balance |
Interest | Average Yield/Rate (6) |
|||||||||||||||||||
Interest Earning Assets: |
||||||||||||||||||||||||
Deposits in other financial institutions |
$ | 274,531 | $ | 417 | 0.60 | % | $ | 265,123 | $ | 246 | 0.37 | % | ||||||||||||
Investment securities (1) |
374,888 | 1,415 | 1.51 | % | 265,367 | 1,051 | 1.58 | % | ||||||||||||||||
Loans (2) |
1,908,945 | 23,165 | 4.88 | % | 1,673,185 | 20,644 | 4.95 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest earning assets |
2,558,364 | 24,997 | 3.93 | % | 2,203,675 | 21,941 | 3.99 | % | ||||||||||||||||
Non-interest earning assets |
209,342 | 212,825 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Assets |
$ | 2,767,706 | $ | 2,416,500 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Interest Bearing Liabilities: |
||||||||||||||||||||||||
Interest bearing transaction accounts |
$ | 288,384 | $ | 99 | 0.14 | % | $ | 254,843 | $ | 98 | 0.15 | % | ||||||||||||
Money market and savings deposits |
740,117 | 484 | 0.26 | % | 693,090 | 408 | 0.24 | % | ||||||||||||||||
Certificates of deposit |
53,460 | 31 | 0.23 | % | 60,469 | 46 | 0.31 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest bearing deposits |
1,081,961 | 614 | 0.23 | % | 1,008,402 | 552 | 0.22 | % | ||||||||||||||||
Securities sold under agreements to repurchase |
25,223 | 14 | 0.22 | % | 12,571 | 7 | 0.22 | % | ||||||||||||||||
Subordinated debentures |
9,758 | 120 | 4.86 | % | 9,598 | 109 | 4.49 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest bearing liabilities |
1,116,942 | 748 | 0.27 | % | 1,030,571 | 668 | 0.26 | % | ||||||||||||||||
Non-interest bearing demand deposits |
1,312,833 | 1,081,090 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total funding sources |
2,429,775 | 2,111,661 | ||||||||||||||||||||||
Non-interest bearing liabilities |
15,901 | 16,909 | ||||||||||||||||||||||
Shareholders Equity |
322,030 | 287,930 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Liabilities and Shareholders Equity |
$ | 2,767,706 | $ | 2,416,500 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Excess of interest earning assets over funding sources |
$ | 128,589 | $ | 92,014 | ||||||||||||||||||||
Net interest income |
$ | 24,249 | $ | 21,273 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Net interest rate spread (3) |
3.66 | % | 3.73 | % | ||||||||||||||||||||
Net interest margin (4) |
3.81 | % | 3.87 | % | ||||||||||||||||||||
Core net interest margin (5) |
3.67 | % | 3.79 | % |
(1) | Average balances of investment securities available-for-sale are presented on an amortized cost basis and thus do not include the unrealized market gain or loss on the securities. |
(2) | Average balances of loans are calculated net of deferred loan fees and fair value discounts, but would include non-accrual loans which have a zero yield. |
(3) | Net interest rate spread represents the yield earned on average total interest earning assets less the rate paid on average total interest bearing liabilities. |
(4) | Net interest margin is computed by dividing net interest income by average total interest earning assets. |
(5) | Core net interest margin is computed by dividing annualized net interest income, excluding accelerated accretion of fair value discounts earned on early loan payoffs of acquired loans and interest recovered or reversed on non-accrual loans or other nonrecurring items based on managements judgement, by average total interest-earning assets. See the reconciliation table for core net interest margin. |
(6) | Annualized. |
Page 48 of 71
Six Months Ended | ||||||||||||||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||||||||||||||
Average Balance |
Interest | Average Yield/Rate (6) |
Average Balance |
Interest | Average Yield/Rate (6) |
|||||||||||||||||||
Interest Earning Assets: |
||||||||||||||||||||||||
Deposits in other financial institutions |
$ | 287,967 | $ | 856 | 0.59 | % | $ | 231,481 | $ | 448 | 0.38 | % | ||||||||||||
Investment securities (1) |
363,909 | 2,647 | 1.45 | % | 268,418 | 2,231 | 1.66 | % | ||||||||||||||||
Loans (2) |
1,879,074 | 45,743 | 4.90 | % | 1,662,055 | 40,550 | 4.92 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest earning assets |
2,530,950 | 49,246 | 3.91 | % | 2,161,954 | 43,229 | 4.03 | % | ||||||||||||||||
Non-interest earning assets |
211,959 | 207,466 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Assets |
$ | 2,742,909 | $ | 2,369,420 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Interest Bearing Liabilities: |
||||||||||||||||||||||||
Interest bearing transaction accounts |
$ | 279,590 | $ | 198 | 0.14 | % | $ | 246,577 | $ | 198 | 0.16 | % | ||||||||||||
Money market and savings deposits |
733,399 | 995 | 0.27 | % | 672,023 | 791 | 0.24 | % | ||||||||||||||||
Certificates of deposit |
54,690 | 64 | 0.24 | % | 62,196 | 97 | 0.31 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest bearing deposits |
1,067,679 | 1,257 | 0.24 | % | 980,796 | 1,086 | 0.22 | % | ||||||||||||||||
Securities sold under agreements to repurchase |
22,882 | 25 | 0.22 | % | 11,671 | 12 | 0.21 | % | ||||||||||||||||
Subordinated debentures |
9,739 | 237 | 4.81 | % | 9,583 | 216 | 4.46 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest bearing liabilities |
1,100,300 | 1,519 | 0.27 | % | 1,002,050 | 1,314 | 0.26 | % | ||||||||||||||||
Non-interest bearing demand deposits |
1,308,925 | 1,063,958 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total funding sources |
2,409,225 | 2,066,008 | ||||||||||||||||||||||
Non-interest bearing liabilities |
16,162 | 17,982 | ||||||||||||||||||||||
Shareholders Equity |
317,522 | 285,430 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Liabilities and Shareholders Equity |
$ | 2,742,909 | $ | 2,369,420 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Excess of interest earning assets over funding sources |
$ | 121,725 | $ | 95,946 | ||||||||||||||||||||
Net interest income |
$ | 47,727 | $ | 41,915 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Net interest rate spread (3) |
3.64 | % | 3.77 | % | ||||||||||||||||||||
Net interest margin (4) |
3.79 | % | 3.91 | % | ||||||||||||||||||||
Core net interest margin (5) |
3.67 | % | 3.86 | % |
(1) | Average balances of investment securities available-for-sale are presented on an amortized cost basis and thus do not include the unrealized market gain or loss on the securities. |
(2) | Average balances of loans are calculated net of deferred loan fees and fair value discounts, but would include non-accrual loans which have a zero yield. |
(3) | Net interest rate spread represents the yield earned on average total interest earning assets less the rate paid on average total interest bearing liabilities. |
(4) | Net interest margin is computed by dividing net interest income by average total interest earning assets. |
(5) | Core net interest margin is computed by dividing annualized net interest income, excluding accelerated accretion of fair value discounts earned on early loan payoffs of acquired loans and interest recovered or reversed on non-accrual loans or other nonrecurring items based on managements judgement, by average total interest-earning assets. See the reconciliation table for core net interest margin. |
(6) | Annualized. |
Page 49 of 71
Net Changes in Average Balances, Composition, Yields and Rates
Three and Six Months Ended June 30, 2016 and 2015
The following tables set forth the composition of average interest earning assets and average interest bearing liabilities by category and by the percentage of each category to the total for the periods indicated, including the change in average balance, composition, and yield/rate between these respective periods (dollars in thousands):
Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||
2016 | 2015 | Increase (Decrease) | ||||||||||||||||||||||||||||||||||
Average Balance |
% of Total |
Average Yield/ Rate (6) |
Average Balance |
% of Total |
Average Yield/ Rate (6) |
Average Balance |
% of Total |
Average Yield/ Rate (6) |
||||||||||||||||||||||||||||
Interest Earning Assets: |
||||||||||||||||||||||||||||||||||||
Deposits in other financial institutions |
$ | 274,531 | 10.7 | % | 0.60 | % | $ | 265,123 | 12.0 | % | 0.37 | % | $ | 9,408 | (1.3 | )% | 0.23 | % | ||||||||||||||||||
Investment securities (1) |
374,888 | 14.7 | % | 1.51 | % | 265,367 | 12.0 | % | 1.58 | % | 109,521 | 2.7 | % | (0.07 | )% | |||||||||||||||||||||
Loans (2) |
1,908,945 | 74.6 | % | 4.88 | % | 1,673,185 | 75.9 | % | 4.95 | % | 235,760 | (1.3 | )% | (0.07 | )% | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total interest earning assets |
$ | 2,558,364 | 100 | % | 3.93 | % | $ | 2,203,675 | 100.0 | % | 3.99 | % | $ | 354,689 | (0.06 | )% | ||||||||||||||||||||
Interest Bearing Liabilities: |
||||||||||||||||||||||||||||||||||||
Non-interest bearing demand deposits |
$ | 1,312,833 | 54.0 | % | $ | 1,081,090 | 51.2 | % | $ | 231,743 | 2.8 | % | ||||||||||||||||||||||||
Interest bearing transaction accounts |
288,384 | 11.9 | % | 0.14 | % | 254,843 | 12.1 | % | 0.15 | % | 33,541 | (0.2 | )% | (0.01 | )% | |||||||||||||||||||||
Money market and savings deposits |
740,117 | 30.5 | % | 0.26 | % | 693,090 | 32.8 | % | 0.24 | % | 47,027 | (2.3 | )% | 0.02 | % | |||||||||||||||||||||
Certificates of deposit |
53,460 | 2.2 | % | 0.23 | % | 60,469 | 2.9 | % | 0.31 | % | (7,009 | ) | (0.7 | )% | (0.08 | )% | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total deposits |
2,394,794 | 98.6 | % | 0.10 | % | 2,089,492 | 99.0 | % | 0.11 | % | 305,302 | (0.4 | )% | (0.01 | )% | |||||||||||||||||||||
Securities sold under agreements to repurchase |
25,223 | 1.0 | % | 0.22 | % | 12,571 | 0.6 | % | 0.22 | % | 12,652 | 0.4 | % | | % | |||||||||||||||||||||
Subordinated debentures |
9,758 | 0.4 | % | 4.86 | % | 9,598 | 0.5 | % | 4.49 | % | 160 | (0.1 | )% | 0.37 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total borrowings |
34,981 | 1.4 | % | 1.54 | % | 22,169 | 1.0 | % | 2.10 | % | 12,812 | 0.4 | % | (0.56 | )% | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total funding sources |
$ | 2,429,775 | 100.0 | % | 0.12 | % | $ | 2,111,661 | 100.0 | % | 0.13 | % | $ | 318,114 | (0.01 | )% | ||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Excess of interest earning assets over funding sources |
$ | 128,589 | $ | 92,014 | $ | 36,575 | ||||||||||||||||||||||||||||||
Net interest rate spread (3) |
3.66 | % | 3.73 | % | (0.07 | )% | ||||||||||||||||||||||||||||||
Net interest margin (4) |
3.81 | % | 3.87 | % | (0.06 | )% | ||||||||||||||||||||||||||||||
Core net interest margin (5) |
3.67 | % | 3.79 | % | (0.12 | )% |
(1) | Average balances of investment securities available-for-sale are presented on an amortized cost basis and thus do not include the unrealized market gain or loss on the securities. |
(2) | Average balances of loans are calculated net of deferred loan fees and fair value discounts, but would include non-accrual loans which have a zero yield. |
(3) | Net interest rate spread represents the yield earned on average total interest earning assets less the rate paid on average total interest bearing liabilities. |
(4) | Net interest margin is computed by dividing net interest income by average total interest earning assets. |
(5) | Core net interest margin is computed by dividing annualized net interest income, excluding accelerated accretion of fair value discounts earned on early loan payoffs of acquired loans and interest recovered or reversed on non-accrual loans or other nonrecurring items based on managements judgement, by average total interest-earning assets. See the reconciliation table for core net interest margin. |
(6) | Annualized. |
Page 50 of 71
Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||
2016 | 2015 | Increase (Decrease) | ||||||||||||||||||||||||||||||||||
Average Balance |
% of Total |
Average Yield/ Rate (6) |
Average Balance |
% of Total |
Average Yield/ Rate (6) |
Average Balance |
% of Total |
Average Yield/ Rate (6) |
||||||||||||||||||||||||||||
Interest Earning Assets: |
||||||||||||||||||||||||||||||||||||
Deposits in other financial institutions |
$ | 287,967 | 11.4 | % | 0.59 | % | $ | 231,481 | 10.7 | % | 0.38 | % | $ | 56,486 | 0.7 | % | 0.21 | % | ||||||||||||||||||
Investment securities (1) |
363,909 | 14.4 | % | 1.45 | % | 268,418 | 12.4 | % | 1.66 | % | 95,491 | 2.0 | % | (0.21 | )% | |||||||||||||||||||||
Loans (2) |
1,879,074 | 74.2 | % | 4.90 | % | 1,662,055 | 76.9 | % | 4.92 | % | 217,019 | (2.7 | )% | (0.02 | )% | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total interest earning assets |
$ | 2,530,950 | 100.0 | % | 3.91 | % | $ | 2,161,954 | 100.0 | % | 4.03 | % | $ | 368,996 | (0.12 | )% | ||||||||||||||||||||
Interest Bearing Liabilities: |
||||||||||||||||||||||||||||||||||||
Non-interest bearing demand deposits |
$ | 1,308,925 | 54.3 | % | $ | 1,063,958 | 51.5 | % | $ | 244,967 | 2.8 | % | ||||||||||||||||||||||||
Interest bearing transaction accounts |
279,590 | 11.6 | % | 0.14 | % | 246,577 | 11.9 | % | 0.16 | % | 33,013 | (0.3 | )% | (0.02 | )% | |||||||||||||||||||||
Money market and savings deposits |
733,399 | 30.4 | % | 0.27 | % | 672,023 | 32.5 | % | 0.24 | % | 61,376 | (2.1 | )% | 0.03 | % | |||||||||||||||||||||
Certificates of deposit |
54,690 | 2.3 | % | 0.24 | % | 62,196 | 3.0 | % | 0.31 | % | (7,506 | ) | (0.7 | )% | (0.07 | )% | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total deposits |
2,376,604 | 98.6 | % | 0.11 | % | 2,044,754 | 99.0 | % | 0.11 | % | 331,850 | (0.4 | )% | | % | |||||||||||||||||||||
Securities sold under agreements to repurchase |
22,882 | 1.0 | % | 0.22 | % | 11,671 | 0.6 | % | 0.21 | % | 11,211 | 0.4 | % | 0.01 | % | |||||||||||||||||||||
Subordinated debentures |
9,739 | 0.4 | % | 4.81 | % | 9,583 | 0.5 | % | 4.46 | % | 156 | (0.1 | )% | 0.35 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total borrowings |
32,621 | 1.4 | % | 1.62 | % | 21,254 | 1.0 | % | 2.15 | % | 11,367 | 0.4 | % | (0.53 | )% | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total funding sources |
$ | 2,409,225 | 100.0 | % | 0.13 | % | $ | 2,066,008 | 100.0 | % | 0.13 | % | $ | 343,217 | | % | ||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Excess of interest earning assets over funding sources |
$ | 121,725 | $ | 95,946 | $ | 25,779 | ||||||||||||||||||||||||||||||
Net interest rate spread (3) |
3.64 | % | 3.77 | % | (0.13 | )% | ||||||||||||||||||||||||||||||
Net interest margin (4) |
3.79 | % | 3.91 | % | (0.12 | )% | ||||||||||||||||||||||||||||||
Core net interest margin (5) |
3.67 | % | 3.86 | % | (0.19 | )% |
(1) | Average balances of investment securities available-for-sale are presented on an amortized cost basis and thus do not include the unrealized market gain or loss on the securities. |
(2) | Average balances of loans are calculated net of deferred loan fees and fair value discounts, but would include non-accrual loans which have a zero yield. |
(3) | Net interest rate spread represents the yield earned on average total interest earning assets less the rate paid on average total interest bearing liabilities. |
(4) | Net interest margin is computed by dividing net interest income by average total interest earning assets. |
(5) | Core net interest margin is computed by dividing annualized net interest income, excluding accelerated accretion of fair value discounts earned on early loan payoffs of acquired loans and interest recovered or reversed on non-accrual loans or other nonrecurring items based on managements judgement, by average total interest-earning assets. See the reconciliation table for core net interest margin. |
(6) | Annualized. |
Page 51 of 71
Volume and Rate Variance Analysis of Net Interest Income
Three and Six Months Ended June 30, 2016 and 2015
The following table presents the dollar amount of changes in interest income and interest expense due to changes in average balances of interest earning assets and interest bearing liabilities and changes in interest rates. For each category of interest earning assets and interest bearing liabilities, information is provided on changes attributable to: (i) changes in volume (i.e. changes in average balance multiplied by prior period rate) and (ii) changes in rate (i.e. changes in rate multiplied by prior period average balance). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately based on the absolute dollar amounts of the changes due to volume and rate (dollars in thousands):
Three Months Ended June 30, 2016 vs. 2015 |
||||||||||||
Increase (Decrease) Due To |
||||||||||||
Volume | Rate | Total | ||||||||||
Interest Income |
||||||||||||
Loans |
$ | 2,846 | $ | (325 | ) | $ | 2,521 | |||||
Deposits in other financial institutions |
11 | 160 | 171 | |||||||||
Investment securities |
428 | (64 | ) | 364 | ||||||||
|
|
|
|
|
|
|||||||
Total interest income |
3,285 | (229 | ) | 3,056 | ||||||||
|
|
|
|
|
|
|||||||
Interest Expense |
||||||||||||
Interest bearing transaction accounts |
25 | (24 | ) | 1 | ||||||||
Money market and savings deposits |
35 | 41 | 76 | |||||||||
Certificates of deposit |
(5 | ) | (10 | ) | (15 | ) | ||||||
|
|
|
|
|
|
|||||||
Total deposits |
55 | 7 | 62 | |||||||||
Securities sold under agreements to repurchase |
7 | | 7 | |||||||||
Subordinated debentures, net |
2 | 9 | 11 | |||||||||
|
|
|
|
|
|
|||||||
Total borrowings |
9 | 9 | 18 | |||||||||
|
|
|
|
|
|
|||||||
Total interest expense |
64 | 16 | 80 | |||||||||
|
|
|
|
|
|
|||||||
Net Interest Income |
$ | 3,221 | $ | (245 | ) | $ | 2,976 | |||||
|
|
|
|
|
|
|||||||
Six Months Ended June 30, 2016 vs. 2015 |
||||||||||||
Increase (Decrease) Due To |
||||||||||||
Volume | Rate | Total | ||||||||||
Interest Income |
||||||||||||
Loans |
$ | 5,382 | $ | (189 | ) | $ | 5,193 | |||||
Deposits in other financial institutions |
108 | 300 | 408 | |||||||||
Investment securities |
