Allowance for Credit Losses and Credit Quality | ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY Allowance for Credit Losses Activity A summary of changes in the allowance for credit losses for the nine months ended September 30 is as follows: 2016 (Dollars in thousands) Legacy Loans Acquired Loans Total Allowance for credit losses Allowance for loan losses at beginning of period $ 93,808 $ 44,570 $ 138,378 Provision for (Reversal of) loan losses before benefit attributable to FDIC loss share agreements 40,516 (2,501 ) 38,015 Adjustment attributable to FDIC loss share arrangements — 1,240 1,240 Net provision for loan losses 40,516 (1,261 ) 39,255 Adjustment attributable to FDIC loss share arrangements — (1,240 ) (1,240 ) Transfer of balance to OREO and other — (2,045 ) (2,045 ) Loans charged-off (28,559 ) (1,495 ) (30,054 ) Recoveries 3,124 775 3,899 Allowance for loan losses at end of period $ 108,889 $ 39,304 $ 148,193 Reserve for unfunded commitments at beginning of period 14,145 — 14,145 Provision for (Reversal of) unfunded lending commitments (2,155 ) — (2,155 ) Reserve for unfunded commitments at end of period $ 11,990 $ — $ 11,990 Allowance for credit losses at end of period $ 120,879 $ 39,304 $ 160,183 2015 (Dollars in thousands) Legacy Loans Acquired Loans Total Allowance for credit losses Allowance for loan losses at beginning of period $ 76,174 $ 53,957 $ 130,131 Provision for loan losses before benefit attributable to FDIC loss share agreements 17,743 112 17,855 Adjustment attributable to FDIC loss share arrangements — 1,342 1,342 Net provision for loan losses 17,743 1,454 19,197 Adjustment attributable to FDIC loss share arrangements — (1,342 ) (1,342 ) Transfer of balance to OREO and other — (9,768 ) (9,768 ) Loans charged-off (12,073 ) (952 ) (13,025 ) Recoveries 4,556 505 5,061 Allowance for loan losses at end of period $ 86,400 $ 43,854 $ 130,254 Reserve for unfunded commitments at beginning of period 11,801 — 11,801 Provision for unfunded lending commitments 2,724 — 2,724 Reserve for unfunded commitments at end of period $ 14,525 $ — $ 14,525 Allowance for credit losses at end of period $ 100,925 $ 43,854 $ 144,779 A summary of changes in the allowance for credit losses for legacy loans, by loan portfolio type, for the nine months ended September 30 is as follows: 2016 Commercial Real Estate Commercial and Industrial Energy-related Residential Mortgage (Dollars in thousands) Consumer Total Allowance for loan losses at beginning of period $ 24,658 $ 23,283 $ 23,863 $ 3,947 $ 18,057 $ 93,808 Provision for (Reversal of) loan losses (651 ) 13,201 18,998 248 8,720 40,516 Loans charged off (1,598 ) (2,418 ) (14,672 ) (240 ) (9,631 ) (28,559 ) Recoveries 766 251 — 142 1,965 3,124 Allowance for loan losses at end of period $ 23,175 $ 34,317 $ 28,189 $ 4,097 $ 19,111 $ 108,889 Reserve for unfunded commitments at beginning of period $ 4,160 $ 3,448 $ 2,665 $ 830 $ 3,042 $ 14,145 Provision for (Reversal of) unfunded commitments (427 ) (46 ) (1,712 ) (148 ) 178 (2,155 ) Reserve for unfunded commitments at end of period $ 3,733 $ 3,402 $ 953 $ 682 $ 3,220 $ 11,990 Allowance on loans individually evaluated for impairment $ 655 $ 8,996 $ 14,396 $ 110 $ 1,053 $ 25,210 Allowance on loans collectively evaluated for impairment 22,520 25,321 13,793 3,987 18,058 83,679 Loans, net of unearned income: Balance at end of period $ 5,419,483 $ 3,101,472 $ 598,279 $ 840,082 $ 2,454,054 $ 12,413,370 Balance at end of period individually evaluated for impairment 31,405 58,464 212,512 4,539 11,546 318,466 Balance at end of period collectively evaluated for impairment 5,388,078 3,043,008 385,767 835,543 2,442,508 12,094,904 2015 Commercial Real Estate Commercial and Industrial Energy-related Residential Mortgage (Dollars in thousands) Consumer Total Allowance for loan losses at beginning of period $ 26,752 $ 24,455 $ 5,949 $ 2,678 $ 16,340 $ 76,174 Provision for (Reversal of) loan losses (947 ) 1,308 9,269 1,474 6,639 17,743 Loans charged off (2,009 ) (1,048 ) — (224 ) (8,792 ) (12,073 ) Recoveries 1,535 49 — 44 2,928 4,556 Allowance for loan losses at end of period $ 25,331 $ 24,764 $ 15,218 $ 3,972 $ 17,115 $ 86,400 Reserve for unfunded commitments at beginning of period $ 3,370 $ 3,733 $ 1,596 $ 168 $ 2,934 $ 11,801 