Allowance for Credit Losses | Allowance for Credit LossesIn accordance with ASC 326, the Company is required to measure the allowance for credit losses of financial assets with similar risk characteristics on a collective or pooled basis. In considering the segmentation of financial assets measured at amortized cost into pools, the Company considered various risk characteristics in its analysis. Generally, the segmentation utilized represents the level at which the Company develops and documents its systematic methodology to determine the allowance for credit losses for the financial assets held at amortized cost, specifically the Company's loan portfolio and debt securities classified as held-to-maturity. Descriptions of the Company’s loan portfolio segments and major debt security types are included in Note (5) “Allowance for Credit Losses” of the 2022 Form 10-K. In accordance with ASC 326, the Company elected to not measure an allowance for credit losses on accrued interest. As such accrued interest is written off in a timely manner when deemed uncollectible. Any such write-off of accrued interest will reverse previously recognized interest income. In addition, the Company elected to not include accrued interest within presentation and disclosures of the carrying amount of financial assets held at amortized cost. This election is applicable to the various disclosures included within the Company's financial statements. Accrued interest related to financial assets held at amortized cost is included within accrued interest receivable and other assets The tables below show the aging of the Company’s loan portfolio by the segmentation noted above at March 31, 2023, December 31, 2022 and March 31, 2022: As of March 31, 2023 90+ days and still accruing 60-89 days past due 30-59 days past due (In thousands) Nonaccrual Current Total Loans Loan Balances (includes PCD): Commercial Commercial, industrial and other $ 47,950 $ — $ 10,755 $ 95,593 $ 12,422,687 $ 12,576,985 Commercial real estate Construction and development 5,404 — 4,438 19,616 1,567,595 1,597,053 Non-construction 5,792 — 16,101 53,064 8,567,068 8,642,025 Home equity 1,190 — 116 1,118 334,592 337,016 Residential real estate, excluding early buy-out loans 11,333 104 74 19,183 2,278,699 2,309,393 Premium finance receivables Property and casualty insurance loans 18,543 9,215 14,287 32,545 5,664,290 5,738,880 Life insurance loans — 1,066 21,552 52,975 8,050,209 8,125,802 Consumer and other 6 87 10 379 41,683 42,165 Total loans, net of unearned income, excluding early buy-out loans $ 90,218 $ 10,472 $ 67,333 $ 274,473 $ 38,926,823 $ 39,369,319 Early buy-out loans guaranteed by U.S. government agencies (1) 29,245 36,920 — 1,485 128,502 196,152 Total loans, net of unearned income $ 119,463 $ 47,392 $ 67,333 $ 275,958 $ 39,055,325 $ 39,565,471 As of December 31, 2022 90+ days and still accruing 60-89 days past due 30-59 days past due (In thousands) Nonaccrual Current Total Loans Loan Balances (includes PCD): Commercial Commercial, industrial and other $ 35,579 $ 462 $ 21,128 $ 56,696 $ 12,435,299 $ 12,549,164 Commercial real estate Construction and development 416 — 361 14,390 1,471,763 1,486,930 Non-construction 5,971 — 1,883 16,285 8,439,878 8,464,017 Home equity 1,487 — — 2,152 329,059 332,698 Residential real estate, excluding early buy-out loans 10,171 — 4,364 9,982 2,183,078 2,207,595 Premium finance receivables Property and casualty insurance loans 13,470 15,841 14,926 40,557 5,764,665 5,849,459 Life insurance loans — 17,245 5,260 68,725 7,999,768 8,090,998 Consumer and other 6 49 18 224 50,539 50,836 Total loans, net of unearned income, excluding early buy-out loans $ 67,100 $ 33,597 $ 47,940 $ 209,011 $ 38,674,049 $ 39,031,697 Early buy-out loans guaranteed by U.S. government agencies (1) 31,279 47,450 984 1,584 83,491 164,788 Total loans, net of unearned income $ 98,379 $ 81,047 $ 48,924 $ 210,595 $ 38,757,540 $ 39,196,485 (1) Early buy-out loans are insured or guaranteed by the FHA or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans. As of March 31, 2022 90+ days and still accruing 60-89 days