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Section 1: 10-Q (10-Q)

20180331 Q1



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q





 

 

[X]

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE



 

SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended:     March 31, 2018





 

 



 

 

[  ]

 

TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE



 

SECURITIES EXCHANGE ACT OF 1934



For the transition period from: _____ to _____



Commission file number: 51018



THE BANCORP, INC.



(Exact name of registrant as specified in its charter)





 

 

Delaware

 

23-3016517

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)



 

 

409 Silverside Road, Wilmington, DE 19809

 

(302) 385-5000

(Address of principal executive offices and zip code)

 

(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 [X]   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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X]   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. (Check one): 

 



 

 



 

 

Large accelerated filer [ ]   

Accelerated filer [X]    

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 Act).  Yes [ ]  No [X]



    Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of  May 4, 2018, there were 56,307,238 outstanding shares of common stock, $1.00 par value.



 

 

 


 

THE BANCORP, INC



Form 10-Q Index



 

 



 

Page

Part I Financial Information

Item 1.

Financial Statements:

3



 

 



Consolidated Balance Sheets – March 31, 2018 (unaudited) and December 31, 2017

3



 

 



Unaudited Consolidated Statements of Operations – Three months ended March 31, 2018 and 2017

4



 

 



Unaudited Consolidated Statements of Comprehensive Income – Three months ended March 31, 2018 and 2017

6



 

 



Unaudited Consolidated Statements of Changes in Shareholders’ Equity – Three months ended March 31, 2018

7



 

 



Unaudited Consolidated Statements of Cash Flows – Three months ended March 31, 2018 and 2017

8



 

 



Notes to Unaudited Consolidated Financial Statements

9



 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34



 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

53



 

 

Item 4.

Controls and Procedures

53



 

 

Part II Other Information



 

 

Item 1.

Legal Proceedings

54

Item 6.

Exhibits

55



 

 

Signatures

 

55



 

 









 

2


 



PART I – FINANCIAL INFORMATION



Item 1. Financial Statements



THE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS





 

 

 

 



 

March 31,

 

December 31,



 

2018

 

2017



 

(unaudited)

 

 



 

(in thousands)

ASSETS

 

 

 

 

Cash and cash equivalents

 

 

 

 

Cash and due from banks

 

$                    1,999 

 

$                    3,152 

Interest earning deposits at Federal Reserve Bank

 

508,847 

 

841,471 

Securities purchased under agreements to resell

 

64,312 

 

64,312 

Total cash and cash equivalents

 

575,158 

 

908,935 



 

 

 

 

Investment securities, available-for-sale, at fair value

 

1,381,020 

 

1,294,484 

Investment securities, held-to-maturity (fair value $85,949 and $85,345, respectively)

 

86,370 

 

86,380 

Commercial loans held for sale

 

349,806 

 

503,316 

Loans, net of deferred loan fees and costs

 

1,463,064 

 

1,392,228 

Allowance for loan and lease losses

 

(7,285)

 

(7,096)

Loans, net

 

1,455,779 

 

1,385,132 

Federal Home Loan Bank and Atlantic Central Bankers Bank stock

 

991 

 

991 

Premises and equipment, net

 

19,052 

 

20,051 

Accrued interest receivable

 

11,778 

 

10,900 

Intangible assets, net

 

4,995 

 

5,377 

Other real estate owned

 

405 

 

450 

Deferred tax asset, net

 

38,139 

 

34,802 

Investment in unconsolidated entity, at fair value

 

70,016 

 

74,473 

Assets held for sale from discontinued operations

 

289,038 

 

304,313 

Other assets

 

86,553 

 

78,543 

Total assets

 

$             4,369,100 

 

$             4,708,147 



 

 

 

 

LIABILITIES

 

 

 

 

Deposits

 

 

 

 

Demand and interest checking

 

$             3,461,881 

 

$             3,806,965 

Savings and money market

 

493,288 

 

453,877 

Total deposits

 

3,955,169 

 

4,260,842 



 

 

 

 

Securities sold under agreements to repurchase

 

182 

 

217 

Subordinated debentures

 

13,401 

 

13,401 

Long-term borrowings

 

42,157 

 

42,323 

Other liabilities

 

28,299 

 

67,215 

Total liabilities

 

4,039,208 

 

4,383,998 



 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

Common stock - authorized, 75,000,000 shares of $1.00 par value; 56,307,088 and 55,861,150

 

 

 

 

shares issued at March 31, 2018 and December 31, 2017, respectively

 

56,307 

 

55,861 

Treasury stock, at cost (100,000 shares)

 

(866)

 

(866)

Additional paid-in capital

 

363,605 

 

363,196 

Accumulated deficit

 

(75,345)

 

(89,485)

Accumulated other comprehensive loss

 

(13,809)

 

(4,557)

Total shareholders' equity

 

329,892 

 

324,149 



 

 

 

 

Total liabilities and shareholders' equity

 

$             4,369,100 

 

$             4,708,147 



The accompanying notes are an integral part of these consolidated statements.



