EXHIBIT 99.1

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of Mercantil Bank Holding Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Mercantil Bank Holding Corporation and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations and comprehensive income, of changes in stockholder’s equity, and of cash flows for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Certified Public Accountants

Fort Lauderdale, Florida

March 12, 2018, except for the effects of (i) the revision discussed in Note 10 to the consolidated financial statements, as to which the date is June 15, 2018, (ii) the revision discussed in Note 1 to the consolidated financial statements, as to which the date is October 4, 2018, and (iii) the stock split discussed in Note 22 to the consolidated financial statements, as to which the date is November 16, 2018

We have served as the Company’s auditor since 1987.    

PricewaterhouseCoopers LLP, 401 East Las Olas Boulevard, Suite 1800, Ft. Lauderdale, Florida 33301.

T: (305) 375 7400, F: (305) 375 6221, www.pwc.com/us

 

F-1

Mercantil Bank Holding Corporation and Subsidiaries

Consolidated Balance Sheets (Audited)

 

(in thousands of dollars, except per share data)		December 31, 2017				December 31, 2016
Assets
Cash and due from banks		$	44,531			$	32,956
Interest earning deposits with banks			108,914				102,033
Cash and cash equivalents			153,445				134,989
Securities
Available for sale			1,687,157				2,123,247
Held to maturity			89,860				—
Federal Reserve Bank and Federal Home Loan Bank stock			69,934				59,490
Loans held for sale			5,611				—
Loans, gross			6,066,225				5,764,761
Less: Allowance for loan losses			72,000				81,751
Loans, net			5,994,225				5,683,010
Bank owned life insurance			200,318				164,860
Premises and equipment, net			129,357				148,712
Deferred tax assets, net			14,583				30,730
Goodwill			19,193				19,193
Accrued interest receivable and other assets			73,084				70,033
		$	8,436,767			$	8,434,264
Liabilities and Stockholder’s Equity
Deposits
Demand
Noninterest bearing		$	895,710			$	1,106,834
Interest bearing			1,496,749				1,736,136
Savings and money market			1,684,080				1,897,136
Time			2,246,434				1,837,259
Total deposits			6,322,973				6,577,365
Advances from the Federal Home Loan Bank and other borrowings			1,173,000				931,000
Junior subordinated debentures held by trust subsidiaries			118,110				118,110
Securities sold under agreements to repurchase			—				50,000
Accounts payable, accrued liabilities and other liabilities			69,234				53,052
			7,683,317				7,729,527
Commitments and contingencies (Note 16)
Stockholder’s equity (Notes 1 and 22)
Class A common stock, $0.10 par value, 400,000,000 shares authorized; 24,737,470 shares issued and outstanding in 2017 and 2016			2,474				2,474
Class B common stock, $0.10 par value, 100,000,000 shares authorized; 17,751,053 shares issued and outstanding in 2017 and 2016			1,775				1,775
Additional paid in capital			367,505				367,505
Retained earnings			387,829				343,678
Accumulated other comprehensive loss			(6,133	)			(10,695	)
			753,450				704,737
		$	8,436,767			$	8,434,264

 

F-2

Mercantil Bank Holding Corporation and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Audited)

 

		Years ended December 31,
(in thousands of dollars, except per share data)		2017				2016				2015
Interest income
Loans		$	223,765			$	188,526			$	160,893
Investment securities			47,913				49,495				46,898
Interest earning deposits with banks			1,642				806				408
Total interest income			273,320				238,827				208,199
Interest expense
Interest bearing demand deposits			394				653				1,187
Savings and money market deposits			8,856				8,306				7,426
Time deposits			26,787				16,576				8,016
Advances from the Federal Home Loan Bank			18,235				10,971				8,787
Junior subordinated debentures			7,456				7,129				6,868
Securities sold under agreements to repurchase			1,882				3,259				3,630
Total interest expense			63,610				46,894				35,914
Net interest income			209,710				191,933				172,285
(Reversal of) provision for loan losses			(3,490	)			22,110				11,220
Net interest income after (reversal of) provision for loan losses			213,200				169,823				161,065
Noninterest income
Deposits and service fees			19,560				20,928				21,147
Brokerage, advisory and fiduciary activities			20,626				20,282				19,047
Change in cash surrender value of bank owned life insurance			5,458				4,422				438
Cards and trade finance servicing fees			4,589				4,250				5,175
Data processing, rental income and fees for other services to related parties			3,593				4,409				4,342
Securities (losses) gains, net			(1,601	)			1,031				1,062
Other noninterest income			19,260				6,948				3,545
Total noninterest income			71,485				62,270				54,756
Noninterest expense
Salaries and employee benefits			131,800				129,681				122,230
Occupancy and equipment			17,381				18,368				16,441
Professional and other services fees			16,399				11,937				16,892
FDIC assessments and insurance			7,624				7,131				7,579
Telecommunication and data processing			9,825				8,392				7,494
Depreciation and amortization			9,040				9,130				8,381
Other operating expenses			15,567				13,664				13,245
Total noninterest expenses			207,636				198,303				192,262
Net income before income tax			77,049				33,790				23,559
Income tax expense			(33,992	)			(10,211	)			(8,514	)
Net income			43,057				23,579				15,045
Other comprehensive income (loss), net of tax
Net unrealized holding gains (losses) on securities available for sale arising during the year			3,577				(3,839	)			(11,456	)
Net unrealized holding gains (losses) on cash flow hedges arising during the year			152				3,598				(114	)
Reclassification adjustment for net losses (gains) included in net income			833				(1,004	)			(1,258	)
Other comprehensive income (loss)			4,562				(1,245	)			(12,828	)
Comprehensive income		$	47,619			$	22,334			$	2,217
Basic and diluted earnings per share:
Net income available to common shareholders		$	43,057			$	23,579			$	15,045
Basic and diluted weighted average shares outstanding			42,488,523				42,488,523				42,488,523
Basic and diluted income per common share			1.01				0.55				0.35

