Allowance For Loan Losses And Credit Quality

3 Months Ended

Mar. 31, 2012

Allowance For Loan Losses And Credit Quality [Abstract]

Allowance For Loan Losses And Credit Quality

NOTE 7 – ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision charged to earnings, and for loans covered by loss share agreements with the FDIC, through a charge to earnings and an indemnification asset, the FDIC loss share receivable. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Changes in the allowance related to impaired loans are charged or credited to the provision for loan losses and reversed when losses are charged off for impaired loan pools or transferred as a component of the carrying value for OREO transfers.

The allowance for loan losses is maintained at a level which, in management's opinion, is adequate to absorb credit losses inherent in the portfolio. The Company utilizes both peer group analysis, as well as a historical analysis of the Company's portfolio to validate the overall adequacy of the allowance for loan losses. In addition to these objective criteria, the Company subjectively assesses the adequacy of the allowance for loan losses with consideration given to current economic conditions, changes to loan policies, the volume and type of lending, composition of the portfolio, the level of classified and criticized credits, seasoning of the loan portfolio, payment status and other factors.

In connection with acquisitions, the Company acquires certain loans considered impaired and accounts for these loans under the provisions of ASC Topic 310, which require the initial recognition of these loans at the present value of amounts expected to be received. Further, the Company also accounts for non-impaired loans acquired in acquisitions by analogy to ASC 310. The allowance for loan losses previously associated with these loans does not carry over. Any deterioration in the credit quality of these loans subsequent to acquisition would be considered in the allowance for loan losses. For any increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the loan's or pool's remaining life and recaptures any previously recognized impairment up to the amount of the improvement in expected cash flows.

A summary of changes in the allowance for loan losses, in total and for the covered loan and non-covered loan portfolios, for the three months ended March 31, 2012 and 2011 is as follows:

(dollars in thousands)	2012			2011
Balance, beginning of period	$	193,761		$	136,100
Provision charged to operations		2,857			5,471
Provision recorded through FDIC loss share receivable		684			6,784
Decrease in balance for transfer of covered loans to OREO		(5,363	)		—
Loans charged-off – covered loans		(13,266	)		(218	)
Loans charged-off – non-covered loans		(2,271	)		(3,076	)
Recoveries – covered loans		17			327
Recoveries – non-covred loans		773			3,731
Balance, end of period	$	177,192		$	149,119

(dollars in thousands)	March 31, 2012
	Covered loans			Non-covered loans			Total
Balance, beginning of period	$	118,900		$	74,861		$	193,761
Provision for loan losses before benefit attributable to FDIC loss share agreements		1,431			2,110			3,541
Benefit attributable to FDIC loss share agreements		(684	)		—			(684	)
Net provision for loan losses		747			2,110			2,857
Increase in FDIC loss share receivable		684			—			684
Transfer of balance to OREO		(5,357	)		(6	)		(5,363	)
Loans charged-off		(13,266	)		(2,271	)		(15,537	)
Recoveries		17			773			790
Balance, end of period	$	101,725		$	75,467		$	177,192

(dollars in thousands)	March 31, 2011
	Covered loans			Non-covered loans			Total
Balance, beginning of period	$	73,640		$	62,460		$	136,100
Provision for loan losses before benefit attributable to FDIC loss share agreements		8,554			3,701			12,255
Benefit attributable to FDIC loss share agreements		(6,784	)		—			(6,784	)
Net provision for loan losses		1,770			3,701			5,471
Increase in FDIC loss share receivable		6,784			—			6,784
Loans charged-off		(218	)		(3,076	)		(3,294	)
Recoveries		327			3,731			4,058
Balance, end of period	$	82,303		$	66,816		$	149,119

A summary of changes in the allowance for loan losses for non-covered loans, by loan portfolio type, for the three months ended March 31, 2012 and 2011 is as follows:

