FULT 9.30.2014 10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20459
FORM 10-Q
(Mark One)
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ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2014, or
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¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 0-10587
FULTON FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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PENNSYLVANIA | | 23-2195389 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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One Penn Square, P.O. Box 4887, Lancaster, Pennsylvania | | 17604 |
(Address of principal executive offices) | | (Zip Code) |
(717) 291-2411
(Registrant’s telephone number, including area code)
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 ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | | ý | | Accelerated filer | | ¨ |
Non-accelerated filer | | ¨ | | Smaller reporting company | | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common Stock, $2.50 Par Value –185,265,000 shares outstanding as of October 31, 2014.
FULTON FINANCIAL CORPORATION
FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014
INDEX
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Description | Page |
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PART I. FINANCIAL INFORMATION | |
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(a) | Consolidated Balance Sheets - September 30, 2014 and December 31, 2013 | |
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(b) | | |
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(c) | | |
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(d) | | |
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(e) | | |
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(f) | | |
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | |
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Item 4. Mine Safety Disclosures | |
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Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(in thousands, except per-share data) |
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| September 30, 2014 | | December 31, 2013 |
| (unaudited) | |
ASSETS | | | |
Cash and due from banks | $ | 220,946 |
| | $ | 218,540 |
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Interest-bearing deposits with other banks | 291,523 |
| | 163,988 |
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Federal Reserve Bank and Federal Home Loan Bank stock | 86,056 |
| | 84,173 |
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Loans held for sale | 25,212 |
| | 21,351 |
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Available for sale investment securities | 2,470,609 |
| | 2,568,434 |
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Loans, net of unearned income | 13,030,405 |
| | 12,782,220 |
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Less: Allowance for loan losses | (189,477 | ) | | (202,780 | ) |
Net Loans | 12,840,928 |
| | 12,579,440 |
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Premises and equipment | 224,441 |
| | 226,021 |
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Accrued interest receivable | 43,544 |
| | 44,037 |
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Goodwill and intangible assets | 532,117 |
| | 533,076 |
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Other assets | 502,798 |
| | 495,574 |
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Total Assets | $ | 17,238,174 |
| | $ | 16,934,634 |
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LIABILITIES | | | |
Deposits: | | | |
Noninterest-bearing | $ | 3,556,810 |
| | $ | 3,283,172 |
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Interest-bearing | 9,776,817 |
| | 9,208,014 |
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Total Deposits | 13,333,627 |
| | 12,491,186 |
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Short-term borrowings: | | | |
Federal funds purchased | 6,606 |
| | 582,436 |
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Other short-term borrowings | 558,346 |
| | 676,193 |
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Total Short-Term Borrowings | 564,952 |
| | 1,258,629 |
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Accrued interest payable | 17,425 |
| | 15,218 |
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Other liabilities | 225,875 |
| | 222,830 |
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Federal Home Loan Bank advances and long-term debt | 1,018,289 |
| | 883,584 |
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Total Liabilities | 15,160,168 |
| | 14,871,447 |
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SHAREHOLDERS’ EQUITY | | | |
Common stock, $2.50 par value, 600 million shares authorized, 218.1 million shares issued in 2014 and 217.8 million shares issued in 2013 | 545,207 |
| | 544,568 |
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Additional paid-in capital | 1,438,343 |
| | 1,432,974 |
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Retained earnings | 538,749 |
| | 463,843 |
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Accumulated other comprehensive loss | (11,948 | ) | | (37,341 | ) |
Treasury stock, at cost, 32.9 million shares in 2014 and 25.2 million shares in 2013 | (432,345 | ) | | (340,857 | ) |
Total Shareholders’ Equity | 2,078,006 |
| | 2,063,187 |
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Total Liabilities and Shareholders’ Equity | $ | 17,238,174 |
| | $ | 16,934,634 |
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See Notes to Consolidated Financial Statements | | | |
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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(in thousands, except per-share data) | Three months ended September 30 | | Nine months ended September 30 |
| 2014 | | 2013 | | 2014 | | 2013 |
INTEREST INCOME | | | | | | | |
Loans, including fees | $ | 133,741 |
| | $ | 136,150 |
| | $ | 397,011 |
| | $ | 405,312 |
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Investment securities: | | | | | | | |
Taxable | 12,278 |
| | 12,977 |
| | 37,962 |
| | 40,890 |
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Tax-exempt | 2,219 |
| | 2,327 |
| | 6,865 |
| | 7,151 |
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Dividends | 339 |
| | 337 |
| | 996 |
| | 1,091 |
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Loans held for sale | 237 |
| | 382 |
| | 585 |
| | 1,261 |
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Other interest income | 976 |
| | 659 |
| | 3,065 |
| | 1,527 |
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Total Interest Income | 149,790 |
| | 152,832 |
| | 446,484 |
| | 457,232 |
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INTEREST EXPENSE | | | | | | | |
Deposits | 8,998 |
| | 8,743 |
| | 25,579 |
| | 28,642 |
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Short-term borrowings | 297 |
| | 691 |
| | 1,470 |
| | 1,900 |
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Long-term debt | 11,129 |
| | 10,865 |
| | 32,606 |
| | 32,448 |
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Total Interest Expense | 20,424 |
| | 20,299 |
| | 59,655 |
| | 62,990 |
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Net Interest Income | 129,366 |
| | 132,533 |
| | 386,829 |
| | 394,242 |
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Provision for credit losses | 3,500 |
| | 9,500 |
| | 9,500 |
| | 38,000 |
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Net Interest Income After Provision for Credit Losses | 125,866 |
| | 123,033 |
| | 377,329 |
| | 356,242 |
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NON-INTEREST INCOME | | | | | | | |
Service charges on deposit accounts | 12,801 |
| | 13,938 |
| | 37,064 |
| | 42,700 |
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Investment management and trust services | 11,120 |
| | 10,420 |
| | 33,417 |
| | 31,117 |
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Other service charges and fees | 9,954 |
| | 9,518 |
| | 29,407 |
| | 27,536 |
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Mortgage banking income | 4,038 |
| | 7,123 |
| | 13,384 |
| | 26,293 |
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Other | 3,906 |
| | 3,725 |
| | 10,813 |
| | 11,315 |
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Investment securities gains, net: | | | | | | | |
Other-than-temporary impairment losses | (84 | ) | | (125 | ) | | (122 | ) | | (146 | ) |
