Allowance for Loan Losses | We maintain an allowance for loan losses, or ALL, at a level determined to be adequate to absorb estimated probable credit losses inherent in the loan portfolio as of the balance sheet date. We develop and document a systematic ALL methodology based on the following portfolio segments: 1) CRE, 2) C&I, 3) Commercial Construction, 4) Consumer Real Estate and 5) Other Consumer. The following are key risks within each portfolio segment: CRE —Loans secured by commercial purpose real estate, including both owner occupied properties and investment properties, for various purposes such as hotels, strip malls and apartments. Operations of the individual projects as well as global cash flows of the debtors are the primary sources of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type as well as the business prospects of the lessee, if the project is not owner occupied. C&I —Loans made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. Cash flow from the operations of the company is the primary source of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the company. Collateral for these types of loans often do not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt. Commercial Construction —Loans made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. While the risk of these loans is generally confined to the construction period, if there are problems, the project may not be complete, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer. Consumer Real Estate —Loans secured by first and second liens such as home equity loans, home equity lines of credit and 1-4 family residences, including purchase money mortgages. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy the debt. Other Consumer —Loans made to individuals that may be secured by assets other than 1-4 family residences, as well as unsecured loans. This segment includes auto loans, unsecured loans and lines and credit cards. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values. We further assess risk within each portfolio segment by pooling loans with similar risk characteristics. For the commercial loan classes, the most important indicator of risk is the internally assigned risk rating, including pass, special mention and substandard. Consumer loans are pooled by type of collateral, lien position and loan to value, or LTV, ratio for Consumer Real Estate loans. Historical loss rates are applied to these loan pools to determine the reserve for loans collectively evaluated for impairment. The ALL methodology for groups of loans collectively evaluated for impairment is comprised of both a quantitative and qualitative analysis. A key assumption in the quantitative component of the reserve is the loss emergence period, or LEP. The LEP is an estimate of the average amount of time from the point at which a loss is incurred on a loan to the point at which the loss is confirmed. In general, the LEP will be shorter in an economic slowdown or recession and longer during times of economic stability or growth, as customers are better able to delay loss confirmation after a potential loss event has occurred. Another key assumption is the look-back period, or LBP, which represents the historical data period utilized to calculate loss rates. Management monitors various credit quality indicators for both the commercial and consumer loan portfolios, including delinquency, nonperforming status and changes in risk ratings on a monthly basis. The following tables present the age analysis of past due loans segregated by class of loans as of June 30, 2015 and December 31, 2014 : June 30, 2015 (dollars in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days Past Due (1) Nonaccrual Total Past Due Total Loans Commercial real estate $ 2,032,731 $ 9,656 $ 3,518 $ 1,721 $ 7,309 $ 22,204 $ 2,054,935 Commercial and industrial 1,231,221 2,875 2,143 — 3,143 8,161 1,239,382 Commercial construction 333,897 4,474 — 2,140 4,472 11,086 344,983 Residential mortgage 593,043 1,732 1,770 947 2,010 6,459 599,502 Home equity 453,279 1,971 430 107 2,026 4,534 457,813 