Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
GBCI
NASDAQ
The number of shares of Registrant’s common stock outstanding on April 16, 2019 was 84,588,574. No preferred shares are issued or outstanding.
Repurchase agreements – securities sold under agreements to repurchase
ROU - right-of-use
S&P – Standard and Poor’s
SEC – United States Securities and Exchange Commission
TBA – to-be-announced
TDR – troubled debt restructuring
VIE – variable interest entity
GLACIER BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
March 31, 2019
December 31, 2018
Assets
Cash on hand and in banks
$
139,333
161,782
Federal funds sold
115
—
Interest bearing cash deposits
63,079
42,008
Cash and cash equivalents
202,527
203,790
Debt securities, available-for-sale
2,522,322
2,571,663
Debt securities, held-to-maturity
255,572
297,915
Total debt securities
2,777,894
2,869,578
Loans held for sale, at fair value
29,389
33,156
Loans receivable
8,326,070
8,287,549
Allowance for loan and lease losses
(129,786
)
(131,239
)
Loans receivable, net
8,196,284
8,156,310
Premises and equipment, net
277,619
241,528
Other real estate owned
8,125
7,480
Accrued interest receivable
57,367
54,408
Deferred tax asset
12,554
23,564
Core deposit intangible, net
47,548
49,242
Goodwill
289,586
289,586
Non-marketable equity securities
16,435
27,871
Bank-owned life insurance
82,819
82,320
Other assets
75,632
76,651
Total assets
$
12,073,779
12,115,484
Liabilities
Non-interest bearing deposits
$
3,051,119
3,001,178
Interest bearing deposits
6,536,996
6,492,589
Securities sold under agreements to repurchase
489,620
396,151
Federal Home Loan Bank advances
154,683
440,175
Other borrowed funds
14,738
14,708
Subordinated debentures
134,048
134,051
Accrued interest payable
4,709
4,252
Other liabilities
137,016
116,526
Total liabilities
10,522,929
10,599,630
Stockholders’ Equity
Preferred shares, $0.01 par value per share, 1,000,000 shares authorized, none issued or outstanding
—
—
Common stock, $0.01 par value per share, 117,187,500 shares authorized
846
845
Paid-in capital
1,051,299
1,051,253
Retained earnings - substantially restricted
474,818
473,183
Accumulated other comprehensive income (loss)
23,887
(9,427
)
Total stockholders’ equity
1,550,850
1,515,854
Total liabilities and stockholders’ equity
$
12,073,779
12,115,484
Number of common stock shares issued and outstanding
84,588,199
84,521,692
See accompanying notes to unaudited condensed consolidated financial statements.
4
GLACIER BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months ended
(Dollars in thousands, except per share data)
March 31, 2019
March 31, 2018
Interest Income
Investment securities
$
21,351
20,142
Residential real estate loans
10,779
8,785
Commercial loans
83,539
65,515
Consumer and other loans
10,447
8,624
Total interest income
126,116
103,066
Interest Expense
Deposits
5,341
3,916
Securities sold under agreements to repurchase
802
485
Federal Home Loan Bank advances
3,055
2,089
Other borrowed funds
38
16
Subordinated debentures
1,668
1,268
Total interest expense
10,904
7,774
Net Interest Income
115,212
95,292
Provision for loan losses
57
795
Net interest income after provision for loan losses
115,155
94,497
Non-Interest Income
Service charges and other fees
18,015
16,871
Miscellaneous loan fees and charges
967
1,477
Gain on sale of loans
5,798
6,097
Gain (loss) on sale of debt securities
213
(333
)
Other income
3,481
1,974
Total non-interest income
28,474
26,086
Non-Interest Expense
Compensation and employee benefits
52,728
45,721
Occupancy and equipment
8,437
7,274
Advertising and promotions
2,388
2,170
Data processing
3,892
3,967
Other real estate owned
139
72
Regulatory assessments and insurance
1,285
1,206
Core deposit intangibles amortization
1,694
1,056
Other expenses
12,267
12,161
Total non-interest expense
82,830
73,627
Income Before Income Taxes
60,799
46,956
Federal and state income tax expense
11,667
8,397
Net Income
$
49,132
38,559
Basic earnings per share
$
0.58
0.48
Diluted earnings per share
$
0.58
0.48
Dividends declared per share
$
0.26
0.23
Average outstanding shares - basic
84,549,974
80,808,904
Average outstanding shares - diluted
84,614,248
80,887,135
See accompanying notes to unaudited condensed consolidated financial statements.
5
GLACIER BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months ended
(Dollars in thousands)
March 31, 2019
March 31, 2018
Net Income
$
49,132
38,559
Other Comprehensive Income (Loss), Net of Tax
Unrealized gains (losses) on available-for-sale securities
46,452
(25,711
)
Reclassification adjustment for (gains) losses included in net income
(221
)
282
Net unrealized gains (losses) on available-for-sale securities
46,231
(25,429
)
Tax effect
(11,715
)
6,444
Net of tax amount
34,516
(18,985
)
Unrealized (losses) gains on derivatives used for cash flow hedges
(1,834
)
4,379
Reclassification adjustment for losses included in net income
223
900
Net unrealized (losses) gains on derivatives used for cash flow hedges
(1,611
)
5,279
Tax effect
409
(1,338
)
Net of tax amount
(1,202
)
3,941
Total other comprehensive income (loss), net of tax
33,314
(15,044
)
Total Comprehensive Income
$
82,446
23,515
See accompanying notes to unaudited condensed consolidated financial statements.
