Allowance for Credit Losses and Credit Quality

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

Allowance for Credit Losses and Credit Quality

ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

Allowance for Credit Losses Activity

A summary of changes in the allowance for credit losses for the six months ended June 30 is as follows:

	2017
(Dollars in thousands)	Legacy Loans			Acquired Loans			Total
Allowance for credit losses
Allowance for loan losses at beginning of period	$	105,569		$	39,150		$	144,719
Provision for (Reversal of) loan losses	18,315			(111		)	18,204
Transfer of balance to OREO and other	—			258			258
Loans charged-off	(18,098		)	(1,382		)	(19,480		)
Recoveries	1,824			700			2,524
Allowance for loan losses at end of period	$	107,610		$	38,615		$	146,225
Reserve for unfunded commitments at beginning of period	$	11,241		$	—		$	11,241
Provision for (Reversal of) unfunded lending commitments	(779		)	—			(779		)
Reserve for unfunded commitments at end of period	$	10,462		$	—		$	10,462
Allowance for credit losses at end of period	$	118,072		$	38,615		$	156,687

	2016
	Legacy Loans			Acquired Loans			Total
Allowance for credit losses
Allowance for loan losses at beginning of period	$	93,808		$	44,570		$	138,378
Provision for (Reversal of) loan losses before benefit attributable to FDIC loss share agreements	28,390			(2,416		)	25,974
Adjustment attributable to FDIC loss share arrangements	—			797			797
Net provision for (Reversal of) loan losses	28,390			(1,619		)	26,771
Adjustment attributable to FDIC loss share arrangements	—			(797		)	(797		)
Transfer of balance to OREO and other	—			(967		)	(967		)
Loans charged-off	(17,359		)	(1,196		)	(18,555		)
Recoveries	2,022			600			2,622
Allowance for loan losses at end of period	$	106,861		$	40,591		$	147,452
Reserve for unfunded commitments at beginning of period	$	14,145		$	—		$	14,145
Provision for (Reversal of) unfunded lending commitments	(319		)	—			(319		)
Reserve for unfunded commitments at end of period	$	13,826		$	—		$	13,826
Allowance for credit losses at end of period	$	120,687		$	40,591		$	161,278

A summary of changes in the allowance for credit losses for legacy loans, by loan portfolio type, for the six months ended June 30 is as follows:

	2017
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			Consumer			Total
Allowance for loan losses at beginning of period	$	25,408		$	35,434		$	22,486		$	3,835		$	18,406		$	105,569
Provision for (Reversal of) loan losses	4,323			5,181			3,387			(884		)	6,308			18,315
Loans charged-off	(256		)	(8,366		)	(2,845		)	(45		)	(6,586		)	(18,098		)
Recoveries	189			269			—			77			1,289			1,824
Allowance for loan losses at end of period	$	29,664		$	32,518		$	23,028		$	2,983		$	19,417		$	107,610
Reserve for unfunded commitments at beginning of period	$	3,206		$	3,535		$	1,003		$	657		$	2,840		$	11,241
Provision for (Reversal of) unfunded commitments	294			(46		)	(856		)	(89		)	(82		)	(779		)
Reserve for unfunded commitments at end of period	$	3,500		$	3,489		$	147		$	568		$	2,758		$	10,462
Allowance on loans individually evaluated for impairment	$	1,316		$	7,192		$	16,094		$	137		$	2,181		$	26,920
Allowance on loans collectively evaluated for impairment	28,348			25,326			6,934			2,846			17,236			80,690
Loans, net of unearned income:
Balance at end of period	$	6,114,930		$	3,390,699		$	550,162		$	970,961		$	2,466,658		$	13,493,410
Balance at end of period individually evaluated for impairment	42,204			36,836			89,814			4,631			25,983			199,468
Balance at end of period collectively evaluated for impairment	6,072,726			3,353,863			460,348			966,330			2,440,675			13,293,942