Installment and other consumer 93,223 261 774 — 179 1,214 94,437 Consumer construction 7,446 — — — — — 7,446 Loans held for sale 13,634 — — — — — 13,634 Totals $ 4,758,474 $ 20,969 $ 8,635 $ 4,915 $ 19,139 $ 53,658 $ 4,812,132 (1) Represents acquired loans that were recorded at fair value at the acquisition date. December 31, 2014 (dollars in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days Past Due Nonaccrual Total Past Due Total Loans Commercial real estate $ 1,674,930 $ 2,548 $ 323 $ — $ 4,435 $ 7,306 $ 1,682,236 Commercial and industrial 991,136 1,227 153 — 1,622 3,002 994,138 Commercial construction 214,174 — — — 1,974 1,974 216,148 Residential mortgage 485,465 565 1,220 — 2,336 4,121 489,586 Home equity 414,303 1,756 445 — 2,059 4,260 418,563 Installment and other consumer 65,111 352 73 — 31 456 65,567 Consumer construction 2,508 — — — — — 2,508 Loans held for sale 2,970 — — — — — 2,970 Totals $ 3,850,597 $ 6,448 $ 2,214 $ — $ 12,457 $ 21,119 $ 3,871,716 We continually monitor the commercial loan portfolio through an internal risk rating system. Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies. Loans within the pass rating generally have a lower risk of loss than loans risk rated as special mention or substandard. Our risk ratings are consistent with regulatory guidance and are as follows: Pass —The loan is currently performing and is of high quality. Special Mention —A special mention loan has potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects or in the strength of our credit position at some future date. Economic and market conditions, beyond the borrower’s control, may in the future necessitate this classification. Substandard —A substandard loan is not adequately protected by the net worth and/or paying capacity of the borrower or by the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. The following tables present the recorded investment in commercial loan classes by internally assigned risk ratings as of the dates presented: June 30, 2015 (dollars in thousands) Commercial Real Estate % of Total Commercial and Industrial % of Total Commercial Construction % of Total Total % of Total Pass $ 1,976,311 96.2 % $ 1,158,898 93.5 % $ 300,968 87.3 % $ 3,436,177 94.4 % Special mention 33,328 1.6 % 60,251 4.9 % 26,276 7.6 % 119,855 3.3 % Substandard 45,296 2.2 % 20,233 1.6 % 17,739 5.1 % 83,268 2.3 % Total $ 2,054,935 100 % $ 1,239,382 100.0 % $ 344,983 100.0 % $ 3,639,300 100.0 % December 31, 2014 (dollars in thousands) Commercial Real Estate % of Total Commercial and Industrial % of Total Commercial Construction % of Total Total % of Total Pass $ 1,635,132 97.2 % $ 948,663 95.4 % $ 196,520 90.9 % $ 2,780,315 96.1 % Special mention 23,597 1.4 % 30,357 3.1 % 12,014 5.6 % 65,968 2.3 % Substandard 23,507 1.4 % 15,118 1.5 % 7,614 3.5 % 46,239 1.6 % Total $ 1,682,236 100.0 % $ 994,138 100.0 % $ 216,148 100.0 % $ 2,892,522 100.0 % We monitor the delinquent status of the consumer portfolio on a monthly basis. Loans are considered nonperforming when interest and principal are 90 days or more past due or management has determined that a material deterioration in the borrower’s financial condition exists. The risk of loss is generally highest for nonperforming loans. The following tables present the recorded investment in consumer loan classes by performing and nonperforming status as of the dates presented: June 30, 2015 (dollars in thousands) Residential Mortgage % of Total Home Equity % of Total Installment and other consumer % of Total Consumer Construction % of Total Total % of Total Performing $ 597,492 99.7 % $ 455,787 99.6 % $ 94,258 99.8 % $ 7,446 100.0 % $ 1,154,983 99.6 % Nonperforming 2,010 0.3 % 2,026 0.4 % 179 0.2 % — — % 4,215 0.4 % Total $ 599,502 100.0 % $ 457,813 100.0 % $ 94,437 100.0 % $ 7,446 100.0 % $ 1,159,198 100.0 % December 31, 2014 (dollars in thousands) Residential Mortgage % of Total Home Equity % of Total Installment and other consumer % of Total Consumer Construction % of Total Total % of Total Performing $ 487,250 99.5 % $ 416,504 99.5 % $ 65,536 99.9 % $ 2,508 100.0 % $ 971,798 99.5 % Nonperforming 2,336 0.5 % 2,059 0.5 % 31 0.1 % — — % 4,426 0.5 % Total $ 489,586 100.0 % $ 418,563 100.0 % $ 65,567 100.0 % $ 2,508 100.0 % $ 976,224 100.0 % We individually evaluate all substandard and nonaccrual commercial loans greater than $0.5 million for impairment. Loans are considered to be impaired when based upon current information and events it is probable that we will be unable to collect all principal and interest payments due according to the original contractual terms of the loan agreement. All TDRs will be reported as an impaired loan for the remaining life of the loan, unless the restructuring agreement specifies an interest rate equal to or greater than the rate that would be accepted at the time of the restructuring for a new loan with comparable risk and it is expected that the remaining principal and interest will be fully collected according to the restructured agreement. For all TDRs, regardless of size, as well as all other impaired loans, we conduct further analysis to determine the probable loss and assign a specific reserve to the loan if deemed appropriate. The following tables summarize investments in loans considered to be impaired and the related information on those impaired loans as of the dates presented: June 30, 2015 December 31, 2014 (dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance Without a related allowance recorded: Commercial real estate $ 18,548 $ 25,698 $ — $ 19,890 $ 25,262 $ — Commercial and industrial 10,125 11,877 — 9,218 9,449 — Commercial construction 9,293 12,983 — 7,605 11,293 — Consumer real estate 6,824 7,527 — 7,159 7,733 — Other consumer 192 197 — 42 48 — Total without a Related Allowance Recorded 44,982 58,282 — 43,914 53,785 — With a related allowance recorded: Commercial real estate 749 749 567 — — — Commercial and industrial — — — — — — Commercial construction — — — — — — Consumer real estate 120 120 37 43 43 43 Other consumer 4 4 4 20 20 11 Total with a Related Allowance Recorded 873 873 608 63 63 54 Total: Commercial real estate 19,297 26,447 567 19,890 25,262 — Commercial and industrial 10,125 11,877 — 9,218 9,449 — Commercial construction 9,293 12,983 — 7,605 11,293 — Consumer real estate 6,944 7,647 37 7,202 7,776 43 Other consumer 196 201 4 62 68 11 Total $ 45,855 $ 59,155 $ 608 $ 43,977 $ 53,848 $ 54 The following tables summarize investments in loans considered to be impaired and related information on those impaired loans for the periods presented: Three Months Ended June 30, 2015 June 30, 2014 (dollars in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Without a related allowance recorded: Commercial real estate $ 19,733 $ 158 $ 21,382 $ 159 Commercial and industrial 10,782 84 9,317 57 Commercial construction 8,119 81 8,279 57 Consumer real estate 6,891 91 7,166 100 Other consumer 126 4 109 1 Total without a Related Allowance Recorded 45,651 418 46,253 374 With a related allowance recorded: Commercial real estate 420 — — — Commercial and industrial — — — — Commercial construction — — — — Consumer real estate 121 2 48 1 Other consumer 4 — 22 — Total with a Related Allowance Recorded 545 2 70 1 Total: Commercial real estate 20,153 158 21,382 159 Commercial and industrial 10,782 84 9,317 57 Commercial construction 8,119 81 8,279 57 Consumer real estate 7,012 93 7,214 101 Other consumer 130 4 131 1 Total $ 46,196 $ 420 $ 46,323 $ 375 Six Months Ended June 30, 2015 June 30, 2014 (dollars in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Without a related allowance recorded: Commercial real estate $ 20,455 $ 322 $ 21,980 $ 329 Commercial and industrial 11,162 146 9,066 114 Commercial construction 6,628 134 8,301 114 Consumer real estate 6,943 186 7,260 203 Other consumer 86 4 112 2 Total without a Related Allowance Recorded 45,274 792 46,719 762 With a related allowance recorded: Commercial real estate $ 211 $ — $ — $ — Commercial and industrial — — — — Commercial construction — — — — Consumer real estate 122 3 50 2 Other consumer 4 — 23 1 Total with a Related Allowance Recorded 337 3 73 3 Total: Commercial real estate 20,666 322 21,980 329 Commercial