NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Tompkins Financial Corporation (“Tompkins” or the “Company”) is headquartered in Ithaca, New York and is registered as a Financial Holding Company with the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended. The Company is a locally oriented, community-based financial services organization that offers a full array of products and services, including commercial and consumer banking, leasing, trust and investment management, financial planning and wealth management, and insurance services. At
June 30, 2018
, the Company’s subsidiaries included:
four
wholly-owned banking subsidiaries, Tompkins Trust Company (the “Trust Company”), The Bank of Castile (DBA Tompkins Bank of Castile), Mahopac Bank (formerly known as Mahopac National Bank, DBA Tompkins Mahopac Bank), VIST Bank (DBA Tompkins VIST Bank); and a wholly-owned insurance agency subsidiary, Tompkins Insurance Agencies, Inc. (“Tompkins Insurance”). The trust division of the Trust Company provides a full array of investment services, including investment management, trust and estate, financial and tax planning as well as life, disability and long-term care insurance services. The Company’s principal offices are located at 118 E. Seneca Street, Ithaca, New York, 14851, and its telephone number is (888) 503-5753. The Company’s common stock is traded on the NYSE American under the Symbol “TMP.”
As a registered financial holding company, the Company is regulated under the Bank Holding Company Act of 1956 (“BHC Act”), as amended and is subject to examination and comprehensive regulation by the Federal Reserve Board (“FRB”). The Company is also subject to the jurisdiction of the Securities and Exchange Commission (“SEC”) and is subject to disclosure and regulatory requirements under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The Company is subject to the rules of the NYSE American for listed companies.
The Company’s banking subsidiaries are subject to examination and comprehensive regulation by various regulatory authorities, including the Federal Deposit Insurance Corporation (“FDIC”), the New York State Department of Financial Services (“NYSDFS”), and the Pennsylvania Department of Banking and Securities (“PDBS”). Each of these agencies issues regulations and requires the filing of reports describing the activities and financial condition of the entities under its jurisdiction. Likewise, such agencies conduct examinations on a recurring basis to evaluate the safety and soundness of the institutions, and to test compliance with various regulatory requirements, including: consumer protection, privacy, fair lending, the Community Reinvestment Act, the Bank Secrecy Act, sales of non-deposit investments, electronic data processing, and trust department activities.
The trust division of Tompkins Trust Company is subject to examination and comprehensive regulation by the FDIC and NYSDFS.
The Company’s insurance subsidiary is subject to examination and regulation by the NYSDFS and the Pennsylvania Insurance Department.
2. Basis of Presentation
The unaudited consolidated financial statements included in this quarterly report do not include all of the information and footnotes required by GAAP for a full year presentation and certain disclosures have been condensed or omitted in accordance with rules and regulations of the SEC. In the application of certain accounting policies, management is required to make assumptions regarding the effect of matters that are inherently uncertain. These estimates and assumptions affect the reported amounts of certain assets, liabilities, revenues, and expenses in the unaudited condensed consolidated financial statements. Different amounts could be reported under different conditions, or if different assumptions were used in the application of these accounting policies. The accounting policies that management considers critical in this respect are the determination of the allowance for loan and lease losses and the review of its securities portfolio for other than temporary impairment.
In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year ended
December 31, 2018
. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2017
. There have been no significant changes to the Company’s accounting policies from those presented in the
2017
Annual Report on Form 10-K. Refer to Note 3- “Accounting Standards Updates” of this Report for a discussion of recently issued accounting guidelines.
Cash and cash equivalents in the consolidated statements of cash flow include cash and noninterest bearing balances due from banks, interest-bearing balances due from banks, and money market funds. Management regularly evaluates the credit risk associated with the counterparties to these transactions and believes that the Company is not exposed to any significant credit risk on cash and cash equivalents.
The Company has evaluated subsequent events for potential recognition and/or disclosure, and determined that no further disclosures were required.
The consolidated financial information included herein combines the results of operations, the assets, liabilities, and shareholders’ equity of the Company and its subsidiaries. Amounts in the prior periods’ unaudited condensed consolidated financial statements are reclassified when necessary to conform to the current periods’ presentation. All significant intercompany balances and transactions are eliminated in consolidation.
3. Accounting Standards Updates
Newly Adopted Accounting Standards
In May 2014, the FASB issued
ASU No. 2014-09, “Revenue from Contracts with Customers” ("ASC 606").
The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. Since the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, the new guidance did not have a material impact on revenue most closely associated with financial instruments, including interest income and expense. The Company completed its overall assessment of revenue streams and review of related contracts potentially affected by the ASU, including trust and asset management fees, deposit related fees, interchange fees, merchant income, and annuity and insurance commissions.
On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method for all contracts. Results for reporting periods beginning January 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic 605, Revenue Recognition.
The Company recorded a net increase to beginning retained earnings of
$1.8 million
as of January 1, 2018 due to the cumulative impact of adopting ASC 606. The impact to beginning retained earnings was primarily driven by the recognition of
$1.8 million
of contingency income related to our insurance business segment. The adoption of ASC 606 did not have a significant impact on the Company’s consolidated financial statements as of and for the three- and six month periods ended June 30, 2018 and, as a result, comparisons of revenues and operating profit performance between periods are not significantly affected by the adoption of this ASU. Refer to Note 11 for additional disclosures required by ASC 606.
In January 2016, the FASB issued
ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.”
This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments by making targeted improvements to GAAP as follows: (1) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (2) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value; (3) eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (4) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (5) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (6) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance
with the fair value option for financial instruments; (7) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (8) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The Company adopted ASU No. 2016-01 effective January 1, 2018, and recognized a cumulative-effect adjustment of
$65,000
for the after-tax impact of the unrealized loss on equity securities. In addition, the Company measured the fair value of its loan portfolio as of June 30, 2018 using an exit price notion. Refer to Note 14 "Fair Value".
In August 2016, the FASB issued
ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments.”
ASU 2016-15 provides guidance related to certain cash flow issues in order to reduce the current and potential future diversity in practice. The Company adopted ASU No. 2016-15 on January 1, 2018. ASU No. 2016-15 did not have a material impact on the Company’s consolidated financial statements.
In March 2017, the FASB issued
ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.”
Under the new guidance, employers are required to present the service cost component of the net periodic benefit cost in the same income statement line item (e.g., Salaries and Benefits) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components of net periodic benefit cost separately (e.g., Other Noninterest Expense) from the line item that includes the service cost. ASU No. 2017-07 is effective for interim and annual reporting periods beginning after December 15, 2017. Employers will apply the guidance on the presentation of the components of net periodic benefit cost in the income statement retrospectively. The guidance limiting the capitalization of net periodic benefit cost in assets to the service cost component will be applied prospectively. The Company adopted ASU No. 2017-07 on January 1, 2018 and utilized the ASU’s practical expedient allowing entities to estimate amounts for comparative periods using the information previously disclosed in their pension and other postretirement benefit plan footnote. ASU No. 2017-07 did not have a material impact on the Company’s consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09,
“Compensation-Stock Compensation (Topic 718)- Scope of Modification Accounting.”
ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the award's fair value, (ii) the award's vesting conditions and (iii) the award's classification as an equity or liability instrument. ASU 2017-09 became effective for us on January 1, 2018 and did not have a significant impact on our consolidated financial statements.
ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income"
was issued to address a narrow-scope financial reporting issue that arose as a consequence of the change in the tax law. On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Cuts and Jobs Act of 2017). ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate. The amount of the reclassification would be the difference between the historical corporate income tax rate of 35 percent and the newly enacted 21 percent corporate income tax rate. ASU 2018-02 is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years with early adoption permitted, including adoption in any interim period, for (i) public business entities for reporting periods for which financial statements have not yet been issued and (ii) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The changes are applied retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act of 2017 is recognized. The Company early adopted ASU 2018-02 in 2017, which resulted in the reclassification from accumulated other comprehensive income (loss) to retained earnings totaling
$10.0 million
, reflected in the consolidated statements of changes in shareholders' equity.
ASU 2018-05, "Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 118."
ASU 2018-05 amends the Accounting Standards Codification to incorporate various SEC paragraphs pursuant to the issuance of SAB 118. SAB 118 addresses the application of generally accepted accounting principles in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act.
Accounting Standards Pending Adoption
Information about certain recently issued accounting standards updates is presented below. Also refer to Note 1 - "Summary of Significant Accounting Policies" in our 2017 Form 10-K for additional information related to previously issued accounting standards updates.
ASU 2016-02,“Leases (Topic 842).”
ASU 2016-02 will, among other things, require lessees to recognize a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model and ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2016-2 will be effective for Tompkins on January 1, 2019 and will require transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company occupies certain banking offices and uses certain equipment under noncancelable operating lease agreements, which currently are not reflected in its consolidated statements of condition. Tompkins is preparing an inventory of its leases and evaluating the impact of this ASU on these leases. Upon adoption of the guidance, the Company expects to report increased assets and increased liabilities as a result of recognizing right-of-use assets and lease liabilities on its consolidated statements of condition. Tompkins is currently evaluating the extent of the impact that the adoption of this ASU will have on our consolidated financial statements.
ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”
ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective on January 1, 2020. Tompkins is currently evaluating the requirements of the new guidance to determine what modifications to our existing allowance methodology may be required. The Company expects that the new guidance will likely result in an increase in the allowance; however, Tompkins is unable to quantify the impact at this time since we are still reviewing the guidance. The extent of any impact to our allowance will depend, in part, upon the composition of our loan portfolio at the adoption date as well as economic conditions and loss forecasts at that date.
ASU 2017-08 “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20) - Premium Amortization on Purchased Callable Debt Securities.”
ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium to require such premiums to be amortized to the earliest call date unless applicable guidance related to certain pools of securities is applied to consider estimated prepayments. Under prior guidance, entities were generally required to amortize premiums on individual, non-pooled callable debt securities as a yield adjustment over the contractual life of the security. ASU 2017-08 does not change the accounting for callable debt securities held at a discount. ASU 2017-08 will be effective for us on January 1, 2019, with early adoption permitted. Tompkins is currently evaluating the potential impact of ASU 2017-08 on our consolidated financial statements.
4. Securities
Available-for-Sales Securities
The following table summarizes available-for-sale securities held by the Company at
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Securities
|
June 30, 2018
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Government sponsored entities
|
$
|
498,540
|
|
|
$
|
0
|
|
|
$
|
10,941
|
|
|
$
|
487,599
|
|
Obligations of U.S. states and political subdivisions
|
87,510
|
|
|
74
|
|
|
1,374
|
|
|
86,210
|
|
Mortgage-backed securities – residential, issued by
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
124,343
|
|
|
261
|
|
|
4,728
|
|
|
119,876
|
|
U.S. Government sponsored entities
|
672,859
|
|
|
305
|
|
|
25,387
|
|
|
647,777
|
|
Non-U.S. Government agencies or sponsored entities
|
53
|
|
|
0
|
|
|
0
|
|
|
53
|
|
U.S. corporate debt securities
|
2,500
|
|
|
0
|
|
|
325
|
|
|
2,175
|
|
Total available-for-sale securities
|
$
|
1,385,805
|
|
|
$
|
640
|
|
|
$
|
42,755
|
|
|
$
|
1,343,690
|
|
The following table summarizes available-for-sale securities held by the Company at
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Securities
|
December 31, 2017
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Government sponsored entities
|
$
|
507,248
|
|
|
$
|
278
|
|
|
$
|
3,333
|
|
|
$
|
504,193
|
|
Obligations of U.S. states and political subdivisions
|
91,659
|
|
|
281
|
|
|
421
|
|
|
91,519
|
|
Mortgage-backed securities – residential, issued by
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
139,747
|
|
|
659
|
|
|
2,671
|
|
|
137,735
|
|
U.S. Government sponsored entities
|
667,767
|
|
|
1,045
|
|
|
12,634
|
|
|
656,178
|
|
Non-U.S. Government agencies or sponsored entities
|
75
|
|
|
0
|
|
|
0
|
|
|
75
|
|
U.S. corporate debt securities
|
2,500
|
|
|
0
|
|
|
338
|
|
|
2,162
|
|
Total debt securities
|
1,408,996
|
|
|
2,263
|
|
|
19,397
|
|
|
1,391,862
|
|
Equity securities
|
1,000
|
|
|
0
|
|
|
87
|
|
|
913
|
|
Total available-for-sale securities
|
$
|
1,409,996
|
|
|
$
|
2,263
|
|
|
$
|
19,484
|
|
|
$
|
1,392,775
|
|
Held-to-Maturity Securities
The following table summarizes held-to-maturity securities held by the Company at
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities
|
June 30, 2018
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Government sponsored entities
|
$
|
131,507
|
|
|
$
|
0
|
|
|
$
|
2,230
|
|
|
$
|
129,277
|
|
Obligations of U.S. states and political subdivisions
|
7,906
|
|
|
42
|
|
|
4
|
|
|
7,944
|
|
Total held-to-maturity debt securities
|
$
|
139,413
|
|
|
$
|
42
|
|
|
$
|
2,234
|
|
|
$
|
137,221
|
|
The following table summarizes held-to-maturity securities held by the Company at
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities
|
December 31, 2017
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Government sponsored entities
|
$
|
131,707
|
|
|
$
|
1,103
|
|
|
$
|
90
|
|
|
$
|
132,720
|
|
Obligations of U.S. states and political subdivisions
|
7,509
|
|
|
93
|
|
|
7
|
|
|
7,595
|
|
Total held-to-maturity debt securities
|
$
|
139,216
|
|
|
$
|
1,196
|
|
|
$
|
97
|
|
|
$
|
140,315
|
|
The Company may from time to time sell investment securities from its available-for-sale portfolio. Realized gains on available-for-sale securities were
$172,000
and
$297,000
for the three and six months ended
June 30, 2018
and
$0
for the same periods during 2017. Realized losses on available-for-sale securities were
$3,000
for the three and six months ended
June 30, 2018
and
$0
for the same periods during 2017. The sales of available-for-sale investment securities were the result of general investment portfolio and interest rate risk management. The Company also recognized losses of
$20,000
for the three and six months ended June 30, 2018, on equity securities, reflecting the change in fair value.
The following table summarizes available-for-sale securities that had unrealized losses at
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
12 Months or Longer
|
|
Total
|
(in thousands)
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
Obligations of U.S. Government sponsored entities
|
$
|
434,523
|
|
|
$
|
9,116
|
|
|
$
|
53,076
|
|
|
$
|
1,825
|
|
|
$
|
487,599
|
|
|
$
|
10,941
|
|
Obligations of U.S. states and political subdivisions
|
55,903
|
|
|
852
|
|
|
11,026
|
|
|
522
|
|
|
66,929
|
|
|
1,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities – residential, issued by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
20,321
|
|
|
749
|
|
|
87,043
|
|
|
3,979
|
|
|
107,364
|
|
|
4,728
|
|
U.S. Government sponsored entities
|
226,916
|
|
|
6,178
|
|
|
406,749
|
|
|
19,209
|
|
|
633,665
|
|
|
25,387
|
|
U.S. corporate debt securities
|
0
|
|
|
0
|
|
|
2,175
|
|
|
325
|
|
|
2,175
|
|
|
325
|
|
Total available-for-sale securities
|
$
|
737,663
|
|
|
$
|
16,895
|
|
|
$
|
560,069
|
|
|
$
|
25,860
|
|
|
$
|
1,297,732
|
|
|
$
|
42,755
|
|
The following table summarizes available-for-sale securities that had unrealized losses at
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
12 Months or Longer
|
|
Total
|
(in thousands)
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
Obligations of U.S. Government sponsored entities
|
$
|
319,545
|
|
|
$
|
2,301
|
|
|
$
|
39,791
|
|
|
$
|
1,032
|
|
|
$
|
359,336
|
|
|
$
|
3,333
|
|
Obligations of U.S. states and political subdivisions
|
39,571
|
|
|
219
|
|
|
11,729
|
|
|
202
|
|
|
51,300
|
|
|
421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities – residential, issued by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
33,056
|
|
|
452
|
|
|
86,562
|
|
|
2,219
|
|
|
119,618
|
|
|
2,671
|
|
U.S. Government sponsored entities
|
208,524
|
|
|
1,941
|
|
|
410,767
|
|
|
10,693
|
|
|
619,291
|
|
|
12,634
|
|
U.S. corporate debt securities
|
0
|
|
|
0
|
|
|
2,163
|
|
|
338
|
|
|
2,163
|
|
|
338
|
|
Equity securities
|
0
|
|
|
0
|
|
|
913
|
|
|
87
|
|
|
913
|
|
|
87
|
|
Total available-for-sale securities
|
$
|
600,696
|
|
|
$
|
4,913
|
|
|
$
|
551,925
|
|
|
$
|
14,571
|
|
|
$
|
1,152,621
|
|
|
$
|
19,484
|
|
Beginning January 1, 2018, upon adoption of ASU 2016-01, equity securities with readily determinable fair values are stated at fair value with realized and unrealized gains and losses reported in the consolidated statement of income. For periods prior to adoption, equity securities were classified as available-for-sale and stated at fair value with unrealized gains and losses reports as a separate component of accumulated other comprehensive income, net of tax.
