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 September 30, 2015 and December 31, 2014 : September 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 $ 2,092,139 $ 8,987 $ 1,567 $ 973 $ 7,919 $ 19,446 $ 2,111,585 Commercial and industrial 1,228,571 2,183 1,791 — 5,370 9,344 1,237,915 Commercial construction 374,001 3,955 1,364 — 5,008 10,327 384,328 Residential mortgage 614,609 3,563 3,281 556 3,242 10,642 625,251 Home equity 463,145 2,144 262 — 2,147 4,553 467,698 Installment and other consumer 90,624 344 32 — 122 498 91,122 Consumer construction 8,064 — — — — — 8,064 Loans held for sale 13,794 — — — — — 13,794 Totals $ 4,884,947 $ 21,176 $ 8,297 $ 1,529 $ 23,808 $ 54,810 $ 4,939,757 (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: September 30, 2015 (dollars in thousands) Commercial Real Estate % of Total Commercial and Industrial % of Total Commercial Construction % of Total Total % of Total Pass $ 2,036,905 96.5 % $ 1,169,828 94.5 % $ 344,513 89.6 % $ 3,551,246 95.1 % Special mention 32,371 1.5 % 45,750 3.7 % 18,771 4.9 % 96,892 2.6 % Substandard 42,309 2.0 % 22,337 1.8 % 21,044 5.5 % 85,690 2.3 % Total $ 2,111,585 100 % $ 1,237,915 100.0 % $ 384,328 100.0 % $ 3,733,828 100.0 % 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: September 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 $ 622,009 99.5 % $ 465,551 99.5 % $ 91,000 99.9 % $ 8,064 100.0 % $ 1,186,624 99.5 % Nonperforming 3,242 0.5 % 2,147 0.5 % 122 0.1 % — — % 5,511 0.5 % Total $ 625,251 100.0 % $ 467,698 100.0 % $ 91,122 100.0 % $ 8,064 100.0 % $ 1,192,135 100.0 % 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: September 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 $ 14,080 $ 14,576 $ — $ 19,890 $ 25,262 $ — Commercial and industrial 8,746 10,918 — 9,218 9,449 — Commercial construction 9,315 12,977 — 7,605 11,293 — Consumer real estate 6,852 7,401 — 7,159 7,733 — Other consumer 119 191 — 42 48 — Total without a Related Allowance Recorded 39,112 46,063 — 43,914 53,785 — With a related allowance recorded: Commercial real estate — — — — — — Commercial and industrial 1,969 1,969 1,224 — — — Commercial construction — — — — — — Consumer real estate 118 118 34 43 43 43 Other consumer 2 2 2 20 20 11 Total with a Related Allowance Recorded 2,089 2,089 1,260 63 63 54 Total: Commercial real estate 14,080 14,576 — 19,890 25,262 — Commercial and industrial 10,715 12,887 1,224 9,218 9,449 — Commercial construction 9,315 12,977 — 7,605 11,293 — Consumer real estate 6,970 7,519 34 7,202 7,776 43 Other consumer 121 193 2 62 68 11 Total $ 41,201 $ 48,152 $ 1,260 $ 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 September 30, 2015 September 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 $ 14,101 $ 352 $ 21,110 $ 159 Commercial and industrial 8,993 44 9,702 63 Commercial construction 11,034 67 8,160 58 Consumer real estate 6,829 92 7,034 100 Other consumer 183 — 115 1 Total without a Related Allowance Recorded 41,140 555 46,121 381 With a related allowance recorded: Commercial real estate — — — — Commercial and industrial 1,977 7 — — Commercial construction — — — — Consumer real estate 119 2 47 1 Other consumer 2 — 23 — Total with a Related Allowance Recorded 2,098 9 70 1 Total: Commercial real estate 14,101 352 21,110 159 Commercial and industrial 10,970 51 9,702 63 Commercial