Loans and Allowance for Credit Losses | Loans and Allowance for Credit Losses Loans, Net of Unearned Income Loans, net of unearned income are summarized as follows: March 31, December 31, 2016 (in thousands) Real-estate - commercial mortgage $ 6,118,533 $ 6,018,582 Commercial - industrial, financial and agricultural 4,167,809 4,087,486 Real-estate - residential mortgage 1,665,142 1,601,994 Real-estate - home equity 1,595,901 1,625,115 Real-estate - construction 882,983 843,649 Consumer 288,826 291,470 Leasing and other 262,315 246,704 Overdrafts 3,342 3,662 Loans, gross of unearned income 14,984,851 14,718,662 Unearned income (21,674 ) (19,390 ) Loans, net of unearned income $ 14,963,177 $ 14,699,272 Allowance for Credit Losses The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of incurred losses in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheets. The allowance for credit losses is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries. The Corporation’s allowance for credit losses includes: (1) specific allowances allocated to loans evaluated for impairment under FASB ASC Section 310-10-35; and (2) allowances calculated for pools of loans measured for impairment under FASB ASC Subtopic 450-20. The Corporation segments its loan portfolio by general loan type, or "portfolio segments," as presented in the table under the heading, "Loans, Net of Unearned Income," above. Certain portfolio segments are further disaggregated and evaluated collectively for impairment based on "class segments," which are largely based on the type of collateral underlying each loan. Commercial loans include both secured and unsecured loans. Construction loan class segments include loans secured by commercial real estate, loans to commercial borrowers secured by residential real estate and loans to individuals secured by residential real estate. Consumer loan class segments include direct consumer installment loans and indirect vehicle loans. The following table presents the components of the allowance for credit losses: March 31, December 31, (in thousands) Allowance for loan losses $ 170,076 $ 168,679 Reserve for unfunded lending commitments 2,571 2,646 Allowance for credit losses $ 172,647 $ 171,325 The following table presents the activity in the allowance for credit losses: Three months ended March 31 2017 2016 (in thousands) Balance at beginning of period $ 171,325 $ 171,412 Loans charged off (9,407 ) (11,155 ) Recoveries of loans previously charged off 5,929 4,278 Net loans charged off (3,478 ) (6,877 ) Provision for credit losses 4,800 1,530 Balance at end of period $ 172,647 $ 166,065 The following table presents the activity in the allowance for loan losses by portfolio segment: Real Estate - Commercial Mortgage Commercial - Industrial, Financial and Agricultural Real Estate - Home Equity Real Estate - Residential Mortgage Real Estate - Construction Consumer Leasing, other and overdrafts Unallocated Total (in thousands) Three months ended March 31, 2017 Balance at December 31, 2016 $ 46,842 $ 54,353 $ 26,801 $ 22,929 $ 6,455 $ 3,574 $ 3,192 $ 4,533 $ 168,679 Loans charged off (1,224 ) (5,527 ) (698 ) (216 ) (247 ) (856 ) (639 ) — (9,407 ) Recoveries of loans previously charged off 450 4,191 137 230 548 236 137 — 5,929 Net loans charged off (774 ) (1,336 ) (561 ) 14 301 (620 ) (502 ) — (3,478 ) Provision for loan losses (1) 1,305 2,292 (2,419 ) (925 ) 745 77 578 3,222 4,875 Balance at March 31, 2017 $ 47,373 $ 55,309 $ 23,821 $ 22,018 $ 7,501 $ 3,031 $ 3,268 $ 7,755 $ 170,076 Three months ended March 31, 2016 Balance at December 31, 2015 $ 47,866 $ 57,098 $ 22,405 $ 21,375 $ 6,529 $ 2,585 $ 2,468 $ 8,728 $ 169,054 Loans charged off (582 ) (6,188 ) (1,541 ) (1,068 ) (326 ) (1,007 ) (443 ) — (11,155 ) Recoveries of loans previously charged off 825 2,319 338 136 383 196 81 — 4,278 Net loans charged off 243 (3,869 ) (1,203 ) (932 ) 57 (811 ) (362 ) — (6,877 ) Provision for loan losses (1) 202 1,104 1,322 (515 ) (304 ) 550 868 (1,563 ) 1,664 Balance at March 31, 2016 $ 48,311 $ 54,333 $ 22,524 $ 19,928 $ 6,282 $ 2,324 $ 2,974 $ 7,165 $ 163,841 (1) The provision for loan losses excluded a $75,000 and an $134,000 decrease, respectively, in the reserve