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

 

F-3

Mercantil Bank Holding Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholder’s Equity (Audited)

Each of the Three Years Ended December 31, 2017

 

		Common Stock																Additional Paid in Capital				Retained Earnings				Accumulated Other Comprehensive Loss				Total Stockholder’s Equity
		Class A								Class B
(in thousands of dollars, except per share data)		Shares Issued and Outstanding				Par value				Shares Issued and Outstanding				Par value
Balances at December 31, 2014			24,737,470			$	2,474				17,751,053			$	1,775			$	367,505			$	305,054			$	3,378			$	680,186
Net income			—				—				—				—				—				15,045				—				15,045
Other comprehensive loss			—				—				—				—				—				—				(12,828	)			(12,828	)
Balances at December 31 2015			24,737,470			$	2,474				17,751,053			$	1,775			$	367,505			$	320,099			$	(9,450	)		$	682,403
Net income			—				—				—				—				—				23,579				—				23,579
Other comprehensive loss			—				—				—				—				—				—				(1,245	)			(1,245	)
Balance at December 31 2016			24,737,470			$	2,474				17,751,053			$	1,775			$	367,505			$	343,678			$	(10,695	)		$	704,737
Net income			—				—				—				—				—				43,057				—				43,057
Reclassification of tax law impact on AOCI			—				—				—				—				—				1,094				(1,094	)			—
Other comprehensive income			—				—				—				—				—				—				5,656				5,656
Balance at December 31 2017			24,737,470			$	2,474				17,751,053			$	1,775			$	367,505			$	387,829			$	(6,133	)		$	753,450

 

 

 

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

 

F-4

Mercantil Bank Holding Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Audited)

 

		Years ended December 31,
(in thousands of dollars)		2017				2016				2015
Cash flows from operating activities
Net income		$	43,057			$	23,579			$	15,045
Adjustments to reconcile net income to net cash provided by operating activities
(Reversal of) provision for loan losses			(3,490	)			22,110				11,220
Net premium amortization on securities			19,357				27,264				36,702
Depreciation and amortization			9,040				9,130				8,381
Increase in cash surrender value of bank owned life insurance			(5,458	)			(4,422	)			(438	)
Net gain on sale of premises and equipment			(11,319	)			(1,956	)			(189	)
Deferred taxes, securities net gains or losses and others			14,684				(4,705	)			(2,315	)
Net changes in operating assets and liabilities
Loans held for sale			(5,705	)			(4,730	)			(2,788	)
Accrued interest receivable and other assets			(1,257	)			(7,937	)			(3,118	)
Account payable, accrued liabilities and other liabilities			14,373				16,935				1,134
Net cash provided by operating activities			73,282				75,268				63,634
Cash flows from investing activities
Purchases of investment securities
Available for sale			(231,675	)			(1,084,029	)			(633,527	)
Held to maturity securities			(90,196	)			—				—
Federal Reserve Bank and Federal Home Loan Bank stock			(41,044	)			(53,350	)			(59,143	)
Maturities, sales and calls of investment securities
Available for sale			655,305				986,041				707,557
Held to maturity securities			315				—				—
Federal Reserve Bank and Federal Home Loan Bank stock			30,600				44,253				58,749
Net increase in loans			(393,636	)			(259,931	)			(420,742	)
Proceeds from loan sales			85,767				105,164				84,107
Purchase of bank owned life insurance			(30,000	)			(60,000	)			(100,000	)
Purchases of bank premises and equipment			(8,606	)			(8,535	)			(15,028	)
Net proceeds from sales of premises and equipment and others			30,737				8,159				5,137
Net cash provided by (used in) investing activities			7,567				(322,228	)			(372,890	)
Cash flows from financing activities
Net decrease in demand, savings and money market accounts			(663,568	)			(388,520	)			(278,204	)
Net increase in time deposits			409,175				446,211				522,798
Net decrease in securities sold under agreements to repurchase			(50,000	)			(23,488	)			(25,887	)
Proceeds from Advances from the Federal Home Loan Bank and other banks			1,771,500				2,239,000				1,781,800
Repayments of Advances from the Federal Home Loan Bank and other banks			(1,529,500	)			(2,029,536	)			(1,741,800	)
Net cash (used in) provided by financing activities			(62,393	)			243,667				258,707
Net increase (decrease) in cash and cash equivalents			18,456				(3,293	)			(50,549	)
Cash and cash equivalents
Beginning of year			134,989				138,282				188,831
End of year			153,445				134,989				138,282
Supplemental disclosures of cash flow information
Cash paid:
Interest		$	61,590			$	46,109			$	35,035
Income taxes			18,881				9,264				10,137
Noncash investing activities:
Loans transferred to other assets			319				5,545				2,475
Loans held for sale exchanged for securities			4,710				4,659				2,762

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

 

F-5

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

1.	Organization and Summary of Significant Accounting Policies

Mercantil Bank Holding Corporation (the “Company”), a Florida Corporation incorporated in 1985 and operating since January 1987, is a bank holding company registered under the Bank Holding Company Act of 1956. The Company’s principal office is in the City of Coral Gables, Florida. The Company is a wholly owned subsidiary of Mercantil Servicios Financieros, C.A. (“MSF”), a corporation domiciled in the Bolivarian Republic of Venezuela.

On December 15, 2017, MSF shareholders voted to approve the spin-off of the Company from MSF. Following the spin-off, the Company will operate as a separate organization. In connection with the spin-off, each MSF shareholder of record will be entitled to receive one share of the Company’s Class A and Class B common stock for each share of MSF of the same class held by the MSF record holder as of the record date, which is to be determined by MSF’s Board of Directors as soon as practicable. MSF will retain shares of the Company’s common stock representing 19.9% of the Company’s outstanding common stock, through MSF’s beneficial interest in a newly-created trust for the benefit of MSF’s shareholders of record, until such time as MSF can divest those shares. The spin-off is expected to be completed in the first half of 2018, subject to the receipt of various regulatory actions, including the effectiveness of a registration statement to be filed by the Company with the U.S. Securities and Exchange Commission (“SEC”). In February 2018, the Company’s Articles of Incorporation were amended and restated. See Note 22. “Subsequent Events” for additional information.

