SBSI 10-Q Doc_06.30.15
Table of Contents


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
OR
o
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: 0-12247
SOUTHSIDE BANCSHARES, INC.
(Exact name of registrant as specified in its charter)

TEXAS
 
75-1848732
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
1201 S. Beckham Avenue, Tyler, Texas
 
75701
(Address of principal executive offices)
 
(Zip Code)
903-531-7111
(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  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x    No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o
Accelerated filer x
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x

The number of shares of the issuer's common stock, par value $1.25, outstanding as of August 7, 2015 was 25,357,855 shares.


 



TABLE OF CONTENTS
 
PART I.  FINANCIAL INFORMATION
 
PART II.  OTHER INFORMATION
 
EXHIBIT 31.1 – CERTIFICATION PURSUANT TO SECTION 302
 
EXHIBIT 31.2 – CERTIFICATION PURSUANT TO SECTION 302
 
EXHIBIT 32 – CERTIFICATION PURSUANT TO SECTION 906
 


Table of Contents


PART I.   FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS
SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share amounts)
 
 
June 30,
2015
 
December 31,
2014
ASSETS
 
 
 
 
Cash and due from banks
 
$
50,406

 
$
64,001

Interest earning deposits
 
26,623

 
20,654

Total cash and cash equivalents
 
77,029

 
84,655

Investment securities:
 
 

 
 

Available for sale, at estimated fair value
 
371,019

 
306,706

Held to maturity, at carrying value (estimated fair value of $391,191 and $400,248, respectively)
 
387,212

 
388,823

Mortgage-backed securities:
 
 

 
 

Available for sale, at estimated fair value
 
1,094,802

 
1,142,002

Held to maturity, at carrying value (estimated fair value of $362,283 and $261,339, respectively)
 
356,669

 
253,496

FHLB stock, at cost
 
37,769

 
39,942

Other investments
 
5,350

 
3,929

Loans held for sale
 
7,431

 
2,899

Loans:
 
 

 
 

Loans
 
2,179,863

 
2,181,133

Less:  Allowance for loan losses
 
(16,822
)
 
(13,292
)
Net Loans
 
2,163,041

 
2,167,841

Premises and equipment, net
 
110,493

 
112,860

Goodwill
 
90,571

 
91,372

Other intangible assets, net
 
7,654

 
8,844

Interest receivable
 
22,666

 
22,436

Deferred tax asset
 
18,906

 
12,707

Unsettled trades to sell securities
 

 
57,202

Bank owned life insurance
 
93,673

 
92,384

Other assets
 
11,733

 
19,163

TOTAL ASSETS
 
$
4,856,018

 
$
4,807,261

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 

 
 

Deposits:
 
 

 
 

Noninterest bearing
 
$
715,966

 
$
661,014

Interest bearing
 
2,752,717

 
2,713,403

Total deposits
 
3,468,683

 
3,374,417

Short-term obligations:
 
 

 
 

Federal funds purchased and repurchase agreements
 
2,084

 
4,237

FHLB advances
 
282,699

 
297,368

Total short-term obligations
 
284,783

 
301,605

Long-term obligations:
 
 

 
 

FHLB advances
 
572,254

 
600,052

Long-term debt
 
60,311

 
60,311

Total long-term obligations
 
632,565

 
660,363

Unsettled trades to purchase securities
 
3,453

 
5,982

Other liabilities
 
34,860

 
39,651

TOTAL LIABILITIES
 
4,424,344

 
4,382,018

 
 
 
 
 
Off-Balance-Sheet Arrangements, Commitments and Contingencies (Note 12)
 


 


 
 
 
 
 
Shareholders' equity:
 
 

 
 

Common stock ($1.25 par, 40,000,000 shares authorized, 27,821,074 shares issued at June 30, 2015 and 26,578,127 shares issued at December 31, 2014)
 
34,776

 
33,223

Paid-in capital
 
422,392

 
389,886

Retained earnings
 
31,871

 
55,396

Treasury stock (2,469,638 shares at cost)
 
(37,692
)
 
(37,692
)
Accumulated other comprehensive loss
 
(19,673
)
 
(15,570
)
TOTAL SHAREHOLDERS' EQUITY
 
431,674

 
425,243

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
4,856,018

 
$
4,807,261

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

1

Table of Contents


SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Interest income
 
 
 
 
 
 
 
Loans
$
23,887

 
$
18,305

 
$
47,803

 
$
36,668

Investment securities – taxable
459

 
143

 
696

 
266

Investment securities – tax-exempt
5,644

 
6,021

 
11,509

 
11,979

Mortgage-backed securities
7,666

 
7,557

 
16,128

 
15,239

FHLB stock and other investments
65

 
38

 
158

 
108

Other interest earning assets
29

 
22

 
63

 
65

Total interest income
37,750

 
32,086

 
76,357

 
64,325

Interest expense
 

 
 

