TYLER, Texas, Oct. 28, 2016 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ:SBSI) today reported its financial results for the three and nine months ended September 30, 2016.
Southside reported net income of $12.9 million for the three months ended September 30, 2016, an increase of $1.1 million, or 9.4%, compared to $11.8 million for the same period in 2015. Net income for the nine months ended September 30, 2016 increased $5.5 million, or 16.9%, to $37.8 million when compared to $32.3 million for the same period in 2015.
Diluted earnings per common share were $0.49 and $0.44 for the three months ended September 30, 2016 and 2015, respectively, an increase of $0.05, or 11.4%. For the nine months ended September 30, 2016, diluted earnings per common share increased $0.22, or 18.2%, to $1.43 when compared to $1.21 for the same period in 2015.
The return on average shareholders’ equity for the nine months ended September 30, 2016 was 10.87%, compared to 9.93% for the same period in 2015. The return on average assets was 0.98% for the nine months ended September 30, 2016, compared to 0.90% for the same period in 2015.
“We are pleased to report that during the third quarter our net income increased 9.4% compared to the same period in 2015,” stated Sam Dawson, Chief Executive Officer of Southside Bancshares, Inc. “Loans increased $99.3 million, or 4.2%, on a linked quarter basis and we sold a significant portion of nonperforming assets. We incurred approximately $400,000 of net expense during the quarter associated with the sale of the nonperforming assets. Our nonperforming assets to total assets ratio has declined to 0.29%. Loan commitments made during 2016 began to fund at a greater pace during the third quarter, which we anticipate continuing through the fourth quarter. We believe that we continue to have an opportunity to book a number of quality loans and that our pipeline remains solid. During the third quarter, we prepaid a lease at approximately 59% of the remaining lease payments on a Fort Worth operations facility that was recently vacated. The cost of prepaying this lease, combined with writing off the leasehold improvements, was $1.8 million. We anticipate that the savings going forward will be approximately $45,000 a month.”
“The decrease in the net interest margin during the third quarter on a linked quarter basis was primarily reflective of a decrease in the average yield on loans and securities. Average loan yields decreased primarily as a result of a decrease in purchase accretion of $487,000 compared to the second quarter. Average security yields decreased due to overall lower interest rates which was slightly offset by an increase in average total securities during the third quarter.”
“In September 2016, we issued $100.0 million of 5.50% Fixed-to-Floating Rate Subordinated Notes due 2026. This debt initially bears interest at a fixed rate of 5.50% through September 29, 2021 and thereafter, adjusts quarterly at a floating rate equal to three-month LIBOR plus 429.7 basis points. We plan to use the proceeds from the issuance of the notes for general corporate purposes and to finance the activities of our subsidiaries.”
“Our team members continue to execute on our business plan of quality loan growth, revenue generating opportunities, innovative financial services and delivery channels and cost containment.”
Loans and Deposits
For the nine months ended September 30, 2016, total loans increased by $51.9 million, or 2.1%, when compared to December 31, 2015. The net increase in our loans was comprised of increases of $124.6 million of commercial real estate loans, $28.1 million of construction loans, and $5.8 million of municipal loans, which were partially offset by decreases of $51.4 million of commercial loans, $44.6 million of loans to individuals, and $10.7 million of 1-4 family residential loans. Loans with oil and gas industry exposure totaled 1.13% of the loan portfolio at September 30, 2016.
Nonperforming assets decreased during the nine months ended September 30, 2016 by $16.5 million, or 50.7%, to $16.0 million, or 0.29% of total assets, when compared to 0.63% at December 31, 2015.
During the nine months ended September 30, 2016, the allowance for loan losses decreased $3.7 million, or 19.0%, to $16.0 million, or 0.64% of total loans, when compared to 0.81% at December 31, 2015, as a result of partial charge-offs of two large impaired commercial borrowing relationships during the six months ended June 30, 2016.
During the nine months ended September 30, 2016, deposits, net of brokered deposits, increased $151.1 million, or 4.5%, compared
to December 31, 2015. During this nine-month period, public fund deposits increased $67.6 million.
Net Interest Income for the Three Months Ended September 30, 2016
Net interest income increased $0.6 million, or 1.9%, to $33.9 million for the three months ended September 30, 2016, when compared to $33.3 million for the same period in 2015. The increase in net interest income was the result of the increase in interest income of $2.9 million, which was primarily a result of the increase in the loan and securities portfolio, compared to the same period in 2015. The increase in interest income was partially offset by an increase in interest expense of $2.3 million. For the three months ended September 30, 2016, our net interest spread decreased to 3.06%, compared to 3.25% for the same period in 2015, due to higher rates paid on interest-bearing liabilities along with a slight decrease in the yield on interest-earning assets. Our net interest margin decreased to 3.19% for the three months ended September 30, 2016, compared to 3.35% for the same period in 2015. The net interest spread and margin on a linked quarter basis decreased from 3.24% and 3.35%, respectively.
Net Interest Income for the Nine Months Ended September 30, 2016
Net interest income increased $4.9 million, or 4.9%, to $104.9 million for the nine months ended September 30, 2016, when compared to $100.0 million for the same period in 2015. The increase in net interest income was due to the increase in interest income of $10.7 million, which was primarily a result of the increase in the loan portfolio, compared to the same period in 2015, and a $1.3 million recovery of interest income on the payoff of a long-time nonaccrual loan during the first quarter of 2016. The increase in interest income was partially offset by an increase in interest expense of $5.7 million. For the nine months ended September 30, 2016, our net interest spread decreased to 3.23%, compared to 3.32% for the same period in 2015, due to higher rates paid on interest-bearing liabilities, which more than offset the increase in the yield on interest-earning assets. Our net interest margin decreased to 3.35% for the nine months ended September 30, 2016, compared to 3.41% for the same period in 2015.
