ASSOCIATED BANC-CORP - Quarter Report: 2019 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: June 30, 2019
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the transition period from to |
Commission file number: 001-31343
Associated Banc-Corp
(Exact name of registrant as specified in its charter)
Wisconsin | 39-1098068 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
433 Main Street | |||
Green Bay, | Wisconsin | 54301 | |
(Address of principal executive offices) | (Zip Code) |
(920) 491-7500
(Registrant’s telephone number, including area code)
(not applicable)
(Former name, former address and former fiscal year, if changed since last report)
Securities Registered Pursuant to Section 12(b) of the act:
Title of each class | Trading symbol | Name of each exchange on which registered |
Common stock, par value $0.01 per share | ASB | New York Stock Exchange |
Depositary Shrs, each representing 1/40th intrst in a shr of 6.125% Non-Cum. Perp Pref Stock, Srs C | ASB PrC | New York Stock Exchange |
Depositary Shrs, each representing 1/40th intrst in a shr of 5.375% Non-Cum. Perp Pref Stock, Srs D | ASB PrD | New York Stock Exchange |
Depositary Shrs, each representing 1/40th intrst in a shr of 5.875% Non-Cum. Perp Pref Stock, Srs E | ASB PrE | New York Stock Exchange |
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, a 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 ☑
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of registrant’s common stock, par value $0.01 per share, at July 26, 2019 was 162,166,503.
1
ASSOCIATED BANC-CORP | |
Table of Contents |
Page | ||
2
Commonly Used Acronyms and Abbreviations |
The following listing provides a reference of common acronyms and abbreviations used throughout the document: |
ABS | Asset-Backed Securities |
ALCO | Asset / Liability Committee |
Anderson | Anderson Insurance and Investment Agency, Inc. |
ASC | Accounting Standards Codification |
ASU | Accounting Standards Update |
the Bank | Associated Bank, National Association |
Bank Mutual | Bank Mutual Corporation |
Basel III | International framework established by the Basel Committee on Banking Supervision for the regulation of capital and liquidity |
bp | basis point(s) |
CD | Certificate of Deposit |
CDI | Core Deposit Intangibles |
CET1 | Common Equity Tier 1 |
CMBS | Commercial Mortgage-Backed Securities |
CMO | Collateralized Mortgage Obligations |
CRA | Community Reinvestment Act |
Diversified | Diversified Insurance Solutions |
EAR | Earnings at Risk |
FASB | Financial Accounting Standards Board |
FDIC | Federal Deposit Insurance Corporation |
FFELP | Federal Family Education Loan Program |
FHLB | Federal Home Loan Bank |
FHLMC | Federal Home Loan Mortgage Corporation |
FNMA | Federal National Mortgage Association |
FTP | Funds Transfer Pricing |
GAAP | Generally Accepted Accounting Principles |
GNMA | Government National Mortgage Association |
GSEs | Government-Sponsored Enterprises |
Huntington | The Huntington National Bank, a subsidiary of Huntington Bancshares Incorporated |
LIBOR | London Interbank Offered Rate |
LTV | Loan-to-Value |
MBS | Mortgage-Backed Securities |
MSR | Mortgage Servicing Rights |
MVE | Market Value of Equity |
NII | Net Interest Income |
NPAs | Nonperforming Assets |
OCI | Other Comprehensive Income |
OREO | Other Real Estate Owned |
RAP | Retirement Account Plan - the Corporation's noncontributory defined benefit retirement plan |
restricted stock awards | Restricted common stock and restricted common stock units to certain key employees |
S&P | Standard & Poor's |
SEC | U.S. Securities and Exchange Commission |
Tax Act | U.S. Tax Cuts and Jobs Act of 2017 |
3
PART I - FINANCIAL INFORMATION | |
ITEM 1. | Financial Statements: |
ASSOCIATED BANC-CORP
Consolidated Balance Sheets
June 30, 2019 | December 31, 2018 | ||||||
(Unaudited) | (Audited) | ||||||
(In Thousands, except share and per share data) | |||||||
Assets | |||||||
Cash and due from banks | $ | 382,985 | $ | 507,187 | |||
Interest-bearing deposits in other financial institutions | 172,708 | 221,226 | |||||
Federal funds sold and securities purchased under agreements to resell | 1,385 | 148,285 | |||||
Investment securities held to maturity, at amortized cost | 2,806,064 | 2,740,511 | |||||
Investment securities available for sale, at fair value | 3,283,456 | 3,946,941 | |||||
Equity securities | 15,066 | 1,568 | |||||
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost | 202,758 | 250,534 | |||||
Residential loans held for sale | 129,303 | 64,321 | |||||
Commercial loans held for sale | 11,000 | 14,943 | |||||
Loans | 23,249,967 | 22,940,429 | |||||
Allowance for loan losses | (233,659 | ) | (238,023 | ) | |||
Loans, net | 23,016,308 | 22,702,406 | |||||
Bank and corporate owned life insurance | 668,638 | 663,203 | |||||
Investment in unconsolidated subsidiaries | 222,812 | 161,181 | |||||
Premises and equipment, net(a) | 432,058 | 363,225 | |||||
Goodwill | 1,176,019 | 1,169,023 | |||||
Mortgage servicing rights, net | 66,175 | 68,193 | |||||
Other intangible assets, net | 93,915 | 75,836 | |||||
Other assets(a) | 591,976 | 549,274 | |||||
Total assets | $ | 33,272,628 | $ | 33,647,859 | |||
Liabilities and Stockholders' Equity | |||||||
Noninterest-bearing demand deposits | $ | 5,354,987 | $ | 5,698,530 | |||
Interest-bearing deposits | 19,919,235 | 19,198,863 | |||||
Total deposits | 25,274,222 | 24,897,393 | |||||
Federal funds purchased and securities sold under agreements to repurchase | 83,195 | 111,651 | |||||
Commercial paper | 28,787 | 45,423 | |||||
FHLB advances | 2,742,941 | 3,574,371 | |||||
Other long-term funding | 796,403 | 795,611 | |||||
Accrued expenses and other liabilities | 447,286 | 442,522 | |||||
Total liabilities | 29,372,835 | 29,866,971 | |||||
Stockholders’ Equity | |||||||
Preferred equity | 256,716 | 256,716 | |||||
Common equity | |||||||
Common stock | 1,752 | 1,752 | |||||
Surplus | 1,695,715 | 1,712,615 | |||||
Retained earnings | 2,288,909 | 2,181,414 | |||||
Accumulated other comprehensive income (loss) | (59,063 | ) | (124,972 | ) | |||
Treasury stock, at cost | (284,235 | ) | (246,638 | ) | |||
Total common equity | 3,643,077 | 3,524,171 | |||||
Total stockholders’ equity | 3,899,794 | 3,780,888 | |||||
Total liabilities and stockholders’ equity | $ | 33,272,628 | $ | 33,647,859 | |||
Preferred shares issued | 264,458 | 264,458 | |||||
Preferred shares authorized (par value $1.00 per share) | 750,000 | 750,000 | |||||
Common shares issued | 175,216,409 | 175,216,409 | |||||
Common shares authorized (par value $0.01 per share) | 250,000,000 | 250,000,000 | |||||
Treasury shares of common stock | 12,554,448 | 10,775,938 |
Numbers may not sum due to rounding.
(a) During the second quarter of 2019, the Corporation reclassified operating leases from Other Assets to Premises and Equipment.
See accompanying notes to consolidated financial statements.