In October 2008, MSF, the Company and various individuals as Voting Trustees (“Voting Trustees”), entered into a Voting Trust Agreement (the “Voting Trust”). The Voting Trust’s purposes are to promote the interests of Mercantil Bank, N.A. (the “Bank”) and expand its business in the United States by facilitating access to the United States’ capital markets, and to provide continued appropriate corporate governance of the Bank upon the occurrence of certain changes or threatened changes in control of MSF not approved by MSF’s board of directors (“Control Changes”). The Voting Trust was amended and restated in 2017 to clarify its terms and governance, and to extend the Voting Trust’s original 10-year term by an additional 25 years.

The Voting Trust is organized under the laws of Florida and is a grantor trust for Federal income tax purposes. It holds all the issued and outstanding shares of capital stock of Mercantil Florida Bancorp, Inc., which is the Bank’s immediate parent and sole shareholder. The Voting Trust is a “company” subject to supervision and regulation under the Bank Holding Company of 1956 (the “BHC Act”). The Voting Trust has issued Voting Trust certificates representing the entire interest in the Voting Trust to the Company. In the event of Control Changes in MSF, the Voting Trustees, may cancel the existing Voting Trust certificates and distribute these to MSF’s shareholders pro rata to preserve the Bank and MSF’s shareholders’ economic interests in the Bank. No Control Change had occurred as of December 31, 2017.

The Company has determined that it is the sole beneficial owner of the Voting Trust. Accordingly, the Voting Trust’s financial statements are consolidated with the Company’s financial statements for regulatory reporting purposes.

The Bank and its subsidiaries have been serving the communities in which they operates for over 35 years. The Bank is headquartered in the City of Coral Gables, Florida and has 23 Banking Centers, including 15 located in South Florida, seven in the Greater Houston area, Texas and a loan production office in New York City, New York. As the main operating subsidiary of the Company, the Bank offers a wide variety of domestic, international, personal and commercial banking services. Investment, trust, fiduciary and wealth management services are provided through the Bank’s main operating subsidiaries Mercantil Investment Services, Inc. and Mercantil Trust Company, N.A.

 

F-6

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

Most of the Company’s investments are U.S. government, U.S. government agencies and U.S. government-sponsored entity securities. Most of the Company’s banking activity is with domestic customers located within the States of Florida, Texas and New York, and with international customers located in Latin America. The Company’s banking activities are concentrated in its primary markets. The Company does not have any significant concentrations to any one customer.

The effects of significant subsequent events, if any, have been adequately recognized or disclosed in these consolidated financial statements. Subsequent events have been evaluated through March 12, 2018, the date when these consolidated financial statements were available to be issued. See Note 22. “Subsequent Events” for additional information.

The following is a description of the significant accounting policies and practices followed by the Company in the preparation of the accompanying consolidated financial statements. These policies conform with generally accepted accounting principles in the United States (U.S. GAAP).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include: i) the determination of the allowance for loan losses; (ii) the fair values of securities, bank owned life insurance and the reporting unit to which goodwill has been assigned during the annual goodwill impairment test; and (iii) the determination of whether the amount of deferred tax assets will more likely than not be realized. Management believes that these estimates are appropriate. Actual results could differ from these estimates.

Income Recognition

Interest income is generally recognized on the accrual basis using the interest method. Non-refundable loan origination fees, net of direct costs of originating or acquiring loans, as well as loan purchase premiums and discounts, are deferred and amortized over the term of the related loans as adjustments to interest income using the level yield method. Purchase premiums and discounts on debt securities are amortized as adjustments to interest income over the estimated lives of the securities using the level yield method.

Brokerage and advisory activities include brokerage commissions and advisory fees. Brokerage commissions earned are related to the dollar amount of trading volume of customers’ transactions. Commissions and related clearing expenses are recorded on a trade-date basis as securities transactions occur. Advisory fees are derived from investment advisory fees and account administrative services. Investment advisory fees are recorded as earned on a pro rata basis over the term of the contracts, based on a percentage of the average value of assets managed during the period. These fees are assessed and collected quarterly. Account administrative fees are charged to customers for the maintenance of their accounts and are earned and collected on a quarterly basis. Fiduciary activities fee income is recognized as earned on a pro rate basis over the term of contracts.

 

F-7

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

Card servicing fees include credit card issuance fees, and debit and credit card interchange fees. Annual credit card membership fees are generally recognized in the period over which the cardholders are entitled to use the cards. Interchange fees are recognized when earned. Trade finance servicing fees are generally recognized over the service period on a straight line basis.

Earnings per Share

Basic and diluted earnings per share are computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during each period. As of December 31, 2017, 2016 and 2015, the Company had no outstanding dilutive instruments. Changes in the number of shares outstanding as a result of stock dividends, stock splits, stock exchanges or reverse stock splits are given effect retroactively for all periods presented to reflect those changes in capital structure. See Note 22. “Subsequent Events” for additional information.

 

Cash and Cash Equivalents

The Company has defined as cash equivalents those highly liquid instruments purchased with an original maturity of three months or less and include cash and cash due from banks, federal funds sold and deposits with banks.

The Company must comply with federal regulations requiring the maintenance of minimum reserve balances against its deposits. At December 31, 2017 and 2016, these reserve balances amounted to approximately $1.2 million and $4.2 million, respectively.

