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: September 30, December 31, 2018 (in thousands) Real-estate - commercial mortgage $ 6,604,634 $ 6,434,285 Commercial - industrial, financial and agricultural 4,494,496 4,404,548 Real estate - residential mortgage 2,570,793 2,251,044 Real estate - home equity 1,346,115 1,452,137 Real estate - construction 913,644 916,599 Consumer 464,213 419,186 Equipment lease financing and other 316,880 311,866 Overdrafts 2,929 2,774 Loans and leases, gross of unearned income 16,713,704 16,192,439 Unearned income (26,838 ) (26,639 ) Loans and leases, net of unearned income $ 16,686,866 $ 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 loans 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 loans 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: September 30, December 31, (in thousands) Allowance for loan and lease losses $ 166,135 $ 160,537 Reserve for unfunded lending commitments 6,662 8,873 Allowance for credit losses $ 172,797 $ 169,410 The following table presents the activity in the allowance for credit losses: Three months ended September 30 Nine months ended September 30 2019 2018 2019 2018 (in thousands) Balance at beginning of period $ 176,941 $ 169,247 $ 169,410 $ 176,084 Loans and leases charged off (10,128 ) (6,883 ) (20,208 ) (55,440 ) Recoveries of loans and leases previously charged off 3,814 3,842 11,300 8,475 Net loans and leases charged off (6,314 ) (3,041 ) (8,908 ) (46,965 ) Provision for credit losses 2,170 1,620 12,295 38,707 Balance at end of period $ 172,797 $ 167,826 $ 172,797 $ 167,826 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 September 30, 2019 Balance at June 30, 2019 $ 54,859 $ 66,341 $ 18,981 $ 18,892 $ 4,928 $ 3,363 $ 2,869 $ 170,233 Loans and leases charged off (394 ) (7,181 ) (498 ) (533 ) (45 ) (877 ) (600 ) (10,128 ) Recoveries of loans and leases previously charged off 444 2,311 132 440 164 216 107 3,814 Net loans and leases recovered (charged off) 50 (4,870 ) (366 ) (93 ) 119 (661 ) (493 ) (6,314 ) Provision for loan and lease losses (1) (5,529 ) 7,710 (662 ) (109 ) (664 ) 798 672 2,216 Balance at September 30, 2019 $ 49,380 $ 69,181 $ 17,953 $ 18,690 $ 4,383 $ 3,500 $ 3,048 $ 166,135 Three months ended September 30, 2018 Balance at June 30, 2018 $ 56,583 $ 59,045 $ 16,247 $ 14,504 $ 5,988 $ 1,699 $ 1,984 $ 156,050 Loans and leases charged off (650 ) (3,541 ) (743 ) (483 ) (212 ) (672 ) (582 ) (6,883 ) Recoveries of loans and leases previously charged off 928 731 217 317 664 390 595 3,842 Net loans and leases recovered (charged off) 278 (2,810 ) (526 ) (166 ) 452 (282 ) 13 (3,041 ) Provision for loan and lease losses (1) (2,750 ) (301 ) 2,890 3,774 (961 ) 1,429 720 4,801 Balance at September 30, 2018 $ 54,111 $ 55,934 $ 18,611 $ 18,112 $ 5,479 $ 2,846 $ 2,717 $ 157,810 Nine months ended September 30, 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 (1,769 ) (11,863 ) (923 ) (1,322 ) (143 ) (2,355 ) (1,833 ) (20,208 ) Recoveries of loans and leases previously charged off 749 6,234 552 783 1,493 1,005 484 11,300 Net loans and leases recovered (charged off) (1,020 ) (5,629 ) (371 ) (539 ) 1,350 (1,350 ) (1,349 ) (8,908 ) Provision for loan losses (1) (2,489 ) 15,942 (587 ) 308 (2,028 ) 1,633 1,727 14,506 Balance at September 30, 2019 $ 49,380 $ 69,181 $ 17,953 $ 18,690 $ 4,383 $ 3,500 $ 3,048 $ 166,135 Nine months ended September 30, 