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Loans, Allowance for Loan and Lease Losses, and Reserve for Off-Balance Sheet Credit Commitments
 6 Months Ended
Jun. 30, 2011
Loans, Allowance for Loan and Lease Losses, and Reserve for Off-Balance Sheet Credit Commitments  
Loans, Allowance for Loan and Lease Losses, and Reserve for Off-Balance Sheet Credit Commitments

Note 6. Loans, Allowance for Loan and Lease Losses, and Reserve for Off-Balance Sheet Credit Commitments

 

The following is a summary of the major categories of loans:

 

Loans and Leases

 

 

 

June 30,

 

December 31,

 

June 30,

 

(in thousands)

 

2011

 

2010

 

2010

 

Commercial

 

$

4,420,899

 

$

4,136,874

 

$

3,935,544

 

Commercial real estate mortgages

 

1,930,269

 

1,958,317

 

2,078,003

 

Residential mortgages

 

3,710,765

 

3,552,312

 

3,577,894

 

Real estate construction

 

355,014

 

467,785

 

629,902

 

Equity lines of credit

 

735,899

 

733,741

 

742,071

 

Installment

 

130,924

 

160,144

 

169,070

 

Lease financing

 

379,353

 

377,455

 

350,560

 

Loans and leases, excluding covered loans

 

11,663,123

 

11,386,628

 

11,483,044

 

Less: Allowance for loan and lease losses

 

(265,933

)

(257,007

)

(290,492

)

Loans and leases, excluding covered loans, net

 

11,397,190

 

11,129,621

 

11,192,552

 

 

 

 

 

 

 

 

 

Covered loans

 

1,724,633

 

1,857,522

 

2,080,846

 

Less: Allowance for loan losses

 

(67,629

)

(67,389

)

(46,255

)

Covered loans, net

 

1,657,004

 

1,790,133

 

2,034,591

 

 

 

 

 

 

 

 

 

Total loans and leases

 

$

13,387,756

 

$

13,244,150

 

$

13,563,890

 

Total loans and leases, net

 

$

13,054,194

 

$

12,919,754

 

$

13,227,143

 

 

The loan amounts above include unamortized fees, net of deferred costs, of $4.5 million, $7.0 million and $5.2 million as of June 30, 2011, December 31, 2010 and June 30, 2010, respectively.

 

Concentrations of credit risk arise when a number of clients are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. The Company’s lending activities are predominantly in California, and to a lesser extent, New York and Nevada. Excluding covered loans, at June 30, 2011, California represented 85 percent of total loans outstanding and Nevada and New York represented 6 percent and 2 percent, respectively. The remaining 7 percent of total loans outstanding represented other states. Although the Company has a diversified loan portfolio, a substantial portion of the loan portfolio and credit performance depends on the economic stability of Southern California. Credit performance also depends, to a lesser extent, on economic conditions in the San Francisco Bay area, New York and Nevada.  Within the Company’s covered loan portfolio at June 30, 2011, the five states with the largest concentration were California (39 percent), Texas (12 percent), Nevada (9 percent), New York (5 percent) and Arizona (4 percent). The remaining 31 percent of total covered loans outstanding represented other states.

 

Covered Loans

 

Covered loans represent loans acquired from the FDIC that are subject to loss-sharing agreements. Covered loans were $1.72 billion as of June 30, 2011, $1.86 billion as of December 31, 2010 and $2.08 billion as of June 30, 2010.  Covered loans, net of allowance for loan losses, were $1.66 billion at June 30, 2011, $1.79 billion at December 31, 2010 and $2.03 billion as of June 30, 2010.

 

The following is a summary of the major categories of covered loans:

 

 

 

June 30,

 

December 31,

 

June 30,

 

(in thousands)

 

2011

 

2010

 

2010

 

Commercial

 

$

41,135

 

$

55,082

 

$

85,638

 

Commercial real estate mortgages

 

1,482,186

 

1,569,739

 

1,710,159

 

Residential mortgages

 

19,494

 

18,380

 

21,680

 

Real estate construction

 

173,263

 

204,945

 

250,162

 

Equity lines of credit

 

5,791

 

6,919

 

9,780

 

Installment loans

 

2,764

 

2,457

 

3,427

 

Covered loans

 

1,724,633

 

1,857,522

 

2,080,846

 

Less: Allowance for loan losses

 

(67,629

)

(67,389

)

(46,255

)

Covered loans, net

 

$

1,657,004

 

$

1,790,133

 

$

2,034,591

 

 

The Company evaluated the acquired loans from its FDIC-assisted acquisitions and concluded that all loans, with the exception of a small population of acquired loans, would be accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”).  Loans are accounted for under ASC 310-30 when there is evidence of credit deterioration since origination and for which it is probable, at acquisition, that the Company would be unable to collect all contractually required payments.  Interest income is recognized on all acquired impaired loans through accretion of the difference between the carrying amount of the loans and their expected cash flows.