873 | (457 | ) | 416 | ||||||||
|
|
|
|
|
|
|||||||
Total interest income |
6,363 | (346 | ) | 6,017 | ||||||||
|
|
|
|
|
|
|||||||
Interest Expense |
||||||||||||
Interest bearing transaction accounts |
26 | (26 | ) | | ||||||||
Money market and savings deposits |
86 | 118 | 204 | |||||||||
Certificates of deposit |
(13 | ) | (20 | ) | (33 | ) | ||||||
|
|
|
|
|
|
|||||||
Total deposits |
99 | 72 | 171 | |||||||||
Securities sold under agreements to repurchase |
12 | 1 | 13 | |||||||||
Subordinated debentures, net |
4 | 17 | 21 | |||||||||
|
|
|
|
|
|
|||||||
Total borrowings |
16 | 18 | 34 | |||||||||
|
|
|
|
|
|
|||||||
Total interest expense |
115 | 90 | 205 | |||||||||
|
|
|
|
|
|
|||||||
Net Interest Income |
$ | 6,248 | $ | (436 | ) | $ | 5,812 | |||||
|
|
|
|
|
|
Page 52 of 71
Reconciliation of Core Net Interest Margin to Net Interest Margin
The following table represents a reconciliation of GAAP net interest margin to core net interest margin (a non-GAAP financial measure) used by the Company. The table presents the information for the periods indicated (dollars in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net Interest Income |
$ | 24,249 | $ | 21,273 | $ | 47,727 | $ | 41,915 | ||||||||
Less: |
||||||||||||||||
Accelerated accretion of fair value adjustment on early loan payoffs and other associated payoff benefits on acquired loans |
546 | 474 | 1,074 | 584 | ||||||||||||
Income recognition due to early payoff of organic loans |
359 | | 482 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Core Net Interest Income |
$ | 23,344 | $ | 20,799 | $ | 46,171 | $ | 41,331 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net interest margin |
3.81 | % | 3.87 | % | 3.79 | % | 3.91 | % | ||||||||
Core net interest margin |
3.67 | % | 3.79 | % | 3.67 | % | 3.86 | % |
Composition of Net Deferred Loan Fees, Costs and Fair Value Discounts
The following table reflects the composition of the net deferred loan fees, costs and fair value discounts at June 30, 2016 and December 31, 2015 (dollars in thousands):
June 30, 2016 |
December 31, 2015 |
|||||||
Accretable loan discount |
$ | 12,133 | $ | 14,856 | ||||
Non-Accretable loan discount |
511 | 2,061 | ||||||
|
|
|
|
|||||
Remaining loan discount on acquired loans |
12,644 | 16,917 | ||||||
Net deferred loan fees on organic loans |
5,416 | 4,575 | ||||||
|
|
|
|
|||||
Total |
$ | 18,060 | $ | 21,492 | ||||
|
|
|
|
Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015
The net interest margin decreased 6 basis points to 3.81% for the three months ended June 30, 2016, compared to 3.87% for the three months ended June 30, 2015. The decrease in net interest margin is primarily due to average loans being a lower percentage of interest earning assets for the quarter ended June 30, 2016 than for the same quarter a year ago. Net interest margins for both quarters were positively impacted by the recognition of fair value discounts earned on early payoffs of acquired loans. For the quarter ended June 30, 2016, the Company recorded $546 thousand in discounts earned on early loan payoffs of acquired loans and other associated payoff benefits of $359 thousand, which had a positive impact on the net interest margin of 14 basis points. For the quarter ended June 30, 2015, the Company recorded $474 thousand in discounts earned on early loan payoffs of acquired loans, which had a positive impact on the net interest margin of 8 basis points.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
The net interest margin decreased 12 basis points to 3.79% for the six months ended June 30, 2016, compared to 3.91% for the six months ended June 30, 2015. The decrease in net interest margin is primarily due to average loans being a lower percentage of interest earning assets. A decline on yields on interest earning assets also contributed, especially on investment securities where the portfolio is comprised of shorter duration securities, and the first quarter of 2016 was impacted by additional premium amortization associated with SBA securities. For the six months ended June 30, 2016, the Company recorded $1.1 million in discounts earned on early loan payoffs of acquired loans and other associated payoff benefits of $359 thousand, which had a positive impact on the net interest margin of 12 basis points. For the six months ended June 30, 2015, the Company recorded $584 thousand in discounts earned on early loan payoffs of acquired loans, which had a positive impact on the net interest margin of 5 basis points.
Page 53 of 71
Provision for Loan Losses
Provision for loan losses for the three months ended June 30, 2016 was $1.1 million compared to $683 thousand for the three months ended June 30, 2015. The Company had $121 million of net organic loan growth for the quarter ended June 30, 2016, compared to $90 million for the same quarter a year ago. Net recoveries for the three months ended June 30, 2016 were $868 thousand, compared to net recoveries of $194 thousand in 2015. The loan loss provision reflects record organic loan growth and a $594 thousand specific allowance recorded for an acquired commercial and industrial loan during the second quarter of 2016.
Provision for loan losses for the six months ended June 30, 2016 was $1.7 million, compared to $2.1 million for the six months ended June 30, 2015. The Company had $212 million of net organic loan growth for the six months ended June 30, 2016, compared to $157 million for the six months ended June 30, 2015. Net recoveries for the six months ended June 30, 2016 were $1.1 million compared to net charge-offs of $612 thousand in 2015. The loan loss provision reflects record organic loan growth and a $594 thousand specific allowance recorded for an acquired commercial loan in the second quarter, with the benefit of the net recoveries year to date. See further discussion in Balance Sheet Analysis, Allowance for Loan Loss.
Non-Interest Income
The following table lists the major components of the Companys non-interest income for the periods indicated (dollars in thousands):
Three Months Ended June 30, |
Increase (Decrease) |
Six Months Ended June 30, |
Increase (Decrease) |
|||||||||||||||||||||||||||||
2016 | 2015 | $ | % | 2016 | 2015 | $ | % | |||||||||||||||||||||||||
Gain on sale of SBA loans, net |
$ | 485 | $ | 215 | $ | 270 | 125.6 | % | $ | 1,039 | $ | 638 | $ | 401 | 62.9 | % | ||||||||||||||||
Deposit account service charge income |
1,222 | 1,153 | 69 | 6.0 | % | 2,411 | 2,294 | 117 | 5.1 | % | ||||||||||||||||||||||
Letters of credit income |
295 | 174 | 121 | 69.5 | % | 565 | 319 | 246 | 77.1 | % | ||||||||||||||||||||||
Transaction referral income |
29 | 380 | (351 | ) | (92.4 | )% | 29 | 408 | (379 | ) | (92.9 | )% | ||||||||||||||||||||
Dividend income in equity securities |
219 | 498 | (279 | ) | (56.0 | )% | 370 | 697 | (327 | ) | (46.9 | )% | ||||||||||||||||||||
BOLI income |
325 | 317 | 8 | 2.5 | % | 648 | 613 | 35 | 5.7 | % | ||||||||||||||||||||||
Other non-interest income |
400 | 358 | 42 | 11.7 | % | 733 | 734 | (1 | ) | (0.1 | )% | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total Non-Interest Income |
$ | 2,975 | $ | 3,095 | $ | (120 | ) | (3.9 | )% | $ | 5,795 | $ | 5,703 | $ | 92 | 1.6 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015
Non-interest income decreased $120 thousand or 3.9% to $3.0 million for the three months ended June 30, 2016 compared to $3.1 million for the three months ended June 30, 2015. The decrease is primarily driven by a $351 thousand decrease in transaction referral income, a $279 thousand decrease in dividend income as the Company received a special dividend of $296 thousand on the capital stock from the Federal Home Loan Bank (FHLB) of San Francisco for which there was no equivalent in the three months ended June 30, 2016. These decreases were offset by a $270 thousand increase in gain on sale of SBA loans and a $69 thousand increase in deposit account service charge income, which reflects growth in areas that are central to the Companys fundamental strategy.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Non-interest income increased $92 thousand or 1.6% to $5.8 million for the six months ended June 30, 2016 compared to $5.7 million for the six months ended June 30, 2015. This change was mainly due to a $401 thousand increase in gain on sale of SBA loans, a $117 thousand increase in deposit account service charge income and a $246 thousand increase in letters of credit income, offset by a $379 thousand decrease of transactional referral income and a $327 thousand decrease of dividend income as the result of a $296 thousand special dividend from the FHLB received in the three months ended June 30, 2015.
Page 54 of 71
Non-Interest Expense
The following table lists the major components of the Companys non-interest expense for the periods indicated (dollars in thousands):
Three Months Ended June 30, |
Increase (Decrease) |
Six Months Ended June 30, |
Increase (Decrease) |
|||||||||||||||||||||||||||||
2016 | 2015 | $ | % | 2016 | 2015 | $ | % | |||||||||||||||||||||||||
Salaries and employee benefits |
$ | 9,030 | $ | 8,473 | $ | 557 | 6.6 | % | $ | 18,349 | $ | 17,111 | $ | 1,238 | 7.2 | % | ||||||||||||||||
Stock based compensation expense |
891 | 807 | 84 | 10.4 | % | 1,725 | 1,320 | 405 | 30.7 | % | ||||||||||||||||||||||
Occupancy |
1,439 | 1,415 | 24 | 1.7 | % | 2,875 | 2,835 | 40 | 1.4 | % | ||||||||||||||||||||||
Data processing |
635 | 635 | | 0 | % | 1,253 | 1,276 | (23 | ) | (1.8 | )% | |||||||||||||||||||||
Legal and professional |
651 | 656 | (5 | ) | (0.8 | )% | 1,126 | 1,502 | (376 | ) | (25.0 | )% | ||||||||||||||||||||
FDIC deposit assessment |
359 | 351 | 8 | 2.3 | % | 709 | 684 | 25 | 3.7 | % | ||||||||||||||||||||||
Merger related expenses |
| 112 | (112 | ) | (100 | )% | | 352 | (352 | ) | (100 | )% | ||||||||||||||||||||
OREO loss and expenses |
4 | 20 | (16 | ) | (80.0 | )% | 83 | 26 | 57 | 219.2 | % | |||||||||||||||||||||
Office services expenses |
320 | 407 | (87 | ) | (21.4 | )% | 723 | 821 | (98 | ) | (11.9 | )% | ||||||||||||||||||||
Core deposit intangible amortization |
321 | 422 | (101 | ) | (23.9 | )% | 642 | 843 | (201 | ) | (23.8 | )% | ||||||||||||||||||||
Other operating expenses |
1,439 | 1,614 | (175 | ) | (10.8 | )% | 2,791 | 3,055 | (264 | ) | (8.6 | )% | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total Non-Interest Expense |
$ | 15,089 | $ | 14,912 | $ | 177 | 1.2 | % | $ | 30,276 | $ | 29,825 | $ | 451 | 1.5 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015
Non-interest expense increased modestly by $177 thousand or 1.2% to $15.1 million for the three months ended June 30, 2016 compared to $14.9 million for the three months ended June 30, 2015. The increase was largely related to increases in salaries and employee benefits, as the Companys active full-time equivalent employees grew to 280 at June 30, 2016, an increase of 17 from the year-ago period end. The increase in salaries and employee benefits was offset by a $101 thousand reduction in the amortization of the core deposit intangibles which is based on an accelerated amortization method, as well as modest declines in other expenses that fluctuate from quarter to quarter. Additionally, there were no merger expenses in the three months ended June 30, 2016, which were $112 thousand in the year-ago quarter.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Non-interest expense increased $451 thousand or 1.5% to $30.3 million for the six months ended June 30, 2016 compared to $29.8 million for the six months ended June 30, 2015. Overall, the increase was minimal. The increase was largely related to increases in salaries and employee benefits, as the Companys active full-time equivalent employees grew to 280 at June 30, 2016, an increase of 17 from the year-ago period end. The $405 thousand increase in stock based compensation expense is primarily due to the timing of the expense for the Management Incentive Plan in 2015 which started in April, compared to 2016 which started in January, impacting the comparability between the two periods. The increase in salaries and employee benefits was offset by a $376 thousand decrease in legal and professional fees, a $352 thousand decrease in merger expenses and a $201 thousand decrease in core deposit intangible amortization.
Income Taxes
The effective tax rate for the three months ended June 30, 2016 and June 30, 2015 was 40.0%. The effective tax rate for the six months ended June 30, 2016 was 40.0% compared to 39.6% for the six months ended June 30, 2015. The Companys effective tax rate is impacted by BOLI income and interest income from tax exempt securities and loans which are excluded from taxable income and deductions from disqualifying disposition of incentive stock options. In addition, the Company has invested in Qualified Affordable Housing Projects LIHTC that generate tax credits and benefits for the Company. The Company operates in the Federal and California jurisdictions and the blended statutory tax rate for Federal and California income taxes is 42.05%.
Page 55 of 71
FINANCIAL CONDITION
Balance Sheet Analysis
Total assets increased $142 million during the six months ended June 30, 2016, to $2.8 billion with an increase of $15 million in cash and cash equivalents, an increase of $17 million in investment securities, and an increase of $118 million in loans. The increase in loans from the end of the prior year was due to organic loan growth. Net organic loan growth during the period was $212 million, partially offset by $94 million of pay downs in the acquired loan portfolios from the COSB, PC Bancorp acquisitions and 1st Enterprise merger.
Funding the asset growth for the Company for the first six months of 2016 was the growth in deposits of $109 million and net income of $13 million. Further, the deposit growth of $109 million is the result of a $49 million increase in non-interest bearing deposits and a $68 million increase in money market and savings deposits. Non-interest bearing deposits represented 56% of total deposits at both June 30, 2016, and December 31, 2015.
Lending
The following table presents the composition of the loan portfolio at the dates indicated (dollars in thousands):
June 30, 2016 |
December 31, 2015 |
|||||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||||
Commercial and Industrial Loans: |
$ | 522,074 | 27 | % | $ | 537,368 | 29 | % | ||||||||
Loans Secured by Real Estate: |
||||||||||||||||
Owner-Occupied Nonresidential Properties |
425,515 | 22 | % | 407,979 | 23 | % | ||||||||||
Other Nonresidential Properties |
582,204 | 30 | % | 533,168 | 29 | % | ||||||||||
Construction, Land Development and Other Land |
165,963 | 9 | % | 125,832 | 7 | % | ||||||||||
1-4 Family Residential Properties |
121,971 | 6 | % | 114,525 | 6 | % | ||||||||||
Multifamily Residential Properties |
86,942 | 4 | % | 71,179 | 4 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Loans Secured by Real Estate |
1,382,595 | 71 | % | 1,252,683 | 69 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other Loans: |
46,442 | 2 | % | 43,112 | 2 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Loans |
$ | 1,951,111 | 100 | % | $ | 1,833,163 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
Page 56 of 71
The following table is a breakout of the Companys gross loans stratified by the industry concentration of the borrower by their respective NAICS code at the dates indicated (dollars in thousands):
June 30, 2016 |
December 31, 2015 |
|||||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||||
Real Estate |
$ | 969,563 | 49 | % | $ | 857,021 | 47 | % | ||||||||
Manufacturing |
167,350 | 9 | % | 174,773 | 10 | % | ||||||||||
Construction |
176,853 | 9 | % | 161,618 | 9 | % | ||||||||||
Wholesale |
118,608 | 6 | % | 134,093 | 7 | % | ||||||||||
Hotel/Lodging |
112,097 | 6 | % | 105,741 | 6 | % | ||||||||||
Finance |
91,451 | 5 | % | 87,734 | 5 | % | ||||||||||
Professional Services |
58,185 | 3 | % | 60,952 | 3 | % | ||||||||||
Healthcare |
49,592 | 3 | % | 47,293 | 3 | % | ||||||||||
Other Services |
57,363 | 3 | % | 45,002 | 3 | % | ||||||||||
Retail |
29,926 | 2 | % | 38,928 | 2 | % | ||||||||||
Restaurant/Food Service |
29,553 | 2 | % | 26,226 | 1 | % | ||||||||||
Administrative Services |
19,257 | 1 | % | 23,736 | 1 | % | ||||||||||
Transportation |
25,491 | 1 | % | 22,237 | 1 | % | ||||||||||
Information |
17,992 | 1 | % | 20,171 | 1 | % | ||||||||||
Education |
8,728 | | % | 9,244 | 1 | % | ||||||||||
Management |
7,245 | | % | 8,137 | | % | ||||||||||
Entertainment |
8,064 | | % | 6,188 | | % | ||||||||||
Other |
3,793 | | % | 4,069 | | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Loans |
$ | 1,951,111 | 100 | % | $ | 1,833,163 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
The Companys loan origination and lending activities continue to be focused primarily on direct contact with its borrowers through the Companys relationship managers and/or executive officers. Total loans were $2.0 billion at June 30, 2016, an increase of $118 million or 6.4%, from $1.8 billion at December 31, 2015. The Company had approximately $212 million of net organic loan growth, which was partially offset by approximately $94 million in loan pay downs from the acquired loan portfolios. The increase in total loans from the end of the prior year included an $18 million increase in the owner-occupied non-residential properties portfolio, a $49 million increase in the other nonresidential real estate properties portfolio, a $40 million increase in the construction, land development and other land portfolio, and a $16 million increase in the multifamily residential properties portfolio. These increases were offset by a decrease of $15 million in commercial and industrial loans. The yields on new loans originated during the first two quarters of 2016 have averaged 4.16%.