Net Income for the Three Months Ended September 30, 2016
Net income increased $1.1 million, or 9.4%, for the three months ended September 30, 2016, to $12.9 million when compared to the same period in 2015. The increase was primarily the result of a $2.9 million increase in interest income, a $2.4 million increase in noninterest income and a $0.6 million decrease in provision for loan losses, partially offset by a $2.3 million increase in interest expense, a $1.8 million increase in noninterest expense, and a $0.8 million increase in income tax expense.
Noninterest income increased $2.4 million, or 25.3%, for the three months ended September 30, 2016 compared to the same period in 2015, primarily due to increases in net gain on sale of securities available for sale and gain on sale of loans.
Noninterest expense increased $1.8 million, or 6.7%, for the three months ended September 30, 2016, compared to the same period in 2015, primarily due to increases in occupancy expense, professional fees, and other noninterest expense partially offset by decreases in salaries and employee benefits, advertising, travel and entertainment, and telephone and communication expense.
Net Income for the Nine Months Ended September 30, 2016
Net income increased $5.5 million, or 16.9%, for the nine months ended September 30, 2016, to $37.8 million when compared to the same period in 2015. The increase was primarily the result of a $10.7 million increase in interest income, a $3.6 million increase in noninterest income and a $0.9 million decrease in noninterest expense, partially offset by a $5.7 million increase in interest expense, a $2.6 million increase in income tax expense and a $1.3 million increase in provision for loan losses.
Noninterest income increased $3.6 million, or 12.4%, for the nine months ended September 30, 2016 compared to the same period in 2015, primarily due to increases in net gain on sale of securities available for sale and gain on sale of loans.
Noninterest expense decreased $0.9 million, or 1.0%, for the nine months ended September 30, 2016, compared to the same period in 2015, primarily due to decreases in salaries and employee benefits expense, software and data processing expense, and telephone and communication expense, partially offset by increases in professional fees, occupancy expense, and ATM and debit card expense.
Conference Call
Southside's management team will host a conference call to discuss its third quarter 2016 financial results on Friday, October 28, 2016 at 9:00 am CDT. The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 95800526 or by identifying “Southside Bancshares, Inc., Third Quarter 2016 Earnings Call.” To listen to the call via web-cast, register at www.southside.com/about/investor-relations.
For those unable to listen to the conference call live, a recording of the conference call will be available from approximately 3:00 pm CDT October 28, 2016 through November 9, 2016 by accessing the company website, www.southside.com/about/investor-relations.
Non-GAAP Financial Measures
Our accounting and reporting policies conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of our performance. These include the following fully-taxable equivalent measures: tax-equivalent net interest income, tax-equivalent net interest margin, tax-equivalent net interest spread, and tax-equivalent efficiency ratio, which include the effects of taxable-equivalent adjustments using a federal income tax rate of 35% to increase tax-exempt interest income to a tax-equivalent basis. Whenever we present a non-GAAP financial measure in an SEC filing, we are also required to present the most directly comparable financial measure calculated and presented in accordance with GAAP and reconcile the differences between the non-GAAP financial measure and such comparable GAAP measure. Tax-equivalent adjustments are reported in Notes 2 and 3 to the Average Balances with Average Yields and Rates tables under Results of Operations below.
Tax-equivalent net interest income, net interest margin and net interest spread. Net interest income on a tax-equivalent basis is a non-GAAP measure that adjusts for the tax-favored status of net interest income from loans and investments. We believe this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. The most directly comparable financial measure calculated in accordance with GAAP is our net interest income. Net interest margin on a tax-equivalent basis is net interest income on a tax-equivalent basis divided by average interest-earning assets on a tax-equivalent basis. The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin. Net interest spread on a tax-equivalent basis is the difference in the average yield on average interest-earning assets on a tax equivalent basis and the average rate paid on average interest-bearing liabilities. The most directly comparable financial measure calculated in accordance with GAAP is our net interest spread.
Tax-equivalent efficiency ratio. The efficiency ratio on a tax-equivalent basis is a non-GAAP measure that provides a measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. The ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense, excluding amortization of intangibles and certain non-recurring expense by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding gains (losses) on sales of investment securities and certain non-recurring impairments.
These non-GAAP financial measures should not be considered alternatives to GAAP-basis financial statements, and other bank holding companies may define or calculate these non-GAAP measures or similar measures differently.
About Southside Bancshares, Inc.
Southside Bancshares, Inc. is a bank holding company with approximately $5.5 billion in assets as of September 30, 2016, that owns 100% of Southside Bank. Southside Bank currently has 61 banking centers in Texas and operates a network of over 70 ATMs.
To learn more about Southside Bancshares, Inc., please visit our investor relations website at www.southside.com/about/investor-relations. Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data. To receive e-mail notification of company news, events and stock activity, please register on the E-mail Notification portion of the website. Questions or comments may be directed to Deborah Wilkinson at (817) 367-4962, or deborah.wilkinson@southside.com.
Forward-Looking Statements
Certain statements of other than historical fact that are contained in this document and in other written material, press releases and oral statements issued by or on behalf of the Company may be considered to be “forward-looking statements” within the meaning of and subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. These statements may include words such as “expect,” “estimate,” “project,” “anticipate,” “appear,” “believe,” “could,” “should,” “may,” “likely,” “intend,” “probability,” “risk,” “target,” “objective,” “plans,” “potential,” and similar expressions. Forward-looking statements are statements with respect to the Company’s beliefs, plans, expectations, objectives, goals, anticipations, assumptions and estimates about the Company's future performance and are subject to significant known and unknown risks and uncertainties, which could cause the Company's actual results to differ materially from the results discussed in the forward-looking statements. For example, discussions about trends in asset quality, capital, liquidity, the pace of loan and revenue growth, the Company's ability to sell nonperforming assets, expense reductions, the benefits of the Share Repurchase Plan, planned operational efficiencies, earnings and certain market risk disclosures, including the impact of interest rates and other economic factors, are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future.
Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, under “Forward-Looking Information” and Item 1A. “Risk Factors,” and in the Company’s other filings with the Securities and Exchange Commission. The Company disclaims any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.
| SOUTHSIDE BANCSHARES, INC. CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) (In thousands, except per share data) | |||||||||||||||
| ASSETS | As of | ||||||||||||||
| 2016 | 2015 | ||||||||||||||
| Sept. 30, | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | |||||||||||
| Cash and due from banks | $ | 54,255 | $ | 45,663 | $ | 52,324 | $ | 54,288 | $ | 52,311 | |||||
| Interest earning deposits | 144,833 | 18,450 | 16,130 | 26,687 | 19,583 | ||||||||||
| Securities available for sale, at estimated fair value | 1,622,128 | 1,416,335 | 1,332,381 | 1,460,492 | 1,374,995 | ||||||||||
| Securities held to maturity, at carrying value | 775,682 | 784,925 | 784,579 | 784,296 | 771,914 | ||||||||||
| Federal Home Loan Bank stock, at cost | 51,901 | 47,702 | 47,550 | 51,047 | 43,446 | ||||||||||
| Loans held for sale | 5,301 | 5,883 | 4,971 | 3,811 | 4,883 | ||||||||||
| Loans | 2,483,641 | 2,384,321 | 2,443,231 | 2,431,753 | 2,239,146 | ||||||||||
| Less: Allowance for loan losses | (15,993 | ) | (14,908 | ) | (21,799 | ) | (19,736 | ) | (18,402 | ) | |||||
| Net loans | 2,467,648 | 2,369,413 | 2,421,432 | 2,412,017 | 2,220,744 | ||||||||||
| Premises & equipment, net | 106,777 | 107,242 | 107,556 | 107,929 | 109,087 | ||||||||||
| Goodwill | 91,520 | 91,520 | 91,520 | 91,520 | 91,520 | ||||||||||
| Other intangible assets, net | 5,060 | 5,534 | 6,029 | 6,548 | 7,090 | ||||||||||
| Bank owned life insurance | 97,002 | 96,375 | 95,718 | 95,080 | 94,303 | ||||||||||
| Other assets | 42,796 | 45,886 | 58,743 | 68,281 | 47,518 | ||||||||||
| Total assets | $ | 5,464,903 | $ | 5,034,928 | $ | 5,018,933 | $ | 5,161,996 | $ | 4,837,394 | |||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||
| Noninterest bearing deposits | $ | 747,270 | $ | 679,831 | $ | 698,695 | $ | 672,470 | $ | 681,618 | |||||
| Interest bearing deposits | 2,834,117 | 2,890,418 | 2,920,673 | 2,782,937 | 2,646,259 | ||||||||||
| Total deposits | 3,581,387 | 3,570,249 | 3,619,368 | 3,455,407 | 3,327,877 | ||||||||||
| Short-term obligations | 720,634 | 385,717 | 259,646 | 647,836 | 445,008 | ||||||||||
| Long-term obligations | 621,640 | 559,071 | 622,222 | 562,512 | 558,786 | ||||||||||
| Other liabilities | 68,682 | 47,591 | 60,121 | 52,179 | 58,575 | ||||||||||
| Total liabilities | 4,992,343 | 4,562,628 | 4,561,357 | 4,717,934 | 4,390,246 | ||||||||||
| Shareholders' equity | 472,560 | 472,300 | 457,576 | 444,062 | 447,148 | ||||||||||
| Total liabilities and shareholders' equity | $ | 5,464,903 | $ | 5,034,928 | $ | 5,018,933 | $ | 5,161,996 | $ | 4,837,394 | |||||
| Income Statement: | At or For the Three Months Ended | ||||||||||||||
| 2016 | 2015 | ||||||||||||||
| Sept. 30, | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | |||||||||||
| Total interest income | $ | 41,132 | $ | 41,089 | $ | 43,012 | $ | 39,964 | $ | 38,211 | |||||
| Total interest expense | 7,202 | 6,711 | 6,396 | 5,268 | 4,928 | ||||||||||
| Net interest income | 33,930 | 34,378 | 36,616 | 34,696 | 33,283 | ||||||||||
| Provision for loan losses | 1,631 | 3,768 | 2,316 | 1,951 | 2,276 | ||||||||||
| Net interest income after provision for loan losses | 32,299 | 30,610 | 34,300 | 32,745 | 31,007 | ||||||||||
| Noninterest income | |||||||||||||||
| Deposit services | 5,335 | 5,099 | 5,085 | 4,990 | 5,213 | ||||||||||
| Net gain on sale of securities available for sale | 2,343 | 728 | 2,441 | 204 | 875 | ||||||||||
| Gain on sale of loans | 818 | 873 | 643 | 578 | 305 | ||||||||||
| Trust income | 867 | 869 | 855 | 871 | 835 | ||||||||||
| Bank owned life insurance income | 656 | 647 | 674 | 640 | 661 | ||||||||||
| Brokerage services | 551 | 535 | 575 | 555 | 540 | ||||||||||
| Other | 1,162 | 619 | 1,323 | 977 | 932 | ||||||||||
| Total noninterest income | 11,732 | 9,370 | 11,596 | 8,815 | 9,361 | ||||||||||
| Noninterest expense | |||||||||||||||
| Salaries and employee benefits | 15,203 | 14,849 | 17,732 | 16,420 | 15,733 | ||||||||||
| Occupancy expense | 4,569 | 2,993 | 3,335 | 3,263 | 3,316 | ||||||||||
| Advertising, travel & entertainment | 588 | 722 | 685 | 726 | 642 | ||||||||||
| ATM and debit card expense | 868 | 736 | 712 | 1,086 | 617 | ||||||||||
| Professional fees | 1,148 | 1,478 | 1,338 | 1,517 | 825 | ||||||||||
| Software and data processing expense | 736 | 739 | 749 | 771 | 819 | ||||||||||