Securities

The Company classifies its investments in securities as available for sale and held to maturity. Securities classified as available for sale are carried at fair value with unrealized gains and losses included in accumulated other comprehensive income (“AOCI”) in stockholder’s equity on an after-tax basis. Securities classified as held to maturity are securities the Company has both the ability and intent to hold until maturity and are carried at amortized cost. Investments in stock issued by the Federal Reserve Bank of Atlanta (“FRB”) and Federal Home Loan Bank of Atlanta (“FHLB”) are stated at their original cost, which approximates their realizable value. Realized gains and losses from sales of securities are recorded on the trade date and are determined using the specific identification method. Securities purchased are recorded on the consolidated balance sheets as of the trade date. Receivables and payables to and from clearing organizations relating to outstanding transactions are included in other assets or other liabilities. At December 31, 2017 and 2016 securities receivables amounted to $6.5 million and $5.6 million, respectively.

The Company considers an investment security to be impaired when a decline in fair value below the amortized cost basis is other-than-temporary. When an investment security is considered to be other-than-temporarily impaired, the cost basis of the individual investment security is written down through earnings by an amount that corresponds to the credit component of the other-than-temporary impairment. The amount of the other-than-temporary impairment that corresponds to the noncredit component of the other-than-temporary impairment is recorded in AOCI and is associated with securities which the Company does not intend to sell and it is more likely than not that the Company will not be required to sell the securities prior to the recovery of its fair value.

 

F-8

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

The Company estimates the credit component of other-than-temporary impairment using a discounted cash flow model. The Company estimates the expected cash flows of the underlying collateral using third party vendor models that incorporate management’s best estimate of current key assumptions, such as default rates, loss severity and prepayment rates (based on historical performance and stress test scenarios). Assumptions used can vary widely from security to security and are influenced by such factors as current debt service coverage ratio, historical prepayment rates, expected prepayment rates, and loans’ current interest rates. The Company then uses, as it deems appropriate, a third party vendor to determine how the underlying collateral cash flows will be distributed to each security. The present value of an impaired debt security results from estimating its future cash flows, discounted at the security’s effective interest rate. The Company expects to recover the remaining noncredit related unrealized losses included as a component of AOCI.

Loans Held for Sale

Loans are transferred into the held for sale classification at the lower of carrying amount or fair value when they are specifically identified for sale and a formal plan exists to sell them.

Loans

Loans represent extensions of credit which the Company has the intent and ability to hold for the foreseeable future or until maturity or payoff. These extensions of credit consist of commercial real estate (including land acquisition, development and construction loans), single-family residential, commercial loans, loans to financial institutions and acceptances, and consumer loans. Amounts included in the loan portfolio are stated at the amount of unpaid principal, reduced by unamortized net deferred loan fees and origination costs and an allowance for loan losses. Unamortized net deferred loan fees and origination costs amounted to $7.4 million and $5.3 million at December 31, 2017 and 2016, respectively.

A loan is placed in nonaccrual status when management believes that collection in full of the principal amount of the loan or related interest is in doubt. Management considers that collectability is in doubt when any of the following factors are present, among others: (1) there is a reasonable probability of inability to collect principal, interest or both, on a loan for which payments are current or delinquent for less than ninety days; and (2) when a required payment of principal, interest or both is delinquent for ninety days or longer, unless the loan is considered well secured and in the process of collection in accordance with regulatory guidelines. Once a loan to a single borrower has been placed in nonaccrual status, management reviews all loans to the same borrower to determine their appropriate accrual status. When a loan is placed in nonaccrual status, accrual of interest and amortization of net deferred loan fees or costs are discontinued, and any accrued interest receivable is reversed against interest income.

Payments received on a loan in nonaccrual status are generally applied to its outstanding principal amount, unless there are no doubts on the full collection of the remaining recorded investment in the loan. When there are no doubts on the full collection of the remaining recorded investment in the loan, and there is sufficient documentation to support the collectability of that amount, payments of interest received may be recorded as interest income.

A loan in nonaccrual status is returned to accrual status when none of the conditions noted when first placed in nonaccrual status are currently present, none of its principal and interest is past due, and management believes there are reasonable prospects of the loan performing in accordance with its terms. For this purpose, management generally considers there are reasonable prospects of performance in accordance with the loan terms when at least six months of principal and interest payments or principal curtailments have been received, and current financial information of the borrower demonstrates that performance will continue into the near future.

 

F-9

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

The total outstanding principal amount of a loan is reported as past due thirty days following the date of a missed scheduled payment, based on the contractual terms of the loan.

Loans which have been modified because the borrowers were experiencing financial difficulty and the Company, for economic or legal reasons related to the debtors’ financial difficulties, granted a concession to the debtors that it would not have otherwise considered, are accounted for as troubled debt restructurings.

Allowance for Loan Losses

The allowance for loan losses represents an estimate of the current amount of principal that is probable the Company will be unable to collect given facts and circumstances as of the evaluation date, and includes amounts arising from loans individually and collectively evaluated for impairment. These estimated amounts are recorded through a provision for loan losses charged against income. Management periodically evaluates the adequacy of the allowance for loan losses to ensure it is maintained at a reasonable level to provide for recognized and unrecognized but inherent losses in the loan portfolio. The Company uses the same methods used to determine the allowance for loan losses, to assess any reserves needed for off-balance sheet credit risks such as unfunded loan commitments and contingent obligations on letters of credit. These reserves for off-balance sheet credit risks are presented in the liabilities section in the consolidated balance sheets.

The Company develops and documents its methodology to determine the allowance for loan losses at the portfolio segment level. The Company determines its loan portfolio segments based on the type of loans it carries and their associated risk characteristics. The Company’s loan portfolio segments are: Real Estate, Commercial, Financial Institutions, Consumer and Other. Loans in these portfolio segments have distinguishing borrower needs and differing risks associated with each product type.

