NOTE 2 – LOANS AND LEASES

The Company’s loan and lease portfolio is disaggregated into the following segments: commercial and industrial; real estate; credit card; and all other. The real estate segment is further disaggregated into the following classes: consumer mortgages; home equity; agricultural; commercial and industrial-owner occupied; construction, acquisition and development; and commercial. A summary of gross loans and leases by segment and class as of the dates indicated follows:



		March 31,		December 31,
		2017	2016	2016

	(In thousands)

Commercial and industrial		$ 1,539,481	$ 1,720,574	$ 1,615,608
Real estate
Consumer mortgages		2,675,672	2,480,828	2,643,966
Home equity		626,488	605,228	628,846
Agricultural		240,534	239,422	245,377
Commercial and industrial-owner occupied		1,801,613	1,654,577	1,764,265
Construction, acquisition and development		1,136,827	966,362	1,157,248
Commercial real estate		2,271,542	2,233,742	2,237,719
Credit cards		103,813	106,714	109,656
All other		426,598	468,081	432,827
Gross Loans Total		10,822,568	10,475,528	10,835,512
Less: Unearned Income		20,874	30,831	23,521
Net Loans		$ 10,801,694	$ 10,444,697	$ 10,811,991

(1)

Gross loans and leases are net of deferred costs of $1.6 million, approximately $264,000 and approximately $282,000 at March 31, 2017 and 2016 and December 31, 2016, respectively.

The following table shows the Company’s loans and leases, net of unearned income, as of March 31, 2017 by segment, class and geographical location:



	Alabama
	and Florida
	Panhandle	Arkansas	Louisiana	Mississippi	Missouri	Tennessee	Texas	Other	Total
	(In thousands)
Commercial and industrial	$ 146,277	$ 181,759	$ 172,034	$ 554,665	$ 85,672	$ 118,052	$ 219,638	$ 58,430	$ 1,536,527
Real estate
Consumer mortgages	355,497	322,928	224,643	846,615	89,752	302,422	506,417	27,398	2,675,672
Home equity	95,605	44,558	71,903	230,822	21,956	144,109	15,722	1,813	626,488
Agricultural	8,540	83,664	26,241	66,060	6,568	13,501	35,927	33	240,534
Commercial and industrial-owner occupied	200,300	193,486	210,282	732,207	47,847	155,666	261,825	-	1,801,613
Construction, acquisition and development	125,908	61,890	53,512	344,875	21,592	167,290	361,760	-	1,136,827
Commercial real estate	314,657	355,978	219,715	585,549	200,684	202,476	392,068	415	2,271,542
Credit cards	-	-	-	-	-	-	-	103,813	103,813
All other	52,756	41,000	25,235	212,471	3,417	23,799	43,841	6,159	408,678
Total	$ 1,299,540	$ 1,285,263	$ 1,003,565	$ 3,573,264	$ 477,488	$ 1,127,315	$ 1,837,198	$ 198,061	$ 10,801,694

There are no other loan and lease concentrations which exceed 10% of total loans and leases not already reflected in the preceding tables. A substantial portion of construction, acquisition and development loans are secured by real estate in markets in which the Company is located. The Company’s loan policy generally prohibits loans for the sole purpose of carrying interest reserves. Certain of the construction, acquisition and development loans were structured with interest-only terms. A portion of the consumer mortgage and commercial real estate portfolios were originated through the permanent financing of construction, acquisition and development loans. Future economic distress could negatively impact borrowers’ and guarantors’ ability to repay their debt which would make more of the Company’s loans collateral dependent.

