Loans | 3 Months Ended |
Mar. 31, 2015 |
Receivables [Abstract] | |
Loans | Loans |
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Loans consist of the following at (in thousands): |
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| | March 31, | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2015 | 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial loans | | $ | 3,258,652 | | | $ | 3,245,206 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial loans collateralized by assignment of lease payments | | 1,628,031 | | | 1,692,258 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial real estate | | 2,525,640 | | | 2,544,867 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Residential real estate | | 505,558 | | | 503,287 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Construction real estate | | 184,105 | | | 247,068 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Indirect vehicle | | 273,105 | | | 268,840 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Home equity | | 241,078 | | | 251,909 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Other consumer loans | | 77,645 | | | 78,137 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total loans, excluding purchased credit-impaired and covered loans | | 8,693,814 | | | 8,831,572 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Purchased credit-impaired and covered loans | | 227,514 | | | 251,645 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total loans | | $ | 8,921,328 | | | $ | 9,083,217 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Loans are made to individuals as well as commercial and tax exempt entities. Specific loan terms vary as to interest rate, repayment, and collateral requirements based on the type of loan requested and the credit worthiness of the prospective borrower. Except for commercial loans collateralized by assignment of lease payments and asset-based loans, credit risk tends to be geographically concentrated in that a majority of the loan customers are located in the markets serviced by MB Financial Bank. |
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The Company's extension of credit is governed by its Credit Risk Policy which was established to control the quality of the Company's loans. This policy is reviewed and approved by the Company's Board of Directors on a regular basis. |
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Commercial Loans. Commercial credit is extended primarily to middle market customers. Such credits are typically comprised of working capital loans, loans for physical asset expansion, asset acquisition loans and other business loans. Loans to closely held businesses will generally be guaranteed in full or for a significant amount by the businesses' principal owners. Commercial loans are made based primarily on the historical and projected cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to economic or individual performance factors. Minimum standards and underwriting guidelines have been established for all commercial loan types. Asset-based loans, also included in commercial loans, are made to businesses with the primary source of repayment derived from payments on the related assets securing the loan. Collateral for these loans may include accounts receivable, inventory and equipment, and is monitored regularly to ensure ongoing sufficiency of collateral coverage and quality. The primary risk for these loans is a significant decline in collateral values due to general market conditions. Loan terms that mitigate these risks include typical industry amortization schedules, percentage of collateral advances, maintenance of cash collateral accounts and regular asset monitoring. Because of the national scope of our asset-based lending, the risk of these loans is also diversified by geography. |
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Commercial Loans Collateralized by Assignment of Lease Payments ("Lease Loans"). The Company makes lease loans to lessors where the underlying leases are with both investment grade and non-investment grade companies. Investment grade lessees are companies rated in one of the four highest categories by Moody's Investor Services or Standard & Poor's Rating Services or, in the event the related lessee has not received any such rating, where the related lessee would be viewed under the underwriting policies of the Company as an investment grade company. Whether or not companies fall into this category, each lease loan is considered on its individual merit based on the financial wherewithal of the lessee using financial information available at the time of underwriting. |
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Commercial Real Estate Loans. Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property. Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market such as geographic location and/or property type. |
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Construction Real Estate Loans. The Company defines construction loans as loans where the loan proceeds are controlled by the Company and used exclusively for the improvement of real estate in which the Company holds a mortgage. Due to the inherent risk in this type of loan, they are subject to other industry specific policy guidelines outlined in the Company's Credit Risk Policy. |
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Consumer Related Loans. The Company originates direct and indirect consumer loans, including primarily residential real estate, home equity lines and loans, credit cards, and indirect vehicle loans (motorcycle, powersports, recreational and marine vehicles). Each loan type is underwritten based upon several factors including debt to income, type of collateral and loan to collateral value, credit history and Company relationship with the borrower. Indirect loan and credit card underwriting involves the use of risk-based pricing in the underwriting process. |
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A collateral pledge agreement exists whereby at all times, the Company must keep on hand, free of all other pledges, liens, and encumbrances, first mortgage loans and home equity loans with unpaid principal balances aggregating no less than 133% for first mortgage loans and 250% for home equity loans of the outstanding advances from the Federal Home Loan Bank. As of March 31, 2015 and December 31, 2014, the Company had $3.5 billion and $2.0 billion, respectively, of loans pledged as collateral for long-term Federal Home Loan Bank advances and third party letters of credit, while only $1.3 billion were required to be pledged at March 31, 2015 and December 31, 2014, respectively. |
