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Loans And Allowance For Credit Losses
 6 Months Ended
Jun. 30, 2014
Loans And Allowance For Credit Losses [Abstract]  
Loans And Allowance For Credit Losses
LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans and Loans Held for Sale
Loans are summarized as follows according to major portfolio segment and specific loan class:
(In thousands)
June 30,
2014
 
December 31,
2013
 
 
 
 
Loans held for sale
$
164,374

 
$
171,328

 
 
 
 
Commercial:
 
 
 
Commercial and industrial
$
12,805,303

 
$
12,481,083

Leasing
415,205

 
387,929

Owner occupied
7,386,414

 
7,437,195

Municipal
522,327

 
449,418

Total commercial
21,129,249

 
20,755,625

Commercial real estate:
 
 
 
Construction and land development
2,340,249

 
2,182,821

Term
7,968,625

 
8,005,837

Total commercial real estate
10,308,874

 
10,188,658

Consumer:
 
 
 
Home equity credit line
2,204,174

 
2,133,120

1-4 family residential
4,827,067

 
4,736,665

Construction and other consumer real estate
338,170

 
324,922

Bankcard and other revolving plans
376,366

 
356,240

Other
195,895

 
197,864

Total consumer
7,941,672

 
7,748,811

FDIC-supported/PCI loans
250,568

 
350,271

Total loans
$
39,630,363

 
$
39,043,365


Loan balances are presented net of unearned income and fees, which amounted to $149.6 million at June 30, 2014 and $141.7 million at December 31, 2013.

Owner occupied and commercial real estate (“CRE”) loans include unamortized premiums of approximately $41.6 million at June 30, 2014 and $47.2 million at December 31, 2013.
Municipal loans generally include loans to municipalities with the debt service being repaid from general funds or pledged revenues of the municipal entity, or to private commercial entities or 501(c)(3) not-for-profit entities utilizing a pass-through municipal entity to achieve favorable tax treatment.
Land development loans included in the construction and land development loan class were $540.1 million at June 30, 2014 and $561.3 million at December 31, 2013.

FDIC-supported loans were acquired during 2009 and are indemnified by the Federal Deposit Insurance Corporation (“FDIC”) under loss sharing agreements. The FDIC-supported loan balances presented in the accompanying schedules include purchased credit-impaired (“PCI”) loans accounted for at their carrying values rather than their outstanding balances. See subsequent discussion under Purchased Loans.
Loans with a carrying value of approximately $23.4 billion at June 30, 2014 and $23.0 billion at December 31, 2013 have been pledged at the Federal Reserve and various Federal Home Loan Banks (“FHLB”) as collateral for current and potential borrowings.
We sold loans with a carrying value of $260.1 million and $597.7 million for the three and six months ended June 30, 2014, and $446.7 million and $894.3 million for the three and six months ended June 30, 2013, respectively, that were classified as loans held for sale. The sold loans were derecognized from the balance sheet. Loans classified as loans held for sale primarily consist of conforming residential mortgages. The principal balance of sold loans for which we retain servicing was approximately $1.2 billion at both June 30, 2014 and December 31, 2013.

Amounts added to loans held for sale during these periods were $301.6 million and $597.1 million for the three and six months ended June 30, 2014, and $418.9 million and $777.8 million for the three and six months ended June 30, 2013, respectively. Income from loans sold, excluding servicing, was $3.6 million and $7.1 million for the three and six months ended June 30, 2014, and $8.0 million and $16.5 million for the three and six months ended June 30, 2013, respectively.

Allowance for Credit Losses
The allowance for credit losses (“ACL”) consists of the allowance for loan and lease losses (“ALLL”) (also referred to as the allowance for loan losses) and the reserve for unfunded lending commitments (“RULC”).

Allowance for Loan and Lease Losses
The ALLL represents our estimate of probable and estimable losses inherent in the loan and lease portfolio as of the balance sheet date. Losses are charged to the ALLL when recognized. Generally, commercial loans are charged off or charged down at the point at which they are determined to be uncollectible in whole or in part, or when 180 days past due unless the loan is well secured and in the process of collection. Consumer loans are either charged off or charged down to net realizable value no later than the month in which they become 180 days past due. Closed-end consumer loans that are not secured by residential real estate are either charged off or charged down to net realizable value no later than the month in which they become 120 days past due. We establish the amount of the ALLL by analyzing the portfolio at least quarterly, and we adjust the provision for loan losses so the ALLL is at an appropriate level at the balance sheet date.

We determine our ALLL as the best estimate within a range of estimated losses. The methodologies we use to estimate the ALLL depend upon the impairment status and portfolio segment of the loan. The methodology for impaired loans is discussed subsequently. For the commercial and CRE segments, we use a comprehensive loan grading system to assign probability of default (“PD”) and loss given default (“LGD”) grades to each loan. The credit quality indicators discussed subsequently are based on this grading system. PD and LGD grades are based on both financial and statistical models and loan officers’ judgment. We create groupings of these grades for each subsidiary bank and loan class and calculate historic loss rates using a loss migration analysis that attributes historic realized losses to these loan grade groupings over the period of January 2008 through the most recent full quarter.
For the consumer loan segment, we use roll rate models to forecast probable inherent losses. Roll rate models measure the rate at which consumer loans migrate from one delinquency category to the next worse delinquency category, and eventually to loss. We estimate roll rates for consumer loans using recent delinquency and loss experience by segmenting our consumer loan portfolio into separate pools based on common risk characteristics and separately calculating historical delinquency and loss experience for each pool. These roll rates are then applied to current delinquency levels to estimate probable inherent losses. Roll rates incorporate housing market trends inasmuch as these trends manifest themselves in charge-offs and delinquencies. In addition, our qualitative and environmental factors discussed subsequently incorporate the most recent housing market trends.
For FDIC-supported/PCI loans purchased with evidence of credit deterioration, we determine the ALLL according to separate accounting guidance. The accounting for these loans, including the allowance calculation, is described in the Purchased Loans section following.

The current status and historical changes in qualitative and environmental factors may not be reflected in our quantitative models. Thus, after applying historical loss experience, as described above, we review the quantitatively derived level of ALLL for each segment using qualitative criteria and use those criteria to determine our estimate within the range. We track various risk factors that influence our judgment regarding the level of the ALLL across the portfolio segments. These factors primarily include:
•
Asset quality trends
•
Risk management and loan administration practices
•
Risk identification practices
•
Effect of changes in the nature and volume of the portfolio
•
Existence and effect of any portfolio concentrations
•
National economic and business conditions
•
Regional and local economic and business conditions
•
Data availability and applicability
•
Effects of other external factors
The magnitude of the impact of these factors on our qualitative assessment of the ALLL changes from quarter to quarter according to the extent these factors are already reflected in historic loss rates and according to the extent these factors diverge from one to another. We also consider the uncertainty inherent in the estimation process when evaluating the ALLL.

Reserve for Unfunded Lending Commitments
We also estimate a reserve for potential losses associated with off-balance sheet commitments, including standby letters of credit. We determine the RULC using the same procedures and methodologies that we use for the ALLL. The loss factors used in the RULC are the same as the loss factors used in the ALLL, and the qualitative adjustments used in the RULC are the same as the qualitative adjustments used in the ALLL. We adjust the Company’s unfunded lending commitments that are not unconditionally cancelable to an outstanding amount equivalent using credit conversion factors, and we apply the loss factors to the outstanding equivalents.

