SHAREHOLDERS' EQUITY AND EARNINGS PER COMMON SHARE

12 Months Ended

Dec. 31, 2019

Stockholders' Equity Note [Abstract]

SHAREHOLDERS' EQUITY AND EARNINGS PER COMMON SHARE

SHAREHOLDERS’ EQUITY AND EARNINGS PER COMMON SHARE

Minimum Regulatory Capital Requirements

The Company and Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if imposed, could have a direct material impact on the Company’s Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital to average assets (as defined). As of year-end 2019 and 2018, the Bank and the Company met the capital adequacy requirements. Regulators may set higher expected capital requirements in some cases based on their examinations.

Effective January 1, 2015, the Company and the Bank became subject to the Basel III rule that requires the Company and the Bank to assess their Common equity tier 1 capital to risk weighted assets and the Company and the Bank each exceed the minimum to be well capitalized. In addition, the final capital rules added mechanism for the maintenance of a conservation buffer, composed of Common equity tier 1 capital, of 2.5% of risk-weighted assets, to be phased in over three years and applied to the Common equity tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio and the Total risk-based capital ratio. Accordingly, banking organizations, on a fully phased in basis no later than January 1, 2019, must maintain a minimum Common equity tier 1 risk-based capital ratio of 7.0%, a minimum Tier 1 risk-based capital ratio of 8.5%, and a minimum Total risk-based capital ratio of 10.5%. The required minimum conservation buffer began to be phased in incrementally, starting at 0.625% on January 1, 2016, increased to 1.25% on January 1, 2017, increased to 1.875% on January 1, 2018 and increased to 2.5% on January 1, 2019. The final capital rules impose restrictions on capital distributions and certain discretionary cash bonus payments if the minimum capital conservation buffer is not met.

At December 31, 2019, the capital levels of both the Company and the Bank exceeded all regulatory capital requirements and their regulatory capital ratios were above the minimum levels. The capital levels of both the Company and the Bank at December 31, 2018 also exceeded the minimum capital requirements including the currently applicable capital conservation buffer of 1.875%.

As of year-end 2019 and 2018, the Bank met the conditions to be classified as “well capitalized” under the relevant regulatory framework. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following tables.

The Company and Bank’s actual and required capital amounts were as follows:



					Minimum Capital Requirement				Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
	Actual				Minimum Capital Requirement
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2019
Company (Consolidated)
Total capital to risk-weighted assets	$	1,321,910	13.73	%	$	770,294	8.00	%	N/A		N/A
Common Equity Tier 1 Capital to risk weighted assets	1,161,800		12.07		433,290		4.50		N/A		N/A
Tier 1 capital to risk-weighted assets	1,183,932		12.30		577,720		6.00		N/A		N/A
Tier 1 capital to average assets	1,183,932		9.33		385,147		4.00		N/A		N/A
Bank
Total capital to risk-weighted assets	$	1,233,278	12.82	%	$	769,327	8.00	%	$	961,659	10.00	%
Common Equity Tier 1 Capital to risk weighted assets	1,169,535		12.16		432,747		4.50		625,079		6.50
Tier 1 capital to risk-weighted assets	1,169,535		12.16		576,996		6.00		769,327		8.00
Tier 1 capital to average assets	1,169,535		9.14		384,664		4.00		480,830		5.00
December 31, 2018
Company (Consolidated)
Total capital to risk-weighted assets	$	1,172,120	12.99	%	$	721,605	8.00	%	N/A		N/A
Common Equity Tier 1 Capital to risk weighted assets	1,029,724		11.42		405,903		4.50		N/A		N/A
Tier 1 capital to risk-weighted assets	1,043,898		11.57		541,203		6.00		N/A		N/A
Tier 1 capital to average assets	1,043,898		9.04		360,802		4.00		N/A		N/A
Bank
Total capital to risk-weighted assets	$	1,100,783	12.21	%	$	721,185	8.00	%	$	901,481	10.00	%
Common Equity Tier 1 Capital to risk weighted assets	1,043,401		11.57		405,667		4.50		585,963		6.50
Tier 1 capital to risk-weighted assets	1,043,401		11.57		540,889		6.00		721,185		8.00
Tier 1 capital to average assets	1,043,401		9.04		360,593		4.00		450,741		5.00

Common stock

The Bank is subject to dividend restrictions imposed by various regulators, including a limitation on the total of all dividends that the Bank may pay to the Company in any calendar year. The total of all dividends shall not exceed the Bank’s net income for the current year (as defined by statute), plus the Bank’s net income retained for the two previous years, without regulatory approval. Dividends from the Bank are an important source of funds to the Company to make dividend payments on its common and preferred stock, to make payments on its borrowings, and for its other cash needs. The ability of the Company and the Bank to pay dividends is dependent on regulatory policies and regulatory capital requirements. The ability to pay such dividends in the future may be adversely affected by new legislation or regulations, or by changes in regulatory policies relating to capital, safety and soundness, and other regulatory concerns.

