Allowance for Loan and Lease Losses

Activity in the allowance for loan and lease losses, ending balances of loans and leases and related allowance by class of loans is summarized as follows:



	Construction and Land Development - Commercial			Commercial Mortgage			Other Commercial Real Estate			Commercial and Industrial			Lease Financing			Other			Residential Mortgage			Revolving Mortgage			Construction and Land Development - Non- commercial			Consumer			Non- specific		Total
Noncovered Loans
Allowance for loan and lease losses:
Three months ended March 31, 2012
Balance at January 1	$	5,467		$	67,486		$	2,169		$	23,723		$	3,288		$	1,315		$	8,879		$	27,045		$	1,427		$	25,962		$	14,122	$	180,883
Charge-offs	(5,729		)	(2,464		)	(142		)	(1,447		)	(191		)	—			(1,035		)	(2,940		)	(676		)	(3,008		)	—		(17,632		)
Recoveries	42			996			—			250			31			4			42			216			7			432			—		2,020
Provision	6,828			6,137			221			1,720			192			(38		)	1,221			2,590			639			902			700		21,112
Balance at March 31	$	6,608		$	72,155		$	2,248		$	24,246		$	3,320		$	1,281		$	9,107		$	26,911		$	1,397		$	24,288		$	14,822	$	186,383
Three months ended March 31, 2011
Balance at January 1	$	10,512		$	64,772		$	2,200		$	24,089		$	3,384		$	1,473		$	7,009		$	18,016		$	1,751		$	29,448		$	13,863	$	176,517
Charge-offs	(711		)	(1,801		)	—			(2,057		)	(12		)	(38		)	(1,688		)	(2,363		)	(456		)	(3,296		)	—		(12,422		)
Recoveries	92			157			6			313			11			1			787			186			65			393			—		2,011
Provision	835			3,062			(2		)	2,020			(14		)	(17		)	1,021			3,524			(32		)	1,233			232		11,862
Balance at March 31	$	10,728		$	66,190		$	2,204		$	24,365		$	3,369		$	1,419		$	7,129		$	19,363		$	1,328		$	27,778		$	14,095	$	177,968



Allowance for loan and lease losses:
March 31, 2012
ALLL for loans and leases individually evaluated for impairment	$	2,605	$	6,662	$	256	$	838	$	19	$	—	$	782	$	—	$	145	$	42	$	—	$	11,349
ALLL for loans and leases collectively evaluated for impairment	4,003		65,493		1,992		23,408		3,301		1,281		8,325		26,911		1,252		24,246		—		160,212
Non-specific ALLL	—		—		—		—		—		—		—		—		—		—		14,822		14,822
Total allowance for loan and lease losses	$	6,608	$	72,155	$	2,248	$	24,246	$	3,320	$	1,281	$	9,107	$	26,911	$	1,397	$	24,288	$	14,822	$	186,383
December 31, 2011
ALLL for loans and leases individually evaluated for impairment	$	1,139	$	5,266	$	283	$	640	$	17	$	14	$	411	$	—	$	145	$	47	$	—	$	7,962
ALLL for loans and leases collectively evaluated for impairment	4,328		62,220		1,886		23,083		3,271		1,301		8,468		27,045		1,282		25,915		—		158,799
Non-specific ALLL	—		—		—		—		—		—		—		—		—		—		14,122		14,122
Total allowance for loan and lease losses	$	5,467	$	67,486	$	2,169	$	23,723	$	3,288	$	1,315	$	8,879	$	27,045	$	1,427	$	25,962	$	14,122	$	180,883
March 31, 2011
ALLL for loans and leases individually evaluated for impairment	$	6,170	$	4,716	$	62	$	727	$	73	$	—	$	354	$	—	$	5	$	8	$	—	$	12,115
ALLL for loans and leases collectively evaluated for impairment	4,558		61,474		2,142		23,638		3,296		1,419		6,775		19,363		1,323		27,770		—		151,758
Non-specific ALLL	—		—		—		—		—		—		—		—		—		—		14,095		14,095
Total allowance for loan and lease losses	$	10,728	$	66,190	$	2,204	$	24,365	$	3,369	$	1,419	$	7,129	$	19,363	$	1,328	$	27,778	$	14,095	$	177,968