 
 

 
 

Deposits
2,493

 
1,984

 
5,022

 
4,100

Short-term obligations
154

 
56

 
296

 
127

Long-term obligations
2,198

 
2,190

 
4,343

 
4,350

Total interest expense
4,845

 
4,230

 
9,661

 
8,577

Net interest income
32,905

 
27,856

 
66,696

 
55,748

Provision for loan losses
268

 
2,650

 
4,116

 
6,783

Net interest income after provision for loan losses
32,637

 
25,206

 
62,580

 
48,965

Noninterest income
 

 
 

 
 

 
 

Deposit services
4,920

 
3,794

 
9,909

 
7,432

Net gain on sale of securities available for sale
105

 
498

 
2,581

 
509

Gain on sale of loans
822

 
81

 
1,199

 
161

Trust income
820

 
762

 
1,713

 
1,542

Bank owned life insurance income
653

 
307

 
1,322

 
621

Other
1,099

 
1,073

 
2,743

 
2,056

Total noninterest income
8,419

 
6,515

 
19,467

 
12,321

Noninterest expense
 

 
 

 
 

 
 

Salaries and employee benefits
16,869

 
13,092

 
35,068

 
26,194

Occupancy expense
2,593

 
1,786

 
6,052

 
3,540

Advertising, travel & entertainment
683

 
605

 
1,340

 
1,148

ATM and debit card expense
750

 
302

 
1,429

 
619

Professional fees
793

 
1,304

 
1,535

 
2,231

Software and data processing expense
1,237

 
486

 
2,268

 
987

Telephone and communications
603

 
320

 
1,072

 
598

FDIC insurance
629

 
434

 
1,267

 
882

Other
3,768

 
2,097

 
7,603

 
4,409

Total noninterest expense
27,925

 
20,426

 
57,634

 
40,608

 
 
 
 
 
 
 
 
Income before income tax expense
13,131

 
11,295

 
24,413

 
20,678

Income tax expense
1,967

 
838

 
3,870

 
1,997

Net income
$
11,164

 
$
10,457

 
$
20,543

 
$
18,681

Earnings per common share – basic
$
0.44

 
$
0.53

 
$
0.81

 
$
0.94

Earnings per common share – diluted
$
0.44

 
$
0.53

 
$
0.81

 
$
0.94

Dividends paid per common share
$
0.23

 
$
0.21

 
$
0.46

 
$
0.42


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

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Table of Contents


SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands)
 
Three Months Ended
 
Six Months Ended

June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
11,164

 
$
10,457

 
$
20,543

 
$
18,681

Other comprehensive income:
 

 
 

 
 

 
 

Net unrealized holding (losses) gains on available for sale securities during the period
(14,915
)
 
8,308

 
(5,395
)
 
18,319

Change in net unrealized loss on securities transferred to held to maturity
244

 
278

 
526

 
554

Reclassification adjustment for net gain on sale of available for sale securities, included in net income
(105
)
 
(498
)
 
(2,581
)
 
(509
)
Amortization of net actuarial loss, included in net periodic benefit cost
614

 
289

 
1,145

 
521

Amortization of prior service credit, included in net periodic benefit cost
(4
)
 
(4
)
 
(8
)
 
(7
)
Other comprehensive (loss) income, before tax
(14,166
)
 
8,373

 
(6,313
)
 
18,878

Income tax benefit (expense) related to other items of comprehensive income
4,959

 
(2,930
)
 
2,210

 
(6,607
)
Other comprehensive (loss) income, net of tax
(9,207
)
 
5,443

 
(4,103
)
 
12,271

Comprehensive income
$
1,957

 
$
15,900

 
$
16,440

 
$
30,952


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

3

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SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(in thousands, except share and per share data)
 
Common
Stock
 
Paid In
Capital
 
Retained
Earnings
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Shareholders'
Equity
Balance at December 31, 2013
$
25,483

 
$
214,091

 
$
78,673

 
$
(37,692
)
 
$
(21,037
)
 
$
259,518

Net income

 

 
18,681

 

 

 
18,681

Other comprehensive income

 

 

 

 
12,271

 
12,271

Issuance of common stock (18,265 shares)
23

 
500

 

 

 

 
523

Stock compensation expense

 
577

 

 

 

 
577

Tax benefits related to stock awards

 
38

 

 

 