We continue to establish new relationships and expand our current business, as evidenced by our increased commercial line of credit commitments, which are up $46 million, or 5.6% from $828 million at June 30, 2015 to $874 million at June 30, 2016. Compared to December 31, 2015, commercial line of credit commitments decreased slightly by $13 million or 1% from $887 million at December 31, 2015 due to various reasons including the sale of two of our customers businesses. The Companys commercial and industrial line of credit utilization returned to 45% as of June 30, 2016, which is up from 41% at March 31, 2016, and comparable to 46% as of December 31, 2015. Due to the dynamic nature of commercial and industrial lending, actual credit utilization may experience ebbs and flows.
Commercial and industrial loans and owner-occupied real estate loans combined were $948 million or 49% of total loans at June 30, 2016, compared to $945 million or 52% at December 31, 2015. Of the total commercial and industrial loans, 20% and 19% was unsecured at June 30, 2016 and December 31, 2015, respectively.
Other non-residential loans increased by $49 million from the end of the prior year. These are loans with well-structured terms and guarantees, primarily collateralized by commercial buildings. Multifamily residential properties increased by $16 million, primarily related to a single loan in Los Angeles County.
Included in loan growth from the end of the prior year was a $40 million increase in the construction lending portfolio, which primarily consists of 1-4 single family and multifamily construction projects in Los Angeles County undertaken by customers that have long-term relationships with the Company.
Page 57 of 71
The Company had 53 commercial banking relationship managers and 10 commercial real estate relationship managers at June 30, 2016. This compares to 53 commercial banking relationship managers and 9 commercial real estate relationship managers at December 31, 2015.
The Company provides commercial loans, including working capital and equipment financing, real estate loans, including construction and consumer loans, generally to business principals, entrepreneurs and professionals. The Company currently does not offer residential mortgages to consumers other than home equity lines of credit. In addition, we have not made any loans to finance leveraged buyouts. The Companys real estate construction loans are primarily short-term loans made to finance the construction of 1-4 single family and multifamily residential properties. On occasion, the Company originates loans to finance the construction of single family residences to established developers and owner-occupiers. The Companys construction lending is to known relationships, doing projects the builder/developer has experience with, and the majority are with recourse and are rarely speculative in nature. The Companys credit approval process includes an examination of the collateral, cash flow and debt service coverage of the loan, as well as the financial condition and credit references of the borrower and guarantors, where applicable. The Companys senior management is actively involved in its lending activities, collateral valuation and review process. The Company obtains independent third party appraisals of loans secured by real property as required by applicable federal law and regulations. There is also a Board of Directors Loan Committee (BODLC) comprised of senior management and outside directors that monitors the loan portfolio on at least a quarterly basis.
The Company believes that it manages credit risk closely in its loan portfolio and uses a variety of policy and procedure guidelines and analytical tools to achieve its asset quality objectives.
We do not have any concentrations in our loan portfolio except for the level of loans that are secured by real estate and the level of loans to the real estate industry as presented in the tables above. Although the Banks real estate concentration this quarter ending June 30, 2016 exceeds 300% of total risk based capital, the Company has maintained its relationship based approach to lending which has resulted in nominal charge-off experience in the real estate portfolio since the Companys inception. Management plans to continue originating the same quality real estate loans that are currently included in its loan portfolio.
Page 58 of 71
Allowance for Loan Loss
The Allowance increased by $1.9 million, to $18 million during the quarter ended June 30, 2016, due to a provision for loan losses of $1.1 million with the benefit of net recoveries of $868 thousand. The Allowance as a percentage of total loans was 0.95% at June 30, 2016 and 0.86% at December 31, 2015. The increase in the allowance ratio is primarily due to net organic loan growth. The Allowance as a percentage of loans (excluding loan balances and the related Allowance on loans acquired through acquisition) was 1.22% and 1.25%, respectively, at June 30, 2016 and December 31, 2015. The decrease in the allowance ratio related to organic loans was directly attributable to the strong credit performance of the loan portfolio in 2016, which reflects the Companys continuing commitment to prudent underwriting and credit management.
The Companys management considered the following factors in evaluating the allowance for loan loss at June 30, 2016:
| During the six months ended June 30, 2016 there were loan recoveries of $1.1 million |
| There was one loan charge-off of $20 thousand during the six months ended June 30, 2016 |
| There were fourteen non-accrual loans totaling $2.6 million with related specific allowance of $641 thousand at June 30, 2016 |
| The overall growth and composition of the loan portfolio |
| Changes to the overall economic conditions within the markets in which the Company makes loans |
| Concentrations within the loan portfolio |
| The remaining fair value adjustments on loans acquired through acquisition |
Management has considered various material elements of potential risk within the loan portfolio, including classified credits, pools of loans with similar characteristics, economic factors, trends in the loan portfolio and changes in the Companys lending policies, procedures and underwriting criteria. In addition, management recognized the potential for unforeseen events to occur when evaluating the qualitative factors in all categories of its analysis.
The Company analyzes historical net charge-offs in various loan portfolio segments when evaluating the allowance. For loan segments without a meaningful historical loss experience, the analysis is adjusted to consider regulatory peer group loss experience in those loan segments. The loss analysis is then adjusted for qualitative factors that may have an impact on loss experience in the particular loan segments.
The Allowance and the reserve for unfunded loan commitments are significant estimates that can and do change based on managements process in analyzing the loan portfolio and on managements assumptions about specific borrowers and applicable economic and environmental conditions, among other factors. In considering all of the above factors, management believes that the Allowance at June 30, 2016 is adequate. Although the Company maintains its Allowance at a level which it considers adequate to provide for probable loan losses, there can be no assurance that such losses will not exceed the estimated amounts, thereby adversely affecting future results of operations.
The following table is a summary of the activity for the Allowance as of the dates and for the periods indicated (dollars in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Allowance for loan loss at beginning of period |
$ | 16,545 | $ | 13,247 | $ | 15,682 | $ | 12,610 | ||||||||
Provision for loan losses |
1,063 | 683 | 1,685 | 2,126 | ||||||||||||
Net (charge-offs) recoveries: |
||||||||||||||||
Charge-offs |
(20 | ) | (1 | ) | (20 | ) | (891 | ) | ||||||||
Recoveries |
888 | 195 | 1,129 | 279 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (charge-offs) recoveries |
868 | 194 | 1,109 | (612 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Allowance for loan loss at end of period |
$ | 18,476 | $ | 14,124 | $ | 18,476 | $ | 14,124 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (charge-offs) recoveries to average loans |
0.05 | % | 0.01 | % | 0.06 | % | (0.04 | )% |
Page 59 of 71
The following is a summary of our asset quality data and key ratios at the dates indicated (dollars in thousands):
June 30, 2016 |
December 31, 2015 |
|||||||
Loans originated by the Bank on non-accrual |
$ | 114 | $ | 89 | ||||
Loans acquired through acquisition that are on non-accrual |
2,463 | 1,962 | ||||||
|
|
|
|
|||||
Total non-accrual loans |
2,577 | 2,051 | ||||||
Other Real Estate Owned |
| 325 | ||||||
|
|
|
|
|||||
Total non-performing assets |
$ | 2,577 | $ | 2,376 | ||||
|
|
|
|
|||||
Net charge-offs (recoveries) year to date |
$ | (1,109 | ) | $ | 2,009 | |||
Non-accrual loans to total loans |
0.13 | % | 0.11 | % | ||||
Total non-performing assets to total assets |
0.09 | % | 0.09 | % | ||||
Allowance for loan losses to total loans |
0.95 | % | 0.86 | % | ||||
Allowance for loan losses to total loans accounted at historical cost, which excludes loans acquired by acquisition |
1.22 | % | 1.25 | % | ||||
Allowance for loan losses to non-accrual loans accounted at historical cost, which excludes non-accrual loans acquired by acquisition and related allowance |
15684 | % | 17583 | % | ||||
Allowance for loan losses to total non-accrual loans |
717 | % | 764 | % |
Deposits
The following table presents the balance of each major category of deposits at the dates indicated (dollars in thousands):
June 30, 2016 |
December 31, 2015 |
|||||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||||
Non-interest bearing demand deposits |
$ | 1,337,550 | 56 | % | $ | 1,288,085 | 56 | % | ||||||||
Interest bearing transaction accounts |
259,103 | 11 | % | 261,123 | 11 | % | ||||||||||
Money market and savings deposits |
747,490 | 31 | % | 679,081 | 30 | % | ||||||||||
Certificates of deposit |
51,598 | 2 | % | 58,502 | 3 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total deposits |
$ | 2,395,741 | 100 | % | $ | 2,286,791 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
Total deposits increased $109 million to $2.4 billion at June 30, 2016, primarily due to a $50 million increase in non-interest bearing demand deposits, and a $68 million increase in money market and savings deposits, offset by a decrease of $2 million in interest bearing transaction accounts and a decrease of $7 million in certificates of deposit. The strong growth in deposits during this period came primarily from existing relationships. Non-interest bearing deposits represented 56% of total deposits at June 30, 2016 and December 31, 2015.
Management believes one of the strengths of the Company continues to be its core deposit franchise with a cost of deposits of 0.10% for the quarter ended June 30, 2016, which was a decrease from the prior quarter. This decrease was based on rate, not mix. Furthermore, deposit costs have not risen since the December 2015 increase in the prime rate.
Page 60 of 71
LIQUIDITY
The following table provides a summary of the Banks primary and secondary liquidity levels at the dates indicated (dollars in thousands):
June 30, 2016 |
December 31, 2015 |
|||||||
Amount | Amount | |||||||
Primary Liquidity-On Balance Sheet: |
||||||||
Cash and due from banks |
$ | 42,659 | $ | 50,960 | ||||
Interest earning deposits in other financial institutions |
194,681 | 171,103 | ||||||
Investment securities available-for-sale |
334,113 | 315,785 | ||||||
Less: pledged cash and due from banks |
| | ||||||
Less: pledged investment securities |
(193,636 | ) | (197,251 | ) | ||||
|
|
|
|
|||||
Total primary liquidity |
$ | 377,817 | $ | 340,597 | ||||
|
|
|
|
|||||
Ratio of primary liquidity to total deposits |
15.8 | % | 14.9 | % | ||||
Additional Liquidity Not Included In Primary Liquidity: |
||||||||
Certificates of deposit in other financial institutions |
$ | 54,410 | $ | 56,860 | ||||
Less: Certificate of deposits pledged |
(2,731 | ) | (2,731 | ) | ||||
|
|
|
|
|||||
Total additional liquidity |
$ | 51,679 | $ | 54,129 | ||||
|
|
|
|
|||||
Secondary Liquidity-Off-Balance Sheet: |
||||||||
Available Borrowing Capacity: |
||||||||
Total secured borrowing capacity with FHLB |
$ | 684,905 | $ | 544,132 | ||||
Fed Funds borrowing lines |
72,000 | 72,000 | ||||||
Secured credit line with the FRBSF |
8,293 | 18,708 | ||||||
|
|
|
|
|||||
Total secondary liquidity |
$ | 765,198 | $ | 634,840 | ||||
|
|
|
|
As of June 30, 2016, the Companys primary overnight source of liquidity consisted of the balances reflected in the table above. The Companys primary liquidity consisted of cash and due from banks and interest earning deposits at financial institutions. The amount of funds maintained directly with the Federal Reserve included in interest earning deposits in other financial institutions was $123 million and $102 million, at June 30, 2016 and December 31, 2015, respectively. The next source of liquidity is the money market accounts at other banks. Furthermore, the Company has collateralized borrowings and unsecured borrowing facilities. In addition, the Company has $54 million of certificates of deposits in other financial institutions where the average maturity is approximately 5 months that could be utilized over time to supplement the liquidity needs of the Company.
The Companys long term source of funding has come from the liability side of the balance sheet and has historically been through the growth in non-interest bearing and interest bearing core deposits from new and existing customers. Additional sources of funds from the Companys asset side of the balance sheet include payments of principal and interest on loans and investment securities. While maturities and scheduled principal amortization on loans are a reasonably predictable source of funds, deposit flows and loan prepayments are greatly influenced by the level of interest rates, economic conditions and competition.
As an additional source of liquidity, the Company maintains credit facilities in the form of Fed Funds Borrowing Lines of $72 million with its primary correspondent banks for the purchase of overnight Federal funds. The lines are subject to availability of funds and have restrictions as to the number of days and length used during a month, $5 million of these credit facilities require the pledging of investment securities.
The Company has established a secured credit facility with the FHLB of San Francisco which allows the Bank to borrow up to 25% of the Banks total assets, which equates to a credit line of approximately $685 million at June 30, 2016. The Company currently has no outstanding borrowings with the FHLB. As of June 30, 2016, the Company had $917 million of loan collateral pledged with the FHLB. This level of loan collateral would provide the Company with $608 million in borrowing capacity. The Company also had $18 million in securities serving as collateral for an additional $17 million in borrowing capacity. Any amount of borrowings in excess of the $625 million, up to the Companys borrowing capacity of $685 million, would require the Company to pledge additional collateral. In addition, the Company must maintain a certain
Page 61 of 71
investment in the common stock of the FHLB. The Companys investment in the common stock of the FHLB is $9 million at June 30, 2016. This level of capital would allow the Company to borrow up to $340 million of the $685 million. Any advances from the FHLB in excess of the $340 million would require additional purchases of FHLB common stock.
The Company maintains a secured credit facility with the Federal Reserve Bank of San Francisco (FRBSF) which is collateralized by investment securities pledged with the FRBSF. At June 30, 2016, the Companys available borrowing capacity was $8 million.
The Company maintains investments in short term certificates of deposit with other financial institutions, with an average remaining maturity of approximately 5 months, with various balances maturing monthly. The Company had balances of $54 million and $57 million at June 30, 2016 and December 31, 2015, respectively. At June 30, 2016, $2.7 million of the Companys certificates of deposit with other financial institutions were pledged as collateral as credit support for the interest rate swap contracts and are not available as a source of liquidity.
The Companys commitments to extend credit (off-balance sheet liquidity risk) are agreements to lend funds to customers as long as there are no covenant violations as established in the loan agreement. The total commitment amounts do not necessarily represent future cash requirements. Financial instruments with off-balance sheet risk for the Company include both undisbursed loan commitments, as well as undisbursed letters of credit. The Companys exposure to extend credit was $870 million and $806 million at June 30, 2016 and December 31, 2015, respectively.
The holding company liquidity on a stand-alone basis was $8.8 million and $6.8 million, in cash on deposit at the Bank, at June 30, 2016 and December 31, 2015, respectively. Management believes this amount of cash is currently sufficient to fund the holding companys cash flow needs over at least the next twelve to twenty-four months.
Page 62 of 71
DIVIDENDS
To date, the Company has not paid any cash dividends on its common stock. Payment of stock or cash dividends in the future will depend upon earnings, liquidity, financial condition and other factors deemed relevant by our Board of Directors. Notification to the FRB is required prior to declaring and paying a dividend to shareholders that exceeds earnings for the period for which the dividend is being paid. This notification requirement is included in regulatory guidance regarding safety and soundness surrounding capital and includes other non-financial measures such as asset quality, financial condition, capital adequacy, liquidity, future earnings projections, capital planning and credit concentrations. Should the FRB object to dividend payments, the Company would be precluded from declaring and paying dividends, until approval is received or the Company no longer needs to provide notice under applicable guidance.
California law also limits the Companys ability to pay dividends. A corporation may make a distribution/dividend from retained earnings to the extent that the retained earnings exceed (a) the amount of the distribution plus (b) the amount if any, of dividends in arrears on shares with preferential dividend rights. Alternatively, a corporation may make a distribution/dividend, if, immediately after the distribution, the value of its assets equals or exceeds the sum of (a) its total liabilities plus (b) the liquidation preference of any shares which have a preference upon dissolution over the rights of shareholders receiving the distribution/dividend.
The Bank is subject to certain restrictions on the amount of dividends that may be declared without regulatory approval. Such dividends shall not exceed the lesser of the Banks retained earnings or net income for its last three fiscal years (less any distributions to the shareholder made during such period). In addition, the Bank may not pay dividends that would result in its capital being reduced below the minimum requirements for capital adequacy purposes.
