Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used by Enterprise Financial Services Corp (the “Company,” “EFSC,” or “Enterprise”) in the preparation of the condensed consolidated financial statements are summarized below:
Business and Consolidation
Enterprise is a financial holding company that provides a full range of banking and wealth management services to individuals and corporate customers primarily located in Arizona, California, Kansas, Missouri, Nevada, and New Mexico through its banking subsidiary, Enterprise Bank & Trust.
Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2021. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC.
Basis of Financial Statement Presentation
The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated.
In the opinion of management, the consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the statements of financial position, results of operations, and cash flow for the interim periods.
Recent Accounting Pronouncements
FASB ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” In March 2020, the FASB issued “Reference Rate Reform (Topic 848)” which provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The guidance is effective for contract modifications as of March 12, 2020 through December 31, 2022. The Company is actively working to amend and address impacted contracts to allow for a replacement index. Additionally, the Company is currently evaluating the optional expedients and exceptions and has not yet determined the impact this standard may have on its consolidated financial statements.
NOTE 2 - EARNINGS PER SHARE
Basic earnings per common share data is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method.
The following table presents a summary of per common share data and amounts for the periods indicated.
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Three months ended June 30,
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Six months ended June 30,
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(in thousands, except per share data)
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2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net income as reported
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$
|
38,405
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|
|
$
|
14,634
|
|
|
$
|
68,331
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|
|
$
|
27,502
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|
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|
|
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Weighted average common shares outstanding
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31,265
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|
|
26,180
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|
31,256
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|
|
26,325
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|
|
|
|
|
|
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Additional dilutive common stock equivalents
|
47
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|
|
15
|
|
|
49
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|
|
29
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Weighted average diluted common shares outstanding
|
31,312
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|
|
26,195
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|
|
31,305
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|
|
26,354
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|
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|
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|
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Basic earnings per common share:
|
$
|
1.23
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|
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$
|
0.56
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|
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$
|
2.19
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|
|
$
|
1.04
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|
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Diluted earnings per common share:
|
1.23
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|
0.56
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|
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$
|
2.18
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$
|
1.04
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For the three and six months ended June 30, 2021 common stock equivalents of approximately 154,000 and 133,000, respectively, were excluded from the earnings per share calculations because their effect would have been anti-dilutive. Comparatively, there were 157,000 and 147,000 common stock equivalents excluded in the prior year periods. respectively.
NOTE 3 - INVESTMENTS
The following tables present the amortized cost, gross unrealized gains and losses, allowance for credit losses and fair value of securities available for sale and held to maturity:
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June 30, 2021
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(in thousands)
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Amortized Cost
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Gross
Unrealized Gains
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Gross
Unrealized Losses
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|
|
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Fair Value
|
|
Available-for-sale securities:
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|
|
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|
|
|
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|
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Obligations of U.S. Government-sponsored enterprises
|
$
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99,490
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|
|
$
|
93
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|
|
$
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(329)
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|
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$
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99,254
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Obligations of states and political subdivisions
|
475,710
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|
|
6,328
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(1,193)
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|
|
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480,845
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|
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Agency mortgage-backed securities
|
464,288
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|
14,393
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|
(1,302)
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|
|
|
|
477,379
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|
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U.S. Treasury bills
|
10,985
|
|
|
361
|
|
|
—
|
|
|
|
|
11,346
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|
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Corporate debt securities
|
14,750
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|
|
649
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|
|
—
|
|
|
|
|
15,399
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Total securities available for sale
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$
|
1,065,223
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|
|
$
|
21,824
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|
$
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(2,824)
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|
|
$
|
1,084,223
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|
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Held-to-maturity securities:
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Obligations of states and political subdivisions
|
$
|
240,163
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|
|
$
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1,845
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|
|
$
|
(763)
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|
|
|
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$
|
241,245
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|
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Agency mortgage-backed securities
|
84,544
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|
|
1,403
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|
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(268)
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|
|
|
|
85,679
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|
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Corporate debt securities
|
126,407
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|
|
5,694
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|
|
—
|
|
|
|
|
132,101
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|
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Total securities held-to-maturity
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$
|
451,114
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|
|
$
|
8,942
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$
|
(1,031)
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|
|
|
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$
|
459,025
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|
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Allowance for credit losses
|
(449)
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Total securities held-to-maturity, net
|
$
|
450,665
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|
|
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|
|
December 31, 2020
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(in thousands)
|
Amortized Cost
|
|
Gross
Unrealized Gains
|
|
Gross
Unrealized Losses
|
|
Fair Value
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
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Obligations of U.S. Government-sponsored enterprises
|
$
|
14,978
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|
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$
|
186
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|
|
$
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(3)
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|
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$
|
15,161
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|
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Obligations of states and political subdivisions
|
335,271
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|
|
8,994
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(33)
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|
|
344,232
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|
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Agency mortgage-backed securities
|
506,703
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|
|
20,190
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|
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(321)
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|
|
526,572
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|
|
U.S. Treasury Bills
|
10,980
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|
|
486
|
|
|
—
|
|
|
11,466
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|
|
Corporate debt securities
|
14,750
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|
|
248
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|
|
—
|
|
|
14,998
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Total securities available for sale
|
$
|
882,682
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|
|
$
|
30,104
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|
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$
|
(357)
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|
|
$
|
912,429
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|
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Held-to-maturity securities:
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|
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|
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|
|
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Obligations of states and political subdivisions
|
$
|
248,324
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|
|
$
|
2,814
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|
|
$
|
—
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|
|
$
|
251,138
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|
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Agency mortgage-backed securities
|
112,742
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|
|
2,295
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|
|
(496)
|
|
|
114,541
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|
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Corporate debt securities
|
126,993
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|
|
8,851
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|
|
—
|
|
|
135,844
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Total securities held to maturity
|
$
|
488,059
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|
|
$
|
13,960
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|
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$
|
(496)
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|
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$
|
501,523
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|
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Less: Allowance for credit losses
|
449
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|
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|
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Total securities held-to-maturity, net
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$
|
487,610
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At June 30, 2021 and December 31, 2020, there were no holdings of securities of any one issuer in an amount greater than 10% of shareholders’ equity, other than U.S. Government agencies and sponsored enterprises. The agency mortgage-backed securities are all issued by U.S. Government agencies and sponsored enterprises. Securities having a fair value of $489.4 million and $525.8 million at June 30, 2021 and December 31, 2020, respectively, were pledged as collateral to secure deposits of public institutions and for other purposes as required by law or contract provisions.
The amortized cost and estimated fair value of debt securities at June 30, 2021, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted average life of the mortgage-backed securities is approximately 4 years.
