Note 6 - Past Due Loans, Allowance For Credit Losses, and Impaired Loans

9 Months Ended

Sep. 30, 2011

Allowance for Credit Losses [Text Block]

6.  PAST DUE LOANS, ALLOWANCE FOR CREDIT LOSSES, AND IMPAIRED LOANS

Past Due and Non-accrual Loans

The following table presents an aging analysis of the Company’s past due loans as of September 30, 2011 and December 31, 2010. The aging is determined without regard to accrual status. The table also presents non-performing loans, consisting of non-accrual loans (most of which are past due) and loans 90 days or more past due and still accruing interest, as of each balance sheet date.

Aging Analysis of Past Due Loans and Non-Performing Loans by Class

(Dollar amounts in thousands)

	Aging Analysis (Accruing and Non-accrual)										Non-performing Loans
	Current		30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Loans		Non-accrual Loans		90 Days Past Due Loans, Still Accruing Interest
September 30, 2011
Commercial and industrial	$	1,437,341	$	12,385	$	26,308	$	38,693	$	1,476,034	$	30,507	$	3,096
Agricultural		247,553		13		2,870		2,883		250,436		2,977		-
Commercial real estate:
Office, retail, and industrial		1,227,218		18,674		17,423		36,097		1,263,315		24,728		128
Multi-family		298,258		6,199		12,856		19,055		317,313		18,196		-
Residential construction		100,577		885		14,821		15,706		116,283		20,911		-
Commercial construction		130,217		-		15,672		15,672		145,889		15,672		-
Other commercial real estate		840,918		3,130		33,193		36,323		877,241		45,727		802
Total commercial real estate		2,597,188		28,888		93,965		122,853		2,720,041		125,234		930
Total corporate loans		4,282,082		41,286		123,143		164,429		4,446,511		158,718		4,026
Home equity		411,270		5,417		8,299		13,716		424,986		7,789		1,452
1-4 family mortgages		182,475		2,206		4,906		7,112		189,587		4,648		489
Installment loans		42,884		451		75		526		43,410		34		41
Total consumer loans		636,629		8,074		13,280		21,354		657,983		12,471		1,982
Total loans, excluding covered loans		4,918,711		49,360		136,423		185,783		5,104,494		171,189		6,008
Covered loans		207,485		11,317		70,945		82,262		289,747		15,573		56,834
Total loans	$	5,126,196	$	60,677	$	207,368	$	268,045	$	5,394,241	$	186,762	$	62,842
December 31, 2010
Commercial and industrial	$	1,428,841	$	7,706	$	29,356	$	37,062	$	1,465,903	$	50,088	$	1,552
Agricultural		225,007		65		2,684		2,749		227,756		2,497		187
Commercial real estate:
Office, retail, and industrial		1,183,952		4,009		15,652		19,661		1,203,613		19,573		-
Multi-family		345,018		2,811		2,033		4,844		349,862		6,203		-
Residential construction		139,499		1,320		33,871		35,191		174,690		52,122		200
Commercial construction		140,044		4,000		20,428		24,428		164,472		28,685		-
Other commercial real estate		813,333		9,091		33,933		43,024		856,357		40,605		345
Total commercial real estate		2,621,846		21,231		105,917		127,148		2,748,994		147,188		545
Total corporate loans		4,275,694		29,002		137,957		166,959		4,442,653		199,773		2,284
Home equity		431,446		4,715		9,082		13,797		445,243		7,948		1,870
1-4 family mortgages		154,999		2,523		3,368		5,891		160,890		3,902		4
Installment loans		50,899		742		133		875		51,774		159		86
Total consumer loans		637,344		7,980		12,583		20,563		657,907		12,009		1,960
Total loans, excluding covered loans		4,913,038		36,982		150,540		187,522		5,100,560		211,782		4,244
Covered loans		268,934		18,445		84,350		102,795		371,729		-		84,350
Total loans	$	5,181,972	$	55,427	$	234,890	$	290,317	$	5,472,289	$	211,782	$	88,594

Allowance for Credit Losses

The Company maintains an allowance for credit losses at a level believed adequate by management to absorb probable losses inherent in the loan portfolio.