 

As of NCB’s acquisition date on April 8, 2011, the preliminary estimates of the contractually required payments receivable for all acquired impaired covered loans of NCB were $107.4 million, the cash flows expected to be collected were $66.2 million, and the fair value of the acquired impaired loans was $55.3 million.  The above amounts were determined based on the estimated remaining life of the underlying loans, which included the effects of estimated prepayments.  The Company also acquired non-covered loans with a fair value of $1.1 million that were not considered impaired at acquisition date.  Fair value of the acquired loans includes estimated credit losses, therefore, an allowance for loan losses is not recorded on the acquisition date.

 

Changes in the accretable yield for acquired impaired loans were as follows for the six months ended June 30, 2011 and 2010:

 

 

 

For the six months ended
June 30,

 

(in thousands)

 

2011

 

2010

 

Balance, beginning of period

 

$

562,826

 

$

687,126

 

Additions

 

10,871

 

48,644

 

Accretion

 

(54,558

)

(58,776

)

Reclassifications to nonaccretable yield

 

13,461

 

(114,883

)

Disposals and other

 

(27,127

)

5,926

 

Balance, end of period

 

$

505,473

 

$

568,037

 

 

At acquisition date, the Company recorded an indemnification asset for its FDIC-assisted acquisitions. The FDIC indemnification asset represents the present value of the expected reimbursement from the FDIC related to expected losses on acquired loans, OREO and unfunded commitments.  The FDIC indemnification asset from all FDIC-assisted acquisitions was $261.7 million at June 30, 2011, $295.5 million at December 31, 2010 and $394.0 million at June 30, 2010.

 

Credit Quality on Loans and Leases, Excluding Covered Loans

 

Allowance for Loan and Lease Losses and Reserve for Off-Balance Sheet Credit Commitments

 

The allowance for loan and lease losses and the reserve for off-balance sheet credit commitments are significant estimates that can and do change based on management’s process of analyzing the loan and commitment portfolios and on management’s assumptions about specific borrowers and applicable economic and environmental conditions, among other factors.  The allowance for loan and lease losses and the reserve for off-balance sheet credit commitments which provide for the risk of losses inherent in the credit extension process, are increased by the provision for credit losses charged to operating expense. The allowance for loan and lease losses is decreased by the amount of charge-offs, net of recoveries. There is no exact method of predicting specific losses or amounts that ultimately may be charged off on particular segments of the loan portfolio.

 

The following tables provide a summary of activity in the allowance for loan and lease losses and period-end balances of loans evaluated for impairment, excluding covered loans, for the three and six month periods ended June 30, 2011. Activity is provided by loan type which is consistent with the Company’s methodology for determining the allowance for loans and lease losses.

 

(in thousands)

 

Commercial
(1)

 

Commercial
Real Estate
Mortgages

 

Residential
Mortgages

 

Real Estate
Construction

 

Equity 
Lines
of Credit

 

Installment

 

Unallocated

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

75,661

 

$

47,519

 

$

13,527

 

$

36,693

 

$

6,445

 

$

5,445

 

$

78,066

 

$

263,356

 

Provision for credit losses (2)

 

7,440

 

272

 

(401

)

(7,815

)

343

 

(3,600

)

2,143

 

(1,618

)

Charge-offs

 

(3,446

)

(98

)

(375

)

(1,897

)

(128

)

(131

)

—

 

(6,075

)

Recoveries

 

6,062

 

1,367

 

122

 

2,474

 

8

 

237

 

—

 

10,270

 

Net charge-offs (recoveries)

 

2,616

 

1,269

 

(253

)

577

 

(120

)

106

 

—

 

4,195

 

Ending balance

 

$

85,717

 

$

49,060

 

$

12,873

 

$

29,455

 

$

6,668

 

$

1,951

 

$

80,209

 

$

265,933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

82,451

 

$

52,516

 

$

16,753

 

$

40,824

 

$

7,229

 

$

3,931

 

$

53,303

 

$

257,007

 

Provision for credit losses (2)

 