and industrial 11,162 146 9,066 114 Commercial construction 6,628 134 8,301 114 Consumer real estate 7,065 189 7,310 205 Other consumer 90 4 135 3 Total $ 45,611 $ 795 $ 46,792 $ 765 The following tables detail activity in the ALL for the periods presented: Three Months Ended June 30, 2015 (dollars in thousands) Commercial Real Estate Commercial and Industrial Commercial Construction Consumer Real Estate Other Consumer Total Loans Balance at beginning of period $ 19,071 $ 13,711 $ 6,869 $ 6,723 $ 1,732 $ 48,106 Charge-offs (310 ) (992 ) — (177 ) (276 ) (1,755 ) Recoveries 73 89 1 112 129 404 Net (Charge-offs)/ Recoveries (237 ) (903 ) 1 (65 ) (147 ) (1,351 ) Provision for loan losses 184 500 801 369 205 2,059 Balance at End of Period $ 19,018 $ 13,308 $ 7,671 $ 7,027 $ 1,790 $ 48,814 Three Months Ended June 30, 2014 (dollars in thousands) Commercial Real Estate Commercial and Industrial Commercial Construction Consumer Real Estate Other Consumer Total Loans Balance at beginning of period $ 19,880 $ 13,979 $ 5,183 $ 6,408 $ 1,166 $ 46,616 Charge-offs (1,737 ) (743 ) (664 ) (425 ) (177 ) (3,746 ) Recoveries 1,294 2,936 324 164 126 4,844 Net (Charge-offs)/ Recoveries (443 ) 2,193 (340 ) (261 ) (51 ) 1,098 Provision for loan losses 1,296 (3,168 ) (84 ) 558 264 (1,134 ) Balance at End of Period $ 20,733 $ 13,004 $ 4,759 $ 6,705 $ 1,379 $ 46,580 Six Months Ended June 30, 2015 (dollars in thousands) Commercial Real Estate Commercial and Industrial Commercial Construction Consumer Real Estate Other Consumer Total Loans Balance at beginning of period $ 20,164 $ 13,668 $ 6,093 $ 6,333 $ 1,653 $ 47,911 Charge-offs (376 ) (1,698 ) — (552 ) (579 ) (3,205 ) Recoveries 176 203 2 248 213 842 Net (Charge-offs)/Recoveries (200 ) (1,495 ) 2 (304 ) (366 ) (2,363 ) Provision for loan losses (946 ) 1,135 1,576 998 503 3,266 Balance at End of Period $ 19,018 $ 13,308 $ 7,671 $ 7,027 $ 1,790 $ 48,814 Six Months Ended June 30, 2014 (dollars in thousands) Commercial Real Estate Commercial and Industrial Commercial Construction Consumer Real Estate Other Consumer Total Loans Balance at beginning of period $ 18,921 $ 14,433 $ 5,374 $ 6,362 $ 1,165 $ 46,255 Charge-offs (2,004 ) (1,033 ) (692 ) (547 ) (445 ) (4,721 ) Recoveries 1,834 3,249 375 223 210 5,891 Net (Charge-offs)/Recoveries (170 ) 2,216 (317 ) (324 ) (235 ) 1,170 Provision for loan losses 1,982 (3,645 ) (298 ) 667 449 (845 ) Balance at End of Period $ 20,733 $ 13,004 $ 4,759 $ 6,705 $ 1,379 $ 46,580 The following tables present the ALL and recorded investments in loans by category as of the periods presented: June 30, 2015 Allowance for Loan Losses Portfolio Loans (dollars in thousands) Individually Evaluated for Impairment Collectively Evaluated for Impairment Total Individually Evaluated for Impairment Collectively Evaluated for Impairment Total (1) Commercial real estate $ 567 $ 18,451 $ 19,018 $ 19,297 $ 2,035,638 $ 2,054,935 Commercial and industrial — 13,308 13,308 10,125 1,229,257 1,239,382 Commercial construction — 7,671 7,671 9,293 335,690 344,983 Consumer real estate 37 6,990 7,027 6,944 1,057,817 1,064,761 Other consumer 4 1,786 1,790 196 94,241 94,437 Total $ 608 $ 48,206 $ 48,814 $ 45,855 $ 4,752,643 $ 4,798,498 (1) Includes acquired loans. December 31, 2014 Allowance for Loan Losses Portfolio Loans (dollars in thousands) Individually Evaluated for Impairment Collectively Evaluated for Impairment Total Individually Evaluated for Impairment Collectively Evaluated for Impairment Total (1) Commercial real estate $ — $ 20,164 $ 20,164 $ 19,890 $ 1,662,346 $ 1,682,236 Commercial and industrial — 13,668 13,668 9,218 984,920 994,138 Commercial construction — 6,093 6,093 7,605 208,543 216,148 Consumer real estate 43 6,290 6,333 7,202 903,455 910,657 Other consumer 11 1,642 1,653 62 65,505 65,567 Total $ 54 $ 47,857 $ 47,911 $ 43,977 $ 3,824,769 $ 3,868,746 (1) Includes acquired loans. Acquired loans are recorded at fair value with no carryover of the ALL. Credit deterioration on acquired loans incurred subsequent to the acquisition date will be recognized in the ALL through the provision. |