The following table summarizes held-to-maturity securities that had unrealized losses at
June 30, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
12 Months or Longer
|
|
Total
|
(in thousands)
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
Obligations of U.S. Government sponsored entities
|
$
|
129,278
|
|
|
$
|
2,230
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
129,278
|
|
|
$
|
2,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. states and political subdivisions
|
3,181
|
|
|
4
|
|
|
0
|
|
|
0
|
|
|
3,181
|
|
|
4
|
|
Total held-to-maturity securities
|
$
|
132,459
|
|
|
$
|
2,234
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
132,459
|
|
|
$
|
2,234
|
|
The following table summarizes held-to-maturity securities that had unrealized losses at
December 31, 2017
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
12 Months or Longer
|
|
Total
|
(in thousands)
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
Obligations of U.S. Government sponsored entities
|
$
|
20,505
|
|
|
$
|
90
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
20,505
|
|
|
$
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. states and political subdivisions
|
5,094
|
|
|
7
|
|
|
0
|
|
|
0
|
|
|
5,094
|
|
|
7
|
|
Total held-to-maturity securities
|
$
|
25,599
|
|
|
$
|
97
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,599
|
|
|
$
|
97
|
|
The gross unrealized losses reported for residential mortgage-backed securities relate to investment securities issued by U.S. government sponsored entities such as Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, and U.S. government agencies such as Government National Mortgage Association. The total gross unrealized losses, shown in the tables above, were primarily attributable to changes in interest rates and levels of market liquidity, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities.
The Company does not intend to sell other-than-temporarily impaired investment securities that are in an unrealized loss position until recovery of unrealized losses (which may be until maturity), and it is not more-likely-than not that the Company will be required to sell the investment securities, before recovery of their amortized cost basis, which may be at maturity. Accordingly, as of
June 30, 2018
, and
December 31, 2017
, management has determined that the unrealized losses detailed in the tables above are not other-than-temporary.
Ongoing Assessment of Other-Than-Temporary Impairment
On a quarterly basis, the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered other-than-temporary impairment (“OTTI”). A debt security is considered impaired if the fair value is less than its amortized cost basis (including any previous OTTI charges) at the reporting date. If impaired, the Company then assesses whether the unrealized loss is other-than-temporary. An unrealized loss on a debt security is generally deemed to be other-than-temporary and a credit loss is deemed to exist if the present value, discounted at the security’s effective rate, of the expected future cash flows is less than the amortized cost basis of the debt security. As a result, the credit loss component of an other-than-temporary impairment write-down for debt securities is recorded in earnings while the remaining portion of the impairment loss is recognized, net of tax, in other comprehensive income provided that the Company does not intend to sell the underlying debt security and it is more-likely-than not that the Company would not have to sell the debt security prior to recovery of the unrealized loss, which may be to maturity. If the Company intended to sell any securities with an unrealized loss or it is more-likely-than not that the Company would be required to sell the investment securities, before recovery of their amortized cost basis, then the entire unrealized loss would be recorded in earnings.
The Company considers the following factors in determining whether a credit loss exists.
|
|
•
|
The length of time and the extent to which the fair value has been less than the amortized cost basis;
|
|
|
•
|
The level of credit enhancement provided by the structure which includes, but is not limited to, credit subordination positions, excess spreads, overcollateralization, protective triggers;
|
|
|
•
|
Changes in the near term prospects of the issuer or underlying collateral of a security, such as changes in default rates, loss severities given default and significant changes in prepayment assumptions;
|
|
|
•
|
The level of excess cash flow generated from the underlying collateral supporting the principal and interest payments of the debt securities; and
|
|
|
•
|
Any adverse change to the credit conditions of the issuer or the security such as credit downgrades by the rating agencies.
|
As a result of the other-than-temporarily impairment review process, the Company does not consider any investment security held at
June 30, 2018
to be other-than-temporarily impaired.
The amortized cost and estimated fair value of debt securities by contractual maturity are shown in the following table. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities are shown separately since they are not due at a single maturity date.
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
(in thousands)
|
Amortized Cost
|
|
Fair Value
|
Available-for-sale securities:
|
|
|
|
|
|
Due in one year or less
|
$
|
72,650
|
|
|
$
|
72,406
|
|
Due after one year through five years
|
335,687
|
|
|
329,350
|
|
Due after five years through ten years
|
166,258
|
|
|
160,972
|
|
Due after ten years
|
13,955
|
|
|
13,256
|
|
Total
|
588,550
|
|
|
575,984
|
|
Mortgage-backed securities
|
797,255
|
|
|
767,706
|
|
Total available-for-sale debt securities
|
$
|
1,385,805
|
|
|
$
|
1,343,690
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
(in thousands)
|
Amortized Cost
|
|
Fair Value
|
Available-for-sale securities:
|
|
|
|
|
|
Due in one year or less
|
$
|
51,909
|
|
|
$
|
51,932
|
|
Due after one year through five years
|
368,846
|
|
|
367,377
|
|
Due after five years through ten years
|
162,061
|
|
|
160,374
|
|
Due after ten years
|
18,591
|
|
|
18,191
|
|
Total
|
601,407
|
|
|
597,874
|
|
Mortgage-backed securities
|
807,589
|
|
|
793,988
|
|
Total available-for-sale debt securities
|
$
|
1,408,996
|
|
|
$
|
1,391,862
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
(in thousands)
|
Amortized Cost
|
|
Fair Value
|
Held-to-maturity securities:
|
|
|
|
|
|
Due in one year or less
|
$
|
7,264
|
|
|
$
|
7,268
|
|
Due after one year through five years
|
76,894
|
|
|
75,655
|
|
Due after five years through ten years
|
55,255
|
|
|
54,298
|
|
Total held-to-maturity debt securities
|
$
|
139,413
|
|
|
$
|
137,221
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
(in thousands)
|
Amortized Cost
|
|
Fair Value
|
Held-to-maturity securities:
|
|
|
|
|
|
Due in one year or less
|
$
|
5,980
|
|
|
$
|
5,979
|
|
Due after one year through five years
|
51,936
|
|
|
52,227
|
|
Due after five years through ten years
|
81,300
|
|
|
82,109
|
|
Due after ten years
|
0
|
|
|
0
|
|
Total held-to-maturity debt securities
|
$
|
139,216
|
|
|
$
|
140,315
|
|
The Company also holds non-marketable Federal Home Loan Bank New York (“FHLBNY”) stock, non-marketable Federal Home Loan Bank Pittsburgh (“FHLBPITT”) stock and non-marketable Atlantic Community Bankers Bank stock ("ACBB"), all of which are required to be held for regulatory purposes and for borrowing availability. The required investment in FHLB stock is tied to the Company’s borrowing levels with the FHLB. Holdings of FHLBNY stock, FHLBPITT stock, and ACBB stock totaled
$41.4 million
,
$17.3 million
and
$95,000
at
June 30, 2018
, respectively. These securities are carried at par, which is also cost. The FHLBNY and FHLBPITT continue to pay dividends and repurchase stock. Quarterly, we evaluate our investment in the FHLB for impairment. We evaluate recent and long-term operating performance, liquidity, funding and capital positions, stock repurchase history, dividend history and impact of legislative and regulatory changes. Based on our most recent evaluation, as of
June 30, 2018
, we have determined that no impairment write-downs are currently required.
5. Loans and Leases
Loans and Leases at
June 30, 2018
and
December 31, 2017
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/30/2018
|
|
12/31/2017
|
(in thousands)
|
Originated
|
|
Acquired
|
|
Total Loans and Leases
|
|
Originated
|
|
Acquired
|
|
Total Loans and Leases
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
$
|
95,618
|
|
|
$
|
0
|
|
|
$
|
95,618
|
|
|
$
|
108,608
|
|
|
$
|
0
|
|
|
$
|
108,608
|
|
Commercial and industrial other
|
939,058
|
|
|
45,965
|
|
|
985,023
|
|
|
932,067
|
|
|
50,976
|
|
|
983,043
|
|
Subtotal commercial and industrial
|
1,034,676
|
|
|
45,965
|
|
|
1,080,641
|
|
|
1,040,675
|
|
|
50,976
|
|
|
1,091,651
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
232,922
|
|
|
1,432
|
|
|
234,354
|
|
|
202,486
|
|
|
1,480
|
|
|
203,966
|
|
Agriculture
|
143,229
|
|
|
236
|
|
|
143,465
|
|
|
129,712
|
|
|
247
|
|
|
129,959
|
|
Commercial real estate other
|
1,737,686
|
|
|
189,722
|
|
|
1,927,408
|
|
|
1,660,782
|
|
|
206,020
|
|
|
1,866,802
|
|
Subtotal commercial real estate
|
2,113,837
|
|
|
191,390
|
|
|
2,305,227
|
|
|
1,992,980
|
|
|
207,747
|
|
|
2,200,727
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
207,820
|
|
|
24,425
|
|
|
232,245
|
|
|
212,812
|
|
|
28,444
|
|
|
241,256
|
|
Mortgages
|
1,075,865
|
|
|
21,501
|
|
|
1,097,366
|
|
|
1,039,040
|
|
|
22,645
|
|
|
1,061,685
|
|
Subtotal residential real estate
|
1,283,685
|
|
|
45,926
|
|
|
1,329,611
|
|
|
1,251,852
|
|
|
51,089
|
|
|
1,302,941
|
|
Consumer and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect
|
12,051
|
|
|
0
|
|
|
12,051
|
|
|
12,144
|
|
|
0
|
|
|
12,144
|
|
Consumer and other
|
52,128
|
|
|
906
|
|
|
53,034
|
|
|
50,214
|
|
|
765
|
|
|
50,979
|
|
Subtotal consumer and other
|
64,179
|
|
|
906
|
|
|
65,085
|
|
|
62,358
|
|
|
765
|
|
|
63,123
|
|
Leases
|
14,461
|
|
|
0
|
|
|
14,461
|
|
|
14,467
|
|
|
0
|
|
|
14,467
|
|
Total loans and leases
|
4,510,838
|
|
|
284,187
|
|
|
4,795,025
|
|
|
4,362,332
|
|
|
310,577
|
|
|
4,672,909
|
|
Less: unearned income and deferred costs and fees
|
(3,832
|
)
|
|
0
|
|
|
(3,832
|
)
|
|
(3,789
|
)
|
|
0
|
|
|
(3,789
|
)
|
Total loans and leases, net of unearned income and deferred costs and fees
|
$
|
4,507,006
|
|
|
$
|
284,187
|
|
|
$
|
4,791,193
|
|
|
$
|
4,358,543
|
|
|
$
|
310,577
|
|
|
$
|
4,669,120
|
|
The outstanding principal balance and the related carrying amount of the Company’s loans acquired in the VIST Bank acquisition are as follows at
June 30, 2018
and
December 31, 2017
:
|
|
|
|
|
|
|
|
|
(in thousands)
|
6/30/2018
|
|
12/31/2017
|
Acquired Credit Impaired Loans
|
|
|
|
|
|
Outstanding principal balance
|
$
|
13,675
|
|
|
$
|
14,337
|
|
Carrying amount
|
11,539
|
|
|
11,962
|
|
|
|
|
|
Acquired Non-Credit Impaired Loans
|
|
|
|
|
|
Outstanding principal balance
|
275,173
|
|
|
301,128
|
|
Carrying amount
|
272,648
|
|
|
298,615
|
|
|
|
|
|
Total Acquired Loans
|
|
|
|
|
|
Outstanding principal balance
|
288,848
|
|
|
315,465
|
|
Carrying amount
|
284,187
|
|
|
310,577
|
|
The Company has adopted comprehensive lending policies, underwriting standards and loan review procedures. Management reviews these policies and procedures on a regular basis. The Company discussed its lending policies and underwriting guidelines for its various lending portfolios in Note 5 – “Loans and Leases” in the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2017
. There have been no significant changes in these policies and guidelines since the date of that report. As such, these policies are reflective of new originations as well as those balances held at
June 30, 2018
. The Company’s Board of Directors approves the lending policies at least annually. The Company recognizes that exceptions to policy guidelines may occasionally occur and has established procedures for approving exceptions to these policy guidelines. Management has also implemented reporting systems to monitor loan origination, loan quality, concentrations of credit, loan delinquencies and nonperforming loans and potential problem loans.
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments are due. Generally loans are placed on nonaccrual status if principal or interest payments become 90 days or more past due and/or management deems the collectability of the principal and/or interest to be in question as well as when required by regulatory agencies. When interest accrual is discontinued, all unpaid accrued interest is reversed. Payments received on loans on nonaccrual are generally applied to reduce the principal balance of the loan. Loans are generally returned to accrual status when all the principal and interest amounts contractually due are brought current, the borrower has established a payment history, and future payments are reasonably assured. When management determines that the collection of principal in full is not probable, management will charge-off a partial amount or full amount of the loan balance. Management considers specific facts and circumstances relative to each individual credit in making such a determination. For residential and consumer loans, management uses specific regulatory guidance and thresholds for determining charge-offs.
Acquired loans that met the criteria for nonaccrual of interest prior to the acquisition may be considered performing after the date of acquisition, regardless of whether the customer is contractually delinquent, if we can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans. As such, we may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable discount. To the extent we cannot reasonably estimate cash flows, interest income recognition is discontinued. The Company has determined that it can reasonably estimate future cash flows on our acquired loans that are past due 90 days or more and accruing interest and the Company expects to fully collect the carrying value of the loans.
