Loans and Allowance for Loan Losses | 3. Loans and Allowance for Loan Losses The presentation of loan disclosures has been modified from prior filings to eliminate segmentation of Acquired (2011 Whitney Holding Corporation transaction) and FDIC Acquired (2009 Peoples First Community Bank transaction) due to the significantly reduced size of these portfolios. The revised presentation reflects purchased credit impaired (“PCI”) loan information in select tables. PCI loans include the total FDIC Acquired portfolio and the portion of the Acquired portfolio deemed credit impaired at acquisition. In addition, the revised presentation includes further segmentation of the commercial real estate portfolio between owner occupied and income producing loans due to the significant differences in risk characteristics of these loans and to conform more closely to regulatory concentration segments and general industry practices. All prior period information has been reclassified to conform to the current period presentation. Loans, net of unearned income, by portfolio are presented in the table below . June 30, December 31, (in thousands) 2016 2015 Commercial non-real estate $ 7,132,519 $ 6,995,824 Commercial real estate - owner occupied 1,916,200 1,859,469 Total commercial & industrial 9,048,719 8,855,293 Commercial real estate - income producing 2,024,471 1,553,082 Construction and land development 880,588 1,151,950 Residential mortgages 2,017,650 2,049,524 Consumer 2,064,368 2,093,465 Total loans $ 16,035,796 $ 15,703,314 The following briefly describes the composition of each loan category. Commercial and industrial Commercial and industrial loans are made available to businesses for working capital (including financing of inventory and receivables), business expansion, to facilitate the acquisition of a business, and the purchase of equipment and machinery, including equipment leasing. These loans are primarily made based on the identified cash flows of the borrower and, if secured, on the underlying collateral. Commercial non-real estate loans may be secured by the assets being financed or other business assets such as accounts receivable, inventory, ownership or commodity interests, and may incorporate a personal or corporate guarantee; however, some short-term loans may be made on an unsecured basis, including a small portfolio of corporate credit cards, generally issued as a part of overall customer relationships. Commercial real estate – owner occupied loans consist of commercial mortgages on properties where repayment is generally dependent on the cash flow from the ongoing operations and activities of the borrower. Like commercial non-real estate, these loans are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real estate collateral. Commercial real estate – income producing Commercial real estate – income producing loans consist of loans secured by commercial mortgages on properties where the loan is made to real estate developers or investors and repayment is dependent on the sale, refinance, or income generated from the operation of the property. Properties financed include retail, office, multifamily, senior housing, hotel/motel, skilled nursing facilities and other commercial properties. Construction and land development C onstruction and land development loans are made to facilitate t he acquisition, development, improvement and construction of both commercial and residential-purpose properties. Such loans are made to builders and investors where repayment is expected to be made from the sale, refinance or operation of the property or to businesses to be used in their business operations. This portfolio also includes a small amount of residential construction loans and loans secured by raw land not yet under development. Residential Mortgages Residential mortgages consist of closed-end loans secured by first liens on 1- 4 family residential properties. The portfolio includes both fixed and adjustable rate loans, although most longer-term, fixed-rate loans originated are sold in the secondary mortgage market . Consumer Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and unsecured), and deposit account secured loans. Indirect nonresidential loans include automobile