QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State of Incorporation) |
(I.R.S. Employer Identification No.) |
Title of class |
Trading Symbol(s) |
Name of exchange on which registered |
||
Accelerated filer ☐ |
Non-accelerated filer ☐ |
Smaller reporting company |
Emerging growth company |
| PART I | FINANCIAL INFORMATION |
Item 1 |
Financial Statements |
|
3 |
||
4 |
||
5 |
||
6 |
||
7 |
||
9 |
||
Item 2 |
37 |
|
Item 3 |
50 |
|
Item 4 |
50 |
|
PART II |
OTHER INFORMATION |
|
Item 1 |
51 |
|
Item 1A |
51 |
|
Item 2 |
51 |
|
Item 3 |
51 |
|
Item 4 |
51 |
|
Item 5 |
51 |
|
Item 6 |
52 |
|
53 |
June 30, |
December 31, |
|||||||
2019 |
2018 |
|||||||
(In thousands, except share and per share data) |
||||||||
Assets |
||||||||
Cash and due from banks |
$ |
$ |
||||||
Short-term interest bearing accounts |
||||||||
Equity securities, at fair value |
||||||||
Securities available for sale, at fair value |
||||||||
Securities held to maturity (fair value $ |
||||||||
Federal Reserve and Federal Home Loan Bank stock |
||||||||
Loans held for sale |
||||||||
Loans |
||||||||
Less allowance for loan losses |
||||||||
Net loans |
$ |
$ |
||||||
Premises and equipment, net |
||||||||
Goodwill |
||||||||
Intangible assets, net |
||||||||
Bank owned life insurance |
||||||||
Other assets |
||||||||
Total assets |
$ |
$ |
||||||
Liabilities |
||||||||
Demand (noninterest bearing) |
$ |
$ |
||||||
Savings, NOW and money market |
||||||||
Time |
||||||||
Total deposits |
$ |
$ |
||||||
Short-term borrowings |
||||||||
Long-term debt |
||||||||
Junior subordinated debt |
||||||||
Other liabilities |
||||||||
Total liabilities |
$ |
$ |
||||||
Stockholders’ equity |
||||||||
Preferred stock, $ |
$ |
$ |
||||||
Common stock, $ |
||||||||
Additional paid-in-capital |
||||||||
Retained earnings |
||||||||
Accumulated other comprehensive loss |
( |
) |
( |
) |
||||
Common stock in treasury, at cost, |
( |
) |
( |
) |
||||
Total stockholders’ equity |
$ |
$ |
||||||
Total liabilities and stockholders’ equity |
$ |
$ |
||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
(In thousands, except per share data) |
||||||||||||||||
Interest, fee and dividend income |
||||||||||||||||
Interest and fees on loans |
$ |
$ |
$ |
$ |
||||||||||||
Securities available for sale |
||||||||||||||||
Securities held to maturity |
||||||||||||||||
Other |
||||||||||||||||
Total interest, fee and dividend income |
$ |
$ |
$ |
$ |
||||||||||||
Interest expense |
||||||||||||||||
Deposits |
$ |
$ |
$ |
$ |
||||||||||||
Short-term borrowings |
||||||||||||||||
Long-term debt |
||||||||||||||||
Junior subordinated debt |
||||||||||||||||
Total interest expense |
$ |
$ |
$ |
$ |
||||||||||||
Net interest income |
$ |
$ |
$ |
$ |
||||||||||||
Provision for loan losses |
||||||||||||||||
Net interest income after provision for loan losses |
$ |
$ |
$ |
$ |
||||||||||||
Noninterest income |
||||||||||||||||
Insurance and other financial services revenue |
$ |
$ |
$ |
$ |
||||||||||||
Service charges on deposit accounts |
||||||||||||||||
ATM and debit card fees |
||||||||||||||||
Retirement plan administration fees |
||||||||||||||||
Trust |
||||||||||||||||
Bank owned life insurance |
||||||||||||||||
Net securities (losses) gains |
( |
) |
( |
) |
||||||||||||
Other |
||||||||||||||||
Total noninterest income |
$ |
$ |
$ |
$ |
||||||||||||
Noninterest expense |
||||||||||||||||
Salaries and employee benefits |
$ |
$ |
$ |
$ |
||||||||||||
Occupancy |
||||||||||||||||
Data processing and communications |
||||||||||||||||
Professional fees and outside services |
||||||||||||||||
Equipment |
||||||||||||||||
Office supplies and postage |
||||||||||||||||
FDIC expenses |
||||||||||||||||
Advertising |
||||||||||||||||
Amortization of intangible assets |
||||||||||||||||
Loan collection and other real estate owned, net |
||||||||||||||||
Other |
||||||||||||||||
Total noninterest expense |
$ |
$ |
$ |
$ |
||||||||||||
Income before income tax expense |
$ |
$ |
$ |
$ |
||||||||||||
Income tax expense |
||||||||||||||||
Net income |
$ |
$ |
$ |
$ |
||||||||||||
Earnings per share |
||||||||||||||||
Basic |
$ |
$ |
$ |
$ |
||||||||||||
Diluted |
$ |
$ |
$ |
$ |
||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
(In thousands) |
||||||||||||||||
Net income |
$ |
$ |
$ |
$ |
||||||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||
Securities available for sale: |
||||||||||||||||
Unrealized net holding gains (losses) arising during the period, gross |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||
Tax effect |
( |
) |
( |
) |
||||||||||||
Unrealized net holding gains (losses) arising during the period, net |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||
Reclassification adjustment for net losses in net income, gross |
$ |
$ |
$ |
$ |
||||||||||||
Tax effect |
( |
) |
||||||||||||||
Reclassification adjustment for net losses in net income, net |
$ |
$ |
$ |
$ |
||||||||||||
Amortization of unrealized net gains for the reclassification of available for sale securities to held to maturity, gross |
$ |
$ |
$ |
$ |
||||||||||||
Tax effect |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Amortization of unrealized net gains for the reclassification of available for sale securities to held to maturity, net |
$ |
$ |
$ |
$ |
||||||||||||
Total securities available for sale, net |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||
Cash flow hedges: |
||||||||||||||||
Unrealized (losses) gains on derivatives (cash flow hedges), gross |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
||||||||
Tax effect |
( |
) |
( |
) |
||||||||||||
Unrealized (losses) gains on derivatives (cash flow hedges), net |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
||||||||
Reclassification of net unrealized (gains) on cash flow hedges to interest (income), gross |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
||||
Tax effect |
||||||||||||||||
Reclassification of net unrealized (gains) on cash flow hedges to interest (income), net |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
||||
Total cash flow hedges, net |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
||||||
Pension and other benefits: |
||||||||||||||||
Amortization of prior service cost and actuarial losses, gross |
$ |
$ |
$ |
$ |
||||||||||||
Tax effect |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Amortization of prior service cost and actuarial losses, net |
$ |
$ |
$ |
$ |
||||||||||||
Total pension and other benefits, net |
$ |
$ |
$ |
$ |
||||||||||||
Total other comprehensive income (loss) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||
Comprehensive income |
$ |
$ |
$ |
$ |
||||||||||||
Common Stock |
Additional Paid-in- Capital |
Retained Earnings |
Accumulated Other Comprehensive (Loss) Income |
Common Stock in Treasury |
Total |
|||||||||||||||||||
(In thousands, except share and per share data) |
||||||||||||||||||||||||
Balance at March 31, 2019 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||
Net income |
||||||||||||||||||||||||
Cash dividends - $ |
( |
) |
( |
) |
||||||||||||||||||||
Net issuance of |
( |
) |
( |
) |
||||||||||||||||||||
Stock-based compensation |
||||||||||||||||||||||||
Other comprehensive income |
||||||||||||||||||||||||
Balance at June 30, 2019 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||
Balance at March 31, 2018 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||
Net income |
||||||||||||||||||||||||
Cumulative effect adjustment for ASU 2016-01 implementation |
( |
) |
||||||||||||||||||||||
Cash dividends - $ |
( |
) |
( |
) |
||||||||||||||||||||
Net issuance of |
( |
) |
||||||||||||||||||||||
Stock-based compensation |
||||||||||||||||||||||||
Other comprehensive (loss) |
( |
) |
( |
) |
||||||||||||||||||||
Balance at June 30, 2018 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||
Common Stock |
Additional Paid-in- Capital |
Retained Earnings |
Accumulated Other Comprehensive (Loss) Income |
Common Stock in Treasury |
Total |
|||||||||||||||||||
(In thousands, except share and per share data) |
||||||||||||||||||||||||
Balance at December 31, 2018 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||
Net income |
||||||||||||||||||||||||
Cash dividends - $ |
( |
) |
( |
) |
||||||||||||||||||||
Net issuance of |
( |
) |
( |
) |
||||||||||||||||||||
Stock-based compensation |
||||||||||||||||||||||||
Other comprehensive income |
||||||||||||||||||||||||
Balance at June 30, 2019 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||
Balance at December 31, 2017 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||
Net income |
||||||||||||||||||||||||
Cumulative effect adjustment for ASU 2016-01 implementation |
( |
) |
( |
) |
||||||||||||||||||||
Cumulative effect adjustment for ASU 2018-02 implementation |
( |
) |
||||||||||||||||||||||
Cash dividends - $ |
( |
) |
( |
) |
||||||||||||||||||||
Net issuance of |
( |
) |
( |
) |
||||||||||||||||||||
Stock-based compensation |
||||||||||||||||||||||||
Other comprehensive (loss) |
( |
) |
( |
) |
||||||||||||||||||||
Balance at June 30, 2018 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||
Six Months Ended June 30, |
||||||||
2019 |
2018 |
|||||||
(In thousands) |
||||||||
Operating activities |
||||||||
Net income |
$ |
$ |
||||||
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
Provision for loan losses |
||||||||
Depreciation and amortization of premises and equipment |
||||||||
Net amortization on securities |
||||||||
Amortization of intangible assets |
||||||||
Amortization of operating lease right-of-use assets |
||||||||
Excess tax benefit on stock-based compensation |
( |
) |
( |
) |
||||
Stock-based compensation expense |
||||||||
Bank owned life insurance income |
( |
) |
( |
) |
||||
Proceeds from sale of loans held for sale |
||||||||
Originations of loans held for sale |
( |
) |
( |
) |
||||
Net gains on sale of loans held for sale |
( |
) |
( |
) |
||||
Net security losses (gains) |
( |
) |
||||||
Net gains on sale of other real estate owned |
( |
) |
( |
) |
||||
Net change in other assets and other liabilities |
( |
) |
( |
) |
||||
Net cash provided by operating activities |
$ |
$ |
||||||
Investing activities |
||||||||
Net cash used in acquisitions |
$ |
$ |
( |
) |
||||
Securities available for sale: |
||||||||
Proceeds from maturities, calls and principal paydowns |
||||||||
Proceeds from sales |
||||||||
Purchases |
( |
) |
( |
) |
||||
Securities held to maturity: |
||||||||
Proceeds from maturities, calls and principal paydowns |
||||||||
Purchases |
( |
) |
( |
) |
||||
Equity securities: |
||||||||
Proceeds from sales |
||||||||
Purchases |
( |
) |
||||||
Other: |
||||||||
Net increase in loans |
( |
) |
( |
) |
||||
Proceeds from Federal Home Loan Bank stock redemption |
||||||||
Purchases of Federal Reserve and Federal Home Loan Bank stock |
( |
) |
( |
) |
||||
Purchases of premises and equipment, net |
( |
) |
( |
) |
||||
Proceeds from sales of other real estate owned |
||||||||
Net cash used in investing activities |
$ |
( |
) |
$ |
( |
) |
||
Financing activities |
||||||||
Net increase in deposits |
$ |
$ |
||||||
Net (decrease) increase in short-term borrowings |
( |
) |
||||||
Proceeds from issuance of long-term debt |
||||||||
Repayments of long-term debt |
( |
) |
( |
) |
||||
Proceeds from the issuance of shares to employee and other stock plans |
||||||||
Cash paid by employer for tax-withholdings on stock issuance |
( |
) |
( |
) |
||||
Cash dividends |
( |
) |
( |
) |
||||
Net cash (used in) provided by financing activities |
$ |
( |
) |
$ |
||||
Net increase (decrease) in cash and cash equivalents |
$ |
$ |
( |
) |
||||
Cash and cash equivalents at beginning of period |
||||||||
Cash and cash equivalents at end of period |
$ |
$ |
||||||
Six Months Ended June 30, |
||||||||
2019 |
2018 |
|||||||
Supplemental disclosure of cash flow information |
||||||||
Cash paid during the period for: |
||||||||
Interest expense |
$ |
$ |
||||||
Income taxes paid, net of refund |
||||||||
Noncash investing activities: |
||||||||
Loans transferred to other real estate owned |
$ |
$ |
||||||
Acquisitions: |
||||||||
Fair value of assets acquired |
$ |
$ |
||||||
| 1. | Description of Business |
| 2. | Basis of Presentation |
| 3. | Securities |
(In thousands) |
Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Estimated Fair Value |
||||||||||||
As of June 30, 2019 |
||||||||||||||||
Federal agency |
$ |
$ |
$ |
$ |
||||||||||||
State & municipal |
||||||||||||||||
Mortgage-backed: |
||||||||||||||||
Government-sponsored enterprises |
||||||||||||||||
U.S. government agency securities |
||||||||||||||||
Collateralized mortgage obligations: |
||||||||||||||||
Government-sponsored enterprises |
||||||||||||||||
U.S. government agency securities |
||||||||||||||||
Total AFS securities |
$ |
$ |
$ |
$ |
||||||||||||
As of December 31, 2018 |
||||||||||||||||
Federal agency |
$ |
$ |
$ |
$ |
||||||||||||
State & municipal |
||||||||||||||||
Mortgage-backed: |
||||||||||||||||
Government-sponsored enterprises |
||||||||||||||||
U.S. government agency securities |
||||||||||||||||
Collateralized mortgage obligations: |
||||||||||||||||
Government-sponsored enterprises |
||||||||||||||||
U.S. government agency securities |
||||||||||||||||
Total AFS securities |
$ |
$ |
$ |
$ |
||||||||||||
Six Months Ended June 30, |
||||||||
(In thousands) |
2019 |
2018 |
||||||
Gross realized gains |
$ |
$ |
||||||
Gross realized (losses) |
( |
) |
||||||
Net AFS realized (losses) |
$ |
( |
) |
$ |
||||
(In thousands) |
Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Estimated Fair Value |
||||||||||||
As of June 30, 2019 |
||||||||||||||||
Federal agency |
$ |
$ |
$ |
$ |
||||||||||||
Mortgage-backed: |
||||||||||||||||
Government-sponsored enterprises |
||||||||||||||||
U.S. government agency securities |
||||||||||||||||
Collateralized mortgage obligations: |
||||||||||||||||
Government-sponsored enterprises |
||||||||||||||||
U.S. government agency securities |
||||||||||||||||
State & municipal |
||||||||||||||||
Total HTM securities |
$ |
$ |
$ |
$ |
||||||||||||
As of December 31, 2018 |
||||||||||||||||
Federal agency |
$ |
$ |
$ |
$ |
||||||||||||
Mortgage-backed: |
||||||||||||||||
Government-sponsored enterprises |
||||||||||||||||
U.S. government agency securities |
||||||||||||||||
Collateralized mortgage obligations: |
||||||||||||||||
Government-sponsored enterprises |
||||||||||||||||
U.S. government agency securities |
||||||||||||||||
State & municipal |
||||||||||||||||
Total HTM securities |
$ |
$ |
$ |
$ |
||||||||||||
Less Than 12 Months |
12 Months or Longer |
Total |
||||||||||||||||||||||||||||||||||
(In thousands) |
Fair Value |
Unrealized Losses |
Number of Positions |
Fair Value |
Unrealized Losses |
Number of Positions |
Fair Value |
Unrealized Losses |
Number of Positions |
|||||||||||||||||||||||||||
As of June 30, 2019 |
||||||||||||||||||||||||||||||||||||
AFS securities: |
||||||||||||||||||||||||||||||||||||
Federal agency |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||||
Mortgage-backed |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||
Collateralized mortgage obligations |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Total securities with unrealized losses |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
HTM securities: |
||||||||||||||||||||||||||||||||||||
Mortgage-backed |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||||
Collateralized mortgage obligations |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
State & municipal |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||
Total securities with unrealized losses |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
As of December 31, 2018 |
||||||||||||||||||||||||||||||||||||
AFS securities: |
||||||||||||||||||||||||||||||||||||
Federal agency |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||||
State & municipal |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Mortgage-backed |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Collateralized mortgage obligations |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Total securities with unrealized losses |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
HTM securities: |
||||||||||||||||||||||||||||||||||||
Mortgage-backed |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||||
Collateralized mortgage obligations |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
State & municipal |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Total securities with unrealized losses |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