The below table is an age analysis of past due loans, segregated by originated and acquired loan and lease portfolios, and by class of loans, as of
June 30, 2018
and
December 31, 2017
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
(in thousands)
|
30-89 days
|
|
90 days or more
|
|
Current Loans
|
|
Total Loans
|
|
90 days and accruing
1
|
|
Nonaccrual
|
Originated Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
95,618
|
|
|
$
|
95,618
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Commercial and industrial other
|
515
|
|
|
940
|
|
|
937,603
|
|
|
939,058
|
|
|
0
|
|
|
4,576
|
|
Subtotal commercial and industrial
|
515
|
|
|
940
|
|
|
1,033,221
|
|
|
1,034,676
|
|
|
0
|
|
|
4,576
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
0
|
|
|
0
|
|
|
232,922
|
|
|
232,922
|
|
|
0
|
|
|
0
|
|
Agriculture
|
0
|
|
|
0
|
|
|
143,229
|
|
|
143,229
|
|
|
0
|
|
|
0
|
|
Commercial real estate other
|
1,252
|
|
|
1,855
|
|
|
1,734,579
|
|
|
1,737,686
|
|
|
0
|
|
|
5,431
|
|
Subtotal commercial real estate
|
1,252
|
|
|
1,855
|
|
|
2,110,730
|
|
|
2,113,837
|
|
|
0
|
|
|
5,431
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
835
|
|
|
566
|
|
|
206,419
|
|
|
207,820
|
|
|
0
|
|
|
1,300
|
|
Mortgages
|
2,402
|
|
|
2,206
|
|
|
1,071,257
|
|
|
1,075,865
|
|
|
0
|
|
|
7,425
|
|
Subtotal residential real estate
|
3,237
|
|
|
2,772
|
|
|
1,277,676
|
|
|
1,283,685
|
|
|
0
|
|
|
8,725
|
|
Consumer and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect
|
284
|
|
|
86
|
|
|
11,681
|
|
|
12,051
|
|
|
0
|
|
|
211
|
|
Consumer and other
|
587
|
|
|
63
|
|
|
51,478
|
|
|
52,128
|
|
|
0
|
|
|
139
|
|
Subtotal consumer and other
|
871
|
|
|
149
|
|
|
63,159
|
|
|
64,179
|
|
|
0
|
|
|
350
|
|
Leases
|
0
|
|
|
0
|
|
|
14,461
|
|
|
14,461
|
|
|
0
|
|
|
0
|
|
Total loans and leases
|
5,875
|
|
|
5,716
|
|
|
4,499,247
|
|
|
4,510,838
|
|
|
0
|
|
|
19,082
|
|
Less: unearned income and deferred costs and fees
|
0
|
|
|
0
|
|
|
(3,832
|
)
|
|
(3,832
|
)
|
|
0
|
|
|
0
|
|
Total originated loans and leases, net of unearned income and deferred costs and fees
|
$
|
5,875
|
|
|
$
|
5,716
|
|
|
$
|
4,495,415
|
|
|
$
|
4,507,006
|
|
|
$
|
0
|
|
|
$
|
19,082
|
|
Acquired Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
0
|
|
|
82
|
|
|
45,883
|
|
|
45,965
|
|
|
59
|
|
|
23
|
|
Subtotal commercial and industrial
|
0
|
|
|
82
|
|
|
45,883
|
|
|
45,965
|
|
|
59
|
|
|
23
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
0
|
|
|
0
|
|
|
1,432
|
|
|
1,432
|
|
|
0
|
|
|
0
|
|
Agriculture
|
0
|
|
|
0
|
|
|
236
|
|
|
236
|
|
|
0
|
|
|
0
|
|
Commercial real estate other
|
231
|
|
|
2,245
|
|
|
187,246
|
|
|
189,722
|
|
|
568
|
|
|
232
|
|
Subtotal commercial real estate
|
231
|
|
|
2,245
|
|
|
188,914
|
|
|
191,390
|
|
|
568
|
|
|
232
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
320
|
|
|
341
|
|
|
23,764
|
|
|
24,425
|
|
|
61
|
|
|
1,130
|
|
Mortgages
|
554
|
|
|
671
|
|
|
20,276
|
|
|
21,501
|
|
|
422
|
|
|
1,288
|
|
Subtotal residential real estate
|
874
|
|
|
1,012
|
|
|
44,040
|
|
|
45,926
|
|
|
483
|
|
|
2,418
|
|
Consumer and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other
|
3
|
|
|
0
|
|
|
903
|
|
|
906
|
|
|
0
|
|
|
0
|
|
Subtotal consumer and other
|
3
|
|
|
0
|
|
|
903
|
|
|
906
|
|
|
0
|
|
|
0
|
|
Total acquired loans and leases, net of unearned income and deferred costs and fees
|
$
|
1,108
|
|
|
$
|
3,339
|
|
|
$
|
279,740
|
|
|
$
|
284,187
|
|
|
$
|
1,110
|
|
|
$
|
2,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
(in thousands)
|
30-89 days
|
|
90 days or more
|
|
Current Loans
|
|
Total Loans
|
|
90 days and accruing
1
|
|
Nonaccrual
|
Originated loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
108,608
|
|
|
$
|
108,608
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Commercial and industrial other
|
431
|
|
|
849
|
|
|
930,787
|
|
|
932,067
|
|
|
0
|
|
|
2,852
|
|
Subtotal commercial and industrial
|
431
|
|
|
849
|
|
|
1,039,395
|
|
|
1,040,675
|
|
|
0
|
|
|
2,852
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
0
|
|
|
0
|
|
|
202,486
|
|
|
202,486
|
|
|
0
|
|
|
0
|
|
Agriculture
|
0
|
|
|
0
|
|
|
129,712
|
|
|
129,712
|
|
|
0
|
|
|
0
|
|
Commercial real estate other
|
1,583
|
|
|
2,125
|
|
|
1,657,074
|
|
|
1,660,782
|
|
|
0
|
|
|
5,402
|
|
Subtotal commercial real estate
|
1,583
|
|
|
2,125
|
|
|
1,989,272
|
|
|
1,992,980
|
|
|
0
|
|
|
5,402
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
1,045
|
|
|
448
|
|
|
211,319
|
|
|
212,812
|
|
|
0
|
|
|
1,537
|
|
Mortgages
|
3,153
|
|
|
2,692
|
|
|
1,033,195
|
|
|
1,039,040
|
|
|
0
|
|
|
6,108
|
|
Subtotal residential real estate
|
4,198
|
|
|
3,140
|
|
|
1,244,514
|
|
|
1,251,852
|
|
|
0
|
|
|
7,645
|
|
Consumer and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect
|
449
|
|
|
205
|
|
|
11,490
|
|
|
12,144
|
|
|
6
|
|
|
278
|
|
Consumer and other
|
130
|
|
|
42
|
|
|
50,042
|
|
|
50,214
|
|
|
38
|
|
|
76
|
|
Subtotal consumer and other
|
579
|
|
|
247
|
|
|
61,532
|
|
|
62,358
|
|
|
44
|
|
|
354
|
|
Leases
|
0
|
|
|
0
|
|
|
14,467
|
|
|
14,467
|
|
|
0
|
|
|
0
|
|
Total loans and leases
|
6,791
|
|
|
6,361
|
|
|
4,349,180
|
|
|
4,362,332
|
|
|
44
|
|
|
16,253
|
|
Less: unearned income and deferred costs and fees
|
0
|
|
|
0
|
|
|
(3,789
|
)
|
|
(3,789
|
)
|
|
0
|
|
|
0
|
|
Total originated loans and leases, net of unearned income and deferred costs and fees
|
$
|
6,791
|
|
|
$
|
6,361
|
|
|
$
|
4,345,391
|
|
|
$
|
4,358,543
|
|
|
$
|
44
|
|
|
$
|
16,253
|
|
Acquired loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
12
|
|
|
61
|
|
|
50,903
|
|
|
50,976
|
|
|
61
|
|
|
0
|
|
Subtotal commercial and industrial
|
12
|
|
|
61
|
|
|
50,903
|
|
|
50,976
|
|
|
61
|
|
|
0
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
0
|
|
|
0
|
|
|
1,480
|
|
|
1,480
|
|
|
0
|
|
|
0
|
|
Agriculture
|
0
|
|
|
0
|
|
|
247
|
|
|
247
|
|
|
0
|
|
|
0
|
|
Commercial real estate other
|
167
|
|
|
727
|
|
|
205,126
|
|
|
206,020
|
|
|
515
|
|
|
546
|
|
Subtotal commercial real estate
|
167
|
|
|
727
|
|
|
206,853
|
|
|
207,747
|
|
|
515
|
|
|
546
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
601
|
|
|
564
|
|
|
27,279
|
|
|
28,444
|
|
|
130
|
|
|
1,604
|
|
Mortgages
|
472
|
|
|
942
|
|
|
21,231
|
|
|
22,645
|
|
|
440
|
|
|
1,114
|
|
Subtotal residential real estate
|
1,073
|
|
|
1,506
|
|
|
48,510
|
|
|
51,089
|
|
|
570
|
|
|
2,718
|
|
Consumer and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other
|
4
|
|
|
0
|
|
|
761
|
|
|
765
|
|
|
0
|
|
|
0
|
|
Subtotal consumer and other
|
4
|
|
|
0
|
|
|
761
|
|
|
765
|
|
|
0
|
|
|
0
|
|
Covered loans
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Total acquired loans and leases, net of unearned income and deferred costs and fees
|
$
|
1,256
|
|
|
$
|
2,294
|
|
|
$
|
307,027
|
|
|
$
|
310,577
|
|
|
$
|
1,146
|
|
|
$
|
3,264
|
|
1
Includes acquired loans that were recorded at fair value at the acquisition date.
6. Allowance for Loan and Lease Losses
Originated Loans and Leases
Management reviews the appropriateness of the allowance for loan and lease losses (“allowance”) on a regular basis. Management considers the accounting policy relating to the allowance to be a critical accounting policy, given the inherent uncertainty in evaluating the levels of the allowance required to cover credit losses in the portfolio and the material effect that assumptions could have on the Company’s results of operations. The Company has developed a methodology to measure the amount of estimated loan loss exposure inherent in the loan portfolio to assure that an appropriate allowance is maintained. The Company’s methodology is based upon guidance provided in SEC Staff Accounting Bulletin No. 102,
Selected Loan Loss Allowance Methodology and Documentation Issues
and ASC Topic 310,
Receivables
and ASC Topic 450,
Contingencies
.
The model is comprised of four major components that management has deemed appropriate in evaluating the appropriateness of the allowance for loan and lease losses. While none of these components, when used independently, is effective in arriving at a reserve level that appropriately measures the risk inherent in the portfolio, management believes that using them collectively, provides reasonable measurement of the loss exposure in the portfolio. The four components include: impaired loans; individually reviewed and graded loans; historical loss experience; and qualitative or subjective analysis.
Since the methodology is based upon historical experience and trends as well as management’s judgment, factors may arise that result in different estimates. Significant factors that could give rise to changes in these estimates may include, but are not limited to, changes in economic conditions in the local area, concentration of risk, changes in interest rates, and declines in local property values. While management’s evaluation of the allowance as of
June 30, 2018
, considers the allowance to be appropriate, under adversely different conditions or assumptions, the Company would need to increase or decrease the allowance.
Acquired Loans and Leases
Acquired loans accounted for under ASC 310-30
For our acquired loans, our allowance for loan losses is estimated based upon our expected cash flows for these loans. To the extent that we experience a deterioration in borrower credit quality resulting in a decrease in our expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be established based on our estimate of future credit losses over the remaining life of the loans.
Acquired loans accounted for under ASC 310-20
We establish our allowance for loan losses through a provision for credit losses based upon an evaluation process that is similar to our evaluation process used for originated loans. This evaluation, which includes a review of loans on which full collectability may not be reasonably assured, considers, among other matters, the estimated fair value of the underlying collateral, economic conditions, historical net loan loss experience, carrying value of the loans, which includes the remaining net purchase discount or premium, and other factors that warrant recognition in determining our allowance for loan losses.
The following tables detail activity in the allowance for loan and lease losses segregated by originated and acquired loan and lease portfolios and by portfolio segment for the three and six months ended
June 30, 2018
and
2017
. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial
and Industrial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Consumer
and Other
|
|
|
Finance
Leases
|
|
|
Total
|
|
Allowance for originated loans and leases
|
Beginning balance
|
$
|
12,431
|
|
|
$
|
20,402
|
|
|
$
|
5,972
|
|
|
$
|
1,302
|
|
|
$
|
0
|
|
|
$
|
40,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
(103
|
)
|
|
(60
|
)
|
|
(21
|
)
|
|
(650
|
)
|
|
0
|
|
|
(834
|
)
|
Recoveries
|
2
|
|
|
176
|
|
|
94
|
|
|
531
|
|
|
0
|
|
|
803
|
|
Provision (credit)
|
536
|
|
|
252
|
|
|
102
|
|
|
145
|
|
|
0
|
|
|
1,035
|
|
Ending Balance
|
$
|
12,866
|
|
|
$
|
20,770
|
|
|
$
|
6,147
|
|
|
$
|
1,328
|
|
|
$
|
0
|
|
|
$
|
41,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial
and Industrial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Consumer
and Other
|
|
|
Finance
Leases
|
|
|
Total
|
|
Allowance for acquired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
25
|
|
|
$
|
0
|
|
|
$
|
73
|
|
|
$
|
6
|
|
|
$
|
0
|
|
|
$
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
0
|
|
|
0
|
|
|
(103
|
)
|
|
0
|
|
|
0
|
|
|
(103
|
)
|
Recoveries
|
36
|
|
|
15
|
|
|
50
|
|
|
2
|
|
|
0
|
|
|
103
|
|
Provision (credit)
|
(42
|
)
|
|
10
|
|
|
45
|
|
|
(3
|
)
|
|
0
|
|
|
10
|
|
Ending Balance
|
$
|
19
|
|
|
$
|
25
|
|
|
$
|
65
|
|
|
$
|
5
|
|
|
$
|
0
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial
and Industrial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Consumer
and Other
|
|
|
Finance
Leases
|
|
|
Total
|
|
Allowance for originated loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
10,273
|
|
|
$
|
19,114
|
|
|
$
|
5,386
|
|
|
$
|
1,142
|
|
|
$
|
0
|
|
|
$
|
35,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
(2
|
)
|
|
0
|
|
|
(68
|
)
|
|
(249
|
)
|
|
0
|
|
|
(319
|
)
|
Recoveries
|
54
|
|
|
218
|
|
|
109
|
|
|
137
|
|
|
0
|
|
|
518
|
|
Provision (credit)
|
517
|
|
|
(211
|
)
|
|
334
|
|
|
206
|
|
|
0
|
|
|
846
|
|
Ending Balance
|
$
|
10,842
|
|
|
$
|
19,121
|
|
|
$
|
5,761
|
|
|
$
|
1,236
|
|
|
$
|
0
|
|
|
$
|
36,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial
and Industrial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Consumer
and Other
|
|
|
Covered
Loans
|
|
|
Total
|
|
Allowance for acquired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
0
|
|
|
$
|
76
|
|
|
$
|
169
|
|
|
$
|
6
|
|
|
$
|
0
|
|
|
$
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
(65
|
)
|
|
0
|
|
|
(152
|
)
|
|
(1
|
)
|
|
0
|
|
|
(218
|
)
|
Recoveries
|
0
|
|
|
16
|
|
|
12
|
|
|
6
|
|
|
0
|
|
|
34
|
|
Provision (credit)
|
115
|
|
|
(5
|
)
|
|
25
|
|
|
(5
|
)
|
|
0
|
|
|
130
|
|
Ending Balance
|
$
|
50
|
|
|
$
|
87
|
|
|
$
|
54
|
|
|
$
|
6
|
|
|
$
|
0
|
|
|
$
|
197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial
and Industrial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Consumer
and Other
|
|
|
Finance
Leases
|
|
|
Total
|
|
Allowance for originated loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
11,812
|
|
|
$
|
20,412
|
|
|
$
|
6,161
|
|
|
$
|
1,301
|
|
|
$
|
0
|
|
|
$
|
39,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
(106
|
)
|
|
(60
|
)
|
|
(206
|
)
|
|
(942
|
)
|
|
0
|
|
|
(1,314
|
)
|
Recoveries
|
8
|
|
|
346
|
|
|
136
|
|
|
606
|
|
|
0
|
|
|
1,096
|
|
Provision (credit)
|
1,152
|
|
|
72
|
|
|
56
|
|
|
363
|
|
|
0
|
|
|
1,643
|
|
Ending Balance
|
$
|
12,866
|
|
|
$
|
20,770
|
|
|
$
|
6,147
|
|
|
$
|
1,328
|
|
|
$
|
0
|
|
|
$
|
41,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial
and Industrial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Consumer
and Other
|
|
|
Covered
Loans
|
|
|
Total
|
|
Allowance for acquired loans
|
Beginning balance
|
$
|
25
|
|
|
$
|
0
|
|
|
$
|
54
|
|
|
$
|
6
|
|
|
$
|
0
|
|
|
$
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
(1
|
)
|
|
0
|
|
|
(103
|
)
|
|
0
|
|
|
0
|
|
|
(104
|
)
|
Recoveries
|
56
|
|
|
23
|
|
|
83
|
|
|
2
|
|
|
0
|
|
|
164
|
|
Provision (credit)
|
(61
|
)
|
|
2
|
|
|
31
|
|
|
(3
|
)
|
|
0
|
|
|
(31
|
)
|
Ending Balance
|
$
|
19
|
|
|
$
|
25
|
|
|
$
|
65
|
|
|
$
|
5
|
|
|
$
|
0
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial
and Industrial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Consumer
and Other
|
|
|
Finance
Leases
|
|
|
Total
|
|
Allowance for originated loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
9,389
|
|
|
$
|
19,836
|
|
|
$
|
5,149
|
|
|
$
|
1,224
|
|
|
$
|
0
|
|
|
$
|
35,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
(77
|
)
|
|
(21
|
)
|
|
(441
|
)
|
|
(530
|
)
|
|
0
|
|
|
(1,069
|
)
|
Recoveries
