Allowance for Loan and Lease Losses

3 Months Ended

Mar. 31, 2017

Receivables [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, 2017 and March 31, 2016:

	Three months ended March 31, 2017
(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	$	28,877		$	48,278		$	3,269		$	50,225		$	5,907		$	3,127		$	23,094		$	12,366		$	1,596		$	28,287		$	205,026
Provision	2,536			6			304			3,592			575			517			1,061			840			(83		)	1,728			11,076
Charge-offs	(77		)	(37		)	(5		)	(3,253		)	(173		)	(123		)	(250		)	(825		)	—			(3,966		)	(8,709		)
Recoveries	55			364			4			265			6			13			287			552			—			1,080			2,626
Balance at March 31	$	31,391		$	48,611		$	3,572		$	50,829		$	6,315		$	3,534		$	24,192		$	12,933		$	1,513		$	27,129		$	210,019
	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
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

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, 2017 and December 31, 2016:

	March 31, 2017
(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	$	151	$	3,122	$	132	$	1,043	$	213	$	21	$	3,189	$	287	$	103	$	591	$	8,852
ALLL for loans and leases collectively evaluated for impairment	31,240		45,489		3,440		49,786		6,102		3,513		21,003		12,646		1,410		26,538		201,167
Total allowance for loan and lease losses	$	31,391	$	48,611	$	3,572	$	50,829	$	6,315	$	3,534	$	24,192	$	12,933	$	1,513	$	27,129	$	210,019
Loans and leases:
Loans and leases individually evaluated for impairment	$	1,058	$	74,788	$	1,497	$	10,864	$	2,054	$	259	$	34,484	$	8,272	$	2,577	$	1,858	$	137,711
Loans and leases collectively evaluated for impairment	682,357		9,098,824		363,365		2,467,047		838,147		321,093		2,910,877		2,595,884		215,526		1,426,802		20,919,922
Total loan and leases	$	683,415	$	9,173,612	$	364,862	$	2,477,911	$	840,201	$	321,352	$	2,945,361	$	2,604,156	$	218,103	$	1,428,660	$	21,057,633
	December 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	$	151	$	3,488	$	152	$	1,732	$	75	$	23	$	2,447	$	366	$	109	$	667	$	9,210
ALLL for loans and leases collectively evaluated for impairment	28,726		44,790		3,117		48,493		5,832		3,104		20,647		12,000		1,487		27,620		195,816
Total allowance for loan and lease losses	$	28,877	$	48,278	$	3,269	$	50,225	$	5,907	$	3,127	$	23,094	$	12,366	$	1,596	$	28,287	$	205,026
Loans and leases:
Loans and leases individually evaluated for impairment	$	1,045	$	76,361	$	1,563	$	12,600	$	1,074	$	142	$	31,476	$	7,613	$	2,613	$	1,912	$	136,399
Loans and leases collectively evaluated for impairment	648,112		8,949,859		349,728		2,554,901		825,196		340,122		2,857,648		2,593,731		228,787		1,444,226		20,792,310
Total loan and leases	$	649,157	$	9,026,220	$	351,291	$	2,567,501	$	826,270	$	340,264	$	2,889,124	$	2,601,344	$	231,400	$	1,446,138	$	20,928,709

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, 2017 and March 31, 2016.

	Three months ended March 31, 2017
(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
PCI Loans
Allowance for loan and lease losses:
Balance at January 1	$	483		$	6,423		$	502		$	504		$	4,818		$	956		$	83		$	13,769
Provision	(186		)	(1,230		)	(158		)	(142		)	(545		)	(550		)	(34		)	(2,845		)
Charge-offs	—			—			—			—			—			—			—			—
Recoveries	—			—			—			—			—			—			—			—
Balance at March 31	$	297		$	5,193		$	344		$	362		$	4,273		$	406		$	49		$	10,924
	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			Consumer and other			Total
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

As of March 31, 2017, and December 31, 2016, $275.8 million and $359.7 million, respectively, in PCI loans experienced an adverse change in expected cash flows since the date of acquisition. The corresponding valuation reserve was $10.9 million and $13.8 million, respectively.