The Company completed the merger with 1st Enterprise on November 30, 2014. As part of the Merger Agreement, 16,400 shares of preferred stock issued by 1st Enterprise as part of the Small Business Lending Fund (SBLF) program of the United States Department of the Treasury was converted into 16,400 CU Bancorp preferred shares with substantially identical terms. CU Bancorp Preferred Stock has a liquidation preference amount of $1 thousand per share, designated as the Companys Non-Cumulative Perpetual Preferred Stock, Series A. The U.S. Department of the Treasury is the sole holder of all outstanding shares of CU Bancorp Preferred Stock.
Dividends on the Companys Series A Preferred Stock are payable quarterly in arrears if authorized and declared by the Companys board of directors out of legally available funds, on a non-cumulative basis, on the $1 thousand per share liquidation preference amount. Dividends are payable on January 1, April 1, July 1 and October 1 of each year. The current coupon dividend rate was adjusted to 9% on March 1, 2016 through perpetuity. However, the dividend yield through November 30, 2018 approximates 7% as a result of business combination accounting. The Company may from time to time evaluate if a partial or full payment to redeem the Preferred Stock is appropriate in capital management. Dividends on the Series A Preferred Stock are non-cumulative. There is no sinking fund with respect to dividends on the Series A Preferred Stock. So long as the Companys Series A Preferred Stock remains outstanding, the Company may declare and pay dividends on the common stock only if full dividends on all outstanding shares of Series A Preferred Stock for the most recently completed dividend period have been or are contemporaneously declared and paid.
As of June 30, 2016, both CU Bancorp the holding company and the Bank had positive retained earnings and positive net income that would allow either of them to declare and pay a dividend as of June 30, 2016. However, neither the holding company nor the Bank has plans to declare and pay a cash dividend on the common stock at the current time.
The Company has a program to repurchase a portion of an employees outstanding restricted stock upon the vesting of this restricted stock, but only in amounts necessary to cover the minimum employee tax withholding obligations at the option of the restricted stockholder (employee). The Company had this program in place during all of 2015 and through the six months ending June 30, 2016. This program was designed to provide the Banks employees with the financial ability to cover their tax liability obligation associated with the vesting of their restricted stock at the date of vesting. These transactions under the State of California Corporations Code are defined as distributions to shareholders.
Page 63 of 71
REGULATORY MATTERS
Capital Resources
The Companys objective is to maintain a level of capital that will support sustained asset and loan growth, provide for anticipated credit risks, and ensure that regulatory guidelines and industry standards are met. The Company and the Bank are subject to certain minimum capital adequacy and minimum well capitalized category guidelines adopted by the FRB and the FDIC. These guidelines relate primarily to the Tier 1 leverage ratio, the Common Equity Tier 1 Ratio (CET1), the Tier 1 risk-based capital ratio, and the Total risk-based capital ratio.
On October 26, 2015, the Company filed a Form S-3 registration statement for offerings up to $100 million of certain types of securities. If drawn on, proceeds from the offering could be used for general corporate purposes. The registration statement represents capital resources available to the Company as the registration statement is deemed to be effective by the Securities Exchange Commission (SEC) and will be available for three years.
At June 30, 2016, the respective capital ratios of the Company and the Bank exceeded the minimum percentage requirements to be deemed well-capitalized for Prompt Corrective Action (PCA) purpose and the Basel III minimum capital ratios with buffer (effective January 1, 2016) under the current capital guidelines. The following tables present the regulatory capital ratios requirements and the actual capitalization levels of the Company and the Bank as of the dates indicated (dollars in thousands):
CU Bancorp
June 30, 2016 |
December 31, 2015 |
Well Capitalized |
Basel III Minimum with Buffer |
|||||||||||||
Amount | Amount | (greater than or equal to) | ||||||||||||||
Regulatory Capital Ratios: |
||||||||||||||||
Tier 1 leverage ratio |
10.00 | % | 9.67 | % | 5.0 | % | NA | |||||||||
Common Equity Tier 1 ratio |
9.69 | % | 9.61 | % | 6.5 | % | 5.125 | % | ||||||||
Total Tier 1 risk-based capital ratio |
10.85 | % | 10.85 | % | 8.0 | % | 6.625 | % | ||||||||
Total risk-based capital ratio |
11.62 | % | 11.54 | % | 10.0 | % | 8.625 | % | ||||||||
Regulatory Capital Data: |
||||||||||||||||
Common Equity Tier 1 |
$ | 241,209 | $ | 223,977 | ||||||||||||
Total Tier 1 capital |
269,937 | 252,681 | ||||||||||||||
Total risk-based capital |
289,139 | 268,971 | ||||||||||||||
Average total assets* |
2,700,320 | 2,611,774 | ||||||||||||||
Risk-weighted assets |
2,488,391 | 2,329,770 |
* | Represents the average total assets for calculation of the leverage ratio |
California United Bank
June 30, 2016 |
December 31, 2015 |
Well Capitalized |
Basel III Minimum with Buffer |
|||||||||||||
Amount | Amount | (greater than or equal to) | ||||||||||||||
Regulatory Capital Ratios: |
||||||||||||||||
Tier 1 leverage ratio |
9.59 | % | 9.34 | % | 5.0 | % | NA | |||||||||
Common Equity Tier 1 ratio |
10.41 | % | 10.47 | % | 6.5 | % | 5.125 | % | ||||||||
Total Tier 1 risk-based capital ratio |
10.41 | % | 10.47 | % | 8.0 | % | 6.625 | % | ||||||||
Total risk-based capital ratio |
11.18 | % | 11.17 | % | 10.0 | % | 8.625 | % | ||||||||
Regulatory Capital Data: |
||||||||||||||||
Common Equity Tier 1 |
$ | 259,029 | $ | 234,989 | ||||||||||||
Tier 1 capital |
259,029 | 243,989 | ||||||||||||||
Total risk-based capital |
278,230 | 260,279 | ||||||||||||||
Average total assets* |
2,700,136 | 2,612,206 | ||||||||||||||
Risk-weighted assets |
2,488,300 | 2,329,798 |
* | Represents the average total assets for calculation of the leverage ratio |
Page 64 of 71
In July 2013, the federal bank regulatory agencies adopted final regulations which revised their risk-based and leverage capital requirements for banking organizations to meet requirements of Dodd-Frank and to implement international agreements reached by the Basel Committee on Banking Supervision intended to improve both the quality and quantity of banking organizations capital (Basel III). Dodd-Frank required the Federal Reserve to apply consolidated capital requirements to depository institution holding companies that are no less stringent than those currently applied to depository institutions.
The following are among the requirements that were phased-in beginning January 1, 2015 under the new capital rules:
| an increase in the minimum Tier 1 capital ratio from 4.00% to 6.00% of risk-weighted assets; |
| a new category and a required 4.50% of risk-weighted assets ratio is established for CET1 as a subset of Tier 1 capital limited to common equity; |
| a minimum non-risk-based leverage ratio is set at 4.00%; |
| changes in the permitted composition of Tier 1 capital to exclude trust preferred securities (however, trust preferred securities issued prior to May 19, 2010 by a bank holding company with less than $15 billion in assets, such as CU Bancorp, continues to be included in Tier 1 capital, subject to a limit of 25% of Tier 1 capital elements; see further discussion below), mortgage servicing rights and certain deferred tax assets and include unrealized gains and losses on available-for-sale debt and equity securities; |
| the risk-weights of certain assets for purposes of calculating the risk-based capital ratios are changed for high volatility commercial real estate acquisition, development and construction loans, certain past due non-residential mortgage loans and certain mortgage-backed and other securities exposures; |
| an additional countercyclical capital buffer is required for larger and more complex institutions; and |
| a new additional capital conservation buffer of 2.5% of risk weighted assets over the period from 2016 to 2019 must be met to avoid limitations on the ability of the Company and the Bank to pay dividends, repurchase shares or pay discretionary bonuses. |
Including the capital conservation buffer of 2.5%, the new final capital rule will result in the following minimum ratios: (i) a Tier 1 capital ratio of 8.5%, (ii) a common equity Tier 1 capital ratio of 7.0%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement phase-in began in January 2016 at 0.625% of risk-weighted assets and will increase each year by 0.625% until fully implemented in January 2019. While the final capital rule sets higher regulatory capital standards for the Company and the Bank, bank regulators may also continue their past policies of expecting banks to maintain additional capital beyond the new minimum requirements. The implementation of the final capital rules or more stringent requirements to maintain higher levels of capital or to maintain higher levels of liquid assets could adversely impact the Companys net income and return on equity, restrict the ability to pay dividends or executive bonuses and require the raising of additional capital.
Under Dodd Frank, trust preferred securities are excluded from Tier 1 capital, unless such securities were issued prior to May 19, 2010 by a bank holding company with less than $15 billion in assets. CU Bancorp assumed approximately $12.4 million of junior subordinated debt securities issued to various business trust subsidiaries of Premier Commercial Bancorp and funded through the issuance of approximately $12.0 million of floating rate capital trust preferred securities. These junior subordinated debt securities were issued prior to May 19, 2010. Because CU Bancorp has less than $15 billion in assets, the trust preferred securities that CU Bancorp assumed from Premier Commercial Bancorp continues to be included in Tier 1 capital, subject to a limit of 25% of Tier 1 capital elements.
The Company also currently includes in its Tier 1 capital an amount of Non-Cumulative Perpetual Preferred Stock, Series A issued under the SBLF program. The U.S. Department of the Treasury is the sole holder of all outstanding shares of CU Bancorp Preferred Stock. Under the Final Rule, the CU Bancorp Preferred Stock continues to be included in Tier 1 Risk-Based Capital because non-cumulative perpetual preferred stock remained classified as Tier 1 capital following the enactment of Dodd Frank.
Page 65 of 71
Dodd-Frank Wall Street Reform and Consumer Protection Act
For a discussion regarding the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, see the Companys December 31, 2015 Form 10K, Part I, Item 1 Business Supervision and Regulation Legislation and Regulatory Developments Dodd Frank Wall Street Reform and Consumer Protection Act.
Number of Employees
The number of active full-time equivalent employees increased from 266 at December 31, 2015 to 280 at June 30, 2016.
Page 66 of 71
ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk |
The Companys primary market risk is interest rate risk. Interest rate risk is the potential for economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income. Management realizes certain risks are inherent and that the goal is to identify and minimize the risks. To mitigate interest rate risk, the structure of the Companys balance sheet is managed with the objective of correlating the movements of interest rates on loans and investments with those of deposits and borrowings.
The Companys exposure to interest rate risk is reviewed by the Companys management Asset/Liability Committee formally on a quarterly basis and on an ongoing basis. The main tool used to monitor interest rate risk is a dynamic simulation model that quantifies the estimated exposure of net interest income to sustained interest rate changes. The simulation model estimates the impact of changing interest rates on interest income from all interest earning assets and interest expense paid on all interest bearing liabilities reflected on the Companys balance sheet. This sensitivity analysis is compared to the Companys policy limits, which specify a maximum tolerance level for net interest income exposure over a one-year horizon assuming no balance sheet growth, given a 100 and 400 basis point upward and 200 basis point downward shift in interest rates.
At June 30, 2016, the Company had nineteen pay-fixed, receive-variable interest rate contracts that were designed to convert fixed rate loans into variable rate loans. Seventeen of these swap contacts are designated as fair value hedges. For additional information on these interest rate contracts, see Note 9 Derivative Financial Instruments located in Part I, Item 1. Notes to the Consolidated Financial Statements.
The Company has no market risk sensitive instruments held for trading purposes. Management believes that the Companys market risk is reasonable at this time.
The following depicts the Companys net interest income sensitivity analysis as of June 30, 2016 (dollars in thousands):
Simulated Rate Changes |
Estimated Net Interest Income Sensitivity | |||||||
+ 400 basis points | 32.4 | % | $ | 28,338 | ||||
+ 100 basis points | 8.0 | % | $ | 6,991 | ||||
- 200 basis points (1) | (7.7 | )% | $ | (6,763 | ) |
(1) | The simulated rate change under the -200 basis points reflected above actually reflects only a maximum negative 50 basis points or less decline in actual rates based on the current targeted Fed Funds target rate by the government of 0.25% to 0.50%. The -200 simulation model reflects repricing of liabilities of less than 0.25% due to the Company paying significantly less than 25 basis points on its deposit accounts, and higher downward repricing of the Companys interest earning assets in the -200 simulation model. |
The Company is currently asset sensitive. The estimated sensitivity does not necessarily represent our forecast and the results may not be indicative of actual changes to our net interest income. These estimates are based upon a number of assumptions including: the nature and timing of interest rate levels including yield curve shape, prepayments on loans and securities, pricing strategies on loans and deposits and replacement of asset and liability cash flows. The effective duration of the Companys investment securities portfolio is approximately 1.7 years at June 30, 2016, compared to 2.1 years at December 31, 2015. Management considers the current effective duration to be relatively low and future purchases may increase this measurement if doing so will provide increased earnings while keeping risk low. While the assumptions used are based on current economic and local market conditions, there is no assurance as to the predictive nature of these conditions including how customer preferences or competitor influences might change.
Variable rate loans make up 72% of the loan portfolio. However, the Company has floors on some of its loans. At June 30, 2016, 36% of variable rate loans are at their floor, and thus an increase in the underlying index may not necessarily result in an increase in the coupon until the loan index plus margin exceeds that floor. However, 55% of the variable rate loans are tied to the Prime index with $602 million subject to repricing within 30 days of a 25 basis point increase in Prime rate.
Page 67 of 71
An additional tool used less frequently by management to monitor interest rate risk includes the standard GAP report, which measures the estimated difference between the amount of interest-sensitive assets and interest-sensitive liabilities anticipated to mature or reprice during future periods, based on certain assumptions. In general, the GAP report presents the carrying amounts of these assets and liabilities in a particular period based on either the date that they first reprice, for variable rate products, or the maturity date, for fixed rate products.
The Companys static GAP as of June 30, 2016, is not materially different from that reported at December 31, 2015 and is thus not included in this 10Q. See the Companys Static Gap reports under Item7A-Quantitative and Qualitative Disclosures about Market Risk in the Companys 2015 Annual Report on Form 10-K.
Page 68 of 71
ITEM 4. | Controls and Procedures |
a) | Evaluation of disclosure controls and procedures |
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of our fiscal year. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure.
b) | Changes in internal controls over financial reporting |
There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) identified during the fiscal quarter that ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Page 69 of 71
PART II OTHER INFORMATION
ITEM 1. | Legal Proceedings |
From time to time the Company is involved in certain legal actions arising from normal business activities. The Company believes the ultimate resolution of all pending legal actions will not have a material effect on the financial statements of the Company.
ITEM 1A. | Risk Factors |
There have been no material changes from the risk factors previously disclosed in the Banks 2015 Annual Report on Form 10-K.
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
ITEM 3. | Defaults upon Senior Securities |
None.
ITEM 4. | Mine Safety Disclosures |
Not applicable.
ITEM 5. | Other Information |
(a) | None. |
(b) | None. |
ITEM 6. | Exhibits |
(a) | Index to Exhibits |
Exhibit Number |
Description | |
31.1⌂ | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2⌂ | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1⌂ | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS⌂ | XBRL Instance Document | |
101.SCH⌂ | XBRL Taxonomy Extension Schema Document | |
101.CAL⌂ | XBRL Taxonomy Calculation Linkbase Document | |
101.LAB⌂ | XBRL Taxonomy Label Linkbase Document | |
101 DEF⌂ | XBRL Taxonomy Extension Definition Linkbase Document | |
101.PRE⌂ | XBRL Taxonomy Presentation Linkbase Document |
⌂ | Attached hereto |
Page 70 of 71
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CU BANCORP
Date: | August 5, 2016 |
/s/ DAVID I. RAINER | ||||
David I. Rainer | ||||||
Chief Executive Officer | ||||||
Date: | August 5, 2016 |
/s/ KAREN A. SCHOENBAUM | ||||
Karen A. Schoenbaum | ||||||
Chief Financial Officer |
Page 71 of 71
Exhibit 31.1
CHIEF EXECUTIVE OFFICER SECTION 302 CERTIFICATION
I, David I. Rainer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CU BANCORP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within the registrant, 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 registrants 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 registrants internal control over financial reporting that occurred during the registrants fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrants 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 registrants internal controls over financial reporting.
DATE: August 5, 2016 | /s/ DAVID I. RAINER | |||||
DAVID I. RAINER | ||||||
Chief Executive Officer |
Exhibit 31.2
CHIEF FINANCIAL OFFICER SECTION 302 CERTIFICATION
I, Karen A. Schoenbaum, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CU BANCORP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within the registrant, 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 registrants 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 registrants internal control over financial reporting that occurred during the registrants fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrants 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 registrants internal controls over financial reporting.
