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 . September 30, December 31, (in thousands) 2016 2015 Commercial non-real estate $ 7,133,928 $ 6,995,824 Commercial real estate - owner occupied 1,901,825 1,859,469 Total commercial & industrial 9,035,753 8,855,293 Commercial real estate - income producing 1,990,309 1,553,082 Construction and land development 946,592 1,151,950 Residential mortgages 2,037,162 2,049,524 Consumer 2,061,005 2,093,465 Total loans $ 16,070,821 $ 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, when secured, have the added strength of 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 nine months ended September 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 Nine Months Ended September 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) (91) (8) (146) Recoveries 76 163 239 2 98 33 112 484 Net provision for loan losses 54 (140) (86) (436) (253) 1,685 (1,633) (723) (Decrease) increase in FDIC loss share receivable (2) — (2) — — (3,341) 316 (3,027) Non-purchased credit impaired activity: Charge-offs (27,504) (1,660) (29,164) (191) (827) (908) (17,403) (48,493) Recoveries 2,709 287 2,996 673 1,422 497 4,272 9,860 Net provision for loan losses 74,500 2,303 76,803 4,862 (216) 964 14,514 96,927 Ending balance $ 159,261 $ 10,783 $ 170,044 $ 10,950 $ 5,848 $ 24,192 $ 25,027 $ 236,061 Ending balance: Allowance: Individually evaluated for impairment $ 20,665 $ 223 $ 20,888 $ 57 $ 6 $ 94 $ 85 $ 21,130 Amounts related to purchased credit impaired loans 574 1,088 1,662 279 484 15,949 1,334 19,708 Collectively evaluated for impairment 138,022 9,472 147,494 10,614 5,358 8,149 23,608 195,223 Total allowance $ 159,261 $ 10,783 $ 170,044 $ 10,950 $ 5,848 $ 24,192 $ 25,027 $ 236,061 Loans: Individually evaluated for impairment $ 235,039 $ 6,458 $ 241,497 $ 7,655 $ 2,062 $ 3,864 $ 1,485 $ 256,563 Purchased credit impaired loans 11,534 16,417 27,951 8,087 8,436 145,273 12,045 201,792 Collectively evaluated for impairment 6,887,355 1,878,950 8,766,305 1,974,567 936,094 1,888,025 2,047,475 15,612,466 Total loans $ 7,133,928 $ 1,901,825 9,035,753 $ 1,990,309 $ 946,592 $ 2,037,162 $ 2,061,005 $ 16,070,821 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 Nine Months ended September 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 (1,425) (379) (1,804) (2,353) (406) (748) (140) (5,451) Recoveries 1,699 937 2,636 20 896 5 185 3,742 Net provision for loan losses (950) (1,614) (2,564) 994 235 1,181 (1,232) (1,386) Increase (decrease) in FDIC loss share receivable 314 (396) (82) 919 (6) (2,718) (97) (1,984) Non-purchased credit impaired activity: Charge-offs (3,068) (664) (3,732) (464) (1,483) (1,451) (10,431) (17,561) Recoveries 2,589 249 2,838 386 2,006 578 3,418 9,226 Net provision for loan losses 13,594 2,436 16,030 (1,915) (289) 283 10,119 24,228 Ending balance $ 63,922 $ 14,105 $ 78,027 $ 5,133 $ 7,374 $ 25,790 $ 23,252 $ 139,576 Ending balance: Allowance: Individually evaluated for impairment $ 5,588 $ 2,723 $ 8,311 $ 187 $ 21 $ 96 $ 3 $ 8,618 Amounts related to purchased credit impaired loans 549 1,304 1,853 885 1,727 18,329 2,711 25,505 Collectively evaluated for impairment 57,785 10,078 67,863 4,061 5,626 7,365 20,538 105,453 Total allowance $ 63,922 $ 14,105 $ 78,027 $ 5,133 $ 7,374 $ 25,790 $ 23,252 $ 139,576 Loans: Individually evaluated for impairment $ 75,345 $ 21,465 $ 96,810 $ 12,520 $ 2,053 $ 903 $ 157 $ 112,443 Purchased credit impaired loans 13,158 21,674 34,832 15,280 16,336 170,033 13,424 249,905 Collectively evaluated for impairment 6,257,491 1,800,015 8,057,506 1,456,432 1,067,196 1,842,853 1,976,715 14,400,702 Total loans $ 6,345,994 $ 1,843,154 8,189,148 $ 1,484,232 $ 1,085,585 $ 2,013,789 $ 1,990,296 $ 14,763,050 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. September 