Real estate loans include commercial loans secured by real estate properties. Commercial loans secured by non-owner occupied real estate properties are generally granted to finance the acquisition or operation of commercial real estate properties, with terms similar to the properties’ useful lives or the operating cycle of the businesses. The main source of repayment of these real estate loans is derived from cash flows or conversion of productive assets and not from the income generated by the disposition of the property held as collateral. The main repayment source of loans granted to finance land acquisition, development and construction projects is generally derived from the disposition of the properties held as collateral, with the repayment capacity of the borrowers and any guarantors considered as alternative sources of repayment.

Commercial loans correspond to facilities established for specific business purposes such as financing working capital and capital improvements projects and asset-based lending, among others. These may be loan commitments, uncommitted lines of credit to qualifying customers, short term (one year or less) or longer term credit facilities, and may be secured, unsecured or partially secured. Terms on commercial loans generally do not exceed five years, and exceptions are documented. Commercial loans secured by owner-occupied real estate properties are generally granted to finance the acquisition or operation of commercial real estate properties, with terms similar to the properties’ useful lives or the operating cycle of the businesses. The main source of repayment of these commercial real estate loans is derived from cash flows and not from the income generated by the disposition of the property held as collateral. Commercial loans to borrowers in similar businesses or products with similar characteristics or specific credit requirements are generally evaluated under a standardized commercial credit program. Commercial loans outside the scope of those programs are evaluated on a case by case basis, with consideration of any exposure under an existing commercial credit program.

Loans to financial institutions and acceptances are facilities granted to fund certain transactions classified according to their risk level, and primarily include trade financing facilities through letters of credits, bankers’

 

F-10

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

acceptances, pre and post-export financing, and working capital loans, among others. Loans in this portfolio segment are generally granted for terms not exceeding three years and on an unsecured basis under the limits of an existing credit program, primarily to the largest financial institutions that our credit analyzes indicate are of high quality in Brazil, Chile, Colombia, Mexico and Peru, as well as a limited number of other countries in Latin America. Prior to approval, management also considers cross-border and portfolio limits set forth in its programs and credit policies.

Consumer and other loans are retail open-end and closed-end credits extended to individuals for household, family and other personal expenditures. These loans include loans to individuals secured by their personal residence, including first mortgage, home equity and home improvement loans as well as revolving credit card agreements. Because these loans generally consist of a large number of relatively small-balance, homogeneous loans, their risk is generally evaluated collectively.

An individual loan is considered impaired when it is probable that the Company will be unable to collect all amounts due, including both principal and interest, according to the contractual terms of the loan agreement. The Company generally considers as impaired all loans in nonaccrual status, and other loans classified in accordance with an internal risk grading system exceeding a defined threshold when it is probable that an impairment exists and the amount of the potential impairment is reasonably estimable. To determine when it is probable that an impairment exists, the Company considers the extent to which a loan may be inadequately protected by the current net worth and paying capacity of the borrower or any guarantor, or by the current value of the assets pledged as collateral.

When a loan is considered impaired, the potential impairment is measured as the excess of the carrying value of the loan over the present value of expected future cash flows at the measurement date, or the fair value of the collateral in the case where the loan is considered collateral-dependent. If the amount of the present value of the loan’s expected future cash flows exceeds the loan’s carrying amount, the loan is still considered impaired but no impairment is recorded. The present value of an impaired loan results from estimating its future cash flows, discounted at the loan’s effective interest rate. In the case of loans considered collateral-dependent, which are generally certain real estate loans for which repayment is expected to be provided solely by the operation or sale of the underlying collateral, the potential impairment is measured based on the fair value of the asset pledged as collateral. The allowance for loan losses on loans considered troubled debt restructuring is generally determined by discounting the restructured cash flows by the original effective rate of the loan.

Loans that do not meet the criteria of an individually impaired loan are collectively evaluated for impairment. These loans include large groups of smaller homogeneous loan balances, such as loans in the consumer and other loan portfolio segment, and all other loans that have not been individually identified as impaired. This group of collective loans is evaluated for impairment based on measures of historical losses associated with loans within their respective portfolio segments adjusted by a variety of qualitative factors. These qualitative factors incorporate the most recent data reflecting current economic conditions, industry performance trends or obligor concentrations within each portfolio segment, among other factors. Other adjustments may be made to the allowance for loans collectively evaluated for impairment based on any other pertinent information that management considers may affect the estimation of the allowance for loan losses, including a judgmental assessment of internal and external influences on credit quality that are not fully reflected in historical loss or their risk rating data. The measures of historical losses and the related qualitative adjustments are updated quarterly and semi-annually, respectively, to incorporate the most recent loan loss data reflecting current economic conditions.

Loans to borrowers that are domiciled in foreign countries, primarily loans in the Financial Institutions portfolio segment, are also evaluated for impairment by assessing the probability of additional losses arising from

 

F-11

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

the Company’s exposure to transfer risk. The Company defines transfer risk exposure as the possibility that a loan obligation cannot be serviced in the currency of payment because the borrower’s country of origin may not have sufficient available currency of payment or may have put restraints on its availability, such as currency controls. To determine an individual country’s transfer risk probability, the Company assigns numerical values corresponding to the perceived performance of that country in certain macroeconomic, social and political factors generally considered in the banking industry for evaluating a country’s transfer risk. A defined country’s transfer risk probability is assigned to that country based on an average of the individual scores given to those factors, calculated using an interpolation formula. The results of this evaluation are also updated semi-annually.

Loans in the real estate, commercial and financial institutions portfolio segments are charged off against the allowance for loan losses when they are considered uncollectable. These loans are considered uncollectable when a loss becomes evident to management, which generally occurs when the following conditions are present, among others: (1) a loan or portions of a loan are classified as “loss” in accordance with the internal risk grading system; (2) a collection attorney has provided a written statement indicating that a loan or portions of a loan are considered uncollectible; and (3) the carrying value of a collateral-dependent loan exceeds the appraised value of the asset held as collateral.