financing provided to the consumer through an agreement with automobile dealerships. Consumer loans also include a small portfolio of credit card receivables issued on the basis of applications received through referrals from the Bank’s branches, online and other marketing efforts. Allowance for Loan Losses The following schedule shows activity in the allowance for loan losses by portfolio class for the six months ended June 30, 2016 and 2015, as well as the corresponding recorded investment in loans at the end of each period. Commercial Commercial Commercial real estate- Total real estate- Construction non-real owner commercial & income and land Residential (in thousands) estate occupied industrial producing development mortgages Consumer Total Six Months Ended June 30, 2016 Allowance for loan losses: Beginning balance $ 109,428 $ 9,858 $ 119,286 $ 6,041 $ 5,642 $ 25,353 $ 24,857 $ 181,179 Purchased credit impaired activity: Charge-offs — (28) (28) (1) (18) (23) (8) (78) Recoveries 8 120 128 2 53 3 106 292 Net provision for loan losses 79 (170) (91) 26 (117) 1,165 (1,290) (307) Increase (decrease) in FDIC loss share receivable 39 — 39 — — (3,378) (98) (3,437) Non-purchased credit impaired activity: Charge-offs (22,212) (1,199) (23,411) (191) (592) (592) (11,268) (36,054) Recoveries 1,802 238 2,040 268 1,125 480 3,039 6,952 Net provision for loan losses 61,628 1,857 63,485 6,654 (1,087) 466 8,021 77,539 Ending balance $ 150,772 $ 10,676 $ 161,448 $ 12,799 $ 5,006 $ 23,474 $ 23,359 $ 226,086 Ending balance: Allowance: Individually evaluated for impairment $ 12,885 $ 183 $ 13,068 $ 72 $ 1 $ 167 $ 41 $ 13,349 Amounts related to purchased credit impaired loans 572 1,015 1,587 741 575 15,430 1,257 19,590 Collectively evaluated for impairment 137,315 9,478 146,793 11,986 4,430 7,877 22,061 193,147 Total allowance $ 150,772 $ 10,676 $ 161,448 $ 12,799 $ 5,006 $ 23,474 $ 23,359 $ 226,086 Loans: Individually evaluated for impairment $ 232,785 $ 5,898 $ 238,683 $ 7,803 $ 1,247 $ 1,068 $ 166 $ 248,967 Purchased credit impaired loans 10,483 15,428 25,911 10,752 8,761 151,674 12,826 209,924 Collectively evaluated for impairment 6,889,251 1,894,874 8,784,125 2,005,916 870,580 1,864,908 2,051,376 15,576,905 Total loans $ 7,132,519 $ 1,916,200 9,048,719 $ 2,024,471 $ 880,588 $ 2,017,650 $ 2,064,368 $ 16,035,796 Commercial Commercial Commercial real estate- Total real estate- Construction non-real owner commercial & income and land Residential (in thousands) estate occupied industrial producing development mortgages Consumer Total Six Months ended June 30, 2015 Allowance for loan losses: Beginning balance $ 51,169 $ 13,536 $ 64,705 $ 7,546 $ 6,421 $ 28,660 $ 21,430 $ 128,762 Purchased credit impaired activity: Charge-offs (1,099) (15) (1,114) (2,353) (285) (168) (140) (4,060) Recoveries 14 465 479 — 406 2 136 1,023 Net provision for loan losses 470 (1,171) (701) 1,102 (733) 272 (889) (949) Increase (decrease) in FDIC loss share receivable 347 (396) (49) 919 (6) (3,296) (104) (2,536) Non-purchased credit impaired activity: Charge-offs (2,215) (378) (2,593) (147) (828) (1,292) (6,729) (11,589) Recoveries 2,051 135 2,186 291 1,308 449 2,491 6,725 Net provision for loan losses 9,586 2,812 12,398 (1,858) (982) 62 4,091 13,711 Ending balance $ 60,323 $ 14,988 $ 75,311 $ 5,500 $ 5,301 $ 24,689 $ 20,286 $ 131,087 Ending balance: Allowance: Individually evaluated for impairment $ 2,903 $ 2,189 $ 5,092 $ 228 $ 73 $ 163 $ 6 $ 5,562 Amounts related to purchased credit impaired loans 643 1,639 2,282 973 390 17,419 2,998 24,062 Collectively evaluated for impairment 56,777 11,160 67,937 4,299 4,838 7,107 17,282 101,463 Total allowance $ 60,323 $ 14,988 $ 75,311 $ 5,500 $ 5,301 $ 24,689 $ 20,286 $ 131,087 Loans: Individually evaluated for impairment $ 32,379 $ 21,701 $ 54,080 $ 12,682 $ 4,360 $ 1,369 $ 116 $ 72,607 Purchased credit impaired loans 13,667 24,775 38,442 15,563 19,465 171,107 14,860 259,437 Collectively evaluated for impairment 6,139,638 1,714,266 7,853,904 1,423,846 1,097,122 1,783,361 1,854,475 14,012,708 Total loans $ 6,185,684 $ 1,760,742 7,946,426 $ 1,452,091 $ 1,120,947 $ 1,955,837 $ 1,869,451 $ 14,344,752 Impaired Loans The following table shows the composition of nonaccrual loans