LOANS AND LEASES | NOTE 2 – LOANS AND LEASES The Company’s loan and lease portfolio is disaggregated into the following segments: commercial and industrial; real estate; credit card; and all other. The real estate segment is further disaggregated into the following classes: consumer mortgages; home equity; agricultural; commercial and industrial-owner occupied; construction, acquisition and development; and commercial. A summary of gross loans and leases by segment and class as of the dates indicated follows: September 30, December 31, 2017 2016 2016 (In thousands) Commercial and industrial $ 1,508,794 $ 1,619,668 $ 1,615,608 Real estate Consumer mortgages 2,826,333 2,611,387 2,643,966 Home equity 626,961 622,566 628,846 Agricultural 247,211 242,171 245,377 Commercial and industrial-owner occupied 1,835,430 1,668,477 1,764,265 Construction, acquisition and development 1,175,979 1,121,386 1,157,248 Commercial real estate 2,336,219 2,240,717 2,237,719 Credit cards 104,613 107,447 109,656 All other 411,766 451,347 432,827 Gross Loans Total (1) 11,073,306 10,685,166 10,835,512 Less: Unearned Income 17,797 26,405 23,521 Net Loans $ 11,055,509 $ 10,658,761 $ 10,811,991 (1) Gross loans and leases are net of deferred costs of $3.5 million, $2.2 million and approximately $282,000 at September 30, 2017 and 2016 and December 31, 2016, respectively. The following table shows the Company’s loans and leases, net of unearned income, as of September 30, 2017 by segment, class and geographical location: Alabama and Florida Panhandle Arkansas Louisiana Mississippi Missouri Tennessee Texas Other Total (In thousands) Commercial and industrial $ 136,368 $ 195,461 $ 193,882 $ 551,391 $ 70,856 $ 108,389 $ 200,118 $ 49,887 $ 1,506,352 Real estate Consumer mortgages 379,388 327,113 233,715 879,524 92,807 316,209 543,855 53,722 2,826,333 Home equity 96,418 47,361 70,916 230,493 21,531 139,521 19,348 1,373 626,961 Agricultural 8,298 83,830 25,290 66,829 7,205 13,019 42,722 18 247,211 Commercial and industrial-owner occupied 210,503 203,249 223,947 710,693 46,384 154,354 286,300 - 1,835,430 Construction, acquisition and development 126,581 75,400 57,445 355,559 20,391 164,014 376,589 - 1,175,979 Commercial real estate 300,226 357,712 236,589 574,667 209,097 212,296 445,632 - 2,336,219 Credit cards - - - - - - - 104,613 104,613 All other 52,154 40,023 22,141 210,898 2,969 22,066 39,332 6,828 396,411 Total $ 1,309,936 $ 1,330,149 $ 1,063,925 $ 3,580,054 $ 471,240 $ 1,129,868 $ 1,953,896 $ 216,441 $ 11,055,509 There are no other loan and lease concentrations which exceed 10% of total loans and leases not already reflected in the preceding tables. A substantial portion of construction, acquisition and development loans are secured by real estate in markets in which the Company is located. The Company’s loan policy generally prohibits loans for the sole purpose of carrying interest reserves. Certain of the construction, acquisition and development loans were structured with interest-only terms. A portion of the consumer mortgage and commercial real estate portfolios were originated through the permanent financing of construction, acquisition and development loans. Future economic distress could negatively impact borrowers’ and guarantors’ ability to repay their debt which would make more of the Company’s loans collateral dependent. The following tables provide details regarding the aging of the Company’s loan and lease portfolio, net of unearned income, by segment and class at September 30, 2017 and December 31, 2016: September 30, 2017 90+ Days 30-59 Days 60-89 Days 90+ Days Total Total Past Due still Past Due Past Due Past Due Past Due Current Outstanding Accruing (In thousands) Commercial and industrial $ 2,704 $ 2,083 $ 7,091 $ 11,878 $ 1,494,474 $ 1,506,352 $ 115 Real estate Consumer mortgages 15,221 6,328 13,620 35,169 2,791,164 