Changes in the allowance for credit losses are summarized as follows:

 
Three Months Ended June 30, 2014
(In thousands)
Commercial
 
Commercial
real estate
 
Consumer
 
FDIC-
supported/PCI 1
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
474,548

 
$
206,546

 
$
51,080

 
$
4,779

 
$
736,953

Additions:
 
 
 
 
 
 
 
 
 
Provision for loan losses
(29,878
)
 
(19,348
)
 
(5,232
)
 
42

 
(54,416
)
Adjustment for FDIC-supported/PCI loans

 

 

 
(444
)
 
(444
)
Deductions:
 
 
 
 
 
 
 
 
 
Gross loan and lease charge-offs
(15,003
)
 
(2,961
)
 
(4,258
)
 
(1,178
)
 
(23,400
)
Recoveries
10,567

 
3,024

 
2,945

 
678

 
17,214

Net loan and lease charge-offs
(4,436
)
 
63

 
(1,313
)
 
(500
)
 
(6,186
)
Balance at end of period
$
440,234

 
$
187,261

 
$
44,535

 
$
3,877

 
$
675,907

 
 
 
 
 
 
 
 
 
 
Reserve for unfunded lending commitments:
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
49,870

 
$
35,273

 
$
3,550

 
$
—

 
$
88,693

Provision charged (credited) to earnings
2,931

 
3,416

 
432

 
—

 
6,779

Balance at end of period
$
52,801

 
$
38,689

 
$
3,982

 
$
—

 
$
95,472

 
 
 
 
 
 
 
 
 
 
Total allowance for credit losses at end of period:
 
 
 
 
 
 
 
 
Allowance for loan losses
$
440,234

 
$
187,261

 
$
44,535

 
$
3,877

 
$
675,907

Reserve for unfunded lending commitments
52,801

 
38,689

 
3,982

 
—

 
95,472

Total allowance for credit losses
$
493,035

 
$
225,950

 
$
48,517

 
$
3,877

 
$
771,379



 
Six Months Ended June 30, 2014
(In thousands)
Commercial
 
Commercial
real estate
 
Consumer
 
FDIC-
supported/PCI 1
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
465,145

 
$
213,363

 
$
60,865

 
$
6,918

 
$
746,291

Additions:
 
 
 
 
 
 
 
 
 
Provision for loan losses
(18,196
)
 
(20,915
)
 
(14,100
)
 
(1,815
)
 
(55,026
)
Adjustment for FDIC-supported/PCI loans

 

 

 
(1,261
)
 
(1,261
)
Deductions:
 
 
 
 
 
 
 
 
 
Gross loan and lease charge-offs
(24,127
)
 
(10,815
)
 
(7,372
)
 
(1,881
)
 
(44,195
)
Recoveries
17,412

 
5,628

 
5,142

 
1,916

 
30,098

Net loan and lease charge-offs
(6,715
)
 
(5,187
)
 
(2,230
)
 
35

 
(14,097
)
Balance at end of period
$
440,234

 
$
187,261

 
$
44,535

 
$
3,877

 
$
675,907

 
 
 
 
 
 
 
 
 
 
Reserve for unfunded lending commitments:
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
48,345

 
$
37,485

 
$
3,875

 
$
—

 
$
89,705

Provision charged (credited) to earnings
4,456

 
1,204

 
107

 
—

 
5,767

Balance at end of period
$
52,801

 
$
38,689

 
$
3,982

 
$
—

 
$
95,472

 
 
 
 
 
 
 
 
 
 
Total allowance for credit losses at end of period:
 
 
 
 
 
 
 
 
Allowance for loan losses
$
440,234

 
$
187,261

 
$
44,535

 
$
3,877

 
$
675,907

Reserve for unfunded lending commitments
52,801

 
38,689

 
3,982

 
—

 
95,472

Total allowance for credit losses
$
493,035

 
$
225,950

 
$
48,517

 
$
3,877

 
$
771,379


 
Three Months Ended June 30, 2013
(In thousands)
Commercial

Commercial
real estate

Consumer

FDIC-
supported/PCI 1

Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
496,930

 
$
256,421

 
$
84,622

 
$
3,808

 
$
841,781

Additions:
 
 
 
 
 
 
 
 
 
Provision for loan losses
(5,182
)
 
(11,222
)
 
(8,274
)
 
2,688

 
(21,990
)
Adjustment for FDIC-supported/PCI loans
—

 
—

 
—

 
(209
)
 
(209
)
Deductions:
 
 
 
 
 
 
 
 
 
Gross loan and lease charge-offs
(18,508
)
 
(6,107
)
 
(9,102
)
 
(1,382
)
 
(35,099
)
Recoveries
13,113

 
12,186

 
3,120

 
1,010

 
29,429

Net loan and lease charge-offs
(5,395
)
 
6,079

 
(5,982
)
 
(372
)
 
(5,670
)
Balance at end of period
$
486,353

 
$
251,278

 
$
70,366

 
$
5,915

 
$
813,912


 
 
 
 
 
 
 
 
 
Reserve for unfunded lending commitments:
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
65,632

 
$
33,240

 
$
1,583

 
$
—

 
$
100,455

Provision charged (credited) to earnings
(2,360
)
 
6,214

 
(227
)
 
—

 
3,627

Balance at end of period
$
63,272

 
$
39,454

 
$
1,356

 
$
—

 
$
104,082


 
 
 
 
 
 
 
 
 
Total allowance for credit losses at end of period:
 
 
 
 
 
 
 
 
Allowance for loan losses
$
486,353

 
$
251,278

 
$
70,366

 
$
5,915

 
$
813,912

Reserve for unfunded lending commitments
63,272

 
39,454

 
1,356

 
—

 
104,082

Total allowance for credit losses
$
549,625

 
$
290,732

 
$
71,722

 
$
5,915

 
$
917,994


 
Six Months Ended June 30, 2013
(In thousands)
Commercial
 
Commercial
real estate
 
Consumer
 
FDIC-
supported/PCI 1
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
510,908

 
$
276,976

 
$
95,656

 
$
12,547

 
$
896,087

Additions:
 
 
 
 
 
 
 
 
 
Provision for loan losses
(8,411
)
 
(29,850
)
 
(13,294
)
 
530

 
(51,025
)
Adjustment for FDIC-supported/PCI loans
—

 
—

 
—

 
(7,638
)
 
(7,638
)
Deductions:
 
 
 
 
 
 
 
 
 
Gross loan and lease charge-offs
(36,608
)
 
(13,331
)
 
(19,039
)
 
(1,588
)
 
(70,566
)
Recoveries
20,464

 
17,483

 
7,043

 
2,064

 
47,054

Net loan and lease charge-offs
(16,144
)
 
4,152

 
(11,996
)
 
476

 
(23,512
)
Balance at end of period
$
486,353

 
$
251,278

 
$
70,366

 
$
5,915

 
$
813,912

 
 
 
 
 
 
 
 
 
 
Reserve for unfunded lending commitments:
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
67,374

 
$
37,852

 
$
1,583

 
$
—

 
$
106,809

Provision charged (credited) to earnings
(4,102
)
 
