Loans And Allowance For Loan Losses | Loans and Allowance for Loan Losses Major classifications within the Company’s held for investment loan portfolio at December 31, 2017 and 2016 are as follows: (In thousands) 2017 2016 Commercial: Business $ 4,958,554 $ 4,776,365 Real estate — construction and land 968,820 791,236 Real estate — business 2,697,452 2,643,374 Personal Banking: Real estate — personal 2,062,787 2,010,397 Consumer 2,104,487 1,990,801 Revolving home equity 400,587 413,634 Consumer credit card 783,864 776,465 Overdrafts 7,123 10,464 Total loans $ 13,983,674 $ 13,412,736 Loans to directors and executive officers of the Parent and the Bank, and to their associates, are summarized as follows: (In thousands) Balance at January 1, 2017 $ 62,991 Additions 655,544 Amounts collected (639,920 ) Amounts written off — Balance, December 31, 2017 $ 78,615 Management believes all loans to directors and executive officers have been made in the ordinary course of business with normal credit terms, including interest rate and collateral considerations, and do not represent more than a normal risk of collection. The activity in the table above includes draws and repayments on several lines of credit with business entities. There were no outstanding loans at December 31, 2017 to principal holders (over 10% ownership) of the Company’s common stock. The Company’s lending activity is generally centered in Missouri, Illinois, Kansas and other nearby states including Oklahoma, Colorado, Iowa, Ohio, Texas, and others. The Company maintains a diversified portfolio with limited industry concentrations of credit risk. Loans and loan commitments are extended under the Company’s normal credit standards, controls, and monitoring features. Most loan commitments are short or intermediate term in nature. Commercial loan maturities generally range from three to seven years. Collateral is commonly required and would include such assets as marketable securities and cash equivalent assets, accounts receivable and inventory, equipment, other forms of personal property, and real estate. At December 31, 2017 , unfunded loan commitments totaled $10.8 billion (which included $5.1 billion in unused approved lines of credit related to credit card loan agreements) which could be drawn by customers subject to certain review and terms of agreement. At December 31, 2017 , loans totaling $ 3.8 billion were pledged at the FHLB as collateral for borrowings and letters of credit obtained to secure public deposits. Additional loans of $ 1.7 billion were pledged at the Federal Reserve Bank as collateral for discount window borrowings. The Company has a net investment in direct financing and sales type leases to commercial and industrial and tax-exempt entities of $737.7 million and $725.3 million at December 31, 2017 and 2016 , respectively, which is included in business loans on the Company’s consolidated balance sheets. This investment includes deferred income of $52.1 million and $49.9 million at December 31, 2017 and 2016 , respectively. The net investment in operating leases amounted to $17.4 million and $19.0 million at December 31, 2017 and 2016 , respectively, and is included in other assets on the Company’s consolidated balance sheets. Allowance for loan losses A summary of the activity in the allowance for losses during the previous three years follows: (In thousands) Commercial Personal Banking Total Balance at December 31, 2014 $ 89,622 $ 66,910 $ 156,532 Provision for loan losses (9,319 ) 38,046 28,727 Deductions: Loans charged off 4,057 46,993 51,050 Less recoveries 5,840 11,483 17,323 Net loans charged off (recoveries) (1,783 ) 35,510 33,727 Balance at December 31, 2015 82,086 69,446 151,532 Provision for loan losses 4,898 31,420 36,318 Deductions: Loans charged off 3,258 47,720 50,978 Less recoveries 7,635 11,425 19,060 Net loans charged off (recoveries) (4,377 ) 36,295 31,918 Balance at December 31, 2016 91,361 64,571 155,932 Provision for loan losses 2,327 42,917 45,244 Deductions: Loans charged off 2,538 52,641 55,179 Less recoveries 2,554 10,981 13,535 Net loans charged off (recoveries) (16 ) 41,660 41,644 Balance at December 31, 2017 $ 93,704 $ 65,828 $ 159,532 The following table shows the balance in the allowance for loan losses and the related loan balance at December 31, 2017 and 2016 , disaggregated on the basis of impairment methodology. Impaired loans evaluated under ASC 310-10-35 include loans on non-accrual status which are individually evaluated for impairment and other impaired loans deemed to have similar risk characteristics, which are collectively evaluated. All other loans are collectively evaluated for impairment under ASC 450-20. Impaired Loans All Other Loans (In thousands) Allowance for Loan Losses Loans Outstanding Allowance for Loan Losses Loans Outstanding December 31, 2017 Commercial $ 3,067 $ 92,613 $ 90,637 $ 8,532,213 Personal Banking 1,176 22,182 64,652 5,336,666 Total $ 4,243 $ 114,795 $ 155,289 $ 13,868,879 December 31, 2016 Commercial $ 