Provision for (Reversal of) unfunded commitments 218 (149 ) 2,037 650 (32 ) 2,724 Reserve for unfunded commitments at end of period $ 3,588 $ 3,584 $ 3,633 $ 818 $ 2,902 $ 14,525 Allowance on loans individually evaluated for impairment $ 883 $ 817 $ — $ — $ — $ 1,700 Allowance on loans collectively evaluated for impairment 24,448 23,947 15,218 3,972 17,115 84,700 Loans, net of unearned income: Balance at end of period $ 4,321,723 $ 2,779,503 $ 713,935 $ 660,543 $ 2,303,554 $ 10,779,258 Balance at end of period individually evaluated for impairment 26,463 22,076 3,409 — 198 52,146 Balance at end of period collectively evaluated for impairment 4,295,260 2,757,427 710,526 660,543 2,303,356 10,727,112 A summary of changes in the allowance for credit losses for acquired loans, by loan portfolio type, for the nine months ended September 30 is as follows: 2016 Commercial Real Estate Commercial and Industrial Energy-related Residential Mortgage (Dollars in thousands) Consumer Total Allowance for loan losses at beginning of period $ 25,979 $ 2,819 $ 125 $ 7,841 $ 7,806 $ 44,570 Provision for (Reversal of) loan losses (1,952 ) 216 (99 ) 1,017 (443 ) (1,261 ) Decrease in FDIC loss share receivable (34 ) (50 ) — (833 ) (323 ) (1,240 ) Transfer of balance to OREO and other (380 ) (467 ) — 28 (1,226 ) (2,045 ) Loans charged off (789 ) — — — (706 ) (1,495 ) Recoveries 102 217 — 33 423 775 Allowance for loan losses at end of period $ 22,926 $ 2,735 $ 26 $ 8,086 $ 5,531 $ 39,304 Allowance on loans individually evaluated for impairment $ 177 $ 77 $ — $ — $ — $ 254 Allowance on loans collectively evaluated for impairment 22,749 2,658 26 8,086 5,531 39,050 Loans, net of unearned income: Balance at end of period $ 1,261,732 $ 361,525 $ 1,362 $ 430,448 $ 456,062 $ 2,511,129 Balance at end of period individually evaluated for impairment 5,647 1,926 — — 679 8,252 Balance at end of period collectively evaluated for impairment 948,523 324,445 1,362 304,699 354,801 1,933,830 Balance at end of period acquired with deteriorated credit quality 307,562 35,154 — 125,749 100,582 569,047 2015 Commercial Real Estate Commercial and Industrial Energy-related Residential Mortgage (Dollars in thousands) Consumer Total Allowance for loans losses at beginning of period $ 29,949 $ 3,265 $ 51 $ 6,484 $ 14,208 $ 53,957 Provision for (Reversal of) loan losses 809 174 67 1,263 (859 ) 1,454 (Decrease) Increase in FDIC loss share receivable 748 59 — (277 ) (1,872 ) (1,342 ) Transfer of balance to OREO and other (6,096 ) (282 ) — (472 ) (2,918 ) (9,768 ) Loans charged off — (8 ) — (59 ) (885 ) (952 ) Recoveries 8 116 — 4 377 505 Allowance for loans losses at end of period $ 25,418 $ 3,324 $ 118 $ 6,943 $ 8,051 $ 43,854 Allowance on loans individually evaluated for impairment $ — $ — $ — $ — $ 16 $ 16 Allowance on loans collectively evaluated for impairment 25,418 3,324 118 6,943 8,035 43,838 Loans, net of unearned income: Balance at end of period $ 1,658,028 $ 523,468 $ 5,521 $ 529,398 $ 621,346 $ 3,337,761 Balance at end of period individually evaluated for impairment — 142 — — 456 598 Balance at end of period collectively evaluated for impairment 1,205,439 465,514 5,521 385,854 493,032 2,555,360 Balance at end of period acquired with deteriorated credit quality 452,589 57,812 — 143,544 127,858 781,803 Portfolio Segment Risk Factors Commercial real estate loans include loans to commercial customers for long-term financing of land and buildings or for land development or construction of a building. These loans are repaid through revenues from operations of the businesses, rents of properties and refinances. Commercial and industrial loans represent loans to commercial customers to finance general working capital needs, equipment purchases and other projects where repayment is derived from cash flows resulting from business operations. The Company originates commercial business loans on a secured and, to a lesser extent, unsecured basis. Residential mortgage loans consist of loans to consumers to finance a primary residence. The vast majority of the residential mortgage loan portfolio is comprised of one-to-four family mortgage loans secured by properties located in the Company's market areas and originated under terms and documentation that permit sale in the