Three Months Ended June 30, |
||||||||
(In thousands) |
2019 |
2018 |
||||||
Net gains and losses recognized on equity securities |
$ |
( |
) |
$ |
||||
Less: Net gains and losses recognized during the period on equity securities sold during the period |
||||||||
Unrealized gains and losses recognized on equity securities still held |
$ |
( |
) |
$ |
||||
Six Months Ended June 30, |
||||||||
(In thousands) |
2019 |
2018 |
||||||
Net gains and losses recognized on equity securities |
$ |
$ |
||||||
Less: Net gains and losses recognized during the period on equity securities sold during the period |
||||||||
Unrealized gains and losses recognized on equity securities still held |
$ |
$ |
||||||
(In thousands) |
Amortized Cost |
Estimated Fair Value |
||||||
AFS debt securities: |
||||||||
Within one year |
$ |
$ |
||||||
From one to five years |
||||||||
From five to ten years |
||||||||
After ten years |
||||||||
Total AFS debt securities |
$ |
$ |
||||||
HTM debt securities: |
||||||||
Within one year |
$ |
$ |
||||||
From one to five years |
||||||||
From five to ten years |
||||||||
After ten years |
||||||||
Total HTM debt securities |
$ |
$ |
||||||
Portfolio |
Class |
Commercial Loans |
Commercial and Industrial |
Commercial Real Estate |
|
Business Banking |
|
Consumer Loans |
Dealer Finance |
Specialty Lending |
|
Direct |
|
Residential Real Estate |
(In thousands) |
Commercial Loans |
Consumer Loans |
Residential Real Estate |
Total |
||||||||||||
Balance as of March 31, 2019 |
$ |
$ |
$ |
$ |
||||||||||||
Charge-offs |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Recoveries |
||||||||||||||||
Provision |
||||||||||||||||
Ending Balance as of June 30, 2019 |
$ |
$ |
$ |
$ |
||||||||||||
Balance as of March 31, 2018 |
$ |
$ |
$ |
$ |
||||||||||||
Charge-offs |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Recoveries |
||||||||||||||||
Provision |
( |
) |
||||||||||||||
Ending Balance as of June 30, 2018 |
$ |
$ |
$ |
$ |
||||||||||||
(In thousands) |
Commercial Loans |
Consumer Loans |
Residential Real Estate |
Total |
||||||||||||
Balance as of December 31, 2018 |
$ |
$ |
$ |
$ |
||||||||||||
Charge-offs |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Recoveries |
||||||||||||||||
Provision |
||||||||||||||||
Ending Balance as of June 30, 2019 |
$ |
$ |
$ |
$ |
||||||||||||
Balance as of December 31, 2017 |
$ |
$ |
$ |
$ |
||||||||||||
Charge-offs |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Recoveries |
||||||||||||||||
Provision |
||||||||||||||||
Ending Balance as of June 30, 2018 |
$ |
$ |
$ |
$ |
||||||||||||
(In thousands) |
Commercial Loans |
Consumer Loans |
Residential Real Estate |
Total |
||||||||||||
As of June 30, 2019 |
||||||||||||||||
Allowance for loan losses |
$ |
$ |
$ |
$ |
||||||||||||
Allowance for loans individually evaluated for impairment |
||||||||||||||||
Allowance for loans collectively evaluated for impairment |
$ |
$ |
$ |
$ |
||||||||||||
Ending balance of loans |
$ |
$ |
$ |
$ |
||||||||||||
Ending balance of originated loans individually evaluated for impairment |
||||||||||||||||
Ending balance of acquired loans collectively evaluated for impairment |
||||||||||||||||
Ending balance of originated loans collectively evaluated for impairment |
$ |
$ |
$ |
$ |
||||||||||||
As of December 31, 2018 |
||||||||||||||||
Allowance for loan losses |
$ |
$ |
$ |
$ |
||||||||||||
Allowance for loans individually evaluated for impairment |
||||||||||||||||
Allowance for loans collectively evaluated for impairment |
$ |
$ |
$ |
$ |
||||||||||||
Ending balance of loans |
$ |
$ |
$ |
$ |
||||||||||||
Ending balance of originated loans individually evaluated for impairment |
||||||||||||||||
Ending balance of acquired loans collectively evaluated for impairment |
||||||||||||||||
Ending balance of originated loans collectively evaluated for impairment |
$ |
$ |
$ |
$ |
||||||||||||
(In thousands) |
31-60 Days Past Due Accruing |
61-90 Days Past Due Accruing |
Greater Than 90 Days Past Due Accruing |
Total Past Due Accruing |
Nonaccrual |
Current |
Recorded Total Loans |
|||||||||||||||||||||
As of June 30, 2019 |
||||||||||||||||||||||||||||
Originated |
||||||||||||||||||||||||||||
Commercial Loans: |
||||||||||||||||||||||||||||
C&I |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
CRE |
||||||||||||||||||||||||||||
Business Banking |
||||||||||||||||||||||||||||
Total Commercial Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Consumer Loans: |
||||||||||||||||||||||||||||
Dealer Finance |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Specialty Lending |
||||||||||||||||||||||||||||
Direct |
||||||||||||||||||||||||||||
Total Consumer Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Residential Real Estate |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Total Originated Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Acquired |
||||||||||||||||||||||||||||
Commercial Loans: |
||||||||||||||||||||||||||||
C&I |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
CRE |
||||||||||||||||||||||||||||
Business Banking |
||||||||||||||||||||||||||||
Total Commercial Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Consumer Loans: |
||||||||||||||||||||||||||||
Direct |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Total Consumer Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Residential Real Estate |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Total Acquired Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Total Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
(In thousands) |
31-60 Days Past Due Accruing |
61-90 Days Past Due Accruing |
Greater Than 90 Days Past Due Accruing |
Total Past Due Accruing |
Nonaccrual |
Current |
Recorded Total Loans |
|||||||||||||||||||||
As of December 31, 2018 |
||||||||||||||||||||||||||||
Originated |
||||||||||||||||||||||||||||
Commercial Loans: |
||||||||||||||||||||||||||||
C&I |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
CRE |
||||||||||||||||||||||||||||
Business Banking |
||||||||||||||||||||||||||||
Total Commercial Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Consumer Loans: |
||||||||||||||||||||||||||||
Dealer Finance |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Specialty Lending |
||||||||||||||||||||||||||||
Direct |
||||||||||||||||||||||||||||
Total Consumer Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Residential Real Estate |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Total Originated Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Acquired |
||||||||||||||||||||||||||||
Commercial Loans: |
||||||||||||||||||||||||||||
C&I |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
CRE |
||||||||||||||||||||||||||||
Business Banking |
||||||||||||||||||||||||||||
Total Commercial Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Consumer Loans: |
||||||||||||||||||||||||||||
Dealer Finance |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Direct |
||||||||||||||||||||||||||||
Total Consumer Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Residential Real Estate |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Total Acquired Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Total Loans |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
June 30, 2019 |
December 31, 2018 |
|||||||||||||||||||||||
(In thousands) |
Recorded Investment Balance (Book) |
Unpaid Principal Balance (Legal) |
Related Allowance |
Recorded Investment Balance (Book) |
Unpaid Principal Balance (Legal) |
Related Allowance |
||||||||||||||||||
Originated |
||||||||||||||||||||||||
With no related allowance recorded: |
||||||||||||||||||||||||
Commercial Loans: |
||||||||||||||||||||||||
C&I |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
CRE |
||||||||||||||||||||||||
Business Banking |
||||||||||||||||||||||||
Total Commercial Loans |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Consumer Loans: |
||||||||||||||||||||||||
Dealer Finance |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Direct |
||||||||||||||||||||||||
Total Consumer Loans |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Residential Real Estate |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||||||||||
With an allowance recorded: |
||||||||||||||||||||||||
Commercial Loans: |
||||||||||||||||||||||||
C&I |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Total Commercial Loans |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Total Loans |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
For the Three Months Ended |
||||||||||||||||
June 30, 2019 |
June 30, 2018 |
|||||||||||||||
(In thousands) |
Average Recorded Investment |
Interest Income Recognized |
Average Recorded Investment |
Interest Income Recognized |
||||||||||||
Originated |
||||||||||||||||
Commercial Loans: |
||||||||||||||||
C&I |
$ |
$ |
$ |
$ |
||||||||||||
CRE |
||||||||||||||||
Business Banking |
||||||||||||||||
Total Commercial Loans |
$ |
$ |
$ |
$ |
||||||||||||
Consumer Loans: |
||||||||||||||||
Dealer Finance |
$ |
$ |
$ |
$ |
||||||||||||
Direct |
||||||||||||||||
Total Consumer Loans |
$ |
$ |
$ |
$ |
||||||||||||
Residential Real Estate |
$ |
$ |
$ |
$ |
||||||||||||
Total Originated |
$ |
$ |
$ |
$ |
||||||||||||
Total Loans |
$ |
$ |
$ |
$ |
||||||||||||
For the Six Months Ended |
||||||||||||||||
June 30, 2019 |
June 30, 2018 |
|||||||||||||||
(In thousands) |
Average Recorded Investment |
Interest Income Recognized |
Average Recorded Investment |
Interest Income Recognized |
||||||||||||
Originated |
||||||||||||||||
Commercial Loans: |
||||||||||||||||
C&I |
$ |
$ |
$ |
$ |
||||||||||||
CRE |
||||||||||||||||
Business Banking |
||||||||||||||||
Total Commercial Loans |
$ |
$ |
$ |
$ |
||||||||||||
Consumer Loans: |
||||||||||||||||
Dealer Finance |
$ |
$ |
$ |
$ |
||||||||||||
Direct |
||||||||||||||||
Total Consumer Loans |
$ |
$ |
$ |
$ |
||||||||||||
Residential Real Estate |
$ |
$ |
$ |
$ |
||||||||||||
Total Originated |
$ |
$ |
$ |
$ |
||||||||||||
Total Loans |
$ |
$ |
$ |
$ |
||||||||||||
| ● | Doubtful |
| ● | Substandard |
| ● | Special Mention |
| ● | Classified |
| ● | Non-classified |
| ● | Nonperforming |
| ● | Performing |
(In thousands) |
As of June 30, 2019 |
|||||||||||
Originated |
||||||||||||
Commercial Credit Exposure By Internally Assigned Grade: |
C&I |
CRE |
Total |
|||||||||
Pass |
$ |
$ |
$ |
|||||||||
Special Mention |
||||||||||||
Substandard |
||||||||||||
Total |
$ |
$ |
$ |
|||||||||
Business Banking Credit Exposure By Internally Assigned Grade: |
Business Banking |
Total |
||||||
Non-classified |
$ |
$ |
||||||
Classified |
||||||||
Total |
$ |
$ |
||||||
Consumer Credit Exposure By Payment Activity: |
Dealer Finance |
Specialty Lending |
Direct |
Total |
||||||||||||
Performing |
$ |
$ |
$ |
$ |
||||||||||||
Nonperforming |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
Residential Real Estate Credit Exposure By Payment Activity: |
Residential Real Estate |
Total |
||||||
Performing |
$ |
$ |
||||||
Nonperforming |
||||||||
Total |
$ |
$ |
||||||
Acquired |
||||||||||||
Commercial Credit Exposure |
||||||||||||
By Internally Assigned Grade: |
C&I |
CRE |
Total |
|||||||||
Pass |
$ |
$ |
$ |
|||||||||
Special Mention |
||||||||||||
Substandard |
||||||||||||
Total |
$ |
$ |
$ |
|||||||||
Business Banking Credit Exposure By Internally Assigned Grade: |
Business Banking |
Total |
||||||
Non-classified |
$ |
$ |
||||||
Classified |
||||||||
Total |
$ |
$ |
||||||
Consumer Credit Exposure |
||||||||
By Payment Activity: |
Direct |
Total |
||||||
Performing |
$ |
$ |
||||||
Nonperforming |
||||||||
Total |
$ |
$ |
||||||
Residential Real Estate Credit Exposure By Payment Activity: |
Residential Real Estate |
Total |
||||||
Performing |
$ |
$ |
||||||
Nonperforming |
||||||||
Total |
$ |
|||||||
(In thousands) |
As of December 31, 2018 |
|||||||||||
Originated |
||||||||||||
Commercial Credit Exposure |
||||||||||||
By Internally Assigned Grade: |
C&I |
CRE |
Total |
|||||||||
Pass |
$ |
$ |
$ |
|||||||||
Special Mention |
||||||||||||
Substandard |
||||||||||||
Total |
$ |
$ |
$ |
|||||||||
Business Banking Credit Exposure By Internally Assigned Grade: |
Business Banking |
Total |
||||||
Non-classified |
$ |
$ |
||||||
Classified |
||||||||
Total |
$ |
$ |
||||||
Consumer Credit Exposure By Payment Activity: |
Dealer Finance |
Specialty Lending |
Direct |
Total |
||||||||||||
Performing |
$ |
$ |
$ |
$ |
||||||||||||
Nonperforming |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
Residential Real Estate Credit Exposure By Payment Activity: |
Residential Real Estate |
Total |
||||||
Performing |
$ |
$ |
||||||
Nonperforming |
||||||||
Total |
$ |
$ |
||||||
Acquired |
||||||||||||
Commercial Credit Exposure |
||||||||||||
By Internally Assigned Grade: |
C&I |
CRE |
Total |
|||||||||
Pass |
$ |
$ |
$ |
|||||||||
Special Mention |
||||||||||||
Substandard |
||||||||||||
Total |
$ |
$ |
$ |
|||||||||
Business Banking Credit Exposure By Internally Assigned Grade: |
Business Banking |
Total |
||||||
Non-classified |
$ |
$ |
||||||
Classified |
||||||||
Total |
$ |
$ |
||||||
Consumer Credit Exposure By Payment Activity: |
Dealer Finance |
Direct |
Total |
|||||||||
Performing |
$ |
$ |
$ |
|||||||||
Nonperforming |
||||||||||||
Total |
$ |
$ |
$ |
|||||||||
Residential Real Estate Credit Exposure By Payment Activity: |
Residential Real Estate |
Total |
||||||
Performing |
$ |
$ |
||||||
Nonperforming |
||||||||
Total |
$ |
$ |
||||||
Three Months Ended June 30, 2019 |
Three Months Ended June 30, 2018 |
|||||||||||||||||||||||
(Dollars in thousands) |
Number of Contracts |
Pre- Modification Outstanding Recorded Investment |
Post- Modification Outstanding Recorded Investment |
Number of Contracts |
Pre- Modification Outstanding Recorded Investment |
Post- Modification Outstanding Recorded Investment |
||||||||||||||||||
Commercial Loans: |
||||||||||||||||||||||||
Business Banking |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Total Commercial Loans |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Consumer Loans: |
||||||||||||||||||||||||
Dealer Finance |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Direct |
||||||||||||||||||||||||
Total Consumer Loans |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Residential Real Estate |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Total Troubled Debt Restructurings |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Six Months Ended June 30, 2019 |
Six Months Ended June 30, 2018 |
|||||||||||||||||||||||
(Dollars in thousands) |
Number of Contracts |
Pre- Modification Outstanding Recorded Investment |
Post- Modification Outstanding Recorded Investment |
Number of Contracts |
Pre- Modification Outstanding Recorded Investment |
Post- Modification Outstanding Recorded Investment |
||||||||||||||||||
Commercial Loans: |
||||||||||||||||||||||||
C&I |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Business Banking |
||||||||||||||||||||||||
Total Commercial Loans |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Consumer Loans: |
||||||||||||||||||||||||
Dealer Finance |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Direct |
||||||||||||||||||||||||
Total Consumer Loans |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Residential Real Estate |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Total Troubled Debt Restructurings |
$ |
$ |
$ |
$ |
||||||||||||||||||||
Three Months Ended June 30, 2019 |
Three Months Ended June 30, 2018 |
|||||||||||||||
(Dollars in thousands) |
Number of Contracts |
Recorded Investment |
Number of Contracts |
Recorded Investment |
||||||||||||
Commercial Loans: |
||||||||||||||||
Business Banking |
$ |
$ |
||||||||||||||
Total Commercial Loans |
$ |
$ |
||||||||||||||
Consumer Loans: |
||||||||||||||||
Direct |
$ |
$ |
||||||||||||||
Total Consumer Loans |
$ |
$ |
||||||||||||||
Residential Real Estate |
$ |
$ |
||||||||||||||
Total Troubled Debt Restructurings |
$ |
$ |
||||||||||||||
Six Months Ended June 30, 2019 |
Six Months Ended June 30, 2018 |
|||||||||||||||
(Dollars in thousands) |
Number of Contracts |
Recorded Investment |
Number of Contracts |
Recorded Investment |
||||||||||||
Commercial Loans: |
||||||||||||||||
Business Banking |
$ |
$ |
||||||||||||||
Total Commercial Loans |
$ |
$ |
||||||||||||||
Consumer Loans: |
||||||||||||||||
Dealer Finance |
$ |
$ |
||||||||||||||
Direct |
||||||||||||||||
Total Consumer Loans |
$ |
$ |
||||||||||||||
Residential Real Estate |
$ |
$ |
