Allowance for Credit Losses and Credit Quality

3 Months Ended

Mar. 31, 2017

Receivables [Abstract]

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 three months ended March 31 is as follows:

	2017
(Dollars in thousands)	Legacy Loans			Acquired Loans			Total
Allowance for credit losses
Allowance for loan losses at beginning of period	$	105,569		$	39,150		$	144,719
Provision for (Reversal of) loan losses	6,566			(412		)	6,154
Transfer of balance to OREO and other	—			73			73
Loans charged-off	(7,202		)	(89		)	(7,291		)
Recoveries	880			355			1,235
Allowance for loan losses at end of period	$	105,813		$	39,077		$	144,890
Reserve for unfunded commitments at beginning of period	$	11,241		$	—		$	11,241
Provision for unfunded lending commitments	419			—			419
Reserve for unfunded commitments at end of period	$	11,660		$	—		$	11,660
Allowance for credit losses at end of period	$	117,473		$	39,077		$	156,550

	2016
	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	15,908			(1,261		)	14,647
Adjustment attributable to FDIC loss share arrangements	—			258			258
Net provision for (Reversal of) loan losses	15,908			(1,003		)	14,905
Adjustment attributable to FDIC loss share arrangements	—			(258		)	(258		)
Transfer of balance to OREO and other	—			(2,459		)	(2,459		)
Loans charged-off	(5,389		)	(171		)	(5,560		)
Recoveries	1,247			304			1,551
Allowance for loan losses at end of period	$	105,574		$	40,983		$	146,557
Reserve for unfunded commitments at beginning of period	$	14,145		$	—		$	14,145
Provision for (Reversal of) unfunded lending commitments	(112		)	—			(112		)
Reserve for unfunded commitments at end of period	$	14,033		$	—		$	14,033
Allowance for credit losses at end of period	$	119,607		$	40,983		$	160,590

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

	2017
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			Consumer			Total
Allowance for loan losses at beginning of period	$	25,408		$	35,434		$	22,486		$	3,835		$	18,406		$	105,569
Provision for (Reversal of) loan losses	1,948			1,951			490			(623		)	2,800			6,566
Transfer of balance to OREO and other	—			—			—			—			—			—
Loans charged off	(95		)	(917		)	(2,845		)	(22		)	(3,323		)	(7,202		)
Recoveries	87			49			—			43			701			880
Allowance for loan losses at end of period	$	27,348		$	36,517		$	20,131		$	3,233		$	18,584		$	105,813
Reserve for unfunded commitments at beginning of period	$	3,206		$	3,535		$	1,003		$	657		$	2,840		$	11,241
Provision for (Reversal of) unfunded commitments	1,377			(83		)	(800		)	(49		)	(26		)	419
Reserve for unfunded commitments at end of period	$	4,583		$	3,452		$	203		$	608		$	2,814		$	11,660
Allowance on loans individually evaluated for impairment	$	1,222		$	13,860		$	10,446		$	98		$	1,679		$	27,305
Allowance on loans collectively evaluated for impairment	26,126			22,657			9,685			3,135			16,905			78,508
Loans, net of unearned income:
Balance at end of period	$	5,878,509		$	3,140,205		$	562,515		$	901,859		$	2,440,356		$	12,923,444
Balance at end of period individually evaluated for impairment	46,203			40,380			142,398			4,583			23,468			257,032
Balance at end of period collectively evaluated for impairment	5,832,306			3,099,825			420,117			897,276			2,416,888			12,666,412

	2016
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			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	1,297			(2,431		)	14,533			(115		)	2,624			15,908
Loans charged off	(1,738		)	(225		)	—			(14		)	(3,412		)	(5,389		)
Recoveries	487			30			—			18			712			1,247
Allowance for loan losses at end of period	$	24,704		$	20,657		$	38,396		$	3,836		$	17,981		$	105,574
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	(297		)	1,952			(1,766		)	(24		)	23			(112		)
Reserve for unfunded commitments at end of period	$	3,863		$	5,400		$	899		$	806		$	3,065		$	14,033
Allowance on loans individually evaluated for impairment	$	695		$	488		$	10,918		$	72		$	809		$	12,982
Allowance on loans collectively evaluated for impairment	24,009			20,169			27,478			3,764			17,172			92,592
Loans, net of unearned income:
Balance at end of period	$	4,771,690		$	2,926,686		$	728,778		$	730,621		$	2,370,922		$	11,528,697
Balance at end of period individually evaluated for impairment	26,608			23,302			79,417			2,724			5,909			137,960
Balance at end of period collectively evaluated for impairment	4,745,082			2,903,384			649,361			727,897			2,365,013			11,390,737