4
Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Income (Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In Thousands, except per share data) | |||||||||||||||
Interest income | |||||||||||||||
Interest and fees on loans | $ | 260,784 | $ | 246,646 | $ | 519,637 | $ | 466,680 | |||||||
Interest and dividends on investment securities | |||||||||||||||
Taxable | 26,710 | 30,623 | 55,764 | 60,727 | |||||||||||
Tax-exempt | 14,643 | 10,783 | 28,459 | 20,000 | |||||||||||
Other interest | 3,995 | 3,153 | 8,221 | 5,330 | |||||||||||
Total interest income | 306,133 | 291,205 | 612,081 | 552,737 | |||||||||||
Interest expense | |||||||||||||||
Interest on deposits | 67,050 | 38,431 | 129,823 | 71,843 | |||||||||||
Interest on federal funds purchased and securities sold under agreements to repurchase | 286 | 538 | 913 | 1,060 | |||||||||||
Interest on other short-term funding | 37 | 51 | 88 | 111 | |||||||||||
Interest on FHLB advances | 17,744 | 21,279 | 37,298 | 34,402 | |||||||||||
Interest on long-term funding | 7,396 | 4,544 | 14,792 | 9,088 | |||||||||||
Total interest expense | 92,513 | 64,843 | 182,914 | 116,504 | |||||||||||
Net interest income | 213,619 | 226,362 | 429,167 | 436,233 | |||||||||||
Provision for credit losses | 8,000 | 4,000 | 14,000 | 4,000 | |||||||||||
Net interest income after provision for credit losses | 205,619 | 222,362 | 415,167 | 432,233 | |||||||||||
Noninterest income | |||||||||||||||
Insurance commissions and fees | 22,985 | 23,996 | 48,449 | 46,644 | |||||||||||
Wealth management fees(a) | 20,691 | 20,333 | 40,870 | 40,975 | |||||||||||
Service charges on deposit account fees | 15,426 | 16,390 | 30,542 | 32,810 | |||||||||||
Card-based fees | 10,131 | 10,115 | 19,392 | 19,557 | |||||||||||
Other fee-based revenue | 5,178 | 4,272 | 9,161 | 8,252 | |||||||||||
Capital markets, net | 4,726 | 4,783 | 7,916 | 10,089 | |||||||||||
Mortgage banking, net | 9,466 | 6,258 | 14,178 | 12,628 | |||||||||||
Bank and corporate owned life insurance | 3,352 | 3,978 | 7,144 | 7,165 | |||||||||||
Asset gains (losses), net(b) | 871 | 2,497 | 1,438 | 2,390 | |||||||||||
Investment securities gains (losses), net | 463 | (2,015 | ) | 2,143 | (2,015 | ) | |||||||||
Other | 2,547 | 2,235 | 5,807 | 4,727 | |||||||||||
Total noninterest income | 95,837 | 92,842 | 187,040 | 183,222 | |||||||||||
Noninterest expense | |||||||||||||||
Personnel | 123,228 | 123,980 | 243,279 | 241,665 | |||||||||||
Technology | 20,114 | 19,452 | 39,126 | 37,167 | |||||||||||
Occupancy | 13,830 | 15,071 | 30,302 | 30,428 | |||||||||||
Business development and advertising | 6,658 | 7,067 | 13,293 | 13,760 | |||||||||||
Equipment | 5,577 | 5,953 | 11,245 | 11,509 | |||||||||||
Legal and professional | 4,668 | 6,284 | 8,619 | 11,697 | |||||||||||
Card issuance costs | 1,290 | 2,412 | 2,266 | 4,744 | |||||||||||
Loan costs | 952 | 761 | 2,316 | 1,733 | |||||||||||
Foreclosure / OREO expense, net | 924 | 1,021 | 1,491 | 1,744 | |||||||||||
FDIC assessment | 4,500 | 8,250 | 8,250 | 16,500 | |||||||||||
Other intangible amortization | 2,324 | 2,168 | 4,551 | 3,693 | |||||||||||
Acquisition related costs(c) | 3,734 | 7,107 | 4,366 | 27,712 | |||||||||||
Other | 9,979 | 11,732 | 20,346 | 21,873 | |||||||||||
Total noninterest expense | 197,779 | 211,258 | 389,450 | 424,223 | |||||||||||
Income before income taxes | 103,678 | 103,947 | 212,756 | 191,232 | |||||||||||
Income tax expense | 19,017 | 14,754 | 41,409 | 32,583 | |||||||||||
Net income | 84,661 | 89,192 | 171,347 | 158,648 | |||||||||||
Preferred stock dividends | 3,801 | 2,329 | 7,601 | 4,668 | |||||||||||
Net income available to common equity | $ | 80,860 | $ | 86,863 | $ | 163,746 | $ | 153,980 | |||||||
Earnings per common share | |||||||||||||||
Basic | $ | 0.49 | $ | 0.51 | $ | 1.00 | $ | 0.92 | |||||||
Diluted | $ | 0.49 | $ | 0.50 | $ | 0.99 | $ | 0.90 | |||||||
Average common shares outstanding | |||||||||||||||
Basic | 162,180 | 170,633 | 163,049 | 167,096 | |||||||||||
Diluted | 163,672 | 173,409 | 164,518 | 169,920 |
Numbers may not sum due to rounding.
(a) Includes trust, asset management, brokerage, and annuity fees.
(b) Both the three and six months ended June 30, 2019 include less than $1 million of Huntington related asset losses; Both the three and six months ended June 30, 2018 include approximately $1 million of Bank Mutual acquisition related asset losses net of asset gains.
(c) Includes Bank Mutual and Huntington branch acquisition related costs only.
See accompanying notes to consolidated financial statements.
5
Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||
($ in Thousands) | |||||||||||||
Net income | $ | 84,661 | $ | 89,192 | $ | 171,347 | $ | 158,648 | |||||
Other comprehensive income, net of tax | |||||||||||||
Investment securities available for sale | |||||||||||||
Net unrealized gains (losses) | 59,476 | (18,919 | ) | 89,966 | (60,754 | ) | |||||||
Amortization of net unrealized (gains) losses on available for sale securities transferred to held to maturity securities | 218 | (335 | ) | 288 | (632 | ) | |||||||
Reclassification adjustment for net losses (gains) realized in net income | (463 | ) | 2,015 | (2,143 | ) | 2,015 | |||||||
Reclassification from OCI due to change in accounting principle | — | — | — | (84 | ) | ||||||||
Reclassification of certain tax effects from OCI | — | — | — | (8,419 | ) | ||||||||
Income tax (expense) benefit | (14,940 | ) | 4,705 | (22,242 | ) | 15,340 | |||||||
Other comprehensive income (loss) on investment securities available for sale | 44,292 | (12,533 | ) | 65,869 | (52,533 | ) | |||||||
Defined benefit pension and postretirement obligations | |||||||||||||
Amortization of prior service cost | (38 | ) | (38 | ) | (75 | ) | (76 | ) | |||||
Amortization of actuarial loss (gain) | 64 | 465 | 128 | 929 | |||||||||
Reclassification of certain tax effects from OCI | — | — | — | (5,235 | ) | ||||||||
Income tax (expense) benefit | (7 | ) | (109 | ) | (13 | ) | (216 | ) | |||||
Other comprehensive income (loss) on pension and postretirement obligations | 20 | 318 | 40 | (4,597 | ) | ||||||||
Total other comprehensive income (loss) | 44,311 | (12,215 | ) | 65,909 | (57,130 | ) | |||||||
Comprehensive income | $ | 128,972 | $ | 76,977 | $ | 237,256 | $ | 101,518 |
Numbers may not sum due to rounding.
See accompanying notes to consolidated financial statements.
6
Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
Preferred Equity | Common Stock | Surplus | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total | |||||||||||||||
(In Thousands, except per share data) | |||||||||||||||||||||
Balance, December 31, 2018 | $ | 256,716 | $ | 1,752 | $ | 1,712,615 | $ | 2,181,414 | $ | (124,972 | ) | $ | (246,638 | ) | $ | 3,780,888 | |||||
Comprehensive income | |||||||||||||||||||||
Net income | — | — | — | 86,686 | — | — | 86,686 | ||||||||||||||
Other comprehensive income (loss) | — | — | — | — | 21,597 | — | 21,597 | ||||||||||||||
Comprehensive income | 108,283 | ||||||||||||||||||||
Common stock issued | |||||||||||||||||||||
Stock-based compensation plans, net | — | — | (32,220 | ) | — | — | 39,265 | 7,045 | |||||||||||||
Purchase of treasury stock | — | — | — | — | — | (37,467 | ) | (37,467 | ) | ||||||||||||
Cash dividends | |||||||||||||||||||||
Common stock, $0.17 per share | — | — | — | (28,183 | ) | — | — | (28,183 | ) | ||||||||||||
Preferred stock (a) | — | — | — | (3,801 | ) | — | — | (3,801 | ) | ||||||||||||
Stock-based compensation expense, net | — | — | 9,397 | — | — | — | 9,397 | ||||||||||||||
Other | — | — | — | (293 | ) | — | — | (293 | ) | ||||||||||||
Balance, March 31, 2019 | $ | 256,716 | $ | 1,752 | $ | 1,689,792 | $ | 2,235,824 | $ | (103,375 | ) | $ | (244,840 | ) | $ | 3,835,870 | |||||
Comprehensive income: | |||||||||||||||||||||
Net income | — | — | — | 84,661 | — | — | 84,661 | ||||||||||||||
Other comprehensive income (loss) | — | — | — | — | 44,311 | — | 44,311 | ||||||||||||||
Comprehensive income | 128,972 | ||||||||||||||||||||
Common stock issued: | |||||||||||||||||||||
Stock-based compensation plans, net | — | — | (211 | ) | — | — | 1,038 | 827 | |||||||||||||
Purchase of treasury stock | — | — | — | — | — | (40,433 | ) | (40,433 | ) | ||||||||||||
Cash dividends: | |||||||||||||||||||||
Common stock, $0.17 per share | — | — | — | (27,776 | ) | — | — | (27,776 | ) | ||||||||||||
Preferred stock (a) | — | — | — | (3,801 | ) | — | — | (3,801 | ) | ||||||||||||
Stock-based compensation expense, net | — | — | 6,134 | — | — | — | 6,134 | ||||||||||||||
Balance, June 30, 2019 | $ | 256,716 | $ | 1,752 | $ | 1,695,715 | $ | 2,288,909 | $ | (59,063 | ) | $ | (284,235 | ) | $ | 3,899,794 |
Numbers may not sum due to rounding.