| Telephone and communications | 407 | 468 | 484 | 372 | 534 | ||||||||||
| FDIC insurance | 643 | 645 | 638 | 619 | 624 | ||||||||||
| FHLB prepayment fees | — | 148 | — | — | — | ||||||||||
| Other | 4,263 | 3,035 | 3,734 | 3,656 | 3,525 | ||||||||||
| Total noninterest expense | 28,425 | 25,813 | 29,407 | 28,430 | 26,635 | ||||||||||
| Income before income tax expense | 15,606 | 14,167 | 16,489 | 13,130 | 13,733 | ||||||||||
| Income tax expense | 2,741 | 2,772 | 2,973 | 1,438 | 1,971 | ||||||||||
| Net income | $ | 12,865 | $ | 11,395 | $ | 13,516 | $ | 11,692 | $ | 11,762 | |||||
| Common share data: | |||||||||||||||
| Weighted-average basic shares outstanding | 26,262 | 26,230 | 26,449 | 26,653 | 26,632 | ||||||||||
| Weighted-average diluted shares outstanding | 26,415 | 26,349 | 26,519 | 26,745 | 26,721 | ||||||||||
| Shares outstanding end of period | 26,278 | 26,251 | 26,222 | 26,670 | 26,645 | ||||||||||
| Net income per common share | |||||||||||||||
| Basic | $ | 0.49 | $ | 0.43 | $ | 0.51 | $ | 0.44 | $ | 0.44 | |||||
| Diluted | 0.49 | 0.43 | 0.51 | 0.44 | 0.44 | ||||||||||
| Book value per common share | 17.98 | 17.99 | 17.46 | 16.66 | 16.78 | ||||||||||
| Cash dividend paid per common share | 0.24 | 0.24 | 0.23 | 0.31 | 0.23 | ||||||||||
| Selected Performance Ratios: | |||||||||||||||
| Return on average assets | 0.98 | % | 0.90 | % | 1.07 | % | 0.92 | % | 0.96 | % | |||||
| Return on average shareholders’ equity | 10.78 | 9.91 | 11.96 | 10.35 | 10.65 | ||||||||||
| Average yield on interest earning assets | 3.78 | 3.93 | 4.06 | 3.80 | 3.79 | ||||||||||
| Average rate on interest bearing liabilities | 0.72 | 0.69 | 0.66 | 0.54 | 0.54 | ||||||||||
| Net interest spread | 3.06 | 3.24 | 3.40 | 3.26 | 3.25 | ||||||||||
| Net interest margin | 3.19 | 3.35 | 3.51 | 3.35 | 3.35 | ||||||||||
| Average interest earnings assets to average interest bearing liabilities | 120.40 | 120.21 | 119.62 | 120.29 | 121.61 | ||||||||||
| Noninterest expense to average total assets | 2.17 | 2.05 | 2.33 | 2.25 | 2.18 | ||||||||||
| Efficiency ratio | 53.88 | 52.85 | 57.47 | 58.45 | 56.60 | ||||||||||
| Income Statement: | At or For the Nine Months Ended September 30, | |||||
| 2016 | 2015 | |||||
| Total interest income | $ | 125,233 | $ | 114,568 | ||
| Total interest expense | 20,309 | 14,591 | ||||
| Net interest income | 104,924 | 99,977 | ||||
| Provision for loan losses | 7,715 | 6,392 | ||||
| Net interest income after provision for loan losses | 97,209 | 93,585 | ||||
| Noninterest income | ||||||
| Deposit services | 15,519 | 15,122 | ||||
| Net gain on sale of securities available for sale | 5,512 | 3,456 | ||||
| Gain on sale of loans | 2,334 | 1,504 | ||||
| Trust income | 2,591 | 2,548 | ||||
| Bank owned life insurance income | 1,977 | 1,983 | ||||
| Brokerage services | 1,661 | 1,651 | ||||
| Other | 3,104 | 2,816 | ||||
| Total noninterest income | 32,698 | 29,080 | ||||
| Noninterest expense | ||||||
| Salaries and employee benefits | 47,784 | 50,801 | ||||
| Occupancy expense | 10,897 | 9,620 | ||||
| Advertising, travel & entertainment | 1,995 | 1,982 | ||||
| ATM and debit card expense | 2,316 | 2,046 | ||||
| Professional fees | 3,964 | 2,360 | ||||
| Software and data processing expense | 2,224 | 3,087 | ||||
| Telephone and communications | 1,359 | 1,606 | ||||
| FDIC insurance | 1,926 | 1,891 | ||||
| FHLB prepayment fees | 148 | — | ||||
| Other | 11,032 | 11,126 | ||||
| Total noninterest expense | 83,645 | 84,519 | ||||
| Income before income tax expense | 46,262 | 38,146 | ||||
| Income tax expense | 8,486 | 5,841 | ||||
| Net income | $ | 37,776 | $ | 32,305 | ||
| Common share data: | ||||||
| Weighted-average basic shares outstanding | 26,314 | 26,611 | ||||
| Weighted-average diluted shares outstanding | 26,425 | 26,700 | ||||
| Net income per common share | ||||||
| Basic | $ | 1.43 | $ | 1.21 | ||
| Diluted | 1.43 | 1.21 | ||||
| Book value per common share | 17.98 | 16.78 | ||||
| Cash dividend paid per common share | 0.71 | 0.69 | ||||
| Selected Performance Ratios: | ||||||
| Return on average assets | 0.98 | % | 0.90 | % | ||
| Return on average shareholders’ equity | 10.87 | 9.93 | ||||
| Average yield on interest earning assets | 3.92 | 3.85 | ||||
| Average yield on interest bearing liabilities | 0.69 | 0.53 | ||||
| Net interest spread | 3.23 | 3.32 | ||||
| Net interest margin | 3.35 | 3.41 | ||||
| Average interest earnings assets to average interest bearing liabilities | 120.08 | 120.07 | ||||
| Noninterest expense to average total assets | 2.18 | 2.34 | ||||
