Loans, Allowance for Loan and Lease Losses, and Reserve for Off-Balance Sheet Credit Commitments | 9 Months Ended |
Sep. 30, 2013 |
Loans, Allowance for Loan and Lease Losses, and Reserve for Off-Balance Sheet Credit Commitments | ' |
Loans, Allowance for Loan and Lease Losses, and Reserve for Off-Balance Sheet Credit Commitments | ' |
Note 6. Loans, Allowance for Loan and Lease Losses, and Reserve for Off-Balance Sheet Credit Commitments |
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The following is a summary of the major categories of loans: |
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Loans and Leases |
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| | September 30, | | December 31, | | | | | | | | | | | | | | | | | | | |
(in thousands) | | 2013 | | 2012 | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 7,126,158 | | $ | 6,211,353 | | | | | | | | | | | | | | | | | | | |
Commercial real estate mortgages | | 3,077,183 | | 2,739,284 | | | | | | | | | | | | | | | | | | | |
Residential mortgages | | 4,418,231 | | 3,962,205 | | | | | | | | | | | | | | | | | | | |
Real estate construction | | 380,489 | | 313,190 | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 681,879 | | 711,750 | | | | | | | | | | | | | | | | | | | |
Installment | | 152,107 | | 142,793 | | | | | | | | | | | | | | | | | | | |
Lease financing | | 730,086 | | 737,720 | | | | | | | | | | | | | | | | | | | |
Loans and leases, excluding covered loans | | 16,566,133 | | 14,818,295 | | | | | | | | | | | | | | | | | | | |
Less: Allowance for loan and lease losses | | (295,947 | ) | (277,888 | ) | | | | | | | | | | | | | | | | | | |
Loans and leases, excluding covered loans, net | | 16,270,186 | | 14,540,407 | | | | | | | | | | | | | | | | | | | |
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Covered loans | | 780,072 | | 1,031,004 | | | | | | | | | | | | | | | | | | | |
Less: Allowance for loan losses | | (25,882 | ) | (44,781 | ) | | | | | | | | | | | | | | | | | | |
Covered loans, net | | 754,190 | | 986,223 | | | | | | | | | | | | | | | | | | | |
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Total loans and leases. | | $ | 17,346,205 | | $ | 15,849,299 | | | | | | | | | | | | | | | | | | | |
Total loans and leases, net | | $ | 17,024,376 | | $ | 15,526,630 | | | | | | | | | | | | | | | | | | | |
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The loan amounts above include unamortized fees, net of deferred costs, of $2.4 million and $5.9 million as of September 30, 2013 and December 31, 2012, respectively. |
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Concentrations of credit risk arise when a number of clients are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. Although the Company’s lending activities are predominantly in California, and to a lesser extent, New York and Nevada, the Company has various specialty lending businesses that lend to businesses located throughout the United States of America. Excluding covered loans, at September 30, 2013, California represented 77 percent of total loans outstanding and New York and Nevada represented 8 percent and 2 percent, respectively. The remaining 13 percent of total loans outstanding represented other states. Although the Company has a diversified loan portfolio, a substantial portion of the loan portfolio and credit performance depends on the economic stability of Southern California. |
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Within the Company’s covered loan portfolio at September 30, 2013, the five states with the largest concentration were California (36 percent), Texas (11 percent), Nevada (8 percent), Arizona (5 percent) and Ohio (5 percent). The remaining 35 percent of total covered loans outstanding represented other states. |
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Covered Loans |
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Covered loans represent loans acquired from the FDIC that are subject to loss-sharing agreements. Covered loans were $780.1 million as of September 30, 2013 and $1.03 billion as of December 31, 2012. Covered loans, net of allowance for loan losses, were $754.2 million at September 30, 2013 and $986.2 million at December 31, 2012. |
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The following is a summary of the major categories of covered loans: |
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| | September 30, | | December 31, | | | | | | | | | | | | | | | | | | | |
(in thousands) | | 2013 | | 2012 | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 10,015 | | $ | 10,561 | | | | | | | | | | | | | | | | | | | |
Commercial real estate mortgages | | 719,207 | | 931,758 | | | | | | | | | | | | | | | | | | | |
Residential mortgages | | 5,030 | | 5,652 | | | | | | | | | | | | | | | | | | | |
Real estate construction | | 41,625 | | 78,554 | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 3,672 | | 3,790 | | | | | | | | | | | | | | | | | | | |
Installment | | 523 | | 689 | | | | | | | | | | | | | | | | | | | |
Covered loans | | 780,072 | | 1,031,004 | | | | | | | | | | | | | | | | | | | |
Less: Allowance for loan losses | | (25,882 | ) | (44,781 | ) | | | | | | | | | | | | | | | | | | |
Covered loans, net | | $ | 754,190 | | $ | 986,223 | | | | | | | | | | | | | | | | | | | |
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The following table provides information on covered loans and loss-sharing terms by acquired entity: |
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(in thousands) | | Imperial | | 1st Pacific | | Sun West | | Nevada | | Total | | | | | | | | | | |
Capital | Bank | Bank | Commerce | | | | | | | | | |
Bank | | | Bank | | | | | | | | | |
Carrying value of covered loans as of: | | | | | | | | | | | | | | | | | | | | |
September 30, 2013 | | $ | 680,427 | | $ | 45,123 | | $ | 25,948 | | $ | 28,574 | | $ | 780,072 | | | | | | | | | | |
December 31, 2012 | | $ | 893,031 | | $ | 70,240 | | $ | 34,803 | | $ | 32,930 | | $ | 1,031,004 | | | | | | | | | | |
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Expiration date of FDIC loss sharing: | | | | | | | | | | | | | | | | | | | | |
Commercial (1) | | 12/31/16 | | 6/30/15 | | 6/30/15 | | 6/30/16 | | | | | | | | | | | | |
Residential | | 12/31/19 | | 5/30/20 | | 5/30/20 | | 4/30/21 | | | | | | | | | | | | |
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Termination date of FDIC loss-sharing agreements: | | | | | | | | | | | | | | | | | | | | |
Commercial (1) | | 12/19/17 | | 5/8/18 | | 5/29/18 | | 6/30/19 | | | | | | | | | | | | |
Residential | | 12/31/19 | | 5/30/20 | | 5/30/20 | | 4/30/21 | | | | | | | | | | | | |