 
38

Net issuance of common stock under employee stock plans
14

 
158

 
(103
)
 

 

 
69

Cash dividends paid on common stock ($0.42 per share)

 

 
(7,717
)
 

 

 
(7,717
)
Stock dividend declared
1,124

 
24,941

 
(26,065
)
 

 

 

Balance at June 30, 2014
$
26,644

 
$
240,305

 
$
63,469

 
$
(37,692
)
 
$
(8,766
)
 
$
283,960

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
$
33,223

 
$
389,886

 
$
55,396

 
$
(37,692
)
 
$
(15,570
)
 
$
425,243

Net income

 

 
20,543

 

 

 
20,543

Other comprehensive loss

 

 

 

 
(4,103
)
 
(4,103
)
Issuance of common stock (21,499 shares)
26

 
587

 

 

 

 
613

Stock compensation expense

 
567

 

 

 

 
567

Tax benefits related to stock awards

 
32

 

 

 

 
32

Net issuance of common stock under employee stock plans
15

 
157

 
(21
)
 

 

 
151

Cash dividends paid on common stock ($0.46 per share)

 

 
(11,372
)
 

 

 
(11,372
)
Stock dividend declared
1,512

 
31,163

 
(32,675
)
 

 

 

Balance at June 30, 2015
$
34,776

 
$
422,392

 
$
31,871

 
$
(37,692
)
 
$
(19,673
)
 
$
431,674


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

4

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SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
(in thousands)
 
Six Months Ended
 
June 30,
 
2015
 
2014
OPERATING ACTIVITIES:
 
 
 
Net income
$
20,543

 
$
18,681

Adjustments to reconcile net income to net cash provided by operations:
 

 
 

Depreciation
4,052

 
1,615

Amortization of premium
14,286

 
10,750

Accretion of discount and loan fees
(4,373
)
 
(1,971
)
Provision for loan losses
4,116

 
6,783

Stock compensation expense
567

 
577

Deferred tax benefit
(2,019
)
 
(1,361
)
Tax benefit related to stock awards
(32
)
 
(42
)
Net gain on sale of securities available for sale
(2,581
)
 
(509
)
Net loss (gain) on premises and equipment
137

 
(7
)
Net loss on other real estate owned
382

 
65

Net change in:
 

 
 

Interest receivable
(230
)
 
1,461

Other assets
2,070

 
(1,459
)
Interest payable
(52
)
 
(40
)
Other liabilities
(3,601
)
 
3,356

Loans originated for sale
(4,532
)
 
(604
)
Net cash provided by operating activities
28,733

 
37,295

 
 
 
 
INVESTING ACTIVITIES:
 

 
 

Securities held to maturity:
 

 
 

Purchases
(56,752
)
 

Maturities, calls and principal repayments
11,411

 
14,797

Securities available for sale:
 

 
 

Purchases
(528,964
)
 
(327,668
)
Sales
336,136

 
252,696

Maturities, calls and principal repayments
158,022

 
153,637

Proceeds from redemption of FHLB stock
5,692

 
8,938

Purchases of FHLB stock and other investments
(3,594
)
 
(384
)
Net loans originated
1,235

 
(49,047
)
Purchases of premises and equipment
(1,828
)
 
(2,878
)
Proceeds from sales of premises and equipment
6

 
8

Proceeds from sales of other real estate owned
634

 
275

Proceeds from sales of repossessed assets
1,619

 
3,268

Net cash (used in) provided by investing activities
(76,383
)
 
53,642

 
 
 
 
(continued)
 
 
 

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SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED) (continued)
(in thousands)
 
Six Months Ended
 
June 30,
 
2015
 
2014
FINANCING ACTIVITIES:
 
 
 
Net increase in demand and savings accounts
80,540

 
157,322

Net increase (decrease) in certificates of deposit
14,368

 
(83,711
)
Net (decrease) increase in federal funds purchased and repurchase agreements
(2,153
)
 
1,198

Proceeds from FHLB advances
8,447,303

 
6,267,018

Repayment of FHLB advances
(8,489,458
)
 
(6,325,689
)
Tax benefit related to stock awards
32

 
42

Net issuance of common stock under employee stock plan
151

 
69

Proceeds from the issuance of common stock
613

 
523

Cash dividends paid
(11,372
)
 
(7,717
)
Net cash provided by financing activities
40,024

 
9,055

 
 
 
 
Net (decrease) increase in cash and cash equivalents
(7,626
)
 
99,992

Cash and cash equivalents at beginning of period
84,655

 
54,431

Cash and cash equivalents at end of period
$
77,029

 
$
154,423

 
 
 
 