Allowance for Credit Losses

(Dollar amounts in thousands)

	Quarters Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Balance at beginning of period	$	139,831		$	145,477		$	145,072		$	144,808
Loans charged-off		(29,998	)		(35,806	)		(79,315	)		(80,535	)
Recoveries of loans previously charged-off		1,033			1,772			6,854			7,294
Net loans charged-off		(28,965	)		(34,034	)		(72,461	)		(73,241	)
Provision for loan losses		20,425			33,576			58,680			73,452
Balance at end of period	$	131,291		$	145,019		$	131,291		$	145,019
Allowance for loan losses	$	128,791		$	144,569		$	128,791		$	144,569
Reserve for unfunded commitments		2,500			450			2,500			450
Total allowance for credit losses	$	131,291		$	145,019		$	131,291		$	145,019

Allowance for Credit Losses by Portfolio Segment

(Dollar amounts in thousands)

	Commercial, Industrial, and Agricultural			Office, Retail, and Industrial			Multi- Family			Residential Construction			Other Commercial Real Estate			Consumer			Covered Loans			Total Allowance
Nine Months ended September 30, 2011
Balance at beginning of period	$	49,545		$	20,758		$	3,996		$	27,933		$	29,869		$	12,971		$	-		$	145,072
Loans charged-off		(22,815	)		(4,395	)		(9,445	)		(11,397	)		(17,018	)		(8,021	)		(6,224	)		(79,315	)
Recoveries of loans previously charged-off		2,952			60			74			2,830			623			315			-			6,854
Net loans charged-off		(19,863	)		(4,335	)		(9,371	)		(8,567	)		(16,395	)		(7,706	)		(6,224	)		(72,461	)
Provision for loan losses		19,217			224			9,985			(1,295	)		13,637			9,665			7,247			58,680
Balance at end of period	$	48,899		$	16,647		$	4,610		$	18,071		$	27,111		$	14,930		$	1,023		$	131,291
Nine Months ended September 30, 2010
Balance at beginning of period	$	54,452		$	20,164		$	4,555		$	33,078		$	21,084		$	11,475		$	-		$	144,808
Loans charged-off		(26,376	)		(7,434	)		(1,771	)		(19,176	)		(17,128	)		(7,986	)		(664	)		(80,535	)
Recoveries of loans previously charged-off		4,796			612			552			270			342			698			24			7,294
Net loans charged-off		(21,580	)		(6,822	)		(1,219	)		(18,906	)		(16,786	)		(7,288	)		(640	)		(73,241	)
Provision for loan losses		22,125			6,837			573			9,379			24,509			9,389			640			73,452
Balance at end of period	$	54,997		$	20,179		$	3,909		$	23,551		$	28,807		$	13,576		$	-		$	145,019

Impaired Loans

A portion of the Company’s allowance for credit losses is allocated to loans deemed impaired. Impaired loans consist of corporate non-accrual loans and TDRs. Smaller homogeneous loans, such as home equity, installment, and 1-4 family mortgages, are not individually assessed for impairment.

Impaired Loans

(Dollar amounts in thousands)

	September 30, 2011		December 31, 2010
Impaired loans individually evaluated for impairment:
Impaired loans with a related allowance for credit losses (1)	$	35,447	$	13,790
Impaired loans with no specific related allowance (2)		110,539		173,534
Total impaired loans individually evaluated for impairment		145,986		187,324
Corporate non-accrual loans not individually evaluated for impairment (3)		12,732		12,449
Total corporate non-accrual loans		158,718		199,773
TDRs, still accruing interest		7,033		22,371
Total impaired loans	$	165,751	$	222,144
Valuation allowance related to impaired loans	$	14,893	$	6,343

(1)	These impaired loans require a valuation allowance because the present value of expected future cash flows or the estimated value of the related collateral less estimated selling costs is less than the recorded investment in the loans.
(2)	No specific allowance for credit losses is allocated to these loans since they are deemed to be sufficiently collateralized or had charge-offs. However, while each component of the allowance for credit losses is determined separately, the entire balance is available for the entire loan portfolio.
(3)	These are loans with balances under a specified threshold.

The table below provides a break-down of loans and the related allowance for credit losses by portfolio segment. Loans individually evaluated for impairment include corporate non-accrual loans with the exception of certain loans with balances under a specified threshold.

