LOANS | LOANS AND CREDIT QUALITY The following loan portfolio and credit quality disclosures exclude covered loans. Covered loans represent loans acquired through a FDIC-assisted acquisition that are subject to a loss share agreement and are presented separately in the consolidated statements of financial condition. Refer to the “Covered Assets” section in this footnote for further information regarding covered loans. Loan Portfolio (Amounts in thousands) December 31, 2016 2015 Commercial and industrial $ 7,506,977 $ 6,747,389 Commercial – owner-occupied commercial real estate 2,142,068 1,888,238 Total commercial 9,649,045 8,635,627 Commercial real estate 3,127,373 2,629,873 Commercial real estate – multi-family 993,352 722,637 Total commercial real estate 4,120,725 3,352,510 Construction 417,955 522,263 Residential real estate 581,757 461,412 Home equity 119,049 129,317 Personal 167,710 165,346 Total loans $ 15,056,241 $ 13,266,475 Net deferred loan fees and unamortized discount and premium on loans, included as a reduction in total loans $ 45,220 $ 48,009 Overdrawn demand deposits included in total loans $ 2,160 $ 2,654 We primarily lend to businesses and consumers in the market areas in which we have physical locations. We seek to diversify our loan portfolio by loan type, industry and borrower. Loans Held-For-Sale (Amounts in thousands) December 31, 2016 2015 Mortgage loans held-for-sale (1) $ 24,934 $ 35,704 Other loans held-for-sale (2) 78,350 73,094 Total loans held-for-sale $ 103,284 $ 108,798 (1) Comprised of residential mortgage loan originations intended to be sold in the secondary market. The Company accounts for these loans under the fair value option. Refer to Note 20 for additional information regarding mortgage loans held-for-sale. (2) Amounts represent commercial, commercial real estate, construction and residential loans carried at the lower of aggregate cost or fair value, including one nonaccrual loan totaling $667,000 at December 31, 2015 . Generally, the Company intends to sell these loans within 30-60 days from the date the intent to sell was established. Carrying Value of Loans Pledged (Amounts in thousands) December 31, 2016 2015 Loans pledged to secure outstanding borrowings or availability: FRB discount window borrowings (1) $ 818,116 $ 440,023 FHLB advances (2) 3,855,892 4,133,942 Total $ 4,674,008 $ 4,573,965 (1) No borrowings were outstanding at December 31, 2016 or 2015 . (2) Refer to Notes 9 and 10 for additional information regarding FHLB advances. Related Party Loans Some of our directors, and certain business entities for which they serve as an executive officer and/or in which they directly or indirectly own 10% or more of the equity, are or have been in the past, lending clients of the Bank. Additionally, two of our executive officers each had an immediate family member who had a small balance loan outstanding as of year end 2015 and 2016. Loans made to these individuals and their affiliated entities were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other unaffiliated persons and do not involve more than the normal risk of collectability. Such loans, in the aggregate, totaled $37.4 million and $39.4 million at December 31, 2016 and 2015 , respectively, and were not greater than 5% of stockholders' equity. Loan Portfolio Aging (Amounts in thousands) Delinquent Current 30 – 59 Days Past Due 60 – 89 Days Past Due 90 Days Past Due and Accruing Total Accruing Loans Nonaccrual Total Loans As of December 31, 2016 Commercial $ 9,572,607 $ 6,889 $ 96 $ — $ 9,579,592 $ 69,453 $ 9,649,045 Commercial real estate 4,114,409 — — — 4,114,409 6,316 4,120,725 Construction 417,955 — — — 417,955 — 417,955 Residential real estate 573,667 2,859 640 — 577,166 4,591 581,757 Home equity 115,652 80 — — 115,732 3,317 119,049 Personal 167,675 19 5 — 167,699 11 167,710 Total loans $ 14,961,965 $ 9,847 $ 741 $ — $ 14,972,553 $ 83,688 $ 15,056,241 As of December 31, 2015 Commercial $ 8,595,150 $ 6,641 $ 1,042 $ — $ 