The following tables provide details regarding the aging of the Company’s loan and lease portfolio, net of unearned income, by segment and class at March 31, 2017 and December 31, 2016:



	March 31, 2017
							90+ Days
	30-59 Days	60-89 Days	90+ Days	Total		Total	Past Due still
	Past Due	Past Due	Past Due	Past Due	Current	Outstanding	Accruing
	(In thousands)
Commercial and industrial	$ 4,811	$ 4,621	$ 6,588	$ 16,020	$ 1,520,507	$ 1,536,527	$ 84
Real estate
Consumer mortgages	8,303	3,818	13,897	26,018	2,649,654	2,675,672	2,555
Home equity	1,501	396	1,999	3,896	622,592	626,488	-
Agricultural	3,224	2,758	1,067	7,049	233,485	240,534	-
Commercial and industrial-owner occupied	1,630	2,914	4,892	9,436	1,792,177	1,801,613	-
Construction, acquisition and development	3,390	309	1,048	4,747	1,132,080	1,136,827	-
Commercial real estate	2,654	1	11,821	14,476	2,257,066	2,271,542	-
Credit cards	493	337	439	1,269	102,544	103,813	424
All other	525	265	55	845	407,833	408,678	-
Total	$ 26,531	$ 15,419	$ 41,806	$ 83,756	$ 10,717,938	$ 10,801,694	$ 3,063



	December 31, 2016
							90+ Days
	30-59 Days	60-89 Days	90+ Days	Total		Total	Past Due still
	Past Due	Past Due	Past Due	Past Due	Current	Outstanding	Accruing
	(In thousands)
Commercial and industrial	$ 3,231	$ 1,610	$ 9,152	$ 13,993	$ 1,598,302	$ 1,612,295	$ 58
Real estate
Consumer mortgages	12,393	6,785	15,054	34,232	2,609,734	2,643,966	3,439
Home equity	2,771	670	2,959	6,400	622,446	628,846	-
Agricultural	969	354	247	1,570	243,807	245,377	-
Commercial and industrial-owner occupied	2,551	530	4,342	7,423	1,756,842	1,764,265	-
Construction, acquisition and development	2,101	440	1,443	3,984	1,153,264	1,157,248	14
Commercial real estate	312	933	11,211	12,456	2,225,263	2,237,719	-
Credit cards	466	297	501	1,264	108,392	109,656	472
All other	550	148	230	928	411,691	412,619	-
Total	$ 25,344	$ 11,767	$ 45,139	$ 82,250	$ 10,729,741	$ 10,811,991	$ 3,983

The Company utilizes an internal loan classification system to grade loans according to certain credit quality indicators. These credit quality indicators include, but are not limited to, recent credit performance, delinquency, liquidity, cash flows, debt coverage ratios, collateral type and loan-to-value ratio. The Company’s internal loan classification system is compatible with classifications used by the Federal Deposit Insurance Corporation, as well as other regulatory agencies. Loans may be classified as follows:

Pass: Loans which are performing as agreed with few or no signs of weakness. These loans show sufficient cash flow, capital and collateral to repay the loan as agreed.

Special Mention: Loans where potential weaknesses have developed which could cause a more serious problem if not corrected.

Substandard: Loans where well-defined weaknesses exist that require corrective action to prevent further deterioration. Loans are further characterized by the possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans having all the characteristics of Substandard and which have deteriorated to a point where collection and liquidation in full is highly questionable.

Loss: Loans that are considered uncollectible or with limited possible recovery.

Impaired: Loans for which it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement and for which a specific impairment reserve has been considered.

The following tables provide details of the Company’s loan and lease portfolio, net of unearned income, by segment, class and internally assigned grade at March 31, 2017 and December 31, 2016:


	March 31, 2017
		Special
	Pass	Mention	Substandard	Doubtful	Loss	Impaired (1)	Total

	(In thousands)
Commercial and industrial	$ 1,489,753	$ -	$ 34,936	$ -	$ -	$ 11,838	$ 1,536,527
Real estate
Consumer mortgages	2,611,576	517	62,045	258	-	1,276	2,675,672
Home equity	615,753	-	9,881	-	-	854	626,488
Agricultural	227,902	-	8,899	141	-	3,592	240,534
Commercial and industrial-owner occupied	1,734,995	3,663	50,908	-	-	12,047	1,801,613
Construction, acquisition and development	1,124,929	-	11,621	-	-	277	1,136,827
Commercial real estate	2,216,915	-	42,614	-	-	12,013	2,271,542
Credit cards	103,813	-	-	-	-	-	103,813
All other	402,287	-	6,291	100	-	-	408,678
Total	$ 10,527,923	$ 4,180	$ 227,195	$ 499	$ -	$ 41,897	$ 10,801,694

(1) Impaired loans are shown exclusive of $4.1 million of accruing troubled debt restructurings (“TDRs”) and $2.7 million of non-accruing TDRs.