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Available for sale
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|
Held to maturity
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(in thousands)
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Amortized Cost
|
|
Estimated Fair Value
|
|
Amortized Cost
|
|
Estimated Fair Value
|
|
Due in one year or less
|
$
|
11,345
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|
|
$
|
11,435
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|
|
$
|
—
|
|
|
$
|
—
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|
|
Due after one year through five years
|
70,321
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|
|
70,640
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|
|
12,469
|
|
|
12,839
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|
|
Due after five years through ten years
|
65,658
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|
|
66,316
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|
|
137,489
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|
|
143,056
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|
|
Due after ten years
|
453,611
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|
|
458,453
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|
|
216,612
|
|
|
217,451
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|
|
Agency mortgage-backed securities
|
464,288
|
|
|
477,379
|
|
|
84,544
|
|
|
85,679
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,065,223
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|
|
$
|
1,084,223
|
|
|
$
|
451,114
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|
|
$
|
459,025
|
|
The following tables presents a summary of available-for-sale investment securities in an unrealized loss position:
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|
(in thousands)
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Obligations of U.S. Government-sponsored enterprises
|
$
|
76,671
|
|
|
$
|
329
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
76,671
|
|
|
$
|
329
|
|
|
Obligations of states and political subdivisions
|
$
|
142,099
|
|
|
$
|
1,193
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
142,099
|
|
|
$
|
1,193
|
|
|
Agency mortgage-backed securities
|
116,819
|
|
|
1,301
|
|
|
74
|
|
|
1
|
|
|
116,893
|
|
|
1,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
335,589
|
|
|
$
|
2,823
|
|
|
$
|
74
|
|
|
$
|
1
|
|
|
$
|
335,663
|
|
|
$
|
2,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|
(in thousands)
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Obligations of U.S. Government-sponsored enterprises
|
$
|
4,997
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,997
|
|
|
$
|
3
|
|
|
Obligations of states and political subdivisions
|
$
|
4,079
|
|
|
$
|
33
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,079
|
|
|
$
|
33
|
|
|
Agency mortgage-backed securities
|
65,986
|
|
|
321
|
|
|
—
|
|
|
—
|
|
|
65,986
|
|
|
321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75,062
|
|
|
$
|
357
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
75,062
|
|
|
$
|
357
|
|
The unrealized losses at both June 30, 2021 and December 31, 2020 were primarily attributable to changes in market interest rates after the securities were purchased. At June 30, 2021 and December 31, 2020, the Company had not recorded an ACL on available-for-sale securities.
Accrued interest receivable on held-to-maturity debt securities totaled $3.5 million at June 30, 2021 and is excluded from the estimate of expected credit losses. The estimate of expected credit losses considers historical credit loss information adjusted for current conditions and reasonable and supportable forecasts. At June 30, 2021, the ACL on held-to-maturity securities was $0.4 million.
During the three and six months ended June 30, 2021, there were no sales of available-for-sale investment securities. Proceeds from sales of available-for-sale investment securities during the six months ended June 30, 2020 were immaterial.
Other Investments
At June 30, 2021 and December 31, 2020, other investments totaled $51.0 million and $48.8 million, respectively. As a member of the FHLB system administered by the Federal Housing Finance Agency, the Bank is required to maintain a minimum investment in capital stock with the FHLB consisting of membership stock and activity-based stock. The FHLB capital stock of $12.0 million and $10.8 million at June 30, 2021 and December 31, 2020, respectively, is recorded at cost, which represents redemption value, and is included in other investments in the consolidated balance sheets. The remaining amounts in other investments primarily include various investments in SBICs, CDFIs, private equity investments, and the Company’s investment in unconsolidated trusts used to issue preferred securities to third parties.
NOTE 4 - LOANS
The following table presents a summary of loans by category:
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|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
June 30, 2021
|
|
December 31, 2020
|
|
Commercial and industrial
|
$
|
2,943,048
|
|
|
$
|
3,100,299
|
|
|
Real estate:
|
|
|
|
|
Commercial - investor owned
|
1,646,021
|
|
|
1,589,419
|
|
|
Commercial - owner occupied
|
1,554,727
|
|
|
1,498,408
|
|
|
Construction and land development
|
556,776
|
|
|
546,686
|
|
|
Residential
|
305,497
|
|
|
319,179
|
|
|
Total real estate loans
|
4,063,021
|
|
|
3,953,692
|
|
|
Other
|
235,431
|
|
|
187,083
|
|
|
Loans, before unearned loan fees
|
7,241,500
|
|
|
7,241,074
|
|
|
Unearned loan fees, net
|
(15,233)
|
|
|
(16,139)
|
|
|
Loans, including unearned loan fees
|
$
|
7,226,267
|
|
|
$
|
7,224,935
|
|
PPP loans totaled $408.9 million at June 30, 2021, or $396.7 million net of deferred fees of $12.2 million. The loan balance at June 30, 2021 also includes a net premium on acquired loans of $20.6 million. At June 30, 2021 loans of $2.8 billion were pledged to FHLB and the Federal Reserve Bank.
PPP loans totaled $709.9 million at December 31, 2020, or $698.6 million net of unearned fees of $11.3 million. The loan balance includes a net premium on acquired loans of $16.1 million at December 31, 2020. At December 31, 2020 loans of $2.5 billion were pledged to FHLB and the Federal Reserve Bank.
The Company has elected to present the accrued interest receivable balance separate from amortized cost basis, to exclude accrued interest receivable balances from the tabular disclosures, and not to estimate an ACL on accrued interest receivable as these amounts are timely written off as a credit loss expense.
Accrued interest receivable totaled $24.6 million at June 30, 2021 and was reported in Other Assets on the consolidated balance sheets.
A summary of the activity in the ACL on loans by category for the three and six months ended June 30, 2021 is as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial and industrial
|
|
CRE - investor owned
|
|
CRE -
owner occupied
|
|
Construction and land development
|
|
Residential real estate
|
|
Other
|
|
|
|
Total
|
|
Allowance for credit losses on loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021
|
$
|
55,941
|
|
|
$
|
33,105
|
|
|
$
|
20,219
|
|
|
$
|
14,557
|
|
|
$
|
4,305
|
|
|
$
|
3,400
|
|
|
|
|
$
|
131,527
|
|
|
Provision (benefit) for credit losses
|
(1,839)
|
|
|
2,859
|
|
|
(4,449)
|
|
|
(2,957)
|
|
|
255
|
|
|
3,658
|
|
|
|
|
(2,473)
|
|
|
Charge-offs
|
(1,451)
|
|
|
—
|
|
|
(216)
|
|
|
—
|
|
|
(44)
|
|
|
(121)
|
|
|
|
|
(1,832)
|
|
|
Recoveries
|
700
|
|
|
39
|
|
|
10
|
|
|
32
|
|
|
161
|
|
|
21
|
|
|
|
|
963
|
|
|
Balance at June 30, 2021
|
$
|
53,351
|
|
|
$
|
36,003
|
|
|
$
|
15,564
|
|
|
$
|
11,632
|
|
|
$
|
4,677
|
|
|
$
|
6,958
|
|
|
|
|
$
|
128,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial and industrial
|
|
CRE - investor owned
|
|
CRE -
owner occupied
|
|
Construction and land development
|
|
Residential real estate
|
|
Other
|
|
|
|
Total
|
|
Allowance for credit losses on loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
$
|
58,812
|
|
|
$
|
32,062
|
|
|
$
|
17,012
|
|
|
$
|
21,413
|
|
|
$
|
4,585
|
|
|
$
|
2,787
|
|
|
|
|
$
|
136,671
|
|
|
Provision (benefit) for credit losses
|
(1,298)
|
|
|
6,240
|
|
|
(1,223)
|
|
|
(10,048)
|
|
|
103
|
|
|
4,256
|
|
|
|
|
(1,970)
|
|
|
Charge-offs
|
(5,190)
|
|
|
(2,372)
|
|
|
(244)
|
|
|
—
|
|
|
(315)
|
|
|
(185)
|
|
|
|
|
(8,306)
|
|
|
Recoveries
|
1,027
|
|
|
73
|
|
|
19
|
|
|
267
|
|
|
304
|
|
|
100
|
|
|
|
|
1,790
|
|
|
Balance at June 30, 2021
|
$
|
53,351
|
|
|
$
|
36,003
|
|
|
$
|
15,564
|
|
|
$
|
11,632
|
|
|
$
|
4,677
|
|
|
$
|
6,958
|
|
|
|
|
$
|
128,185
|
|
The ACL on sponsor finance loans, which is included in the categories above, represented $20.1 million and $19.0 million, respectively, as of June 30, 2021 and December 30, 2020.