6
GLACIER BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Three Months Months ended March 31, 2019 and 2018
(Dollars in thousands, except per share data)
Common Stock
Paid-in Capital
Retained
Earnings
Substantially Restricted
Accumulated
Other Compre-
hensive (Loss) Income
Shares
Amount
Total
Balance at January 1, 2018
78,006,956
$
780
797,997
402,259
(1,979
)
1,199,057
Net income
—
—
—
38,559
—
38,559
Other comprehensive loss
—
—
—
—
(15,044
)
(15,044
)
Cash dividends declared ($0.23 per share)
—
—
—
(19,476
)
—
(19,476
)
Stock issued in connection with acquisitions
6,432,868
64
250,743
—
—
250,807
Stock issuances under stock incentive plans
71,648
1
(1
)
—
—
—
Stock-based compensation and related taxes
—
—
121
—
—
121
Balance at March 31, 2018
84,511,472
$
845
1,048,860
421,342
(17,023
)
1,454,024
Balance at January 1, 2019
84,521,692
$
845
1,051,253
473,183
(9,427
)
1,515,854
Net income
—
—
—
49,132
—
49,132
Other comprehensive income
—
—
—
—
33,314
33,314
Cash dividends declared ($0.26 per share)
—
—
—
(22,039
)
—
(22,039
)
Stock issuances under stock incentive plans
66,507
1
(1
)
—
—
—
Stock-based compensation and related taxes
—
—
47
—
—
47
Cumulative-effect of accounting changes
—
—
—
(25,458
)
—
(25,458
)
Balance at March 31, 2019
84,588,199
$
846
1,051,299
474,818
23,887
1,550,850
See accompanying notes to unaudited condensed consolidated financial statements.
7
GLACIER BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months ended
(Dollars in thousands)
March 31, 2019
March 31, 2018
Operating Activities
Net income
$
49,132
38,559
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses
57
795
Net amortization of debt securities
5,379
3,465
Net (accretion) amortization of purchase accounting adjustments
(1,788
)
1,337
Amortization of debt modification costs
412
412
Origination of loans held for sale
(145,163
)
(175,506
)
Proceeds from loans held for sale
154,756
184,188
Gain on sale of loans
(5,798
)
(6,097
)
(Gain) loss on sale of debt securities
(213
)
333
Bank-owned life insurance income, net
(497
)
(424
)
Stock-based compensation, net of tax benefits
1,197
1,189
Depreciation and amortization of premises and equipment
4,574
3,722
Gain on sale and write-downs of other real estate owned, net
(416
)
(53
)
Amortization of core deposit intangibles
1,694
1,056
Amortization of investments in variable interest entities
1,644
1,117
Net increase in accrued interest receivable
(2,959
)
(2,709
)
Net (increase) decrease in other assets
(1,636
)
289
Net increase (decrease) in accrued interest payable
457
(155
)
Net decrease in other liabilities
(14,525
)
(3,582
)
Net cash provided by operating activities
46,307
47,936
Investing Activities
Sales of available-for-sale debt securities
269,616
219,855
Maturities, prepayments and calls of available-for-sale debt securities
120,368
72,952
Purchases of available-for-sale debt securities
(311,281
)
(383,992
)
Maturities, prepayments and calls of held-to-maturity debt securities
29,945
13,297
Principal collected on loans
617,236
552,922
Loan originations
(656,930
)
(678,251
)
Net additions to premises and equipment
(3,809
)
(5,558
)
Proceeds from sale of other real estate owned
1,208
755
Proceeds from redemption of non-marketable equity securities
39,436
28,986
Purchases of non-marketable equity securities
(28,000
)
(18,395
)
Investments in variable interest entities
(576
)
(16,129
)
Net cash received from acquisitions
—
101,268
Net cash provided by (used in) investing activities
77,213
(112,290
)
See accompanying notes to unaudited condensed consolidated financial statements.
8
GLACIER BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Three Months ended
(Dollars in thousands)
March 31, 2019
March 31, 2018
Financing Activities
Net increase in deposits
$
94,322
524,162
Net increase in securities sold under agreements to repurchase
93,470
4,041
Net decrease in short-term Federal Home Loan Bank advances
(285,000
)
(200,000
)
Repayments of long-term Federal Home Loan Bank advances
(896
)
(104
)
Net increase (decrease) in other borrowed funds
27
(11,562
)
Cash dividends paid
(25,562
)
(107
)
Tax withholding payments for stock-based compensation
(1,144
)
(1,032
)
Net cash (used in) provided by financing activities
(124,783
)
315,398
Net (decrease) increase in cash, cash equivalents and restricted cash
(1,263
)
251,044
Cash, cash equivalents and restricted cash at beginning of period
203,790
200,004
Cash, cash equivalents and restricted cash at end of period
$
202,527
451,048
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest
$
10,447
7,930
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Transfer of loans to other real estate owned
$
1,437
378
Right-of-use assets obtained in exchange for operating lease liabilities
647
—
Dividends declared but not paid
22,039
19,476
Acquisitions
Fair value of common stock shares issued
—
250,807
Cash consideration for outstanding shares
—
16,265
Effective settlement of a pre-existing receivable
—
10,054
Fair value of assets acquired
—
1,549,158
Liabilities assumed
—
1,383,756
See accompanying notes to unaudited condensed consolidated financial statements.
9
GLACIER BANCORP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Summary of Significant Accounting Policies
General
Glacier Bancorp, Inc. (“Company”) is a Montana corporation headquartered in Kalispell, Montana. The Company provides a full range of banking services to individuals and businesses in Montana, Idaho, Utah, Washington, Wyoming, Colorado and Arizona through its wholly-owned bank subsidiary, Glacier Bank (“Bank”). The Company offers a wide range of banking products and services, including: 1) retail banking; 2) business banking; 3) real estate, commercial, agriculture and consumer loans; and 4) mortgage origination services. The Company serves individuals, small to medium-sized businesses, community organizations and public entities.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the Company’s financial condition as of March 31, 2019, the results of operations and comprehensive income for the three month periods ended March 31, 2019 and 2018, and changes in stockholders’ equity and cash flows for the three month periods ended March 31, 2019 and 2018. The condensed consolidated statement of financial condition of the Company as of December 31, 2018 has been derived from the audited consolidated statements of the Company as of that date.
The accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results anticipated for the year ending December 31, 2019.
The Company is a defendant in legal proceedings arising in the normal course of business. In the opinion of management, the disposition of pending litigation will not have a material affect on the Company’s consolidated financial position, results of operations or liquidity.
Material estimates that are particularly susceptible to significant change include: 1) the determination of the allowance for loan and lease losses (“ALLL” or “allowance”); 2) the valuation of debt securities; 3) the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans; and 4) the evaluation of goodwill impairment. For the determination of the ALLL and real estate valuation estimates, management obtains independent appraisals (new or updated) for significant items. Estimates relating to investment valuations are obtained from independent third parties. Estimates relating to the evaluation of goodwill for impairment are determined based on internal calculations using significant independent party inputs.
Principles of Consolidation
The consolidated financial statements of the Company include the parent holding company and the Bank. The Bank consists of fourteen bank divisions, a treasury division, an information technology division and a centralized mortgage division. The treasury division includes the Bank’s investment portfolio and wholesale borrowings, the information technology division includes the Bank’s internal data processing, and the centralized mortgage division includes mortgage loan servicing and secondary market sales. The Bank divisions operate under separate names, management teams and advisory directors. The Company considers the Bank to be its sole operating segment as the Bank 1) engages in similar bank business activity from which it earns revenues and incurs expenses; 2) the operating results of the Bank are regularly reviewed by the Chief Executive Officer (“CEO”) (i.e., the chief operating decision maker) who makes decisions about resources to be allocated to the Bank; and 3) financial information is available for the Bank. All significant inter-company transactions have been eliminated in consolidation.
10
The Bank has subsidiary interests in variable interest entities (“VIE”) for which the Bank has both the power to direct the VIE’s significant activities and the obligation to absorb losses or right to receive benefits of the VIE that could potentially be significant to the VIE. These subsidiary interests are included in the Company’s consolidated financial statements. The Bank also has subsidiary interests in VIEs for which the Bank does not have a controlling financial interest and is not the primary beneficiary. These subsidiary interests are not included in the Company’s consolidated financial statements.
The parent holding company owns non-bank subsidiaries that have issued trust preferred securities as Tier 1 capital instruments. The trust subsidiaries are not included in the Company’s consolidated financial statements. The Company's investments in the trust subsidiaries are included in other assets on the Company's statements of financial condition.
On April 30, 2019, the Company acquired the outstanding common stock of FNB Bancorp and its wholly-owned subsidiary, The First National Bank of Layton, a community bank based in Layton, Utah (collectively, “FNB”). As of March 31, 2019, FNB had total assets of $328,893,000, gross loans of $248,725,000 and total deposits of $279,674,000. For additional information relating to this subsequent event, see Note 13.
Loans Receivable
Loans that are intended to be held-to-maturity are reported at the unpaid principal balance less net charge-offs and adjusted for deferred fees and costs on originated loans and unamortized premiums or discounts on acquired loans. Fees and costs on originated loans and premiums or discounts on acquired loans are deferred and subsequently amortized or accreted as a yield adjustment over the expected life of the loan utilizing the interest method. The objective of the interest method is to calculate periodic interest income at a constant effective yield. When a loan is paid off prior to maturity, the remaining fees and costs on originated loans and premiums or discounts on acquired loans are immediately recognized into interest income.
The Company’s loan segments, which are based on the purpose of the loan, include residential real estate, commercial, and consumer loans. The Company’s loan classes, a further disaggregation of segments, include residential real estate loans (residential real estate segment), commercial real estate and other commercial loans (commercial segment), and home equity and other consumer loans (consumer segment).
Loans that are thirty days or more past due based on payments received and applied to the loan are considered delinquent. Loans are designated non-accrual and the accrual of interest is discontinued when the collection of the contractual principal or interest is unlikely. A loan is typically placed on non-accrual when principal or interest is due and has remained unpaid for ninety days or more. When a loan is placed on non-accrual status, interest previously accrued but not collected is reversed against current period interest income. Subsequent payments on non-accrual loans are applied to the outstanding principal balance if doubt remains as to the ultimate collectability of the loan. Interest accruals are not resumed on partially charged-off impaired loans. For other loans on nonaccrual, interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest.
The Company considers impaired loans to be the primary credit quality indicator for monitoring the credit quality of the loan portfolio. Loans are designated impaired when, based upon current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement and, therefore, the Company has serious doubts as to the ability of such borrowers to fulfill the contractual obligation. Impaired loans include non-performing loans (i.e., non-accrual loans and accruing loans ninety days or more past due) and accruing loans under ninety days past due where it is probable payments will not be received according to the loan agreement (e.g., troubled debt restructuring). Interest income on accruing impaired loans is recognized using the interest method. The Company measures impairment on a loan-by-loan basis in the same manner for each class within the loan portfolio. An insignificant delay or shortfall in the amounts of payments would not cause a loan or lease to be considered impaired. The Company determines the significance of payment delays and shortfalls on a case-by-case basis, taking into consideration all of the facts and circumstances surrounding the loan and the borrower, including the length and reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest due.