1,817 $ 44,795 $ 89,544 $ 8,166,180 Personal Banking 1,292 19,737 63,279 5,182,024 Total $ 3,109 $ 64,532 $ 152,823 $ 13,348,204 Impaired loans The table below shows the Company’s investment in impaired loans at December 31, 2017 and 2016 . These loans consist of all loans on non-accrual status and other restructured loans whose terms have been modified and classified as troubled debt restructurings under current accounting guidance. These restructured loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. They are discussed further in the "Troubled debt restructurings" section on page 78. (In thousands) 2017 2016 Non-accrual loans $ 11,983 $ 14,283 Restructured loans (accruing) 102,812 50,249 Total impaired loans $ 114,795 $ 64,532 The following table provides additional information about impaired loans held by the Company at December 31, 2017 and 2016 , segregated between loans for which an allowance for credit losses has been provided and loans for which no allowance has been provided. (In thousands) Recorded Investment Unpaid Principal Balance Related Allowance December 31, 2017 With no related allowance recorded: Business $ 5,356 $ 9,000 $ — Real estate – business 1,299 1,303 — Consumer 779 817 — $ 7,434 $ 11,120 $ — With an allowance recorded: Business $ 72,589 $ 73,168 $ 2,455 Real estate – construction and land 837 841 27 Real estate – business 12,532 13,071 585 Real estate – personal 9,126 11,914 532 Consumer 5,388 5,426 67 Revolving home equity 204 204 11 Consumer credit card 6,685 6,685 566 $ 107,361 $ 111,309 $ 4,243 Total $ 114,795 $ 122,429 $ 4,243 December 31, 2016 With no related allowance recorded: Business $ 7,375 $ 10,470 $ — Real estate – construction and land 557 752 — $ 7,932 $ 11,222 $ — With an allowance recorded: Business $ 29,924 $ 31,795 $ 1,318 Real estate – construction and land 69 72 3 Real estate – business 6,870 8,072 496 Real estate – personal 6,394 9,199 642 Consumer 5,281 5,281 57 Revolving home equity 584 584 1 Consumer credit card 7,478 7,478 592 $ 56,600 $ 62,481 $ 3,109 Total $ 64,532 $ 73,703 $ 3,109 Total average impaired loans during 2017 and 2016 are shown in the table below. 2017 2016 (In thousands) Commercial Personal Banking Total Commercial Personal Banking Total Average impaired loans: Non-accrual loans $ 9,658 $ 3,989 $ 13,647 $ 17,294 $ 4,135 $ 21,429 Restructured loans (accruing) 49,070 17,539 66,609 32,295 17,058 49,353 Total $ 58,728 $ 21,528 $ 80,256 $ 49,589 $ 21,193 $ 70,782 The table below shows interest income recognized during the years ended December 31, 2017 , 2016 and 2015 for impaired loans held at the end of each respective period. This interest relates to accruing restructured loans, as discussed previously. Years Ended December 31 (In thousands) 2017 2016 2015 Interest income recognized on impaired loans: Business $ 3,135 $ 1,064 $ 495 Real estate – construction and land 41 2 80 Real estate – business 514 171 122 Real estate – personal 402 152 187 Consumer 307 339 348 Revolving home equity 10 31 20 Consumer credit card 673 722 750 Total $ 5,082 $ 2,481 $ 2,002 Delinquent and non-accrual loans The following table provides aging information on the Company’s past due and accruing loans, in addition to the balances of loans on non-accrual status, at December 31, 2017 and 2016 . (In thousands) Current or Less Than 30 Days Past Due 30 – 89 Days Past Due 90 Days Past Due and Still Accruing Non-accrual Total December 31, 2017 Commercial: Business $ 4,949,148 $ 3,085 $ 374 $ 5,947 $ 4,958,554 Real estate – construction and land 967,321 1,473 21 5 968,820 Real estate – business 2,694,234 482 — 2,736 2,697,452 Personal Banking: Real estate – personal 2,050,787 6,218 3,321 2,461 2,062,787 Consumer 2,067,025 32,674 3,954 834 2,104,487 Revolving home equity 397,349 1,962 1,276 — 400,587 Consumer credit card 764,568 10,115 9,181 — 783,864 Overdrafts 6,840 283 — — 7,123 Total $ 13,897,272 $ 56,292 $ 18,127 $ 11,983 $ 13,983,674 December 31, 2016 Commercial: Business $ 4,763,274 $ 3,735 $ 674 $ 8,682 $ 4,776,365 Real estate – construction and land 789,633 1,039 — 564 791,236 Real estate – business 2,639,586 2,154 — 1,634 2,643,374 Personal Banking: Real estate – personal 1,995,724 9,162 2,108 3,403 2,010,397 Consumer 1,957,358 29,783 3,660 — 1,990,801 Revolving home equity 411,483 1,032 1,119 — 413,634 Consumer credit card 757,443 10,187 8,835 — 776,465 Overdrafts 10,014 450 — — 10,464 Total $ 13,324,515 $ 57,542 $ 16,396 $ 14,283 $ 13,412,736 Credit quality The following table provides information about the credit quality of the Commercial loan portfolio, using the Company’s internal rating system as an indicator. The internal rating system is a series of grades reflecting management’s risk assessment, based on its analysis of the borrower’s financial condition. The “pass” category consists of a range of loan grades that reflect increasing, though still acceptable, risk. Movement of risk through the various grade levels in the “pass” category is monitored for early identification of credit