8,602,833 $ 32,794 $ 8,635,627 Commercial real estate 3,343,714 — 295 — 3,344,009 8,501 3,352,510 Construction 522,263 — — — 522,263 — 522,263 Residential real estate 455,764 613 273 — 456,650 4,762 461,412 Home equity 121,580 66 — — 121,646 7,671 129,317 Personal 165,188 132 5 — 165,325 21 165,346 Total loans $ 13,203,659 $ 7,452 $ 1,615 $ — $ 13,212,726 $ 53,749 $ 13,266,475 Impaired Loans Impaired loans consist of nonaccrual loans (which include nonaccrual TDRs) and loans classified as accruing TDRs. A loan is considered impaired when, based on current information and events, either (i) management believes that it is probable that we will be unable to collect all amounts due (both principal and interest) according to the original contractual terms of the loan agreement, or (ii) it has been classified as a TDR. The following two tables present our recorded investment in impaired loans outstanding by product segment, including our recorded investment in impaired loans, which represents the principal amount outstanding, net of unearned income, deferred loan fees and costs, and any direct principal charge-offs. Impaired Loans (Amounts in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Specific Reserve Recorded Investment With Specific Reserve Total Recorded Investment Specific Reserve As of December 31, 2016 Commercial $ 141,415 $ 104,408 $ 28,756 $ 133,164 $ 10,930 Commercial real estate 6,316 5,169 1,147 6,316 223 Residential real estate 4,708 — 4,591 4,591 406 Home equity 5,740 2,291 3,317 5,608 376 Personal 11 — 11 11 3 Total impaired loans $ 158,190 $ 111,868 $ 37,822 $ 149,690 $ 11,938 As of December 31, 2015 Commercial $ 49,912 $ 27,300 $ 20,020 $ 47,320 $ 4,458 Commercial real estate 14,150 2,085 6,416 8,501 1,156 Residential real estate 4,950 — 4,762 4,762 539 Home equity 10,071 2,626 7,065 9,691 1,106 Personal 21 — 21 21 3 Total impaired loans $ 79,104 $ 32,011 $ 38,284 $ 70,295 $ 7,262 Average Recorded Investment and Interest Income Recognized on Impaired Loans (1) (Amounts in thousands) 2016 2015 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Commercial $ 89,565 $ 2,734 $ 52,489 $ 968 Commercial real estate 9,330 — 14,269 13 Construction 33 1 171 — Residential real estate 4,179 — 4,584 — Home equity 7,551 122 12,012 107 Personal 24 — 173 — Total $ 110,682 $ 2,857 $ 83,698 $ 1,088 (1) Represents amounts while classified as impaired for the periods presented. Credit Quality Indicators We attempt to mitigate risk through loan structure, collateral, monitoring, and other credit risk management controls. We have adopted an internal risk rating policy under which each loan is rated for credit quality with a numerical rating of 1 through 8 . Loans rated 5 and better ( 1 - 5 ratings, inclusive) are considered “pass” rated credits that we believe exhibit acceptable financial performance, cash flow, and leverage. Credits rated 6 are performing in accordance with contractual terms, but are considered “special mention” as they demonstrate potential weakness that, if left unresolved, may result in deterioration in our credit position and/or the repayment prospects for the credit. Borrowers rated special mention may exhibit adverse operating trends, high leverage, tight liquidity or other credit concerns. Loans rated 7 may be classified as either accruing (“potential problem”) or nonaccrual (“nonperforming”). Potential problem loans, like special mention, are loans that are performing in accordance with contractual terms, but for which management has some level of concern (greater than that of special mention loans) about the ability of the borrowers to meet existing repayment terms in future periods. Potential problem loans continue to accrue interest, but the ultimate collection of these loans in full is a risk due to the same conditions that characterize a 6 -rated credit. These credits may also have somewhat increased risk profiles as a result of the current net worth and/or paying capacity of the obligor or guarantors