		$ 2,580,727			$ 2,580,727			$ 2,580,727			$ 2,580,727			$ 2,580,727		$ 2,580,727
(dollars in thousands)	Commercial Real Estate			Commercial Business			Consumer			Mortgage			Unallocated		Total
March 31, 2012
Allowance for loan losses
Balance, beginning of period	$	35,604		$	25,705		$	12,655		$	897		$	—	$	74,861
(Reversal of) Provision for loan losses		(860	)		2,065			1,024			(119	)		—		2,110
Transfer of balance to OREO		(6	)		—			—			—			—		(6	)
Loans charged off		(803	)		(31	)		(1,274	)		(163	)		—		(2,271	)
Recoveries		128			31			604			10			—		773
Balance, end of period		34,063			27,770			13,009			625			—		75,467
Allowance on loans individually evaluated for impairment	$	1,590		$	202		$	—		$	168		$	—	$	1,960
Allowance on loans collectively evaluated for impairment		32,473			27,568			13,009			457			—		73,507
Loans, net of unearned income
Balance, end of period	$	2,580,727		$	2,020,510		$	1,353,404		$	263,003		$	—	$	6,217,644
Balance, end of period: Loans individually evaluated for impairment		33,952			6,486			228			1,186			—		41,852
Balance, end of period: Loans collectively evaluated for impairment		2,546,775			2,014,024			1,353,176			261,817			—		6,175,792
Balance, end of period: Loans acquired with deteriorated credit quality		15,292			24,193			5,640			—			—		45,125

		$ 2,580,727			$ 2,580,727			$ 2,580,727			$ 2,580,727			$ 2,580,727		$ 2,580,727
(dollars in thousands)	Commercial Real Estate			Commercial Business			Consumer			Mortgage			Unallocated		Total
March 31, 2011
Allowance for loan losses
Balance, beginning of period	$	31,390		$	16,473		$	13,332		$	1,265		$	—	$	62,460
(Reversal of) Provision for loan losses		(948	)		1,964			2,705			(20	)		—		3,701
Loans charged off		(579	)		(142	)		(2,294	)		(61	)		—		(3,076	)
Recoveries		3,065			50			606			10			—		3,731
Balance, end of period		32,928			18,345			14,349			1,194			—		66,816
Allowance on loans individually evaluated for impairment	$	1,983		$	8		$	—		$	—		$	—	$	1,991
Allowance on loans collectively evaluated for impairment		30,945			18,337			14,349			1,194			—		64,825
Loans, net of unearned income
Balance, end of period	$	1,842,777		$	1,412,549		$	1,002,403		$	344,306		$	—	$	4,602,035
Balance, end of period: Loans individually evaluated for impairment		37,823			4,654			—			—			—		42,477
Balance, end of period: Loans collectively evaluated for impairment		1,804,954			1,407,895			1,002,403			344,306			—		4,559,558
Balance, end of period: Loans acquired with deteriorated credit quality		616			—			—			—			—		616

A summary of changes in the allowance for loan losses for covered loans, by loan portfolio type, for the three months ended March 31, 2012 and 2011 is as follows:

		$ 1,260,662			$ 1,260,662			$ 1,260,662			$ 1,260,662			$ 1,260,662		$ 1,260,662
(dollars in thousands)	Commercial Real Estate			Commercial Business			Consumer			Mortgage			Unallocated		Total
March 31, 2012
Allowance for loan losses
Balance, beginning of period	$	69,175		$	9,788		$	18,753		$	21,184		$	—	$	118,900
(Reversal of) Provision for loan losses		1,386			794			578			(2,011	)		—		747
(Decrease) Increase in FDIC loss share receivable		1,268			728			529			(1,841	)		—		684
Transfer of balance to OREO		(3,179	)		(4	)		(797	)		(1,377	)		—		(5,357	)
Loans charged off		(13,126	)		—			(9	)		(131	)		—		(13,266	)
Recoveries		14			—			3			—			—		17
Balance, end of period		55,538			11,306			19,057			15,824			—		101,725
Allowance on loans individually evaluated for impairment	$	—		$	—		$	—		$	—		$	—	$	—
Allowance on loans collectively evaluated for impairment		55,538			11,306			19,057			15,824			—		101,725
Loans, net of unearned income
Balance, end of period	$	683,233		$	140,073		$	227,883		$	209,473		$	—	$	1,260,662
Balance, end of period: Loans individually evaluated for impairment		—			—			—			—			—		—
Balance, end of period: Loans collectively evaluated for impairment		683,233			140,073			227,883			209,473			—		1,260,662
Balance, end of period: Loans acquired with deteriorated credit quality		15,507			3,121			27,978			31,031			—		77,637