by portfolio class. Purchased credit impaired loans accounted for in pools with an accretable yield are considered to be performing and are excluded from the table. June 30, December 31, (in thousands) 2016 2015 Commercial non-real estate $ 209,362 $ 88,743 Commercial real estate - owner occupied 11,761 10,001 Total commercial & industrial 221,123 98,744 Commercial real estate - income producing 9,011 10,815 Construction and land development 4,173 17,294 Residential mortgages 22,874 23,799 Consumer 8,541 9,061 Total loans $ 265,722 $ 159,713 Nonaccrual loans include loans modified in troubled debt restructurings (“TDRs”) of $34.8 million and $8.8 million at June 30 , 2016 and December 31, 2015, respectively. Total TDRs, both accruing and nonaccruing, were $70.8 million as of June 30 , 2016 and $13.1 million at December 31, 2015. The table below details TDRs that were modified during the six months ended June 30, 2016 and June 30, 2015 by portfolio class . The TDRs during the six months ended June 30, 2016 and 2015 were extended amortization, other modification of payment terms, or covenant violations. All are individually evaluated for impairment. Six Months Ended ($ in thousands) June 30, 2016 June 30, 2015 Pre-Modification Post-Modification Pre-Modification Post-Modification Outstanding Outstanding Outstanding Outstanding Number of Recorded Recorded Number of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment Contracts Investment Investment Commercial non-real estate 17 $ 57,915 $ 57,915 — $ — $ — Commercial real estate - owner occupied — — — — — — Total commercial & industrial 17 57,915 57,915 — — — Commercial real estate - income producing — — — 1 482 482 Construction and land development — — — — — — Residential mortgages 4 432 432 2 68 68 Consumer — — — 1 20 20 Total loans 21 $ 58,347 $ 58,347 4 $ 570 $ 570 No TDRs that subsequently defaulted within twelve months of modification were recorded in the six months ended June 30, 2016 or 2015. The tables below present loans that are individually evaluated for impairment disaggregated by portfolio class at June 30, 2016 and December 31, 2015 . Loans individually evaluated for impairment include TDRs and loans that are determined to be impaired and have aggregate relationship balances of $1 million or more. June 30, 2016 Recorded investment Recorded investment Unpaid (in thousands) without an allowance with an allowance principal balance Related allowance Commercial non-real estate $ 101,481 $ 131,304 $ 244,928 $ 12,885 Commercial real estate - owner occupied 3,323 2,575 6,285 183 Total commercial & industrial 104,804 133,879 251,213 13,068 Commercial real estate - income producing 5,265 2,538 8,034 72 Construction and land development 1,228 19 2,089 1 Residential mortgages — 1,068 1,709 167 Consumer — 166 166 41 Total loans $ 111,297 $ 137,670 $ 263,211 $ 13,349 December 31, 2015 Recorded investment Recorded investment Unpaid (in thousands) without an allowance with an allowance principal balance Related allowance Commercial non-real estate $ 34,788 $ 46,834 $ 84,988 $ 19,031 Commercial real estate - owner occupied 4,747 661 5,931 23 Total commercial & industrial 39,535 47,495 90,919 19,054 Commercial real estate - income producing 3,038 8,085 11,363 1,382 Construction and land development 12,461 1,765 14,784 392 Residential mortgages — 895 1,405 127 Consumer — 152 152 33 Total loans $ 55,034 $ 58,392 $ 118,623 $ 20,988 Three Months Ended June 30, 2016 June 30, 2015 Average Interest Average Interest recorded income recorded income (in thousands) investment recognized investment recognized Commercial non-real estate $ 216,907 $ 493 $ 23,473 $ 1 Commercial real estate - owner occupied 5,959 14 14,565 12 Total commercial & industrial 222,866 507 38,038 13 Commercial real estate - income producing 8,242 22 12,521 26 Construction and land development 7,660 — 4,371 27 Residential mortgages 976 2 1,896 7 Consumer 112 1 119 1 Total loans $ 239,856 $ 532 $ 56,945 $ 74 Six Months Ended June 30, 2016 June 30, 2015 Average Interest Average Interest recorded income recorded income (in thousands) investment recognized investment recognized Commercial non-real estate $ 179,117 $ 847 $ 16,977 $ 3 Commercial real estate - owner