past due 30-59 days past due (In thousands) Nonaccrual Current Total Loans Loan Balances (includes PCD): Commercial Commercial, industrial and other $ 16,878 $ — $ 1,294 $ 31,889 $ 11,533,902 $ 11,583,963 Commercial real estate Construction and development 1,054 — — 1,409 1,393,943 1,396,406 Non-construction 11,247 — 2,648 28,732 7,796,041 7,838,668 Home equity 1,747 — 199 545 318,944 321,435 Residential real estate, excluding early buy-out loans 7,262 — 293 18,808 1,723,526 1,749,889 Premium finance receivables Property and casualty insurance loans 6,707 12,363 8,890 21,278 4,888,170 4,937,408 Life insurance loans — — 22,401 15,522 7,316,240 7,354,163 Consumer and other 4 43 5 221 48,246 48,519 Total loans, net of unearned income, excluding early buy-out loans $ 44,899 $ 12,406 $ 35,730 $ 118,404 $ 35,019,012 $ 35,230,451 Early buy-out loans guaranteed by U.S. government agencies (1) 4,661 28,958 — 185 16,292 50,096 Total loans, net of unearned income $ 49,560 $ 41,364 $ 35,730 $ 118,589 $ 35,035,304 $ 35,280,547 (1) Early buy-out loans are insured or guaranteed by the FHA or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans. Credit Quality Indicators Credit quality indicators, specifically the Company's internal risk rating systems, reflect how the Company monitors credit losses and represents factors used by the Company when measuring the allowance for credit losses. Descriptions of the Company’s credit quality indicators by financial asset are included in Note (5) “Allowance for Credit Losses” of the 2022 Form 10-K. The table below shows the Company’s loan portfolio by credit quality indicator and year of origination at March 31, 2023: Year of Origination Revolving Total (In thousands) 2023 2022 2021 2020 2019 Prior Revolving to Term Loans Loan Balances: Commercial, industrial and other Pass $ 752,119 $ 2,576,073 $ 2,081,628 $ 940,341 $ 603,016 $ 1,213,066 $ 3,872,419 $ 3,497 $ 12,042,159 Special mention 402 55,314 92,315 9,462 23,220 10,695 149,012 268 340,688 Substandard accrual — 13,415 40,397 2,401 12,670 40,814 36,035 456 146,188 Substandard nonaccrual/doubtful — 550 5,479 10,985 28,490 2,215 231 — 47,950 Total commercial, industrial and other $ 752,521 $ 2,645,352 $ 2,219,819 $ 963,189 $ 667,396 $ 1,266,790 $ 4,057,697 $ 4,221 $ 12,576,985 Construction and development Pass $ 42,635 $ 506,714 $ 512,801 $ 204,113 $ 111,497 $ 119,478 $ 12,626 $ 369 $ 1,510,233 Special mention — — 1,475 16,480 23,494 14,360 — — 55,809 Substandard accrual — 2,337 — 8,301 — 14,969 — — 25,607 Substandard nonaccrual/doubtful — 4,190 798 — — 416 — — 5,404 Total construction and development $ 42,635 $ 513,241 $ 515,074 $ 228,894 $ 134,991 $ 149,223 $ 12,626 $ 369 $ 1,597,053 Non-construction Pass $ 472,528 $ 1,862,370 $ 1,441,054 $ 1,002,397 $ 814,910 $ 2,637,342 $ 184,246 $ 649 $ 8,415,496 Special mention — 4,351 11,872 2,140 29,868 74,174 1,439 — 123,844 Substandard accrual — — 3,163 22,041 16,827 54,862 — — 96,893 Substandard nonaccrual/doubtful — — — — — 5,792 — — 5,792 Total non-construction $ 472,528 $ 1,866,721 $ 1,456,089 $ 1,026,578 $ 861,605 $ 2,772,170 $ 185,685 $ 649 $ 8,642,025 Home equity Pass $ — $ — $ — $ — $ 56 $ 5,633 $ 317,387 $ — $ 323,076 Special mention — — — — — 1,430 2,193 — 3,623 Substandard accrual — — — — — 8,214 869 44 9,127 Substandard nonaccrual/doubtful — — 77 116 18 880 99 — 1,190 Total home equity $ — $ — $ 77 $ 116 $ 74 $ 16,157 $ 320,548 $ 44 $ 337,016 Residential real estate Early buy-out loans guaranteed by U.S. government agencies $ — $ — $ 769 $ 9,250 $ 19,430 $ 166,703 $ — $ — $ 196,152 Pass 95,403 815,003 825,881 225,297 118,840 196,150 — — 2,276,574 Special mention 40 3,816 718 1,992 542 4,488 — — 11,596 Substandard accrual 323 1,204 1,825 1,182 1,100 4,256 — — 9,890 Substandard nonaccrual/doubtful — 284 1,100 759 1,665 7,525 — — 11,333 Total residential real estate $ 95,766 $ 820,307 $ 830,293 $ 238,480 $ 141,577 $ 379,122 $ — $ — $ 2,505,545 Premium finance receivables - property and casualty Pass $ 2,826,947 $ 2,757,313 $ 35,647 $ 5,270 $ 906 $ — $ — $ — $ 5,626,083 Special mention 42,025 49,190 969 17 — — — — 92,201 Substandard