		$ 1,260,662			$ 1,260,662		$ 1,260,662			$ 1,260,662			$ 1,260,662		$ 1,260,662
(dollars in thousands)	Commercial Real Estate			Commercial Business		Consumer			Mortgage			Unallocated		Total
March 31, 2011
Allowance for loan losses
Balance, beginning of period	$	26,439		$	6,657	$	12,201		$	28,343		$	—	$	73,640
(Reversal of) Provision for loan losses		1,745			257		12			(244	)		—		1,770
Increase in FDIC loss share receivable		10,242			955		1,027			(3,386	)		—		6,784
Loans charged off		(158	)		—		(41	)		(19	)		—		(218	)
Recoveries		239			—		42			46			—		327
Balance, end of period		38,507			7,869		11,187			24,740			—		82,303
Allowance on loans individually evaluated for impairment	$	—		$	—	$	—		$	—		$	—	$	—
Allowance on loans collectively evaluated for impairment		38,507			7,869		11,187			24,740			—		82,303
Loans, net of unearned income
Balance, end of period	$	837,037		$	160,093	$	275,820		$	246,605		$	—	$	1,519,555
Balance, end of period: Loans individually evaluated for impairment		—			—		—			—			—		—
Balance, end of period: Loans collectively evaluated for impairment		837,037			160,093		275,820			246,605			—		1,519,555
Balance, end of period: Loans acquired with deteriorated credit quality		164,780			5,766		57,988			48,268			—		276,802

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 disclosure of these loans as nonperforming. 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 substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full questionable and there is a high probability of loss based on currently existing facts, conditions and values. 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 periodically reviewed and changed if, in the opinion of management, the risk profile of the customer has changed since the last review of the loan relationship. Asset risk classifications for commercial loans reflect the classification as of March 31, 2012.

The Company's investment in non-covered loans by credit quality indicator as of March 31, 2012 and December 31, 2011 is presented in the following tables. Because of the difference in the accounting for acquired loans, the tables below further segregate the Company's non-covered loans receivable between loans acquired from OMNI and Cameron in 2011 and loans that were not acquired in 2011.

	Non-covered loans excluding acquired loans
(dollars in thousands)	Commercial Real Estate Construction				Commercial Real Estate- Other				Commercial Business
Credit quality indicator by asset risk classification	March 31, 2012		December 31, 2011		March 31, 2012		December 31, 2011		March 31, 2012		December 31, 2011
Pass	$	280,407	$	249,669	$	1,716,486	$	1,689,455	$	1,879,218	$	1,729,279
Special Mention		12,203		18,274		64,603		62,868		27,653		46,225
Substandard		5,859		8,559		55,704		55,236		28,019		25,477
Doubtful		149		170		5,906		5,697		199		199
Total		298,618		276,672		1,842,699		1,813,256		1,935,089		1,801,180
Discount		—		—		—		—		—		—
Non-covered commercial loans, net	$	298,618	$	276,672	$	1,842,699	$	1,813,256	$	1,935,089	$	1,801,180

		000000000		000000000		000000000		000000000
	Mortgage – Prime				Mortgage- Subprime
Credit risk by payment status	March 31, 2012		December 31, 2011		March 31, 2012		December 31, 2011
Current	$	253,297	$	271,534	$	—	$	—
Past due greater than 30 days		5,629		7,065		—		—
Total		258,926		278,599		—		—
Discount		—		—		—		—
Non-covered mortgage loans, net	$	258,926	$	278,599	$	—	$	—

		000000000		000000000		000000000		000000000
	Indirect Automobile				Credit Card
Credit risk by payment status	March 31, 2012		December 31, 2011		March 31, 2012		December 31, 2011
Current	$	277,236	$	248,070	$	45,297	$	46,786
Past due greater than 30 days		1,550		2,385		612		977
Total	$	278,786	$	250,455	$	45,909	$	47,763

