Loans and Allowance for Loan Losses

The following table presents the composition of the loan portfolio.



	December 31,
	2015		2014
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	26,022,374	$	23,828,537
Real estate – construction	2,354,253		2,154,652
Commercial real estate – mortgage	10,453,280		9,877,206
Total commercial loans	38,829,907		35,860,395
Consumer loans:
Residential real estate – mortgage	13,993,285		13,922,656
Equity lines of credit	2,419,815		2,304,784
Equity loans	580,804		634,968
Credit card	627,359		630,456
Consumer direct	936,871		652,927
Consumer indirect	3,495,082		2,870,408
Total consumer loans	22,053,216		21,016,199
Covered loans	440,961		495,190
Total loans	$	61,324,084	$	57,371,784

Unearned income totaled $269.8 million and $248.1 million at December 31, 2015 and 2014, respectively. Unamortized deferred costs totaled $315.4 million and $244.1 million at December 31, 2015 and 2014, respectively. Unamortized purchase discounts totaled $39.5 million and $110.6 million at December 31, 2015 and 2014, respectively.

The loan portfolio is diversified geographically, by product type and by industry exposure. Geographically, the portfolio is predominantly in the Sunbelt states, including Alabama, Arizona, Colorado, Florida, New Mexico and Texas, as well as growing but modest exposure in northern and southern California. The loan portfolio’s most significant geographic presence is within Texas. The Company monitors its exposure to various industries and adjusts loan production based on current and anticipated changes in the macro-economic environment as well as specific structural, legal and business conditions affecting each broad industry category.

At December 31, 2015, the Company considered its energy lending portfolio as a concentration due to the impact on this portfolio of declining oil prices that began in late 2014 and has continued into 2015. The Company's energy lending portfolio was approximately $3.8 billion and $3.6 billion at December 31, 2015 and 2014, respectively, and is reported in total commercial, financial and agricultural in the table above. This amount is comprised of loans directly related to energy, such as exploration and production, pipeline transportation of natural gas, crude oil and other refined petroleum productions, oil field services, and refining and support. The decline in oil prices has negatively impacted the financial results of many borrowers in the energy lending portfolio, leading to internal risk rating downgrades during 2015. If the current level of oil prices stagnates or continues to decline, this energy-related portfolio may be subject to additional pressure on credit quality metrics including past due, criticized, and nonperforming loans, as well as net charge-offs.

At December 31, 2015, approximately $14.2 billion of loans were pledged to secure deposits and FHLB advances and for other purposes as required or permitted by law.

Covered loans represent loans acquired from the FDIC subject to loss sharing agreements. The loss sharing agreements provide for FDIC loss sharing for five years for commercial loans and 10 years for single family residential loans. The loss sharing agreement for commercial loans expired in the fourth quarter of 2014.

Allowance for Loan Losses and Credit Quality

The following table, which excludes loans held for sale, presents a summary of the activity in the allowance for loan losses. The portion of the allowance that has not been identified by the Company as related to specific loan categories has been allocated to the individual loan categories on a pro rata basis for purposes of the table below:



	Commercial, Financial and Agricultural			Commercial Real Estate (1)			Residential Real Estate (2)			Consumer (3)			Covered			Total Loans
	(In Thousands)
Year Ended December 31, 2015
Allowance for loan losses:
Beginning balance	$	299,482		$	138,233		$	154,627		$	89,891		$	2,808		$	685,041
Provision (credit) for loan losses	116,272			(17,975		)	(9,711		)	104,195			857			193,638
Loans charged off	(25,831		)	(3,882		)	(26,630		)	(115,113		)	(2,228		)	(173,684		)
Loan recoveries	12,190			5,692			13,818			25,975			3			57,678
Net (charge-offs) recoveries	(13,641		)	1,810			(12,812		)	(89,138		)	(2,225		)	(116,006		)
Ending balance	$	402,113		$	122,068		$	132,104		$	104,948		$	1,440		$	762,673
Year Ended December 31, 2014
Allowance for loan losses:
Beginning balance	$	292,327		$	158,960		$	155,575		$	90,903		$	2,954		$	700,719
Transfer - expiration of commercial LSA	1,406			6			—			323			(1,735		)	—
Provision (credit) for loan losses	17,580			(13,582		)	34,962			68,519			(1,178		)	106,301
Loans charged off	(31,627		)	(14,970		)	(48,749		)	(88,452		)	(2,466		)	(186,264		)
Loan recoveries	19,796			7,819			12,839			18,598			5,233			64,285
Net (charge-offs) recoveries	(11,831		)	(7,151		)	(35,910		)	(69,854		)	2,767			(121,979		)
Ending balance	$	299,482		$	138,233		$	154,627		$	89,891		$	2,808		$	685,041
Year Ended December 31, 2013
Allowance for loan losses:
Beginning balance	$	283,058		$	254,324		$	172,265		$	75,403		$	17,803		$	802,853
Provision (credit) for loan losses	36,970			(70,724		)	88,685			69,244			(16,629		)	107,546
Loans charged off	(47,751		)	(43,415		)	(118,422		)	(72,576		)	(6,708		)	(288,872		)
Loan recoveries	20,050			18,775			13,047			18,832			8,488			79,192
Net (charge-offs) recoveries	(27,701		)	(24,640		)	(105,375		)	(53,744		)	1,780			(209,680		)
Ending balance	$	292,327		$	158,960		$	155,575		$	90,903		$	2,954		$	700,719