1,602

 
(227
)
 
—

 
(2,727
)
Balance at end of period
$
63,272

 
$
39,454


$
1,356


$
—


$
104,082

 
 
 
 
 
 
 
 
 
 
Total allowance for credit losses at end of period:
 
 
 
 
 
 
 
 
Allowance for loan losses
$
486,353

 
$
251,278


$
70,366


$
5,915

 
$
813,912

Reserve for unfunded lending commitments
63,272

 
39,454


1,356


—

 
104,082

Total allowance for credit losses
$
549,625

 
$
290,732


$
71,722


$
5,915


$
917,994

1 The Purchased Loans section following contains further discussion related to FDIC-supported/PCI loans.
The ALLL and outstanding loan balances according to the Company’s impairment method are summarized as follows:
 
June 30, 2014
(In thousands)
Commercial
 
Commercial
real estate
 
Consumer
 
FDIC-
supported/PCI
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
35,940

 
$
5,788

 
$
9,260

 
$
—

 
$
50,988

Collectively evaluated for impairment
404,294

 
181,473

 
35,275

 
37

 
621,079

Purchased loans with evidence of credit deterioration
—

 
—

 
—

 
3,840

 
3,840

Total
$
440,234

 
$
187,261

 
$
44,535

 
$
3,877

 
$
675,907

 
 
 
 
 
 
 
 
 
 
Outstanding loan balances:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
304,303

 
$
219,238

 
$
97,668

 
$
1,229

 
$
622,438

Collectively evaluated for impairment
20,824,946

 
10,089,636

 
7,844,004

 
35,657

 
38,794,243

Purchased loans with evidence of credit deterioration
—

 
—

 
—

 
213,682

 
213,682

Total
$
21,129,249

 
$
10,308,874

 
$
7,941,672

 
$
250,568

 
$
39,630,363

 
 
December 31, 2013
(In thousands)
Commercial
 
Commercial
real estate
 
Consumer
 
FDIC-
supported/PCI
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
39,288

 
$
12,510

 
$
10,701

 
$
—

 
$
62,499

Collectively evaluated for impairment
425,857

 
200,853

 
50,164

 
392

 
677,266

Purchased loans with evidence of credit deterioration
—

 
—

 
—

 
6,526

 
6,526

Total
$
465,145

 
$
213,363

 
$
60,865

 
$
6,918

 
$
746,291

 
 
 
 
 
 
 
 
 
 
Outstanding loan balances:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
315,604

 
$
262,907

 
$
101,545

 
$
1,224

 
$
681,280

Collectively evaluated for impairment
20,440,021

 
9,925,751

 
7,647,266

 
37,963

 
38,051,001

Purchased loans with evidence of credit deterioration
—

 
—

 
—

 
311,084

 
311,084

Total
$
20,755,625

 
$
10,188,658

 
$
7,748,811

 
$
350,271

 
$
39,043,365


Nonaccrual and Past Due Loans
Loans are generally placed on nonaccrual status when payment in full of principal and interest is not expected, or the loan is 90 days or more past due as to principal or interest, unless the loan is both well secured and in the process of collection. Factors we consider in determining whether a loan is placed on nonaccrual include delinquency status, collateral value, borrower or guarantor financial statement information, bankruptcy status, and other information which would indicate that the full and timely collection of interest and principal is uncertain.
A nonaccrual loan may be returned to accrual status when all delinquent interest and principal become current in accordance with the terms of the loan agreement; the loan, if secured, is well secured; the borrower has paid according to the contractual terms for a minimum of six months; and analysis of the borrower indicates a reasonable assurance of the ability and willingness to maintain payments. Payments received on nonaccrual loans are applied as a reduction to the principal outstanding.
Closed-end loans with payments scheduled monthly are reported as past due when the borrower is in arrears for two or more monthly payments. Similarly, open-end credit such as charge-card plans and other revolving credit plans are reported as past due when the minimum payment has not been made for two or more billing cycles. Other multi-payment obligations (i.e., quarterly, semiannual, etc.), single payment, and demand notes are reported as past due when either principal or interest is due and unpaid for a period of 30 days or more.
Nonaccrual loans are summarized as follows:
(In thousands)
June 30,
2014
 
December 31,
2013
 
 
 
 
Loans held for sale
$
29,453

 
$
—

Commercial:
 
 
 
Commercial and industrial
$
82,646

 
$
97,960

Leasing
668

 
757

Owner occupied
100,617

 
136,281

Municipal
8,951

 
9,986

Total commercial
192,882

 
244,984

Commercial real estate:
 
 
 
Construction and land development
23,616

 
29,205

Term
44,042

 
60,380

Total commercial real estate
67,658

 
89,585

Consumer:
 
 
 
Home equity credit line
11,367

 
8,969

1-4 family residential
44,668

 
53,002

Construction and other consumer real estate
2,462

 
3,510

Bankcard and other revolving plans
600

 
1,365

Other
325

 
804

Total consumer loans
59,422

 
67,650

FDIC-supported/PCI loans
2,032

 
4,394

Total
$
321,994

 
$
406,613


Past due loans (accruing and nonaccruing) are summarized as follows:
 
June 30, 2014
(In thousands)
Current
 
30-89 days
past due
 
90+ days
past due
 
Total
past due
 
Total
loans
 
Accruing
loans
90+ days
past due
 
Nonaccrual
loans
that are
current 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans held for sale
$
157,062

 
$
4,479

 
$
2,833

 
$
7,312

 
$
164,374

 
$
—

 
$
22,141

Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
12,694,068

 
$
67,955

 
$
43,280

 
$
111,235

 
$
12,805,303

 
$
1,537

 
$
27,058

Leasing
414,954

 
—

 
251

 
251

 
415,205

 
—

 
417

Owner occupied
7,321,609

 
22,324

 
42,481

 
64,805

 
7,386,414

 
2,145

 
58,200

Municipal
517,581

 
4,746

 
—

 
4,746

 
522,327

 
—

 
4,205

Total commercial
20,948,212

 
95,025

 
86,012

 
181,037

 
21,129,249

 
3,682

 
89,880

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Construction and land development
2,328,070

 
296

 
11,883

 
12,179

 
2,340,249

 
2,239

 
13,972

Term
7,922,149

 
17,603

 
28,873

 
46,476

 
7,968,625

 
5,648

 
18,509

Total commercial real estate
10,250,219

 
17,899

 
40,756

 
58,655

 
10,308,874

 
7,887

 
32,481

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity credit line
2,191,199

 
4,113

 
8,862

 
12,975

 
2,204,174

 
—

 
1,827

1-4 family residential
4,798,122

 
10,523

 
18,422

 
28,945

 
4,827,067

 
1,126

 
21,729

Construction and other consumer real estate
336,016

 
1,049

 
1,105

 
2,154

 
338,170

 
164

 
1,323

Bankcard and other revolving plans
374,012

 
1,273

 
1,081

 
2,354

 
376,366

 
869

 
337

Other
195,164

 
520

 
211

 
731

 
195,895

 
—

 
113

Total consumer loans
7,894,513

 
17,478

 
29,681

 
47,159

 
7,941,672

 
2,159

 
25,329

FDIC-supported/PCI loans
203,683

 
8,144

 
38,741

 
46,885

 
250,568

 
38,018

 
1,131

Total
$
39,296,627

 
$
138,546

 
$
195,190

 
$
333,736

 
$
39,630,363

 
$
51,746

 
$
148,821


 
December 31, 2013
(In thousands)
Current
 
30-89 days
past due
 
90+ days
past due
 
Total
past due
 
Total
loans
 
Accruing
loans
90+ days
past due
 
Nonaccrual
loans
that are
current 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans held for sale
$
171,328