Less: Portion of gain recognized in other comprehensive income (loss) (before taxes) | 66 |
| | 28 |
| | 92 |
| | 22 |
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Net other-than-temporary impairment losses | (18 | ) | | (97 | ) | | (30 | ) | | (124 | ) |
Net gains on sales of investment securities | 99 |
| | 2,730 |
| | 1,223 |
| | 8,095 |
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Investment securities gains, net | 81 |
| | 2,633 |
| | 1,193 |
| | 7,971 |
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Total Non-Interest Income | 41,900 |
| | 47,357 |
| | 125,278 |
| | 146,932 |
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NON-INTEREST EXPENSE | | | | | | | |
Salaries and employee benefits | 62,434 |
| | 63,344 |
| | 185,623 |
| | 188,046 |
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Net occupancy expense | 11,582 |
| | 11,519 |
| | 36,649 |
| | 34,810 |
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Other outside services | 8,632 |
| | 5,048 |
| | 19,684 |
| | 13,223 |
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Data processing | 4,689 |
| | 4,757 |
| | 12,816 |
| | 13,169 |
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Software | 3,353 |
| | 3,268 |
| | 9,487 |
| | 9,110 |
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Equipment expense | 3,307 |
| | 3,646 |
| | 10,269 |
| | 11,447 |
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Professional fees | 3,252 |
| | 3,329 |
| | 9,715 |
| | 9,771 |
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FDIC insurance expense | 2,882 |
| | 2,918 |
| | 8,186 |
| | 8,766 |
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Marketing | 1,798 |
| | 2,251 |
| | 5,719 |
| | 6,045 |
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Other real estate owned and repossession expense | 1,303 |
| | 1,453 |
| | 3,034 |
| | 6,248 |
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Operating risk loss | 1,242 |
| | 3,297 |
| | 3,786 |
| | 6,923 |
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Intangible amortization | 314 |
| | 534 |
| | 944 |
| | 1,603 |
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Other | 11,010 |
| | 11,241 |
| | 35,614 |
| | 35,510 |
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Total Non-Interest Expense | 115,798 |
| | 116,605 |
| | 341,526 |
| | 344,671 |
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Income Before Income Taxes | 51,968 |
| | 53,785 |
| | 161,081 |
| | 158,503 |
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Income taxes | 13,402 |
| | 13,837 |
| | 41,136 |
| | 38,746 |
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Net Income | $ | 38,566 |
| | $ | 39,948 |
| | $ | 119,945 |
| | $ | 119,757 |
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PER SHARE: | | | | | | | |
Net Income (Basic) | $ | 0.21 |
| | $ | 0.21 |
| | $ | 0.64 |
| | $ | 0.62 |
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Net Income (Diluted) | 0.21 |
| | 0.21 |
| | 0.64 |
| | 0.61 |
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Cash Dividends | 0.08 |
| | 0.08 |
| | 0.24 |
| | 0.24 |
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See Notes to Consolidated Financial Statements | | | | | | | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
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| Three months ended September 30 | | Nine months ended September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
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Net Income | $ | 38,566 |
| | $ | 39,948 |
| | $ | 119,945 |
| | $ | 119,757 |
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Other Comprehensive Income (Loss), net of tax: | | | | | | | |
Unrealized gain (loss) on securities | (3,011 | ) | | (6,951 | ) | | 23,912 |
| | (43,784 | ) |
Reclassification adjustment for postretirement amendment gains included in net income | — |
| | — |
| | (944 | ) | | — |
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Reclassification adjustment for securities gains included in net income | (52 | ) | | (1,711 | ) | | (775 | ) | | (5,181 | ) |
Non-credit related unrealized gain on other-than-temporarily impaired debt securities | 138 |
| | (106 | ) | | 650 |
| | 1,332 |
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Unrealized gain on derivative financial instruments | 34 |
| | 34 |
| | 102 |
| | 102 |
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Unrecognized pension and postretirement income | — |
| | — |
| | 2,144 |
| | — |
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Amortization of net unrecognized pension and postretirement items | 104 |
| | 329 |
| | 304 |
| | 985 |
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Other Comprehensive Income (Loss) | (2,787 | ) | | (8,405 | ) | | 25,393 |
| | (46,546 | ) |
Total Comprehensive Income | $ | 35,779 |
| | $ | 31,543 |
| | $ | 145,338 |
| | $ | 73,211 |
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See Notes to Consolidated Financial Statements | | | | | | | |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(in thousands, except per-share data)
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| Common Stock | | | | Retained Earnings | | | | Treasury Stock | | Total |
| Shares Outstanding | | Amount | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | |
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Balance at December 31, 2013 | 192,652 |
| | $ | 544,568 |
| | $ | 1,432,974 |
| | $ | 463,843 |
| | $ | (37,341 | ) | | $ | (340,857 | ) | | $ | 2,063,187 |
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Net income |
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| | 119,945 |
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| | 119,945 |
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Other comprehensive income (loss) |
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| | 25,393 |
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| | 25,393 |
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Stock issued, including related tax benefits | 506 |
| | 639 |
| | 1,059 |
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| | 3,767 |
| | 5,465 |
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Stock-based compensation awards |
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| | 4,310 |
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| | 4,310 |
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Acquisition of treasury stock | (8,000 | ) | | | | | | | | | | (95,255 | ) | | (95,255 | ) |
Common stock cash dividends - $0.24 per share |
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| | (45,039 | ) | |
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| | (45,039 | ) |
Balance at September 30, 2014 | 185,158 |
| | $ | 545,207 |
| | $ | 1,438,343 |
| | $ | 538,749 |
| | $ | (11,948 | ) | | $ | (432,345 | ) | | $ | 2,078,006 |
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Balance at December 31, 2012 | 199,225 |
| | $ | 542,093 |
| | $ | 1,426,267 |
| | $ | 363,937 |
| | $ | 5,675 |
| | $ | (256,316 | ) | | $ | 2,081,656 |
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Net income |
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| | 119,757 |
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| | 119,757 |
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Other comprehensive income (loss) |
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| | (46,546 | ) | |
| | (46,546 | ) |
Stock issued, including related tax benefits | 1,107 |
| | 1,959 |
| | 562 |
| |
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| | 4,838 |
| | 7,359 |
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Stock-based compensation awards |
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| | 4,186 |
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| | 4,186 |
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Acquisition of treasury stock | (8,000 | ) | | | | | | | | | | (90,927 | ) | | (90,927 | ) |
Common stock cash dividends - $0.24 per share |
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| | (46,521 | ) | |
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| | (46,521 | ) |
Balance at September 30, 2013 | 192,332 |
| | $ | 544,052 |
| | $ | 1,431,015 |
| | $ | 437,173 |
| | $ | (40,871 | ) | | $ | (342,405 | ) | | $ | 2,028,964 |
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See Notes to Consolidated Financial Statements | | | | | | | | | | | | | |
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