for unfunded lending commitments for the three months ended March 31, 2017 and 2016 . The following table presents loans, net of unearned income and their related allowance for loan losses, by portfolio segment: Real Estate - Commercial Mortgage Commercial - Industrial, Financial and Agricultural Real Estate - Home Equity Real Estate - Residential Mortgage Real Estate - Construction Consumer Leasing, other and overdrafts Unallocated Total (in thousands) Allowance for loan losses at March 31, 2017: Measured for impairment under FASB ASC Subtopic 450-20 $ 37,457 $ 43,155 $ 14,744 $ 10,581 $ 4,915 $ 3,007 $ 3,268 $ 7,755 $ 124,882 Evaluated for impairment under FASB ASC Section 310-10-35 9,916 12,154 9,077 11,437 2,586 24 — N/A 45,194 $ 47,373 $ 55,309 $ 23,821 $ 22,018 $ 7,501 $ 3,031 $ 3,268 $ 7,755 $ 170,076 Loans, net of unearned income at March 31, 2017: Measured for impairment under FASB ASC Subtopic 450-20 $ 6,067,492 $ 4,119,550 $ 1,576,949 $ 1,620,302 $ 869,225 $ 288,789 $ 243,983 N/A $ 14,786,290 Evaluated for impairment under FASB ASC Section 310-10-35 51,041 48,259 18,952 44,840 13,758 37 — N/A 176,887 $ 6,118,533 $ 4,167,809 $ 1,595,901 $ 1,665,142 $ 882,983 $ 288,826 $ 243,983 N/A $ 14,963,177 Allowance for loan losses at March 31, 2016: Measured for impairment under FASB ASC Subtopic 450-20 $ 35,914 $ 40,969 $ 13,541 $ 7,599 $ 4,004 $ 2,302 $ 1,756 $ 7,165 $ 113,250 Evaluated for impairment under FASB ASC Section 310-10-35 12,397 13,364 8,983 12,329 2,278 22 1,218 N/A 50,591 $ 48,311 $ 54,333 $ 22,524 $ 19,928 $ 6,282 $ 2,324 $ 2,974 $ 7,165 $ 163,841 Loans, net of unearned income at March 31, 2016: Measured for impairment under FASB ASC Subtopic 450-20 $ 5,499,820 $ 3,992,567 $ 1,641,457 $ 1,329,114 $ 797,282 $ 263,189 $ 164,806 N/A $ 13,688,235 Evaluated for impairment under FASB ASC Section 310-10-35 58,288 42,766 18,024 48,345 13,590 32 1,421 N/A 182,466 $ 5,558,108 $ 4,035,333 $ 1,659,481 $ 1,377,459 $ 810,872 $ 263,221 $ 166,227 N/A $ 13,870,701 N/A - Not applicable. Impaired Loans A loan is considered to be impaired if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. Impaired loans consist of all loans on non-accrual status and accruing troubled debt restructurings ("TDRs"). An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. Impaired loans to borrowers with total outstanding commitments greater than or equal to $1.0 million are evaluated individually for impairment. Impaired loans to borrowers with total outstanding commitments less than $1.0 million are pooled and measured for impairment collectively. Based on an evaluation of all relevant credit quality factors, the Corporation recorded a $4.8 million provision for credit losses during the three months ended March 31, 2017 , compared to a $1.5 million provision for credit losses for the same period in 2016. All loans individually evaluated for impairment under FASB ASC Section 310-10-35 are measured for losses on a quarterly basis. As of March 31, 2017 and December 31, 2016 , substantially all of the Corporation’s individually evaluated impaired loans with total outstanding balances greater than or equal to $1.0 million were measured based on the estimated fair value of each loan’s collateral. Collateral could be in the form of real estate, in the case of impaired commercial mortgages and construction loans, or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real property. As of March 31, 2017 and 2016 , approximately 67% and 77% , respectively, of impaired loans with principal balances greater than or equal to $1.0 million , whose primary collateral is real estate, were measured at estimated fair value using state certified third-party appraisals that had been updated in the preceding 12 months. When updated appraisals are not obtained for loans evaluated for impairment under FASB ASC Section 310-10-35 that are secured by real estate, fair values are estimated based on the original appraisal values, as long as the original appraisal indicated an acceptable loan-to-value position and, in the opinion of the Corporation's internal credit administration staff, there has not been a significant deterioration in the collateral value since the original appraisal