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 (1,283 ) (46,178 ) (1,967 ) (1,128 ) (976 ) (2,276 ) (1,632 ) (55,440 ) Recoveries of loans and leases previously charged off 1,528 2,347 694 520 1,414 1,015 957 8,475 Net loans and leases recovered (charged off) 245 (43,831 ) (1,273 ) (608 ) 438 (1,261 ) (675 ) (46,965 ) Provision for loan losses (1) (4,927 ) 33,485 1,757 2,632 (1,579 ) 2,062 1,435 34,865 Balance at September 30, 2018 $ 54,111 $ 55,934 $ 18,611 $ 18,112 $ 5,479 $ 2,846 $ 2,717 $ 157,810 (1) The provision for loan and lease losses excluded a $ 46,000 and a $2.2 million decrease in the reserve for unfunded lending commitments for the three and nine months ended September 30, 2019 , respectively, and a $3.2 million decrease and a $3.8 million increase in the reserve for unfunded lending commitments for the three and nine months ended September 30, 2018, respectively. 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 September 30, 2019: Collectively evaluated for impairment $ 42,766 $ 58,722 $ 8,033 $ 9,678 $ 3,970 $ 3,495 $ 2,944 $ 129,608 Individually evaluated for impairment 6,614 10,459 9,920 9,012 413 5 104 36,527 $ 49,380 $ 69,181 $ 17,953 $ 18,690 $ 4,383 $ 3,500 $ 3,048 $ 166,135 Loans and leases, net of unearned income at September 30, 2019: Collectively evaluated for impairment $ 6,543,781 $ 4,453,062 $ 1,323,950 $ 2,533,295 $ 909,811 $ 464,206 $ 275,552 $ 16,503,657 Individually evaluated for impairment 60,853 41,434 22,165 37,498 3,833 7 17,419 183,209 $ 6,604,634 $ 4,494,496 $ 1,346,115 $ 2,570,793 $ 913,644 $ 464,213 $ 292,971 $ 16,686,866 Allowance for loan and lease losses at September 30, 2018: Collectively evaluated for impairment $ 46,812 $ 47,028 $ 7,856 $ 8,369 $ 4,718 $ 2,841 $ 2,717 $ 120,341 Individually evaluated for impairment 7,299 8,906 10,755 9,743 761 5 — 37,469 $ 54,111 $ 55,934 $ 18,611 $ 18,112 $ 5,479 $ 2,846 $ 2,717 $ 157,810 Loans and leases, net of unearned income at September 30, 2018: Collectively evaluated for impairment $ 6,290,143 $ 4,235,953 $ 1,444,898 $ 2,133,718 $ 971,167 $ 390,700 $ 285,021 $ 15,751,600 Individually evaluated for impairment 47,841 52,870 24,254 39,830 8,690 8 — 173,493 $ 6,337,984 $ 4,288,823 $ 1,469,152 $ 2,173,548 $ 979,857 $ 390,708 $ 285,021 $ 15,925,093 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 September 30, 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 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 September 30, 2019 and December 31, 2018 , approximately 73% 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 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: September 30, 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 $ 31,305 $ 29,156 $ — $ 25,095 $ 23,481 $ — Commercial 27,060 21,617 — 33,493 26,585 — Real estate - residential mortgage 4,531 4,368 — 3,149 3,149 — Construction 6,449 2,598 — 8,980 5,083 — Equipment lease financing 19,269 17,003 — 19,269 19,268 — 88,614 74,742 — 89,986 77,566 — With a related allowance recorded: Real estate - commercial mortgage 38,393 31,697 6,614 29,005 22,592 7,255 Commercial 29,146 19,817 10,459 37,706 28,708 12,513 Real estate - residential mortgage 37,559 33,130 9,012 39,972 35,621 9,394 Real estate - home equity 25,317 22,165 9,920 26,599 23,373 10,370 Real estate - construction 4,724 1,235 413 5,984 2,307 793 Consumer 7 7 5 11 11 7 Equipment lease financing 416 416 104 — — — 135,562 108,467 36,527 139,277 112,612 40,332 Total $ 224,176 $ 183,209 $ 36,527 $ 229,263 $ 190,178 $ 40,332 As of September 30, 2019 and December 31, 2018 , there were $74.7 million and $77.6 million , respectively, of impaired loans and leases that did not have a related allowance for loan and lease losses. 