11
A restructured loan is considered a troubled debt restructuring (“TDR”) if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. The Company periodically enters into restructure agreements with borrowers whereby the loans were previously identified as TDRs. When such circumstances occur, the Company carefully evaluates the facts of the subsequent restructure to determine the appropriate accounting and under certain circumstances it may be acceptable not to account for the subsequently restructured loan as a TDR. When assessing whether a concession has been granted by the Company, any prior forgiveness on a cumulative basis is considered a continuing concession. A TDR loan is considered an impaired loan and a specific valuation allowance is established when the fair value of the collateral-dependent loan or present value of the loan’s expected future cash flows (discounted at the loan’s effective interest rate based on the original contractual rate) is lower than the carrying value of the impaired loan. The Company has made the following types of loan modifications, some of which were considered a TDR:
•
reduction of the stated interest rate for the remaining term of the debt;
•
extension of the maturity date(s) at a stated rate of interest lower than the current market rate for newly originated debt having similar risk characteristics; and
•
reduction of the face amount of the debt as stated in the debt agreements.
The Company recognizes that while borrowers may experience deterioration in their financial condition, many continue to be creditworthy customers who have the willingness and capacity for debt repayment. In determining whether non-restructured or unimpaired loans issued to a single or related party group of borrowers should continue to accrue interest when the borrower has other loans that are impaired or are TDRs, the Company on a quarterly or more frequent basis performs an updated and comprehensive assessment of the willingness and capacity of the borrowers to timely and ultimately repay their total debt obligations, including contingent obligations. Such analysis takes into account current financial information about the borrowers and financially responsible guarantors, if any, including for example:
•
analysis of global, i.e., aggregate debt service for total debt obligations;
•
assessment of the value and security protection of collateral pledged using current market conditions and alternative market assumptions across a variety of potential future situations; and
•
loan structures and related covenants.
For additional information relating to loans, see Note 3.
Allowance for Loan and Lease Losses
Based upon management’s analysis of the Company’s loan portfolio, the balance of the ALLL is an estimate of probable credit losses known and inherent within the Bank’s loan portfolio as of the date of the consolidated financial statements. The ALLL is analyzed at the loan class level and is maintained within a range of estimated losses. Determining the adequacy of the ALLL involves a high degree of judgment and is inevitably imprecise as the risk of loss is difficult to quantify. The determination of the ALLL and the related provision for loan losses is a critical accounting estimate that involves management’s judgments about known relevant internal and external environmental factors that affect loan losses. The balance of the ALLL is highly dependent upon management’s evaluations of borrowers’ current and prospective performance, appraisals and other variables affecting the quality of the loan portfolio. Individually significant loans and major lending areas are reviewed periodically to determine potential problems at an early date. Changes in management’s estimates and assumptions are reasonably possible and may have a material impact upon the Company’s consolidated financial statements, results of operations or capital.
Risk characteristics considered in the ALLL analysis applicable to each loan class within the Company's loan portfolio are as follows:
Residential Real Estate. Residential real estate loans are secured by owner-occupied 1-4 family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans is impacted by economic conditions within the Company’s market areas that affect the value of the property securing the loans and affect the borrowers' personal incomes. Mitigating risk factors for this loan class include a large number of borrowers, geographic dispersion of market areas and the loans are originated for relatively smaller amounts.
12
Commercial Real Estate. Commercial real estate loans typically involve larger principal amounts, and repayment of these loans is generally dependent on the successful operation of the property securing the loan and/or the business conducted on the property securing the loan. Credit risk in these loans is impacted by the creditworthiness of a borrower, valuation of the property securing the loan and conditions within the local economies in the Company’s diverse, geographic market areas.
Commercial. Commercial loans consist of loans to commercial customers for use in financing working capital needs, equipment purchases and business expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations across the Company’s diverse, geographic market areas.
Home Equity. Home equity loans consist of junior lien mortgages and first and junior lien lines of credit (revolving open-end and amortizing closed-end) secured by owner-occupied 1-4 family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans is impacted by economic conditions within the Company’s market areas that affect the value of the residential property securing the loans and affect the borrowers' personal incomes. Mitigating risk factors for this loan class are a large number of borrowers, geographic dispersion of market areas and the loans are originated for terms that range from 10 to 15 years.
Other Consumer. The other consumer loan portfolio consists of various short-term loans such as automobile loans and loans for other personal purposes. Repayment of these loans is primarily dependent on the personal income of the borrowers. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the Company’s diverse, geographic market area) and the creditworthiness of a borrower.
The ALLL consists of a specific valuation allowance component and a general valuation allowance component. The specific component relates to loans that are determined to be impaired and individually evaluated for impairment. The Company measures impairment on a loan-by-loan basis based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except when it is determined that repayment of the loan is expected to be provided solely by the underlying collateral. For impairment based on expected future cash flows, the Company considers all information available as of a measurement date, including past events, current conditions, potential prepayments, and estimated cost to sell when such costs are expected to reduce the cash flows available to repay or otherwise satisfy the loan. For alternative ranges of cash flows, the likelihood of the possible outcomes is considered in determining the best estimate of expected future cash flows. The effective interest rate for a loan restructured in a TDR is based on the original contractual rate. For collateral-dependent loans and real estate loans for which foreclosure or a deed-in-lieu of foreclosure is probable, impairment is measured by the fair value of the collateral, less estimated cost to sell. The fair value of the collateral is determined primarily based upon appraisal or evaluation of the underlying real property value.
The general valuation allowance component relates to probable credit losses inherent in the balance of the loan portfolio based on historical loss experience, adjusted for changes in trends and conditions of qualitative or environmental factors. The historical loss experience is based on the previous twelve quarters loss experience by loan class adjusted for risk characteristics in the existing loan portfolio. The same trends and conditions are evaluated for each class within the loan portfolio; however, the risk characteristics are weighted separately at the individual class level based on the Company’s judgment and experience.
