Allowance for Loan and Lease Losses

3 Months Ended

Mar. 31, 2016

Loans and Leases Receivable, Allowance [Abstract]

Allowance

NOTE E - ALLOWANCE FOR LOAN AND LEASE LOSSES (ALLL)

The following tables present the activity in the ALLL for non-PCI loan and lease losses by loan class for the three months ended March 31, 2016 and March 31, 2015:

	Three months ended March 31, 2016
(Dollars in thousands)	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			Total
Non-PCI Loans
Allowance for loan and lease losses:
Balance at January 1	$	16,288		$	69,896		$	2,168		$	43,116		$	5,524		$	1,855		$	14,105		$	15,971		$	1,485		$	19,496		$	189,904
Provision	943			394			(104		)	2,201			(282		)	(328		)	776			1,158			87			1,995			6,840
Charge-offs	(426		)	(90		)	—			(1,317		)	—			(71		)	(174		)	(1,036		)	—			(3,108		)	(6,222		)
Recoveries	80			256			143			479			180			321			20			32			3			990			2,504
Balance at March 31	$	16,885		$	70,456		$	2,207		$	44,479		$	5,422		$	1,777		$	14,727		$	16,125		$	1,575		$	19,373		$	193,026
	Three months ended March 31, 2015
	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			Total
Balance at January 1	$	11,961		$	85,189		$	732		$	30,727		$	4,286		$	3,184		$	10,661		$	18,650		$	892		$	16,555		$	182,837
Provision	1,103			(3,679		)	458			7,546			11			(218		)	813			(462		)	118			2,966			8,656
Charge-offs	(18		)	(233		)	(169		)	(1,713		)	(15		)	—			(284		)	(793		)	(22		)	(2,783		)	(6,030		)
Recoveries	62			761			10			394			11			15			138			134			68			878			2,471
Balance at March 31	$	13,108		$	82,038		$	1,031		$	36,954		$	4,293		$	2,981		$	11,328		$	17,529		$	1,056		$	17,616		$	187,934

The following tables present the allowance for non-PCI loan losses and the recorded investment in loans, by loan class, based on impairment method as of March 31, 2016 and December 31, 2015:

	March 31, 2016
(Dollars in thousands)	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		Total
Allowance for loan and lease losses:
ALLL for loans and leases individually evaluated for impairment	$	83	$	3,467	$	282	$	650	$	191	$	49	$	1,203	$	310	$	27	$	514	$	6,776
ALLL for loans and leases collectively evaluated for impairment	16,802		66,989		1,925		43,829		5,231		1,728		13,524		15,815		1,548		18,859		186,250
Total allowance for loan and lease losses	$	16,885	$	70,456	$	2,207	$	44,479	$	5,422	$	1,777	$	14,727	$	16,125	$	1,575	$	19,373	$	193,026
Loans and leases:
Loans and leases individually evaluated for impairment	$	3,247	$	88,448	$	418	$	13,720	$	1,528	$	960	$	24,025	$	6,594	$	416	$	1,324	$	140,680
Loans and leases collectively evaluated for impairment	623,064		8,265,183		324,440		2,376,226		749,764		342,917		2,694,183		2,515,308		212,816		1,227,221		19,331,122
Total loan and leases	$	626,311	$	8,353,631	$	324,858	$	2,389,946	$	751,292	$	343,877	$	2,718,208	$	2,521,902	$	213,232	$	1,228,545	$	19,471,802
	December 31, 2015
(Dollars in thousands)	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		Total
Allowance for loan and lease losses:
ALLL for loans and leases individually evaluated for impairment	$	123	$	3,370	$	289	$	1,118	$	213	$	—	$	1,212	$	299	$	49	$	527	$	7,200
ALLL for loans and leases collectively evaluated for impairment	16,165		66,526		1,879		41,998		5,311		1,855		12,893		15,672		1,436		18,969		182,704
Total allowance for loan and lease losses	$	16,288	$	69,896	$	2,168	$	43,116	$	5,524	$	1,855	$	14,105	$	15,971	$	1,485	$	19,496	$	189,904
Loans and leases:
Loans and leases individually evaluated for impairment	$	3,094	$	95,107	$	427	$	17,910	$	1,755	$	1,183	$	22,986	$	5,883	$	784	$	1,238	$	150,367
Loans and leases collectively evaluated for impairment	617,258		8,179,441		320,594		2,351,048		729,023		313,649		2,672,999		2,517,223		219,289		1,218,583		19,139,107
Total loan and leases	$	620,352	$	8,274,548	$	321,021	$	2,368,958	$	730,778	$	314,832	$	2,695,985	$	2,523,106	$	220,073	$	1,219,821	$	19,289,474