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| Nine months ended September 30 |
| 2014 | | 2013 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net Income | $ | 119,945 |
| | $ | 119,757 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Provision for credit losses | 9,500 |
| | 38,000 |
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Depreciation and amortization of premises and equipment | 18,412 |
| | 19,165 |
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Net amortization of investment securities premiums | 4,399 |
| | 8,749 |
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Investment securities gains, net | (1,193 | ) | | (7,971 | ) |
Net (increase) decrease in loans held for sale | (3,861 | ) | | 28,626 |
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Amortization of intangible assets | 944 |
| | 1,603 |
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Stock-based compensation | 4,310 |
| | 4,186 |
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Excess tax benefits from stock-based compensation | (54 | ) | | (237 | ) |
Decrease in accrued interest receivable | 493 |
| | 1,071 |
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(Increase) decrease in other assets | (1,909 | ) | | 37,129 |
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Increase (decrease) in accrued interest payable | 2,207 |
| | (2,673 | ) |
Decrease in other liabilities | (5,315 | ) | | (24,207 | ) |
Total adjustments | 27,933 |
| | 103,441 |
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Net cash provided by operating activities | 147,878 |
| | 223,198 |
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CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Proceeds from sales of securities available for sale | 15,219 |
| | 268,259 |
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Proceeds from maturities of securities held to maturity | — |
| | 86 |
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Proceeds from maturities of securities available for sale | 273,688 |
| | 526,393 |
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Purchase of securities available for sale | (164,676 | ) | | (691,362 | ) |
Increase in short-term investments | (129,418 | ) | | (63,965 | ) |
Net increase in loans | (271,494 | ) | | (684,529 | ) |
Net purchases of premises and equipment | (16,832 | ) | | (18,741 | ) |
Net cash used in investing activities | (293,513 | ) | | (663,859 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Net increase in demand and savings deposits | 768,979 |
| | 595,722 |
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Net increase (decrease) in time deposits | 73,462 |
| | (358,764 | ) |
(Decrease) increase in short-term borrowings | (693,677 | ) | | 330,178 |
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Additions to long-term debt | 140,000 |
| | — |
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Repayments of long-term debt | (5,295 | ) | | (5,131 | ) |
Net proceeds from issuance of common stock | 5,411 |
| | 7,122 |
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Excess tax benefits from stock-based compensation | 54 |
| | 237 |
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Dividends paid | (45,638 | ) | | (31,138 | ) |
Acquisition of treasury stock | (95,255 | ) | | (90,927 | ) |
Net cash provided by financing activities | 148,041 |
| | 447,299 |
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Net Increase in Cash and Due From Banks | 2,406 |
| | 6,638 |
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Cash and Due From Banks at Beginning of Period | 218,540 |
| | 256,300 |
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Cash and Due From Banks at End of Period | $ | 220,946 |
| | $ | 262,938 |
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Supplemental Disclosures of Cash Flow Information: | | | |
Cash paid during the period for: | | | |
Interest | $ | 57,448 |
| | $ | 65,663 |
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Income taxes | 16,632 |
| | 29,964 |
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See Notes to Consolidated Financial Statements | | | |
FULTON FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A – Basis of Presentation
The accompanying unaudited consolidated financial statements of Fulton Financial Corporation (the Corporation) have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as revenues and expenses during the period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. The Corporation evaluates subsequent events through the filing date of this Form 10-Q with the Securities and Exchange Commission (SEC).
Recent Accounting Standards
In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) Update 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." ASC Update 2014-08 changes the criteria for reporting discontinued operations, including a change in the definition of what constitutes the disposal of a component and additional disclosure requirements. For public business entities ASC Update 2014-08 is effective for disposals that occur within annual periods beginning after December 15, 2014. For the Corporation, this standards update is effective with its March 31, 2015 quarterly report on Form 10-Q. The adoption of ASC Update 2014-08 is not expected to have a material impact on the Corporation's consolidated financial statements.
In May 2014, the FASB issued ASC Update 2014-09, "Revenue from Contracts with Customers." This standards update provides a framework that replaces most existing revenue recognition guidance. The core principle prescribed by this standards update is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC Update 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2016. Early application is not permitted. For the Corporation, this standards update is effective with its March 31, 2017 quarterly report on Form 10-Q. The Corporation is currently evaluating the impact of the adoption of ASC Update 2014-09 on its consolidated financial statements.
In June 2014, the FASB issued ASC Update 2014-11, "Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures." In addition to new disclosure requirements, ASC Update 2014-11 requires that all repurchase-to-maturity transactions be accounted for as secured borrowings rather than as sales of financial assets. Also, all transfers of financial assets executed contemporaneously with a repurchase agreement with the same counterparty must be accounted for separately, the result of which would be the treatment of such transactions as secured borrowings. ASC Update 2014-11 is effective for public business entities’ interim and annual reporting periods beginning after December 15, 2014. For the Corporation, this standards update is effective with its March 31, 2015 quarterly report on Form 10-Q. The adoption of ASC Update 2014-11 is not expected to have a material impact on the Corporation’s consolidated financial statements.
In June 2014, the FASB issued ASC Update 2014-12, "Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period." ASC Update 2014-12 clarifies guidance related to accounting for share-based payment awards with terms that allow an employee to vest in the award regardless of whether the employee is rendering service on the date a performance target is achieved. ASC Update 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. ASC Update 2014-12 is effective for public business entities’ interim and annual reporting periods beginning after December 15, 2014, with earlier adoption permitted. For the Corporation, this standards update is effective with its March 31, 2015 quarterly report on Form 10-Q. The adoption of ASC Update 2014-12 is not expected to have a material impact on the Corporation’s consolidated financial statements.
In August 2014, the FASB issued ASC Update 2014-14, "Receivables - Troubled Debt Restructuring by Creditors." ASC Update 2014-14 clarifies troubled debt restructuring guidance related to the classification and measurement of certain government-sponsored loan guarantee programs upon foreclosure. ASC Update 2014-14 is effective for public business entities’ interim and annual reporting periods beginning after December 15, 2014, with earlier adoption permitted. For the Corporation, this standards
update is effective with its March 31, 2015 quarterly report on Form 10-Q. The adoption of ASC Update 2014-14 is not expected to have a material impact on the Corporation’s consolidated financial statements.
