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, 2019 and December 31, 2018 are as follows: (In thousands) September 30, 2019 December 31, 2018 Commercial: Business $ 5,393,268 $ 5,106,427 Real estate – construction and land 932,737 869,659 Real estate – business 2,833,146 2,875,788 Personal Banking: Real estate – personal 2,226,663 2,127,083 Consumer 1,953,690 1,955,572 Revolving home equity 349,111 376,399 Consumer credit card 766,743 814,134 Overdrafts 7,236 15,236 Total loans $ 14,462,594 $ 14,140,298 At September 30, 2019 , loans of $4.0 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 $1.6 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, 2019 and 2018 , 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 $ 91,808 $ 69,374 $ 161,182 $ 92,869 $ 67,063 $ 159,932 Provision 553 10,410 10,963 55 35,177 35,232 Deductions: Loans charged off 490 13,990 14,480 1,436 42,233 43,669 Less recoveries on loans 199 2,818 3,017 582 8,605 9,187 Net loan charge-offs 291 11,172 11,463 854 33,628 34,482 Balance September 30, 2019 $ 92,070 $ 68,612 $ 160,682 $ 92,070 $ 68,612 $ 160,682 Balance at beginning of period $ 93,851 $ 65,681 $ 159,532 $ 93,704 $ 65,828 $ 159,532 Provision 411 9,588 9,999 2 30,436 30,438 Deductions: Loans charged off 485 12,515 13,000 1,213 39,203 40,416 Less recoveries on loans 314 2,887 3,201 1,598 8,580 10,178 Net loan charge-offs (recoveries) 171 9,628 9,799 (385 ) 30,623 30,238 Balance September 30, 2018 $ 94,091 $ 65,641 $ 159,732 $ 94,091 $ 65,641 $ 159,732 The following table shows the balance in the allowance for loan losses and the related loan balance at September 30, 2019 and December 31, 2018 , 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 deemed to have similar risk characteristics, which 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, 2019 Commercial $ 1,594 $ 66,399 $ 90,476 $ 9,092,752 Personal Banking 905 17,283 67,707 5,286,160 Total $ 2,499 $ 83,682 $ 158,183 $ 14,378,912 December 31, 2018 Commercial $ 1,780 $ 61,496 $ 91,089 $ 8,790,378 Personal Banking 916 17,120 66,147 5,271,304 Total $ 2,696 $ 78,616 $ 157,236 $ 14,061,682 Impaired loans The table below shows the Company’s investment in impaired loans at September 30, 2019 and December 31, 2018 . 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 below. (In thousands) Sept. 30, 2019 Dec. 31, 2018 Non-accrual loans $ 11,733 $ 12,536 Restructured loans (accruing) 71,949 66,080 Total impaired loans $ 83,682 $ 78,616 The following table provides additional information about impaired loans held by the Company at September 30, 2019 and December 31, 2018 , 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, 2019 With no related allowance recorded: Business $ 7,632 $ 14,100 $ — Real estate – business 1,364 1,364 — $ 8,996 $ 15,464 $ — With an allowance recorded: Business $ 27,975 $ 28,017 $ 744 Real estate – construction and land 48 52 1 Real estate – business 29,380 29,982 849 Real estate – personal 4,736 5,922 247 Consumer 4,825 4,824 29 Revolving home equity 36 36 1 Consumer credit card 7,686 7,686 628 $ 74,686 $ 76,519 $ 2,499 Total $ 83,682 $ 91,983 $ 2,499 December 31, 2018 With no related allowance recorded: Business $ 8,725 $ 14,477 $ — $ 8,725 $ 14,477 $ — With an allowance recorded: Business $ 40,286 $ 40,582 $ 1,223 Real estate – construction and land 416 421 11 Real estate – business 12,069 12,699 546 Real estate – personal 4,461 6,236 266 Consumer 5,510 5,510 38 Revolving home equity 40 40 1 Consumer credit card 7,109 7,109 611 $ 69,891 $ 72,597 $ 2,696 Total $ 78,616 $ 87,074 $ 2,696 Total average impaired loans for the three and nine month periods ended September 30, 2019 and 2018 , respectively, are shown in the table below. (In thousands) Commercial Personal Banking Total Average Impaired Loans: For the three months ended September 