|
130
|
|
|
452
|
|
|
136
|
|
|
265
|
|
|
0
|
|
|
983
|
|
Provision (credit)
|
1,400
|
|
|
(1,146
|
)
|
|
917
|
|
|
277
|
|
|
0
|
|
|
1,448
|
|
Ending Balance
|
$
|
10,842
|
|
|
$
|
19,121
|
|
|
$
|
5,761
|
|
|
$
|
1,236
|
|
|
$
|
0
|
|
|
$
|
36,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial
and Industrial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Consumer
and Other
|
|
|
Covered
Loans
|
|
|
Total
|
|
Allowance for acquired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
0
|
|
|
$
|
97
|
|
|
$
|
54
|
|
|
$
|
6
|
|
|
$
|
0
|
|
|
$
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
(74
|
)
|
|
(73
|
)
|
|
(152
|
)
|
|
(1
|
)
|
|
0
|
|
|
(300
|
)
|
Recoveries
|
0
|
|
|
25
|
|
|
12
|
|
|
6
|
|
|
0
|
|
|
43
|
|
Provision (credit)
|
124
|
|
|
38
|
|
|
140
|
|
|
(5
|
)
|
|
0
|
|
|
297
|
|
Ending Balance
|
$
|
50
|
|
|
$
|
87
|
|
|
$
|
54
|
|
|
$
|
6
|
|
|
$
|
0
|
|
|
$
|
197
|
|
At
June 30, 2018
and
December 31, 2017
, the allocation of the allowance for loan and lease losses summarized on the basis of the Company’s impairment methodology was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial
and Industrial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Consumer
and Other
|
|
|
Finance
Leases
|
|
|
Total
|
|
Allowance for originated loans and leases
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
412
|
|
|
$
|
29
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
441
|
|
Collectively evaluated for impairment
|
12,454
|
|
|
20,741
|
|
|
6,147
|
|
|
1,328
|
|
|
0
|
|
|
40,670
|
|
Ending balance
|
$
|
12,866
|
|
|
$
|
20,770
|
|
|
$
|
6,147
|
|
|
$
|
1,328
|
|
|
$
|
0
|
|
|
$
|
41,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial
and Industrial
|
|
|
Commercial Real Estate
|
|
|
Residential Real Estate
|
|
|
Consumer
and Other
|
|
|
Covered Loans
|
|
|
Total
|
|
Allowance for acquired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
0
|
|
|
$
|
25
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25
|
|
Collectively evaluated for impairment
|
19
|
|
|
0
|
|
|
65
|
|
|
5
|
|
|
0
|
|
|
89
|
|
Ending balance
|
$
|
19
|
|
|
$
|
25
|
|
|
$
|
65
|
|
|
$
|
5
|
|
|
$
|
0
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial and Industrial
|
|
|
Commercial Real Estate
|
|
|
Residential Real Estate
|
|
|
Consumer
and Other
|
|
|
Finance Leases
|
|
|
Total
|
|
Allowance for originated loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
441
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
441
|
|
Collectively evaluated for impairment
|
11,371
|
|
|
20,412
|
|
|
6,161
|
|
|
1,301
|
|
|
0
|
|
|
39,245
|
|
Ending balance
|
$
|
11,812
|
|
|
$
|
20,412
|
|
|
$
|
6,161
|
|
|
$
|
1,301
|
|
|
$
|
0
|
|
|
$
|
39,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial and Industrial
|
|
|
Commercial Real Estate
|
|
|
Residential Real Estate
|
|
|
Consumer
and Other
|
|
|
Covered Loans
|
|
|
Total
|
|
Allowance for acquired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
25
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25
|
|
Collectively evaluated for impairment
|
0
|
|
|
0
|
|
|
54
|
|
|
6
|
|
|
0
|
|
|
60
|
|
Ending balance
|
$
|
25
|
|
|
$
|
0
|
|
|
$
|
54
|
|
|
$
|
6
|
|
|
$
|
0
|
|
|
$
|
85
|
|
The recorded investment in loans and leases summarized on the basis of the Company’s impairment methodology as of
June 30, 2018
and
December 31, 2017
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial and Industrial
|
|
|
Commercial Real Estate
|
|
|
Residential Real Estate
|
|
|
Consumer
and Other
|
|
|
Finance Leases
|
|
|
Total
|
|
Originated loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
4,224
|
|
|
$
|
6,803
|
|
|
$
|
4,037
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
15,064
|
|
Collectively evaluated for impairment
|
1,030,452
|
|
|
2,107,034
|
|
|
1,279,648
|
|
|
64,179
|
|
|
14,461
|
|
|
4,495,774
|
|
Total
|
$
|
1,034,676
|
|
|
$
|
2,113,837
|
|
|
$
|
1,283,685
|
|
|
$
|
64,179
|
|
|
$
|
14,461
|
|
|
$
|
4,510,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial and Industrial
|
|
|
Commercial Real Estate
|
|
|
Residential Real Estate
|
|
|
Consumer
and Other
|
|
|
Covered Loans
|
|
|
Total
|
|
Acquired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
287
|
|
|
$
|
1,282
|
|
|
$
|
1,779
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
3,348
|
|
Loans acquired with deteriorated credit quality
|
101
|
|
|
6,066
|
|
|
5,372
|
|
|
0
|
|
|
0
|
|
|
11,539
|
|
Collectively evaluated for impairment
|
45,577
|
|
|
184,042
|
|
|
38,775
|
|
|
906
|
|
|
0
|
|
|
269,300
|
|
Total
|
$
|
45,965
|
|
|
$
|
191,390
|
|
|
$
|
45,926
|
|
|
$
|
906
|
|
|
$
|
0
|
|
|
$
|
284,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial and Industrial
|
|
|
Commercial Real Estate
|
|
|
Residential Real Estate
|
|
|
Consumer
and Other
|
|
|
Finance Leases
|
|
|
Total
|
|
Originated loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
1,759
|
|
|
$
|
6,626
|
|
|
$
|
3,965
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
12,350
|
|
Collectively evaluated for impairment
|
1,038,916
|
|
|
1,986,354
|
|
|
1,247,887
|
|
|
62,358
|
|
|
14,467
|
|
|
4,349,982
|
|
Total
|
$
|
1,040,675
|
|
|
$
|
1,992,980
|
|
|
$
|
1,251,852
|
|
|
$
|
62,358
|
|
|
$
|
14,467
|
|
|
$
|
4,362,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Commercial and Industrial
|
|
|
Commercial Real Estate
|
|
|
Residential Real Estate
|
|
|
Consumer
and Other
|
|
|
Covered Loans
|
|
|
Total
|
|
Acquired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
276
|
|
|
$
|
1,372
|
|
|
$
|
1,823
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
3,471
|
|
Loans acquired with deteriorated credit quality
|
506
|
|
|
7,481
|
|
|
3,975
|
|
|
0
|
|
|
0
|
|
|
11,962
|
|
Collectively evaluated for impairment
|
50,194
|
|
|
198,894
|
|
|
45,291
|
|
|
765
|
|
|
0
|
|
|
295,144
|
|
Total
|
$
|
50,976
|
|
|
$
|
207,747
|
|
|
$
|
51,089
|
|
|
$
|
765
|
|
|
$
|
0
|
|
|
$
|
310,577
|
|
A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans consist of our non-homogenous nonaccrual loans, and all loans restructured in a troubled debt restructuring (TDR). Specific reserves on individually identified impaired loans that are not collateral dependent are measured based on the present value of expected future cash flows discounted at the original effective interest rate of each loan. For loans that are collateral dependent, impairment is measured based on the fair value of the collateral less estimated selling costs, and such impaired amounts are generally charged off. The majority of impaired loans are collateral dependent impaired loans that have limited exposure or require limited specific reserves because of the amount of collateral support with respect to these loans, and previous charge-offs. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured. In these cases, interest is recognized on a cash basis. Impaired loans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/30/2018
|
|
12/31/2017
|
(in thousands)
|
Recorded Investment
|
|
Unpaid Principal Balance
|
|
Related Allowance
|
|
Recorded Investment
|
|
Unpaid Principal Balance
|
|
Related Allowance
|
Originated loans and leases with no related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
$
|
2,958
|
|
|
$
|
2,958
|
|
|
$
|
0
|
|
|
$
|
1,246
|
|
|
$
|
1,250
|
|
|
$
|
0
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate other
|
6,757
|
|
|
6,965
|
|
|
0
|
|
|
6,626
|
|
|
6,533
|
|
|
0
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
4,037
|
|
|
4,213
|
|
|
0
|
|
|
3,965
|
|
|
4,049
|
|
|
0
|
|
Subtotal
|
$
|
13,752
|
|
|
$
|
14,136
|
|
|
$
|
0
|
|
|
$
|
11,837
|
|
|
$
|
11,832
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated loans and leases with related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
1,266
|
|
|
1,266
|
|
|
412
|
|
|
513
|
|
|
532
|
|
|
441
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate other
|
46
|
|
|
57
|
|
|
29
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Subtotal
|
$
|
1,312
|
|
|
$
|
1,323
|
|
|
$
|
441
|
|
|
$
|
513
|
|
|
$
|
532
|
|
|
$
|
441
|
|
Total
|
$
|
15,064
|
|
|
$
|
15,459
|
|
|
$
|
441
|
|
|
$
|
12,350
|
|
|
$
|
12,364
|
|
|
$
|
441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/30/2018
|
|
12/31/2017
|
(in thousands)
|
Recorded Investment
|
|
Unpaid Principal Balance
|
|
Related Allowance
|
|
Recorded Investment
|
|
Unpaid Principal Balance
|
|
Related Allowance
|
Acquired loans and leases with no related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
$
|
287
|
|
|
$
|
379
|
|
|
$
|
0
|
|
|
$
|
226
|
|
|
$
|
226
|
|
|
$
|
0
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate other
|
1,257
|
|
|
1,258
|
|
|
0
|
|
|
1,372
|
|
|
1,474
|
|
|
0
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
1,779
|
|
|
1,809
|
|
|
0
|
|
|
1,823
|
|
|
1,854
|
|
|
0
|
|
Subtotal
|
$
|
3,323
|
|
|
$
|
3,446
|
|
|
$
|
0
|
|
|
$
|
3,421
|
|
|
$
|
3,554
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired loans and leases with related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
0
|
|
|
0
|
|
|
0
|
|
|
50
|
|
|
50
|
|
|
25
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate other
|
25
|
|
|
25
|
|
|
25
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Subtotal
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
50
|
|
|
$
|
50
|
|
|
$
|
25
|
|
Total
|
$
|
3,348
|
|
|
$
|
3,471
|
|
|
$
|
25
|
|
|
$
|
3,471
|
|
|
$
|
3,604
|
|
|
$
|
25
|
|
The average recorded investment and interest income recognized on impaired loans for the
three months ended June 30, 2018
and
2017
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended 06/30/2018
|
|
Three Months Ended 06/30/17
|
(in thousands)
|
Average Recorded Investment
|
|
Interest Income Recognized
|
|
Average Recorded Investment
|
|
Interest Income Recognized
|
Originated loans and leases with no related allowance
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
3,227
|
|
|
0
|
|
|
301
|
|
|
0
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate other
|
6,407
|
|
|
0
|
|
|
7,614
|
|
|
0
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
4,016
|
|
|
0
|
|
|
3,628
|
|
|
0
|
|
Subtotal
|
$
|
13,650
|
|
|
$
|
0
|
|
|
$
|
11,543
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
Originated loans and leases with related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
1,300
|
|
|
0
|
|
|
612
|
|
|
0
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate other
|
36
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Subtotal
|
$
|
1,336
|
|
|
$
|
0
|
|
|
$
|
612
|
|
|
$
|
0
|
|
Total
|
$
|
14,986
|
|
|
$
|
0
|
|
|
$
|
12,155
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended 06/30/2018
|
|
Three Months Ended 06/30/2017
|
(in thousands)
|
Average Recorded Investment
|
|
Interest Income Recognized
|
|
Average Recorded Investment
|
|
Interest Income Recognized
|
Acquired loans and leases with no related allowance
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
270
|
|
|
0
|
|
|
83
|
|
|
0
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Commercial real estate other
|
1,479
|
|
|
0
|
|
|
1,299
|
|
|
0
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
1,786
|
|
|
0
|
|
|
1,443
|
|
|
0
|
|
Subtotal
|
$
|
3,535
|
|
|
$
|
0
|
|
|
$
|
2,825
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
Acquired loans and leases with related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
0
|
|
|
0
|
|
|
50
|
|
|
0
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate other
|
37
|
|
|
0
|
|
|
267
|
|
|
0
|
|
Subtotal
|
$
|
37
|
|
|
$
|
0
|
|
|
$
|
317
|
|
|
$
|
0
|
|
Total
|
$
|
3,572
|
|
|
$
|
0
|
|
|
$
|
3,142
|
|
|
$
|
0
|
|
The average recorded investment and interest income recognized on impaired loans for the six months ended
June 30, 2018
and
2017
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
Six months ended
|
|
June 30, 2018
|
|
June 30, 2017
|
(in thousands)
|
Average Recorded Investment
|
|
Interest Income Recognized
|
|
Average Recorded Investment
|
|
Interest Income Recognized
|
Originated loans and leases with no related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
2,104
|
|
|
0
|
|
|
334
|
|
|
0
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate other
|
6,084
|
|
|
0
|
|
|
8,031
|
|
|
0
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
3,758
|
|
|
0
|
|
|
3,485
|
|
|
0
|
|
Subtotal
|
$
|
11,946
|
|
|
$
|
0
|
|
|
$
|
11,850
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
Originated loans and leases with related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
789
|
|
|
0
|
|
|
340
|
|
|
0
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate other
|
14
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Subtotal
|
$
|
803
|
|
|
$
|
0
|
|
|
$
|
340
|
|
|
$
|
0
|
|
Total
|
$
|
12,749
|
|
|
$
|
0
|
|
|
$
|
12,190
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
Six months ended
|
|
June 30, 2018
|
|
June 30, 2017
|
(in thousands)
|
Average Recorded Investment
|
|
Interest Income Recognized
|
|
Average Recorded Investment
|
|
Interest Income Recognized
|
Acquired loans and leases with no related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
138
|
|
|
0
|
|
|
66
|
|
|
0
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
0
|
|
|
0
|
|
|
51
|
|
|
0
|
|
Commercial real estate other
|
1,637
|
|
|
0
|
|
|
2,774
|
|
|
0
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
1,966
|
|
|
0
|
|
|
1,694
|
|
|
0
|
|
Subtotal
|
$
|
3,741
|
|
|
$
|
0
|
|
|
$
|
4,585
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
Acquired loans and leases with related allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial other
|
—
|
|
|
0
|
|
|
20
|
|
|
0
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate other
|
15
|
|
|
0
|
|
|
267
|
|
|
0
|
|
Subtotal
|
$
|
15
|
|
|
$
|
0
|
|
|
$
|
287
|
|
|
$
|
0
|
|
Total
|
$
|
3,756
|
|
|
$
|
0
|
|
|
$
|
4,872
|
|
|
$
|
0
|
|
Loans are considered modified in a TDR when, due to a borrower’s financial difficulties, the Company makes concessions to the borrower that it would not otherwise consider. These modifications may include, among others, an extension for the term of the loan, and granting a period when interest-only payments can be made with the principal payments made over the remaining term of the loan or at maturity.
The following tables present information on loans modified in troubled debt restructuring during the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
Three Months Ended
|
|
|
|
|
|
|
|
Defaulted TDRs
2
|
(in thousands)
|
Number of Loans
|
|
Pre-Modification Outstanding Recorded Investment
|
|
Post-Modification Outstanding Recorded Investment
|
|
Number of Loans
|
|
Post-Modification Outstanding Recorded Investment
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
1
|
1
|
|
|
49
|
|
|
49
|
|
|
0
|
|
|
0
|
|
Total
|
1
|
|
|
$
|
49
|
|
|
$
|
49
|
|
|
0
|
|
|
$
|
0
|
|
1
Represents the following concessions: extension of term and reduction of rate.