In August 2014, the FASB issued ASC Update 2014-15, "Presentation of Financial Statements - Going Concern." ASC Update 2014-15 provides guidance regarding management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related disclosures. The standards update describes how an entity's management should assess whether there are conditions and events, considered in the aggregate, that raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that the financial statements are issued. ASC Update 2014-15 is effective for public business entities’ annual reporting periods ending after December 15, 2016, with earlier adoption permitted. For the Corporation, this standards update is effective with its December 31, 2016 annual report on Form 10-K. The adoption of ASC Update 2014-15 is not expected to have a material impact on the Corporation’s consolidated financial statements.
Reclassifications
Certain amounts in the 2013 consolidated financial statements and notes have been reclassified to conform to the 2014 presentation.
NOTE B – Net Income Per Share
Basic net income per share is calculated as net income divided by the weighted average number of shares outstanding.
Diluted net income per share is calculated as net income divided by the weighted average number of shares outstanding plus the incremental number of shares added as a result of converting common stock equivalents, calculated using the treasury stock method. The Corporation’s common stock equivalents consist of outstanding stock options, restricted stock, restricted stock units (RSUs) and performance-based restricted stock units (PSUs). PSUs are required to be included in weighted average shares outstanding if performance measures, as defined in each PSU award agreement, are met as of the end of the period.
A reconciliation of weighted average shares outstanding used to calculate basic net income per share and diluted net income per share follows:
|
| | | | | | | | | | | |
| Three months ended September 30 | | Nine months ended September 30 |
| 2014 | | 2013 | | 2014 | | 2013 |
| (in thousands) |
Weighted average shares outstanding (basic) | 186,109 |
| | 192,251 |
| | 187,893 |
| | 193,926 |
|
Impact of common stock equivalents | 846 |
| | 1,008 |
| | 970 |
| | 1,000 |
|
Weighted average shares outstanding (diluted) | 186,955 |
| | 193,259 |
| | 188,863 |
| | 194,926 |
|
For the three and nine months ended September 30, 2014, 2.5 million and 2.9 million shares issuable under stock options, respectively, were excluded from the diluted net income per share computation as their effect would have been anti-dilutive. For the three and nine months ended September 30, 2013, 3.2 million and 3.7 million shares issuable under stock options, respectively, were excluded from the diluted net income per share computation as their effect would have been anti-dilutive.
NOTE C – Accumulated Other Comprehensive Income (Loss)
The following table presents changes in other comprehensive income (loss):
|
| | | | | | | | | | | |
| Before-Tax Amount | | Tax Effect | | Net of Tax Amount |
| (in thousands) |
Three months ended September 30, 2014 | | | | | |
Unrealized gain (loss) on securities | $ | (4,629 | ) | | $ | 1,618 |
| | $ | (3,011 | ) |
Reclassification adjustment for securities gains included in net income (1) | (81 | ) | | 29 |
| | (52 | ) |
Non-credit related unrealized gains (losses) on other-than-temporarily impaired debt securities | 212 |
| | (74 | ) | | 138 |
|
Unrealized gain on derivative financial instruments | 52 |
| | (18 | ) | | 34 |
|
Amortization of net unrecognized pension and postretirement items (2) | 160 |
| | (56 | ) | | 104 |
|
Total Other Comprehensive Income (Loss) | $ | (4,286 | ) | | $ | 1,499 |
| | $ | (2,787 | ) |
Three months ended September 30, 2013 | | | | | |
Unrealized gain (loss) on securities | $ | (10,691 | ) | | $ | 3,740 |
| | $ | (6,951 | ) |
Reclassification adjustment for securities gains included in net income (1) | (2,633 | ) | | 922 |
| | (1,711 | ) |
Non-credit related unrealized gains (losses) on other-than-temporarily impaired debt securities | (163 | ) | | 57 |
| | (106 | ) |
Unrealized gain on derivative financial instruments | 52 |
| | (18 | ) | | 34 |
|
Amortization of net unrecognized pension and postretirement items (2) | 505 |
| | (176 | ) | | 329 |
|
Total Other Comprehensive Income (Loss) | $ | (12,930 | ) | | $ | 4,525 |
| | $ | (8,405 | ) |
| | | | | |
Nine months ended September 30, 2014 | | | | | |
Unrealized gain (loss) on securities | $ | 36,790 |
| | $ | (12,878 | ) | | $ | 23,912 |
|
Reclassification adjustment for postretirement gains included in net income (2) | (1,452 | ) | | 508 |
| | (944 | ) |
Reclassification adjustment for securities gains included in net income (1) | (1,193 | ) | | 418 |
| | (775 | ) |
Non-credit related unrealized gains (losses) on other-than-temporarily impaired debt securities | 1,000 |
| | (350 | ) | | 650 |
|
Unrealized gain on derivative financial instruments | 157 |
| | (55 | ) | | 102 |
|
Unrecognized pension and postretirement income | 3,291 |
| | (1,147 | ) | | 2,144 |
|
Amortization of net unrecognized pension and postretirement items (2) | 469 |
| | (165 | ) | | 304 |
|
Total Other Comprehensive Income (Loss) | $ | 39,062 |
| | $ | (13,669 | ) | | $ | 25,393 |
|
Nine months ended September 30, 2013 | | | | | |
Unrealized gain (loss) on securities | $ | (67,357 | ) | | $ | 23,573 |
| | $ | (43,784 | ) |
Reclassification adjustment for securities gains included in net income (1) | (7,971 | ) | | 2,790 |
| | (5,181 | ) |
Non-credit related unrealized gains (losses) on other-than-temporarily impaired debt securities | 2,049 |
| | (717 | ) | | 1,332 |
|
Unrealized gain on derivative financial instruments | 157 |
| | (55 | ) | | 102 |
|
Amortization of net unrecognized pension and postretirement items (2) | 1,515 |
| | (530 | ) | | 985 |
|
Total Other Comprehensive Income (Loss) | $ | (71,607 | ) | | $ | 25,061 |
| | $ | (46,546 | ) |
| |
