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, 2018 and December 31, 2017 are as follows: (In thousands) March 31, 2018 December 31, 2017 Commercial: Business $ 4,960,614 $ 4,958,554 Real estate – construction and land 932,058 968,820 Real estate – business 2,724,584 2,697,452 Personal Banking: Real estate – personal 2,069,012 2,062,787 Consumer 2,069,235 2,104,487 Revolving home equity 382,825 400,587 Consumer credit card 752,651 783,864 Overdrafts 2,382 7,123 Total loans $ 13,893,361 $ 13,983,674 At March 31, 2018 , loans of $3.7 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, 2018 and 2017 , respectively, follows: For the Three Months Ended March 31 (In thousands) Commercial Personal Banking Total Balance at January 1 $ 93,704 $ 65,828 $ 159,532 Provision (894 ) 11,290 10,396 Deductions: Loans charged off 366 13,365 13,731 Less recoveries on loans 621 2,714 3,335 Net loan charge-offs (recoveries) (255 ) 10,651 10,396 Balance March 31, 2018 $ 93,065 $ 66,467 $ 159,532 Balance at 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 The following table shows the balance in the allowance for loan losses and the related loan balance at March 31, 2018 and December 31, 2017 , disaggregated on the basis of impairment methodology. Impaired loans evaluated under Accounting Standards Codification (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, 2018 Commercial $ 2,391 $ 82,699 $ 90,674 $ 8,534,557 Personal Banking 1,107 20,828 65,360 5,255,277 Total $ 3,498 $ 103,527 $ 156,034 $ 13,789,834 December 31, 2017 Commercial $ 3,067 $ 92,613 $ 90,637 $ 8,532,213 Personal Banking 1,176 22,182 64,652 5,336,666 Total $ 4,243 $ 114,795 $ 155,289 $ 13,868,879 Impaired loans The table below shows the Company’s investment in impaired loans at March 31, 2018 and December 31, 2017 . 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) Mar. 31, 2018 Dec. 31, 2017 Non-accrual loans $ 10,277 $ 11,983 Restructured loans (accruing) 93,250 102,812 Total impaired loans $ 103,527 $ 114,795 The following table provides additional information about impaired loans held by the Company at March 31, 2018 and December 31, 2017 , 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, 2018 With no related allowance recorded: Business $ 5,221 $ 9,000 $ — Real estate – business 1,299 1,303 — $ 6,520 $ 10,303 $ — With an allowance recorded: Business $ 64,228 $ 64,448 $ 1,905 Real estate – construction and land 1,458 1,462 42 Real estate – business 10,493 11,021 444 Real estate – personal 8,589 11,412 415 Consumer 5,415 5,415 52 Revolving home equity 153 153 17 Consumer credit card 6,671 6,671 623 $ 97,007 $ 100,582 $ 3,498 Total $ 103,527 $ 110,885 $ 3,498 December 31, 2017 With no related allowance recorded: Business $ 5,356 $ 9,000 $ — Real estate – business 1,299 1,303 — Consumer 779 817 — $ 7,434 $ 11,120 $ — With an allowance recorded: Business $ 72,589 $ 73,168 $ 2,455 Real estate – construction and land 837 841 27 Real estate – business 12,532 13,071 585 Real estate – personal 9,126 11,914 532 Consumer 5,388 5,426 67 Revolving home equity 204 204 11 Consumer credit card 6,685 6,685 566 $ 107,361 $ 111,309 $ 4,243 Total $ 114,795 $ 122,429 $ 4,243 Total average impaired loans for the three month periods ended March 31, 2018 and 2017 , respectively, are shown in the table below. (In thousands) Commercial Personal Banking Total Average Impaired Loans: For the three months ended March 31, 2018 Non-accrual loans $ 8,523 $ 2,928 $ 11,451 Restructured loans (accruing) 79,258 18,773 98,031 Total $ 87,781 $ 21,701 $ 109,482 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 The table below shows interest income recognized during the three month periods ended March 31, 2018 and 2017 , 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 March 31 (In thousands) 2018 2017 Interest income recognized on impaired loans: Business $ 760 $ 263 Real estate – construction and land 24 1 Real estate – business 113 62 Real estate – personal 111 37 Consumer 80 82 Revolving home equity 2 6 Consumer credit card 128 135 Total $ 1,218 $ 586 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, 2018 and December 31, 2017 . (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, 2018 Commercial: Business $ 4,928,806 $ 25,792 $ 459 $ 5,557 $ 4,960,614 Real estate – construction and land 929,113 2,940 — 5 932,058 Real estate – business 2,717,484 4,554 — 2,546 2,724,584 Personal Banking: Real estate – personal 2,059,965 5,962 916 2,169 2,069,012 Consumer 2,044,135 22,374 2,726 — 2,069,235 Revolving home equity 379,309 2,277 1,239 — 382,825 Consumer credit card 734,498 8,565 9,588 — 752,651 Overdrafts 2,123 259 — — 2,382 Total $ 13,795,433 $ 72,723 $ 14,928 $ 10,277 $ 13,893,361 December 31, 2017 Commercial: Business $ 4,949,148 $ 3,085 $ 374 $ 5,947 $ 4,958,554 Real estate – construction and land 967,321 1,473 21 5 968,820 Real estate – business 2,694,234 482 — 2,736 2,697,452 Personal Banking: Real estate – personal 2,050,787 6,218 3,321 2,461 2,062,787 Consumer 2,067,025 32,674 3,954 834 2,104,487 Revolving home equity 397,349 1,962 1,276 — 400,587 Consumer credit card 764,568 10,115 9,181 — 783,864 Overdrafts 6,840 283 — — 7,123 Total $ 13,897,272 $ 56,292 $ 18,127 $ 11,983 $ 13,983,674 The increase in business loans which were delinquent 30-89 days relates to one borrower who was past due at March 31, 2018 but has subsequently brought the loan to a current status. 