||||||||||||||
Total Troubled Debt Restructurings |
$ |
$ |
||||||||||||||
(In thousands) |
Three Months Ended June 30, 2019 |
Six Months Ended June 30, 2019 |
||||||
Operating lease cost |
$ |
$ |
||||||
Variable lease cost |
||||||||
Short-term lease cost |
||||||||
Sublease income |
( |
) |
( |
) |
||||
Total operating lease cost |
$ |
$ |
||||||
(In thousands) |
||||
2019 |
$ |
|||
2020 |
||||
2021 |
||||
2022 |
||||
2023 |
||||
Thereafter |
||||
Total lease payments |
$ |
|||
Less: interest |
( |
) |
||
Present value of lease liabilities |
$ |
|||
(In thousands except for percent and period data) |
June 30, 2019 |
|||
Weighted average remaining lease term, in years |
||||
Weighted average discount rate |
% |
|||
Cash paid for amounts included in the measurement of lease liabilities: |
||||
Operating cash flows from operating leases |
$ |
|||
ROU assets obtained in exchange for lease liabilities |
||||
(In thousands) |
||||
2019 |
$ |
|||
2020 |
||||
2021 |
||||
2022 |
||||
2023 |
||||
Thereafter |
||||
Total |
$ |
|||
Pension Benefits |
Other Benefits |
|||||||||||||||
Three Months Ended June 30, |
Three Months Ended June 30, |
|||||||||||||||
(In thousands) |
2019 |
2018 |
2019 |
2018 |
||||||||||||
Components of net periodic cost (benefit): |
||||||||||||||||
Service cost |
$ |
$ |
$ |
$ |
||||||||||||
Interest cost |
||||||||||||||||
Expected return on plan assets |
( |
) |
( |
) |
||||||||||||
Net amortization |
||||||||||||||||
Total net periodic cost (benefit) |
$ |
$ |
( |
) |
$ |
$ |
||||||||||
Pension Benefits |
Other Benefits |
|||||||||||||||
Six Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
(In thousands) |
2019 |
2018 |
2019 |
2018 |
||||||||||||
Components of net periodic cost (benefit): |
||||||||||||||||
Service cost |
$ |
$ |
$ |
$ |
||||||||||||
Interest cost |
||||||||||||||||
Expected return on plan assets |
( |
) |
( |
) |
||||||||||||
Net amortization |
||||||||||||||||
Total net periodic cost (benefit) |
$ |
$ |
( |
) |
$ |
$ |
||||||||||
Three Months Ended June 30, |
||||||||
(In thousands, except per share data) |
2019 |
2018 |
||||||
Basic EPS: |
||||||||
Weighted average common shares outstanding |
||||||||
Net income available to common stockholders |
$ |
$ |
||||||
Basic EPS |
$ |
$ |
||||||
Diluted EPS: |
||||||||
Weighted average common shares outstanding |
||||||||
Dilutive effect of common stock options and restricted stock |
||||||||
Weighted average common shares and common share equivalents |
||||||||
Net income available to common stockholders |
$ |
$ |
||||||
Diluted EPS |
$ |
$ |
||||||
Six Months Ended June 30, |
||||||||
(In thousands, except per share data) |
2019 |
2018 |
||||||
Basic EPS: |
||||||||
Weighted average common shares outstanding |
||||||||
Net income available to common stockholders |
$ |
$ |
||||||
Basic EPS |
$ |
$ |
||||||
Diluted EPS: |
||||||||
Weighted average common shares outstanding |
||||||||
Dilutive effect of common stock options and restricted stock |
||||||||
Weighted average common shares and common share equivalents |
||||||||
Net income available to common stockholders |
$ |
$ |
||||||
Diluted EPS |
$ |
$ |
||||||
Detail About AOCI Components |
Amount Reclassified From AOCI |
Affected Line Item in the Consolidated Statement of Comprehensive Income (Loss) |
|||||||
Three Months Ended |
|||||||||
(In thousands) |
June 30, 2019 |
June 30, 2018 |
|||||||
AFS securities: |
|||||||||
Amortization of unrealized gains related to securities transfer |
$ |
$ |
Interest income |
||||||
Tax effect |
$ |
( |
) |
$ |
( |
) |
Income tax (benefit) |
||
Net of tax |
$ |
$ |
|||||||
Cash flow hedges: |
|||||||||
Net unrealized (gains) on cash flow hedges reclassified to interest expense |
$ |
( |
) |
$ |
( |
) |
Interest expense |
||
Tax effect |
$ |
$ |
Income tax expense |
||||||
Net of tax |
$ |
( |
) |
$ |
( |
) |
|||
Pension and other benefits: |
|||||||||
Amortization of net losses |
$ |
$ |
Other noninterest expense |
||||||
Amortization of prior service costs |
Other noninterest expense |
||||||||
Tax effect |
$ |
( |
) |
$ |
( |
) |
Income tax (benefit) |
||
Net of tax |
$ |
$ |
|||||||
Total reclassifications, net of tax |
$ |
$ |
( |
) |
|||||
Detail About AOCI Components |
Amount Reclassified From AOCI |
Affected Line item in the Consolidated Statement of Comprehensive Income (Loss) |
|||||||
Six Months Ended |
|||||||||
(In thousands) |
June 30, 2019 |
June 30, 2018 |
|||||||
AFS securities: |
|||||||||
Losses on AFS securities |
$ |
$ |
Net securities gains |
||||||
Amortization of unrealized gains related to securities transfer |
Interest income |
||||||||
Tax effect |
$ |
( |
) |
$ |
( |
) |
Income tax (benefit) |
||
Net of tax |
$ |
$ |
|||||||
Cash flow hedges: |
|||||||||
Net unrealized (gains) on cash flow hedges reclassified to interest expense |
$ |
( |
) |
$ |
( |
) |
Interest expense |
||
Tax effect |
$ |
$ |
Income tax expense |
||||||
Net of tax |
$ |
( |
) |
$ |
( |
) |
|||
Pension and other benefits: |
|||||||||
Amortization of net losses |
$ |
$ |
Other noninterest expense |
||||||
Amortization of prior service costs |
Other noninterest expense |
||||||||
Tax effect |
$ |
( |
) |
$ |
( |
) |
Income tax (benefit) |
||
Net of tax |
$ |
$ |
|||||||
Total reclassifications, net of tax |
$ |
$ |
|||||||
June 30, |
December 31, |
|||||||
(In thousands) |
2019 |
2018 |
||||||
Derivatives Not Designated as Hedging Instruments: |
||||||||
Fair value adjustment included in other assets and other liabilities |
||||||||
Interest rate derivatives |
$ |
$ |
||||||
Notional amount: |
||||||||
Interest rate derivatives |
||||||||
Risk participation agreements |
||||||||
Derivatives Designated as Hedging Instruments: |
||||||||
Fair value adjustment included in other assets |
||||||||
Interest rate derivatives |
||||||||
Fair value adjustment included in other liabilities |
||||||||
Interest rate derivatives |
||||||||
Notional amount: |
||||||||
Interest rate derivatives |
||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
(In thousands) |
2019 |
2018 |
2019 |
2018 |
||||||||||||
Derivatives Designated as Hedging Instruments: |
||||||||||||||||
Interest rate derivatives - included component |
||||||||||||||||
Amount of (loss) or gain recognized in OCI |
$ |
( |
) |
$ |
( |
) |
$ |
|||||||||
Amount of (gain) reclassified from AOCI into interest expense |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
(In thousands) |
2019 |
2018 |
2019 |
2018 |
||||||||||||
Derivatives Not Designated as Hedging Instruments: |
||||||||||||||||
Increase in other income |
$ |
$ |
$ |
$ |
||||||||||||
(In thousands) |
Level 1 |
Level 2 |
Level 3 |
June 30, 2019 |
||||||||||||
Assets: |
||||||||||||||||
AFS securities: |
||||||||||||||||
Federal agency |
$ |
$ |
$ |
$ |
||||||||||||
State & municipal |
||||||||||||||||
Mortgage-backed |
||||||||||||||||
Collateralized mortgage obligations |
||||||||||||||||
Total AFS securities |
$ |
$ |
$ |
$ |
||||||||||||
Equity securities |
||||||||||||||||
Derivatives |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
Liabilities: |
||||||||||||||||
Derivatives |
$ |
$ |
$ |
$ |
||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
(In thousands) |
Level 1 |
Level 2 |
Level 3 |
December 31, 2018 |
||||||||||||
Assets: |
||||||||||||||||
AFS securities: |
||||||||||||||||
Federal agency |
$ |
$ |
$ |
$ |
||||||||||||
State & municipal |
||||||||||||||||
Mortgage-backed |
||||||||||||||||
Collateralized mortgage obligations |
||||||||||||||||
Total AFS securities |
$ |
$ |
$ |
$ |
||||||||||||
Equity securities |
||||||||||||||||
Derivatives |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
Liabilities: |
||||||||||||||||
Derivatives |
$ |
$ |
$ |
$ |
||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
June 30, 2019 |
December 31, 2018 |
|||||||||||||||||||
(In thousands) |
Fair Value Hierarchy |
Carrying Amount |
Estimated Fair Value |
Carrying Amount |
Estimated Fair Value |
|||||||||||||||
Financial assets: |
||||||||||||||||||||
HTM securities |
2 |
$ |
$ |
$ |
$ |
|||||||||||||||
Net loans |
3 |
|||||||||||||||||||
Financial liabilities: |
||||||||||||||||||||
Time deposits |
2 |
$ |
$ |
$ |
$ |
|||||||||||||||
Long-term debt |
2 |
|||||||||||||||||||
Junior subordinated debt |
2 |
|||||||||||||||||||
| 12. | Recent Accounting Pronouncements |
| ● | Second quarter diluted earnings per share up 4.5% from prior quarter and up 7.8% from prior year |
| ● | Second quarter net income up 4.9% from prior quarter and up 8.7% from prior year |
| ● | FTE net interest margin of 3.63% for the six months ended June 30, 2019, up 6 bps from 2018 |
| ● | Full cycle deposit beta of 14.7% through the quarter ending June 30, 2019(1) |
| ● | Tangible equity ratio of 8.41%, up 93 bps from the second quarter of 2018(2) |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
(In thousands) |
2019 |
2018 |
2019 |
2018 |
||||||||||||
Net income |
$ |
30,555 |
$ |
28,121 |
$ |
59,682 |
$ |
54,107 |
||||||||
Amortization of intangible assets (net of tax) |
670 |
822 |
1,396 |
1,508 |
||||||||||||
Net income, excluding intangible amortization |
$ |
31,225 |
$ |
28,943 |
$ |
61,078 |
$ |
55,615 |
||||||||
Average stockholders' equity |
$ |
1,053,750 |
$ |
969,029 |
$ |
1,039,829 |
$ |
964,064 |
||||||||
Less: average goodwill and other intangibles |
288,930 |
289,250 |
289,419 |
285,161 |
||||||||||||
Average tangible common equity |
$ |
764,820 |
$ |
679,779 |
$ |
750,410 |
$ |
678,903 |
||||||||
Three Months Ended |
June 30, 2019 |
June 30, 2018 |
||||||||||||||||||||||
(Dollars in thousands) |
Average Balance |
Interest |
Yield/ Rates |
Average Balance |
Interest |
Yield/ Rates |
||||||||||||||||||
Assets: |
||||||||||||||||||||||||
Short-term interest bearing accounts |
$ |
25,783 |
$ |
82 |
1.28 |
% |
$ |
3,574 |
$ |
46 |
5.16 |
% |
||||||||||||
Securities available for sale (1) (3) |
981,079 |
6,031 |
2.47 |
% |
1,266,304 |
7,046 |
2.23 |
% |
||||||||||||||||
Securities held to maturity (1) (3) |
770,651 |
5,447 |
2.83 |
% |
503,501 |
3,135 |
2.50 |
% |
||||||||||||||||
Federal Reserve Bank and FHLB stock |
46,179 |
760 |
6.60 |
% |
48,184 |
735 |
6.12 |
% |
||||||||||||||||
Loans (2) (3) |
6,958,299 |
81,358 |
4.69 |
% |
6,750,710 |
74,283 |
4.41 |
% |
||||||||||||||||
Total interest-earning assets |
$ |
8,781,991 |
$ |
93,678 |
4.28 |
% |
$ |
8,572,273 |
$ |
85,245 |
3.99 |
% |
||||||||||||
Other assets |
$ |
816,748 |
$ |
766,604 |
||||||||||||||||||||
Total assets |
$ |
9,598,739 |
$ |
9,338,877 |
||||||||||||||||||||
Liabilities and Stockholders' Equity: |
||||||||||||||||||||||||
Money market deposit accounts |
$ |
1,916,045 |
$ |
5,564 |
1.16 |
% |
$ |
1,699,956 |
$ |
1,816 |
0.43 |
% |
||||||||||||
NOW deposit accounts |
1,127,413 |
379 |
0.13 |
% |
1,222,889 |
479 |
0.16 |
% |
||||||||||||||||
Savings deposits |
1,282,084 |
185 |
0.06 |
% |
1,289,062 |
183 |
0.06 |
% |
||||||||||||||||
Time deposits |
953,698 |
4,106 |
1.73 |
% |
858,080 |
2,601 |
1.22 |
% |
||||||||||||||||
Total interest-bearing deposits |
$ |
5,279,240 |
$ |
10,234 |
0.78 |
% |
$ |
5,069,987 |
$ |
5,079 |
0.40 |
% |
||||||||||||
Short-term borrowings |
620,898 |
2,760 |
1.78 |
% |
706,694 |
2,455 |
1.39 |
% |
||||||||||||||||
Long-term debt |
82,414 |
471 |
2.29 |
% |
84,676 |
452 |
2.14 |
% |
||||||||||||||||
Junior subordinated debt |
101,196 |
1,141 |
4.52 |
% |
101,196 |
1,040 |
4.12 |
% |
||||||||||||||||
Total interest-bearing liabilities |
$ |
6,083,748 |
$ |
14,606 |
0.96 |
% |
$ |
5,962,553 |
$ |
9,026 |
0.61 |
% |
||||||||||||
Demand deposits |
$ |
2,298,867 |
$ |
2,294,023 |
||||||||||||||||||||
Other liabilities |
162,374 |
113,272 |
||||||||||||||||||||||
Stockholders' equity |
1,053,750 |
969,029 |
||||||||||||||||||||||
Total liabilities and stockholders' equity |
$ |
9,598,739 |
$ |
9,338,877 |
||||||||||||||||||||
Net interest income (FTE) |
$ |
79,072 |
$ |
76,219 |
||||||||||||||||||||
Interest rate spread |
3.32 |
% |
3.38 |
% |
||||||||||||||||||||
Net interest margin (FTE) |
3.61 |
% |
3.57 |
% |
||||||||||||||||||||
Taxable equivalent adjustment |
$ |
445 |
$ |
478 |
||||||||||||||||||||
Net interest income |
$ |
78,627 |
$ |
75,741 |
||||||||||||||||||||
| (1) | Securities are shown at average amortized cost. |
| (2) | For purposes of these computations, nonaccrual loans and loans held for sale are included in the average loan balances outstanding. |
| (3) | Interest income for tax-exempt securities and loans have been adjusted to a FTE basis using the statutory Federal income tax rate of 21%. |
Six Months Ended |
June 30, 2019 |
June 30, 2018 |
||||||||||||||||||||||
(Dollars in thousands) |
Average Balance |
Interest |
Yield/ Rates |
Average Balance |
Interest |
Yield/ Rates |
||||||||||||||||||
Assets: |
||||||||||||||||||||||||
Short-term interest bearing accounts |
$ |
17,471 |
$ |
174 |
2.01 |
% |
$ |
3,198 |
$ |
82 |
5.17 |
% |
||||||||||||
Securities available for sale (1) (3) |
982,881 |
11,984 |
2.46 |
% |
1,269,949 |
14,017 |
2.23 |
% |
||||||||||||||||
Securities held to maturity (1) (3) |
776,577 |
11,043 |
2.87 |
% |
492,996 |
6,081 |
2.49 |
% |
||||||||||||||||
Federal Reserve Bank and FHLB stock |
47,657 |
1,552 |
6.57 |
% |
47,518 |
1,465 |
6.22 |
% |
||||||||||||||||
Loans (2) (3) |
6,922,684 |
160,768 |
4.68 |
% |
6,672,016 |
144,825 |
4.38 |
% |
||||||||||||||||
Total interest-earning assets |
$ |
8,747,270 |
$ |
185,521 |
4.28 |
% |
$ |
8,485,677 |
$ |
166,470 |
3.96 |
% |
||||||||||||
Other assets |
$ |
806,225 |
$ |
756,444 |
||||||||||||||||||||
Total assets |
$ |
9,553,495 |
$ |
9,242,121 |
||||||||||||||||||||
Liabilities and Stockholders' Equity: |
||||||||||||||||||||||||
Money market deposit accounts |
$ |
1,860,358 |
$ |
9,974 |
1.08 |
% |
$ |
1,677,755 |
$ |
2,933 |
0.35 |
% |
||||||||||||
NOW deposit accounts |
1,131,291 |
817 |
0.15 |
% |
1,216,992 |
882 |
0.15 |
% |
||||||||||||||||
Savings deposits |
1,267,146 |
362 |
0.06 |
% |
1,268,859 |
354 |
0.06 |
% |
||||||||||||||||
Time deposits |
948,109 |
7,907 |
1.68 |
% |
830,671 |
4,841 |
1.18 |
% |
||||||||||||||||
Total interest-bearing deposits |
$ |
5,206,904 |
$ |
19,060 |
0.74 |
% |
$ |
4,994,277 |
$ |
9,010 |
0.36 |
% |
||||||||||||
Short-term borrowings |
666,349 |
5,997 |
1.81 |
% |
709,442 |
4,421 |
1.26 |
% |
||||||||||||||||
Long-term debt |
78,085 |
893 |
2.31 |
% |
86,749 |
928 |
2.16 |
% |
||||||||||||||||
Junior subordinated debt |
101,196 |
2,309 |
4.60 |
% |
101,196 |
1,941 |
3.87 |
% |
||||||||||||||||
Total interest-bearing liabilities |
$ |
6,052,534 |
$ |
28,259 |
0.94 |
% |
$ |
5,891,664 |
$ |
16,300 |
0.56 |
% |
||||||||||||
Demand deposits |
$ |
2,304,169 |
$ |
2,277,083 |
||||||||||||||||||||
Other liabilities |
156,963 |
109,310 |
||||||||||||||||||||||
Stockholders' equity |
1,039,829 |
964,064 |
||||||||||||||||||||||
Total liabilities and stockholders' equity |
$ |
9,553,495 |
$ |
9,242,121 |
||||||||||||||||||||
Net interest income (FTE) |
$ |
157,262 |
$ |
150,170 |
||||||||||||||||||||
Interest rate spread |
3.34 |
% |
3.40 |
% |
||||||||||||||||||||
Net interest margin (FTE) |
3.63 |
% |
3.57 |
% |
||||||||||||||||||||
Taxable equivalent adjustment |
$ |
944 |
$ |
943 |
||||||||||||||||||||
Net interest income |
$ |
156,318 |
$ |
149,227 |
||||||||||||||||||||
| (1) | Securities are shown at average amortized cost. |
| (2) | For purposes of these computations, nonaccrual loans and loans held for sale are included in the average loan balances outstanding. |
| (3) | Interest income for tax-exempt securities and loans have been adjusted to a FTE basis using the statutory Federal income tax rate of 21%. |
Three Months Ended June 30, |
Increase (Decrease) 2019 over 2018 |
|||||||||||
(In thousands) |
Volume |
Rate |
Total |
|||||||||
Short-term interest bearing accounts |
$ |
94 |
$ |
(58 |
) |
$ |
36 |
|||||
Securities available for sale |
(1,701 |
) |
686 |
(1,015 |
) |
|||||||
Securities held to maturity |
1,844 |
468 |
2,312 |
|||||||||
Federal Reserve Bank and FHLB stock |
(31 |
) |
56 |
25 |
||||||||
Loans |
2,331 |
4,744 |
7,075 |
|||||||||
Total interest income (FTE) |
$ |
2,537 |
$ |
5,896 |
$ |
8,433 |
||||||
Money market deposit accounts |
$ |
258 |
$ |
3,490 |
$ |
3,748 |
||||||
NOW deposit accounts |
(36 |
) |
(64 |
) |
(100 |
) |
||||||
Savings deposits |
(1 |
) |
3 |
2 |
||||||||
Time deposits |
315 |
1,190 |
1,505 |
|||||||||
Short-term borrowings |
(323 |
) |
628 |
305 |
||||||||
Long-term debt |
(12 |
) |
31 |
19 |
||||||||
Junior subordinated debt |
- |
101 |
101 |
|||||||||
Total interest expense (FTE) |
$ |
201 |
$ |
5,379 |
$ |
5,580 |
||||||