3

 


 







THE BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS







 

 

 

 

 



 

 

 

 

 



 

For the three months ended March 31,

 



 

2018

 

2017

 



 

(in thousands, except per share data)

Interest income

 

 

 

 

 

Loans, including fees

 

$               23,302 

 

$               17,629 

 

Interest on investment securities:

 

 

 

 

 

Taxable interest

 

9,699 

 

9,005 

 

Tax-exempt interest

 

60 

 

72 

 

Federal funds sold/securities purchased under agreements to resell

 

414 

 

227 

 

Interest earning deposits

 

1,832 

 

1,516 

 



 

35,307 

 

28,449 

 

Interest expense

 

 

 

 

 

Deposits

 

4,969 

 

3,434 

 

Short-term borrowings

 

104 

 

 -

 

Subordinated debenture

 

160 

 

138 

 



 

5,233 

 

3,572 

 

Net interest income

 

30,074 

 

24,877 

 

Provision for loan and lease losses

 

700 

 

1,000 

 

Net interest income after provision for loan and lease losses

 

29,374 

 

23,877 

 



 

 

 

 

 

Non-interest income

 

 

 

 

 

Service fees on deposit accounts

 

1,576 

 

1,675 

 

Card payment and ACH processing fees

 

1,692 

 

1,528 

 

Prepaid card fees

 

14,282 

 

13,547 

 

Gain on sale of loans

 

11,729 

 

5,383 

 

Gain on sale of investment securities

 

26 

 

503 

 

Change in value of investment in unconsolidated entity

 

(1,171)

 

(19)

 

Leasing income

 

487 

 

551 

 

Affinity fees

 

102 

 

1,021 

 

Other

 

372 

 

30 

 

Total non-interest income

 

29,095 

 

24,219 

 



 

 

 

 

 

Non-interest expense

 

 

 

 

 

Salaries and employee benefits

 

21,073 

 

18,006 

 

Depreciation and amortization

 

1,031 

 

1,206 

 

Rent and related occupancy cost

 

1,359 

 

1,461 

 

Data processing expense

 

2,005 

 

3,480 

 

Printing and supplies

 

189 

 

505 

 

Audit expense

 

469 

 

421 

 

Legal expense

 

2,431 

 

1,738 

 

Amortization of intangible assets

 

383 

 

379 

 

Losses on sale and write downs on other real estate owned

 

45 

 

 -

 

FDIC insurance

 

2,219 

 

2,065 

 

Software

 

3,291 

 

3,228 

 

Insurance

 

621 

 

678 

 

Telecom and IT network communications

 

326 

 

592 

 

Consulting

 

665 

 

534 

 

Civil money penalty

 

(290)

 

 -

 

Other

 

3,232 

 

3,490 

 

Total non-interest expense

 

39,049 

 

37,783 

 

Income from continuing operations before income taxes

 

19,420 

 

10,313 

 

Income tax expense

5,399 

 

4,011 

 

Net income from continuing operations

 

$               14,021 

 

$                 6,302 

 

Discontinued operations

 

 

 

 

 

4

 


 

Income from discontinued operations before income taxes

 

156 

 

2,667 

 

Income tax expense

37 

 

1,006 

 

Income from discontinued operations, net of tax

 

119 

 

1,661 

 

Net income available to common shareholders

 

$               14,140 

 

$                 7,963 

 



 

 

 

 

 

Net income per share from continuing operations - basic

 

$                   0.25 

 

$                   0.11 

 

Net income per share from discontinued operations - basic

 

$                         - 

 

$                   0.03 

 

Net income per share - basic

 

$                   0.25 

 

$                   0.14 

 



 

 

 

 

 

Net income per share from continuing operations - diluted

 

$                   0.25 

 

$                   0.11 

 

Net income per share from discontinued operations - diluted

 

$                         - 

 

$                   0.03 

 

Net income per share - diluted

 

$                   0.25 

 

$                   0.14 

 



The accompanying notes are an integral part of these consolidated statements.

