Massachusetts | 04-2870273 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large Accelerated Filer | x | Accelerated Filer | o |
Non-accelerated Filer | o | Smaller Reporting Company | o |
Table of Contents | |
PAGE | |
Exhibit 31.1 – Certification 302 | |
Exhibit 31.2 – Certification 302 | |
Exhibit 32.1 – Certification 906 | |
Exhibit 32.2 – Certification 906 |
March 31, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Cash and due from banks | $ | 83,345 | $ | 84,813 | |||
Interest-earning deposits with banks | 113,387 | 190,952 | |||||
Securities | |||||||
Securities - trading | 763 | 356 | |||||
Securities - available for sale | 378,227 | 367,249 | |||||
Securities - held to maturity (fair value $467,764 and $478,749) | 457,641 | 477,507 | |||||
Total securities | 836,631 | 845,112 | |||||
Loans held for sale (at fair value) | 7,588 | 5,990 | |||||
Loans | |||||||
Commercial and industrial | 835,336 | 843,276 | |||||
Commercial real estate | 2,711,857 | 2,653,434 | |||||
Commercial construction | 357,867 | 373,368 | |||||
Small business | 103,323 | 96,246 | |||||
Residential real estate | 631,888 | 638,606 | |||||
Home equity - first position | 547,056 | 543,092 | |||||
Home equity - subordinate positions | 388,255 | 384,711 | |||||
Other consumer | 13,649 | 14,988 | |||||
Total loans | 5,589,231 | 5,547,721 | |||||
Less: allowance for loan losses | (56,432 | ) | (55,825 | ) | |||
Net loans | 5,532,799 | 5,491,896 | |||||
Federal Home Loan Bank stock | 11,807 | 14,431 | |||||
Bank premises and equipment, net | 76,692 | 75,663 | |||||
Goodwill | 201,083 | 201,083 | |||||
Other intangible assets | 11,135 | 11,826 | |||||
Cash surrender value of life insurance policies | 135,734 | 134,627 | |||||
Other real estate owned and other foreclosed assets | 1,720 | 2,159 | |||||
Other assets | 177,347 | 150,917 | |||||
Total assets | $ | 7,189,268 | $ | 7,209,469 | |||
Liabilities and Stockholders' Equity | |||||||
Deposits | |||||||
Demand deposits | 1,840,186 | 1,846,593 | |||||
Savings and interest checking accounts | 2,374,264 | 2,370,141 | |||||
Money market | 1,123,600 | 1,089,139 | |||||
Time certificates of deposit of $100,000 and over | 267,936 | 274,701 | |||||
Other time certificates of deposits | 389,261 | 410,129 | |||||
Total deposits | 5,995,247 | 5,990,703 | |||||
Borrowings | |||||||
Federal Home Loan Bank borrowings | 50,840 | 102,080 | |||||
Customer repurchase agreements and other short-term borrowings | 134,568 | 133,958 |
Junior subordinated debentures (less unamortized debt issuance costs of $152 and $158) | 73,257 | 73,306 | |||||
Subordinated debentures (less unamortized debt issuance costs of $400 and $411) | 34,600 | 34,589 | |||||
Total borrowings | 293,265 | 343,933 | |||||
Other liabilities | 112,609 | 103,370 | |||||
Total liabilities | 6,401,121 | 6,438,006 | |||||
Commitments and contingencies | |||||||
Stockholders' equity | |||||||
Preferred stock, $.01 par value. authorized: 1,000,000 shares, outstanding: none | — | — | |||||
Common stock, $.01 par value. authorized: 75,000,000 shares, issued and outstanding: 26,293,565 shares at March 31, 2016 and 26,236,352 shares at December 31, 2015 (includes 223,753 and 230,900 shares of unvested participating restricted stock awards, respectively) | 261 | 260 | |||||
Shares held in rabbi trust at cost: 164,571 shares at March 31, 2016 and 173,378 shares at December 31, 2015 | (4,031 | ) | (3,958 | ) | |||
Deferred compensation and other retirement benefit obligations | 4,031 | 3,958 | |||||
Additional paid in capital | 406,921 | 405,486 | |||||
Retained earnings | 379,153 | 368,169 | |||||
Accumulated other comprehensive income (loss), net of tax | 1,812 | (2,452 | ) | ||||
Total stockholders’ equity | 788,147 | 771,463 | |||||
Total liabilities and stockholders' equity | $ | 7,189,268 | $ | 7,209,469 |
Three Months Ended | |||||||
March 31 | |||||||
2016 | 2015 | ||||||
Interest income | |||||||
Interest and fees on loans | $ | 54,269 | $ | 51,687 | |||
Taxable interest and dividends on securities | 5,197 | 4,627 | |||||
Nontaxable interest and dividends on securities | 32 | 34 | |||||
Interest on loans held for sale | 32 | 51 | |||||
Interest on federal funds sold and short-term investments | 211 | 30 | |||||
Total interest and dividend income | 59,741 | 56,429 | |||||
Interest expense | |||||||
Interest on deposits | 2,868 | 2,763 | |||||
