Loans and Leases

Loans and leases outstanding, by class, include the following as of the dates indicated:



(Dollars in thousands)	March 31, 2014		December 31, 2013
Acquired loans
Commercial:
Construction and land development	$	106,670	$	78,915
Commercial mortgage	728,872		642,891
Other commercial real estate	47,826		41,381
Commercial and industrial	38,838		17,254
Other	870		866
Total commercial loans	923,076		781,307
Noncommercial:
Residential mortgage	291,254		213,851
Revolving mortgage	25,776		30,834
Construction and land development	28,151		2,583
Consumer	2,561		851
Total noncommercial loans	347,742		248,119
Total acquired loans	1,270,818		1,029,426
Originated loans and leases:
Commercial:
Construction and land development	335,271		319,847
Commercial mortgage	6,330,843		6,362,490
Other commercial real estate	177,082		178,754
Commercial and industrial	1,175,543		1,081,158
Lease financing	394,268		381,763
Other	179,725		175,336
Total commercial loans	8,592,732		8,499,348
Noncommercial:
Residential mortgage	1,030,032		982,421
Revolving mortgage	2,091,000		2,113,285
Construction and land development	119,049		122,792
Consumer	367,413		386,452
Total noncommercial loans	3,607,494		3,604,950
Total originated loans and leases	12,200,226		12,104,298
Total loans and leases	$	13,471,044	$	13,133,724

At March 31, 2014, $962.4 million in acquired loans were covered under loss share agreements, compared to $1.03 billion at December 31, 2013. The remaining acquired loans as of March 31, 2014 are from the 1st Financial merger.

At March 31, 2014, $2.57 billion in originated loans were pledged to secure debt obligations, compared to $2.56 billion at December 31, 2013.

Credit quality indicators

Loans and leases are monitored for credit quality on a recurring basis. The credit quality indicators used are dependent on the portfolio segment to which the loan relates. Originated commercial loans and leases, originated noncommercial loans and leases and acquired loans have different credit quality indicators as a result of the unique characteristics relative to each loan segment being evaluated.

The credit quality indicators for commercial loans and leases are developed through a review of individual borrowers on an ongoing basis. Each commercial loan is evaluated annually with more frequent evaluation of more severely criticized loans or leases. The credit quality indicators for noncommercial loans are based on the delinquency status of the borrower. As the borrower becomes more delinquent, the likelihood of loss increases. Acquired loans are bifurcated into commercial and noncommercial segments and credit quality indicators are assigned in the same manner as the originated portfolio. The indicators represent the rating for loans or leases as of the date presented based on the most recent assessment performed. These credit quality indicators are defined as follows:

Pass – A pass rated asset is one in which repayment is considered highly likely and there are no observable weaknesses in the asset. Such an asset does not meet any of the characteristics for adverse classification.

Special mention – A special mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification.

Substandard – A substandard asset is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful – An asset classified as doubtful has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions and values.

Loss – Assets classified as loss are considered uncollectible and of such little value that it is inappropriate to be carried as an asset. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full charge-off even though partial recovery may be effected in the future.

Ungraded – Ungraded loans represent loans that are not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of originated, ungraded loans at March 31, 2014 and December 31, 2013 relate to business credit cards. Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit. The remaining balance is comprised of a small amount of commercial mortgage loans and other smaller balance consumer loans. Prior to March 31, 2014, ungraded loans also included tobacco buyout loans classified as commercial and industrial loans. Final payment from the Commodity Credit Corporation was received during January 2014 for tobacco buyout loans held by FCB. As of March 31, 2014, ungraded also includes $122.2 million of loans resulting from the 1st Financial merger.

Originated loans and leases outstanding at March 31, 2014 and December 31, 2013 by credit quality indicator are provided below:



	March 31, 2014
(Dollars in thousands)	Originated commercial loans and leases
Grade:	Construction and land development		Commercial mortgage		Other commercial real estate		Commercial and industrial		Lease financing		Other		Total originated commercial loans and leases
Pass	$	323,876	$	6,064,405	$	173,517	$	1,074,210	$	386,324	$	179,640	$	8,201,972
Special mention	8,442		117,436		1,302		16,777		4,233		10		148,200
Substandard	2,953		143,723		2,119		6,051		3,155		70		158,071
Doubtful	—		4,227		—		152		543		5		4,927
Ungraded	—		1,052		144		78,353		13		—		79,562
Total	$	335,271	$	6,330,843	$	177,082	$	1,175,543	$	394,268	$	179,725	$	8,592,732