DATE: August 5, 2016 | /s/ KAREN A. SCHOENBAUM | |||||
KAREN A. SCHOENBAUM | ||||||
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CU BANCORP (the Company) on Form 10-Q for the quarter ending June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the Report), we, David I. Rainer, Chief Executive Officer of the Company, and Karen A. Schoenbaum, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge, based on a review of the Report of the Company, and except as corrected or supplemented in a subsequent report:
(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. |
DATE: August 5, 2016 | /s/ DAVID I. RAINER | |||
DAVID I. RAINER | ||||
Chief Executive Officer | ||||
DATE: August 5, 2016 | /s/ KAREN A SCHOENBAUM | |||
KAREN A. SCHOENBAUM | ||||
Chief Financial Officer |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Aug. 02, 2016 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | CUNB | |
Entity Registrant Name | CU Bancorp | |
Entity Central Index Key | 0001543643 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 17,671,272 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Preferred stock, authorized shares | 50,000,000 | 50,000,000 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, no par value | ||
Common stock, shares issued | 17,668,381 | 17,175,389 |
Common stock, shares outstanding | 17,668,381 | 17,175,389 |
Series A Preferred Stock | ||
Preferred stock, authorized shares | 16,400 | 16,400 |
Preferred stock, liquidation preference per share | $ 1,000 | $ 1,000 |
Preferred stock, shares issued | 16,400 | 16,400 |
Preferred stock, shares outstanding | 16,400 | 16,400 |
Consolidated Statements of Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Income Statement [Abstract] | ||||
Stock based compensation expense | $ 891 | $ 807 | $ 1,725 | $ 1,320 |
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 6,645 | $ 5,267 | $ 12,932 | $ 9,466 |
Other Comprehensive Income, net of tax: | ||||
Net change in unrealized gain (loss) on available-for-sale investment securities, net of tax | 825 | (749) | 1,594 | (238) |
Other Comprehensive Income (Loss) | 825 | (749) | 1,594 | (238) |
Comprehensive Income | $ 7,470 | $ 4,518 | $ 14,526 | $ 9,228 |
Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands |
Total |
Restricted Stock Units (RSUs) |
Preferred Stock |
Common Stock |
Common Stock
Restricted Stock Units (RSUs)
|
Additional Paid-in Capital |
Additional Paid-in Capital
Restricted Stock Units (RSUs)
|
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
---|---|---|---|---|---|---|---|---|---|
Net income | $ 9,466 | ||||||||
Other comprehensive income | (238) | ||||||||
Net income | 5,267 | ||||||||
Other comprehensive income | (749) | ||||||||
Beginning Balance (in shares) at Dec. 31, 2015 | 16,400 | 17,175,389 | |||||||
Beginning Balance at Dec. 31, 2015 | $ 306,807 | $ 16,995 | $ 230,688 | $ 23,017 | $ 36,923 | $ (816) | |||
Net issuance of restricted stock | 96,028 | 109,809 | |||||||
Exercise of stock options | $ 3,453 | $ 3,453 | |||||||
Exercise of stock options (in shares) | 396,964 | ||||||||
Stock based compensation expense | 1,725 | 1,725 | |||||||
Restricted stock repurchase | $ (305) | $ (305) | |||||||
Restricted stock repurchase (in shares) | (13,781) | ||||||||
Excess tax benefit - stock based compensation | 772 | 772 | |||||||
Preferred stock dividends and discount accretion | (519) | $ 91 | (610) | ||||||
Net income | 12,932 | 12,932 | |||||||
Other comprehensive income | 1,594 | 1,594 | |||||||
Ending Balance (in shares) at Jun. 30, 2016 | 16,400 | 17,668,381 | |||||||
Ending balance at Jun. 30, 2016 | 326,459 | $ 17,086 | $ 234,141 | 25,209 | 49,245 | 778 | |||
Net income | 6,645 | ||||||||
Other comprehensive income | 825 | ||||||||
Ending Balance (in shares) at Jun. 30, 2016 | 16,400 | 17,668,381 | |||||||
Ending balance at Jun. 30, 2016 | $ 326,459 | $ 17,086 | $ 234,141 | $ 25,209 | $ 49,245 | $ 778 |
Basis of Financial Statement Presentation |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Financial Statement Presentation | Note 1 - Basis of Financial Statement Presentation CU Bancorp (the “Company”) is a bank holding company whose operating subsidiary is California United Bank. As a bank holding company, CU Bancorp is subject to regulation of the Federal Reserve Board (“FRB”). The term “Company”, as used throughout this document, refers to the consolidated financial statements of CU Bancorp and California United Bank. California United Bank (the “Bank”) is a full-service commercial business bank offering a broad range of banking products and services including: deposit services, lending and cash management to small and medium-sized businesses, to non-profit organizations, to business principals and entrepreneurs, to the professional community, including attorneys, certified public accountants, financial advisors, healthcare providers and investors. The Bank opened for business in 2005. Its current headquarters office is located in Los Angeles, California. As a state chartered non-member bank, the Bank is subject to regulation by the California Department of Business Oversight (“DBO”) and the Federal Deposit Insurance Corporation (“FDIC”). The deposits of the Bank are insured by the FDIC to the maximum amount allowed by law. The consolidated financial statements include the accounts of the Company and the Bank. Significant intercompany items have been eliminated in consolidation. The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). CU Bancorp is the common shareholder of Premier Commercial Statutory Trust I, Premier Commercial Statutory Trust II, and Premier Commercial Statutory Trust III, entities which were acquired in the merger with Premier Commercial Bancorp (“PC Bancorp”). These trusts were established for the sole purpose of issuing trust preferred securities and do not meet the criteria for consolidation. For more detail, see Note 8 – Borrowings and Subordinated Debentures. Certain information and footnote disclosures presented in the annual consolidated financial statements are not included in the interim consolidated financial statements. Accordingly, the accompanying unaudited interim consolidated financial statements should be read in conjunction with the 2015 Annual Report on Form 10-K. In the opinion of management, the accompanying interim consolidated financial statements contain all necessary adjustments of a normal recurring nature, to present fairly the consolidated financial position of the Company and the results of its operations for the interim periods presented. Use of Estimates in the Preparation of Consolidated Financial Statements The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In addition, these accounting principles require the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements. Estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan loss and various assets and liabilities measured at fair value. While management uses the most current available information to recognize losses on loans, future additions to the allowance for loan loss may be necessary based on, among other factors, changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan loss. Regulatory agencies may require the Company to recognize changes to the allowance for loan loss based on their judgment about information available to them at the time of their examination.
Business Segments The Company is organized and operates as a single reporting segment, principally engaged in commercial business banking. The Company conducts its lending and deposit operations through nine full service branch offices located in Los Angeles, Orange, Ventura and San Bernardino counties. |
Recent Accounting Pronouncements |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Note 2 - Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which replaced existing revenue recognition guidance for contracts to provide goods or services to customers and amended existing guidance related to recognition of gains and losses on the sale of certain nonfinancial assets such as real estate. ASU 2014-09 established a principles-based approach to recognizing revenue that applies to all contracts other than those covered by other authoritative GAAP guidance. Quantitative and qualitative disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows were also required. ASU 2014-09 was to be effective for interim and annual periods beginning after December 15, 2016 and was to be applied on either a modified retrospective or full retrospective basis. In August 2015, the FASB issued ASU 2015-14 which defers the original effective date for all entities by one year. Public business entities should apply the guidance in ASU 2015-14 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. Changes to the current GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged. The classification and measurement guidance will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities can early adopt the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. Early adoption of these provisions can be elected for all financial statements of fiscal years and interim periods that have not yet been issued or that have not yet been made available for issuance. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. By definition, a short-term lease is one in which: (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect an accounting policy by class of underlying asset under which right-of-use assets and lease liabilities are not recognized and lease payments are generally recognized as expense over the lease term on a straight-line basis. This change will result in lessees recognizing right-of-use assets and lease liabilities for most leases currently accounted for as operating leases under the legacy lease accounting guidance. Examples of changes in the new guidance affecting both lessees and lessors include: (a) defining initial direct costs to only include those incremental costs that would not have been incurred if the lease had not been entered into, (b) requiring related party leases to be accounted for based on their legally enforceable terms and conditions, (c) eliminating the additional requirements that must be applied today to leases involving real estate and (d) revising the circumstances under which the transfer contract in a sale-leaseback transaction should be accounted for as the sale of an asset by the seller-lessee and the purchase of an asset by the buyer-lessor. In addition, both lessees and lessors are subject to new disclosure requirements. ASU 2016-02 is effective for public entities for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to reduce the complexity of certain aspects of the accounting for employee share-based payment transactions. As a result of this ASU, changes applicable to all entities include: 1) The threshold to qualify for equity classification would permit withholding up to the maximum individual statutory tax rate in the applicable jurisdictions. Also, the ASU provides that cash paid by an employer when directly withholding shares for tax-withholding purposes would be classified as a financing activity on the statement of cash flows; 2) An entity would be allowed to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur; 3) All excess tax benefits and tax deficiencies would be recognized as income tax expense or benefit in the income statement. An entity also would recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Further, excess tax benefits would not be separated from other income tax cash flows and thus would be classified along with other cash flows as an operating activity. ASU 2016-09 is effective for public entities for interim and annual periods beginning after December 15, 2016. The Company does not expect a material impact of this ASU on its consolidated financial statements. On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. Current expected credit losses (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees, and net investments in leases, as well as reinsurance and trade receivables. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses (ECL) should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating ECL. ASU 2016-13 is effective for public entities for interim and annual periods beginning after December 15, 2019. Early application of the guidance will be permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. |
Computation of Book Value and Tangible Book Value per Common Share |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Book Value and Tangible Book Value per Common Share | Note 3 - Computation of Book Value and Tangible Book Value per Common Share Book value per common share was calculated by dividing total shareholders’ equity less preferred stock, by the number of common shares issued and outstanding. Tangible book value per common share was calculated by dividing tangible common equity, by the number of common shares issued and outstanding. The tables below present the computation of book value and tangible book value per common share as of the dates indicated (dollars in thousands, except share and per share data):
|
Computation of Earnings per Common Share |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Earnings per Common Share | Note 4 - Computation of Earnings per Common Share Basic and diluted earnings per common share were determined by dividing net income available to common shareholders by the applicable basic and diluted weighted average common shares outstanding. The following table shows weighted average basic common shares outstanding, potential dilutive shares related to stock options, unvested restricted stock, and weighted average diluted shares for the periods indicated (dollars in thousands, except share and per share data):
|
Investment Securities |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | Note 5 - Investment Securities The investment securities portfolio has been classified into two categories: available-for-sale (“AFS”) and held-to-maturity (“HTM”). The following tables present the amortized cost, gross unrealized gains and losses, and fair values of investment securities by major category as of the dates indicated (dollars in thousands):
The Company’s investment securities portfolio at June 30, 2016 consists of A-rated or above investment-grade securities. At June 30, 2016 and December 31, 2015, securities with a market value of $194 million and $197 million, respectively, were pledged as collateral for securities sold under agreements to repurchase, public deposits, outstanding standby letters of credit, bankruptcy deposits, and other purposes as required by various statutes and agreements. See Note 8 – Borrowings and Subordinated Debentures. The following tables present the gross unrealized losses and fair values of AFS and HTM investment securities that were in unrealized loss positions, summarized and classified according to the duration of the loss period as of the dates indicated (dollars in thousands).
The unrealized losses in each of the above categories are associated with the general fluctuation of market interest rates and are not an indication of any deterioration in the credit quality of the security issuers. Further, the Company does not intend to sell these securities and is not more-likely-than-not to be required to sell the securities before the recovery of its amortized cost basis. Accordingly, the Company had no securities that were classified as other-than-temporarily impaired at June 30, 2016 or December 31, 2015, and did not recognize any impairment charges in the consolidated statements of income.
The amortized cost, fair value and the weighted average yield of debt securities at June 30, 2016, are reflected in the table below (dollars in thousands). Maturity categories are determined as follows:
Although, U.S. Government Agency and U.S. Government Sponsored Agency Mortgage-Backed and CMO securities have contractual maturities through 2048, the expected maturity will differ from the contractual maturities because borrowers or issuers may have the right to prepay such obligations without penalties.
The weighted average yields in the above table are based on effective rates of net book balances at the end of the period. Investment in Federal Home Loan Bank (FHLB) Common Stock The Company’s investment in the common stock of the FHLB of San Francisco is carried at cost and was $9.2 million at June 30, 2016 and $8.0 million at December 31, 2015. The investment in FHLB stock is included in accrued interest receivable and other assets in the consolidated balance sheets and is periodically evaluated for impairment. Based on the capital adequacy of the FHLB and its overall financial condition, no impairment losses have been recorded. See Note 8 - Borrowings and Subordinated Debentures for a detailed discussion regarding the Company’s borrowings and the requirements to purchase FHLB common stock. See Note 5 - Investment Securities in the Company’s Form 10-K for the year ended December 31, 2015 for additional discussion on the Company’s evaluation and accounting for its investment in FHLB common stock. |
Loans |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans | Note 6 - Loans The following table presents the composition of the Company’s loan portfolio as of the dates indicated (dollars in thousands):
Loan balances in the table above include net deferred fees and net discounts for a total of $18 million and $22 million as of June 30, 2016 and December 31, 2015, respectively. Small Business Administration Loans Included in the loan portfolio is $32 million in loans that were originated under the guidelines of the Small Business Administration (“SBA”) program of which $6 million is guaranteed. The total portfolio of the SBA contractual loan balances serviced by the Company at June 30, 2016 was $113 million, of which $81 million has been sold. At June 30, 2016, there were no loans classified as held for sale. At June 30, 2016, the balance of SBA 7a loans originated during the quarter is $728 thousand, of which $546 thousand is guaranteed by the SBA. The Company does not currently plan on selling these loans, but it may choose to do so in the future.
Allowance for Loan Loss The following table is a summary of the activity for the allowance for loan loss for the periods indicated (dollars in thousands):
The following tables present, by portfolio segment, the changes in the allowance for loan loss and the recorded investment in loans as of the dates and for the periods indicated (dollars in thousands):
The following tables present both the allowance for loan loss and the associated loan balance classified by loan portfolio segment and by credit evaluation methodology (dollars in thousands):
Credit Quality of Loans The Company utilizes an internal loan classification system as a means of reporting problem and potential problem loans. Under the Company’s loan risk rating system, loans are classified as “Pass,” with problem and potential problem loans as “Special Mention,” “Substandard,” “Doubtful” and “Loss”. Individual loan risk ratings are updated continuously or at any time the situation warrants. In addition, management regularly reviews problem loans to determine whether any loan requires a classification change, in accordance with the Company’s policy and applicable regulations. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The internal loan classification risk grading system is based on experiences with similarly graded loans. The Company’s internally assigned grades are as follows:
The following tables present the risk category of loans by class of loans based on the most recent internal loan classification as of the dates indicated (dollars in thousands):
Aging Analysis of Past Due and Non-Accrual Loans The following tables present an aging analysis of the recorded investment of past due loans and non-accrual loans as of the dates indicated (dollars in thousands):
Impaired Loans Impaired loans are evaluated by comparing the fair value of the collateral, if the loan is collateral dependent, and the present value of the expected future cash flows discounted at the loan’s effective interest rate, if the loan is not collateral dependent. A valuation allowance is established for an impaired loan when the realizable value of the loan is less than the recorded investment. In certain cases, portions of impaired loans are charged-off to realizable value instead of establishing a valuation allowance and are included, when applicable, in the table below as impaired loans “with no specific allowance recorded.” The valuation allowance disclosed below is included in the allowance for loan loss reported in the consolidated balance sheets as of June 30, 2016 and December 31, 2015. The following tables present, by loan portfolio segment, the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable, for the dates and periods indicated (dollars in thousands). This table excludes purchased credit impaired loans (loans acquired in acquisitions with deteriorated credit quality) of $1.9 million and $2.0 million at June 30, 2016 and December 31, 2015, respectively.
The following is a summary of additional information pertaining to impaired loans for the periods indicated (dollars in thousands):
Troubled Debt Restructuring The Company’s loan portfolio contains certain loans that have been modified in a Troubled Debt Restructuring (“TDR”), where economic concessions have been granted to borrowers experiencing financial difficulties. Loans are restructured in an effort to maximize collections. Economic concessions can include: reductions to the stated interest rate, payment extensions, principal forgiveness or other actions. The modification process includes evaluation of impairment based on the present value of expected future cash flows, discounted at the effective interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the loan collateral. In these cases, management uses the current fair value of the collateral, less selling costs, to evaluate the loan for impairment. If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs and unamortized premium or discount) impairment is recognized through a specific allowance or a charge-off. The following tables include the recorded investment and unpaid principal balances for troubled debt restructured loans at June 30, 2016 and December 31, 2015 (dollars in thousands). These tables include TDR loans that were purchased credit impaired (“PCI”). TDR loans that are non-PCI loans are included in the Impaired Loans tables above. As of June 30, 2016, there were two PCI loans that are considered to be TDR loans with a recorded investment of $127 thousand and unpaid principal balances of $301 thousand.
There were no loans modified or restructured during the three or six months ended June 30, 2016 or June 30, 2015. There have been no payment defaults in the three or six months ended June 30, 2016 or June 30, 2015 subsequent to modification on troubled debt restructured loans that have been modified within the last twelve months. Loans are restructured in an effort to maximize collections. Impairment analyses are performed on the Company’s troubled debt restructured loans in conjunction with the normal allowance for loan loss process. The Company’s troubled debt restructured loans are analyzed to ensure adequate cash flow or collateral supports the outstanding loan balance. There were no commitments to lend additional funds to borrowers whose terms have been modified in troubled debt restructurings at June 30, 2016 or December 31, 2015. Loans Acquired Through Acquisition The following table reflects the accretable net discount for acquired loans for the periods indicated (dollars in thousands):
The above table reflects the fair value adjustment on the loans acquired from mergers that will be amortized to loan interest income based on the effective yield method over the remaining life of the loans. These amounts do not include the fair value adjustments on the purchased credit impaired loans acquired from mergers. Purchased Credit Impaired Loans PCI loans are acquired loans with evidence of deterioration of credit quality since origination and it is probable at the acquisition date, that the Company will not be able to collect all contractually required amounts. When the timing and/or amounts of expected cash flows on such loans are not reasonably estimable, no interest is accreted and the loan is reported as a non-accrual loan; otherwise, if the timing and amounts of expected cash flows for PCI loans are reasonably estimable, then interest is accreted and the loans are reported as accruing loans. The non-accretable difference represents the difference between the undiscounted contractual cash flows and the undiscounted expected cash flows, and also reflects the estimated credit losses in the acquired loan portfolio at the acquisition date and can fluctuate due to changes in expected cash flows during the life of the PCI loans.