(1) | Amounts reclassified out of accumulated other comprehensive income. Before-tax amounts included within "Investment securities gains, net" on the consolidated statements of income. See Note D, "Investment Securities," for additional details. |
| |
(2) | Amounts reclassified out of accumulated other comprehensive income. Before-tax amounts included within "Salaries and employee benefits" on the consolidated statements of income. See Note H, "Employee Benefit Plans," for additional details. |
The following table presents changes in each component of accumulated other comprehensive income (loss), net of tax:
|
| | | | | | | | | | | | | | | | | | | |
| Unrealized Gains (Losses) on Investment Securities Not Other-Than-Temporarily Impaired | | Unrealized Non-Credit Gains (Losses) on Other-Than-Temporarily Impaired Debt Securities | | Unrealized Effective Portions of Losses on Forward-Starting Interest Rate Swaps | | Unrecognized Pension and Postretirement Plan Income (Costs) | | Total |
| (in thousands) |
Three months ended September 30, 2014 | | | | | | | | | |
Balance at June 30, 2014 | $ | (580 | ) | | $ | 1,434 |
| | $ | (2,614 | ) | | $ | (7,401 | ) | | $ | (9,161 | ) |
Other comprehensive income (loss) before reclassifications | (3,011 | ) | | 138 |
| | — |
| | — |
| | (2,873 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) | (63 | ) | | 11 |
| | 34 |
| | 104 |
| | 86 |
|
Balance at September 30, 2014 | $ | (3,654 | ) | | $ | 1,583 |
| | $ | (2,580 | ) | | $ | (7,297 | ) | | $ | (11,948 | ) |
Three months ended September 30, 2013 |
| |
| | | |
| |
|
Balance at June 30, 2013 | $ | (12,941 | ) | | $ | 1,050 |
| | $ | (2,750 | ) | | $ | (17,825 | ) | | $ | (32,466 | ) |
Other comprehensive income (loss) before reclassifications | (6,951 | ) |
| (106 | ) | | — |
| | — |
| | (7,057 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) | (1,774 | ) | | 63 |
| | 34 |
| | 329 |
| | (1,348 | ) |
Balance at September 30, 2013 | $ | (21,666 | ) | | $ | 1,007 |
| | $ | (2,716 | ) | | $ | (17,496 | ) | | $ | (40,871 | ) |
| | | | | | | | | |
Nine months ended September 30, 2014 | | | | | | | | | |
Balance at December 31, 2013 | $ | (27,510 | ) | | $ | 1,652 |
| | $ | (2,682 | ) | | $ | (8,801 | ) | | $ | (37,341 | ) |
Other comprehensive income (loss) before reclassifications | 23,912 |
| | 650 |
| | — |
| | 2,144 |
| | 26,706 |
|
Amounts reclassified from accumulated other comprehensive income (loss) | (56 | ) | | (719 | ) | | 102 |
| | (640 | ) | | (1,313 | ) |
Balance at September 30, 2014 | $ | (3,654 | ) | | $ | 1,583 |
| | $ | (2,580 | ) | | $ | (7,297 | ) | | $ | (11,948 | ) |
Nine months ended September 30, 2013 | | | | | | | | | |
Balance at December 31, 2012 | $ | 26,361 |
| | $ | 613 |
| | $ | (2,818 | ) | | $ | (18,481 | ) | | $ | 5,675 |
|
Other comprehensive income (loss) before reclassifications | (43,784 | ) | | 1,332 |
| | — |
| | — |
| | (42,452 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) | (4,243 | ) | | (938 | ) | | 102 |
| | 985 |
| | (4,094 | ) |
Balance at September 30, 2013 | $ | (21,666 | ) | | $ | 1,007 |
| | $ | (2,716 | ) | | $ | (17,496 | ) | | $ | (40,871 | ) |
NOTE D – Investment Securities
The following table presents the amortized cost and estimated fair values of investment securities, which were all classified as available for sale:
|
| | | | | | | | | | | | | | | |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
| (in thousands) |
September 30, 2014 | | | | | | | |
Equity securities | $ | 34,380 |
| | $ | 10,927 |
| | $ | (29 | ) | | $ | 45,278 |
|
U.S. Government securities | 200 |
| | — |
| | — |
| | 200 |
|
U.S. Government sponsored agency securities | 235 |
| | 5 |
| | — |
| | 240 |
|
State and municipal securities | 250,195 |
| | 7,917 |
| | (496 | ) | | 257,616 |
|
Corporate debt securities | 99,670 |
| | 5,777 |
| | (4,020 | ) | | 101,427 |
|
Collateralized mortgage obligations | 975,971 |
| | 6,700 |
| | (27,631 | ) | | 955,040 |
|
Mortgage-backed securities | 954,412 |
| | 14,201 |
| | (6,278 | ) | | 962,335 |
|
Auction rate securities | 158,725 |
| | 1 |
| | (10,253 | ) | | 148,473 |
|
| $ | 2,473,788 |
| | $ | 45,528 |
| | $ | (48,707 | ) | | $ | 2,470,609 |
|
|
| | | | | | | | | | | | | | | |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
| (in thousands) |
December 31, 2013 | | | | | | | |
Equity securities | $ | 33,922 |
| | $ | 12,355 |
| | $ | (76 | ) | | $ | 46,201 |
|
U.S. Government securities | 525 |
| | — |
| | — |
| | 525 |
|
U.S. Government sponsored agency securities | 720 |
| | 7 |
| | (1 | ) | | 726 |
|
State and municipal securities | 281,810 |
| | 6,483 |
| | (3,444 | ) | | 284,849 |
|
Corporate debt securities | 100,468 |
| | 5,685 |
| | (7,404 | ) | | 98,749 |
|
Collateralized mortgage obligations | 1,069,138 |
| | 8,036 |
| | (44,776 | ) | | 1,032,398 |
|
Mortgage-backed securities | 949,328 |
| | 13,881 |
| | (17,497 | ) | | 945,712 |
|
Auction rate securities | 172,299 |
| | 234 |
| | (13,259 | ) | | 159,274 |
|
| $ | 2,608,210 |
| | $ | 46,681 |
| | $ | (86,457 | ) | | $ | 2,568,434 |
|
Securities carried at $1.8 billion as of September 30, 2014 and $1.7 billion as of December 31, 2013 were pledged as collateral to secure public and trust deposits and customer repurchase agreements.
Equity securities include common stocks of financial institutions (estimated fair value of $39.3 million at September 30, 2014 and $40.6 million at December 31, 2013) and other equity investments (estimated fair value of $6.0 million at September 30, 2014 and $5.6 million at December 31, 2013).
As of September 30, 2014, the financial institutions stock portfolio had a cost basis of $28.6 million and an estimated fair value of $39.3 million, including an investment in a single financial institution with a cost basis of $20.0 million and an estimated fair value of $27.5 million. The estimated fair value of this investment accounted for 70.0% of the fair value of the Corporation's investments in the common stocks of publicly traded financial institutions. No other investment within the financial institutions stock portfolio exceeded 5% of the portfolio's estimated fair value.
