Note 6 - Loans and Allowance for Loan Losses

The following is a summary of current, accruing past due, and non-accrual loans by portfolio class as of June 30, 2017 and December 31, 2016.



Current, Accruing Past Due, and Non-accrual Loans
	June 30, 2017
(in thousands)	Current		Accruing 30-89 Days Past Due	Accruing 90 Days or Greater Past Due	Total Accruing Past Due	Non-accrual	Total
Investment properties	$	6,028,397	3,482	72	3,554	3,712	6,035,663
1-4 family properties	818,327		8,657	101	8,758	8,535	835,620
Land and development	529,967		1,964	126	2,090	10,931	542,988
Total commercial real estate	7,376,691		14,103	299	14,402	23,178	7,414,271
Commercial, financial and agricultural	6,915,588		14,670	765	15,435	69,550	7,000,573
Owner-occupied	4,715,325		9,291	801	10,092	24,918	4,750,335
Total commercial and industrial	11,630,913		23,961	1,566	25,527	94,468	11,750,908
Home equity lines	1,533,528		8,286	705	8,991	20,648	1,563,167
Consumer mortgages	2,444,866		7,141	623	7,764	18,035	2,470,665
Credit cards	223,092		1,550	1,258	2,808	—	225,900
Other consumer loans	1,021,355		7,197	99	7,296	2,988	1,031,639
Total consumer	5,222,841		24,174	2,685	26,859	41,671	5,291,371
Total loans	$	24,230,445	62,238	4,550	66,788	159,317	24,456,550	⁽¹	⁾

	December 31, 2016
(in thousands)	Current		Accruing 30-89 Days Past Due	Accruing 90 Days or Greater Past Due	Total Accruing Past Due	Non-accrual	Total
Investment properties	$	5,861,198	2,795	—	2,795	5,268	5,869,261
1-4 family properties	873,231		4,801	161	4,962	9,114	887,307
Land and development	591,732		1,441	—	1,441	16,233	609,406
Total commercial real estate	7,326,161		9,037	161	9,198	30,615	7,365,974
Commercial, financial and agricultural	6,846,591		9,542	720	10,262	59,074	6,915,927
Owner-occupied	4,601,356		17,913	244	18,157	16,503	4,636,016
Total commercial and industrial	11,447,947		27,455	964	28,419	75,577	11,551,943
Home equity lines	1,585,228		10,013	473	10,486	21,551	1,617,265
Consumer mortgages	2,265,966		7,876	81	7,957	22,681	2,296,604
Credit cards	229,177		1,819	1,417	3,236	—	232,413
Other consumer loans	809,419		5,771	39	5,810	2,954	818,183
Total consumer	4,889,790		25,479	2,010	27,489	47,186	4,964,465
Total loans	$	23,663,898	61,971	3,135	65,106	153,378	23,882,382	⁽²	⁾

⁽¹⁾Total before net deferred fees and costs of $26.0 million.

⁽²⁾Total before net deferred fees and costs of $26.0 million.

The credit quality of the loan portfolio is reviewed and updated no less frequently than quarterly using the standard asset classification system utilized by the federal banking agencies. These classifications are divided into three groups – Not Criticized (Pass), Special Mention, and Classified or Adverse rating (Substandard, Doubtful, and Loss) and are defined as follows:

Pass - loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell in a timely manner, of any underlying collateral.

Special Mention - loans which have potential weaknesses that deserve management's close attention. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification.

Substandard - loans which are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Loans with this classification are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - loans which have all the weaknesses inherent in loans classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently known facts, conditions, and values.

Loss - loans which are considered by management to be uncollectible and of such little value that their continuance on the institution's books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted.

In the following tables, consumer loans are generally assigned a risk grade similar to the classifications described above; however, upon reaching 90 days and 120 days past due, they are generally downgraded to Substandard and Loss, respectively, in accordance with the FFIEC Uniform Retail Credit Classification and Account Management Policy. Additionally, in accordance with the Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties, the risk grade classifications of consumer loans (home equity lines and consumer mortgages) secured by junior liens on 1-4 family residential properties also consider available information on the payment status of any associated senior liens with other financial institutions.