	Construction and Land Development - Commercial		Commercial Mortgage		Other Commercial Real Estate		Commercial and Industrial		Lease Financing		Other		Residential Mortgage		Revolving Mortgage		Construction and Land Development - Non- commercial		Consumer		Non- specific		Total
Loans and leases:
March 31, 2012
Loans and leases individually evaluated for impairment	$	21,621	$	95,265	$	2,721	$	17,261	$	375	$	—	$	12,772	$	—	$	3,345	$	915	$	—	$	154,275
Loans and leases collectively evaluated for impairment	324,936		5,032,683		147,595		1,722,463		315,329		149,792		780,840		2,282,138		129,332		450,146		—		11,335,254
Total loan and leases	$	346,557	$	5,127,948	$	150,316	$	1,739,724	$	315,704	$	149,792	$	793,612	$	2,282,138	$	132,677	$	451,061	$	—	$	11,489,529
December 31, 2011
Loans and leases individually evaluated for impairment	$	26,782	$	92,872	$	5,686	$	15,996	$	328	$	193	$	9,776	$	—	$	3,676	$	992	$	—	$	156,301
Loans and leases collectively evaluated for impairment	354,381		5,012,121		139,085		1,748,411		312,541		158,176		774,342		2,296,306		133,595		496,378		—		11,425,336
Total loan and leases	$	381,163	$	5,104,993	$	144,771	$	1,764,407	$	312,869	$	158,369	$	784,118	$	2,296,306	$	137,271	$	497,370	$	—	$	11,581,637
March 31, 2011
Loans and leases individually evaluated for impairment	$	30,369	$	69,017	$	946	$	14,631	$	963	$	—	$	7,186	$	—	$	514	$	102	$	—	$	123,728
Loans and leases collectively evaluated for impairment	343,400		4,694,376		146,204		1,777,411		295,031		174,370		801,464		2,299,668		145,350		591,349		—		11,268,623
Total loan and leases	$	373,769	$	4,763,393	$	147,150	$	1,792,042	$	295,994	$	174,370	$	808,650	$	2,299,668	$	145,864	$	591,451	$	—	$	11,392,351



	Construction and Land Development - Commercial			Commercial Mortgage			Other Commercial Real Estate			Commercial and Industrial			Lease Financing			Residential Mortgage			Revolving Mortgage			Construction and Land Development - Non-commercial			Consumer and Other			Total
Covered Loans
Allowance for loan and lease losses (1):
Three months ended March 31, 2012
Balance at January 1	$	16,693		$	39,557		$	16,862		$	5,500		$	13		$	5,433		$	77		$	4,652		$	474		$	89,261
Charge-offs	(1,387		)	(6,211		)	—			(3,189		)	—			(1,955		)	—			—			(5		)	(12,747		)
Recoveries	—			—			—			—			—			—			—			—			—			—
Provision	(2,570		)	6,398			(5,712		)	11,417			(10		)	1,254			950			(1,932		)	(192		)	9,603
Balance at March 31	$	12,736		$	39,744		$	11,150		$	13,728		$	3		$	4,732		$	1,027		$	2,720		$	277		$	86,117
Three months ended March 31, 2011
Balance at January 1	$	20,654		$	13,199		$	4,148		$	6,828		$	—		$	113		$	676		$	5,607		$	23		$	51,248
Charge-offs	(4,318		)	(6,775		)	(4,117		)	(13,141		)	—			(323		)	(2,072		)	(496		)	(12		)	(31,254		)
Recoveries	1,188			426			4			252			—			60			—			148			—			2,078
Provision	2,895			7,799			4,870			12,773			—			1,162			2,847			209			2			32,557
Balance at March 31	$	20,419		$	14,649		$	4,905		$	6,712		$	—		$	1,012		$	1,451		$	5,468		$	13		$	54,629
Allowance for loan and lease losses (1):
March 31, 2012
ALLL for loans and leases acquired with deteriorated credit quality	$	12,736		$	39,744		$	11,150		$	13,728		$	3		$	4,732		$	1,027		$	2,720		$	277		$	86,117
December 31, 2011
ALLL for loans and leases acquired with deteriorated credit quality	16,693			39,557			16,862			5,500			13			5,433			77			4,652			474			89,261
March 31, 2011
ALLL for loans and leases acquired with deteriorated credit quality	20,419			14,649			4,905			6,712			—			1,012			1,451			5,468			13			54,629
Loans and leases:
March 31, 2012
Loans and leases acquired with deteriorated credit quality	310,601			1,195,541			144,978			93,261			45			298,538			50,016			85,555			5,334			2,183,869
December 31, 2011
Loans and leases acquired with deteriorated credit quality	338,873			1,260,589			158,394			113,442			57			327,568			51,552			105,536			6,141			2,362,152
March 31, 2011
Loans and leases acquired with deteriorated credit quality	402,316			1,432,632			163,305			171,041			271			347,393			23,409			111,425			6,342			2,658,134

(1) The allowance of $2,936 at March 31, 2012 and $1,099 at December 31, 2011 relating to pooled loans is included in the loan classes above based on the primary loan class within each pool.