	December 31, 2016
		Special
	Pass	Mention	Substandard	Doubtful	Loss	Impaired (1)	Total
	(In thousands)
Commercial and industrial	$ 1,562,263	$ -	$ 41,618	$ 100	$ -	$ 8,314	$ 1,612,295
Real estate
Consumer mortgages	2,579,905	522	61,602	282	-	1,655	2,643,966
Home equity	616,758	-	11,231	-	-	857	628,846
Agricultural	233,939	-	10,577	-	-	861	245,377
Commercial and industrial-owner occupied	1,705,266	3,668	47,010	-	-	8,321	1,764,265
Construction, acquisition and development	1,135,618	-	15,697	-	-	5,933	1,157,248
Commercial real estate	2,179,318	634	45,471	-	-	12,296	2,237,719
Credit cards	109,656	-	-	-	-	-	109,656
All other	405,611	-	7,008	-	-	-	412,619
Total	$ 10,528,334	$ 4,824	$ 240,214	$ 382	$ -	$ 38,237	$ 10,811,991

(1) Impaired loans are shown exclusive of $26.0 million of accruing TDRs and $2.2 million of non-accruing TDRs.

The following tables provide details regarding impaired loans and leases, net of unearned income, which exclude accruing TDRs by segment and class as of and for the three months ended March 31, 2017 and as of and for the year ended December 31, 2016:



	March 31, 2017
		Unpaid		Average Recorded Investment	Interest Income Recognized
	Recorded	Principal	Related	Three months	Three months
	Investment	Balance of	Allowance	ended	ended
	in Impaired	Impaired	for Credit	March 31,	March 31,
	Loans (1)	Loans	Losses	2017	2017
	(In thousands)
With no related allowance:
Commercial and industrial	$ 6,801	$ 12,021	$ -	$ 6,600	$ 15
Real estate:
Consumer mortgages	1,270	1,670	-	1,302	-
Home equity	266	381	-	470	2
Agricultural	3,592	3,650	-	1,794	4
Commercial and industrial-owner occupied	7,464	8,293	-	7,447	37
Construction, acquisition and development	250	250	-	1,701	-
Commercial real estate	2,382	2,382	-	2,537	3
All other	-	-	-	-	-
Total	$ 22,025	$ 28,647	$ -	$ 21,851	$ 61

With an allowance:
Commercial and industrial	$ 5,037	$ 5,037	$ 3,482	$ 4,244	$ 2
Real estate:
Consumer mortgages	6	74	7	411	-
Home equity	588	1,216	30	385	-
Agricultural	-	-	-	-	-
Commercial and industrial-owner occupied	4,583	5,200	352	3,827	4
Construction, acquisition and development	27	27	30	131	-
Commercial real estate	9,631	9,631	2,329	9,639	4
All other	-	-	-	-	-
Total	$ 19,872	$ 21,185	$ 6,230	$ 18,637	$ 10

Total:
Commercial and industrial	$ 11,838	$ 17,058	$ 3,482	$ 10,844	$ 17
Real estate:
Consumer mortgages	1,276	1,744	7	1,713	-
Home equity	854	1,597	30	855	2
Agricultural	3,592	3,650	-	1,794	4
Commercial and industrial-owner occupied	12,047	13,493	352	11,274	41
Construction, acquisition and development	277	277	30	1,832	-
Commercial real estate	12,013	12,013	2,329	12,176	7
All other	-	-	-	-	-
Total	$ 41,897	$ 49,832	$ 6,230	$ 40,488	$ 71

(1)

Excludes $2.7 million of non-accruing TDRs and $4.1 million of accruing TDRs.