Consumer and other retail loans are charged off against the allowance for loan losses at the earlier of (1) when management becomes aware that a loss has occurred, or (2) when closed-end retail loans become past due 120 cumulative days or open-end retail loans become past due 180 cumulative days from the contractual due date. For open and closed-end retail loans secured by residential real estate, any outstanding loan balance in excess of the fair value of the property, less cost to sell, is charged off no later than when the loan is 180 days past due. Consumer and other retail loans may not be charged off when management can clearly document that a past due loan is well secured and in the process of collection such that collection will occur regardless of delinquency status in accordance with regulatory guidelines applicable to these types of loans.

Recoveries on loans represent collections received on amounts that were previously charged off against the allowance for loan losses. Recoveries are credited to the allowance for loan losses when received, to the extent of the amount previously charged off against the allowance for loan losses on the related loan. Any amounts collected in excess of this limit are first recognized as interest income, then as a reduction of collection costs, and then as other income.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales or purchases when control over the assets has been surrendered by the transferor. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the transferor, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the transferor does not maintain effective control over the transferred assets.

Premises and Equipment, Net

Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed on the straight-line basis over the estimated useful lives of the related assets. Leasehold improvements are amortized over the remaining term of the lease. Repairs and maintenance are charged to operations as incurred; renewals, betterments and interest during construction are capitalized. Gains or losses on sales of premises and equipment are recorded as other noninterest income or noninterest expense at the date of the sales.

 

F-12

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of recognition and measurement of an impairment loss, when the independent and identifiable cash flow of a single asset may not be determinable, the long-lived asset may be grouped with other assets of like cash flows. Recoverability of an asset or group of assets to be held and used is measured by comparing the carrying amount with future undiscounted net cash flows expected to be generated by the asset or group of assets. If an asset is considered impaired, the impairment recognized is generally measured by the amount by which the carrying amount of the asset or group exceeds its fair value.

Bank Owned Life Insurance

Bank owned life insurance policies (“BOLI”) are recorded at the cash surrender value of the insurance contracts, which represent the amount that may be realizable under the contracts, at the consolidated balance sheet dates. Changes to the cash surrender value are recorded as other noninterest income in the consolidated statements of operations.

Income Taxes

Deferred income tax assets and liabilities are determined using the balance sheet method. Under this method, the resulting net deferred tax asset is determined based on the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis. The effect of changes in tax laws or rates is recognized in results in the period that includes the legislation enactment date. A valuation allowance is established against the deferred tax asset to the extent that management believes that it is more likely than not that any tax benefit will not be realized. Income tax expense is recognized on the periodic change in deferred tax assets and liabilities at the current statutory rates.

The results of operations of the Company and the majority of its wholly owned subsidiaries are included in the consolidated income tax return of the Company and its subsidiaries as members of the same consolidated tax group.

Under the intercompany income tax allocation policy, the Company and the subsidiaries included in the consolidated tax group are allocated current and deferred taxes as if they were separate taxpayers. As a result, the subsidiaries included in the consolidated group pay their allocation of income taxes to the Company, or receive payments from the Company to the extent that tax benefits are realized.

Goodwill

Goodwill is not amortized but is reviewed for potential impairment at the reporting unit level on an annual basis, or on an interim basis if events or circumstances indicate a potential impairment. The impairment test is performed in two steps. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. However, if the carrying amount of the reporting unit exceeds its fair value, an additional procedure must be performed as a second step. In that second step, the implied fair value of the reporting unit’s goodwill is compared to the carrying amount of goodwill allocated to that reporting unit. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value at the measurement date. At December 31, 2017 and 2016, goodwill was considered not impaired and, therefore, no impairment charges were recorded.

 

F-13

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are classified as secured borrowings and are reflected at the amount of cash received in connection with the transaction.

Derivative Instruments

Derivative instruments are recognized on the consolidated balance sheet as other assets or other liabilities, at their respective fair values. The accounting for changes in the fair value of a derivative instrument is dependent upon whether the derivative has been designated and qualifies as part of a hedging relationship. For derivative instruments that have not been designated and qualified as hedging relationships, the change in their fair value is recognized in current period earnings. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instruments is initially recognized as a component of other comprehensive income (loss), and subsequently reclassified into earnings in the same period during which the hedged transactions affect earnings. The ineffective portion of the gain or loss, if any, is recognized immediately in earnings. The Company has designated certain derivatives as cash flow hedges. Management periodically evaluates the effectiveness of these hedges in offsetting the fluctuations in cash flows due to changes in benchmark interest rates.

Fair Value Measurement

Financial instruments are classified based on a three-level valuation hierarchy required by U.S. GAAP. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

 

Level 1

Inputs to the valuation methodology are quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities may include debt and equity securities that are traded in an active exchange market, as well as certain U.S. securities that are highly liquid and are actively traded in over-the-counter markets.

 

Level 2

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange traded instruments which value is determined by using a pricing model with inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. This category generally may include U.S. Government and U.S. Government Sponsored Enterprise mortgage backed debt securities and corporate debt securities.

 

Level 3

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities may include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 

F-14

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

Recently Issued Accounting Pronouncements

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the Financial Accounting Standards Board (“FASB”) issued guidance that allows a reclassification from AOCI to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate. The amount of the reclassification is the difference between the historical corporate income tax rate and the newly enacted 21% corporate income tax rate pursuant to H.R. 1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal year 2018, known as the Tax Cuts and Jobs Act of 2017 (“the 2017 Tax Act”). This guidance is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted for (1) public business entities for reporting periods for which financial statements have not been issued, and (2) for other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company early-adopted this guidance and reclassified the effect of remeasuring net deferred tax assets related to items within AOCI to retained earnings resulting in a $1.1 million increase in retained earnings in 2017.

Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued targeted amendments to the guidance for recognition, presentation and disclosure of hedging activities. These targeted amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amendments also simplify the application of hedge accounting guidance. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years for public business entities. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company is in the process of determining whether the adoption of this guidance will have a material impact on the Company’s consolidated financial statements and disclosures.