30, 2019 Non-accrual loans $ 9,655 $ 1,903 $ 11,558 Restructured loans (accruing) 53,517 15,644 69,161 Total $ 63,172 $ 17,547 $ 80,719 For the nine months ended September 30, 2019 Non-accrual loans $ 9,881 $ 2,074 $ 11,955 Restructured loans (accruing) 48,248 15,605 63,853 Total $ 58,129 $ 17,679 $ 75,808 For the three months ended September 30, 2018 Non-accrual loans $ 7,477 $ 1,862 $ 9,339 Restructured loans (accruing) 83,493 16,409 99,902 Total $ 90,970 $ 18,271 $ 109,241 For the nine months ended September 30, 2018 Non-accrual loans $ 7,888 $ 2,261 $ 10,149 Restructured loans (accruing) 81,543 17,426 98,969 Total $ 89,431 $ 19,687 $ 109,118 The table below shows interest income recognized during the three and nine month periods ended September 30, 2019 and 2018 , 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 below. For the Three Months Ended September 30 For the Nine Months Ended September 30 (In thousands) 2019 2018 2019 2018 Interest income recognized on impaired loans: Business $ 222 $ 939 $ 665 $ 2,817 Real estate – construction and land 1 6 2 19 Real estate – business 363 110 1,088 329 Real estate – personal 31 47 92 142 Consumer 76 79 227 238 Revolving home equity 1 2 2 6 Consumer credit card 181 129 542 386 Total $ 875 $ 1,312 $ 2,618 $ 3,937 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, 2019 and December 31, 2018 . (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, 2019 Commercial: Business $ 5,365,188 $ 19,334 $ 993 $ 7,753 $ 5,393,268 Real estate – construction and land 925,805 6,918 11 3 932,737 Real estate – business 2,824,165 6,622 — 2,359 2,833,146 Personal Banking: Real estate – personal 2,216,292 6,354 2,399 1,618 2,226,663 Consumer 1,926,310 25,031 2,349 — 1,953,690 Revolving home equity 347,956 994 161 — 349,111 Consumer credit card 745,438 10,910 10,395 — 766,743 Overdrafts 6,910 326 — — 7,236 Total $ 14,358,064 $ 76,489 $ 16,308 $ 11,733 $ 14,462,594 December 31, 2018 Commercial: Business $ 5,086,912 $ 10,057 $ 473 $ 8,985 $ 5,106,427 Real estate – construction and land 867,692 1,963 — 4 869,659 Real estate – business 2,867,347 6,704 22 1,715 2,875,788 Personal Banking: Real estate – personal 2,118,045 6,041 1,165 1,832 2,127,083 Consumer 1,916,320 35,608 3,644 — 1,955,572 Revolving home equity 374,830 875 694 — 376,399 Consumer credit card 792,334 11,140 10,660 — 814,134 Overdrafts 14,937 299 — — 15,236 Total $ 14,038,417 $ 72,687 $ 16,658 $ 12,536 $ 14,140,298 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, 2019 Pass $ 5,225,204 $ 888,688 $ 2,665,880 $ 8,779,772 Special mention 86,152 43,155 102,219 231,526 Substandard 74,159 891 62,688 137,738 Non-accrual 7,753 3 2,359 10,115 Total $ 5,393,268 $ 932,737 $ 2,833,146 $ 9,159,151 December 31, 2018 Pass $ 4,915,042 $ 866,527 $ 2,777,374 $ 8,558,943 Special mention 84,391 1,917 51,845 138,153 Substandard 98,009 1,211 44,854 144,074 Non-accrual 8,985 4 1,715 10,704 Total $ 5,106,427 $ 869,659 $ 2,875,788 $ 8,851,874 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 section on "Delinquent and non-accrual loans." 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 the loans generally pertain to commercial customer activities and are often underwritten with other collateral considerations. These loans totaled $196.1 million at September 30, 2019 and $201.7 million at December 31, 2018 . The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled $178.4 million at September 30, 2019 and $170.3 million at December 31, 2018 . As the healthcare loans are guaranteed by the hospital, customer FICO scores are not obtained for these loans. The personal real estate loans and consumer loans excluded below totaled less than 8% 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 September 30, 2019 and December 31, 2018 by FICO score. Personal Banking Loans % of Loan Category