The amortized cost and estimated fair values of debt securities as of September 30, 2014, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
| | | | | | | | |
| | Amortized Cost | | Estimated Fair Value |
| (in thousands) |
Due in one year or less | | $ | 13,218 |
| | $ | 13,284 |
|
Due from one year to five years | | 75,307 |
| | 78,967 |
|
Due from five years to ten years | | 187,966 |
| | 193,537 |
|
Due after ten years | | 232,534 |
| | 222,168 |
|
| | 509,025 |
| | 507,956 |
|
Collateralized mortgage obligations | | 975,971 |
| | 955,040 |
|
Mortgage-backed securities | | 954,412 |
| | 962,335 |
|
| | $ | 2,439,408 |
| | $ | 2,425,331 |
|
The following table presents information related to the gross realized gains and losses on the sales of equity and debt securities:
|
| | | | | | | | | | | | | | | |
| Gross Realized Gains | | Gross Realized Losses | | Other-than- temporary Impairment Losses | | Net Gains (Losses) |
Three months ended September 30, 2014 | (in thousands) |
Equity securities | $ | 99 |
| | $ | — |
| | $ | — |
| | $ | 99 |
|
Debt securities | — |
| | — |
| | (18 | ) | | (18 | ) |
Total | $ | 99 |
| | $ | — |
| | $ | (18 | ) | | $ | 81 |
|
Three months ended September 30, 2013 | | | | | | | |
Equity securities | $ | 2,135 |
| | $ | — |
| | $ | — |
| | $ | 2,135 |
|
Debt securities | 617 |
| | (22 | ) | | (97 | ) | | 498 |
|
Total | $ | 2,752 |
| | $ | (22 | ) | | $ | (97 | ) | | $ | 2,633 |
|
| | | | | | | |
Nine months ended September 30, 2014 | | | | | | | |
Equity securities | $ | 100 |
| | $ | — |
| | $ | (12 | ) | | $ | 88 |
|
Debt securities | 1,446 |
| | (323 | ) | | (18 | ) | | 1,105 |
|
Total | $ | 1,546 |
| | $ | (323 | ) | | $ | (30 | ) | | $ | 1,193 |
|
Nine months ended September 30, 2013 | | | | | | | |
Equity securities | $ | 4,357 |
| | $ | (28 | ) | | $ | (27 | ) | | $ | 4,302 |
|
Debt securities | 3,788 |
| | (22 | ) | | (97 | ) | | 3,669 |
|
Total | $ | 8,145 |
| | $ | (50 | ) | | $ | (124 | ) | | $ | 7,971 |
|
The other-than-temporary impairment charges for equity securities during the three and nine months ended September 30, 2014 and 2013 were for investments in common stocks of financial institutions and were due to the severity and duration of the declines in the fair values of certain financial institution stocks, in conjunction with management's assessment of the near-term prospects of each specific financial institution.
The credit related other-than-temporary impairment charges for debt securities during the three and nine months ended September 30, 2014 and 2013 were for investments in pooled trust preferred securities issued by financial institutions. The credit related other-than-temporary impairment charges for the pooled trust preferred securities were determined based on an expected cash flows model.
The following table presents a summary of the cumulative credit related other-than-temporary impairment charges, recognized as components of earnings, for debt securities held by the Corporation at September 30, 2014 and 2013:
|
| | | | | | | | | | | | | | | |
| Three months ended September 30 | | Nine months ended September 30 |
| 2014 | | 2013 | | 2014 | | 2013 |
| (in thousands) |
Balance of cumulative credit losses on debt securities, beginning of period | $ | (17,214 | ) | | $ | (20,607 | ) | | $ | (20,691 | ) | | $ | (23,079 | ) |
Additions for credit losses recorded which were not previously recognized as components of earnings | (18 | ) | | (97 | ) | | (18 | ) | | (97 | ) |
Reductions for securities sold during the period | — |
| | — |
| | 3,472 |
| | 2,468 |
|
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security | — |
| | — |
| | 5 |
| | 4 |
|
Balance of cumulative credit losses on debt securities, end of period | $ | (17,232 | ) | | $ | (20,704 | ) | | $ | (17,232 | ) | | $ | (20,704 | ) |
The following table presents the gross unrealized losses and estimated fair values of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2014:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Less than 12 months | | 12 months or longer | | Total |
| Estimated Fair Value | | Unrealized Losses | | Estimated Fair Value | | Unrealized Losses | | Estimated Fair Value | | Unrealized Losses |
| (in thousands) |
State and municipal securities | $ | 7,996 |
| | $ | (37 | ) | | $ | 26,484 |
| | $ | (459 | ) | | $ | 34,480 |
| | $ | (496 | ) |
Corporate debt securities | — |
| | — |
| | 38,900 |
| | (4,020 | ) | | 38,900 |
| | (4,020 | ) |
Collateralized mortgage obligations | 53,189 |
| | (248 | ) | | 652,396 |
| | (27,383 | ) | | 705,585 |
| | (27,631 | ) |
Mortgage-backed securities | 241,707 |
| | (527 | ) | | 291,712 |
| | (5,751 | ) | | 533,419 |
| | (6,278 | ) |
Auction rate securities | — |
| | — |
| | 148,380 |
| | (10,253 | ) | | 148,380 |
| | (10,253 | ) |
Total debt securities | 302,892 |
| | (812 | ) | | 1,157,872 |
| | (47,866 | ) | | 1,460,764 |
| | (48,678 | ) |
Equity securities | 269 |
| | (17 | ) | | 77 |
| | (12 | ) | | 346 |
| | (29 | ) |
| $ | 303,161 |
| | $ | (829 | ) | | $ | 1,157,949 |
| | $ | (47,878 | ) | | $ | 1,461,110 |
| | $ | (48,707 | ) |
The Corporation’s collateralized mortgage obligations and mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the decline in market value of these securities is attributable to changes in interest rates and not credit quality, and because the Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, the Corporation does not consider these investments to be other-than-temporarily impaired as of September 30, 2014.
The unrealized holding losses on auction rate securities, or auction rate certificates (ARCs), are attributable to liquidity issues resulting from the failure of periodic auctions. The Corporation had previously purchased ARCs for investment management and trust customers as short-term investments with fair values that could be derived based on periodic auctions under normal market conditions. During 2008 and 2009, the Corporation purchased ARCs from these customers due to the failure of these periodic auctions, which made these previously short-term investments illiquid.