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The following table presents the contractual aging of the recorded investment in past due loans by class of loans as of March 31, 2015 and December 31, 2014 (in thousands): |
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| | Current | | 30-59 Days | | 60-89 Days | | Loans Past Due | | Total | | Total | | | | | | | | | | | | | | | | |
Past Due | Past Due | 90 Days or More | Past Due | | | | | | | | | | | | | | | | |
31-Mar-15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial | | $ | 3,220,398 | | | $ | 27,393 | | | $ | 1,899 | | | $ | 8,962 | | | $ | 38,254 | | | $ | 3,258,652 | | | | | | | | | | | | | | | | | |
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Commercial collateralized by assignment of lease payments | | 1,611,508 | | | 12,350 | | | 2,062 | | | 2,111 | | | 16,523 | | | 1,628,031 | | | | | | | | | | | | | | | | | |
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Commercial real estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Healthcare | | 344,393 | | | — | | | — | | | — | | | — | | | 344,393 | | | | | | | | | | | | | | | | | |
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Industrial | | 334,667 | | | — | | | — | | | 2,309 | | | 2,309 | | | 336,976 | | | | | | | | | | | | | | | | | |
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Multifamily | | 372,358 | | | 2,823 | | | — | | | 1,336 | | | 4,159 | | | 376,517 | | | | | | | | | | | | | | | | | |
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Retail | | 436,710 | | | 240 | | | 1,817 | | | 2,054 | | | 4,111 | | | 440,821 | | | | | | | | | | | | | | | | | |
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Office | | 243,266 | | | 1,235 | | | 23 | | | 2,048 | | | 3,306 | | | 246,572 | | | | | | | | | | | | | | | | | |
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Other | | 776,851 | | | 1,156 | | | 281 | | | 2,073 | | | 3,510 | | | 780,361 | | | | | | | | | | | | | | | | | |
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Residential real estate | | 492,557 | | | 5,060 | | | 951 | | | 6,990 | | | 13,001 | | | 505,558 | | | | | | | | | | | | | | | | | |
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Construction real estate | | 183,768 | | | — | | | — | | | 337 | | | 337 | | | 184,105 | | | | | | | | | | | | | | | | | |
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Indirect vehicle | | 270,474 | | | 1,933 | | | 473 | | | 225 | | | 2,631 | | | 273,105 | | | | | | | | | | | | | | | | | |
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Home equity | | 232,851 | | | 2,551 | | | 268 | | | 5,408 | | | 8,227 | | | 241,078 | | | | | | | | | | | | | | | | | |
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Other consumer | | 77,546 | | | 76 | | | 23 | | | — | | | 99 | | | 77,645 | | | | | | | | | | | | | | | | | |
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Total loans, excluding purchased credit-impaired and covered loans | | 8,597,347 | | | 54,817 | | | 7,797 | | | 33,853 | | | 96,467 | | | 8,693,814 | | | | | | | | | | | | | | | | | |
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Purchased credit-impaired and covered loans | | 134,140 | | | 8,291 | | | 1,685 | | | 83,398 | | | 93,374 | | | 227,514 | | | | | | | | | | | | | | | | | |
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Total loans | | $ | 8,731,487 | | | $ | 63,108 | | | $ | 9,482 | | | $ | 117,251 | | | $ | 189,841 | | | $ | 8,921,328 | | | | | | | | | | | | | | | | | |
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Non-performing loan aging | | $ | 45,674 | | | $ | 3,018 | | | $ | 911 | | | $ | 33,675 | | | $ | 37,604 | | | $ | 83,278 | | | | | | | | | | | | | | | | | |
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31-Dec-14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial | | $ | 3,231,571 | | | $ | 8,222 | | | $ | — | | | $ | 5,413 | | | $ | 13,635 | | | $ | 3,245,206 | | | | | | | | | | | | | | | | | |
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Commercial collateralized by assignment of lease payments | | 1,679,991 | | | 2,025 | | | 6,095 | | | 4,147 | | | 12,267 | | | 1,692,258 | | | | | | | | | | | | | | | | | |
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Commercial real estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Healthcare | | 342,984 | | | — | | | — | | | — | | | — | | | 342,984 | | | | | | | | | | | | | | | | | |
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Industrial | | 333,907 | | | 944 | | | — | | | 3,182 | | | 4,126 | | | 338,033 | | | | | | | | | | | | | | | | | |
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Multifamily | | 417,504 | | | 1,377 | | | — | | | 1,517 | | | 2,894 | | | 420,398 | | | | | | | | | | | | | | | | | |
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Retail | | 432,718 | | | 2,481 | | | 652 | | | 2,325 | | | 5,458 | | | 438,176 | | | | | | | | | | | | | | | | | |
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Office | | 244,166 | | | — | | | — | | | 2,127 | | | 2,127 | | | 246,293 | | | | | | | | | | | | | | | | | |
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Other | | 754,031 | | | 307 | | | 2,421 | | | 2,224 | | | 4,952 | | | 758,983 | | | | | | | | | | | | | | | | | |
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Residential real estate | | 485,492 | | | 8,038 | | | 2,319 | | | 7,438 | | | 17,795 | | | 503,287 | | | | | | | | | | | | | | | | | |
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Construction real estate | | 246,731 | | | — | | | — | | | 337 | | | 337 | | | 247,068 | | | | | | | | | | | | | | | | | |
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Indirect vehicle | | 265,296 | | | 2,516 | | | 702 | | | 326 | | | 3,544 | | | 268,840 | | | | | | | | | | | | | | | | | |
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Home equity | | 242,756 | | | 2,717 | | | 1,039 | | | 5,397 | | | 9,153 | | | 251,909 | | | | | | | | | | | | | | | | | |
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Other consumer | | 78,106 | | | 16 | | | 12 | | | 3 | | | 31 | | | 78,137 | | | | | | | | | | | | | | | | | |
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Total loans, excluding purchased credit-impaired and covered loans | | 8,755,253 | | | 28,643 | | | 13,240 | | | 34,436 | | | 76,319 | | | 8,831,572 | | | | | | | | | | | | | | | | | |
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Purchased credit-impaired and covered loans | | 158,215 | | | 4,432 | | | 585 | | | 88,413 | | | 93,430 | | | 251,645 | | | | | | | | | | | | | | | | | |
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Total loans | | $ | 8,913,468 | | | $ | 33,075 | | | $ | 13,825 | | | $ | 122,849 | | | $ | 169,749 | | | $ | 9,083,217 | | | | | | | | | | | | | | | | | |
