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, 2017 (in thousands) Real-estate - commercial mortgage $ 6,332,508 $ 6,364,804 Commercial - industrial, financial and agricultural 4,299,072 4,300,297 Real-estate - residential mortgage 1,976,524 1,954,711 Real-estate - home equity 1,514,241 1,559,719 Real-estate - construction 976,131 1,006,935 Consumer 326,766 313,783 Leasing and other 297,465 291,556 Overdrafts 2,031 4,113 Loans, gross of unearned income 15,724,738 15,795,918 Unearned income (28,454 ) (27,671 ) Loans, net of unearned income $ 15,696,284 $ 15,768,247 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. 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 individually evaluated for impairment (FASB ASC Section 310-10-35); and (2) allowances calculated for pools of loans collectively evaluated for impairment (FASB ASC Subtopic 450-20). The following table presents the components of the allowance for credit losses: March 31, December 31, (in thousands) Allowance for loan losses $ 163,217 $ 169,910 Reserve for unfunded lending commitments 12,802 6,174 Allowance for credit losses $ 176,019 $ 176,084 The following table presents the activity in the allowance for credit losses: Three months ended March 31 2018 2017 (in thousands) Balance at beginning of period $ 176,084 $ 171,325 Loans charged off (6,397 ) (9,407 ) Recoveries of loans previously charged off 2,362 5,929 Net loans charged off (4,035 ) (3,478 ) Provision for credit losses 3,970 4,800 Balance at end of period $ 176,019 $ 172,647 The Corporation has historically maintained an unallocated allowance for credit losses for factors and conditions that exist at the balance sheet date, but are not specifically identifiable, and to recognize the inherent imprecision in estimating and measuring loss exposure. In the second quarter of 2017, enhancements were made to allow for the impact of these factors and conditions to be quantified in the allowance allocation process. Accordingly, an unallocated allowance for credit losses is no longer necessary. 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, 2018 Balance at December 31, 2017 $ 58,793 $ 66,280 $ 18,127 $ 16,088 $ 6,620 $ 2,045 $ 1,957 $ — $ 169,910 Loans charged off (267 ) (4,005 ) (408 ) (162 ) (158 ) (892 ) (505 ) — (6,397 ) Recoveries of loans previously charged off 279 1,075 206 107 306 179 210 — 2,362 Net loans charged off 12 (2,930 ) (202 ) (55 ) 148 (713 ) (295 ) — (4,035 ) Provision for loan losses (1) (88 ) (1,520 ) (397 ) (772 ) (844 ) 571 392 — (2,658 ) Balance at March 31, 2018 $ 58,717 $ 61,830 $ 17,528 $ 15,261 $ 5,924 $ 1,903 $ 2,054 $ — $ 163,217 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 (1) The provision for loan losses excluded an increase of $6.6 million and a decrease of $75,000 in the reserve for unfunded lending commitments for the three months ended March 31, 2018 and March 31, 2017, respectively. These amounts were reclassified to Other Liabilities. 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, 2018: Loans collectively evaluated for impairment $ 50,392 $ 51,314 $ 6,440 $ 5,610 $ 5,245 $ 1,887 $ 2,054 N/A $ 122,942 Loans individually evaluated for impairment 8,325 10,516 11,088 9,651 679 16 — N/A 40,275 $ 58,717 $ 61,830 $ 17,528 $ 15,261 $ 5,924 $ 1,903 $ 2,054 N/A $ 163,217 Loans, net of unearned income at March 31, 2018 Loans collectively evaluated for impairment $ 6,279,144 $ 4,234,362 $ 1,489,429 $ 1,935,587 $ 965,398 $ 326,742 $ 271,042 N/A $ 15,501,704 Loans individually evaluated for impairment 53,364 64,710 24,812 40,937 10,733 24 — N/A 194,580 $ 6,332,508 $ 4,299,072 $ 1,514,241 $ 1,976,524 $ 976,131 $ 326,766 $ 271,042 N/A $ 15,696,284 Allowance for loan losses at March 31, 2017: Loans collectively evaluated for impairment $ 37,457 $ 43,155 $ 14,744 $ 10,581 $ 4,915 $ 3,007 $ 3,268 $ 7,755 $ 124,882 Loans individually evaluated for impairment 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: Loans collectively evaluated for impairment $ 6,067,492 $ 4,119,550 $ 1,576,949 $ 1,620,302 $ 869,225 $ 288,789 $ 243,983 N/A $ 14,786,290 Loans individually evaluated for impairment 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 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. All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of March 31, 2018 and December 31, 2017 , 