Change in net interest income (FTE) |
$ |
2,336 |
$ |
517 |
$ |
2,853 |
||||||
Six Months Ended June 30, |
Increase (Decrease) 2019 over 2018 |
|||||||||||
(In thousands) |
Volume |
Rate |
Total |
|||||||||
Short-term interest bearing accounts |
$ |
169 |
$ |
(77 |
) |
$ |
92 |
|||||
Securities available for sale |
(3,395 |
) |
1,362 |
(2,033 |
) |
|||||||
Securities held to maturity |
3,920 |
1,042 |
4,962 |
|||||||||
Federal Reserve Bank and FHLB stock |
4 |
83 |
87 |
|||||||||
Loans |
5,574 |
10,369 |
15,943 |
|||||||||
Total interest income (FTE) |
$ |
6,272 |
$ |
12,779 |
$ |
19,051 |
||||||
Money market deposit accounts |
$ |
352 |
$ |
6,689 |
$ |
7,041 |
||||||
NOW deposit accounts |
(62 |
) |
(3 |
) |
(65 |
) |
||||||
Savings deposits |
- |
8 |
8 |
|||||||||
Time deposits |
757 |
2,309 |
3,066 |
|||||||||
Short-term borrowings |
(283 |
) |
1,859 |
1,576 |
||||||||
Long-term debt |
(96 |
) |
61 |
(35 |
) |
|||||||
Junior subordinated debt |
- |
368 |
368 |
|||||||||
Total interest expense (FTE) |
$ |
668 |
$ |
11,291 |
$ |
11,959 |
||||||
Change in net interest income (FTE) |
$ |
5,604 |
$ |
1,488 |
$ |
7,092 |
||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
(In thousands) |
2019 |
2018 |
2019 |
2018 |
||||||||||||
Insurance and other financial services revenue |
$ |
5,938 |
$ |
5,826 |
$ |
12,694 |
$ |
12,330 |
||||||||
Service charges on deposit accounts |
4,224 |
4,246 |
8,460 |
8,218 |
||||||||||||
ATM and debit card fees |
6,156 |
5,816 |
11,681 |
11,089 |
||||||||||||
Retirement plan administration fees |
7,836 |
7,296 |
15,570 |
12,635 |
||||||||||||
Trust |
4,731 |
5,265 |
9,282 |
10,143 |
||||||||||||
Bank owned life insurance |
1,186 |
1,217 |
2,563 |
2,564 |
||||||||||||
Net securities (losses) gains |
(69 |
) |
91 |
(12 |
) |
163 |
||||||||||
Other |
4,239 |
4,401 |
7,824 |
8,293 |
||||||||||||
Total noninterest income |
$ |
34,241 |
$ |
34,158 |
$ |
68,062 |
$ |
65,435 |
||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
(In thousands) |
2019 |
2018 |
2019 |
2018 |
||||||||||||
Salaries and employee benefits |
$ |
38,567 |
$ |
37,726 |
$ |
77,923 |
$ |
74,293 |
||||||||
Occupancy |
5,443 |
5,535 |
11,718 |
11,654 |
||||||||||||
Data processing and communications |
4,693 |
4,508 |
9,107 |
8,787 |
||||||||||||
Professional fees and outside services |
3,359 |
3,336 |
7,027 |
6,828 |
||||||||||||
Equipment |
4,518 |
4,151 |
9,275 |
8,189 |
||||||||||||
Office supplies and postage |
1,577 |
1,504 |
3,168 |
3,077 |
||||||||||||
FDIC expenses |
949 |
1,092 |
1,966 |
2,293 |
||||||||||||
Advertising |
641 |
700 |
1,144 |
1,037 |
||||||||||||
Amortization of intangible assets |
893 |
1,096 |
1,861 |
2,010 |
||||||||||||
Loan collection and other real estate owned, net |
961 |
908 |
1,746 |
2,245 |
||||||||||||
Other |
4,630 |
4,332 |
9,756 |
8,747 |
||||||||||||
Total noninterest expense |
$ |
66,231 |
$ |
64,888 |
$ |
134,691 |
$ |
129,160 |
||||||||
June 30, 2019 |
December 31, 2018 |
|||||||
Mortgage-backed securities: |
||||||||
With maturities 15 years or less |
26 |
% |
26 |
% |
||||
With maturities greater than 15 years |
10 |
% |
10 |
% |
||||
Collateral mortgage obligations |
44 |
% |
40 |
% |
||||
Municipal securities |
12 |
% |
15 |
% |
||||
U.S. agency notes |
7 |
% |
8 |
% |
||||
Equity securities |
1 |
% |
1 |
% |
||||
Total |
100 |
% |
100 |
% |
||||
(In thousands) |
June 30, 2019 |
December 31, 2018 |
||||||
Commercial |
$ |
1,299,784 |
$ |
1,291,568 |
||||
Commercial real estate |
2,025,280 |
1,930,742 |
||||||
Residential real estate |
1,404,079 |
1,380,836 |
||||||
Dealer finance |
1,189,670 |
1,216,144 |
||||||
Specialty lending |
519,974 |
524,928 |
||||||
Home equity |
456,754 |
474,566 |
||||||
Other consumer |
67,732 |
68,925 |
||||||
Total loans |
$ |
6,963,273 |
$ |
6,887,709 |
||||
Allowance for Loan Losses |
Three Months Ended |
|||||||||||||||
(Dollars in thousands) |
June 30, 2019 |
June 30, 2018 |
||||||||||||||
Balance, beginning of period |
$ |
71,405 |
$ |
70,200 |
||||||||||||
Recoveries |
1,915 |
2,029 |
||||||||||||||
Charge-offs |
(8,432 |
) |
(8,557 |
) |
||||||||||||
Net charge-offs |
$ |
(6,517 |
) |
$ |
(6,528 |
) |
||||||||||
Provision for loan losses |
7,277 |
8,778 |
||||||||||||||
Balance, end of period |
$ |
72,165 |
$ |
72,450 |
||||||||||||
Composition of Net Charge-offs |
||||||||||||||||
Commercial |
$ |
(1,053 |
) |
16 |
% |
$ |
(724 |
) |
11 |
% |
||||||
Residential Real Estate |
(279 |
) |
4 |
% |
(62 |
) |
1 |
% |
||||||||
Consumer |
(5,185 |
) |
80 |
% |
(5,742 |
) |
88 |
% |
||||||||
Net charge-offs |
$ |
(6,517 |
) |
100 |
% |
$ |
(6,528 |
) |
100 |
% |
||||||
Annualized net charge-offs to average loans |
0.38 |
% |
0.39 |
% |
||||||||||||
Allowance for Loan Losses |
Six Months Ended |
|||||||||||||||
(Dollars in thousands) |
June 30, 2019 |
June 30, 2018 |
||||||||||||||
Balance, beginning of period |
$ |
72,505 |
$ |
69,500 |
||||||||||||
Recoveries |
3,462 |
3,907 |
||||||||||||||
Charge-offs |
(16,886 |
) |
(17,231 |
) |
||||||||||||
Net charge-offs |
$ |
(13,424 |
) |
$ |
(13,324 |
) |
||||||||||
Provision for loan losses |
13,084 |
16,274 |
||||||||||||||
Balance, end of period |
$ |
72,165 |
$ |
72,450 |
||||||||||||
Composition of Net Charge-offs |
||||||||||||||||
Commercial |
$ |
(1,706 |
) |
13 |
% |
$ |
(1,342 |
) |
10 |
% |
||||||
Residential Real Estate |
(499 |
) |
4 |
% |
(197 |
) |
1 |
% |
||||||||
Consumer |
(11,219 |
) |
83 |
% |
(11,785 |
) |
89 |
% |
||||||||
Net charge-offs |
$ |
(13,424 |
) |
100 |
% |
$ |
(13,324 |
) |
100 |
% |
||||||
Annualized net charge-offs to average loans |
0.39 |
% |
0.40 |
% |
||||||||||||
June 30, 2019 |
December 31, 2018 |
|||||||||||||||
(Dollars in thousands) |
Amount |
% |
Amount |
% |
||||||||||||
Nonaccrual loans |
||||||||||||||||
Commercial |
$ |
11,678 |
47 |
% |
$ |
11,804 |
46 |
% |
||||||||
Residential Real Estate |
5,888 |
24 |
% |
6,526 |
26 |
% |
||||||||||
Consumer |
3,456 |
14 |
% |
4,068 |
16 |
% |
||||||||||
Troubled debt restructured loans |
3,647 |
15 |
% |
3,089 |
12 |
% |
||||||||||
Total nonaccrual loans |
$ |
24,669 |
100 |
% |
$ |
25,487 |
100 |
% |
||||||||
Loans 90 days or more past due and still accruing |
||||||||||||||||
Commercial |
$ |
- |
- |
$ |
588 |
12 |
% |
|||||||||
Residential Real Estate |
- |
- |
1,182 |
23 |
% |
|||||||||||
Consumer |
2,387 |
100 |
% |
3,315 |
65 |
% |
||||||||||
Total loans 90 days or more past due and still accruing |
$ |
2,387 |
100 |
% |
$ |
5,085 |
100 |
% |
||||||||
Total nonperforming loans |
$ |
27,056 |
$ |
30,572 |
||||||||||||
OREO |
2,203 |
2,441 |
||||||||||||||
Total nonperforming assets |
$ |
29,259 |
$ |
33,013 |
||||||||||||
Total nonperforming loans to total loans |
0.39 |
% |
0.44 |
% |
||||||||||||
Total nonperforming assets to total assets |
0.30 |
% |
0.35 |
% |
||||||||||||
Allowance for loan losses to total nonperforming loans |
266.72 |
% |
237.16 |
% |
||||||||||||
Capital Measurements |
June 30, 2019 |
December 31, 2018 |
|||
Tier 1 leverage ratio |
9.88% |
9.52% |
|||
Common equity tier 1 capital ratio |
10.95% |
10.49% |
|||
Tier 1 capital ratio |
12.24% |
11.79% |
|||
Total risk-based capital ratio |
13.21% |
12.78% |
|||
Cash dividends as a percentage of net income |
38.17% |
38.44% |
|||
Per common share: |
|||||
Book value |
$ |
24.56 |
$ |
23.31 |
|
Tangible book value (1) |
$ |
17.97 |
$ |
16.66 |
|
Tangible equity ratio (2) |
8.41% |
7.85% |
|||
| (1) | Stockholders' equity less goodwill and intangible assets divided by common shares outstanding. |
| (2) | Non-GAAP measure - Stockholders’ equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. |
Interest Rate Sensitivity Analysis |
|
Change in interest rates |
Percent change in |
(in bps points) |
net interest income |
+200 |
(0.88%) |
-100 |
(1.85%) |
(a) |
Not applicable |
(b) |
Not applicable |
(c) |
None |
3.1 |
Restated Certificate of Incorporation of NBT Bancorp Inc. as amended through July 1, 2015 (filed as Exhibit 3.1 to Registrant's Form 10-Q, filed on August 10, 2015 and incorporated herein by reference) |
3.2 |
Amended and Restated Bylaws of NBT Bancorp Inc. effective May 22, 2018 (filed as Exhibit 3.1 to Registrant’s Form 8-K, filed on May 23, 2018 and incorporated herein by reference). |
3.3 |
Certificate of Designation of the Series A Junior Participating Preferred Stock (filed as Exhibit A to Exhibit 4.1 of the Registrant’s Form 8-K, filed on November 18, 2004 and incorporated herein by reference). |
10.1 |
|
31.1 |
|
31.2 |
|
32.1 |
|
32.2 |
|
101.INS |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
NBT BANCORP INC. |
||
By: |
/s/ Michael J. Chewens |
|
Michael J. Chewens, CPA |
||
Senior Executive Vice President |
||
Chief Financial Officer |
|
EXECUTIVE
/s/ Michael J. Chewens
|
Date: May 2, 2019
|
|
|
NBT BANCORP INC.
By: /s/ John H. Watt, Jr.
President & Chief Executive Officer
|
Date: May 2, 2019
|
|
|
By:
|
/s/ John H. Watt, Jr.
|
|
|
|
John H. Watt Jr.
|
|
|
|
Chief Executive Officer
|
|
|
By:
|
/s/ Michael J. Chewens
|
|
|
|
Michael J. Chewens
|
|
|
|
Senior Executive Vice President and
|
|
|
|
Chief Financial Officer
|
|
|
|
/s/ John H. Watt, Jr.
|
|
|
|
John H. Watt, Jr.
|
|
|
|
Chief Executive Officer
|
|
|
|
August 8,
2019
|
|
|
|
/s/ Michael J. Chewens
|
|
|
|
Michael J. Chewens
|
|
|
|
Senior Executive Vice President and
|
|
|
|
Chief Financial Officer
|
|
|
|
August 8, 2019
|
|
Consolidated Balance Sheets (unaudited) (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Assets | ||
| Securities held to maturity fair value | $ 754,995 | $ 778,675 |
| Stockholders' equity | ||
| Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Preferred stock, shares authorized (in shares) | 2,500,000 | 2,500,000 |
| Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
| Common stock, shares issued (in shares) | 49,651,493 | 49,651,493 |
| Common stock in treasury, at cost (in shares) | 5,882,082 | 5,978,527 |
Consolidated Statements of Income (unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Interest, fee and dividend income | ||||
| Interest and fees on loans | $ 81,271 | $ 74,172 | $ 160,592 | $ 144,615 |
| Securities available for sale | 6,031 | 7,003 | 11,953 | 13,929 |
| Securities held to maturity | 5,089 | 2,811 | 10,306 | 5,436 |
| Other | 842 | 781 | 1,726 | 1,547 |
| Total interest, fee and dividend income | 93,233 | 84,767 | 184,577 | 165,527 |
| Interest expense | ||||
| Deposits | 10,234 | 5,079 | 19,060 | 9,010 |
| Short-term borrowings | 2,760 | 2,455 | 5,997 | 4,421 |
| Long-term debt | 471 | 452 | 893 | 928 |
| Junior subordinated debt | 1,141 | 1,040 | 2,309 | 1,941 |
| Total interest expense | 14,606 | 9,026 | 28,259 | 16,300 |
| Net interest income | 78,627 | 75,741 | 156,318 | 149,227 |
| Provision for loan losses | 7,277 | 8,778 | 13,084 | 16,274 |
| Net interest income after provision for loan losses | 71,350 | 66,963 | 143,234 | 132,953 |
| Noninterest income | ||||
| Insurance and other financial services revenue | 5,938 | 5,826 | 12,694 | 12,330 |
| Service charges on deposit accounts | 4,224 | 4,246 | 8,460 | 8,218 |
| ATM and debit card fees | 6,156 | 5,816 | 11,681 | 11,089 |
| Retirement plan administration fees | 7,836 | 7,296 | 15,570 | 12,635 |
| Trust | 4,731 | 5,265 | 9,282 | 10,143 |
| Bank owned life insurance | 1,186 | 1,217 | 2,563 | 2,564 |
| Net securities (losses) gains | (69) | 91 | (12) | 163 |
| Other | 4,239 | 4,401 | 7,824 | 8,293 |
| Total noninterest income | 34,241 | 34,158 | 68,062 | 65,435 |
| Noninterest expense | ||||
| Salaries and employee benefits | 38,567 | 37,726 | 77,923 | 74,293 |
| Occupancy | 5,443 | 5,535 | 11,718 | 11,654 |
| Data processing and communications | 4,693 | 4,508 | 9,107 | 8,787 |
| Professional fees and outside services | 3,359 | 3,336 | 7,027 | 6,828 |
| Equipment | 4,518 | 4,151 | 9,275 | 8,189 |
| Office supplies and postage | 1,577 | 1,504 | 3,168 | 3,077 |
| FDIC expenses | 949 | 1,092 | 1,966 | 2,293 |
| Advertising | 641 | 700 | 1,144 | 1,037 |
| Amortization of intangible assets | 893 | 1,096 | 1,861 | 2,010 |
| Loan collection and other real estate owned, net | 961 | 908 | 1,746 | 2,245 |
| Other | 4,630 | 4,332 | 9,756 | 8,747 |
| Total noninterest expense | 66,231 | 64,888 | 134,691 | 129,160 |
| Income before income tax expense | 39,360 | 36,233 | 76,605 | 69,228 |
| Income tax expense | 8,805 | 8,112 | 16,923 | 15,121 |
| Net income | $ 30,555 | $ 28,121 | $ 59,682 | $ 54,107 |
| Earnings per share | ||||
| Basic (in dollars per share) | $ 0.70 | $ 0.64 | $ 1.36 | $ 1.24 |
| Diluted (in dollars per share) | $ 0.69 | $ 0.64 | $ 1.35 | $ 1.23 |
Consolidated Statements of Stockholders' Equity (unaudited) - USD ($) $ in Thousands |
Common Stock [Member] |
Additional Paid-in-Capital [Member] |
Retained Earnings [Member] |
Accumulated Other Comprehensive (Loss) Income [Member] |
Common Stock in Treasury [Member] |
Total |
|---|---|---|---|---|---|---|
| Cumulative effect adjustment for ASU implementation | ASU 2016-01 [Member] | $ 0 | $ 0 | $ 2,618 | $ (2,645) | $ 0 | $ (27) |
| Cumulative effect adjustment for ASU implementation | ASU 2018-02 [Member] | 0 | 0 | 5,575 | (5,575) | 0 | 0 |
| Balance at Dec. 31, 2017 | 497 | 574,209 | 543,713 | (22,077) | (138,165) | 958,177 |
| Net income | 0 | 0 | 54,107 | 0 | 0 | 54,107 |
| Cash dividends | 0 | 0 | (20,969) | 0 | 0 | (20,969) |
| Net issuance of shares to employee and other stock plans | 0 | (2,422) | 0 | 0 | 1,568 | (854) |
| Stock-based compensation | 0 | 2,954 | 0 | 0 | 0 | 2,954 |
| Other comprehensive (loss) income | 0 | 0 | 0 | (14,459) | 0 | (14,459) |
| Balance at Jun. 30, 2018 | 497 | 574,741 | 585,044 | (44,756) | (136,597) | 978,929 |
| Cumulative effect adjustment for ASU implementation | ASU 2016-01 [Member] | 0 | 0 | 1,143 | (17) | 0 | 1,126 |
| Balance at Mar. 31, 2018 | 497 | 574,626 | 555,783 | (40,991) | (137,185) | 952,730 |
| Net income | 0 | 0 | 28,121 | 0 | 0 | 28,121 |
| Cash dividends | 0 | 0 | (3) | 0 | 0 | (3) |
| Net issuance of shares to employee and other stock plans | 0 | (385) | 0 | 0 | 588 | 203 |
| Stock-based compensation | 0 | 500 | 0 | 0 | 0 | 500 |
| Other comprehensive (loss) income | 0 | 0 | 0 | (3,748) | 0 | (3,748) |
| Balance at Jun. 30, 2018 | 497 | 574,741 | 585,044 | (44,756) | (136,597) | 978,929 |
| Balance at Dec. 31, 2018 | 497 | 575,466 | 621,203 | (43,174) | (136,083) | 1,017,909 |
| Net income | 0 | 0 | 59,682 | 0 | 0 | 59,682 |
| Cash dividends | 0 | 0 | (22,778) | 0 | 0 | (22,778) |
| Net issuance of shares to employee and other stock plans | 0 | (2,812) | 0 | 0 | 1,544 | (1,268) |
| Stock-based compensation | 0 | 3,140 | 0 | 0 | 0 | 3,140 |
| Other comprehensive (loss) income | 0 | 0 | 0 | 18,138 | 0 | 18,138 |
| Balance at Jun. 30, 2019 | 497 | 575,794 | 658,107 | (25,036) | (134,539) | 1,074,823 |
| Balance at Mar. 31, 2019 | 497 | 575,944 | 627,556 | (34,932) | (135,010) | 1,034,055 |
| Net income | 0 | 0 | 30,555 | 0 | 0 | 30,555 |
| Cash dividends | 0 | 0 | (4) | 0 | 0 | (4) |
| Net issuance of shares to employee and other stock plans | 0 | (713) | 0 | 0 | 471 | (242) |
| Stock-based compensation | 0 | 563 | 0 | 0 | 0 | 563 |
| Other comprehensive (loss) income | 0 | 0 | 0 | 9,896 | 0 | 9,896 |
| Balance at Jun. 30, 2019 | $ 497 | $ 575,794 | $ 658,107 | $ (25,036) | $ (134,539) | $ 1,074,823 |
Consolidated Statements of Stockholders' Equity (unaudited) (Parenthetical) - $ / shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Consolidated Statements of Stockholders' Equity (unaudited) [Abstract] | ||||
| Cash dividends - per share (in dollars per share) | $ 0.00 | $ 0.00 | $ 0.52 | $ 0.48 |
| Net issuance of shares to employee benefit plans and other stock plans (in shares) | 29,525 | 31,546 | 96,445 | 104,390 |
Description of Business |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2019 | |||
| Description of Business [Abstract] | |||
| Description of Business |
NBT Bancorp Inc. (the “Registrant” or the “Company”) is a registered financial holding company incorporated in the state of Delaware in 1986, with its principal headquarters located in Norwich, New York. The principal assets of the Registrant consist of all of the outstanding shares of common stock of its subsidiaries, including: NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”), NBT Holdings, Inc. (“NBT Holdings”), CNBF Capital Trust I, NBT Statutory Trust I, NBT Statutory Trust II, Alliance Financial Capital Trust I and Alliance Financial Capital Trust II (collectively, the “Trusts”). The Company’s principal sources of revenue are the management fees and dividends it receives from the Bank, NBT Financial and NBT Holdings.
