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 does 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 residential mortgages, 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. 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 the dates presented: March 31, 2016 (dollars in thousands) Current 30-59 Days Past Due 60-89 Days Past Due Nonaccrual Total Past Due Total Loans Commercial real estate $ 2,238,144 $ 6,669 $ 174 $ 15,244 $ 22,087 $ 2,260,231 Commercial and industrial 1,306,834 12,509 567 14,209 27,285 1,334,119 Commercial construction 364,675 1,086 3,539 9,993 14,618 379,293 Residential mortgage 636,328 1,749 3,455 9,012 14,216 650,544 Home equity 460,203 3,754 447 3,267 7,468 467,671 Installment and other consumer 75,741 297 42 109 448 76,189 Consumer construction 8,701 — — — — 8,701 Loans held for sale 11,739 — — — — 11,739 Totals $ 5,102,365 $ 26,064 $ 8,224 $ 51,834 $ 86,122 $ 5,188,487 December 31, 2015 (dollars in thousands) Current 30-59 Days Past Due 60-89 Days Past Due Nonaccrual Total Past Due Total Loans Commercial real estate $ 2,145,655 $ 11,602 $ 627 $ 8,719 $ 20,948 $ 2,166,603 Commercial and industrial 1,244,802 2,453 296 9,279 12,028 1,256,830 Commercial construction 401,084 3,517 90 8,753 12,360 413,444 Residential mortgage 631,085 1,728 930 5,629 8,287 639,372 Home equity 465,055 2,365 523 2,902 5,790 470,845 Installment and other consumer 73,486 242 111 100 453 73,939 Consumer construction 6,579 — — — — 6,579 Loans held for sale 35,179 94 48 — 142 35,321 Totals $ 5,002,925 $ 22,001 $ 2,625 $ 35,382 $ 60,008 $ 5,062,933 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: March 31, 2016 (dollars in thousands) Commercial Real Estate % of Total Commercial and Industrial % of Total Commercial Construction % of Total Total % of Total Pass $ 2,179,599 96.4 % $ 1,253,947 94.0 % $ 340,469 89.8 % $ 3,774,015 95.0 % Special mention 26,788 1.2 % 28,517 2.1 % 20,362 5.4 % 75,667 1.9 % Substandard 53,844 2.4 % 51,655 3.9 % 18,462 4.8 % 123,961 3.1 % Total $ 2,260,231 100 % $ 1,334,119 100.0 % $ 379,293 100.0 % $ 3,973,643 100.0 % December 31, 2015 (dollars in thousands) Commercial Real Estate % of Total Commercial and Industrial % of Total Commercial Construction % of Total Total % of Total Pass $ 2,094,851 96.7 % $ 1,182,685 94.1 % $ 375,808 90.9 % $ 3,653,344 95.2 % Special mention 19,938 0.9 % 43,896 3.5 % 19,846 4.8 % 83,680 2.2 % Substandard 51,814 2.4 % 30,249 2.4 % 17,790 4.3 % 99,853 2.6 % Total $ 2,166,603 100.0 % $ 1,256,830 100.0 % $ 413,444 100.0 % $ 3,836,877 100.0 % 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: March 31, 2016 (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 $ 641,532 98.6 % $ 464,404 99.3 % $ 76,080 99.9 % $ 8,701 100.0 % $ 1,190,717 99.0 % Nonperforming 9,012 1.4 % 3,267 0.7 % 109 0.1 % — — % 12,388 1.0 % Total $ 650,544 100.0 % $ 467,671 100.0 % $ 76,189 100.0 % $ 8,701 100.0 % $ 1,203,105 100.0 % December 31, 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 $ 633,743 99.1 % $ 467,943 99.4 % $ 73,839 99.8 % $ 6,579 100.0 % $ 1,182,104 99.3 % Nonperforming 5,629 0.9 % 2,902 0.6 % 100 0.2 % — — % 8,631 0.7 % Total $ 639,372 100.0 % $ 470,845 100.0 % $ 73,939 100.0 % $ 6,579 100.0 % $ 1,190,735 100.0 % 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 related information on those impaired loans as of the dates presented: March 31, 2016 December 31, 2015 (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 $ 18,505 $ 26,493 $ — $ 12,661 $ 13,157 $ — Commercial and industrial 13,778 14,750 — 14,417 15,220 — Commercial construction 10,772 13,974 — 10,998 14,200 — Consumer real estate 11,038 11,703 — 6,845 7,521 — Other consumer 27 29 — 111 188 — Total without a Related Allowance Recorded 54,120 66,949 — 45,032 50,286 — With a