Loan Portfolio Credit Exposure by Risk Grade
	June 30, 2017
(in thousands)	Pass		Special Mention	Substandard⁽¹⁾	Doubtful⁽²⁾	Loss		Total
Investment properties	$	5,952,286	61,451	21,926	—	—		6,035,663
1-4 family properties	788,665		24,169	22,559	227	—		835,620
Land and development	477,974		40,576	21,227	3,211	—		542,988
Total commercial real estate	7,218,925		126,196	65,712	3,438	—		7,414,271
Commercial, financial and agricultural	6,710,038		124,412	160,354	5,629	140	⁽³⁾	7,000,573
Owner-occupied	4,590,414		52,101	106,410	1,410	—		4,750,335
Total commercial and industrial	11,300,452		176,513	266,764	7,039	140		11,750,908
Home equity lines	1,535,583		—	24,812	373	2,399	⁽³⁾	1,563,167
Consumer mortgages	2,450,658		—	19,528	313	166	⁽³⁾	2,470,665
Credit cards	224,643		—	445	—	812	⁽⁴⁾	225,900
Other consumer loans	1,028,493		—	2,808	299	39	⁽³⁾	1,031,639
Total consumer	5,239,377		—	47,593	985	3,416		5,291,371
Total loans	$	23,758,754	302,709	380,069	11,462	3,556		24,456,550	⁽⁵	⁾

	December 31, 2016
(in thousands)	Pass		Special Mention	Substandard⁽¹⁾	Doubtful⁽²⁾	Loss		Total
Investment properties	$	5,794,626	43,336	31,299	—	—		5,869,261
1-4 family properties	826,311		33,928	26,790	278	—		887,307
Land and development	514,853		60,205	27,361	6,987	—		609,406
Total commercial real estate	7,135,790		137,469	85,450	7,265	—		7,365,974
Commercial, financial and agricultural	6,642,648		126,268	140,425	6,445	141	⁽³⁾	6,915,927
Owner-occupied	4,462,420		60,856	111,330	1,410	—		4,636,016
Total commercial and industrial	11,105,068		187,124	251,755	7,855	141		11,551,943
Home equity lines	1,589,199		—	22,774	2,892	2,400	⁽³⁾	1,617,265
Consumer mortgages	2,271,916		—	23,268	1,283	137	⁽³⁾	2,296,604
Credit cards	230,997		—	637	—	779	⁽⁴⁾	232,413
Other consumer loans	814,844		—	3,233	42	64	⁽³⁾	818,183
Total consumer	4,906,956		—	49,912	4,217	3,380		4,964,465
Total loans	$	23,147,814	324,593	387,117	19,337	3,521		23,882,382	₍₆	₎

⁽¹⁾ Includes $235.8 million and $256.6 million of Substandard accruing loans at June 30, 2017 and December 31, 2016, respectively.

⁽²⁾ The loans within this risk grade are on non-accrual status. Commercial loans generally have an allowance for loan losses in accordance with ASC 310, and retail loans generally have an allowance for loan losses equal to 50% of the loan amount.

⁽³⁾ The loans within this risk grade are on non-accrual status and have an allowance for loan losses equal to the full loan amount.

⁽⁴⁾Represent amounts that were 120 days past due. These credits are downgraded to the Loss category with an allowance for loan losses equal to the full loan amount and are generally charged off upon reaching 181 days past due in accordance with the FFIEC Uniform Retail Credit Classification and Account Management Policy.

⁽⁵⁾Total before net deferred fees and costs of $26.0 million.

⁽⁶⁾Total before net deferred fees and costs of $26.0 million.

The following table details the changes in the allowance for loan losses by loan segment for the six and three months ended June 30, 2017.