2,587

 

(10,937

)

(3,012

)

(15,772

)

316

 

(1,884

)

26,906

 

(1,796

)

Charge-offs

 

(6,684

)

(2,897

)

(1,022

)

(2,463

)

(921

)

(455

)

—

 

(14,442

)

Recoveries

 

7,363

 

10,378

 

154

 

6,866

 

44

 

359

 

—

 

25,164

 

Net charge-offs (recoveries)

 

679

 

7,481

 

(868

)

4,403

 

(877

)

(96

)

—

 

10,722

 

Ending balance

 

$

85,717

 

$

49,060

 

$

12,873

 

$

29,455

 

$

6,668

 

$

1,951

 

$

80,209

 

$

265,933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance of allowance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

7,605

 

$

1,150

 

$

56

 

$

1,853

 

$

404

 

$

—

 

$

—

 

$

11,068

 

Collectively evaluated for impairment

 

78,112

 

47,910

 

12,817

 

27,602

 

6,264

 

1,951

 

80,209

 

254,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases, excluding covered loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance of loans and leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases excluding covered loans

 

$

4,800,252

 

$

1,930,269

 

$

3,710,765

 

$

355,014

 

$

735,899

 

$

130,924

 

$

—

 

$

11,663,123

 

Individually evaluated for impairment

 

19,236

 

23,689

 

12,552

 

60,543

 

4,522

 

41

 

—

 

120,583

 

Collectively evaluated for impairment

 

4,781,016

 

1,906,580

 

3,698,213

 

294,471

 

731,377

 

130,883

 

—

 

11,542,540

 

 

(1)        Includes lease financing loans.

(2)        There was no provision for credit losses for the three and six months ended June 30, 2011. Net transfers to the reserve for off-balance sheet credit commitments were $1.6 million and $1.8 million for the three and six months ended June 30, 2011, respectively.

 

The following is a summary of activity in the allowance for loan and lease losses on non-covered loans for the three and six months ended June 30, 2010:

 

 

 

For the three

 

For the six

 

 

 

months ended

 

months ended

 

(in thousands)

 

June 30, 2010

 

June 30, 2010

 

Allowance for loan and lease losses

 

 

 

 

 

Balance, beginning of period

 

$

292,799

 

$

288,493

 

Charge-offs

 

 

 

 

 

Commercial

 

(22,680

)

(40,749

)

Commercial real estate mortgages

 

(476

)

(15,451

)

Residential mortgages

 

(620

)

(2,080

)

Real estate construction

 

(12,025

)

(26,250

)

Equity lines of credit

 

(345

)

(557

)

Installment

 

(5

)

(1,502

)

Total charge-offs

 

(36,151

)

(86,589

)

Recoveries

 

 

 

 

 

Commercial

 

1,390

 

1,835

 

Commercial real estate mortgages

 

74

 

81

 

Residential mortgages

 

10

 

79

 

Real estate construction

 

1,081

 

1,123

 

Equity lines of credit

 

7

 

10

 

Installment

 

94

 

430

 

Total recoveries

 

2,656

 

3,558

 

Net charge-offs

 

(33,495

)

(83,031

)

Provision for credit losses

 

32,000

 

87,000

 

Transfers to reserve for off-balance sheet credit commitments

 

(812

)

(1,970

)

Balance, end of period

 

$

290,492

 

$

290,492

 

 

Off-balance sheet credit exposures include loan commitments, letters of credit and financial guarantees. The following table provides a summary of activity in the reserve for off-balance sheet credit commitments for the three and six months ended June 30, 2011 and 2010:

 

 

 

For the three months ended
June 30,

 

For the six months ended
June 30,

 

(in thousands)

 

2011

 

2010

 

2011

 

2010

 

Balance, beginning of period

 

$

21,707

 

$

18,498

 

$

21,529

 

$

17,340

 

Transfers from allowance for loan and lease losses

 

1,618

 

812

 

1,796

 

1,970

 

Balance, end of period

 

$

23,325

 

$

19,310

 

$

23,325

 

$

19,310

 

 

Impaired Loans and Leases

 

Information on impaired loans, excluding covered loans, at June 30, 2011 and December 31, 2010 is provided in the following tables: 

 

 

 

 

 

 

 

 

 

For the three months ended
June 30, 2011

 

For the six months ended
June 30, 2011

 

(in thousands)

 

Recorded 
Investment

 

Unpaid 
Principal 
Balance

 

Related 
Allowance

 