Interest on borrowings | 1,982 | 2,417 | |||||
Total interest expense | 4,850 | 5,180 | |||||
Net interest income | 54,891 | 51,249 | |||||
Provision (benefit) for loan losses | 525 | (500 | ) | ||||
Net interest income after provision (benefit) for loan losses | 54,366 | 51,749 | |||||
Noninterest income | |||||||
Deposit account fees | 4,470 | 4,166 | |||||
Interchange and ATM fees | 3,724 | 3,100 | |||||
Investment management | 5,003 | 5,107 | |||||
Mortgage banking income | 1,132 | 1,126 | |||||
Increase in cash surrender value of life insurance policies | 1,014 | 778 | |||||
Loan level derivative income | 1,722 | 418 | |||||
Other noninterest income | 2,090 | 1,862 | |||||
Total noninterest income | 19,155 | 16,557 | |||||
Noninterest expenses | |||||||
Salaries and employee benefits | 27,189 | 25,288 | |||||
Occupancy and equipment expenses | 5,827 | 6,394 | |||||
Data processing and facilities management | 1,206 | 1,122 | |||||
FDIC assessment | 1,010 | 956 | |||||
Advertising expense | 1,257 | 834 | |||||
Consulting expense | 601 | 755 | |||||
Loss on extinguishment of debt | 437 | 122 | |||||
Loss on sale of equity securities | 29 | — | |||||
Merger and acquisition expense | 334 | 10,230 | |||||
Software maintenance | 754 | 625 | |||||
Other noninterest expenses | 7,838 | 8,651 | |||||
Total noninterest expenses | 46,482 | 54,977 | |||||
Income before income taxes | 27,039 | 13,329 | |||||
Provision for income taxes | 8,428 | 3,869 | |||||
Net income | $ | 18,611 | $ | 9,460 | |||
Basic earnings per share | $ | 0.71 | $ | 0.38 | |||
Diluted earnings per share | $ | 0.71 | $ | 0.38 | |||
Weighted average common shares (basic) | 26,275,323 | 24,959,865 | |||||
Common shares equivalents | 43,409 | 80,215 | |||||
Weighted average common shares (diluted) | 26,318,732 | 25,040,080 | |||||
Cash dividends declared per common share | $ | 0.29 | $ | 0.26 |
Three Months Ended | |||||||
March 31 | |||||||
2016 | 2015 | ||||||
Net income | $ | 18,611 | $ | 9,460 | |||
Other comprehensive income, net of tax | |||||||
Net change in fair value of securities available for sale | 4,081 | 1,561 | |||||
Net change in fair value of cash flow hedges | 123 | 82 | |||||
Net change in other comprehensive income for defined benefit postretirement plans | 60 | 76 | |||||
Total other comprehensive income | 4,264 | 1,719 | |||||
Total comprehensive income | $ | 22,875 | $ | 11,179 |
Common Stock Outstanding | Common Stock | Value of Shares Held in Rabbi Trust at Cost | Deferred Compensation and Other Retirement Benefit Obligations | Additional Paid in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||||||||||
Balance December 31, 2015 | 26,236,352 | $ | 260 | $ | (3,958 | ) | $ | 3,958 | $ | 405,486 | $ | 368,169 | $ | (2,452 | ) | $ | 771,463 | |||||||||||||
Net income | — | — | — | — | — | 18,611 | — | 18,611 | ||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 4,264 | 4,264 | ||||||||||||||||||||||
Common dividend declared ($0.29 per share) | — | — | — | — | — | (7,627 | ) | — | (7,627 | ) | ||||||||||||||||||||
Proceeds from exercise of stock options | 5,000 | — | — | — | 149 | — | — | 149 | ||||||||||||||||||||||
Tax benefit related to equity award activity | — | — | — | — | 235 | — | — | 235 | ||||||||||||||||||||||
Stock based compensation | — | — | — | — | 865 | — | — | 865 | ||||||||||||||||||||||
Restricted stock awards issued, net of awards surrendered | 36,887 | 1 | — | — | (672 | ) | — | — | (671 | ) | ||||||||||||||||||||
Shares issued under direct stock purchase plan | 15,326 | — | — | — | 679 | — | — | 679 | ||||||||||||||||||||||
Deferred compensation and other retirement benefit obligations | — | — | (73 | ) | 73 | — | — | — | ||||||||||||||||||||||
Tax benefit related to deferred compensation distributions | — | — | — | — | 179 | — | — | 179 | ||||||||||||||||||||||
Balance March 31, 2016 | 26,293,565 | $ | 261 | $ | (4,031 | ) | $ | 4,031 | $ | 406,921 | $ | 379,153 | $ | 1,812 | $ | 788,147 | ||||||||||||||
Balance December 31, 2014 | 23,998,738 | $ | 237 | $ | (3,666 | ) | $ | 3,666 | $ | 311,978 | $ | 330,444 | $ | (2,132 | ) | $ | 640,527 | |||||||||||||
Net income | — | — | — | — | — | 9,460 | — | 9,460 | ||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 1,719 | 1,719 | ||||||||||||||||||||||
Common dividend declared ($0.26 per share) | — | — | — | — | — | (6,800 | ) | — | (6,800 | ) | ||||||||||||||||||||