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 estate. As of March 31, 2018 and 2017 , approximately 72% and 67% , 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 of the collateral using appraisals that had been updated in the preceding 12 months, performed by state certified third-party appraisers. When updated appraisals are not obtained for loans evaluated for impairment 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, 2018 December 31, 2017 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 $ 29,862 $ 27,819 $ — $ 26,728 $ 22,886 $ — Commercial 46,673 40,525 — 44,936 39,550 — Real estate - residential mortgage 4,547 4,547 — 4,575 4,575 — Construction 12,343 7,842 — 12,477 8,100 — 93,425 80,733 88,716 75,111 With a related allowance recorded: Real estate - commercial mortgage 32,863 25,545 8,325 33,710 25,895 8,112 Commercial 29,723 24,185 10,516 29,816 24,175 11,406 Real estate - home equity 28,387 24,812 11,088 28,282 24,693 11,124 Real estate - residential mortgage 41,889 36,390 9,651 42,597 37,132 9,895 Construction 6,186 2,891 679 7,308 4,097 967 Consumer 25 24 16 26 26 17 139,073 113,847 40,275 141,739 116,018 41,521 Total $ 232,498 $ 194,580 $ 40,275 $ 230,455 $ 191,129 $ 41,521 As of March 31, 2018 and December 31, 2017 , there were $80.7 million and $75.1 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 the loans 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 2018 2017 Average Interest Average Interest (in thousands) With no related allowance recorded: Real estate - commercial mortgage $ 25,353 $ 83 $ 23,842 $ 70 Commercial 40,038 73 25,574 36 Real estate - residential mortgage 4,561 27 4,673 26 Construction 7,971 — 5,046 2 77,923 183 59,135 134 With a related allowance recorded: Real estate - commercial mortgage 25,720 84 29,126 85 Commercial 24,181 44 23,044 32 Real estate - home equity 24,752 184 19,079 95 Real estate - residential mortgage 36,761 221 40,839 230 Construction 3,495 — 7,100 3 Consumer 25 — 38 — Leasing, other and overdrafts — — 713 — 114,934 533 119,939 445 Total $ 192,857 $ 716 $ 179,074 $ 579 (1) All impaired loans, excluding accruing TDRs, were non-accrual loans. Interest income recognized for the three months ended March 31, 2018 and 2017 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 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 following table presents internal credit risk ratings for the indicated loan class segments: Pass Special Mention Substandard or Lower Total March 31, 2018 December 31, 2017 March 31, 2018 December 31, 2017 March 31, 2018 December 31, 2017 March 31, 2018 December 31, 2017 (dollars in thousands) Real estate - commercial mortgage $ 6,027,210 $ 6,066,396 $ 144,809 $ 147,604 $ 160,489 $ 150,804 $ 6,332,508 $ 6,364,804 Commercial - secured 3,873,737 3,831,485 100,242 121,842 180,234 179,113 4,154,213 4,132,440 Commercial - unsecured 139,139 159,620 3,378 5,478 2,342 2,759 144,859 167,857 Total commercial - industrial, financial and agricultural 4,012,876 3,991,105 103,620 127,320 182,576 181,872 4,299,072 4,300,297 Construction - commercial residential 141,587 143,759 4,613 5,259 12,282 14,084 158,482 163,102 Construction - commercial 744,274 761,218 834 846 3,688 3,752 748,796 765,816 Total construction (excluding Construction - other) 885,861 904,977 5,447 6,105 15,970 17,836 907,278 928,918 $ 10,925,947 $ 10,962,478 $ 253,876 $ 281,029 $ 359,035 $ 350,512 $ 11,538,858 $ 11,594,019 % of Total 94.7 % 94.6 % 2.2 % 2.4 % 3.1 % 3.0 % 100.0 % 100.0 % 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, 2018 December 31, 2017 March 31, 2018 December 31, 2017 March 31, 2018 December 31, 2017 March 31, 2018 December 31, 2017 (dollars in thousands) Real estate - home equity $ 1,493,485 $ 1,535,557 $ 8,731 $ 12,655 $ 12,025 $ 11,507 $ 1,514,241 $ 1,559,719 Real estate - residential mortgage 1,938,817 1,914,888 17,539 18,852 20,168 20,971 1,976,524 1,954,711 Construction - other 68,363 77,403 — 203 490 411 68,853 78,017 Consumer - direct 55,681 54,828 323 315 54 70 56,058 55,213 Consumer - indirect 267,584 254,663 2,931 3,681 193 226 270,708 258,570 Total consumer 323,265 309,491 3,254 3,996 247 296 326,766 313,783 Leasing 270,027 267,111 843 855 172 32 271,042 267,998 $ 4,093,957 $ 4,104,450 $ 30,367 $ 36,561 $ 33,102 $ 33,217 $ 4,157,426 $ 4,174,228 % of Total 98.5 % 98.3 % 0.7 % 0.9 % 0.8 % 0.8 % 