A summary of the activity in the ACL on loans by category for the three and six months ended June 30, 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial and industrial
|
|
CRE - investor owned
|
|
CRE -
owner occupied
|
|
Construction and land development
|
|
Residential real estate
|
|
Other
|
|
|
|
Total
|
|
Allowance for credit losses on loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020
|
$
|
45,981
|
|
|
$
|
19,892
|
|
|
$
|
9,477
|
|
|
$
|
9,895
|
|
|
$
|
5,395
|
|
|
$
|
1,547
|
|
|
|
|
$
|
92,187
|
|
|
Provision for credit losses
|
7,168
|
|
|
2,599
|
|
|
1,600
|
|
|
6,038
|
|
|
744
|
|
|
242
|
|
|
|
|
18,391
|
|
|
Charge-offs
|
(3,303)
|
|
|
(224)
|
|
|
—
|
|
|
—
|
|
|
(32)
|
|
|
(105)
|
|
|
|
|
(3,664)
|
|
|
Recoveries
|
293
|
|
|
2,752
|
|
|
11
|
|
|
29
|
|
|
226
|
|
|
45
|
|
|
|
|
3,356
|
|
|
Balance at June 30, 2020
|
50,139
|
|
|
25,019
|
|
|
11,088
|
|
|
15,962
|
|
|
6,333
|
|
|
1,729
|
|
|
|
|
110,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial and industrial
|
|
CRE - investor owned
|
|
CRE -
owner occupied
|
|
Construction and land development
|
|
Residential real estate
|
|
Other
|
|
|
|
Total
|
|
Allowance for credit losses on loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
$
|
27,455
|
|
|
$
|
5,935
|
|
|
$
|
4,873
|
|
|
$
|
2,611
|
|
|
$
|
1,280
|
|
|
$
|
1,134
|
|
|
|
|
$
|
43,288
|
|
|
CECL adoption
|
6,494
|
|
|
10,726
|
|
|
2,598
|
|
|
5,183
|
|
|
3,470
|
|
|
(84)
|
|
|
|
|
28,387
|
|
|
PCD loans immediately charged off
|
—
|
|
|
(5)
|
|
|
(57)
|
|
|
(217)
|
|
|
(1,401)
|
|
|
—
|
|
|
|
|
(1,680)
|
|
|
Balance at January 1, 2020
|
$
|
33,949
|
|
|
$
|
16,656
|
|
|
$
|
7,414
|
|
|
$
|
7,577
|
|
|
$
|
3,349
|
|
|
$
|
1,050
|
|
|
|
|
$
|
69,995
|
|
|
Provision for credit losses
|
18,759
|
|
|
5,823
|
|
|
3,594
|
|
|
8,347
|
|
|
2,755
|
|
|
808
|
|
|
|
|
40,086
|
|
|
Charge-offs
|
(3,366)
|
|
|
(226)
|
|
|
—
|
|
|
(31)
|
|
|
(154)
|
|
|
(191)
|
|
|
|
|
(3,968)
|
|
|
Recoveries
|
797
|
|
|
2,766
|
|
|
80
|
|
|
69
|
|
|
383
|
|
|
62
|
|
|
|
|
4,157
|
|
|
Balance at June 30, 2020
|
$
|
50,139
|
|
|
$
|
25,019
|
|
|
$
|
11,088
|
|
|
$
|
15,962
|
|
|
$
|
6,333
|
|
|
$
|
1,729
|
|
|
|
|
$
|
110,270
|
|
The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model: Moody’s baseline, a stronger near-term growth upside and a moderate recession downside forecast. The Company weights these scenarios at 70%, 5%, and 25%, respectively, which added approximately $12.9 million to the ACL over the baseline model. These forecasts incorporate an accommodative monetary policy and the current and anticipated impact of government stimulus. The Company has also recognized the risk posed by loans that have received multiple deferrals of principal and interest payments, loans in the hospitality sector, and loans with other specific identified risks by allocating additional reserves to those segments. Some of the key risks to the forecasts that could result in future provision for credit losses are additional shutdowns and self-quarantines if another significant wave of COVID hits, the vaccination process stalls, small-business bankruptcies occur at higher levels, or unemployment increases.
The following tables present the recorded investment in nonperforming loans by category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
(in thousands)
|
|
|
|
|
Nonaccrual
|
|
Restructured, accruing
|
|
Loans over 90 days past due and still accruing interest
|
|
Total nonperforming loans
|
|
Nonaccrual loans with no allowance
|
|
Commercial and industrial
|
|
|
|
|
$
|
19,082
|
|
|
$
|
2,965
|
|
|
$
|
2,797
|
|
|
$
|
24,844
|
|
|
$
|
10,215
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial - investor owned
|
|
|
|
|
7,359
|
|
|
—
|
|
|
—
|
|
|
7,359
|
|
|
441
|
|
|
Commercial - owner occupied
|
|
|
|
|
5,885
|
|
|
—
|
|
|
—
|
|
|
5,885
|
|
|
1,616
|
|
|
Construction and land development
|
|
|
|
|
100
|
|
|
—
|
|
|
—
|
|
|
100
|
|
|
100
|
|
|
Residential
|
|
|
|
|
3,961
|
|
|
77
|
|
|
—
|
|
|
4,038
|
|
|
2,695
|
|
|
Other
|
|
|
|
|
16
|
|
|
—
|
|
|
10
|
|
|
26
|
|
|
—
|
|
|
Total
|
|
|
|
|
$
|
36,403
|
|
|
$
|
3,042
|
|
|
$
|
2,807
|
|
|
$
|
42,252
|
|
|
$
|
15,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
(in thousands)
|
Nonaccrual
|
|
Restructured, accruing
|
|
Loans over 90 days past due and still accruing interest
|
|
Total nonperforming loans
|
|
Nonaccrual loans with no allowance
|
|
Commercial and industrial
|
$
|
18,158
|
|
|
$
|
3,482
|
|
|
$
|
130
|
|
|
$
|
21,770
|
|
|
$
|
8,316
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
Commercial - investor owned
|
9,579
|
|
|
—
|
|
|
—
|
|
|
9,579
|
|
|
716
|
|
|
Commercial - owner occupied
|
2,940
|
|
|
—
|
|
|
—
|
|
|
2,940
|
|
|
6,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
4,112
|
|
|
77
|
|
|
—
|
|
|
4,189
|
|
|
—
|
|
|
Other
|
29
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
3,190
|
|
|
Total
|
$
|
34,818
|
|
|
$
|
3,559
|
|
|
$
|
130
|
|
|
$
|
38,507
|
|
|
$
|
18,246
|
|
The total nonperforming loan balances at June 31, 2021 and December 31, 2020 exclude government guaranteed balances of $3.9 million for each period.
No interest income was recognized on nonaccrual loans during the three and six months ended June 30, 2021 or 2020.