(a) Series C, $0.3828125 per share; Series D, $0.3359375 per share; and Series E, $0.3671875 per share.
See accompanying notes to consolidated financial statements.
7
Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Changes in Stockholders’ Equity continued (Unaudited)
Preferred Equity | Common Stock | Surplus | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total | |||||||||||||||
(In Thousands, except per share data) | |||||||||||||||||||||
Balance, December 31, 2017 | $ | 159,929 | $ | 1,618 | $ | 1,338,722 | $ | 1,934,696 | $ | (62,758 | ) | $ | (134,764 | ) | $ | 3,237,443 | |||||
Comprehensive income | |||||||||||||||||||||
Net income | — | — | — | 69,456 | — | — | 69,456 | ||||||||||||||
Other comprehensive income (loss) | — | — | — | — | (31,177 | ) | — | (31,177 | ) | ||||||||||||
Adoption of new accounting standards | — | — | — | — | (13,738 | ) | — | (13,738 | ) | ||||||||||||
Comprehensive income | 24,541 | ||||||||||||||||||||
Common stock issued | |||||||||||||||||||||
Stock-based compensation plans, net | — | — | (7,665 | ) | 20,136 | — | (1,780 | ) | 10,691 | ||||||||||||
Acquisition of Bank Mutual | — | 134 | 390,258 | — | — | 91,296 | 481,688 | ||||||||||||||
Purchase of common stock returned to authorized but unissued | — | (11 | ) | (26,469 | ) | — | — | — | (26,480 | ) | |||||||||||
Purchase of treasury stock | — | — | — | — | — | (5,240 | ) | (5,240 | ) | ||||||||||||
Cash dividends | |||||||||||||||||||||
Common stock, $0.15 per share | — | — | — | (25,710 | ) | — | — | (25,710 | ) | ||||||||||||
Preferred stock (b) | — | — | — | (2,339 | ) | — | — | (2,339 | ) | ||||||||||||
Purchase of preferred stock | (76 | ) | — | — | (2 | ) | — | — | (78 | ) | |||||||||||
Stock-based compensation expense, net | — | — | 3,675 | — | — | — | 3,675 | ||||||||||||||
Tax Act reclassification | — | — | — | 13,654 | — | — | 13,654 | ||||||||||||||
Change in accounting principle | — | — | — | 84 | — | — | 84 | ||||||||||||||
Other | — | — | — | 771 | — | — | 771 | ||||||||||||||
Balance, March 31, 2018 | $ | 159,853 | $ | 1,741 | $ | 1,698,521 | $ | 2,010,746 | $ | (107,673 | ) | $ | (50,488 | ) | $ | 3,712,699 | |||||
Comprehensive income: | |||||||||||||||||||||
Net income | — | — | — | 89,192 | — | — | 89,192 | ||||||||||||||
Other comprehensive income (loss) | — | — | — | — | (12,215 | ) | — | (12,215 | ) | ||||||||||||
Comprehensive income | 76,977 | ||||||||||||||||||||
Common stock issued: | |||||||||||||||||||||
Stock-based compensation plans, net(a) | — | — | 1,455 | (485 | ) | — | 4,486 | 5,456 | |||||||||||||
Acquisition of Bank Mutual | — | 3 | 6,717 | — | — | — | 6,720 | ||||||||||||||
Purchase of common stock returned to authorized but unissued | — | (3 | ) | (6,592 | ) | — | — | — | (6,595 | ) | |||||||||||
Purchase of treasury stock | — | — | — | — | — | (477 | ) | (477 | ) | ||||||||||||
Cash dividends: | |||||||||||||||||||||
Common stock, $0.15 per share | — | — | — | (26,107 | ) | — | — | (26,107 | ) | ||||||||||||
Preferred stock (b) | — | — | — | (2,329 | ) | — | — | (2,329 | ) | ||||||||||||
Common stock warrants exercised | — | 10 | (10 | ) | — | — | — | — | |||||||||||||
Purchase of preferred stock | (452 | ) | — | — | (6 | ) | — | — | (459 | ) | |||||||||||
Stock-based compensation expense, net | — | — | 4,497 | — | — | — | 4,497 | ||||||||||||||
Other | — | — | — | (139 | ) | — | — | (139 | ) | ||||||||||||
Balance, June 30, 2018 | $ | 159,401 | $ | 1,751 | $ | 1,704,587 | $ | 2,070,872 | $ | (119,888 | ) | $ | (46,479 | ) | $ | 3,770,244 |
Numbers may not sum due to rounding.
(a) As previously disclosed in Associated Banc-Corp's 2018 Annual Report on Form 10-K, an adjustment was made to the June 30, 2018 stockholders' equity balances related to the
grant and vesting of options, restricted stock awards, and restricted stock units awarded. This adjustment increased Surplus by $901 thousand, decreased Retained Earnings $1 million, and increased Treasury Stock $484 thousand. The reclassification had no impact on earnings, expenses, or total stockholders' equity.
(b) Series C, $0.3828125 per share and Series D, $0.3359375 per share.
See accompanying notes to consolidated financial statements.
8
Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, | |||||||
($ in Thousands) | 2019 | 2018 | |||||
Cash Flow From Operating Activities | |||||||
Net income | $ | 171,347 | $ | 158,648 | |||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Provision for credit losses | 14,000 | 4,000 | |||||
Depreciation and amortization | 28,810 | 24,249 | |||||
Addition to (recovery of) valuation allowance on mortgage servicing rights, net | 146 | (607 | ) | ||||
Amortization of mortgage servicing rights | 5,448 | 4,649 | |||||
Amortization of other intangible assets | 4,551 | 3,693 | |||||
Amortization and accretion on earning assets, funding, and other, net | 14,495 | 423 | |||||
Net amortization of tax credit investments | 11,180 | 9,770 | |||||
Losses (gains) on sales of investment securities, net | (2,143 | ) | 2,015 | ||||
Asset (gains) losses, net | (1,438 | ) | (2,390 | ) | |||
(Gain) loss on mortgage banking activities, net | (11,172 | ) | 261 | ||||
Mortgage loans originated and acquired for sale | (459,181 | ) | (516,285 | ) | |||
Proceeds from sales of mortgage loans held for sale | 432,099 | 482,080 | |||||
Pension Contribution | — | (31,371 | ) | ||||
Changes in certain assets and liabilities | |||||||
(Increase) decrease in interest receivable | (11,738 | ) | (14,569 | ) | |||
Increase (decrease) in interest payable | 3,572 | 3,775 | |||||
Increase (decrease) in expense payable | (35,516 | ) | 20,631 | ||||
Increase (decrease) in cash collateral | (38,777 | ) | (63,929 | ) | |||
Increase (decrease) in net derivative position | (61,656 | ) | (34,214 | ) | |||
Net change in other assets and other liabilities | 6,444 | 65,705 | |||||
Net cash provided by (used in) operating activities | 70,470 | 116,534 | |||||
Cash Flow From Investing Activities | |||||||
Net increase in loans | (244,230 | ) | (338,781 | ) | |||
Purchases of | |||||||
Available for sale securities | (460,124 | ) | (655,949 | ) | |||
Held to maturity securities | (169,775 | ) | (429,964 | ) | |||
Federal Home Loan Bank and Federal Reserve Bank stocks | (178,363 | ) | (238,190 | ) | |||
Premises, equipment, and software, net of disposals | (30,608 | ) | (23,932 | ) | |||
Proceeds from | |||||||
Sales of available for sale securities | 934,228 | 493,060 | |||||
Sale of Federal Home Loan Bank and Federal Reserve Bank stocks | 226,139 | 174,506 | |||||
Prepayments, calls, and maturities of available for sale investment securities | 262,872 | 330,517 | |||||
Prepayments, calls, and maturities of held to maturity investment securities | 100,603 | 121,612 | |||||
Sales, prepayments, calls, and maturities of other assets | 7,064 | 9,640 | |||||
Net change in tax credit and alternative investments | (30,814 | ) | (18,842 | ) | |||
Net cash (paid) received in acquisition | 551,250 | 59,472 | |||||
Net cash provided by (used in) investing activities | 968,242 | (516,851 | ) | ||||
Cash Flow From Financing Activities | |||||||
Net increase (decrease) in deposits | (348,344 | ) | (810,598 | ) | |||
Net increase (decrease) in short-term funding | (45,091 | ) | (135,757 | ) | |||
Net increase (decrease) in short-term FHLB advances | (820,000 | ) | (260,162 | ) | |||
Repayment of long-term FHLB advances | (762,880 | ) | (400,000 | ) | |||
Proceeds from long-term FHLB advances | 751,573 | 1,841,965 | |||||
Proceeds from issuance of common stock for stock-based compensation plans | 7,872 | 16,147 | |||||
Purchase of preferred shares | — | (646 | ) | ||||
Purchase of common stock returned to authorized but unissued | — | (33,075 | ) | ||||
Purchase of treasury stock | (77,900 | ) | (5,717 | ) | |||
Cash dividends on common stock | (55,959 | ) | (51,817 | ) | |||
Cash dividends on preferred stock | (7,601 | ) | (4,668 | ) | |||
Net cash provided by (used in) financing activities | (1,358,331 | ) | 155,672 | ||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | (319,619 | ) | (244,645 | ) | |||
Cash, cash equivalents, and restricted cash at beginning of period | 876,698 | 716,018 | |||||
Cash, cash equivalents, and restricted cash at end of period | $ | 557,078 | $ | 471,373 | |||
Supplemental disclosures of cash flow information | |||||||
Cash paid for interest | $ | 178,550 | $ | 112,392 | |||
Cash paid for (received from) income and franchise taxes | 21,909 | 12,674 | |||||
Loans and bank premises transferred to other real estate owned | 5,406 | 21,299 | |||||
Capitalized mortgage servicing rights | 3,575 | 4,502 | |||||
Loans transferred into held for sale from portfolio, net | 30,597 | 12,709 | |||||
Unsettled trades to purchase securities | 136 | 15,339 | |||||
Acquisition | |||||||
Fair value of assets acquired, including cash and cash equivalents | 696,013 | 2,569,700 | |||||
Fair value ascribed to goodwill and intangible assets | 29,626 | 258,885 | |||||
Fair value of liabilities assumed | 725,719 | 2,828,448 | |||||
Equity issued in (adjustments related to) acquisition | (79 | ) | 137 |
Numbers may not sum due to rounding.