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Non-performing loan aging | | $ | 46,149 | | | $ | 5,764 | | | $ | 1,099 | | | $ | 34,075 | | | $ | 40,938 | | | $ | 87,087 | | | | | | | | | | | | | | | | | |
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The following table presents the recorded investment in non-accrual loans and loans past due ninety days or more and still accruing by class of loans, excluding purchased credit-impaired and covered loans, as of March 31, 2015 and December 31, 2014 (in thousands): |
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| | March 31, 2015 | | December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Loans past due | | | | Loans past due | | | | | | | | | | | | | | | | | | | | | | | | |
| | Non-accrual | | 90 days or more | | Non-accrual | | 90 days or more | | | | | | | | | | | | | | | | | | | | | | | | |
and still accruing | and still accruing | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 13,897 | | | $ | 75 | | | $ | 14,088 | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial collateralized by assignment of lease payments | | 3,602 | | | 741 | | | 2,404 | | | 3,566 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Healthcare | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Industrial | | 4,816 | | | — | | | 6,371 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Multifamily | | 5,008 | | | — | | | 5,333 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Office | | 3,268 | | | — | | | 3,644 | | | 464 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Retail | | 2,898 | | | — | | | 2,986 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Other | | 13,655 | | | — | | | 13,541 | | | 324 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Residential real estate | | 16,925 | | | 891 | | | 17,311 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Construction real estate | | 337 | | | — | | | 337 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Indirect vehicle | | 1,473 | | | — | | | 1,542 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Home equity | | 15,672 | | | — | | | 15,171 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Other consumer | | 20 | | | — | | | 5 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total | | $ | 81,571 | | | $ | 1,707 | | | $ | 82,733 | | | $ | 4,354 | | | | | | | | | | | | | | | | | | | | | | | | | |
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The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Under the Company's risk rating system, the Company classifies potential problem and problem loans as “Special Mention,” “Substandard,” and “Doubtful.” Substandard loans include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses that deserve management's close attention are deemed to be Special Mention. Risk ratings are updated any time the situation warrants and at least annually. Loans listed as not rated are included in groups of homogeneous loans with similar risk and loss characteristics. |
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The following tables present the risk category of loans by class of loans based on the most recent analysis performed, excluding purchased credit-impaired and covered loans, as of March 31, 2015 and December 31, 2014 (in thousands): |
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| | Pass | | Special | | Substandard | | Doubtful | | Total | | | | | | | | | | | | | | | | | | | | |
Mention | | | | | | | | | | | | | | | | | | | | |
31-Mar-15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial | | $ | 3,029,893 | | | $ | 155,032 | | | $ | 73,727 | | | $ | — | | | $ | 3,258,652 | | | | | | | | | | | | | | | | | | | | | |
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Commercial collateralized by assignment of lease payments | | 1,614,968 | | | 935 | | | 12,128 | | | — | | | 1,628,031 | | | | | | | | | | | | | | | | | | | | | |
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Commercial real estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Healthcare | | 340,036 | | | 4,357 | | | — | | | — | | | 344,393 | | | | | | | | | | | | | | | | | | | | | |
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Industrial | | 314,666 | | | 13,200 | | | 9,110 | | | — | | | 336,976 | | | | | | | | | | | | | | | | | | | | | |
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Multifamily | | 368,675 | | | 1,287 | | | 6,555 | | | — | | | 376,517 | | | | | | | | | | | | | | | | | | | | | |
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Retail | | 426,760 | | | 4,165 | | | 9,896 | | | — | | | 440,821 | | | | | | | | | | | | | | | | | | | | | |
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Office | | 225,451 | | | 13,544 | | | 7,577 | | | — | | | 246,572 | | | | | | | | | | | | | | | | | | | | | |
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Other | | 727,643 | | | 17,426 | | | 35,292 | | | — | | | 780,361 | | | | | | | | | | | | | | | | | | | | | |
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Construction real estate | | 183,244 | | | 524 | | | 337 | | | — | | | 184,105 | | | | | | | | | | | | | | | | | | | | | |
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Total | | $ | 7,231,336 | | | $ | 210,470 | | | $ | 154,622 | | | $ | — | | | $ | 7,596,428 | | | | | | | | | | | | | | | | | | | | | |
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31-Dec-14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 3,036,069 | | | $ | 178,984 | | | $ | 30,153 | | | $ | — | | | $ | 3,245,206 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Commercial collateralized by assignment of lease payments | | 1,680,736 | | | 6,853 | | | 4,669 | | | — | | | 1,692,258 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Healthcare | | 338,622 | | | 4,362 | | | — | | | — | | | 342,984 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Industrial | | 314,225 | | | 8,817 | | | 14,991 | | | — | | | 338,033 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Multifamily | | 412,824 | | | 920 | | | 6,654 | | | — | | | 420,398 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Retail | | 423,842 | | | 2,740 | | | 11,594 | | | — | | | 438,176 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Office | | 229,947 | | | 8,524 | | | 7,822 | | | — | | | 246,293 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Other | | 708,447 | | | 22,013 | | | 28,523 | | | — | | | 758,983 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Construction real estate | | 246,204 | | | 527 | | | 337 | | | — | | | 247,068 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Total | | $ | 7,390,916 | | | $ | 233,740 | | | $ | 104,743 | | | $ | — | | | $ | 7,729,399 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