2,826,333 1,240 Home equity 1,380 681 1,479 3,540 623,421 626,961 - Agricultural 1,737 27 4,793 6,557 240,654 247,211 34 Commercial and industrial-owner occupied 3,294 2,083 4,134 9,511 1,825,919 1,835,430 - Construction, acquisition and development 4,441 100 1,583 6,124 1,169,855 1,175,979 - Commercial real estate 632 607 2,478 3,717 2,332,502 2,336,219 - Credit cards 427 329 492 1,248 103,365 104,613 466 All other 479 273 250 1,002 395,409 396,411 - Total $ 30,315 $ 12,511 $ 35,920 $ 78,746 $ 10,976,763 $ 11,055,509 $ 1,855 December 31, 2016 90+ Days 30-59 Days 60-89 Days 90+ Days Total Total Past Due still Past Due Past Due Past Due Past Due Current Outstanding Accruing (In thousands) Commercial and industrial $ 3,231 $ 1,610 $ 9,152 $ 13,993 $ 1,598,302 $ 1,612,295 $ 58 Real estate Consumer mortgages 12,393 6,785 15,054 34,232 2,609,734 2,643,966 3,439 Home equity 2,771 670 2,959 6,400 622,446 628,846 - Agricultural 969 354 247 1,570 243,807 245,377 - Commercial and industrial-owner occupied 2,551 530 4,342 7,423 1,756,842 1,764,265 - Construction, acquisition and development 2,101 440 1,443 3,984 1,153,264 1,157,248 14 Commercial real estate 312 933 11,211 12,456 2,225,263 2,237,719 - Credit cards 466 297 501 1,264 108,392 109,656 472 All other 550 148 230 928 411,691 412,619 - Total $ 25,344 $ 11,767 $ 45,139 $ 82,250 $ 10,729,741 $ 10,811,991 $ 3,983 The Company utilizes an internal loan classification system to grade loans according to certain credit quality indicators. These credit quality indicators include, but are not limited to, recent credit performance, delinquency, liquidity, cash flows, debt coverage ratios, collateral type and loan-to-value ratio. The Company’s internal loan classification system is compatible with classifications used by the Federal Deposit Insurance Corporation, as well as other regulatory agencies. Loans may be classified as follows: Pass: Loans which are performing as agreed with few or no signs of weakness. These loans show sufficient cash flow, capital and collateral to repay the loan as agreed. Special Mention: Loans where potential weaknesses have developed which could cause a more serious problem if not corrected. Substandard: Loans where well-defined weaknesses exist that require corrective action to prevent further deterioration. These loans are further characterized by the possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful: Loans having all the characteristics of Substandard and which have deteriorated to a point where collection and liquidation in full is highly questionable. Loss: Loans that are considered uncollectible or with limited possible recovery. Impaired: Loans for which it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement and for which a specific impairment reserve has been considered. The following tables provide details of the Company’s loan and lease portfolio, net of unearned income, by segment, class and internally assigned grade at September 30, 2017 and December 31, 2016: September 30, 2017 Special Pass Mention Substandard Doubtful Loss Impaired (1) Total (In thousands) Commercial and industrial $ 1,449,512 $ 762 $ 50,633 $ 290 $ 146 $ 5,009 $ 1,506,352 Real estate Consumer mortgages 2,768,161 - 55,836 272 - 2,064 2,826,333 Home equity 617,463 - 8,731 - - 767 626,961 Agricultural 234,563 - 7,372 - - 5,276 247,211 Commercial and industrial-owner occupied 1,766,055 2,920 62,232 - - 4,223 1,835,430 Construction, acquisition and development 1,159,359 3,718 12,902 - - - 1,175,979 Commercial real estate 2,293,845 - 39,805 177 - 2,392 2,336,219 Credit cards 104,613 - - - - - 104,613 All other 392,100 - 4,211 100 - - 396,411 Total $ 10,785,671 $ 7,400 $ 241,722 $ 839 $ 146 $ 19,731 $ 11,055,509 (1) Impaired loans are shown exclusive of $7.4 million of accruing troubled debt restructurings (“TDRs”) and $3.3 million of non-accruing