The payment of dividends by the Company is subject to Delaware law, which generally limits dividends to an amount equal to an excess of the net assets of a company (the amount by which total assets exceed total liabilities) over statutory capital, or if there is no excess, to the Company’s net profits for the current and/or immediately preceding fiscal year.

Preferred stock

The Company previously issued Series B Non-Voting Preferred Stock. Each preferred share is convertible into two shares of the Company's common stock under specified conditions. The shares are considered participating, but do not maintain preferential treatment over common shares. Proportional dividends on the preferred shares are not payable unless also declared for common shares. As of year-end 2019, 522 thousand preferred shares were issued and outstanding.

Accumulated other comprehensive income

Year-end components of accumulated other comprehensive (loss)/income are as follows:



(In thousands)	2019			2018
Other accumulated comprehensive income/(loss), before tax:
Net unrealized holding gain/(loss) on AFS securities	$	19,263		$	(15,267	)
Net unrealized holding (loss) on pension plans	(3,023		)	(2,753		)

Income taxes related to items of accumulated other comprehensive (loss)/income:
Net unrealized holding (gain)/loss on AFS securities	(5,059		)	3,814
Net unrealized holding loss on pension plans	812			736
Accumulated other comprehensive income/(loss)	$	11,993		$	(13,470	)

The following table presents the components of other comprehensive (loss)/income for the years ended December 31, 2019, 2018, and 2017:



(In thousands)	Before Tax			Tax Effect			Net of Tax
Year Ended December 31, 2019
Net unrealized holding gain on AFS securities:
Net unrealized gain arising during the period	$	34,591		$	(8,890	)	$	25,701
Less: reclassification adjustment for gains realized in net income	61			(17		)	44
Net unrealized holding gain on AFS securities	34,530			(8,873		)	25,657

Net unrealized holding (loss) on pension plans
Net unrealized (loss) arising during the period	(270		)	76			(194		)
Less: reclassification adjustment for (losses) realized in net income	—			—			—
Net unrealized holding (loss) on pension plans	(270		)	76			(194		)
Other comprehensive gain	$	34,260		$	(8,797	)	$	25,463



(In thousands)	Before Tax			Tax Effect			Net of Tax
Year Ended December 31, 2018
Net unrealized holding (loss) on AFS securities:
Net unrealized (loss) arising during the period	$	(16,917	)	$	4,419		$	(12,498	)
Less: reclassification adjustment for gains realized in net income	6			(2		)	4
Net unrealized holding (loss) on AFS securities	(16,923		)	4,421			(12,502		)

Net unrealized holding (loss) on pension plans
Net unrealized gain arising during the period	135			(54		)	81
Less: reclassification adjustment for (losses) realized in net income	(201		)	54			(147		)
Net unrealized holding gain on pension plans	336			(108		)	228
Other comprehensive (loss)	$	(16,587	)	$	4,313		$	(12,274	)
Less: reclassification related to adoption of ASU 2016-01	8,379			(2,126		)	6,253
Less: reclassification related to adoption of ASU 2018-02	—			(896		)	(896		)
Total change to accumulated other comprehensive (loss)	$	(24,966	)	$	7,335		$	(17,631	)



(In thousands)	Before Tax			Tax Effect			Net of Tax
Year Ended December 31, 2017
Net unrealized holding gain on AFS securities:
Net unrealized (loss) arising during the period	$	(2,544	)	$	1,075		$	(1,469	)
Less: reclassification adjustment for gains realized in net income	12,598			(4,535		)	8,063
Net unrealized holding gain on AFS securities	(15,142		)	5,610			(9,532		)

Net (loss) on cash flow hedging derivatives:
Net unrealized (loss) arising during the period	(449		)	180			(269		)
Less: reclassification adjustment for (losses) realized in net income	(7,022		)	2,769			(4,253		)
Net gain on cash flow hedging derivatives	6,573			(2,589		)	3,984

Net unrealized holding (loss) on pension plans
Net unrealized (loss) arising during the period	(311		)	124			(187		)
Less: reclassification adjustment for (losses) realized in net income	(217		)	87			(130		)
Net unrealized holding (losses) on pension plans	(94		)	37			(57		)
Other comprehensive (loss)	$	(8,663	)	$	3,058		$	(5,605	)