or a declining value of the collateral pledged. These loans generally have a well-defined weakness that may jeopardize collection of the debt and are characterized by the distinct possibility that we may sustain some loss if the deficiencies are not resolved. Although these loans are generally identified as potential problem loans and require additional attention by management, they may never become nonperforming. Nonperforming loans include nonaccrual loans risk-rated 7 or 8 and have all the weaknesses inherent in a 7 -rated potential problem loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently-existing facts, conditions and values, highly questionable and improbable. Special mention, potential problem and nonperforming loans are reviewed, at a minimum, on a quarterly basis, while all other rated credits over a certain dollar threshold, depending on loan type, are reviewed annually or more frequently as the circumstances warrant. Credit Quality Indicators (Dollars in thousands) Special Mention % of Portfolio Loan Type Potential Problem Loans % of Portfolio Loan Type Non-Performing Loans % of Portfolio Loan Type Total Loans As of December 31, 2016 Commercial $ 173,626 1.8 $ 114,090 1.2 $ 69,453 0.7 $ 9,649,045 Commercial real estate — — 4,632 0.1 6,316 0.2 4,120,725 Construction — — — — — — 417,955 Residential real estate 5,449 0.9 3,829 0.7 4,591 0.8 581,757 Home equity 508 0.4 733 0.6 3,317 2.8 119,049 Personal 28 * 61 * 11 * 167,710 Total $ 179,611 1.2 $ 123,345 0.8 $ 83,688 0.6 $ 15,056,241 As of December 31, 2015 Commercial $ 85,217 1.0 $ 124,654 1.4 $ 32,794 0.4 $ 8,635,627 Commercial real estate 27,580 0.8 121 * 8,501 0.3 3,352,510 Construction — — — — — — 522,263 Residential real estate 5,988 1.3 5,031 1.1 4,762 1.0 461,412 Home equity 623 0.5 2,451 1.9 7,671 5.9 129,317 Personal 620 0.4 141 0.1 21 * 165,346 Total $ 120,028 0.9 $ 132,398 1.0 $ 53,749 0.4 $ 13,266,475 * Less than 0.1% Troubled Debt Restructured Loans Troubled Debt Restructured Loans Outstanding (Amounts in thousands) December 31, 2016 2015 Accruing Nonaccrual (1) Accruing Nonaccrual (1) Commercial $ 63,711 $ 33,141 $ 14,526 $ 25,034 Commercial real estate — 5,857 — 7,619 Residential real estate — 1,534 — 1,341 Home equity 2,291 3,081 2,020 5,177 Total $ 66,002 $ 43,613 $ 16,546 $ 39,171 (1) Included in nonperforming loans. At December 31, 2016 and 2015 , credit commitments to lend additional funds to debtors whose loan terms have been modified in a TDR (both accruing and nonaccruing) totaled $13.4 million and $9.7 million , respectively. The following table presents the type of modification for loans that have been restructured and the post-modification recorded investment during the years ended December 31, 2016 and 2015. Additions to Troubled Debt Restructurings During the Year (Dollars in thousands) Year Ended December 31, 2016 Extension of Maturity Date (1) Other Concession (2) Total Number of Loans Balance Number of Loans Balance Number of Loans Balance Accruing: Commercial 8 $ 7,223 10 $ 70,384 18 $ 77,607 Home equity — — 2 538 2 538 Nonaccruing: Commercial 4 792 7 14,540 11 15,332 Commercial real estate 1 77 1 691 2 768 Residential real estate — — 5 550 5 550 Home equity — — 3 146 3 146 Total accruing and nonaccruing additions 13 $ 8,092 28 $ 86,849 41 $ 94,941 Change in recorded investment due to principal paydown or charge-off at time of modification, net of advances $ 3,527 (1) Extension of maturity date also includes loans renewed at an existing rate of interest that is considered a below market rate for that particular loan’s risk profile. (2) Other concessions primarily include interest rate reductions, loan increases or deferrals of principal. Additions to Troubled Debt Restructurings During the Year (Continued) (Dollars in thousands) Year Ended December 31, 2015 Extension of Maturity Date (1) Other Concession (2) Total Number of Loans Balance Number of Loans Balance Number of Loans Balance Accruing: Commercial 9 $ 27,656 — $ — 