Statement of Cash Flows Classification of Certain Receipts and Payments

In August 2016 , the FASB issued specific guidance for the classification of a number of cash receipts and payments, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, proceeds from the settlement of insurance claims and proceeds from the settlement of bank-owned life insurance policies. The new guidance is effective for years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for private companies, and for years beginning after December 15, 2017 and interim periods within those fiscal years for public companies. Early adoption is permitted. The Company is in the process of understanding whether this new guidance will have a material impact on its consolidated statement of cash flows when adopted.

Accounting for Credit Losses on Financial Instruments

In June 2016, the FASB issued new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The standard is effective for fiscal years beginning after December 15, 2020, and interim periods

 

F-15

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

within fiscal years beginning after December 15, 2021, for private companies, and for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, for public companies. Early adoption is permitted for fiscal years beginning after December 15, 2018. The Company is in the process of determining whether these changes will have a material impact on its consolidated financial position or results of operations or disclosures.

Accounting for Leases

In February 2016, the FASB issued guidance for the recognition and measurement of all leases. The new guidance requires lessees to recognize a right-of-use asset and a lease liability for most leases within the scope of the guidance. There were no significant changes to the guidance for lessors. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for private companies, and for fiscal periods beginning after December 15, 2018, and interim periods within those fiscal years, for public companies. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition at the beginning of the earliest comparative period presented, and provides for certain practical expedients. The Company is in the process of determining whether this new guidance will have a material impact on its consolidated financial position, results of operations and disclosures, when adopted.

Recognition and Measurement of Financial Instruments

In January 2016, the FASB issued changes to the guidance on the recognition and measurement of financial instruments. The changes include, among others, the removal of the available-for-sale category for equity securities and updates to certain disclosure requirements. This standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for private companies, and for fiscal periods beginning December 15, 2017, and interim periods within those fiscal years, for public companies, with limited early adoption permitted. The Company is in the process of determining whether these changes will have a material impact on its consolidated financial position or results of operations or disclosures.

Revenue from Contracts with Customers

In May 2014, the FASB issued a common revenue standard for recognizing revenue from contracts with customers. This new standard establishes principles for reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The core principle of the guidance is 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. The amended effective date is annual reporting periods beginning after December 15, 2018, and interim periods beginning after December 15, 2019, for private companies, and for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period, for public companies. Earlier adoption continues to be permitted. The Company is in the process of determining whether the new guidance will have a material impact on its consolidated financial position or results of operations.

Reclassifications

Certain reclassifications have been made to the December 31, 2016 and 2015 consolidated financial statements to conform to current year presentation.

 

F-16

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

Revisions

During the second quarter of 2018, the Company determined to revise its presentation of loans by classes to correct for certain immaterial misclassifications in the presentation of loans by classes in the footnotes to the Company’s consolidated financial statements as of December 31, 2017 and 2016. The Company assessed the impact of these misclassifications and determined they had no effect on the Consolidated Balance Sheet as of December 31, 2017 and 2016, and the Consolidated Statements of Operations and Comprehensive Income or the Consolidated Statement of Cash Flows for the three years ended December 31, 2017.

The following tables show the effects of the correction of the misclassifications to the footnotes to the Company’s consolidated financial statements as of December 31, 2017 and 2016.

Loan portfolio by class:

 

		December 31, 2017
(in thousands)		As Reported				As Revised				Effect of change
Real estate loans
Commercial real estate
Non-owner occupied		$	1,745,839			$	1,713,104			$	(32,735	)
Multi-family residential			795,912				839,709				43,797
Land development and construction loans			421,285				406,940				(14,345	)
			2,963,036				2,959,753				(3,283	)
Single-family residential			515,237				512,754				(2,483	)
Owner-occupied			429,803				610,386				180,583
			3,908,076				4,082,893				174,817
Commercial loans			1,529,572				1,354,755				(174,817	)
Loans to financial institutions and acceptances			497,626				497,626				—
Consumer loans and overdrafts			130,951				130,951				—
		$	6,066,225			$	6,066,225			$	—

 

F-17

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

Loan portfolio by class:

 

		December 31, 2016
(in thousands)		As Reported				As Revised				Effect of change
Real estate loans
Commercial real estate
Non-owner occupied		$	1,445,243			$	1,377,753			$	(67,490	)
Multi-family residential			669,659				667,256				(2,403	)
Land development and construction loans			429,085				429,085				—
			2,543,987				2,474,094				(69,893	)
Single-family residential			476,840				470,489				(6,351	)
Owner-occupied			463,040				610,657				147,617
			3,483,867				3,555,240				71,373
Commercial loans			1,742,192				1,670,802				(71,390	)
Loans to financial institutions and acceptances			416,293				416,293				—
Consumer loans and overdrafts			122,409				122,426				17
		$	5,764,761			$	5,764,761			$	—

Age analysis of the loan portfolio by class:

As reported:

 

		December 31, 2017
		Total Loans, Net of Unearned Income				Current				Past Due																Total Loans in Nonaccrual Status				Total Loans 90 Days or More Past Due and Accruing
(in thousands)										30-59 Days				60-89 Days				Greater than 90 Days				Total Past Due
Real estate loans
Commercial real estate
Non-owner occupied		$	1,745,839			$	1,745,686			$	—			$	—			$	153			$	153			$	162			$	—
Multi-family residential			795,912				795,912				—				—				—				—				—				—
Land development and construction loans			421,285				421,285				—				—				—				—				—				—
			2,963,036				2,962,883				—				—				153				153				162				—
Single-family residential			515,237				504,204				6,609				2,421				2,003				11,033				5,004				226
Owner-occupied			429,803				423,560				1,571				503				4,169				6,243				10,398				—
			3,908,076				3,890,647				8,180				2,924				6,325				17,429				15,564				226
Commercial loans			1,529,572				1,523,329				1,814				5				4,424				6,243				11,103				—
Loans to financial institutions and acceptances			497,626				497,626				—				—				—				—				—				—
Consumer loans and overdrafts			130,951				130,846				57				29				19				105				55				—
		$	6,066,225			$	6,042,448			$	10,051			$	2,958			$	10,768			$	23,777			$	26,722			$	226