Common stock issued for acquisition | 2,052,137 | 21 | — | — | 86,394 | — | — | 86,415 | ||||||||||||||||||||||
Proceeds from exercise of stock options | 23,436 | — | — | — | 321 | — | — | 321 | ||||||||||||||||||||||
Tax benefit related to equity award activity | — | — | — | — | 337 | — | — | 337 | ||||||||||||||||||||||
Stock based compensation | — | — | — | — | 739 | — | — | 739 | ||||||||||||||||||||||
Restricted stock awards issued, net of awards surrendered | 33,491 | 1 | — | — | (636 | ) | — | — | (635 | ) | ||||||||||||||||||||
Shares issued under direct stock purchase plan | 15,774 | — | — | — | 638 | — | — | 638 | ||||||||||||||||||||||
Deferred compensation and other retirement benefit obligations | — | — | (34 | ) | 34 | — | — | — | — | |||||||||||||||||||||
Tax benefit related to deferred compensation distributions | — | — | — | — | 165 | — | — | 165 | ||||||||||||||||||||||
Balance March 31, 2015 | 26,123,576 | $ | 259 | $ | (3,700 | ) | $ | 3,700 | $ | 399,936 | $ | 333,104 | $ | (413 | ) | $ | 732,886 |
Three Months Ended | |||||||
March 31 | |||||||
2016 | 2015 | ||||||
Cash flow from operating activities | |||||||
Net income | $ | 18,611 | $ | 9,460 | |||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Depreciation and amortization | 2,905 | 3,145 | |||||
Provision (benefit) for loan losses | 525 | (500 | ) | ||||
Deferred income tax expense | 462 | 639 | |||||
Net loss on sale of securities | 29 | — | |||||
Net gain on fixed assets | — | (2 | ) | ||||
Loss on extinguishment of debt | 437 | 122 | |||||
Net (gain) loss on other real estate owned and foreclosed assets | (86 | ) | 666 | ||||
Realized gain on sale leaseback transaction | (258 | ) | (258 | ) | |||
Stock based compensation | 865 | 739 | |||||
Excess tax benefit related to equity award activity | (235 | ) | (337 | ) | |||
Increase in cash surrender value of life insurance policies | (1,014 | ) | (778 | ) | |||
Change in fair value on loans held for sale | (54 | ) | (27 | ) | |||
Net change in: | |||||||
Trading assets | (407 | ) | (494 | ) | |||
Loans held for sale | (1,544 | ) | (2,592 | ) | |||
Other assets | (30,455 | ) | 2,934 | ||||
Other liabilities | 11,762 | (5,292 | ) | ||||
Total adjustments | (17,068 | ) | (2,035 | ) | |||
Net cash provided by operating activities | 1,543 | 7,425 | |||||
Cash flows provided by (used in) investing activities | |||||||
Proceeds from sales of securities available for sale | 266 | — | |||||
Proceeds from maturities and principal repayments of securities available for sale | 11,575 | 13,108 | |||||
Purchases of securities available for sale | (16,469 | ) | (5,846 | ) | |||
Proceeds from maturities and principal repayments of securities held to maturity | 19,942 | 12,616 | |||||
Purchases of securities held to maturity | — | (31,890 | ) | ||||
Redemption of Federal Home Loan Bank stock | 2,624 | — | |||||
Investments in low income housing projects | (2,648 | ) | (5,002 | ) | |||
Purchases of life insurance policies | (93 | ) | (92 | ) | |||
Net (increase) decrease in loans | (40,895 | ) | 41,330 | ||||
Cash used in business combinations, net of cash acquired | — | (13,448 | ) | ||||
Purchases of bank premises and equipment | (2,750 | ) | (1,481 | ) | |||
Proceeds from the sale of bank premises and equipment | — | 14 | |||||
Proceeds from the sale of other real estate owned and foreclosed assets | 724 | 1,641 | |||||
Net capital improvements to other real estate owned | (113 | ) | (665 | ) | |||
Net cash provided by (used in) investing activities | (27,837 | ) | 10,285 | ||||
Cash flows used in financing activities | |||||||
Net decrease in time deposits | (27,633 | ) | (19,023 | ) |
Net increase in other deposits | 32,177 | 47,019 | |||||
Net repayments of short-term Federal Home Loan Bank borrowings | — | (10,000 | ) | ||||
Repayments of long-term Federal Home Loan Bank borrowings | (51,641 | ) | (3,000 | ) | |||
Net increase (decrease) in customer repurchase agreements | 610 | (29,752 | ) | ||||
Net increase in other short term borrowings | — | 10,000 | |||||
Repayments of subordinated debentures | — | (30,000 | ) | ||||
Net proceeds from exercise of stock options | 149 | 321 | |||||
Restricted stock awards issued, net of awards surrendered | (671 | ) | (635 | ) | |||
Excess tax benefit from stock based compensation | 235 | 337 | |||||
Tax benefit from deferred compensation distribution | 179 | 165 | |||||