Allowance for Loan Losses and Recorded Investment in Loans
	As of and For The Six Months Ended June 30, 2017
(in thousands)	Commercial Real Estate			Commercial & Industrial		Retail		Total
Allowance for loan losses:
Beginning balance	$	81,816		125,778		44,164		251,758
Charge-offs	(3,207		)	(19,535	)	(9,656	)	(32,398	)
Recoveries	3,648			3,282		2,871		9,801
Provision for loan losses	(4,730		)	13,912		9,752		18,934
Ending balance⁽¹⁾	$	77,527		123,437		47,131		248,095
Ending balance: individually evaluated for impairment	4,386			7,226		1,038		12,650
Ending balance: collectively evaluated for impairment	$	73,141		116,211		46,093		235,445
Loans:
Ending balance: total loans⁽¹⁾⁽²⁾	$	7,414,271		11,750,908		5,291,371		24,456,550
Ending balance: individually evaluated for impairment	73,638			122,889		31,688		228,215
Ending balance: collectively evaluated for impairment	$	7,340,633		11,628,019		5,259,683		24,228,335

	As of and For The Six Months Ended June 30, 2016
(in thousands)	Commercial Real Estate			Commercial & Industrial		Retail		Total
Allowance for loan losses:
Beginning balance	$	87,133		122,989		42,374		252,496
Charge-offs	(9,277		)	(10,661	)	(7,148	)	(27,086	)
Recoveries	6,690			4,342		2,564		13,596
Provision for loan losses	(5,187		)	12,963		8,294		16,070
Ending balance⁽¹⁾	$	79,359		129,633		46,084		255,076
Ending balance: individually evaluated for impairment	12,515			14,221		1,691		28,427
Ending balance: collectively evaluated for impairment	$	66,844		115,412		44,393		226,649
Loans:
Ending balance: total loans⁽¹⁾⁽³⁾	$	7,507,695		10,955,430		4,625,410		23,088,535
Ending balance: individually evaluated for impairment	112,954			119,805		37,788		270,547
Ending balance: collectively evaluated for impairment	$	7,394,741		10,835,625		4,587,622		22,817,988

⁽¹⁾As of and for the six months ended June 30, 2017 and 2016, there were no purchased credit-impaired loans and no allowance for loan losses for purchased credit-impaired loans.

⁽²⁾Total before net deferred fees and costs of $26.0 million.

⁽³⁾Total before net deferred fees and costs of $27.6 million.



Allowance for Loan Losses and Recorded Investment in Loans
	As Of and For The Three Months Ended June 30, 2017
(in thousands)	Commercial Real Estate			Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	78,314		127,096		48,104		253,514
Charge-offs	(1,299		)	(12,642	)	(5,722	)	(19,663	)
Recoveries	759			1,458		1,767		3,984
Provision for loan losses	(247		)	7,525		2,982		10,260
Ending balance⁽¹⁾	$	77,527		123,437		47,131		248,095
Ending balance: individually evaluated for impairment	4,386			7,226		1,038		12,650
Ending balance: collectively evaluated for impairment	$	73,141		116,211		46,093		235,445
Loans:
Ending balance: total loans⁽¹⁾⁽²⁾	$	7,414,271		11,750,908		5,291,371		24,456,550
Ending balance: individually evaluated for impairment	73,638			122,889		31,688		228,215
Ending balance: collectively evaluated for impairment	$	7,340,633		11,628,019		5,259,683		24,228,335

	As Of and For The Three Months Ended June 30, 2016
(in thousands)	Commercial Real Estate			Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	84,557		124,878		45,081		254,516
Charge-offs	(7,455		)	(5,136	)	(3,180	)	(15,771	)
Recoveries	5,397			3,078		1,163		9,638
Provision for loan losses	(3,140		)	6,813		3,020		6,693
Ending balance⁽¹⁾	$	79,359		129,633		46,084		255,076
Ending balance: individually evaluated for impairment	12,515			14,221		1,691		28,427
Ending balance: collectively evaluated for impairment	$	66,844		115,412		44,393		226,649
Loans:
Ending balance: total loans⁽¹⁾⁽³⁾	$	7,507,695		10,955,430		4,625,410		23,088,535
Ending balance: individually evaluated for impairment	112,954			119,805		37,788		270,547
Ending balance: collectively evaluated for impairment	$	7,394,741		10,835,625		4,587,622		22,817,988

⁽¹⁾For the three months ended June 30, 2017 and 2016, there were no purchased credit-impaired loans and no allowance for loan losses for purchased credit-impaired loans.