was performed. Original appraisals are typically used only when the estimated collateral value, as adjusted for the age of the appraisal, results in a current loan-to-value ratio that is lower than the Corporation's loan-to-value requirements for new loans, generally less than 70% . The following table presents total impaired loans by class segment: March 31, 2017 December 31, 2016 Unpaid Principal Balance Recorded Investment Related Allowance Unpaid Principal Balance Recorded Investment Related Allowance (in thousands) With no related allowance recorded: Real estate - commercial mortgage $ 25,043 $ 22,236 $ — $ 28,757 $ 25,447 $ — Commercial - secured 33,791 25,622 — 29,296 25,526 — Real estate - residential mortgage 4,657 4,657 — 4,689 4,689 — Construction - commercial residential 6,169 4,692 — 6,271 4,795 — Construction - commercial 603 603 — — — — 70,263 57,810 69,013 60,457 With a related allowance recorded: Real estate - commercial mortgage 37,069 28,805 9,916 37,132 29,446 10,162 Commercial - secured 26,205 21,872 11,739 27,767 22,626 13,198 Commercial - unsecured 1,061 765 415 1,122 823 455 Real estate - home equity 23,351 18,952 9,077 23,971 19,205 9,511 Real estate - residential mortgage 47,442 40,183 11,437 48,885 41,359 11,897 Construction - commercial residential 13,451 7,286 2,134 10,103 4,206 1,300 Construction - commercial 141 81 31 681 435 145 Construction - other 1,096 1,096 421 1,096 1,096 423 Consumer - direct 20 20 14 19 19 12 Consumer - indirect 17 17 10 21 21 14 149,853 119,077 45,194 150,797 119,236 47,117 Total $ 220,116 $ 176,887 $ 45,194 $ 219,810 $ 179,693 $ 47,117 As of March 31, 2017 and December 31, 2016 , there were $57.8 million and $60.5 million , respectively, of impaired loans that did not have a related allowance for loan loss. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or they were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary. The following table presents average impaired loans by class segment: Three months ended March 31 2017 2016 Average Interest Average Interest (in thousands) With no related allowance recorded: Real estate - commercial mortgage $ 23,842 $ 70 $ 22,810 $ 69 Commercial - secured 25,574 36 12,964 16 Real estate - residential mortgage 4,673 26 5,501 30 Construction - commercial residential 4,744 2 7,582 19 Construction - commercial 302 — — — 59,135 134 48,857 134 With a related allowance recorded: Real estate - commercial mortgage 29,126 85 35,482 108 Commercial - secured 22,249 32 31,642 38 Commercial - unsecured 795 — 853 1 Real estate - home equity 19,079 95 16,896 57 Real estate - residential mortgage 40,839 230 43,885 235 Construction - commercial residential 5,746 3 6,189 15 Construction - commercial 258 — 616 — Construction - other 1,096 — 402 — Consumer - direct 20 — 17 — Consumer - indirect 18 — 16 — Leasing, other and overdrafts 713 — 1,423 — 119,939 445 137,421 454 Total $ 179,074 $ 579 $ 186,278 $ 588 (1) All impaired loans, excluding accruing TDRs, were non-accrual loans. Interest income recognized for the three months ended March 31, 2017 and 2016 represents amounts earned on accruing TDRs. Credit Quality Indicators and Non-performing Assets The following is a summary of the Corporation's internal risk rating categories: • Pass : These loans do not currently pose undue credit risk and can range from the highest to average quality, depending on the degree of potential risk. • Special Mention : These loans constitute an undue and unwarranted credit risk, but not to a point of justifying a classification of substandard. Loans in this category are currently acceptable, but are nevertheless potentially weak. • Substandard or Lower : These loans are inadequately protected by current sound worth and paying capacity of the borrower. There exists a well-defined weakness or weaknesses that jeopardize the normal repayment of the debt. The following table presents internal credit risk ratings for the indicated loan class segments: Pass Special Mention Substandard or Lower Total March 31, 2017 December 31, 2016 March 31, 2017 December 31, 2016 March 31, 2017 December 31, 2016 March 31, 2017 December 31, 2016 (dollars in thousands) Real estate - commercial mortgage $ 