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(1) The Company is subject to sharing 80% of its recoveries with the FDIC up to the termination dates of the commercial loss-sharing agreements. |
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The Company evaluated the acquired loans from its FDIC-assisted acquisitions and concluded that all loans, with the exception of a small population of acquired loans, would be accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). Loans are accounted for under ASC 310-30 when there is evidence of credit deterioration since origination and for which it is probable, at acquisition, that the Company would be unable to collect all contractually required payments. Interest income is recognized on all acquired impaired loans through accretion of the difference between the carrying amount of the loans and their expected cash flows. |
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The excess of cash flows expected to be collected over the carrying value of the underlying acquired impaired loans is referred to as the accretable yield. This amount is not reported in the consolidated balance sheets, but is accreted into interest income over the remaining estimated lives of the underlying pools of loans. Changes in the accretable yield for acquired impaired loans were as follows for the nine months ended September 30, 2013 and 2012: |
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| | For the nine months ended | | | | | | | | | | | | | | | | | | | |
September 30, | | | | | | | | | | | | | | | | | | |
(in thousands) | | 2013 | | 2012 | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 295,813 | | $ | 436,374 | | | | | | | | | | | | | | | | | | | |
Accretion | | (48,424 | ) | (62,189 | ) | | | | | | | | | | | | | | | | | | |
Reclassifications from (to) nonaccretable yield | | 26,990 | | (4,042 | ) | | | | | | | | | | | | | | | | | | |
Disposals and other | | (41,930 | ) | (51,854 | ) | | | | | | | | | | | | | | | | | | |
Balance, end of period | | $ | 232,449 | | $ | 318,289 | | | | | | | | | | | | | | | | | | | |
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The factors that most significantly affect estimates of cash flows expected to be collected, and accordingly the accretable yield balance, include: (i) changes in credit assumptions, including both credit loss amounts and timing; (ii) changes in prepayment assumptions; and (iii) changes in interest rates for variable-rate loans. Reclassifications between accretable yield and nonaccretable yield may vary from period to period as the Company periodically updates its cash flow projections. The reclassification of nonaccretable yield to accretable yield during 2013 was principally driven by positive changes in cash flows, resulting mainly from changes in credit assumptions. |
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The Company recorded an indemnification asset related to its FDIC-assisted acquisitions, which represents the present value of the expected reimbursement from the FDIC for expected losses on acquired loans, OREO and unfunded commitments. The FDIC indemnification asset from all FDIC-assisted acquisitions was $101.1 million at September 30, 2013 and $150.0 million at December 31, 2012. |
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Credit Quality on Loans and Leases, Excluding Covered Loans |
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Allowance for Loan and Lease Losses and Reserve for Off-Balance Sheet Credit Commitments |
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The Company accounts for the credit risk associated with lending activities through its allowance for loan and lease losses, reserve for off-balance sheet credit commitments and provision for credit losses. The provision is the expense recognized in the consolidated statements of income to adjust the allowance and reserve to the levels deemed appropriate by management, as determined through application of the Company’s allowance methodology procedures. The provision for credit losses reflects management’s judgment of the adequacy of the allowance for loan and lease losses and the reserve for off-balance sheet credit commitments. It is determined through quarterly analytical reviews of the loan and commitment portfolios and consideration of such other factors as the Company’s loan and lease loss experience, trends in problem loans, concentrations of credit risk, underlying collateral values, and current economic conditions, as well as the results of the Company’s ongoing credit review process. As conditions change, the Company’s level of provisioning and the allowance for loan and lease losses and reserve for off-balance sheet credit commitments may change. |
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The relative significance of risk considerations used in measuring the allowance for loan and lease losses will vary by portfolio segment. For commercial loans, the primary risk consideration is a borrower’s ability to generate sufficient cash flows to repay their loan. Secondary considerations include the creditworthiness of guarantors and the valuation of collateral. In addition to the creditworthiness of a borrower, the type and location of real estate collateral is an important risk factor for commercial real estate and real estate construction loans. The primary risk considerations for consumer loans are a borrower’s personal cash flow and liquidity, as well as collateral value. |
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For commercial, non-homogenous loans that are not impaired, the Bank derives loss factors for each risk grade and loan type via a process that begins with estimates of probable losses inherent in the portfolio based upon various statistical analyses. The factors considered in the analysis include loan type, migration analysis, in which historical delinquency and credit loss experience is applied to the portfolio, as well as analyses that reflect current trends and conditions. Each portfolio of smaller balance homogeneous loans, including residential first mortgages, installment, revolving credit and most other consumer loans, is collectively evaluated for loss potential. The quantitative portion of the allowance for loan and lease losses is adjusted for qualitative factors to account for model imprecision and to incorporate the range of probable outcomes inherent in the estimates used for the allowance. The qualitative portion of the allowance attempts to incorporate the risks inherent in the portfolio, economic uncertainties, competition, and regulatory requirements and other subjective factors such as changes in underwriting standards. It also considers overall portfolio indicators, including current and historical credit losses; delinquent, nonperforming and criticized loans; portfolio concentrations; trends in volumes and terms of loans; and economic trends in the broad market and in specific industries. |