(1)	Includes commercial real estate – mortgage and real estate – construction loans.


(2)	Includes residential real estate – mortgage, equity lines of credit and equity loans.


(3)	Includes credit card, consumer direct and consumer indirect loans.

The table below provides a summary of the allowance for loan losses and related loan balances by portfolio.



	Commercial, Financial and Agricultural		Commercial Real Estate (1)		Residential Real Estate (2)		Consumer (3)		Covered		Total Loans
	(In Thousands)
December 31, 2015
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	27,486	$	3,725	$	38,126	$	1,880	$	—	$	71,217
Collectively evaluated for impairment	374,458		118,343		93,978		103,068		—		689,847
Purchased impaired	—		—		—		—		1,340		1,340
Purchased nonimpaired	169		—		—		—		100		269
Total allowance for loan losses	$	402,113	$	122,068	$	132,104	$	104,948	$	1,440	$	762,673
Loans:
Ending balance of loans:
Individually evaluated for impairment	$	163,201	$	80,123	$	183,473	$	2,789	$	—	$	429,586
Collectively evaluated for impairment	25,828,286		12,685,320		16,809,525		5,051,488		—		60,374,619
Purchased impaired	—		—		—		—		323,092		323,092
Purchased nonimpaired	30,887		42,090		906		5,035		117,869		196,787
Total loans	$	26,022,374	$	12,807,533	$	16,993,904	$	5,059,312	$	440,961	$	61,324,084

December 31, 2014
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	11,158	$	8,466	$	42,277	$	1,532	$	—	$	63,433
Collectively evaluated for impairment	287,105		129,767		112,350		88,037		—		617,259
Purchased impaired	—		—		—		—		2,066		2,066
Purchased nonimpaired	1,219		—		—		322		742		2,283
Total allowance for loan losses	$	299,482	$	138,233	$	154,627	$	89,891	$	2,808	$	685,041
Loans:
Ending balance of loans:
Individually evaluated for impairment	$	48,173	$	105,608	$	195,462	$	1,827	$	—	$	351,070
Collectively evaluated for impairment	23,745,149		11,896,943		16,665,930		4,145,880		—		56,453,902
Purchased impaired	—		—		—		—		361,572		361,572
Purchased nonimpaired	35,215		29,307		1,016		6,084		133,618		205,240
Total loans	$	23,828,537	$	12,031,858	$	16,862,408	$	4,153,791	$	495,190	$	57,371,784


(1)	Includes commercial real estate – mortgage and real estate – construction loans.


(2)	Includes residential real estate – mortgage, equity lines of credit and equity loans.


(3)	Includes credit card, consumer direct and consumer indirect loans.

The following table presents information on individually evaluated impaired loans, by loan class.



	December 31, 2015
	Individually Evaluated Impaired Loans With No Recorded Allowance						Individually Evaluated Impaired Loans With a Recorded Allowance
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance
	(In Thousands)
Commercial, financial and agricultural	$	45,583	$	53,325	$	—	$	117,618	$	122,148	$	27,486
Real estate – construction	3,403		3,986		—		628		689		515
Commercial real estate – mortgage	24,851		27,486		—		51,241		54,863		3,210
Residential real estate – mortgage	6,521		6,521		—		102,375		102,375		7,370
Equity lines of credit	—		—		—		28,164		30,302		23,183
Equity loans	—		—		—		46,413		47,245		7,573
Credit card	—		—		—		—		—		—
Consumer direct	—		—		—		935		935		26
Consumer indirect	—		—		—		1,854		1,854		1,854
Total loans	$	80,358	$	91,318	$	—	$	349,228	$	360,411	$	71,217