Approximately $46.9 million and $49.1 million of the substandard and doubtful loans were non-performing as of March 31, 2015 and December 31, 2014, respectively. |
|
For residential real estate, home equity, indirect vehicle and other consumer loan classes, which are not rated, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in those loan classes based on payment activity, excluding purchased credit-impaired and covered loans, as of March 31, 2015 and December 31, 2014 (in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Performing | | Non-performing | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
31-Mar-15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate | | $ | 487,742 | | | $ | 17,816 | | | $ | 505,558 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Indirect vehicle | | 271,631 | | | 1,474 | | | 273,105 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | | 225,407 | | | 15,671 | | | 241,078 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | 77,625 | | | 20 | | | 77,645 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,062,405 | | | $ | 34,981 | | | $ | 1,097,386 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
31-Dec-14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate | | $ | 485,976 | | | $ | 17,311 | | | $ | 503,287 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Indirect vehicle | | 267,297 | | | 1,543 | | | 268,840 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | | 236,739 | | | 15,170 | | | 251,909 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | 78,132 | | | 5 | | | 78,137 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,068,144 | | | $ | 34,029 | | | $ | 1,102,173 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following tables present loans individually evaluated for impairment by class of loans, excluding purchased credit-impaired and covered loans, as of March 31, 2015 and December 31, 2014 (in thousands): |
|
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 31-Mar-15 | | | | | | | | | | | | | | | | |
| | | | | | | | | | Three Months Ended | | | | | | | | | | | | | | | | |
| | Unpaid | | Recorded | | Partial | | Allowance for | | Average | | Interest | | | | | | | | | | | | | | | | |
Principal | Investment | Charge-offs | Loan Losses | Recorded | Income | | | | | | | | | | | | | | | | |
Balance | | | Allocated | Investment | Recognized | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | $ | 9,686 | | | $ | 8,925 | | | $ | 761 | | | $ | — | | | $ | 10,640 | | | $ | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial collateralized by assignment of lease payments | | 1,508 | | | 1,508 | | | — | | | — | | | 1,626 | | | 29 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Healthcare | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Industrial | | 5,846 | | | 4,670 | | | 1,176 | | | — | | | 4,962 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Multifamily | | 1,698 | | | 1,698 | | | — | | | — | | | 1,792 | | | 7 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Retail | | 2,019 | | | 807 | | | 1,212 | | | — | | | 825 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Office | | 1,608 | | | 1,031 | | | 577 | | | — | | | 1,609 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other | | 1,490 | | | 1,465 | | | 25 | | | — | | | 1,527 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Residential real estate | | 970 | | | 970 | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Construction real estate | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Indirect vehicle | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Home equity | | 1,025 | | | 1,025 | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other consumer | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | 6,464 | | | 6,464 | | | — | | | 2,051 | | | 6,760 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial collateralized by assignment of lease payments | | 2,145 | | | 2,145 | | | — | | | 1,534 | | | 1,331 | | | 14 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Healthcare | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Industrial | | 146 | | | 146 | | | — | | | 37 | | | 49 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Multifamily | | 5,723 | | | 4,749 | | | 974 | | | 664 | | | 5,926 | | | 8 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Retail | | 8,889 | | | 7,493 | | | 1,396 | | | 626 | | | 7,710 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Office | | 2,369 | | | 1,866 | | | 503 | | | 484 | | | 2,274 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other | | 12,247 | | | 12,227 | | | 20 | | | 100 | | | 13,207 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Residential real estate | | 14,153 | | | 14,153 | | | — | | | 3,045 | | | 14,407 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Construction real estate | | 2,708 | | | 337 | | | 2,371 | | | 162 | | | 431 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Indirect vehicle | | 164 | | | 164 | | | — | | | 14 | | | 372 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Home equity | | 26,954 | | | 26,954 | | | — | | | 2,348 | | | 27,213 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other consumer | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | | $ | 107,812 | | | $ | 98,797 | | | $ | 9,015 | | | $ | 11,065 | | | $ | 102,661 | | | $ | 58 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
|
|
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 31-Dec-14 | | | | | | | | | | | | | | | | |
| | Unpaid | | Recorded | | Partial | | Allowance for | | Average | | Interest | | | | | | | | | | | | | | | | |
Principal | Investment | Charge-offs | Loan Losses | Recorded | Income | | | | | | | | | | | | | | | | |