occupied 5,836 29 12,628 23 Total commercial & industrial 184,953 876 29,605 26 Commercial real estate - income producing 9,072 43 10,366 41 Construction and land development 10,905 — 5,664 59 Residential mortgages 932 4 2,149 20 Consumer 109 2 81 3 Total loans $ 205,971 $ 925 $ 47,865 $ 149 Aging Analysis The tables below present the age analysis of past due loans by portfolio class at June 30, 2016 and December 31, 2015 . Purchased credit impaired loans accounted for in pools with an accretable yield are considered to be current. Recorded Greater than investment 30-59 days 60-89 days 90 days Total Total > 90 days and June 30, 2016 past due past due past due past due Current Loans still accruing (in thousands) Commercial non-real estate $ 47,859 $ 28,591 $ 29,000 $ 105,450 $ 7,027,069 $ 7,132,519 $ 567 Commercial real estate - owner occupied 2,451 2,106 7,149 11,706 1,904,494 1,916,200 1,495 Total commercial & industrial 50,310 30,697 36,149 117,156 8,931,563 9,048,719 2,062 Commercial real estate - income producing 2,583 467 2,777 5,827 2,018,644 2,024,471 194 Construction and land development 1,386 938 7,647 9,971 870,617 880,588 4,759 Residential mortgages 15,108 7,293 12,549 34,950 1,982,700 2,017,650 143 Consumer 12,012 4,459 6,107 22,578 2,041,790 2,064,368 824 Total $ 81,399 $ 43,854 $ 65,229 $ 190,482 $ 15,845,314 $ 16,035,796 $ 7,982 Recorded Greater than investment 30-59 days 60-89 days 90 days Total Total > 90 days and December 31, 2015 past due past due past due past due Current Loans still accruing (in thousands) Commercial non-real estate $ 17,406 $ 1,468 $ 25,007 $ 43,881 $ 6,951,943 $ 6,995,824 $ 3,060 Commercial real estate - owner occupied 5,898 802 6,646 13,346 1,846,123 1,859,469 535 Total commercial & industrial 23,304 2,270 31,653 57,227 8,798,066 8,855,293 3,595 Commercial real estate - income producing 871 603 6,382 7,856 1,545,226 1,553,082 499 Construction and land development 19,886 436 4,043 24,365 1,127,585 1,151,950 1,230 Residential mortgages 18,657 4,360 11,840 34,857 2,014,667 2,049,524 163 Consumer 16,309 4,432 8,645 29,386 2,064,079 2,093,465 2,166 Total $ 79,027 $ 12,101 $ 62,563 $ 153,691 $ 15,549,623 $ 15,703,314 $ 7,653 Credit Quality Indicators The following tables present the credit quality indicators by segments and portfolio class of loans at June 30, 2016 and December 31, 2015 . June 30, 2016 (in thousands) Commercial non-real estate Commercial real estate - owner-occupied Total commercial & industrial Commercial real estate - income producing Construction and land development Total commercial Grade: Pass $ 5,968,194 $ 1,743,672 $ 7,711,866 $ 1,961,653 $ 847,229 $ 10,520,748 Pass-Watch 252,605 39,586 292,191 15,764 16,355 324,310 Special Mention 250,226 37,151 287,377 8,412 537 296,326 Substandard 659,381 95,791 755,172 38,629 16,467 810,268 Doubtful 2,113 — 2,113 13 — 2,126 Total $ 7,132,519 $ 1,916,200 $ 9,048,719 $ 2,024,471 $ 880,588 $ 11,953,778 December 31, 2015 (in thousands) Commercial non-real estate Commercial real estate - owner-occupied Total commercial & industrial Commercial real estate - income producing Construction and land development Total commercial Grade: Pass $ 6,260,863 $ 1,718,725 $ 7,979,588 $ 1,502,484 $ 1,095,296 $ 10,577,368 Pass-Watch 168,589 31,764 200,353 14,717 6,841 221,911 Special Mention 211,230 41,147 252,377 5,905 12,297 270,579 Substandard 355,098 67,833 422,931 29,960 37,516 490,407 Doubtful 44 — 44 16 — 60 Total $ 6,995,824 $ 1,859,469 $ 8,855,293 $ 1,553,082 $ 1,151,950 $ 11,560,325 June 30, 2016 December 31, 2015 (in thousands) Residential mortgage Consumer Total Residential mortgage Consumer Total Performing $ 1,994,633 $ 2,055,003 $ 4,049,636 $ 2,025,563 $ 2,082,238 $ 4,107,801 Nonperforming 23,017 9,365 32,382 23,961 11,227 35,188 Total $ 2,017,650 $ 2,064,368 $ 4,082,018 $ 2,049,524 $ 2,093,465 $ 4,142,989 Below are the definitions of the Company’s internally assigned grades: Commercial : · Pass – loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk. · Pass-Watch – credits in this category have heightened risk factors that warrant additional monitoring; however, these risk factors have not manifested themselves as potential weaknesses. The “Watch” grade should be regarded as a