See accompanying notes to consolidated financial statements.
9
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same sum amounts shown in the statement of cash flows:
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
($ in Thousands) | |||||||
Cash and cash equivalents | $ | 403,693 | $ | 385,957 | |||
Restricted cash | 153,385 | 85,416 | |||||
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | 557,078 | $ | 471,373 |
Amounts included in restricted cash represent required reserve balances with the Federal Reserve Bank, which is included in interest-bearing deposits in other financial institutions on the face of the consolidated balance sheets. In addition, the six months ended June 30, 2018 included cash collateral for public fund customers, which is included in interest-bearing deposits in other financial institutions on the face of the consolidated balance sheets.
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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Notes to Consolidated Financial Statements
These interim consolidated financial statements have been prepared according to the rules and regulations of the SEC and, therefore, certain information and footnote disclosures normally presented in accordance with GAAP have been omitted or abbreviated. The information contained in the consolidated financial statements and footnotes in Associated Banc-Corp's 2018 Annual Report on Form 10-K, should be referred to in connection with the reading of these unaudited interim financial statements.
Note 1 Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations and comprehensive income, changes in stockholders’ equity, and cash flows of Associated Banc-Corp (individually referred to herein as the “Parent Company,” and together with all of its subsidiaries and affiliates, collectively referred to herein as the “Corporation”) for the periods presented, and all such adjustments are of a normal recurring nature. The consolidated financial statements include the accounts of all subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheets and revenues and expenses for the period. Actual results could differ significantly from those estimates. Estimates that are particularly susceptible to significant change include the determination of the allowance for loan losses, goodwill impairment assessment, mortgage servicing rights valuation, and income taxes. Management has evaluated subsequent events for potential recognition or disclosure.
Within the tables presented, certain columns and rows may not sum due to the use of rounded numbers for disclosure purposes.
Note 2 Acquisitions
Huntington Wisconsin Branch Acquisition
On February 15, 2019, the Corporation received regulatory approval for the acquisition of the Wisconsin branches of Huntington. This all cash transaction closed on June 14, 2019. The conversion of the branches happened simultaneously with the close of the transaction and the acquisition expanded the Bank's presence into 13 new Wisconsin communities. As a result of the acquisition and other consolidations, a net of 14 branch locations were added.
The Huntington branch acquisition constituted a business combination. The acquisition has been accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair value on the acquisition date. The determination of estimated fair values required management to make certain estimates that are subjective in nature and may require adjustments upon the availability of new information regarding facts and circumstances which existed at the date of acquisition (i.e., appraisals) for up to a year following the acquisition. The Corporation continues to review information relating to events or circumstances existing at the acquisition date. Management anticipates that this review could result in adjustments to the acquisition date valuation amounts presented herein but does not anticipate that these adjustments will be material.
The Corporation recorded approximately $7 million in goodwill related to the Huntington branch acquisition. Goodwill created by the acquisition is tax deductible. See Note 8 for additional information on goodwill, as well as the carrying amount and amortization of core deposit intangible assets related to the Huntington branch acquisition.
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The following table presents the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date related to Huntington branch acquisition:
Purchase Accounting Adjustments | June 14, 2019 | |||||
($ in Thousands) | ||||||
Assets | ||||||
Cash and cash equivalents | $ | — | $ | 551,250 | ||
Loans | (1,552 | ) | 116,344 | |||
Premises and equipment, net | 4,967 | 22,597 | ||||
Goodwill | 7,075 | |||||
Core deposit intangibles (included in other intangible assets, net on the face of the Consolidated Balance Sheets) | 22,630 | 22,630 | ||||
Other real estate owned (included in other assets on the face of the Consolidated Balance Sheets) | (2,561 | ) | 5,263 | |||
Others assets | — | 559 | ||||
Total assets | $ | 725,719 | ||||
Liabilities | ||||||
Deposits | $ | 156 | $ | 725,173 | ||
Other liabilities | 70 | 546 | ||||
Total liabilities | $ | 725,719 |
The following is a description of the methods used to determine the fair value of significant assets and liabilities presented on the balance sheet above.
Loans: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, amortization status and current discount rates. Loans were grouped together according to similar characteristics when applying various valuation techniques.
Core deposit intangible ("CDI"): This intangible asset represents the value of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative cost of funds, and the interest costs associated with customer deposits. The CDI is being amortized on a straight-line basis over 10 years.
Note 3 Summary of Significant Accounting Policies
The accounting and reporting policies of the Corporation conform to U.S. generally accepted accounting principles and to general practice within the financial services industry. A discussion of these policies can be found in Note 1 Summary of Significant Accounting Policies included in the Corporation’s 2018 Annual Report on Form 10-K. There has been one change to the Corporation's significant accounting policies since December 31, 2018, which is described below.
Leases
The Corporation determines if a lease is present at the inception of an agreement. Operating leases are capitalized at commencement and are discounted using the Corporation’s FHLB borrowing rate for a similar term borrowing unless the lease defines an implicit rate within the contract. Leases with original terms of less than 12 months are not capitalized. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was used.
Right-of-use assets represent the Corporation’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and operating lease liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term. No significant judgments or assumptions were involved in developing the estimated operating lease liabilities as the Corporation’s operating lease liabilities largely represent future rental expenses associated with operating leases and the borrowing rates are based on publicly available interest rates.
The lease term includes options to extend or terminate the lease. These options to extend or terminate are assessed on a lease-by-lease basis and adjustments are made to the right-of-use asset and lease liability if the Corporation is reasonably certain that an option will be exercised and will be expensed on a straight-line basis.