30, December 31, (in thousands) 2016 2015 Commercial non-real estate $ 240,298 $ 88,743 Commercial real estate - owner occupied 15,331 10,001 Total commercial & industrial 255,629 98,744 Commercial real estate - income producing 9,318 10,815 Construction and land development 4,930 17,294 Residential mortgages 21,181 23,799 Consumer 11,752 9,061 Total loans $ 302,810 $ 159,713 Nonaccrual loans include loans modified in troubled debt restructurings (“TDRs”) of $48.2 million and $8.8 million at September 30 , 2016 and December 31, 2015, respectively. Total TDRs, both accruing and nonaccruing, were $56.3 million as of September 30 , 2016 and $13.1 million at December 31, 2015. All TDRs are individually evaluated for impairment. The table below details TDRs that were modified during the nine months ended September 30, 2016 and September 30, 2015 by portfolio class . Nine Months Ended ($ in thousands) September 30, 2016 September 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 6 532 532 4 185 185 Consumer — — — 1 20 20 Total loans 23 $ 58,447 $ 58,447 6 $ 687 $ 687 The TDRs during the nine months ended September 30, 2016 reflected in the table above include $43.4 million of loans with extended amortization terms or other payment concessions, $14.7 million of loans with significant covenant waivers and $0.4 million with other modifications. The TDRs during the nine months ended September 30, 2015 include $0.7 million of loans with extended terms or other payment concessions and $0.1 million of other modifications. No TDRs that subsequently defaulted within twelve months of modification were recorded in the nine months ended September 30, 2016 or 2015. The tables below present loans that are individually evaluated for impairment disaggregated by portfolio class at September 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. September 30, 2016 Recorded investment Recorded investment Unpaid (in thousands) without an allowance with an allowance principal balance Related allowance Commercial non-real estate $ 118,527 $ 116,512 $ 247,732 $ 20,665 Commercial real estate - owner occupied 4,351 2,107 6,850 223 Total commercial & industrial 122,878 118,619 254,582 20,888 Commercial real estate - income producing 5,654 2,001 7,882 57 Construction and land development 1,228 834 2,905 6 Residential mortgages 2,908 956 4,382 94 Consumer — 1,485 1,485 85 Total loans $ 132,668 $ 123,895 $ 271,236 $ 21,130 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 September 30, 2016 September 30, 2015 Average Interest Average Interest recorded income recorded income (in thousands) investment recognized investment recognized Commercial non-real estate $ 233,913 $ 155 $ 53,862 $ 3 Commercial real estate - owner occupied 6,374 10 21,584 16 Total commercial & industrial 240,287 165 75,446 19 Commercial real estate - income producing 7,729 24 12,601 15 Construction and land development 1,655 — 3,207 7 Residential mortgages 2,466 3 1,136 1 Consumer 826 2 137 — Total loans $ 252,963 $ 194 $ 92,527 $ 42 Nine Months Ended September 30, 2016 September 30, 2015 Average Interest Average Interest recorded income recorded income (in thousands) investment recognized investment recognized Commercial non-real estate $ 197,382 $ 1,002 $ 31,570 $ 6 Commercial real estate - owner occupied 6,015 39 14,836 40 Total commercial & industrial 203,397 1,041 46,406 46 Commercial real estate - income producing 8,624 67 10,905 56 Construction and land development 7,821 — 4,762 66 Residential mortgages 1,444 7 1,837 20 Consumer 348 4 101 3 Total loans $ 221,634 $ 1,119 $ 64,011 $ 191 Aging Analysis The tables below present the age analysis of past due loans by portfolio class at September 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 September 30, 2016 past due past due