Balance | | | Allocated | Investment | Recognized | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | $ | 9,752 | | | $ | 8,992 | | | $ | 760 | | | $ | — | | | $ | 10,324 | | | $ | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial collateralized by assignment of lease payments | | 2,316 | | | 2,316 | | | — | | | — | | | 2,569 | | | 121 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Healthcare | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Industrial | | 9,115 | | | 5,858 | | | 3,257 | | | — | | | 7,870 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Multifamily | | 1,733 | | | 1,733 | | | — | | | — | | | 1,928 | | | 52 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Retail | | 2,025 | | | 813 | | | 1,212 | | | — | | | 3,465 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Office | | — | | | — | | | — | | | — | | | 1,127 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other | | 1,479 | | | 1,465 | | | 14 | | | — | | | 5,249 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Residential real estate | | 1,941 | | | 1,941 | | | — | | | — | | | 2,740 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Construction real estate | | — | | | — | | | — | | | — | | | 34 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Indirect vehicle | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Home equity | | 577 | | | 577 | | | — | | | — | | | 762 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other consumer | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | 7,987 | | | 7,987 | | | — | | | 2,395 | | | 14,227 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial collateralized by assignment of lease payments | | 715 | | | 715 | | | — | | | 105 | | | 1,515 | | | 91 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Healthcare | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Industrial | | 517 | | | 513 | | | 4 | | | 130 | | | 4,982 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Multifamily | | 5,680 | | | 4,709 | | | 971 | | | 996 | | | 6,354 | | | 131 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Retail | | 9,264 | | | 7,897 | | | 1,367 | | | 720 | | | 8,547 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Office | | 4,528 | | | 2,986 | | | 1,542 | | | 545 | | | 2,833 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other | | 12,612 | | | 12,527 | | | 85 | | | 136 | | | 11,022 | | | 12 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Residential real estate | | 14,234 | | | 14,234 | | | — | | | 3,126 | | | 14,632 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Construction real estate | | 2,707 | | | 337 | | | 2,370 | | | 162 | | | 455 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Indirect vehicle | | 227 | | | 227 | | | — | | | 14 | | | 358 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Home equity | | 25,927 | | | 25,705 | | | 222 | | | 2,153 | | | 25,672 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other consumer | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | | $ | 113,336 | | | $ | 101,532 | | | $ | 11,804 | | | $ | 10,482 | | | $ | 126,665 | | | $ | 407 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
|
Impaired loans included accruing restructured loans of $16.9 million and $15.6 million that have been modified and are performing in accordance with those modified terms as of March 31, 2015 and December 31, 2014, respectively. In addition, impaired loans included $25.5 million and $25.8 million of non-performing, restructured loans as of March 31, 2015 and December 31, 2014, respectively. |
|
Loans may be restructured in an effort to maximize collections from financially distressed borrowers. We use various restructuring techniques, including, but not limited to, deferring past due interest or principal, implementing an A/B note structure, redeeming past due taxes, reducing interest rates, extending maturities and modifying amortization schedules. Residential real estate loans are restructured in an effort to minimize losses while allowing borrowers to remain in their primary residences when possible. Programs that we offer to residential real estate borrowers include the Home Affordable Refinance Program (“HARP”), a restructuring program similar to the Home Affordable Modification Program (“HAMP”) for first mortgage borrowers, the Second Lien Modification Program (“2MP”) and similar programs for home equity borrowers in keeping with the restructuring techniques discussed above. |
|
Periodically, the Company will restructure a note into two separate notes (A/B structure), charging off the entire B portion of the note. The A note is structured with appropriate loan-to-value and cash flow coverage ratios that provide for a high likelihood of repayment. The A note is classified as a non-performing note until the borrower has displayed a historical payment performance for a reasonable time prior to and subsequent to the restructuring. A period of sustained repayment for at least six months generally is required to return the note to accrual status provided that management has determined that the performance is reasonably expected to continue. The A note will be classified as a restructured note (either performing or non-performing) through the calendar year of the restructuring that the historical payment performance has been established. As of March 31, 2015 and December 31, 2014, there was one A/B structure with a recorded investment of $1.0 million, which is included above as an accruing restructured loan. |
|
A loan classified as a troubled debt restructuring will no longer be included in the troubled debt restructuring disclosures in the years after the restructuring if the loan performs in accordance with the terms specified by the restructuring agreement and the interest rate specified in the restructuring agreement represents a market rate at the time of modification. The specified interest rate is considered a market rate when the interest rate is equal to or greater than the rate the Company is willing to accept at the time of restructuring for a new loan with comparable risk. If there are concerns that the borrower will not be able to meet the modified terms of the loan, the loan will continue to be included in the troubled debt restructuring disclosures. |
|
Impairment analyses on commercial-related loans classified as troubled debt restructurings are performed in conjunction with the normal allowance for loan loss process. Consumer loans classified as troubled debt restructurings are aggregated in two pools that share common risk characteristics, home equity and residential real estate loans, with impairment measured on a quarterly basis based on the present value of expected future cash flows discounted at the loan's effective interest rate. |
|
The following table presents loans that were restructured during the three months ended March 31, 2015 (dollars in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 31-Mar-15 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | Pre-Modification Recorded | | Post-Modification Recorded | | Charge-offs and | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans | Investment | Investment | Specific Reserves | | | | | | | | | | | | | | | | | | | | | | | | | | |
