Loans And Allowance For Loan Losses | Loans and Allowance for Loan Losses Major classifications within the Company’s held for investment loan portfolio at March 31, 2017 and December 31, 2016 are as follows: (In thousands) March 31, 2017 December 31, 2016 Commercial: Business $ 4,888,011 $ 4,776,365 Real estate – construction and land 846,904 791,236 Real estate – business 2,710,595 2,643,374 Personal Banking: Real estate – personal 2,013,437 2,010,397 Consumer 1,975,521 1,990,801 Revolving home equity 396,542 413,634 Consumer credit card 736,766 776,465 Overdrafts 4,733 10,464 Total loans $ 13,572,509 $ 13,412,736 At March 31, 2017 , loans of $3.9 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 $1.7 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 months ended March 31, 2017 and 2016 , respectively, follows: For the Three Months Ended March 31 (In thousands) Commercial Personal Banking Total Balance January 1 $ 91,361 $ 64,571 $ 155,932 Provision 1,113 10,015 11,128 Deductions: Loans charged off 546 12,330 12,876 Less recoveries on loans 1,023 2,625 3,648 Net loan charge-offs (recoveries) (477 ) 9,705 9,228 Balance March 31, 2017 $ 92,951 $ 64,881 $ 157,832 Balance January 1 $ 82,086 $ 69,446 $ 151,532 Provision 4,151 5,288 9,439 Deductions: Loans charged off 1,513 11,777 13,290 Less recoveries on loans 1,303 3,148 4,451 Net loan charge-offs (recoveries) 210 8,629 8,839 Balance March 31, 2016 $ 86,027 $ 66,105 $ 152,132 The following table shows the balance in the allowance for loan losses and the related loan balance at March 31, 2017 and December 31, 2016 , 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 March 31, 2017 Commercial $ 1,352 $ 40,140 $ 91,599 $ 8,405,370 Personal Banking 1,475 20,592 63,406 5,106,407 Total $ 2,827 $ 60,732 $ 155,005 $ 13,511,777 December 31, 2016 Commercial $ 1,817 $ 44,795 $ 89,544 $ 8,166,180 Personal Banking 1,292 19,737 63,279 5,182,024 Total $ 3,109 $ 64,532 $ 152,823 $ 13,348,204 Impaired loans The table below shows the Company’s investment in impaired loans at March 31, 2017 and December 31, 2016 . 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. 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 13. (In thousands) Mar. 31, 2017 Dec. 31, 2016 Non-accrual loans $ 14,803 $ 14,283 Restructured loans (accruing) 45,929 50,249 Total impaired loans $ 60,732 $ 64,532 The following table provides additional information about impaired loans held by the Company at March 31, 2017 and December 31, 2016 , 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 March 31, 2017 With no related allowance recorded: Business $ 6,527 $ 9,785 $ — Real estate – construction and land 546 752 — $ 7,073 $ 10,537 $ — With an allowance recorded: Business $ 25,360 $ 25,958 $ 879 Real estate – construction and land 99 1,852 8 Real estate – business 7,608 9,054 465 Real estate – personal 6,205 9,070 550 Consumer 6,427 6,466 265 Revolving home equity 613 613 2 Consumer credit card 7,347 7,347 658 $ 53,659 $ 60,360 $ 2,827 Total $ 60,732 $ 70,897 $ 2,827 December 31, 2016 With no related allowance recorded: Business $ 7,375 $ 10,470 $ — Real estate – construction and land 557 752 — $ 7,932 $ 11,222 $ — With an allowance recorded: Business $ 29,924 $ 31,795 $ 1,318 Real estate – construction and land 69 72 3 Real estate – business 6,870 8,072 496 Real estate – personal 6,394 9,199 642 Consumer 5,281 5,281 57 Revolving home equity 584 584 1 Consumer credit card 7,478 7,478 592 $ 56,600 $ 62,481 $ 3,109 Total $ 64,532 $ 73,703 $ 3,109 Total average impaired loans for the three month periods ended March 31, 2017 and 2016 , respectively, are shown in the table below. (In thousands) Commercial Personal Banking Total Average Impaired Loans: For the three months ended March 31, 2017 Non-accrual loans $ 10,613 $ 3,509 $ 14,122 Restructured loans (accruing) 31,885 16,204 48,089 Total $ 42,498 $ 19,713 $ 62,211 For the three months ended March 31, 2016 Non-accrual loans $ 21,004 $ 4,623 $ 25,627 Restructured loans (accruing) 27,179 17,701 44,880 Total $ 48,183 $ 22,324 $ 70,507 The table below shows interest income recognized during the three month periods ended March 31, 2017 and 2016 , 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 13. For the Three Months Ended March 31 (In thousands) 2017 2016 Interest income recognized on impaired loans: Business $ 263 $ 274 Real estate – construction and land 1 2 Real estate – business 62 36 Real estate – personal 37 46 Consumer 82 90 Revolving home equity 6 5 Consumer credit card 135 146 Total $ 586 $ 599 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 March 31, 2017 and December 31, 2016 . (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 March 31, 2017 Commercial: Business $ 4,875,924 $ 3,653 $ 499 $ 7,935 $ 4,888,011 