Average 
Recorded 
Investment

 

Interest Income
Recognized

 

Average 
Recorded 
Investment

 

Interest Income
Recognized

 

June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

4,007

 

$

4,007

 

$

—

 

$

5,204

 

$

—

 

$

5,901

 

$

—

 

Commercial real estate mortgages

 

14,610

 

14,530

 

—

 

16,550

 

60

 

18,866

 

190

 

Residential mortgages:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed

 

7,834

 

7,840

 

—

 

7,036

 

17

 

8,338

 

162

 

Variable

 

4,163

 

4,175

 

—

 

3,717

 

24

 

3,827

 

34

 

Total residential mortgages

 

11,997

 

12,015

 

—

 

10,753

 

41

 

12,165

 

196

 

Real estate construction:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

39,184

 

39,097

 

—

 

44,221

 

175

 

54,740

 

405

 

Land

 

11,271

 

11,271

 

—

 

17,400

 

—

 

19,510

 

—

 

Total real estate construction

 

50,455

 

50,368

 

—

 

61,621

 

175

 

74,250

 

405

 

Equity lines of credit

 

2,420

 

2,420

 

—

 

2,856

 

—

 

2,906

 

—

 

Installment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

Consumer

 

41

 

41

 

—

 

41

 

—

 

41

 

—

 

Total installment

 

41

 

41

 

—

 

41

 

—

 

41

 

—

 

Lease financing

 

762

 

762

 

—

 

935

 

—

 

1,002

 

99

 

Total with no related allowance

 

$

84,292

 

$

84,143

 

$

—

 

$

97,960

 

$

276

 

$

115,131

 

$

890

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

14,467

 

$

14,467

 

$

7,605

 

$

10,695

 

$

—

 

$

9,986

 

$

—

 

Commercial real estate mortgages

 

9,159

 

9,159

 

1,150

 

8,229

 

—

 

11,866

 

—

 

Residential mortgages:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed

 

539

 

537

 

56

 

1,046

 

—

 

886

 

—

 

Variable

 

—

 

—

 

—

 

707

 

—

 

950

 

—

 

Total residential mortgages

 

539

 

537

 

56

 

1,753

 

—

 

1,836

 

—

 

Real estate construction:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

—

 

—

 

—

 

4,409

 

—

 

5,889

 

—

 

Land

 

10,175

 

10,175

 

1,853

 

5,087

 

—

 

3,392

 

—

 

Total real estate construction

 

10,175

 

10,175

 

1,853

 

9,496

 

—

 

9,281

 

—

 

Equity lines of credit

 

2,102

 

2,102

 

404

 

1,530

 

3

 

1,642

 

6

 

Installment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

—

 

—

 

—

 

3,448

 

—

 

2,299

 

—

 

Total installment

 

—

 

—

 

—

 

3,448

 

—

 

2,299

 

—

 

Lease financing

 

—

 

—

 

—

 

—

 

—

 

285

 

—

 

Total with an allowance

 

$

36,442

 

$

36,440

 

$

11,068

 

$

35,151

 

$

3

 

$

37,195

 

$

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total impaired loans by type:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

18,474

 

$

18,474

 

$

7,605

 

$

15,899

 

$

—

 

$

15,887

 

$

—

 

Commercial real estate mortgages

 

23,769

 

23,689

 

1,150

 

24,779

 

60

 

30,732

 

190

 

Residential mortgages

 

12,536

 

12,552

 

56

 

12,506

 

41

 

14,001

 

196

 

Real estate construction

 

60,630

 

60,543

 

1,853

 

71,117

 

175

 

83,531

 

405

 

Equity lines of credit

 

4,522

 

4,522

 

404

 

4,386

 

3

 

4,548

 

6

 

Installment

 

41

 

41

 

—

 

3,489

 

—

 

2,350

 

—

 

Lease financing

 

762

 

762

 

—

 

935

 

—

 

1,287

 

99

 

Total impaired loans

 

$

120,734

 

$

120,583

 

$

11,068

 

$

133,111

 

$

279

 

$

152,326

 

$

896

 

 

(in thousands)

 

Recorded
 Investment

 

Unpaid 
Principal 
Balance

 

Related 
Allowance

 

December 31, 2010

 

 

 

 

 

 

 

With no related allowance recorded:

 

 

 

 

 

 

 

Commercial

 

$

7,295

 

$

7,293

 

$

—

 

Commercial real estate mortgages

 

23,496

 

23,426

 

—

 

Residential mortgages:

 

 

 

 

 

 

 

Fixed

 

10,942

 

10,858

 

—

 

Variable

 

4,048

 

4,040

 

—

 

Total residential mortgages

 

14,990

 

14,898

 

—

 

Real estate construction:

 

 

 

 

 

 

 

Construction

 

75,778

 

75,639

 

—

 

Land

 

23,732

 

23,732

 

—

 

Total real estate construction

 

99,510

 

99,371

 

—

 

Equity lines of credit

 

3,006

 

2,997

 

—

 

Installment:

 

 

 

 

 

 

 

Consumer

 

41

 

41

 

—

 

Total installment

 

41

 

41

 

—

 

Lease financing

 

1,137

 

1,107

 

—

 

Total with no related allowance

 

$

149,475

 

$

149,133

 

$

—

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

Commercial

 

$

8,567

 

$

8,567

 

$

2,067

 

Commercial real estate mortgages

 

19,139

 

19,154

 

1,889

 

Residential mortgages:

 

 

 

 

 

 

 

Fixed

 

566

 

563

 

69

 

Variable

 

1,435

 

1,428

 

273

 

Total residential mortgages

 

2,001

 

1,991

 

342

 

Real estate construction:

 

 

 

 

 

 

 

Construction

 

8,850

 

8,850

 

366

 

Total real estate construction

 

8,850

 

8,850

 

366

 

Equity lines of credit

 

1,868

 

1,862

 

255

 

Lease financing

 

855

 

855

 

525

 

Total with an allowance

 

$

41,280

 

$

41,279

 

$

5,444

 

 

 

 

 

 

 

 

 

Total impaired loans by type:

 

 

 

 

 

 

 

Commercial

 

$

15,862

 

$

15,860

 

$

2,067

 

Commercial real estate mortgages

 

42,635

 

42,580

 

1,889

 

Residential mortgages

 

16,991

 

16,889

 

342

 

Real estate construction

 

108,360

 

108,221

 

366

 

Equity lines of credit

 

4,874

 

4,859

 

255

 

Installment

 

41

 

41

 

—

 

Lease financing

 

1,992

 

1,962

 

525

 

Total impaired loans

 

$

190,755

 

$

190,412

 

$

5,444

 

 

Information on impaired loans, excluding covered loans, at June 30, 2010 is provided in the following table:

 

 

 

Unpaid Principal Balance

 

 

 

 

 

(in thousands)

 

With No 
Allowance 
Recorded

 

With 
Allowance 
Recorded

 

Total 
Impaired 
Loans

 

Related 
Allowance

 

June 30, 2010

 

 

 

 

 

 

 

 

 

Commercial

 

$

23,910

 

$

16,595

 

$

40,505

 

$

6,368

 

Commercial real estate mortgage

 

9,974

 

42,579

 

52,553

 

6,350

 

Residential mortgages

 

9,700

 

1,109

 

10,809

 

90

 

Real estate construction

 

74,412

 

79,735

 

154,147

 

12,836

 

Equity lines of credit

 

1,200

 

—

 

1,200

 

—

 

Lease financing

 

1,647

 

1,120

 

2,767

 

895

 

Total impaired loans

 

$

120,843

 

$

141,138

 

$

261,981

 

$

26,539

 

 

Additional detail on the components of impaired loans, excluding covered loans, is provided below:

 

(in thousands)

 

June 30,
2011

 

December 31,
2010

 

June 30,
2010

 

Nonaccrual loans (1)

 

$

119,375

 

$

179,578

 

$

251,807

 

Troubled debt restructured loans on accrual

 

1,208

 

10,834

 

10,174

 

Total impaired loans, excluding covered loans

 

$

120,583

 

$

190,412

 

$

261,981

 

 

(1)         Impaired loans exclude $13.4 million, $11.3 million and $8.3 million of nonaccrual loans under $500,000 that are not individually evaluated for impairment at June 30, 2011, December 31, 2010 and June 30, 2010.

 

Impaired loans may include troubled debt restructured loans that have been returned to accrual status, but will continue to be reported as impaired until they have a demonstrated period of performance under their restructured terms.  Impaired loans at June 30, 2011, December 31, 2010 and June 30, 2010 included $1.2 million, $10.8 million and $10.2 million, respectively, of restructured loans that have been returned to accrual status.