accrual 205 1,700 148 — — — — — 2,053 Substandard nonaccrual/doubtful 777 16,975 779 12 — — — — 18,543 Total premium finance receivables - property and casualty $ 2,869,954 $ 2,825,178 $ 37,543 $ 5,299 $ 906 $ — $ — $ — $ 5,738,880 Premium finance receivables - life Pass $ 49,164 $ 550,396 $ 830,917 $ 1,056,414 $ 936,674 $ 4,699,645 $ — $ — $ 8,123,210 Special mention — — 1,156 1,436 — — — — 2,592 Substandard accrual — — — — — — — — — Substandard nonaccrual/doubtful — — — — — — — — — Total premium finance receivables - life $ 49,164 $ 550,396 $ 832,073 $ 1,057,850 $ 936,674 $ 4,699,645 $ — $ — $ 8,125,802 Consumer and other Pass $ 750 $ 2,469 $ 1,414 $ 200 $ 433 $ 5,306 $ 31,392 $ — $ 41,964 Special mention — 6 1 — 2 133 3 — 145 Substandard accrual — 2 — — — 40 8 — 50 Substandard nonaccrual/doubtful — — 6 — — — — — 6 Total consumer and other $ 750 $ 2,477 $ 1,421 $ 200 $ 435 $ 5,479 $ 31,403 $ — $ 42,165 Total loans Early buy-out loans guaranteed by U.S. government agencies $ — $ — $ 769 $ 9,250 $ 19,430 $ 166,703 $ — $ — $ 196,152 Pass 4,239,546 9,070,338 5,729,342 3,434,032 2,586,332 8,876,620 4,418,070 4,515 38,358,795 Special mention 42,467 112,677 108,506 31,527 77,126 105,280 152,647 268 630,498 Substandard accrual 528 18,658 45,533 33,925 30,597 123,155 36,912 500 289,808 Substandard nonaccrual/doubtful 777 21,999 8,239 11,872 30,173 16,828 330 — 90,218 Total loans $ 4,283,318 $ 9,223,672 $ 5,892,389 $ 3,520,606 $ 2,743,658 $ 9,288,586 $ 4,607,959 $ 5,283 $ 39,565,471 Current period gross write offs $ 478 $ 4,893 $ 1,194 $ 337 $ 318 $ 131 $ — $ — $ 7,351 Held-to-maturity debt securities The Company conducts an assessment of its investment securities, including those classified as held-to-maturity, at the time of purchase and on at least an annual basis to ensure such investment securities remain within appropriate levels of risk and continue to perform satisfactorily in fulfilling its obligations. The Company considers, among other factors, the nature of the securities and credit ratings or financial condition of the issuer. If available, the Company obtains a credit rating for issuers from a Nationally Recognized Statistical Rating Organization (“NRSRO”) for consideration. If no such rating is available for an issuer, the Company performs an internal rating based on the scale utilized within the loan portfolio as discussed above. For purposes of the table below, the Company has converted any issuer rating from an NRSRO into the Company’s internal ratings based on Investment Policy and review by the Company’s management. As of March 31, 2023 Year of Origination Total (In thousands) 2023 2022 2021 2020 2019 Prior Balance Amortized Cost Balances: U.S. government agencies 1-4 internal grade $ — $ 160,000 $ 147,804 $ 25,000 $ 4,000 $ 2,804 $ 339,608 5-7 internal grade — 8-10 internal grade — Total U.S. government agencies $ — $ 160,000 $ 147,804 $ 25,000 $ 4,000 $ 2,804 $ 339,608 Municipal 1-4 internal grade $ — $ 1,042 $ 6,978 $ 264 $ 618 $ 165,818 $ 174,720 5-7 internal grade — — — — — — — 8-10 internal grade — — — — — — — Total municipal $ — $ 1,042 $ 6,978 $ 264 $ 618 $ 165,818 $ 174,720 Mortgage-backed securities 1-4 internal grade $ 5,065 $ 606,922 $ 2,422,478 $ — $ — $ — $ 3,034,465 5-7 internal grade — — — — — — — 8-10 internal grade — — — — — — — Total mortgage-backed securities $ 5,065 $ 606,922 $ 2,422,478 $ — $ — $ — $ 3,034,465 Corporate notes 1-4 internal grade $ — $ 14,964 $ — $ 6,009 $ 7,291 $ 29,797 $ 58,061 5-7 internal grade — — — — — — — 8-10 internal grade — — — — — — — Total corporate notes $ — $ 14,964 $ — $ 6,009 $ 7,291 $ 29,797 $ 58,061 Total held-to-maturity securities $ 3,606,854 Less: Allowance for credit losses (463) Held-to-maturity securities, net of allowance for credit losses $ 3,606,391 Measurement of Allowance for Credit Losses The Company's allowance for credit losses consists of the allowance for loan losses, the allowance for unfunded commitment losses and the allowance for held-to-maturity debt security losses. In accordance with ASC 326, the Company measures the allowance for credit losses at the time of origination