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, 2018 Pass $ 4,716,879 $ 919,050 $ 2,632,074 $ 8,268,003 Special mention 88,442 10,694 50,925 150,061 Substandard 149,736 2,309 39,039 191,084 Non-accrual 5,557 5 2,546 8,108 Total $ 4,960,614 $ 932,058 $ 2,724,584 $ 8,617,256 December 31, 2017 Pass $ 4,740,013 $ 955,499 $ 2,593,005 $ 8,288,517 Special mention 59,177 10,614 50,577 120,368 Substandard 153,417 2,702 51,134 207,253 Non-accrual 5,947 5 2,736 8,688 Total $ 4,958,554 $ 968,820 $ 2,697,452 $ 8,624,826 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 real estate loans for which FICO scores are not obtained because they generally pertain to commercial customer activities and are often underwritten with other collateral considerations. These loans totaled $216.2 million at March 31, 2018 and $219.2 million at December 31, 2017 . The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled $148.9 million at March 31, 2018 and $145.0 million at December 31, 2017 . As the healthcare loans are guaranteed by the hospital, FICO scores are not considered relevant for this program. The personal real estate loans and consumer loans excluded below totaled less than 7% of the Personal Banking portfolio. For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at March 31, 2018 and December 31, 2017 by FICO score. Personal Banking Loans % of Loan Category Real Estate - Personal Consumer Revolving Home Equity Consumer Credit Card March 31, 2018 FICO score: Under 600 1.3 % 3.5 % 1.1 % 5.2 % 600 - 659 1.7 5.3 1.7 15.1 660 - 719 10.0 17.3 9.1 36.1 720 - 779 26.0 26.9 23.2 25.6 780 and over 61.0 47.0 64.9 18.0 Total 100.0 % 100.0 % 100.0 % 100.0 % December 31, 2017 FICO score: Under 600 1.3 % 3.3 % 1.1 % 4.7 % 600 - 659 2.1 5.5 1.7 14.4 660 - 719 10.5 17.3 9.5 34.4 720 - 779 25.6 26.8 21.4 26.0 780 and over 60.5 47.1 66.3 20.5 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, as shown in the table below. 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. Other performing restructured loans are comprised of 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 were classified as troubled debt restructurings. These 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. 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 also classified certain loans as troubled debt restructings because they were not reaffirmed by the borrower in bankruptcy proceedings. These loans are comprised of 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. (In thousands) March 31, 2018 December 31, 2017 Accruing loans: Non-market interest rates $ 77,922 $ 88,588 Assistance programs 6,671 6,685 Bankruptcy non-affirmation 8,386 7,283 Other 271 256 Non-accrual loans 7,619 7,796 Total troubled debt restructurings $ 100,869 $ 110,608 The table below shows the balance of troubled debt restructurings by loan classification at March 31, 2018 , 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, 2018 Balance 90 days past due at any time during previous 12 months Commercial: Business $ 69,156 $ 43 Real estate - construction and land 1,399 — Real estate - business 10,546 1,299 Personal Banking: Real estate - personal 7,476 389 Consumer 5,469 106 Revolving home equity 152 74 Consumer credit card 6,671 744 Total troubled debt restructurings $ 100,869 $ 2,655 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 $896 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 March 31, 2018 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, 2018 , the fair value of these loans was $6.5 million , and the unpaid principal balance was $6.3 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 March 31, 2018 totaled $10.0 million . At March 31, 2018 , 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 $1.3 million and $681 thousand at March 31, 2018 and December 31, 2017 , respectively. Personal property acquired in repossession, generally autos and marine and recreational vehicles, totaled $3.1 million and $2.7 million at March 31, 2018 and December 31, 2017 , 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. |