The present value of any decreases in expected cash flows of covered loans after the purchase date is recognized by recording a charge-off through the allowance for loan losses. Since most covered loans are accounted for as purchased impaired loans and the carrying values of those loans are periodically adjusted for any changes in expected future cash flows, they are not included in the calculation of the allowance for credit losses and are not displayed in this table.

Loans and Related Allowance for Credit Losses by Portfolio Segment

(Dollar amounts in thousands)

	Loans						Allowance For Credit Losses
	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total		Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
September 30, 2011
Commercial, industrial, and agricultural	$	26,421	$	1,700,049	$	1,726,470	$	7,625	$	41,274	$	48,899
Commercial real estate:
Office, retail, and industrial		23,168		1,240,147		1,263,315		154		16,493		16,647
Multi-family		17,489		299,824		317,313		35		4,575		4,610
Residential construction		20,327		95,956		116,283		2,360		15,711		18,071
Other commercial real estate		58,581		964,549		1,023,130		4,719		22,392		27,111
Total commercial real estate		119,565		2,600,476		2,720,041		7,268		59,171		66,439
Total corporate loans		145,986		4,300,525		4,446,511		14,893		100,445		115,338
Consumer		-		657,983		657,983		-		14,930		14,930
Total loans, excluding covered loans		145,986		4,958,508		5,104,494		14,893		115,375		130,268
Covered loans (1)		-		45,888		45,888		-		1,023		1,023
Total loans included in the calculation of the allowance for credit losses	$	145,986	$	5,004,396	$	5,150,382	$	14,893	$	116,398	$	131,291
December 31, 2010
Commercial, industrial, and agricultural	$	43,365	$	1,650,294	$	1,693,659	$	2,650	$	46,895	$	49,545
Commercial real estate:
Office, retail, and industrial		18,076		1,185,537		1,203,613		-		20,758		20,758
Multi-family		5,696		344,166		349,862		497		3,499		3,996
Residential construction		51,269		123,421		174,690		-		27,933		27,933
Other commercial real estate		68,918		951,911		1,020,829		3,196		26,673		29,869
Total commercial real estate		143,959		2,605,035		2,748,994		3,693		78,863		82,556
Total corporate loans		187,324		4,255,329		4,442,653		6,343		125,758		132,101
Consumer		-		657,907		657,907		-		12,971		12,971
Total	$	187,324	$	4,913,236	$	5,100,560	$	6,343	$	138,729	$	145,072

(1) These are open-end consumer loans that are not categorized as impaired loans.

The following table presents loans individually evaluated for impairment by class of loan as of September 30, 2011 and December 31, 2010.

Impaired Loans Individually Evaluated by Class

(Dollar amounts in thousands)

	September 30, 2011								December 31, 2010
	Recorded Investment In								Recorded Investment In
	Loans with No Specific Related Allowance		Loans with a Related Allowance for Credit Losses		Unpaid Principal Balance		Allowance for Credit Losses Allocated		Loans with No Specific Related Allowance		Loans with a Related Allowance for Credit Losses		Unpaid Principal Balance		Allowance for Credit Losses Allocated
Commercial and industrial	$	13,484	$	10,540	$	33,119	$	6,948	$	40,715	$	2,650	$	53,353	$	2,650
Agricultural		-		2,397		3,445		677		2,447		-		2,982		-
Commercial real estate:
Office, retail, and industrial		21,126		2,042		28,367		154		18,076		-		26,193		-
Multi-family		17,383		106		25,489		35		4,565		1,131		7,322		497
Residential construction		12,521		7,806		46,316		2,360		51,269		-		129,698		-
Commercial construction		15,311		-		20,047		-		28,685		-		38,404		-
Other commercial real estate		30,714		12,556		65,803		4,719		27,777		10,009		60,465		3,196
Total commercial real estate		97,055		22,510		186,022		7,268		130,372		11,140		262,082		3,693
Total impaired loans individually evaluated for  impairment	$	110,539	$	35,447	$	222,586	$	14,893	$	173,534	$	13,790	$	318,417	$	6,343

	Nine Months Ended September 30, 2011				Nine Months Ended September 30, 2010
	Average Recorded Investment Balance		Interest Income Recognized (1)		Average Recorded Investment Balance		Interest Income Recognized (1)
Commercial and industrial	$	48,982	$	51	$	35,238	$	69
Agricultural		1,463		-		1,702		-
Commercial real estate:
Office, retail, and industrial		30,423		30		26,154		-
Multi-family		12,226		6		8,518		-
Residential construction		34,828		27		89,905		75
Commercial construction		23,818		-		21,522		-
Other commercial real estate		26,143		23		18,821		37
Total commercial real estate		127,438		86		164,920		112
Total impaired loans individually evaluated for impairment	$	177,883	$	137	$	201,860	$	181

(1) Recorded using the cash basis of accounting.

