Loans And Allowance For Loan Losses | Loans and Allowance for Loan Losses Major classifications within the Company’s held for investment loan portfolio at September 30, 2015 and December 31, 2014 are as follows: (In thousands) September 30, 2015 December 31, 2014 Commercial: Business $ 4,406,854 $ 3,969,952 Real estate – construction and land 534,425 403,507 Real estate – business 2,286,013 2,288,215 Personal Banking: Real estate – personal 1,920,650 1,883,092 Consumer 1,886,806 1,705,134 Revolving home equity 428,940 430,873 Consumer credit card 756,093 782,370 Overdrafts 4,493 6,095 Total loans $ 12,224,274 $ 11,469,238 At September 30, 2015 , loans of $3.6 billion were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits. Additional loans of $1.4 billion were pledged at the Federal Reserve Bank as collateral for discount window borrowings. Allowance for loan losses A summary of the activity in the allowance for loan losses during the three and nine months ended September 30, 2015 and 2014 , respectively, follows: For the Three Months Ended September 30 For the Nine Months Ended September 30 (In thousands) Commercial Personal Banking Total Commercial Personal Banking Total Balance at beginning of period $ 86,329 $ 65,203 $ 151,532 $ 89,622 $ 66,910 $ 156,532 Provision (1,976 ) 10,340 8,364 (6,089 ) 25,630 19,541 Deductions: Loans charged off 903 11,321 12,224 3,035 34,194 37,229 Less recoveries on loans 1,167 2,693 3,860 4,119 8,569 12,688 Net loan charge-offs (recoveries) (264 ) 8,628 8,364 (1,084 ) 25,625 24,541 Balance September 30, 2015 $ 84,617 $ 66,915 $ 151,532 $ 84,617 $ 66,915 $ 151,532 Balance at beginning of period $ 98,928 $ 62,604 $ 161,532 $ 94,189 $ 67,343 $ 161,532 Provision (717 ) 8,369 7,652 3,836 21,031 24,867 Deductions: Loans charged off 686 11,414 12,100 3,034 35,917 38,951 Less recoveries on loans 1,431 3,017 4,448 3,965 10,119 14,084 Net loan charge-offs (recoveries) (745 ) 8,397 7,652 (931 ) 25,798 24,867 Balance September 30, 2014 $ 98,956 $ 62,576 $ 161,532 $ 98,956 $ 62,576 $ 161,532 The following table shows the balance in the allowance for loan losses and the related loan balance at September 30, 2015 and December 31, 2014 , disaggregated on the basis of impairment methodology. Impaired loans evaluated under ASC 310-10-35 include loans on non-accrual status, which are individually evaluated for impairment, and other impaired loans discussed below, which are deemed to have similar risk characteristics and are collectively evaluated. All other loans are collectively evaluated for impairment under ASC 450-20. Impaired Loans All Other Loans (In thousands) Allowance for Loan Losses Loans Outstanding Allowance for Loan Losses Loans Outstanding September 30, 2015 Commercial $ 1,829 $ 32,513 $ 82,788 $ 7,194,779 Personal Banking 1,667 22,868 65,248 4,974,114 Total $ 3,496 $ 55,381 $ 148,036 $ 12,168,893 December 31, 2014 Commercial $ 4,527 $ 55,551 $ 85,095 $ 6,606,123 Personal Banking 2,314 25,537 64,596 4,782,027 Total $ 6,841 $ 81,088 $ 149,691 $ 11,388,150 Impaired loans The table below shows the Company’s investment in impaired loans at September 30, 2015 and December 31, 2014 . These loans consist of all loans on non-accrual status and other restructured loans whose terms have been modified and classified as troubled debt restructurings under ASC 310-40. These restructured loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. They are discussed further in the "Troubled debt restructurings" section on page 14. (In thousands) Sept. 30, 2015 Dec. 31, 2014 Non-accrual loans $ 25,779 $ 40,775 Restructured loans (accruing) 29,602 40,313 Total impaired loans $ 55,381 $ 81,088 The following table provides additional information about impaired loans held by the Company at September 30, 2015 and December 31, 2014 , segregated between loans for which an allowance for credit losses has been provided and loans for which no allowance has been provided. (In thousands) Recorded Investment Unpaid Principal Balance Related Allowance September 30, 2015 With no related allowance recorded: Business $ 9,692 $ 11,866 $ — Real estate – construction and land 2,072 7,679 — Real estate – business 1,535 2,969 — $ 13,299 $ 22,514 $ — With an allowance recorded: Business $ 8,292 $ 10,252 $ 681 Real estate – construction and land 3,327 4,939 288 Real estate – business 7,595 11,084 860 Real estate – personal 8,652 11,835 1,015 Consumer 5,461 5,461 70 Revolving home equity 492 492 13 Consumer credit card 8,263 8,263 569 $ 42,082 $ 52,326 $ 3,496 Total $ 55,381 $ 74,840 $ 3,496 December 31, 2014 With no related allowance recorded: Business $ 9,237 $ 11,532 $ — Real estate – construction and land 