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A portion of the allowance for loan and lease losses is attributed to impaired loans that are individually measured for impairment. This measurement considers all available evidence, including as appropriate, the probability that a specific loan will default, the expected exposure of a loan at default, an estimate of loss given default, the present value of expected future cash flows discounted using the loan’s contractual effective rate, the secondary market value of the loan and the fair value of collateral. |
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The allowance for loan and lease losses is decreased by the amount of charge-offs and increased by the amount of recoveries. Generally, commercial, commercial real estate and real estate construction loans are charged off when it is determined that advances to the borrower are in excess of the calculated current fair value of the collateral and if a borrower is deemed incapable of repayment of unsecured debt, there is little or no prospect for near term improvement and no realistic strengthening action of significance pending. Consumer loans are charged-off based on delinquency, ranging from 60 days for overdrafts to 180 days for secured consumer loans, or earlier when it is determined that the loan is uncollectible due to a triggering event, such as bankruptcy, fraud or death. |
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The following is a summary of activity in the allowance for loan and lease losses and period-end recorded investment balances of loans evaluated for impairment, excluding covered loans, for the three and nine months ended September 30, 2013 and 2012. Activity is provided by loan portfolio segment which is consistent with the Company’s methodology for determining the allowance for loan and lease losses. |
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(in thousands) | | Commercial | | Commercial | | Residential | | Real Estate | | Home Equity | | Installment | | Unallocated | | Total | |
-1 | Real Estate | Mortgages | Construction | Loans and |
| Mortgages | | | Lines of Credit |
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Three months ended September 30, 2013 | | | | | | | | | | | | | | | | | |
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Allowance for loan and lease losses: | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 116,619 | | $ | 53,339 | | $ | 8,004 | | $ | 8,335 | | $ | 5,400 | | $ | 1,355 | | $ | 96,862 | | $ | 289,914 | |
Provision (reduction) for credit losses (2) | | (14,173 | ) | (2,829 | ) | 5,070 | | (1,589 | ) | 3,092 | | 317 | | 9,363 | | (749 | ) |
Charge-offs | | (488 | ) | (1,270 | ) | — | | — | | (225 | ) | (18 | ) | — | | (2,001 | ) |
Recoveries | | 4,863 | | 686 | | 40 | | 2,945 | | 31 | | 218 | | — | | 8,783 | |
Net recoveries (charge-offs) | | 4,375 | | (584 | ) | 40 | | 2,945 | | (194 | ) | 200 | | — | | 6,782 | |
Ending balance | | $ | 106,821 | | $ | 49,926 | | $ | 13,114 | | $ | 9,691 | | $ | 8,298 | | $ | 1,872 | | $ | 106,225 | | $ | 295,947 | |
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Nine months ended September 30, 2013 | | | | | | | | | | | | | | | | | |
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Allowance for loan and lease losses: | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 104,731 | | $ | 48,901 | | $ | 10,558 | | $ | 11,784 | | $ | 7,283 | | $ | 1,858 | | $ | 92,773 | | $ | 277,888 | |
Provision (reduction) for credit losses (2) | | (7,313 | ) | 572 | | 2,547 | | (10,386 | ) | 946 | | (854 | ) | 13,452 | | (1,036 | ) |
Charge-offs | | (4,719 | ) | (1,315 | ) | (106 | ) | (100 | ) | (500 | ) | (370 | ) | — | | (7,110 | ) |
Recoveries | | 14,122 | | 1,768 | | 115 | | 8,393 | | 569 | | 1,238 | | — | | 26,205 | |
Net recoveries (charge-offs) | | 9,403 | | 453 | | 9 | | 8,293 | | 69 | | 868 | | — | | 19,095 | |
Ending balance | | $ | 106,821 | | $ | 49,926 | | $ | 13,114 | | $ | 9,691 | | $ | 8,298 | | $ | 1,872 | | $ | 106,225 | | $ | 295,947 | |
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Ending balance of allowance: | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 344 | | $ | 602 | | $ | 232 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 1,178 | |
Collectively evaluated for impairment | | 106,477 | | 49,324 | | 12,882 | | 9,691 | | 8,298 | | 1,872 | | 106,225 | | 294,769 | |
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Loans and leases, excluding covered loans | | | | | | | | | | | | | | | | | |
Ending balance of loans and leases: | | | | | | | | | | | | | | | | | |
Loans and leases, excluding covered loans | | $ | 7,856,244 | | $ | 3,077,183 | | $ | 4,418,231 | | $ | 380,489 | | $ | 681,879 | | $ | 152,107 | | $ | — | | $ | 16,566,133 | |
Individually evaluated for impairment | | 32,727 | | 38,546 | | 6,767 | | 30,190 | | 2,350 | | — | | — | | 110,580 | |
Collectively evaluated for impairment | | 7,823,517 | | 3,038,637 | | 4,411,464 | | 350,299 | | 679,529 | | 152,107 | | — | | 16,455,553 | |
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(1) Includes lease financing loans. |
(2) Provision for credit losses in the allowance rollforward for the three months ended September 30, 2013 includes total transfers to the reserve for off-balance sheet credit commitments of $0.7 million. Provision for credit losses in the allowance rollforward for the nine months ended September 30, 2013 includes total transfers to the reserve for off-balance sheet credit commitments of $1.0 million. There was no other provision for credit losses recognized for the three and nine months ended September 30, 2013. |
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(in thousands) | | Commercial | | Commercial | | Residential | | Real Estate | | Home Equity | | Installment | | Unallocated | | Total | |
-1 | Real Estate | Mortgages | Construction | Loans and |
| Mortgages | | | Lines of Credit |
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Three months ended September 30, 2012 | | | | | | | | | | | | | | | | | |
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Allowance for loan and lease losses: | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 93,981 | | $ | 49,715 | | $ | 12,490 | | $ | 14,810 | | $ | 7,656 | | $ | 1,774 | | $ | 89,108 | | $ | 269,534 | |
Provision (reduction) for credit losses (2) | | 6,333 | | (1,298 | ) | 1,327 | | (3,898 | ) | 47 | | (314 | ) | (1,106 | ) | 1,091 | |