Performing: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | | 6 | | $ | 2,346 | | | $ | 2,346 | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | 6 | | $ | 2,346 | | | $ | 2,346 | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Non-Performing: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Indirect vehicle | | 3 | | $ | 9 | | | $ | 9 | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | | 5 | | 798 | | | 798 | | | 122 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | 8 | | $ | 807 | | | $ | 807 | | | $ | 122 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table presents loans that were restructured during the three months ended March 31, 2014 (dollars in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 31-Mar-14 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | Pre-Modification Recorded | | Post-Modification Recorded | | Charge-offs and | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans | Investment | Investment | Specific Reserves | | | | | | | | | | | | | | | | | | | | | | | | | |
Performing: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Indirect vehicle | | 1 | | | $ | 5 | | | $ | 5 | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | | 3 | | | 1,039 | | | 1,039 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | 4 | | | $ | 1,044 | | | $ | 1,044 | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-Performing: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate | | 4 | | | $ | 1,439 | | | $ | 1,439 | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Indirect vehicle | | 18 | | | 108 | | | 108 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | | 4 | | | 532 | | | 532 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | 26 | | | $ | 2,079 | | | $ | 2,079 | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Of the troubled debt restructurings entered into during the past twelve months, $224 thousand subsequently defaulted during the three months ended March 31, 2015. Performing troubled debt restructurings are considered to have defaulted when they become 90 days or more past due post restructuring or are placed on non-accrual status. |
|
The following table presents the troubled debt restructurings activity during the three months ended March 31, 2015 (in thousands): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Performing | | Non-performing | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 15,603 | | | $ | 25,771 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Additions | | 2,346 | | | 807 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | — | | | (203 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Principal payments, net | | (111 | ) | | (619 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Removals | | (1,185 | ) | | (22 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transfer from/to performing | | 221 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transfer from/to non-performing | | — | | | (221 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 16,874 | | | $ | 25,513 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Loans removed from troubled debt restructuring status are those that were restructured in a previous calendar year at a market rate of interest and have performed in compliance with the modified terms. |
|
The following table presents the type of modification for loans that have been restructured during the three months ended March 31, 2015 (in thousands): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 31-Mar-15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Extended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Maturity, | | Delay in | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amortization | | Payments or | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| and Reduction | | Reduction of | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| of Interest Rate | | Interest Rate | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Indirect vehicle | $ | — | | | $ | 9 | | | $ | 9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | 791 | | | 2,353 | | | 3,144 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 791 | | | $ | 2,362 | | | $ | 3,153 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following table presents the activity in the allowance for credit losses, balance in allowance for credit losses and recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2015 and 2014 (in thousands): |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial | | Commercial | | Commercial | | Residential | | Construction | | Indirect | | Home | | Other consumer | | Unfunded | | Total |
collateralized by | real estate | real estate | real estate | vehicle | equity | commitments |
assignment of | | | | | | |
lease payments | | | | | | |
31-Mar-15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Three Months Ended | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 29,571 | | | $ | 9,962 | | | $ | 41,826 | | | $ | 6,646 | | | $ | 8,918 | | | $ | 1,687 | | | $ | 9,456 | | | $ | 1,960 | | | $ | 4,031 | | | $ | 114,057 | |
|
Charge-offs | | 569 | | | — | | | 2,034 | | | 579 | | | 3 | | | 874 | | | 444 | | | 424 | | | — | | | 4,927 | |
|
Recoveries | | 242 | | | 749 | | | 1,375 | | | 72 | | | 2 | | | 475 | | | 101 | | | 69 | | | — | | | 3,085 | |
|
Provision | | 3,583 | | | (886 | ) | | 791 | | | 621 | | | 556 | | | 427 | | | (333 | ) | | 469 | | | (254 | ) | | 4,974 | |
|
Ending balance | | $ | 32,827 | | | $ | 9,825 | | | $ | 41,958 | | | $ | 6,760 | | | $ | 9,473 | | | $ | 1,715 | | | $ | 8,780 | | | $ | 2,074 | | | $ | 3,777 | | | $ | 117,189 | |
|
| | | | | | | | | | | | | | | | | | | | |
Ending allowance balance attributable to loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Individually evaluated for impairment | | $ | 2,051 | | | $ | 1,534 | | | $ | 1,911 | | | $ | 3,045 | | | $ | 162 | | | $ | 14 | | | $ | 2,348 | | | $ | — | | | $ | 1,333 | | | $ | 12,398 | |
|
Collectively evaluated for impairment | | 30,320 | | | 8,291 | | | 39,435 | | | 3,715 | | | 9,305 | | | 1,701 | | | 6,432 | | | 2,074 | | | 2,444 | | | 103,717 | |
|
Acquired and accounted for under ASC 310-30 (1) | | 456 | | | — | | | 612 | | | — | | | 6 | | | — | | | — | | | — | | | — | | | 1,074 | |
|
Total ending allowance balance | | $ | 32,827 | | | $ | 9,825 | | | $ | 41,958 | | | $ | 6,760 | | | $ | 9,473 | | | $ | 1,715 | | | $ | 8,780 | | | $ | 2,074 | | | $ | 3,777 | | | $ | 117,189 | |
|
| | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Individually evaluated for impairment | | $ | 15,389 | | | $ | 3,653 | | | $ | 36,152 | | | $ | 15,123 | | | $ | 337 | | | $ | 164 | | | $ | 27,979 | | | $ | — | | | $ | — | | | $ | 98,797 | |
|
Collectively evaluated for impairment | | 3,243,263 | | | 1,624,378 | | | 2,489,488 | | | 490,435 | | | 183,768 | | | 272,941 | | | 213,099 | | | 77,645 | | | — | | | 8,595,017 | |
|
Acquired and accounted for under ASC 310-30 (1) | | 84,564 | | | — | | | 75,008 | | | 19,265 | | | 28,801 | | | — | | | 75 | | | 19,801 | | | — | | | 227,514 | |
|
Total ending loans balance | | $ | 3,343,216 | | | $ | 1,628,031 | | | $ | 2,600,648 | | | $ | 524,823 | | | $ | 212,906 | | | $ | 273,105 | | | $ | 241,153 | | | $ | 97,446 | | | $ | — | | | $ | 8,921,328 | |