⁽²⁾Total before net deferred fees and costs of $26.0 million.

⁽³⁾Total before net deferred fees and costs of $27.6 million.

The tables below summarize impaired loans (including accruing TDRs) as of June 30, 2017 and December 31, 2016.



Impaired Loans (including accruing TDRs)
	June 30, 2017				Six Months Ended June 30, 2017		Three Months Ended June 30, 2017
(in thousands)	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized	Average Recorded Investment	Interest Income Recognized
With no related allowance recorded
Investment properties	$	—	—	—	246	—	—	—
1-4 family properties	253		2,582	—	380	—	257	—
Land and development	2,226		5,539	—	2,193	—	2,246	—
Total commercial real estate	2,479		8,121	—	2,819	—	2,503	—
Commercial, financial and agricultural	26,913		33,098	—	22,956	—	26,202	—
Owner-occupied	13,824		20,250	—	10,383	—	11,910	—
Total commercial and industrial	40,737		53,348	—	33,339	—	38,112	—
Home equity lines	1,064		1,064	—	1,060	—	1,064	—
Consumer mortgages	744		941	—	744	—	744	—
Credit cards	—		—	—	—	—	—	—
Other consumer loans	—		—	—	—	—	—	—
Total consumer	1,808		2,005	—	1,804	—	1,808	—
Total impaired loans with no related allowance recorded	$	45,024	63,474	—	37,962	—	42,423	—
With allowance recorded
Investment properties	$	29,168	29,168	1,175	29,575	597	29,264	306
1-4 family properties	15,879		15,893	448	16,995	386	16,133	250
Land and development	26,112		26,168	2,763	27,381	299	26,366	126
Total commercial real estate	71,159		71,229	4,386	73,951	1,282	71,763	682
Commercial, financial and agricultural	46,569		46,887	5,524	46,455	787	48,959	436
Owner-occupied	35,583		35,594	1,702	42,814	674	38,318	336
Total commercial and industrial	82,152		82,481	7,226	89,269	1,461	87,277	772
Home equity lines	7,135		7,135	171	8,197	465	7,680	229
Consumer mortgages	18,762		18,762	598	19,720	183	19,009	92
Credit cards	—		—	—	—	—	—	—
Other consumer loans	3,983		3,984	269	4,692	132	4,380	59
Total consumer	29,880		29,881	1,038	32,609	780	31,069	380
Total impaired loans with allowance recorded	$	183,191	183,591	12,650	195,829	3,523	190,109	1,834
Total impaired loans
Investment properties	$	29,168	29,168	1,175	29,821	597	29,264	306
1-4 family properties	16,132		18,475	448	17,375	386	16,390	250
Land and development	28,338		31,707	2,763	29,574	299	28,612	126
Total commercial real estate	73,638		79,350	4,386	76,770	1,282	74,266	682
Commercial, financial and agricultural	73,482		79,985	5,524	69,411	787	75,161	436
Owner-occupied	49,407		55,844	1,702	53,197	674	50,228	336
Total commercial and industrial	122,889		135,829	7,226	122,608	1,461	125,389	772
Home equity lines	8,199		8,199	171	9,257	465	8,744	229
Consumer mortgages	19,506		19,703	598	20,464	183	19,753	92
Credit cards	—		—	—	—	—	—	—
Other consumer loans	3,983		3,984	269	4,692	132	4,380	59
Total consumer	31,688		31,886	1,038	34,413	780	32,877	380
Total impaired loans	$	228,215	247,065	12,650	233,791	3,523	232,532	1,834