The amortized cost basis of collateral-dependent nonperforming loans by class of loan is presented for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
|
Type of Collateral
|
|
(in thousands)
|
Commercial Real Estate
|
|
Residential Real Estate
|
|
Blanket Lien
|
|
Other
|
|
Commercial and industrial
|
$
|
11,941
|
|
|
$
|
—
|
|
|
$
|
4,252
|
|
|
$
|
—
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
Commercial - investor owned
|
7,141
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Commercial - owner occupied
|
5,767
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
100
|
|
|
3,984
|
|
|
—
|
|
|
—
|
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
Total
|
$
|
24,949
|
|
|
$
|
3,984
|
|
|
$
|
4,252
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
Type of Collateral
|
|
(in thousands)
|
Commercial Real Estate
|
|
Residential Real Estate
|
|
Blanket Lien
|
|
Other
|
|
Commercial and industrial
|
$
|
8,316
|
|
|
$
|
—
|
|
|
$
|
394
|
|
|
$
|
—
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
Commercial - investor owned
|
9,579
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Commercial - owner occupied
|
2,940
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
—
|
|
|
4,135
|
|
|
—
|
|
|
—
|
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
Total
|
$
|
20,835
|
|
|
$
|
4,135
|
|
|
$
|
394
|
|
|
$
|
17
|
|
There were no loans restructured during the three and six months ended June 30, 2021 or the three months ended June 30, 2020. The recorded investment by category for troubled debt restructurings that occurred during the six months ended June 30, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
(in thousands, except for number of loans)
|
|
|
|
|
|
|
Number of loans
|
|
Pre-Modification Outstanding Recorded Balance
|
|
Post-Modification Outstanding Recorded Balance
|
|
Commercial and industrial
|
|
|
|
|
|
|
1
|
|
|
$
|
3,731
|
|
|
$
|
3,731
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
2
|
|
|
155
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
3
|
|
|
$
|
3,886
|
|
|
$
|
3,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No troubled debt restructurings subsequently defaulted during the three and six months ended June 30, 2021 or 2020.
In response to the COVID-19 pandemic, the Company has implemented short-term deferral programs allowing customers to primarily defer payments for up to 90 days. Deferrals under the CARES Act or interagency guidance are not included above as troubled debt restructurings. As of June 30, 2021, $8.5 million loans remain in a deferral status. Interest of $4.1 million has been deferred and will be collected upon final maturity.
The aging of the recorded investment in past due loans by class is presented for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
(in thousands)
|
30-89 Days
Past Due
|
|
90 or More
Days
Past Due
|
|
Total
Past Due
|
|
Current
|
|
Total
|
|
Commercial and industrial
|
$
|
8,245
|
|
|
$
|
15,247
|
|
|
$
|
23,492
|
|
|
$
|
2,907,313
|
|
|
$
|
2,930,805
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
Commercial - investor owned
|
1,065
|
|
|
6,700
|
|
|
7,765
|
|
|
1,638,256
|
|
|
1,646,021
|
|
|
Commercial - owner occupied
|
4,710
|
|
|
512
|
|
|
5,222
|
|
|
1,549,505
|
|
|
1,554,727
|
|
|
Construction and land development
|
65
|
|
|
100
|
|
|
165
|
|
|
556,611
|
|
|
556,776
|
|
|
Residential
|
461
|
|
|
1,925
|
|
|
2,386
|
|
|
303,111
|
|
|
305,497
|
|
|
Other
|
62
|
|
|
25
|
|
|
87
|
|
|
232,354
|
|
|
232,441
|
|
|
Total
|
$
|
14,608
|
|
|
$
|
24,509
|
|
|
$
|
39,117
|
|
|
$
|
7,187,150
|
|
|
$
|
7,226,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
(in thousands)
|
30-89 Days
Past Due
|
|
90 or More
Days
Past Due
|
|
Total
Past Due
|
|
Current
|
|
Total
|
|
Commercial and industrial
|
$
|
8,652
|
|
|
$
|
12,928
|
|
|
$
|
21,580
|
|
|
$
|
3,067,415
|
|
|
$
|
3,088,995
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
Commercial - investor owned
|
734
|
|
|
9,301
|
|
|
10,035
|
|
|
1,579,384
|
|
|
1,589,419
|
|
|
Commercial - owner occupied
|
328
|
|
|
4,647
|
|
|
4,975
|
|
|
1,493,433
|
|
|
1,498,408
|
|
|
Construction and land development
|
13
|
|
|
—
|
|
|
13
|
|
|
546,673
|
|
|
546,686
|
|
|
Residential
|
2,071
|
|
|
2,118
|
|
|
4,189
|
|
|
314,990
|
|
|
319,179
|
|
|
Other
|
1,731
|
|
|
50
|
|
|
1,781
|
|
|
180,467
|
|
|
182,248
|
|
|
Total
|
$
|
13,529
|
|
|
$
|
29,044
|
|
|
$
|
42,573
|
|
|
$
|
7,182,362
|
|
|
$
|
7,224,935
|
|
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, payment experience, credit documentation, and current economic factors among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
•Grades 1, 2, and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry.
•Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.
•Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.
•Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may also include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.
•Grade 7 – Watch credits are borrowers that have experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated at this time, due to strong collateral and/or guarantor support.
•Grade 8 – Substandard credits include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.
•Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on nonaccrual.
The recorded investment by risk category of loans by class and year of origination is presented in the following tables as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
|
|
Term Loans by Origination Year
|
|
|
|
|
|
|
|
(in thousands)
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
Prior
|
|
Revolving Loans Converted to Term Loans
|
|
Revolving Loans
|
|
Total
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
731,143
|
|
|
$
|
649,462
|
|
|
$
|
384,160
|
|
|
$
|
183,888
|
|
|
$
|
117,020
|
|
|
$
|
76,679
|
|
|
$
|
8,765
|
|
|
$
|
564,593
|
|
|
$
|
2,715,710
|
|
|
Watch (7)
|
|
31,131
|
|
|
33,339
|
|
|
13,864
|
|
|
8,671
|
|
|
4,163
|
|
|
12,402
|
|
|
7,628
|
|
|
58,428
|
|
|
169,626
|
|
|
Classified (8-9)
|
|
7,365
|
|
|
2,049
|
|
|
8,451
|
|
|
2,592
|
|
|
3,254
|
|
|
880
|
|
|
2,018
|
|
|
15,487
|
|
|
42,096
|
|
|
Total Commercial and industrial
|
|
$
|
769,639
|
|
|
$
|
684,850
|
|
|
$
|
406,475
|
|
|
$
|
195,151
|
|
|
$
|
124,437
|
|
|
$
|
89,961
|
|
|
$
|