The Company’s business, primarily conducted through the Bank, consists of providing commercial banking, retail banking and wealth management services primarily to customers in its market area, which includes central and upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts, Vermont and the southern coastal Maine area. The Company has been, and intends to continue to be, a community-oriented financial institution offering a variety of financial services. The Company’s business philosophy is to operate as a community bank with local decision-making, providing a broad array of banking and financial services to retail, commercial and municipal customers.
|
Basis of Presentation |
6 Months Ended | ||
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Jun. 30, 2019 | |||
| Basis of Presentation [Abstract] | |||
| Basis of Presentation |
The accompanying unaudited interim consolidated financial statements include the accounts of the Registrant and its wholly-owned subsidiaries, the Bank, NBT Financial and NBT Holdings. Collectively, the Registrant and its subsidiaries are referred to herein as “the Company.” The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods in accordance with generally accepted accounting principles in the United States of America (“GAAP”). These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2018 Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. All material intercompany transactions have been eliminated in consolidation. Amounts previously reported in the consolidated financial statements are reclassified whenever necessary to conform to current period presentation. The Company has evaluated subsequent events for potential recognition and/or disclosure and there were none identified.
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Securities |
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| Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Securities |
The amortized cost, estimated fair value and unrealized gains (losses) of available for sale (“AFS”) securities are as follows:
The components of net realized gains (losses) on the sale of AFS securities are as follows. These amounts were reclassified out of AOCI and into earnings. There were no sales of AFS securities during the three months ended June 30, 2019 and 2018.
Included in net gains (losses) from sale transactions, the Company recorded gains from calls on AFS securities of approximately $4 thousand for the six months ended June 30, 2019. There were no recorded gains from calls on AFS securities included in net gains (losses) from sales transactions for the three months ended June 30, 2019 and 2018 and for the six months ended June 30, 2018.
The amortized cost, estimated fair value and unrealized gains (losses) of held to maturity (“HTM”) securities are as follows:
AFS and HTM securities with amortized costs totaling $1.4 billion at June 30, 2019 and $1.5 billion at December 31, 2018 were pledged to secure public deposits and for other purposes required or permitted by law. Additionally, at June 30, 2019 and December 31, 2018, AFS and HTM securities with an amortized cost of $197.4 million and $215.3 million, respectively, were pledged as collateral for securities sold under repurchase agreements.
The following table sets forth information with regard to investment securities with unrealized losses segregated according to the length of time the securities had been in a continuous unrealized loss position:
Declines in the fair value of HTM securities below their amortized cost, less any current period credit loss, that are deemed to be other-than-temporary are reflected in earnings as realized losses or in other comprehensive income (“OCI”). The classification is dependent upon whether the Company intends to sell the security, or whether it is more likely than not, that the Company will be required to sell the security before recovery. The other-than-temporary impairment (“OTTI”) shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the OTTI shall be separated into (i) the amount representing the credit loss and (ii) the amount related to all other factors. The amount of the total OTTI related to the credit loss shall be recognized in earnings. The amount of the total OTTI related to other factors shall be recognized in OCI, net of applicable taxes.
In estimating OTTI losses, 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 and (iii) the historical and implied volatility of the fair value of the security.
Management has the intent to hold the securities classified as HTM until they mature, at which time it is believed the Company will receive full value for the securities. The unrealized losses on HTM debt securities are due to increases in market interest rates over yields at the time the underlying securities were purchased. When necessary, the Company has performed a discounted cash flow analysis to determine whether or not it will receive the contractual principal and interest on certain securities. The fair value is expected to recover as the bond approaches its maturity date or repricing date or if market yields for such investments declines.
Management also has the intent to hold and will not be required to sell, the debt securities classified as AFS for a period of time sufficient for a recovery of cost, which may be until maturity. The unrealized losses on AFS debt securities are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. When necessary, the Company has performed a discounted cash flow analysis to determine whether or not it will receive the contractual principal and interest on certain securities. For AFS debt securities, OTTI losses are recognized in earnings if the Company intends to sell the security. In other cases the Company considers the relevant factors noted above, as well as the Company’s intent and ability to retain its investment for a period of time sufficient to allow for any anticipated recovery in market value and whether evidence exists to support a realizable value equal to or greater than the cost basis. Any impairment loss on an equity security is equal to the full difference between the cost basis and the fair value of the security.
As of June 30, 2019 and December 31, 2018, management believes the impairments detailed in the table above are temporary. There were no OTTI losses realized in the Company’s unaudited interim consolidated statements of income for the three and six months ended June 30, 2019, or in the three and six months ended June 30, 2018.
The following tables set forth information with regard to gains and losses on equity securities:
The following tables set forth information with regard to contractual maturities of debt securities at June 30, 2019:
Maturities of mortgage-backed, collateralized mortgage obligations and asset-backed securities are stated based on their estimated average lives. Actual maturities may differ from estimated average lives or contractual maturities because, in certain cases, borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Except for U.S. Government securities, there were no holdings, when taken in the aggregate, of any single issuer that exceeded 10% of consolidated stockholders’ equity at June 30, 2019 and December 31, 2018.
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Allowance for Loan Losses and Credit Quality of Loans |
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| Allowance for Loan Losses and Credit Quality of Loans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for Loan Losses and Credit Quality of Loans |
4. Allowance for Loan Losses and Credit Quality of Loans
Allowance for Loan Losses
The allowance for loan losses is maintained at a level estimated by management to provide adequately for probable incurred losses inherent in the current loan portfolio. The appropriateness of the allowance for loan losses is continuously monitored. It is assessed for appropriateness using a methodology designed to ensure the level of the allowance reasonably reflects the loan portfolio’s risk profile and can absorb all reasonably estimable credit losses inherent in the current loan portfolio.
To develop and document a systematic methodology for determining the allowance for loan losses, the Company has divided the loan portfolio into three segments, each with different risk characteristics and methodologies for assessing risk. Those segments are further segregated between our loans accounted for under the amortized cost method (referred to as “originated” loans) and loans acquired in a business combination (referred to as “acquired” loans). Each portfolio segment is broken down into class segments where appropriate. Class segments contain unique measurement attributes, risk characteristics and methods for monitoring and assessing risk that are necessary to develop the allowance for loan losses. Unique characteristics such as borrower type, loan type, collateral type and risk characteristics define each class segment. The following table illustrates the portfolio and class segments for the Company’s loan portfolio:
Commercial Loans
The Company offers a variety of Commercial loan products. The Company’s underwriting analysis for commercial loans typically includes credit verification, independent appraisals, a review of the borrower’s financial condition and a detailed analysis of the borrower’s underlying cash flows.
Commercial and Industrial (“C&I”) – The Company offers a variety of loan options to meet the specific needs of our C&I customers including term loans, time notes and lines of credit. Such loans are made available to businesses for working capital needs such as inventory and receivables, business expansion, equipment purchases, livestock purchases and seasonal crop expenses. These loans are usually collateralized by business assets such as equipment, accounts receivable and perishable agricultural products, which are exposed to industry price volatility. To reduce these risks, management also attempts to obtain personal guarantees of the owners or obtain government loan guarantees to provide further support.
Commercial Real Estate (“CRE”) – The Company offers CRE loans to finance real estate purchases, refinancings, expansions and improvements to commercial and agricultural properties. These CRE loans are secured by liens on the real estate, which may include both owner occupied and non-owner-occupied properties, such as apartments, commercial structures, health care facilities and other facilities. The Company’s underwriting analysis includes credit verification, independent appraisals, a review of the borrower’s financial condition and a detailed analysis of the borrower’s underlying cash flows. These loans are typically originated in amounts of no more than 80% of the appraised value of the property.
Business Banking - The Company offers a variety of loan options to meet the specific needs of our Business Banking customers including term loans, mortgages and lines of credit. Such loans are generally less than $750 thousand and are made available to businesses for working capital such as inventory and receivables, business expansion, equipment purchases and agricultural needs. Generally, a collateral lien is placed on assets owned by the borrower and can include real estate, equipment, inventory, receivables or other business assets. These loans carry a higher risk than C&I and CRE loans due to the smaller size of the borrower and lower levels of capital.
Consumer Loans
The Company offers a variety of Consumer loan products including Dealer Finance, Specialty Lending and Direct loans.
Dealer Finance – The Company maintains relationships with many dealers primarily in the communities that we serve. Through these relationships, the Company primarily finances the purchases of automobiles indirectly through dealer relationships. Approximately 95% of the Dealer Finance relationships represent automobile financing. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from three to six years, based upon the nature of the collateral and the size of the loan. The majority of Dealer Finance Consumer loans are underwritten on a secured basis using the underlying collateral being financed.
Specialty Lending – The Company offers unsecured Consumer loans across a national footprint originated through our relationships with national technology-driven consumer lending companies to finance such things as dental and medical procedures, K-12 tuition, solar energy installations and other consumer purpose loans. Advances of credit through this specialty lending business line are subject to the Company’s underwriting standards including criteria such as FICO score and debt to income thresholds.
Direct – The Company offers a variety of consumer installment loans to finance vehicle purchases, mobile home purchases and personal expenditures. In addition to installment loans, the Company also offers personal lines of credit, overdraft protection, home equity lines of credit and second mortgage loans (loans secured by a lien position on one-to-four family residential real estate) to finance home improvements, debt consolidation, education and other uses. Most of the consumer installment loans carry a fixed rate of interest with principal repayment terms typically ranging from one to ten years, based upon the nature of the collateral and the size of the loan. For home equity loans, consumers are able to borrow up to 85% of the equity in their homes. These loans carry a higher risk than first mortgage residential loans as they are often in a second position with respect to collateral. Consumer installment loans are often secured with collateral consisting of a perfected lien on the asset being purchased or a perfected lien on a consumer’s deposit account. Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower’s financial condition and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate.
Residential Real Estate
Residential real estate loans consist primarily of loans secured by a first or second mortgage on primary residences. We originate adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a mortgage. These loans are collateralized by owner-occupied properties located in the Company’s market area. When market conditions are favorable, for longer term, fixed-rate residential real estate mortgages without escrow, the Company retains the servicing, but sells the right to receive principal and interest to Government-sponsored enterprises. This practice allows the Company to manage interest rate risk, liquidity risk and credit risk. Loans on one-to-four-family residential real estate are generally originated in amounts of no more than 85% of the purchase price or appraised value (whichever is lower) or have private mortgage insurance. Mortgage title insurance and hazard insurance are normally required. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic site inspections, including one at each loan draw period.
Allowance for Loan Loss Calculation
For purposes of evaluating the adequacy of the allowance, the Company considers a number of significant factors that affect the collectability of the portfolio. For individually impaired loans, these include estimates of impairment, if any, which reflect the facts and circumstances that affect the likelihood of repayment of such loans as of the evaluation date. For homogeneous pools of loans, estimates of the Company’s exposure to credit loss reflect a current assessment of a number of factors, which could affect collectability. These factors include: past loss experience, size, trend, composition and nature of loans; changes in lending policies and procedures, including underwriting standards and collection, charge-offs and recoveries; trends experienced in nonperforming and delinquent loans; current economic conditions in the Company’s market; portfolio concentrations that may affect loss experienced across one or more components of the portfolio; the effect of external factors such as competition, legal and regulatory requirements; and the experience, ability and depth of lending management and staff. In addition, various regulatory agencies, as an integral component of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to make loan grade changes as well as recognize additions to the allowance based on their examinations.
After a thorough consideration of the factors discussed above, any required additions or reductions to the allowance for loan losses are made periodically by charges or credits to the provision for loan losses. These charges are necessary to maintain the allowance at a level that management believes is reflective of overall level of incurred loss in the portfolio. While management uses available information to recognize losses on loans, additions and reductions of the allowance may fluctuate from one reporting period to another. These fluctuations are reflective of changes in risk associated with portfolio content or changes in management’s assessment of any or all of the determining factors discussed above.
The following tables illustrate the changes in the allowance for loan losses by our portfolio segments:
For acquired loans, to the extent that we experience deterioration in borrower credit quality resulting in a decrease in our expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses is established based on our estimate of incurred losses at the balance sheet date. There was no allowance for loan losses for the acquired loan portfolio as of June 30, 2019 and December 31, 2018. Net charge-offs related to acquired loans totaled approximately $0.1 million during the three months ended June 30, 2019 and 2018, and approximately $0.1 million and $0.2 million during the six months ended June 30, 2019 and 2018, respectively, which are included in the table above.
The following tables illustrate the allowance for loan losses and the recorded investment by portfolio segments:
Credit Quality of Loans
For all loan classes within the Company’s loan portfolio, loans are placed on nonaccrual status when timely collection of principal and/or interest in accordance with contractual terms is in doubt. Loans are transferred to nonaccrual status generally when principal or interest payments become ninety days delinquent, unless the loan is well secured and in the process of collection or sooner when management concludes circumstances indicate that borrowers may be unable to meet contractual principal or interest payments. When a loan is transferred to a nonaccrual status, all interest previously accrued in the current period but not collected is reversed against interest income in that period. Interest accrued in a prior period and not collected is charged-off against the allowance for loan losses.
If ultimate repayment of a nonaccrual loan is expected, any payments received are applied in accordance with contractual terms. If ultimate repayment of principal is not expected, any payment received on a nonaccrual loan is applied to principal until ultimate repayment becomes expected. For all loan classes within the Company’s loan portfolio, nonaccrual loans are returned to accrual status when they become current as to principal and interest and demonstrate a period of performance under the contractual terms and, in the opinion of management, are fully collectible as to principal and interest. For loans in all portfolios, the principal amount is charged off in full or in part as soon as management determines, based on available facts, that the collection of principal in full or in part is improbable. For Commercial loans, management considers specific facts and circumstances relative to individual credits in making such a determination. For Consumer and Residential Real Estate loan classes, management uses specific guidance and thresholds from the Federal Financial Institutions Examination Council’s Uniform Retail Credit Classification and Account Management Policy.
The following tables set forth information with regard to past due and nonperforming loans by loan class:
There were no material commitments to extend further credit to borrowers with nonperforming loans as of June 30, 2019 and December 31, 2018.
Impaired Loans
The methodology used to establish the allowance for loan losses on impaired loans incorporates specific allocations on loans analyzed individually. Classified loans, including all troubled debt restructured loans (“TDRs”) and nonaccrual Commercial loans that are graded Substandard, Doubtful or Loss, with outstanding balances of $750 thousand or more are evaluated for impairment through the Company’s quarterly status review process. The Company considers Commercial loans less than $750 thousand to be homogeneous loans. In determining that we will be unable to collect all principal and/or interest payments due in accordance with the contractual terms of the loan agreements, we consider factors such as payment history and changes in the financial condition of individual borrowers, local economic conditions, historical loss experience and the conditions of the various markets in which the collateral may be liquidated. For loans that are identified as impaired, impairment is measured by one of three methods: 1) the fair value of collateral less cost to sell, 2) present value of expected future cash flows or 3) the loan’s observable market price. These impaired loans are reviewed on a quarterly basis for changes in the level of impairment. Impaired amounts are charged off immediately if such amounts are determined by management to be uncollectable. Any change to the previously recognized impairment loss is recognized as a component of the provision for loan losses.
The following table provides information on loans specifically evaluated for impairment:
There were no acquired impaired loans specifically evaluated for impairment as of June 30, 2019 or December 31, 2018.
The following tables summarize the average recorded investments on loans specifically evaluated for impairment and the interest income recognized:
Credit Quality Indicators
The Company has developed an internal loan grading system to evaluate and quantify the Company’s loan portfolio with respect to quality and risk. The system focuses on, among other things, financial strength of borrowers, experience and depth of borrower’s management, primary and secondary sources of repayment, payment history, nature of the business and outlook on particular industries. The internal grading system enables the Company to monitor the quality of the entire loan portfolio on a consistent basis and provides management with an early warning system, enabling recognition and response to problem loans and potential problem loans.
Commercial Grading System
For C&I and CRE loans, the Company uses a grading system that relies on quantifiable and measurable characteristics when available. This would include comparison of financial strength to available industry averages, comparison of transaction factors (loan terms and conditions) to loan policy and comparison of credit history to stated repayment terms and industry averages. Some grading factors are necessarily more subjective such as economic and industry factors, regulatory environment and management. C&I and CRE loans are graded Doubtful, Substandard, Special Mention and Pass.
A Doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as a loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral and refinancing. Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information. Nonaccrual treatment is required for Doubtful assets because of the high probability of loss.
Substandard loans have a high probability of payment default or they have other well-defined weaknesses. They require more intensive supervision by bank management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some Substandard loans, the likelihood of full collection of interest and principal may be in doubt and those loans should be placed on nonaccrual. Although Substandard assets in the aggregate will have a distinct potential for loss, an individual asset’s loss potential does not have to be distinct for the asset to be rated Substandard.
Special Mention loans have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company’s position at some future date. These loans pose elevated risk, but their weakness does not yet justify a Substandard classification. Borrowers may be experiencing adverse operating trends (i.e., declining revenues or margins) or may be struggling with an ill-proportioned balance sheet (i.e., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a Special Mention rating. Although a Special Mention loan has a higher probability of default than a Pass asset, its default is not imminent.
● Pass
Loans graded as Pass encompass all loans not graded as Doubtful, Substandard or Special Mention. Pass loans are in compliance with loan covenants and payments are generally made as agreed. Pass loans range from superior quality to fair quality.