5,860,141 $ 5,763,122 $ 137,643 $ 132,484 $ 120,749 $ 122,976 $ 6,118,533 $ 6,018,582 Commercial - secured 3,753,918 3,686,152 138,242 128,873 138,757 118,527 4,030,917 3,933,552 Commercial - unsecured 127,858 145,922 6,471 4,481 2,563 3,531 136,892 153,934 Total commercial - industrial, financial and agricultural 3,881,776 3,832,074 144,713 133,354 141,320 122,058 4,167,809 4,087,486 Construction - commercial residential 124,415 113,570 10,677 15,447 16,221 13,172 151,313 142,189 Construction - commercial 674,863 635,963 4,902 3,412 5,363 5,115 685,128 644,490 Total construction (excluding Construction - other) 799,278 749,533 15,579 18,859 21,584 18,287 836,441 786,679 $ 10,541,195 $ 10,344,729 $ 297,935 $ 284,697 $ 283,653 $ 263,321 $ 11,122,783 $ 10,892,747 % of Total 94.8 % 95.0 % 2.6 % 2.6 % 2.6 % 2.4 % 100.0 % 100.0 % The risk rating process allows management to identify credits that potentially carry more risk in a timely manner and to allocate resources to managing troubled accounts. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for the class segments presented above. The migration of loans through the various internal risk rating categories is a significant component of the allowance for credit loss methodology, which bases the probability of default on this migration. Assigning risk ratings involves judgment. The Corporation's loan review officers provide an independent assessment of risk rating accuracy. Ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff, or if specific loan review activities identify a deterioration or an improvement in the loan. The Corporation does not assign internal risk ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, construction loans to individuals secured by residential real estate, consumer and lease receivables. For these loans, the most relevant credit quality indicator is delinquency status. The migration of loans through the various delinquency status categories is a significant component of the allowance for credit losses methodology for those loans, which bases the probability of default on this migration. The following table presents a summary of performing, delinquent and non-performing loans for the indicated loan class segments: Performing Delinquent (1) Non-performing (2) Total March 31, 2017 December 31, 2016 March 31, 2017 December 31, 2016 March 31, 2017 December 31, 2016 March 31, 2017 December 31, 2016 (dollars in thousands) Real estate - home equity $ 1,576,374 $ 1,602,687 $ 7,295 $ 9,274 $ 12,232 $ 13,154 $ 1,595,901 $ 1,625,115 Real estate - residential mortgage 1,624,477 1,557,995 17,068 20,344 23,597 23,655 1,665,142 1,601,994 Construction - other 45,446 55,874 — — 1,096 1,096 46,542 56,970 Consumer - direct 84,670 93,572 1,383 1,752 1,129 1,563 87,182 96,887 Consumer - indirect 199,542 190,656 2,055 3,599 47 328 201,644 194,583 Total consumer 284,212 284,228 3,438 5,351 1,176 1,891 288,826 291,470 Leasing 242,120 229,591 1,425 1,068 438 317 243,983 230,976 $ 3,772,629 $ 3,730,375 $ 29,226 $ 36,037 $ 38,539 $ 40,113 $ 3,840,394 $ 3,806,525 % of Total 98.2 % 98.0 % 0.8 % 0.9 % 1.0 % 1.1 % 100.0 % 100.0 % (1) Includes all accruing loans 30 days to 89 days past due. (2) Includes all accruing loans 90 days or more past due and all non-accrual loans. The following table presents non-performing assets: March 31, December 31, (in thousands) Non-accrual loans $ 117,264 $ 120,133 Loans 90 days or more past due and still accruing 14,268 11,505 Total non-performing loans 131,532 131,638 Other real estate owned (OREO) 11,906 12,815 Total non-performing assets $ 143,438 $ 144,453 The following table presents past due status and non-accrual loans by portfolio segment and class segment: March 31, 2017 30-59 Days Past Due 60-89 Days Past Due ≥ 90 Days Past Due and Accruing Non- accrual Total ≥ 90 Days Total Past Due Current Total (in thousands) Real estate - commercial mortgage $ 9,890 $ 971 $ 910 $ 35,803 $ 36,713 $ 47,574 $ 6,070,959 $ 6,118,533 Commercial - secured 4,530 3,179 2,511 40,084 42,595 50,304 3,980,613 4,030,917 Commercial - unsecured 309 54 497 734 1,231 1,594 135,298 136,892 Total commercial - industrial, financial and agricultural 4,839 3,233 3,008 40,818 43,826 