As of September 30, 2014, approximately $144 million, or 97%, of the ARCs were rated above investment grade, with approximately $6 million, or 4%, AAA rated and $104 million, or 72%, AA rated. Approximately $4 million, or 3%, of ARCs were either not rated or rated below investment grade by at least one ratings agency. Of this amount, approximately $3 million of the student loans underlying these ARCs have principal payments which are guaranteed by the federal government. In total, approximately $147 million, or 99%, of the student loans underlying the ARCs have principal payments that are guaranteed by the federal government.
During the nine months ended September 30, 2014, the Corporation sold ARCs with a total book value of $11.9 million, with no gain or loss upon sale. As of September 30, 2014, all ARCs were current and making scheduled interest payments. Based on management’s evaluations, ARCs with a fair value of $148.5 million were not subject to any other-than-temporary impairment charges as of September 30, 2014. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.
For its investments in equity securities, particularly its investments in stocks of financial institutions, management evaluates the near-term prospects of the issuers in relation to the severity and duration of the impairment. Based on that evaluation and the Corporation’s ability and intent to hold those investments for a reasonable period of time sufficient for a recovery of fair value, the Corporation does not consider those investments with unrealized holding losses as of September 30, 2014 to be other-than-temporarily impaired.
The majority of the Corporation's available for sale corporate debt securities are issued by financial institutions. The following table presents the amortized cost and estimated fair value of corporate debt securities:
|
| | | | | | | | | | | | | | | |
| September 30, 2014 | | December 31, 2013 |
| Amortized cost | | Estimated fair value | | Amortized cost | | Estimated fair value |
| (in thousands) |
Single-issuer trust preferred securities | $ | 47,546 |
| | $ | 44,075 |
| | $ | 47,481 |
| | $ | 40,531 |
|
Subordinated debt | 47,498 |
| | 50,289 |
| | 47,405 |
| | 50,327 |
|
Pooled trust preferred securities | 2,050 |
| | 4,487 |
| | 2,997 |
| | 5,306 |
|
Corporate debt securities issued by financial institutions | 97,094 |
| | 98,851 |
| | 97,883 |
| | 96,164 |
|
Other corporate debt securities | 2,576 |
| | 2,576 |
| | 2,585 |
| | 2,585 |
|
Available for sale corporate debt securities | $ | 99,670 |
| | $ | 101,427 |
| | $ | 100,468 |
| | $ | 98,749 |
|
The Corporation’s investments in single-issuer trust preferred securities had an unrealized loss of $3.5 million at September 30, 2014. The Corporation did not record any other-than-temporary impairment charges for single-issuer trust preferred securities during the three or nine months ended September 30, 2014 or 2013. Six of the Corporation's 20 single-issuer trust preferred securities were rated below investment grade by at least one ratings agency, with an amortized cost of $13.5 million and an estimated fair value of $12.3 million at September 30, 2014. All of the single-issuer trust preferred securities rated below investment grade were rated BB or Ba. Three single-issuer trust preferred securities with an amortized cost of $4.7 million and an estimated fair value of $3.9 million at September 30, 2014 were not rated by any ratings agency.
During the nine months ended September 30, 2014, the Corporation sold two pooled trust preferred securities with a total amortized cost of $728,000, for a gain of $1.1 million. As of September 30, 2014, all six of the Corporation's pooled trust preferred securities, with an amortized cost of $2.1 million and an estimated fair value of $4.5 million, were rated below investment grade by at least one ratings agency, with ratings ranging from C to Ca. The class of securities held by the Corporation was below the most senior tranche, with the Corporation’s interests being subordinate to other investors in the pool. The Corporation determines the fair value of pooled trust preferred securities based on quotes provided by third-party brokers.
The amortized cost of pooled trust preferred securities is the purchase price of the securities, net of cumulative credit related other-than-temporary impairment charges, determined using an expected cash flows model. The most significant input to the expected cash flows model is the expected payment deferral rate for each pooled trust preferred security. The Corporation evaluates the financial metrics, such as capital ratios and non-performing assets ratios, of the individual financial institution issuers that comprise each pooled trust preferred security to estimate its expected deferral rate.
Based on management’s evaluations, corporate debt securities with a fair value of $101.4 million were not subject to any additional other-than-temporary impairment charges as of September 30, 2014. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.
As mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), in December 2013, five regulatory bodies issued final rulings (Final Rules) implementing certain prohibitions and restrictions on the ability of a banking entity and non-bank financial company supervised by the Federal Reserve Board to engage in proprietary trading and have certain ownership interests in, or relationships with, a "covered fund" (the so-called "Volcker Rule"). The Final Rules generally treat as a covered fund any entity that would be an investment company under the Investment Company Act of 1940 (1940 Act) but for the application of the exemptions from SEC registration set forth in Section 3(c)(1) (fewer than 100 beneficial owners) or Section 3(c)(7) (qualified purchasers) of the 1940 Act. The Final Rules also require regulated entities to establish an internal compliance program that is consistent with the extent to which it engages in activities covered by the Volcker Rule, which must include making regular reports about those activities to regulators. Although the Final Rules provide some tiering of compliance and reporting obligations based on size, the fundamental prohibitions of the Volcker Rule apply to banking entities of any size, including the Corporation. Banking entities have until July 21, 2015 to conform their activities and investments to the requirements of the Final Rules. The Corporation does not engage in proprietary trading or in any other activities prohibited by the Final Rules. Based on the Corporation's evaluation of its investments, none fall within the definition of a "covered fund" and would need to be disposed
of by July 21, 2015. Therefore, it does not currently expect that the Final Rules will have a material effect on its business, financial condition or results of operations.
NOTE E – Loans and Allowance for Credit Losses
Loans, Net of Unearned Income
Loans, net of unearned income are summarized as follows:
|
| | | | | | | |
| September 30, 2014 | | December 31, 2013 |
| (in thousands) |
Real-estate - commercial mortgage | $ | 5,156,979 |
| | $ | 5,101,922 |
|
Commercial - industrial, financial and agricultural | 3,691,262 |
| | 3,628,420 |
|
Real-estate - home equity | 1,733,036 |
| | 1,764,197 |
|
Real-estate - residential mortgage | 1,372,033 |
| | 1,337,380 |
|
Real-estate - construction | 687,728 |
| | 573,672 |
|
Consumer | 278,219 |
| | 283,124 |
|
Leasing and other | 120,144 |
| | 99,256 |
|
Overdrafts | 2,646 |
| | 4,045 |
|
Loans, gross of unearned income | 13,042,047 |
| | 12,792,016 |
|
Unearned income | (11,642 | ) | | (9,796 | ) |
Loans, net of unearned income | $ | 13,030,405 |
| | $ | 12,782,220 |
|
Allowance for Credit Losses
The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of incurred losses in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet. The allowance for credit losses is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries.