18,411
|
|
|
$
|
638,508
|
|
|
$
|
2,927,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate-investor owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
249,960
|
|
|
$
|
421,836
|
|
|
$
|
327,290
|
|
|
$
|
169,832
|
|
|
$
|
111,808
|
|
|
$
|
227,018
|
|
|
$
|
3,690
|
|
|
$
|
38,687
|
|
|
$
|
1,550,121
|
|
|
Watch (7)
|
|
9,126
|
|
|
27,342
|
|
|
13,822
|
|
|
7,144
|
|
|
—
|
|
|
19,381
|
|
|
—
|
|
|
—
|
|
|
76,815
|
|
|
Classified (8-9)
|
|
—
|
|
|
6,012
|
|
|
429
|
|
|
6,651
|
|
|
—
|
|
|
2,684
|
|
|
—
|
|
|
—
|
|
|
15,776
|
|
|
Total Commercial real estate-investor owned
|
|
$
|
259,086
|
|
|
$
|
455,190
|
|
|
$
|
341,541
|
|
|
$
|
183,627
|
|
|
$
|
111,808
|
|
|
$
|
249,083
|
|
|
$
|
3,690
|
|
|
$
|
38,687
|
|
|
$
|
1,642,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate-owner occupied
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
213,157
|
|
|
$
|
398,971
|
|
|
$
|
240,316
|
|
|
$
|
181,078
|
|
|
$
|
142,757
|
|
|
$
|
229,030
|
|
|
$
|
—
|
|
|
$
|
41,902
|
|
|
$
|
1,447,211
|
|
|
Watch (7)
|
|
8,794
|
|
|
7,884
|
|
|
1,651
|
|
|
15,452
|
|
|
5,917
|
|
|
9,605
|
|
|
—
|
|
|
1,349
|
|
|
50,652
|
|
|
Classified (8-9)
|
|
1,085
|
|
|
895
|
|
|
11,363
|
|
|
6,112
|
|
|
4,660
|
|
|
8,231
|
|
|
88
|
|
|
63
|
|
|
32,497
|
|
|
Total Commercial real estate-owner occupied
|
|
$
|
223,036
|
|
|
$
|
407,750
|
|
|
$
|
253,330
|
|
|
$
|
202,642
|
|
|
$
|
153,334
|
|
|
$
|
246,866
|
|
|
$
|
88
|
|
|
$
|
43,314
|
|
|
$
|
1,530,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
174,256
|
|
|
$
|
133,328
|
|
|
$
|
116,620
|
|
|
$
|
39,332
|
|
|
$
|
7,784
|
|
|
$
|
13,490
|
|
|
$
|
195
|
|
|
$
|
20,974
|
|
|
$
|
505,979
|
|
|
Watch (7)
|
|
28,003
|
|
|
4,926
|
|
|
—
|
|
|
1,216
|
|
|
11,215
|
|
|
2,423
|
|
|
—
|
|
|
—
|
|
|
47,783
|
|
|
Classified (8-9)
|
|
—
|
|
|
54
|
|
|
—
|
|
|
427
|
|
|
—
|
|
|
26
|
|
|
—
|
|
|
100
|
|
|
607
|
|
|
Total Construction real estate
|
|
$
|
202,259
|
|
|
$
|
138,308
|
|
|
$
|
116,620
|
|
|
$
|
40,975
|
|
|
$
|
18,999
|
|
|
$
|
15,939
|
|
|
$
|
195
|
|
|
$
|
21,074
|
|
|
$
|
554,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
38,535
|
|
|
$
|
49,198
|
|
|
$
|
21,357
|
|
|
$
|
13,139
|
|
|
$
|
11,177
|
|
|
$
|
99,035
|
|
|
$
|
171
|
|
|
$
|
62,095
|
|
|
$
|
294,707
|
|
|
Watch (7)
|
|
33
|
|
|
276
|
|
|
719
|
|
|
342
|
|
|
—
|
|
|
2,691
|
|
|
—
|
|
|
400
|
|
|
4,461
|
|
|
Classified (8-9)
|
|
569
|
|
|
706
|
|
|
575
|
|
|
77
|
|
|
13
|
|
|
3,408
|
|
|
—
|
|
|
74
|
|
|
5,422
|
|
|
Total residential real estate
|
|
$
|
39,137
|
|
|
$
|
50,180
|
|
|
$
|
22,651
|
|
|
$
|
13,558
|
|
|
$
|
11,190
|
|
|
$
|
105,134
|
|
|
$
|
171
|
|
|
$
|
62,569
|
|
|
$
|
304,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
86,875
|
|
|
$
|
54,771
|
|
|
$
|
19,687
|
|
|
$
|
24,583
|
|
|
$
|
8,414
|
|
|
$
|
20,903
|
|
|
$
|
—
|
|
|
$
|
13,144
|
|
|
$
|
228,377
|
|
|
Watch (7)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
2,539
|
|
|
—
|
|
|
135
|
|
|
2,679
|
|
|
Classified (8-9)
|
|
—
|
|
|
—
|
|
|
14
|
|
|
16
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
2
|
|
|
53
|
|
|
Total Other
|
|
$
|
86,875
|
|
|
$
|
54,771
|
|
|
$
|
19,701
|
|
|
$
|
24,604
|
|
|
$
|
8,414
|
|
|
$
|
23,463
|
|
|
$
|
—
|
|
|
$
|
13,281
|
|
|
$
|
231,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
Term Loans by Origination Year
|
|
|
|
|
|
|
|
(in thousands)
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
Prior
|
|
Revolving Loans Converted to Term Loans
|
|
Revolving Loans
|
|
Total
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
1,402,276
|
|
|
$
|
454,729
|
|
|
$
|
262,258
|
|
|
$
|
132,832
|
|
|
$
|
25,057
|
|
|
$
|
58,315
|
|
|
$
|
14,118
|
|
|
$
|
527,170
|
|
|
$
|
2,876,755
|
|
|
Watch (7)
|
|
44,922
|
|
|
15,369
|
|
|
9,585
|
|
|
7,509
|
|
|
19,613
|
|
|
110
|
|
|
—
|
|
|
60,448
|
|
|
157,556
|
|
|
Classified (8-9)
|
|
6,602
|
|
|
9,219
|
|
|
3,115
|
|
|
3,964
|
|
|
4,490
|
|
|
1,080
|
|
|
1,281
|
|
|
22,432
|
|
|
52,183
|
|
|
Total Commercial and industrial
|
|
$
|
1,453,800
|
|
|
$
|
479,317
|
|
|
$
|
274,958
|
|
|
$
|
144,305
|
|
|
$
|
49,160
|
|
|
$
|
59,505
|
|
|
$
|
15,399
|
|
|
$
|
610,050
|
|
|
$
|
3,086,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate-investor owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
481,867
|
|
|
$
|
338,843
|
|
|
$
|
189,305
|
|
|
$
|
131,718
|
|
|
$
|
138,288
|
|
|
$
|
161,439
|
|
|
$
|
6,509
|
|
|
$
|
32,058
|
|
|
$
|
1,480,027
|
|
|
Watch (7)
|
|
32,308
|
|
|
19,722
|
|
|
6,656
|
|
|
—
|
|
|
9,647
|
|
|
17,370
|
|
|
—
|
|
|
—
|
|
|
85,703
|
|
|
Classified (8-9)
|
|
—
|
|
|
5,278
|
|
|
8,716
|
|
|
5,830
|
|
|
1,245
|
|
|
2,620
|
|
|
—
|
|
|
—
|
|
|
23,689
|
|
|
Total Commercial real estate-investor owned
|
|
$
|
514,175
|
|
|
$
|
363,843
|
|
|
$
|
204,677
|
|
|
$
|
137,548
|
|
|
$
|
149,180
|
|
|
$
|
181,429
|
|
|
$
|
6,509
|
|
|
$
|
32,058
|
|
|
$
|
1,589,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate-owner occupied
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
419,142
|
|
|
$
|
287,001
|
|
|
$
|
215,181
|
|
|
$
|
179,382
|
|
|
$
|
104,470
|
|
|
$
|
167,456
|
|
|
$
|
2,672
|
|
|
$
|
45,323
|
|
|
$
|
1,420,627
|
|
|
Watch (7)
|
|
13,657
|
|
|
5,257
|
|
|
3,113
|
|
|
6,198
|
|
|
4,338
|
|
|
8,460
|
|
|
1,776
|
|
|
941
|
|
|
43,740
|
|
|
Classified (8-9)
|
|
2,420
|
|
|
7,427
|
|
|
5,822
|
|
|
6,140
|
|
|
1,309
|
|
|
10,860
|
|
|
—
|
|
|
63
|
|
|
34,041
|
|
|
Total Commercial real estate-owner occupied
|
|
$
|
435,219
|
|
|
$
|
299,685
|
|
|
$
|
224,116
|
|
|
$
|
191,720
|
|
|
$
|
110,117
|
|
|
$
|
186,776
|
|
|
$
|
4,448
|
|
|
$
|
46,327
|
|
|
$
|
1,498,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
223,069
|
|
|
$
|
156,360
|
|
|
$
|
45,460
|
|
|
$
|
18,579
|
|
|
$
|
11,539
|
|
|
$
|
9,144
|
|
|
$
|
—
|
|
|
$
|
28,880
|
|
|
$
|
493,031
|
|
|
Watch (7)
|
|
2,544
|
|
|
86
|
|
|
34,179
|
|
|
11,632
|
|
|
—
|
|
|
2,499
|
|
|
—
|
|
|
—
|
|
|
50,940
|
|
|
Classified (8-9)
|
|
56
|
|
|
2,124
|
|
|
503
|
|
|
1
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
—
|
|
|
2,715
|
|
|
Total Construction real estate
|
|
$
|
225,669
|
|
|
$
|
158,570
|
|
|
$
|
80,142
|
|
|
$
|
30,212
|
|
|
$
|
11,539
|
|
|
$
|
11,674
|
|
|
$
|
—
|
|
|
$
|
28,880
|
|
|
$
|
546,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
57,059
|
|
|
$
|
27,907
|
|
|
$
|
17,718
|