The following table reflects the outstanding balance and related carrying value of PCI loans as of the dates indicated (dollars in thousands):
The following table reflects the activities in the accretable net discount for PCI loans for the period indicated (dollars in thousands):
|
Qualified Affordable Housing Project Investments |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Federal Home Loan Banks [Abstract] | |
Qualified Affordable Housing Project Investments | Note 7 – Qualified Affordable Housing Project Investments The Company’s investment in Qualified Affordable Housing Projects that generate Low Income Housing Tax Credits (“LIHTC”) was $3.5 million at June 30, 2016 and $3.7 million at December 31, 2015. The funding liability for the LIHTC at June 30, 2016 was $702 thousand compared to $1.1 million at December 31, 2015. The amount of tax credits and other tax benefits recognized was $143 thousand and $287 thousand for the three and six months ended June 30, 2016 and $145 thousand and $290 thousand for the three and six months ended June 30, 2015, respectively. Further, the amount of amortization expense included in the provision for income taxes was $112 thousand and $224 thousand for the three and six months ended June 30, 2016 and $114 thousand and $229 thousand for the three and six months ended June 30, 2015, respectively. These investments and related tax credits are described more fully in Note 11 – Qualified Affordable Housing Project Investments in the Company’s Form 10-K for the year ended December 31, 2015. |
Borrowings and Subordinated Debentures |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brokers and Dealers [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings and Subordinated Debentures | Note 8 - Borrowings and Subordinated Debentures Securities Sold Under Agreements to Repurchase The Company enters into certain transactions, the legal form of which are sales of securities under agreements to repurchase (“Repos”) at a later date at a set price. Securities sold under agreements to repurchase generally mature within 1 day to 180 days from the issue date and are routinely renewed. As discussed in Note 5 – Investment Securities, the Company has pledged certain investments as collateral for these agreements. Securities with a fair value of $58 million and $47 million were pledged to secure the Repos at June 30, 2016 and December 31, 2015, respectively. The tables below describe the terms and maturity of the Company’s securities sold under agreements to repurchase as of the dates indicated (dollars in thousands):
FHLB Borrowings The Company maintains a secured credit facility with the FHLB, allowing the Company to borrow on an overnight and term basis. The Company’s credit facility with the FHLB is $685 million, which represents approximately 25% of the Bank’s total assets, as reported by the Bank in its March 31, 2015 Federal Financial Institution Examination Council (FFIEC) Call Report. As of June 30, 2016, the Company had $917 million of loan collateral pledged with the FHLB which provides $608 million in borrowing capacity. The Company has $18 million in investment securities pledged with the FHLB to support this credit facility. In addition, the Company must maintain an investment in the capital stock of the FHLB. Under the FHLB Act, the FHLB has a statutory lien on the FHLB capital stock that the Company owns and the FHLB capital stock serves as further collateral under the borrowing line. The Company had no outstanding advances (borrowings) with the FHLB as of June 30, 2016 or December 31, 2015. Subordinated Debentures The following table summarizes the terms of each issuance of subordinated debentures outstanding as of June 30, 2016:
The Company had an aggregate outstanding contractual balance of $12.4 million in subordinated debentures at June 30, 2016. These subordinated debentures were acquired as part of the PC Bancorp merger and were issued to trusts originally established by PC Bancorp, which in turn issued trust preferred securities. These subordinated debentures were issued in three separate series. Each issuance had a maturity of 30 years from their approximate date of issue. All three subordinated debentures are variable rate instruments that reprice quarterly based on the three month London Interbank Offered Rate (“LIBOR”) plus a margin (see tables above). All three subordinated debentures had their interest rates reset in June 2016 at the current three month LIBOR plus their index, and will continue to reprice quarterly through their maturity date. All three subordinated debentures are currently callable at par with no prepayment penalties. Under Dodd Frank, trust preferred securities are excluded from Tier 1 capital, unless such securities were issued prior to May 19, 2010 by a bank holding company with less than $15 billion in assets. CU Bancorp assumed approximately $12.4 million of junior subordinated debt securities issued to various business trust subsidiaries of PC Bancorp and funded through the issuance of approximately $12.0 million of floating rate capital trust preferred securities. These junior subordinated debt securities were issued prior to May 19, 2010. Because CU Bancorp has less than $15 billion in assets, the trust preferred securities that CU Bancorp assumed from PC Bancorp continue to be included in Tier 1 capital, subject to a limit of 25% of Tier 1 capital elements. Interest payments made by the Company on subordinated debentures are considered dividend payments under FRB regulations. Notification to the FRB is required prior to the Company declaring and paying a dividend during any period in which the Company’s quarterly net earnings are insufficient to fund the dividend amount. This notification requirement is included in regulatory guidance regarding safety and soundness surrounding capital and includes other non-financial measures such as asset quality, financial condition, capital adequacy, liquidity, future earnings projections, capital planning and credit concentrations. Should the FRB object to the dividend payments, the Company would be precluded from paying interest on the subordinated debentures after giving notice within 15 days before the payment date. Payments would not commence until approval is received or the Company no longer needs to provide notice under applicable guidance. The Company has the right, assuming no default has occurred, to defer payments of interest on the subordinated debentures at any time for a period not to exceed 20 consecutive quarters. The Company has not deferred any interest payments. |
Derivative Financial Instruments |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Note 9 - Derivative Financial Instruments The Company is exposed to certain risks relating to its ongoing business operations and utilizes interest rate swap agreements (“swaps”) as part of its asset/liability management strategy to help manage its interest rate risk position. The Company has two counterparty banks. Derivative Financial Instruments Acquired from 1st Enterprise Bank At June 30, 2016, the Company has twelve interest rate swap agreements with customers and twelve offsetting interest-rate swaps with a counterparty bank. The swap agreements are not designated as hedging instruments. The purpose of entering into offsetting derivatives not designated as a hedging instrument is to provide the Company a variable-rate loan receivable and provide the customer the financial effects of a fixed-rate loan without creating significant interest rate risk in the Company’s earnings. The structure of the swaps is as follows: The Company enters into a swap with its customers to allow them to convert variable rate loans to fixed rate loans, and at the same time, the Company enters into a swap with the counterparty bank to allow the Company to pass on the interest-rate risk associated with fixed rate loans. The net effect of the transaction allows the Company to receive interest on the loan from the customer at a variable rate based on LIBOR plus a spread. The changes in the fair value of the swaps primarily offset each other and therefore should not have a significant impact on the Company’s results of operations. The interest rate swap derivatives acquired from 1st Enterprise Bank are subject to a master netting arrangement with one counterparty bank. None of the derivative assets and liabilities are offset in the balance sheet. The Company believes the risk of loss associated with counterparty borrowers relating to interest rate swaps is mitigated as the loans with swaps are underwritten to take into account potential additional exposure, although there can be no assurances in this regard since the performance of the swaps is subject to market and counterparty risk. At June 30, 2016 and December 31, 2015, the total notional amount of the Company’s swaps with the counterparty bank was $27 million and $28 million, respectively.
The following tables present the fair values of the asset and liability of the Company’s derivative instruments acquired from 1st Enterprise Bank as of the dates and periods indicated (dollars in thousands):
Derivative Financial Instruments Acquired from PC Bancorp At June 30, 2016, the Company also has nineteen pay-fixed, receive-variable, interest rate swaps with one counterparty bank that are designed to convert fixed rate loans into variable rate loans. The following table presents the notional amount and the fair values of the asset and liability of the Company’s derivative instruments acquired from PC Bancorp as of the dates indicated (dollars in thousands):
The Effect of Derivative Instruments on the Consolidated Statements of Income The following table summarizes the effect of derivative financial instruments on the consolidated statements of income for the periods indicated (dollars in thousands):
Under all of the Company’s interest rate swap contracts, the Company is required to pledge and maintain collateral for the credit support under these agreements. At June 30, 2016, the Company has pledged $2.6 million in investment securities, $2.7 million in certificates of deposit, for a total of $5.3 million, as collateral under the swap agreements. |
Balance Sheet Offsetting |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Offsetting | Note 10 – Balance Sheet Offsetting Assets and liabilities relating to certain financial instruments, including derivatives, and securities sold under repurchase agreements (“Repos”), may be eligible for offset in the consolidated balance sheets as permitted under accounting guidance. The Company’s interest rate swap derivatives are subject to a master bilateral netting and offsetting arrangement under specific conditions as defined within a master agreement governing all interest rate swap contracts that the Company and the counterparty banks have entered into. In addition, the master agreement under which the interest rate contracts have been written require the pledging of assets by the Company based on certain risk thresholds. The Company has pledged a certificate of deposit and investment securities as collateral under the swap agreements. The pledged collateral under the swap agreements are reported in the Company’s consolidated balance sheets, unless the Company defaults under the master agreement. The Company currently does not net or offset the interest rate swap contracts in its consolidated balance sheets, as reflected within the table below. The Company’s securities sold under repurchase agreements represent transactions the Company has entered into with several deposit customers. These transactions represent the sale of securities on an overnight or on a term basis to our deposit customers under an agreement to repurchase the securities from the customers the next business day or at maturity. There is an individual contract for each customer with only one transaction per customer. There is no master agreement that provides for the netting arrangement or the offsetting of these individual transactions or for the netting of collateral positions. The Company does not net or offset the Repos in its consolidated balance sheets as reflected within the table below. The table below presents the Company’s financial instruments that may be eligible for offsetting which include securities sold under agreements to repurchase that have no enforceable master netting arrangement and derivative securities that could be offset in the consolidated financial statements due to an enforceable master netting arrangement (dollars in thousands):
|
Stock Options and Restricted Stock |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options and Restricted Stock | Note 11 - Stock Options and Restricted Stock Equity Compensation Plans The Company’s 2007 Equity and Incentive Plan (“Equity Plan”) was adopted by the Company in 2007 and replaced two prior equity compensation plans. The Equity Plan provides for significant flexibility in determining the types and terms of awards that may be made to participants. The Equity Plan was revised and approved by the Company’s shareholders in 2011 and adopted by the Company as part of the Bank holding company reorganization. This plan is designed to promote the interest of the Company in aiding the Company to attract and retain employees, officers and non-employee directors who are expected to contribute to the future success of the organization. The Equity Plan is intended to provide participants with incentives to maximize their efforts on behalf of the Company through stock-based awards that provide an opportunity for stock ownership. This plan provides the Company with a flexible equity incentive compensation program, which allows the Company to grant stock options, restricted stock, restricted stock award units and performance units. Certain options and share awards provide for accelerated vesting, if there is a change in control, as defined in the Equity Plan. These plans are described more fully in Note 16 - Stock Options and Restricted Stock in the Company’s Form 10-K for the year ended December 31, 2015. At June 30, 2016, future compensation expense related to unvested restricted stock grants are reflected in the table below (dollars in thousands):
At June 30, 2016, the weighted-average period over which the total compensation cost related to unvested restricted stock grants not yet recognized is 2.7 years. There was no future compensation expense related to unvested stock options as of June 30, 2016. All stock options outstanding at June 30, 2016 are vested.
Stock Options No stock options have been granted by the Company since 2010. The following table summarizes the share option activity under the plans as of the date and for the period indicated:
The total intrinsic value of options exercised during the three months ended June 30, 2016 and 2015 was $2.7 million and $697 thousand, and during the six months ended June 30, 2016 and 2015, was $5.6 million and $1.3 million, respectively. Restricted Stock The weighted-average grant-date fair value per share in the table below is calculated by taking the total aggregate cost of the restricted shares issued divided by the number of shares of restricted stock issued. The aggregate cost of the restricted stock was calculated by multiplying the number of shares granted at each of the grant dates by the closing stock price of the Company’s common stock on the date of the grant. The following table summarizes the restricted stock activity under the Equity Plan for the period indicated:
Restricted stock compensation expense was $891 thousand and $807 thousand for the three month period ended June 30, 2016 and 2015, and $1.7 million and $1.3 million for the six month period ended June 30, 2016 and 2015, respectively. Restricted stock awards reflected in the table above are valued at the closing stock price on the date of grant and are expensed to stock based compensation expense over the period for which the related service is performed. In 2015, the Company granted 40,000 shares of Restricted Stock Unit (“RSU”) under the Equity Plan to one of its executive officers. Such grant is reflected in the table above. The shares of common stock underlying the 40,000 shares of RSU will not be issued until the RSUs vest and are not included in the Company’s shares issued and outstanding as of June 30, 2016. The RSUs are valued at the closing stock price on the date of grant and are expensed to stock based compensation expense over the period for which the related service is performed. |
Shareholders' Equity |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | Note 12 – Shareholders’ Equity Common Stock Holders of shares of the Company’s common stock are entitled to one vote for each share held of record on all matters voted upon by shareholders. Furthermore, the holders of the Company’s common stock have no preemptive rights to subscribe for new issue securities, and shares of the Company’s common stock are not subject to redemption, conversion, or sinking fund provisions. With respect to the payment of dividends, after the preferential dividends upon all other classes and series of stock entitled thereto have been paid or declared and set apart for payment, then the holders of the Company’s common stock are entitled to such dividends as may be declared by the Company’s board of directors out of funds legally available under the laws of the State of California. Upon the Company’s liquidation or dissolution, the assets legally available for distribution to holders of the Company’s shares of common stock, after payment of all the Company’s obligations and payment of any liquidation preference of all other classes and series of stock entitled thereto, including the Company’s preferred stock, are distributable ratably among the holders of the Company’s common stock. During 2016, the Company issued 396,964 shares of stock from the exercise of stock options for a total value of $3.5 million. The Company also issued 113,809 shares of restricted stock to the Company’s directors and employees, cancelled 4,000 shares of unvested restricted stock related to employee turnover and cancelled 13,781 shares of restricted stock that had a value of $305 thousand when employees elected to pay their tax obligation via the repurchase of the stock by the Company. The net issuance of restricted stock for 2016 was 96,028 shares. The Equity Plan, as amended, allows employees to make an election to have a portion of their restricted stock that became vested during the year repurchased by the Company to provide funds to pay the employee’s tax obligation related to the vesting of the stock. Preferred Stock The Company completed the merger with 1st Enterprise on November 30, 2014. As part of the Merger Agreement, 16,400 shares of preferred stock issued by 1st Enterprise as part of the Small Business Lending Fund (SBLF) program of the United States Department of the Treasury was converted into 16,400 CU Bancorp preferred shares with substantially identical terms. CU Bancorp Preferred Stock has a liquidation preference amount of $1 thousand per share, designated as the Company’s Non-Cumulative Perpetual Preferred Stock, Series A. The U.S. Department of the Treasury is the sole holder of all outstanding shares of CU Bancorp Preferred Stock. The CU Bancorp Preferred Stock had an estimated life of four years and the fair value was $16 million at the merger date, resulting in a net discount of $479 thousand. The life-to-date and the year-to-date accretion on the net discount as of June 30, 2016 are $1.2 million and $91 thousand, respectively. The net carrying value of the CU Bancorp Preferred Stock is $17 million ($16 million plus of $0.7 million net premium) as of June 30, 2016. Dividends on the Company’s Series A Preferred Stock are payable quarterly in arrears if authorized and declared by the Company’s board of directors out of legally available funds, on a non-cumulative basis, on the $1 thousand per share liquidation preference amount. Dividends are payable on January 1, April 1, July 1 and October 1 of each year. The current coupon dividend rate was adjusted to 9% on March 1, 2016 through perpetuity. However, the dividend yield through November 30, 2018 approximates 7% as a result of business combination accounting. Dividends on the Series A Preferred Stock are non-cumulative. There is no sinking fund with respect to dividends on the Series A Preferred Stock. So long as the Company’s Series A Preferred Stock remains outstanding, the Company may declare and pay dividends on the common stock only if full dividends on all outstanding shares of Series A Preferred Stock for the most recently completed dividend period have been or are contemporaneously declared and paid. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, holders of the Series A Preferred Stock will be entitled to receive for each share of Series A Preferred Stock, out of the Company’s assets or proceeds available for distribution to the Company’s shareholders, subject to any rights of the Company’s creditors, before any distribution of assets or proceeds is made to or set aside for the holders of the common stock, payment of an amount equal to the sum of (i) the $1 thousand liquidation preference amount per share and (ii) the amount of any accrued and unpaid dividends on the Series A Preferred Stock. To the extent the assets or proceeds available for distribution to shareholders are not sufficient to fully pay the liquidation payments owing to the holders of the Series A Preferred Stock and the holders of any other class or series of the stock ranking equally with the Series A Preferred Stock, the holders of the Series A Preferred Stock and such the Company’s stock will share ratably in the distribution. Holders of the Series A Preferred Stock have no right to exchange or convert their shares into common stock or any other securities and do not have voting rights.