13
The changes in trends and conditions evaluated for each class within the loan portfolio include the following:
•
changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;
•
changes in global, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments;
•
changes in the nature and volume of the portfolio and in the terms of loans;
•
changes in experience, ability, and depth of lending management and other relevant staff;
•
changes in the volume and severity of past due and nonaccrual loans;
•
changes in the quality of the Company’s loan review system;
•
changes in the value of underlying collateral for collateral-dependent loans;
•
the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and
•
the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Company’s existing portfolio.
The ALLL is increased by provisions for loan losses which are charged to expense. The portions of loan and overdraft balances determined by management to be uncollectible are charged-off as a reduction of the ALLL and recoveries of amounts previously charged-off are credited as an increase to the ALLL. The Company’s charge-off policy is consistent with bank regulatory standards. Consumer loans generally are charged-off when the loan becomes over 120 days delinquent. Real estate acquired as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned (“OREO”) until such time as it is sold.
At acquisition date, the assets and liabilities of acquired banks are recorded at their estimated fair values which results in no ALLL carried over from acquired banks. Subsequent to acquisition, an allowance will be recorded on the acquired loan portfolios for further credit deterioration, if any.
Leases
The Company leases certain land, premises and equipment from third parties. A lessee lease is classified as an operating lease unless it meets certain criteria (e.g., lease contains option to purchase that Company is reasonably certain to exercise), in which case it is classified as a finance lease. Effective January 1, 2019, operating leases are included in net premises and equipment and other liabilities on the Company’s statements of financial condition and lease expense for lease payments is recognized on a straight-line basis over the lease term. Finance leases are included in net premises and equipment and other borrowed funds on the Company’s statements of financial condition. Right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. An ROU asset represents the right to use the underlying asset for the lease term and also includes any direct costs and payments made prior to lease commencement and excludes lease incentives. When an implicit rate is not available, an incremental borrowing rate based on the information available at commencement date is used in determining the present value of the lease payments. A lease term may include an option to extend or terminate the lease when it is reasonably certain the option will be exercised. The Company accounts for lease and nonlease components (e.g., common-area maintenance) together as a single combined lease component for all asset classes. Short-term leases of 12 months or less are excluded from accounting guidance; as a result, the lease payments are recognized on a straight-line basis over the lease term and the leases are not reflected on the Company’s statements of financial condition. Renewal and termination options are considered when determining short-term leases. Leases are accounted for on an individual lease level.
Lease improvements incurred at the inception of the lease are recorded as an asset and depreciated over the initial term of the lease and lease improvements incurred subsequently are depreciated over the remaining term of the lease.
The Company also leases certain premises and equipment to third parties. A lessor lease is classified as an operating lease unless it meets certain criteria that would classify it as either a sales-type lease or a direct financing lease. For additional information relating to leases, see Note 4.
14
Revenue Recognition
The Company recognizes revenue when services or products are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled. The Company’s principal source of revenue is interest income from debt securities and loans. Revenue from contracts with customers within the scope of Accounting Standards Codification™ (“ASC”) Topic 606 was $18,446,000 and $17,291,000 for the three months ended March 31, 2019 and 2018, respectively, and largely consisted of revenue from service charges and other fees from deposits (e.g., overdraft fees, ATM fees, debit card fees). Due to the short-term nature of the Company’s contracts with customers, an insignificant amount of receivables related to such revenue was recorded at March 31, 2019 and December 31, 2018 and there were no impairment losses recognized. Policies specific to revenue from contracts with customers include the following:
Service Charges. Revenue from service charges consists of service charges and fees on deposit accounts under depository agreements with customers to provide access to deposited funds and, when applicable, pay interest on deposits. Service charges on deposit accounts may be transactional or non-transactional in nature. Transactional service charges occur in the form of a service or penalty and are charged upon the occurrence of an event (e.g., overdraft fees, ATM fees, wire transfer fees). Transactional service charges are recognized as services are delivered to and consumed by the customer, or as penalty fees are charged. Non-transactional service charges are charges that are based on a broader service, such as account maintenance fees and dormancy fees, and are recognized on a monthly basis.
Debit Card Fees. Revenue from debit card fees includes interchange fee income from debit cards processed through card association networks. Interchange fees represent a portion of a transaction amount that the Company and other involved parties retain to compensate themselves for giving the cardholder immediate access to funds. Interchange rates are generally set by the card association networks and are based on purchase volumes and other factors. The Company records interchange fees as services are provided.
Accounting Guidance Adopted in 2019
The ASC is the Financial Accounting Standards Board’s (“FASB”) officially recognized source of authoritative GAAP applicable to all public and non-public non-governmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under the authority of the federal securities laws are also sources of authoritative GAAP for the Company as an SEC registrant. All other accounting literature is non-authoritative. The following paragraphs provide descriptions of recently adopted Accounting Standards Updates (“ASU”) that may have had a material effect on the Company’s financial position or results of operations.
ASU 2017-08 - Receivables - Nonrefundable Fees and Other Costs. In March 2017, FASB amended ASC Subtopic 310-20 to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments required the premium to be amortized to the earliest call date instead of the maturity date. The amendments did not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments were effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2018 and any adjustments were to be reflected as of the beginning of the year that includes the interim period. Entities were to apply the amendments on a modified retrospective basis; therefore, a cumulative-effect reduction to retained earnings of $24,102,000 was recognized as of the January 1, 2019 effective date. The Company’s debt securities that were effected by the amendments were primarily in the state and local governments category. The Company’s accounting policies and procedures were updated to reflect the amendments.