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New Accounting Pronouncements Adopted
Standard | Description | Date of adoption | Effect on financial statements | |||
ASU-2018-15 Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract | The FASB issued an amendment which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this Update require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendments also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendment was effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Entities were required to apply the amendment either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption was permitted. | 1st Quarter 2019 | The Corporation elected to early adopt this amendment using the prospective approach. No material impact on results of operation, financial position or liquidity. | |||
ASU 2018-09 Codification Improvements | The FASB issued an amendment which affects a wide variety of Topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance. The amendments in this Update represent changes to clarify, correct errors in, or make minor improvements to the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in this Update did not require transition guidance and were effective upon issuance of this Update. However, many of the amendments in this Update did have transition guidance with effective dates for annual periods beginning after December 15, 2018. There are some conforming amendments in this Update that have been made to recently issued guidance that is not yet effective that may require application of the transition and effective date guidance in the original Accounting Standards Update. | 1st Quarter 2019 | No material impact on results of operations, financial position and liquidity. | |||
ASU 2016-02 Leases (Topic 842) | The FASB issued an amendment to provide transparency and comparability among organizations by recognizing lease assets and lease liabilities on the consolidated balance sheets and disclosing key information about leasing arrangements. This amendment required lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and 2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. This amendment was effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities could elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. Early adoption was permitted. ASU 2018-01 permits an entity to elect an optional transition practical expedient to not evaluate under Topic 842 land easements that exist or expired before the entity's adoption of Topic 842. ASU 2018-10 was issued as improvements and clarifications of ASU 2016-02 were identified. This Update provides clarification on narrow aspects of the previously issued Updates. ASU 2018-11 was issued to provide entities with an additional (and optional) transition method to adopt the new leases standard under ASU 2016-02. ASU 2019-01 was issued to assist in determining the fair value of underlying asset by lessors, address the presentation to the statements of cash flows, and clarify transition disclosures related to Topic 250. | 1st Quarter 2019 | The Corporation has adopted this amendment utilizing a modified retrospective approach. At adoption, a right-of-use asset and corresponding lease liability were recognized on the consolidated balance sheets for $52 million and $56 million, respectively. See Note 18 for expanded disclosure requirements. |
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Note 4 Earnings Per Common Share
Earnings per common share are calculated utilizing the two-class method. Basic earnings per common share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per common share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding adjusted for the dilutive effect of common stock awards (outstanding stock options and unvested restricted stock awards) and common stock warrants. Presented below are the calculations for basic and diluted earnings per common share:
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||
(In Thousands, except per share data) | ||||||||||||||
Net income | $ | 84,661 | $ | 89,192 | $ | 171,347 | $ | 158,648 | ||||||
Preferred stock dividends | (3,801 | ) | (2,329 | ) | (7,601 | ) | (4,668 | ) | ||||||
Net income available to common equity | $ | 80,860 | $ | 86,863 | $ | 163,746 | $ | 153,980 | ||||||
Common shareholder dividends | (27,571 | ) | (25,977 | ) | (55,650 | ) | (51,549 | ) | ||||||
Unvested share-based payment awards | (205 | ) | (130 | ) | (308 | ) | (269 | ) | ||||||
Undistributed earnings | $ | 53,085 | $ | 60,756 | $ | 107,787 | $ | 102,162 | ||||||
Undistributed earnings allocated to common shareholders | 52,690 | 60,446 | 107,098 | 101,677 | ||||||||||
Undistributed earnings allocated to unvested share-based payment awards | 395 | 310 | 689 | 485 | ||||||||||
Undistributed earnings | $ | 53,085 | $ | 60,756 | $ | 107,787 | $ | 102,162 | ||||||
Basic | ||||||||||||||
Distributed earnings to common shareholders | $ | 27,571 | $ | 25,977 | $ | 55,650 | $ | 51,549 | ||||||
Undistributed earnings allocated to common shareholders | 52,690 | 60,446 | 107,098 | 101,677 | ||||||||||
Total common shareholders earnings, basic | $ | 80,261 | $ | 86,423 | $ | 162,748 | $ | 153,226 | ||||||
Diluted | ||||||||||||||
Distributed earnings to common shareholders | $ | 27,571 | $ | 25,977 | $ | 55,650 | $ | 51,549 | ||||||
Undistributed earnings allocated to common shareholders | 52,690 | 60,446 | 107,098 | 101,677 | ||||||||||
Total common shareholders earnings, diluted | $ | 80,261 | $ | 86,423 | $ | 162,748 | $ | 153,226 | ||||||
Weighted average common shares outstanding | 162,180 | 170,633 | 163,049 | 167,096 | ||||||||||
Effect of dilutive common stock awards | 1,492 | 2,146 | 1,469 | 2,080 | ||||||||||
Effect of dilutive common stock warrants | — | 630 | — | 744 | ||||||||||
Diluted weighted average common shares outstanding | 163,672 | 173,409 | 164,518 | 169,920 | ||||||||||
Basic earnings per common share | $ | 0.49 | $ | 0.51 | $ | 1.00 | $ | 0.92 | ||||||
Diluted earnings per common share | $ | 0.49 | $ | 0.50 | $ | 0.99 | $ | 0.90 |
Anti-dilutive common stock options of approximately 4 million and 2 million for the three months ended June 30, 2019 and 2018, respectively, and 3 million and 1 million for the six months ended June 30, 2019 and 2018, respectively, were excluded from the earnings per common share calculation.
Note 5 Stock-Based Compensation
The fair value of stock options granted is estimated on the date of grant using a Black-Scholes option pricing model, while the fair value of restricted stock awards is their fair market value on the date of grant. The fair values of stock options and restricted stock awards are amortized as compensation expense on a straight-line basis over the vesting period of the grants. For retirement eligible colleagues, whose employment meets the definitions under the 2017 Incentive Compensation Plan, expenses related to stock options and restricted stock awards are fully recognized on the date the colleague meets the definition of normal or early retirement. Compensation expense recognized is included in personnel expense in the consolidated statements of income.
Performance awards are based on performance goals of earnings per share and total shareholder return with vesting ranging from a minimum of 0% to a maximum of 150% of the target award. Performance awards are valued utilizing a Monte Carlo simulation model to estimate fair value of the awards at the grant date.
Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock option represents the period of time stock options are expected to be outstanding and is estimated using historical data of stock
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option exercises and forfeitures. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the implied volatility of the Corporation’s stock.
The following assumptions were used in estimating the fair value for options granted in the first six months of 2019 and full year 2018:
2019 | 2018 | ||||
Dividend yield | 3.30 | % | 2.50 | % | |
Risk-free interest rate | 2.60 | % | 2.60 | % | |
Weighted average expected volatility | 24.00 | % | 22.00 | % | |
Weighted average expected life | 5.75 years | 5.75 years | |||
Weighted average per share fair value of options | $4.00 | $4.47 |
A summary of the Corporation’s stock option activity for the six months ended June 30, 2019 is presented below:
Stock Options | Shares(a) | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value(a) | |||||
Outstanding at December 31, 2018 | 5,281 | $ | 19.09 | 6.18 | $ | 12,392 | |||
Granted | 1,050 | 22.77 | |||||||
Exercised | (418 | ) | 15.68 | ||||||
Forfeited or expired | (85 | ) | 23.96 | ||||||
Outstanding at June 30, 2019 | 5,828 | $ | 19.94 | 6.61 | $ | 14,870 | |||
Options Exercisable at June 30, 2019 | 3,631 | $ | 18.04 | 5.32 | $ | 14,016 |
(a) In thousands
Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option. For the six months ended June 30, 2019, the intrinsic value of stock options exercised was approximately $3 million, compared to $9 million for the six months ended June 30, 2018. The total fair value of stock options vested was $4 million for the six months ended June 30, 2019 and June 30, 2018.
The Corporation recognized compensation expense for the vesting of stock options of $3 million for the six months ended June 30, 2019 and $2 million for the six months ended June 30, 2018. Included in compensation expense for 2019 was $1 million of expense for the accelerated vesting of stock options granted to retirement eligible colleagues. At June 30, 2019, the Corporation had approximately $6 million of unrecognized compensation expense related to stock options that is expected to be recognized over the remaining requisite service periods that extend through first quarter 2023.
The Corporation also issues restricted stock awards under the 2017 Incentive Compensation Plan. The following table summarizes information about the Corporation’s restricted stock awards activity for the six months ended June 30, 2019:
Restricted Stock Awards | Shares(a) | Weighted Average Grant Date Fair Value | ||||
Outstanding at December 31, 2018 | 1,993 | $ | 21.92 | |||
Granted | 1,164 | 22.21 | ||||
Vested | (673 | ) | 20.49 | |||
Forfeited | (38 | ) | 24.14 | |||
Outstanding at June 30, 2019 | 2,446 | $ | 22.42 |
(a) In thousands
The Corporation amortizes the expense related to restricted stock awards as compensation expense over the vesting period specified in the grant's award agreement. Performance-based restricted stock awards granted during 2018 and 2019 will vest ratably over a period of three years. Service-based restricted stock awards granted during 2018 and 2019 will vest ratably over a period of four years. Expense for restricted stock awards issued of approximately $13 million was recorded for the six months ended June 30, 2019 and $6 million was recorded for the six months ended June 30, 2018. Included in compensation expense for 2019 was approximately $3 million of expense for the accelerated vesting of restricted stock awards granted to retirement eligible colleagues. The Corporation had $28 million of unrecognized compensation costs related to restricted stock awards at June 30, 2019, that is expected to be recognized over the remaining requisite service periods that extend through first quarter 2023.