	2016
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			Consumer			Total
Allowance for loan losses at beginning of period	$	24,658		$	23,283		$	23,863		$	3,947		$	18,057		$	93,808
Provision for (Reversal of) loan losses	(715		)	5,874			16,819			264			6,148			28,390
Loans charged-off	(1,549		)	(1,154		)	(7,715		)	(173		)	(6,768		)	(17,359		)
Recoveries	644			35			—			27			1,316			2,022
Allowance for loan losses at end of period	$	23,038		$	28,038		$	32,967		$	4,065		$	18,753		$	106,861
Reserve for unfunded commitments at beginning of period	$	4,160		$	3,448		$	2,665		$	830		$	3,042		$	14,145
Provision for (Reversal of) unfunded commitments	(26		)	(60		)	(442		)	(23		)	232			(319		)
Reserve for unfunded commitments at end of period	$	4,134		$	3,388		$	2,223		$	807		$	3,274		$	13,826
Allowance on loans individually evaluated for impairment	$	691		$	969		$	11,925		$	100		$	800		$	14,485
Allowance on loans collectively evaluated for impairment	22,347			27,069			21,042			3,965			17,953			92,376
Loans, net of unearned income:
Balance at end of period	$	5,097,689		$	3,027,590		$	659,510		$	794,701		$	2,405,359		$	11,984,849
Balance at end of period individually evaluated for impairment	26,152			34,298			148,317			3,451			9,140			221,358
Balance at end of period collectively evaluated for impairment	5,071,537			2,993,292			511,193			791,250			2,396,219			11,763,491

A summary of changes in the allowance for loan losses for acquired loans, by loan portfolio type, for the six months ended June 30 is as follows:

	2017
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			Consumer			Total
Allowance for loan losses at beginning of period	$	23,574		$	3,230		$	39		$	7,412		$	4,895		$	39,150
Provision for (Reversal of) loan losses	1,407			(46		)	(21		)	(578		)	(873		)	(111		)
Transfer of balance to OREO and other	135			(69		)	—			2			190			258
Loans charged-off	(1,026		)	(71		)	—			(30		)	(255		)	(1,382		)
Recoveries	145			77			—			65			413			700
Allowance for loan losses at end of period	$	24,235		$	3,121		$	18		$	6,871		$	4,370		$	38,615
Allowance on loans individually evaluated for impairment	$	402		$	678		$	—		$	32		$	92		$	1,204
Allowance on loans collectively evaluated for impairment	23,833			2,443			18			6,839			4,278			37,411
Loans, net of unearned income:
Balance at end of period	$	1,026,673		$	293,382		$	1,806		$	375,506		$	365,239		$	2,062,606
Balance at end of period individually evaluated for impairment	10,225			2,851			—			660			2,856			16,592
Balance at end of period collectively evaluated for impairment	777,865			259,101			1,806			263,596			279,019			1,581,387
Balance at end of period acquired with deteriorated credit quality	238,583			31,430			—			111,250			83,364			464,627

	2016
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			Consumer			Total
Allowance for loan losses at beginning of period	$	25,979		$	2,819		$	125		$	7,841		$	7,806		$	44,570
Provision for (Reversal of) loan losses	(1,804		)	350			(52		)	896			(1,009		)	(1,619		)
Increase (Decrease) in FDIC loss share receivable	45			(28		)	—			(562		)	(252		)	(797		)
Transfer of balance to OREO and other	(880		)	323			—			22			(432		)	(967		)
Loans charged-off	(31		)	(700		)	—			—			(465		)	(1,196		)
Recoveries	85			112			—			29			374			600
Allowance for loan losses at end of period	$	23,394		$	2,876		$	73		$	8,226		$	6,022		$	40,591
Allowance on loans individually evaluated for impairment	$	—		$	22		$	—		$	2		$	44		$	68
Allowance on loans collectively evaluated for impairment	23,394			2,854			73			8,224			5,978			40,523
Loans, net of unearned income:
Balance at end of period	$	1,374,312		$	408,219		$	2,524		$	454,361		$	498,296		$	2,737,712
Balance at end of period individually evaluated for impairment	1,145			2,075			—			245			4,412			7,877
Balance at end of period collectively evaluated for impairment	1,038,737			368,283			2,524			321,879			386,080			2,117,503
Balance at end of period acquired with deteriorated credit quality	334,430			37,861			—			132,237			107,804			612,332