 
$
—

 
$
—

 
$
—

 
$
171,328

 
$
—

 
$
—

Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
12,387,546

 
$
48,811

 
$
44,726

 
$
93,537

 
$
12,481,083

 
$
1,855

 
$
52,412

Leasing
387,526

 
173

 
230

 
403

 
387,929

 
36

 
563

Owner occupied
7,357,618

 
36,718

 
42,859

 
79,577

 
7,437,195

 
744

 
82,072

Municipal
440,608

 
3,307

 
5,503

 
8,810

 
449,418

 
—

 
1,176

Total commercial
20,573,298

 
89,009

 
93,318

 
182,327

 
20,755,625

 
2,635

 
136,223

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Construction and land development
2,162,018

 
8,967

 
11,836

 
20,803

 
2,182,821

 
23

 
17,311

Term
7,971,327

 
15,362

 
19,148

 
34,510

 
8,005,837

 
5,580

 
42,624

Total commercial real estate
10,133,345

 
24,329

 
30,984

 
55,313

 
10,188,658

 
5,603

 
59,935

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity credit line
2,122,549

 
8,001

 
2,570

 
10,571

 
2,133,120

 
98

 
2,868

1-4 family residential
4,704,852

 
8,526

 
23,287

 
31,813

 
4,736,665

 
667

 
27,592

Construction and other consumer real estate
322,807

 
1,038

 
1,077

 
2,115

 
324,922

 
—

 
2,232

Bankcard and other revolving plans
353,060

 
2,093

 
1,087

 
3,180

 
356,240

 
900

 
1,105

Other
196,327

 
827

 
710

 
1,537

 
197,864

 
54

 
125

Total consumer loans
7,699,595

 
20,485

 
28,731

 
49,216

 
7,748,811

 
1,719

 
33,922

FDIC-supported/PCI loans
305,709

 
12,026

 
32,536

 
44,562

 
350,271

 
30,391

 
1,975

Total
$
38,711,947

 
$
145,849

 
$
185,569

 
$
331,418

 
$
39,043,365

 
$
40,348

 
$
232,055

1 Represents nonaccrual loans that are not past due more than 30 days; however, full payment of principal and interest is still not expected.

Credit Quality Indicators
In addition to the past due and nonaccrual criteria, we also analyze loans using loan risk grading systems, which vary based on the size and type of credit risk exposure. The internal risk grades assigned to loans follow our definitions of Pass, Special Mention, Substandard, and Doubtful, which are consistent with published definitions of regulatory risk classifications.

Definitions of Pass, Special Mention, Substandard, and Doubtful are summarized as follows:
Pass – A Pass asset is higher quality and does not fit any of the other categories described below. The likelihood of loss is considered remote.
Special Mention – A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the bank’s credit position at some future date.
Substandard – A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have well defined weaknesses and are characterized by the distinct possibility that the bank may sustain some loss if deficiencies are not corrected.
Doubtful – A Doubtful asset has all the weaknesses inherent in a Substandard asset with the added characteristics that the weaknesses make collection or liquidation in full highly questionable and improbable.

We generally assign internal risk grades to commercial and CRE loans with commitments equal to or greater than $750,000 based on financial and statistical models, individual credit analysis, and loan officer judgment. For these larger loans, we assign one of multiple grades within the Pass classification or one of the following four grades: Special Mention, Substandard, Doubtful, and Loss. Loss indicates that the outstanding balance has been charged off. We confirm our internal risk grades quarterly, or as soon as we identify information that affects the credit risk of the loan.

For consumer loans or certain small commercial loans with commitments equal to or less than $750,000, we generally assign internal risk grades similar to those described previously based on automated rules that depend on refreshed credit scores, payment performance, and other risk indicators. These are generally assigned either a Pass or Substandard grade and are reviewed as we identify information that might warrant a grade change.

Outstanding loan balances (accruing and nonaccruing) categorized by these credit quality indicators are summarized as follows:
 
June 30, 2014
(In thousands)
Pass
 
Special
Mention
 
Sub-
standard
 
Doubtful
 
Total
loans
 
Total
allowance
 
 
 
 
 
 
 
 
 
 
 
 
Loans held for sale
$
148,381

 
$
15,993

 
$
—

 
$
—

 
$
164,374

 
$
—

Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
12,105,752

 
$
237,639

 
$
459,167

 
$
2,745

 
$
12,805,303

 
 
Leasing
408,963

 
3,801

 
2,441

 
—

 
415,205

 
 
Owner occupied
6,801,947

 
201,329

 
383,138

 
—

 
7,386,414

 
 
Municipal
513,376

 
—

 
8,951

 
—

 
522,327

 
 
Total commercial
19,830,038

 
442,769

 
853,697

 
2,745

 
21,129,249

 
$
440,234

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
Construction and land development
2,279,946

 
9,334

 
50,969

 
—

 
2,340,249

 
 
Term
7,634,361

 
107,039

 
227,225

 
—

 
7,968,625

 
 
Total commercial real estate
9,914,307

 
116,373

 
278,194

 
—

 
10,308,874

 
187,261

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Home equity credit line
2,182,585

 
—

 
21,589

 
—

 
2,204,174

 
 
1-4 family residential
4,767,970

 
—

 
59,097

 
—

 
4,827,067

 
 
Construction and other consumer real estate
332,101

 
—

 
6,069

 
—

 
338,170

 
 
Bankcard and other revolving plans
374,281

 
—

 
2,085

 
—

 
376,366

 
 
Other
195,323

 
—

 
572

 
—

 
195,895

 
 
Total consumer loans
7,852,260

 
—

 
89,412

 
—

 
7,941,672

 
44,535

FDIC-supported/PCI loans
153,253

 
17,286

 
80,029

 
—

 
250,568

 
3,877

Total
$
37,749,858

 
$
576,428

 
$
1,301,332

 
$
2,745

 
$
39,630,363

 
$
675,907


 
December 31, 2013
(In thousands)
Pass
 
Special
Mention
 
Sub-
standard
 
Doubtful
 
Total
loans
 
Total
allowance
 
 
 
 
 
 
 
 
 
 
 
 
Loans held for sale
$
171,328

 
$
—

 
$
—

 
$
—

 
$
171,328

 
$
—

Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
11,807,825

 
$
303,598

 
$
360,391

 
$
9,269

 
$
12,481,083

 
 
Leasing
380,268

 
2,050

 
5,611

 
—

 
387,929

 
 
Owner occupied
6,827,464

 
184,328

 
425,403

 
—

 
7,437,195

 
 
Municipal
439,432

 
—

 
9,986

 
—

 
449,418

 
 
Total commercial
19,454,989

 
489,976

 
801,391

 
9,269

 
20,755,625

 
$
465,145

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
Construction and land development
2,107,828

 
15,010

 
59,983

 
—

 
2,182,821

 
 
