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, 2017 and December 31, 2016 are as follows: (In thousands) September 30, 2017 December 31, 2016 Commercial: Business $ 4,834,037 $ 4,776,365 Real estate – construction and land 921,609 791,236 Real estate – business 2,700,174 2,643,374 Personal Banking: Real estate – personal 2,029,302 2,010,397 Consumer 2,113,438 1,990,801 Revolving home equity 391,308 413,634 Consumer credit card 752,379 776,465 Overdrafts 3,245 10,464 Total loans $ 13,745,492 $ 13,412,736 At September 30, 2017 , loans of $3.8 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 and nine months ended September 30, 2017 and 2016 , 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 $ 92,739 $ 65,093 $ 157,832 $ 91,361 $ 64,571 $ 155,932 Provision 24 10,680 10,704 1,026 31,564 32,590 Deductions: Loans charged off 378 13,592 13,970 1,455 39,337 40,792 Less recoveries on loans 651 2,615 3,266 2,104 7,998 10,102 Net loan charge-offs (recoveries) (273 ) 10,977 10,704 (649 ) 31,339 30,690 Balance September 30, 2017 $ 93,036 $ 64,796 $ 157,832 $ 93,036 $ 64,796 $ 157,832 Balance at beginning of period $ 89,198 $ 64,634 $ 153,832 $ 82,086 $ 69,446 $ 151,532 Provision (1,411 ) 8,674 7,263 4,309 21,609 25,918 Deductions: Loans charged off 291 11,872 12,163 2,465 35,633 38,098 Less recoveries on loans 2,759 2,841 5,600 6,325 8,855 15,180 Net loan charge-offs (recoveries) (2,468 ) 9,031 6,563 (3,860 ) 26,778 22,918 Balance September 30, 2016 $ 90,255 $ 64,277 $ 154,532 $ 90,255 $ 64,277 $ 154,532 The following table shows the balance in the allowance for loan losses and the related loan balance at September 30, 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 September 30, 2017 Commercial $ 1,789 $ 55,969 $ 91,247 $ 8,399,851 Personal Banking 1,322 23,571 63,474 5,266,101 Total $ 3,111 $ 79,540 $ 154,721 $ 13,665,952 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 September 30, 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 14. (In thousands) Sept. 30, 2017 Dec. 31, 2016 Non-accrual loans $ 13,640 $ 14,283 Restructured loans (accruing) 65,900 50,249 Total impaired loans $ 79,540 $ 64,532 The following table provides additional information about impaired loans held by the Company at September 30, 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 September 30, 2017 With no related allowance recorded: Business $ 6,196 $ 9,725 $ — Real estate – business 587 587 — Consumer 1,023 1,047 — $ 7,806 $ 11,359 $ — With an allowance recorded: Business $ 35,708 $ 36,219 $ 1,141 Real estate – construction and land 1,367 1,595 37 Real estate – business 12,111 13,319 611 Real estate – personal 9,723 12,537 607 Consumer 5,232 5,271 52 Revolving home equity 578 578 5 Consumer credit card 7,015 7,015 658 $ 71,734 $ 76,534 $ 3,111 Total $ 79,540 $ 87,893 $ 3,111 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 and nine month periods ended September 30, 2017 and 2016 , respectively, are shown in the table below. (In thousands) Commercial Personal Banking Total Average Impaired Loans: For the three months ended September 30, 2017 Non-accrual loans $ 8,938 $ 4,238 $ 13,176 Restructured loans (accruing) 42,930 18,691 61,621 Total $ 51,868 $ 22,929 $ 74,797 For the nine months ended September 30, 2017 Non-accrual loans $ 9,800 $ 4,098 $ 13,898 Restructured loans (accruing) 36,567 16,901 53,468 Total $ 46,367 $ 20,999 $ 67,366 For the three months ended September 30, 2016 Non-accrual loans $ 15,106 $ 3,928 $ 19,034 Restructured loans (accruing) 31,372 17,082 48,454 Total $ 46,478 $ 21,010 $ 67,488 For the nine months ended September 30, 2016 Non-accrual loans $ 19,387 $ 4,336 $ 23,723 Restructured loans (accruing) 29,117 17,359 46,476 Total $ 48,504 $ 21,695 $ 70,199 The table below shows interest income recognized during the three and nine month periods ended September 30, 2017 and 2016 , respectively, for impaired loans held at the end of each 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) 2017 2016 2017 2016 Interest income recognized on impaired loans: Business $ 473 $ 277 $ 1,418 $ 830 Real estate – construction and land 10 2 30 7 Real estate – business 118 42 354 126 Real estate – personal 104 39 311 118 Consumer 79 89 236 267 Revolving home equity 7 7 20 22 Consumer credit card 162 174 486 522 Total $ 953 $ 630 $ 2,855 $ 1,892 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, 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 September 30, 2017 Commercial: Business $ 4,823,779 $ 2,630 $ 807 $ 6,821 $ 4,834,037 Real estate – construction and land 917,128 3,913 35 533 921,609 Real estate – business 2,688,625 8,580 623 2,346 2,700,174 Personal Banking: Real estate – personal 2,013,632 11,141 1,666 2,863 2,029,302 Consumer 2,082,203 27,450 2,708 1,077 2,113,438 Revolving home equity 388,346 1,530 1,432 — 391,308 Consumer credit card 734,215 8,971 9,193 — 752,379 Overdrafts 2,933 312 — — 3,245 Total $ 13,650,861 $ 64,527 $ 16,464 $ 13,640 $ 13,745,492 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 September 30, 2017 Pass $ 4,593,958 $ 915,279 $ 2,586,349 $ 8,095,586 Special mention 123,549 2,527 57,319 183,395 Substandard 109,709 3,270 54,160 167,139 Non-accrual 6,821 533 2,346 9,700 Total $ 4,834,037 $ 921,609 $ 2,700,174 $ 8,455,820 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 September 30, 2017 , these were comprised of $220.7 million in personal real estate loans, or 4.2% 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 September 30, 2017 and December 31, 2016 by FICO score. Personal Banking Loans % of Loan Category Real Estate - Personal Consumer Revolving Home Equity Consumer Credit Card September 30, 2017 FICO score: Under 600 1.4 % 3.3 % .9 % 5.0 % 600 - 659 2.2 5.7 2.1 15.1 660 - 719 10.1 17.1 9.0 34.9 720 - 779 24.8 26.1 21.2 25.9 780 and over 61.5 47.8 66.8 19.1 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 $73.1 million at September 30, 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 $7.2 million at September 30, 2017 . Other performing restructured loans totaled $65.9 million at September 30, 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 $51.0 million at September 30, 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 $7.0 million at September 30, 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 September 30, 2017 , these loans totaled $7.7 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, 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) September 30, 2017 Balance 90 days past due at any time during previous 12 months Commercial: Business $ 40,608 $ — Real estate - construction and land 1,304 — Real estate - business 10,353 623 Personal Banking: Real estate - personal 7,996 397 Consumer 5,235 32 Revolving home equity 578 42 Consumer credit card 7,015 800 Total restructured loans $ 73,089 $ 1,894 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 $979 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 $10.6 million at September 30, 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 September 30, 2017 , the fair value of these loans was $11.3 million , and the unpaid principal balance was $10.9 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 within 210 days after the last disbursement to the student. These loans are carried at lower of cost or fair value, which at September 30, 2017 totaled $6.0 million . At September 30, 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 $1.1 million and $366 thousand at September 30, 2017 and December 31, 2016 , respectively. Personal property acquired in repossession, generally autos and marine and recreational vehicles, totaled $2.7 million and $2.2 million at September 30, 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. |