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

	2017
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			Consumer			Total
Allowance for loan losses at beginning of period	$	23,574		$	3,230		$	39		$	7,412		$	4,895		$	39,150
Provision for (Reversal of) loan losses	(84		)	63			(26		)	(437		)	72			(412		)
Transfer of balance to OREO and other	377			(350		)	—			2			44			73
Loans charged off	—			—			—			—			(89		)	(89		)
Recoveries	109			35			—			—			211			355
Allowance for loan losses at end of period	$	23,976		$	2,978		$	13		$	6,977		$	5,133		$	39,077
Allowance on loans individually evaluated for impairment	$	694		$	750		$	—		$	15		$	45		$	1,504
Allowance on loans collectively evaluated for impairment	23,282			2,228			13			6,962			5,088			37,573
Loans, net of unearned income:
Balance at end of period	$	1,099,365		$	315,373		$	1,108		$	394,499		$	398,413		$	2,208,758
Balance at end of period individually evaluated for impairment	7,966			1,810			—			464			1,840			12,080
Balance at end of period collectively evaluated for impairment	832,060			281,009			1,108			278,742			306,420			1,699,339
Balance at end of period acquired with deteriorated credit quality	259,339			32,554			—			115,293			90,153			497,339

	2016
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			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	(598		)	194			(25		)	662			(1,236		)	(1,003		)
Increase (Decrease) in FDIC loss share receivable	2			(34		)	—			(35		)	(191		)	(258		)
Transfer of balance to OREO and other	(1,574		)	(343		)	—			(70		)	(472		)	(2,459		)
Loans charged off	—			(30		)	—			—			(141		)	(171		)
Recoveries	55			108			—			25			116			304
Allowance for loan losses at end of period	$	23,864		$	2,714		$	100		$	8,423		$	5,882		$	40,983
Allowance on loans individually evaluated for impairment	$	41		$	5		$	—		$	—		$	50		$	96
Allowance on loans collectively evaluated for impairment	23,823			2,709			100			8,423			5,832			40,887
Loans, net of unearned income:
Balance at end of period	$	1,458,938		$	447,696		$	2,884		$	477,770		$	535,259		$	2,922,547
Balance at end of period individually evaluated for impairment	911			1,582			34			—			4,718			7,245
Balance at end of period collectively evaluated for impairment	1,088,713			409,561			2,850			340,278			414,902			2,256,304
Balance at end of period acquired with deteriorated credit quality	369,314			36,553			—			137,492			115,639			658,998

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, sales 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 non-conforming 1-4 family mortgage loans secured by properties located in the Company's market areas and originated under terms and documentation that permit their sale in a 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 which may result in future disclosure of these loans as non-performing. For problem assets with identified credit issues, the Company has two primary classifications: “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 satisfaction of the loan balance outstanding questionable, which makes probability of loss higher 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 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, or renewed and underwritten by the Company (legacy loans) and acquired loans. Loan premiums/discounts in the tables below represent the adjustment of 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 March 31, 2017 and December 31, 2016. Credit quality information in the tables below includes total loans acquired (including acquired impaired loans) at the gross loan balance, prior to the application of premiums/discounts, at March 31, 2017 and December 31, 2016.

Loan delinquency is the primary credit quality indicator that the Company utilizes to monitor consumer asset quality.

	Legacy loans
	March 31, 2017										December 31, 2016
(Dollars in thousands)	Pass		Special Mention		Sub- standard		Doubtful		Total		Pass		Special Mention		Sub- standard		Doubtful		Total
Commercial real estate - Construction	$	876,872	$	1,119	$	4,348	$	—	$	882,339	$	734,687	$	2,203	$	3,871	$	—	$	740,761
Commercial real estate - Other	4,882,222		52,083		61,865		—		4,996,170		4,801,494		26,159		54,900		—		4,882,553
Commercial and industrial	3,064,306		31,615		27,014		17,270		3,140,205		3,112,300		29,763		35,199		17,534		3,194,796
Energy-related	314,975		65,469		153,186		28,885		562,515		242,123		80,084		225,724		11,358		559,289
Total	$	9,138,375	$	150,286	$	246,413	$	46,155	$	9,581,229	$	8,890,604	$	138,209	$	319,694	$	28,892	$	9,377,399

	Legacy loans
	March 31, 2017						December 31, 2016
(Dollars in thousands)	Current		30+ Days Past Due		Total		Current		30+ Days Past Due		Total
Residential mortgage	$	884,571	$	17,288	$	901,859	$	836,509	$	17,707	$	854,216
Consumer - Home equity	1,779,409		17,714		1,797,123		1,768,763		14,658		1,783,421
Consumer - Indirect automobile	107,519		2,655		110,174		127,054		3,994		131,048
Consumer - Credit card	82,636		976		83,612		81,602		922		82,524
Consumer - Other	445,538		3,909		449,447		462,650		3,666		466,316
Total	$	3,299,673	$	42,542	$	3,342,215	$	3,276,578	$	40,947	$	3,317,525