		000000000		000000000		000000000		000000000
	Home Equity				Consumer - Other
Credit risk by payment status	March 31, 2012		December 31, 2011		March 31, 2012		December 31, 2011
Current	$	795,167	$	741,968	$	134,756	$	129,640
Past due greater than 30 days		8,852		8,774		936		1,119
Total		804,019		750,742		135,692		130,759
Discount		—		—		—		—
Non-covered consumer loans, net	$	804,019	$	750,742	$	135,692	$	130,759

	Acquired loans from OMNI and Cameron
(dollars in thousands)	Commercial Real Estate Construction						Commercial Real Estate-Other						Commercial Business
Credit quality indicator by asset risk classification	March 31, 2012			December 31, 2011			March 31, 2012			December 31, 2011			March 31, 2012			December 31, 2011
Pass	$	38,569		$	51,510		$	323,669		$	360,598		$	86,606		$	94,760
Special Mention		2,734			9,138			49,854			53,503			7,627			7,870
Substandard		7,801			5,441			62,313			75,161			2,508			4,057
Doubtful		—			—			—			—			68			—
Total		49,104			66,089			435,836			489,262			96,809			106,687
Discount		(4,610	)		(6,458	)		(40,920	)		(47,808	)		(11,388	)		(11,371	)
Non-covered commercial loans, net	$	44,494		$	59,631		$	394,916		$	441,454		$	85,421		$	95,316

	Mortgage – Prime					Mortgage- Subprime
Credit risk by payment status	March 31, 2012			December 31, 2011		March 31, 2012		December 31, 2011
Current	$	4,031		$	4,145	$	—	$	—
Past due greater than 30 days		340			369		—		—
Total		4,371			4,514		—		—
Discount		(294	)		—		—		—
Non-covered mortgage loans, net	$	4,077		$	4,514	$	—	$	—

	Indirect Automobile				Credit Card
Credit risk by payment status	March 31, 2012		December 31, 2011		March 31, 2012		December 31, 2011
Current	$	9,000	$	10,813	$	—	$	—
Past due greater than 30 days		278		439		—		—
Total		9,278		11,252
Discount		—		189		—		—
Non-covered consumer loans, net	$	9,278	$	11,441	$	—	$	—

	Home Equity						Consumer - Other
Credit risk by payment status	March 31, 2012			December 31, 2011			March 31, 2012			December 31, 2011
Current	$	63,465		$	73,822		$	18,909		$	16,067
Past due greater than 30 days		5,807			6,738			530			1,529
Total		69,272			80,560			19,439			17,596
Discount		(1,802	)		(4,839	)		(7,189	)		(1,511	)
Non-covered consumer loans, net	$	67,470		$	75,721		$	12,250		$	16,085

Credit quality information in the table above includes loans acquired from OMNI and Cameron at gross contractual balance outstanding at March 31, 2012 and December 31, 2011.

The Company's investment in covered loans by credit quality indicator as of March 31, 2012 and December 31, 2011 is presented in the following table. Loan discounts in the table below represent the adjustment of acquired loans to fair value at the time of acquisition in accordance with ASC Topic 805, as adjusted for income accretion and changes in cash flow estimates in subsequent periods.

(dollars in thousands)	Covered loans
March 31, 2012	Commercial
Credit quality indicator by asset risk classification	Real Estate- Construction		Real Estate- Other		Business		Total
Pass	$	54,451	$	266,472	$	56,404	$	377,327
Special Mention		17,445		74,888		10,701		103,034
Substandard		149,054		344,538		61,626		555,218
Doubtful		1,132		10,217		3,982		15,331
Total	$	222,082	$	696,115	$	132,713	$	1,050,910
						Discount		(227,604	)
		Covered commercial loans, net					$	823,306

	Mortgage
Credit risk by payment status	Prime		Subprime		Total
Current	$	231,598	$	—	$	231,598
Past due greater than 30 days		83,187		—		83,187
Total	$	314,785	$	—	$	314,785
				Discount		(105,312	)
		Covered mortgage loans, net			$	209,473