TDRs. December 31, 2016 Special Pass Mention Substandard Doubtful Loss Impaired (1) Total (In thousands) Commercial and industrial $ 1,562,263 $ - $ 41,618 $ 100 $ - $ 8,314 $ 1,612,295 Real estate Consumer mortgages 2,579,905 522 61,602 282 - 1,655 2,643,966 Home equity 616,758 - 11,231 - - 857 628,846 Agricultural 233,939 - 10,577 - - 861 245,377 Commercial and industrial-owner occupied 1,705,266 3,668 47,010 - - 8,321 1,764,265 Construction, acquisition and development 1,135,618 - 15,697 - - 5,933 1,157,248 Commercial real estate 2,179,318 634 45,471 - - 12,296 2,237,719 Credit cards 109,656 - - - - - 109,656 All other 405,611 - 7,008 - - - 412,619 Total $ 10,528,334 $ 4,824 $ 240,214 $ 382 $ - $ 38,237 $ 10,811,991 (1) Impaired loans are shown exclusive of $26.0 million of accruing TDRs and $2.2 million of non-accruing TDRs. The following tables provide details regarding impaired loans and leases, net of unearned income, which exclude accruing TDRs, by segment and class as of and for the three months and nine months ended September 30, 2017 and as of and for the year ended December 31, 2016: September 30, 2017 Unpaid Average Recorded Investment Interest Income Recognized Recorded Principal Related Three months Nine months Three months Nine months Investment Balance of Allowance ended ended ended ended in Impaired Impaired for Credit September 30, September 30, September 30, September 30, Loans (1) Loans Losses 2017 2017 2017 2017 (In thousands) With no related allowance: Commercial and industrial $ 4,460 $ 11,545 $ - $ 5,356 $ 6,010 $ - $ 28 Real estate: Consumer mortgages 2,064 2,573 - 1,296 1,325 - 3 Home equity 767 1,510 - 514 483 1 4 Agricultural 5,276 5,909 - 5,262 3,780 - 10 Commercial and industrial-owner occupied 4,223 6,156 - 5,718 6,700 40 148 Construction, acquisition and development - - - 88 1,061 - 1 Commercial real estate 1,759 1,809 - 2,663 2,529 10 15 All other - - - - - - - Total $ 18,549 $ 29,502 $ - $ 20,897 $ 21,888 $ 51 $ 209 With an allowance: Commercial and industrial $ 549 $ 549 $ 528 $ 1,281 $ 2,978 $ - $ 2 Real estate: Consumer mortgages - - - 997 531 - - Home equity - - - 294 353 - - Agricultural - - - - - - - Commercial and industrial-owner occupied - - - - 1,685 - 5 Construction, acquisition and development - - - - 155 - - Commercial real estate 633 633 53 899 4,348 10 20 All other - - - - - - - Total $ 1,182 $ 1,182 $ 581 $ 3,471 $ 10,050 $ 10 $ 27 Total: Commercial and industrial $ 5,009 $ 12,094 $ 528 $ 6,637 $ 8,988 $ - $ 30 Real estate: Consumer mortgages 2,064 2,573 - 2,293 1,856 - 3 Home equity 767 1,510 - 808 836 1 4 Agricultural 5,276 5,909 - 5,262 3,780 - 10 Commercial and industrial-owner occupied 4,223 6,156 - 5,718 8,385 40 153 Construction, acquisition and development - - - 88 1,216 - 1 Commercial real estate 2,392 2,442 53 3,562 6,877 20 35 All other - - - - - - - Total $ 19,731 $ 30,684 $ 581 $ 24,368 $ 31,938 $ 61 $ 236 (1) Excludes $3.3 million of non-accruing TDRs and $7.4 million of accruing TDRs. December 31, 2016 Unpaid Recorded Principal Related Investment Balance of Allowance Average Interest in Impaired Impaired for Credit Recorded Income Loans (1) Loans Losses Investment Recognized (In thousands) With no related allowance: Commercial and industrial $ 6,222 $ 11,856 $ - $ 6,394 $ 72 Real estate: Consumer mortgages 1,655 2,305 - 1,851 22 Home equity 857 1,600 - 1,176 9 Agricultural 861 919 - 440 8 Commercial and industrial-owner occupied 8,321 9,520 - 10,314 355 Construction, acquisition and development 4,803 4,803 - 5,379 4 Commercial real estate 2,646 2,646 - 4,391 94 All other - - - - - Total $ 25,365 $ 33,649 $ - $ 29,945 $ 564 With an allowance: Commercial and industrial $ 2,092 $ 2,092 $ 1,837 $ 1,190 $ 20 Real estate: Consumer mortgages - - - 431 - Home equity - - - 367 1 Agricultural - - - 352 - Commercial and industrial-owner