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The Corporation has the ability to issue shares from treasury or new shares upon the exercise of stock options or the granting of restricted stock awards. The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock in the market, to be made available for issuance in connection with the Corporation’s employee incentive plans and for other corporate purposes. The repurchase of shares will be based on market and investment opportunities, capital levels, growth prospects, and regulatory constraints. Such repurchases may occur from time to time in open market purchases, block transactions, private transactions, accelerated share repurchase programs, or similar facilities.
Note 6 Investment Securities
Investment securities are generally classified as available for sale or held to maturity at the time of purchase. The majority of the Corporation's investment securities are mortgage-related securities issued by GNMA or GSEs such as FNMA and FHLMC. Obligations of state and political subdivisions (municipal securities) make up a large percentage of the portfolio as well.
The amortized cost and fair values of securities available for sale and held to maturity at June 30, 2019 were as follows:
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
($ in Thousands) | ||||||||||||||||
Investment securities available for sale | ||||||||||||||||
Residential mortgage-related securities | ||||||||||||||||
FNMA / FHLMC | $ | 182,893 | $ | 1,646 | $ | (817 | ) | $ | 183,722 | |||||||
GNMA | 1,325,739 | 7,942 | (2,048 | ) | 1,331,633 | |||||||||||
Private-label | 805 | 9 | — | 814 | ||||||||||||
Commercial mortgage-related securities | ||||||||||||||||
FNMA / FHLMC | 20,244 | 858 | — | 21,102 | ||||||||||||
GNMA | 1,483,392 | 6,217 | (19,562 | ) | 1,470,048 | |||||||||||
FFELP asset backed securities | 274,520 | 152 | (1,535 | ) | 273,137 | |||||||||||
Other debt securities | 3,000 | — | — | 3,000 | ||||||||||||
Total investment securities available for sale | $ | 3,290,593 | $ | 16,825 | $ | (23,962 | ) | $ | 3,283,456 | |||||||
Investment securities held to maturity | ||||||||||||||||
U. S. Treasury securities | $ | 999 | $ | 20 | $ | — | $ | 1,019 | ||||||||
Obligations of state and political subdivisions (municipal securities) | 1,913,737 | 68,372 | (152 | ) | 1,981,957 | |||||||||||
Residential mortgage-related securities | ||||||||||||||||
FNMA / FHLMC | 89,078 | 1,143 | (145 | ) | 90,076 | |||||||||||
GNMA | 321,046 | 3,430 | (292 | ) | 324,184 | |||||||||||
GNMA commercial mortgage-related securities | 481,205 | 7,264 | (10,948 | ) | 477,521 | |||||||||||
Total investment securities held to maturity | $ | 2,806,064 | $ | 80,230 | $ | (11,537 | ) | $ | 2,874,758 |
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The amortized cost and fair values of securities available for sale and held to maturity at December 31, 2018 were as follows:
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
($ in Thousands) | ||||||||||||||||
Investment securities available for sale | ||||||||||||||||
U. S. Treasury securities | $ | 1,000 | $ | — | $ | (1 | ) | $ | 999 | |||||||
Residential mortgage-related securities | ||||||||||||||||
FNMA / FHLMC | 296,296 | 2,466 | (3,510 | ) | 295,252 | |||||||||||
GNMA | 2,169,943 | 473 | (41,885 | ) | 2,128,531 | |||||||||||
Private-label | 1,007 | — | (4 | ) | 1,003 | |||||||||||
GNMA commercial mortgage-related securities | 1,273,309 | — | (52,512 | ) | 1,220,797 | |||||||||||
FFELP asset backed securities | 297,347 | 711 | (698 | ) | 297,360 | |||||||||||
Other debt securities | 3,000 | — | — | 3,000 | ||||||||||||
Total investment securities available for sale | $ | 4,041,902 | $ | 3,649 | $ | (98,610 | ) | $ | 3,946,941 | |||||||
Investment securities held to maturity | ||||||||||||||||
Obligations of state and political subdivisions (municipal securities) | $ | 1,790,683 | $ | 8,255 | $ | (15,279 | ) | $ | 1,783,659 | |||||||
Residential mortgage-related securities | ||||||||||||||||
FNMA / FHLMC | 92,788 | 169 | (1,795 | ) | 91,162 | |||||||||||
GNMA | 351,606 | 1,611 | (8,181 | ) | 345,035 | |||||||||||
GNMA commercial mortgage-related securities | 505,434 | 7,559 | (22,579 | ) | 490,414 | |||||||||||
Total investment securities held to maturity | $ | 2,740,511 | $ | 17,593 | $ | (47,835 | ) | $ | 2,710,271 |
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The expected maturities of investment securities available for sale and held to maturity at June 30, 2019 are shown below:
Available for Sale | Held to Maturity | ||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
($ in Thousands) | |||||||||||||||
Due in one year or less | $ | 1,000 | $ | 1,000 | $ | 48,235 | $ | 48,393 | |||||||
Due after one year through five years | 2,000 | 2,000 | 184,581 | 185,909 | |||||||||||
Due after five years through ten years | — | — | 479,215 | 491,122 | |||||||||||
Due after ten years | — | — | 1,202,705 | 1,257,552 | |||||||||||
Total debt securities | 3,000 | 3,000 | 1,914,735 | 1,982,976 | |||||||||||
Residential mortgage-related securities | |||||||||||||||
FNMA / FHLMC | 182,893 | 183,722 | 89,078 | 90,076 | |||||||||||
GNMA | 1,325,739 | 1,331,633 | 321,046 | 324,184 | |||||||||||
Private-label | 805 | 814 | — | — | |||||||||||
Commercial mortgage-related securities | |||||||||||||||
FNMA / FHLMC | 20,244 | 21,102 | — | — | |||||||||||
GNMA | 1,483,392 | 1,470,048 | 481,205 | 477,521 | |||||||||||
FFELP asset backed securities | 274,520 | 273,137 | — | — | |||||||||||
Total investment securities | $ | 3,290,593 | $ | 3,283,456 | $ | 2,806,064 | $ | 2,874,758 | |||||||
Ratio of fair value to amortized cost | 99.8 | % | 102.4 | % |
17
Investment securities gains (losses), net includes proceeds from the sale of investment securities as well as any applicable write-ups or write-downs of investment securities. The proceeds from the sale and write-up of investment securities for the six months ended June 30, 2019 and 2018 are shown below:
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
($ in Thousands) | |||||||
Gross gains on available for sale securities | $ | 2,334 | $ | — | |||
Gross gains on held to maturity securities | — | — | |||||
Total gains | 2,334 | — | |||||
Gross losses on available for sale securities | (13,636 | ) | (2,015 | ) | |||
Gross losses on held to maturity securities | — | — | |||||
Total losses | (13,636 | ) | (2,015 | ) | |||
Write-up of equity securities without readily determinable fair values | 13,444 | — | |||||
Investment securities gains (losses), net | $ | 2,143 | $ | (2,015 | ) | ||
Proceeds from sales of investment securities | $ | 934,228 | $ | 493,060 |
During the first six months of 2019, the Corporation sold $934 million of taxable, floating rate ABS and shorter duration MBS, CMBS, and CMO Agency securities, with the proceeds utilized to pay down borrowings and to reinvest into higher yielding Agency related mortgage securities with slightly longer durations, repositioning the portfolio for a stable to declining rate environment. The Corporation also donated 42,039 shares of Visa Class B restricted shares to the Corporation's Charitable Remainder Trust during the second quarter of 2019, and the subsequent sale of those shares by the Trust resulted in an observable market price. As a result, the Corporation wrote up its remaining 77,000 Visa Class B restricted shares to fair value. Based on the existing transfer restriction and the uncertainty of covered litigation, the shares were previously carried at a zero cost basis.
During the first six months of 2018, the Corporation sold approximately $40 million of lower yielding GNMA commercial mortgage-related securities. In addition, on February 1, 2018, the date the Bank Mutual acquisition was completed, the Corporation sold Bank Mutual's entire $453 million securities portfolio. The Corporation originally reinvested the proceeds from the Bank Mutual securities portfolio into GNMA residential mortgage-related securities with the goal of reinvesting future cash flows into municipal securities. That strategy was completed during August 2018.
Investment securities with a carrying value of approximately $3.3 billion and $3.0 billion at June 30, 2019, and December 31, 2018, respectively, were required to be pledged to secure certain deposits or for other purposes as required or permitted by law.