51,898 4,115,911 4,167,809 Real estate - home equity 6,181 1,114 2,881 9,351 12,232 19,527 1,576,374 1,595,901 Real estate - residential mortgage 12,829 4,239 5,790 17,807 23,597 40,665 1,624,477 1,665,142 Construction - commercial residential 1,550 801 65 11,705 11,770 14,121 137,192 151,313 Construction - commercial 1,546 142 — 684 684 2,372 682,756 685,128 Construction - other — — — 1,096 1,096 1,096 45,446 46,542 Total real estate - construction 3,096 943 65 13,485 13,550 17,589 865,394 882,983 Consumer - direct 939 444 1,129 — 1,129 2,512 84,670 87,182 Consumer - indirect 1,784 271 47 — 47 2,102 199,542 201,644 Total consumer 2,723 715 1,176 — 1,176 4,614 284,212 288,826 Leasing, other and overdrafts 981 444 438 — 438 1,863 242,120 243,983 Total $ 40,539 $ 11,659 $ 14,268 $ 117,264 $ 131,532 $ 183,730 $ 14,779,447 $ 14,963,177 December 31, 2016 30-59 Days Past Due 60-89 Days Past Due ≥ 90 Days Past Due and Accruing Non- accrual Total ≥ 90 Days Total Past Due Current Total (in thousands) Real estate - commercial mortgage $ 6,254 $ 1,622 $ 383 $ 38,936 $ 39,319 $ 47,195 $ 5,971,387 $ 6,018,582 Commercial - secured 6,660 2,616 959 41,589 42,548 51,824 3,881,728 3,933,552 Commercial - unsecured 898 35 152 760 912 1,845 152,089 153,934 Total commercial - industrial, financial and agricultural 7,558 2,651 1,111 42,349 43,460 53,669 4,033,817 4,087,486 Real estate - home equity 6,596 2,678 2,543 10,611 13,154 22,428 1,602,687 1,625,115 Real estate - residential mortgage 15,600 4,744 5,224 18,431 23,655 43,999 1,557,995 1,601,994 Construction - commercial residential 233 51 36 8,275 8,311 8,595 133,594 142,189 Construction - commercial 743 — — 435 435 1,178 643,312 644,490 Construction - other — — — 1,096 1,096 1,096 55,874 56,970 Total real estate - construction 976 51 36 9,806 9,842 10,869 832,780 843,649 Consumer - direct 1,211 541 1,563 — 1,563 3,315 93,572 96,887 Consumer - indirect 3,200 399 328 — 328 3,927 190,656 194,583 Total consumer 4,411 940 1,891 — 1,891 7,242 284,228 291,470 Leasing, other and overdrafts 543 525 317 — 317 1,385 229,591 230,976 Total $ 41,938 $ 13,211 $ 11,505 $ 120,133 $ 131,638 $ 186,787 $ 14,512,485 $ 14,699,272 The following table presents TDRs, by class segment: March 31, December 31, (in thousands) Real-estate - residential mortgage $ 27,033 $ 27,617 Real-estate - commercial mortgage 15,237 15,957 Real estate - home equity 9,601 8,594 Commercial 7,441 6,627 Construction 273 726 Consumer 37 39 Total accruing TDRs 59,622 59,560 Non-accrual TDRs (1) 27,220 27,850 Total TDRs $ 86,842 $ 87,410 (1) Included in non-accrual loans in the preceding table detailing non-performing assets. As of both March 31, 2017 and December 31, 2016 , there were $3.6 million of commitments to lend additional funds to borrowers whose loans were modified under TDRs. The following table presents TDRs, by class segment and type of concession for loans that were modified during the three months ended March 31, 2017 and 2016 : Three months ended March 31 2017 2016 Number of Loans Post-Modification Recorded Investment Number of Loans Post-Modification Recorded Investment (dollars in thousands) Real estate – residential mortgage: Extend maturity without rate concession 2 $ 337 — $ — Bankruptcy 1 178 — — Real estate - commercial mortgage: Extend maturity without rate concession 1 318 — — Real estate - home equity: Extend maturity with rate concession — — 1 44 Extend maturity without rate concession 16 1,284 — — Bankruptcy 7 453 37 2,698 Commercial: Extend maturity without rate concession 4 3,126 4 933 Consumer: Bankruptcy — — 1 2 Total 31 $ 5,696 43 $ 3,677 The following table presents TDRs, by class segment, as of March 31, 2017 and 2016 , that were modified in the previous 12 months and had a post-modification payment default during the three months ended March 31, 2017 and 2016 . The Corporation defines a payment default as a single missed payment. 2017 2016 Number of Loans Recorded Investment Number of Loans Recorded Investment (dollars in thousands) Real estate - residential mortgage 8 $ 2,006 3 $ 260 Real estate - commercial mortgage 2 430 3 235 Real estate - home equity 14 639 14 1,039 Commercial 6 3,654 1 47 Total 30 $ 6,729 21 $ 1,581 |