Impaired Loans (including accruing TDRs)
	December 31, 2016				Year Ended December 31, 2016
(in thousands)	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized
With no related allowance recorded
Investment properties	$	748	793	—	2,013	—
1-4 family properties	643		2,939	—	1,021	—
Land and development	2,099		7,243	—	6,769	—
Total commercial real estate	3,490		10,975	—	9,803	—
Commercial, financial and agricultural	17,958		20,577	—	6,321	—
Owner-occupied	5,508		7,377	—	8,394	—
Total commercial and industrial	23,466		27,954	—	14,715	—
Home equity lines	1,051		1,051	—	1,045	—
Consumer mortgages	744		814	—	870	—
Credit cards	—		—	—	—	—
Other consumer loans	—		—	—	—	—
Total consumer	1,795		1,865	—	1,915	—
Total impaired loans with no related allowance recorded	$	28,751	40,794	—	26,433	—
With allowance recorded
Investment properties	$	31,489	31,489	2,044	42,659	1,436
1-4 family properties	23,642		23,649	769	39,864	855
Land and development	32,789		32,788	5,103	25,568	995
Total commercial real estate	87,920		87,926	7,916	108,091	3,286
Commercial, financial and agricultural	43,386		45,913	5,687	51,968	1,215
Owner-occupied	53,708		53,942	2,697	52,300	1,946
Total commercial and industrial	97,094		99,855	8,384	104,268	3,161
Home equity lines	9,638		9,638	971	9,668	432
Consumer mortgages	20,953		20,953	673	20,993	1,014
Credit cards	—		—	—	—	—
Other consumer loans	5,140		5,140	167	5,062	303
Total consumer	35,731		35,731	1,811	35,723	1,749
Total impaired loans with allowance recorded	$	220,745	223,512	18,111	248,082	8,196
Total impaired loans
Investment properties	$	32,237	32,282	2,044	44,672	1,436
1-4 family properties	24,285		26,588	769	40,885	855
Land and development	34,888		40,031	5,103	32,337	995
Total commercial real estate	91,410		98,901	7,916	117,894	3,286
Commercial, financial and agricultural	61,344		66,490	5,687	58,289	1,215
Owner-occupied	59,216		61,319	2,697	60,694	1,946
Total commercial and industrial	120,560		127,809	8,384	118,983	3,161
Home equity lines	10,689		10,689	971	10,713	432
Consumer mortgages	21,697		21,767	673	21,863	1,014
Credit cards	—		—	—	—	—
Other consumer loans	5,140		5,140	167	5,062	303
Total consumer	37,526		37,596	1,811	37,638	1,749
Total impaired loans	$	249,496	264,306	18,111	274,515	8,196

The average recorded investment in impaired loans was $290.3 million and $281.9 million, respectively, for the six and three months ended June 30, 2016. Excluding accruing TDRs, there was no interest income recognized for the investment in impaired loans for the six and three months ended June 30, 2016. Interest income recognized for accruing TDRs was $4.0 million and $2.0 million, respectively, for the six and three months ended June 30, 2016. At June 30, 2017 and December 31, 2016, impaired loans of $60.8 million and $53.7 million, respectively, were on non-accrual status.

Concessions provided in a TDR are primarily in the form of providing a below market interest rate given the borrower's credit risk, a period of time generally less than one year with a reduction of required principal and/or interest payments (e.g., interest only for a period of time), or an extension of the maturity of the loan generally for less than one year. Insignificant periods of reduction of principal and/or interest payments, or one-time deferrals of 3 months or less, are generally not considered to be financial concessions.

The following tables represent, by concession type, the post-modification balance for loans modified or renewed during the six and three months ended June 30, 2017 and 2016 that were reported as accruing or non-accruing TDRs.



TDRs by Concession Type
	Six Months Ended June 30, 2017
(in thousands, except contract data)	Number of Contracts	Principal Forgiveness		Below Market Interest Rate	Term Extensions and/or Other Concessions	Total
Investment properties	—	$	—	—	—	—
1-4 family properties	16	—		2,089	513	2,602
Land acquisition	1	—		—	135	135
Total commercial real estate	17	—		2,089	648	2,737
Commercial, financial and agricultural	28	—		5,760	6,279	12,039
Owner-occupied	1	—		—	22	22
Total commercial and industrial	29	—		5,760	6,301	12,061
Home equity lines	—	—		—	—	—
Consumer mortgages	1	—		—	9	9
Credit cards	—	—		—	—	—
Other retail loans	8	—		—	570	570
Total retail	9	—		—	579	579
Total TDRs	55	$	—	7,849	7,528	15,377	⁽¹	⁾