Charge-offs | | (12,163 | ) | (444 | ) | (1,030 | ) | (310 | ) | (43 | ) | (134 | ) | — | | (14,124 | ) |
Recoveries | | 7,227 | | 203 | | 495 | | 3,415 | | 11 | | 588 | | — | | 11,939 | |
Net (charge-offs) recoveries | | (4,936 | ) | (241 | ) | (535 | ) | 3,105 | | (32 | ) | 454 | | — | | (2,185 | ) |
Ending balance | | $ | 95,378 | | $ | 48,176 | | $ | 13,282 | | $ | 14,017 | | $ | 7,671 | | $ | 1,914 | | $ | 88,002 | | $ | 268,440 | |
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Nine months ended September 30, 2012 | | | | | | | | | | | | | | | | | |
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Allowance for loan and lease losses: | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 83,514 | | $ | 48,451 | | $ | 14,122 | | $ | 20,155 | | $ | 8,077 | | $ | 1,972 | | $ | 86,266 | | $ | 262,557 | |
Provision (reduction) for credit losses (2) | | 3,425 | | (481 | ) | 732 | | (4,508 | ) | 588 | | (655 | ) | 1,736 | | 837 | |
Charge-offs | | (22,382 | ) | (1,318 | ) | (2,333 | ) | (9,769 | ) | (1,077 | ) | (959 | ) | — | | (37,838 | ) |
Recoveries | | 30,821 | | 1,524 | | 761 | | 8,139 | | 83 | | 1,556 | | — | | 42,884 | |
Net (charge-offs) recoveries | | 8,439 | | 206 | | (1,572 | ) | (1,630 | ) | (994 | ) | 597 | | — | | 5,046 | |
Ending balance | | $ | 95,378 | | $ | 48,176 | | $ | 13,282 | | $ | 14,017 | | $ | 7,671 | | $ | 1,914 | | $ | 88,002 | | $ | 268,440 | |
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Ending balance of allowance: | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 1,167 | | $ | 1,874 | | $ | 185 | | $ | 1,467 | | $ | 138 | | $ | — | | $ | — | | $ | 4,831 | |
Collectively evaluated for impairment | | 94,211 | | 46,302 | | 13,097 | | 12,550 | | 7,533 | | 1,914 | | 88,002 | | 263,609 | |
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Loans and leases, excluding covered loans | | | | | | | | | | | | | | | | | |
Ending balance of loans and leases: | | | | | | | | | | | | | | | | | |
Loans and leases, excluding covered loans | | $ | 6,264,562 | | $ | 2,436,218 | | $ | 3,897,690 | | $ | 269,583 | | $ | 718,966 | | $ | 137,632 | | $ | — | | $ | 13,724,651 | |
Individually evaluated for impairment | | 34,731 | | 58,217 | | 11,342 | | 56,582 | | 4,496 | | 449 | | — | | 165,817 | |
Collectively evaluated for impairment | | 6,229,831 | | 2,378,001 | | 3,886,348 | | 213,001 | | 714,470 | | 137,183 | | — | | 13,558,834 | |
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(1) Includes lease financing loans. |
(2) Provision for credit losses in the allowance rollforward for the three months ended September 30, 2012 includes total provision expense of $2.0 million, net of total transfers to the reserve for off-balance sheet credit commitments of $0.9 million. Provision for credit losses for the nine months ended September 30, 2012 includes total provision expense of $3.0 million, net of total transfers to the reserve for off-balance sheet credit commitments of $2.2 million. |
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Off-balance sheet credit exposures include loan commitments and letters of credit. The following table provides a summary of activity in the reserve for off-balance sheet credit commitments for the three and nine months ended September 30, 2013 and 2012: |
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| | For the three months ended | | For the nine months ended | | | | | | | | | | | | | |
September 30, | September 30, | | | | | | | | | | | | |
(in thousands) | | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 25,124 | | $ | 24,351 | | $ | 24,837 | | $ | 23,097 | | | | | | | | | | | | | |
Transfers from allowance for loan and lease losses | | 749 | | 909 | | 1,036 | | 2,163 | | | | | | | | | | | | | |
Balance, end of period | | $ | 25,873 | | $ | 25,260 | | $ | 25,873 | | $ | 25,260 | | | | | | | | | | | | | |
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Impaired Loans and Leases |
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Information on impaired loans, excluding covered loans, at September 30, 2013, December 31, 2012 and September 30, 2012 is provided in the following tables: |
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| | | | | | | | For the three months ended | | For the nine months ended | | | | |
| | | | Unpaid | | | | September 30, 2013 | | September 30, 2013 | | | | |
| | | | Contractual | | | | Average | | Interest | | Average | | Interest | | | | |
| | Recorded | | Principal | | Related | | Recorded | | Income | | Recorded | | Income | | | | |
(in thousands) | | Investment | | Balance | | Allowance | | Investment | | Recognized | | Investment | | Recognized | | | | |
September 30, 2013 | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 25,233 | | $ | 25,488 | | $ | — | | $ | 26,255 | | $ | 593 | | $ | 22,584 | | $ | 1,440 | | | | |
Commercial real estate mortgages | | 33,133 | | 37,754 | | — | | 29,977 | | 440 | | 33,060 | | 1,102 | | | | |
Residential mortgages: | | | | | | | | | | | | | | | | | | |
Fixed | | 2,031 | | 2,155 | | — | | 2,019 | | 33 | | 2,860 | | 75 | | | | |
Variable | | 3,062 | | 3,418 | | — | | 3,670 | | 47 | | 4,062 | | 116 | | | | |
Total residential mortgages | | 5,093 | | 5,573 | | — | | 5,689 | | 80 | | 6,922 | | 191 | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | |
Construction | | 16,259 | | 21,064 | | — | | 16,262 | | 233 | | 17,904 | | 791 | | | | |
Land | | 13,931 | | 27,092 | | — | | 14,056 | | 224 | | 16,506 | | 511 | | | | |
Total real estate construction | | 30,190 | | 48,156 | | — | | 30,318 | | 457 | | 34,410 | | 1,302 | | | | |
Home equity loans and lines of credit | | 2,350 | | 3,375 | | — | | 2,803 | | 47 | | 2,827 | | 81 | | | | |
Installment: | | | | | | | | | | | | | | | | | | |
Consumer | | — | | — | | — | | — | | — | | 112 | | — | | | | |
Total installment | | — | | — | | — | | — | | — | | 112 | | — | | | | |
Total with no related allowance | | $ | 95,999 | | $ | 120,346 | | $ | — | | $ | 95,042 | | $ | 1,617 | | $ | 99,915 | | $ | 4,116 | | | | |
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With an allowance recorded: | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 7,494 | | $ | 9,168 | | $ | 344 | | $ | 7,567 | | $ | 156 | | $ | 7,556 | | $ | 513 | | | | |
Commercial real estate mortgages | | 5,413 | | 5,810 | | 602 | | 10,262 | | 45 | | 11,018 | | 361 | | | | |
Residential mortgages: | | | | | | | | | | | | | | | | | | |
Fixed | | — | | — | | — | | — | | — | | 116 | | — | | | | |
Variable | | 1,674 | | 1,688 | | 232 | | 1,684 | | 14 | | 842 | | 55 | | | | |
Total residential mortgages | | 1,674 | | 1,688 | | 232 | | 1,684 | | 14 | | 958 | | 55 | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | |
Land | | — | | — | | — | | — | | — | | 3,213 | | 213 | | | | |
Total real estate construction | | — | | — | | — | | — | | — | | 3,213 | | 213 | | | | |
Home equity loans and lines of credit | | — | | — | | — | | — | | — | | 225 | | — | | | | |
Total with an allowance | | $ | 14,581 | | $ | 16,666 | | $ | 1,178 | | $ | 19,513 | | $ | 215 | | $ | 22,970 | | $ | 1,142 | | | | |
| | | | | | | | | | | | | | | | | | |
Total impaired loans by type: | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 32,727 | | $ | 34,656 | | $ | 344 | | $ | 33,822 | | $ | 749 | | $ | 30,140 | | $ | 1,953 | | | | |
Commercial real estate mortgages | | 38,546 | | 43,564 | | 602 | | 40,239 | | 485 | | 44,078 | | 1,463 | | | | |
Residential mortgages | | 6,767 | | 7,261 | | 232 | | 7,373 | | 94 | | 7,880 | | 246 | | | | |
Real estate construction | | 30,190 | | 48,156 | | — | | 30,318 | | 457 | | 37,623 | | 1,515 | | | | |
Home equity loans and lines of credit | | 2,350 | | 3,375 | | — | | 2,803 | | 47 | | 3,052 | | 81 | | | | |
Installment | | — | | — | | — | | — | | — | | 112 | | — | | | | |
Total impaired loans | | $ | 110,580 | | $ | 137,012 | | $ | 1,178 | | $ | 114,555 | | $ | 1,832 | | $ | 122,885 | | $ | 5,258 | | | | |
|
(in thousands) | | Recorded | | Unpaid | | Related | | | | | | | | | | | | | | | | |
Investment | Contractual | Allowance | | | | | | | | | | | | | | | |
| Principal | | | | | | | | | | | | | | | | |
| Balance | | | | | | | | | | | | | | | | |
December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 18,761 | | $ | 24,135 | | $ | — | | | | | | | | | | | | | | | | |
Commercial real estate mortgages | | 42,882 | | 49,110 | | — | | | | | | | | | | | | | | | | |
Residential mortgages: | | | | | | | | | | | | | | | | | | | | | | |
Fixed | | 3,482 | | 3,757 | | — | | | | | | | | | | | | | | | | |
Variable | | 4,865 | | 5,437 | | — | | | | | | | | | | | | | | | | |
Total residential mortgages | | 8,347 | | 9,194 | | — | | | | | | | | | | | | | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | | | | | |
Construction | | 19,762 | | 33,267 | | — | | | | | | | | | | | | | | | | |
Land | | 25,748 | | 41,016 | | — | | | | | | | | | | | | | | | | |
Total real estate construction | | 45,510 | | 74,283 | | — | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 3,562 | | 4,660 | | — | | | | | | | | | | | | | | | | |
Installment: | | | | | | | | | | | | | | | | | | | | | | |
Consumer | | 449 | | 927 | | — | | | | | | | | | | | | | | | | |
Total installment | | 449 | | 927 | | — | | | | | | | | | | | | | | | | |
Total with no related allowance | | $ | 119,511 | | $ | 162,309 | | $ | — | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 7,516 | | $ | 8,038 | | $ | 952 | | | | | | | | | | | | | | | | |
Commercial real estate mortgages | | 10,203 | | 10,783 | | 1,326 | | | | | | | | | | | | | | | | |
Residential mortgages: | | | | | | | | | | | | | | | | | | | | | | |
Fixed | | 463 | | 507 | | 9 | | | | | | | | | | | | | | | | |
Total residential mortgages | | 463 | | 507 | | 9 | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 899 | | 965 | | 116 | | | | | | | | | | | | | | | | |
Total with an allowance | | $ | 19,081 | | $ | 20,293 | | $ | 2,403 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans by type: | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 26,277 | | $ | 32,173 | | $ | 952 | | | | | | | | | | | | | | | | |
Commercial real estate mortgages | | 53,085 | | 59,893 | | 1,326 | | | | | | | | | | | | | | | | |
Residential mortgages | | 8,810 | | 9,701 | | 9 | | | | | | | | | | | | | | | | |
Real estate construction | | 45,510 | | 74,283 | | — | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 4,461 | | 5,625 | | 116 | | | | | | | | | | | | | | | | |
Installment | | 449 | | 927 | | — | | | | | | | | | | | | | | | | |
Total impaired loans | | $ | 138,592 | | $ | 182,602 | | $ | 2,403 | | | | | | | | | | | | | | | | |
|
| | | | | | | | For the three months ended | | For the nine months ended | | | | |
| | | | Unpaid | | | | September 30, 2012 | | September 30, 2012 | | | | |
| | | | Contractual | | | | Average | | Interest | | Average | | Interest | | | | |
| | Recorded | | Principal | | Related | | Recorded | | Income | | Recorded | | Income | | | | |
(in thousands) | | Investment | | Balance | | Allowance | | Investment | | Recognized | | Investment | | Recognized | | | | |
September 30, 2012 | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 28,575 | | $ | 39,624 | | $ | — | | $ | 30,476 | | $ | — | | $ | 24,732 | | $ | — | | | | |
Commercial real estate mortgages | | 40,825 | | 46,081 | | — | | 34,597 | | 34 | | 25,767 | | 158 | | | | |
Residential mortgages: | | | | | | | | | | | | | | | | | | |
Fixed | | 4,199 | | 4,613 | | — | | 3,014 | | — | | 3,047 | | — | | | | |
Variable | | 3,528 | | 3,968 | | — | | 4,893 | | 9 | | 5,010 | | 48 | | | | |
Total residential mortgages | | 7,727 | | 8,581 | | — | | 7,907 | | 9 | | 8,057 | | 48 | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | |
Construction | | 29,446 | | 42,870 | | — | | 34,137 | | 245 | | 29,189 | | 487 | | | | |
Land | | 19,038 | | 23,606 | | — | | 18,987 | | 35 | | 22,763 | | 35 | | | | |
Total real estate construction | | 48,484 | | 66,476 | | — | | 53,124 | | 280 | | 51,952 | | 522 | | | | |
Home equity loans and lines of credit | | 3,297 | | 4,370 | | — | | 3,252 | | — | | 4,470 | | — | | | | |
Installment: | | | | | | | | | | | | | | — | | | | |
Consumer | | 449 | | 927 | | — | | 500 | | — | | 552 | | — | | | | |
Total installment | | 449 | | 927 | | — | | 500 | | — | | 552 | | — | | | | |
Lease financing | | — | | — | | — | | — | | — | | 7 | | — | | | | |
Total with no related allowance | | $ | 129,357 | | $ | 166,059 | | $ | — | | $ | 129,856 | | $ | 323 | | $ | 115,537 | | $ | 728 | | | | |
| | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 6,156 | | $ | 6,922 | | $ | 1,167 | | $ | 8,461 | | $ | — | | $ | 11,286 | | $ | — | | | | |
Commercial real estate mortgages | | 17,392 | | 18,962 | | 1,874 | | 17,257 | | — | | 13,406 | | — | | | | |
Residential mortgages: | | | | | | | | | | | | | | | | | | |
Fixed | | 2,229 | | 2,336 | | 181 | | 2,260 | | — | | 1,844 | | — | | | | |
Variable | | 1,386 | | 1,476 | | 4 | | 2,321 | | 4 | | 1,879 | | 4 | | | | |
Total residential mortgages | | 3,615 | | 3,812 | | 185 | | 4,581 | | 4 | | 3,723 | | 4 | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | |
Land | | 8,098 | | 18,362 | | 1,467 | | 8,432 | | — | | 14,700 | | — | | | | |
Total real estate construction | | 8,098 | | 18,362 | | 1,467 | | 8,432 | | — | | 14,700 | | — | | | | |
Home equity loans and lines of credit | | 1,199 | | 1,406 | | 138 | | 1,213 | | — | | 1,166 | | — | | | | |