secondary market. Consumer loans are offered by the Company in order to provide a full range of retail financial services to its customers and include home equity, credit card and other direct consumer installment loans. The Company originates substantially all of its consumer loans in its primary market areas. Loans in the consumer segment are sensitive to unemployment and other key consumer economic measures. Credit Quality The Company utilizes an asset risk classification system in accordance with guidelines established by the Federal Reserve Board as part of its efforts to monitor commercial asset quality. "Special mention" loans are defined as loans where known information about possible credit problems of the borrower cause management to have some doubt as to the ability of these borrowers to comply with the present loan repayment terms and which may result in future disclosures of these loans as non-performing. For assets with identified credit issues, the Company has two primary classifications for problem assets: "substandard" and "doubtful". Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of the substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full satisfaction of the loan balance outstanding questionable, which makes probability of loss based on currently existing facts, conditions, and values higher. Loans classified as "Pass" do not meet the criteria set forth for special mention, substandard, or doubtful classification and are not considered criticized. Asset risk classifications are determined at origination or acquisition and reviewed on an ongoing basis. Risk classifications are changed if, in the opinion of management, the risk profile of the customer has changed since the last review of the loan relationship. The Company’s investment in loans by credit quality indicator is presented in the following tables. The tables below further segregate the Company’s loans between loans that were originated by the Company (legacy loans) and acquired loans. Loan premiums/discounts in the tables below represent the adjustment of non-covered acquired loans to fair value at the acquisition date, as adjusted for income accretion and changes in cash flow estimates in subsequent periods. Asset risk classifications for commercial loans reflect the classification as of September 30, 2016 and December 31, 2015 . Credit quality information in the tables below includes loans acquired at the gross loan balance, prior to the application of premiums/discounts, at September 30, 2016 and December 31, 2015 . Loan delinquency is the primary credit quality indicator that the Company utilizes to monitor consumer asset quality. Legacy loans September 30, 2016 December 31, 2015 (Dollars in thousands) Pass Special Mention Sub-standard Doubtful Loss Total Pass Special Mention Sub-standard Doubtful Loss Total Commercial real estate - Construction $ 694,983 $ 84 $ 1,060 $ — $ — $ 696,127 $ 634,889 $ 160 $ 1,432 $ — $ — $ 636,481 Commercial real estate - Other 4,654,619 22,919 45,656 162 — 4,723,356 3,806,528 21,877 37,001 2,175 — 3,867,581 Commercial and industrial 2,994,661 34,249 53,951 18,611 — 3,101,472 2,911,396 14,826 19,888 5,992 — 2,952,102 Energy-related 279,404 65,263 249,640 3,972 — 598,279 531,657 67,937 74,272 3,311 — 677,177 Total $ 8,623,667 $ 122,515 $ 350,307 $ 22,745 $ — $ 9,119,234 $ 7,884,470 $ 104,800 $ 132,593 $ 11,478 $ — $ 8,133,341 Legacy loans September 30, 2016 December 31, 2015 (Dollars in thousands) Current 30+ Days Past Due Total Current 30+ Days Past Due Total Residential mortgage $ 817,154 $ 22,928 $ 840,082 $ 676,347 $ 17,676 $ 694,023 Consumer - Home equity 1,740,001 15,294 1,755,295 1,565,596 10,047 1,575,643 Consumer - Indirect automobile 150,008 3,896 153,904 242,328 3,886 246,214 Consumer - Credit card 79,588 864 80,452 76,360 901 77,261 Consumer - Other 459,548 4,855 464,403 460,594 3,444 464,038 Total $ 3,246,299 $ 47,837 $ 3,294,136 $ 3,021,225 $ 35,954 $ 3,057,179 Acquired loans September 30, 2016 December 31, 2015 (Dollars in thousands) Pass Special Mention Sub- standard Doubtful Loss Premium/(Discount) Total Pass Special Mention Sub- standard Doubtful Loss Premium/(Discount) Total Commercial real estate-Construction $ 63,139 $ 140 $ 5,167 $ 744 $ — $ 11,605 $ 80,795 $ 104,064 $ 