Proceeds from shares issued under direct stock purchase plan | 679 | 638 | |||||
Common dividends paid | (6,823 | ) | (5,760 | ) | |||
Net cash used in financing activities | (52,739 | ) | (39,690 | ) | |||
Net decrease in cash and cash equivalents | (79,033 | ) | (21,980 | ) | |||
Cash and cash equivalents at beginning of year | 275,765 | 178,254 | |||||
Cash and cash equivalents at end of period | 196,732 | 156,274 | |||||
Supplemental schedule of noncash investing and financing activities | |||||||
Transfer of loans to other real estate owned & foreclosed assets | $ | 86 | $ | 354 | |||
Net increase in capital commitments relating to low income housing project investments | $ | 37 | $ | — | |||
In conjunction with the purchase acquisition detailed in note 2 to the consolidated financial statements, assets were acquired and liabilities were assumed as follows | |||||||
Common stock issued for acquisition | $ | — | $ | 86,415 | |||
Fair value of assets acquired, net of cash acquired | $ | — | $ | 598,376 | |||
Fair value of liabilities assumed | $ | — | $ | 498,513 |
March 31, 2016 | December 31, 2015 | ||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||
Available for sale securities | |||||||||||||||||||||||||||||||
U.S. government agency securities | $ | 29,466 | $ | 856 | $ | — | $ | 30,322 | $ | 29,958 | $ | 261 | $ | (4 | ) | $ | 30,215 | ||||||||||||||
Agency mortgage-backed securities | 200,081 | 6,950 | (20 | ) | 207,011 | 207,693 | 4,227 | (983 | ) | 210,937 | |||||||||||||||||||||
Agency collateralized mortgage obligations | 76,481 | 1,001 | (325 | ) | 77,157 | 64,157 | 179 | (752 | ) | 63,584 | |||||||||||||||||||||
State, county, and municipal securities | 4,529 | 127 | — | 4,656 | 4,543 | 116 | — | 4,659 | |||||||||||||||||||||||
Single issuer trust preferred securities issued by banks | 2,350 | 8 | (125 | ) | 2,233 | 2,865 | 8 | (81 | ) | 2,792 | |||||||||||||||||||||
Pooled trust preferred securities issued by banks and insurers | 2,216 | — | (716 | ) | 1,500 | 2,217 | — | (645 | ) | 1,572 | |||||||||||||||||||||
Small business administration pooled securities | 39,942 | 849 | — | 40,791 | 40,472 | 87 | (110 | ) | 40,449 | ||||||||||||||||||||||
Equity securities | 14,373 | 423 | (239 | ) | 14,557 | 13,235 | 374 | (568 | ) | 13,041 | |||||||||||||||||||||
Total available for sale securities | $ | 369,438 | $ | 10,214 | $ | (1,425 | ) | $ | 378,227 | $ | 365,140 | $ | 5,252 | $ | (3,143 | ) | $ | 367,249 | |||||||||||||
Held to maturity securities | |||||||||||||||||||||||||||||||
U.S. Treasury securities | $ | 1,008 | $ | 84 | $ | — | $ | 1,092 | $ | 1,009 | $ | 55 | $ | — | $ | 1,064 | |||||||||||||||
Agency mortgage-backed securities | 161,452 | 6,123 | — | 167,575 | 167,134 | 3,460 | (219 | ) | 170,375 | ||||||||||||||||||||||
Agency collateralized mortgage obligations | 258,620 | 3,866 | (1,007 | ) | 261,479 | 267,348 | 1,195 | (3,652 | ) | 264,891 | |||||||||||||||||||||
State, county, and municipal securities | 225 | — | — | 225 | 225 | 2 | — | 227 | |||||||||||||||||||||||
Single issuer trust preferred securities issued by banks | 1,500 | 17 | — | 1,517 | 1,500 | 22 | — | 1,522 | |||||||||||||||||||||||
Small business administration pooled securities | 34,836 | 1,040 | — | 35,876 | 35,291 | 437 | (64 | ) | 35,664 | ||||||||||||||||||||||
Corporate debt securities | — | — | — | — | 5,000 | 6 | — | 5,006 | |||||||||||||||||||||||
Total held to maturity securities | $ | 457,641 | $ | 11,130 | $ | (1,007 | ) | $ | 467,764 | $ | 477,507 | $ | 5,177 | $ | (3,935 | ) | $ | 478,749 | |||||||||||||
Total | $ | 827,079 | $ | 21,344 | $ | (2,432 | ) | $ | 845,991 | $ | 842,647 | $ | 10,429 | $ | (7,078 | ) | $ | 845,998 |
Available for Sale | Held to Maturity | ||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Due in one year or less | $ | 500 | $ | 500 | $ | 276 | $ | 277 | |||||||
Due after one year to five years | 33,068 | 33,743 | 15,263 | 15,875 | |||||||||||
Due after five to ten years | 96,153 | 98,802 | 29,468 | 30,705 | |||||||||||
Due after ten years | 225,344 | 230,625 | 412,634 | 420,907 | |||||||||||
Total debt securities | $ | 355,065 | $ | 363,670 | $ | 457,641 | $ | 467,764 | |||||||
Equity securities | $ | 14,373 | $ | 14,557 | $ | — | $ | — | |||||||
Total | $ | 369,438 | $ | 378,227 | $ | 457,641 | $ | 467,764 |
March 31, 2016 | ||||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||