SUPPLEMENTAL DISCLOSURES FOR CASH FLOW INFORMATION:
 

 
 


 
 
 
Interest paid
$
9,713

 
$
8,617

Income taxes paid
$
2,000

 
$
3,550

 
 
 
 
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
 

 
 


 
 
 
Loans transferred to other repossessed assets and real estate through foreclosure
$
1,073

 
$
2,807

Transfer of available for sale securities to held to maturity securities
$
57,724

 
$

Adjustment to pension liability
$
(1,137
)
 
$
(514
)
5% stock dividend
$
32,675

 
$
26,065

Unsettled trades to purchase securities
$
(3,453
)
 
$
(10,269
)
Unsettled trades to sell securities
$

 
$
19,183


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


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Table of Contents


SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    Basis of Presentation
In this report, the words “the Company,” “we,” “us,” and “our” refer to the combined entities of Southside Bancshares, Inc. and its subsidiaries.  The words “Southside” and “Southside Bancshares” refer to Southside Bancshares, Inc.  The words “Southside Bank” and “the Bank” refer to Southside Bank.  “OABC” and “Omni” refer to OmniAmerican Bancorp, Inc.  “SFG” refers to SFG Finance, LLC (formerly Southside Financial Group, LLC), which was a wholly-owned subsidiary of the Bank and was dissolved in April 2015.
The consolidated balance sheet as of June 30, 2015, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows and notes to the financial statements for the three- and six-month periods ended June 30, 2015 and 2014 are unaudited; in the opinion of management, all adjustments necessary for a fair statement of such financial statements have been included.  Such adjustments consisted only of normal recurring items.  All significant intercompany accounts and transactions are eliminated in consolidation.  The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the use of management’s estimates.  These estimates are subjective in nature and involve matters of judgment.  Actual amounts could differ from these estimates.
Certain prior period amounts have been reclassified to conform to current year presentation and had no impact on net income, equity or cash flows.
Interim results are not necessarily indicative of results for a full year.  These financial statements should be read in conjunction with the financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2014.  For a description of our significant accounting and reporting policies, refer to "Note 1- Summary of Significant Accounting and Reporting Policies" in our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2014.
On April 13, 2015, our board of directors declared a 5% stock dividend to common stock shareholders of record as of April 27, 2015, which was paid on May 14, 2015. All share data has been adjusted to give retroactive recognition to stock dividends.  
Accounting Pronouncements
In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-04, “Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” This update clarifies that an in-substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of the residential real estate property collateralizing a consumer mortgage loan, upon either: (i) the creditor obtaining legal title to the property upon completion of the foreclosure; or (ii) the borrower conveying all interest in the property to the creditor to satisfy the loan through completion of a deed-in-lieu of foreclosure or through a similar legal agreement. ASU 2014-04 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2014. The adoption of this guidance did not have a significant impact on our consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).”  This update states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  This update affects entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards.  ASU 2014-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016.  Early adoption is not permitted.  We are reviewing the potential impact the adoption of this guidance will have on our consolidated financial statements.
In June 2014, the FASB issued ASU 2014-11, “Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.”  This update aligns the accounting for repurchase-to-maturity

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transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements by accounting for these transactions as secured borrowings.  This update also requires a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return of the transferred financial assets throughout the term of the transaction.  ASU 2014-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2014. The adoption of this guidance did not have a significant impact on our consolidated financial statements.
In August 2014, the FASB issued ASU 2014-14, “Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure.”  This update affects creditors that hold government-guaranteed mortgage loans, including those guaranteed by the Federal Housing Administration (FHA) of the U.S.  Department of Housing and Urban Development (HUD), and the U.S. Department of Veterans Affairs (VA).  The update requires that, upon foreclosure, a guaranteed mortgage loan be derecognized and a separate other receivable be recognized when specific criteria are met.  ASU 2014-14 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2014. The adoption of this guidance did not have a significant impact on our consolidated financial statements.
In April 2015, the FASB issued ASU 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) – Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” ASU 2015-05 affects the accounting for fees paid by a customer in cloud computing arrangements such as (i) software as a service, (ii) platform as a service (iii) infrastructure as a service and (iv) other similar hosting arrangements. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on our consolidated financial statements.
In May 2015, the FASB issued ASU 2015-07, "Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share." ASU 2015-07 eliminates the current requirement to categorize within the fair value hierarchy investments whose fair values are measured at net asset value ("NAV"). Instead, entities will be required to disclose the fair values of such investments so that financial statement users can reconcile amounts reported in the fair value hierarchy table and the amounts reported on the balance sheet. ASU 2015-07 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on our consolidated financial statements.