9 $ 27,656 Home equity 1 346 — — 1 346 Nonaccruing: Commercial 6 19,899 3 7,246 9 27,145 Commercial real estate 2 1,660 1 3,773 3 5,433 Residential real estate — — 1 49 1 49 Home equity 4 224 5 513 9 737 Total accruing and nonaccruing additions 22 $ 49,785 10 $ 11,581 32 $ 61,366 Change in recorded investment due to principal paydown or charge-off at time of modification, net of advances $ 395 (1) Extension of maturity date also includes loans renewed at an existing rate of interest that is considered a below market rate for that particular loan’s risk profile. (2) Other concessions primarily include interest rate reductions, loan increases or deferrals of principal. At the time an accruing loan becomes modified and meets the definition of a TDR, it is considered impaired and no longer included as part of the general loan loss reserve calculation. However, our general reserve methodology considers the amount and product type of the TDRs removed as a proxy for potentially heightened risk in the portfolio when establishing final reserve requirements. As impaired loans, TDRs (both accruing and nonaccruing) are evaluated for impairment at the end of each quarter with a specific valuation reserve created, or adjusted (either individually or as part of a pool), if necessary, as a component of the allowance for loan losses. Refer to the “Impaired Loan” and “Allowance for Loan Loss” sections of Note 1 regarding our policy for assessing potential impairment on such loans. Our allowance for loan losses included $1.6 million and $3.9 million in specific reserves for nonaccrual TDRs at December 31, 2016 and 2015 , respectively. During the year ended December 31, 2016 , two commercial loans totaling $8.0 million and one home equity loan totaling $187,000 became nonperforming within 12 months of being modified as an accruing TDR. During the year ended December 31, 2015 , a single commercial real estate loan totaling $175,000 became nonperforming within 12 months of being modified as an accruing TDR. A loan typically becomes nonperforming and placed on nonaccrual status when the principal or interest payments are 90 days past due based on contractual terms or when an individual analysis of a borrower’s creditworthiness indicates a loan should be placed on nonaccrual status earlier than the 90-day past due date. Other Real Estate Owned The following table presents the composition of property acquired as a result of borrower defaults on loans secured by real property. OREO Composition (Amounts in thousands) December 31, 2016 2015 Single-family homes $ 186 $ 1,878 Land parcels 1,070 1,760 Multi-family — 598 Office/industrial 1,003 1,779 Retail 7,944 1,258 Total OREO properties $ 10,203 $ 7,273 The recorded investment in consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $1.4 million at December 31, 2016 , and $3.0 million at December 31, 2015 . Covered Assets Covered assets represent acquired residential mortgage loans and foreclosed real estate covered under a loss share agreement with the FDIC and include an indemnification receivable representing the present value of the expected reimbursement from the FDIC related to expected losses on the acquired loans and foreclosed real estate under such agreement. The loss share agreement will expire on September 30, 2019. The carrying amount of covered assets is presented in the following table. Covered Assets (Amounts in thousands) December 31, 2016 2015 Residential mortgage loans (1) $ 20,347 $ 24,717 Foreclosed real estate - single-family homes 777 530 Estimated loss reimbursement by the FDIC 939 1,707 Total covered assets 22,063 26,954 Allowance for covered loan losses (4,766 ) (5,712 ) Net covered assets $ 17,297 $ 21,242 (1) Includes $203,000 and $257,000 of purchased credit-impaired loans as of December 31, 2016 and December 31, 2015 , respectively. The recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $194,000 and $775,000 at December 31, 2016 and December 31, 2015 , respectively. |