	December 31, 2014
	Individually Evaluated Impaired Loans With No Recorded Allowance						Individually Evaluated Impaired Loans With a Recorded Allowance
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance
	(In Thousands)
Commercial, financial and agricultural	$	—	$	—	$	—	$	48,173	$	61,552	$	11,158
Real estate – construction	3,492		4,006		—		2,686		2,731		872
Commercial real estate – mortgage	22,822		23,781		—		76,608		82,005		7,594
Residential real estate – mortgage	8,795		8,795		—		107,223		107,306		9,236
Equity lines of credit	—		—		—		25,743		26,124		23,394
Equity loans	—		—		—		53,701		54,038		9,647
Credit card	—		—		—		—		—		—
Consumer direct	—		—		—		337		337		42
Consumer indirect	—		—		—		1,490		1,490		1,490
Total loans	$	35,109	$	36,582	$	—	$	315,961	$	335,583	$	63,433

The following table presents information on individually evaluated impaired loans, by loan class.



	Years Ended December 31,
	2015				2014				2013
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
Commercial, financial and agricultural	$	113,844	$	1,118	$	84,578	$	1,146	$	133,838	$	1,287
Real estate – construction	5,391		100		8,639		222		51,157		724
Commercial real estate – mortgage	84,565		2,200		116,815		3,208		207,104		4,663
Residential real estate – mortgage	110,251		2,786		114,842		2,886		140,583		3,464
Equity lines of credit	27,108		1,124		24,306		1,049		13,785		586
Equity loans	49,336		1,638		54,708		1,710		44,143		1,514
Credit card	—		—		—		—		—		—
Consumer direct	657		17		154		5		176		32
Consumer indirect	1,694		7		1,323		4		976		13
Total loans	$	392,846	$	8,990	$	405,365	$	10,230	$	591,762	$	12,283

The tables above do not include Purchased Impaired Loans, Purchased Nonimpaired Loans or loans held for sale.

The Company monitors the credit quality of its commercial portfolio using an internal dual risk rating, which considers both the obligor and the facility. The obligor risk ratings are defined by ranges of default probabilities of the borrowers, through internally assigned letter grades AAA through D2, and the facility risk ratings are defined by ranges of the loss given default. The combination of those two approaches results in the assessment of the likelihood of loss and it is mapped to the regulatory classifications. The Company assigns internal risk ratings at loan origination and at regular intervals subsequent to origination. Loan review intervals are dependent on the size and risk grade of the loan, and are generally conducted at least annually. Additional reviews are conducted when information affecting the loan’s risk grade becomes available. The general characteristics of the risk grades are as follows:

•

The Company’s internally assigned letter grades “AAA” through “B-” correspond to the regulatory classification “Pass.” These loans do not have any identified potential or well-defined weaknesses and have a high likelihood of orderly repayment. Exceptions exist when either the facility is fully secured by a CD and held at the Company or the facility is secured by properly margined and controlled marketable securities.

•

Internally assigned letter grades “CCC+” through “CCC” correspond to the regulatory classification “Special Mention.” Loans within this classification have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Special mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

•

Internally assigned letter grades “CCC-” through “D1” correspond to the regulatory classification “Substandard.” A loan classified as substandard is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the loan. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.


•	The internally assigned letter grade “D2” corresponds to the regulatory classification “Doubtful.” Loans classified as doubtful have all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable or improbable.

The Company considers payment history as the best indicator of credit quality for the consumer portfolio. Nonperforming loans in the tables below include loans classified as nonaccrual, loans 90 days or more past due and loans modified in a TDR 90 days or more past due.

The following tables, which exclude loans held for sale and covered loans, illustrate the credit quality indicators associated with the Company’s loans, by loan class.



	Commercial
	December 31, 2015
	Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage
	(In Thousands)
Pass	$	24,823,312	$	2,340,145	$	10,165,630
Special Mention	469,400		5,148		142,124
Substandard	688,427		8,941		133,091
Doubtful	41,235		19		12,435
	$	26,022,374	$	2,354,253	$	10,453,280



	December 31, 2014
	Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage
	(In Thousands)
Pass	$	23,380,541	$	2,098,994	$	9,514,917
Special Mention	280,934		42,176		210,337
Substandard	128,251		13,458		129,435
Doubtful	38,811		24		22,517
	$	23,828,537	$	2,154,652	$	9,877,206