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2.    Acquisition
On December 17, 2014, we acquired 100% of the outstanding stock of OmniAmerican Bancorp, Inc. and its wholly-owned subsidiary OmniAmerican Bank (collectively, "Omni") headquartered in Fort Worth, Texas. Omni operated 14 banking offices in Fort Worth, Texas and surrounding areas. We acquired Omni to further expand our presence in the growing Fort Worth market. The operations of Omni were merged into ours as of the date of the acquisition.
The Omni acquisition was accounted for using the purchase method of accounting and accordingly, purchased assets, including identifiable intangible assets, and assumed liabilities were recorded at their respective acquisition date fair values.  The purchase price allocation remains preliminary and is subject to final determination and valuation of the fair value of assets acquired and liabilities assumed. Subsequent to filing our Annual Report on Form 10-K for the year ended December 31, 2014, we continued to evaluate the assets and liabilities assumed.  This evaluation resulted in adjustments to goodwill, consisting primarily of a $1.4 million adjustment to the fair value of Visa Class B stock included in other investments on the consolidated balance sheets, not previously recorded. The impact of the adjustments to goodwill, net of deferred tax, is reflected below. For more information concerning the fair value of the assets acquired and liabilities assumed in relation to the acquisition of Omni, see "Note 2 - Acquisition" in our Annual Report on Form 10-K for the year ended December 31, 2014.
The following table reflects the changes in the carrying amount of our goodwill for the six months ended June 30, 2015 (in thousands):
 
 
Goodwill
 
 
 
Balance as of December 31, 2014
 
$
91,372

Less: measurement period adjustments
 
(801
)
Balance as of June 30, 2015
 
$
90,571

In connection with the integration of our policies and operations, certain loans acquired have been reclassified as of December 31, 2014 to be consistent with our current classification methodology, see “Note 6 - Loans and Allowance for Probable Loan Losses” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Composition of Loans” in this Quarterly Report on Form 10-Q.
3.     Earnings Per Share
Earnings per share on a basic and diluted basis have been adjusted to give retroactive recognition to stock dividends and is calculated as follows (in thousands, except per share amounts):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Basic and Diluted Earnings:
 
 
 
 
 
 
 
Net income
$
11,164

 
$
10,457

 
$
20,543

 
$
18,681

Basic weighted-average shares outstanding
25,337

 
19,776

 
25,330

 
19,769

Add:   Stock awards
88

 
97

 
84

 
93

Diluted weighted-average shares outstanding
25,425

 
19,873

 
25,414

 
19,862

 
 

 
 

 
 

 
 

Basic Earnings Per Share:
$
0.44

 
$
0.53

 
$
0.81

 
$
0.94

 
 

 
 

 
 

 
 

Diluted Earnings Per Share:
$
0.44

 
$
0.53

 
$
0.81

 
$
0.94

For both the three- and six-month periods ended June 30, 2015, there were approximately 12,000 anti-dilutive shares. For the three- and six-month periods ended June 30, 2014, there were approximately 18,000 and 22,000 anti-dilutive shares, respectively.

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4.     Accumulated Other Comprehensive (Loss) Income

The changes in accumulated other comprehensive (loss) income by component are as follows (in thousands):

 
Three Months Ended June 30, 2015
 
Unrealized Gains (Losses) on Securities
Pension Plans
 
 
 
Other
 
Net Prior
 Service
 (Cost)
 Credit
 
Net Gain (Loss)
 
Total
Beginning balance, net of tax
$
11,000

 
$
4

 
$
(21,470
)
 
$
(10,466
)
Other comprehensive loss before reclassifications
(14,671
)
 

 

 
(14,671
)
Reclassified to income
(105
)
 
(4
)
 
614

 
505

Income tax benefit (expense)
5,172

 
2

 
(215
)
 
4,959

Net current-period other comprehensive (loss) income, net of tax
(9,604
)
 
(2
)
 
399

 
(9,207
)
Ending balance, net of tax
$
1,396

 
$
2

 
$
(21,071
)
 
$
(19,673
)
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2015
 
Unrealized Gains (Losses) on Securities
Pension Plans
 
 
 
Other
 
Net Prior
 Service
 (Cost)
 Credit
 
Net Gain (Loss)
 
Total
Beginning balance, net of tax
$
6,238

 
$
7

 
$
(21,815
)
 
$
(15,570
)
Other comprehensive loss before reclassifications
(4,869
)
 

 

 
(4,869
)
Reclassified to income
(2,581
)
 
(8
)
 
1,145

 
(1,444
)
Income tax benefit (expense)
2,608

 
3

 
(401
)
 