The following table provides information on noncovered impaired loans and leases, exclusive of loans and leases evaluated collectively as a homogeneous group, including interest income recognized in the period during which the loans and leases were considered impaired.



	With a recorded allowance		With no recorded allowance		Total		Related allowance recorded
March 31, 2012
Impaired noncovered loans and leases
Construction and land development - commercial	$	19,768	$	—	$	19,768	$	2,487
Commercial mortgage	54,593		8,773		63,366		4,915
Other commercial real estate	1,521		—		1,521		196
Commercial and industrial	6,797		5,801		12,598		574
Lease financing	79		—		79		4
Other	—		—		—		—
Residential mortgage	10,438		—		10,438		674
Construction and land development - non-commercial	3,345		—		3,345		145
Consumer	915		—		915		42
Total impaired noncovered loans and leases	$	97,456	$	14,574	$	112,030	$	9,037
December 31, 2011
Impaired noncovered loans and leases
Construction and land development - commercial	$	24,994	$	—	$	24,994	$	1,027
Commercial mortgage	53,687		11,840		65,527		3,813
Other commercial real estate	1,558		1,022		2,580		114
Commercial and industrial	7,157		7,111		14,268		549
Lease financing	322		—		322		16
Other	—		—		—		—
Residential mortgage	9,776		—		9,776		411
Construction and land development - non-commercial	3,676		—		3,676		145
Consumer	992		—		992		47
Total impaired noncovered loans and leases	$	102,162	$	19,973	$	122,135	$	6,122
March 31, 2011
Impaired noncovered loans and leases
Construction and land development - commercial	$	30,369	$	—	$	30,369	$	6,170
Commercial mortgage	65,807		3,210		69,017		4,716
Other commercial real estate	946		—		946		62
Commercial and industrial	7,473		7,158		14,631		727
Lease financing	963		—		963		73
Other	—		—		—		—
Residential mortgage	7,186		—		7,186		354
Construction and land development - non-commercial	514		—		514		5
Consumer	102		—		102		8
Total impaired noncovered loans and leases	$	113,360	$	10,368	$	123,728	$	12,115



	Average Balance		Unpaid Principal Balance		Interest Income Recognized
Three months ended March 31, 2012
Noncovered impaired loans and leases:
Construction and land development - commercial	$	23,129	$	33,430	$	58
Commercial mortgage	64,206		64,551		530
Other commercial real estate	2,050		1,521		15
Commercial and industrial	12,466		12,598		66
Lease financing	201		79		1
Other	—		—		—
Residential mortgage	10,107		10,438		90
Construction and land development - non-commercial	3,510		3,345		23
Consumer	954		915		4
Total noncovered impaired loans and leases	$	116,623	$	126,877	$	787
Three months ended March 31, 2011
Noncovered impaired loans and leases:
Construction and land development - commercial	$	29,181	$	29,018	$	72
Commercial mortgage	65,364		71,442		738
Other commercial real estate	955		946		10
Commercial and industrial	11,706		14,631		165
Lease financing	828		963		12
Other	38		—		—
Residential mortgage	6,674		7,186		60
Construction and land development - non-commercial	514		514		6
Consumer	102		102		2
Total noncovered impaired loans and leases	$	115,362	$	124,802	$	1,065

Noncovered impaired loans presented in the preceding table exclude troubled debt restructurings of $42,246 that are considered performing as a result of the loans carrying a market interest rate and evidence of sustained performance after restructuring.

At March 31, 2012, covered loans of $291,148 have had no adverse change in expected cashflows since the date of acquisition and have no allowance for loan losses recorded.

Troubled Debt Restructurings

The following table provides the types of troubled debt restructurings made for the three and twelve month periods ended March 31, 2012 as well as the loans restructured during those periods that have experienced payment default subsequent to restructuring.