deterioration. The “special mention” rating is attached to loans where the borrower exhibits material negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten its capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. It is a transitional grade that is closely monitored for improvement or deterioration. The “substandard” rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on “non-accrual” when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment, as discussed in Note 1. Commercial Loans (In thousands) Business Real Estate -Construction Real Estate - Business Total December 31, 2017 Pass $ 4,740,013 $ 955,499 $ 2,593,005 $ 8,288,517 Special mention 59,177 10,614 50,577 120,368 Substandard 153,417 2,702 51,134 207,253 Non-accrual 5,947 5 2,736 8,688 Total $ 4,958,554 $ 968,820 $ 2,697,452 $ 8,624,826 December 31, 2016 Pass $ 4,607,553 $ 788,778 $ 2,543,348 $ 7,939,679 Special mention 116,642 722 45,479 162,843 Substandard 43,488 1,172 52,913 97,573 Non-accrual 8,682 564 1,634 10,880 Total $ 4,776,365 $ 791,236 $ 2,643,374 $ 8,210,975 The credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided in the table in the above section on "Delinquent and non-accrual loans" . In addition, FICO scores are obtained and updated on a quarterly basis for most of the loans in the Personal Banking portfolio. This is a published credit score designed to measure the risk of default by taking into account various factors from a person's financial history. The bank normally obtains a FICO score at the loan's origination and renewal dates, and updates are obtained on a quarterly basis. Excluded from the table below are certain personal real estate loans for which FICO scores are not obtained because the loans are related to commercial activity. These loans totaled $219.2 million at December 31, 2017 and $237.2 million at December 31, 2016 . The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled $145.0 million at December 31, 2017 and $75.4 million at December 31, 2016 . As the healthcare loans are guaranteed by the hospital, FICO scores are not considered relevant for this program. The personal real estate loans and consumer loans excluded below totaled less than 7% of the Personal Banking portfolio. For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at December 31, 2017 and 2016 by FICO score. Personal Banking Loans % of Loan Category Real Estate - Personal Consumer Revolving Home Equity Consumer Credit Card December 31, 2017 FICO score: Under 600 1.3 % 3.3 % 1.1 % 4.7 % 600 – 659 2.1 5.5 1.7 14.4 660 – 719 10.5 17.3 9.5 34.4 720 – 779 25.6 26.8 21.4 26.0 780 and over 60.5 47.1 66.3 20.5 Total 100.0 % 100.0 % 100.0 % 100.0 % December 31, 2016 FICO score: Under 600 1.3 % 3.4 % 1.0 % 4.9 % 600 – 659 2.6 6.4 1.8 15.5 660 – 719 10.4 19.7 9.7 34.9 720 – 779 25.4 26.3 21.1 25.1 780 and over 60.3 44.2 66.4 19.6 Total 100.0 % 100.0 % 100.0 % 100.0 % Troubled debt restructurings As mentioned previously, the Company's impaired loans include loans which have been classified as troubled debt restructurings. Restructured loans are those extended to borrowers who are experiencing financial difficulty and who have been granted a concession. Restructured loans are placed on non-accrual status if the Company does not believe it probable that amounts due under the contractual terms will be collected. Other performing restructured loans are comprised of certain business, construction and business real estate loans classified as substandard. Upon maturity, the loans renewed at interest rates judged not to be market rates for new debt with similar risk and as a result were classified as troubled debt restructurings. These loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. Performing restructured loans at rates judged to be below market increased $54.1 million at year end 2017 compared to year end 2016 due to several large loan renewals in 2017, including a single business loan of $31.9 million . Troubled debt restructurings also include certain credit card loans under various debt management and assistance programs. Modifications to credit card loans generally involve removing the available line of credit, placing loans on amortizing status, and lowering the contractual interest rate. The Company also classified certain loans as troubled debt restructurings because they were not reaffirmed by the borrower in bankruptcy proceedings. These loans are comprised of personal real estate, revolving home equity and consumer loans. Interest on these loans is being recognized on an accrual basis, as the borrowers are continuing to make payments. The table below summarizes the troubled debt restructurings outstanding by type of modification, as described above. December 31 (In thousands) 2017 2016 Accruing loans: Non-market interest rates $ 88,588 $ 34,531 Assistance programs 6,685 7,478 Bankruptcy non-affirmation 7,283 7,937 Other 256 303 Non-accrual loans 7,796 8,825 Total restructured loans $ 110,608 $ 59,074 The table below shows the balance of troubled debt restructurings