Loans and Leases | LOANS AND LEASES BancShares' accounting methods for loans and leases differ depending on whether they are non-purchased credit impaired (Non-PCI) or purchased credit impaired (PCI). Loans that are originated by FCB, as well as loans that are performing under their contractual obligations at acquisition, are classified as Non-PCI. Loans that reflect credit deterioration since origination, such that it is probable at acquisition that FCB will be unable to collect all contractually required payments, are classified as PCI. Additionally, at the date of acquisition, all acquired loans are recorded at fair value with no corresponding allowance for loan and lease losses. Loans and leases outstanding included the following at March 31, 2019 and December 31, 2018 : (Dollars in thousands) March 31, 2019 December 31, 2018 Non-PCI loans and leases: Commercial: Construction and land development $ 804,463 $ 757,854 Commercial mortgage 10,747,715 10,717,234 Other commercial real estate 427,419 426,985 Commercial and industrial and leases 3,879,575 3,938,730 Other 280,848 296,424 Total commercial loans 16,140,020 16,137,227 Noncommercial: Residential mortgage 4,303,137 4,265,687 Revolving mortgage 2,469,898 2,542,975 Construction and land development 258,959 257,030 Consumer 1,734,415 1,713,781 Total noncommercial loans 8,766,409 8,779,473 Total non-PCI loans and leases 24,906,429 24,916,700 PCI loans: Total PCI loans 557,356 606,576 Total loans and leases $ 25,463,785 $ 25,523,276 At March 31, 2019 , $9.08 billion in non-PCI loans with a lendable collateral value of $6.36 billion were used to secure $175.2 million in Federal Home Loan Bank (FHLB) of Atlanta advances and $14.5 million in FHLB of Chicago advances, resulting in additional borrowing capacity of $6.17 billion . At December 31, 2018 , $9.12 billion in non-PCI loans with a lendable collateral value of $6.36 billion were used to secure $175.2 million in FHLB of Atlanta advances, resulting in additional borrowing capacity of $6.18 billion . At March 31, 2019 , $2.93 billion in non-PCI loans with a lendable collateral value of $2.23 billion were used to secure additional borrowing capacity at the Federal Reserve Bank (FRB). At December 31, 2018 , $2.94 billion in non-PCI loans with a lendable collateral value of $2.19 billion were used to secure additional borrowing capacity at the FRB. Certain residential real estate loans are originated to be sold to investors and are recorded in loans held for sale at fair value. In addition, we may change our strategy for certain portfolio loans and decide to sell them in the secondary market. At that time, portfolio loans are transferred to loans held for sale at fair value. Loans held for sale totaled $53.2 million and $45.5 million at March 31, 2019 and December 31, 2018 , respectively. During the three months ended March 31, 2019 , total proceeds from sales of loans held for sale were $123.0 million and there were no transfers to loans held for sale from the residential mortgage portfolio. For the three months ended March 31, 2018 , total proceeds from sales of loans held for sale were $138.5 million and there were no transfers to loans held for sale from the residential mortgage portfolio. Net deferred fees on non-PCI loans and leases, including unearned income as well as unamortized costs and fees, were $130 thousand and $79 thousand at March 31, 2019 and December 31, 2018 , respectively. The net unamortized discount related to purchased non-PCI loans and leases was $30.1 million at March 31, 2019 and $33.3 million at December 31, 2018. During the three months ended March 31, 2019 and March 31, 2018 , accretion income on purchased non-PCI loans and leases was $3.2 million and $2.9 million , respectively. Credit quality indicators Loans and leases are monitored for credit quality on a recurring basis. Commercial and noncommercial loans and leases have different credit quality indicators as a result of the unique characteristics of the loan segments being evaluated. The credit quality indicators for non-PCI and PCI commercial loans and leases are developed through a review of individual borrowers on an ongoing basis. Commercial loans are evaluated periodically with more frequent evaluations done on criticized loans. Commercial credit cards are included in the Commercial and industrial and leases segment, but are not specifically graded as with other commercial loans. The indicators as of the date presented are based on the most recent assessment performed and are defined below: Pass – A pass rated asset is not adversely