The following tables show the ending balances of PCI loans and leases and related allowance by class of loans as of March 31, 2017 and December 31, 2016:

	March 31, 2017
(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	$	297	$	5,193	$	344	$	362	$	4,273	$	406	$	49	$	10,924
Loans and leases acquired with deteriorated credit quality	26,542		455,551		18,723		27,794		275,904		40,345		3,957		848,816
	December 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	$	483	$	6,423	$	502	$	504	$	4,818	$	956	$	83	$	13,769
Loans and leases acquired with deteriorated credit quality	20,766		453,013		12,645		11,844		268,777		38,650		3,474		809,169

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, 2017 and December 31, 2016 including interest income recognized in the period during which the loans and leases were considered impaired.

	March 31, 2017
(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	$	750	$	308	$	1,058	$	1,191	$	151
Commercial mortgage	38,730		36,058		74,788		81,232		3,122
Other commercial real estate	1,052		445		1,497		1,810		132
Commercial and industrial	8,053		2,811		10,864		13,244		1,043
Lease financing	1,808		246		2,054		2,054		213
Other	116		143		259		274		21
Residential mortgage	21,606		12,878		34,484		35,863		3,189
Revolving mortgage	1,627		6,645		8,272		9,535		287
Construction and land development - noncommercial	862		1,715		2,577		3,044		103
Consumer	1,425		433		1,858		2,056		591
Total non-PCI impaired loans and leases	$	76,029	$	61,682	$	137,711	$	150,303	$	8,852
	December 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	$	1,002	$	43	$	1,045	$	1,172	$	151
Commercial mortgage	42,875		33,486		76,361		82,658		3,488
Other commercial real estate	1,279		284		1,563		1,880		152
Commercial and industrial	8,920		3,680		12,600		16,637		1,732
Lease financing	1,002		72		1,074		1,074		75
Other	142		—		142		233		23
Residential mortgage	20,269		11,207		31,476		32,588		2,447
Revolving mortgage	1,825		5,788		7,613		8,831		366
Construction and land development - noncommercial	645		1,968		2,613		3,030		109
Consumer	1,532		380		1,912		2,086		667
Total non-PCI impaired loans and leases	$	79,491	$	56,908	$	136,399	$	150,189	$	9,210

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, 2017 and March 31, 2016:

	Three months ended March 31, 2017				Three months ended March 31, 2016
(Dollars in thousands)	Average balance		Interest income recognized		Average balance		Interest income recognized
Non-PCI impaired loans and leases:
Construction and land development - commercial	$	1,055	$	12	$	3,164	$	41
Commercial mortgage	75,310		642		92,945		766
Other commercial real estate	1,584		8		423		5
Commercial and industrial	11,529		104		15,551		151
Lease financing	1,568		14		1,657		20
Other	196		2		1,072		14
Residential mortgage	32,963		253		23,500		172
Revolving mortgage	7,969		57		6,309		32
Construction and land development - noncommercial	2,605		33		556		6
Consumer	1,900		23		1,265		18
Total non-PCI impaired loans and leases	$	136,679	$	1,148	$	146,442	$	1,225

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, 2017						December 31, 2016
(Dollars in thousands)	Accruing		Nonaccruing		Total		Accruing		Nonaccruing		Total
Commercial loans
Construction and land development - commercial	$	3,228	$	329	$	3,557	$	3,292	$	308	$	3,600
Commercial mortgage	64,447		15,282		79,729		70,263		14,435		84,698
Other commercial real estate	863		608		1,471		1,635		80		1,715
Commercial and industrial	9,124		652		9,776		9,193		1,436		10,629
Lease financing	1,135		917		2,052		882		192		1,074
Other	184		74		258		64		78		142
Total commercial TDRs	78,981		17,862		96,843		85,329		16,529		101,858
Noncommercial
Residential mortgage	35,292		6,374		41,666		34,012		5,117		39,129
Revolving mortgage	6,712		1,725		8,437		6,346		1,431		7,777
Construction and land development - noncommercial	240		—		240		240		—		240
Consumer and other	1,531		326		1,857		1,603		309		1,912
Total noncommercial TDRs	43,775		8,425		52,200		42,201		6,857		49,058
Total TDRs	$	122,756	$	26,287	$	149,043	$	127,530	$	23,386	$	150,916