Portfolio Segment Risk Factors

Commercial real estate loans include loans to commercial customers for long-term financing of land and buildings or for land development or construction of a building. These loans are repaid through revenues from operations of the businesses, rents of properties, sales of properties and refinances. Commercial and industrial loans represent loans to commercial customers to finance general working capital needs, equipment purchases and other projects where repayment is derived from cash flows resulting from business operations. The Company originates commercial business loans on a secured and, to a lesser extent, unsecured basis.

Residential mortgage loans consist of loans to consumers to finance a primary residence. The vast majority of the residential mortgage loan portfolio is comprised of non-conforming 1-4 family mortgage loans secured by properties located in the Company's market areas and originated under terms and documentation that permit their sale in a secondary market.

Consumer loans are offered by the Company in order to provide a full range of retail financial services to its customers and include home equity, credit card and other direct consumer installment loans. The Company originates substantially all of its consumer loans in its primary market areas. Loans in the consumer segment are sensitive to unemployment and other key consumer economic measures.

Credit Quality

The Company utilizes an asset risk classification system in accordance with guidelines established by the Federal Reserve Board as part of its efforts to monitor commercial asset quality. “Special mention” loans are defined as loans where known information about possible credit problems of the borrower cause management to have some doubt as to the ability of these borrowers to comply with the present loan repayment terms which may result in future disclosure of these loans as non-performing. For problem assets with identified credit issues, the Company has two primary classifications: “substandard” and “doubtful.”

Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full satisfaction of the loan balance outstanding questionable, which makes probability of loss higher based on currently existing facts, conditions, and values. Loans classified as “Pass” do not meet the criteria set forth for special mention, substandard, or doubtful classification and are not considered criticized. Asset risk classifications are determined at origination or acquisition and reviewed on an ongoing basis. Risk classifications are changed if, in the opinion of management, the risk profile of the customer has changed since the last review of the loan relationship.

The Company’s investment in loans by credit quality indicator is presented in the following tables. The tables below further segregate the Company’s loans between loans that were originated, or renewed and underwritten by the Company (legacy loans) and acquired loans. Loan premiums/discounts in the tables below represent the adjustment of acquired loans to fair value at the acquisition date, as adjusted for income accretion and changes in cash flow estimates in subsequent periods. Asset risk classifications for commercial loans reflect the classification as of June 30, 2017 and December 31, 2016. Credit quality information in the tables below includes total loans acquired (including acquired impaired loans) at the gross loan balance, prior to the application of premiums/discounts, at June 30, 2017 and December 31, 2016.

Loan delinquency is the primary credit quality indicator that the Company utilizes to monitor consumer asset quality.

	Legacy loans
	June 30, 2017										December 31, 2016
(Dollars in thousands)	Pass		Special Mention		Sub- standard		Doubtful		Total		Pass		Special Mention		Sub- standard		Doubtful		Total
Commercial real estate - construction	$	997,264	$	7,917	$	5,298	$	—	$	1,010,479	$	734,687	$	2,203	$	3,871	$	—	$	740,761
Commercial real estate - owner-occupied	1,740,717		39,772		34,210		468		1,815,167		1,738,024		17,542		29,058		—		1,784,624
Commercial real estate- non-owner-occupied	3,251,368		8,696		29,220		—		3,289,284		3,063,470		8,617		25,842		—		3,097,929
Commercial and industrial	3,287,383		42,422		58,527		2,367		3,390,699		3,112,300		29,763		35,199		17,534		3,194,796
Energy-related	373,342		49,097		74,620		53,103		550,162		242,123		80,084		225,724		11,358		559,289
Total	$	9,650,074	$	147,904	$	201,875	$	55,938	$	10,055,791	$	8,890,604	$	138,209	$	319,694	$	28,892	$	9,377,399