Business Banking Grading System
Business Banking loans are graded as either Classified or Non-classified:
Classified loans are inadequately protected by the current worth and paying capacity of the obligor or, if applicable, the collateral pledged. These loans have a well-defined weakness or weaknesses, that jeopardize the liquidation of the debt or in some cases make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Classified loans have a high probability of payment default or total substantial loss. These loans require more intensive supervision by management and are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. Classified loans where the full collection of interest and principal is in doubt are considered to have a nonaccrual status. In some cases, Classified loans are considered uncollectable and of such little value that their continuance as assets is not warranted.
Loans graded as Non-classified encompass all loans not graded as Classified. Payments on non-classified loans are generally made as agreed.
Consumer and Residential Real Estate Grading System
Consumer and Residential Real Estate loans are graded as either Nonperforming or Performing.
Nonperforming loans are loans that are 1) over 90 days past due and interest is still accruing or 2) on nonaccrual status.
The following tables illustrate the Company’s credit quality by loan class:
Troubled Debt Restructured Loans
When the Company modifies a loan in a troubled debt restructuring, such modifications generally include one or a combination of the following: an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; temporary reduction in the interest rate; or change in scheduled payment amount. Residential Real Estate and Consumer TDRs occurring during 2019 and 2018 were due to the reduction in the interest rate or extension of the term. Commercial TDRs during 2019 and 2018 were both a reduction of the interest rate or change in terms.
When the Company modifies a loan in a troubled debt restructuring, management measures for impairment, if any, based on the present value of the expected future cash flows, discounted at the contractual 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 collateral. In these cases, management uses the current fair value of the collateral, less selling costs. If management determines that the value of the modified loan is less than the recorded investment in the loan an impairment charge would be recognized.
The following tables illustrate the recorded investment and number of modifications for modified loans, including the recorded investment in the loans prior to a modification and the recorded investment in the loans after restructuring:
The following tables illustrate the recorded investment and number of modifications for TDRs where a concession has been made and subsequently defaulted during the period:
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Leases |
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| Leases |
5. Leases
Operating leases in which we are the lessee are recorded as operating lease right of use (“ROU”) assets and operating lease liabilities, included in other assets and other liabilities, respectively, on the unaudited interim consolidated balance sheets. The Company does not have any significant finance leases in which we are the lessee as of June 30, 2019 and December 31, 2018.
Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commencement date. ROU assets are further adjusted for lease incentives. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in occupancy expense in the unaudited interim consolidated statements of income.
We have made a policy election to exclude the recognition requirements to all classes of leases with original terms of 12 months or less. Instead, the short-term lease payments are recognized in profit or loss on a straight-line basis over the lease term.
The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes and insurance are not included in the measurement of the lease liability since they are generally able to be segregated.
Our leases relate primarily to office space and bank branches, and some contain options to renew the lease. These options to renew are generally not considered reasonably certain to exercise, and are therefore not included in the lease term until such time that the option to renew is reasonably certain. As of June 30, 2019, operating lease ROU assets and liabilities were $34.6 million and $37.1 million, respectively.
The table below summarizes our net lease cost:
The following table shows the weighted average remaining operating lease term, the weighted average discount rate and supplemental information on the unaudited interim consolidated statements of cash flows for operating leases:
As of June 30, 2019 there are no new significant leases that have not yet commenced.
The following table shows the future minimum rental payments related to non-cancelable operating leases with original terms of one year or more as of December 31, 2018.
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Defined Benefit Post-Retirement Plans |
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6. Defined Benefit Post-Retirement Plans
The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at June 30, 2019. Benefits paid from the plan are based on age, years of service, compensation, social security benefits and are determined in accordance with defined formulas. The Company’s policy is to fund the Plan in accordance with Employee Retirement Income Security Act of 1974 standards. Assets of the Plan are invested in publicly traded stocks and mutual funds.
In addition to the Plan, the Company provides supplemental employee retirement plans to certain current and former executives. The Company also assumed supplemental retirement plans for former executives of Alliance Financial Corporation (“Alliance”) when the Company acquired Alliance.
These supplemental employee retirement plans and the Plan are collectively referred to herein as “Pension Benefits.”
In addition, the Company provides certain health care benefits for retired employees. Benefits were accrued over the employees’ active service period. Only employees that were employed by the Company on or before January 1, 2000 are eligible to receive post-retirement health care benefits. In addition, the Company assumed post-retirement medical life insurance benefits for certain Alliance employees, retirees and their spouses, if applicable, in the Alliance acquisition. These post-retirement benefits are referred to herein as “Other Benefits.”
The Company made no voluntary contributions to the pension and other benefits plans during the three and six months ended June 30, 2019 and 2018.
The components of expense for Pension Benefits and Other Benefits are set forth below:
The service cost component of the net periodic cost (benefit) is included in Salaries and Employee Benefits and the interest cost, expected return on plan assets and net amortization components are included in Other Noninterest Expense on the unaudited interim consolidated statements of income.
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Earnings Per Share |
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7. Earnings Per Share
Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity (such as the Company’s dilutive stock options and restricted stock units).
The following is a reconciliation of basic and diluted EPS for the periods presented in the unaudited interim consolidated statements of income:
There were 1,500 stock options for the quarters ended June 30, 2019 and June 30, 2018, that were not considered in the calculation of diluted EPS since the stock options’ exercise price was greater than the average market price during these periods.
There were 1,500 stock options for the six months ended June 30, 2019 and June 30, 2018, that were not considered in the calculation of diluted EPS since the stock options’ exercise price was greater than the average market price during these periods.
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| Reclassification Adjustments Out of Other Comprehensive Income (Loss) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification Adjustments Out of Other Comprehensive Income (Loss) |
8. Reclassification Adjustments Out of Other Comprehensive Income (Loss)
The following table summarizes the reclassification adjustments out of accumulated other comprehensive income (loss) (“AOCI”):
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Derivative Instruments and Hedging Activities |
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| Derivative Instruments and Hedging Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities |
9. Derivative Instruments and Hedging Activities
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, primarily by managing the amount, sources and duration of its assets and liabilities and through the use of derivative instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain fixed rate borrowings. The Company also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.
Derivatives Not Designated as Hedging Instruments
The Company enters into interest rate swaps to facilitate customer transactions and meet their financing needs. These swaps are considered derivatives, but are not designated in hedging relationships. These instruments have interest rate and credit risk associated with them. To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties. The counterparty swaps are also considered derivatives and are also not designated in hedging relationships. Interest rate swaps are recorded within other assets or other liabilities on the consolidated balance sheet at their estimated fair value. Changes to the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the consolidated statement of income.
As of June 30, 2019 the Company had ten risk participation agreements with financial institution counterparties for interest rate swaps related to participated loans. The fair values included in other assets and other liabilities on the unaudited interim consolidated balance sheet applicable to these agreements amounts to $69 thousand and $93 thousand, respectively as of June 30, 2019. As of December 31, 2018 the Company had nine risk participation agreements, with the fair values included in other assets and other liabilities on the unaudited interim consolidated balance sheet of $36 thousand and $17 thousand, respectively. Risk participation agreements provide credit protection to the financial institution that originated the swap transaction should the borrower fail to perform on its obligation. The Company enters into both risk participation agreements in which it purchases credit protection from other financial institutions and those in which it provides credit protection to other financial institutions.
Derivatives Designated as Hedging Instruments
The Company has entered into interest rate swaps to modify the interest rate characteristics of certain short-term Federal Home Loan Bank (“FHLB”) advances from variable rate to fixed rate in order to reduce the impact of changes in future cash flows due to market interest rate changes. These agreements are designated as cash flow hedges.
The following table depicts the fair value adjustment recorded related to the notional amount of derivatives outstanding as well as the notional amount of risk participation agreements:
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest expense in the same period during which the hedge transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s short-term rate borrowings. During the next twelve months, the Company estimates that an additional $0.5 million will be reclassified from AOCI as a reduction to interest expense.
The following table indicates the effect of cash flow hedge accounting on AOCI and on the unaudited interim consolidated statement of income:
The following table indicates the gain or loss recognized in income on derivatives not designated as a hedging relationship:
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Fair Value Measurements and Fair Value of Financial Instruments |
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| Fair Value Measurements and Fair Value of Financial Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements and Fair Value of Financial Instruments |
10. Fair Value Measurements and Fair Value of Financial Instruments
GAAP states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value measurements are not adjusted for transaction costs. A fair value hierarchy exists within GAAP that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
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.
The types of instruments valued based on quoted market prices in active markets include most U.S. government and agency securities, many other sovereign government obligations, liquid mortgage products, active listed equities and most money market securities. Such instruments are generally classified within Level 1 or Level 2 of the fair value hierarchy. The Company does not adjust the quoted prices for such instruments.
The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency include most investment-grade and high-yield corporate bonds, less liquid mortgage products, less liquid agency securities, less liquid listed equities, state, municipal and provincial obligations and certain physical commodities. Such instruments are generally classified within Level 2 of the fair value hierarchy. Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices). Other investment securities are reported at fair value utilizing Level 1 and Level 2 inputs. The prices for Level 2 instruments are obtained through an independent pricing service or dealer market participants with whom the Company has historically transacted both purchases and sales of investment securities. Prices obtained from these sources include prices derived from market quotations and matrix pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Management reviews the methodologies used in pricing the securities by its third party providers.
Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions. Valuations are adjusted to reflect illiquidity and/or non-transferability and such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate will be used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt markets and changes in financial ratios or cash flows.
For the three and six months ended June 30, 2019 the Company made no transfers of assets between the levels of the fair value hierarchy. For the year ended December 31, 2018, the Company made no transfer of assets from Level 1 to Level 2 and made a $4.0 million transfer from Level 2 to Level 1.
The following tables set forth the Company’s financial assets and liabilities measured on a recurring basis that were accounted for at fair value. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
GAAP requires disclosure of assets and liabilities measured and recorded at fair value on a non-recurring basis such as goodwill, loans held for sale, other real estate owned, collateral-dependent impaired loans, mortgage servicing rights and HTM securities. The only non-recurring fair value measurements recorded during the three and six month periods ended June 30, 2019 and the year ended December 31, 2018 were related to impaired loans and write-downs of other real estate owned. The Company uses the fair value of underlying collateral, less costs to sell, to estimate the specific reserves for collateral dependent impaired loans. The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses ranging from 10% to 35%. Based on the valuation techniques used, the fair value measurements for collateral dependent impaired loans are classified as Level 3.
As of June 30, 2019 and December 31, 2018, the Company had collateral dependent loans with a carrying value of $0.1 million and $0.2 million, respectively, which had specific reserves included in the allowance for loan losses of $11 thousand and $25 thousand, respectively.
The following table sets forth information with regard to estimated fair values of financial instruments. This table excludes financial instruments for which the carrying amount approximates fair value. Financial instruments for which the fair value approximates carrying value include cash and cash equivalents, AFS securities, equity securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable and derivatives.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, the Company has a substantial trust and investment management operation that contributes net fee income annually. The trust and investment management operation is not considered a financial instrument and its value has not been incorporated into the fair value estimates. Other significant assets and liabilities include the benefits resulting from the low-cost funding of deposit liabilities as compared to the cost of borrowing funds in the market and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimate of fair value.
HTM Securities
The fair value of the Company’s HTM securities is primarily measured using information from a third party pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.
Net Loans
The fair value of the Company’s loans was estimated in accordance with the exit price notion as defined by Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”). Net loans include portfolio loans and loans held for sale. Loans were first segregated by type and then further segmented into fixed and variable rate and loan quality categories. Expected future cash flows were projected based on contractual cash flows, adjusted for estimated prepayments, which also includes credit risk, illiquidity risk and other market factors to calculate the exit price fair value in accordance with ASC 820.
Time Deposits
The fair value of time deposits was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments. The fair values of the Company’s time deposit liabilities do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.
Long-Term Debt
The fair value of long-term debt was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments.
Junior Subordinated Debt
The fair value of junior subordinated debt has been estimated using a discounted cash flow analysis.
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Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2019 | |
| Commitments and Contingencies [Abstract] | |
| Commitments and Contingencies |
11. Commitments and Contingencies
The Company is a party to certain financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit, standby letters of credit and certain agricultural real estate loans sold to investors with recourse, with the sold portion having a government guarantee that is assignable back to the Company upon repurchase of the loan in the event of default. The Company’s exposure to credit loss in the event of nonperformance by the other party to the commitments to extend credit, unused lines of credit, standby letters of credit and loans sold with recourse is represented by the contractual amount of those investments. The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s assessment of the customer’s credit worthiness. Commitments to extend credit and unused lines of credit totaled $1.9 billion at June 30, 2019 and $1.7 billion at December 31, 2018.
Since many loan commitments, standby letters of credit and guarantees and indemnification contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows. The Company does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit.
The Company guarantees the obligations or performance of customers by issuing standby letters of credit to third parties. These standby letters of credit are frequently issued in support of third party debt, such as corporate debt issuances, industrial revenue bonds and municipal securities. The risk involved in issuing standby letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers and letters of credit are subject to the same credit origination, portfolio maintenance and management procedures in effect to monitor other credit and off-balance sheet products. Typically, these instruments have one year expirations with an option to renew upon annual review; therefore, the total amounts do not necessarily represent future cash requirements. Standby letters of credit totaled $31.5 million at June 30, 2019 and $41.2 million at December 31, 2018. As of June 30, 2019 and December 31, 2018, the fair value of the Company’s standby letters of credit was not significant.
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Recent Accounting Pronouncements |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2019 | |||
| Recent Accounting Pronouncements [Abstract] | |||
| Recent Accounting Pronouncements |
Recently Adopted Accounting Standards
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize a right-of-use asset and lease liability. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonably certain to exercise an option to extend the lease, exercise a purchase option or not exercise an option to terminate the lease. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842. ASU 2018-01 was issued to address concerns about the cost and complexity of complying with the transition provisions of ASU 2016-02. Both ASU 2016-02 and ASU 2018-01 are effective for the Company on January 1, 2019. Lessees and lessors are required to apply the provisions of ASU 2016-02 at the beginning of the earliest period presented using a modified retrospective approach. At its November 29, 2017 meeting, the FASB proposed allowing entities the option of applying the provisions of ASU 2016-02 at the effective date without adjusting the comparative periods presented. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. ASU 2018-10 was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Also in July 2018, the FASB issued ASU 2018-11, Targeted Improvements, which allows for an optional transition method in which the provisions of ASC Topic 842 would be applied upon the adoption date and would not have to be retroactively applied to the earliest reporting period presented in the consolidated financial statements.
The Company adopted ASU 2016-02 as of January 1, 2019 and elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows the carryforward of the historical lease classification, the practical expedient related to land easements and the hindsight practical expedient to determine the reasonably certain lease term for existing leases. The Company made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet and recognize those lease payments in the consolidated statements of income on a straight-line basis over the lease term. The adoption of ASU 2016-02 and related transition guidance resulted in the recognition of additional net lease assets and liabilities of approximately $34 million and $37 million, respectively, as of January 1, 2019. The standard did not materially affect our consolidated net earnings or regulatory capital ratios. Refer to Note 5, Leases for more information.
In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20). ASU 2017-08 requires amortization of premiums to the earliest call date on debt securities with call features that are explicit, on contingent and callable at fixed prices on present dates. The ASU does not impact securities held at a discount; the discount continues to be amortized to the contractual maturity. The guidance is required to be applied with a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. ASU 2017-08 is effective for the Company on January 1, 2019. The adoption did not have an impact on the consolidated financial statements and related disclosures and no cumulative effect adjustment was required upon adoption.
In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815) - Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The ASU 2018-16 amends existing guidance permits the use of the OIS rate based on SOFR as a United States benchmark interest rate for hedge accounting purposes under Topic 815 in addition to other allowable rates stated in the guidance. ASU 2018-16 is effective for the Company on January 1, 2019 and should be applied prospectively for qualifying new or redesignated hedging relationships entered into on or after the date of adoption. The adoption did not have an impact on the Company’s consolidated financial statements.
Accounting Standards Issued Not Yet Adopted
In August 2018, the FASB issued ASU 2018-13, Fair value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair value Measurement. The provisions of ASU 2018-13 modify the disclosure requirements on fair value measurements in ASC 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 is effective January 1, 2020 but may be early adopted in any interim period. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures and does not expect the impact to be material.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”). ASU 2016-13 introduces new guidance that make substantive changes to the accounting for credit losses. ASU 2016-13 introduces the CECL model, which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includes loans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and HTM debt securities. The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable and supportable forecasts and is generally expected to result in earlier recognition of credit losses. ASU 2016-13 also modifies certain provisions of the current OTTI model for AFS debt securities. Credit losses on AFS debt securities will be limited to the difference between the security’s amortized cost basis and its fair value and will be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. ASU 2016-13 also provides for a simplified accounting model for purchased financial assets with more than insignificant credit deterioration since their origination. ASU 2016-13 requires expanded disclosures including, but not limited to, (i) information about the methods and assumptions used to estimate expected credit losses, including changes in the factors that influenced management’s estimate and the reasons for those changes, (ii) for financing receivables and net investment in leases measured at amortized cost, further disaggregation of information about the credit quality of those assets and (iii) a rollforward of the allowance for credit losses for HTM and AFS securities. ASU 2016-13 is effective for the Company on January 1, 2020. Early adoption is permitted for all organizations for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018; however, the Company does not intend to early adopt this ASU. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures, processes and controls and is not currently able to reasonably estimate the impact of adoption on the Company’s consolidated financial statements; however, adoption is likely to lead to significant changes in accounting policies related to, and the methods employed in estimating, the allowance for loan and lease losses. It is possible that the impact will be material to the Company’s consolidated financial statements. Moreover, the CECL model may create more volatility in the level of our allowance for loan losses. To date, the Company has completed a gap analysis, adopted a detailed implementation plan, established a formal governance structure for the project, selected and is in the process of implementing a software solution to serve as its CECL platform, hired talent to support the CECL model, documented accounting policy elections and drafted policies to comply with the new standard, selected credit loss methods for key portfolio segments and is in the process of documenting processes and controls. In the second quarter of 2019, the Company designed a qualitative analysis framework, began performing parallel calculations and ran various sensitivity analyses to test the significant model assumptions. In May 2019, the FASB issued ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. The Company is considering the impact of the irrevocable election of the fair value option (election to elect fair value option for certain financial assets).
In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans - General (Subtopic 715-20), provides changes to the disclosure requirements for defined benefit plans. The amended guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments are a result of the disclosure framework project that focuses on improvements to the effectiveness of disclosures in the notes to financial statements. The amendments remove and add certain disclosure requirements. The disclosure requirements being removed relating to public companies are (1) the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, (2) the amount and timing of plan assets expected to be returned to the employer, (3) the 2001 disclosure requirement relating to Japanese Welfare Pension Insurance Law, (4) related party disclosures about the amount of future annual benefits covered by insurance, and (5) the effects of a one-percentage-point change in assumed health care cost trends on the benefit cost and obligation. The disclosure requirements being added relating to public companies are (1) the weighted-average interest crediting rates for cash balance plans, and (2) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. ASU 2018-14 is effective for the Company on January 1, 2021 and early adoption is permitted. The amendments should be applied retrospectively and the Company does not expect the guidance to have a material impact on its disclosures to the consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) – Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. ASU 2018-15 amends existing guidance and requires a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize and which costs to expense. ASU 2018-15 is effective for the Company on January 1, 2020, and early adoption is permitted. The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is evaluating the impact that the guidance will have on its consolidated financial statements.