	December 31, 2016
		Unpaid
	Recorded	Principal	Related
	Investment	Balance of	Allowance	Average	Interest
	in Impaired	Impaired	for Credit	Recorded	Income
	Loans (1)	Loans	Losses	Investment	Recognized
	(In thousands)
With no related allowance:
Commercial and industrial	$ 6,222	$ 11,856	$ -	$ 6,394	$ 72
Real estate:
Consumer mortgages	1,655	2,305	-	1,851	22
Home equity	857	1,600	-	1,176	9
Agricultural	861	919	-	440	8
Commercial and industrial-owner occupied	8,321	9,520	-	10,314	355
Construction, acquisition and development	4,803	4,803	-	5,379	4
Commercial real estate	2,646	2,646	-	4,391	94
All other	-	-	-	-	-
Total	$ 25,365	$ 33,649	$ -	$ 29,945	$ 564
With an allowance:
Commercial and industrial	$ 2,092	$ 2,092	$ 1,837	$ 1,190	$ 20
Real estate:
Consumer mortgages	-	-	-	431	-
Home equity	-	-	-	367	1
Agricultural	-	-	-	352	-
Commercial and industrial-owner occupied	-	-	-	741	-
Construction, acquisition and development	1,130	1,130	35	739	10
Commercial real estate	9,650	9,650	2,481	9,868	203
All other	-	-	-	-	-
Total	$ 12,872	$ 12,872	$ 4,353	$ 13,688	$ 234
Total:
Commercial and industrial	$ 8,314	$ 13,948	$ 1,837	$ 7,584	$ 92
Real estate:
Consumer mortgages	1,655	2,305	-	2,282	22
Home equity	857	1,600	-	1,543	10
Agricultural	861	919	-	792	8
Commercial and industrial-owner occupied	8,321	9,520	-	11,055	355
Construction, acquisition and development	5,933	5,933	35	6,118	14
Commercial real estate	12,296	12,296	2,481	14,259	297
All other	-	-	-	-	-
Total	$ 38,237	$ 46,521	$ 4,353	$ 43,633	$ 798

(1)

Excludes $2.2 million of non-accruing TDRs and $26.0 million of accruing TDRs.

The following tables provide details regarding impaired loans and leases, net of unearned income, which include accruing TDRs, by segment and class as of and for the three months ended March 31, 2017 and as of and for the year ended December 31, 2016:


	March 31, 2017
	Recorded	Unpaid Principal		Average Recorded Investment	Interest Income Recognized
	Investment	Balance of	Related	Three months	Three months
	in Impaired	Impaired Loans	Allowance	ended	ended
	Loans and	and	for Credit	March 31,	March 31,
	Accruing TDRs	Accruing TDRs	Losses	2017	2017
	(In thousands)
With no related allowance:
Commercial and industrial	$ 6,801	$ 12,021	$ -	$ 12,584	$ 111
Real estate:
Consumer mortgages	1,270	1,670	-	1,302	-
Home equity	266	381	-	470	2
Agricultural	3,592	3,650	-	1,794	4
Commercial and industrial-owner occupied	7,464	8,293	-	7,447	37
Construction, acquisition and development	250	250	-	1,706	-
Commercial real estate	2,382	2,382	-	4,307	24
All other	-	-	-	-	-
Total	$ 22,025	$ 28,647	$ -	$ 29,610	$ 178
With an allowance:
Commercial and industrial	$ 5,368	$ 5,387	$ 3,544	$ 5,138	$ 13
Real estate:
Consumer mortgages	1,654	1,858	299	2,670	16
Home equity	721	1,359	41	486	-
Agricultural	348	360	26	170	1
Commercial and industrial-owner occupied	7,525	8,951	478	8,106	44
Construction, acquisition and development	261	261	41	366	2
Commercial real estate	9,755	9,755	2,339	12,130	32
Credit card	821	821	49	851	85
All other	217	240	33	1,921	19
Total	$ 26,670	$ 28,992	$ 6,850	$ 31,838	$ 212
Total:
Commercial and industrial	$ 12,169	$ 17,408	$ 3,544	$ 17,722	$ 124
Real estate:
Consumer mortgages	2,924	3,528	299	3,972	16
Home equity	987	1,740	41	956	2
Agricultural	3,940	4,010	26	1,964	5
Commercial and industrial-owner occupied	14,989	17,244	478	15,553	81
Construction, acquisition and development	511	511	41	2,072	2
Commercial real estate	12,137	12,137	2,339	16,437	56
Credit card	821	821	49	851	85
All other	217	240	33	1,921	19
Total	$ 48,695	$ 57,639	$ 6,850	$ 61,448	$ 390