Term
7,569,472

 
172,856

 
263,509

 
—

 
8,005,837

 
 
Total commercial real estate
9,677,300

 
187,866

 
323,492

 
—

 
10,188,658

 
213,363

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Home equity credit line
2,111,475

 
—

 
21,645

 
—

 
2,133,120

 
 
1-4 family residential
4,668,841

 
—

 
67,824

 
—

 
4,736,665

 
 
Construction and other consumer real estate
313,881

 
—

 
11,041

 
—

 
324,922

 
 
Bankcard and other revolving plans
353,618

 
—

 
2,622

 
—

 
356,240

 
 
Other
196,770

 
—

 
1,094

 
—

 
197,864

 
 
Total consumer loans
7,644,585

 
—

 
104,226

 
—

 
7,748,811

 
60,865

FDIC-supported/PCI loans
232,893

 
22,532

 
94,846

 
—

 
350,271

 
6,918

Total
$
37,009,767

 
$
700,374

 
$
1,323,955

 
$
9,269

 
$
39,043,365

 
$
746,291



Impaired Loans
Loans are considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due in accordance with the contractual terms of the loan agreement, including scheduled interest payments. For our non-purchased credit-impaired loans, if a nonaccrual loan has a balance greater than $1 million or if a loan is a troubled debt restructuring (“TDR”), including TDRs that subsequently default, we individually evaluate the loan for impairment and estimate a specific reserve for the loan for all portfolio segments under applicable accounting guidance. Smaller nonaccrual loans are pooled for ALLL estimation purposes. PCI loans in our FDIC-supported/PCI portfolio segment are included in impaired loans and are accounted for under separate accounting guidance. See subsequent discussion under Purchased Loans.

When a loan is impaired, we estimate a specific reserve for the loan based on the projected present value of the loan’s future cash flows discounted at the loan’s effective interest rate, the observable market price of the loan, or the fair value of the loan’s underlying collateral. The process of estimating future cash flows also incorporates the same determining factors discussed previously under nonaccrual loans. When we base the impairment amount on the fair value of the loan’s underlying collateral, we generally charge off the portion of the balance that is impaired, such that these loans do not have a specific reserve in the ALLL. Payments received on impaired loans that are accruing are recognized in interest income, according to the contractual loan agreement. Payments received on impaired loans that are on nonaccrual are not recognized in interest income, but are applied as a reduction to the principal outstanding. The amount of interest income recognized on a cash basis during the time the loans were impaired within the three and six months ended June 30, 2014 and 2013 was not significant.

Information on impaired loans individually evaluated is summarized as follows, including the average recorded investment and interest income recognized for the six months ended June 30, 2014 and 2013:

 
June 30, 2014
(In thousands)

Unpaid
principal
balance
 
Recorded investment
 
Total
recorded
investment
 
Related
allowance
with no
allowance
 
with
allowance
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
212,998

 
$
19,380

 
$
139,936

 
$
159,316

 
$
24,970

Owner occupied
132,060

 
49,728

 
62,514

 
112,242

 
5,604

Municipal
9,429

 
1,106

 
7,844

 
8,950

 
1,798

Total commercial
354,487

 
70,214

 
210,294

 
280,508

 
32,372

Commercial real estate:
 
 
 
 
 
 
 
 
 
Construction and land development
62,346

 
22,454

 
30,339

 
52,793

 
2,433

Term
150,332

 
72,672

 
33,659

 
106,331

 
1,894

Total commercial real estate
212,678

 
95,126

 
63,998

 
159,124

 
4,327

Consumer:
 
 
 
 
 
 
 
 
 
Home equity credit line
19,981

 
11,463

 
5,164

 
16,627

 
155

1-4 family residential
88,987

 
39,138

 
35,961

 
75,099

 
8,584

Construction and other consumer real estate
3,903

 
1,608

 
1,094

 
2,702

 
242

Bankcard and other revolving plans
—

 
—

 
—

 
—

 
—

Total consumer loans
112,871

 
52,209

 
42,219

 
94,428

 
8,981

FDIC-supported/PCI loans
282,088

 
94,740

 
120,171

 
214,911

 
3,840

Total
$
962,124

 
$
312,289

 
$
436,682

 
$
748,971

 
$
49,520


 
December 31, 2013
(In thousands)

Unpaid
principal
balance
 
Recorded investment
 
Total
recorded
investment
 
Related
allowance
with no
allowance
 
with
allowance
 
Commercial:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
167,816

 
$
28,917

 
$
117,881

 
$
146,798

 
$
22,462

Owner occupied
151,499

 
50,361

 
88,584

 
138,945

 
13,900

Municipal
10,465

 
1,175

 
8,811

 
9,986

 
1,225

Total commercial
329,780

 
80,453

 
215,276

 
295,729

 
37,587

Commercial real estate:
 
 
 
 
 
 
 
 
 
Construction and land development
85,440

 
19,206

 
50,744

 
69,950

 
3,483

Term
171,826

 
34,258

 
112,330

 
146,588

 
7,981

Total commercial real estate
257,266

 
53,464

 
163,074

 
216,538

 
11,464

Consumer:
 
 
 
 
 
 
 
 
 
Home equity credit line
17,547

 
12,568

 
2,200

 
14,768

 
178

1-4 family residential
95,613

 
38,775

 
42,132

 
80,907

 
10,276

Construction and other consumer real estate
4,713

 
2,643

 
933

 
3,576

 
175

Bankcard and other revolving plans
726

 
726

 
—

 
726

 
—

Total consumer loans
118,599

 
54,712

 
45,265

 
99,977

 
10,629

FDIC-supported/PCI loans
404,308

 
83,917

 
228,392

 
312,309

 
6,526

Total
$
1,109,953

 
$
272,546

 
$
652,007

 
$
924,553

 
$
66,206


 
Three Months Ended
June 30, 2014
 
Six Months Ended
June 30, 2014
 
(In thousands)

Average
recorded
investment
 
Interest
income
recognized
 
Average
recorded
investment
 
Interest
income
recognized
 
Commercial:
 
 
 
 
 
 
 
 
Commercial and industrial
$
182,556

 
$
875

 
$
175,150

 
$
1,898

 
Owner occupied
139,901

 
752

 
139,623

 
1,500

 
Municipal
9,270

 
—

 
9,615

 
—

 
Total commercial
331,727

 
1,627

 
324,388

 
3,398

 
Commercial real estate:
 
 
 
 
 
 
 
 
Construction and land development
59,488

 
386

 
60,939

 
938

 
Term
136,152

 
1,058

 
134,024

 
2,120

 
Total commercial real estate
195,640

 
1,444

 
194,963

 
3,058

 
Consumer:
 
 
 
 
 
 
 
 
Home equity credit line
16,512

 
136

 
15,686

 
270

 
1-4 family residential
79,764

 
439

 
79,077

 
886

 
Construction and other consumer real estate
3,005

 
33

 
3,008

 
68

 
Other
—

 
—

 
—

 
—

 
Total consumer loans
99,281

 
608

 
97,771


1,224

 
FDIC-supported/PCI loans
236,436

 
14,419

1 
260,297

 
36,739

1 
Total
$
863,084

 
$
18,098

 
$
877,419

 
$
44,419

 

