Allowance for Credit Losses and Credit Quality

6 Months Ended

Jun. 30, 2018

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 six months ended June 30 is as follows:

(Dollars in thousands)	2018			2017
Allowance for credit losses
Allowance for loan and lease losses at beginning of period	$	140,891		$	144,719
Provision for loan and lease losses	15,581			18,204
Transfer of balance to OREO and other	(3,943		)	258
Charge-offs	(22,734		)	(19,480		)
Recoveries	6,781			2,524
Allowance for loan and lease losses at end of period	$	136,576		$	146,225
Reserve for unfunded commitments at beginning of period	$	13,208		$	11,241
Balance created in acquisition accounting	900			—
Provision for (Reversal of) unfunded lending commitments	325			(779		)
Reserve for unfunded commitments at end of period	$	14,433		$	10,462
Allowance for credit losses at end of period	$	151,009		$	156,687

A summary of changes in the allowance for credit losses, by loan portfolio type, for the six months ended June 30 is as follows:

	2018
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Residential Mortgage			Consumer			Total
Allowance for loan and lease losses at beginning of period	$	54,201		$	53,916		$	9,117		$	23,657		$	140,891
Provision for (Reversal of) loan and lease losses	(3,404		)	10,083			1,112			7,790			15,581
Transfer of balance to OREO and other	(506		)	(18		)	6			(3,425		)	(3,943		)
Charge-offs	(1,258		)	(13,575		)	(196		)	(7,705		)	(22,734		)
Recoveries	384			4,403			44			1,950			6,781
Allowance for loan and lease losses at end of period	$	49,417		$	54,809		$	10,083		$	22,267		$	136,576
Reserve for unfunded commitments at beginning of period	$	4,531		$	5,309		$	555		$	2,813		$	13,208
Balance created in acquisition accounting	129			81			—			690			900
Provision for (Reversal of) unfunded commitments	467			(306		)	160			4			325
Reserve for unfunded commitments at end of period	$	5,127		$	5,084		$	715		$	3,507		$	14,433
Allowance on loans individually evaluated for impairment	$	2,274		$	11,946		$	168		$	3,199		$	17,587
Allowance on loans collectively evaluated for impairment	40,763			40,540			3,816			18,742			103,861
Allowance on loans acquired with deteriorated credit quality	6,380			2,323			6,099			326			15,128
Loans and leases, net of unearned income:
Balance at end of period	$	9,292,304		$	5,512,416		$	4,124,538		$	3,146,525		$	22,075,783
Balance at end of period individually evaluated for impairment	84,217			66,683			5,873			35,550			192,323
Balance at end of period collectively evaluated for impairment	9,017,756			5,415,093			3,984,086			3,029,027			21,445,962
Balance at end of period acquired with deteriorated credit quality	190,331			30,640			134,579			81,948			437,498

	2017
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Residential Mortgage			Consumer			Total
Allowance for loan losses at beginning of period	$	49,231		$	60,939		$	11,249		$	23,300		$	144,719
Provision for (Reversal of) loan and lease losses	5,635			8,596			(1,462		)	5,435			18,204
Transfer of balance to OREO and other	135			(69		)	2			190			258
Charge-offs	(1,283		)	(11,281		)	(75		)	(6,841		)	(19,480		)
Recoveries	334			347			142			1,701			2,524
Allowance for loan losses at end of period	$	54,052		$	58,532		$	9,856		$	23,785		$	146,225
Reserve for unfunded commitments at beginning of period	$	3,207		$	4,537		$	657		$	2,840		$	11,241
Provision for (Reversal of) unfunded commitments	296			(904		)	(89		)	(82		)	(779		)
Reserve for unfunded commitments at end of period	$	3,503		$	3,633		$	568		$	2,758		$	10,462
Allowance on loans individually evaluated for impairment	$	1,718		$	23,964		$	169		$	2,273		$	28,124
Allowance on loans collectively evaluated for impairment	29,342			32,314			3,454			18,010			83,120
Allowance on loans acquired with deteriorated credit quality	22,992			2,254			6,233			3,502			34,981
Loans, net of unearned income:
Balance at end of period	$	7,182,556		$	4,195,096		$	1,346,467		$	2,831,897		$	15,556,016
Balance at end of period individually evaluated for impairment	68,961			112,969			5,291			28,839			216,060
Balance at end of period collectively evaluated for impairment	6,875,012			4,050,697			1,229,926			2,719,694			14,875,329
Balance at end of period acquired with deteriorated credit quality	238,583			31,430			111,250			83,364			464,627

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 and leases represent loans to commercial customers to finance general working capital needs, equipment purchases and leases 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 with potential weaknesses that may, if not corrected, result in future deterioration of the loan. Special mention loans do not expose the Company to sufficient risk to warrant adverse classification. 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. Asset risk classifications for commercial loans and leases reflect the classification as of June 30, 2018 and December 31, 2017. Credit quality information in the tables below includes total loans acquired (including acquired impaired loans) at the net loan balance, after the application of premiums/discounts, at June 30, 2018 and December 31, 2017. Loan premiums/discounts 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. Loan premiums/discounts include preliminary discounts recorded on acquired Gibraltar loans, which are subject to change upon receipt of final fair value estimates during the measurement period.