	Consumer
	December 31, 2015
	Residential Real Estate -Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer Direct		Consumer Indirect
	(In Thousands)
Performing	$	13,877,592	$	2,381,909	$	564,110	$	617,641	$	932,773	$	3,484,426
Nonperforming	115,693		37,906		16,694		9,718		4,098		10,656
	$	13,993,285	$	2,419,815	$	580,804	$	627,359	$	936,871	$	3,495,082



	December 31, 2014
	Residential Real Estate -Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer Direct		Consumer Indirect
	(In Thousands)
Performing	$	13,810,857	$	2,269,231	$	614,064	$	621,015	$	649,832	$	2,865,013
Nonperforming	111,799		35,553		20,904		9,441		3,095		5,395
	$	13,922,656	$	2,304,784	$	634,968	$	630,456	$	652,927	$	2,870,408

The following tables present an aging analysis of the Company’s past due loans excluding loans classified as held for sale.



	December 31, 2015
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)
Commercial, financial and agricultural	$	8,197	$	4,215	$	3,567	$	161,591	$	9,402	$	186,972	$	25,835,402	$	26,022,374
Real estate – construction	2,864		91		421		5,908		2,247		11,531		2,342,722		2,354,253
Commercial real estate – mortgage	3,843		1,461		2,237		69,953		33,904		111,398		10,341,882		10,453,280
Residential real estate – mortgage	47,323		19,540		1,961		113,234		67,343		249,401		13,743,884		13,993,285
Equity lines of credit	8,263		4,371		2,883		35,023		—		50,540		2,369,275		2,419,815
Equity loans	6,356		2,194		704		15,614		37,108		61,976		518,828		580,804
Credit card	5,563		4,622		9,718		—		—		19,903		607,456		627,359
Consumer direct	7,648		3,801		3,537		561		908		16,455		920,416		936,871
Consumer indirect	73,438		17,167		5,629		5,027		—		101,261		3,393,821		3,495,082
Covered loans	4,862		3,454		37,972		134		—		46,422		394,539		440,961
Total loans	$	168,357	$	60,916	$	68,629	$	407,045	$	150,912	$	855,859	$	60,468,225	$	61,324,084



	December 31, 2014
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)
Commercial, financial and agricultural	$	10,829	$	5,765	$	1,610	$	61,157	$	10,127	$	89,488	$	23,739,049	$	23,828,537
Real estate – construction	1,954		994		477		7,964		2,112		13,501		2,141,151		2,154,652
Commercial real estate – mortgage	9,813		4,808		628		89,736		39,841		144,826		9,732,380		9,877,206
Residential real estate – mortgage	45,279		16,510		2,598		108,357		69,408		242,152		13,680,504		13,922,656
Equity lines of credit	9,929		4,395		2,679		32,874		—		49,877		2,254,907		2,304,784
Equity loans	6,357		3,268		997		19,029		41,197		70,848		564,120		634,968
Credit card	5,692		3,921		9,441		—		—		19,054		611,402		630,456
Consumer direct	9,542		1,826		2,296		799		298		14,761		638,166		652,927
Consumer indirect	35,366		7,935		2,771		2,624		—		48,696		2,821,712		2,870,408
Covered loans	6,678		4,618		47,957		114		—		59,367		435,823		495,190
Total loans	$	141,439	$	54,040	$	71,454	$	322,654	$	162,983	$	752,570	$	56,619,214	$	57,371,784

It is the Company’s policy to classify TDRs that are not accruing interest as nonaccrual loans. It is also the Company’s policy to classify TDR past due loans that are accruing interest as TDRs and not according to their past due status. The tables above reflect this policy.

The following table provides a breakout of TDRs, including nonaccrual loans, and covered loans and excluding loans classified as held for sale.



	December 31, 2015
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due and Nonaccrual		Not Past Due or Nonaccrual		Total
	(In Thousands)
Commercial, financial and agricultural	$	—	$	—	$	—	$	131	$	131	$	9,402	$	9,533
Real estate – construction	—		—		—		495		495		2,247		2,742
Commercial real estate – mortgage	—		—		—		7,205		7,205		33,904		41,109
Residential real estate – mortgage	2,188		1,935		498		30,174		34,795		62,722		97,517
Equity lines of credit	—		—		—		27,176		27,176		—		27,176
Equity loans	1,737		782		376		9,844		12,739		34,213		46,952
Credit card	—		—		—		—		—		—		—
Consumer direct	—		—		—		27		27		908		935
Consumer indirect	—		—		—		1,853		1,853		—		1,853
Covered loans	—		—		—		8		8		—		8
Total loans	$	3,925	$	2,717	$	874	$	76,913	$	84,429	$	143,396	$	227,825