|
31-Mar-14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Three Months Ended | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 23,461 | | | $ | 9,159 | | | $ | 51,628 | | | $ | 8,872 | | | $ | 6,856 | | | $ | 1,662 | | | $ | 8,478 | | | $ | 1,630 | | | $ | 1,716 | | | $ | 113,462 | |
|
Charge-offs | | 90 | | | — | | | 7,156 | | | 265 | | | 56 | | | 920 | | | 619 | | | 495 | | | — | | | 9,601 | |
|
Recoveries | | 1,628 | | | — | | | 485 | | | 519 | | | 99 | | | 442 | | | 133 | | | 78 | | | — | | | 3,384 | |
|
Provision | | (1,061 | ) | | (101 | ) | | 2,583 | | | (1,039 | ) | | (415 | ) | | 500 | | | 405 | | | 351 | | | (73 | ) | | 1,150 | |
|
Ending balance | | $ | 23,938 | | | $ | 9,058 | | | $ | 47,540 | | | $ | 8,087 | | | $ | 6,484 | | | $ | 1,684 | | | $ | 8,397 | | | $ | 1,564 | | | $ | 1,643 | | | $ | 108,395 | |
|
| | | | | | | | | | | | | | | | | | | | |
Ending allowance balance attributable to loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Individually evaluated for impairment | | $ | 6,160 | | | $ | 174 | | | $ | 4,151 | | | $ | 3,076 | | | $ | 195 | | | $ | 25 | | | $ | 1,395 | | | $ | — | | | $ | 665 | | | $ | 15,841 | |
|
Collectively evaluated for impairment | | 17,312 | | | 8,884 | | | 41,707 | | | 5,011 | | | 6,229 | | | 1,659 | | | 7,002 | | | 1,564 | | | 978 | | | 90,346 | |
|
Acquired and accounted for under ASC 310-30 (1) | | 466 | | | — | | | 1,682 | | | — | | | 60 | | | — | | | — | | | — | | | — | | | 2,208 | |
|
Total ending allowance balance | | $ | 23,938 | | | $ | 9,058 | | | $ | 47,540 | | | $ | 8,087 | | | $ | 6,484 | | | $ | 1,684 | | | $ | 8,397 | | | $ | 1,564 | | | $ | 1,643 | | | $ | 108,395 | |
|
| | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Individually evaluated for impairment | | $ | 41,191 | | | $ | 4,235 | | | $ | 57,960 | | | $ | 18,151 | | | $ | 782 | | | $ | 183 | | | $ | 24,810 | | | $ | — | | | $ | — | | | $ | 147,312 | |
|
Collectively evaluated for impairment | | 1,208,639 | | | 1,468,386 | | | 1,565,549 | | | 287,790 | | | 132,215 | | | 265,861 | | | 233,310 | | | 64,812 | | | — | | | 5,226,562 | |
|
Acquired and accounted for under ASC 310-30 (1) | | 30,976 | | | — | | | 95,506 | | | 5,121 | | | 36,752 | | | — | | | 110 | | | 25,976 | | | — | | | 194,441 | |
|
Total ending loans balance | | $ | 1,280,806 | | | $ | 1,472,621 | | | $ | 1,719,015 | | | $ | 311,062 | | | $ | 169,749 | | | $ | 266,044 | | | $ | 258,230 | | | $ | 90,788 | | | $ | — | | | $ | 5,568,315 | |
|
|
(1) Loans acquired in business combinations and accounted for under ASC Subtopic 310-30 “Receivables — Loans and Debt Securities Acquired with Deteriorated Credit Quality.” |
|
Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan losses. These acquired loans are segregated into three types: pass rated loans with no discount attributable to credit quality, non-impaired loans with a discount attributable at least in part to credit quality and impaired loans with evidence of significant credit deterioration. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
• | Pass rated loans (typically performing loans) are accounted for in accordance with ASC 310-20 "Nonrefundable Fees and Other Costs" as these loans do not have evidence of credit deterioration since origination. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
• | Non-impaired loans (typically performing substandard loans) are accounted for in accordance with ASC 310-30 if they display at least some level of credit deterioration since origination. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
• | Impaired loans (typically substandard loans on non-accrual status) are accounted for in accordance with ASC 310-30 as they display significant credit deterioration since origination. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
For pass rated loans (non-purchased credit-impaired loans), the difference between the estimated fair value of the loans (computed on a loan by loan basis) and the principal outstanding is accreted over the remaining life of the loans. We anticipate recording a provision for the acquired portfolio in future quarters related to renewing Taylor loans which will largely offset the accretion from the pass rated loans. |
|
In accordance with ASC 310-30, for both purchased non-impaired loans and purchased credit-impaired loans, the difference between contractually required payments at acquisition and the cash flows expected to be collected is referred to as the non-accretable difference. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. |
|
Substantially all of the loans acquired in transactions with the FDIC displayed at least some level of credit deterioration and as such are included as non-impaired and impaired loans as described immediately above. |
|
During the three months ended March 31, 2015, there was a negative provision for credit losses of $429 thousand and net recoveries of $220 thousand, in relation to 16 pools of purchased loans with a total carrying amount of $71.7 million as of March 31, 2015. There was $1.1 million and $1.3 million in allowance for loan losses related to these purchased loans at March 31, 2015 and December 31, 2014, respectively. The provision for credit losses and accompanying charge-offs are included in the table above. |
|
Changes in the accretable yield for loans acquired and accounted for under ASC 310-30 were as follows for the three months ended March 31, 2015 and 2014 (in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2015 | | 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 7,434 | | | $ | 2,337 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accretion | | (1,930 | ) | | (550 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | 863 | | | 574 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at end of period | | $ | 6,367 | | | $ | 2,361 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
In our FDIC-assisted transactions, the fair value of purchased credit-impaired loans, on the acquisition date, was determined based on assigned risk ratings, expected cash flows and the fair value of loan collateral. The fair value of loans that were non-impaired was determined based on estimates of losses on defaults and other market factors. Due to the loss-share agreements with the FDIC, we recorded a receivable (FDIC indemnification asset) from the FDIC equal to the present value of the corresponding reimbursement percentages on the estimated losses embedded in the loan portfolio. |
|