5

 


 





THE BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME







 

 

 



 

 

 



For the three months



ended March 31,



2018

 

2017



(in thousands)



 

 

 

Net income

$                  14,140 

 

$                  7,963 

Other comprehensive income net of reclassifications into net income:

 

 

 



 

 

 

Other comprehensive income (loss)

 

 

 

Change in net unrealized gain (loss) during the period

(12,658)

 

4,273 

Reclassification adjustments for gains included in income

(26)

 

(503)

Amortization of losses previously held as available-for-sale

10 

 

Net unrealized gain (loss)

(12,674)

 

3,779 



 

 

 

Deferred tax expense

 

 

 

 Securities available-for-sale:

 

 

 

Change in net unrealized gain (loss) during the period

(3,418)

 

1,709 

Reclassification adjustments for gains included in income

(7)

 

(201)

Amortization of losses previously held as available-for-sale

 

Income tax (benefit) expense related to items of other comprehensive income

(3,422)

 

1,512 



 

 

 

Other comprehensive income (loss) net of tax and reclassifications into net income

(9,252)

 

2,267 

Comprehensive income

$                    4,888 

 

$                10,230 



The accompanying notes are an integral part of these consolidated statements.





 

6

 


 





THE BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY





 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31, 2018

(in thousands, except share data)



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 



 

Common

 

 

 

 

 

Additional

 

 

 

other

 

 



 

stock

 

Common

 

Treasury

 

paid-in

 

Accumulated

 

comprehensive

 

 



 

shares

 

stock

 

stock

 

capital

 

deficit

 

loss

 

Total



 

 

 

 

Balance at January 1, 2018

 

55,861,150 

 

$        55,861 

 

$        (866)

 

$      363,196 

 

$       (89,485)

 

$              (4,557)

 

$          324,149 

Net income

 

 -

 

 -

 

 -

 

 -

 

14,140 

 

 -

 

14,140 

Common stock issued from option exercises,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

net of tax benefits

 

12,594 

 

13 

 

 -

 

99 

 

 -

 

 -

 

112 

Common stock issued from restricted shares,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

net of tax benefits

 

433,344 

 

433 

 

 -

 

(433)

 

 -

 

 -

 

 -

Stock-based compensation

 

 -

 

 -

 

 -

 

743 

 

 -

 

 -

 

743 

Other comprehensive loss net of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reclassification adjustments and tax

 

 -

 

 -

 

 -

 

 -

 

 -

 

(9,252)

 

(9,252)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2018

 

56,307,088 

 

$        56,307 

 

$        (866)

 

$      363,605 

 

$       (75,345)

 

$            (13,809)

 

$          329,892 



The accompanying notes are an integral part of this consolidated statement.





7

 


 





THE BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS







 

 

 

 



 

 

 

 



 

For the three months



 

ended March 31,



 

2018

 

2017



 

(in thousands)

Operating activities

 

 

 

 

Net income from continuing operations

 

$            14,021 

 

$              6,302 

Net income from discontinued operations

 

119 

 

1,661 

Adjustments to reconcile net income to net cash

 

 

 

 

provided by operating activities

 

 

 

 

Depreciation and amortization

 

1,414 

 

1,585 

Provision for loan and lease losses

 

700 

 

1,000 

Net amortization of investment securities discounts/premiums

 

3,580 

 

2,219 

Stock-based compensation expense

 

743 

 

775 

Loans originated for sale

 

(152,574)

 

(100,618)

Sale of loans originated for resale

 

316,124 

 

24,974 

Gain on sales of loans originated for resale

 

(11,661)

 

(5,383)

Gain on sale of fixed assets

 

 -

 

(13)

Fair value adjustment on investment in unconsolidated entity

 

1,171 

 

(19)

Writedown of other real estate

 

45 

 

 -

Change in fair value loans held for sale

 

1,455 

 

155 

Change in fair value of derivatives

 

(1,524)

 

(450)

Gain on sales of investment securities

 

(26)

 

(503)

Decrease (increase) in accrued interest receivable

 

(878)

 

293 

Increase in other assets

 

(8,011)

 

(5,033)

Change in fair value discontinued loans held for sale

 

960 

 

 -

Decrease (increase) in discontinued assets held for sale

 