	Three Months Ended June 30, 2017
(in thousands, except contract data)	Number of Contracts	Principal Forgiveness		Below Market Interest Rate	Term Extensions and/or Other Concessions	Total
Investment properties	—	$	—	—	—	—
1-4 family properties	8	—		478	196	674
Land and development	1	—		—	135	135
Total commercial real estate	9	—		478	331	809
Commercial, financial and agricultural	10	—		1,895	740	2,635
Owner-occupied	1	—		—	22	22
Total commercial and industrial	11	—		1,895	762	2,657
Home equity lines	—	—		—	—	—
Consumer mortgages	1	—		—	9	9
Credit cards	—	—		—	—	—
Other consumer loans	5	—		—	295	295
Total consumer	6	—		—	304	304
Total TDRs	26	$	—	2,373	1,397	3,770	⁽¹	⁾

⁽¹⁾No net charge-offs were recorded during the six and three months ended June 30, 2017 upon restructuring of these loans.



TDRs by Concession Type
	Six Months Ended June 30, 2016
(in thousands, except contract data)	Number of Contracts	Principal Forgiveness		Below Market Interest Rate	Term Extensions and/or Other Concessions	Total
Investment properties	3	$	—	1,826	148	1,974
1-4 family properties	19	—		3,490	1,164	4,654
Land acquisition	11	—		—	1,269	1,269
Total commercial real estate	33	—		5,316	2,581	7,897
Commercial, financial and agricultural	45	—		13,948	4,845	18,793
Owner-occupied	6	—		2,667	550	3,217
Total commercial and industrial	51	—		16,615	5,395	22,010
Home equity lines	3	—		224	—	224
Consumer mortgages	6	—		354	51	405
Credit cards	—	—		—	—	—
Other retail loans	17	—		324	1,534	1,858
Total retail	26	—		902	1,585	2,487
Total TDRs	110	$	—	22,833	9,561	32,394	⁽²	⁾

	Three Months Ended June 30, 2016
(in thousands, except contract data)	Number of Contracts	Principal Forgiveness		Below Market Interest Rate	Term Extensions and/or Other Concessions	Total
Investment properties	1	$	—	1,389	—	1,389
1-4 family properties	12	—		3,095	324	3,419
Land and development	5	—		—	734	734
Total commercial real estate	18	—		4,484	1,058	5,542
Commercial, financial and agricultural	15	—		1,934	1,458	3,392
Owner-occupied	2	—		1,132	102	1,234
Total commercial and industrial	17	—		3,066	1,560	4,626
Home equity lines	1	—		28	—	28
Consumer mortgages	3	—		200	51	251
Credit cards	—	—		—	—	—
Other consumer loans	10	—		94	1,449	1,543
Total consumer	14	—		322	1,500	1,822
Total TDRs	49	$	—	7,872	4,118	11,990	⁽²	⁾

⁽²⁾ No net charge-offs were recorded during the six and three months ended June 30, 2016 upon restructuring of these loans.

For both the six and three months ended June 30, 2017, there were three defaults with a recorded investment of $292 thousand on accruing TDRs restructured during the previous twelve months (defaults are defined as the earlier of the TDR being placed on non-accrual status or reaching 90 days past due with respect to principal and/or interest payments) compared to one default for both the six and three months ended June 30, 2016 with a recorded investment of $92 thousand.

If, at the time a loan was designated as a TDR, the loan was not already impaired, the measurement of impairment that resulted from the TDR designation closely approximates the reserve derived through specific loan measurement of impairment in accordance with ASC 310-10-35. Generally, the change in the allowance for loan losses resulting from such TDR designation is not significant. At June 30, 2017, the allowance for loan losses allocated to accruing TDRs totaling $167.4 million was $8.5 million compared to accruing TDRs of $195.8 million with an allocated allowance for loan losses of $9.8 million at December 31, 2016. Non-accrual, non-homogeneous loans (commercial-type impaired loans greater than $1 million) that are designated as TDRs are individually measured for the amount of impairment, if any, both before and after the TDR designation.