 

The average balance of impaired loans was $133.1 million and $152.3 million for the three months and six months ended June 30, 2011, respectively. The average balance of impaired loans was $290.5 million and $318.9 million for the same periods of 2010.  With the exception of restructured loans that have been returned to accrual status and a limited number of loans on cash basis nonaccrual for which the full collection of principal and interest is expected, interest income is not recognized on impaired loans until the principal balance of these loans is paid off.

 

Troubled Debt Restructured Loans

 

The unpaid principal balance of troubled debt restructured loans was $18.3 million, before specific reserves of $1.3 million, at June 30, 2011, $32.5 million, before specific reserves of $1.6 million, at December 31, 2010, and $27.5 million, before specific reserves of $3.9 million, at June 30, 2010. As of June 30, 2011, there were no commitments to lend additional funds on restructured loans.

 

Past Due and Nonaccrual Loans and Leases

 

Loans are considered past due following the date when either interest or principal is contractually due and unpaid.  The following tables provide a summary of past due and nonaccrual loans, excluding covered loans, at June 30, 2011, December 31, 2010 and June 30, 2010 based upon the length of time the loans have been past due:

 

(in thousands)

 

30-59 Days 
Past Due

 

60-89 Days 
Past Due

 

Greater 
Than 90 
Days and 
Accruing

 

Nonaccrual

 

Total Past 
Due and 
Nonaccrual 
Loans

 

Current

 

Total Loans 
and Leases

 

June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

18,270

 

$

622

 

$

351

 

$

23,575

 

$

42,818

 

$

4,378,081

 

$

4,420,899

 

Commercial real estate mortgages

 

15,342

 

—

 

586

 

26,676

 

42,604

 

1,887,665

 

1,930,269

 

Residential mortgages:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed

 

—

 

—

 

1,282

 

10,036

 

11,318

 

1,664,751

 

1,676,069

 

Variable

 

—

 

1,317

 

—

 

4,175

 

5,492

 

2,029,204

 

2,034,696

 

Total residential mortgages

 

—

 

1,317

 

1,282

 

14,211

 

16,810

 

3,693,955

 

3,710,765

 

Real estate construction:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

—

 

—

 

—

 

39,097

 

39,097

 

198,183

 

237,280

 

Land

 

—

 

—

 

4,995

 

21,446

 

26,441

 

91,293

 

117,734

 

Total real estate construction

 

—

 

—

 

4,995

 

60,543

 

65,538

 

289,476

 

355,014

 

Equity lines of credit

 

74

 

160

 

—

 

6,668

 

6,902

 

728,997

 

735,899

 

Installment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

—

 

—

 

—

 

68

 

68

 

1,418

 

1,486

 

Consumer

 

95

 

40

 

—

 

297

 

432

 

129,006

 

129,438

 

Total installment

 

95

 

40

 

—

 

365

 

500

 

130,424

 

130,924

 

Lease financing

 

—

 

—

 

—

 

762

 

762

 

378,591

 

379,353

 

Total

 

$

33,781

 

$

2,139

 

$

7,214

 

$

132,800

 

$

175,934

 

$

11,487,189

 

$

11,663,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

9,832

 

$

4,178

 

$

904

 

$

19,498

 

$

34,412

 

$

4,102,462

 

$

4,136,874

 

Commercial real estate mortgages

 

15,112

 

3,996

 

—

 

44,882

 

63,990

 

1,894,327

 

1,958,317

 

Residential mortgages:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed

 

—

 

731

 

379

 

13,253

 

14,363

 

1,628,683

 

1,643,046

 

Variable

 

—

 

—

 

—

 

5,468

 

5,468

 

1,903,798

 

1,909,266

 

Total residential mortgages

 

—

 

731

 

379

 

18,721

 

19,831

 

3,532,481

 

3,552,312

 

Real estate construction:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

554

 

—

 

—

 

74,446

 

75,000

 

251,518

 

326,518

 

Land

 

—

 

—

 

—

 

23,763

 

23,763

 

117,504

 

141,267

 

Total real estate construction

 

554

 

—

 

—

 

98,209

 

98,763

 

369,022

 

467,785

 

Equity lines of credit

 

74

 

526

 

—

 

6,782

 

7,382

 

726,359

 

733,741

 

Installment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

63

 

—

 

—

 

308

 

371

 

30,790

 

31,161

 

Consumer

 

304

 

—

 

—

 

282

 

586

 

128,397

 

128,983

 

Total installment

 

367

 

—

 

—

 

590

 

957

 

159,187

 

160,144

 

Lease financing

 

7

 

—

 

1,216

 

2,241

 

3,464

 

373,991

 