|
|
$
|
17,138
|
|
|
$
|
27,443
|
|
|
$
|
92,657
|
|
|
$
|
1,172
|
|
|
$
|
66,902
|
|
|
$
|
307,996
|
|
|
Watch (7)
|
|
210
|
|
|
840
|
|
|
526
|
|
|
—
|
|
|
514
|
|
|
1,603
|
|
|
287
|
|
|
511
|
|
|
4,491
|
|
|
Classified (8-9)
|
|
571
|
|
|
733
|
|
|
121
|
|
|
14
|
|
|
898
|
|
|
3,181
|
|
|
—
|
|
|
253
|
|
|
5,771
|
|
|
Total residential real estate
|
|
$
|
57,840
|
|
|
$
|
29,480
|
|
|
$
|
18,365
|
|
|
$
|
17,152
|
|
|
$
|
28,855
|
|
|
$
|
97,441
|
|
|
$
|
1,459
|
|
|
$
|
67,666
|
|
|
$
|
318,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass (1-6)
|
|
$
|
43,526
|
|
|
$
|
28,195
|
|
|
$
|
30,074
|
|
|
$
|
9,646
|
|
|
$
|
5,641
|
|
|
$
|
17,027
|
|
|
$
|
—
|
|
|
$
|
40,779
|
|
|
$
|
174,888
|
|
|
Watch (7)
|
|
—
|
|
|
1
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
2,637
|
|
|
—
|
|
|
1
|
|
|
2,647
|
|
|
Classified (8-9)
|
|
—
|
|
|
18
|
|
|
19
|
|
|
13
|
|
|
—
|
|
|
17
|
|
|
8
|
|
|
4
|
|
|
79
|
|
|
Total Other
|
|
$
|
43,526
|
|
|
$
|
28,214
|
|
|
$
|
30,101
|
|
|
$
|
9,659
|
|
|
$
|
5,641
|
|
|
$
|
19,681
|
|
|
$
|
8
|
|
|
$
|
40,784
|
|
|
$
|
177,614
|
|
In the tables above, loan originations in 2021 and 2020 with a classification of watch or classified primarily represent renewals or modifications initially underwritten and originated in prior years.
For certain loans, primarily credit cards, the Company evaluates credit quality based on the aging status.
The following tables presents the recorded investment on loans based on payment activity as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
(in thousands)
|
Performing
|
|
Non Performing
|
|
Total
|
|
Commercial and industrial
|
$
|
3,370
|
|
|
$
|
3
|
|
|
$
|
3,373
|
|
|
Real estate:
|
|
|
|
|
|
|
Commercial - investor owned
|
3,309
|
|
|
—
|
|
|
3,309
|
|
|
Commercial - owner occupied
|
24,367
|
|
|
—
|
|
|
24,367
|
|
|
Construction and land development
|
2,407
|
|
|
—
|
|
|
2,407
|
|
|
Residential
|
907
|
|
|
—
|
|
|
907
|
|
|
Other
|
1,322
|
|
|
10
|
|
|
1,332
|
|
|
Total
|
$
|
35,682
|
|
|
$
|
13
|
|
|
$
|
35,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
(in thousands)
|
Performing
|
|
Non Performing
|
|
Total
|
|
Commercial and industrial
|
$
|
2,502
|
|
|
$
|
—
|
|
|
$
|
2,502
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
921
|
|
|
—
|
|
|
921
|
|
|
Other
|
4,612
|
|
|
21
|
|
|
4,633
|
|
|
Total
|
$
|
8,035
|
|
|
$
|
21
|
|
|
$
|
8,056
|
|
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company issues financial instruments with off balance sheet risk in the normal course of the business of meeting the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments may involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.
The Company’s extent of involvement and maximum potential exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments.
The Company uses the same credit policies in making commitments and conditional obligations as it does for financial instruments included on its consolidated balance sheets.
The contractual amounts of off-balance-sheet financial instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
June 30, 2021
|
|
December 31, 2020
|
|
Commitments to extend credit
|
$
|
1,982,555
|
|
|
$
|
1,946,068
|
|
|
Letters of credit
|
55,571
|
|
|
50,971
|
|
Off-Balance Sheet Credit Risk
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments usually have fixed expiration dates or other termination clauses, may have significant usage restrictions, and may require payment of a fee. Of the total commitments to extend credit at June 30, 2021, and December 31, 2020, approximately $167.3 million and $160.6 million, respectively, represent fixed rate loan commitments. Since certain of the commitments may expire without being drawn upon or may be revoked, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, premises and equipment, and real estate. Other liabilities includes $5.4 million and $5.7 million for estimated losses attributable to the unadvanced commitments at June 30, 2021, and December 31, 2020, respectively.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance or payment of a customer to a third party. These standby letters of credit are issued to support contractual obligations of the Company’s customers. The credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers. As of June 30, 2021, the approximate remaining terms of standby letters of credit range from 1 month to 3 years.
Contingencies
The Company and its subsidiaries are, from time to time, parties to various legal proceedings arising out of their businesses. Management believes there are no such proceedings pending or threatened against the Company or its subsidiaries which, if determined adversely, would have a material adverse effect on the business, consolidated financial condition, results of operations or cash flows of the Company or any of its subsidiaries.
NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Objective of Using Derivatives
The Company is exposed to certain risk 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, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial 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 the Company’s borrowings. The Company does not enter into derivative financial instruments for trading purposes.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. These derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The Company has executed a series of cash flow hedges to fix the effective interest rate for payments due on $62.0 million of LIBOR-based junior subordinated debentures to a weighted-average-fixed rate of 2.62%.
Select terms of the hedges are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
|
|
|
|
Notional
|
|
Fixed Rate
|
|
Maturity Date
|
|
$
|
15,465
|
|
|
2.60
|
%
|
|
March 15, 2024
|
|
$
|
14,433
|
|
|
2.60
|
%
|
|
March 30, 2024
|
|
$
|
18,558
|
|
|
2.64
|
%
|
|
March 15, 2026
|
|
$
|
13,506
|
|
|
2.64
|
%
|
|
March 17, 2026
|
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are paid on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $1.5 million will be reclassified as an increase to interest expense.
Non-designated Hedges
Derivatives not designated as hedges are not considered speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings as a component of other noninterest income.