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 $ 122,966 $ 124,749 Loans 90 days or more past due and still accruing 11,676 10,010 Total non-performing loans 134,642 134,759 Other real estate owned (OREO) 10,744 9,823 Total non-performing assets $ 145,386 $ 144,582 The following tables present past due status and non-accrual loans by portfolio segment and class segment: March 31, 2018 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 $ 11,606 $ 1,091 $ 1,001 $ 35,183 $ 36,184 $ 48,881 $ 6,283,627 $ 6,332,508 Commercial - secured 4,048 3,607 1,935 52,336 54,271 61,926 4,092,287 4,154,213 Commercial - unsecured 814 159 10 634 644 1,617 143,242 144,859 Total commercial - industrial, financial and agricultural 4,862 3,766 1,945 52,970 54,915 63,543 4,235,529 4,299,072 Real estate - home equity 6,401 2,330 3,280 8,745 12,025 20,756 1,493,485 1,514,241 Real estate - residential mortgage 12,725 4,814 4,833 15,335 20,168 37,707 1,938,817 1,976,524 Construction - commercial residential — — — 10,422 10,422 10,422 148,060 158,482 Construction - commercial — — — 19 19 19 748,777 748,796 Construction - other — — 198 292 490 490 68,363 68,853 Total real estate - construction — — 198 10,733 10,931 10,931 965,200 976,131 Consumer - direct 211 112 54 — 54 377 55,681 56,058 Consumer - indirect 2,253 678 193 — 193 3,124 267,584 270,708 Total consumer 2,464 790 247 — 247 3,501 323,265 326,766 Leasing, other and overdrafts 662 181 172 — 172 1,015 270,027 271,042 Total $ 38,720 $ 12,972 $ 11,676 $ 122,966 $ 134,642 $ 186,334 $ 15,509,950 $ 15,696,284 December 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 $ 9,456 $ 4,223 $ 625 $ 34,822 $ 35,447 $ 49,126 $ 6,315,678 $ 6,364,804 Commercial - secured 4,778 5,254 1,360 52,255 53,615 63,647 4,068,793 4,132,440 Commercial - unsecured 305 10 45 649 694 1,009 166,848 167,857 Total commercial - industrial, financial and agricultural 5,083 5,264 1,405 52,904 54,309 64,656 4,235,641 4,300,297 Real estate - home equity 9,640 3,015 2,372 9,135 11,507 24,162 1,535,557 1,559,719 Real estate - residential mortgage 11,961 6,891 5,280 15,691 20,971 39,823 1,914,888 1,954,711 Construction - commercial residential — 439 — 11,767 11,767 12,206 150,896 163,102 Construction - commercial 483 — — 19 19 502 765,314 765,816 Construction - other 203 — — 411 411 614 77,403 78,017 Total real estate - construction 686 439 — 12,197 12,197 13,322 993,613 1,006,935 Consumer - direct 260 55 70 — 70 385 54,828 55,213 Consumer - indirect 3,055 626 226 — 226 3,907 254,663 258,570 Total consumer 3,315 681 296 — 296 4,292 309,491 313,783 Leasing, other and overdrafts 568 287 32 — 32 887 267,111 267,998 Total $ 40,709 $ 20,800 $ 10,010 $ 124,749 $ 134,759 $ 196,268 $ 15,571,979 $ 15,768,247 The following table presents TDRs, by class segment: March 31, December 31, (in thousands) Real-estate - residential mortgage $ 25,602 $ 26,016 Real-estate - commercial mortgage 18,181 13,959 Real estate - home equity 16,067 15,558 Commercial 11,740 10,820 Consumer 24 26 Total accruing TDRs 71,614 66,379 Non-accrual TDRs (1) 24,897 29,051 Total TDRs $ 96,511 $ 95,430 (1) Included in non-accrual loans in the preceding table detailing non-performing assets. The following table presents TDRs, by class segment and type of concession for loans that were modified during the three months ended March 31, 2018 and 2017 : Three months ended March 31 2018 2017 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 5 1 178 Real estate - commercial mortgage: Extend maturity without rate concession — — 1 318 Real estate - home equity: Extend maturity without rate concession 17 1,276 16 1,284 Bankruptcy 2 108 7 453 Commercial: Extend maturity without rate concession 9 9,359 4 3,126 Total 29 $ 10,748 31 $ 5,696 The following table presents TDRs, by class segment, as of March 31, 2018 and 2017 , that were modified in the previous 12 months and had a post-modification payment default during the three months ended March 31, 2018 and 2017 . The Corporation defines a payment default as a single missed payment. 2018 2017 Number of Loans Recorded Investment Number of Loans Recorded Investment (dollars in thousands) Real estate - residential mortgage 5 $ 332 8 $ 2,006 Real estate - commercial mortgage 1 180 2 430 Real estate - home equity 18 1,000 14 639 Commercial 6 526 6 3,654 Construction 2 1,484 — — Total 32 $ 3,522 30 $ 6,729 |