2
TDRs that defaulted during the
three months ended June 30, 2018
that were restructured in the prior twelve months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
Three Months Ended
|
|
|
|
|
|
|
|
Defaulted TDRs
2
|
(in thousands)
|
Number of Loans
|
|
Pre-Modification Outstanding Recorded Investment
|
|
Post-Modification Outstanding Recorded Investment
|
|
Number of Loans
|
|
Post-Modification Outstanding Recorded Investment
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
1
|
1
|
|
|
89
|
|
|
89
|
|
|
0
|
|
|
0
|
|
Total
|
1
|
|
|
$
|
89
|
|
|
$
|
89
|
|
|
0
|
|
|
$
|
0
|
|
1
Represents the following concessions: extension of term and reduction of rate.
2
TDRs that defaulted during the three months ended
June 30, 2017
that had been restructured in the prior twelve months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
Defaulted TDRs
2
|
(in thousands)
|
Number of
Loans
|
|
Pre-
Modification
Outstanding
Recorded
Investment
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
|
Number of
Loans
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
1
|
2
|
|
|
112
|
|
|
112
|
|
|
0
|
|
|
0
|
|
Total
|
2
|
|
|
$
|
112
|
|
|
$
|
112
|
|
|
0
|
|
|
$
|
0
|
|
1
Represents the following concessions: extension of term and reduction of rate.
2
TDRs that defaulted during the six months ended
June 30, 2018
that had been restructured in the prior twelve months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
Defaulted TDRs
2
|
(in thousands)
|
Number of
Loans
|
|
Pre-
Modification
Outstanding
Recorded
Investment
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
|
Number of
Loans
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
1
|
2
|
|
|
162
|
|
|
162
|
|
|
1
|
|
|
55
|
|
Total
|
2
|
|
|
$
|
162
|
|
|
$
|
162
|
|
|
1
|
|
|
$
|
55
|
|
1
Represents the following concessions: extension of term and reduction of rate.
2
TDRs that defaulted during the six months ended
June 30, 2017
that had been restructured in the prior twelve months.
The following tables present credit quality indicators (internal risk grade) by class of commercial and industrial loans and commercial real estate loans as of
June 30, 2018
and
December 31, 2017
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial
|
|
Commercial and Industrial
|
|
CommercialReal Estate
|
|
CommercialReal Estate
|
|
CommercialReal Estate
|
|
|
(in thousands)
|
Other
|
|
Agriculture
|
|
Other
|
|
Agriculture
|
|
Construction
|
|
Total
|
|
Originated Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
916,710
|
|
|
$
|
80,377
|
|
|
$
|
1,705,560
|
|
|
$
|
127,304
|
|
|
$
|
232,922
|
|
|
$
|
3,062,873
|
|
Special Mention
|
16,497
|
|
|
4,655
|
|
|
17,250
|
|
|
5,666
|
|
|
0
|
|
|
44,068
|
|
Substandard
|
5,851
|
|
|
10,586
|
|
|
14,876
|
|
|
10,259
|
|
|
0
|
|
|
41,572
|
|
Total
|
$
|
939,058
|
|
|
$
|
95,618
|
|
|
$
|
1,737,686
|
|
|
$
|
143,229
|
|
|
$
|
232,922
|
|
|
$
|
3,148,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial
|
|
Commercial and Industrial
|
|
Commercial Real Estate
|
|
Commercial Real Estate
|
|
Commercial Real Estate
|
|
|
(in thousands)
|
Other
|
|
Agriculture
|
|
Other
|
|
Agriculture
|
|
Construction
|
|
Total
|
|
Acquired Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
45,682
|
|
|
$
|
0
|
|
|
$
|
186,356
|
|
|
$
|
236
|
|
|
$
|
1,432
|
|
|
$
|
233,706
|
|
Special Mention
|
0
|
|
|
0
|
|
|
469
|
|
|
0
|
|
|
0
|
|
|
469
|
|
Substandard
|
283
|
|
|
0
|
|
|
2,897
|
|
|
0
|
|
|
0
|
|
|
3,180
|
|
Total
|
$
|
45,965
|
|
|
$
|
0
|
|
|
$
|
189,722
|
|
|
$
|
236
|
|
|
$
|
1,432
|
|
|
$
|
237,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial
|
|
Commercial and Industrial
|
|
Commercial Real Estate
|
|
Commercial Real Estate
|
|
Commercial Real Estate
|
|
|
(in thousands)
|
Other
|
|
Agriculture
|
|
Other
|
|
Agriculture
|
|
Construction
|
|
Total
|
|
Originated Loans and Leases
|
Internal risk grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
919,214
|
|
|
$
|
100,470
|
|
|
$
|
1,627,713
|
|
|
$
|
119,392
|
|
|
$
|
201,948
|
|
|
$
|
2,968,737
|
|
Special Mention
|
6,680
|
|
|
8,068
|
|
|
19,068
|
|
|
9,980
|
|
|
538
|
|
|
44,334
|
|
Substandard
|
6,173
|
|
|
70
|
|
|
14,001
|
|
|
340
|
|
|
0
|
|
|
20,584
|
|
Total
|
$
|
932,067
|
|
|
$
|
108,608
|
|
|
$
|
1,660,782
|
|
|
$
|
129,712
|
|
|
$
|
202,486
|
|
|
$
|
3,033,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial
|
|
Commercial and Industrial
|
|
Commercial Real Estate
|
|
Commercial Real Estate
|
|
Commercial Real Estate
|
|
|
(in thousands)
|
Other
|
|
Agriculture
|
|
Other
|
|
Agriculture
|
|
Construction
|
|
Total
|
|
Acquired Loans and Leases
|
Internal risk grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
50,554
|
|
|
$
|
0
|
|
|
$
|
198,822
|
|
|
$
|
247
|
|
|
$
|
1,480
|
|
|
$
|
251,103
|
|
Special Mention
|
0
|
|
|
0
|
|
|
2,265
|
|
|
0
|
|
|
0
|
|
|
2,265
|
|
Substandard
|
422
|
|
|
0
|
|
|
4,933
|
|
|
0
|
|
|
0
|
|
|
5,355
|
|
Total
|
$
|
50,976
|
|
|
$
|
0
|
|
|
$
|
206,020
|
|
|
$
|
247
|
|
|
$
|
1,480
|
|
|
$
|
258,723
|
|
The following tables present credit quality indicators by class of residential real estate loans and by class of consumer loans. Nonperforming loans include nonaccrual, impaired, and loans 90 days past due and accruing interest. All other loans are considered performing as of
June 30, 2018
and
December 31, 2017
. For purposes of this footnote, acquired loans that were recorded at fair value at the acquisition date and are 90 days or greater past due are considered performing.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Residential
Home Equity
|
|
Residential
Mortgages
|
|
Consumer
Indirect
|
|
Consumer
Other
|
|
Total
|
Originated Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
$
|
206,520
|
|
|
$
|
1,068,440
|
|
|
$
|
11,840
|
|
|
$
|
51,989
|
|
|
$
|
1,338,789
|
|
Nonperforming
|
1,300
|
|
|
7,425
|
|
|
211
|
|
|
139
|
|
|
9,075
|
|
Total
|
$
|
207,820
|
|
|
$
|
1,075,865
|
|
|
$
|
12,051
|
|
|
$
|
52,128
|
|
|
$
|
1,347,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Residential
Home Equity
|
|
Residential
Mortgages
|
|
Consumer
Indirect
|
|
Consumer
Other
|
|
Total
|
Acquired Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
$
|
23,234
|
|
|
$
|
19,791
|
|
|
$
|
0
|
|
|
$
|
906
|
|
|
$
|
43,931
|
|
Nonperforming
|
1,191
|
|
|
1,710
|
|
|
0
|
|
|
0
|
|
|
2,901
|
|
Total
|
$
|
24,425
|
|
|
$
|
21,501
|
|
|
$
|
0
|
|
|
$
|
906
|
|
|
$
|
46,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
(in thousands)
|
Residential
Home Equity
|
|
Residential
Mortgages
|
|
Consumer
Indirect
|
|
Consumer
Other
|
|
Total
|
Originated Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
$
|
211,275
|
|
|
$
|
1,032,932
|
|
|
$
|
11,866
|
|
|
$
|
50,138
|
|
|
$
|
1,306,211
|
|
Nonperforming
|
1,537
|
|
|
6,108
|
|
|
278
|
|
|
76
|
|
|
7,999
|
|
Total
|
$
|
212,812
|
|
|
$
|
1,039,040
|
|
|
$
|
12,144
|
|
|
$
|
50,214
|
|
|
$
|
1,314,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
(in thousands)
|
Residential
Home Equity
|
|
Residential
Mortgages
|
|
Consumer
Indirect
|
|
Consumer
Other
|
|
Total
|
Acquired Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
$
|
26,840
|
|
|
$
|
21,531
|
|
|
$
|
0
|
|
|
$
|
765
|
|
|
$
|
49,136
|
|
Nonperforming
|
1,604
|
|
|
1,114
|
|
|
0
|
|
|
0
|
|
|
2,718
|
|
Total
|
$
|
28,444
|
|
|
$
|
22,645
|
|
|
$
|
0
|
|
|
$
|
765
|
|
|
$
|
51,854
|
|
7. Earnings Per Share
Earnings per share in the table below, for the three and six month periods ended
June 30, 2018
and
2017
are calculated under the two-class method as required by ASC Topic 260, Earnings Per Share. ASC 260 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company has issued restricted stock awards that contain such rights and are therefore considered participating securities. Basic earnings per common share are calculated by dividing net income allocable to common stock by the weighted average number of common shares, excluding participating securities, during the period. Diluted earnings per common share include the dilutive effect of participating securities.
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in thousands, except share and per share data)
|
6/30/2018
|
|
6/30/17
|
Basic
|
|
|
|
|
|
Net income available to common shareholders
|
$
|
22,059
|
|
|
$
|
16,926
|
|
Less: income attributable to unvested stock-based compensation awards
|
(359
|
)
|
|
(266
|
)
|
Net earnings allocated to common shareholders
|
21,700
|
|
|
16,660
|
|
|
|
|
|
Weighted average shares outstanding, including unvested stock-based compensation awards
|
15,280,412
|
|
|
15,184,835
|
|
|
|
|
|
Less: unvested stock-based compensation awards
|
(242,351
|
)
|
|
(239,901
|
)
|
Weighted average shares outstanding - Basic
|
15,038,061
|
|
|
14,944,934
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
Net earnings allocated to common shareholders
|
21,700
|
|
|
16,660
|
|
|
|
|
|
Weighted average shares outstanding - Basic
|
15,038,061
|
|
|
14,944,934
|
|
|
|
|
|
Plus: incremental shares from assumed conversion of stock-based compensation awards
|
97,909
|
|
|
121,927
|
|
|
|
|
|
Weighted average shares outstanding - Diluted
|
15,135,970
|
|
|
15,066,861
|
|
|
|
|
|
Basic EPS
|
1.44
|
|
|
1.11
|
|
Diluted EPS
|
1.43
|
|
|
1.11
|
|
Stock-based compensation awards representing
19,668
and
21,317
of common shares during the three months ended
June 30, 2018
and
2017
, respectively, were not included in the computations of diluted earnings per common share because the effect on those periods would have been antidilutive.
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
(in thousands, except share and per share data)
|
6/30/2018
|
|
6/30/2017
|
Basic
|
|
|
|
|
|
Net income available to common shareholders
|
$
|
42,495
|
|
|
$
|
32,642
|
|
Less: income attributable to unvested stock-based compensation awards
|
(706
|
)
|
|
(527
|
)
|
Net earnings allocated to common shareholders
|
41,789
|
|
|
32,115
|
|
|
|
|
|
Weighted average shares outstanding, including unvested stock-based compensation awards
|
15,276,194
|
|
|
15,168,310
|
|
|
|
|
|
Less: unvested stock-based compensation awards
|
(250,402
|
)
|
|
(245,242
|
)
|
Weighted average shares outstanding - Basic
|
15,025,792
|
|
|
14,923,068
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
Net earnings allocated to common shareholders
|
41,789
|
|
|
32,115
|
|
|
|
|
|
Weighted average shares outstanding - Basic
|
15,025,792
|
|
|
14,923,068
|
|
|
|
|
|
Plus: incremental shares from assumed conversion of stock-based compensation awards
|
98,475
|
|
|
131,802
|
|
|
|
|
|
Weighted average shares outstanding - Diluted
|
15,124,267
|
|
|
15,054,870
|
|
|
|
|
|
Basic EPS
|
2.78
|
|
|
2.15
|
|
Diluted EPS
|
2.76
|
|
|
2.13
|
|
Stock-based compensation awards representing approximately
20,067
and
41,559
of common shares during the six months ended
June 30, 2018
and
2017
, respectively were not included in the computations of diluted earnings per common share because the effect on those periods would have been antidilutive.