related allowance recorded: Commercial real estate — — — — — — Commercial and industrial 4,850 5,356 2,027 — — — Commercial construction 1,116 1,966 154 500 1,350 3 Consumer real estate 114 114 30 116 116 32 Other consumer 2 2 2 2 2 2 Total with a Related Allowance Recorded 6,082 7,438 2,213 618 1,468 37 Total: Commercial real estate 18,505 26,493 — 12,661 13,157 — Commercial and industrial 18,628 20,106 2,027 14,417 15,220 — Commercial construction 11,888 15,940 154 11,498 15,550 3 Consumer real estate 11,152 11,817 30 6,961 7,637 32 Other consumer 29 31 2 113 190 2 Total $ 60,202 $ 74,387 $ 2,213 $ 45,650 $ 51,754 $ 37 As of March 31, 2016, we had $60.2 million of impaired loans which included $21.0 million of acquired loans in the Merger that experienced credit deterioration since the acquisition date. 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 March 31, 2016 March 31, 2015 (dollars in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Without a related allowance recorded: Commercial real estate $ 18,605 $ 199 $ 22,627 $ 164 Commercial and industrial 15,513 149 10,847 62 Commercial construction 10,782 64 7,704 53 Consumer real estate 11,102 135 7,073 96 Other consumer 26 — 34 — Total without a Related Allowance Recorded 56,028 547 48,285 375 With a related allowance recorded: Commercial real estate — — 823 8 Commercial and industrial 5,382 32 — — Commercial construction 1,117 6 — — Consumer real estate 115 2 42 1 Other consumer 2 — 19 — Total with a Related Allowance Recorded 6,616 40 884 9 Total: Commercial real estate 18,605 199 23,450 172 Commercial and industrial 20,895 181 10,847 62 Commercial construction 11,899 70 7,704 53 Consumer real estate 11,217 137 7,115 97 Other consumer 28 — 53 — Total $ 62,644 $ 587 $ 49,169 $ 384 The following tables detail activity in the ALL for the periods presented: Three Months Ended March 31, 2016 (dollars in thousands) Commercial Real Estate Commercial and Industrial Commercial Construction Consumer Real Estate Other Consumer Total Loans Balance at beginning of period $ 15,043 $ 10,853 $ 12,625 $ 8,400 $ 1,226 $ 48,147 Charge-offs (54 ) (2,694 ) — (232 ) (648 ) (3,628 ) Recoveries 361 203 2 164 84 814 Net (Charge-offs)/ Recoveries 307 (2,491 ) 2 (68 ) (564 ) (2,814 ) Provision for loan losses (84 ) 6,378 (1,802 ) (71 ) 593 5,014 Balance at End of Period $ 15,266 $ 14,740 $ 10,825 $ 8,261 $ 1,255 $ 50,347 Three Months Ended March 31, 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 (66 ) (707 ) — (375 ) (303 ) (1,451 ) Recoveries 103 114 1 136 85 439 Net (Charge-offs)/ Recoveries 37 (593 ) 1 (239 ) (218 ) (1,012 ) Provision for loan losses (1,130 ) 636 775 629 297 1,207 Balance at End of Period $ 19,071 $ 13,711 $ 6,869 $ 6,723 $ 1,732 $ 48,106 The following tables present the ALL and recorded investments in loans by category as of the periods presented: March 31, 2016 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 $ — $ 15,266 $ 15,266 $ 18,505 $ 2,241,726 $ 2,260,231 Commercial and industrial 2,027 12,713 14,740 18,628 1,315,491 1,334,119 Commercial construction 154 10,671 10,825 11,888 367,405 379,293 Consumer real estate 30 8,231 8,261 11,152 1,115,764 1,126,916 Other consumer 2 1,253 1,255 29 76,160 76,189 Total $ 2,213 $ 48,134 $ 50,347 $ 60,202 $ 5,116,546 $ 5,176,748 (1) Includes acquired loans. December 31, 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 $ — $ 15,043 $ 15,043 $ 12,661 $ 2,153,942 $ 2,166,603 Commercial and industrial — 10,853 10,853 14,417 1,242,413 1,256,830 Commercial construction 3 12,622 12,625 11,498 401,946 413,444 Consumer real estate 32 8,368 8,400 6,961 1,109,835 1,116,796 Other consumer 2 1,224 1,226 113 73,826 73,939 Total $ 37 $ 48,110 $ 48,147 $ 45,650 $ 4,981,962 $ 5,027,612 (1) Includes acquired loans. |