18
The following represents gross unrealized losses and the related fair value of investment securities available for sale and held to maturity, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position, at June 30, 2019:
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||
Number of Securities | Unrealized Losses | Fair Value | Number of Securities | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | ||||||||||||||||||||||
($ in Thousands) | |||||||||||||||||||||||||||||
Investment securities available for sale | |||||||||||||||||||||||||||||
Residential mortgage-related securities | |||||||||||||||||||||||||||||
FNMA / FHLMC | 3 | $ | — | $ | 781 | 14 | $ | (817 | ) | $ | 121,661 | $ | (817 | ) | $ | 122,441 | |||||||||||||
GNMA | 2 | (602 | ) | 53,013 | 13 | (1,446 | ) | 316,714 | (2,048 | ) | 369,727 | ||||||||||||||||||
GNMA commercial mortgage-related securities | — | — | — | 70 | (19,562 | ) | 1,002,980 | (19,562 | ) | 1,002,980 | |||||||||||||||||||
FFELP asset backed securities | 16 | (1,380 | ) | 205,710 | 1 | (155 | ) | 5,839 | (1,535 | ) | 211,550 | ||||||||||||||||||
Other debt securities | 3 | — | 3,000 | — | — | — | — | 3,000 | |||||||||||||||||||||
Total | 24 | $ | (1,982 | ) | $ | 262,504 | 98 | $ | (21,979 | ) | $ | 1,447,194 | $ | (23,962 | ) | $ | 1,709,698 | ||||||||||||
Investment securities held to maturity | |||||||||||||||||||||||||||||
Obligations of state and political subdivisions (municipal securities) | 8 | $ | (12 | ) | $ | 3,962 | 50 | $ | (140 | ) | $ | 25,109 | $ | (152 | ) | $ | 29,071 | ||||||||||||
Residential mortgage-related securities | |||||||||||||||||||||||||||||
FNMA / FHLMC | — | — | — | 10 | (145 | ) | 18,474 | (145 | ) | 18,474 | |||||||||||||||||||
GNMA | 1 | (51 | ) | 6,956 | 27 | (241 | ) | 35,339 | (292 | ) | 42,295 | ||||||||||||||||||
GNMA commercial mortgage-related securities | — | — | — | 22 | (10,948 | ) | 404,790 | (10,948 | ) | 404,790 | |||||||||||||||||||
Total | 9 | $ | (63 | ) | $ | 10,918 | 109 | $ | (11,474 | ) | $ | 483,712 | $ | (11,537 | ) | $ | 494,630 |
For comparative purposes, the following represents gross unrealized losses and the related fair value of investment securities available for sale and held to maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2018:
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||
Number of Securities | Unrealized Losses | Fair Value | Number of Securities | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | ||||||||||||||||||||||
($ in Thousands) | |||||||||||||||||||||||||||||
Investment securities available for sale | |||||||||||||||||||||||||||||
U.S. Treasury securities | — | $ | — | $ | — | 1 | $ | (1 | ) | $ | 999 | $ | (1 | ) | $ | 999 | |||||||||||||
Residential mortgage-related securities | |||||||||||||||||||||||||||||
FNMA / FHLMC | 15 | (31 | ) | 17,993 | 17 | (3,479 | ) | 189,405 | (3,510 | ) | 207,398 | ||||||||||||||||||
GNMA | 12 | (4,529 | ) | 452,183 | 79 | (37,355 | ) | 1,598,159 | (41,885 | ) | 2,050,342 | ||||||||||||||||||
Private-label | 1 | (4 | ) | 1,003 | — | — | — | (4 | ) | 1,003 | |||||||||||||||||||
GNMA commercial mortgage-related securities | — | — | — | 93 | (52,512 | ) | 1,220,854 | (52,512 | ) | 1,220,854 | |||||||||||||||||||
FFELP asset backed securities | 13 | (698 | ) | 142,432 | — | — | — | (698 | ) | 142,432 | |||||||||||||||||||
Total | 41 | $ | (5,262 | ) | $ | 613,612 | 190 | $ | (93,347 | ) | $ | 3,009,417 | $ | (98,610 | ) | $ | 3,623,028 | ||||||||||||
Investment securities held to maturity | |||||||||||||||||||||||||||||
Obligations of state and political subdivisions (municipal securities) | 272 | $ | (2,860 | ) | $ | 313,212 | 752 | $ | (12,419 | ) | $ | 509,374 | $ | (15,279 | ) | $ | 822,586 | ||||||||||||
Residential mortgage-related securities | |||||||||||||||||||||||||||||
FNMA / FHLMC | 13 | (780 | ) | 57,896 | 22 | (1,015 | ) | 28,888 | (1,795 | ) | 86,784 | ||||||||||||||||||
GNMA | 13 | (414 | ) | 19,822 | 66 | (7,767 | ) | 320,387 | (8,181 | ) | 340,209 | ||||||||||||||||||
GNMA commercial mortgage-related securities | — | — | — | 25 | (22,579 | ) | 490,414 | (22,579 | ) | 490,414 | |||||||||||||||||||
Total | 298 | $ | (4,053 | ) | $ | 390,929 | 865 | $ | (43,780 | ) | $ | 1,349,063 | $ | (47,835 | ) | $ | 1,739,992 |
19
The Corporation reviews the investment securities portfolio on a quarterly basis to monitor its exposure to other-than-temporary impairment. A determination as to whether a security’s decline in fair value is other-than-temporary takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors the Corporation may consider in the other-than-temporary impairment analysis include the length of time and extent to which the security has been in an unrealized loss position, changes in security ratings, financial condition and near-term prospects of the issuer, as well as security and industry specific economic conditions.
Based on the Corporation’s evaluation, management does not believe any unrealized loss at June 30, 2019 represents an other-than-temporary impairment as these unrealized losses are primarily attributable to changes in interest rates and the current market conditions, and not credit deterioration. The unrealized losses reported for municipal securities relate to various state and local political subdivisions and school districts. The unrealized losses at June 30, 2019 for mortgage-related securities have declined due to the decrease in overall interest rates. The U.S. Treasury 3 year and 5 year rates both decreased by 75 bp from December 31, 2018. The Corporation does not intend to sell nor does it believe that it will be required to sell the securities in an unrealized loss position before recovery of their amortized cost basis.
FHLB and Federal Reserve Bank stocks: The Corporation is required to maintain Federal Reserve Bank stock and FHLB stock as a member of both the Federal Reserve System and the FHLB, and in amounts as required by these institutions. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other marketable equity securities and their fair value is equal to amortized cost. At June 30, 2019 and December 31, 2018, the Corporation had FHLB stock of $125 million and $173 million, respectively. The Corporation had Federal Reserve Bank stock of $78 million at June 30, 2019 and $77 million at December 31, 2018.
Equity Securities
Equity securities with readily determinable fair values: The Corporation's portfolio of equity securities with readily determinable fair values is primarily comprised of CRA Qualified Investment mutual funds. At both June 30, 2019 and December 31, 2018, the Corporation had equity securities with readily determinable fair values of $2 million.
Equity securities without readily determinable fair values: The Corporation's portfolio of equity securities without readily determinable fair values consists of Visa Class B restricted shares that the Corporation received in 2008 as part of Visa's initial public offering. During the second quarter of 2019, the Corporation donated 42,039 shares of Visa Class B restricted shares to the Corporation's Charitable Remainder Trust, and the subsequent sale of those shares by the Trust resulted in an observable market price. As a result, the Corporation wrote up their remaining 77,000 Visa Class B restricted shares to fair value. Based on the existing transfer restriction and the uncertainty of the covered litigation, the Visa Class B restricted shares were previously carried at a zero cost basis. Thus, the Corporation had equity securities without readily determinable fair values of $13 million at June 30, 2019 and $0 at December 31, 2018.
Note 7 Loans
The period end loan composition was as follows:
June 30, 2019 | December 31, 2018 | ||||||
($ in Thousands) | |||||||
Commercial and industrial | $ | 7,579,384 | $ | 7,398,044 | |||
Commercial real estate — owner occupied | 942,811 | 920,443 | |||||
Commercial and business lending | 8,522,194 | 8,318,487 | |||||
Commercial real estate — investor | 3,779,201 | 3,751,554 | |||||
Real estate construction | 1,394,815 | 1,335,031 | |||||
Commercial real estate lending | 5,174,016 | 5,086,585 | |||||
Total commercial | 13,696,210 | 13,405,072 | |||||
Residential mortgage | 8,277,479 | 8,277,712 | |||||
Home equity | 916,213 | 894,473 | |||||
Other consumer | 360,065 | 363,171 | |||||
Total consumer | 9,553,757 | 9,535,357 | |||||
Total loans(a) | $ | 23,249,967 | $ | 22,940,429 |
(a) Includes $2 million and $5 million of purchased credit-impaired loans at June 30, 2019 and December 31, 2018, respectively.