| Efficiency ratio | 54.78 | 59.63 | ||||
| Southside Bancshares, Inc. Selected Financial Data (Unaudited) (In thousands) Three Months Ended | |||||||||||||||
| 2016 | 2015 | ||||||||||||||
| Sept. 30, | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | |||||||||||
| Nonperforming assets | $ | 16,008 | $ | 24,510 | $ | 34,046 | $ | 32,480 | $ | 33,621 | |||||
| Nonaccrual loans (1) | 8,536 | 11,767 | 21,927 | 20,526 | 20,988 | ||||||||||
| Accruing loans past due more than 90 days (1) | 1 | 6 | 7 | 3 | — | ||||||||||
| Restructured loans (2) | 7,193 | 12,477 | 11,762 | 11,143 | 11,772 | ||||||||||
| Other real estate owned | 237 | 237 | 265 | 744 | 793 | ||||||||||
| Repossessed assets | 41 | 23 | 85 | 64 | 68 | ||||||||||
| Asset Quality Ratios: | |||||||||||||||
| Nonaccruing loans to total loans | 0.34 | % | 0.49 | % | 0.90 | % | 0.84 | % | 0.94 | % | |||||
| Allowance for loan losses to nonaccruing loans | 187.36 | 126.69 | 99.42 | 96.15 | 87.68 | ||||||||||
| Allowance for loan losses to nonperforming assets | 99.91 | 60.82 | 64.03 | 60.76 | 54.73 | ||||||||||
| Allowance for loan losses to total loans | 0.64 | 0.63 | 0.89 | 0.81 | 0.82 | ||||||||||
| Nonperforming assets to total assets | 0.29 | 0.49 | 0.68 | 0.63 | 0.70 | ||||||||||
| Net charge-offs to average loans | 0.09 | 1.77 | 0.04 | 0.11 | 0.13 | ||||||||||
| Capital Ratios: | |||||||||||||||
| Shareholders’ equity to total assets | 8.65 | 9.38 | 9.12 | 8.60 | 9.24 | ||||||||||
| Average shareholders’ equity to average total assets | 9.10 | 9.11 | 8.94 | 8.92 | 9.03 | ||||||||||
| (1) Excludes purchased credit impaired ("PCI") loans measured at fair value at acquisition. |
| (2) Includes $3.2 million, $8.3 million, $7.4 million, $7.5 million, and $6.8 million in PCI loans restructured as of September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015, and September 30, 2015, respectively. |
Loan Portfolio Composition
The following table sets forth loan totals by category for the periods presented:
| Real Estate Loans: | |||||||||||||||
| Construction | $ | 466,323 | $ | 425,595 | $ | 464,750 | $ | 438,247 | $ | 342,282 | |||||
| 1-4 Family Residential | 644,746 | 633,400 | 644,826 | 655,410 | 678,431 | ||||||||||
| Commercial | 759,795 | 694,272 | 657,962 | 635,210 | 537,161 | ||||||||||
| Commercial Loans | 191,154 | 197,896 | 233,857 | 242,527 | 228,272 | ||||||||||
| Municipal Loans | 293,949 | 292,909 | 286,217 | 288,115 | 262,384 | ||||||||||
| Loans to Individuals | 127,674 | 140,249 | 155,619 | 172,244 | 190,616 | ||||||||||
| Total Loans | $ | 2,483,641 | $ | 2,384,321 | $ | 2,443,231 | $ | 2,431,753 | $ | 2,239,146 | |||||
RESULTS OF OPERATIONS
The analysis below shows average interest earning assets and interest bearing liabilities together with the average yield on the interest earning assets and the average rate of the interest bearing liabilities.
| AVERAGE BALANCES WITH AVERAGE YIELDS AND RATES (dollars in thousands) (unaudited) Three Months Ended | ||||||||||||||||||
| September 30, 2016 | June 30, 2016 | |||||||||||||||||
| AVG BALANCE | INTEREST | AVG YIELD/ RATE | AVG BALANCE | INTEREST | AVG YIELD/ RATE | |||||||||||||
| ASSETS | ||||||||||||||||||
| INTEREST EARNING ASSETS: | ||||||||||||||||||
| Loans (1) (2) | $ | 2,436,349 | $ | 26,750 | 4.37 | % | $ | 2,426,733 | $ | 27,275 | 4.52 | % | ||||||
| Loans Held For Sale | 6,718 | 54 | 3.20 | % | 4,984 | 40 | 3.23 | % | ||||||||||
| Securities: | ||||||||||||||||||
| Investment Securities (Taxable) (4) | 61,238 | 251 | 1.63 | % | 22,010 | 107 | 1.96 | % | ||||||||||
| Investment Securities (Tax-Exempt) (3) (4) | 690,635 | 8,911 | 5.13 | % | 657,568 | 8,636 | 5.28 | % | ||||||||||
| Mortgage-backed Securities (4) | 1,492,271 | 9,399 | 2.51 | % | 1,450,868 | 9,366 | 2.60 | % | ||||||||||
| Total Securities | 2,244,144 | 18,561 | 3.29 | % | 2,130,446 | 18,109 | 3.42 | % | ||||||||||
| FHLB stock and other investments, at cost | 54,085 | 186 | 1.37 | % | 52,952 | 185 | 1.41 | % | ||||||||||
| Interest Earning Deposits | 57,598 | 89 | 0.61 | % | 57,493 | 61 | 0.43 | % | ||||||||||
| Total Interest Earning Assets | 4,798,894 | 45,640 | 3.78 | % | 4,672,608 | 45,670 | 3.93 | % | ||||||||||
| NONINTEREST EARNING ASSETS: | ||||||||||||||||||
| Cash and Due From Banks | 49,418 | 47,079 | ||||||||||||||||
| Bank Premises and Equipment | 107,318 | 107,842 | ||||||||||||||||
| Other Assets | 278,599 | 270,141 | ||||||||||||||||
| Less: Allowance for Loan Losses | (14,989 | ) | (22,377 | ) | ||||||||||||||
| Total Assets | $ | 5,219,240 | $ | 5,075,293 | ||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||