The Corporation’s allowance for credit losses includes: (1) specific allowances allocated to loans evaluated for impairment under the FASB's ASC Section 310-10-35; and (2) allowances calculated for pools of loans measured for impairment under FASB ASC Subtopic 450-20.
The Corporation segments its loan portfolio by general loan type, or "portfolio segments," as presented in the table under the heading, "Loans, Net of Unearned Income," above. Certain portfolio segments are further disaggregated and evaluated collectively for impairment based on "class segments," which are largely based on the type of collateral underlying each loan. For commercial loans, class segments include loans secured by collateral and unsecured loans. Construction loan class segments include loans secured by commercial real estate, loans to commercial borrowers secured by residential real estate and loans to individuals secured by residential real estate. Consumer loan class segments include direct consumer installment loans and indirect automobile loans.
The following table presents the components of the allowance for credit losses:
|
| | | | | | | |
| September 30, 2014 | | December 31, 2013 |
| (in thousands) |
Allowance for loan losses | $ | 189,477 |
| | $ | 202,780 |
|
Reserve for unfunded lending commitments | 1,631 |
| | 2,137 |
|
Allowance for credit losses | $ | 191,108 |
| | $ | 204,917 |
|
The following table presents the activity in the allowance for credit losses:
|
| | | | | | | | | | | | | | | |
| Three months ended September 30 | | Nine months ended September 30 |
| 2014 | | 2013 | | 2014 | | 2013 |
| (in thousands) |
Balance at beginning of period | $ | 193,442 |
| | $ | 217,626 |
| | $ | 204,917 |
| | $ | 225,439 |
|
Loans charged off | (9,604 | ) | | (18,108 | ) | | (31,348 | ) | | (61,597 | ) |
Recoveries of loans previously charged off | 3,770 |
| | 3,820 |
| | 8,039 |
| | 10,996 |
|
Net loans charged off | (5,834 | ) | | (14,288 | ) | | (23,309 | ) | | (50,601 | ) |
Provision for credit losses | 3,500 |
| | 9,500 |
| | 9,500 |
| | 38,000 |
|
Balance at end of period | $ | 191,108 |
| | $ | 212,838 |
| | $ | 191,108 |
| | $ | 212,838 |
|
The following table presents the activity in the allowance for loan losses by portfolio segment:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Real Estate - Commercial Mortgage | | Commercial - Industrial, Financial and Agricultural | | Real Estate - Home Equity | | Real Estate - Residential Mortgage | | Real Estate - Construction | | Consumer | | Leasing and other and overdrafts | | Unallocated | | Total |
| (in thousands) |
Three months ended September 30, 2014 | | | | | | | | | | | | | | | | | |
Balance at June 30, 2014 | $ | 49,842 |
| | $ | 49,084 |
| | $ | 32,041 |
| | $ | 32,744 |
| | $ | 11,331 |
| | $ | 3,306 |
| | $ | 1,851 |
| | $ | 11,486 |
| | $ | 191,685 |
|
Loans charged off | (1,557 | ) | | (5,167 | ) | | (1,492 | ) | | (231 | ) | | (313 | ) | | (538 | ) | | (306 | ) | | — |
| | (9,604 | ) |
Recoveries of loans previously charged off | 1,167 |
| | 1,013 |
| | 336 |
| | 95 |
| | 470 |
| | 448 |
| | 241 |
| | — |
| | 3,770 |
|
Net loans charged off | (390 | ) | | (4,154 | ) | | (1,156 | ) | | (136 | ) | | 157 |
| | (90 | ) | | (65 | ) | | — |
| | (5,834 | ) |
Provision for loan losses (1) | (278 | ) | | 6,110 |
| | 406 |
| | 397 |
| | (312 | ) | | 244 |
| | 180 |
| | (3,121 | ) | | 3,626 |
|
Balance at September 30, 2014 | $ | 49,174 |
| | $ | 51,040 |
| | $ | 31,291 |
| | $ | 33,005 |
| | $ | 11,176 |
| | $ | 3,460 |
| | $ | 1,966 |
| | $ | 8,365 |
| | $ | 189,477 |
|
Three months ended September 30, 2013 | | | | | | | | | | | | | | | | | |
Balance at June 30, 2013 | $ | 58,696 |
| | $ | 57,557 |
| | $ | 25,736 |
| | $ | 32,684 |
| | $ | 14,471 |
| | $ | 2,497 |
| | $ | 2,925 |
| | $ | 21,865 |
| | $ | 216,431 |
|
Loans charged off | (3,724 | ) | | (9,394 | ) | | (2,365 | ) | | (767 | ) | | (598 | ) | | (473 | ) | | (787 | ) | | — |
| | (18,108 | ) |
Recoveries of loans previously charged off | 185 |
| | 2,295 |
| | 198 |
| | 245 |
| | 379 |
| | 294 |
| | 224 |
| | — |
| | 3,820 |
|
Net loans charged off | (3,539 | ) | | (7,099 | ) | | (2,167 | ) | | (522 | ) | | (219 | ) | | (179 | ) | | (563 | ) | | — |
| | (14,288 | ) |
Provision for loan losses (1) | 3,470 |
| | 1,437 |
| | 4,451 |
| | 1,595 |
| | (1,221 | ) | | 610 |
| | 620 |
| | (2,619 | ) | | 8,343 |
|
Balance at September 30, 2013 | $ | 58,627 |
| | $ | 51,895 |
| | $ | 28,020 |
| | $ | 33,757 |
| | $ | 13,031 |
| | $ | 2,928 |
| | $ | 2,982 |
| | $ | 19,246 |
| | $ | 210,486 |
|
Nine months ended September 30, 2014 | | | | | | | | | | | | | | | | | |
Balance at December 31, 2013 | $ | 55,659 |
| | $ | 50,330 |
| | $ | 28,222 |
| | $ | 33,082 |
| | $ | 12,649 |
| | $ | 3,260 |
| | $ | 3,370 |
| | $ | 16,208 |
| | $ | 202,780 |
|
Loans charged off | (5,084 | ) | | (15,804 | ) | | (4,377 | |