 
Three Months Ended
June 30, 2013
 
Six Months Ended
June 30, 2013
 
(In thousands)
Average
recorded
investment
 
Interest
income
recognized
 
Average
recorded
investment
 
Interest
income
recognized
 
Commercial:
 
 
 
 
 
 
 
 
Commercial and industrial
$
161,960

 
$
861

 
$
153,230

 
$
1,519

 
Owner occupied
213,757

 
959

 
209,928

 
1,878

 
Municipal
8,999

 
—

 
9,100

 
—

 
Total commercial
384,716

 
1,820

 
372,258

 
3,397

 
Commercial real estate:
 
 
 
 
 
 
 
 
Construction and land development
142,428

 
1,558

 
145,234

 
2,215

 
Term
284,518

 
1,984

 
287,464

 
3,824

 
Total commercial real estate
426,946

 
3,542

 
432,698

 
6,039

 
Consumer:
 
 
 
 
 
 
 
 
Home equity credit line
13,462

 
85

 
12,459

 
143

 
1-4 family residential
100,395

 
354

 
98,914

 
725

 
Construction and other consumer real estate
5,626

 
47

 
5,874

 
93

 
Other
1,782

 
—

 
1,799

 
—

 
Total consumer loans
121,265


486

 
119,046

 
961

 
FDIC-supported/PCI loans
404,652

 
33,996

1 
425,972

 
59,149

1 
Total
$
1,337,579

 
$
39,844

 
$
1,349,974

 
$
69,546

 
1 
The balance of interest income recognized results primarily from accretion of interest income on impaired FDIC-supported/PCI loans.
Modified and Restructured Loans
Loans may be modified in the normal course of business for competitive reasons or to strengthen the Company’s position. Loan modifications and restructurings may also occur when the borrower experiences financial difficulty and needs temporary or permanent relief from the original contractual terms of the loan. These modifications are structured on a loan-by-loan basis and, depending on the circumstances, may include extended payment terms, a modified interest rate, forgiveness of principal, or other concessions. Loans that have been modified to accommodate a borrower who is experiencing financial difficulties, and for which the Company has granted a concession that it would not otherwise consider, are considered TDRs.

We consider many factors in determining whether to agree to a loan modification involving concessions, and seek a solution that will both minimize potential loss to the Company and attempt to help the borrower. We evaluate borrowers’ current and forecasted future cash flows, their ability and willingness to make current contractual or proposed modified payments, the value of the underlying collateral (if applicable), the possibility of obtaining additional security or guarantees, and the potential costs related to a repossession or foreclosure and the subsequent sale of the collateral.

TDRs are classified as either accrual or nonaccrual loans. A loan on nonaccrual and restructured as a TDR will remain on nonaccrual status until the borrower has proven the ability to perform under the modified structure for a minimum of six months, and there is evidence that such payments can and are likely to continue as agreed. Performance prior to the restructuring, or significant events that coincide with the restructuring, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of restructuring or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains classified as a nonaccrual loan. A TDR loan that specifies an interest rate that at the time of the restructuring is greater than or equal to the rate the bank is willing to accept for a new loan with comparable risk may not be reported as a TDR or an impaired loan in the calendar years subsequent to the restructuring if it is in compliance with its modified terms.

Selected information on TDRs that includes the recorded investment on an accruing and nonaccruing basis by loan class and modification type is summarized in the following schedules:
 
 
June 30, 2014
 
Recorded investment resulting from the following modification types:
 
 
(In thousands)

Interest
rate below
market
 
Maturity
or term
extension
 
Principal
forgiveness
 
Payment
deferral
 
Other1
 
Multiple
modification
types2
 
Total
Accruing
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
338

 
$
8,285

 
$
20

 
$
2,909

 
$
4,060

 
$
82,439

 
$
98,051

Owner occupied
20,853

 
1,200

 
974

 
1,272

 
11,642

 
21,790

 
57,731

Total commercial
21,191

 
9,485

 
994

 
4,181

 
15,702

 
104,229

 
155,782

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Construction and land development
—

 
6,546

 
—

 
745

 
545

 
22,757

 
30,593

Term
8,541

 
8,916

 
186

 
3,639

 
5,287

 
45,081

 
71,650

Total commercial real estate
8,541

 
15,462

 
186

 
4,384

 
5,832

 
67,838

 
102,243

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity credit line
742

 
—

 
10,566

 
—

 
164

 
611

 
12,083

1-4 family residential
2,588

 
53

 
6,949

 
634

 
1,424

 
36,250

 
47,898

Construction and other consumer real estate
118

 
633

 
46

 
—

 
—

 
1,403

 
2,200

Total consumer loans
3,448

 
686


17,561


634


1,588


38,264

 
62,181

Total accruing
33,180

 
25,633

 
18,741

 
9,199

 
23,122

 
210,331

 
320,206

Nonaccruing
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
661

 
1,473

 
—

 
1,051

 
210

 
16,267

 
19,662

Owner occupied
3,351

 
896

 
560

 
959

 
7,720

 
12,346

 
25,832

Municipal
—

 
1,106

 
—

 
—

 
—

 
—

 
1,106

Total commercial
4,012

 
3,475

 
560

 
2,010

 
7,930

 
28,613

 
46,600

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Construction and land development
11,396

 
558

 
—

 
—

 
3,373

 
7,032

 
22,359

Term
3,031

 
—

 
—

 
1,420

 
329

 
6,570

 
11,350

Total commercial real estate
14,427

 
558

 
—

 
1,420

 
3,702

 
13,602

 
33,709

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity credit line
—

 
—

 
687

 
—

 
216

 
—

 
903

1-4 family residential
3,421

 
47

 
1,712

 
164

 
4,179

 
11,620

 
21,143

Construction and other consumer real estate
4

 
678

 
—

 
—

 
—

 
120

 
802

Bankcard and other revolving plans
—

 
—

 
—

 
—

 
—

 
—

 
—

Total consumer loans
3,425

 
725

 
2,399

 
164

 
4,395

 
11,740

 
22,848

Total nonaccruing
21,864

 
4,758

 
2,959

 
3,594

 
16,027

 
53,955

 
103,157

Total
$
55,044

 
$
30,391

 
$
21,700

 
$
12,793

 
$
39,149

 
$
264,286

 
$
423,363

 
 
December 31, 2013
 
Recorded investment resulting from the following modification types:
 
 
(In thousands)

Interest
rate below
market
 
Maturity
or term
extension
 
Principal
forgiveness
 
Payment
deferral
 
Other1
 
Multiple
modification
types2
 
Total
Accruing
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
1,143

 
$
9,848

 
$
11,491

 
$
3,217

 
$
4,308

 
$
53,117

 
$
83,124

Owner occupied
22,841

 
1,482

 
987

 
1,291

 
9,659

 
23,576

 
59,836

Total commercial
23,984

 
11,330

 
12,478

 
4,508

 
13,967

 
76,693

 
142,960

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Construction and land development
1,067