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Description of Business (Policies) |
6 Months Ended |
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Jun. 30, 2019 | |
| Description of Business [Abstract] | |
| Nature of Operations |
NBT Bancorp Inc. (the “Registrant” or the “Company”) is a registered financial holding company incorporated in the state of Delaware in 1986, with its principal headquarters located in Norwich, New York. The principal assets of the Registrant consist of all of the outstanding shares of common stock of its subsidiaries, including: NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”), NBT Holdings, Inc. (“NBT Holdings”), CNBF Capital Trust I, NBT Statutory Trust I, NBT Statutory Trust II, Alliance Financial Capital Trust I and Alliance Financial Capital Trust II (collectively, the “Trusts”). The Company’s principal sources of revenue are the management fees and dividends it receives from the Bank, NBT Financial and NBT Holdings.
The Company’s business, primarily conducted through the Bank, consists of providing commercial banking, retail banking and wealth management services primarily to customers in its market area, which includes central and upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts, Vermont and the southern coastal Maine area. The Company has been, and intends to continue to be, a community-oriented financial institution offering a variety of financial services. The Company’s business philosophy is to operate as a community bank with local decision-making, providing a broad array of banking and financial services to retail, commercial and municipal customers.
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Basis of Presentation (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Basis of Presentation [Abstract] | |
| Basis of Presentation |
The accompanying unaudited interim consolidated financial statements include the accounts of the Registrant and its wholly-owned subsidiaries, the Bank, NBT Financial and NBT Holdings. Collectively, the Registrant and its subsidiaries are referred to herein as “the Company.” The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods in accordance with generally accepted accounting principles in the United States of America (“GAAP”). These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2018 Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. All material intercompany transactions have been eliminated in consolidation. Amounts previously reported in the consolidated financial statements are reclassified whenever necessary to conform to current period presentation. The Company has evaluated subsequent events for potential recognition and/or disclosure and there were none identified.
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Securities (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Securities [Abstract] | |
| Investment, Policy |
Declines in the fair value of HTM securities below their amortized cost, less any current period credit loss, that are deemed to be other-than-temporary are reflected in earnings as realized losses or in other comprehensive income (“OCI”). The classification is dependent upon whether the Company intends to sell the security, or whether it is more likely than not, that the Company will be required to sell the security before recovery. The other-than-temporary impairment (“OTTI”) shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the OTTI shall be separated into (i) the amount representing the credit loss and (ii) the amount related to all other factors. The amount of the total OTTI related to the credit loss shall be recognized in earnings. The amount of the total OTTI related to other factors shall be recognized in OCI, net of applicable taxes.
In estimating OTTI losses, 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 and (iii) the historical and implied volatility of the fair value of the security.
Management has the intent to hold the securities classified as HTM until they mature, at which time it is believed the Company will receive full value for the securities. The unrealized losses on HTM debt securities are due to increases in market interest rates over yields at the time the underlying securities were purchased. When necessary, the Company has performed a discounted cash flow analysis to determine whether or not it will receive the contractual principal and interest on certain securities. The fair value is expected to recover as the bond approaches its maturity date or repricing date or if market yields for such investments declines.
Management also has the intent to hold and will not be required to sell, the debt securities classified as AFS for a period of time sufficient for a recovery of cost, which may be until maturity. The unrealized losses on AFS debt securities are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. When necessary, the Company has performed a discounted cash flow analysis to determine whether or not it will receive the contractual principal and interest on certain securities. For AFS debt securities, OTTI losses are recognized in earnings if the Company intends to sell the security. In other cases the Company considers the relevant factors noted above, as well as the Company’s intent and ability to retain its investment for a period of time sufficient to allow for any anticipated recovery in market value and whether evidence exists to support a realizable value equal to or greater than the cost basis. Any impairment loss on an equity security is equal to the full difference between the cost basis and the fair value of the security.
Maturities of mortgage-backed, collateralized mortgage obligations and asset-backed securities are stated based on their estimated average lives. Actual maturities may differ from estimated average lives or contractual maturities because, in certain cases, borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
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Allowance for Loan Losses and Credit Quality of Loans (Policies) |
6 Months Ended | |||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||
| Allowance for Loan Losses and Credit Quality of Loans [Abstract] | ||||||||||||||||||||||
| Portfolio and Class Segments |
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| Allowance for Loan Losses | Allowance for Loan Losses
The allowance for loan losses is maintained at a level estimated by management to provide adequately for probable incurred losses inherent in the current loan portfolio. The appropriateness of the allowance for loan losses is continuously monitored. It is assessed for appropriateness using a methodology designed to ensure the level of the allowance reasonably reflects the loan portfolio’s risk profile and can absorb all reasonably estimable credit losses inherent in the current loan portfolio.
To develop and document a systematic methodology for determining the allowance for loan losses, the Company has divided the loan portfolio into three segments, each with different risk characteristics and methodologies for assessing risk. Those segments are further segregated between our loans accounted for under the amortized cost method (referred to as “originated” loans) and loans acquired in a business combination (referred to as “acquired” loans). Each portfolio segment is broken down into class segments where appropriate. Class segments contain unique measurement attributes, risk characteristics and methods for monitoring and assessing risk that are necessary to develop the allowance for loan losses. Unique characteristics such as borrower type, loan type, collateral type and risk characteristics define each class segment. The following table illustrates the portfolio and class segments for the Company’s loan portfolio:
The Company offers a variety of Commercial loan products. The Company’s underwriting analysis for commercial loans typically includes credit verification, independent appraisals, a review of the borrower’s financial condition and a detailed analysis of the borrower’s underlying cash flows.
Commercial and Industrial (“C&I”) – The Company offers a variety of loan options to meet the specific needs of our C&I customers including term loans, time notes and lines of credit. Such loans are made available to businesses for working capital needs such as inventory and receivables, business expansion, equipment purchases, livestock purchases and seasonal crop expenses. These loans are usually collateralized by business assets such as equipment, accounts receivable and perishable agricultural products, which are exposed to industry price volatility. To reduce these risks, management also attempts to obtain personal guarantees of the owners or obtain government loan guarantees to provide further support.
Commercial Real Estate (“CRE”) – The Company offers CRE loans to finance real estate purchases, refinancings, expansions and improvements to commercial and agricultural properties. These CRE loans are secured by liens on the real estate, which may include both owner occupied and non-owner-occupied properties, such as apartments, commercial structures, health care facilities and other facilities. The Company’s underwriting analysis includes credit verification, independent appraisals, a review of the borrower’s financial condition and a detailed analysis of the borrower’s underlying cash flows. These loans are typically originated in amounts of no more than 80% of the appraised value of the property.
Business Banking - The Company offers a variety of loan options to meet the specific needs of our Business Banking customers including term loans, mortgages and lines of credit. Such loans are generally less than $750 thousand and are made available to businesses for working capital such as inventory and receivables, business expansion, equipment purchases and agricultural needs. Generally, a collateral lien is placed on assets owned by the borrower and can include real estate, equipment, inventory, receivables or other business assets. These loans carry a higher risk than C&I and CRE loans due to the smaller size of the borrower and lower levels of capital.
Consumer Loans
The Company offers a variety of Consumer loan products including Dealer Finance, Specialty Lending and Direct loans.
Dealer Finance – The Company maintains relationships with many dealers primarily in the communities that we serve. Through these relationships, the Company primarily finances the purchases of automobiles indirectly through dealer relationships. Approximately 95% of the Dealer Finance relationships represent automobile financing. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from three to six years, based upon the nature of the collateral and the size of the loan. The majority of Dealer Finance Consumer loans are underwritten on a secured basis using the underlying collateral being financed.
Specialty Lending – The Company offers unsecured Consumer loans across a national footprint originated through our relationships with national technology-driven consumer lending companies to finance such things as dental and medical procedures, K-12 tuition, solar energy installations and other consumer purpose loans. Advances of credit through this specialty lending business line are subject to the Company’s underwriting standards including criteria such as FICO score and debt to income thresholds.
Direct – The Company offers a variety of consumer installment loans to finance vehicle purchases, mobile home purchases and personal expenditures. In addition to installment loans, the Company also offers personal lines of credit, overdraft protection, home equity lines of credit and second mortgage loans (loans secured by a lien position on one-to-four family residential real estate) to finance home improvements, debt consolidation, education and other uses. Most of the consumer installment loans carry a fixed rate of interest with principal repayment terms typically ranging from one to ten years, based upon the nature of the collateral and the size of the loan. For home equity loans, consumers are able to borrow up to 85% of the equity in their homes. These loans carry a higher risk than first mortgage residential loans as they are often in a second position with respect to collateral. Consumer installment loans are often secured with collateral consisting of a perfected lien on the asset being purchased or a perfected lien on a consumer’s deposit account. Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower’s financial condition and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate.
Residential Real Estate
Residential real estate loans consist primarily of loans secured by a first or second mortgage on primary residences. We originate adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a mortgage. These loans are collateralized by owner-occupied properties located in the Company’s market area. When market conditions are favorable, for longer term, fixed-rate residential real estate mortgages without escrow, the Company retains the servicing, but sells the right to receive principal and interest to Government-sponsored enterprises. This practice allows the Company to manage interest rate risk, liquidity risk and credit risk. Loans on one-to-four-family residential real estate are generally originated in amounts of no more than 85% of the purchase price or appraised value (whichever is lower) or have private mortgage insurance. Mortgage title insurance and hazard insurance are normally required. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic site inspections, including one at each loan draw period.
Allowance for Loan Loss Calculation
For purposes of evaluating the adequacy of the allowance, the Company considers a number of significant factors that affect the collectability of the portfolio. For individually impaired loans, these include estimates of impairment, if any, which reflect the facts and circumstances that affect the likelihood of repayment of such loans as of the evaluation date. For homogeneous pools of loans, estimates of the Company’s exposure to credit loss reflect a current assessment of a number of factors, which could affect collectability. These factors include: past loss experience, size, trend, composition and nature of loans; changes in lending policies and procedures, including underwriting standards and collection, charge-offs and recoveries; trends experienced in nonperforming and delinquent loans; current economic conditions in the Company’s market; portfolio concentrations that may affect loss experienced across one or more components of the portfolio; the effect of external factors such as competition, legal and regulatory requirements; and the experience, ability and depth of lending management and staff. In addition, various regulatory agencies, as an integral component of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to make loan grade changes as well as recognize additions to the allowance based on their examinations.
After a thorough consideration of the factors discussed above, any required additions or reductions to the allowance for loan losses are made periodically by charges or credits to the provision for loan losses. These charges are necessary to maintain the allowance at a level that management believes is reflective of overall level of incurred loss in the portfolio. While management uses available information to recognize losses on loans, additions and reductions of the allowance may fluctuate from one reporting period to another. These fluctuations are reflective of changes in risk associated with portfolio content or changes in management’s assessment of any or all of the determining factors discussed above.
For all loan classes within the Company’s loan portfolio, loans are placed on nonaccrual status when timely collection of principal and/or interest in accordance with contractual terms is in doubt. Loans are transferred to nonaccrual status generally when principal or interest payments become ninety days delinquent, unless the loan is well secured and in the process of collection or sooner when management concludes circumstances indicate that borrowers may be unable to meet contractual principal or interest payments. When a loan is transferred to a nonaccrual status, all interest previously accrued in the current period but not collected is reversed against interest income in that period. Interest accrued in a prior period and not collected is charged-off against the allowance for loan losses.
If ultimate repayment of a nonaccrual loan is expected, any payments received are applied in accordance with contractual terms. If ultimate repayment of principal is not expected, any payment received on a nonaccrual loan is applied to principal until ultimate repayment becomes expected. For all loan classes within the Company’s loan portfolio, nonaccrual loans are returned to accrual status when they become current as to principal and interest and demonstrate a period of performance under the contractual terms and, in the opinion of management, are fully collectible as to principal and interest. For loans in all portfolios, the principal amount is charged off in full or in part as soon as management determines, based on available facts, that the collection of principal in full or in part is improbable. For Commercial loans, management considers specific facts and circumstances relative to individual credits in making such a determination. For Consumer and Residential Real Estate loan classes, management uses specific guidance and thresholds from the Federal Financial Institutions Examination Council’s Uniform Retail Credit Classification and Account Management Policy.
The methodology used to establish the allowance for loan losses on impaired loans incorporates specific allocations on loans analyzed individually. Classified loans, including all troubled debt restructured loans (“TDRs”) and nonaccrual Commercial loans that are graded Substandard, Doubtful or Loss, with outstanding balances of $750 thousand or more are evaluated for impairment through the Company’s quarterly status review process. The Company considers Commercial loans less than $750 thousand to be homogeneous loans. In determining that we will be unable to collect all principal and/or interest payments due in accordance with the contractual terms of the loan agreements, we consider factors such as payment history and changes in the financial condition of individual borrowers, local economic conditions, historical loss experience and the conditions of the various markets in which the collateral may be liquidated. For loans that are identified as impaired, impairment is measured by one of three methods: 1) the fair value of collateral less cost to sell, 2) present value of expected future cash flows or 3) the loan’s observable market price. These impaired loans are reviewed on a quarterly basis for changes in the level of impairment. Impaired amounts are charged off immediately if such amounts are determined by management to be uncollectable. Any change to the previously recognized impairment loss is recognized as a component of the provision for loan losses.
The Company has developed an internal loan grading system to evaluate and quantify the Company’s loan portfolio with respect to quality and risk. The system focuses on, among other things, financial strength of borrowers, experience and depth of borrower’s management, primary and secondary sources of repayment, payment history, nature of the business and outlook on particular industries. The internal grading system enables the Company to monitor the quality of the entire loan portfolio on a consistent basis and provides management with an early warning system, enabling recognition and response to problem loans and potential problem loans.
Commercial Grading System
For C&I and CRE loans, the Company uses a grading system that relies on quantifiable and measurable characteristics when available. This would include comparison of financial strength to available industry averages, comparison of transaction factors (loan terms and conditions) to loan policy and comparison of credit history to stated repayment terms and industry averages. Some grading factors are necessarily more subjective such as economic and industry factors, regulatory environment and management. C&I and CRE loans are graded Doubtful, Substandard, Special Mention and Pass.
A Doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as a loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral and refinancing. Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information. Nonaccrual treatment is required for Doubtful assets because of the high probability of loss.
Substandard loans have a high probability of payment default or they have other well-defined weaknesses. They require more intensive supervision by bank management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some Substandard loans, the likelihood of full collection of interest and principal may be in doubt and those loans should be placed on nonaccrual. Although Substandard assets in the aggregate will have a distinct potential for loss, an individual asset’s loss potential does not have to be distinct for the asset to be rated Substandard.
Special Mention loans have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company’s position at some future date. These loans pose elevated risk, but their weakness does not yet justify a Substandard classification. Borrowers may be experiencing adverse operating trends (i.e., declining revenues or margins) or may be struggling with an ill-proportioned balance sheet (i.e., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a Special Mention rating. Although a Special Mention loan has a higher probability of default than a Pass asset, its default is not imminent.
● Pass
Loans graded as Pass encompass all loans not graded as Doubtful, Substandard or Special Mention. Pass loans are in compliance with loan covenants and payments are generally made as agreed. Pass loans range from superior quality to fair quality.
Business Banking Grading System
Business Banking loans are graded as either Classified or Non-classified:
Classified loans are inadequately protected by the current worth and paying capacity of the obligor or, if applicable, the collateral pledged. These loans have a well-defined weakness or weaknesses, that jeopardize the liquidation of the debt or in some cases make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Classified loans have a high probability of payment default or total substantial loss. These loans require more intensive supervision by management and are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. Classified loans where the full collection of interest and principal is in doubt are considered to have a nonaccrual status. In some cases, Classified loans are considered uncollectable and of such little value that their continuance as assets is not warranted.
Loans graded as Non-classified encompass all loans not graded as Classified. Payments on non-classified loans are generally made as agreed.
Consumer and Residential Real Estate Grading System
Consumer and Residential Real Estate loans are graded as either Nonperforming or Performing.
Nonperforming loans are loans that are 1) over 90 days past due and interest is still accruing or 2) on nonaccrual status.
All loans not meeting any of these criteria are considered Performing.
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| Troubled Debt Restructuring |
Troubled Debt Restructured Loans
When the Company modifies a loan in a troubled debt restructuring, such modifications generally include one or a combination of the following: an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; temporary reduction in the interest rate; or change in scheduled payment amount. Residential Real Estate and Consumer TDRs occurring during 2019 and 2018 were due to the reduction in the interest rate or extension of the term. Commercial TDRs during 2019 and 2018 were both a reduction of the interest rate or change in terms.
When the Company modifies a loan in a troubled debt restructuring, management measures for impairment, if any, based on the present value of the expected future cash flows, discounted at the contractual 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 collateral. In these cases, management uses the current fair value of the collateral, less selling costs. If management determines that the value of the modified loan is less than the recorded investment in the loan an impairment charge would be recognized.
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Leases (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Leases [Abstract] | |
| Operating Lease |
Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commencement date. ROU assets are further adjusted for lease incentives. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in occupancy expense in the unaudited interim consolidated statements of income.
We have made a policy election to exclude the recognition requirements to all classes of leases with original terms of 12 months or less. Instead, the short-term lease payments are recognized in profit or loss on a straight-line basis over the lease term.
The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes and insurance are not included in the measurement of the lease liability since they are generally able to be segregated.
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Defined Benefit Post-Retirement Plans (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Defined Benefit Post-Retirement Plans [Abstract] | |
| Postemployment Benefit Plans, Policy |
The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at June 30, 2019. Benefits paid from the plan are based on age, years of service, compensation, social security benefits and are determined in accordance with defined formulas. The Company’s policy is to fund the Plan in accordance with Employee Retirement Income Security Act of 1974 standards. Assets of the Plan are invested in publicly traded stocks and mutual funds.
In addition to the Plan, the Company provides supplemental employee retirement plans to certain current and former executives. The Company also assumed supplemental retirement plans for former executives of Alliance Financial Corporation (“Alliance”) when the Company acquired Alliance.
These supplemental employee retirement plans and the Plan are collectively referred to herein as “Pension Benefits.”