occupied - - - 741 - Construction, acquisition and development 1,130 1,130 35 739 10 Commercial real estate 9,650 9,650 2,481 9,868 203 All other - - - - - Total $ 12,872 $ 12,872 $ 4,353 $ 13,688 $ 234 Total: Commercial and industrial $ 8,314 $ 13,948 $ 1,837 $ 7,584 $ 92 Real estate: Consumer mortgages 1,655 2,305 - 2,282 22 Home equity 857 1,600 - 1,543 10 Agricultural 861 919 - 792 8 Commercial and industrial-owner occupied 8,321 9,520 - 11,055 355 Construction, acquisition and development 5,933 5,933 35 6,118 14 Commercial real estate 12,296 12,296 2,481 14,259 297 All other - - - - - Total $ 38,237 $ 46,521 $ 4,353 $ 43,633 $ 798 (1) Excludes $2.2 million of non-accruing TDRs and $26.0 million of accruing TDRs. The following tables provide details regarding impaired loans and leases, net of unearned income, which include accruing TDRs, by segment and class as of and for the three months and nine months ended September 30, 2017 and as of and for the year ended December 31, 2016: September 30, 2017 Recorded Unpaid Principal Average Recorded Investment Interest Income Recognized Investment Balance of Related Three months Nine months Three months Nine months in Impaired Impaired Loans, Allowance ended ended ended ended Loans, including including for Credit September 30, September 30, September 30, September 30, Accruing TDRs Accruing TDRs Losses 2017 2017 2017 2017 (In thousands) With no related allowance: Commercial and industrial $ 4,460 $ 11,545 $ - $ 5,356 $ 6,010 $ - $ 28 Real estate: Consumer mortgages 2,064 2,573 - 1,296 1,325 - 3 Home equity 767 1,510 - 514 483 1 4 Agricultural 5,276 5,909 - 5,262 3,780 - 10 Commercial and industrial-owner occupied 4,223 6,156 - 5,718 6,700 40 148 Construction, acquisition and development - - - 88 1,061 - 1 Commercial real estate 1,759 1,809 - 2,663 2,529 10 15 All other - - - - - - - Total $ 18,549 $ 29,502 $ - $ 20,897 $ 21,888 $ 51 $ 209 With an allowance: Commercial and industrial $ 1,684 $ 1,778 $ 779 $ 2,327 $ 4,804 $ 11 $ 30 Real estate: Consumer mortgages 1,743 2,097 313 2,684 2,432 11 38 Home equity 139 139 16 436 466 2 3 Agricultural 116 127 11 302 248 - 1 Commercial and industrial-owner occupied 4,558 4,984 198 4,009 5,735 39 120 Construction, acquisition and development 568 670 121 646 584 1 7 Commercial real estate 1,671 1,671 129 1,495 6,023 18 59 Credit card 888 888 61 864 856 86 254 All other 472 472 67 475 1,133 5 27 Total $ 11,839 $ 12,826 $ 1,695 $ 13,238 $ 22,281 $ 173 $ 539 Total: Commercial and industrial $ 6,144 $ 13,323 $ 779 $ 7,683 $ 10,814 $ 11 $ 58 Real estate: Consumer mortgages 3,807 4,670 313 3,980 3,757 11 41 Home equity 906 1,649 16 950 949 3 7 Agricultural 5,392 6,036 11 5,564 4,028 - 11 Commercial and industrial-owner occupied 8,781 11,140 198 9,727 12,435 79 268 Construction, acquisition and development 568 670 121 734 1,645 1 8 Commercial real estate 3,430 3,480 129 4,158 8,552 28 74 Credit card 888 888 61 864 856 86 254 All other 472 472 67 475 1,133 5 27 Total $ 30,388 $ 42,328 $ 1,695 $ 34,135 $ 44,169 $ 224 $ 748 December 31, 2016 Recorded Unpaid Principal Investment Balance of Related in Impaired Impaired Loans, Allowance Average Interest Loans, including including for Credit Recorded Income Accruing TDRs Accruing TDRs Losses Investment Recognized (In thousands) With no related allowance: Commercial and industrial $ 6,222 $ 11,856 $ - $ 6,394 $ 72 Real estate: Consumer mortgages 1,655 2,305 - 1,851 22 Home equity 857 1,600 - 1,176 9 Agricultural 861 919 - 440 8 Commercial and industrial-owner occupied 8,321 9,520 - 10,314 355 Construction, acquisition and development 4,803 4,803 - 5,379 4 Commercial real estate 2,646 2,646 - 4,391 94 All other - - - - - Total $ 25,365 $ 33,649 $ - $ 29,945 $ 564 With an allowance: Commercial and industrial $ 12,401 $ 12,424 $ 1,938 $ 4,045 $ 160 Real estate: Consumer mortgages 2,453 2,734 