or purchase of a financial asset, representing an estimate of lifetime expected credit losses on the related asset. When developing its estimate, the Company considers available information relevant to assessing the collectability of cash flows, from both internal and external sources. Historical credit loss experience is one input in the estimation process as well as inputs relevant to current conditions and reasonable and supportable forecasts. In considering past events, the Company considers the relevance, or lack thereof, of historical information due to changes in such things as financial asset underwriting or collection practices, and changes in portfolio mix due to changing business plans and strategies. In considering current conditions and forecasts, the Company considers both the current economic environment and the forecasted direction of the economic environment with emphasis on those factors deemed relevant to or driving changes in expected credit losses. As significant judgment is required, the review of the appropriateness of the allowance for credit losses is performed quarterly by various committees with participation by the Company's executive management. March 31, December 31, March 31, (In thousands) 2023 2022 2022 Allowance for loan losses $ 287,972 $ 270,173 $ 250,539 Allowance for unfunded lending-related commitments losses 87,826 87,275 50,629 Allowance for loan losses and unfunded lending-related commitments losses 375,798 357,448 301,168 Allowance for held-to-maturity securities losses 463 488 159 Allowance for credit losses $ 376,261 $ 357,936 $ 301,327 The allowance for credit losses is measured on a collective or pooled basis when similar risk characteristics exist, based upon the segmentation discussed above. The Company utilizes modeling methodologies that estimate lifetime credit loss rates on each pool, including methodologies estimating the probability of default and loss given default on specific segments. Historical credit loss history is adjusted for reasonable and supportable forecasts developed by the Company on a quantitative or qualitative basis and incorporates third party economic forecasts. Reasonable and supportable forecasts consider the macroeconomic factors that are most relevant to evaluating and predicting expected credit losses in the Company's financial assets. Currently, the Company utilizes an eight quarter forecast period using a single macroeconomic scenario provided by a third party and reviewed within the Company's governance structure. For periods beyond the ability to develop reasonable and supportable forecasts, the Company reverts to historical loss rates at an input level, straight-line over a four quarter reversion period. Expected credit losses are measured over the contractual term of the financial asset with consideration of expected prepayments. Expected extensions, renewals or modifications of the financial asset are considered when the expected extension, renewal or modification is contained within the existing agreement and is not unconditionally cancelable. The methodologies discussed above are applied to both current asset balances on the Company's Consolidated Statements of Condition and off-balance sheet commitments (i.e. unfunded lending-related commitments). Assets that do not share similar risk characteristics with a pool are assessed for the allowance for credit losses on an individual basis. These typically include assets experiencing financial difficulties, including assets rated as substandard nonaccrual and doubtful. If foreclosure is probable or the asset is considered collateral-dependent, expected credit losses are measured based upon the fair value of the underlying collateral adjusted for selling costs, if appropriate. Underlying collateral across the Company's segments consist primarily of real estate, land and construction assets as well as general business assets of the borrower. As of March 31, 2023, excluding loans carried at fair value, substandard nonaccrual loans totaling $23.3 million in carrying balance had no related allowance for credit losses. The Company does