In addition, the Company provides certain health care benefits for retired employees. Benefits were accrued over the employees’ active service period. Only employees that were employed by the Company on or before January 1, 2000 are eligible to receive post-retirement health care benefits. In addition, the Company assumed post-retirement medical life insurance benefits for certain Alliance employees, retirees and their spouses, if applicable, in the Alliance acquisition. These post-retirement benefits are referred to herein as “Other Benefits.”
The Company made no voluntary contributions to the pension and other benefits plans during the three and six months ended June 30, 2019 and 2018.
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Earnings Per Share (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Earnings Per Share [Abstract] | |
| Earnings Per Share |
Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity (such as the Company’s dilutive stock options and restricted stock units).
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Fair Value Measurements and Fair Value of Financial Instruments (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Fair Value Measurements and Fair Value of Financial Instruments [Abstract] | |
| Fair Value of Financial Instruments, Policy |
GAAP states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value measurements are not adjusted for transaction costs. A fair value hierarchy exists within GAAP that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
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.
The types of instruments valued based on quoted market prices in active markets include most U.S. government and agency securities, many other sovereign government obligations, liquid mortgage products, active listed equities and most money market securities. Such instruments are generally classified within Level 1 or Level 2 of the fair value hierarchy. The Company does not adjust the quoted prices for such instruments.
The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency include most investment-grade and high-yield corporate bonds, less liquid mortgage products, less liquid agency securities, less liquid listed equities, state, municipal and provincial obligations and certain physical commodities. Such instruments are generally classified within Level 2 of the fair value hierarchy. Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices). Other investment securities are reported at fair value utilizing Level 1 and Level 2 inputs. The prices for Level 2 instruments are obtained through an independent pricing service or dealer market participants with whom the Company has historically transacted both purchases and sales of investment securities. Prices obtained from these sources include prices derived from market quotations and matrix pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Management reviews the methodologies used in pricing the securities by its third party providers.
Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions. Valuations are adjusted to reflect illiquidity and/or non-transferability and such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate will be used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt markets and changes in financial ratios or cash flows.
GAAP requires disclosure of assets and liabilities measured and recorded at fair value on a non-recurring basis such as goodwill, loans held for sale, other real estate owned, collateral-dependent impaired loans, mortgage servicing rights and HTM securities. The only non-recurring fair value measurements recorded during the three and six month periods ended June 30, 2019 and the year ended December 31, 2018 were related to impaired loans and write-downs of other real estate owned. The Company uses the fair value of underlying collateral, less costs to sell, to estimate the specific reserves for collateral dependent impaired loans. The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses ranging from 10% to 35%. Based on the valuation techniques used, the fair value measurements for collateral dependent impaired loans are classified as Level 3.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, the Company has a substantial trust and investment management operation that contributes net fee income annually. The trust and investment management operation is not considered a financial instrument and its value has not been incorporated into the fair value estimates. Other significant assets and liabilities include the benefits resulting from the low-cost funding of deposit liabilities as compared to the cost of borrowing funds in the market and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimate of fair value.
HTM Securities
The fair value of the Company’s HTM securities is primarily measured using information from a third party pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.
Net Loans
The fair value of the Company’s loans was estimated in accordance with the exit price notion as defined by Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”). Net loans include portfolio loans and loans held for sale. Loans were first segregated by type and then further segmented into fixed and variable rate and loan quality categories. Expected future cash flows were projected based on contractual cash flows, adjusted for estimated prepayments, which also includes credit risk, illiquidity risk and other market factors to calculate the exit price fair value in accordance with ASC 820.
Time Deposits
The fair value of time deposits was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments. The fair values of the Company’s time deposit liabilities do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.
Long-Term Debt
The fair value of long-term debt was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments.
Junior Subordinated Debt
The fair value of junior subordinated debt has been estimated using a discounted cash flow analysis.
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Recent Accounting Pronouncements (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Recent Accounting Pronouncements [Abstract] | |
| Recently Adopted Accounting Standards |
Recently Adopted Accounting Standards
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize a right-of-use asset and lease liability. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonably certain to exercise an option to extend the lease, exercise a purchase option or not exercise an option to terminate the lease. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842. ASU 2018-01 was issued to address concerns about the cost and complexity of complying with the transition provisions of ASU 2016-02. Both ASU 2016-02 and ASU 2018-01 are effective for the Company on January 1, 2019. Lessees and lessors are required to apply the provisions of ASU 2016-02 at the beginning of the earliest period presented using a modified retrospective approach. At its November 29, 2017 meeting, the FASB proposed allowing entities the option of applying the provisions of ASU 2016-02 at the effective date without adjusting the comparative periods presented. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. ASU 2018-10 was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Also in July 2018, the FASB issued ASU 2018-11, Targeted Improvements, which allows for an optional transition method in which the provisions of ASC Topic 842 would be applied upon the adoption date and would not have to be retroactively applied to the earliest reporting period presented in the consolidated financial statements.
The Company adopted ASU 2016-02 as of January 1, 2019 and elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows the carryforward of the historical lease classification, the practical expedient related to land easements and the hindsight practical expedient to determine the reasonably certain lease term for existing leases. The Company made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet and recognize those lease payments in the consolidated statements of income on a straight-line basis over the lease term. The adoption of ASU 2016-02 and related transition guidance resulted in the recognition of additional net lease assets and liabilities of approximately $34 million and $37 million, respectively, as of January 1, 2019. The standard did not materially affect our consolidated net earnings or regulatory capital ratios. Refer to Note 5, Leases for more information.
In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20). ASU 2017-08 requires amortization of premiums to the earliest call date on debt securities with call features that are explicit, on contingent and callable at fixed prices on present dates. The ASU does not impact securities held at a discount; the discount continues to be amortized to the contractual maturity. The guidance is required to be applied with a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. ASU 2017-08 is effective for the Company on January 1, 2019. The adoption did not have an impact on the consolidated financial statements and related disclosures and no cumulative effect adjustment was required upon adoption.
In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815) - Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The ASU 2018-16 amends existing guidance permits the use of the OIS rate based on SOFR as a United States benchmark interest rate for hedge accounting purposes under Topic 815 in addition to other allowable rates stated in the guidance. ASU 2018-16 is effective for the Company on January 1, 2019 and should be applied prospectively for qualifying new or redesignated hedging relationships entered into on or after the date of adoption. The adoption did not have an impact on the Company’s consolidated financial statements.
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| Accounting Standards Issued Not Yet Adopted | Accounting Standards Issued Not Yet Adopted
In August 2018, the FASB issued ASU 2018-13, Fair value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair value Measurement. The provisions of ASU 2018-13 modify the disclosure requirements on fair value measurements in ASC 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 is effective January 1, 2020 but may be early adopted in any interim period. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures and does not expect the impact to be material.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”). ASU 2016-13 introduces new guidance that make substantive changes to the accounting for credit losses. ASU 2016-13 introduces the CECL model, which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includes loans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and HTM debt securities. The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable and supportable forecasts and is generally expected to result in earlier recognition of credit losses. ASU 2016-13 also modifies certain provisions of the current OTTI model for AFS debt securities. Credit losses on AFS debt securities will be limited to the difference between the security’s amortized cost basis and its fair value and will be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. ASU 2016-13 also provides for a simplified accounting model for purchased financial assets with more than insignificant credit deterioration since their origination. ASU 2016-13 requires expanded disclosures including, but not limited to, (i) information about the methods and assumptions used to estimate expected credit losses, including changes in the factors that influenced management’s estimate and the reasons for those changes, (ii) for financing receivables and net investment in leases measured at amortized cost, further disaggregation of information about the credit quality of those assets and (iii) a rollforward of the allowance for credit losses for HTM and AFS securities. ASU 2016-13 is effective for the Company on January 1, 2020. Early adoption is permitted for all organizations for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018; however, the Company does not intend to early adopt this ASU. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures, processes and controls and is not currently able to reasonably estimate the impact of adoption on the Company’s consolidated financial statements; however, adoption is likely to lead to significant changes in accounting policies related to, and the methods employed in estimating, the allowance for loan and lease losses. It is possible that the impact will be material to the Company’s consolidated financial statements. Moreover, the CECL model may create more volatility in the level of our allowance for loan losses. To date, the Company has completed a gap analysis, adopted a detailed implementation plan, established a formal governance structure for the project, selected and is in the process of implementing a software solution to serve as its CECL platform, hired talent to support the CECL model, documented accounting policy elections and drafted policies to comply with the new standard, selected credit loss methods for key portfolio segments and is in the process of documenting processes and controls. In the second quarter of 2019, the Company designed a qualitative analysis framework, began performing parallel calculations and ran various sensitivity analyses to test the significant model assumptions. In May 2019, the FASB issued ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. The Company is considering the impact of the irrevocable election of the fair value option (election to elect fair value option for certain financial assets).
In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans - General (Subtopic 715-20), provides changes to the disclosure requirements for defined benefit plans. The amended guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments are a result of the disclosure framework project that focuses on improvements to the effectiveness of disclosures in the notes to financial statements. The amendments remove and add certain disclosure requirements. The disclosure requirements being removed relating to public companies are (1) the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, (2) the amount and timing of plan assets expected to be returned to the employer, (3) the 2001 disclosure requirement relating to Japanese Welfare Pension Insurance Law, (4) related party disclosures about the amount of future annual benefits covered by insurance, and (5) the effects of a one-percentage-point change in assumed health care cost trends on the benefit cost and obligation. The disclosure requirements being added relating to public companies are (1) the weighted-average interest crediting rates for cash balance plans, and (2) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. ASU 2018-14 is effective for the Company on January 1, 2021 and early adoption is permitted. The amendments should be applied retrospectively and the Company does not expect the guidance to have a material impact on its disclosures to the consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) – Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. ASU 2018-15 amends existing guidance and requires a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize and which costs to expense. ASU 2018-15 is effective for the Company on January 1, 2020, and early adoption is permitted. The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is evaluating the impact that the guidance will have on its consolidated financial statements.
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Securities (Tables) |
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| Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost, Estimated Fair Value and Unrealized Gains (Losses) of Available for Sale ("AFS") Securities | The amortized cost, estimated fair value and unrealized gains (losses) of available for sale (“AFS”) securities are as follows:
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| Components of Net Realized Gains (Losses) on Sale of AFS Securities |
The components of net realized gains (losses) on the sale of AFS securities are as follows. These amounts were reclassified out of AOCI and into earnings. There were no sales of AFS securities during the three months ended June 30, 2019 and 2018.
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| Amortized Cost, Estimated Fair Value, and Unrealized Gains (Losses) of Held to Maturity Securities | The amortized cost, estimated fair value and unrealized gains (losses) of held to maturity (“HTM”) securities are as follows:
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| Investment Securities with Unrealized Losses | The following table sets forth information with regard to investment securities with unrealized losses segregated according to the length of time the securities had been in a continuous unrealized loss position:
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| Gains and Losses on Equity Securities | The following tables set forth information with regard to gains and losses on equity securities:
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| Contractual Maturities of Debt Securities | The following tables set forth information with regard to contractual maturities of debt securities at June 30, 2019:
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Allowance for Loan Losses and Credit Quality of Loans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for Loan Losses and Credit Quality of Loans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Portfolio and Class Segments |
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| Allowance for Loan Losses by Portfolio | The following tables illustrate the changes in the allowance for loan losses by our portfolio segments:
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| Past due and Nonperforming Loans by Loan Class | The following tables set forth information with regard to past due and nonperforming loans by loan class:
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| Impaired Loans and Specific Reserve Allocations | The following table provides information on loans specifically evaluated for impairment:
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| Financing Receivable Credit Quality by Loan Class | The following tables illustrate the Company’s credit quality by loan class:
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| Troubled Debt Restructurings on Financing Receivables | The following tables illustrate the recorded investment and number of modifications for modified loans, including the recorded investment in the loans prior to a modification and the recorded investment in the loans after restructuring:
The following tables illustrate the recorded investment and number of modifications for TDRs where a concession has been made and subsequently defaulted during the period:
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Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Lease Cost | The table below summarizes our net lease cost:
|
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| Future Minimum Rental Commitments Related to Non-cancelable Operating Leases | The table below shows future minimum rental commitments related to non-cancelable operating leases for the next five years and thereafter as of June 30, 2019.
|
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| Additional Information for Operating Leases | The following table shows the weighted average remaining operating lease term, the weighted average discount rate and supplemental information on the unaudited interim consolidated statements of cash flows for operating leases:
|
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| Future Minimum Rental Payments Related to Non-cancelable Operating Leases | The following table shows the future minimum rental payments related to non-cancelable operating leases with original terms of one year or more as of December 31, 2018.
|
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Defined Benefit Post-Retirement Plans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Defined Benefit Post-Retirement Plans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Periodic Pension Benefits and Other Benefit Costs | The components of expense for Pension Benefits and Other Benefits are set forth below:
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Earnings Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of Basic and Diluted Earnings Per Share |
The following is a reconciliation of basic and diluted EPS for the periods presented in the unaudited interim consolidated statements of income:
|
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Reclassification Adjustments Out of Other Comprehensive Income (Loss) (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification Adjustments Out of Other Comprehensive Income (Loss) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification Out of Accumulated Other Comprehensive Income | The following table summarizes the reclassification adjustments out of accumulated other comprehensive income (loss) (“AOCI”):
|
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Derivative Instruments and Hedging Activities (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Adjustment Recorded Related to Notional Amount of Derivatives Outstanding and Notional Amount of Risk Participation Agreements | The following table depicts the fair value adjustment recorded related to the notional amount of derivatives outstanding as well as the notional amount of risk participation agreements:
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| Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of Derivatives on AOCI and on Consolidated Statement of Income |
The following table indicates the effect of cash flow hedge accounting on AOCI and on the unaudited interim consolidated statement of income:
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| Not Designated as Hedging Instrument [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of Derivatives on AOCI and on Consolidated Statement of Income | The following table indicates the gain or loss recognized in income on derivatives not designated as a hedging relationship:
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Fair Value Measurements and Fair Value of Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements and Fair Value of Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis | The following tables set forth the Company’s financial assets and liabilities measured on a recurring basis that were accounted for at fair value. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
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| Information with Regard to Estimated Fair Values of Financial Instruments | The following table sets forth information with regard to estimated fair values of financial instruments. This table excludes financial instruments for which the carrying amount approximates fair value. Financial instruments for which the fair value approximates carrying value include cash and cash equivalents, AFS securities, equity securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable and derivatives.
|
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Securities, AFS Debt Securities, Contractual Maturities (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Available-for-sale Securities, Debt Maturities, Amortized Cost [Abstract] | ||
| Within one year | $ 123 | |
| From one to five years | 52,233 | |
| From five to ten years | 174,204 | |
| After ten years | 747,740 | |
| Amortized cost | 974,300 | $ 1,017,626 |
| Available-for-sale Securities, Debt Maturities, Estimated Fair Value [Abstract] | ||
| Within one year | 123 | |
| From one to five years | 52,196 | |
| From five to ten years | 175,628 | |
| After ten years | 751,749 | |
| Fair value | $ 979,696 | $ 998,496 |
Securities, HTM Debt Securities, Contractual Maturities (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Held-to-maturity Securities, Debt Maturities, Amortized Cost [Abstract] | ||
| Within one year | $ 60,959 | |
| From one to five years | 67,594 | |
| From five to ten years | 190,717 | |
| After ten years | 425,331 | |
| Amortized cost | 744,601 | $ 783,599 |
| Held-to-maturity Securities, Debt Maturities, Estimated Fair Value [Abstract] | ||
| Within one year | 60,959 | |
| From one to five years | 68,031 | |
| From five to ten years | 193,697 | |
| After ten years | 432,308 | |
| Fair value | $ 754,995 | $ 778,675 |
Defined Benefit Post-Retirement Plans (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Defined Benefit Post-Retirement Plans [Abstract] | ||||
| Employer contributions | $ 0 | $ 0 | $ 0 | $ 0 |
| Pension Benefits [Member] | ||||
| Components of net periodic cost (benefit) [Abstract] | ||||
| Service cost | 435 | 420 | 870 | 840 |
| Interest cost | 981 | 920 | 1,962 | 1,840 |
| Expected return on plan assets | (1,873) | (2,123) | (3,746) | (4,246) |
| Net amortization | 639 | 251 | 1,278 | 502 |
| Total net periodic cost (benefit) | 182 | (532) | 364 | (1,064) |
| Other Benefits [Member] | ||||
| Components of net periodic cost (benefit) [Abstract] | ||||
| Service cost | 2 | 3 | 4 | 6 |
| Interest cost | 81 | 82 | 162 | 164 |
| Expected return on plan assets | 0 | 0 | 0 | 0 |
| Net amortization | 18 | 44 | 35 | 88 |
| Total net periodic cost (benefit) | $ 101 | $ 129 | $ 201 | $ 258 |
Fair Value Measurements and Fair Value of Financial Instruments, Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Financial assets [Abstract] | ||
| HTM securities | $ 754,995 | $ 778,675 |
| Carrying Amount [Member] | Level 2 [Member] | ||
| Financial assets [Abstract] | ||
| HTM securities | 744,601 | 783,599 |
| Financial liabilities [Abstract] | ||
| Time deposits | 976,567 | 930,678 |
| Long-term debt | 84,267 | 73,724 |
| Junior subordinated debt | 101,196 | 101,196 |
| Carrying Amount [Member] | Level 3 [Member] | ||
| Financial assets [Abstract] | ||
| Net loans | 6,906,770 | 6,822,147 |
| Estimated Fair Value [Member] | Level 2 [Member] | ||
| Financial assets [Abstract] | ||
| HTM securities | 754,995 | 778,675 |
| Financial liabilities [Abstract] | ||
| Time deposits | 973,822 | 920,534 |
| Long-term debt | 84,878 | 73,927 |
| Junior subordinated debt | 104,914 | 100,114 |
| Estimated Fair Value [Member] | Level 3 [Member] | ||
| Financial assets [Abstract] | ||
| Net loans | $ 7,199,147 | $ 6,754,460 |
Commitments and Contingencies (Details) - USD ($) $ in Millions |
6 Months Ended | |
|---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
| Guarantor Obligations [Abstract] | ||
| Obligation instrument term | 1 year | |
| Commitment to Extend Credits and Unused Lines of Credit [Member] | ||
| Guarantor Obligations [Abstract] | ||
| Commitments - maximum potential obligation | $ 1,900.0 | $ 1,700.0 |
| Standby Letters of Credit [Member] | ||
| Guarantor Obligations [Abstract] | ||
| Commitments - maximum potential obligation | $ 31.5 | $ 41.2 |
Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Recent Accounting Pronouncements [Abstract] | ||
| Right of use assets | $ 34,600 | |
| Lease liability | $ 37,135 | |
| ASU 2016-02 [Member] | ||
| Recent Accounting Pronouncements [Abstract] | ||
| Right of use assets | $ 34,000 | |
| Lease liability | $ 37,000 |