The table below presents the fair value of the Company’s derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
Derivative Assets
|
|
Derivative Liabilities
|
|
(in thousands)
|
June 30,
2021
|
|
December 31, 2020
|
|
June 30,
2021
|
|
December 31, 2020
|
|
June 30,
2021
|
|
December 31, 2020
|
|
Derivatives Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
$
|
61,962
|
|
|
$
|
61,962
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,379
|
|
|
$
|
5,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
$
|
983,018
|
|
|
$
|
1,026,016
|
|
|
$
|
19,809
|
|
|
$
|
28,703
|
|
|
$
|
19,846
|
|
|
$
|
28,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets are classified on the balance sheet in other assets. Derivative liabilities are classified on the balance sheet in other liabilities.
|
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments that are subject to offsetting. The gross amounts of assets or liabilities can be reconciled to the tabular disclosure of fair value. The fair value table above provides the location that financial assets and liabilities are presented on the Balance Sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
|
|
|
Gross Amounts Not Offset in the Statement of Financial Position
|
|
|
|
(in thousands)
|
Gross Amounts Recognized
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Net Amounts of Assets presented in the Statement of Financial Position
|
|
Financial Instruments
|
|
Fair Value Collateral Posted
|
|
Net Amount
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
$
|
19,809
|
|
|
$
|
—
|
|
|
$
|
19,809
|
|
|
$
|
570
|
|
|
$
|
—
|
|
|
$
|
19,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
$
|
24,225
|
|
|
$
|
—
|
|
|
$
|
24,225
|
|
|
$
|
570
|
|
|
$
|
23,312
|
|
|
$
|
343
|
|
|
Securities sold under agreements to repurchase
|
208,795
|
|
|
—
|
|
|
208,795
|
|
|
—
|
|
|
208,795
|
|
|
—
|
|
|
|
|
As of December 31, 2020
|
|
|
|
|
Gross Amounts Not Offset in the Statement of Financial Position
|
|
|
|
(in thousands)
|
Gross Amounts Recognized
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Net Amounts of Assets presented in the Statement of Financial Position
|
|
Financial Instruments
|
|
Fair Value Collateral Posted
|
|
Net Amount
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
$
|
28,703
|
|
|
$
|
—
|
|
|
$
|
28,703
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
28,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
$
|
34,967
|
|
|
$
|
—
|
|
|
$
|
34,967
|
|
|
$
|
2
|
|
|
$
|
34,903
|
|
|
$
|
62
|
|
|
Securities sold under agreements to repurchase
|
271,081
|
|
|
—
|
|
|
271,081
|
|
|
—
|
|
|
271,081
|
|
|
—
|
|
As of June 30, 2021, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $25.0 million. Further, the Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral of $23.3 million.
NOTE 7 - FAIR VALUE MEASUREMENTS
The following table summarizes financial instruments measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
(in thousands)
|
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
|
|
Significant
Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total Fair
Value
|
|
Assets
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
|
|
|
|
|
|
Obligations of U.S. Government-sponsored enterprises
|
$
|
—
|
|
|
$
|
99,254
|
|
|
$
|
—
|
|
|
$
|
99,254
|
|
|
Obligations of states and political subdivisions
|
—
|
|
|
480,845
|
|
|
—
|
|
|
480,845
|
|
|
Agency mortgage-backed securities
|
—
|
|
|
477,379
|
|
|
—
|
|
|
477,379
|
|
|
U.S. Treasury bills
|
—
|
|
|
11,346
|
|
|
—
|
|
|
11,346
|
|
|
Corporate debt securities
|
—
|
|
|
15,399
|
|
|
—
|
|
|
15,399
|
|
|
Total securities available for sale
|
—
|
|
|
1,084,223
|
|
|
—
|
|
|
1,084,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
—
|
|
|
19,809
|
|
|
—
|
|
|
19,809
|
|
|
Total assets
|
$
|
—
|
|
|
$
|
1,104,032
|
|
|
$
|
—
|
|
|
$
|
1,104,032
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Derivatives
|
$
|
—
|
|
|
$
|
24,225
|
|
|
$
|
—
|
|
|
$
|
24,225
|
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
24,225
|
|
|
$
|
—
|
|
|
$
|
24,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
(in thousands)
|
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
|
|
Significant
Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total Fair
Value
|
|
Assets
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
|
|
|
|
|
|
Obligations of U.S. Government-sponsored enterprises
|
$
|
—
|
|
|
$
|
15,161
|
|
|
$
|
—
|
|
|
$
|
15,161
|
|
|
Obligations of states and political subdivisions
|
—
|
|
|
344,232
|
|
|
—
|
|
|
344,232
|
|
|
Residential mortgage-backed securities
|
—
|
|
|
526,572
|
|
|
—
|
|
|
526,572
|
|
|
Corporate debt securities
|
—
|
|
|
14,998
|
|
|
—
|
|
|
14,998
|
|
|
U.S. Treasury bills
|
—
|
|
|
11,466
|
|
|
—
|
|
|
11,466
|
|
|
Total securities available-for-sale
|
—
|
|
|
912,429
|
|
|
—
|
|
|
912,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
—
|
|
|
28,703
|
|
|
—
|
|
|
28,703
|
|
|
Total assets
|
$
|
—
|
|
|
$
|
941,132
|
|
|
$
|
—
|
|
|
$
|
941,132
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Derivatives
|
$
|
—
|
|
|
$
|
34,967
|
|
|
$
|
—
|
|
|
$
|
34,967
|
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
34,967
|
|
|
$
|
—
|
|
|
$
|
34,967
|
|
From time to time, the Company measures certain assets at fair value on a nonrecurring basis. These include assets measured at the lower of cost or fair value that were recognized at fair value below cost at the end of the period. At June 30, 2021, no assets were measured on a nonrecurring basis.
Following is a summary of the carrying amounts and fair values of certain financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(in thousands)
|
Carrying Amount
|
|
Estimated fair value
|
|
Level
|
|
Carrying Amount
|
|
Estimated fair value
|
|
Level
|
|
Balance sheet assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held-to-maturity, net
|
$
|
450,665
|
|
|
$
|
470,099
|
|
|
Level 2
|
|
$
|
487,610
|
|
|
$
|
501,523
|
|
|
Level 2
|
|
Other investments
|
50,959
|
|
|
50,959
|
|
|
Level 2
|
|
48,764
|
|
|
48,764
|
|
|
Level 2
|
|
Loans held for sale
|
5,763
|
|
|
5,763
|
|
|
Level 2
|
|
13,564
|
|
|
13,564
|
|
|
Level 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net
|
7,098,082
|
|
|
7,093,710
|
|
|
Level 3
|
|
7,088,264
|
|
|
7,067,562
|
|
|
Level 3
|
|
State tax credits, held for sale
|
34,710
|
|
|
38,629
|
|
|
Level 3
|
|
36,853
|
|
|
39,925
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
$
|
514,334
|
|
|
$
|
515,877
|
|
|
Level 3
|
|
$
|
550,095
|
|
|
$
|
553,946
|
|
|
Level 3
|
|
Subordinated debentures and notes
|
203,940
|
|
|
193,136
|
|
|
Level 2
|
|
203,637
|
|
|
192,889
|
|
|
Level 2
|
|
FHLB advances
|
50,000
|
|
|
51,591
|
|
|
Level 2
|
|
50,000
|
|
|
51,871
|
|
|
Level 2
|
|
Other borrowings and notes payable
|
234,509
|
|
|
234,509
|
|
|
Level 2
|
|
301,081
|
|
|
301,081
|
|
|
Level 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For information regarding the methods and assumptions used to estimate the fair value of each class of financial instruments refer to Note 19 – Fair Value Measurements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC.