	December 31, 2014
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due and Nonaccrual		Not Past Due or Nonaccrual		Total
	(In Thousands)
Commercial, financial and agricultural	$	11	$	—	$	—	$	2,052	$	2,063	$	10,116	$	12,179
Real estate – construction	—		—		—		200		200		2,112		2,312
Commercial real estate – mortgage	371		536		—		7,068		7,975		38,934		46,909
Residential real estate – mortgage	2,440		2,688		844		32,518		38,490		63,436		101,926
Equity lines of credit	—		—		—		24,519		24,519		—		24,519
Equity loans	2,182		1,124		878		12,504		16,688		37,013		53,701
Credit card	—		—		—		—		—		—		—
Consumer direct	105		—		—		40		145		193		338
Consumer indirect	—		—		—		1,490		1,490		—		1,490
Covered loans	—		—		—		17		17		—		17
Total loans	$	5,109	$	4,348	$	1,722	$	80,408	$	91,587	$	151,804	$	243,391

There were no loans held for sale classified as TDRs at December 31, 2015 and 2014.

Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan. During the year ended December 31, 2015, $4.4 million of TDR modifications included an interest rate concession and $21.8 million of TDR modifications resulted from modifications to the loan’s structure. During the year ended December 31, 2014, $10.9 million of TDR modifications included an interest rate concession and $36.5 million of TDR modifications resulted from modifications to the loan’s structure.

The following table presents an analysis of the types of loans that were restructured and classified as TDRs, excluding loans classified as held for sale.



	December 31, 2015			December 31, 2014			December 31, 2013
	Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment
	(Dollars in Thousands)
Commercial, financial and agricultural	6	$	384	4	$	14,281	9	$	6,464
Real estate – construction	—	—		3	476		3	2,409
Commercial real estate – mortgage	7	4,478		10	6,619		19	5,215
Residential real estate – mortgage	46	9,709		89	11,462		216	29,637
Equity lines of credit	115	6,482		161	7,821		512	25,281
Equity loans	35	2,586		64	4,867		438	21,387
Credit card	—	—		—	—		—	—
Consumer direct	23	1,210		4	265		19	157
Consumer indirect	74	1,298		102	1,572		429	2,481
Covered loans	3	29		3	15		6	259

For the years ended December 31, 2015 and 2014, charge-offs and changes to the allowance related to modifications classified as TDRs were not material.

The Company considers TDRs aged 90 days or more past due, charged off or classified as nonaccrual subsequent to modification, where the loan was not classified as a nonperforming loan at the time of modification, as subsequently defaulted.

The following tables provide a summary of initial subsequent defaults that occurred within one year of the restructure date. The table excludes loans classified as held for sale as of period-end and includes loans no longer in default as of year-end.



	Years Ended December 31,
	2015			2014			2013
	Number of Contracts	Recorded Investment at Default		Number of Contracts	Recorded Investment at Default		Number of Contracts	Recorded Investment at Default
	(Dollars in Thousands)
Commercial, financial and agricultural	—	$	—	—	$	—	1	$	9,531
Real estate – construction	1	377		—	—		—	—
Commercial real estate – mortgage	1	178		1	2,198		2	529
Residential real estate – mortgage	7	987		7	1,157		14	2,500
Equity lines of credit	1	—		3	275		5	309
Equity loans	3	216		8	893		7	447
Credit card	—	—		—	—		—	—
Consumer direct	1	100		—	—		—	—
Consumer indirect	1	18		—	—		—	—
Covered loans	2	24		1	4		1	35

The Company’s allowance for loan losses is largely driven by updated risk ratings assigned to commercial loans, updated borrower credit scores on consumer loans, and borrower delinquency history in both commercial and consumer portfolios. As such, the provision for loan losses is impacted primarily by changes in borrower payment performance rather than TDR classification. In addition, all commercial and consumer loans modified in a TDR are considered to be impaired, even if they maintain their accrual status.

At December 31, 2015 and 2014, there were $5.7 million and $1.1 million, respectively, of commitments to lend additional funds to borrowers whose terms have been modified in a TDR.

Foreclosure Proceedings

Other real estate owned totaled $21 million at both December 31, 2015 and 2014, respectively. Other real estate owned included $17 million and $11 million of foreclosed residential real estate properties at December 31, 2015 and 2014, respectively. As of December 31, 2015 and 2014, there were $30 million and $26 million, respectively, of residential real estate loans secured by residential real estate properties for which formal foreclosure proceedings were in process.