	Legacy loans
	June 30, 2017						December 31, 2016
(Dollars in thousands)	Current		30+ Days Past Due		Total		Current		30+ Days Past Due		Total
Residential mortgage	$	955,343	$	15,618	$	970,961	$	836,509	$	17,707	$	854,216
Consumer - home equity	1,819,163		19,678		1,838,841		1,768,763		14,658		1,783,421
Consumer - indirect automobile	89,590		2,516		92,106		127,054		3,994		131,048
Consumer - credit card	85,690		897		86,587		81,602		922		82,524
Consumer - other	444,743		4,381		449,124		462,650		3,666		466,316
Total	$	3,394,529	$	43,090	$	3,437,619	$	3,276,578	$	40,947	$	3,317,525

	Acquired loans
	June 30, 2017													December 31, 2016
(Dollars in thousands)	Pass		Special Mention		Sub-standard		Doubtful		Premium/(Discount)			Total		Pass		Special Mention		Sub-standard		Doubtful		Loss		Premium/(Discount)			Total
Commercial real estate - construction	$	71,157	$	1,208	$	3,431	$	14	$	13,899		$	89,709	$	46,498	$	459	$	3,118	$	2,574	$	—	$	8,759		$	61,408
Commercial real estate - owner-occupied	384,411		3,275		14,627		—		(12,072		)	390,241		426,492		7,664		17,584		1,356		—		(3,084		)	450,012
Commercial real estate- non-owner-occupied	541,724		3,434		26,188		119		(24,742		)	546,723		663,571		11,620		31,552		101		23		(39,335		)	667,532
Commercial and industrial	275,350		5,440		11,315		2,601		(1,324		)	293,382		323,154		1,416		27,749		494		—		(4,487		)	348,326
Energy-related	1,811		—		—		—		(5		)	1,806		1,910		—		—		—		—		(6		)	1,904
Total	$	1,274,453	$	13,357	$	55,561	$	2,734	$	(24,244	)	$	1,321,861	$	1,461,625	$	21,159	$	80,003	$	4,525	$	23	$	(38,153	)	$	1,529,182

	Acquired loans
	June 30, 2017									December 31, 2016
(Dollars in thousands)	Current		30+ Days Past Due		Premium (Discount)			Total		Current		30+ Days Past Due		Premium (Discount)			Total
Residential mortgage	$	378,204	$	22,121	$	(24,819	)	$	375,506	$	424,300	$	20,914	$	(32,030	)	$	413,184
Consumer - home equity	322,658		13,051		(15,602		)	320,107		377,021		12,807		(17,323		)	372,505
Consumer - indirect automobile	24		—		—			24		12		—		(8		)	4
Consumer - other	48,168		1,225		(4,285		)	45,108		58,141		1,423		(4,392		)	55,172
Total	$	749,054	$	36,397	$	(44,706	)	$	740,745	$	859,474	$	35,144	$	(53,753	)	$	840,865

Legacy Impaired Loans

Information on the Company’s investment in legacy impaired loans, which include all TDRs and all other non-accrual loans evaluated or measured individually for impairment for purposes of determining the allowance for loan losses, is presented in the following tables as of and for the periods indicated.