by loan classification at December 31, 2017 , in addition to the period end balances of restructured loans which the Company considers to have been in default at any time during the past twelve months. For purposes of this disclosure, the Company considers "default" to mean 90 days or more past due as to interest or principal. (In thousands) December 31, 2017 Balance 90 days past due at any time during previous 12 months Commercial: Business $ 77,400 $ — Real estate – construction and land 776 — Real estate – business 12,394 — Personal Banking: Real estate – personal 7,760 278 Consumer 5,389 81 Revolving home equity 204 42 Consumer credit card 6,685 630 Total restructured loans $ 110,608 $ 1,031 For those loans on non-accrual status also classified as restructured, the modification did not create any further financial effect on the Company as those loans were already recorded at net realizable value. For those performing commercial loans classified as restructured, there were no concessions involving forgiveness of principal or interest and, therefore, there was no financial impact to the Company as a result of modification to these loans. No financial impact resulted from those performing loans where the debt was not reaffirmed in bankruptcy, as no changes to loan terms occurred in that process. However, the effects of modifications to consumer credit card loans were estimated to decrease interest income by approximately $1.0 million on an annual, pre-tax basis, compared to amounts contractually owed. The allowance for loan losses related to troubled debt restructurings on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status which are not classified as troubled debt restructurings. Those performing loans classified as troubled debt restructurings are accruing loans which management expects to collect under contractual terms. Performing commercial loans have had no other concessions granted other than being renewed at an interest rate judged not to be market. As such, they have similar risk characteristics as non-troubled debt commercial loans and are collectively evaluated based on internal risk rating, loan type, delinquency, historical experience and current economic factors. Performing personal banking loans classified as troubled debt restructurings resulted from the borrower not reaffirming the debt during bankruptcy and have had no other concession granted, other than the Bank's future limitations on collecting payment deficiencies or in pursuing foreclosure actions. As such, they have similar risk characteristics as non-troubled debt personal banking loans and are evaluated collectively based on loan type, delinquency, historical experience and current economic factors. If a troubled debt restructuring defaults and is already on non-accrual status, the allowance for loan losses continues to be based on individual evaluation, using discounted expected cash flows or the fair value of collateral. If an accruing, troubled debt restructuring defaults, the loan's risk rating is downgraded to non-accrual status and the loan's related allowance for loan losses is determined based on individual evaluation, or if necessary, the loan is charged off and collection efforts begin. The Company had commitments of $7.6 million at December 31, 2017 to lend additional funds to borrowers with restructured loans, compared to $10.3 million at December 31, 2016 . Loans held for sale The Company designates certain long-term fixed rate personal real estate loan originations as held for sale, and the Company has elected the fair value option for these loans. The election of the fair value option aligns the accounting for these loans with the related economic hedges discussed in Note 17. The loans are primarily sold to FNMA, FHLMC, and GNMA. At December 31, 2017 , the fair value of these loans was $15.3 million , and the unpaid principal balance was $14.8 million . The Company also designates certain student loan originations as held for sale. The borrowers are credit-worthy students who are attending colleges and universities. The loans are intended to be sold in the secondary market, and the Company maintains contracts with Sallie Mae to sell the loans within 210 days after the last disbursement to the student. These loans are carried at lower of cost or fair value, which at December 31, 2017 totaled $6.1 million . At December 31, 2017, none of the loans held for sale were past due or on non-accrual status. Foreclosed real estate/repossessed assets The Company’s holdings of foreclosed real estate totaled $681 thousand and $366 thousand at December 31, 2017 and 2016 , respectively. Personal property acquired in repossession, generally autos and marine and recreational vehicles, totaled $2.7 million and $2.2 million at December 31, 2017 and 2016 , respectively. Upon acquisition, these assets are recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. They are subsequently carried at the lower of this cost basis or fair value less estimated selling costs. |