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. TDRs 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, 2017		December 31, 2016
Accruing TDRs:
PCI	$	20,296	$	26,068
Non-PCI	102,460		101,462
Total accruing TDRs	122,756		127,530
Nonaccruing TDRs:
PCI	298		301
Non-PCI	25,989		23,085
Total nonaccruing TDRs	26,287		23,386
All TDRs:
PCI	20,594		26,369
Non-PCI	128,449		124,547
Total TDRs	$	149,043	$	150,916

The following table provides the types of non-PCI TDRs made during the three months ended March 31, 2017 and March 31, 2016, as well as a summary of loans that were modified as a TDR during the twelve month periods ended March 31, 2017 and March 31, 2016 that subsequently defaulted during the three months ended March 31, 2017 and March 31, 2016. 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, 2017						Three months ended March 31, 2016
	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
Total interest only	—	—		—	—		1	252		1	252
Loan term extension
Construction and land development - commercial	—	—		—	—		1	404		—	—
Commercial mortgage	—	—		—	—		1	—		—	—
Other commercial real estate	—	—		1	530		—	—		—	—
Commercial and industrial	2	94		—	—		—	—		—	—
Residential mortgage	1	32		1	47		1	34		—	—
Consumer	2	14		—	—		—	—		—	—
Total loan term extension	5	140		2	577		3	438		—	—
Below market interest rate
Construction and land development - commercial	1	60		—	—		1	18		1	18
Commercial mortgage	10	2,512		1	92		10	1,422		4	511
Other commercial real estate	1	4		—	—		—	—		—	—
Commercial and industrial	3	108		1	—		3	12		—	—
Lease financing	3	839		2	769		—	—		—	—
Residential mortgage	30	1,543		15	824		46	3,288		13	841
Construction and land development - noncommercial	2	412		—	—		—	—		—	—
Consumer	2	14		—	—		2	73		—	—
Other	1	143		—	—		—	—		—	—
Total below market interest rate	53	5,635		19	1,685		62	4,813		18	1,370
Discharged from bankruptcy
Construction and land development - commercial	—	—		—	—		—	—		1	16
Commercial mortgage	—	—		1	190		—	—		—	—
Lease financing	16	227		—	—		—	—		—	—
Residential mortgage	3	140		1	978		1	144		—	—
Revolving mortgage	4	99		9	649		8	347		8	277
Consumer	18	193		10	128		7	68		4	59
Total discharged from bankruptcy	41	659		21	1,945		16	559		13	352
Total non-PCI restructurings	99	$	6,434	42	$	4,207	82	$	6,062	32	$	1,974

The following table provides the types of PCI TDRs made during the three months ended March 31, 2017 and March 31, 2016, as well as a summary of loans that were modified as a TDR during the twelve month periods ended March 31, 2017 and March 31, 2016 that subsequently defaulted during the three months ended March 31, 2017 and March 31, 2016.

	Three months ended March 31, 2017						Three months ended March 31, 2016
	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		—	—
Residential mortgage	2	181		1	73		—	—		—	—
Total below market interest rate	2	181		1	73		4	2,030		—	—
Total PCI restructurings	2	$	181	1	$	73	4	$	2,030	—	$	—

For the three months ended March 31, 2017 and March 31, 2016, the pre-modification and post-modification outstanding recorded investments of loans modified as TDRs were not materially different.