2,210

Net current-period other comprehensive (loss) income, net of tax
(4,842
)
 
(5
)
 
744

 
(4,103
)
Ending balance, net of tax
$
1,396

 
$
2

 
$
(21,071
)
 
$
(19,673
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



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Three Months Ended June 30, 2014
 
Unrealized Gains (Losses) on Securities
Pension Plans
 
 
 
Other
 
Net Prior
 Service
 (Cost)
 Credit
 
Net Gain (Loss)
 
Total
Beginning balance, net of tax
$
(1,977
)
 
$
(14
)
 
$
(12,218
)
 
$
(14,209
)
Other comprehensive income before reclassifications
8,586

 

 

 
8,586

Reclassified to income
(498
)
 
(4
)
 
289

 
(213
)
Income tax (expense) benefit
(2,830
)
 
1

 
(101
)
 
(2,930
)
Net current-period other comprehensive income (loss), net of tax
5,258

 
(3
)
 
188

 
5,443

Ending balance, net of tax
$
3,281

 
$
(17
)
 
$
(12,030
)
 
$
(8,766
)
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2014
 
Unrealized Gains (Losses) on Securities
Pension Plans
 
 
 
Other
 
Net Prior
 Service
 (Cost)
 Credit
 
Net Gain (Loss)
 
Total
Beginning balance, net of tax
$
(8,656
)
 
$
(12
)
 
$
(12,369
)
 
$
(21,037
)
Other comprehensive income before reclassifications
18,873

 

 

 
18,873

Reclassified to income
(509
)
 
(7
)
 
521

 
5

Income tax (expense) benefit
(6,427
)
 
2

 
(182
)
 
(6,607
)
Net current-period other comprehensive income (loss), net of tax
11,937

 
(5
)
 
339

 
12,271

Ending balance, net of tax
$
3,281

 
$
(17
)
 
$
(12,030
)
 
$
(8,766
)

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The reclassifications out of accumulated other comprehensive loss into net income are presented below (in thousands):
 
Three Months Ended
June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Unrealized gains and losses on available for sale securities:
 
 
 
 
 
 
 
Realized net gain on sale of securities (1)
$
105

 
$
498

 
$
2,581

 
$
509

Tax expense
(36
)
 
(174
)
 
(903
)
 
(178
)
Net of tax
69

 
324

 
1,678

 
331

 
 
 
 
 
 
 
 
Amortization of pension plan:
 
 
 
 
 
 
 
Net actuarial loss (2)
$
(614
)
 
$
(289
)
 
$
(1,145
)
 
$
(521
)
Prior service credit (2)
4

 
4

 
8

 
7

Total before tax
(610
)
 
(285
)
 
(1,137
)
 
(514
)
Tax benefit
213

 
100

 
398

 
180

Net of tax
(397
)
 
(185
)
 
(739
)
 
(334
)
Total reclassifications for the period, net of tax
$
(328
)
 
$
139

 
$
939

 
$
(3
)

(1) Listed as net gain on sale of securities available for sale on the consolidated statements of income.
(2) These accumulated other comprehensive income components are included in the computation of net periodic pension cost presented in “Note 8 - Employee Benefit Plans.”

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5.     Securities

The amortized cost, carrying value, and estimated fair value of investment and mortgage-backed securities as of June 30, 2015 and December 31, 2014 are reflected in the tables below (in thousands):
 
 
 
June 30, 2015
 
 
 
 
Recognized in OCI
 
 
 
Not recognized in OCI
 
 

 
Amortized
 
Gross
Unrealized
 
Gross Unrealized
 
Carrying
 
Gross
Unrealized
 
Gross Unrealized
 
Estimated
AVAILABLE FOR SALE
 
Cost
 
Gains
 
Losses
 
Value
 
Gains
 
Losses
 
Fair Value
Investment Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 

U.S. Treasury
 
$
101,239

 
$
198

 
$
914

 
$
100,523

 
$

 
$

 
$
100,523

U.S. Government Agency Debentures
 
4,845

 
1

 

 
4,846

 

 

 
4,846

State and Political Subdivisions
 
243,446

 
5,156

 
2,182

 
246,420

 

 

 
246,420

Other Stocks and Bonds
 
13,092

 
111

 

 
13,203

 

 

 
13,203

Other Equity Securities
 
6,058

 

 
31

 
6,027

 

 

 
6,027

Mortgage-backed Securities: (1)
 
 

 
 

 
 

 
 
 
 
 
 
 
 
Residential
 
713,576

 
13,622

 
872

 
726,326

 

 

 
726,326

Commercial

372,155

 
874

 
4,553

 
368,476

 

 