	Three months ended March 31, 2012						Twelve Months Ended March 31, 2012
	All Restructurings			Restructurings with payment default			All Restructurings			Restructurings with payment default
	Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end
Noncovered loans
Interest only period provided
Construction and land development - commercial	—	$	—	—	$	—	4	$	1,424	3	$	1,231
Commercial mortgage	10	4,625		1	669		26	13,958		4	3,493
Other commercial real estate	—	—		—	—		1	365		1	365
Commercial and industrial	1	531		—	—		6	1,907		1	28
Lease financing	—	—		—	—		—	—		—	—
Residential mortgage	—	—		—	—		2	291		—	—
Construction and land development - non-commercial	—	—		—	—		1	476		—	—
Consumer	1	900		—	—		1	900		—	—
Total interest only	12	6,056		1	669		41	19,321		9	5,117

Loan term extension
Construction and land development - commercial	1	7,169		—	—		3	8,739		—	—
Commercial mortgage	13	3,692		2	585		41	15,520		7	1,836
Other commercial real estate	—	—					4	1,156		1	127
Commercial and industrial	3	282		—	—		18	3,106		3	722
Lease financing	2	73		—	—		3	79		—	—
Residential mortgage	5	805		—	—		11	2,168		2	278
Construction and land development - non-commercial	1	2,001		—	—		2	2,396		1	395
Consumer	—	—		—	—		1	15		1	15
Total loan term extension	25	14,022		2	585		83	33,179		15	3,373

Below market interest rate
Construction and land development - commercial	1	231		—	—		7	8,794		2	763
Commercial mortgage	2	1,956		—	—		26	18,172		6	2,887
Other commercial real estate	—	—		—	—		—	—		—	—
Commercial and industrial	1	764		—	—		5	1,276		—	—
Residential mortgage	3	878		—	—		11	2,815		1	52
Construction and land development - non-commercial	—	—		—	—		1	356		1	356
Total below market interest rate	7	3,829		—	—		50	31,413		10	4,058

Other concession
Commercial mortgage	1	168		—	—		1	168		—	—
Commercial and industrial	1	23		1	23		1	23		1	23
Total other concession	2	191		1	23		2	191		1	23
Total noncovered restructurings	46	$	24,098	4	$	1,277	176	$	84,104	35	$	12,571



	Three months ended March 31, 2012						Twelve Months Ended March 31, 2012
	All Restructurings			Restructurings with payment default			All Restructurings			Restructurings with payment default
	Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end
Covered loans
Interest only period provided
Construction and land development - commercial	1	$	133	—	$	—	5	$	9,419	1	$	4,272
Commercial mortgage	—	—		—	—		2	8,378		—	—
Residential mortgage	—	—		—	—		2	5,433		1	4,371
Total interest only	1	133		—	—		9	23,230		2	8,643

Loan term extension
Construction and land development - commercial	2	161		—	—		9	3,186		3	1,389
Commercial mortgage	1	480		—	—		7	4,491		—	—
Other commercial real estate	—	—		—	—		4	6,271		—	—
Commercial and industrial	—	—		—	—		3	271		1	145
Residential mortgage	1	49		—	—		6	1,031		3.00	736
Total loan term extension	4	690		—	—		29	15,250		7	2,270

Below market interest rate
Construction and land development - commercial	10	1,794		—	—		24	9,913		4	4,689
Commercial mortgage	7	9,194		—	—		26	57,504		3	3,699
Other commercial real estate	—	—		—	—		1	71		1	71
Commercial and industrial	3	260		—	—		9	1,609		1	746
Residential mortgage	7	1,557		1	103		21	5,405		6	1,524
Construction and land development - non-commercial	—	—		—	—		1	1,570		—	—
Total below market interest rate	27	12,805		1	103		82	76,072		15	10,729
Total covered restructurings	32	$	13,628	1	$	103	120	$	114,552	24	$	21,642

For the three and twelve month periods ended March 31, 2012, the recorded investment in troubled debt restructurings prior to modification was not materially impacted by the modification since forgiveness of principal is not a restructuring option frequently used by BancShares.

Total troubled debt restructurings at March 31, 2012 equaled $318,323, of which $165,857 were covered and $152,466 were noncovered.

The majority of troubled debt restructurings are included in the special mention, substandard, or doubtful grading categories which results in more elevated loss expectations when determining the expected cash flows that are used to determine the allowance for loan losses associated with these loans. When a restructured loan subsequently defaults, it is evaluated and downgraded if appropriate. The more severely graded the loans, the lower the estimated expected cash flows and the greater the allowance recorded. Further, troubled debt restructurings over $1,000 and on nonaccrual status are evaluated individually for impairment through review of collateral values.