The following tables show the activity in the allowance for PCI loan and lease losses by loan class for the three months ended March 31, 2016 and March 31, 2015.

	Three months ended March 31, 2016
(Dollars in thousands)	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
PCI Loans
Allowance for loan and lease losses:
Balance at January 1	$	1,082		$	7,838		$	773		$	445		$	5,398		$	523		$	—		$	253		$	16,312
Provision	(349		)	(980		)	2			(220		)	(347		)	(108		)	—			5			(1,997		)
Charge-offs	—			(108		)	(5		)	—			(371		)	—			—			(74		)	(558		)
Recoveries	—			—			—			—			—			—			—			—			—
Balance at March 31	$	733		$	6,750		$	770		$	225		$	4,680		$	415		$	—		$	184		$	13,757
	Three months ended March 31, 2015
(Dollars in thousands)	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
Balance at January 1	$	150		$	10,135		$	75		$	1,240		$	5,820		$	3,999		$	183		$	27		$	21,629
Provision	191			(925		)	119			(1,031		)	(863		)	(655		)	(152		)	452			(2,864		)
Charge-offs	—			(334		)	—			(198		)	(85		)	(73		)	—			(456		)	(1,146		)
Recoveries	—			—			—			—			—			—			—			—			—
Balance at March 31	$	341		$	8,876		$	194		$	11		$	4,872		$	3,271		$	31		$	23		$	17,619

The following tables show the ending balances of PCI loans and leases and related allowance by class of loans as of March 31, 2016 and December 31, 2015:

	March 31, 2016
(Dollars in thousands)	Construction and land development - commercial		Commercial mortgage		Other commercial real estate		Commercial and industrial		Residential mortgage		Revolving mortgage		Consumer and other		Total
ALLL for loans and leases acquired with deteriorated credit quality	$	733	$	6,750	$	770	$	225	$	4,680	$	415	$	184	$	13,757
Loans and leases acquired with deteriorated credit quality	32,799		526,776		18,050		14,742		298,662		50,574		4,284		945,887
	December 31, 2015
(Dollars in thousands)	Construction and land development - commercial		Commercial mortgage		Other commercial real estate		Commercial and industrial		Residential mortgage		Revolving mortgage		Consumer and other		Total
ALLL for loans and leases acquired with deteriorated credit quality	$	1,082	$	7,838	$	773	$	445	$	5,398	$	523	$	253	$	16,312
Loans and leases acquired with deteriorated credit quality	33,880		525,468		17,076		15,182		302,158		52,471		4,281		950,516

As of March 31, 2016, and December 31, 2015, $479.2 million and $469.3 million, respectively, in PCI loans experienced an adverse change in expected cash flows since the date of acquisition. The corresponding valuation reserve was $13.8 million and $16.3 million, respectively.

The following tables provide information on non-PCI impaired loans and leases, exclusive of loans and leases evaluated collectively as a homogeneous group, as of March 31, 2016 and December 31, 2015 including interest income recognized in the period during which the loans and leases were considered impaired.