ASU 2016-02 - Leases. In February 2016, FASB amended ASC Topic 842 to address several aspects of lease accounting with the significant change being the recognition of lease assets and lease liabilities for leases previously classified as operating leases. The amendments were effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2018. The Company has lease agreements for which the amendments required the recognition of a lease liability to make lease payments and an ROU asset which represents its right to use the underlying asset for the lease term. An entity is permitted to elect not to restate its comparative periods in the period of adoption when transitioning to ASC Topic 842 and the Company made this election. In addition, the Company made the following elections related to implementation: 1) to not use hindsight in determining lease terms and in assessing impairment of ROU assets; and 2) to use the practical expedient package, which required no reassessment of whether existing contracts are or contain leases as well as no reassessment of lease classification for existing leases. At the date of adoption, the Company recognized an ROU asset and related lease liability on the Company’s statement of financial condition of $36,178,000 and $38,220,000, respectively. The Company developed new processes to comply with the accounting and disclosure requirements of such amendments and policies and procedures were updated accordingly.
15
Accounting Guidance Pending Adoption at March 31, 2019
The following paragraphs provide descriptions of newly issued but not yet effective ASUs that could have a material effect on the Company’s financial position or results of operations.
ASU 2017-04 - Intangibles - Goodwill and Other. In January 2017, FASB amended ASC Topic 350 to simplify the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under these amendments, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has goodwill from prior business combinations and performs an annual impairment test or more frequently if changes or circumstances occur that would more-likely-than-not reduce the fair value of the reporting unit below its carrying value. During the third quarter of 2018, the Company performed its impairment assessment and determined the fair value of the aggregated reporting units exceeded the carrying value, such that the Company’s goodwill was not considered impaired. Although the Company cannot anticipate future goodwill impairment assessments, based on the most recent assessment, it is unlikely that an impairment amount would need to be calculated and, therefore, the Company does not anticipate a material impact from these amendments to the Company’s financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step 2 analysis. For additional information regarding goodwill impairment testing, see Note 5.
ASU 2016-13 - Financial Instruments - Credit Losses. In June 2016, FASB amended ASC Topic 326 to replace the incurred loss model with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. The amendments are effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the impact of these amendments to the Company’s financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. The ALLL is a material estimate of the Company and given the change from an incurred loss model to a methodology that considers the credit loss over the life of the loan, there is the potential for an increase in the ALLL at adoption date. The Company is anticipating a significant change in the processes and procedures to calculate the ALLL, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. The Company will also develop new procedures for determining an allowance for credit losses relating to held-to-maturity debt securities. In addition, the current accounting policy and procedures for other-than-temporary impairment on available-for-sale debt securities will be replaced with an allowance approach. The Company has engaged a third-party vendor solution and is currently in the implementation phase and evaluating the appropriate models, loan pools and assumptions to be utilized. The project team anticipates running parallel models during 2019 to refine its processes and procedures. For additional information on the ALLL, see Note 3.
16
Note 2. Debt Securities
The following tables present the amortized cost, the gross unrealized gains and losses and the fair value of the Company’s debt securities:
March 31, 2019
Amortized Cost
Gross Unrealized
Fair Value
(Dollars in thousands)
Gains
Losses
Available-for-sale
U.S. government and federal agency
$
21,685
22
(186
)
21,521
U.S. government sponsored enterprises
105,189
1,269
(1
)
106,457
State and local governments
700,070
25,426
(305
)
725,191
Corporate bonds
217,494
1,293
(239
)
218,548
Residential mortgage-backed securities
828,103
3,154
(6,209
)
825,048
Commercial mortgage-backed securities
612,407
14,235
(1,085
)
625,557
Total available-for-sale
2,484,948
45,399
(8,025
)
2,522,322
Held-to-maturity
State and local governments
255,572
5,842
(6
)
261,408
Total held-to-maturity
255,572
5,842
(6
)
261,408
Total debt securities
$
2,740,520
51,241
(8,031
)
2,783,730
December 31, 2018
Amortized Cost
Gross Unrealized
Fair Value
(Dollars in thousands)
Gains
Losses
Available-for-sale
U.S. government and federal agency
$
23,757
54
(162
)
23,649
U.S. government sponsored enterprises
120,670
52
(514
)
120,208
State and local governments
844,636
18,936
(11,322
)
852,250
Corporate bonds
292,052
378
(1,613
)
290,817
Residential mortgage-backed securities
808,537
628
(16,250
)
792,915
Commercial mortgage-backed securities
490,868
3,312
(2,356
)
491,824
Total available-for-sale
2,580,520
23,360
(32,217
)
2,571,663
Held-to-maturity
State and local governments
297,915
1,380
(11,039
)
288,256
Total held-to-maturity
297,915
1,380
(11,039
)
288,256
Total debt securities
$
2,878,435
24,740
(43,256
)
2,859,919
17
The following table presents the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by contractual maturity at March 31, 2019. Actual maturities may differ from expected or contractual maturities since issuers have the right to prepay obligations with or without prepayment penalties.
March 31, 2019
Available-for-Sale
Held-to-Maturity
(Dollars in thousands)
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Due within one year
$
88,040
88,011
—
—
Due after one year through five years
243,020
245,035
7,061
7,230
Due after five years through ten years
272,600
282,663
76,025
78,561
Due after ten years
440,778
456,008
172,486
175,617
1,044,438
1,071,717
255,572
261,408
Mortgage-backed securities 1
1,440,510
1,450,605
—
—
Total
$
2,484,948
2,522,322
255,572
261,408
______________________________
1 Mortgage-backed securities, which have prepayment provisions, are not assigned to maturity categories due to fluctuations in their prepayment speeds.