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 September 30 Nine months ended September 30 2019 2018 2019 2018 Average Interest (1) Average Interest (1) Average Interest (1) Average Interest (1) (in thousands) With no related allowance recorded: Real estate - commercial mortgage $ 29,865 $ 94 $ 26,051 $ 94 $ 27,028 $ 291 $ 25,702 $ 274 Commercial 22,603 30 30,157 66 24,670 92 35,098 208 Real estate - residential mortgage 4,384 26 3,182 20 3,761 69 3,872 71 Real estate -construction 2,601 — 6,845 — 3,827 — 7,408 — Equipment lease financing 17,381 — — — 18,136 — — — 76,834 150 66,235 180 77,422 452 72,080 553 With a related allowance recorded: Real estate - commercial mortgage 30,508 96 23,734 85 25,837 268 24,727 260 Commercial 23,906 32 23,687 51 26,373 101 23,934 149 Real estate - home equity 22,874 210 24,628 202 23,237 655 24,690 581 Real estate - residential mortgage 33,035 198 36,396 227 34,535 638 36,578 671 Real estate -construction 1,399 — 2,061 — 1,683 — 2,778 — Consumer 8 — 10 — 10 — 18 — Equipment lease financing 208 — — — 104 — — — 111,938 536 110,516 565 111,779 1,662 112,725 1,661 Total $ 188,772 $ 686 $ 176,751 $ 745 $ 189,201 $ 2,114 $ 184,805 $ 2,214 (1) All impaired loans and leases were either TDRs or non-accrual loans and leases. Interest income recognized for the three and nine months ended September 30, 2019 and 2018 represented 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 September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018 (dollars in thousands) Real estate - commercial mortgage $ 6,290,567 $ 6,129,463 $ 142,136 $ 170,827 $ 171,931 $ 133,995 $ 6,604,634 $ 6,434,285 Commercial - secured 3,926,856 3,902,484 198,592 193,470 184,584 129,026 4,310,032 4,224,980 Commercial - unsecured 175,761 171,589 5,082 4,016 3,621 3,963 184,464 179,568 Total commercial - industrial, financial and agricultural 4,102,617 4,074,073 203,674 197,486 188,205 132,989 4,494,496 4,404,548 Construction - commercial residential 112,163 104,079 2,871 6,912 3,627 6,881 118,661 117,872 Construction - commercial 707,290 723,030 719 1,163 2,704 2,533 710,713 726,726 Total construction (excluding Construction - other) 819,453 827,109 3,590 8,075 6,331 9,414 829,374 844,598 $ 11,212,637 $ 11,030,645 $ 349,400 $ 376,388 $ 366,467 $ 276,398 $ 11,928,504 $ 11,683,431 % of Total 94.0 % 94.4 % 2.9 % 3.2 % 3.1 % 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 equipment lease financing. 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 September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018 (dollars in thousands) Real estate - home equity $ 1,325,900 $ 1,431,666 $ 9,445 $ 10,702 $ 10,770 $ 9,769 $ 1,346,115 $ 1,452,137 Real estate - residential mortgage 2,526,551 2,202,955 24,092 28,988 20,150 19,101 2,570,793 2,251,044 Construction - other 82,787 71,511 1,296 — 187 490 84,270 72,001 Consumer - direct 64,066 55,629 641 338 94 66 64,801 56,033 Consumer - indirect 395,919 359,405 3,345 3,405 148 343 399,412 363,153 Total consumer 459,985 415,034 3,986 3,743 242 409 464,213 419,186 Equipment lease financing, other and overdrafts 274,239 267,112 1,066 1,302 17,666 