	Consumer
Credit risk by payment status	Indirect Automobile		Credit Card		Home Equity		Other		Total
Current	$	—	$	824	$	188,028	$	2,807	$	191,659
Past due greater than 30 days		—		68		86,806		473		87,347
Total	$	—	$	892	$	274,834	$	3,280	$	279,006
								Discount		(51,123	)
				Covered consumer loans, net					$	227,883

(dollars in thousands)	Covered loans
December 31, 2011	Commercial
Credit quality indicator by asset risk classification	Real Estate- Construction		Real Estate- Other		Business		Total
Pass	$	59,936	$	282,974	$	72,563	$	415,473
Special Mention		17,336		87,409		10,965		115,710
Substandard		169,726		349,155		61,268		580,149
Doubtful		705		22,636		4,082		27,423
Total	$	247,703	$	742,174	$	148,878	$	1,138,755
						Discount		(261,909	)
		Covered commercial loans, net					$	876,846

	Mortgage
Credit risk by payment status	Prime		Subprime		Total
Current	$	233,305	$	—	$	233,305
Past Due greater than 30 days		94,553		—		94,553
Total	$	327,858	$	—	$	327,858
		Discount				(111,584	)
		Covered mortgage loans, net			$	216,274

	Consumer
Credit risk by payment status	Indirect Automobile		Credit Card		Home Equity		Other		Total
Current	$	—	$	875	$	193,366	$	4,880	$	199,121
Past Due greater than 30 days		—		94		107,520		534		108,148
Total	$	—	$	969	$	300,886	$	5,414	$	307,269
						Discount				(65,940	)
		Covered consumer loans, net							$	241,329

Impaired Loans

Information on the Company's investment in impaired loans is presented in the following tables for the periods indicated.

(dollars in thousands)	At March 31, 2012							At December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance			Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded
Commercial Loans
Real Estate	$	31,568	$	31,568	$	—		$	32,267	$	32,267	$	—
Business		6,519		6,519		—			6,403		6,403		—
With an allowance recorded
Mortgage Loans
Residential – Prime	$	4,803	$	4,981	$	(178	)	$	4,763	$	4,910	$	(147	)
Residential – Subprime		—		—		—			—		—		—
Commercial Loans
Real Estate		2,327		3,917		(1,590	)		1,430		3,304		(1,874	)
Business		40		243		(203	)		40		219		(179	)
Consumer Loans
Indirect automobile		855		861		(6	)		987		994		(7	)
Credit card		395		408		(13	)		391		403		(12	)
Home equity		6,236		6,296		(60	)		4,826		4,873		(47	)
Other		533		541		(8	)		608		619		(11	)
Total
Mortgage Loans	$	4,803	$	4,981		(178	)	$	4,763	$	4,910		(147	)
Commercial Loans		40,454		42,247		(1,793	)		40,140		42,193		(2,053	)
Consumer Loans		8,019		8,106		(87	)		6,812		6,889		(77	)

(dollars in thousands)	For the Three Months Ended March 31, 2012				For the Three Months Ended March 31, 2011
	Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)
With no related allowance recorded
Commercial Loans
Real Estate	$	32,007	$	—	$	26,440	$	113
Business		6,530		—		2,154		5
With an allowance recorded
Mortgage Loans
Residential – Prime		5,389		—		7,056		13
Residential – Subprime		—		—		—		—
Commercial Loans
Real Estate		4,657		32		17,792		35
Business		246		1		9		—
Consumer Loans
Indirect automobile		862		—		1,057		3
Credit card		423		—		393		—
Home equity		6,575		—		5,451		10
Other		748		—		1,324		3
Total
Mortgage Loans		5,389		—		7,056		13
Commercial Loans		43,440		33		46,395		153
Consumer Loans		8,608		—		8,226		16

⁽¹⁾  Interest income recognized on impaired loans represents income recognized before loans were placed on nonaccrual status.

As of March 31, 2012 and December 31, 2011, the Company was not committed to lend additional funds to any customer whose loan was classified as impaired or as a troubled debt restructuring.