Total with an allowance | | $ | 36,460 | | $ | 49,464 | | $ | 4,831 | | $ | 39,944 | | $ | 4 | | $ | 44,281 | | $ | 4 | | | | |
| | | | | | | | | | | | | | | | | | |
Total impaired loans by type: | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 34,731 | | $ | 46,546 | | $ | 1,167 | | $ | 38,937 | | $ | — | | $ | 36,018 | | $ | — | | | | |
Commercial real estate mortgages | | 58,217 | | 65,043 | | 1,874 | | 51,854 | | 34 | | 39,173 | | 158 | | | | |
Residential mortgages | | 11,342 | | 12,393 | | 185 | | 12,488 | | 13 | | 11,780 | | 52 | | | | |
Real estate construction | | 56,582 | | 84,838 | | 1,467 | | 61,556 | | 280 | | 66,652 | | 522 | | | | |
Home equity loans and lines of credit | | 4,496 | | 5,776 | | 138 | | 4,465 | | — | | 5,636 | | — | | | | |
Installment | | 449 | | 927 | | — | | 500 | | — | | 552 | | — | | | | |
Lease financing | | — | | — | | — | | — | | — | | 7 | | — | | | | |
Total impaired loans | | $ | 165,817 | | $ | 215,523 | | $ | 4,831 | | $ | 169,800 | | $ | 327 | | $ | 159,818 | | $ | 732 | | | | |
|
Effective July 1, 2012, the Company increased the outstanding loan amount under which nonperforming loans are individually evaluated for impairment from $500,000 or greater to $1 million or greater. For borrowers with multiple loans totaling $1 million or more, this threshold is applied at the total relationship level. Loans under $1 million will be measured for impairment using historical loss factors. Loans under $1 million that were previously reported as impaired at June 30, 2012 will continue to be reported as impaired until the collection of principal and interest is no longer in doubt, or the loans are paid or charged-off. At September 30, 2013, impaired loans included $6.1 million of loans previously reported as impaired that are less than $1 million. |
|
Impaired loans at September 30, 2013 and December 31, 2012 included $52.5 million and $48.8 million, respectively, of restructured loans that are on accrual status. With the exception of restructured loans on accrual status and a limited number of loans on cash basis nonaccrual for which the full collection of principal and interest is expected, interest income is not recognized on impaired loans until the principal balance of these loans is paid off. |
|
Troubled Debt Restructured Loans |
|
The following table provides a summary of loans modified in a troubled debt restructuring during the three months ended September 30, 2013 and 2012: |
|
(in thousands) | | Number of | | Pre-Modification | | Period-End | | Financial | | | | | | | | | | | | | | |
Contracts | Outstanding | Outstanding | Effects (1) | | | | | | | | | | | | | |
| Principal | Principal | | | | | | | | | | | | | | |
Three months ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | 2 | | $ | 7,575 | | $ | 7,486 | | $ | 344 | | | | | | | | | | | | | | |
Total troubled debt restructured loans | | 2 | | $ | 7,575 | | $ | 7,486 | | $ | 344 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Three months ended September 30, 2012 | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | 6 | | $ | 1,624 | | $ | 1,538 | | $ | 10,528 | | | | | | | | | | | | | | |
Residential mortgages: | | | | | | | | | | | | | | | | | | | | | | |
Fixed | | 3 | | 1,578 | | 1,078 | | 485 | | | | | | | | | | | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | | | | | |
Land | | 1 | | 8,420 | | 8,098 | | 264 | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 1 | | 257 | | 149 | | — | | | | | | | | | | | | | | |
Total troubled debt restructured loans | | 11 | | $ | 11,879 | | $ | 10,863 | | $ | 11,277 | | | | | | | | | | | | | | |
|
|
(1) Financial effects are comprised of charge-offs and specific reserves recognized on TDR loans at modification date. |
|
The following table provides a summary of loans modified in a troubled debt restructuring during the nine months ended September 30, 2013 and 2012: |
|
(in thousands) | | Number of | | Pre-Modification | | Period-End | | Financial | | | | | | | | | | | | | | |
Contracts | Outstanding | Outstanding | Effects (1) | | | | | | | | | | | | | |
| Principal | Principal | | | | | | | | | | | | | | |
Nine months ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | 12 | | $ | 16,258 | | $ | 13,624 | | $ | 344 | | | | | | | | | | | | | | |
Commercial real estate mortgages | | 1 | | 547 | | 533 | | — | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 1 | | 345 | | — | | — | | | | | | | | | | | | | | |
Total troubled debt restructured loans | | 14 | | $ | 17,150 | | $ | 14,157 | | $ | 344 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Nine months ended September 30, 2012 | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | 15 | | $ | 36,785 | | $ | 23,219 | | $ | 10,528 | | | | | | | | | | | | | | |
Commercial real estate mortgages | | 2 | | 15,832 | | 16,353 | | — | | | | | | | | | | | | | | |
Residential mortgages: | | | | | | | | | | | | | | | | | | | | | | |
Fixed | | 4 | | 2,233 | | 1,078 | | 485 | | | | | | | | | | | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | | | | | |
Construction | | 3 | | 14,857 | | 14,226 | | — | | | | | | | | | | | | | | |
Land | | 1 | | 8,420 | | 8,098 | | 264 | | | | | | | | | | | | | | |
Total real estate construction | | 4 | | 23,277 | | 22,324 | | 264 | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 1 | | 257 | | 149 | | — | | | | | | | | | | | | | | |
Total troubled debt restructured loans | | 26 | | $ | 78,384 | | $ | 63,123 | | $ | 11,277 | | | | | | | | | | | | | | |
|
|
(1) Financial effects are comprised of charge-offs and specific reserves recognized on TDR loans at modification date. |
|
The following tables provide a summary of troubled debt restructured (“TDR”) loans that subsequently defaulted during the three and nine months ended September 30, 2013 and 2012, that had been modified as a troubled debt restructuring during the 12 months prior to their default. A TDR loan is considered to be in default when payments are 90 days or more past due. |
|
| | For three months ended September 30, 2013 | | For nine months ended September 30, 2013 | | | | | | | | | |
(in thousands) | | Number of | | Period-End | | Period-End | | Number of | | Period-End | | Period-End | | | | | | | | | |
Contracts | Outstanding | Specific | Contracts | Outstanding | Specific | | | | | | | | |
| Principal | Reserve | | Principal | Reserve | | | | | | | | |
Commercial | | — | | $ | — | | $ | — | | 4 | | $ | 896 | | $ | — | | | | | | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | | | | |
Land | | — | | — | | — | | 1 | | 7,244 | | — | | | | | | | | | |
Home equity loans and lines of credit | | — | | — | | — | | 1 | | 139 | | — | | | | | | | | | |