	Acquired loans
	March 31, 2017													December 31, 2016
(Dollars in thousands)	Pass		Special Mention		Sub-standard		Doubtful		Premium/(Discount)			Total		Pass		Special Mention		Sub-standard		Doubtful		Loss		Premium/(Discount)			Total
Commercial real estate - Construction	$	45,192	$	472	$	2,717	$	2,574	$	11,001		$	61,956	$	46,498	$	459	$	3,118	$	2,574	$	—	$	8,759		$	61,408
Commercial real estate - Other	1,014,057		15,408		46,451		1,475		(39,982		)	1,037,409		1,090,063		19,284		49,136		1,457		23		(42,419		)	1,117,544
Commercial and industrial	293,402		5,407		18,030		403		(1,869		)	315,373		323,154		1,416		27,749		494		—		(4,487		)	348,326
Energy-related	1,113		—		—		—		(5		)	1,108		1,910		—		—		—		—		(6		)	1,904
Total	$	1,353,764	$	21,287	$	67,198	$	4,452	$	(30,855	)	$	1,415,846	$	1,461,625	$	21,159	$	80,003	$	4,525	$	23	$	(38,153	)	$	1,529,182

	Acquired loans
	March 31, 2017									December 31, 2016
(Dollars in thousands)	Current		30+ Days Past Due		Premium (Discount)			Total		Current		30+ Days Past Due		Premium (Discount)			Total
Residential mortgage	$	404,276	$	19,268	$	(29,045	)	$	394,499	$	424,300	$	20,914	$	(32,030	)	$	413,184
Consumer - Home equity	352,836		12,971		(16,134		)	349,673		377,021		12,807		(17,323		)	372,505
Consumer - Indirect automobile	26		—		—			26		12		—		(8		)	4
Consumer - Other	52,572		937		(4,795		)	48,714		58,141		1,423		(4,392		)	55,172
Total	$	809,710	$	33,176	$	(49,974	)	$	792,912	$	859,474	$	35,144	$	(53,753	)	$	840,865

Legacy Impaired Loans

Information on the Company’s investment in legacy impaired loans, which include all TDRs and all other non-accrual loans evaluated or measured individually for impairment for purposes of determining the allowance for loan losses, is presented in the following tables as of and for the periods indicated.

	March 31, 2017							December 31, 2016
	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	$	24,203	$	24,203	$	—		$	17,299	$	16,507	$	—
Commercial and industrial	10,176		10,176		—			14,202		13,189		—
Energy-related	93,289		93,289		—			152,424		143,239		—
Residential mortgage	519		519		—			—		—		—
Consumer - Home equity	3,480		3,480		—			—		—		—
Consumer -Other	—		—		—			—		—		—
With an allowance recorded:
Commercial real estate	22,000		22,000		(1,222		)	17,688		17,524		(641		)
Commercial and industrial	30,204		30,204		(13,860		)	28,829		28,329		(10,864		)
Energy-related	49,109		49,109		(10,446		)	53,967		53,088		(9,769		)
Residential mortgage	4,392		4,064		(98		)	4,627		4,312		(144		)
Consumer - Home equity	16,605		16,229		(1,263		)	13,906		13,257		(993		)
Consumer - Indirect automobile	724		724		(139		)	1,037		758		(114		)
Consumer - Other	3,124		3,035		(277		)	2,447		2,442		(251		)
Total	$	257,825	$	257,032	$	(27,305	)	$	306,426	$	292,645	$	(22,776	)
Total commercial loans	$	228,981	$	228,981	$	(25,528	)	$	284,409	$	271,876	$	(21,274	)
Total mortgage loans	4,911		4,583		(98		)	4,627		4,312		(144		)
Total consumer loans	23,933		23,468		(1,679		)	17,390		16,457		(1,358		)

	Three Months Ended March 31, 2017				Three Months Ended March 31, 2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	24,370	$	315	$	16,167	$	38
Commercial and industrial	10,408		92		27,540		286
Energy-related	96,664		365		53,920		513
Residential mortgage	519		4		1,289		16
Consumer - Home equity	3,480		34		—		—
With an allowance recorded:
Commercial real estate	22,076		115		10,710		83
Commercial and industrial	30,779		209		3,166		46
Energy-related	49,887		2		21,289		224
Residential mortgage	4,080		41		1,462		8
Consumer - Home equity	15,746		170		5,188		51
Consumer - Indirect automobile	766		7		190		1
Consumer - Other	3,078		49		391		7
Total	$	261,853	$	1,403	$	141,312	$	1,273
Total commercial loans	$	234,184	$	1,098	$	132,792	$	1,190
Total mortgage loans	4,599		45		2,751		24
Total consumer loans	23,070		260		5,769		59

As of March 31, 2017 and December 31, 2016, 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.