300 2,241 55 Home equity 3 13 1 377 1 Agricultural 76 76 1 424 4 Commercial and industrial-owner occupied 4,937 5,406 103 4,643 124 Construction, acquisition and development 1,373 1,373 47 1,551 35 Commercial real estate 16,187 16,400 2,532 12,888 336 Credit cards 823 823 58 881 347 All other 2,890 2,927 23 1,894 78 Total $ 41,143 $ 42,176 $ 5,003 $ 28,944 $ 1,140 Total: Commercial and industrial $ 18,623 $ 24,280 $ 1,938 $ 10,439 $ 232 Real estate: Consumer mortgages 4,108 5,039 300 4,092 77 Home equity 860 1,613 1 1,553 10 Agricultural 937 995 1 864 12 Commercial and industrial-owner occupied 13,258 14,926 103 14,957 479 Construction, acquisition and development 6,176 6,176 47 6,930 39 Commercial real estate 18,833 19,046 2,532 17,279 430 Credit cards 823 823 58 881 347 All other 2,890 2,927 23 1,894 78 Total $ 66,508 $ 75,825 $ 5,003 $ 58,889 $ 1,704 Loans considered impaired under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 310, Receivables (“FASB ASC 310”), are loans for which, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement and all loans restructured in a TDR. The Company’s recorded investment in loans considered impaired exclusive of accruing TDRs at September 30, 2017 and December 31, 2016 was $19.7 million and $38.2 million, respectively. At September 30, 2017 and December 31, 2016, $1.2 million and $12.9 million, respectively, of those impaired loans had a valuation allowance of approximately $ 581,000 and $ 4.4 million, respectively. The remaining balance of impaired loans of $18.5 million and $25.3 million at September 30, 2017 and December 31, 2016, respectively, have sufficient collateral supporting the collection of all outstanding principle or were charged down to fair value of the collateral, less estimated selling costs. Therefore, such loans did not have an associated valuation allowance. Impaired loans that were characterized as non-accruing TDRs totaled $1.0 million and $12.6 million at September 30, 2017 and December 31, 2016, respectively. Non-performing loans and leases (“NPLs”) consist of non-accrual loans and leases, loans and leases 90 days or more past due and still accruing, and loans and leases that have been restructured because of the borrower’s weakened financial condition. The following table presents information concerning NPLs as of the dates indicated: September 30, December 31, 2017 2016 2016 (In thousands) Non-accrual loans and leases $ 55,796 $ 70,725 $ 71,812 Loans and leases 90 days or more past due, still accruing 1,855 2,255 3,983 Restructured loans and leases still accruing 7,366 17,936 26,047 Total non-performing loans and leases $ 65,017 $ 90,916 $ 101,842 The Bank’s policy for all loan classifications provides that loans and leases are generally placed in non-accrual status if, in management’s opinion, payment in full of principal or interest is not expected or payment of principal or interest is more than 90 days past due, unless such loan or lease is both well-secured and in the process of collection. At September 30, 2017, the Company’s geographic NPL distribution was concentrated primarily in its Arkansas and Mississippi markets. The following table presents the Company’s nonaccrual loans and leases by segment and class as of the dates indicated: September 30, December 31, 2017 2016 2016 (In thousands) Commercial and industrial $ 8,776 $ 11,659 $ 13,679 Real estate Consumer mortgages 23,635 20,196 21,084 Home equity 2,555 3,721 3,817 Agricultural 5,919 1,194 1,546 Commercial and industrial-owner occupied 7,558 11,983 10,791 Construction, acquisition and development 1,771 6,939 7,022 Commercial real estate 4,645 14,793 13,402 Credit cards 126 121 161 All other 811 119 310 Total $ 55,796 $ 70,725 $ 71,812 In the normal course of business, management will sometimes grant concessions, which would not otherwise be considered, to borrowers