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

	June 30, 2018										December 31, 2017
(Dollars in thousands)	Pass		Special Mention		Sub- standard		Doubtful		Total		Pass		Special Mention		Sub- standard		Doubtful		Loss		Total
Commercial real estate - construction	$	1,154,965	$	12,514	$	15,876	$	12	$	1,183,367	$	1,189,490	$	20,351	$	30,541	$	14	$	—	$	1,240,396
Commercial real estate - owner-occupied	2,537,393		51,820		46,600		6,011		2,641,824		2,388,715		82,114		56,590		2,466		—		2,529,885
Commercial real estate- non-owner-occupied	5,371,512		41,131		50,368		4,102		5,467,113		5,104,074		19,311		42,702		1,744		118		5,167,949
Commercial and industrial	5,316,458		73,610		92,536		29,812		5,512,416		4,882,554		88,149		128,961		35,403		—		5,135,067
Total	$	14,380,328	$	179,075	$	205,380	$	39,937	$	14,804,720	$	13,564,833	$	209,925	$	258,794	$	39,627	$	118	$	14,073,297

	June 30, 2018						December 31, 2017
(Dollars in thousands)	Current		30+ Days Past Due		Total		Current		30+ Days Past Due		Total
Residential mortgage	$	4,033,339	$	91,199	$	4,124,538	$	2,962,043	$	94,309	$	3,056,352
Consumer - home equity	2,367,409		43,208		2,410,617		2,250,205		42,070		2,292,275
Consumer - other	728,263		7,645		735,908		645,498		10,759		656,257
Total	$	7,129,011	$	142,052	$	7,271,063	$	5,857,746	$	147,138	$	6,004,884

Impaired Loans

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

	June 30, 2018							December 31, 2017
	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- construction	$	13,970	$	13,034	$	—		$	13,763	$	13,013	$	—
Commercial real estate- owner-occupied	42,072		34,476		—			50,867		44,482		—
Commercial real estate- non-owner-occupied	16,333		15,357		—			15,370		14,975		—
Commercial and industrial	47,499		30,845		—			103,013		70,254		—
Residential mortgage	1,265		1,263		—			2,004		2,001		—
Consumer - home equity	1,904		1,879		—			5,906		5,634		—
Consumer -other	—		—		—			75		75		—
With an allowance recorded:
Commercial real estate- construction	235		151		(11		)	238		156		(19		)
Commercial real estate- owner-occupied	19,662		19,526		(2,121		)	13,314		13,287		(949		)
Commercial real estate- non-owner-occupied	1,743		1,673		(142		)	6,051		5,872		(620		)
Commercial and industrial	40,228		35,838		(11,946		)	35,306		32,162		(12,736		)
Residential mortgage	5,045		4,610		(168		)	5,179		4,748		(172		)
Consumer - home equity	29,164		28,522		(2,626		)	27,189		26,575		(2,358		)
Consumer - other	5,567		5,149		(573		)	5,354		4,893		(498		)
Total	$	224,687	$	192,323	$	(17,587	)	$	283,629	$	238,127	$	(17,352	)
Total commercial loans and leases	$	181,742	$	150,900	$	(14,220	)	$	237,922	$	194,201	$	(14,324	)
Total mortgage loans	6,310		5,873		(168		)	7,183		6,749		(172		)
Total consumer loans	36,635		35,550		(3,199		)	38,524		37,177		(2,856		)

	Three Months Ended June 30, 2018				Three Months Ended June 30, 2017				Six Months Ended June 30, 2018				Six Months Ended June 30, 2017
	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- construction	$	12,952	$	198	$	3,953	$	14	$	12,597	$	393	$	3,953	$	39
Commercial real estate- owner-occupied	30,899		209		35,589		180		31,265		609		35,982		453
Commercial real estate- non-owner-occupied	15,929		121		4,476		40		16,558		250		4501		69
Commercial and industrial	37,859		389		38,480		175		37,806		836		41,023		374
Residential mortgage	1,272		13		1,341		13		1,280		27		1,349		27
Consumer - home equity	1,910		28		4,875		48		1,922		52		4,885		95
With an allowance recorded:
Commercial real estate- construction	152		—		214		2		152		—		232		4
Commercial real estate- owner-occupied	19,582		82		17,973		86		19,696		192		18,067		187
Commercial real estate- non-owner-occupied	1,631		14		7,935		48		1,705		39		7,965		141
Commercial and industrial	38,134		158		81,023		299		38,981		357		82,011		585
Residential mortgage	4,657		47		3,986		35		4,678		92		4,009		70
Consumer - home equity	28,595		304		19,482		208		28,173		600		18,583		398
Consumer - other	5,220		67		4,104		60		5,267		139		3,969		117
Total	$	198,792	$	1,630	$	223,431	$	1,208	$	200,080	$	3,586	$	226,529	$	2,559
Total commercial loans and leases	$	157,138	$	1,171	$	189,643	$	844	$	158,760	$	2,676	$	193,734	$	1,852
Total mortgage loans	5,929		60		5,327		48		5,958		119		5,358		97
Total consumer loans	35,725		399		28,461		316		35,362		791		27,437		610

As of June 30, 2018 and December 31, 2017, 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.