construction 11,034 67 8,160 58 Consumer real estate 6,948 94 7,081 101 Other consumer 185 — 138 1 Total $ 43,238 $ 564 $ 46,191 $ 382 Nine Months Ended September 30, 2015 September 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 $ 14,994 $ 731 $ 21,593 $ 512 Commercial and industrial 9,742 131 9,477 177 Commercial construction 8,920 200 8,254 172 Consumer real estate 6,856 279 7,181 306 Other consumer 119 1 122 3 Total without a Related Allowance Recorded 40,631 1,342 46,627 1,170 With a related allowance recorded: Commercial real estate $ — $ — $ — $ — Commercial and industrial 1,980 42 — — Commercial construction — — — — Consumer real estate 121 5 49 2 Other consumer 2 — 24 2 Total with a Related Allowance Recorded 2,103 47 73 4 Total: Commercial real estate 14,994 731 21,593 512 Commercial and industrial 11,722 173 9,477 177 Commercial construction 8,920 200 8,254 172 Consumer real estate 6,977 284 7,230 308 Other consumer 121 1 146 5 Total $ 42,734 $ 1,389 $ 46,700 $ 1,174 The following tables detail activity in the ALL for the periods presented: Three Months Ended September 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 $ 19,018 $ 13,308 $ 7,671 $ 7,027 $ 1,790 $ 48,814 Charge-offs (2,361 ) (1,121 ) (1,247 ) (445 ) (467 ) (5,641 ) Recoveries 2,896 272 129 132 99 3,528 Net (Charge-offs)/ Recoveries 535 (849 ) (1,118 ) (313 ) (368 ) (2,113 ) Provision for loan losses (2,575 ) 12 4,983 302 484 3,206 Balance at End of Period $ 16,978 $ 12,471 $ 11,536 $ 7,016 $ 1,906 $ 49,907 Three Months Ended September 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 $ 20,733 $ 13,004 $ 4,759 $ 6,705 $ 1,379 $ 46,580 Charge-offs — (37 ) (234 ) (436 ) (295 ) (1,002 ) Recoveries (154 ) 315 — 48 75 284 Net (Charge-offs)/ Recoveries (154 ) 278 (234 ) (388 ) (220 ) (718 ) Provision for loan losses (602 ) 616 653 446 341 1,454 Balance at End of Period $ 19,977 $ 13,898 $ 5,178 $ 6,763 $ 1,500 $ 47,316 Nine Months Ended September 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 (2,738 ) (2,819 ) (1,247 ) (997 ) (1,046 ) (8,847 ) Recoveries 3,072 475 132 379 312 4,370 Net (Charge-offs)/Recoveries 334 (2,344 ) (1,115 ) (618 ) (734 ) (4,477 ) Provision for loan losses (3,520 ) 1,147 6,558 1,301 987 6,473 Balance at End of Period $ 16,978 $ 12,471 $ 11,536 $ 7,016 $ 1,906 $ 49,907 Nine Months Ended September 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 (2,002 ) (1,070 ) (693 ) (983 ) (740 ) (5,488 ) Recoveries 1,681 3,564 140 272 284 5,941 Net (Charge-offs)/Recoveries (321 ) 2,494 (553 ) (711 ) (456 ) 453 Provision for loan losses 1,377 (3,029 ) 357 1,112 791 608 Balance at End of Period $ 19,977 $ 13,898 $ 5,178 $ 6,763 $ 1,500 $ 47,316 The following tables present the ALL and recorded investments in loans by category as of the periods presented: September 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 $ — $ 16,978 $ 16,978 $ 14,080 $ 2,097,505 $ 2,111,585 Commercial and industrial 1,224 11,247 12,471 10,715 1,227,200 1,237,915 Commercial construction — 11,536 11,536 9,315 375,013 384,328 Consumer real estate 34 6,982 7,016 6,970 1,094,043 1,101,013 Other consumer 2 1,904 1,906 121 91,001 91,122 Total $ 1,260 $ 48,647 $ 49,907 $ 41,201 $ 4,884,762 $ 4,925,963 (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 was recognized in the ALL through the provision. |