	March 31, 2016
(Dollars in thousands)	With a recorded allowance		With no recorded allowance		Total		Unpaid principal balance		Related allowance recorded
Non-PCI impaired loans and leases:
Construction and land development - commercial	$	1,356	$	1,891	$	3,247	$	4,602	$	83
Commercial mortgage	37,464		50,984		88,448		97,320		3,467
Other commercial real estate	297		121		418		858		282
Commercial and industrial	5,356		8,364		13,720		16,692		650
Lease financing	1,304		224		1,528		1,577		191
Other	898		62		960		1,037		49
Residential mortgage	10,001		14,024		24,025		24,989		1,203
Revolving mortgage	1,059		5,535		6,594		8,049		310
Construction and land development - noncommercial	416		—		416		416		27
Consumer	962		362		1,324		1,401		514
Total non-PCI impaired loans and leases	$	59,113	$	81,567	$	140,680	$	156,941	$	6,776
	December 31, 2015
(Dollars in thousands)	With a recorded allowance		With no recorded allowance		Total		Unpaid principal balance		Related allowance recorded
Non-PCI impaired loans and leases:
Construction and land development - commercial	$	1,623	$	1,471	$	3,094	$	4,428	$	123
Commercial mortgage	41,793		53,314		95,107		103,763		3,370
Other commercial real estate	305		122		427		863		289
Commercial and industrial	8,544		9,366		17,910		21,455		1,118
Lease financing	1,651		104		1,755		1,956		213
Other	—		1,183		1,183		1,260		—
Residential mortgage	10,097		12,889		22,986		25,043		1,212
Revolving mortgage	1,105		4,778		5,883		7,120		299
Construction and land development - noncommercial	693		91		784		784		49
Consumer	1,050		188		1,238		1,294		527
Total non-PCI impaired loans and leases	$	66,861	$	83,506	$	150,367	$	167,966	$	7,200

The following tables show the average non-PCI impaired loan balance and the interest income recognized by loan class for the three months ended March 31, 2016 and March 31, 2015:

	Three months ended March 31, 2016				Three months ended March 31, 2015
(Dollars in thousands)	Average balance		Interest income recognized		Average balance		Interest income recognized
Non-PCI impaired loans and leases:
Construction and land development - commercial	$	3,164	$	41	$	3,052	$	35
Commercial mortgage	92,945		766		80,553		769
Other commercial real estate	423		5		551		1
Commercial and industrial	15,551		151		14,229		103
Lease financing	1,657		20		1,590		18
Other	1,072		14		1,990		—
Residential mortgage	23,500		172		15,364		125
Revolving mortgage	6,309		32		2,986		16
Construction and land development - noncommercial	556		6		658		7
Consumer	1,265		18		1,022		19
Total non-PCI impaired loans and leases	$	146,442	$	1,225	$	121,995	$	1,093

Troubled Debt Restructurings

BancShares accounts for certain loan modifications or restructurings as troubled debt restructurings (TDRs). In general, the modification or restructuring of a loan is considered a TDR if, for economic reasons or legal reasons related to a borrower's financial difficulties, a concession is granted to the borrower that creditors would not otherwise grant. Concessions may relate to the contractual interest rate, maturity date, payment structure or other actions. In accordance with GAAP, acquired loans accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, are not initially considered to be TDRs, but can be classified as such if a modification is made subsequent to acquisition. Subsequent modifications of a PCI loan accounted for in a pool that would otherwise meet the definition of a TDR is not reported, or accounted for, as a TDR since pooled PCI loans are excluded from the scope of TDR accounting.

The following table provides a summary of total TDRs by accrual status.

	March 31, 2016						December 31, 2015
(Dollars in thousands)	Accruing		Nonaccruing		Total		Accruing		Nonaccruing		Total
Commercial loans
Construction and land development - commercial	$	3,637	$	268	$	3,905	$	3,624	$	257	$	3,881
Commercial mortgage	66,385		17,588		83,973		65,812		18,728		84,540
Other commercial real estate	1,614		84		1,698		1,751		89		1,840
Commercial and industrial	8,139		783		8,922		8,833		3,341		12,174
Lease	1,136		46		1,182		1,191		169		1,360
Other	960		—		960		1,183		—		1,183
Total commercial TDRs	81,871		18,769		100,640		82,394		22,584		104,978
Noncommercial
Residential mortgage	26,685		6,546		33,231		25,427		7,129		32,556
Revolving mortgage	3,624		2,179		5,803		3,600		1,705		5,305
Construction and land development - noncommercial	416		—		416		784		—		784
Consumer and other	1,133		174		1,307		1,091		129		1,220
Total noncommercial TDRs	31,858		8,899		40,757		30,902		8,963		39,865
Total TDRs	$	113,729	$	27,668	$	141,397	$	113,296	$	31,547	$	144,843

The majority of TDRs are included in the special mention, substandard or doubtful grading categories. When a restructured loan subsequently defaults, it is evaluated and downgraded if appropriate. The more severely graded the loan, the lower the estimated expected cash flows and the greater the allowance recorded. Further, TDRs over $500,000 and graded substandard or lower are evaluated individually for impairment through a review of collateral values or analysis of cash flows.