	December 31, 2013
	Originated commercial loans and leases
	Construction and land development		Commercial mortgage		Other commercial real estate		Commercial and industrial		Lease financing		Other		Total originated commercial loans and leases
Pass	$	308,231	$	6,094,505	$	174,913	$	964,840	$	375,371	$	174,314	$	8,092,174
Special mention	8,620		119,515		1,362		14,686		2,160		982		147,325
Substandard	2,944		141,913		2,216		6,352		3,491		40		156,956
Doubtful	52		5,159		75		144		592		—		6,022
Ungraded	—		1,398		188		95,136		149		—		96,871
Total	$	319,847	$	6,362,490	$	178,754	$	1,081,158	$	381,763	$	175,336	$	8,499,348



	March 31, 2014
	Originated noncommercial loans and leases
(Dollars in thousands)	Residential mortgage		Revolving mortgage		Construction and land development		Consumer		Total originated noncommercial loans
Current	$	1,003,016	$	2,072,832	$	117,161	$	363,259	$	3,556,268
30-59 days past due	16,845		10,578		888		2,156		30,467
60-89 days past due	1,063		3,249		794		1,195		6,301
90 days or greater past due	9,108		4,341		206		803		14,458
Total	$	1,030,032	$	2,091,000	$	119,049	$	367,413	$	3,607,494

	December 31, 2013
	Originated noncommercial loans and leases
	Residential mortgage		Revolving mortgage		Construction and land development		Consumer		Total originated noncommercial loans
Current	$	955,300	$	2,095,480	$	121,026	$	382,710	$	3,554,516
30-59 days past due	12,885		10,977		1,193		2,114		27,169
60-89 days past due	4,658		2,378		317		955		8,308
90 days or greater past due	9,578		4,450		256		673		14,957
Total	$	982,421	$	2,113,285	$	122,792	$	386,452	$	3,604,950

Acquired loans and leases outstanding at March 31, 2014 and December 31, 2013 by credit quality indicator are provided below:



	March 31, 2014
(Dollars in thousands)	Acquired loans
Grade:	Construction and land development - commercial		Commercial mortgage		Other commercial real estate		Commercial and industrial		Residential mortgage		Revolving mortgage		Construction and land development - noncommercial		Consumer and other		Total acquired loans
Pass	$	14,789	$	375,245	$	28,526	$	29,918	$	131,765	$	20,240	$	32	$	1,387	$	601,902
Special mention	24,065		134,414		114		3,260		4,823		2,649		—		—		169,325
Substandard	58,374		182,540		10,473		4,686		46,044		1,891		1,716		—		305,724
Doubtful	5,101		36,040		8,713		954		1,931		911		295		—		53,945
Ungraded	4,341		633		—		20		106,691		85		26,108		2,044		139,922
Total	$	106,670	$	728,872	$	47,826	$	38,838	$	291,254	$	25,776	$	28,151	$	3,431	$	1,270,818

	December 31, 2013
	Acquired loans
	Construction and land development - commercial		Commercial mortgage		Other commercial real estate		Commercial and industrial		Residential mortgage		Revolving mortgage		Construction and land development - noncommercial		Consumer and other		Total acquired loans
Pass	$	2,619	$	296,824	$	22,225	$	8,021	$	135,326	$	26,322	$	149	$	1,345	$	492,831
Special mention	15,530		125,295		3,431		2,585		6,301		2,608		—		—		155,750
Substandard	52,228		179,657		7,012		5,225		52,774		1,013		2,139		—		300,048
Doubtful	7,436		40,471		8,713		1,257		2,058		891		295		—		61,121
Ungraded	1,102		644		—		166		17,392		—		—		372		19,676
Total	$	78,915	$	642,891	$	41,381	$	17,254	$	213,851	$	30,834	$	2,583	$	1,717	$	1,029,426

The aging of the outstanding loans and leases, by class, at March 31, 2014 and December 31, 2013 (excluding loans and leases acquired with deteriorated credit quality) is provided in the table below.

The calculation of days past due begins on the day after payment is due and includes all days through which all required interest or principal has not been paid. Loans and leases 30 days or less past due are considered current as various grace periods allow borrowers to make payments within a stated period after the due date and still remain in compliance with the loan agreement.