(263)

 

5,102 

Increase (decrease) in other liabilities

 

(22,357)

 

1,778 

 Net cash provided by (used in) operating activities

 

143,038 

 

(66,175)



 

 

 

 

Investing activities

 

 

 

 

Purchase of investment securities available-for-sale

 

(157,980)

 

(36,693)

Proceeds from sale of investment securities available-for-sale

 

 -

 

30,374 

Proceeds from redemptions and prepayments of securities available-for-sale

 

40,276 

 

41,127 

Net increase in loans

 

(71,379)

 

(41,254)

Net decrease in discontinued loans held for sale

 

14,578 

 

14,323 

Proceeds from sale of fixed assets

 

 -

 

132 

Purchases of premises and equipment

 

 -

 

(193)

Investment in unconsolidated entity

 

3,286 

 

967 

 Net cash (used in) provided by investing activities

 

(171,219)

 

8,783 



 

 

 

 

Financing activities

 

 

 

 

Net decrease in deposits

 

(305,673)

 

(202,505)

Net decrease in securities sold under agreements to repurchase

 

(35)

 

(1)

Common stock issuance expense

 

 -

 

(200)

Proceeds from the issuance of common stock

 

112 

 

 -

 Net cash used in financing activities

 

(305,596)

 

(202,706)



 

 

 

 

 Net decrease in cash and cash equivalents

 

(333,777)

 

(260,098)



 

 

 

 

Cash and cash equivalents, beginning of period

 

908,935 

 

999,059 



 

 

 

 

Cash and cash equivalents, end of period

 

$          575,158 

 

$          738,961 



 

 

 

 

Supplemental disclosure:

 

 

 

 

Interest paid

 

$              5,114 

 

$              3,566 

Taxes paid

 

$                   40 

 

$                   35 











The accompanying notes are an integral part of these consolidated statements.

8

 


 

THE BANCORP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



Note 1. Structure of Company

The Bancorp, Inc. (the Company) is a Delaware corporation and a registered financial holding company.  Its primary subsidiary is The Bancorp Bank (the Bank) which is wholly owned by the Company.   The Bank is a Delaware chartered commercial bank located in Wilmington, Delaware and is a Federal Deposit Insurance Corporation (FDIC) insured institution.  In its continuing operations, the Bank has four primary lines of specialty lending: securities-backed lines of credit (SBLOC), vehicle fleet and other equipment leasing, Small Business Administration (SBA) loans and commercial  mortgage-backed loans (CMBS) generated for sale into commercial mortgage-backed securities markets primarily through securitizations.   Through the Bank, the Company also provides banking services nationally, which include prepaid card accounts, private label banking, institutional banking, card payment and other payment processing. 

The Company and the Bank are subject to regulation by certain state and federal agencies and, accordingly, they are examined periodically by those regulatory authorities.  As a consequence of the extensive regulation of commercial banking activities, the Company’s and the Bank’s businesses may be affected by state and federal legislation and regulations.

Note 2. Significant Accounting Policies



Basis of Presentation

The financial statements of the Company, as of March 31, 2018 and for the three month periods ended March 31, 2018 and 2017, are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission.  However, in the opinion of management, these interim financial statements include all necessary adjustments to fairly present the results of the interim periods presented.  The unaudited interim consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (2017 Form 10-K Report).  The results of operations for the three month period ended March 31, 2018 may not necessarily be indicative of the results of operations for the full year ending December 31, 2018.

Revenue Recognition



The Company recognizes revenue when the performance obligations related to the transfer of goods or services under the terms of a contract are satisfied. Some obligations are satisfied at a point in time while others are satisfied over a period of time. Revenue is recognized as the amount of consideration to which the Company expects to be entitled to in exchange for transferring goods or services to a customer. When consideration includes a variable component, the amount of consideration attributable to variability is included in the transaction price only to the extent it is probable that significant revenue recognized will not be reversed when uncertainty associated with the variable consideration is subsequently resolved. The Company’s contracts generally do not contain terms that require significant judgement to determine the variability impacting the transaction price.