Other Comprehensive Income (Loss) The following table presents the changes in accumulated other comprehensive income (loss) by component for the periods indicated (dollars in thousands):
|
Commitments and Contingencies |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 13 - Commitments and Contingencies Litigation From time to time the Company is a party to claims and legal proceedings arising in the ordinary course of business. The Company accrues for any probable loss contingencies that are estimable and discloses any material losses. As of June 30, 2016, there were no legal proceedings against the Company the outcome of which are expected to have a material adverse impact on the Company’s financial position, results of operations or cash flows, as a whole. Financial Instruments with Off Balance Sheet Risk See Note 21 – Commitments and Contingencies in the Company’s Form 10-K for the year ended December 31, 2015. Financial instruments with off balance sheet risk include commitments to extend credit of $871 million and $806 million at June 30, 2016 and December 31, 2015, respectively. Included in the aforementioned commitments were standby letters of credit outstanding of $87 million and $73 million at June 30, 2016 and December 31, 2015. The Company also has a reserve for estimated losses on unfunded loan commitments of $726 thousand and $608 thousand at June 30, 2016 and December 31, 2015, respectively. These balances are included in other liabilities on the consolidated balance sheets. |
Fair Value Information |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Information | Note 14 - Fair Value Information Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date. ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including both those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis and a non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value, and for estimating the fair value of financial assets and financial liabilities not recorded at fair value, are discussed below. In accordance with accounting guidance, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are as follows:
A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Management maximizes the use of observable inputs and attempts to minimize the use of unobservable inputs when determining fair value measurements. The following is a description of both the general and specific valuation methodologies used for certain instruments measured at fair value, as well as the general classification of these instruments pursuant to the valuation hierarchy. Investment Securities Available-for-Sale and Held-to-Maturity: The fair value of securities available-for-sale and held-to-maturity may be determined by obtaining quoted prices in active markets, when available, from nationally recognized securities exchanges (Level 1 financial assets). If quoted market prices are not available, the fair value is determined by matrix pricing, which is a mathematical technique widely used in the securities industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities which are observable market inputs (Level 2 financial assets). Debt securities’ pricing is generally obtained from one of the matrix pricing models developed from one of the three national pricing agencies. In cases where significant credit valuation adjustments are incorporated into the estimation of fair value, reported amounts are classified as Level 3 financial assets. Securities classified as available-for-sale are accounted for at their current fair value rather than amortized historical cost. Unrealized gains or losses are excluded from net income and reported as an amount net of taxes as a separate component of accumulated other comprehensive income included in shareholders’ equity. Securities classified as held-to-maturity are accounted for at their amortized historical cost.
The Company considers the inputs utilized to fair value the available-for-sale and held-to-maturity investment securities to be observable market inputs and classified these financial assets within the Level 2 fair value hierarchy. Management bases the fair value for these investments primarily on third party price indications provided by independent pricing sources utilized by the Company’s bond accounting system to obtain market pricing on its individual securities. Vining Sparks, who provides the Company with its bond accounting system, utilizes pricing from three independent third party pricing sources for pricing of securities. These third party pricing sources utilize quoted market prices, or when quoted market prices are not available, the fair values are estimated using nationally recognized third-party vendor pricing models, of which the inputs are observable. However, the fair value reported may not be indicative of the amounts that could be realized in an actual market exchange. The fair value of the Company’s U.S. Agency and available-for-sale and held-to-maturity investment securities are calculated using an option adjusted spread model from one of the nationally recognized third-party pricing models. Depending on the assumptions used and the treasury yield curve and other interest rate assumptions, the fair value could vary significantly in the near term. Loans: The fair value for loans is estimated by discounting the expected future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities. Loans are segregated by type such as commercial and industrial, commercial real estate, construction and other loans with similar credit characteristics and are further segmented into fixed and variable interest rate loan categories. Expected future cash flows are projected based on contractual cash flows, adjusted for estimated credit losses and estimated prepayments. The inputs utilized in determining the fair value of loans are unobservable and accordingly, these financial assets are classified within Level 3 of the fair value hierarchy. Impaired Loans: The fair value of impaired loans is determined based on an evaluation at the time the loan is originally identified as impaired, and periodically thereafter, at the lower of cost or fair value. Fair value on impaired loans is measured based on the value of the collateral securing these loans, less costs to sell, if the loan is collateral dependent, or based on the cash flows for non-collateral dependent loans discounted at the loan’s original effective rate. Collateral dependent loans may be secured by either real estate and/or business assets including equipment, inventory and/or accounts receivable and is determined based on appraisals performed by qualified licensed appraisers hired by the Company. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Such discounts are typically significant and unobservable. For unsecured loans, the estimated future discounted cash flows of the business or borrower, are used in evaluating the fair value. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above. The inputs utilized in determining the fair value of impaired loans are unobservable and accordingly, these financial assets are classified within Level 3 of the fair value hierarchy. Interest Rate Swap Contracts: The fair value of the interest rate swap contracts are provided by independent third party vendors that specialize in interest rate risk management and fair value analysis using a model that utilizes current market data to estimate cash flows of the interest rate swaps utilizing the future London Interbank Offered Rate (“LIBOR”) yield curve for accruing and the future Overnight Index Swap Rate (“OIS”) yield curve for discounting through the maturity date of the interest rate swap contract. The future LIBOR yield curve is the primary input in the valuation of the interest rate swap contracts. Both the LIBOR and OIS yield curves are readily observable in the marketplace. Accordingly, the interest rate swap contracts are classified within Level 2 of the fair value hierarchy. Other Real Estate Owned: The fair value of other real estate owned is generally based on real estate appraisals (unless more current market information is available) less estimated costs to sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant. The inputs utilized in determining the fair value of other real estate owned are unobservable and accordingly, these financial assets are classified within Level 3 of the fair value hierarchy. SBA Servicing Asset: A servicing asset is recorded at fair value upon the sale of an SBA loan. The fair value of this asset is based on the estimated discounted future cash flows utilizing market based discount rates and estimated prepayment speeds. The discount rate was based on the current U.S. Treasury yield curve, plus a spread for marketplace risk associated with these assets. Prepayment speeds were selected based on the historical prepayments of similar SBA pools. The prepayment speeds determine the timing of the cash flows. The SBA servicing asset is amortized over the contractual life of the loans based on an effective yield approach. In addition, the Company’s servicing asset is evaluated regularly for impairment by discounting the estimated future cash flows using market-based discount rates and prepayment speeds. If the calculated present value of the servicing asset declines below the Company’s current carrying value, the servicing asset is written down to its present value. Based on the Company’s methodology in its valuation of the SBA servicing asset, the current carrying value is estimated to approximate the fair value. The inputs utilized in determining the fair value of SBA servicing asset are unobservable and accordingly, these financial assets are classified within Level 3 of the fair value hierarchy. Non-Maturing Deposits: The fair values for non-maturing deposits (deposits with no contractual termination date), which include non-interest bearing demand deposits, interest bearing transaction accounts, money market deposits and savings accounts are equal to their carrying amounts, which represent the amounts payable on demand. Because the carrying value and fair value are by definition identical, and accordingly non-maturity deposits are classified within Level 1 of the fair value hierarchy, these balances are not listed in the following tables. Maturing Deposits: The fair values of fixed maturity certificates of deposit (time deposits) are estimated using a discounted cash flow calculation that applies current market deposit interest rates to the Company’s current certificates of deposit interest rates for similar term certificates. The inputs utilized in determining the fair value of maturing deposits are observable and accordingly, these financial liabilities are classified within Level 2 of the fair value hierarchy. Securities Sold under Agreements to Repurchase (“Repos”): The fair value of securities sold under agreements to repurchase is estimated based on the discounted value of future cash flows expected to be paid on the deposits. The carrying amounts of Repos with maturities of 90 days or less approximate their fair values. The fair value of Repos with maturities greater than 90 days is estimated based on the discounted value of the contractual future cash flows. The inputs utilized in determining the fair value of securities sold under agreements to repurchase are observable and accordingly, these financial liabilities are classified within Level 2 of the fair value hierarchy. Subordinated Debentures: The fair value of the three variable rate subordinated debentures (“debentures”) is estimated using a discounted cash flow calculation that applies the three month LIBOR plus the margin index at June 30, 2016, to the cash flows from the debentures, based on the actual interest rate the debentures were accruing at June 30, 2016. Because all three of the debentures re-priced on June 15, 2016 based on the current three month LIBOR index rate plus the index margin at that date, and with relatively little to no change in the three month LIBOR index rate from the re-pricing date through June 30, 2016, the current face value of the debentures and their calculated fair value are approximately equal. The inputs utilized in determining the fair value of subordinated debentures are observable and accordingly, these financial liabilities are classified within Level 2 of the fair value hierarchy. Fair Value of Commitments: Loan commitments that are priced on an index plus a margin to a market rate of interest are reported at the carrying value of the loan commitment. Loan commitments on which the committed fixed interest rate is less than the current market rate were insignificant at June 30, 2016 and December 31, 2015.
Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table summarizes the financial assets and financial liabilities measured at fair value on a recurring basis as of the dates indicated, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (dollars in thousands):
At June 30, 2016 and at December 31, 2015 the Company had no financial assets or liabilities that were measured at fair value on a recurring basis that required the use of significant unobservable inputs (Level 3). Additionally, there were no transfers of assets either between Level 1 and Level 2 nor in or out of Level 3 of the fair value hierarchy for assets measured on a recurring basis for the period ended June 30, 2016.
Assets Measured at Fair Value on a Non-recurring Basis The Company may be required periodically, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis, that is, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These include assets that are measured at the lower of cost or fair value that were recognized at fair value below cost at the end of or during the period. There were no transfers of assets either between Level 1 and Level 2 nor in or out of Level 3 of the fair value hierarchy for assets measured on a non-recurring basis during the three or six months ended June 30, 2016. The following table presents the balances of assets and liabilities measured at fair value on a non-recurring basis by caption and by level within the fair value hierarchy as of the dates indicated (dollars in thousands):
The following table presents the significant unobservable inputs used in the fair value measurements for Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of the dates indicated (dollars in thousands):
Fair Value of Financial Assets and Liabilities ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or on a non-recurring basis. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to develop the estimates of fair value. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company could have realized in a current market exchange as of June 30, 2016 and December 31, 2015. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The description of the valuation methodologies used for assets and liabilities measured at fair value and for estimating fair value for financial instruments not recorded at fair value has been described above. The table below presents the carrying amounts and fair values of financial instruments based on their fair value hierarchy indicated (dollars in thousands):
|
Subsequent Events |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 15 – Subsequent Events We have evaluated events that have occurred subsequent to June 30, 2016 and have concluded there are no subsequent events that would require disclosure or recognition in the accompanying interim consolidated financial statements. |
Basis of Financial Statement Presentation (Policies) |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Accounting Changes and Error Corrections [Abstract] | |
Use of Estimates in the Preparation of Consolidated Financial Statements | Use of Estimates in the Preparation of Consolidated Financial Statements The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In addition, these accounting principles require the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements. Estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan loss and various assets and liabilities measured at fair value. While management uses the most current available information to recognize losses on loans, future additions to the allowance for loan loss may be necessary based on, among other factors, changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan loss. Regulatory agencies may require the Company to recognize changes to the allowance for loan loss based on their judgment about information available to them at the time of their examination. |
Business Segments | Business Segments The Company is organized and operates as a single reporting segment, principally engaged in commercial business banking. The Company conducts its lending and deposit operations through nine full service branch offices located in Los Angeles, Orange, Ventura and San Bernardino counties. |
Basis of Financial Statement Presentation | In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which replaced existing revenue recognition guidance for contracts to provide goods or services to customers and amended existing guidance related to recognition of gains and losses on the sale of certain nonfinancial assets such as real estate. ASU 2014-09 established a principles-based approach to recognizing revenue that applies to all contracts other than those covered by other authoritative GAAP guidance. Quantitative and qualitative disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows were also required. ASU 2014-09 was to be effective for interim and annual periods beginning after December 15, 2016 and was to be applied on either a modified retrospective or full retrospective basis. In August 2015, the FASB issued ASU 2015-14 which defers the original effective date for all entities by one year. Public business entities should apply the guidance in ASU 2015-14 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. Changes to the current GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged. The classification and measurement guidance will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities can early adopt the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. Early adoption of these provisions can be elected for all financial statements of fiscal years and interim periods that have not yet been issued or that have not yet been made available for issuance. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. By definition, a short-term lease is one in which: (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect an accounting policy by class of underlying asset under which right-of-use assets and lease liabilities are not recognized and lease payments are generally recognized as expense over the lease term on a straight-line basis. This change will result in lessees recognizing right-of-use assets and lease liabilities for most leases currently accounted for as operating leases under the legacy lease accounting guidance. Examples of changes in the new guidance affecting both lessees and lessors include: (a) defining initial direct costs to only include those incremental costs that would not have been incurred if the lease had not been entered into, (b) requiring related party leases to be accounted for based on their legally enforceable terms and conditions, (c) eliminating the additional requirements that must be applied today to leases involving real estate and (d) revising the circumstances under which the transfer contract in a sale-leaseback transaction should be accounted for as the sale of an asset by the seller-lessee and the purchase of an asset by the buyer-lessor. In addition, both lessees and lessors are subject to new disclosure requirements. ASU 2016-02 is effective for public entities for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to reduce the complexity of certain aspects of the accounting for employee share-based payment transactions. As a result of this ASU, changes applicable to all entities include: 1) The threshold to qualify for equity classification would permit withholding up to the maximum individual statutory tax rate in the applicable jurisdictions. Also, the ASU provides that cash paid by an employer when directly withholding shares for tax-withholding purposes would be classified as a financing activity on the statement of cash flows; 2) An entity would be allowed to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur; 3) All excess tax benefits and tax deficiencies would be recognized as income tax expense or benefit in the income statement. An entity also would recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Further, excess tax benefits would not be separated from other income tax cash flows and thus would be classified along with other cash flows as an operating activity. ASU 2016-09 is effective for public entities for interim and annual periods beginning after December 15, 2016. The Company does not expect a material impact of this ASU on its consolidated financial statements. On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. Current expected credit losses (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees, and net investments in leases, as well as reinsurance and trade receivables. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses (ECL) should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating ECL. ASU 2016-13 is effective for public entities for interim and annual periods beginning after December 15, 2019. Early application of the guidance will be permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. |
Computation of Book Value and Tangible Book Value per Common Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Book Value and Tangible Book Value per Common Share | The tables below present the computation of book value and tangible book value per common share as of the dates indicated (dollars in thousands, except share and per share data):
|
Computation of Earnings per Common Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and Diluted Earnings Per Common Share Computations | The following table shows weighted average basic common shares outstanding, potential dilutive shares related to stock options, unvested restricted stock, and weighted average diluted shares for the periods indicated (dollars in thousands, except share and per share data):
|
Investment Securities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost, Gross Unrealized Gains and Losses, and Fair Values of Investment Securities | The following tables present the amortized cost, gross unrealized gains and losses, and fair values of investment securities by major category as of the dates indicated (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross Unrealized Losses and Fair Values of AFS and HTM Investment Securities that were in Unrealized Loss Positions | The following tables present the gross unrealized losses and fair values of AFS and HTM investment securities that were in unrealized loss positions, summarized and classified according to the duration of the loss period as of the dates indicated (dollars in thousands).