When cash flow estimates are adjusted downward for a particular loan pool, the FDIC indemnification asset is increased. An allowance for loan and lease losses is established for the impairment of the loans. A provision for credit losses is recognized for the difference between the increase in the FDIC indemnification asset and the decrease in cash flows. |
|
When cash flow estimates are adjusted upward for a particular loan pool, the FDIC indemnification asset is decreased. The difference between the decrease in the FDIC indemnification asset and the increase in cash flows is accreted over the estimated life of the loan pool. |
|
When cash flow estimates are adjusted downward for covered foreclosed real estate, the FDIC indemnification asset is increased. A charge is recognized for the difference between the increase in the FDIC indemnification asset and the decrease in cash flows. |
|
When cash flow estimates are adjusted upward for covered foreclosed real estate, the FDIC indemnification asset is decreased. Any write-down after the transfer to covered foreclosed real estate is reversed. |
|
In both scenarios, the clawback liability (the amount the FDIC requires the Company to pay back if certain thresholds are met) will increase or decrease accordingly. |
|
For other loans acquired through business combinations, the fair value of purchased credit-impaired loans, on the acquisition date, was determined based on assigned risk ratings, expected cash flows and the fair value of loan collateral. The fair value of loans that were non-impaired was determined based on estimates of losses on defaults and other market factors. |
|
The carrying amount of loans acquired through a business combination by loan type are as follows (in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
31-Mar-15 | | Purchased | | Purchased Non-Credit-Impaired | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Credit-Impaired | Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Covered loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial related (1) | | $ | 139 | | | $ | 4 | | | $ | 143 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | 837 | | | 273 | | | 1,110 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | 19,570 | | | 13,669 | | | 33,239 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction real estate | | — | | | 1,269 | | | 1,269 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | 1,134 | | | 19,794 | | | 20,928 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total covered loans | | $ | 21,680 | | | $ | 35,009 | | | $ | 56,689 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Estimated (payable) receivable amount from the FDIC under the loss-share agreement (2) | | $ | 482 | | | $ | 4,125 | | | $ | 4,607 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Non-covered loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial related (1) | | $ | 7,033 | | | $ | 11,495 | | | $ | 18,528 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial loans | | 76,279 | | | 1,285,210 | | | 1,361,489 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial loans collateralized by assignment of lease payments | | — | | | 114,829 | | | 114,829 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial real estate | | 41,769 | | | 840,863 | | | 882,632 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Construction real estate | | 27,532 | | | 89,200 | | | 116,732 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Other | | 18,212 | | | 198,740 | | | 216,952 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total non-covered loans | | $ | 170,825 | | | $ | 2,540,337 | | | $ | 2,711,162 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(1) | Commercial related loans include commercial, commercial real estate and construction real estate for the InBank, Heritage and Benchmark FDIC-assisted transactions. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(2) | Estimated reimbursable amounts from the FDIC under the loss-share agreement exclude $1.3 million in amounts due to the FDIC related to covered other real estate owned. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Outstanding balances on purchased loans from the FDIC were $86.5 million and $95.1 million as of March 31, 2015 and December 31, 2014, respectively. The related carrying amount on loans purchased from the FDIC was $81.6 million and $91.4 million as of March 31, 2015 and December 31, 2014, respectively. |
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Effective April 1, 2014, the losses on commercial related loans (commercial, commercial real estate and construction real estate) acquired in connection with the Heritage FDIC-assisted transaction ceased being covered under the loss-share agreement for that transaction. The carrying amount of those loans was $3.0 million as of March 31, 2015. Any recoveries, net of expenses, received on commercial related loans on which losses were incurred prior to April 1, 2014 will continue to be covered (and any such net recoveries must be shared with the FDIC in accordance with the loss-share agreement) through March 31, 2017. The losses on consumer related loans acquired in connection with the Heritage FDIC-assisted transaction will continue to be covered under the loss-share agreement through March 31, 2019. |
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The losses on commercial related loans acquired in connection with the Benchmark FDIC-assisted transaction ceased to be covered under the loss-share agreement for that transaction effective January 1, 2015. The carrying amount of those loans was $2.8 million as of March 31, 2015. Any recoveries, net of expenses, received on commercial related loans on which losses were incurred prior to January 1, 2015 will continue to be covered (and any such net recoveries must be shared with the FDIC in accordance with the loss-share agreements) through December 31, 2017. The losses on consumer related loans acquired in connection with the Benchmark FDIC-assisted transaction will continue to be covered under the loss-share agreements through December 31, 2019. |
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Effective July 1, 2015, the losses on commercial related loans acquired in connection with Broadway and New Century FDIC-assisted transactions will cease to be covered under the loss-share agreements for those transactions. Any recoveries, net of expenses, received on commercial related loans on which losses were incurred prior to July 1, 2015 will continue to be covered (and any such net recoveries must be shared with the FDIC in accordance with the loss-share agreements) through June 30, 2018. The losses on consumer related loans acquired in connection with the Broadway and New Century FDIC-assisted transactions will continue to be covered under the loss-share agreements through June 30, 2020. |