# of holdings | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||
Agency mortgage-backed securities | 3 | $ | 694 | $ | (2 | ) | $ | 3,501 | $ | (18 | ) | $ | 4,195 | $ | (20 | ) | ||||||||||
Agency collateralized mortgage obligations | 9 | — | — | 72,566 | (1,332 | ) | 72,566 | (1,332 | ) | |||||||||||||||||
Single issuer trust preferred securities issued by banks and insurers | 2 | 979 | (66 | ) | 1,000 | (59 | ) | 1,979 | (125 | ) | ||||||||||||||||
Pooled trust preferred securities issued by banks and insurers | 1 | — | — | 1,500 | (716 | ) | 1,500 | (716 | ) | |||||||||||||||||
Equity securities | 29 | 2,545 | (118 | ) | 2,249 | (121 | ) | 4,794 | (239 | ) | ||||||||||||||||
Total temporarily impaired securities | 44 | $ | 4,218 | $ | (186 | ) | $ | 80,816 | $ | (2,246 | ) | $ | 85,034 | $ | (2,432 | ) |
December 31, 2015 | ||||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||
# of holdings | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||
U.S.government agency securities | 3 | $ | 1,990 | $ | (4 | ) | $ | — | $ | — | $ | 1,990 | $ | (4 | ) | |||||||||||
Agency mortgage-backed securities | 57 | 112,648 | (1,062 | ) | 4,297 | (140 | ) | 116,945 | (1,202 | ) | ||||||||||||||||
Agency collateralized mortgage obligations | 23 | 147,707 | (1,420 | ) | 80,927 | (2,984 | ) | 228,634 | (4,404 | ) | ||||||||||||||||
Single issuer trust preferred securities issued by banks and insurers | 2 | 1,018 | (33 | ) | 1,018 | (48 | ) | 2,036 | (81 | ) | ||||||||||||||||
Pooled trust preferred securities issued by banks and insurers | 1 | — | — | 1,572 | (645 | ) | 1,572 | (645 | ) | |||||||||||||||||
Small business administration pooled securities | 3 | 37,986 | (174 | ) | — | — | 37,986 | (174 | ) | |||||||||||||||||
Equity securities | 34 | 3,481 | (189 | ) | 4,971 | (379 | ) | 8,452 | (568 | ) | ||||||||||||||||
Total temporarily impaired securities | 123 | $ | 304,830 | $ | (2,882 | ) | $ | 92,785 | $ | (4,196 | ) | $ | 397,615 | $ | (7,078 | ) |
• | U.S. Government Agency Securities, Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations and Small Business Administration Pooled Securities: These portfolios have contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are either implicitly or explicitly guaranteed by the U.S. Government or one of its agencies. |
• | Single Issuer Trust Preferred Securities: This portfolio consists of two securities, one of which is below investment grade. The unrealized loss on these securities is attributable to the illiquid nature of the trust preferred market in the current economic environment. Management evaluates various financial metrics for the issuers, including regulatory capital ratios of the issuers. |
• | Pooled Trust Preferred Securities: This portfolio consists of one below investment grade security which is performing. The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market and the significant risk premiums required in the current economic environment. Management evaluates collateral credit and instrument structure, including current and expected deferral and default rates and timing. In addition, discount rates are determined by evaluating comparable spreads observed currently in the market for similar instruments. |
• | Equity Securities: This portfolio consists of mutual funds and other equity investments. During some periods, the mutual funds in the Company’s investment portfolio may have unrealized losses resulting from market fluctuations as well as the risk premium associated with that particular asset class. For example, emerging market equities tend to trade at a higher risk premium than U.S. government bonds and thus, will fluctuate to a greater degree on both the upside and the downside. In the context of a well-diversified portfolio, however, the correlation amongst the various asset classes represented by the funds serves to minimize downside risk. The Company evaluates each mutual fund in the portfolio regularly and measures performance on both an absolute and relative basis. A reasonable recovery period for positions with an unrealized loss is based on management’s assessment of general economic data, trends within a particular asset class, valuations, earnings forecasts and bond durations. The Company has the ability and intent to hold these equity securities until a recovery of fair value. |
Three Months Ended | |||||||