TDRs

TDRs are loans for which the original contractual terms of the loans have been modified and both of the following conditions exist: (i) the restructuring constitutes a concession (including forgiveness of principal or interest) and (ii) the borrower is experiencing financial difficulties. Loans are not classified as TDRs when the modification is short-term or results in only an insignificant delay or shortfall in the payments to be received. The Company’s TDRs are determined on a case-by-case basis in connection with ongoing loan collection processes.

Loan modifications are generally performed at the request of the individual borrower and may include reduction in interest rates, changes in payments, and maturity date extensions. Although the Company does not have formal, standardized loan modification programs for its commercial or consumer loan portfolios, it participates in the U.S. Department of the Treasury (the “Treasury”)’s Home Affordable Modification Program (“HAMP”) and complies with Regulation Z, the Federal Truth in Lending Act. HAMP gives qualifying homeowners an opportunity to refinance into more affordable monthly payments, with the Treasury compensating us for a portion of the reduction in monthly amounts due from borrowers participating in this program.

The following table presents a summary of loans that were restructured during the nine months ended September 30, 2011.

	Nine Months Ended September 30, 2011
	Number of Loans		Pre-Modification Recorded Investment		Funds Disbursed		Interest and Escrow Capitalized		Post-Modification Recorded Investment
Commercial and industrial		10	$	886	$	-	$	7	$	893
Agricultural		-		-		-		-		0-
Commercial real estate:
Office, retail and industrial		3		3,407		293		9		3,709
Multi-family		-		-		-		-		-
Residential construction		-		-		-		-		-
Commercial construction		-		-		-		-		-
Other commercial real estate		1		174		-		74		248
Total commercial real estate		4		3,581		293		83		3,957
Total corporate loans		14		4,467		293		90		4,850
Home equity		8		508		-		16		524
1-4 family mortgages		12		1,236		-		89		1,325
Installment loans		1		151		-		4		155
Total consumer loans		21		1,895		-		109		2,004
Total TDRs restructured during the period		35	$	6,362	$	293	$	199	$	6,854
TDRs, still accruing interest (1)		33	$	6,120	$	293	$	122	$	6,535
TDRs included in non-accrual (2)		2		242		-		77		319
Total		35	$	6,362	$	293	$	199	$	6,854

(1)	These loans are still accruing interest as of September 30, 2011.
(2)	These loans are included in non-accrual loans as of September 30, 2011.

The specific reserve portion of the allowance for loan losses on TDRs is determined by discounting the restructured cash flows at the original effective rate of the loan before modification or is based on the underlying collateral value less costs to sell, if repayment of the loan is collateral-dependent. If the resulting amount is less than the recorded book value, the Company either establishes a valuation allowance (i.e. specific reserve) as a component of the allowance for loan losses or charges off the impaired balance if it determines that such amount is a confirmed loss. This method is used consistently for all segments of the portfolio. The allowance for loan losses also includes an allowance based on a loss migration analysis for each loan category for loans that are not individually evaluated for specific impairment. All loans charged-off, including TDRs charged-off, are factored into this calculation by portfolio segment.

The following table presents TDRs that had charge-offs during the nine months ended September 30, 2011. These loans were restructured during the last twelve months and subsequently defaulted, resulting in a principal charge-off during the current year-to-date period. None of these loans accrued interest during the nine months ended September 30, 2011.