	March 31, 2014
(Dollars in thousands)	30-59 days past due		60-89 days past due		90 days or greater		Total past due		Current		Total loans and leases
Originated loans and leases:
Construction and land development - commercial	$	537	$	184	$	655	$	1,376	$	333,895	$	335,271
Commercial mortgage	24,451		3,934		11,248		39,633		6,291,210		6,330,843
Other commercial real estate	155		11		104		270		176,812		177,082
Commercial and industrial	3,921		488		509		4,918		1,170,625		1,175,543
Lease financing	757		323		92		1,172		393,096		394,268
Other	20		5		—		25		179,700		179,725
Residential mortgage	16,845		1,063		9,108		27,016		1,003,016		1,030,032
Revolving mortgage	10,578		3,249		4,341		18,168		2,072,832		2,091,000
Construction and land development - noncommercial	888		794		206		1,888		117,161		119,049
Consumer	2,156		1,195		803		4,154		363,259		367,413
Total originated loans and leases	$	60,308	$	11,246	$	27,066	$	98,620	$	12,101,606	$	12,200,226

	December 31, 2013
	30-59 days past due		60-89 days past due		90 days or greater		Total past due		Current		Total loans and leases
Originated loans and leases:
Construction and land development - commercial	$	1,603	$	9	$	457	$	2,069	$	317,778	$	319,847
Commercial mortgage	11,131		3,601		14,407		29,139		6,333,351		6,362,490
Other commercial real estate	139		210		470		819		177,935		178,754
Commercial and industrial	3,336		682		436		4,454		1,076,704		1,081,158
Lease financing	789		1,341		101		2,231		379,532		381,763
Other	—		85		—		85		175,251		175,336
Residential mortgage	12,885		4,658		9,578		27,121		955,300		982,421
Revolving mortgage	10,977		2,378		4,450		17,805		2,095,480		2,113,285
Construction and land development - noncommercial	1,193		317		256		1,766		121,026		122,792
Consumer	2,114		955		673		3,742		382,710		386,452
Total originated loans and leases	$	44,167	$	14,236	$	30,828	$	89,231	$	12,015,067	$	12,104,298

The recorded investment, by class, in loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at March 31, 2014 and December 31, 2013 (excluding acquired loans and leases) are as follows:



	March 31, 2014				December 31, 2013
(Dollars in thousands)	Nonaccrual loans and leases		Loans and leases > 90 days and accruing		Nonaccrual loans and leases		Loans and leases > 90 days and accruing
Originated loans and leases:
Construction and land development - commercial	$	702	$	192	$	544	$	—
Other commercial real estate	1,459		—		1,610		—
Commercial mortgage	28,910		927		33,529		1,113
Commercial and industrial	1,075		393		1,428		294
Lease financing	689		—		832		—
Residential mortgage	14,091		2,609		14,701		1,998
Revolving mortgage	—		4,341		—		4,450
Construction and land development - noncommercial	—		206		457		256
Consumer	26		803		69		673
Total originated loans and leases	$	46,952	$	9,471	$	53,170	$	8,784

Acquired Loans

The following table provides changes in the recorded investment of acquired loans during the three months ended March 31, 2014 and March 31, 2013:



(Dollars in thousands)	2014			2013
Balance at January 1	$	1,029,426		$	2,362,152
Fair value of acquired loans	316,327			—
Accretion	30,200			79,886
Payments received and other changes, net	(105,135		)	(258,169		)
Balance at March 31	$	1,270,818		$	2,183,869
Outstanding principal balance at March 31	$	1,727,492		$	3,618,722

The recorded investment of loans on the cost recovery method was $52.1 million at March 31, 2014 and $28.5 million at December 31, 2013. This increase is primarily driven by one large acquired loan relationship that was moved to cost recovery during the quarter. The cost recovery method is applied to loans when the timing of future cash flows is not reasonably estimable due to borrower nonperformance or uncertainty in the timing and amount of ultimate disposition of the asset.

The following table documents changes to the amount of accretable yield for the first three months of 2014 and 2013.



(Dollars in thousands)	2014			2013
Balance at January 1	$	439,990		$	539,564
Additions	84,295			—
Accretion	(30,200		)	(79,886		)
Reclassifications from (to) nonaccretable difference	6,048			(11,653		)
Changes in expected cash flows that do not affect nonaccretable difference	(9,888		)	37,910
Balance at March 31	$	490,245		$	485,935