Total loans that subsequently defaulted | | — | | $ | — | | $ | — | | 6 | | $ | 8,279 | | $ | — | | | | | | | | | |
|
| | For three months ended September 30, 2012 | | For nine months ended September 30, 2012 | | | | | | | | | |
(in thousands) | | Number of | | Period-End | | Period-End | | Number of | | Period-End | | Period-End | | | | | | | | | |
Contracts | Outstanding | Specific | Contracts | Outstanding | Specific | | | | | | | | |
| Principal | Reserve | | Principal | Reserve | | | | | | | | |
Commercial | | 1 | | $ | 688 | | $ | — | | 5 | | $ | 4,581 | | $ | 277 | | | | | | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | | | | |
Land | | — | | — | | — | | 2 | | 1,372 | | — | | | | | | | | | |
Total loans that subsequently defaulted | | 1 | | $ | 688 | | $ | — | | 7 | | $ | 5,953 | | $ | 277 | | | | | | | | | |
|
A restructuring constitutes a troubled debt restructuring when a lender, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. Loans with pre-modification outstanding balances totaling $7.6 million and $17.2 million were modified in troubled debt restructurings during the three and nine months ended September 30, 2013, respectively. Loans with pre-modification outstanding balances totaling $11.9 million and $78.4 million were modified in troubled debt restructurings during the three and nine months ended September 30, 2012, respectively. The concessions granted in the restructurings completed in 2013 largely consisted of maturity extensions and interest rate modifications. |
|
The unpaid principal balance of TDR loans was $69.3 million, before specific reserves of $0.9 million, at September 30, 2013 and $94.9 million, before specific reserves of $1.7 million, at December 31, 2012. The net decrease in TDR loans from the prior year-end was primarily attributable to payments received on existing TDR loans and to the removal of $15.3 million of loans that were restructured in an A/B note structure in 2012 that are no longer reported as TDRs. These decreases were partially offset by the addition of $17.2 million of loans restructured during the first nine months of 2013. Loans restructured in an A/B note restructuring are not reported as TDR loans in years after the restructuring if the restructuring agreement specifies an interest rate equal to or greater than the rate the lender was willing to accept at the time of restructuring for a new loan with comparable risk, and the loan is performing based on the terms in the restructuring agreement. In an A/B restructuring, the original note is separated into two notes where the A note represents the portion of the original loan that is expected to be fully paid, and the B note is the portion of the loan that is expected to be uncollectible. The B note is charged-off at the time of restructuring. Loans modified in troubled debt restructurings are impaired loans at the time of restructuring and subject to the same measurement criteria as all other impaired loans. |
|
During the nine months ended September 30, 2013, four commercial loans, one real estate construction loan and one equity line of credit that had been restructured within the preceding 12 months were not performing in accordance with their modified terms. The defaults were primarily due to missed or late payments. All other TDR loans were performing in accordance with their restructured terms at September 30, 2013. As of September 30, 2013, commitments to lend additional funds on restructured loans totaled $1.3 million. |
|
Past Due and Nonaccrual Loans and Leases |
|
Loans are considered past due following the date when either interest or principal is contractually due and unpaid. The following tables provide a summary of past due and nonaccrual loans, excluding covered loans, at September 30, 2013 and December 31, 2012 based upon the length of time the loans have been past due: |
|
(in thousands) | | 30-59 Days | | 60-89 Days | | Greater | | Nonaccrual | | Total Past | | Current | | Total Loans and | | | | |
Past Due | Past Due | Than 90 | Due and | Leases | | | |
| | Days and | Nonaccrual | | | | |
| | Accruing | Loans | | | | |
September 30, 2013 | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 8,052 | | $ | 964 | | $ | 3 | | $ | 10,073 | | $ | 19,092 | | $ | 7,107,066 | | $ | 7,126,158 | | | | |
Commercial real estate mortgages | | 2,631 | | — | | — | | 19,020 | | 21,651 | | 3,055,532 | | 3,077,183 | | | | |
Residential mortgages: | | | | | | | | | | | | | | | | | | |
Fixed | | — | | 1,238 | | 379 | | 3,901 | | 5,518 | | 1,457,866 | | 1,463,384 | | | | |
Variable | | — | | 2,375 | | — | | 5,773 | | 8,148 | | 2,946,699 | | 2,954,847 | | | | |
Total residential mortgages | | — | | 3,613 | | 379 | | 9,674 | | 13,666 | | 4,404,565 | | 4,418,231 | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | |
Construction | | — | | — | | — | | 11,553 | | 11,553 | | 339,138 | | 350,691 | | | | |
Land | | — | | — | | — | | 13,918 | | 13,918 | | 15,880 | | 29,798 | | | | |
Total real estate construction | | — | | — | | — | | 25,471 | | 25,471 | | 355,018 | | 380,489 | | | | |
Home equity loans and lines of credit | | 274 | | — | | — | | 5,289 | | 5,563 | | 676,316 | | 681,879 | | | | |
Installment: | | | | | | | | | | | | | | | | | | |
Commercial | | — | | — | | — | | — | | — | | 379 | | 379 | | | | |
Consumer | | 24 | | — | | — | | 21 | | 45 | | 151,683 | | 151,728 | | | | |
Total installment | | 24 | | — | | — | | 21 | | 45 | | 152,062 | | 152,107 | | | | |
Lease financing | | — | | 12 | | 1 | | 54 | | 67 | | 730,019 | | 730,086 | | | | |
Total | | $ | 10,981 | | $ | 4,589 | | $ | 383 | | $ | 69,602 | | $ | 85,555 | | $ | 16,480,578 | | $ | 16,566,133 | | | | |
| | | | | | | | | | | | | | | | | | |
December 31, 2012 | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 6,207 | | $ | 4,219 | | $ | 602 | | $ | 9,087 | | $ | 20,115 | | $ | 6,191,238 | | $ | 6,211,353 | | | | |
Commercial real estate mortgages | | 16,968 | | 3,249 | | — | | 33,198 | | 53,415 | | 2,685,869 | | 2,739,284 | | | | |
Residential mortgages: | | | | | | | | | | | | | | | | | | |
Fixed | | — | | 1,969 | | 379 | | 4,902 | | 7,250 | | 1,458,224 | | 1,465,474 | | | | |
Variable | | — | | — | | — | | 4,701 | | 4,701 | | 2,492,030 | | 2,496,731 | | | | |
Total residential mortgages | | — | | 1,969 | | 379 | | 9,603 | | 11,951 | | 3,950,254 | | 3,962,205 | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | |
Construction | | — | | — | | — | | 15,067 | | 15,067 | | 239,740 | | 254,807 | | | | |
Land | | — | | 859 | | — | | 25,815 | | 26,674 | | 31,709 | | 58,383 | | | | |
Total real estate construction | | — | | 859 | | — | | 40,882 | | 41,741 | | 271,449 | | 313,190 | | | | |
Home equity loans and lines of credit | | 3,407 | | 480 | | — | | 6,424 | | 10,311 | | 701,439 | | 711,750 | | | | |