 
8,231

 
—

 
1,063

 
4,119

 
28,295

 
42,775

Term
7,542

 
9,241

 
190

 
3,783

 
14,932

 
61,024

 
96,712

Total commercial real estate
8,609

 
17,472

 
190

 
4,846

 
19,051

 
89,319

 
139,487

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity credit line
743

 
—

 
9,438

 
—

 
323

 
332

 
10,836

1-4 family residential
2,628

 
997

 
6,814

 
643

 
3,083

 
35,869

 
50,034

Construction and other consumer real estate
128

 
329

 
11

 
—

 
—

 
1,514

 
1,982

Total consumer loans
3,499

 
1,326

 
16,263

 
643

 
3,406

 
37,715

 
62,852

Total accruing
36,092

 
30,128

 
28,931

 
9,997

 
36,424

 
203,727

 
345,299

Nonaccruing
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
2,028

 
5,814

 
—

 
473

 
8,948

 
10,395

 
27,658

Owner occupied
3,020

 
1,489

 
1,043

 
1,593

 
10,482

 
14,927

 
32,554

Municipal
—

 
1,175

 
—

 
—

 
—

 
—

 
1,175

Total commercial
5,048

 
8,478

 
1,043

 
2,066

 
19,430

 
25,322

 
61,387

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Construction and land development
11,699

 
1,555

 
—

 
—

 
5,303

 
8,617

 
27,174

Term
2,126

 
—

 
—

 
1,943

 
315

 
14,861

 
19,245

Total commercial real estate
13,825

 
1,555

 
—

 
1,943

 
5,618

 
23,478

 
46,419

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity credit line
—

 
—

 
1,036

 
—

 
221

 
—

 
1,257

1-4 family residential
4,315

 
1,396

 
1,606

 
—

 
3,901

 
14,109

 
25,327

Construction and other consumer real estate
4

 
1,260

 
—

 
—

 
—

 
229

 
1,493

Bankcard and other revolving plans
—

 
252

 
—

 
—

 
—

 
—

 
252

Total consumer loans
4,319

 
2,908

 
2,642

 
—

 
4,122

 
14,338

 
28,329

Total nonaccruing
23,192

 
12,941

 
3,685

 
4,009

 
29,170

 
63,138

 
136,135

Total
$
59,284

 
$
43,069

 
$
32,616

 
$
14,006

 
$
65,594

 
$
266,865

 
$
481,434

1 
Includes TDRs that resulted from other modification types including, but not limited to, a legal judgment awarded on different terms, a bankruptcy plan confirmed on different terms, a settlement that includes the delivery of collateral in exchange for debt reduction, etc.
2 
Includes TDRs that resulted from a combination of any of the previous modification types.
Unused commitments to extend credit on TDRs amounted to approximately $6.6 million at June 30, 2014 and $5.6 million at December 31, 2013.
The total recorded investment of all TDRs in which interest rates were modified below market was $182.6 million at June 30, 2014 and $172.6 million at December 31, 2013. These loans are included in the previous schedule in the columns for interest rate below market and multiple modification types.
The net financial impact on interest income due to interest rate modifications below market for accruing TDRs is summarized in the following schedule:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(In thousands)
2014
 
2013
 
2014
 
2013
Commercial:
 
 
 
 
 
 
 
Commercial and industrial
$
(81
)
 
$
(17
)
 
$
244

 
$
(201
)
Owner occupied
(1,602
)
 
(1,046
)
 
(3,310
)
 
(2,097
)
Total commercial
(1,683
)
 
(1,063
)
 
(3,066
)
 
(2,298
)
Commercial real estate:
 
 
 
 
 
 
 
Construction and land development
(606
)
 
(111
)
 
(1,272
)
 
(519
)
Term
(1,647
)
 
(2,585
)
 
(3,425
)
 
(5,150
)
Total commercial real estate
(2,253
)
 
(2,696
)
 
(4,697
)
 
(5,669
)
Consumer:
 
 
 
 
 
 
 
Home equity credit line
(18
)
 
(34
)
 
(42
)
 
(73
)
1-4 family residential
(3,441
)
 
(3,758
)
 
(7,042
)
 
(7,613
)
Construction and other consumer real estate
(102
)
 
(108
)
 
(207
)
 
(217
)
Total consumer loans
(3,561
)
 
(3,900
)
 
(7,291
)
 
(7,903
)
Total decrease to interest income1
$
(7,497
)
 
$
(7,659
)
 
$
(15,054
)
 
$
(15,870
)
1Calculated based on the difference between the modified rate and the premodified rate applied to the recorded investment.
On an ongoing basis, we monitor the performance of all TDRs according to their restructured terms. Subsequent payment default is defined in terms of delinquency, when principal or interest payments are past due 90 days or more for commercial loans, or 60 days or more for consumer loans.
The recorded investment of accruing and nonaccruing TDRs that had a payment default during the period listed below (and are still in default at period end) and are within 12 months or less of being modified as TDRs is as follows:
 
Three Months Ended
June 30, 2014
 
Six Months Ended
June 30, 2014
(In thousands)
Accruing
 
Nonaccruing
 
Total
 
Accruing
 
Nonaccruing
 
Total
Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
—

 
$
284

 
$
284

 
$
—

 
$
284

 
$
284

Owner occupied
—

 
421

 
421

 
—

 
421

 
421

Total commercial
—

 
705

 
705

 
—

 
705

 
705

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
Construction and land development
—

 
—

 
—

 
—

 
—

 
—

Term
—

 
—

 
—

 
—

 
—

 
—

Total commercial real estate
—

 
—

 
—

 
—

 
—

 
—

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Home equity credit line
—

 
—

 
—

 
—

 
217

 
217

1-4 family residential
10

 
39

 
49

 
10

 
39

 
49

Construction and other consumer real estate
—

 
83

 
83

 
—

 
83

 
83

Total consumer loans
10

 
122

 
132

 
10

 
339

 
349

Total
$
10

 
$
827

 
$
837

 
$
10

 
$
1,044

 
$
1,054



 
Three Months Ended
June 30, 2013
 
Six Months Ended
June 30, 2013
(In thousands)
Accruing
 
Nonaccruing
 
Total
 
Accruing
 
Nonaccruing
 
Total
Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
—

 
$
—

 
$
—

 
$
—

 
$
3

 
$
3

Owner occupied
—

 
3,153

 
3,153

 
—

 
3,153

 
3,153

Total commercial
—

 
3,153

 
3,153

 
—

 
3,156

 
3,156

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
Construction and land development
—

 
—

 
—

 
—

 
—

 
—

Term
—

 
—

 
—

 
—

 
1,019

 
1,019

Total commercial real estate
—

 
—

 
—

 
—

 
1,019

 
1,019

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Home equity credit line
—

 
—

 
—

 
—

 
85

 
85

1-4 family residential
—

 
2,399

 
2,399

 
—

 
2,399

 
2,399

Construction and other consumer real estate
—

 
—

 
—

 
—

 
—

 
—

Total consumer loans
—

 
2,399

 
2,399

 
—

 
2,484

 
2,484

Total
$
—

 
$
5,552

 
$
5,552

 
$
—

 
$
6,659

 
$
6,659

Note: Total loans modified as TDRs during the 12 months previous to June 30, 2014 and 2013 were $141.3 million and $183.8 million, respectively.

Concentrations of Credit Risk
We perform an ongoing analysis of our loan portfolio to evaluate whether there is any significant exposure to any concentrations of credit risk. These potential concentrations include, but are not limited to, individual borrowers, groups of borrowers, industries, geographies, collateral types, sponsors, etc. Such credit risks (whether on- or off-balance sheet) may occur when groups of borrowers or counterparties have similar economic characteristics and are similarly affected by changes in economic or other conditions. Credit risk also includes the loss that would be recognized subsequent to the reporting date if counterparties failed to perform as contracted. See Note 7 for a discussion of counterparty risk associated with the Company’s derivative transactions.