| INTEREST BEARING LIABILITIES: | ||||||||||||||||||
| Savings Deposits | $ | 248,364 | 71 | 0.11 | % | $ | 244,639 | 68 | 0.11 | % | ||||||||
| Time Deposits | 949,019 | 2,073 | 0.87 | % | 976,600 | 1,927 | 0.79 | % | ||||||||||
| Interest Bearing Demand Deposits | 1,634,898 | 1,460 | 0.36 | % | 1,727,431 | 1,520 | 0.35 | % | ||||||||||
| Total Interest Bearing Deposits | 2,832,281 | 3,604 | 0.51 | % | 2,948,670 | 3,515 | 0.48 | % | ||||||||||
| Short-term Interest Bearing Liabilities | 608,130 | 1,122 | 0.73 | % | 385,858 | 906 | 0.94 | % | ||||||||||
| Long-term Interest Bearing Liabilities – FHLB Dallas | 472,470 | 1,857 | 1.56 | % | 492,296 | 1,874 | 1.53 | % | ||||||||||
| Subordinated Notes (5) | 12,823 | 189 | 5.86 | % | — | — | — | % | ||||||||||
| Long-term Debt (6) | 60,234 | 430 | 2.84 | % | 60,233 | 416 | 2.78 | % | ||||||||||
| Total Interest Bearing Liabilities | 3,985,938 | 7,202 | 0.72 | % | 3,887,057 | 6,711 | 0.69 | % | ||||||||||
| NONINTEREST BEARING LIABILITIES: | ||||||||||||||||||
| Demand Deposits | 702,539 | 682,360 | ||||||||||||||||
| Other Liabilities | 55,783 | 43,360 | ||||||||||||||||
| Total Liabilities | 4,744,260 | 4,612,777 | ||||||||||||||||
| SHAREHOLDERS’ EQUITY | 474,980 | 462,516 | ||||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 5,219,240 | $ | 5,075,293 | ||||||||||||||
| NET INTEREST INCOME | $ | 38,438 | $ | 38,959 | ||||||||||||||
| NET INTEREST MARGIN ON AVERAGE EARNING ASSETS | 3.19 | % | 3.35 | % | ||||||||||||||
| NET INTEREST SPREAD | 3.06 | % | 3.24 | % | ||||||||||||||
| (1) Interest on loans includes net fees on loans that are not material in amount. |
| (2) Interest income includes taxable-equivalent adjustments of $1,064 and $1,082 for the three months ended September 30, 2016 and June 30, 2016, respectively. |
| (3) Interest income includes taxable-equivalent adjustments of $3,444 and $3,499 for the three months ended September 30, 2016 and June 30, 2016, respectively. |
| (4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost. |
| (5) The unamortized debt issuance costs deducted from the carrying amount of the subordinated notes totaled approximately $220,000 for the three months ended September 30, 2016. |
| (6) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheets for the three months ended September 30, 2016 and June 30, 2016 reflect a decrease in long-term debt of $77,000 and $78,000, respectively. |
| Note: As of September 30, 2016 and June 30, 2016, loans on nonaccrual status totaled $8,536 and $11,767, respectively. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate. |
| March 31, 2016 | Three Months Ended December 31, 2015 | |||||||||||||||||
| AVG BALANCE | INTEREST | AVG YIELD/ RATE | AVG BALANCE | INTEREST | AVG YIELD/ RATE | |||||||||||||
| ASSETS | ||||||||||||||||||
| INTEREST EARNING ASSETS: | ||||||||||||||||||
| Loans (1) (2) | $ | 2,434,837 | $ | 28,793 | 4.76 | % | $ | 2,318,162 | $ | 25,865 | 4.43 | % | ||||||
| Loans Held For Sale | 3,581 | 32 | 3.59 | % | 2,740 | 30 | 4.34 | % | ||||||||||
| Securities: | ||||||||||||||||||
| Investment Securities (Taxable) (4) | 41,659 | 214 | 2.07 | % | 81,344 | 416 | 2.03 | % | ||||||||||
| Investment Securities (Tax-Exempt) (3) (4) | 635,766 | 8,494 | 5.37 | % | 637,993 | 8,645 | 5.38 | % | ||||||||||
| Mortgage-backed Securities (4) | 1,454,343 | 9,391 | 2.60 | % | 1,493,020 | 9,215 | 2.45 | % | ||||||||||
| Total Securities | 2,131,768 | 18,099 | 3.41 | % | 2,212,357 | 18,276 | 3.28 | % | ||||||||||
| FHLB stock and other investments, at cost | 55,116 | 217 | 1.58 | % | 53,643 | 75 | 0.55 | % | ||||||||||
| Interest Earning Deposits | 51,246 | 70 | 0.55 | % | 34,147 | 23 | 0.27 | % | ||||||||||
| Total Interest Earning Assets | 4,676,548 | 47,211 | 4.06 | % | 4,621,049 | 44,269 | 3.80 | % | ||||||||||
| NONINTEREST EARNING ASSETS: | ||||||||||||||||||
| Cash and Due From Banks | 55,732 | 53,267 | ||||||||||||||||
| Bank Premises and Equipment | 107,941 | 108,812 | ||||||||||||||||
| Other Assets | 262,081 | 258,837 | ||||||||||||||||
| Less: Allowance for Loan Losses | (20,088 | ) | (18,720 | ) | ||||||||||||||
| Total Assets | $ | 5,082,214 | $ | 5,023,245 | ||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||
| INTEREST BEARING LIABILITIES: | ||||||||||||||||||
| Savings Deposits | $ | 235,492 | 65 | 0.11 | % | $ | 232,561 | 61 | 0.10 | % | ||||||||
| Time Deposits | 915,316 | 1,723 | 0.76 | % | 833,141 | 1,477 | 0.70 | % | ||||||||||
| Interest Bearing Demand Deposits | 1,717,717 | 1,468 | 0.34 | % | 1,594,109 | 1,117 | 0.28 | % | ||||||||||