Installment: | | | | | | | | | | | | | | | | | | |
Commercial | | — | | — | | — | | — | | — | | 437 | | 437 | | | | |
Consumer | | 58 | | 35 | | — | | 473 | | 566 | | 141,790 | | 142,356 | | | | |
Total installment | | 58 | | 35 | | — | | 473 | | 566 | | 142,227 | | 142,793 | | | | |
Lease financing | | 2,633 | | 2 | | — | | 120 | | 2,755 | | 734,965 | | 737,720 | | | | |
Total | | $ | 29,273 | | $ | 10,813 | | $ | 981 | | $ | 99,787 | | $ | 140,854 | | $ | 14,677,441 | | $ | 14,818,295 | | | | |
|
Credit Quality Monitoring |
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The Company closely monitors and assesses credit quality and credit risk in the loan and lease portfolio on an ongoing basis. Loan risk classifications are continuously reviewed and updated. The following tables provide a summary of the loan and lease portfolio, excluding covered loans, by loan type and credit quality classification as of September 30, 2013 and December 31, 2012. Nonclassified loans generally include those loans that are expected to be repaid in accordance with contractual loan terms. Classified loans are those loans that are classified as substandard or doubtful consistent with regulatory guidelines. |
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| | September 30, 2013 | | December 31, 2012 | | | | | | | |
(in thousands) | | Nonclassified | | Classified | | Total | | Nonclassified | | Classified | | Total | | | | | | | |
Commercial | | $ | 7,011,906 | | $ | 114,252 | | $ | 7,126,158 | | $ | 6,073,459 | | $ | 137,894 | | $ | 6,211,353 | | | | | | | |
Commercial real estate mortgages | | 2,961,319 | | 115,864 | | 3,077,183 | | 2,597,863 | | 141,421 | | 2,739,284 | | | | | | | |
Residential mortgages: | | | | | | | | | | | | | | | | | | | |
Fixed | | 1,443,459 | | 19,925 | | 1,463,384 | | 1,449,270 | | 16,204 | | 1,465,474 | | | | | | | |
Variable | | 2,931,433 | | 23,414 | | 2,954,847 | | 2,479,449 | | 17,282 | | 2,496,731 | | | | | | | |
Total residential mortgages | | 4,374,892 | | 43,339 | | 4,418,231 | | 3,928,719 | | 33,486 | | 3,962,205 | | | | | | | |
Real estate construction: | | | | | | | | | | | | | | | | | | | |
Construction | | 324,908 | | 25,783 | | 350,691 | | 225,577 | | 29,230 | | 254,807 | | | | | | | |
Land | | 15,589 | | 14,209 | | 29,798 | | 28,710 | | 29,673 | | 58,383 | | | | | | | |
Total real estate construction | | 340,497 | | 39,992 | | 380,489 | | 254,287 | | 58,903 | | 313,190 | | | | | | | |
Home equity loans and lines of credit | | 653,349 | | 28,530 | | 681,879 | | 685,011 | | 26,739 | | 711,750 | | | | | | | |
Installment: | | | | | | | | | | | | | | | | | | | |
Commercial | | 379 | | — | | 379 | | 437 | | — | | 437 | | | | | | | |
Consumer | | 151,370 | | 358 | | 151,728 | | 141,662 | | 694 | | 142,356 | | | | | | | |
Total installment | | 151,749 | | 358 | | 152,107 | | 142,099 | | 694 | | 142,793 | | | | | | | |
Lease financing | | 727,500 | | 2,586 | | 730,086 | | 733,803 | | 3,917 | | 737,720 | | | | | | | |
Total | | $ | 16,221,212 | | $ | 344,921 | | $ | 16,566,133 | | $ | 14,415,241 | | $ | 403,054 | | $ | 14,818,295 | | | | | | | |
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Credit Quality on Covered Loans |
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The following is a summary of activity in the allowance for losses on covered loans: |
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| | For the three months ended | | For the nine months ended | | | | | | | | | | | | | |
September 30, | September 30, | | | | | | | | | | | | |
(in thousands) | | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 24,414 | | $ | 43,147 | | $ | 44,781 | | $ | 64,565 | | | | | | | | | | | | | |
Provision for losses | | 2,496 | | 18,089 | | 461 | | 38,848 | | | | | | | | | | | | | |
Reduction in allowance due to loan removals | | (1,028 | ) | (16,258 | ) | (19,360 | ) | (58,435 | ) | | | | | | | | | | | | |
Balance, end of period | | $ | 25,882 | | $ | 44,978 | | $ | 25,882 | | $ | 44,978 | | | | | | | | | | | | | |
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The allowance for losses on covered loans was $25.9 million, $44.8 million and $45.0 million as of September 30, 2013, December 31, 2012 and September 30, 2012, respectively. The Company recorded provision expense of $2.5 million and $0.5 million on covered loans during the three and nine months ended September 30, 2013, respectively. Provision expense was $18.1 million and $38.8 million for the three and nine months ended September 30, 2012, respectively. The Company updates its cash flow projections for covered loans accounted for under ASC 310-30 on a quarterly basis, and may recognize provision expense or reversal of its allowance for loan losses as a result of that analysis. The provision expense or reversal of allowance on covered loans is the result of changes in expected cash flows, both amount and timing, due to loan payments and the Company’s revised loss and prepayment forecasts. The revisions of the loss forecasts were based on the results of management’s review of market conditions, the credit quality of the outstanding covered loans and the analysis of loan |
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performance data since the acquisition of covered loans. The allowance for losses on covered loans is reduced for any loan removals, which occur when a loan has been fully paid off, fully charged off, sold or transferred to OREO. |
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Covered loans accounted for under ASC 310-30 are generally considered accruing and performing loans as the loans accrete interest income over the estimated life of the loan when cash flows are reasonably estimable. Accordingly, acquired impaired loans that are contractually past due are still considered to be accruing and performing loans. If the timing and amount of future cash flows is not reasonably estimable, the loans may be classified as nonaccrual loans and interest income is not recognized until the timing and amount of future cash flows can be reasonably estimated. There were no covered loans that were on nonaccrual status as of September 30, 2013 and December 31, 2012. |
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At September 30, 2013, covered loans that were 30 to 89 days delinquent totaled $6.4 million and covered loans that were 90 days or more past due on accrual status totaled $63.1 million. At December 31, 2012, covered loans that were 30 to 89 days delinquent totaled $43.4 million and covered loans that were 90 days or more past due on accrual status totaled $112.4 million. |
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