 

F-18

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

Age analysis of the loan portfolio by class:

As revised:

 

		December 31, 2017
		Total Loans, Net of Unearned Income				Current				Past Due																Total Loans in Nonaccrual Status				Total Loans 90 Days or More Past Due and Accruing
(in thousands)										30-59 Days				60-89 Days				Greater than 90 Days				Total Past Due
Real estate loans
Commercial real estate
Non-owner occupied		$	1,713,104			$	1,712,624			$	—			$	—			$	480			$	480			$	489			$	—
Multi-family residential			839,709				839,709				—				—				—				—				—				—
Land development and construction loans			406,940				406,940				—				—				—				—				—				—
			2,959,753				2,959,273				—				—				480				480				489				—
Single-family residential			512,754				501,393				6,609				2,750				2,002				11,361				5,004				226
Owner-occupied			610,386				602,643				3,000				174				4,569				7,743				12,227				—
			4,082,893				4,063,309				9,609				2,924				7,051				19,584				17,720				226
Commercial loans			1,354,755				1,350,667				385				5				3,698				4,088				8,947				—
Loans to financial institutions and acceptances			497,626				497,626				—				—				—				—				—				—
Consumer loans and overdrafts			130,951				130,846				57				29				19				105				55				—
		$	6,066,225			$	6,042,448			$	10,051			$	2,958			$	10,768			$	23,777			$	26,722			$	226

Effects of change:

 

		December 31, 2017
		Total Loans, Net of Unearned Income				Current				Past Due																Total Loans in Nonaccrual Status				Total Loans 90 Days or More Past Due and Accruing
(in thousands)										30-59 Days				60-89 Days				Greater than 90 Days				Total Past Due
Real estate loans
Commercial real estate
Non-owner occupied		$	(32,735	)		$	(33,062	)		$	—			$	—			$	327			$	327			$	327			$	—
Multi-family residential			43,797				43,797				—				—				—				—				—				—
Land development and construction loans			(14,345	)			(14,345	)			—				—				—				—				—				—
			(3,283	)			(3,610	)			—				—				327				327				327				—
Single-family residential			(2,483	)			(2,811	)			—				329				(1	)			328				—				—
Owner-occupied			180,583				179,083				1,429				(329	)			400				1,500				1,829				—
			174,817				172,662				1,429				—				726				2,155				2,156				—
Commercial loans			(174,817	)			(172,662	)			(1,429	)			—				(726	)			(2,155	)			(2,156	)			—
Loans to financial institutions and acceptances			—				—				—				—				—				—				—				—
Consumer loans and overdrafts			—				—				—				—				—				—				—				—
		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—

 

F-19

Mercantil Bank Holding Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016 and 2015

 

Age analysis of the loan portfolio by class:

As reported:

 

		December 31, 2016
		Total Loans, Net of Unearned Income				Current				Past Due																Total Loans in Nonaccrual Status				Total Loans 90 Days or More Past Due and Accruing
(in thousands)										30-59 Days				60-89 Days				Greater than 90 Days				Total Past Due
Real estate loans
Commercial real estate
Non-owner occupied		$	1,445,243			$	1,444,591			$	346			$	—			$	305			$	651			$	1,169			$	—
Multi-family residential			669,659				660,394				—				—				9,265				9,265				9,265				—
Land development and construction loans			429,085				426,366				—				—				2,719				2,719				2,719				—
			2,543,987				2,531,351				346				—				12,289				12,635				13,153				—
Single-family residential			476,840				464,051				4,675				1,433				6,681				12,789				8,893				116
Owner-occupied			463,040				449,582				2,819				1,713				8,926				13,458				17,090				—
			3,483,867				3,444,984				7,840				3,146				27,896				38,882				39,136				116
Commercial loans			1,742,192				1,718,789				4,141				—				19,262				23,403				31,236				—
Loans to financial institutions and acceptances			416,293				416,293				—				—				—				—				—				—
Consumer loans and overdrafts			122,409				120,489				1,098				443				380				1,921				74				370
		$	5,764,761			$	5,700,555			$	13,079			$	3,589			$	47,538			$	64,206			$	70,446			$	486

Age analysis of the loan portfolio by class:

As revised:

 

		December 31, 2016
		Total Loans, Net of Unearned Income				Current				Past Due																Total Loans in Nonaccrual Status				Total Loans 90 Days or More Past Due and Accruing
(in thousands)										30-59 Days				60-89 Days				Greater than 90 Days				Total Past Due
Real estate loans
Commercial real estate
Non-owner occupied		$	1,377,753			$	1,367,801			$	347			$	—			$	9,605			$	9,952			$	10,256			$	—
Multi-family residential			667,256				667,256				—				—				—				—				215				—
Land development and construction loans			429,085				426,366				—				—				2,719				2,719				2,719				—
			2,474,094				2,461,423				347				—				12,324				12,671				13,190				—
Single-family residential			470,489				457,700				4,675				1,433				6,681				12,789				8,893				116
Owner-occupied			610,657				597,101				2,819				1,713				9,024				13,556				17,185				—
			3,555,240				3,516,224				7,841				3,146				28,029				39,016				39,268				116
Commercial loans			1,670,802				1,647,532				4,141				—				19,129				23,270				31,104				—
Loans to financial institutions and acceptances			416,293				416,293				—				—				—				—				—				—
Consumer loans and overdrafts			122,426				120,505				1,098				443				380				1,921				74				370
		$	5,764,761			$	5,700,554			$	13,080			$	3,589			$	47,538			$	64,207			$	70,446			$	486

 

F-20