Purchased Loans
Background and Accounting
We purchase loans in the ordinary course of business and account for them and the related interest income based on their performing status at the time of acquisition. Purchased credit-impaired (“PCI”) loans have evidence of credit deterioration at the time of acquisition and it is probable that not all contractual payments will be collected. Interest income for PCI loans is accounted for on an expected cash flow basis. Certain other loans acquired by the Company that are not credit-impaired include loans with revolving privileges and are excluded from the PCI tabular disclosures following. Interest income for these loans is accounted for on a contractual cash flow basis. Upon acquisition, in accordance with applicable accounting guidance, the acquired loans were recorded at their fair value without a corresponding ALLL. Certain acquired loans with similar characteristics such as risk exposure, type, size, etc., are grouped and accounted for in loan pools.

During 2009, CB&T and NSB acquired failed banks from the FDIC as receiver and entered into loss sharing agreements with the FDIC for the acquired loans and foreclosed assets. In general, the FDIC assumed 80% of credit losses up to a specified threshold and 95% above that threshold. The five-year agreements for commercial loans, which comprised the major portion of the covered portfolio, expire in 2014 through September 30. The ten-year agreements for single family residential loans, which are a small portion of the covered portfolio, will expire in 2019. Due to their declining balances, the “FDIC-supported/PCI loans” are included with “Loans and leases” in the Company’s balance sheet. However, they continue to be shown separately in this footnote and in other disclosures, and include both PCI and certain other acquired loans.

Outstanding Balances and Accretable Yield
The outstanding balances of all required payments and the related carrying amounts for PCI loans are as follows:
(In thousands)
June 30,
2014
 
December 31,
2013
 
 
 
 
Commercial
$
124,943

 
$
150,191

Commercial real estate
142,432

 
233,720

Consumer
20,890

 
28,608

Outstanding balance
$
288,265

 
$
412,519

 
 
 
 
Carrying amount
$
213,682

 
$
311,797

ALLL
3,840

 
6,478

Carrying amount, net
$
209,842

 
$
305,319


At the time of acquisition of PCI loans, we determine the loan’s contractually required payments in excess of all cash flows expected to be collected as an amount that should not be accreted (nonaccretable difference). With respect to the cash flows expected to be collected, the portion representing the excess of the loan’s expected cash flows over our initial investment (accretable yield) is accreted into interest income on a level yield basis over the remaining expected life of the loan or pool of loans. The effects of estimated prepayments are considered in estimating the expected cash flows.

Certain PCI loans are not accounted for as previously described because the estimation of cash flows to be collected involves a high degree of uncertainty. Under these circumstances, the accounting guidance provides that interest income is recognized on a cash basis similar to the cost recovery methodology for nonaccrual loans. The net carrying amounts in the preceding schedule also include the amounts for these loans, which were not significant at June 30, 2014 and December 31, 2013.

Changes in the accretable yield for PCI loans were as follows: 
(In thousands)
Three Months Ended
June 30,
 
Six Months Ended
June 30,
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Balance at beginning of period
$
65,765

 
$
126,359

 
$
77,528

 
$
134,461

Accretion
(14,181
)
 
(33,787
)
 
(36,488
)
 
(59,053
)
Reclassification from nonaccretable difference
5,531

 
8,312

 
14,451

 
23,184

Disposals and other
3,719

 
3,599

 
5,343

 
5,891

Balance at end of period
$
60,834

 
$
104,483

 
$
60,834

 
$
104,483


Note: Amounts have been adjusted based on refinements to the original estimates of the accretable yield. Because of the estimation process required, we expect that additional adjustments to these amounts may be necessary in future periods.
The primary drivers of reclassification to accretable yield from nonaccretable difference and increases in disposals and other resulted primarily from (1) changes in estimated cash flows, (2) unexpected payments on nonaccrual loans, and (3) recoveries on zero balance loans pools. See subsequent discussion under changes in cash flow estimates.

ALLL Determination
For all acquired loans, the ALLL is only established for credit deterioration subsequent to the date of acquisition and represents our estimate of the inherent losses in excess of the book value of acquired loans. The ALLL for acquired loans is determined without giving consideration to the amounts recoverable from the FDIC through loss sharing agreements. These amounts recoverable were separately accounted for in the FDIC indemnification asset (“IA”) and are thus presented “gross” in the balance sheet. The FDIC IA is included in other assets in the balance sheet and is discussed subsequently. The ALLL for acquired loans is included in the overall ALLL in the balance sheet. The provision for loan losses is reported net of changes in the amounts recoverable under the loss sharing agreements.

During the three and six months ended June 30, we adjusted the ALLL for acquired loans by recording a provision for loan losses of $0.2 million and $(2.5) million in 2014 and $2.5 million and $(7.1) million in 2013, respectively. The provision is net of the ALLL reversals discussed subsequently. As separately discussed and in accordance with the loss sharing agreements, portions of the provision reductions result in a corresponding decrease of the FDIC IA. For the three and six months ended June 30, these adjustments resulted in net recoveries of $0.5 million and $1.7 million in 2014, and net charge-offs of $0.3 million and net recoveries of $0.6 million in 2013, respectively.

Changes in the provision for loan losses and related ALLL are driven in large part by the same factors that affect the changes in reclassification from nonaccretable difference to accretable yield, as discussed under changes in cash flow estimates.

Changes in Cash Flow Estimates
Over the life of the loan or loan pool, we continue to estimate cash flows expected to be collected. We evaluate quarterly at the balance sheet date whether the estimated present values of these loans using the effective interest rates have decreased below their carrying values. If so, we record a provision for loan losses.

For increases in carrying values that resulted from better-than-expected cash flows, we use such increases first to reverse any existing ALLL. During the three and six months ended June 30, total reversals to the ALLL were $0.7 million and $3.6 million in 2014 and $1.1 million and $10.9 million in 2013, respectively. When there is no current ALLL, we increase the amount of accretable yield on a prospective basis over the remaining life of the loan and recognize this increase in interest income. Any related decrease to the FDIC IA is recorded through a charge to other noninterest expense. Changes that increase cash flows have been due primarily to (1) the enhanced economic status of borrowers compared to original evaluations, (2) improvements in the Southern California market where the majority of these loans were originated, and (3) efforts by our credit officers and loan workout professionals to resolve problem loans.

For the three and six months ended June 30, the impact of increased cash flow estimates recognized in the statement of income for acquired loans with no ALLL was approximately $11.7 million and $30.2 million in 2014 and $28.4 million and $47.4 million in 2013, respectively, of additional interest income; and $9.3 million and $25.3 million in 2014 and $21.8 million and $42.1 million in 2013, respectively, of additional other noninterest expense due to the reduction of the FDIC IA.

FDIC Indemnification Asset
The balance of the FDIC IA was $5.8 million at June 30, 2014 and $26.4 million at December 31, 2013. In accordance with applicable accounting guidance, the balance will reduce to a de minimus level by September 30, 2014 when the final commercial loan loss sharing agreement expires.