not measure an allowance for credit losses on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when assets are placed on nonaccrual status. Loan portfolios A summary of activity in the allowance for credit losses, specifically for the loan portfolio (i.e. allowance for loan losses and allowance for unfunded commitment losses), for the three and three months ended March 31, 2023 and 2022 is as follows. Three months ended March 31, 2023 Commercial Real Estate Home Equity Residential Real Estate Premium Finance Receivables Consumer and Other Total Loans (In thousands) Commercial Allowance for credit losses at beginning of period $ 142,769 $ 184,352 $ 7,573 $ 11,585 $ 10,671 $ 498 $ 357,448 Cumulative effect adjustment from the adoption of ASU 2022-02 111 1,356 (33) (692) — (1) 741 Other adjustments — — — — 4 — 4 Charge-offs (2,543) (5) — — (4,650) (153) (7,351) Recoveries 392 100 35 4 1,323 32 1,886 Provision for credit losses 8,772 8,977 153 537 4,607 24 23,070 Allowance for credit losses at period end $ 149,501 $ 194,780 $ 7,728 $ 11,434 $ 11,955 $ 400 $ 375,798 By measurement method: Individually measured $ 11,281 $ 1,621 $ — $ — $ — $ 1 $ 12,903 Collectively measured 138,220 193,159 7,728 11,434 11,955 399 362,895 Loans at period end Individually measured $ 47,950 $ 11,196 $ 1,190 $ 11,280 $ — $ 6 $ 71,622 Collectively measured 12,529,035 10,227,882 335,826 2,286,733 13,864,682 42,159 39,286,317 Loans held at fair value — — — 207,532 — — 207,532 Three months ended March 31, 2022 Commercial Commercial Real Estate Home Equity Residential Real Estate Premium Finance Receivables Consumer and Other Total Loans (In thousands) Allowance for credit losses at beginning of period $ 119,307 $ 144,583 $ 10,699 $ 8,782 $ 15,859 $ 423 $ 299,653 Other adjustments — — — — 22 — 22 Charge-offs (1,414) (777) (197) (466) (1,678) (193) (4,725) Recoveries 538 32 93 5 1,476 49 2,193 Provision for credit losses 2,480 1,068 (29) 1,108 (957) 355 4,025 Allowance for credit losses at period end $ 120,911 $ 144,906 $ 10,566 $ 9,429 $ 14,722 $ 634 $ 301,168 By measurement method: Individually measured $ 3,698 $ 522 $ 127 $ 800 $ — $ 5 $ 5,152 Collectively measured 117,213 144,384 10,439 8,629 14,722 629 296,016 Loans at period end Individually measured $ 19,651 $ 22,370 $ 12,904 $ 17,842 $ — $ 79 $ 72,846 Collectively measured 11,564,312 9,212,704 308,531 1,724,159 12,291,571 48,440 35,149,717 Loans held at fair value — — — 57,984 — — 57,984 For the three months ended March 31, 2023, and 2022, the Company recognized approximately $23.1 million and $4.0 million of provision for credit losses, respectively, related to loans and lending agreements. The provision for each period was primarily the result of loan growth as well as the Company's macroeconomic forecasts of key model inputs (most notably, Baa corporate credit spreads). Uncertainties remain regarding expected economic performance and macroeconomic forecasts utilized in the measurement of the allowance for credit losses as of March 31, 2023. Other key drivers of provision for credit losses in these portfolios include, but are not limited to, stable loan risk rating migration. Net charge-offs in the three month periods ending March 31, 2023 and 2022, totaled $5.5 million and $2.5 million, respectively. Held-to-maturity debt securities The allowance for credit losses on the Company’s held-to-maturity debt securities is presented as a reduction to the amortized cost basis of held-to-maturity securities on the Company's Consolidated Statements of Condition. For the three month period ended March 31, 2023 and 2022, the Company recognized approximately $(25,000) and $81,000, respectively, of provision for credit losses related to held-to-maturity securities. At March 31, 2023, the Company did not identify any losses within its portfolio that it would deem a credit loss and require additional measurement of an allowance for credit losses. Loan Modifications to Borrowers Experiencing Financial Difficulties The Company’s approach to restructuring or modifying loans is built on its credit risk rating system, which requires credit management