A performance obligation is deemed satisfied when the control over goods or services is transferred to the customer. Control is transferred to a customer either at a point in time or over time. To determine when control is transferred at a point in time, the Company considers indicators, including but not limited to the right to payment for the asset, transfer of significant risk and rewards of ownership of the asset and acceptance of the asset by the customer. When control is transferred over a period of time, for different performance obligations, either the input or output method is used to measure progress for the transfer. The measure of progress used to assess completion of the performance obligation varies between performance obligations and may be based on time throughout the period of service or on the value of goods and services transferred to the customer. As each distinct service or activity is performed, the Company transfers control to the customer based on the services performed as the customer simultaneously receives the benefits of those services. This timing of revenue recognition aligns with the resolution of any uncertainty related to variable consideration. Costs incurred to obtain a revenue producing contract generally are expensed when incurred as a practical expedient as the contractual period for the majority of contracts is one year or less. The Company’s revenue streams that are in scope include prepaid card, card payment, ACH  and deposit processing and other fees. The fees on those revenue streams are generally assessed and collected as the transaction occurs, or on a monthly or quarterly basis.  The Company has completed its review of the contracts and other agreements that are within scope of revenue guidance and did not identify any material changes to the timing or amount of revenue recognition.  The Company’s accounting policies did not change materially since the principles of revenue recognition in the ASU are largely consistent with current practices applied by the Company.  The vast majority of the Company’s services related to its revenues are performed, earned and recognized monthly.



9

 


 

Prepaid card fees primarily include fees for services related to reconciliation, fraud detection, regulatory compliance and other services which are performed and earned daily or monthly and are also billed and collected on a monthly basis. Accordingly, there is no significant component of the services the Company performs or related revenues which are deferred.  The Company earns transactional and/or interchange fees on prepaid card accounts when transactions occur and revenue is billed and collected monthly or quarterly. Certain volume or transaction based interchange expenses paid to payment networks such as Visa, reduce revenue which is presented net on the income statement. Card payment and ACH processing fees include transaction fees earned for processing merchant transactions.  Revenue is recognized when a cardholder’s transaction is approved and settled, or monthly. ACH processing fees are earned on a per item basis as the transactions are processed for third party clients and are also billed and collected monthly. Service charges on deposit accounts include fees and other charges the Company receives to provide various services, including but not limited to, account maintenance, check writing, wire transfer and other services normally associated with deposit accounts. Revenue for these services is recognized monthly as the services are performed. The Company’s customer contracts do not typically have performance obligations and fees are collected and earned when the transaction occurs. The Company may, from time to time, waive certain fees for customers but generally does not reduce the transaction price to reflect variability for future reversals due to the insignificance of the amounts. Waiver of fees reduces the revenue in the period the waiver is granted to the customer.

Note 3. Stock-based Compensation



The Company recognizes compensation expense for stock options in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718, Stock Based Compensation. The expense of the option is generally measured at fair value at the grant date with compensation expense recognized over the service period, which is typically the vesting period. For grants subject to a service condition, the Company utilizes the Black-Scholes option-pricing model to estimate the fair value of each option on the date of grant.  The Black-Scholes model takes into consideration the exercise price and expected life of the options, the current price of the underlying stock and its expected volatility, the expected dividends on the stock and the current risk-free interest rate for the expected life of the option. The Company’s estimate of the fair value of a stock option is based on expectations derived from historical experience and may not necessarily equate to its market value when fully vested.  In accordance with ASC 718, the Company estimates the number of options for which the requisite service is expected to be rendered. At March 31, 2018, the Company had  two active  stock-based compensation plans, which are more fully described in its 2017 Form 10-K Report.  



The Company did not grant stock options during the three month period ended March 31, 2018 or 2017There were 15,000  common stock options exercised in the three month period ended March 31, 2018.  There were no common stock options exercised in the three month period ended March 31, 2017.  



A summary of the status of the Company’s equity compensation plans is presented below.







 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

Weighted average

 

 



 

 

 

 

remaining

 

 



 

 

Weighted average

 

contractual

 

Aggregate



Shares

 

exercise price

 

term (years)

 

intrinsic value

Outstanding at January 1, 2018

1,452,625 

 

$                     8.30 

 

4.64 

 

$                         - 

Granted

 -

 

 -

 

 -

 

 -

Exercised

(15,000)

 

9.13 

 

 -

 

 -

Expired

 -

 

 -

 

 -

 

 -

Forfeited

 -

 

 -

 

 -

 

 -

Outstanding at March 31, 2018

1,437,625 

 

$                     8.29 

 

4.40 

 

$          3,608,029 

Exercisable at March 31, 2018

1,201,375 

 

$                     8.56 

 

3.67 

 

$          2,685,754 



The Company did not grant restricted stock units (RSUs) in the first three months of 2018. In the first three months of 2017, the Company granted 799,559 restricted RSUs of which 664,559 had a vesting period of three years and 135,000 had a vesting period of one year.  All the RSUs granted in the first quarter of 2017 had a fair value of $5.06 at issuance.