March 31 | |||||||
2016 | 2015 | ||||||
(Dollars in thousands) | |||||||
Gross change in OTTI recorded on certain investments | $ | — | $ | 84 | |||
Portion of OTTI recognized in OCI | — | (84 | ) | ||||
Total credit related OTTI recognized in earnings | $ | — | $ | — |
Three Months Ended | |||||||
March 31 | |||||||
2016 | 2015 | ||||||
(Dollars in thousands) | |||||||
Balance at beginning of period | $ | — | $ | (9,997 | ) | ||
Add | |||||||
Incurred on securities not previously impaired | — | — | |||||
Incurred on securities previously impaired | — | — | |||||
Less | |||||||
Securities sold during the period | — | — | |||||
Reclassification due to changes in Company's intent | — | — | |||||
Increases in cash flow expected to be collected | — | — | |||||
Balance at end of period | $ | — | $ | (9,997 | ) |
March 31, 2016 | |||||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||
Commercial and Industrial | Commercial Real Estate | Commercial Construction | Small Business | Residential Real Estate | Home Equity | Other Consumer | Total | ||||||||||||||||||||||||||
Financing receivables ending balance: | |||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | $ | 830,477 | $ | 2,678,161 | $ | 357,867 | $ | 102,384 | $ | 609,153 | $ | 929,050 | $ | 13,113 | $ | 5,520,205 | |||||||||||||||||
Individually evaluated for impairment | $ | 4,859 | $ | 22,808 | $ | — | $ | 939 | $ | 13,673 | $ | 6,006 | $ | 534 | $ | 48,819 | |||||||||||||||||
Purchased credit impaired loans | $ | — | $ | 10,888 | $ | — | $ | — | $ | 9,062 | $ | 255 | $ | 2 | $ | 20,207 | |||||||||||||||||
Total loans by group | $ | 835,336 | $ | 2,711,857 | $ | 357,867 | $ | 103,323 | $ | 631,888 | $ | 935,311 | $ | 13,649 | $ | 5,589,231 | (1 | ) |
December 31, 2015 | |||||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||
Commercial and Industrial | Commercial Real Estate | Commercial Construction | Small Business | Residential Real Estate | Home Equity | Other Consumer | Total | ||||||||||||||||||||||||||
Financing receivables ending balance: | |||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | $ | 838,129 | $ | 2,619,294 | $ | 373,064 | $ | 95,225 | $ | 614,014 | $ | 921,563 | $ | 14,427 | $ | 5,475,716 | |||||||||||||||||
Individually evaluated for impairment | $ | 5,147 | $ | 22,986 | $ | 304 | $ | 1,021 | $ | 15,405 | $ | 5,989 | $ | 558 | $ | 51,410 | |||||||||||||||||
Purchased credit impaired loans | $ | — | $ | 11,154 | $ | — | $ | — | $ | 9,187 | $ | 251 | $ | 3 | $ | 20,595 | |||||||||||||||||
Total loans by group | $ | 843,276 | $ | 2,653,434 | $ | 373,368 | $ | 96,246 | $ | 638,606 | $ | 927,803 | $ | 14,988 | $ | 5,547,721 | (1 | ) |
(1) | The amount of net deferred fees on loans and net unamortized discounts on acquired loans not deemed to be PCI included in the ending balance was $11.0 million and $10.9 million at March 31, 2016 and December 31, 2015, respectively. |
Three Months Ended March 31, 2016 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||
Commercial and Industrial | Commercial Real Estate | Commercial Construction | Small Business | Residential Real Estate | Home Equity | Other Consumer | Total | ||||||||||||||||||||||||
Allowance for loan losses | |||||||||||||||||||||||||||||||
Beginning balance | $ | 13,802 | $ | 27,327 | $ | 5,366 | $ | 1,264 | $ | 2,590 | $ | 4,889 | $ | 587 | $ | 55,825 | |||||||||||||||
Charge-offs | (2 | ) | — | — | (63 | ) | (19 | ) | (147 | ) | (306 | ) | (537 | ) | |||||||||||||||||
Recoveries | 138 | 189 | — | 21 | — | 27 | 244 | 619 | |||||||||||||||||||||||
Provision (benefit) | (453 | ) | 1,079 | (266 | ) | 119 | (4 | ) | 146 | (96 | ) | 525 | |||||||||||||||||||
Ending balance | $ | 13,485 | $ | 28,595 | $ | 5,100 | $ | 1,341 | $ | 2,567 | $ | 4,915 | $ | 429 | $ | 56,432 | |||||||||||||||
Ending balance: individually evaluated for impairment | $ | 222 | $ | 802 | $ | — | $ | 3 | $ | 1,223 | $ | 231 | $ | 26 | $ | 2,507 | |||||||||||||||
Ending balance: collectively evaluated for impairment | $ | 13,263 | $ | 27,793 | $ | 5,100 | $ | 1,338 | $ | 1,344 | $ | 4,684 | $ | 403 | $ | 53,925 | |||||||||||||||
Three Months Ended March 31, 2015 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||
Commercial and Industrial | Commercial Real Estate | Commercial Construction | Small Business | Residential Real Estate | Home Equity | Other Consumer | Total | ||||||||||||||||||||||||