classified because it does not display any of the characteristics for adverse classification. Special mention – A special mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification. Substandard – A substandard asset is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected. Doubtful – An asset classified as doubtful has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions and values. Loss – Assets classified as loss are considered uncollectible and of such little value that it is inappropriate to be carried as an asset. This classification is not necessarily equivalent to any potential for recovery or salvage value, but rather that it is not appropriate to defer a full charge-off even though partial recovery may be affected in the future. Ungraded – Ungraded loans represent loans that are not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of ungraded loans at March 31, 2019 and December 31, 2018 relate to business credit cards. Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit. The remaining balance is comprised of a small amount of commercial mortgage, lease financing and other commercial real estate loans. The credit quality indicators for non-PCI and PCI noncommercial loans are based on delinquency status of the borrower as of the date presented. As the borrower becomes more delinquent, the likelihood of loss increases. The composition of the loans and leases outstanding at March 31, 2019 and December 31, 2018 by credit quality indicator are provided below: March 31, 2019 (Dollars in thousands) Non-PCI commercial loans and leases Grade: Construction and Commercial mortgage Other commercial real estate Commercial and industrial and leases Other Total non-PCI commercial loans and leases Pass $ 800,703 $ 10,528,026 $ 423,288 $ 3,717,237 $ 279,899 $ 15,749,153 Special mention 1,345 110,413 3,244 46,928 350 162,280 Substandard 2,415 109,276 887 37,443 599 150,620 Doubtful — — — 354 — 354 Ungraded — — — 77,613 — 77,613 Total $ 804,463 $ 10,747,715 $ 427,419 $ 3,879,575 $ 280,848 $ 16,140,020 December 31, 2018 (Dollars in thousands) Non-PCI commercial loans and leases Grade: Construction and Commercial mortgage Other commercial real estate Commercial and industrial and leases Other Total non-PCI commercial loans and leases Pass $ 753,985 $ 10,507,687 $ 422,500 $ 3,778,797 $ 294,700 $ 15,757,669 Special mention 1,369 114,219 3,193 54,814 1,105 174,700 Substandard 2,500 92,743 1,292 30,688 619 127,842 Doubtful — — — 354 — 354 Ungraded — 2,585 — 74,077 — 76,662 Total $ 757,854 $ 10,717,234 $ 426,985 $ 3,938,730 $ 296,424 $ 16,137,227 March 31, 2019 Non-PCI noncommercial loans and leases (Dollars in thousands) Residential Revolving Construction Consumer Total non-PCI noncommercial loans and leases Current $ 4,248,823 $ 2,444,150 $ 256,801 $ 1,720,142 $ 8,669,916 30-59 days past due 33,623 10,734 581 7,966 52,904 60-89 days past due 7,760 4,227 28 3,001 15,016 90 days or greater past due 12,931 10,787 1,549 3,306 28,573 Total $ 4,303,137 $ 2,469,898 $ 258,959 $ 1,734,415 $ 8,766,409 December 31, 2018 Non-PCI noncommercial loans and leases (Dollars in thousands) Residential Revolving Construction Consumer Total non-PCI noncommercial loans and leases Current $ 4,214,783 $ 2,514,269 $ 254,837 $ 1,696,321 $ 8,680,210 30-59 days past due 28,239 12,585 581 10,035 51,440 60-89 days past due 7,357 4,490 21 3,904 15,772 90 days or greater past due 15,308 11,631 1,591 3,521 32,051 Total $ 4,265,687 $ 2,542,975 $ 257,030 $ 1,713,781 $ 8,779,473 PCI loans outstanding at March 31, 2019 and December 31, 2018 by credit quality indicator are provided below: March 31, 2019 December 31, 2018 (Dollars in thousands) PCI commercial loans Grade: Pass $ 131,018 $ 141,922 Special mention 43,068 48,475 Substandard 91,940 101,447 Doubtful 3,887 4,828 Total $ 269,913 $ 296,672 March 31, 2019 December 31, 2018 (Dollars in thousands) PCI noncommercial loans Current $ 255,145 $ 268,280 30-59 days past due 8,565 11,155 60-89 days past due 3,449 7,708 90 days or greater past due 20,284 22,761 Total $ 287,443 $ 309,904 The aging of the outstanding non-PCI loans and leases, by class, at March 31, 2019 and December 31, 2018 are provided in the tables below. Loans and leases 30 days or less past due are considered current as various grace periods allow borrowers to make payments within a stated period after the due date and still remain in compliance with the loan agreement. March 31, 2019 (Dollars in thousands) 30-59 days 60-89 days 90 days or greater Total past Current Total loans Non-PCI loans and leases: Commercial: Construction and land development - commercial $ 617 $ 262 $ 206 $ 1,085 $ 803,378 $ 804,463 Commercial mortgage 16,120 8,818 2,802 27,740 10,719,975 10,747,715 Other commercial real estate 1,198 517 — 1,715 425,704 427,419 Commercial and industrial and leases 9,706 2,403 3,389 15,498 3,864,077 3,879,575 Other 113 24 — 137 280,711 280,848 Total commercial loans 27,754 12,024 6,397 46,175 16,093,845 16,140,020 Noncommercial: Residential mortgage 33,623 7,760 12,931 54,314 4,248,823 4,303,137 Revolving mortgage 10,734 4,227 10,787 25,748 2,444,150 2,469,898 Construction and land development - non-commercial 581 28 1,549 2,158 256,801 258,959 Consumer 7,966 3,001 3,306 14,273 1,720,142 1,734,415 Total noncommercial loans 52,904 15,016 28,573 96,493 8,669,916 8,766,409 Total non-PCI loans and leases $ 80,658 $ 27,040 $ 34,970 $ 142,668 $ 24,763,761 $ 24,906,429 December 31, 2018 (Dollars in thousands) 30-59 days 60-89 days 90 days or greater Total past Current Total loans Non-PCI loans and leases: Commercial: Construction and land development - commercial $ 516 $ 9 $ 444 $ 969 $ 756,885 $ 757,854 Commercial mortgage 14,200 2,066 3,237 19,503 10,697,731 10,717,234 Other commercial real estate 91 76 300 467 426,518 426,985 Commercial and industrial and leases 9,655 1,759 2,892 14,306 3,924,424 3,938,730 Other 285 — 89 374 296,050 296,424 Total commercial loans 24,747 3,910 6,962 35,619 16,101,608 16,137,227 Noncommercial: Residential mortgage 28,239 7,357 15,308 50,904 4,214,783 4,265,687 Revolving mortgage 12,585 4,490 11,631 28,706 2,514,269 2,542,975 Construction and land development - non-commercial 581 21 1,591 2,193 254,837 257,030 Consumer 10,035 3,904 3,521 17,460 1,696,321 1,713,781 Total noncommercial loans 51,440 15,772 32,051 99,263 8,680,210 8,779,473 Total non-PCI loans and leases $ 76,187 $ 19,682 $ 39,013 $ 134,882 $ 24,781,818 $ 24,916,700 The recorded investment, by class, in loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at March 31, 2019 and December 31, 2018 for non-PCI loans and leases, were as follows: March 31, 2019 December 31, 2018 (Dollars in thousands) Nonaccrual loans and leases Loans and leases > 90 days and accruing Nonaccrual loans and leases Loans and leases > 90 days and accruing Non-PCI loans and leases: Construction and land development - commercial $ 407 $ — $ 666 $ — Commercial mortgage 15,744 — 12,594 — Other commercial real estate 19 — 366 — Commercial and industrial and leases 5,482 667 4,624 808 Residential mortgage 36,573 614 35,662 — Revolving mortgage 25,723 — 25,563 — Construction and land development - noncommercial 1,699 — 1,823 — Consumer 3,054 2,212 2,969 2,080 Other 257 — 279 — Total non-PCI loans and leases $ 88,958 $ 3,493 $ 84,546 $ 2,888 The following table provides changes in the carrying value of all PCI loans during the three months ended March 31, 2019 and March 31, 2018 : (Dollars in thousands) 2019 2018 Balance at January 1 $ 606,576 $ 762,998 Fair value of acquired loans — — Accretion 17,755 17,973 Payments received and other changes, net (66,975 ) (77,134 ) Balance at March 31 $ 557,356 $ 703,837 Unpaid principal balance at March 31 $ 810,683 $ 1,108,379 The carrying value of PCI loans on the cost recovery method was $3.3 million at both March 31, 2019 and December 31, 2018 . The cost recovery method is applied to loans when the timing of future cash flows cannot be reasonably estimated due to borrower nonperformance or uncertainty in the ultimate disposition of the asset. The recorded investment of PCI loans on nonaccrual status was $1.7 million and $1.3 million at March 31, 2019 and December 31, 2018 , respectively. The remaining discount on PCI loans was $89.4 million and $95.5 million at March 31, 2019 and December 31, 2018, respectively. During the three months ended March 31, 2019 and March 31, 2018 , accretion income on PCI loans was $17.8 million and $18.0 million , respectively. For PCI loans, improved credit loss expectations generally result in the reclassification of nonaccretable difference to accretable yield. Changes in expected cash flow not related to credit improvements or deterioration do not affect the nonaccretable difference. The following table documents changes to the amount of accretable yield for the first three months of 2019 and 2018 . (Dollars in thousands) 2019 2018 Balance at January 1 $ 312,894 $ 316,679 Additions from acquisitions — — Accretion (17,755 ) (17,973 ) Reclassifications from (to) nonaccretable difference 600 (929 ) Changes in expected cash flows that do not affect nonaccretable difference (9,547 ) 11,568 Balance at March 31 $ 286,192 $ 309,345 |