8. Other Comprehensive Income (Loss)
The following tables present reclassifications out of the accumulated other comprehensive income (loss) for the three and six month periods ended
June 30, 2018
and
2017
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
(in thousands)
|
Before-Tax
Amount
|
|
Tax (Expense)
Benefit
|
|
Net of Tax
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
Change in net unrealized gain/loss during the period
|
$
|
(5,335
|
)
|
|
$
|
1,307
|
|
|
$
|
(4,028
|
)
|
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income
|
(170
|
)
|
|
42
|
|
|
(128
|
)
|
Net unrealized gains/losses
|
(5,505
|
)
|
|
1,349
|
|
|
(4,156
|
)
|
|
|
|
|
|
|
Employee benefit plans:
|
|
|
|
|
|
|
|
|
Amortization of net retirement plan actuarial gain
|
442
|
|
|
(108
|
)
|
|
334
|
|
Amortization of net retirement plan prior service cost
|
4
|
|
|
(1
|
)
|
|
3
|
|
Employee benefit plans
|
446
|
|
|
(109
|
)
|
|
337
|
|
Other comprehensive (loss) income
|
$
|
(5,059
|
)
|
|
$
|
1,240
|
|
|
$
|
(3,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
(in thousands)
|
Before-Tax
Amount
|
|
Tax (Expense)
Benefit
|
|
Net of Tax
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
Change in net unrealized gain/loss during the period
|
$
|
3,051
|
|
|
$
|
(1,220
|
)
|
|
$
|
1,831
|
|
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income
|
0
|
|
|
0
|
|
|
0
|
|
Net unrealized gains
|
3,051
|
|
|
(1,220
|
)
|
|
1,831
|
|
|
|
|
|
|
|
Employee benefit plans:
|
|
|
|
|
|
|
|
|
Amortization of net retirement plan actuarial gain
|
397
|
|
|
(159
|
)
|
|
238
|
|
Amortization of net retirement plan prior service cost
|
(15
|
)
|
|
6
|
|
|
(9
|
)
|
Employee benefit plans
|
382
|
|
|
(153
|
)
|
|
229
|
|
Other comprehensive income
|
$
|
3,433
|
|
|
$
|
(1,373
|
)
|
|
$
|
2,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
(in thousands)
|
Before-Tax
Amount
|
|
Tax (Expense)
Benefit
|
|
Net of Tax
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
Change in net unrealized gain/loss during the period
|
$
|
(24,686
|
)
|
|
$
|
6,048
|
|
|
$
|
(18,638
|
)
|
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income
|
(294
|
)
|
|
72
|
|
|
(222
|
)
|
Net unrealized gains/losses
|
(24,980
|
)
|
|
6,120
|
|
|
(18,860
|
)
|
|
|
|
|
|
|
Employee benefit plans:
|
|
|
|
|
|
|
|
|
Amortization of net retirement plan actuarial gain
|
860
|
|
|
(211
|
)
|
|
649
|
|
Amortization of net retirement plan prior service cost
|
8
|
|
|
(2
|
)
|
|
6
|
|
Employee benefit plans
|
868
|
|
|
(213
|
)
|
|
655
|
|
Other comprehensive (loss) income
|
$
|
(24,112
|
)
|
|
$
|
5,907
|
|
|
$
|
(18,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2017
|
(in thousands)
|
Before-Tax
Amount
|
|
Tax (Expense)
Benefit
|
|
Net of Tax
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
Change in net unrealized gain/loss during the period
|
$
|
5,044
|
|
|
$
|
(2,016
|
)
|
|
$
|
3,028
|
|
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income
|
0
|
|
|
0
|
|
|
0
|
|
Net unrealized gains
|
5,044
|
|
|
(2,016
|
)
|
|
3,028
|
|
|
|
|
|
|
|
Employee benefit plans:
|
|
|
|
|
|
|
|
|
Amortization of net retirement plan actuarial gain
|
754
|
|
|
(302
|
)
|
|
452
|
|
Amortization of net retirement plan prior service credit
|
8
|
|
|
(3
|
)
|
|
5
|
|
Employee benefit plans
|
762
|
|
|
(305
|
)
|
|
457
|
|
|
|
|
|
|
|
Other comprehensive income
|
$
|
5,806
|
|
|
$
|
(2,321
|
)
|
|
$
|
3,485
|
|
The following table presents the activity in our accumulated other comprehensive income (loss) for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Available-for-
Sale Securities
|
|
Employee
Benefit Plans
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
Balance at March 31, 2018
|
$
|
(27,644
|
)
|
|
$
|
(37,973
|
)
|
|
$
|
(65,617
|
)
|
Other comprehensive income (loss) before reclassifications
|
(4,028
|
)
|
|
0
|
|
|
(4,028
|
)
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
(128
|
)
|
|
337
|
|
|
209
|
|
Net current-period other comprehensive loss
|
(4,156
|
)
|
|
337
|
|
|
(3,819
|
)
|
Balance at June 30, 2018
|
$
|
(31,800
|
)
|
|
$
|
(37,636
|
)
|
|
$
|
(69,436
|
)
|
|
|
|
|
|
|
Balance at January 1, 2018
|
$
|
(13,005
|
)
|
|
$
|
(38,291
|
)
|
|
$
|
(51,296
|
)
|
Other comprehensive income (loss) before reclassifications
|
(18,638
|
)
|
|
0
|
|
|
(18,638
|
)
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
(222
|
)
|
|
655
|
|
|
433
|
|
Adoption of ASU 2016-01
|
65
|
|
|
0
|
|
|
65
|
|
Net current-period other comprehensive (loss) income
|
(18,860
|
)
|
|
655
|
|
|
(18,205
|
)
|
Balance at June 30, 2018
|
$
|
(31,800
|
)
|
|
$
|
(37,636
|
)
|
|
$
|
(69,436
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Available-for-
Sale Securities
|
|
Employee
Benefit Plans
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
Balance at March 31, 2017
|
$
|
(6,718
|
)
|
|
$
|
(28,966
|
)
|
|
$
|
(35,684
|
)
|
Other comprehensive income before reclassifications
|
1,831
|
|
|
0
|
|
|
1,831
|
|
Amounts reclassified from accumulated other comprehensive (Loss) income
|
0
|
|
|
229
|
|
|
229
|
|
Net current-period other comprehensive income
|
1,831
|
|
|
229
|
|
|
2,060
|
|
Balance at June 30, 2017
|
$
|
(4,887
|
)
|
|
$
|
(28,737
|
)
|
|
$
|
(33,624
|
)
|
|
|
|
|
|
|
Balance at January 1, 2017
|
$
|
(7,915
|
)
|
|
$
|
(29,194
|
)
|
|
$
|
(37,109
|
)
|
Other comprehensive income before reclassifications
|
3,028
|
|
|
0
|
|
|
3,028
|
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
0
|
|
|
457
|
|
|
457
|
|
Net current-period other comprehensive income
|
3,028
|
|
|
457
|
|
|
3,485
|
|
Balance at June 30, 2017
|
$
|
(4,887
|
)
|
|
$
|
(28,737
|
)
|
|
$
|
(33,624
|
)
|
The following tables present the amounts reclassified out of each component of accumulated other comprehensive (loss) income for the three and six months ended
June 30, 2018
and
2017
.
|
|
|
|
|
|
|
Three months ended June 30, 2018
|
|
|
|
Details about Accumulated other Comprehensive Income (Loss) Components (in thousands)
|
Amount
Reclassified from
Accumulated
Other
Comprehensive
(Loss) Income
1
|
|
Affected Line Item in the
Statement Where Net Income is
Presented
|
Available-for-sale securities:
|
|
|
|
|
Unrealized gains and losses on available-for-sale securities
|
$
|
170
|
|
|
Net gain on securities transactions
|
|
(42
|
)
|
|
Tax expense
|
|
128
|
|
|
Net of tax
|
Employee benefit plans:
|
|
|
|
|
Amortization of the following
2
|
|
|
|
|
Net retirement plan actuarial gain
|
(442
|
)
|
|
Other operating expense
|
Net retirement plan prior service cost
|
(4
|
)
|
|
Other operating expense
|
|
(446
|
)
|
|
Total before tax
|
|
109
|
|
|
Tax benefit
|
|
(337
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
|
Details about Accumulated other Comprehensive Income (Loss) Components (in thousands)
|
Amount
Reclassified from
Accumulated
Other
Comprehensive
(Loss) Income
1
|
|
Affected Line Item in the
Statement Where Net Income is
Presented
|
Available-for-sale securities:
|
|
|
|
Unrealized gains and losses on available-for-sale securities
|
$
|
294
|
|
|
Net gain on securities transactions
|
|
(72
|
)
|
|
Tax expense
|
|
222
|
|
|
Net of tax
|
Employee benefit plans:
|
|
|
|
Amortization of the following
2
|
|
|
|
Net retirement plan actuarial loss
|
(860
|
)
|
|
Other operating expense
|
Net retirement plan prior service credit
|
(8
|
)
|
|
Other operating expense
|
|
(868
|
)
|
|
Total before tax
|
|
213
|
|
|
Tax benefit
|
|
(655
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
|
|
|
Details about Accumulated other Comprehensive Income (Loss) Components (in thousands)
|
Amount
Reclassified from
Accumulated
Other
Comprehensive
(Loss) Income
1
|
|
Affected Line Item in the
Statement Where Net Income is
Presented
|
Available-for-sale securities:
|
|
|
|
Unrealized gains and losses on available-for-sale securities
|
$
|
0
|
|
|
Net gain on securities transactions
|
|
0
|
|
|
Tax expense
|
|
0
|
|
|
Net of tax
|
Employee benefit plans:
|
|
|
|
Amortization of the following
2
|
|
|
|
Net retirement plan actuarial gain
|
(397
|
)
|
|
Other operating expense
|
Net retirement plan prior service credit
|
15
|
|
|
Other operating expense
|
|
(382
|
)
|
|
Total before tax
|
|
153
|
|
|
Tax benefit
|
|
(229
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2017
|
|
|
|
Details about Accumulated other Comprehensive Income (Loss) Components (in thousands)
|
Amount
Reclassified from
Accumulated
Other
Comprehensive
(Loss) Income
1
|
|
Affected Line Item in the
Statement Where Net Income is
Presented
|
Available-for-sale securities:
|
|
|
|
Unrealized gains and losses on available-for-sale securities
|
$
|
0
|
|
|
Net gain on securities transactions
|
|
0
|
|
|
Tax expense
|
|
0
|
|
|
Net of tax
|
Employee benefit plans:
|
|
|
|
Amortization of the following
2
|
|
|
|
Net retirement plan actuarial loss
|
(754
|
)
|
|
Other operating expense
|
Net retirement plan prior service cost
|
(8
|
)
|
|
Other operating expense
|
|
(762
|
)
|
|
Total before tax
|
|
305
|
|
|
Tax benefit
|
|
(457
|
)
|
|
Net of tax
|
1
Amounts in parentheses indicated debits in income statement.
2
The accumulated other comprehensive (loss) income components are included in the computation of net periodic benefit cost (See Note 9 - “Employee Benefit Plan”).
9.
Employee Benefit Plan
The following table sets forth the amount of the net periodic benefit cost recognized by the Company for the Company’s pension plan, post-retirement plan (Life and Health), and supplemental employee retirement plans (“SERP”) including the following components: service cost, interest cost, expected return on plan assets for the period, amortization of the unrecognized transitional obligation or transition asset, and the amounts of recognized gains and losses, prior service cost recognized, and gain or loss recognized due to settlement or curtailment.
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
Three Months Ended
|
|
Life and Health
Three Months Ended
|
|
SERP Benefits
Three Months Ended
|
(in thousands)
|
6/30/2018
|
|
|
6/30/2017
|
|
|
6/30/2018
|
|
|
6/30/2017
|
|
|
6/30/2018
|
|
|
6/30/2017
|
|
Service cost
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
53
|
|
|
$
|
28
|
|
|
$
|
35
|
|
|
$
|
29
|
|
Interest cost
|
663
|
|
|
643
|
|
|
71
|
|
|
62
|
|
|
211
|
|
|
217
|
|
Expected return on plan assets
|
(1,406
|
)
|
|
(1,256
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Amortization of net retirement plan actuarial loss
|
292
|
|
|
286
|
|
|
16
|
|
|
13
|
|
|
135
|
|
|
98
|
|
Amortization of net retirement plan prior service (credit) cost
|
(3
|
)
|
|
(3
|
)
|
|
(15
|
)
|
|
(35
|
)
|
|
22
|
|
|
22
|
|
Net periodic benefit (income) cost
|
$
|
(454
|
)
|
|
$
|
(330
|
)
|
|
$
|
125
|
|
|
$
|
68
|
|
|
$
|
403
|
|
|
$
|
366
|
|
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
Six Months Ended
|
|
Life and Health
Six Months Ended
|
|
SERP Benefits
Six Months Ended
|
(in thousands)
|
6/30/2018
|
|
|
6/30/2017
|
|
|
6/30/2018
|
|
|
6/30/2017
|
|
|
6/30/2018
|
|
|
6/30/2017
|
|
Service cost
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
106
|
|
|
$
|
96
|
|
|
$
|
80
|
|
|
$
|
83
|
|
Interest cost
|
1,254
|
|
|
1,250
|
|
|
135
|
|
|
134
|
|
|
417
|
|
|
426
|
|
Expected return on plan assets
|
(2,824
|
)
|
|
(2,523
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Amortization of net retirement plan actuarial loss
|
559
|
|
|
537
|
|
|
31
|
|
|
17
|
|
|
270
|
|
|
199
|
|
Amortization of net retirement plan prior service cost (credit)
|
(5
|
)
|
|
(5
|
)
|
|
(31
|
)
|
|
(31
|
)
|
|
44
|
|
|
44
|
|
Net periodic benefit (income) cost
|
$
|
(1,016
|
)
|
|
$
|
(741
|
)
|
|
$
|
241
|
|
|
$
|
216
|
|
|
$
|
811
|
|
|
$
|
752
|
|
The service component of net periodic benefit cost for the Company's benefit plans is recorded as a part of salaries and wages in the consolidated statements of income. All other components are recorded as part of other operating expenses in the consolidated statements of income.
The Company realized approximately
$655,000
and $
457,000
, net of tax, as amortization of amounts previously recognized in accumulated other comprehensive (loss) income, for the six months ended
June 30, 2018
and
2017
, respectively.
The Company is not required to contribute to the pension plan in 2018, but it may make voluntary contributions. The Company did
no
t contribute to the pension plan in the first six months of 2018 and 2017.
10. Other Income and Operating Expense
Other income and operating expense totals are presented in the table below. Components of these totals exceeding
1%
of the aggregate of total noninterest income and total noninterest expenses for any of the years presented below are stated separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
(in thousands)
|
6/30/2018
|
|
|
6/30/2017
|
|
|
6/30/2018
|
|
|
6/30/2017
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
Other service charges
|
$
|
722
|
|
|
$
|
727
|
|
|
$
|
1,531
|
|
|
$
|
1,547
|
|
Increase in cash surrender value of corporate owned life insurance
|
504
|
|
|
557
|
|
|
1,020
|
|
|
1,188
|
|
Gain on sale of fixed assets
|
2,959
|
|
|
16
|
|
|
2,965
|
|
|
21
|
|
Other income
|
713
|
|
|
446
|
|
|
1,170
|
|
|
1,145
|
|
Total other income
|
$
|
4,898
|
|
|
$
|
1,746
|
|
|
$
|
6,686
|
|
|
$
|
3,901
|
|
Noninterest Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Marketing expense
|
$
|
1,414
|
|
|
$
|
1,242
|
|
|
$
|
2,555
|
|
|
$
|
2,416
|
|
Professional fees
|
1,712
|
|
|
1,331
|
|
|
3,588
|
|
|
2,693
|
|
Legal fees
|
292
|
|
|
260
|
|
|
500
|
|
|
524
|
|
Technology expense
|
1,911
|
|
|
1,632
|
|
|
3,902
|
|
|
3,093
|
|
Cardholder expense
|
810
|
|
|
860
|
|
|
1,442
|
|
|
2,041
|
|
Other expenses
|
6,296
|
|
|
4,645
|
|
|
11,056
|
|
|
9,161
|
|
Total other operating expense
|
$
|
12,435
|
|
|
$
|
9,970
|
|
|
$
|
23,043
|
|
|
$
|
19,928
|
|
Note 11. Revenue Recognition
On January 1, 2018, the Company adopted ASU No. 2014-09
“Revenue from Contracts with Customers” (ASC 606)
and all subsequent ASUs that modified ASC 606. As stated in Note 3 - "
New Accounting Standards,"
results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. The Company recorded a net increase to beginning retained earnings of
$1.8 million
as of January 1, 2018 due to the cumulative impact of adopting ASC 606. The impact to beginning retained earnings was primarily driven by the recognition of contingency income related to our insurance business segment.
Under ASC 606, the Company made any necessary revisions to its policies related to the new revenue recognition guidance. In general, for revenue not associated with financial instruments, guarantees and lease contracts, we apply the following steps when recognizing revenue from contracts with customers: (i) identify the contract, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue when performance obligation is satisfied. Our contracts with customers are generally short term in nature, typically due within one year or less or cancellable by us or our customer upon a short notice period. Performance obligations for our customer contracts are generally satisfied at a single point in time, typically when the transaction is complete, or over time. For performance obligations satisfied over time, we primarily use the output method, directly measuring the value of the products/services transferred to the customer, to determine when performance obligations have been satisfied. We typically receive payment from customers and recognize revenue concurrent with the satisfaction of our performance obligations. In most cases, this occurs within a single financial reporting period. For payments received in advance of the satisfaction of performance obligations, revenue recognition is deferred until such time the performance obligations have been satisfied. In cases where we have not received payment despite satisfaction of our performance obligations, we accrue an estimate of the amount due in the period our performance obligations have been satisfied. For contracts with variable components, only amounts for which collection is probable are accrued. We generally act in a principal capacity, on our own behalf, in most of our contracts with customers. In such transactions, we recognize revenue and the related costs to provide our services on a gross basis in our financial statements. In some cases, we act in an agent capacity, deriving revenue through assisting other entities in transactions with our customers. In such transactions, we recognized revenue and the related costs to provide our services on a net basis in our financial statements. These transactions primarily relate to insurance and brokerage commissions.
ASC 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of the new guidance. ASC 606 is applicable to noninterest revenue streams such as trust and asset management income, deposit related fees, interchange fees, merchant income, and annuity and insurance commissions. However, the recognition of these revenue streams did not change significantly upon adoption of ASC 606.
Insurance Commissions and Fees
Fees are earned upon the effective date of bound coverage, as no significant performance obligation remains after coverage is bound. As the Company has historically recognized revenue in this manner, with the noted exception related to installment billing discussed below, the adoption of ASC 606 will not significantly impact the revenue from this source on a quarterly or annual basis.
Installment billing - Agency Bill
Prior to the adoption of ASC 606, commission revenue on policies billed in installments were recognized on the latter of the policy effective date or the date that the premium was billed to the client. As a result of the adoption of ASC 606, revenue associated with the issuance of policies will be recognized upon the effective date of the associated policy regardless of the billing method, meaning that commission revenues billed on an installment basis will be now recognized earlier than they had been previously. Revenue will be accrued based upon the completion of the performance obligation creating a current asset for the unbilled revenue until such time as an invoice is generated, typically not to exceed twelve months. The Company does not expect the overall impact of these changes to be significant, but it will result in slight variances from quarter to quarter.