4,552 8,493 — Real estate – business 13,453 17,258 — Revolving home equity 1,227 1,384 — $ 28,469 $ 38,667 $ — With an allowance recorded: Business $ 12,326 $ 13,846 $ 1,844 Real estate – construction and land 8,148 9,610 1,081 Real estate – business 7,835 15,025 1,602 Real estate – personal 9,096 12,465 1,441 Consumer 4,244 4,244 50 Revolving home equity 529 529 9 Consumer credit card 10,441 10,441 814 $ 52,619 $ 66,160 $ 6,841 Total $ 81,088 $ 104,827 $ 6,841 Total average impaired loans for the three and nine month periods ended September 30, 2015 and 2014 , respectively, are shown in the table below. (In thousands) Commercial Personal Banking Total Average Impaired Loans: For the three months ended September 30, 2015 Non-accrual loans $ 21,119 $ 5,179 $ 26,298 Restructured loans (accruing) 13,399 18,221 31,620 Total $ 34,518 $ 23,400 $ 57,918 For the nine months ended September 30, 2015 Non-accrual loans $ 25,784 $ 5,791 $ 31,575 Restructured loans (accruing) 16,612 18,854 35,466 Total $ 42,396 $ 24,645 $ 67,041 For the three months ended September 30, 2014 Non-accrual loans $ 38,111 $ 7,267 $ 45,378 Restructured loans (accruing) 32,970 19,822 52,792 Total $ 71,081 $ 27,089 $ 98,170 For the nine months ended September 30, 2014 Non-accrual loans $ 38,099 $ 7,320 $ 45,419 Restructured loans (accruing) 37,157 20,660 57,817 Total $ 75,256 $ 27,980 $ 103,236 The table below shows interest income recognized during the three and nine month periods ended September 30, 2015 and 2014 , respectively, for impaired loans held at the end of each respective period. This interest all relates to accruing restructured loans, as discussed in the "Troubled debt restructurings" section on page 14. For the Three Months Ended September 30 For the Nine Months Ended September 30 (In thousands) 2015 2014 2015 2014 Interest income recognized on impaired loans: Business $ 63 $ 146 $ 188 $ 438 Real estate – construction and land 22 97 66 290 Real estate – business 33 58 99 173 Real estate – personal 47 53 142 160 Consumer 87 72 261 215 Revolving home equity 6 7 17 20 Consumer credit card 186 236 558 707 Total $ 444 $ 669 $ 1,331 $ 2,003 Delinquent and non-accrual loans The following table provides aging information on the Company’s past due and accruing loans, in addition to the balances of loans on non-accrual status, at September 30, 2015 and December 31, 2014 . (In thousands) Current or Less Than 30 Days Past Due 30 – 89 Days Past Due 90 Days Past Due and Still Accruing Non-accrual Total September 30, 2015 Commercial: Business $ 4,391,674 $ 3,106 $ 375 $ 11,699 $ 4,406,854 Real estate – construction and land 529,117 1,262 — 4,046 534,425 Real estate – business 2,277,384 3,575 — 5,054 2,286,013 Personal Banking: Real estate – personal 1,904,280 8,695 2,695 4,980 1,920,650 Consumer 1,867,657 17,244 1,905 — 1,886,806 Revolving home equity 423,939 2,512 2,489 — 428,940 Consumer credit card 740,124 8,726 7,243 — 756,093 Overdrafts 4,204 289 — — 4,493 Total $ 12,138,379 $ 45,409 $ 14,707 $ 25,779 $ 12,224,274 December 31, 2014 Commercial: Business $ 3,946,144 $ 11,152 $ 1,096 $ 11,560 $ 3,969,952 Real estate – construction and land 397,488 827 35 5,157 403,507 Real estate – business 2,266,688 3,661 — 17,866 2,288,215 Personal Banking: Real estate – personal 1,868,606 6,618 1,676 6,192 1,883,092 Consumer 1,687,285 16,053 1,796 — 1,705,134 Revolving home equity 428,478 1,552 843 — 430,873 Consumer credit card 764,599 9,559 8,212 — 782,370 Overdrafts 5,721 374 — — 6,095 Total $ 11,365,009 $ 49,796 $ 13,658 $ 40,775 $ 11,469,238 Credit quality The following table provides information about the credit quality of the Commercial loan portfolio, using the Company’s internal rating system as an indicator. The internal rating system is a series of grades reflecting management’s risk assessment, based on its analysis of the borrower’s financial condition. The “pass” category consists of a range of loan grades that reflect increasing, though still acceptable, risk. Movement of risk through the various grade levels in the “pass” category is monitored for early identification of credit deterioration. The “special mention” rating is applied to loans where the borrower exhibits negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten its capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. It is a transitional grade that is closely monitored for improvement or deterioration. The “substandard” rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on “non-accrual” when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment. Commercial Loans (In thousands) Business Real Estate-Construction Real Estate- Business Total September 30, 