transition · category. · Special Mention – a criticized asset category defined as having potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the credit or the institution’s credit position. Special mention credits are not considered part of the Classified credit categories and do not expose an institution to sufficient risk to warrant adverse classification. · Substandard – an asset that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. · Doubtful – an asset that has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection nor liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. · Loss – credits classified as Loss are considered uncollectable and are charged off promptly once so classified. Residential and Consumer: · Performing – loans on which payments of principal and interest are less than 90 days past due. · Nonperforming – a nonperforming loan is a loan that is in default or close to being in default and there are good reasons to doubt that payments will be made in full. All loans rated as nonaccrual loans are also classified as nonperforming. Purchased credit impaired loans and the related FDIC loss share receivable Loans purchased in the 2009 acquisition of Peoples First Community Bank (“Peoples First”) were covered by two loss share agreements between the FDIC and the Company. The loss share agreement covering the non-single family portfolio expired in December 2014 and is now in a three year recovery period where 80% of recoveries on reimbursed losses are due to the FDIC. The loss share agreement covering the single family portfolio expires in December 2019. As of June 30, 2016 and June 30, 2015, loans totaling $160.0 million and $170.1 million, respectively, remain covered by the single family loss share agreement. The receivable arising from the loss share agreements (referred to as the “FDIC loss share receivable” on our consolidated statements of financial condition) is measured separately from the covered loans because the agreements are not contractually part of the loans and are not transferable should the Company choose to dispose of the loans. The following schedule shows activity in the loss share receivable for the six months ended June 30, 2016 and 201 5 . Six Months Ended June 30, June 30, (in thousands) 2016 2015 Beginning Balance $ 29,868 $ 60,272 Amortization (3,139) (2,470) Charge-offs, write-downs and other recoveries (2,683) (4,667) External expenses qualifying under loss share agreement 307 482 Changes due to changes in cash flow projections (3,437) (2,536) FDIC resolution of denied claims — (1,854) Net payments to (from) FDIC 159 (14,153) Ending balance $ 21,075 $ 35,074 Changes in the carrying amount of purchased credit impaired loans and related accretable yield are presented in the following table for the six months ended June 30, 2016 and the year ended December 31, 2015 . June 30, 2016 December 31, 2015 Carrying Carrying Amount Accretable Amount Accretable (in thousands) of Loans Yield of Loans Yield Balance at beginning of period $ 225,838 $ 129,488 $ 313,685 $ 187,456 Payments received, net (26,541) (6,581) (115,847) (21,978) Accretion 10,627 (10,627) 28,000 (28,000) Increase (decrease) in expected cash flows based on actual cash flows and changes in cash flow assumptions — 5,107 — (4,238) Net transfers from nonaccretable Net transfers to (from) nonaccretable difference to accretable yield — 8,997 — (3,752) Balance at end of period $ 209,924 $ 126,384 $ 225,838 $ 129,488 Residential Mortgage Loans in Process of Foreclosure Included in loans are $7.1 million and $7.4 million of consumer loans secured by single family residential real estate that are in process of foreclosure as of June 30, 2016 and December 31, 2015, respectively. Of these loans, $3.6 million and $4.1 million, respectively, are covered by the FDIC loss share agreement. Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $5.9 million and $9.3 million of foreclosed single family residential properties in other real estate owned as of June 30, 2016 and December 31, 2015 , respectively. Of these foreclosed properties, $0.7 million and $1.6 million as of June 30, 2016 and December 31, 2015 , respectively, are also covered by the FDIC loss share agreement. |