	Nine Months Ended September 30, 2011
	Number of Loans		Pre-Charge-off Recorded Investment		Principal Charged-off			Post-Charge-off Recorded Investment
Commercial and industrial		4	$	904	$	(368	)	$	536
Agricultural		-		-		-			-
Commercial real estate:
Office, retail and industrial		1		397		(397	)		-
Multi-family		14		4,772		(1,231	)		3,541
Residential construction		5		6,088		(1,512	)		4,576
Commercial construction		-		-		-			-
Other commercial real estate		3		2,014		(494	)		1,520
Total commercial real estate		23		13,271		(3,634	)		9,637
Total corporate loans		27		14,175		(4,002	)		10,173
Home equity		3		252		(172	)		80
1-4 family mortgages		3		296		(241	)		55
Installment loans		-				-			0
Total consumer loans		6		548		( 413	)		135
Total TDRs with charge-offs		33	$	14,723	$	(4,415	)	$	10,308
TDRs, still accruing interest		-	$	-	$	-		$	-
TDRs included in non-accrual		33		14,723		(4,415	)		10,308
Total		33	$	14,723	$	(4,415	)	$	10,308

There were no commitments to lend additional funds to borrowers with TDRs as of September 30, 2011.

Credit Quality Indicators

Corporate loans and commitments are assessed for risk and assigned ratings based on various characteristics, such as the borrower’s cash flow, leverage, collateral, management characteristics, and other factors. Ratings for commercial credits are reviewed periodically. Consumer loans are assessed for credit quality based on the aging status of the loan. The assessment of consumer loans is completed at the end of each reporting period. Loans are analyzed on an individual basis when the internal credit rating is at or below a predetermined classification and the loan exceeds a fixed dollar amount.

Credit Quality Indicators by Class, Excluding Covered Loans

 (Dollar amounts in thousands)

	Pass		Special Mention (1)		Substandard / Accrual (2)		Substandard / Non-accrual (3)		Total
September 30, 2011
Commercial and industrial	$	1,318,968	$	75,779	$	50,780	$	30,507	$	1,476,034
Agricultural		236,276		11,183		-		2,977		250,436
Commercial real estate:
Office, retail, and industrial		1,087,461		108,694		42,432		24,728		1,263,315
Multi-family		277,658		5,847		15,612		18,196		317,313
Residential construction		50,220		29,524		15,628		20,911		116,283
Commercial construction		89,462		31,966		8,789		15,672		145,889
Other commercial real estate		732,930		81,402		17,182		45,727		877,241
Total commercial real estate		2,237,731		257,433		99,643		125,234		2,720,041
Total corporate loans	$	3,792,975	$	344,395	$	150,423	$	158,718	$	4,446,511
December 31, 2010
Commercial and industrial	$	1,303,142	$	83,259	$	29,414	$	50,088	$	1,465,903
Agricultural		209,317		15,667		275		2,497		227,756
Commercial real estate:
Office, retail, and industrial		1,026,124		123,800		34,116		19,573		1,203,613
Multi-family		307,845		20,643		15,171		6,203		349,862
Residential construction		57,209		35,950		29,409		52,122		174,690
Commercial construction		85,305		35,750		14,732		28,685		164,472
Other commercial real estate		697,971		89,247		28,534		40,605		856,357
Total commercial real estate		2,174,454		305,390		121,962		147,188		2,748,994
Total corporate loans	$	3,686,913	$	404,316	$	151,651	$	199,773	$	4,442,653

	Performing		Non-accrual		Total
September 30, 2011
Home equity	$	417,197	$	7,789	$	424,986
1-4 family mortgages		184,939		4,648		189,587
Installment loans		43,376		34		43,410
Total consumer loans	$	645,512	$	12,471	$	657,983
December 31, 2010
Home equity	$	437,295	$	7,948	$	445,243
1-4 family mortgages		156,988		3,902		160,890
Installment loans		51,615		159		51,774
Total consumer loans	$	645,898	$	12,009	$	657,907

(1)	Loans categorized as special mention have potential weaknesses that deserve the close attention of management. If left uncorrected, these potential weaknesses may result in the deterioration of repayment prospects or in the credit position of the Company at some future date.
(2)	Loans categorized as substandard/accrual continue to accrue interest, but exhibit a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt. These loans continue to accrue interest because they are well secured and collection of principal and interest is expected within a reasonable time.
(3)	Loans categorized as substandard/non-accrual exhibit a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt and are characterized by the distinct possibility that the Company could sustain some loss if the deficiencies are not corrected. These loans have been placed on non-accrual status.