10

 


 

A summary of the status of the Company’s RSUs is presented below.







 

 

 

 

 



 

 

 

 

 



 

 

Weighted average

 

Average remaining



 

 

grant date

 

contractual



Shares

 

fair value

 

term (years)

Outstanding at January 1, 2018

1,264,454 

 

$                  5.49 

 

1.67 

Granted

 -

 

 -

 

 

Vested

(433,344)

 

4.94 

 

 

Forfeited

 -

 

 -

 

 

Outstanding at March 31, 2018

831,110 

 

$                  5.78 

 

1.64 



As of March 31, 2018, there was a total of $4.3 million of unrecognized compensation cost related to unvested awards under share-based plans.  This cost is expected to be recognized over a weighted average period of approximately 1.7 years.  Related compensation expense for the three months ended March 31, 2018 and 2017 was $743,000 and $775,000, respectively.  The total intrinsic value of options that were exercised and restricted units which vested during the first three months of 2018 and 2017 was $4.6 million and $2.4 million, respectively. The total issuance date fair value of RSUs vested and options exercised during the three months ended March 31, 2018 and 2017 was $2.1 million and $1.9 million, respectively.



Note 4. Earnings Per Share



The Company calculates earnings per share under ASC 260, Earnings Per Share. Basic earnings per share exclude dilution and are computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.



The following tables show the Company’s earnings per share for the periods presented:







 

 

 

 

 

 



 

 

 

 

 

 



 

For the three months ended



 

March 31, 2018



 

Income

 

Shares

 

Per share



 

(numerator)

 

(denominator)

 

amount



 

 

 

 

 

 



 

(dollars in thousands except share and per share data)

Basic earnings per share from continuing operations

 

 

 

 

 

 

Net earnings available to common shareholders

 

$               14,021

 

56,141,830 

 

$                  0.25

Effect of dilutive securities

 

 

 

 

 

 

Common stock options

 

 -

 

881,291 

 

 -

Diluted earnings per share

 

 

 

 

 

 

Net earnings available to common shareholders

 

$               14,021

 

57,023,121 

 

$                  0.25







 

 

 

 

 

 



 

 

 

 

 

 



 

For the three months ended



 

March 31, 2018



 

Income

 

Shares

 

Per share



 

(numerator)

 

(denominator)

 

amount



 

 

 

 

 

 



 

(dollars in thousands except share and per share data)

Basic earnings per share from discontinued operations

 

 

 

 

 

 

Net earnings available to common shareholders

 

$                    119

 

56,141,830 

 

$                      -

Effect of dilutive securities

 

 

 

 

 

 

Common stock options

 

 -

 

881,291 

 

 -

Diluted earnings per share

 

 

 

 

 

 

Net earnings available to common shareholders

 

$                    119

 

57,023,121 

 

$                      -





11

 


 



 

 

 

 

 

 



 

 

 

 

 

 



 

For the three months ended



 

March 31, 2018



 

Income

 

Shares

 

Per share



 

(numerator)

 

(denominator)

 

amount



 

 

 

 

 

 



 

(dollars in thousands except share and per share data)

Basic earnings per share

 

 

 

 

 

 

Net earnings available to common shareholders

 

$               14,140

 

56,141,830 

 

$                  0.25

Effect of dilutive securities

 

 

 

 

 

 

Common stock options

 

 -

 

881,291 

 

 -

Diluted earnings per share

 

 

 

 

 

 

Net earnings available to common shareholders

 

$               14,140

 

57,023,121 

 

$                  0.25



Stock options for 1,437,625 shares, exercisable at prices between $6.75 and $10.45 per share, were outstanding at March 31, 2018, and  included in the dilutive shares because the exercise price per share was less than the average market price.