past due past due Current Loans still accruing (in thousands) Commercial non-real estate $ 15,501 $ 24,566 $ 63,794 $ 103,861 $ 7,030,067 $ 7,133,928 $ 543 Commercial real estate - owner occupied 3,006 1,115 7,257 11,378 1,890,447 1,901,825 — Total commercial & industrial 18,507 25,681 71,051 115,239 8,920,514 9,035,753 543 Commercial real estate - income producing 1,873 225 4,421 6,519 1,983,790 1,990,309 — Construction and land development 1,069 1,565 7,358 9,992 936,600 946,592 3,501 Residential mortgages 23,067 6,771 11,541 41,379 1,995,783 2,037,162 — Consumer 15,650 5,402 7,609 28,661 2,032,344 2,061,005 889 Total $ 60,166 $ 39,644 $ 101,980 $ 201,790 $ 15,869,031 $ 16,070,821 $ 4,933 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 September 30, 2016 and December 31, 2015 . September 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 $ 5,899,626 $ 1,721,031 $ 7,620,657 $ 1,876,423 $ 904,550 $ 10,401,630 Pass-Watch 180,467 42,727 223,194 69,773 21,945 314,912 Special Mention 196,408 32,046 228,454 6,100 198 234,752 Substandard 827,476 106,021 933,497 38,000 19,899 991,396 Doubtful 29,951 — 29,951 13 — 29,964 Total $ 7,133,928 $ 1,901,825 $ 9,035,753 $ 1,990,309 $ 946,592 $ 11,972,654 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 September 30, 2016 December 31, 2015 (in thousands) Residential mortgage Consumer Total Residential mortgage Consumer Total Performing $ 2,015,981 $ 2,048,364 $ 4,064,345 $ 2,025,563 $ 2,082,238 $ 4,107,801 Nonperforming 21,181 12,641 33,822 23,961 11,227 35,188 Total $ 2,037,162 $ 2,061,005 $ 4,098,167 $ 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 the 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 shared with the FDIC. The loss share agreement covering the single family portfolio expires in December 2019. As of September 30, 2016 and September 30, 2015, loans totaling $152.3 million and $177.5 million, respectively, were 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 nine months ended September 30, 2016 and 201 5 . Nine Months Ended September 30, September 30, (in thousands) 2016 2015 Beginning Balance $ 29,868 $ 60,272 Amortization (4,678) (4,034) Charge-offs, write-downs and other recoveries (5,569) (6,733) External expenses qualifying under loss share agreement 1,000 1,035 Changes due to changes in cash flow projections (3,027) (1,984) FDIC resolution of denied claims — (1,854) Net payments to (from) FDIC 436 (14,667) Ending balance $ 18,030 $ 32,035 Changes in the carrying amount of purchased credit impaired loans and related accretable yield are presented in the following table for the nine months ended September 30, 2016 and the year ended December 31, 2015 . September 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 (39,446) (7,575) (115,847) (21,978) Accretion 15,400 (15,400) 28,000 (28,000) Increase (decrease) in expected cash flows based on actual cash flows and changes in cash flow assumptions — 5,352 — (4,238) Net transfers to (from) nonaccretable difference to accretable yield — 10,675 — (3,752) Balance at end of period $ 201,792 $ 122,540 $ 225,838 $ 129,488 Residential Mortgage Loans in Process of Foreclosure Included in loans are $9.2 million and $7.4 million of consumer loans secured by single family residential real estate that are in process of foreclosure as of September 30, 2016 and December 31, 2015, respectively. Of these loans, $2.8 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 $4.5 million and $9.3 million of foreclosed single family residential properties in other real estate owned as of September 30, 2016 and December 31, 2015 , respectively. Of these foreclosed properties , $0.9 million and $1.6 million as of September 30, 2016 and December 31, 2015 , respectively, are also covered by the FDIC loss share agreement. |