Proceeds from sales and calls of debt securities and the associated gains and losses that have been included in earnings are listed below:
Three Months ended
(Dollars in thousands)
March 31, 2019
March 31, 2018
Available-for-sale
Proceeds from sales and calls of debt securities
$
304,048
228,681
Gross realized gains 1
2,937
6
Gross realized losses 1
(2,716
)
(288
)
Held-to-maturity
Proceeds from calls of debt securities
29,945
15,465
Gross realized gains 1
2
54
Gross realized losses 1
(10
)
(105
)
______________________________
1 The gain or loss on the sale or call of each debt security is determined by the specific identification method.
18
Debt securities with an unrealized loss position are summarized as follows:
March 31, 2019
Less than 12 Months
12 Months or More
Total
(Dollars in thousands)
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Available-for-sale
U.S. government and federal agency
$
6,553
(71
)
9,565
(115
)
16,118
(186
)
U.S. government sponsored enterprises
—
—
4,961
(1
)
4,961
(1
)
State and local governments
3,736
(4
)
34,411
(301
)
38,147
(305
)
Corporate bonds
18,409
(37
)
53,314
(202
)
71,723
(239
)
Residential mortgage-backed securities
28,049
(86
)
441,716
(6,123
)
469,765
(6,209
)
Commercial mortgage-backed securities
20,363
(254
)
49,988
(831
)
70,351
(1,085
)
Total available-for-sale
$
77,110
(452
)
593,955
(7,573
)
671,065
(8,025
)
Held-to-maturity
State and local governments
$
—
—
6,896
(6
)
6,896
(6
)
Total held-to-maturity
$
—
—
6,896
(6
)
6,896
(6
)
December 31, 2018
Less than 12 Months
12 Months or More
Total
(Dollars in thousands)
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Available-for-sale
U.S. government and federal agency
$
4,287
(27
)
10,519
(135
)
14,806
(162
)
U.S. government sponsored enterprises
43,400
(103
)
35,544
(411
)
78,944
(514
)
State and local governments
72,080
(922
)
232,244
(10,400
)
304,324
(11,322
)
Corporate bonds
119,111
(937
)
114,800
(676
)
233,911
(1,613
)
Residential mortgage-backed securities
132,405
(833
)
537,202
(15,417
)
669,607
(16,250
)
Commercial mortgage-backed securities
73,118
(402
)
86,504
(1,954
)
159,622
(2,356
)
Total available-for-sale
$
444,401
(3,224
)
1,016,813
(28,993
)
1,461,214
(32,217
)
Held-to-maturity
State and local governments
$
87,392
(2,778
)
126,226
(8,261
)
213,618
(11,039
)
Total held-to-maturity
$
87,392
(2,778
)
126,226
(8,261
)
213,618
(11,039
)
Based on an analysis of its debt securities with unrealized losses as of March 31, 2019 and December 31, 2018, the Company determined that none of such securities had other-than-temporary impairment and the unrealized losses were primarily the result of interest rate changes and market spreads subsequent to acquisition. The fair value of the debt securities is expected to recover as payments are received and the securities approach maturity. At March 31, 2019, management determined that it did not intend to sell debt securities with unrealized losses, and there was no expected requirement to sell any of its debt securities with unrealized losses before recovery of their amortized cost.
19
Note 3. Loans Receivable, Net
The Company’s loan portfolio is comprised of three segments: residential real estate, commercial, and consumer and other loans. The loan segments are further disaggregated into the following classes: residential real estate, commercial real estate, other commercial, home equity and other consumer loans. The following table presents loans receivable for each portfolio class of loans:
At or for the Three Months ended
At or for the Year ended
(Dollars in thousands)
March 31, 2019
December 31, 2018
Residential real estate loans
$
884,732
887,742
Commercial loans
Real estate
4,686,082
4,657,561
Other commercial
1,909,452
1,911,171
Total
6,595,534
6,568,732
Consumer and other loans
Home equity
562,381
544,688
Other consumer
283,423
286,387
Total
845,804
831,075
Loans receivable
8,326,070
8,287,549
Allowance for loan and lease losses
(129,786
)
(131,239
)
Loans receivable, net
$
8,196,284
8,156,310
Net deferred origination (fees) costs included in loans receivable
$
(5,022
)
(5,685
)
Net purchase accounting (discounts) premiums included in loans receivable
$
(23,681
)
(25,172
)
Weighted-average interest rate on loans (tax-equivalent)
5.18
%
4.97
%
20
Allowance for Loan and Lease Losses
The ALLL is a valuation allowance for probable incurred credit losses. The following tables summarize the activity in the ALLL by loan class:
Three Months ended March 31, 2019
(Dollars in thousands)
Total
Residential
Real Estate
Commercial
Real Estate
Other
Commercial
Home
Equity
Other
Consumer
Balance at beginning of period
$
131,239
10,631
72,448
38,160
5,811
4,189
Provision for loan losses
57
278
(148
)
(915
)
64
778
Charge-offs
(3,341
)
(292
)
(283
)
(840
)
(8
)
(1,918
)
Recoveries
1,831
94
311
444
13
969
Balance at end of period
$
129,786
10,711
72,328
36,849
5,880
4,018
Three Months ended March 31, 2018
(Dollars in thousands)
Total
Residential
Real Estate
Commercial
Real Estate
Other
Commercial
Home
Equity
Other
Consumer
Balance at beginning of period
$
129,568
10,798
68,515
39,303
6,204
4,748
Provision for loan losses
795
(177
)
245
(3
)
(202
)
932
Charge-offs
(5,007
)
(3
)
(1,033
)
(1,788
)
(12
)
(2,171
)
Recoveries
2,252
16
615
596
50
975
Balance at end of period
$
127,608
10,634
68,342
38,108
6,040
4,484
The following tables disclose the recorded investment in loans and the balance in the ALLL by loan class:
March 31, 2019
(Dollars in thousands)
Total
Residential
Real Estate
Commercial
Real Estate
Other
Commercial
Home
Equity
Other
Consumer
Loans receivable
Individually evaluated for impairment
$
104,411
10,646
65,104
22,954
3,057
2,650
Collectively evaluated for impairment
8,221,659
874,086
4,620,978
1,886,498
559,324
280,773
Total loans receivable
$
8,326,070
884,732
4,686,082
1,909,452
562,381
283,423
ALLL
Individually evaluated for impairment
$
702
1
57
642
—
2
Collectively evaluated for impairment
129,084
10,710
72,271
36,207
5,880
4,016
Total ALLL
$
129,786
10,711
72,328
36,849
5,880
4,018
21
December 31, 2018
(Dollars in thousands)
Total
Residential
Real Estate
Commercial
Real Estate
Other
Commercial
Home
Equity
Other
Consumer
Loans receivable
Individually evaluated for impairment
$
108,788
12,685
68,837
20,975
3,497
2,794
Collectively evaluated for impairment
8,178,761
875,057
4,588,724
1,890,196
541,191
283,593
Total loans receivable
$
8,287,549
887,742
4,657,561
1,911,171
544,688
286,387
ALLL
Individually evaluated for impairment
$
3,223
83
568
2,313
39
220
Collectively evaluated for impairment
128,016
10,548
71,880
35,847
5,772
3,969
Total ALLL
$
131,239
10,631
72,448
38,160
5,811
4,189
Substantially all of the Company’s loans receivable are with customers in the Company’s geographic market areas. Although the Company has a diversified loan portfolio, a substantial portion of its customers’ ability to honor their obligations is dependent upon the economic performance in the Company’s market areas.