2015 Pass $ 4,304,836 $ 527,590 $ 2,211,387 $ 7,043,813 Special mention 59,526 1,021 19,576 80,123 Substandard 30,793 1,768 49,996 82,557 Non-accrual 11,699 4,046 5,054 20,799 Total $ 4,406,854 $ 534,425 $ 2,286,013 $ 7,227,292 December 31, 2014 Pass $ 3,871,569 $ 385,831 $ 2,184,541 $ 6,441,941 Special mention 62,904 3,865 40,668 107,437 Substandard 23,919 8,654 45,140 77,713 Non-accrual 11,560 5,157 17,866 34,583 Total $ 3,969,952 $ 403,507 $ 2,288,215 $ 6,661,674 The credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided in the table in the above "Delinquent and non-accrual loans" section. In addition, FICO scores are obtained and updated on a quarterly basis for most of the loans in the Personal Banking portfolio. This is a published credit score designed to measure the risk of default by taking into account various factors from a borrower's financial history. The Bank normally obtains a FICO score at the loan's origination and renewal dates, and updates are obtained on a quarterly basis. Excluded from the table below are certain Personal Banking loans for which FICO scores are not obtained because they generally pertain to commercial customer activities and are often underwritten with other collateral considerations. At September 30, 2015 , these were comprised of $256.9 million in personal real estate loans, or 5.1% of the Personal Banking portfolio, compared to $244.3 million at December 31, 2014 . For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at September 30, 2015 and December 31, 2014 by FICO score. Personal Banking Loans % of Loan Category Real Estate - Personal Consumer Revolving Home Equity Consumer Credit Card September 30, 2015 FICO score: Under 600 1.5 % 4.6 % 1.6 % 3.8 % 600 - 659 2.8 9.5 4.2 12.1 660 - 719 9.1 22.5 13.7 32.6 720 - 779 25.3 27.0 26.2 28.1 780 and over 61.3 36.4 54.3 23.4 Total 100.0 % 100.0 % 100.0 % 100.0 % December 31, 2014 FICO score: Under 600 1.4 % 5.2 % 1.8 % 4.1 % 600 - 659 3.1 10.2 4.4 11.8 660 - 719 9.9 22.9 13.7 32.4 720 - 779 26.7 28.0 32.8 27.8 780 and over 58.9 33.7 47.3 23.9 Total 100.0 % 100.0 % 100.0 % 100.0 % Troubled debt restructurings As mentioned previously, the Company's impaired loans include loans which have been classified as troubled debt restructurings. Total restructured loans amounted to $46.7 million at September 30, 2015 . Restructured loans are those extended to borrowers who are experiencing financial difficulty and who have been granted a concession. Restructured loans are placed on non-accrual status if the Company does not believe it probable that amounts due under the contractual terms will be collected, and those non-accrual loans totaled $17.1 million at September 30, 2015 . Other performing restructured loans totaled $29.6 million at September 30, 2015 . These include certain business, construction and business real estate loans classified as substandard. Upon maturity, the loans renewed at interest rates judged not to be market rates for new debt with similar risk and as a result the loans were classified as troubled debt restructurings. These commercial loans totaled $12.5 million at September 30, 2015 . These restructured loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. Troubled debt restructurings also include certain credit card loans under various debt management and assistance programs, which totaled $8.3 million at September 30, 2015 . Modifications to credit card loans generally involve removing the available line of credit, placing loans on amortizing status, and lowering the contractual interest rate. The Company has classified additional loans as troubled debt restructurings because they were not reaffirmed by the borrower in bankruptcy proceedings. At September 30, 2015 , these loans totaled $8.5 million in personal real estate, revolving home equity, and consumer loans. Interest on these loans is being recognized on an accrual basis, as the borrowers are continuing to make payments under the terms of the loan agreements. The following table shows the outstanding balances of loans classified as troubled debt restructurings at September 30, 2015 , in addition to the outstanding balances of these restructured loans which the Company considers to have been in default at any time during the past twelve months. For purposes of this disclosure, the Company considers "default" to mean 90 days or more past due as to interest or principal. (In thousands) September 30, 2015 Balance 90 days past due at any time during previous 12 months Commercial: Business $ 16,441 $ — Real estate - construction and land 5,222 1,499 Real estate - business 5,502 — Personal Banking: Real estate - personal 5,276 — Consumer 5,487 57 Revolving home equity 492 49 Consumer credit card 8,263 541 Total restructured loans $ 46,683 $ 2,146 For those loans on non-accrual status also classified as restructured, the modification did not create any further financial effect on the Company as those loans were already recorded at net realizable value. For those performing commercial loans classified as restructured, there were no concessions involving forgiveness of principal or interest and, therefore, there was no financial impact to the Company as a result of modification to these loans. No financial impact resulted from those performing loans where the debt was not reaffirmed in bankruptcy, as no changes to loan terms occurred in that process. The effects of modifications to consumer credit card loans were estimated to decrease interest income by approximately $1.0 million on an annual, pre-tax basis, compared to amounts contractually owed. The allowance for loan losses related to troubled debt restructurings on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status which are not classified as troubled debt restructurings. Those performing loans classified as troubled debt restructurings are accruing loans which management expects to collect under contractual terms. Performing commercial loans have had no other concessions granted other than being renewed at an interest rate judged not to be market. As such, they have similar risk characteristics as non-troubled debt commercial loans and are collectively evaluated based on internal risk rating, loan type, delinquency, historical experience and current economic factors. Performing personal banking loans classified as troubled debt restructurings resulted from the borrower not reaffirming the debt during bankruptcy and have had no other concession granted, other than the Bank's future limitations on collecting payment deficiencies or in pursuing foreclosure actions. As such, they have similar risk characteristics as non-troubled debt personal banking loans and are evaluated collectively based on loan type, delinquency, historical experience and current economic factors. If a troubled debt restructuring defaults and is already on non-accrual status, the allowance for loan losses continues to be based on individual evaluation, using discounted expected cash flows or the fair value of collateral. If an accruing troubled debt restructuring defaults, the loan's risk rating is downgraded to non-accrual status and the loan's related allowance for loan losses is determined based on individual evaluation, or if necessary, the loan is charged off and collection efforts begun. The Company had commitments of $1.6 million at September 30, 2015 to lend additional funds to borrowers with restructured loans. Loans held for sale Beginning January 1, 2015, certain long-term fixed rate personal real estate loan originations have been designated as held for sale, and the Company has elected the fair value option for these loans. The election of the fair value option aligns the accounting for these loans with the related economic hedges discussed in Note 10. At September 30, 2015 , the fair value of these loans was $2.2 million , and the unpaid principal balance was $2.1 million . The unrealized gain in fair value was recognized in loan fees and sales in the consolidated statement of income. None of these loans were on non-accrual status or past due. Interest income with respect to loans held for sale is accrued based on the principal amount outstanding and the loan's contractual interest rate. Beginning in the third quarter of 2015, the Company has designated certain student loan originations as held for sale. The borrowers are credit-worthy students who are attending colleges and universities. The loans are intended to be sold in the secondary market, and the Company maintains contracts with Sallie Mae to sell the loans at various times while the student is attending school or shortly after graduation. At September 30, 2015 , the balance of these loans was $2.0 million . These loans are carried at lower of cost or fair value, and none were on non-accrual status or past due. Foreclosed real estate/repossessed assets The Company’s holdings of foreclosed real estate totaled $3.1 million and $5.5 million at September 30, 2015 and December 31, 2014 , respectively. Personal property acquired in repossession, generally autos and marine and recreational vehicles, totaled $3.1 million and $2.4 million at September 30, 2015 and December 31, 2014 , respectively. These assets are carried at the lower of the amount recorded at acquisition date or the current fair value less estimated costs to sell. |