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maturities Schedule of Securities |
|
Loans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Composition of Loan Portfolio | The following table presents the composition of the Company’s loan portfolio as of the dates indicated (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Activity for Allowance for Loan Loss | The following table is a summary of the activity for the allowance for loan loss for the periods indicated (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Allowance for Loan Loss | The following tables present, by portfolio segment, the changes in the allowance for loan loss and the recorded investment in loans as of the dates and for the periods indicated (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Represents both Allowance for Loan Loss and Associated Loan Balance Classified by Loan Portfolio Segment and by Credit Evaluation Methodology | The following tables present both the allowance for loan loss and the associated loan balance classified by loan portfolio segment and by credit evaluation methodology (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk Category of Loans by Class of Loans | The following tables present the risk category of loans by class of loans based on the most recent internal loan classification as of the dates indicated (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aging Analysis of Recorded Investment | The following tables present an aging analysis of the recorded investment of past due loans and non-accrual loans as of the dates indicated (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recorded Investment and Unpaid Principal Balances for Impaired Loans | The following tables present, by loan portfolio segment, the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable, for the dates and periods indicated (dollars in thousands). This table excludes purchased credit impaired loans (loans acquired in acquisitions with deteriorated credit quality) of $1.9 million and $2.0 million at June 30, 2016 and December 31, 2015, respectively.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional Information on Impaired Loans | The following is a summary of additional information pertaining to impaired loans for the periods indicated (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recorded Investment and Unpaid Principal Balances for Troubled Debt Restructured Loans | The following tables include the recorded investment and unpaid principal balances for troubled debt restructured loans at June 30, 2016 and December 31, 2015(dollars in thousands). These tables include TDR loans that were purchased credit impaired (“PCI”). TDR loans that are non-PCI loans are included in the Impaired Loans tables above. As of June 30, 2016, there were two PCI loans that are considered to be TDR loans with a recorded investment of $127 thousand and unpaid principal balances of $301 thousand.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accretable Yield for Acquired Loans | The following table reflects the accretable net discount for acquired loans for the periods indicated (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Value of Purchased Credit Impaired Loans | The following table reflects the outstanding balance and related carrying value of PCI loans as of the dates indicated (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accretable Net Discount of Purchased Credit Impaired Loans | The following table reflects the activities in the accretable net discount for PCI loans for the period indicated (dollars in thousands):
|
Borrowings and Subordinated Debentures (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brokers and Dealers [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Terms and Maturity of Bank's Securities Sold under Agreements | The tables below describe the terms and maturity of the Company’s securities sold under agreements to repurchase as of the dates indicated (dollars in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Terms of Issuance Subordinated Debentures Outstanding | The following table summarizes the terms of each issuance of subordinated debentures outstanding as of June 30, 2016:
|
Derivative Financial Instruments (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect of Derivative Instruments on Consolidated Statements of Income | The following table summarizes the effect of derivative financial instruments on the consolidated statements of income for the periods indicated (dollars in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1st Enterprise Bank | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Classification of Derivative Financial Instruments | The following tables present the fair values of the asset and liability of the Company’s derivative instruments acquired from 1st Enterprise Bank as of the dates and periods indicated (dollars in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PC Bancorp | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Classification of Derivative Financial Instruments | The following table presents the notional amount and the fair values of the asset and liability of the Company’s derivative instruments acquired from PC Bancorp as of the dates indicated (dollars in thousands):
|
Balance Sheet Offsetting (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities Sold under Repurchase Agreements and Derivatives Securities Offset in Consolidated Financial Statements Due to an Enforceable Master Netting Arrangement | The table below presents the Company’s financial instruments that may be eligible for offsetting which include securities sold under agreements to repurchase that have no enforceable master netting arrangement and derivative securities that could be offset in the consolidated financial statements due to an enforceable master netting arrangement (dollars in thousands):
|
Stock Options and Restricted Stock (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future Compensation Expense Related to Unvested Restricted Stock Grants | At June 30, 2016, future compensation expense related to unvested restricted stock grants are reflected in the table below (dollars in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Option Activity | The following table summarizes the share option activity under the plans as of the date and for the period indicated:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Activity | The following table summarizes the restricted stock activity under the Equity Plan for the period indicated:
|
Shareholders' Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Accumulated Other Comprehensive Income (Loss) | The following table presents the changes in accumulated other comprehensive income (loss) by component for the periods indicated (dollars in thousands):
|
Fair Value Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Assets and Financial Liabilities Measured at Fair Value on Recurring Basis | The following table summarizes the financial assets and financial liabilities measured at fair value on a recurring basis as of the dates indicated, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances of Assets and Liabilities Measured at Fair Value on Non-Recurring Basis | The following table presents the balances of assets and liabilities measured at fair value on a non-recurring basis by caption and by level within the fair value hierarchy as of the dates indicated (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Unobservable Inputs Used in Fair Value Measurements for Level 3 Assets and Liabilities Measured at Fair Value on Recurring or Non-Recurring Basis | The following table presents the significant unobservable inputs used in the fair value measurements for Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of the dates indicated (dollars in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Level in Fair Value Hierarchy for Financial Instruments Estimated Fair Values | The table below presents the carrying amounts and fair values of financial instruments based on their fair value hierarchy indicated (dollars in thousands):
|
Basis of Financial Statement Presentation - Additional Information (Detail) |
Jun. 30, 2016
Office
|
---|---|
Accounting Policies [Abstract] | |
Full service branch offices | 9 |
Computation of Book Value and Tangible Book Value per Common Share (Detail) - USD ($) $ / shares in Units, $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2016 |
Dec. 31, 2015 |
|
Equity [Abstract] | ||
Total Shareholders' Equity | $ 326,459 | $ 306,807 |
Less: Preferred stock | 17,086 | 16,995 |
Less: Goodwill | 64,603 | 64,603 |
Less: Core deposit and leasehold right intangibles, net | 6,932 | 7,671 |
Tangible common equity | $ 237,838 | $ 217,538 |
Common shares issued | 17,668,381 | 17,175,389 |
Common shares outstanding | 17,668,381 | 17,175,389 |
Book value per common share | $ 17.51 | $ 16.87 |
Tangible book value per common share | $ 13.46 | $ 12.67 |
Basic and Diluted Earnings Per Common Share Computations (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Earnings Per Share [Abstract] | ||||
Net income | $ 6,645 | $ 5,267 | $ 12,932 | $ 9,466 |
Less: Preferred stock dividends and discount accretion | 307 | 312 | 610 | 584 |
Net Income available to common shareholders | $ 6,338 | $ 4,955 | $ 12,322 | $ 8,882 |
Weighted average basic common shares outstanding | 17,210,433 | 16,481,527 | 17,125,930 | 16,445,118 |
Dilutive effect of potential common share issuances from stock options and restricted stock | 250,774 | 442,684 | 274,960 | 441,102 |
Weighted average diluted common shares outstanding | 17,461,207 | 16,924,211 | 17,400,890 | 16,886,220 |
Basic income (loss) per share | $ 0.37 | $ 0.30 | $ 0.72 | $ 0.54 |
Diluted income (loss) per share | $ 0.36 | $ 0.29 | $ 0.71 | $ 0.53 |
Anti-dilutive shares not included in the calculation of diluted earnings per share | 64,500 | 1,500 | 64,889 |
Investment Securities - Additional Information (Detail) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Dec. 31, 2015 |
|
Schedule of Trading Securities and Other Trading Assets [Line Items] | ||
Securities classified as other-than-temporarily impaired | $ 0 | $ 0 |
Company's investment in the common stock of the FHLB | 9,200,000 | 8,000,000 |
Other-than-temporary impairment losses | 0 | |
Securities sold under agreements to repurchase | ||
Schedule of Trading Securities and Other Trading Assets [Line Items] | ||
Market value of securities pledged to secure securities sold under agreements to repurchase | $ 194,000,000 | $ 197,000,000 |
Composition of Loan Portfolio (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Commercial and Industrial Loans: | $ 522,074 | $ 537,368 |
Loans Secured by Real Estate: | ||
Loans Secured by Real Estate | 1,382,595 | 1,252,683 |
Other Loans: | 46,442 | 43,112 |
Total Loans | 1,951,111 | 1,833,163 |
Owner-Occupied Nonresidential Properties | ||
Loans Secured by Real Estate: | ||
Loans Secured by Real Estate | 425,515 | 407,979 |
Other Nonresidential Properties | ||
Loans Secured by Real Estate: | ||
Loans Secured by Real Estate | 582,204 | 533,168 |
Construction, Land Development and Other Land | ||
Loans Secured by Real Estate: | ||
Loans Secured by Real Estate | 165,963 | 125,832 |
Total Loans | 165,963 | 125,832 |
1-4 Family Residential Properties | ||
Loans Secured by Real Estate: | ||
Loans Secured by Real Estate | 121,971 | 114,525 |
Multifamily Residential Properties | ||
Loans Secured by Real Estate: | ||
Loans Secured by Real Estate | $ 86,942 | $ 71,179 |
Summary of Activity for Allowance for Loan Loss (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Receivables [Abstract] | |||||
Allowance for loan loss at beginning of period | $ 16,545 | $ 13,247 | $ 15,682 | $ 12,610 | $ 12,610 |
Provision for loan losses | 1,063 | 683 | 1,685 | 2,126 | |
Net (charge-offs) recoveries: | |||||
Charge-offs | (20) | (1) | (20) | (891) | |
Recoveries | 888 | 195 | 1,129 | 279 | |
Net (charge-offs) recoveries | 868 | 194 | 1,109 | (612) | |
Allowance for loan loss at end of period | $ 18,476 | $ 14,124 | $ 18,476 | $ 14,124 | $ 15,682 |
Net (charge-offs) recoveries to average loans | 0.05% | 0.01% | 0.06% | (0.04%) | |
Allowance for loan loss to total loans | 0.95% | 0.95% | 0.82% | ||
Allowance for loan loss to total loans accounted for at historical cost, which excludes loans and the related allowance for loans acquired through acquisition | 1.22% | 1.33% |
Additional Information on Impaired Loans (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Receivables [Abstract] | ||||
Interest foregone on impaired loans | $ 22 | $ 88 | $ 46 | $ 138 |
Cash collections applied to reduce principal balance | 28 | 19 | 52 | 19 |
Interest income recognized on cash collections | $ 0 | $ 0 | $ 0 | $ 0 |
Accretable Yield for Acquired Loans (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Receivables [Abstract] | ||||
Balance, beginning of period | $ 13,470 | $ 20,078 | $ 14,610 | $ 21,402 |
Accretion, included in interest income | (1,517) | (1,461) | (2,650) | (2,677) |
Reclassifications to non-accretable yield | (25) | (362) | (32) | (470) |
Balance, end of period | $ 11,928 | $ 18,255 | $ 11,928 | $ 18,255 |
Carrying Value of Purchased Credit Impaired Loans (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Financing Receivable, Impaired [Line Items] | ||
Unpaid Principal Balance | $ 2,385 | $ 1,719 |
Carrying Value | 1,903 | 1,207 |
PCI loans | ||
Financing Receivable, Impaired [Line Items] | ||
Unpaid Principal Balance | 2,873 | 4,642 |
Carrying Value | 1,863 | 2,012 |
PCI loans | Commercial and Industrial | ||
Financing Receivable, Impaired [Line Items] | ||
Unpaid Principal Balance | 657 | 2,331 |
Carrying Value | 334 | 477 |
PCI loans | Commercial and Other Real Estate | ||
Financing Receivable, Impaired [Line Items] | ||
Unpaid Principal Balance | 2,216 | 2,250 |
Carrying Value | $ 1,529 | 1,535 |
PCI loans | Other | ||
Financing Receivable, Impaired [Line Items] | ||
Unpaid Principal Balance | $ 61 |
Accretable Net Discount of Purchased Credit Impaired Loans (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Acquired Impaired Loans Change In Accretable Yield [Line Items] | ||||
Balance, beginning of period | $ 13,470 | $ 20,078 | $ 14,610 | $ 21,402 |
Accretion, included in interest income | (1,517) | (1,461) | (2,650) | (2,677) |
Balance, end of period | 11,928 | 18,255 | 11,928 | 18,255 |
PCI loans | ||||
Acquired Impaired Loans Change In Accretable Yield [Line Items] | ||||
Balance, beginning of period | 226 | 305 | 246 | 324 |
Accretion, included in interest income | (21) | (19) | (41) | (38) |
Reclassifications from non-accretable yield | 0 | 0 | 0 | 0 |
Balance, end of period | $ 205 | $ 286 | $ 205 | $ 286 |
Qualified Affordable Housing Project Investments - Additional Information (Detail) - Low Income Housing Tax Credits - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Investment Holdings [Line Items] | |||||
Investment cost | $ 3,500 | $ 3,500 | $ 3,700 | ||
Investment in funding obligation | 702 | 702 | $ 1,100 | ||
Tax credits and other tax benefits | 143 | $ 145 | 287 | $ 290 | |
Amortization expense | $ 112 | $ 114 | $ 224 | $ 229 |
Subordinated Debentures Outstanding (Detail) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Dec. 31, 2015 |
|
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Amount, gross | $ 12,372 | |
Unamortized fair value adjustment | (2,595) | |
Net | 9,777 | $ 9,697 |
Trust I | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Amount, gross | $ 6,186 | |
Issuance Date | Dec. 10, 2004 | |
Maturity Date | Mar. 15, 2035 | |
Rate Index | 3 month LIBOR + 2.05% | |
Current Rate | 2.703% | |
Next Reset Date | Sep. 15, 2016 | |
Trust II | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Amount, gross | $ 3,093 | |
Issuance Date | Dec. 23, 2005 | |
Maturity Date | Mar. 15, 2036 | |
Rate Index | 3 month LIBOR + 1.75% | |
Current Rate | 2.403% | |
Next Reset Date | Sep. 15, 2016 | |
Trust III | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Amount, gross | $ 3,093 | |
Issuance Date | Jun. 30, 2006 | |
Maturity Date | Sep. 18, 2036 | |
Rate Index | 3 month LIBOR + 1.85% | |
Current Rate | 2.503% | |
Next Reset Date | Sep. 15, 2016 |
Derivative Financial Instruments - Additional Information (Detail) |
6 Months Ended | |
---|---|---|
Jun. 30, 2016
USD ($)
Agreement
Derivative
Financial_Institution
|
Dec. 31, 2015
USD ($)
|
|
Derivative [Line Items] | ||
Number of pay-fixed, receive-variable interest rate swap agreements | Agreement | 19 | |
Investment securities | $ 374,708,000 | $ 357,821,000 |
Interest rate swap contracts fair value | ||
Derivative [Line Items] | ||
Certificates of deposit with other financial institutions pledged | 2,700,000 | |
Investment securities | 2,600,000 | |
Trading securities eligible for use as collateral | $ 5,300,000 | |
1st Enterprise Bank | ||
Derivative [Line Items] | ||
Number of counterparty banks | Financial_Institution | 2 | |
Derivative assets liabilities offset | $ 0 | |
Total notional amount of swaps | $ 27,000,000 | $ 28,000,000 |
Derivatives not Designated as Hedging Instruments | 1st Enterprise Bank | Interest rate swap contracts fair value | ||
Derivative [Line Items] | ||
Swap contracts acquired | Derivative | 12 | |
Offsetting interest-rate swaps acquired | Derivative | 12 |
Future Compensation Expense Related to Unvested Restricted Stock Grants (Detail) - Restricted Stock $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Remainder of 2016 | $ 1,691 |
2017 | 1,676 |
2018 | 641 |
2019 | 173 |
Thereafter | 31 |
Total | $ 4,212 |
Restricted Stock Activity (Detail) - Restricted Stock |
6 Months Ended |
---|---|
Jun. 30, 2016
$ / shares
shares
| |
Number of Shares | |
Unvested, at beginning, Number of Shares | shares | 311,458 |
Granted, Number of Shares | shares | 113,809 |
Vested, Number of Shares | shares | (37,575) |
Cancelled and forfeited, Number of Shares | shares | (4,000) |
Unvested, at end, Number of Shares | shares | 383,692 |
Weighted-Average Grant-Date Fair Value per Share | |
Unvested, at beginning, Weighted-Average Grant-Date Fair Value per Share | $ / shares | $ 19.29 |
Granted, Weighted-Average Grant-Date Fair Value per Share | $ / shares | 22.87 |
Vested, Weighted-Average Grant-Date Fair Value per Share | $ / shares | 18.95 |
Cancelled and forfeited, Weighted-Average Grant-Date Fair Value per Share | $ / shares | 19.52 |
Unvested, at end, Weighted-Average Grant-Date Fair Value per Share | $ / shares | $ 20.58 |
Commitments and Contingencies - Additional Information (Detail) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Dec. 31, 2015 |
|
Other Commitments [Line Items] | ||
Legal proceedings against the company | $ 0 | |
Allowance for losses on unfunded loan commitments | 726,000 | $ 608,000 |
Commitments to Extend Credit | ||
Other Commitments [Line Items] | ||
Financial instruments with off balance sheet risk | 871,000,000 | 806,000,000 |
Commitments to Extend Credit | Standby Letters of Credit | ||
Other Commitments [Line Items] | ||
Financial instruments with off balance sheet risk | $ 87,000,000 | $ 73,000,000 |
Financial Assets and Financial Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investment securities available-for-sale | $ 334,113 | $ 315,785 |
Interest Rate Swap Contracts | 1,721 | 881 |
Interest Rate Swap Contracts | 3,133 | 2,545 |
Interest rate swap contracts fair value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Interest Rate Swap Contracts | 1,721 | 881 |
Interest Rate Swap Contracts | 3,133 | 2,545 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investment securities available-for-sale | 334,113 | 315,785 |
Significant Other Observable Inputs (Level 2) | Interest rate swap contracts fair value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Interest Rate Swap Contracts | 1,721 | 881 |
Interest Rate Swap Contracts | $ 3,133 | $ 2,545 |
Balances of Assets and Liabilities Measured at Fair Value on Non-Recurring Basis (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | $ 306 | $ 325 |
Fair Value Hierarchy for Asset Measured on Non-recurring Basis | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Collateral dependent impaired loans with specific valuation allowance and/or partial charge-offs (non-purchased credit impaired loans) | 306 | |
Other real estate owned | 325 | |
Total | 306 | 325 |
Significant Unobservable Inputs (Level 3) | Fair Value Hierarchy for Asset Measured on Non-recurring Basis | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Collateral dependent impaired loans with specific valuation allowance and/or partial charge-offs (non-purchased credit impaired loans) | 306 | |
Other real estate owned | 325 | |
Total | $ 306 | $ 325 |
4^HC -&$MQ_$E"0_F
M@.X' H\':8(OMMV^CY;,DJW9%:]E]Z,^/Q@80S88?*[+=OQ-GE_;
MKJZ<9)94Q6][/!S'X]G^DQ.0X0(& C8)* T*. CX).!A#P($XN)!!@49"+*+
M@ <%$@1R$@@6%"@0J$G 5%"0@R"?!%EX#!H$^C*&/"@8%4.O(.?W'1"6W)"YT\V'D"+Z,"W
MS^YVE/3^_:R)A-:%\,'')EVIE#@#X:R#%X7T
M( 15?T[ Y7C$&SPOO+*F-6Z!%#E9>!43T&DF.Z2@/N*GS>&4.80'_&0PZJLY
M
YHW<,+,Q#8. Z42)A+D@^&4!: >^M" ^_ EJA;W>@WG>@0P<*.S#OC3PN
MC O3"(P%!?HZ508*I-#2W;9&D]9HM,92X]A@363D=:8,C%10W+;$D)88',4E
M+$'&29>PMXP]><=X298TQF(71<*8P!B5,+@,C-?BMB&.-,3%N20,"8SW1HB$
M*8$"[927MZTI2&L*7/_$. ^!*7QBZ/H8([%M>I_V-L?QM<@QX1[6W73;[2_=KVM0T@HNY2C$^;O0SP=DPR9(Z&8KKA
M/DTYV^E.;3>?6Z[4)OD<$\TP,&'>'8;=$]9Z>/;]LOW>BS&1=OO7I;!XRMO+?!
MT2<&1F:CF#C2(ZE"#$XR17"VN#->+Y)4"BZE E IZ ?93@PW2+7PL[/PDTU,
M,#\A_GE"7(6>*P>^/^\@^.P@4 X"5!!^5EF/3*RBIAB6^..?'DQMP4R! ^@
M5GM(:@]1>T2-I PWBB&U*")])+0B(E)$A")BPQ"*80MM6!27*