Allowance for loan losses | |||||||||||||||||||||||||||||||
Beginning balance | $ | 15,573 | $ | 25,873 | $ | 3,945 | $ | 1,171 | $ | 2,834 | $ | 4,956 | $ | 748 | $ | 55,100 | |||||||||||||||
Charge-offs | (561 | ) | (141 | ) | — | (150 | ) | (185 | ) | (161 | ) | (327 | ) | (1,525 | ) | ||||||||||||||||
Recoveries | 379 | 685 | — | 67 | 45 | 72 | 192 | 1,440 | |||||||||||||||||||||||
Provision (benefit) | (834 | ) | (132 | ) | 197 | 134 | 32 | 39 | 64 | (500 | ) | ||||||||||||||||||||
Ending balance | $ | 14,557 | $ | 26,285 | $ | 4,142 | $ | 1,222 | $ | 2,726 | $ | 4,906 | $ | 677 | $ | 54,515 | |||||||||||||||
Ending balance: individually evaluated for impairment | $ | 308 | $ | 265 | $ | — | $ | 5 | $ | 1,453 | $ | 253 | $ | 34 | $ | 2,318 | |||||||||||||||
Ending balance: collectively evaluated for impairment | $ | 14,249 | $ | 26,020 | $ | 4,142 | $ | 1,217 | $ | 1,273 | $ | 4,653 | $ | 643 | $ | 52,197 |
• | Commercial and Industrial: Loans in this category consist of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment. Collateral generally consists of pledges of business assets including, but not limited to: accounts receivable, inventory, plant and equipment, or real estate, if applicable. Repayment sources consist of primarily, operating cash flow, and secondarily, liquidation of assets. |
• | Commercial Real Estate: Loans in this category consist of mortgage loans to finance investment in real property such as multi-family residential, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties. Loans are typically written with amortizing payment structures. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy and regulatory guidelines. Repayment sources consist of primarily, cash flow from operating leases and rents, and secondarily, liquidation of assets. |
• | Commercial Construction: Loans in this category consist of short-term construction loans, revolving and nonrevolving credit lines and construction/permanent loans to finance the acquisition, development and construction or rehabilitation of real property. Project types include residential 1-4 family, condominium and multi-family homes, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties. Loans may be written with nonamortizing or hybrid payment structures depending upon the type of project. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy and regulatory guidelines. Repayment sources vary depending upon the type of project and may consist of sale or lease of units, operating cash flows or liquidation of other assets. |
• | Small Business: Loans in this category consist of revolving, term loan and mortgage obligations extended to sole proprietors and small businesses for purposes of financing working capital and/or capital investment. Collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, or real estate if applicable. Repayment sources consist primarily of operating cash flows, and secondarily, liquidation of assets. |
• | Residential Real Estate: Residential mortgage loans held in the Company’s portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors such as current and expected income, employment status, current assets, other financial resources, credit history and the value of the collateral. Collateral consists of mortgage liens on 1-4 family residential properties. The Company does not originate or purchase sub-prime loans. |
• | Home Equity: Home equity loans and lines are made to qualified individuals and are primarily secured by senior or junior mortgage liens on owner-occupied 1-4 family homes, condominiums or vacation homes. The home equity loan has a fixed rate and is billed in equal payments comprised of principal and interest. The home equity line of credit has a variable rate and is billed in interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the principal balance plus all accrued interest. Additionally, the Company has the option of renewing the line of credit for additional draw periods. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan to value ratios within established policy guidelines. |
• | Other Consumer: Other consumer loan products include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as education, debt consolidation, personal expenses or overdraft protection. Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines. These loans may be secured or unsecured. |