	December 31, 2016
		Recorded	Unpaid Principal
		Investment	Balance of	Related
		in Impaired	Impaired Loans	Allowance	Average	Interest
		Loans and	and	for Credit	Recorded	Income
		Accruing TDRs	Accruing TDRs	Losses	Investment	Recognized
		(In thousands)
With no related allowance:
Commercial and industrial		$ 6,222	$ 11,856	$ -	$ 6,394	$ 72
Real estate:
Consumer mortgages		1,655	2,305	-	1,851	22
Home equity		857	1,600	-	1,176	9
Agricultural		861	919	-	440	8
Commercial and industrial-owner occupied		8,321	9,520	-	10,314	355
Construction, acquisition and development		4,803	4,803	-	5,379	4
Commercial real estate		2,646	2,646	-	4,391	94
All other		-	-	-	-	-
Total		$ 25,365	$ 33,649	$ -	$ 29,945	$ 564

With an allowance:
Commercial and industrial		$ 12,401	$ 12,424	$ 1,938	$ 4,045	$ 160
Real estate:
Consumer mortgages		2,453	2,734	300	2,241	55
Home equity		3	13	1	377	1
Agricultural		76	76	1	424	4
Commercial and industrial-owner occupied		4,937	5,406	103	4,643	124
Construction, acquisition and development		1,373	1,373	47	1,551	35
Commercial real estate		16,187	16,400	2,532	12,888	336
Credit cards		823	823	58	881	347
All other		2,890	2,927	23	1,894	78
Total		$ 41,143	$ 42,176	$ 5,003	$ 28,944	$ 1,140

Total:
Commercial and industrial		$ 18,623	$ 24,280	$ 1,938	$ 10,439	$ 232
Real estate:
Consumer mortgages		4,108	5,039	300	4,092	77
Home equity		860	1,613	1	1,553	10
Agricultural		937	995	1	864	12
Commercial and industrial-owner occupied		13,258	14,926	103	14,957	479
Construction, acquisition and development		6,176	6,176	47	6,930	39
Commercial real estate		18,833	19,046	2,532	17,279	430
Credit cards		823	823	58	881	347
All other		2,890	2,927	23	1,894	78
Total		$ 66,508	$ 75,825	$ 5,003	$ 58,889	$ 1,704

Loans considered impaired under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 310, Receivables (“FASB ASC 310”), are loans greater than $500,000 for which, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement and all loans restructured in a TDR. The Company’s recorded investment in loans considered impaired exclusive of accruing TDRs at March 31, 2017 and December 31, 2016 was $41.9 million and $38.2 million, respectively. At March 31, 2017 and December 31, 2016, $19.9 million and $12.9 million, respectively, of those impaired loans had a valuation allowance of $6.2 million and $4.4 million, respectively. The remaining balance of impaired loans of $22.0 million and $25.3 million at March 31, 2017 and December 31, 2016, respectively, have sufficient collateral supporting the collection of all outstanding principle or were charged down to fair value, less estimated selling costs. Therefore, such loans did not have an associated valuation allowance. Impaired loans that were characterized as non-accruing TDRs totaled $11.6 million and $12.6 million at March 31, 2017 and December 31, 2016, respectively.

Non-performing loans and leases (“NPLs”) consist of non-accrual loans and leases, loans and leases 90 days or more past due and still accruing, and loans and leases that have been restructured because of the borrower’s weakened financial condition. The following table presents information concerning NPLs as of the dates indicated:



		March 31,		December 31,
		2017	2016	2016
	(In thousands)

Non-accrual loans and leases		$ 74,439	$ 81,926	$ 71,812
Loans and leases 90 days or more past due, still accruing		3,063	4,567	3,983
Restructured loans and leases still accruing		4,060	7,753	26,047
Total non-performing loans and leases		$ 81,562	$ 94,246	$ 101,842