Real Estate - Personal Consumer Revolving Home Equity Consumer Credit Card September 30, 2019 FICO score: Under 600 1.2 % 3.0 % 1.0 % 5.4 % 600 - 659 2.0 4.9 2.1 14.4 660 - 719 10.0 15.8 9.6 33.2 720 - 779 28.0 25.7 22.5 26.8 780 and over 58.8 50.6 64.8 20.2 Total 100.0 % 100.0 % 100.0 % 100.0 % December 31, 2018 FICO score: Under 600 1.1 % 3.1 % 0.8 % 4.4 % 600 - 659 1.8 4.8 1.7 14.0 660 - 719 9.4 16.1 9.1 34.8 720 - 779 24.7 25.7 24.0 26.4 780 and over 63.0 50.3 64.4 20.4 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. Commercial performing restructured loans are primarily comprised of certain business, construction and business real estate loans classified as substandard but renewed at rates judged to be non- market. 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 and other small consumer loans under various debt management and assistance programs. Modifications to these loans generally involve removing the available line of credit, placing loans on amortizing status, and lowering the contractual interest rate. Certain personal real estate, revolving home equity, and consumer loans were classified as consumer bankruptcy troubled debt restructurings because they were not reaffirmed by the borrower in bankruptcy proceedings. Interest on these loans is being recognized on an accrual basis, as the borrowers are continuing to make payments. Other consumer loans classified as troubled debt restructurings consist of various other workout arrangements with consumer customers. (In thousands) September 30, 2019 December 31, 2018 Accruing restructured loans: Commercial $ 56,238 $ 50,904 Assistance programs 7,988 7,410 Consumer bankruptcy 3,838 4,103 Other consumer 3,885 3,663 Non-accrual loans 9,553 9,759 Total troubled debt restructurings $ 81,502 $ 75,839 The table below shows the balance of troubled debt restructurings by loan classification at September 30, 2019 , 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, 2019 Balance 90 days past due at any time during previous 12 months Commercial: Business $ 35,139 $ — Real estate - construction and land 45 — Real estate - business 29,749 — Personal Banking: Real estate - personal 4,022 353 Consumer 4,825 48 Revolving home equity 36 — Consumer credit card 7,686 593 Total troubled debt restructurings $ 81,502 $ 994 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. However, the effects of modifications to loans under various debt management and assistance programs were estimated to decrease interest income by approximately $1.1 million on an annual, pre-tax basis, compared to amounts contractually owed. Other modifications to consumer loans mainly involve extensions and other small modifications that did not include the forgiveness of principal or interest. 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 having no other concessions granted other than being renewed at non-market interest rates are judged to 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 $5.2 million at September 30, 2019 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 11. The loans are primarily sold to FNMA, FHLMC, and GNMA. At September 30, 2019 , the fair value of these loans was $14.4 million , and the unpaid principal balance was $14.0 million . The Company also designates 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 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, 2019 totaled $5.7 million . At September 30, 2019 , 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 $502 thousand and $1.4 million at September 30, 2019 and December 31, 2018 , respectively. Personal property acquired in repossession, generally autos, marine and recreational vehicles (RV), totaled $1.8 million and $2.0 million at September 30, 2019 and December 31, 2018 , 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. |