Aging Analysis
The following tables present an aging analysis of the recorded investment in loans by loan class:
March 31, 2019
(Dollars in thousands)
Total
Residential
Real Estate
Commercial
Real Estate
Other
Commercial
Home
Equity
Other
Consumer
Accruing loans 30-59 days past due
$
28,938
5,211
14,345
5,620
2,273
1,489
Accruing loans 60-89 days past due
7,956
768
3,564
1,839
1,082
703
Accruing loans 90 days or more past due
2,451
998
234
998
115
106
Non-accrual loans
40,269
6,219
24,096
6,766
2,454
734
Total past due and non-accrual loans
79,614
13,196
42,239
15,223
5,924
3,032
Current loans receivable
8,246,456
871,536
4,643,843
1,894,229
556,457
280,391
Total loans receivable
$
8,326,070
884,732
4,686,082
1,909,452
562,381
283,423
December 31, 2018
(Dollars in thousands)
Total
Residential
Real Estate
Commercial
Real Estate
Other
Commercial
Home
Equity
Other
Consumer
Accruing loans 30-59 days past due
$
24,312
5,251
9,477
4,282
3,213
2,089
Accruing loans 60-89 days past due
9,255
860
3,231
3,838
735
591
Accruing loans 90 days or more past due
2,018
788
—
492
428
310
Non-accrual loans
47,252
8,021
27,264
8,619
2,575
773
Total past due and non-accrual loans
82,837
14,920
39,972
17,231
6,951
3,763
Current loans receivable
8,204,712
872,822
4,617,589
1,893,940
537,737
282,624
Total loans receivable
$
8,287,549
887,742
4,657,561
1,911,171
544,688
286,387
22
Impaired Loans
Loans are designated impaired when, based upon current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement and therefore, the Company has serious doubts as to the ability of such borrowers to fulfill the contractual obligation. The following tables disclose information related to impaired loans by loan class:
At or for the Three Months ended March 31, 2019
(Dollars in thousands)
Total
Residential
Real Estate
Commercial
Real Estate
Other
Commercial
Home
Equity
Other
Consumer
Loans with a specific valuation allowance
Recorded balance
$
16,061
44
6,004
10,004
—
9
Unpaid principal balance
16,061
44
6,004
10,004
—
9
Specific valuation allowance
702
1
57
642
—
2
Average balance
17,629
1,001
7,674
8,636
60
258
Loans without a specific valuation allowance
Recorded balance
88,350
10,602
59,100
12,950
3,057
2,641
Unpaid principal balance
105,100
12,009
69,991
16,516
3,699
2,885
Average balance
88,970
10,665
59,296
13,328
3,217
2,464
Total
Recorded balance
104,411
10,646
65,104
22,954
3,057
2,650
Unpaid principal balance
121,161
12,053
75,995
26,520
3,699
2,894
Specific valuation allowance
702
1
57
642
—
2
Average balance
106,599
11,666
66,970
21,964
3,277
2,722
At or for the Year ended December 31, 2018
(Dollars in thousands)
Total
Residential
Real Estate
Commercial
Real Estate
Other
Commercial
Home
Equity
Other
Consumer
Loans with a specific valuation allowance
Recorded balance
$
19,197
1,957
9,345
7,268
120
507
Unpaid principal balance
19,491
2,220
9,345
7,268
120
538
Specific valuation allowance
3,223
83
568
2,313
39
220
Average balance
19,519
2,686
8,498
7,081
82
1,172
Loans without a specific valuation allowance
Recorded balance
89,591
10,728
59,492
13,707
3,377
2,287
Unpaid principal balance
107,486
11,989
71,300
17,689
3,986
2,522
Average balance
106,747
10,269
73,889
17,376
3,465
1,748
Total
Recorded balance
108,788
12,685
68,837
20,975
3,497
2,794
Unpaid principal balance
126,977
14,209
80,645
24,957
4,106
3,060
Specific valuation allowance
3,223
83
568
2,313
39
220
Average balance
126,266
12,955
82,387
24,457
3,547
2,920
Interest income recognized on impaired loans for the three months ended March 31, 2019 and 2018 was not significant.
23
Restructured Loans
A restructured loan is considered a troubled debt restructuring if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. The following tables present TDRs that occurred during the periods presented and the TDRs that occurred within the previous twelve months that subsequently defaulted during the periods presented: