Loans and Allowance for Credit Losses | Loans and Leases and Allowance for Credit Losses Loans and Leases, Net of Unearned Income Loans and leases, net of unearned income are summarized as follows: March 31, December 31, 2018 (in thousands) Real-estate - commercial mortgage $ 6,428,688 $ 6,434,285 Commercial - industrial, financial and agricultural 4,429,538 4,404,548 Real estate - residential mortgage 2,313,908 2,251,044 Real estate - home equity 1,413,500 1,452,137 Real estate - construction 953,087 916,599 Consumer 433,545 419,186 Equipment lease financing and other 315,934 311,866 Overdrafts 1,739 2,774 Loans and leases, gross of unearned income 16,289,939 16,192,439 Unearned income (27,306 ) (26,639 ) Loans and leases, net of unearned income $ 16,262,633 $ 16,165,800 The Corporation segments its loan and lease portfolio by general loan type, or "portfolio segments," as presented in the table under the heading, "Loans and Leases, 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 and lease losses and the reserve for unfunded lending commitments. The allowance for loan and lease losses represents management’s estimate of incurred losses in the loan and lease portfolio as of the balance sheet date and is recorded as a reduction to loans and leases. The reserve for unfunded lending commitments represents management’s estimate of incurred losses in its unfunded loan commitments and other off balance sheet credit exposures, such as letters of credit, 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 and leases individually evaluated for impairment (FASB ASC Section 310-10-35); and (2) allowances calculated for pools of loans and leases 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 and lease losses $ 162,109 $ 160,537 Reserve for unfunded lending commitments 8,263 8,873 Allowance for credit losses $ 170,372 $ 169,410 The following table presents the activity in the allowance for credit losses: Three months ended March 31 2019 2018 (in thousands) Balance at beginning of period $ 169,410 $ 176,084 Loans and leases charged off (6,369 ) (6,397 ) Recoveries of loans and leases previously charged off 2,231 2,362 Net loans and leases charged off (4,138 ) (4,035 ) Provision for credit losses 5,100 3,970 Balance at end of period $ 170,372 $ 176,019 The following table presents the activity in the allowance for loan and lease 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 Equipment lease financing, other and overdrafts Total (in thousands) Three months ended March 31, 2019 Balance at December 31, 2018 $ 52,889 $ 58,868 $ 18,911 $ 18,921 $ 5,061 $ 3,217 $ 2,670 $ 160,537 Loans and leases charged off (1,145 ) (2,787 ) (219 ) (655 ) (95 ) (683 ) (785 ) (6,369 ) Recoveries of loans and leases previously charged off 136 1,243 197 132 84 210 229 2,231 Net loans and leases charged off (1,009 ) (1,544 ) (22 ) (523 ) (11 ) (473 ) (556 ) (4,138 ) Provision for loan and lease losses (1) 66 3,177 326 748 (109 ) 575 927 5,710 Balance at March 31, 2019 $ 51,946 $ 60,501 $ 19,215 $ 19,146 $ 4,941 $ 3,319 $ 3,041 $ 162,109 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 and leases charged off (267 ) (4,005 ) (408 ) (162 ) (158 ) (892 ) (505 ) (6,397 ) Recoveries of loans and leases previously charged off 279 1,075 206 107 306 179 210 2,362 Net loans and leases charged off 12 (2,930 ) (202 ) (55 ) 148 (713 ) (295 ) (4,035 ) Provision for loan and lease 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 (1) The provision for loan and lease losses excluded a $610,000 decrease in the reserve for unfunded lending commitments for the three months ended March 31, 2019 and a $6.6 million increase in the reserve for unfunded lending commitments for the three months ended March 31, 2018. These amounts were reclassified to other liabilities on the consolidated balance sheets. The following table presents loans and leases, net of unearned income and their related allowance for loan and lease 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 Equipment lease financing, other and overdrafts Total (in thousands) Allowance for loan and lease losses at March 31, 2019: Collectively evaluated for impairment $ 45,736 $ 48,266 $ 8,619 $ 9,560 $ 4,390 $ 3,312 $ 3,041 $ 122,924 Loans individually evaluated for impairment 6,210 12,235 10,596 9,586 551 7 — 39,185 $ 51,946 $ 60,501 $ 19,215 $ 19,146 $ 4,941 $ 3,319 $ 3,041 $ 162,109 Loans and leases, net of unearned income at March 31, 2019: Collectively evaluated for impairment $ 6,384,048 $ 4,373,677 $ 1,389,670 $ 2,274,330 $ 946,436 $ 433,534 $ 271,854 $ 16,073,549 Individually evaluated for impairment 44,640 55,861 23,830 39,578 6,651 11 18,513 189,084 $ 6,428,688 $ 4,429,538 $ 1,413,500 $ 2,313,908 $ 953,087 $ 433,545 $ 290,367 $ 16,262,633 Allowance for loan and lease losses at March 31, 2018: Collectively evaluated for impairment $ 50,392 $ 51,314 $ 6,440 $ 5,610 $ 5,245 $ 1,887 $ 2,054 $ 122,942 Individually evaluated for impairment 8,325 10,516 11,088 9,651 679 16 — 40,275 $ 58,717 $ 61,830 $ 17,528 $ 15,261 $ 5,924 $ 1,903 $ 2,054 $ 163,217 Loans and leases, net of unearned income at March 31, 2018: Collectively evaluated for impairment $ 6,279,144 $ 4,234,362 $ 1,489,429 $ 1,935,587 $ 965,398 $ 326,742 $ 271,042 $ 15,501,704 Individually evaluated for impairment 53,364 64,710 24,812 40,937 10,733 24 — 194,580 $ 6,332,508 $ 4,299,072 $ 1,514,241 $ 1,976,524 $ 976,131 $ 326,766 $ 271,042 $ 15,696,284 Impaired Loans and Leases A loan or lease is considered to be impaired if it is probable that all amounts will not be collected according to the contractual terms of the loan or lease agreement. Impaired loans and leases consist of all loans and leases on non-accrual status and accruing troubled debt restructurings ("TDRs"). An allowance for loan and lease losses is established for an impaired loan or lease if its carrying value exceeds its estimated fair value. Impaired loans and leases to borrowers with total commitments greater than or equal to $1.0 million are evaluated individually for impairment. Impaired loans and leases to borrowers with total commitments less than $1.0 million are pooled and measured for impairment collectively. All loans and leases individually evaluated for impairment are measured for losses on a quarterly basis. As of March 31, 2019 and December 31, 2018 , substantially all of the Corporation’s individually evaluated impaired loans and leases with total commitments 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, 2019 and December 31, 2018 , approximately 78% and 89% , respectively, of impaired loans and leases with principal balances greater than or equal to $1.0 million , whose primary collateral is real estate, were measured at estimated fair value using appraisals performed by state certified third-party appraisers that had been updated in the preceding 12 months. When updated appraisals are not obtained for loans and leases 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 and leases by class segment: March 31, 2019 December 31, 2018 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 $ 27,178 $ 24,902 $ — $ 25,095 $ 23,481 $ — Commercial 33,660 26,887 — 33,493 26,585 — Real estate - residential mortgage 3,127 3,127 — 3,149 3,149 — Construction 8,922 5,024 — 8,980 5,083 — Equipment lease financing 19,269 18,513 — 19,269 19,268 — 92,156 78,453 — 89,986 77,566 — With a related allowance recorded: Real estate - commercial mortgage 26,014 19,738 6,210 29,005 22,592 7,255 Commercial 38,234 28,974 12,235 37,706 28,708 12,513 Real estate - residential mortgage 41,076 36,451 9,586 39,972 35,621 9,394 Real estate - home equity 26,972 23,830 10,596 26,599 23,373 10,370 Construction 5,259 1,627 551 5,984 2,307 793 Consumer 12 11 7 11 11 7 137,567 110,631 39,185 139,277 112,612 40,332 Total $ 229,723 $ 189,084 $ 39,185 $ 229,263 $ 190,178 $ 40,332 As of March 31, 2019 and December 31, 2018 , there were $78.5 million and $77.6 million , respectively, of impaired loans and leases that did not have a related allowance for loan and lease loss. The estimated fair values of the collateral securing these loans and leases exceeded their carrying amount, or the loans and leases 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 and leases by class segment: Three months ended March 31 2019 2018 Average Interest (1) Average Interest (1) (in thousands) With no related allowance recorded: Real estate - commercial mortgage $ 24,192 $ 97 $ 25,353 $ 83 Commercial 26,736 30 40,038 73 Real estate - residential mortgage 3,138 20 4,561 27 Construction 5,054 — 7,971 — Equipment lease financing, other and overdrafts 18,891 — — — 78,011 147 77,923 183 With a related allowance recorded: Real estate - commercial mortgage 21,166 85 25,720 84 Commercial 28,842 33 24,181 44 Real estate - home equity 23,601 223 24,752 184 Real estate - residential mortgage 36,036 225 36,761 221 Construction 1,967 — 3,495 — Consumer 11 — 25 — 111,623 566 114,934 533 Total $ 189,634 $ 713 $ 192,857 $ 716 (1) All impaired loans, excluding accruing TDRs, were non-accrual loans. Interest income recognized for the three months ended March 31, 2019 and 2018 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 have a heightened credit risk, but not to the 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 in the preceding tables. 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, 2019 December 31, 2018 March 31, 2019 December 31, 2018 March 31, 2019 December 31, 2018 March 31, 2019 December 31, 2018 (dollars in thousands) Real estate - commercial mortgage $ 6,123,827 $ 6,129,463 $ 158,447 $ 170,827 $ 146,414 $ 133,995 $ 6,428,688 $ 6,434,285 Commercial - secured 3,920,866 3,902,484 191,025 193,470 147,483 129,026 4,259,374 4,224,980 Commercial - unsecured 162,883 171,589 4,290 4,016 2,991 3,963 170,164 179,568 Total commercial - industrial, financial and agricultural 4,083,749 4,074,073 195,315 197,486 150,474 132,989 4,429,538 4,404,548 Construction - commercial residential 117,155 104,079 6,310 6,912 6,401 6,881 129,866 117,872 Construction - commercial 742,160 723,030 851 1,163 3,244 2,533 746,255 726,726 Total construction (excluding Construction - other) 859,315 827,109 7,161 8,075 9,645 9,414 876,121 844,598 $ 11,066,891 $ 11,030,645 $ 360,923 $ 376,388 $ 306,533 $ 276,398 $ 11,734,347 $ 11,683,431 % of Total 94.3 % 94.4 % 3.1 % 3.2 % 2.6 % 2.4 % 100.0 % 100.0 % The Corporation does not assign internal risk ratings to smaller balance, homogeneous loans and leases, such as home equity, residential mortgage, construction loans to individuals secured by residential real estate, consumer and leases. For these loans and leases, the most relevant credit quality indicator is delinquency status. The migration of loans and leases through the various delinquency status categories is a significant component of the allowance for credit losses methodology for those loans and leases, which bases the probability of default on this migration. The following table presents a summary of performing, delinquent and non-performing loans and leases for the indicated class segments: Performing Delinquent (1) Non-performing (2) Total March 31, 2019 December 31, 2018 March 31, 2019 December 31, 2018 March 31, 2019 December 31, 2018 March 31, 2019 December 31, 2018 (dollars in thousands) Real estate - home equity $ 1,391,323 $ 1,431,666 $ 11,682 $ 10,702 $ 10,495 $ 9,769 $ 1,413,500 $ 1,452,137 Real estate - residential mortgage 2,270,802 2,202,955 20,807 28,988 22,299 19,101 2,313,908 2,251,044 Construction - other 76,628 71,511 140 — 198 490 76,966 72,001 Consumer - direct 53,283 55,629 251 338 104 66 53,638 56,033 Consumer - indirect 376,538 359,405 3,198 3,405 171 343 379,907 363,153 Total consumer 429,821 415,034 3,449 3,743 275 409 433,545 419,186 Equipment lease financing, other and overdrafts 270,165 267,112 1,594 1,302 18,608 19,587 290,367 288,001 $ 4,438,739 $ 4,388,278 $ 37,672 $ 44,735 $ 51,875 $ 49,356 $ 4,528,286 $ 4,482,369 % of Total 98.0 % 97.9 % 0.8 % 1.0 % 1.2 % 1.1 % 100.0 % 100.0 % (1) Includes all accruing loans and leases 30 days to 89 days past due. (2) Includes all accruing loans and leases 90 days or more past due and all non-accrual loans and leases. The following table presents non-performing assets: March 31, December 31, (in thousands) Non-accrual loans and leases $ 127,141 $ 128,572 Loans and leases 90 days or more past due and still accruing 11,540 11,106 Total non-performing loans and leases 138,681 139,678 Other real estate owned (OREO) 9,012 10,518 Total non-performing assets $ 147,693 $ 150,196 The following tables present past due status and non-accrual loans and leases by portfolio segment and class segment: March 31, 2019 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 $ 14,598 $ 1,741 $ 478 $ 29,339 $ 29,817 $ 46,156 $ 6,382,532 $ 6,428,688 Commercial - secured 3,719 2,506 46 49,267 49,313 55,538 4,203,836 4,259,374 Commercial - unsecured 302 196 — 835 835 1,333 168,831 170,164 Total commercial - industrial, financial and agricultural 4,021 2,702 46 50,102 50,148 56,871 4,372,667 4,429,538 Real estate - home equity 8,980 2,702 3,452 7,043 10,495 22,177 1,391,323 1,413,500 Real estate - residential mortgage 15,796 5,011 6,806 15,493 22,299 43,106 2,270,802 2,313,908 Construction - commercial residential 148 — 388 6,401 6,789 6,937 122,929 129,866 Construction - commercial — — — 52 52 52 746,203 746,255 Construction - other 140 — — 198 198 338 76,628 76,966 Total real estate - construction 288 — 388 6,651 7,039 7,327 945,760 953,087 Consumer - direct 135 116 104 — 104 355 53,283 53,638 Consumer - indirect 2,568 630 171 — 171 3,369 376,538 379,907 Total consumer 2,703 746 275 — 275 3,724 429,821 433,545 Equipment lease financing, other and overdrafts 1,268 326 95 18,513 18,608 20,202 270,165 290,367 Total $ 47,654 $ 13,228 $ 11,540 $ 127,141 $ 138,681 $ 199,563 $ 16,063,070 $ 16,262,633 December 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 $ 12,206 $ 1,500 $ 1,765 $ 30,388 $ 32,153 $ 45,859 $ 6,388,426 $ 6,434,285 Commercial - secured 5,227 938 1,068 49,299 50,367 56,532 4,168,448 4,224,980 Commercial - unsecured 1,598 — 51 851 902 2,500 177,068 179,568 Total commercial - industrial, financial and agricultural 6,825 938 1,119 50,150 51,269 59,032 4,345,516 4,404,548 Real estate - home equity 7,144 3,558 3,061 6,708 9,769 20,471 1,431,666 1,452,137 Real estate - residential mortgage 20,796 8,192 4,433 14,668 19,101 48,089 2,202,955 2,251,044 Construction - commercial residential 2,489 — — 6,881 6,881 9,370 108,502 117,872 Construction - commercial — — — 19 19 19 726,707 726,726 Construction - other — — — 490 490 490 71,511 72,001 Total real estate - construction 2,489 — — 7,390 7,390 9,879 906,720 916,599 Consumer - direct 267 71 66 — 66 404 55,629 56,033 Consumer - indirect 2,908 497 343 — 343 3,748 359,405 363,153 Total consumer 3,175 568 409 — 409 4,152 415,034 419,186 Equipment lease financing, other and overdrafts 1,005 297 319 19,268 19,587 20,889 267,112 288,001 Total $ 53,640 $ 15,053 $ 11,106 $ 128,572 $ 139,678 $ 208,371 $ 15,957,429 $ 16,165,800 The following table presents TDRs, by class segment: March 31, December 31, (in thousands) Real-estate - residential mortgage $ 24,142 $ 24,102 Real estate - home equity 16,786 16,665 Real-estate - commercial mortgage 15,301 15,685 Commercial 5,759 5,143 Consumer 11 10 Total accruing TDRs 61,999 61,605 Non-accrual TDRs (1) 29,523 28,659 Total TDRs $ 91,522 $ 90,264 (1) Included in non-accrual loans and leases in the preceding table detailing non-performing assets. The following table presents TDRs, by class segment for loans that were modified during the three months ended March 31, 2019 and 2018: Three months ended March 31 2019 2018 Number of Loans Recorded Investment Number of Loans Recorded Investment (dollars in thousands) Commercial 4 $ 2,460 9 $ 9,359 Real estate - residential mortgage 4 917 1 $ 5 Real estate - home equity 12 829 19 $ 1,384 Total 20 $ 4,206 29 $ 10,748 Restructured loan modifications may include payment schedule modifications, interest rate concessions, bankruptcies, principal reduction, or some combination of these concessions. During the three months ended March 31, 2019, restructured loan modifications of residential mortgages, home equity loans and commercial mortgage loans primarily included maturity date extensions, rate modifications and payment schedule modifications. The following table presents TDRs, by class segment, as of March 31, 2019 and 2018 that were modified in the previous 12 months and had a post-modification payment default during the three months ended March 31, 2019 and 2018 . The Corporation defines a payment default as a single missed payment. 2019 2018 Number of Loans Recorded Investment Number of Loans Recorded Investment (dollars in thousands) Real estate - residential mortgage 2 $ 299 5 $ 332 Real estate - commercial mortgage — — 1 180 Real estate - home equity 24 1,150 18 1,000 Commercial 3 2,264 6 526 Construction — — 2 1,484 Total 29 $ 3,713 32 $ 3,522 |