The Bank’s policy for all loan classifications provides that loans and leases are generally placed in non-accrual status if, in management’s opinion, payment in full of principal or interest is not expected or payment of principal or interest is more than 90 days past due, unless such loan or lease is both well-secured and in the process of collection. At March 31, 2017, the Company’s geographic NPL distribution was concentrated primarily in its Arkansas, Mississippi and Missouri markets. The following table presents the Company’s nonaccrual loans and leases by segment and class as of the dates indicated:



	March 31,		December 31,
	2017	2016	2016
	(In thousands)
Commercial and industrial	$ 13,959	$ 10,248	$ 13,679
Real estate
Consumer mortgages	21,543	22,968	21,084
Home equity	3,157	3,564	3,817
Agricultural	5,180	932	1,546
Commercial and industrial-owner occupied	15,135	16,633	10,791
Construction, acquisition and development	1,466	7,720	7,022
Commercial real estate	13,638	19,417	13,402
Credit cards	87	188	161
All other	274	256	310
Total	$ 74,439	$ 81,926	$ 71,812

In the normal course of business, management will sometimes grant concessions, which would not otherwise be considered, to borrowers that are experiencing financial difficulty. Loans identified as meeting the criteria set out in FASB ASC 310 are identified as TDRs. The concessions granted most frequently for TDRs involve reductions or delays in required payments of principal and interest for a specified period or the rescheduling of payments in accordance with a bankruptcy plan. In most cases, the conditions of the credit also warrant nonaccrual status, even after the restructure occurs. Other conditions that warrant a loan being considered a TDR include reductions in interest rates to below market rates due to bankruptcy plans or by the bank in an attempt to assist the borrower in working through liquidity problems. As part of the credit approval process, the restructured loans are evaluated for adequate collateral protection in determining the appropriate accrual status at the time of restructure. TDRs recorded as nonaccrual loans may generally be returned to accrual status in years after the restructure if there has been at least a six-month period of sustained repayment performance by the borrower in accordance with the terms of the restructured loan. During the first quarter of 2017, the most common concessions that were granted involved rescheduling payments of principal and interest over a longer amortization period, granting a period of reduced principal payment or interest only payment for a limited time period, or the rescheduling of payments in accordance with a bankruptcy plan.

The following tables summarize the financial effect of TDRs recorded during the periods indicated:



	Three months ended March 31, 2017
		Pre-Modification	Post-Modification
	Number	Outstanding	Outstanding
	of	Recorded	Recorded
	Contracts	Investment	Investment
	(Dollars in thousands)
Commercial and industrial	1	$ 22	$ 18
Real estate
Consumer mortgages	4	230	230
Home equity	3	134	134
Commercial and industrial-owner occupied	1	260	257
All other	5	58	53
Total	14	$ 704	$ 692



	Year ended December 31, 2016
		Pre-Modification	Post-Modification
	Number	Outstanding	Outstanding
	of	Recorded	Recorded
	Contracts	Investment	Investment
	(Dollars in thousands)
Commercial and industrial	25	$ 14,469	$ 14,305
Real estate
Consumer mortgages	16	1,429	1,354
Home equity	1	3	3
Agricultural	2	79	79
Commercial and industrial-owner occupied	10	4,344	4,331
Commercial real estate	5	8,931	6,702
All other	8	3,622	3,608
Total	67	$ 32,877	$ 30,382

The tables below summarize TDRs within the previous 12 months for which there was a payment default during the period indicated (i.e., 30 days or more past due at any given time during the period indicated).



	Three months ended March 31, 2017
	Number of	Recorded
	Contracts	Investment
	(Dollars in thousands)
Commercial and industrial	1	$ 16
Real estate
Consumer mortgages	3	391
Commercial and industrial-owner occupied	2	406
Total	6	$ 813



	Year ended December 31, 2016
	Number of	Recorded
	Contracts	Investment
	(Dollars in thousands)
Commercial and industrial	8	$ 3,804
Real estate
Consumer mortgages	7	597
Commercial and industrial-owner occupied	2	532
Construction, acquisition and development	1	14
Commercial real estate	1	9,336
All other	2	20
Total	21	$ 14,303