The following table presents the changes in each component of accumulated other comprehensive (loss)/income, for the years ended December 31, 2019, 2018, and 2017:



(in thousands)	Net unrealized holding gain (loss) on AFS Securities			Net loss on effective cash flow hedging derivatives			Net unrealized holding gain (loss) on pension plans			Total
Year Ended December 31, 2019
Balance at Beginning of Year	$	(11,453	)	$	—		$	(2,017	)	$	(13,470	)
Other comprehensive gain/(loss) before reclassifications	25,701			—			(194		)	25,507
Amounts reclassified from accumulated other comprehensive income	44			—			—			44
Total other comprehensive (loss)/income	25,657			—			(194		)	25,463
Balance at End of Period	$	14,204		$	—		$	(2,211	)	$	11,993

Year Ended December 31, 2018
Balance at Beginning of Year	$	6,008		$	—		$	(1,847	)	$	4,161
Other comprehensive gain/(loss) before reclassifications	(12,498		)	—			81			(12,417		)
Amounts reclassified from accumulated other comprehensive income	4			—			(147		)	(143		)
Total other comprehensive (loss)/income	(12,502		)	—			228			(12,274		)
Less: amounts reclassified from accumulated other comprehensive income (loss) related to adoption of ASU 2016-01 and ASU 2018-02	4,959			—			398			5,357
Balance at End of Period	$	(11,453	)	$	—		$	(2,017	)	$	(13,470	)

Year Ended December 31, 2017
Balance at Beginning of Year	$	15,540		$	(3,984	)	$	(1,790	)	$	9,766
Other comprehensive gain/(loss) Before reclassifications	(1,469		)	(269		)	(187		)	(1,925		)
Amounts reclassified from accumulated other comprehensive income	8,063			(4,253		)	(130		)	3,680
Total other comprehensive income	(9,532		)	3,984			(57		)	(5,605		)
Balance at End of Period	$	6,008		$	—		$	(1,847	)	$	4,161

The following table presents the amounts reclassified out of each component of accumulated other comprehensive (loss)/income for the years ended December 31, 2019, 2018, and 2017:



										Affected Line Item in the Statement Where Net Income Is Presented
	Years Ended December 31,
(in thousands)	2019			2018			2017
Realized gains/(losses) on AFS securities:
	$	61		$	6		$	12,598		Non-interest income
	(17		)	(2		)	(4,535		)	Tax expense
	44			4			8,063
Realized (losses) on cash flow hedging derivatives:
	—			—			(393		)	Interest expense
	—			—			(6,629		)	Non-interest income
	—			—			—			Non-interest expense
	—			—			2,769			Tax benefit
	—			—			(4,253		)
Realized (losses) on pension plans
	—			(201		)	(217		)	Non-interest expense
	—			54			87			Tax expense
	—			(147		)	(130		)
Total reclassifications for the period	$	44		$	(143	)	$	3,680

Earnings Per Common Share

Basic earnings per common share (“EPS”) excludes dilution and is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the entity. Diluted EPS is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method.

Earnings per common share has been computed based on the following (average diluted shares outstanding is calculated using the treasury stock method):



	Years Ended December 31,
(In thousands, except per share data)	2019			2018			2017
Net income from continuing operations	$	101,521		$	109,219		$	49,116
Net (loss)/income from discontinued operations	(4,071		)	(3,454		)	6,131
Net income	$	97,450		$	105,765		$	55,247

Average number of common shares issued	49,782			46,212			40,627
Less: average number of treasury shares	1,142			810			963
Less: average number of unvested stock award shares	420			421			437
Plus: average participating preferred shares	1,043			1,043			229
Average number of basic common shares outstanding	49,263			46,024			39,456
Plus: dilutive effect of unvested stock award shares	122			180			202
Plus: dilutive effect of stock options outstanding	36			27			37
Average number of diluted common shares outstanding	49,421			46,231			39,695

Basic earnings per share:
Continuing Operations	$	2.06		$	2.38		$	1.24
Discontinued operations	(0.08		)	(0.08		)	0.16
Basic earning per common share	$	1.98		$	2.30		$	1.40

Diluted earnings per share:
Continuing Operations	$	2.05		$	2.36		$	1.24
Discontinued operations	(0.08		)	(0.07		)	0.15
Diluted earnings per common share	$	1.97		$	2.29		$	1.39

For the year ended 2019, 61 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations. For the year ended 2018, 38 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations. For the year ended 2017, 55 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.