377,455

 

Total

 

$

25,946

 

$

9,431

 

$

2,499

 

$

190,923

 

$

228,799

 

$

11,157,829

 

$

11,386,628

 

 

(in thousands)

 

30-59 Days 
Past Due

 

60-89 Days 
Past Due

 

Greater 
Than 90 
Days and 
Accruing

 

Nonaccrual

 

Total Past 
Due and 
Nonaccrual 
Loans

 

Current

 

Total Loans 
and Leases

 

June 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

29,781

 

$

2,898

 

$

149

 

$

44,431

 

$

77,259

 

$

3,858,285

 

$

3,935,544

 

Commercial real estate mortgages

 

5,442

 

1,422

 

—

 

57,155

 

64,019

 

2,013,984

 

2,078,003

 

Residential mortgages:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed

 

—

 

2,773

 

640

 

7,002

 

10,415

 

1,663,212

 

1,673,627

 

Variable

 

—

 

1,256

 

—

 

4,504

 

5,760

 

1,898,507

 

1,904,267

 

Total residential mortgages

 

—

 

4,029

 

640

 

11,506

 

16,175

 

3,561,719

 

3,577,894

 

Real estate construction:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

33,610

 

3,851

 

—

 

97,706

 

135,167

 

320,643

 

455,810

 

Land

 

1,025

 

—

 

—

 

41,203

 

42,228

 

131,864

 

174,092

 

Total real estate construction

 

34,635

 

3,851

 

—

 

138,909

 

177,395

 

452,507

 

629,902

 

Equity lines of credit

 

249

 

—

 

—

 

3,909

 

4,158

 

737,913

 

742,071

 

Installment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

—

 

—

 

—

 

112

 

112

 

40,493

 

40,605

 

Consumer

 

172

 

44

 

—

 

860

 

1,076

 

127,389

 

128,465

 

Total installment

 

172

 

44

 

—

 

972

 

1,188

 

167,882

 

169,070

 

Lease financing

 

—

 

—

 

—

 

3,236

 

3,236

 

347,324

 

350,560

 

Total

 

$

70,279

 

$

12,244

 

$

789

 

$

260,118

 

$

343,430

 

$

11,139,614

 

$

11,483,044

 

 

Credit Quality Monitoring

 

The Company closely monitors and assesses credit quality and credit risk in the loan and lease portfolio on an ongoing basis.  Loan risk classifications are continuously reviewed and updated. The following tables provide a summary of the loan and lease portfolio, excluding covered loans, by loan type and credit quality classification as of June 30, 2011, December 31, 2010 and June 30, 2010. Nonclassified loans generally include those loans that are expected to be repaid in accordance with contractual loan terms. Classified loans are those loans that are classified as substandard or doubtful consistent with regulatory guidelines.

 

 

 

June 30, 2011

 

(in thousands)

 

Nonclassified

 

Classified

 

Total

 

Commercial

 

$

4,308,312

 

$

112,587

 

$

4,420,899

 

Commercial real estate mortgages

 

1,716,331

 

213,938

 

1,930,269

 

Residential mortgages:

 

 

 

 

 

 

 

Fixed

 

1,651,983

 

24,086

 

1,676,069

 

Variable

 

2,019,857

 

14,839

 

2,034,696

 

Total residential mortgages

 

3,671,840

 

38,925

 

3,710,765

 

Real estate construction:

 

 

 

 

 

 

 

Construction

 

128,584

 

108,696

 

237,280

 

Land

 

47,214

 

70,520

 

117,734

 

Total real estate construction

 

175,798

 

179,216

 

355,014

 

Equity lines of credit

 

717,536

 

18,363

 

735,899

 

Installment:

 

 

 

 

 

 

 

Commercial

 

656

 

830

 

1,486

 

Consumer

 

127,561

 

1,877

 

129,438

 

Total installment

 

128,217

 

2,707

 

130,924

 

Lease financing

 

374,784

 

4,569

 

379,353

 

Total

 

$

11,092,818

 

$

570,305

 

$

11,663,123

 

 

 

 

December 31, 2010

 

June 30, 2010

 

(in thousands)

 

Nonclassified

 

Classified

 

Total

 

Nonclassified

 

Classified

 

Total

 

Commercial

 

$

4,009,923

 

$

126,951

 

$

4,136,874

 

$

3,731,182

 

$

204,362

 

$

3,935,544

 

Commercial real estate mortgages

 

1,727,353

 

230,964

 

1,958,317

 

1,856,382

 

221,621

 

2,078,003

 

Residential mortgages:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed

 

1,615,970

 

27,076

 

1,643,046

 

1,644,380

 

29,247

 

1,673,627

 

Variable

 

1,880,570

 

28,696

 

1,909,266

 

1,856,508

 

47,759

 

1,904,267

 

Total residential mortgages

 

3,496,540

 

55,772

 

3,552,312

 

3,500,888

 

77,006

 

3,577,894

 

Real estate construction:

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

129,671

 

196,847

 

326,518

 

213,061

 

242,749

 

455,810

 

Land

 

53,400

 

87,867

 

141,267

 

71,892

 

102,200

 

174,092

 

Total real estate construction

 

183,071

 

284,714

 

467,785

 

284,953

 

344,949

 

629,902

 

Equity lines of credit

 

716,276

 

17,465

 

733,741

 

725,133

 

16,938

 

742,071

 

Installment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

21,349

 

9,812

 

31,161

 

38,057

 

2,548

 

40,605

 

Consumer

 

126,905

 

2,078

 

128,983

 

125,523

 

2,942

 

128,465

 

Total installment

 

148,254

 

11,890

 

160,144

 

163,580

 

5,490

 

169,070

 

Lease financing

 

371,684

 

5,771

 

377,455

 

342,609

 

7,951

 

350,560

 

Total

 

$

10,653,101

 

$

733,527

 

$

11,386,628

 

$

10,604,727

 

$

878,317

 

$

11,483,044

 

 

Credit Quality on Covered Loans

 

The following is a summary of activity in the allowance for loan losses on covered loans:

 

 

 

For the three months ended
June 30,

 

For the six months ended
June 30,

 

(in thousands)

 

2011

 

2010

 

2011

 

2010

 

Balance, beginning of period

 

$

82,016

 

$

—

 

$

67,389

 

$

—

 

Provision for losses

 

1,716

 

46,516

 

20,832

 

46,516

 

Reduction in allowance due to loan removals

 

(16,103

)

(261

)

(20,592

)

(261

)

Balance, end of period

 

$

67,629

 

$

46,255

 

$

67,629

 

$

46,255

 

 

The allowance for loan losses on covered loans was $67.6 million and $46.3 million as of June 30, 2011 and 2010, respectively. The Company recorded provision expense of $1.7 million and $20.8 million on covered loans for the three and six months ended June 30, 2011, respectively, and $46.5 million for the three and six months ended June 30, 2010, respectively.  The Company updates its cash flow projections for covered loans accounted for under ASC 310-30 on a quarterly basis, and may recognize provision expense and an allowance for loan losses as a result of that analysis. The loss on covered loans is the result of changes in expected cash flows, both amount and timing, due to loan payments and the Company’s revised loss forecasts, though overall estimated credit losses decreased as compared with previous expectations. The revisions of the loss forecasts were based on the results of management’s review of the credit quality of the outstanding covered loans and the analysis of the loan performance data since the acquisition of covered loans.  The allowance for loan losses on covered loans is reduced for any loan removals.  A loan is removed when it has been fully paid-off, fully charged off, sold or transferred to OREO.

 

Covered loans accounted for under ASC 310-30 are generally considered accruing and performing loans as the loans accrete interest income over the estimated life of the loan when cash flows are reasonably estimable. Accordingly, acquired impaired loans that are contractually past due are still considered to be accruing and performing loans. If the timing and amount of future cash flows is not reasonably estimable, the loans may be classified as nonaccrual loans and interest income is not recognized until the timing and amount of future cash flows can be reasonably estimated. At June 30, 2011 and 2010, there were no acquired impaired covered loans accounted for under ASC 310-30 that were on nonaccrual status.  Of the population of covered loans that are accounted for outside the scope of ASC 310-30, the Company had $1.4 million and $2.6 million of acquired covered loans that were on nonaccrual status and were considered to be impaired as of June 30, 2011 and December 31, 2010, respectively.

 

At June 30, 2011, covered loans that were 30 to 89 days delinquent totaled $47.3 million and covered loans that were 90 days or more past due on accrual status totaled $368.4 million.  At December 31, 2010, covered loans that were 30 to 89 days delinquent totaled $99.5 million and covered loans that were 90 days or more past due on accrual status totaled $399.0 million.  At June 30, 2010, covered loans that were 30 to 89 days delinquent totaled $56.3 million and covered loans that were 90 days or more past due on accrual status totaled $362.7 million.