Contingent commissions
Prior to the adoption of ASC 606, revenue that was not fixed and determinable because a contingency exists was not recognized until the contingency was resolved. Under ASC 606, the Company must use its judgment to estimate the amount of consideration that will be received such that a significant reversal of revenue is not probable. Contingent commissions represent a form of variable consideration associated with the same performance obligation, which is the placement of coverage, for which we earn
core commissions. In connection with the new standard, contingent commissions will be estimated with an appropriate constraint applied and accrued relative to the recognition of the corresponding core commissions. The resulting effect on the timing of recognition of contingent commissions will more closely follow a similar pattern as our core commissions with true-ups recognized when payments are received or as additional information that affects the estimate becomes available.
Refund of commissions
The contract with the insurance carrier dictates commissions paid to the Company shall be refunded to the carrier upon cancellation by the policyholder. As a result, the Company has established a liability for the estimated amount of commission for which the Company does not expect to be entitled, and corresponding reduction to the gross commission received or receivable. The refund liability will be updated at the end of each reporting period for changes in circumstances.
Trust & Asset Management
Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.
Mutual Fund & Investment Income
Mutual fund and investment income consists of other recurring revenue streams such as commissions from sales of mutual funds and other investments, investment advisory fees from the Company’s Strategic Asset Management Services (SAM) wealth management product. Commissions from the sale of mutual funds and other investments are recognized on trade date, which is when the Company has satisfied its performance obligation. The Company also receives periodic service fees (i.e., trailers) from mutual fund companies typically based on a percentage of net asset value. Trailer revenue is recorded over time, usually monthly or quarterly, as net asset value is determined. Investment advisor fees from the wealth management product is earned over time and based on an annual percentage rate of the net asset value. The investment advisor fees are charged to the customer’s account in advance on the first month of the quarter, and the revenue is recognized over the following three-month period. The Company does engage a third party, LPL Financial, LLC (LPL), to satisfy part of this performance obligation, and therefore this income is reported net of any corresponding expenses paid to LPL.
Service Charges on Deposit Accounts
Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.
Card Services Income
Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Mastercard. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. The Company’s performance obligation for fees and exchange are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.
Other
Other service charges include revenue from processing wire and ACH transfers, lock box service and safe deposit box rental. Both wire transfer fees and lock box services are charged on per item basis. Wire and ACH transfer fees are charged at the time of transfer and charged directly to the customer account. Lock box customers are billed monthly and payments are received in the following month through a direct charge to customers’ accounts. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. The Company determined that since rentals and renewals occur fairly consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation.
The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of ASC 606, for the three and six months ended
June 30, 2018
and
2017
.
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in thousands)
|
06/30/2018
|
06/30/2017
|
Noninterest Income
|
|
|
In-scope of Topic 606:
|
|
|
Commissions and Fees
|
$
|
6,861
|
|
$
|
6,537
|
|
Installment Billing
|
|
(40
|
)
|
|
0
|
|
Refund of Commissions
|
|
6
|
|
|
0
|
|
Contract Liabilities/Deferred Revenue
|
|
(173
|
)
|
|
(104
|
)
|
Contingent commissions
|
|
733
|
|
|
659
|
|
Subtotal Insurance Revenues
|
|
7,387
|
|
|
7,092
|
|
Trust and Asset Management
|
|
2,581
|
|
|
2,496
|
|
Mutual Fund & Investment Income
|
|
1,441
|
|
|
1,395
|
|
Subtotal Investment Service Income
|
|
4,022
|
|
|
3,891
|
|
Service Charges on Deposit Accounts
|
|
2,080
|
|
|
2,045
|
|
Card Services Income
|
|
2,621
|
|
|
2,676
|
|
Other
|
|
285
|
|
|
243
|
|
Noninterest Income (in-scope of ASC 606)
|
|
16,395
|
|
|
15,947
|
|
Noninterest Income (out-of-scope of ASC 606)
1
|
|
4,763
|
|
|
1,503
|
|
Total Noninterest Income
|
$
|
21,158
|
|
$
|
17,450
|
|
1
The period ending June 30, 2018 includes approximately $2.9 million related to gain on sale of fixed assets.
|
|
|
|
|
|
|
|
|
Six Months Ended
|
(dollars in thousands)
|
06/30/2018
|
06/30/2017
|
Noninterest Income
|
|
|
In-scope of Topic 606:
|
|
|
Commissions and Fees
|
$
|
13,740
|
|
$
|
13,278
|
|
Installment Billing
|
|
(111
|
)
|
|
0
|
|
Refund of Commissions
|
|
(17
|
)
|
|
0
|
|
Contract Liabilities/Deferred Revenue
|
|
(173
|
)
|
|
(377
|
)
|
Contingent commissions
|
|
1,342
|
|
|
1,309
|
|
Subtotal Insurance Revenues
|
|
14,781
|
|
|
14,210
|
|
Trust and Asset Management
|
|
5,395
|
|
|
4,940
|
|
Mutual Fund & Investment Income
|
|
2,873
|
|
|
2,742
|
|
Subtotal Investment Service Income
|
|
8,268
|
|
|
7,682
|
|
Service Charges on Deposit Accounts
|
|
4,212
|
|
|
4,212
|
|
Card Services Income
|
|
4,767
|
|
|
4,685
|
|
Other
|
|
599
|
|
|
548
|
|
Noninterest Income (in-scope of ASC 606)
|
|
32,627
|
|
|
31,337
|
|
Noninterest Income (out-of-scope of ASC 606)
1
|
|
6,361
|
|
|
3,353
|
|
Total Noninterest Income
|
$
|
38,988
|
|
$
|
34,690
|
|
1
The period ending June 30, 2018 includes approximately $2.9 million related to gain on sale of fixed assets.
Contract Balances
Receivables primarily consist of amounts due for insurance and wealth management services performed for which the Company's performance obligations have been fully satisfied. Receivables amounted to
$4.6 million
and
$1.9 million
, respectively, at June 30, 2018, compared to
$4.0 million
and
$1.9 million
, respectively, at December 31, 2017 and were included in other assets in the audited Consolidated Statements of Condition.
A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). The Company’s noninterest revenue streams, excluding some insurance commissions and fees, are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of June 30, 2018 and December 31, 2017, the Company did not have any significant contract balances.
A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company often receives cash payments from customers in advance of the Company’s performance resulting in contract liabilities. These contract liabilities are classified current or long-term in the Consolidated Condensed Balance Sheet based on the timing of when the Company expects to recognize revenue. As of June 30, 2018 and at the date of adoption of ASC 606, contract liabilities were
$1.5 million
and
$1.7 million
, respectively, and are included within accrued expenses in the accompanying Consolidated Condensed Statements of Condition. The liabilities include premiums due to insurance carriers in addition to unearned commission revenue.
The increase/decrease in the contract liability balance during the six-month period ended June 30, 2018 is primarily as a result of billings and cash payments received in advance of satisfying performance obligations, offset by insurance premiums and revenue recognized during the period that was included in the contract liability balance at the date of adoption. The adoption of ASC 606 did not create a change in accounting for insurance commissions and fees as they relate to contract liabilities, however the company did eliminate the practice of deferring revenue on its larger accounts over the course of the policy period.
Contract Acquisition Costs
In connection with the adoption of ASC 606, an entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. Upon adoption of ASC 606, the Company did not capitalize any contract acquisition costs.
12. Financial Guarantees
The Company currently does not issue any guarantees that would require liability recognition or disclosure, other than standby letters of credit. The Company extends standby letters of credit to its customers in the normal course of business. The standby letters of credit are generally short-term. As of
June 30, 2018
, the Company’s maximum potential obligation under standby letters of credit was
$22.8 million
compared to
$27.8 million
at
December 31, 2017
. Management uses the same credit policies to extend standby letters of credit that it uses for on-balance sheet lending decisions and may require collateral to support standby letters of credit based upon its evaluation of the counterparty. Management does not anticipate any significant losses as a result of these transactions, and has determined that the fair value of standby letters of credit is not significant.
13. Segment and Related Information
The Company manages its operations through
three
reportable business segments in accordance with the standards set forth in FASB ASC 280, “Segment Reporting”: (i) banking (“Banking”), (ii) insurance (“Tompkins Insurance”) and (iii) wealth management (“Tompkins Financial Advisors”). The Company’s insurance services and wealth management services, other than trust services, are managed separately from the Banking segment.
Banking
The Banking segment is primarily comprised of the Company’s
four
banking subsidiaries: Tompkins Trust Company, a commercial bank with
fourteen
banking offices located in Ithaca, NY and surrounding communities; The Bank of Castile (DBA Tompkins Bank of Castile), a commercial bank with
seventeen
banking offices located in the Genesee Valley region of New York State as well as Monroe County; Mahopac Bank (DBA Tompkins Mahopac Bank), a commercial bank with
fourteen
full-service banking offices located in the counties north of New York City; and VIST Bank (DBA Tompkins VIST Bank), a banking organization with
twenty-one
banking offices headquartered and operating in the areas surrounding southeastern Pennsylvania.
Insurance
The Company provides property and casualty insurance services and employee benefits consulting through Tompkins Insurance Agencies, Inc., a
100%
wholly-owned subsidiary of the Company, headquartered in Batavia, New York. Tompkins Insurance is an independent insurance agency, representing many major insurance carriers and provides employee benefit consulting to employers in Western and Central New York and Southeastern Pennsylvania, assisting them with their medical, group life insurance and group disability insurance. Tompkins Insurance has
five
stand-alone offices in Western New York,
one
stand-alone office in Tompkins County, New York and
one
stand-alone office in Montgomery County, Pennsylvania.
Wealth Management
The Wealth Management segment is generally organized under the Tompkins Financial Advisors brand. Tompkins Financial Advisors offers a comprehensive suite of financial services to customers, including trust and estate services, investment management and financial and insurance planning for individuals, corporate executives, small business owners and high net worth individuals. Tompkins Financial Advisors has offices in each of the Company’s
four
subsidiary banks.
Summarized financial information concerning the Company’s reportable segments and the reconciliation to the Company’s consolidated results is shown in the following table. Investment in subsidiaries is netted out of the presentations below. The “Intercompany” column identifies the intercompany activities of revenues, expenses and other assets between the banking, insurance and wealth management services segments. The Company accounts for intercompany fees and services at an estimated fair value according to regulatory requirements for the services provided. Intercompany items relate primarily to the use of human resources, information systems, accounting and marketing services provided by any of the banks and the holding company. All other accounting policies are the same as those described in the summary of significant accounting policies in the 2017 Annual Report on Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the three months ended June 30, 2018
|
(in thousands)
|
Banking
|
|
Insurance
|
|
Wealth Management
|
|
Intercompany
|
|
Consolidated
|
Interest income
|
$
|
62,143
|
|
|
$
|
1
|
|
|
$
|
0
|
|
|
$
|
(1
|
)
|
|
$
|
62,143
|
|
Interest expense
|
9,430
|
|
|
0
|
|
|
0
|
|
|
(1
|
)
|
|
9,429
|
|
Net interest income
|
52,713
|
|
|
1
|
|
|
0
|
|
|
0
|
|
|
52,714
|
|
Provision for loan and lease losses
|
1,045
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,045
|
|
Noninterest income
|
9,943
|
|
|
7,488
|
|
|
4,207
|
|
|
(480
|
)
|
|
21,158
|
|
Noninterest expense
|
36,287
|
|
|
6,282
|
|
|
2,896
|
|
|
(480
|
)
|
|
44,985
|
|
Income before income tax expense
|
25,324
|
|
|
1,207
|
|
|
1,311
|
|
|
0
|
|
|
27,842
|
|
Income tax expense
|
5,173
|
|
|
274
|
|
|
304
|
|
|
0
|
|
|
5,751
|
|
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation
|
20,151
|
|
|
933
|
|
|
1,007
|
|
|
0
|
|
|
22,091
|
|
Less: Net income attributable to noncontrolling interests
|
32
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
32
|
|
Net Income attributable to Tompkins Financial Corporation
|
$
|
20,119
|
|
|
$
|
933
|
|
|
$
|
1,007
|
|
|
$
|
0
|
|
|
$
|
22,059
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
$
|
2,075
|
|
|
$
|
57
|
|
|
$
|
13
|
|
|
$
|
0
|
|
|
$
|
2,145
|
|
Assets
|
6,695,931
|
|
|
41,304
|
|
|
18,815
|
|
|
(10,250
|
)
|
|
6,745,800
|
|
Goodwill
|
64,370
|
|
|
19,702
|
|
|
8,211
|
|
|
0
|
|
|
92,283
|
|
Other intangibles, net
|
4,595
|
|
|
3,500
|
|
|
247
|
|
|
0
|
|
|
8,342
|
|
Net loans and leases
|
4,749,968
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
4,749,968
|
|
Deposits
|
4,803,044
|
|
|
0
|
|
|
0
|
|
|
(10,815
|
)
|
|
4,792,229
|
|
Total Equity
|
541,373
|
|
|
32,611
|
|
|
16,665
|
|
|
0
|
|
|
590,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the three months ended June 30, 2017
|
(in thousands)
|
Banking
|
|
Insurance
|
|
Wealth
Management
|
|
Intercompany
|
|
Consolidated
|
Interest income
|
$
|
56,342
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,342
|
|
Interest expense
|
6,041
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
6,041
|
|
Net interest income
|
50,301
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
50,301
|
|
Provision for loan and lease losses
|
976
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
976
|
|
Noninterest income
|
6,720
|
|
|
7,132
|
|
|
4,015
|
|
|
(417
|
)
|
|
17,450
|
|
Noninterest expense
|
32,819
|
|
|
6,059
|
|
|
3,107
|
|
|
(417
|
)
|
|
41,568
|
|
Income before income tax expense
|
23,226
|
|
|
1,073
|
|
|
908
|
|
|
0
|
|
|
25,207
|
|
Income tax expense
|
7,510
|
|
|
428
|
|
|
310
|
|
|
0
|
|
|
8,248
|
|
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation
|
15,716
|
|
|
645
|
|
|
598
|
|
|
0
|
|
|
16,959
|
|
Less: Net income attributable to noncontrolling interests
|
33
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
33
|
|
Net Income attributable to Tompkins Financial Corporation
|
$
|
15,683
|
|
|
$
|
645
|
|
|
$
|
598
|
|
|
$
|
0
|
|
|
$
|
16,926
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
$
|
1,766
|
|
|
$
|
74
|
|
|
$
|
14
|
|
|
$
|
0
|
|
|
$
|
1,854
|
|
Assets
|
6,368,374
|
|
|
41,438
|
|
|
15,692
|
|
|
(10,492
|
)
|
|
6,415,012
|
|
Goodwill
|
64,370
|
|
|
19,710
|
|
|
8,211
|
|
|
0
|
|
|
92,291
|
|
Other intangibles, net
|
5,783
|
|
|
4,151
|
|
|
317
|
|
|
0
|
|
|
10,251
|
|
Net loans and leases
|
4,381,439
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
4,381,439
|
|
Deposits
|
4,761,017
|
|
|
0
|
|
|
0
|
|
|
(10,295
|
)
|
|
4,750,722
|
|
Total Equity
|
532,291
|
|
|
31,379
|
|
|
13,245
|
|
|
0
|
|
|
576,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2018
|
(in thousands)
|
Banking
|
|
Insurance
|
|
Wealth
Management
|
|
Intercompany
|
|
Consolidated
|
Interest income
|
$
|
122,283
|
|
|
$
|
1
|
|
|
$
|
0
|
|
|
$
|
(1
|
)
|
|
$
|
122,283
|
|
Interest expense
|
16,883
|
|
|
0
|
|
|
0
|
|
|
(1
|
)
|
|
16,882
|
|
Net interest income
|
105,400
|
|
|
1
|
|
|
0
|
|
|
0
|
|
|
105,401
|
|
Provision for loan and lease losses
|
1,612
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,612
|
|
Noninterest income
|
16,354
|
|
|
14,976
|
|
|
8,615
|
|
|
(957
|
)
|
|
38,988
|
|
Noninterest expense
|
71,044
|
|
|
12,521
|
|
|
6,098
|
|
|
(957
|
)
|
|
88,706
|
|
Income before income tax expense
|
49,098
|
|
—
|
|
2,456
|
|
—
|
|
2,517
|
|
—
|
|
0
|
|
|
54,071
|
|
Income tax expense
|
10,303
|
|
|
624
|
|
|
585
|
|
|
0
|
|
|
11,512
|
|
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation
|
38,795
|
|
—
|
|
1,832
|
|
—
|
|
1,932
|
|
—
|
|
0
|
|
|
42,559
|
|
Less: Net income attributable to noncontrolling interests
|
64
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
64
|
|
Net Income attributable to Tompkins Financial Corporation
|
$
|
38,731
|
|
—
|
|
$
|
1,832
|
|
—
|
|
$
|
1,932
|
|
—
|
|
$
|
0
|
|
|
$
|
42,495
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
$
|
4,475
|
|
|
$
|
118
|
|
|
$
|
25
|
|
|
$
|
0
|
|
|
$
|
4,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2017
|
(in thousands)
|
Banking
|
|
Insurance
|
|
Wealth
Management
|
|
Intercompany
|
|
Consolidated
|
Interest income
|
$
|
109,963
|
|
|
$
|
1
|
|
|
$
|
0
|
|
|
$
|
(1
|
)
|
|
$
|
109,963
|
|
Interest expense
|
11,628
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
11,628
|
|
Net interest income
|
98,335
|
|
|
1
|
|
|
0
|
|
|
(1
|
)
|
|
$
|
98,335
|
|
Provision for loan and lease losses
|
1,745
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,745
|
|
Noninterest income
|
13,123
|
|
|
14,448
|
|
|
7,925
|
|
|
(806
|
)
|
|
34,690
|
|
Noninterest expense
|
65,306
|
|
|
12,139
|
|
|
6,297
|
|
|
(806
|
)
|
|
82,936
|
|
Income before income tax expense
|
44,407
|
|
—
|
|
2,310
|
|
—
|
|
1,628
|
|
—
|
|
(1
|
)
|
|
$
|
48,344
|
|
Income tax expense
|
14,182
|
|
|
903
|
|
|
552
|
|
|
0
|
|
|
15,637
|
|
Net Income attributable to noncontrolling interests and Tompkins Financial Corporation
|
30,225
|
|
—
|
|
1,407
|
|
—
|
|
1,076
|
|
—
|
|
(1
|
)
|
|
$
|
32,707
|
|
Less: Net income attributable to noncontrolling interests
|
65
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
65
|
|
Net Income attributable to Tompkins Financial Corporation
|
$
|
30,160
|
|
—
|
|
$
|
1,407
|
|
—
|
|
$
|
1,076
|
|
—
|
|
$
|
(1
|
)
|
|
$
|
32,642
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
$
|
3,456
|
|
|
$
|
156
|
|
|
$
|
29
|
|
|
$
|
0
|
|
|
$
|
3,641
|
|
14. Fair Value
FASB ASC Topic 820,
Fair Value Measurements and Disclosures,
defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. FASB ASC Topic 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Transfers between levels, when determined to be appropriate, are recognized at the end of each reporting period.