Real estate – construction and land 841,191 5,128 — 585 846,904 Real estate – business 2,700,322 8,509 — 1,764 2,710,595 Personal Banking: Real estate – personal 2,002,185 5,661 2,223 3,368 2,013,437 Consumer 1,951,333 20,950 2,087 1,151 1,975,521 Revolving home equity 394,832 1,001 709 — 396,542 Consumer credit card 717,987 9,389 9,390 — 736,766 Overdrafts 4,501 232 — — 4,733 Total $ 13,488,275 $ 54,523 $ 14,908 $ 14,803 $ 13,572,509 December 31, 2016 Commercial: Business $ 4,763,274 $ 3,735 $ 674 $ 8,682 $ 4,776,365 Real estate – construction and land 789,633 1,039 — 564 791,236 Real estate – business 2,639,586 2,154 — 1,634 2,643,374 Personal Banking: Real estate – personal 1,995,724 9,162 2,108 3,403 2,010,397 Consumer 1,957,358 29,783 3,660 — 1,990,801 Revolving home equity 411,483 1,032 1,119 — 413,634 Consumer credit card 757,443 10,187 8,835 — 776,465 Overdrafts 10,014 450 — — 10,464 Total $ 13,324,515 $ 57,542 $ 16,396 $ 14,283 $ 13,412,736 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 March 31, 2017 Pass $ 4,702,536 $ 843,213 $ 2,611,540 $ 8,157,289 Special mention 131,318 1,961 40,058 173,337 Substandard 46,222 1,145 57,233 104,600 Non-accrual 7,935 585 1,764 10,284 Total $ 4,888,011 $ 846,904 $ 2,710,595 $ 8,445,510 December 31, 2016 Pass $ 4,607,553 $ 788,778 $ 2,543,348 $ 7,939,679 Special mention 116,642 722 45,479 162,843 Substandard 43,488 1,172 52,913 97,573 Non-accrual 8,682 564 1,634 10,880 Total $ 4,776,365 $ 791,236 $ 2,643,374 $ 8,210,975 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 March 31, 2017 , these were comprised of $233.0 million in personal real estate loans, or 4.5% of the Personal Banking portfolio, compared to $237.2 million at December 31, 2016 . For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at March 31, 2017 and December 31, 2016 by FICO score. Personal Banking Loans % of Loan Category Real Estate - Personal Consumer Revolving Home Equity Consumer Credit Card March 31, 2017 FICO score: Under 600 1.3 % 3.6 % 1.0 % 5.3 % 600 - 659 2.7 6.1 1.9 16.0 660 - 719 10.5 19.5 8.6 35.6 720 - 779 25.3 27.2 22.9 25.0 780 and over 60.2 43.6 65.6 18.1 Total 100.0 % 100.0 % 100.0 % 100.0 % December 31, 2016 FICO score: Under 600 1.3 % 3.4 % 1.0 % 4.9 % 600 - 659 2.6 6.4 1.8 15.5 660 - 719 10.4 19.7 9.7 34.9 720 - 779 25.4 26.3 21.1 25.1 780 and over 60.3 44.2 66.4 19.6 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 $54.3 million at March 31, 2017 . 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 $8.3 million at March 31, 2017 . Other performing restructured loans totaled $45.9 million at March 31, 2017 . 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 $30.5 million at March 31, 2017 . 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 $7.3 million at March 31, 2017 . 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 March 31, 2017 , these loans totaled $7.8 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 March 31, 2017 , 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) March 31, 2017 Balance 90 days past due at any time during previous 12 months Commercial: Business $ 30,546 $ — Real estate - construction and land 546 — Real estate - business 5,844 — Personal Banking: Real estate - personal 4,037 422 Consumer 5,336 34 Revolving home equity 613 6 Consumer credit card 7,347 768 Total restructured loans $ 54,269 $ 1,230 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 $960 thousand 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 $7.8 million at March 31, 2017 to lend additional funds to borrowers with restructured loans. Loans held for sale The Company designates certain long-term fixed rate personal real estate loans 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. The loans are primarily sold to FNMA, FHLMC, and GNMA. At March 31, 2017 , the fair value of these loans was $7.4 million , and the unpaid principal balance was $7.1 million . The Company also designates 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. These loans are carried at lower of cost or fair value, which at March 31, 2017 totaled $8.2 million . At March 31, 2017 , none of the loans held for sale were on non-accrual status or 90 days past due and still accruing. Foreclosed real estate/repossessed assets The Company’s holdings of foreclosed real estate totaled $387 thousand and $366 thousand at March 31, 2017 and December 31, 2016 , respectively. Personal property acquired in repossession, generally autos and marine and recreational vehicles, totaled $3.2 million and $2.2 million at March 31, 2017 and December 31, 2016 , respectively. Upon acquisition, these assets are recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. They are subsequently carried at the lower of this cost basis or fair value less estimated selling costs. |