NOTE 8 - SHAREHOLDERS’ EQUITY AND COMPENSATION PLANS
Shareholders’ Equity
Accumulated Other Comprehensive Income (Loss)
The following tables present the changes in accumulated other comprehensive income after-tax by component:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
(in thousands)
|
Net Unrealized Gain on Available-for-Sale Debt Securities
|
|
Unamortized Gain (Loss) on Held-to-Maturity Securities
|
|
Net Unrealized Gain (Loss) on Cash Flow Hedges
|
|
Total
|
|
Balance, March 31, 2021
|
$
|
11,400
|
|
|
$
|
18,159
|
|
|
$
|
(3,382)
|
|
|
$
|
26,177
|
|
|
Net change
|
$
|
2,850
|
|
|
$
|
(837)
|
|
|
$
|
82
|
|
|
$
|
2,095
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021
|
$
|
14,250
|
|
|
$
|
17,322
|
|
|
$
|
(3,300)
|
|
|
$
|
28,272
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020
|
$
|
25,538
|
|
|
$
|
4,778
|
|
|
$
|
(7,219)
|
|
|
$
|
23,097
|
|
|
Net change
|
$
|
10,984
|
|
|
$
|
(329)
|
|
|
$
|
(943)
|
|
|
$
|
9,712
|
|
|
Transfer from available-for-sale to held-to-maturity
|
(8,650)
|
|
|
8,650
|
|
|
—
|
|
|
—
|
|
|
Balance, June 30, 2020
|
$
|
27,872
|
|
|
$
|
13,099
|
|
|
$
|
(8,162)
|
|
|
$
|
32,809
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
(in thousands)
|
Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities
|
|
Unamortized Gain (Loss) on Held-to-Maturity Securities
|
|
Net Unrealized Gain (Loss) on Cash Flow Hedges
|
|
Total
|
|
Balance, December 31, 2020
|
$
|
22,320
|
|
|
$
|
19,308
|
|
|
$
|
(4,508)
|
|
|
$
|
37,120
|
|
|
Net change
|
$
|
(8,070)
|
|
|
$
|
(1,986)
|
|
|
$
|
1,208
|
|
|
$
|
(8,848)
|
|
|
Balance, June 30, 2021
|
$
|
14,250
|
|
|
$
|
17,322
|
|
|
$
|
(3,300)
|
|
|
$
|
28,272
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
$
|
14,977
|
|
|
$
|
4,934
|
|
|
$
|
(2,162)
|
|
|
$
|
17,749
|
|
|
Net change
|
$
|
21,545
|
|
|
$
|
(485)
|
|
|
$
|
(6,000)
|
|
|
$
|
15,060
|
|
|
Transfer from available-for-sale to held-to-maturity
|
$
|
(8,650)
|
|
|
$
|
8,650
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Balance, June 30, 2020
|
$
|
27,872
|
|
|
$
|
13,099
|
|
|
$
|
(8,162)
|
|
|
$
|
32,809
|
|
The following tables present the pre-tax and after-tax changes in the components of other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
|
2021
|
|
2020
|
|
(in thousands)
|
Pre-tax
|
|
Tax effect
|
|
After-tax
|
|
Pre-tax
|
|
Tax effect
|
|
After-tax
|
|
Change in unrealized gain on available-for-sale debt securities
|
$
|
3,795
|
|
|
$
|
945
|
|
|
$
|
2,850
|
|
|
$
|
14,587
|
|
|
$
|
3,603
|
|
|
$
|
10,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of gain on held-to-maturity securities(b)
|
(1,115)
|
|
|
(278)
|
|
|
(837)
|
|
|
(437)
|
|
|
(108)
|
|
|
(329)
|
|
|
Change in unrealized loss on cash flow hedges arising during the period
|
(273)
|
|
|
(68)
|
|
|
(205)
|
|
|
(1,563)
|
|
|
(386)
|
|
|
(1,177)
|
|
|
Reclassification of loss on cash flow hedges(b)
|
382
|
|
|
95
|
|
|
287
|
|
|
311
|
|
|
77
|
|
|
234
|
|
|
Total other comprehensive income
|
$
|
2,789
|
|
|
$
|
694
|
|
|
$
|
2,095
|
|
|
$
|
12,898
|
|
|
$
|
3,186
|
|
|
$
|
9,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
2021
|
|
2020
|
|
(in thousands)
|
Pre-tax
|
|
Tax effect
|
|
After-tax
|
|
Pre-tax
|
|
Tax effect
|
|
After-tax
|
|
Change in unrealized gain (loss) on available-for-sale debt securities
|
$
|
(10,746)
|
|
|
$
|
(2,676)
|
|
|
$
|
(8,070)
|
|
|
$
|
28,616
|
|
|
$
|
7,068
|
|
|
$
|
21,548
|
|
|
Reclassification adjustment for realized gain on sale of available-for-sale debt securities(a)
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
(1)
|
|
|
(3)
|
|
|
Reclassification of gain on held-to-maturity securities(b)
|
(2,644)
|
|
|
(658)
|
|
|
(1,986)
|
|
|
(644)
|
|
|
(159)
|
|
|
(485)
|
|
|
Change in unrealized gain (loss) on cash flow hedges arising during the period
|
855
|
|
|
213
|
|
|
642
|
|
|
(8,442)
|
|
|
(2,085)
|
|
|
(6,357)
|
|
|
Reclassification of loss on cash flow hedges(b)
|
754
|
|
|
188
|
|
|
566
|
|
|
474
|
|
|
117
|
|
|
357
|
|
|
Total other comprehensive income
|
$
|
(11,781)
|
|
|
$
|
(2,933)
|
|
|
$
|
(8,848)
|
|
|
$
|
20,000
|
|
|
$
|
4,940
|
|
|
$
|
15,060
|
|
(a)The pre-tax amount is reported in noninterest income/expense in the Consolidated Statements of Operations
(b)The pre-tax amount is reported in interest income/expense in the Consolidated Statements of Operations
Compensation Plans
Employee Stock Options
During the six months ended June 30, 2021, employee stock options were granted under the Amended and Restated 2018 Stock Incentive Plan.
Various information related to the stock options is shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Stock Options
|
|
Weighted Average Life
|
|
Weighted Average Price
|
|
Shares Exercisable
|
|
Weighted Average Exercise Price
|
|
Options Outstanding, December 31, 2020
|
—
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
111,804
|
|
|
|
|
$
|
43.81
|
|
|
—
|
|
|
$
|
—
|
|
|
Options forfeited
|
(1,500)
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding, June 30, 2021
|
110,304
|
|
|
9.7
|
|
|
|
|
|
|
NOTE 9 - SUBSEQUENT EVENT
On July 21, 2021 the Company completed its previously-announced merger with First Choice Bancorp (“FCBP”), the holding company of First Choice Bank (“First Choice”) pursuant to the Agreement and Plan of Merger, dated April 26, 2021. FCBP merged with and into EFSC, and First Choice subsequently merged with and into the Bank (with EFSC and the Bank as the surviving entities). As of June 30, 2021, First Choice had approximately $2.4 billion in assets, $2.0 billion in loans and $1.9 billion in deposits.
In connection with the merger, the Company issued approximately 7.8 million shares of Enterprise common stock valued at $44.01 per share, the closing price of Enterprise common stock on July 21, 2021. The value of the consideration was approximately $346 million.
Effective as of July 28, 2021, EFSC further amended its certificate of incorporation to increase the number of authorized shares of common stock from 45,000,000 shares to 75,000,000 (the “Amendment”). As previously disclosed on Form 8-K filed with the SEC on July 20, 2021, the stockholders of EFSC approved the Amendment at a special meeting of stockholders held on July 20, 2021.