The three levels of the fair value hierarchy under FASB ASC Topic 820 are:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of
June 30, 2018
and
December 31, 2017
, segregated by the level of valuation inputs within the fair value hierarchy used to measure fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Fair Value Measurements
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
(in thousands)
|
Total
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
Obligations of U.S. Government sponsored entities
|
$
|
487,599
|
|
|
$
|
0
|
|
|
$
|
487,599
|
|
|
$
|
0
|
|
Obligations of U.S. states and political subdivisions
|
86,210
|
|
|
0
|
|
|
86,210
|
|
|
0
|
|
Mortgage-backed securities – residential, issued by:
|
|
|
|
|
|
|
|
U.S. Government agencies
|
119,876
|
|
|
0
|
|
|
119,876
|
|
|
0
|
|
U.S. Government sponsored entities
|
647,777
|
|
|
0
|
|
|
647,777
|
|
|
0
|
|
Non-U.S. Government agencies or sponsored entities
|
53
|
|
|
0
|
|
|
53
|
|
|
0
|
|
U.S. corporate debt securities
|
2,175
|
|
|
0
|
|
|
2,175
|
|
|
0
|
|
Equity securities, at fair value
|
888
|
|
|
0
|
|
|
0
|
|
|
888
|
|
Total Available-for-sale securities
|
1,344,578
|
|
|
0
|
|
|
1,343,690
|
|
|
888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Fair Value Measurements
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
(in thousands)
|
Total
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Government sponsored entities
|
504,193
|
|
|
0
|
|
|
504,193
|
|
|
0
|
|
Obligations of U.S. states and political subdivisions
|
91,519
|
|
|
0
|
|
|
91,519
|
|
|
0
|
|
Mortgage-backed securities – residential, issued by:
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
137,735
|
|
|
0
|
|
|
137,735
|
|
|
0
|
|
U.S. Government sponsored entities
|
656,178
|
|
|
0
|
|
|
656,178
|
|
|
0
|
|
Non-U.S. Government agencies or sponsored entities
|
75
|
|
|
0
|
|
|
75
|
|
|
0
|
|
U.S. corporate debt securities
|
2,162
|
|
|
0
|
|
|
2,162
|
|
|
0
|
|
Equity securities
|
913
|
|
|
0
|
|
|
0
|
|
|
913
|
|
Total Available-for-sale securities
|
1,392,775
|
|
|
0
|
|
|
1,391,862
|
|
|
913
|
|
The change in the fair value of available-for-sale equity securities valued using significant unobservable inputs (level 3), between January 1, 2018 and
June 30, 2018
, and January 1, 2017 and
December 31, 2017
, was immaterial.
There were no transfers between Levels 1, 2 and 3 for the six months ended
June 30, 2018
.
The Company determines fair value for its available-for-sale securities using an independent bond pricing service for identical assets or very similar securities. The Company has reviewed the pricing sources, including methodologies used, and finds them to be fairly stated.
Fair values of borrowings are estimated using Level 2 inputs based upon observable market data. The Company determines fair value for its borrowings using a discounted cash flow technique based upon expected cash flows and current spreads on FHLB advances with the same structure and terms. The Company also receives pricing information from third parties, including the FHLB. The pricing obtained is considered representative of the transfer price if the liabilities were assumed by a third party.
Certain assets are measured at fair value on a nonrecurring basis. For the Company, these include loans held for sale, collateral dependent impaired loans, and other real estate owned (“OREO”). During the second quarter and first half of 2018, certain collateral dependent impaired loans were remeasured and reported at fair value through a specific valuation allowance and/or partial charge-offs for loan and lease losses based upon the fair value of the underlying collateral. Collateral values are estimated using Level 2 inputs based upon observable market data. In addition to collateral dependent impaired loans, certain other real estate owned were remeasured and reported at fair value based upon the fair value of the underlying collateral. The fair values of other real estate owned are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria. In general, the fair values of other real estate owned are based upon appraisals, with discounts made to reflect estimated costs to sell the real estate. Upon initial recognition, fair value write-downs on other real estate owned are taken through a charge-off to the allowance for loan and lease losses. Subsequent fair value write-downs on other real estate owned are reported in other noninterest expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2018
|
|
|
|
Fair value measurements at reporting
date using:
|
|
Gain (losses)
from fair
value changes
|
Assets:
|
As of 06/30/2018
|
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
|
Significant other
observable inputs
(Level 2)
|
|
Significant
unobservable inputs
(Level 3)
|
|
Three months
ended
06/30/2018
|
Impaired loans
|
$
|
1,865
|
|
|
$
|
0
|
|
|
$
|
1,865
|
|
|
$
|
0
|
|
|
$
|
12
|
|
Other real estate owned
|
185
|
|
|
0
|
|
|
185
|
|
|
0
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2017
|
|
|
|
Fair value measurements at reporting
date using:
|
|
Gain (losses)
from fair
value changes
|
Assets:
|
As of
06/30/2017
|
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
|
Significant other
observable inputs
(Level 2)
|
|
Significant
unobservable inputs
(Level 3)
|
|
Three months
ended
06/30/2017
|
Impaired loans
|
$
|
880
|
|
|
$
|
0
|
|
|
$
|
880
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Other real estate owned
|
2,640
|
|
|
0
|
|
|
2,640
|
|
|
0
|
|
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2018
|
|
|
Fair value measurements at reporting
date using:
|
|
Gain (losses)
from fair
value changes
|
Assets:
|
As of
06/30/2018
|
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
|
Significant other
observable inputs
(Level 2)
|
|
Significant
unobservable inputs
(Level 3)
|
|
Six months
ended
06/30/2018
|
Impaired loans
|
$
|
6,583
|
|
|
$
|
0
|
|
|
$
|
6,583
|
|
|
$
|
0
|
|
|
$
|
(111
|
)
|
Other real estate owned
|
1,722
|
|
|
0
|
|
|
1,722
|
|
|
0
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2017
|
|
|
Fair value measurements at reporting
date using:
|
|
Gain (losses)
from fair
value changes
|
Assets:
|
As of
06/30/2017
|
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
|
Significant other
observable inputs
(Level 2)
|
|
Significant
unobservable inputs
(Level 3)
|
|
Six months
ended
06/30/2017
|
Impaired loans
|
$
|
3,037
|
|
|
$
|
0
|
|
|
$
|
3,037
|
|
|
$
|
0
|
|
|
$
|
(332
|
)
|
Other real estate owned
|
2,331
|
|
|
0
|
|
|
2,331
|
|
|
0
|
|
|
(182
|
)
|
The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at
June 30, 2018
and
December 31, 2017
. The carrying amounts shown in the table are included in the Consolidated Statements of Condition under the indicated captions.
The fair value estimates, methods and assumptions set forth below for the Company's financial instruments, including those financial instruments carried at cost, are made solely to comply with disclosures required by generally accepted accounting principles in the United States and should be read in conjunction with the financial statements and notes included in this Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair Value of Financial Instruments
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Carrying
Amount
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
82,673
|
|
|
$
|
82,673
|
|
|
$
|
82,673
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Securities - held to maturity
|
139,413
|
|
|
137,221
|
|
|
0
|
|
|
137,221
|
|
|
0
|
|
FHLB and other stock
|
58,770
|
|
|
58,770
|
|
|
0
|
|
|
58,770
|
|
|
0
|
|
Accrued interest receivable
|
20,584
|
|
|
20,584
|
|
|
0
|
|
|
20,584
|
|
|
0
|
|
Loans/leases, net
1
|
4,749,968
|
|
|
4,632,961
|
|
|
0
|
|
|
6,583
|
|
|
4,626,378
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
$
|
635,004
|
|
|
$
|
629,165
|
|
|
$
|
0
|
|
|
$
|
629,165
|
|
|
$
|
0
|
|
Other deposits
|
4,157,225
|
|
|
4,157,225
|
|
|
0
|
|
|
4,157,225
|
|
|
0
|
|
Fed funds purchased and securities sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
under agreements to repurchase
|
52,042
|
|
|
52,042
|
|
|
0
|
|
|
52,042
|
|
|
0
|
|
Other borrowings
|
1,229,956
|
|
|
1,226,501
|
|
|
0
|
|
|
1,226,501
|
|
|
0
|
|
Trust preferred debentures
|
16,777
|
|
|
21,669
|
|
|
0
|
|
|
21,669
|
|
|
0
|
|
Accrued interest payable
|
2,272
|
|
|
2,272
|
|
|
0
|
|
|
2,272
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair Value of Financial Instruments
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Carrying
Amount
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
84,303
|
|
|
$
|
84,303
|
|
|
$
|
84,303
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Securities - held to maturity
|
139,216
|
|
|
140,315
|
|
|
0
|
|
|
140,315
|
|
|
0
|
|
FHLB and other stock
|
50,498
|
|
|
50,498
|
|
|
0
|
|
|
50,498
|
|
|
0
|
|
Accrued interest receivable
|
20,122
|
|
|
20,122
|
|
|
0
|
|
|
20,122
|
|
|
0
|
|
Loans/leases, net
1
|
4,632,288
|
|
|
4,555,720
|
|
|
0
|
|
|
4,617
|
|
|
4,551,103
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
$
|
748,250
|
|
|
$
|
744,310
|
|
|
$
|
0
|
|
|
$
|
744,310
|
|
|
$
|
0
|
|
Other deposits
|
4,089,557
|
|
|
4,089,557
|
|
|
0
|
|
|
4,089,557
|
|
|
0
|
|
Fed funds purchased and securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sold under agreements to repurchase
|
75,177
|
|
|
75,177
|
|
|
0
|
|
|
75,177
|
|
|
0
|
|
Other borrowings
|
1,071,742
|
|
|
1,069,609
|
|
|
0
|
|
|
1,069,609
|
|
|
0
|
|
Trust preferred debentures
|
16,691
|
|
|
22,012
|
|
|
0
|
|
|
22,012
|
|
|
0
|
|
Accrued interest payable
|
2,054
|
|
|
2,054
|
|
|
0
|
|
|
2,054
|
|
|
0
|
|
1
Lease receivables, although excluded from the scope of ASC Topic 825, are included in the estimated fair value amounts at their carrying value.
The following methods and assumptions were used in estimating fair value disclosures for financial instruments.
Cash and Cash Equivalents:
The carrying amounts reported in the Consolidated Statements of Condition for cash, noninterest-bearing deposits, money market funds, and Federal funds sold approximate the fair value of those assets.
Securities:
Fair values for U.S. Treasury securities are based on quoted market prices. Fair values for obligations of U.S. government sponsored entities, mortgage-backed securities-residential, obligations of U.S. states and political subdivisions, and U.S. corporate debt securities are based on quoted market prices, where available, as provided by third party pricing vendors. If quoted market prices were not available, fair values are based on quoted market prices of comparable instruments in active markets and/or based upon matrix pricing methodology, which uses comprehensive interest rate tables to determine market price, movement and yield relationships. These securities are reviewed periodically to determine if there are any events or changes in circumstances that would adversely affect their value.
Loans and Leases:
Fair value for loans as of June 30, 2018, are calculated using an exit price notion. The Company's valuation methodology takes into account factors such as estimated cash flows, including contractual cash flow and assumptions for prepayments; liquidity risk; and credit risk. For prior periods, fair values were calculated using an entry price notion. The fair values of residential loans were estimated using discounted cash flow analyses, based upon available market benchmarks for rates and prepayment assumptions. The fair values of commercial and consumer loans were estimated using discounted cash flow analyses, based upon interest rates currently offered for loans and leases with similar terms and credit quality. The fair values of loans held for sale were determined based upon contractual prices for loans with similar characteristics.
FHLB Stock:
The carrying amount of FHLB stock approximates fair value. If the stock is redeemed, the Company will receive an amount equal to the par value of the stock. For miscellaneous equity securities, carrying value is cost.
Accrued Interest Receivable and Accrued Interest Payable:
The carrying amount of these short term instruments approximate fair value.
Deposits:
The fair values disclosed for noninterest bearing accounts and accounts with no stated maturities are equal to the amount payable on demand at the reporting date. The fair value of time deposits is based upon discounted cash flow analyses using rates offered for FHLB advances, which is the Company’s primary alternative source of funds.
Securities Sold Under Agreements to Repurchase:
The carrying amounts of repurchase agreements and other short-term borrowings approximate their fair values. Fair values of long-term borrowings are estimated using a discounted cash flow approach, based on current market rates for similar borrowings. For securities sold under agreements to repurchase where the Company has elected the fair value option, the Company also receives pricing information from third parties, including the FHLB.
Other Borrowings:
The fair values of other borrowings are estimated using discounted cash flow analysis, discounted at the Company’s current incremental borrowing rate for similar borrowing arrangements. For other borrowings where the Company has elected the fair value option, the Company also receives pricing information from third parties, including the FHLB.
Trust Preferred Debentures:
The fair value of the trust preferred debentures has been estimated using a discounted cash flow analysis which uses a discount factor of a market spread over current interest rates for similar instruments.