	June 30, 2017							December 31, 2016
	Unpaid Principal Balance		Recorded Investment		Related Allowance			Unpaid Principal Balance		Recorded Investment		Related Allowance
(Dollars in thousands)
With no related allowance recorded:
Commercial real estate- construction	$	2,123	$	2,123	$	—		$	38	$	38	$	—
Commercial real estate- owner-occupied	13,932		13,932		—			4,593		4,593		—
Commercial real estate- non-owner-occupied	4,443		4,443		—			12,668		11,876		—
Commercial and industrial	16,016		16,016		—			14,202		13,189		—
Energy-related	32,013		32,013		—			152,424		143,239		—
Residential mortgage	1,123		1,123		—			—		—		—
Consumer - home equity	3,336		3,336		—			—		—		—
Consumer -other	—		—		—			—		—		—
With an allowance recorded:
Commercial real estate- construction	36		36		(1		)	—		—		—
Commercial real estate- owner-occupied	17,945		17,945		(690		)	17,580		17,429		(640		)
Commercial real estate- non-owner-occupied	3,725		3,725		(625		)	108		95		(1		)
Commercial and industrial	20,820		20,820		(7,192		)	28,829		28,329		(10,864		)
Energy-related	57,801		57,801		(16,094		)	53,967		53,088		(9,769		)
Residential mortgage	3,543		3,508		(137		)	4,627		4,312		(144		)
Consumer - home equity	18,865		18,757		(1,805		)	13,906		13,257		(993		)
Consumer - indirect automobile	668		668		(83		)	1,037		758		(114		)
Consumer - other	3,222		3,222		(293		)	2,447		2,442		(251		)
Total	$	199,611	$	199,468	$	(26,920	)	$	306,426	$	292,645	$	(22,776	)
Total commercial loans	$	168,854	$	168,854	$	(24,602	)	$	284,409	$	271,876	$	(21,274	)
Total mortgage loans	4,666		4,631		(137		)	4,627		4,312		(144		)
Total consumer loans	26,091		25,983		(2,181		)	17,390		16,457		(1,358		)

	Three Months Ended June 30, 2017				Three Months Ended June 30, 2016				Six Months Ended June 30, 2017				Six Months Ended June 30, 2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
With no related allowance recorded:
Commercial real estate- construction	$	2,123	$	13	$	27	$	—	$	2,123	$	39	$	30	$	—
Commercial real estate- owner-occupied	14,054		158		2,072		20		14,179		404		2,085		41
Commercial real estate- non-owner-occupied	4,409		39		13,395		123		4,433		67		13,454		237
Commercial and industrial	21,116		106		36,212		467		21,998		232		41,074		947
Energy-related	32,370		44		106,692		912		34,330		102		102,364		1,857
Residential mortgage	1,130		12		825		10		1,136		24		825		19
Consumer - home equity	3,347		32		—		—		3,356		65		—		—
With an allowance recorded:
Commercial real estate- construction	37		1		—		—		37		1		—		—
Commercial real estate- owner-occupied	17,908		86		10,636		83		17,998		186		10,694		166
Commercial real estate- non-owner-occupied	3,761		13		53		—		3,774		57		60		1
Commercial and industrial	21,028		284		2,125		23		21,504		555		2,191		48
Energy-related	58,399		2		15,486		10		58,868		4		12,290		47
Residential mortgage	3,528		34		2,642		18		3,549		68		2,657		38
Consumer - home equity	18,359		196		7,550		74		17,443		375		7,290		146
Consumer - indirect automobile	750		6		650		6		797		14		723		18
Consumer - other	3,100		51		846		15		2,921		96		702		25
Total	$	205,419	$	1,077	$	199,211	$	1,761	$	208,446	$	2,289	$	196,439	$	3,590
Total commercial loans	$	175,205	$	746	$	186,698	$	1,638	$	179,244	$	1,647	$	184,242	$	3,344
Total mortgage loans	4,658		46		3,467		28		4,685		92		3,482		57
Total consumer loans	25,556		285		9,046		95		24,517		550		8,715		189

As of June 30, 2017 and December 31, 2016, the Company was not committed to lend a material amount of additional funds to any customer whose loan was classified as impaired or as a troubled debt restructuring.