 
368,476

Total
 
$
1,454,411

 
$
19,962

 
$
8,552

 
$
1,465,821

 
$

 
$

 
$
1,465,821

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and Political Subdivisions
 
$
391,784

 
$
5,193

 
$
9,765

 
$
387,212

 
$
6,613

 
$
2,634

 
$
391,191

Mortgage-backed Securities: (1)
 
 

 
 

 
 

 
 
 
 
 
 
 
 
Residential
 
41,215

 

 
61

 
41,154

 
2,602

 

 
43,756

Commercial
 
320,144

 
1,315

 
5,944

 
315,515

 
4,989

 
1,977

 
318,527

Total
 
$
753,143

 
$
6,508

 
$
15,770

 
$
743,881

 
$
14,204

 
$
4,611

 
$
753,474




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December 31, 2014
 
 
 
 
Recognized in OCI
 
 
 
Not recognized in OCI
 
 
 
 
Amortized
 
Gross
Unrealized
 
Gross Unrealized
 
Carrying
 
Gross
Unrealized
 
Gross Unrealized
 
Estimated
AVAILABLE FOR SALE
 
Cost
 
Gains
 
Losses
 
Value
 
Gains
 
Losses
 
Fair Value
Investment Securities:
 
 
 
 
 
 
 
 

 
 
 
 
 
U.S. Treasury
 
$
14,883

 
$
30

 
$
7

 
$
14,906

 
$

 
$

 
$
14,906

U.S. Government Agency Debentures
 
4,835

 

 
7

 
4,828



 

 
4,828

State and Political Subdivisions
 
260,535

 
8,055

 
906

 
267,684



 

 
267,684

Other Stocks and Bonds
 
13,086

 
153

 


13,239



 

 
13,239

Other Equity Securities
 
6,061

 

 
12

 
6,049

 

 

 
6,049

Mortgage-backed Securities:(1)
 
 
 
 
 
 

 
 

 
 
 
 
 
Residential
 
952,481

 
12,624

 
807


964,298



 

 
964,298

Commercial

176,112


1,743


151


177,704



 

 
177,704

Total
 
$
1,427,993

 
$
22,605

 
$
1,890

 
$
1,448,708

 
$

 
$

 
$
1,448,708

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and Political Subdivisions
 
$
393,525

 
$
5,168

 
$
9,870

 
$
388,823

 
$
12,181

 
$
756

 
$
400,248

Mortgage-backed Securities:(1)
 
 

 
 

 
 

 
 
 
 
 
 
 
 

Residential
 
52,287

 

 
70

 
52,217

 
2,871

 

 
55,088

Commercial
 
207,624

 

 
6,345

 
201,279

 
5,461

 
489

 
206,251

Total
 
$
653,436

 
$
5,168

 
$
16,285

 
$
642,319

 
$
20,513

 
$
1,245

 
$
661,587


(1) All mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

From time to time, the Company may transfer securities from available for sale (“AFS”) to held to maturity (“HTM”) due to overall balance sheet strategies. Our management has the current intent and ability to hold the transferred securities until maturity. Any net unrealized gain or loss on the transferred securities included in accumulated other comprehensive income at the time of transfer will be amortized over the remaining life of the underlying security as an adjustment of the yield on those securities. AFS securities transferred with losses included in accumulated other comprehensive income continue to be included in management’s assessment for other-than-temporary impairment for each individual security.

During the second quarter of 2015, the Company transferred commercial mortgage-backed securities with a fair value of $57.7 million from AFS to HTM. The unrealized gain on the securities transferred from AFS to HTM was $1.3 million ($864,000, net of tax) at the date of transfer based on the fair value of the securities on the transfer date.

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The following table represents the unrealized loss on securities as of June 30, 2015 and December 31, 2014 (in thousands):
 
As of June 30, 2015
 
Less Than 12 Months
 
More Than 12 Months
 
Total
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
Investment Securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury
$
71,085

 
$
914

 
$

 
$

 
$
71,085

 
$
914

State and Political Subdivisions
93,099

 
1,178

 
26,796

 
1,004

 
119,895

 
2,182

   Other Equity Securities
6,027

 
31

 

 

 
6,027

 
31

Mortgage-backed Securities:
 
 
 
 
 
 
 
 
 
 
 
Residential
139,161

 
849

 
8,329

 
23

 
147,490

 
872

Commercial
265,182

 
4,553

 

 

 
265,182

 
4,553

Total
$
574,554

 
$
7,525

 
$
35,125

 
$
1,027

 
$
609,679

 
$
8,552

HELD TO MATURITY
 

 
 

 
 

 
 

 
 

 
 