The following table shows the accrual status of non-PCI and PCI TDRs.

(Dollars in thousands)	March 31, 2016		December 31, 2015
Accruing TDRs:
PCI	$	29,410	$	29,231
Non-PCI	84,319		84,065
Total accruing TDRs	113,729		113,296
Nonaccruing TDRs:
PCI	923		1,420
Non-PCI	26,745		30,127
Total nonaccruing TDRs	27,668		31,547
All TDRs:
PCI	30,333		30,651
Non-PCI	111,064		114,192
Total TDRs	$	141,397	$	144,843

The following tables provide the types of TDRs made during the three months ended March 31, 2016 and March 31, 2015, as well as a summary of loans that were modified as a TDR during the twelve months ended March 31, 2016 and March 31, 2015 that subsequently defaulted during the three months ended March 31, 2016 and March 31, 2015. BancShares defines payment default as movement of the TDR to nonaccrual status, which is generally 90 days past due for TDRs, foreclosure or charge-off, whichever occurs first.

	Three months ended March 31, 2016						Three months ended March 31, 2015
	All restructurings			Restructurings with payment default			All restructurings			Restructurings with payment default
(Dollars in thousands)	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
Non-PCI loans and leases
Interest only period provided
Commercial mortgage	1	$	252	1	$	252	—	$	—	—	$	—
Commercial and industrial	—	—		—	—		1	3,796		1	3,796
Total interest only	1	252		1	252		1	3,796		1	3,796
Loan term extension
Construction and land development - commercial	1	404		—	—		1	220		1	220
Commercial mortgage	1	—		—	—		3	535		—	—
Revolving mortgage	—	—		—	—		1	10		—	—
Residential mortgage	1	34		—	—		—	—		—	—
Consumer	—	—		—	—		1	5		—	—
Total loan term extension	3	438		—	—		6	770		1	220
Below market interest rate
Construction and land development - commercial	1	18		1	18		2	47		—	—
Commercial mortgage	10	1,422		4	511		9	3,541		2	733
Commercial and industrial	3	12		—	—		3	172		—	—
Residential mortgage	46	3,288		13	841		23	708		2	45
Revolving mortgage	—	—		—	—		2	18		—	—
Construction and land development - noncommercial	—	—		—	—		2	396		—	—
Consumer	2	73		—	—		3	34		—	—
Other	—	—		—	—		1	1,950		—	—
Total below market interest rate	62	4,813		18	1,370		45	6,866		4	778
Discharged from bankruptcy
Construction and land development - commercial	—	—		1	16		—	—		—	—
Residential mortgage	1	144		—	—		2	68		—	—
Revolving mortgage	8	347		8	277		5	218		2	147
Consumer	7	68		4	59		—	—		—	—
Total discharged from bankruptcy	16	559		13	352		7	286		2	147
Total non-PCI restructurings	82	$	6,062	32	$	1,974	59	$	11,718	8	$	4,941

	Three months ended March 31, 2016						Three months ended March 31, 2015
	All restructurings			Restructurings with payment default			All restructurings			Restructurings with payment default
(Dollars in thousands)	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
PCI loans
Below market interest rate
Construction and land development - commercial	1	$	14	—	$	—	—	$	—	—	$	—
Commercial mortgage	3	2,016		—	—		—	—		—	—
Commercial and industrial	—	—		—	—		—	—		1	65
Residential mortgage	—	—		—	—		7	470		—	—
Total below market interest rate	4	2,030		—	—		7	470		1	65
Total PCI restructurings	4	$	2,030	—	$	—	7	$	470	1	$	65

For the three months ended March 31, 2016 and March 31, 2015, the recorded investment in TDRs subsequent to modification was not materially impacted by the modification since forgiveness of principal is not a restructuring option frequently used by BancShares.