1,681 $ 8,803 $ 771 $ — $ 10,107 $ 125,426 Commercial real estate - Other 1,145,942 21,731 46,941 1,484 23 (35,184 ) 1,180,937 1,395,884 26,080 79,119 6,124 111 (63,295 ) 1,444,023 Commercial and industrial 361,376 6,216 14,443 558 — (21,068 ) 361,525 473,241 8,376 16,510 1,206 43 (6,900 ) 492,476 Energy-related 1,369 — — — — (7 ) 1,362 2,166 55 170 1,198 — — 3,589 Total $ 1,571,826 $ 28,087 $ 66,551 $ 2,786 $ 23 $ (44,654 ) $ 1,624,619 $ 1,975,355 $ 36,192 $ 104,602 $ 9,299 $ 154 $ (60,088 ) $ 2,065,514 Acquired loans September 30, 2016 December 31, 2015 (Dollars in thousands) Current 30+ Days Past Due Premium (Discount) Total Current 30+ Days Past Due Premium (Discount) Total Residential mortgage $ 441,411 $ 21,832 $ (32,795 ) $ 430,448 $ 506,103 $ 24,752 $ (29,559 ) $ 501,296 Consumer - Home equity 408,541 11,458 (24,164 ) 395,835 503,635 16,381 (29,492 ) 490,524 Consumer - Indirect automobile 9 1 (1 ) 9 72 12 — 84 Consumer - Other 58,998 1,618 (398 ) 60,218 79,732 1,475 (1,717 ) 79,490 Total $ 908,959 $ 34,909 $ (57,358 ) $ 886,510 $ 1,089,542 $ 42,620 $ (60,768 ) $ 1,071,394 Legacy Impaired Loans Information on the Company’s investment in legacy impaired loans, which include all TDRs and all other non-accrual loans, is presented in the following tables as of and for the periods indicated. Legacy non-accrual mortgage and consumer loans, and commercial loans below the Company's specific threshold, are included for purposes of this disclosure although such loans are generally not evaluated or measured individually for impairment for purposes of determining the allowance for loan losses. September 30, 2016 December 31, 2015 Unpaid Principal Balance Recorded Investment Related Allowance Unpaid Principal Balance Recorded Investment Related Allowance (Dollars in thousands) With no related allowance recorded: Commercial real estate $ 15,447 $ 14,655 $ — $ 17,002 $ 16,145 $ — Commercial business 29,162 28,722 — 14,571 14,340 — Energy-related 168,723 163,156 — — — — Residential mortgage — — — — — — Consumer - Home equity — — — 730 730 — Consumer -Other — — — 66 66 — With an allowance recorded: Commercial real estate 17,870 17,843 (660 ) 21,377 13,753 (1,253 ) Commercial and industrial 31,406 31,067 (9,012 ) 7,422 6,262 (277 ) Energy-related 52,749 49,407 (14,396 ) 13,474 13,444 (2,125 ) Residential mortgage 18,205 16,840 (124 ) 14,806 13,743 (64 ) Consumer - Home equity 16,845 15,615 (855 ) 9,486 8,559 (363 ) Consumer - Indirect automobile 2,465 1,727 (128 ) 1,955 1,181 (10 ) Consumer - Credit card 438 438 (9 ) 394 394 (8 ) Consumer - Other 2,711 2,573 (122 ) 1,450 899 (23 ) Total $ 356,021 $ 342,043 $ (25,306 ) $ 102,733 $ 89,516 $ (4,123 ) Total commercial loans $ 315,357 $ 304,850 $ (24,068 ) $ 73,846 $ 63,944 $ (3,655 ) Total mortgage loans 18,205 16,840 (124 ) 14,806 13,743 (64 ) Total consumer loans 22,459 20,353 (1,114 ) 14,081 11,829 (404 ) Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized (Dollars in thousands) With no related allowance recorded: Commercial real estate $ 20,345 $ 220 $ 16,018 $ 37 $ 20,633 $ 663 $ 16,036 $ 79 Commercial and industrial 29,533 313 20,055 159 30,772 1,030 20,630 465 Energy-related 165,459 1,364 3,409 — 149,099 3,755 3,425 — Residential mortgage — — — — — — — — Consumer - Home equity — — 215 3 — — 204 4 With an allowance recorded: Commercial real estate 17,776 143 11,649 128 17,654 433 8,247 385 Commercial and industrial 31,859 366 2,121 — 39,087 1,211 2,634 — Energy-related 55,947 416 99 — 42,089 1,325 106 — Residential mortgage 16,558 49 15,008 — 16,410 177 15,100 — Consumer - Home equity 14,632 119 5,344 — 13,696 348 5,462 — Consumer - Indirect automobile 1,853 16 1,361 — 2,092 70 1,551 — Consumer - Credit card 468 — 721 — 461 — 1,038 — Consumer - Other 2,346 38 1,030 — 2,065 109 1,068 — Total $ 356,776 $ 3,044 $ 77,030 $ 327 334,058 9,121 $ 75,501 $ 933 Total commercial loans $ 320,919 $ 2,822 $ 53,351 $ 324 $ 299,334 $ 8,417 $ 51,078 $ 929 Total mortgage loans 16,558 49 15,008 — 16,410 177 15,100 — Total consumer loans 19,299 173 8,671 3 18,314 527 9,323 4 As of September 30, 2016 and December 31, 2015 , the Company was not committed to lend a material amount of additional funds to any customer whose loan was classified as impaired or as a troubled debt restructuring. |