that are experiencing financial difficulty. Loans identified as meeting the criteria set out in FASB ASC 310 are identified as TDRs. The concessions granted most frequently for TDRs involve reductions or delays in required payments of principal and interest for a specified period or the rescheduling of payments in accordance with a bankruptcy plan. In most cases, the conditions of the credit also warrant nonaccrual status, even after the restructure occurs. Other conditions that warrant a loan being considered a TDR include reductions in interest rates to below market rates due to bankruptcy plans or by the bank in an attempt to assist the borrower in working through liquidity problems. As part of the credit approval process, the restructured loans are evaluated for adequate collateral protection in determining the appropriate accrual status at the time of restructure. TDRs recorded as nonaccrual loans may generally be returned to accrual status in years after the restructure if there has been at least a six-month period of sustained repayment performance by the borrower in accordance with the terms of the restructured loan. During the third quarter of 2017, the most common concessions that were granted involved rescheduling payments of principal and interest over a longer amortization period, granting a period of reduced principal payment or interest only payment for a limited time period, or the rescheduling of payments in accordance with a bankruptcy plan. The following tables summarize the financial effect of TDRs recorded during the periods indicated: Three months ended September 30, 2017 Pre-Modification Post-Modification Number Outstanding Outstanding of Recorded Recorded Contracts Investment Investment (Dollars in thousands) Commercial and industrial 3 $ 404 $ 403 Real estate Commercial and industrial-owner occupied 1 418 416 Commercial real estate 2 787 782 All other 1 7 7 Total 7 $ 1,616 $ 1,608 Nine months ended September 30, 2017 Pre-Modification Post-Modification Number Outstanding Outstanding of Recorded Recorded Contracts Investment Investment (Dollars in thousands) Commercial and industrial 8 $ 929 $ 919 Real estate Consumer mortgages 5 297 296 Home equity 4 149 149 Commercial and industrial-owner occupied 4 1,396 1,389 Commercial real estate 2 787 782 All other 6 64 60 Total 29 $ 3,622 $ 3,595 Year ended December 31, 2016 Pre-Modification Post-Modification Number Outstanding Outstanding of Recorded Recorded Contracts Investment Investment (Dollars in thousands) Commercial and industrial 25 $ 14,469 $ 14,305 Real estate Consumer mortgages 16 1,429 1,354 Home equity 1 3 3 Agricultural 2 79 79 Commercial and industrial-owner occupied 10 4,344 4,331 Commercial real estate 5 8,931 6,702 All other 8 3,622 3,608 Total 67 $ 32,877 $ 30,382 The tables below summarize TDRs within the previous 12 months for which there was a payment default during the period indicated (i.e., 30 days or more past due at any given time during the period indicated). Three months ended September 30, 2017 Number of Recorded Contracts Investment (Dollars in thousands) Commercial and industrial 3 $ 309 Real estate Consumer mortgages 1 65 Commercial and industrial-owner occupied 2 1,078 All other 1 5 Total 7 $ 1,457 Nine months ended September 30, 2017 Number of Recorded Contracts Investment (Dollars in thousands) Commercial and industrial 5 $ 343 Real estate Consumer mortgages 4 456 Home equity 1 48 Agricultural 1 10 Commercial and industrial-owner occupied 5 2,170 All other 3 10 Total 19 $ 3,037 Year ended December 31, 2016 Number of Recorded Contracts Investment (Dollars in thousands) Commercial and industrial 8 $ 3,804 Real estate Consumer mortgages 7 597 Commercial and industrial-owner occupied 2 532 Construction, acquisition and development 1 14 Commercial real estate 1 9,336 All other 2 20 Total 21 $ 14,303 |