• | 1- 6 Rating — Pass: Risk-rating grades “1” through “6” comprise those loans ranging from ‘Substantially Risk Free’ which indicates borrowers are of unquestioned credit standing and the pinnacle of credit quality, well established companies with a very strong financial condition, and loans fully secured by cash collateral, through ‘Acceptable Risk’, which indicates borrowers may exhibit declining earnings, strained cash flow, increasing or above average leverage and/or weakening market fundamentals that indicate below average asset quality, margins and market share. Collateral coverage is protective. |
• | 7 Rating — Potential Weakness: Borrowers exhibit potential credit weaknesses or downward trends deserving management’s close attention. If not checked or corrected, these trends will weaken the Company’s asset and position. While potentially weak, currently these borrowers are marginally acceptable; no loss of principal or interest is envisioned. |
• | 8 Rating — Definite Weakness Loss Unlikely: Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. Loan may be inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. However, there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Collateral coverage may be inadequate to cover the principal obligation. |
• | 9 Rating — Partial Loss Probable: Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt with the added provision that the weaknesses make collection of the debt in full, on the basis of currently existing facts, |
• | 10 Rating — Definite Loss: Borrowers deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuation as active assets of the Company is not warranted. |
March 31, 2016 | |||||||||||||||||||||
Category | Risk Rating | Commercial and Industrial | Commercial Real Estate | Commercial Construction | Small Business | Total | |||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Pass | 1 - 6 | $ | 768,317 | $ | 2,558,324 | $ | 351,483 | $ | 100,090 | $ | 3,778,214 | ||||||||||
Potential weakness | 7 | 44,762 | 95,580 | 5,000 | 2,392 | 147,734 | |||||||||||||||
Definite weakness-loss unlikely | 8 | 22,183 | 56,894 | 1,384 | 741 | 81,202 | |||||||||||||||
Partial loss probable | 9 | 74 | 1,059 | — | 100 | 1,233 | |||||||||||||||
Definite loss | 10 | — | — | — | — | — | |||||||||||||||
Total | $ | 835,336 | $ | 2,711,857 | $ | 357,867 | $ | 103,323 | $ | 4,008,383 |
December 31, 2015 | |||||||||||||||||||||
Category | Risk Rating | Commercial and Industrial | Commercial Real Estate | Commercial Construction | Small Business | Total | |||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Pass | 1 - 6 | $ | 765,753 | $ | 2,484,025 | $ | 363,781 | $ | 93,008 | $ | 3,706,567 | ||||||||||
Potential weakness | 7 | 54,375 | 112,022 | 7,678 | 2,444 | 176,519 | |||||||||||||||
Definite weakness-loss unlikely | 8 | 23,073 | 56,276 | 1,909 | 732 | 81,990 | |||||||||||||||
Partial loss probable | 9 | 75 | 1,111 | — | 62 | 1,248 | |||||||||||||||
Definite loss | 10 | — | — | — | — | — | |||||||||||||||
Total | $ | 843,276 | $ | 2,653,434 | $ | 373,368 | $ | 96,246 | $ | 3,966,324 |
March 31, 2016 | December 31, 2015 | ||||
Residential portfolio | |||||
FICO score (re-scored)(1) | 742 | 742 | |||
LTV (re-valued)(2) | 62.0 | % | 61.4 | % | |
Home equity portfolio | |||||
FICO score (re-scored)(1) | 766 | 765 | |||
LTV (re-valued)(2) | 55.9 | % | 55.8 | % |
(1) | The average FICO scores for March 31, 2016 are based upon rescores available from February 29, 2016 and origination score data for loans booked between March 1, 2016 and March 31, 2016. The average FICO scores for December 31, 2015 are based upon rescores available from November 30, 2015 and origination score data for loans booked between December 1, 2015 and December 31, 2015. |
(2) | The combined LTV ratios for March 31, 2016 are based upon updated automated valuations as of March 31, 2015 and origination value data for loans booked between April 1, 2015 and March 31, 2016. The combined LTV ratios for December 31, 2015 are based upon updated automated valuations as of March 31, 2015 and actual score data for loans booked from April 1, 2015 through December 31, 2015. For home equity loans and lines in a subordinate lien position, the LTV data represents a combined LTV, taking into account the senior lien data for loans and lines. |
March 31, 2016 | December 31, 2015 | ||||||
(Dollars in thousands) | |||||||
Commercial and industrial | $ |