 

 

 

 

 

 



 

 

 

 

 

 



 

For the three months ended



 

March 31, 2017



 

Income

 

Shares

 

Per share



 

(numerator)

 

(denominator)

 

amount



 

 

 

 

 

 



 

(dollars in thousands except share and per share data)

Basic earnings per share from continuing operations

 

 

 

 

 

 

Net earnings available to common shareholders

 

$                 6,302

 

55,534,279 

 

$                  0.11

Effect of dilutive securities

 

 

 

 

 

 

Common stock options

 

 -

 

218,217 

 

 -

Diluted earnings per share

 

 

 

 

 

 

Net earnings available to common shareholders

 

$                 6,302

 

55,752,496 

 

$                  0.11







 

 

 

 

 

 



 

 

 

 

 

 



 

For the three months ended



 

March 31, 2017



 

Income

 

Shares

 

Per share



 

(numerator)

 

(denominator)

 

amount



 

 

 

 

 

 



 

(dollars in thousands except share and per share data)

Basic earnings per share from discontinued operations

 

 

 

 

 

 

Net earnings available to common shareholders

 

$                 1,661

 

55,534,279 

 

$                  0.03

Effect of dilutive securities

 

 

 

 

 

 

Common stock options

 

 -

 

218,217 

 

 -

Diluted earnings per share

 

 

 

 

 

 

Net earnings available to common shareholders

 

$                 1,661

 

55,752,496 

 

$                  0.03







 

 

 

 

 

 



 

 

 

 

 

 



 

For the three months ended



 

March 31, 2017



 

Income

 

Shares

 

Per share



 

(numerator)

 

(denominator)

 

amount



 

 

 

 

 

 



 

(dollars in thousands except share and per share data)

Basic earnings per share

 

 

 

 

 

 

Net earnings available to common shareholders

 

$                 7,963

 

55,534,279 

 

$                  0.14

Effect of dilutive securities

 

 

 

 

 

 

Common stock options

 

 -

 

218,217 

 

 -

Diluted earnings per share

 

 

 

 

 

 

Net earnings available to common shareholders

 

$                 7,963

 

55,752,496 

 

$                  0.14

12

 


 



Stock options for 2,019,125 shares, exercisable at prices between $6.75 and $25.43 per share, were outstanding at March 31, 2017 but were not included in dilutive shares because the exercise price per share was less than the average market price.



Note 5. Investment Securities



The amortized cost, gross unrealized gains and losses, and fair values of the Company’s investment securities classified as available-for-sale and held-to-maturity at March 31, 2018 and December 31, 2017 are summarized as follows (in thousands):









 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Available-for-sale

 

March 31, 2018



 

 

 

Gross

 

Gross

 

 



 

Amortized

 

unrealized

 

unrealized

 

Fair



 

cost

 

gains

 

losses

 

value

U.S. Government agency securities

 

$            58,376 

 

$                  3 

 

$            (898)

 

$           57,481 

Asset-backed securities *

 

264,753 

 

1,237 

 

(429)

 

265,561 

Tax-exempt obligations of states and political subdivisions

 

9,894 

 

50 

 

(67)

 

9,877 

Taxable obligations of states and political subdivisions

 

60,850 

 

964 

 

(764)

 

61,050 

Residential mortgage-backed securities

 

429,891 

 

597 

 

(9,647)

 

420,841 

Collateralized mortgage obligation securities

 

292,802 

 

146 

 

(4,786)

 

288,162 

Commercial mortgage-backed securities

 

282,416 

 

 

(4,372)

 

278,048 



 

$       1,398,982 

 

$           3,001 

 

$       (20,963)

 

$      1,381,020 







 

 

 

 

 

 

 

 



 

March 31, 2018



 

 

 

Gross

 

Gross

 

 



 

Amortized

 

unrealized

 

unrealized

 

Fair

* Asset-backed securities as shown above

 

cost

 

gains

 

losses

 

value

Federally insured student loan securities

 

$               86,515 

 

$                  183 

 

$                (429)

 

$              86,269 

Collateralized loan obligation securities

 

170,843 

 

1,015 

 

 -

 

171,858 

Other

 

7,395 

 

39 

 

 -

 

7,434 



 

$             264,753 

 

$               1,237 

 

$                (429)

 

$            265,561 







 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Held-to-maturity

 

March 31, 2018



 

 

 

Gross

 

Gross

 

 



 

Amortized

 

unrealized

 

unrealized

 

Fair



 

cost

 

gains

 

losses

 

value

Other debt securities - single issuers

 

$               11,046 

 

$                    94 

 

$             (1,928)

 

$                9,212 

Other debt securities - pooled

 

75,324 

 

1,413 

 

 -

 

76,737 



 

$               86,370 

 

$               1,507 

 

$             (1,928)

 

$              85,949