20
The following table presents commercial and consumer loans by credit quality indicator at June 30, 2019:
Pass | Special Mention | Potential Problem | Nonaccrual | Total | |||||||||||||||
($ in Thousands) | |||||||||||||||||||
Commercial and industrial | $ | 7,387,549 | $ | 49,026 | $ | 58,658 | $ | 84,151 | $ | 7,579,384 | |||||||||
Commercial real estate - owner occupied | 909,641 | 8,362 | 24,237 | 571 | 942,811 | ||||||||||||||
Commercial and business lending | 8,297,189 | 57,388 | 82,895 | 84,722 | 8,522,194 | ||||||||||||||
Commercial real estate - investor | 3,628,197 | 71,753 | 77,766 | 1,485 | 3,779,201 | ||||||||||||||
Real estate construction | 1,382,502 | 8,720 | 3,166 | 427 | 1,394,815 | ||||||||||||||
Commercial real estate lending | 5,010,699 | 80,473 | 80,932 | 1,912 | 5,174,016 | ||||||||||||||
Total commercial | 13,307,888 | 137,860 | 163,828 | 86,634 | 13,696,210 | ||||||||||||||
Residential mortgage | 8,206,689 | 641 | 1,983 | 68,166 | 8,277,479 | ||||||||||||||
Home equity | 903,694 | 652 | 32 | 11,835 | 916,213 | ||||||||||||||
Other consumer | 359,487 | 506 | — | 72 | 360,065 | ||||||||||||||
Total consumer | 9,469,870 | 1,799 | 2,014 | 80,073 | 9,553,757 | ||||||||||||||
Total loans | $ | 22,777,758 | $ | 139,660 | $ | 165,842 | $ | 166,707 | $ | 23,249,967 |
The following table presents commercial and consumer loans by credit quality indicator at December 31, 2018:
Pass | Special Mention | Potential Problem | Nonaccrual | Total | |||||||||||||||
($ in Thousands) | |||||||||||||||||||
Commercial and industrial | $ | 7,162,370 | $ | 78,075 | $ | 116,578 | $ | 41,021 | $ | 7,398,044 | |||||||||
Commercial real estate - owner occupied | 854,265 | 6,257 | 55,964 | 3,957 | 920,443 | ||||||||||||||
Commercial and business lending | 8,016,635 | 84,332 | 172,542 | 44,978 | 8,318,487 | ||||||||||||||
Commercial real estate - investor | 3,653,642 | 28,479 | 67,481 | 1,952 | 3,751,554 | ||||||||||||||
Real estate construction | 1,321,447 | 8,771 | 3,834 | 979 | 1,335,031 | ||||||||||||||
Commercial real estate lending | 4,975,089 | 37,249 | 71,315 | 2,931 | 5,086,585 | ||||||||||||||
Total commercial | 12,991,724 | 121,582 | 243,856 | 47,909 | 13,405,072 | ||||||||||||||
Residential mortgage | 8,203,729 | 434 | 5,975 | 67,574 | 8,277,712 | ||||||||||||||
Home equity | 880,808 | 1,223 | 103 | 12,339 | 894,473 | ||||||||||||||
Other consumer | 362,343 | 749 | — | 79 | 363,171 | ||||||||||||||
Total consumer | 9,446,881 | 2,406 | 6,078 | 79,992 | 9,535,357 | ||||||||||||||
Total loans | $ | 22,438,605 | $ | 123,988 | $ | 249,935 | $ | 127,901 | $ | 22,940,429 |
Factors that are important to managing overall credit quality are sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early identification of potential problems, and appropriate allowance for loan losses, allowance for unfunded commitments, nonaccrual, and charge off policies.
For commercial loans, management has determined the pass credit quality indicator to include credits exhibiting acceptable financial statements, cash flow, and leverage. If any risk exists, it is mitigated by the loan structure, collateral, monitoring, or control. For consumer loans, performing loans include credits performing in accordance with the original contractual terms. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Special mention credits have potential weaknesses that deserve management’s attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credit. Potential problem loans are considered inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged. These loans generally have a well-defined weakness, or weaknesses, which may jeopardize liquidation of the debt, and are characterized by the distinct possibility the Corporation will sustain some loss if the deficiencies are not corrected. Lastly, management considers a loan to be impaired when it is probable the Corporation will be unable to collect all amounts due according to the original contractual terms of the note agreement, including both principal and interest. Management has determined commercial and consumer loan relationships in nonaccrual status or those with their terms restructured in a troubled debt restructuring meet this impaired loan definition. Commercial loans classified as special mention, potential problem, and nonaccrual are reviewed at a minimum on a quarterly basis, while pass and performing rated credits are reviewed on an annual basis or more frequently if the loan renewal is less than one year or if otherwise warranted.
21
The following table presents loans by past due status at June 30, 2019:
Accruing | |||||||||||||||||||||||
Current | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due | Nonaccrual(a) | Total | ||||||||||||||||||
($ in Thousands) | |||||||||||||||||||||||
Commercial and industrial | $ | 7,490,030 | $ | 4,769 | $ | 139 | $ | 293 | $ | 84,151 | $ | 7,579,384 | |||||||||||
Commercial real estate - owner occupied | 940,222 | 2,018 | — | — | 571 | 942,811 | |||||||||||||||||
Commercial and business lending | 8,430,252 | 6,787 | 139 | 293 | 84,722 | 8,522,194 | |||||||||||||||||
Commercial real estate - investor | 3,776,334 | 1,382 | — | — | 1,485 | 3,779,201 | |||||||||||||||||
Real estate construction | 1,394,237 | 131 | 19 | — | 427 | 1,394,815 | |||||||||||||||||
Commercial real estate lending | 5,170,572 | 1,513 | 19 | — | 1,912 | 5,174,016 | |||||||||||||||||
Total commercial | 13,600,824 | 8,300 | 159 | 293 | 86,634 | 13,696,210 | |||||||||||||||||
Residential mortgage | 8,199,557 | 9,199 | 558 | — | 68,166 | 8,277,479 | |||||||||||||||||
Home equity | 898,550 | 5,176 | 652 | — | 11,835 | 916,213 | |||||||||||||||||
Other consumer | 356,360 | 1,150 | 688 | 1,795 | 72 | 360,065 | |||||||||||||||||
Total consumer | 9,454,467 | 15,524 | 1,898 | 1,795 | 80,073 | 9,553,757 | |||||||||||||||||
Total loans | $ | 23,055,291 | $ | 23,824 | $ | 2,057 | $ | 2,088 | $ | 166,707 | $ | 23,249,967 |
(a) Of the total nonaccrual loans, $90 million, or 54%, were current with respect to payment at June 30, 2019.
The following table presents loans by past due status at December 31, 2018:
Accruing | |||||||||||||||||||||||
Current | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due | Nonaccrual(a) | Total | ||||||||||||||||||
($ in Thousands) | |||||||||||||||||||||||
Commercial and industrial | $ | 7,356,187 | $ | 187 | $ | 338 | $ | 311 | $ | 41,021 | $ | 7,398,044 | |||||||||||
Commercial real estate - owner occupied | 913,787 | 2,580 | 119 | — | 3,957 | 920,443 | |||||||||||||||||
Commercial and business lending | 8,269,974 | 2,767 | 457 | 311 | 44,978 | 8,318,487 | |||||||||||||||||
Commercial real estate - investor | 3,745,835 | 2,954 | 813 | — | 1,952 | 3,751,554 | |||||||||||||||||
Real estate construction | 1,333,722 | 330 | — | — | 979 | 1,335,031 | |||||||||||||||||
Commercial real estate lending | 5,079,557 | 3,284 | 813 | — | 2,931 | 5,086,585 | |||||||||||||||||
Total commercial | 13,349,531 | 6,051 | 1,270 | 311 | 47,909 | 13,405,072 | |||||||||||||||||
Residential mortgage | 8,200,432 | 9,272 | 434 | — | 67,574 | 8,277,712 | |||||||||||||||||
Home equity | 876,085 | 4,826 | 1,223 | — | 12,339 | 894,473 | |||||||||||||||||
Other consumer | 358,970 | 1,401 | 868 | 1,853 | 79 | 363,171 | |||||||||||||||||
Total consumer | 9,435,487 | 15,499 | 2,525 | 1,853 | 79,992 | 9,535,357 | |||||||||||||||||
Total loans | $ | 22,785,019 | $ | 21,550 | $ | 3,795 | $ | 2,165 | $ | 127,901 | $ | 22,940,429 |
(a) Of the total nonaccrual loans, $74 million, or 58%, were current with respect to payment at December 31, 2018.
22
The following table presents impaired loans individually evaluated under ASC Topic 310, excluding $2 million of purchased credit-impaired loans, at June 30, 2019:
Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||||||
($ in Thousands) | |||||||||||||||||||
Loans with a related allowance | |||||||||||||||||||
Commercial and industrial | $ | 83,561 | $ | 94,759 | $ | 22,890 | $ | 48,118 | $ | 1,104 |