| Total Interest Bearing Deposits | 2,868,525 | 3,256 | 0.46 | % | 2,659,811 | 2,655 | 0.40 | % | ||||||||||
| Short-term Interest Bearing Liabilities | 413,985 | 696 | 0.68 | % | 630,998 | 600 | 0.38 | % | ||||||||||
| Long-term Interest Bearing Liabilities – FHLB Dallas | 566,825 | 2,039 | 1.45 | % | 490,396 | 1,638 | 1.33 | % | ||||||||||
| Long-term Debt (5) | 60,232 | 405 | 2.70 | % | 60,231 | 375 | 2.47 | % | ||||||||||
| Total Interest Bearing Liabilities | 3,909,567 | 6,396 | 0.66 | % | 3,841,436 | 5,268 | 0.54 | % | ||||||||||
| NONINTEREST BEARING LIABILITIES: | ||||||||||||||||||
| Demand Deposits | 672,865 | 686,574 | ||||||||||||||||
| Other Liabilities | 45,390 | 47,155 | ||||||||||||||||
| Total Liabilities | 4,627,822 | 4,575,165 | ||||||||||||||||
| SHAREHOLDERS’ EQUITY | 454,392 | 448,080 | ||||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 5,082,214 | $ | 5,023,245 | ||||||||||||||
| NET INTEREST INCOME | $ | 40,815 | $ | 39,001 | ||||||||||||||
| NET INTEREST MARGIN ON AVERAGE EARNING ASSETS | 3.51 | % | 3.35 | % | ||||||||||||||
| NET INTEREST SPREAD | 3.40 | % | 3.26 | % | ||||||||||||||
| (1) Interest on loans includes net fees on loans that are not material in amount. |
| (2) Interest income includes taxable-equivalent adjustments of $1,060 and $1,068 for the three months ended March 31, 2016 and December 31, 2015, respectively. |
| (3) Interest income includes taxable-equivalent adjustments of $3,139 and $3,237 for the three months ended March 31, 2016 and December 31, 2015, respectively. |
| (4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost. |
| (5) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheets for the three months ended March 31, 2016 and December 31, 2015 reflect a decrease in long-term debt of $79,000 and $80,000, respectively. |
| Note: As of March 31, 2016 and December 31, 2015, loans on nonaccrual status totaled $21,927 and $20,526, respectively. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate. |
| Three Months Ended September 30, 2015 | |||||||||
| AVG BALANCE | INTEREST | AVG YIELD/ RATE | |||||||
| ASSETS | |||||||||
| INTEREST EARNING ASSETS: | |||||||||
| Loans (1) (2) | $ | 2,200,241 | $ | 24,779 | 4.47 | % | |||
| Loans Held For Sale | 5,327 | 52 | 3.87 | % | |||||
| Securities: | |||||||||
| Investment Securities (Taxable) (4) | 86,105 | 475 | 2.19 | % | |||||
| Investment Securities (Tax-Exempt) (3) (4) | 638,767 | 8,750 | 5.43 | % | |||||
| Mortgage-backed Securities (4) | 1,441,129 | 8,318 | 2.29 | % | |||||
| Total Securities | 2,166,001 | 17,543 | 3.21 | % | |||||
| FHLB stock and other investments, at cost | 45,963 | 65 | 0.56 | % | |||||
| Interest Earning Deposits | 26,216 | 15 | 0.23 | % | |||||
| Total Interest Earning Assets | 4,443,748 | 42,454 | 3.79 | % | |||||
| NONINTEREST EARNING ASSETS: | |||||||||
| Cash and Due From Banks | 49,285 | ||||||||
| Bank Premises and Equipment | 110,028 | ||||||||
| Other Assets | 262,956 | ||||||||
| Less: Allowance for Loan Losses | (17,021 | ) | |||||||
| Total Assets | $ | 4,848,996 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
| INTEREST BEARING LIABILITIES: | |||||||||
| Savings Deposits | $ | 232,903 | 60 | 0.10 | % | ||||
| Time Deposits | 833,962 | 1,360 | 0.65 | % | |||||
| Interest Bearing Demand Deposits | 1,600,454 | 1,065 | 0.26 | % | |||||
| Total Interest Bearing Deposits | 2,667,319 | 2,485 | 0.37 | % | |||||
| Short-term Interest Bearing Liabilities | 398,905 | 354 | 0.35 | % | |||||
| Long-term Interest Bearing Liabilities – FHLB Dallas | 527,591 | 1,720 | 1.29 | % | |||||
| Long-term Debt (5) | 60,229 | 369 | 2.43 | % | |||||
| Total Interest Bearing Liabilities | 3,654,044 | 4,928 | 0.54 | % | |||||
| NONINTEREST BEARING LIABILITIES: | |||||||||
| Demand Deposits | 715,326 | ||||||||
| Other Liabilities | 41,606 | ||||||||
| Total Liabilities | 4,410,976 | ||||||||
| SHAREHOLDERS’ EQUITY | 438,020 | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | 4,848,996 | |||||||
| NET INTEREST INCOME | $ | 37,526 | |||||||
| NET INTEREST MARGIN ON AVERAGE EARNING ASSETS | 3.35 | % | |||||||
| NET INTEREST SPREAD | 3.25 | % | |||||||
| (1) Interest on loans includes net fees on loans that are not material in amount. |
| (2) Interest income includes taxable-equivalent adjustment of $1,044 for the three months ended September 30, 2015. |
| (3) Interest income includes taxable-equivalent adjustment of $3,199 for the three months ended September 30, 2015. |
| (4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost. |