personnel to assign a credit risk rating to each loan. In each case, the loan officer is responsible for recommending a credit risk rating for each loan and ensuring the credit risk ratings are appropriate. These credit risk ratings are then reviewed and approved by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors, including a borrower’s financial strength, cash flow coverage, collateral protection and guarantees. The Company’s credit risk rating scale is one through ten with higher scores indicating higher risk. In the case of loans rated six or worse following modification, the Company’s Managed Assets Division evaluates the loan and the credit risk rating and determines that the loan has been restructured to be reasonably assured of repayment and of performance according to the modified terms and is supported by a current, well-documented credit assessment of the borrower’s financial condition and prospects for repayment under the revised terms. Based on the Company’s credit risk rating system, it considers that borrowers whose credit risk rating is 5 or better are not experiencing financial difficulties. Restructurings may arise when, due to financial difficulties experienced by the borrower, the Company obtains through physical possession one or more collateral assets in satisfaction of all or part of an existing credit. Once possession is obtained, the Company reclassifies the appropriate portion of the remaining balance of the credit from loans to other real estate owned (“OREO”), which is included within other assets in the Consolidated Statements of Condition. For any residential real estate property collateralizing a consumer mortgage loan, the Company is considered to possess the related collateral only if legal title is obtained upon completion of foreclosure, or the borrower conveys all interest in the residential real estate property to the Company through completion of a deed in lieu of foreclosure or similar legal agreement. At March 31, 2023, the Company had $1.1 million of foreclosed residential real estate properties included within OREO. Further, the recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $53.4 million and $7.7 million at March 31, 2023 and 2022, respectively. The table below presents a summary of the balance immediately following the modification of loans to borrowers experiencing financial difficulties during the three months ended March 31, 2023: Three months ended March 31, 2023 (Dollars in thousands) Total (1) Percentage of Total Class of Loan Extension of Term (1) Reduction of Interest Rate (1) Delay in Contractual Payments (1) Extension of Term and Reduction of Interest Rate (1) Commercial Commercial, industrial and other $ 37,474 0.3 % $ 1,938 $ 221 $ 35,265 $ 50 Commercial real estate Non-construction 1,333 — 467 827 39 — Home equity 203 0.1 203 — — — Residential real estate 1,708 0.1 1,253 271 — 184 Premium finance receivables Property and casualty insurance loans 11 0.0 3 — — 8 Total loans $ 40,729 0.1 % $ 3,864 $ 1,319 $ 35,304 $ 242 Weighted average magnitude of modifications: Duration of extension and delayed payment terms 27 months 17 months Reduction of interest rate 275 bps (1) Balances represent the recorded investment in the loan at the time of the restructuring. The following table presents a summary of all loans for borrowers experiencing financial difficulties modified during the three months ended March 31, 2023, and such loans that were in payment default under the restructured terms during the respective periods below: (Dollars in thousands) As of March 31, 2023 Three Months Ended March 31, 2023 Total (2) Payments in Default (1)(2) Commercial Commercial, industrial and other $ 37,474 $ 2 Commercial real estate Non-construction 1,333 828 Home equity 203 104 Residential real estate 1,708 — Premium finance receivables Property and casualty insurance loans 11 11 Total loans $ 40,729 $ 945 (1) Modified loans considered to be in payment default are over 30 days past due subsequent to the restructuring. (2) Balances represent the recorded investment in the loan at the time of the restructuring. |