Investment Securities:
 
 
 
 
 
 
 
 
 
 
 
State and Political Subdivisions
$
119,415

 
$
986

 
$
56,247

 
$
1,648

 
$
175,662

 
$
2,634

Mortgage-backed Securities:
 
 
 
 
 
 
 
 
 
 
 
Commercial
137,569

 
1,885

 
6,516

 
92

 
144,085

 
1,977

Total
$
256,984

 
$
2,871

 
$
62,763

 
$
1,740

 
$
319,747

 
$
4,611

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2014
 
Less Than 12 Months
 
More Than 12 Months
 
Total
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
AVAILABLE FOR SALE
 

 
 

 
 

 
 

 
 

 
 

Investment Securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury
$
4,968

 
$
7

 
$

 
$

 
$
4,968

 
$
7

U.S. Government Agency Debentures
4,828

 
7

 

 

 
4,828

 
7

State and Political Subdivisions
28,155

 
90

 
44,269

 
816

 
72,424

 
906

   Other Equity Securities
6,049

 
12

 

 

 
6,049

 
12

Mortgage-backed Securities:
 
 
 
 
 
 
 
 
 
 
 
Residential
347,777

 
573

 
27,632

 
234

 
375,409

 
807

Commercial
21,103

 
54

 
10,116

 
97

 
31,219

 
151

Total
$
412,880

 
$
743

 
$
82,017

 
$
1,147

 
$
494,897

 
$
1,890

HELD TO MATURITY
 

 
 

 
 

 
 

 
 

 
 

Investment Securities:
 
 
 
 
 
 
 
 
 
 
 
State and Political Subdivisions
$
7,843

 
$
31

 
$
64,946

 
$
725

 
$
72,789

 
$
756

Mortgage-backed Securities:
 
 
 
 
 
 
 
 
 
 
 
Commercial

 

 
44,144

 
489

 
44,144

 
489

Total
$
7,843

 
$
31

 
$
109,090

 
$
1,214

 
$
116,933

 
$
1,245


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We review those securities in an unrealized loss position for significant differences between fair value and the cost basis to evaluate if a classification of other-than-temporary impairment is warranted. In estimating other-than-temporary impairment losses, management considers, among other things, the length of time and the extent to which the fair value has been less than cost and the financial condition and near-term prospects of the issuer.  The Company considers an other-than-temporary impairment to have occurred when there is an adverse change in expected cash flows.  When it is determined that a decline in fair value of HTM and AFS securities is other-than-temporary, the carrying value of the security is reduced to its estimated fair value, with a corresponding charge to earnings for the credit portion and the noncredit portion to other comprehensive income. Based upon the length of time and the extent to which fair value is less than cost, we believe the securities with an unrealized loss do not have other-than-temporary impairment at June 30, 2015.
The majority of the unrealized loss positions are comprised of highly rated municipal securities and U.S. Agency mortgage- backed securities (“MBS”) where the unrealized loss is a direct result of the change in interest rates and spreads. For those securities in an unrealized loss position, we do not currently intend to sell the securities and it is not more likely than not that we will be required to sell the security before the anticipated recovery of its amortized cost basis. To the best of management’s knowledge and based on our consideration of the qualitative factors associated with each security, there were no securities in our investment and MBS portfolio with an other-than-temporary impairment at June 30, 2015.

Interest income recognized on securities for the periods presented (in thousands):

 
Three Months Ended June 30,
 
2015
 
2014
U.S. Treasury
$
345

 
$
41

U.S. Government Agency Debentures
32

 
41

State and Political Subdivisions
5,645

 
6,031

Other Stocks and Bonds
52

 
51

Other Equity Securities
29

 

Mortgage-backed Securities
7,666

 
7,557

Total interest income on securities
$
13,769

 
$
13,721

 
Six Months Ended June 30,
 
2015
 
2014
U.S. Treasury
$
461

 
$
41

U.S. Government Agency Debentures
64

 
100

State and Political Subdivisions
11,515

 
12,001

Other Stocks and Bonds
104

 
103

Other Equity Securities
61

 

Mortgage-backed Securities
16,128

 
15,239

Total interest income on securities
$
28,333

 
$
27,484


Of the approximately $2.6 million in net securities gains from the AFS portfolio for the six months ended June 30, 2015, there were $2.7 million in realized gains and $120,000 in realized losses.  Of the $509,000 in net securities gains from the AFS portfolio for the six months ended June 30, 2014, there were $4.6 million in realized gains and $4.1 million in realized losses. There were no sales from the HTM portfolio during the six months ended June 30, 2015 or 2014. We calculate realized gains and losses on sales o