| (5) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheet for the three months ended September 30, 2015 reflects a decrease in long-term debt of $82,000. |
| Note: As of September 30, 2015, loans on nonaccrual status totaled $20,988. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate. |
| AVERAGE BALANCES WITH AVERAGE YIELDS AND RATES (dollars in thousands) (unaudited) Nine Months Ended | ||||||||||||||||||
| September 30, 2016 | September 30, 2015 | |||||||||||||||||
| AVG BALANCE | INTEREST | AVG YIELD/ RATE | AVG BALANCE | INTEREST | AVG YIELD/ RATE | |||||||||||||
| ASSETS | ||||||||||||||||||
| INTEREST EARNING ASSETS: | ||||||||||||||||||
| Loans (1) (2) | $ | 2,432,652 | $ | 82,818 | 4.55 | % | $ | 2,192,804 | $ | 74,606 | 4.55 | % | ||||||
| Loans Held For Sale | 5,100 | 126 | 3.30 | % | 3,675 | 125 | 4.55 | % | ||||||||||
| Securities: | ||||||||||||||||||
| Investment Securities (Taxable) (4) | 41,708 | 572 | 1.83 | % | 74,169 | 1,171 | 2.11 | % | ||||||||||
| Investment Securities (Tax-Exempt) (3) (4) | 661,430 | 26,041 | 5.26 | % | 637,110 | 26,336 | 5.53 | % | ||||||||||
| Mortgage-backed Securities (4) | 1,465,923 | 28,156 | 2.57 | % | 1,411,553 | 24,446 | 2.32 | % | ||||||||||
| Total Securities | 2,169,061 | 54,769 | 3.37 | % | 2,122,832 | 51,953 | 3.27 | % | ||||||||||
| FHLB stock and other investments, at cost | 54,051 | 588 | 1.45 | % | 44,204 | 223 | 0.67 | % | ||||||||||
| Interest Earning Deposits | 55,378 | 220 | 0.53 | % | 41,348 | 78 | 0.25 | % | ||||||||||
| Total Interest Earning Assets | 4,716,242 | 138,521 | 3.92 | % | 4,404,863 | 126,985 | 3.85 | % | ||||||||||
| NONINTEREST EARNING ASSETS: | ||||||||||||||||||
| Cash and Due From Banks | 50,738 | 52,108 | ||||||||||||||||
| Bank Premises and Equipment | 107,699 | 111,341 | ||||||||||||||||
| Other Assets | 270,301 | 268,105 | ||||||||||||||||
| Less: Allowance for Loan Losses | (19,136 | ) | (15,914 | ) | ||||||||||||||
| Total Assets | $ | 5,125,844 | $ | 4,820,503 | ||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||
| INTEREST BEARING LIABILITIES: | ||||||||||||||||||
| Savings Deposits | $ | 242,852 | 204 | 0.11 | % | $ | 232,326 | 172 | 0.10 | % | ||||||||
| Time Deposits | 946,986 | 5,723 | 0.81 | % | 850,175 | 4,035 | 0.63 | % | ||||||||||
| Interest Bearing Demand Deposits | 1,693,135 | 4,448 | 0.35 | % | 1,666,718 | 3,300 | 0.26 | % | ||||||||||
| Total Interest Bearing Deposits | 2,882,973 | 10,375 | 0.48 | % | 2,749,219 | 7,507 | 0.37 | % | ||||||||||
| Short-term Interest Bearing Liabilities | 469,831 | 2,724 | 0.77 | % | 301,689 | 650 | 0.29 | % | ||||||||||
| Long-term Interest Bearing Liabilities – FHLB Dallas | 510,392 | 5,770 | 1.51 | % | 557,519 | 5,349 | 1.28 | % | ||||||||||
| Subordinated Notes (5) | 4,305 | 189 | 5.86 | % | — | — | — | % | ||||||||||
| Long-term Debt (6) | 60,233 | 1,251 | 2.77 | % | 60,228 | 1,085 | 2.41 | % | ||||||||||
| Total Interest Bearing Liabilities | 3,927,734 | 20,309 | 0.69 | % | 3,668,655 | 14,591 | 0.53 | % | ||||||||||
| NONINTEREST BEARING LIABILITIES: | ||||||||||||||||||
| Demand Deposits | 685,982 | 676,911 | ||||||||||||||||
| Other Liabilities | 48,120 | 39,764 | ||||||||||||||||
| Total Liabilities | 4,661,836 | 4,385,330 | ||||||||||||||||
| SHAREHOLDERS’ EQUITY | 464,008 | 435,173 | ||||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 5,125,844 | $ | 4,820,503 | ||||||||||||||
| NET INTEREST INCOME | $ | 118,212 | $ | 112,394 | ||||||||||||||
| NET INTEREST MARGIN ON AVERAGE EARNING ASSETS | 3.35 | % | 3.41 | % | ||||||||||||||
| NET INTEREST SPREAD | 3.23 | % | 3.32 | % | ||||||||||||||
| (1) Interest on loans includes net fees on loans that are not material in amount. |
| (2) Interest income includes taxable-equivalent adjustments of $3,206 and $3,141 for the nine months ended September 30, 2016 and 2015, respectively. |
| (3) Interest income includes taxable-equivalent adjustments of $10,082 and $9,276 for the nine months ended September 30, 2016 and 2015, respectively. |
| (4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost. |
| (5) The unamortized debt issuance costs deducted from the carrying amount of the subordinated notes totaled approximately $74,000 for the nine months ended September 30, 2016. |
| (6) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheets for the nine months ended September 30, 2016 and 2015 reflect a decrease in long-term debt of $78,000 and $83,000, respectively. |
| Note: As of September 30, 2016 and 2015, loans on nonaccrual status totaled $8,536 and $20,988, respectively. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate. |