19,587 292,971 288,001 $ 4,669,462 $ 4,388,278 $ 39,885 $ 44,735 $ 49,015 $ 49,356 $ 4,758,362 $ 4,482,369 % of Total 98.1 % 97.9 % 0.9 % 1.0 % 1.0 % 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: September 30, December 31, (in thousands) Non-accrual loans and leases $ 124,287 $ 128,572 Loans and leases 90 days or more past due and still accruing 11,689 11,106 Total non-performing loans and leases 135,976 139,678 Other real estate owned (OREO) 7,706 10,518 Total non-performing assets $ 143,682 $ 150,196 The following tables present past due status and non-accrual loans and leases by portfolio segment and class segment: September 30, 2019 30-59 Days Past Due 60-89 Days Past Due ≥ 90 Days Past Due and Accruing Non- accrual Total Past Due and Non-accrual Current Total (in thousands) Real estate - commercial mortgage $ 25,100 $ 4,292 $ 1,301 $ 44,409 $ 75,102 $ 6,529,532 $ 6,604,634 Commercial - secured 3,234 1,961 731 35,664 41,590 4,268,442 4,310,032 Commercial - unsecured 91 85 153 578 907 183,557 184,464 Total commercial - industrial, financial and agricultural 3,325 2,046 884 36,242 42,497 4,451,999 4,494,496 Real estate - home equity 7,063 2,382 4,122 6,648 20,215 1,325,900 1,346,115 Real estate - residential mortgage 17,801 6,291 4,414 15,736 44,242 2,526,551 2,570,793 Construction - commercial residential 1,326 — 479 3,627 5,432 113,229 118,661 Construction - commercial 392 — — 19 411 710,302 710,713 Construction - other 1,296 — — 187 1,483 82,787 84,270 Total real estate - construction 3,014 — 479 3,833 7,326 906,318 913,644 Consumer - direct 521 120 94 — 735 64,066 64,801 Consumer - indirect 2,890 455 148 — 3,493 395,919 399,412 Total consumer 3,411 575 242 — 4,228 459,985 464,213 Equipment lease financing, other and overdrafts 923 143 247 17,419 18,732 274,239 292,971 Total $ 60,637 $ 15,729 $ 11,689 $ 124,287 $ 212,342 $ 16,474,524 $ 16,686,866 December 31, 2018 30-59 Days Past Due 60-89 Days Past Due ≥ 90 Days Past Due and Accruing Non- accrual Total Past Due and Non-accrual Current Total (in thousands) Real estate - commercial mortgage $ 12,206 $ 1,500 $ 1,765 $ 30,388 $ 45,859 $ 6,388,426 $ 6,434,285 Commercial - secured 5,227 938 1,068 49,299 56,532 4,168,448 4,224,980 Commercial - unsecured 1,598 — 51 851 2,500 177,068 179,568 Total commercial - industrial, financial and agricultural 6,825 938 1,119 50,150 59,032 4,345,516 4,404,548 Real estate - home equity 7,144 3,558 3,061 6,708 20,471 1,431,666 1,452,137 Real estate - residential mortgage 20,796 8,192 4,433 14,668 48,089 2,202,955 2,251,044 Construction - commercial residential 2,489 — — 6,881 9,370 108,502 117,872 Construction - commercial — — — 19 19 726,707 726,726 Construction - other — — — 490 490 71,511 72,001 Total real estate - construction 2,489 — — 7,390 9,879 906,720 916,599 Consumer - direct 267 71 66 — 404 55,629 56,033 Consumer - indirect 2,908 497 343 — 3,748 359,405 363,153 Total consumer 3,175 568 409 — 4,152 415,034 419,186 Equipment lease financing, other and overdrafts 1,005 297 319 19,268 20,889 267,112 288,001 Total $ 53,640 $ 15,053 $ 11,106 $ 128,572 $ 208,371 $ 15,957,429 $ 16,165,800 The following table presents TDRs, by class segment: September 30, December 31, (in thousands) Real estate - residential mortgage $ 21,762 $ 24,102 Real estate - commercial mortgage 16,444 15,685 Real estate - home equity 15,505 16,665 Commercial 5,192 5,143 Consumer 7 10 Total accruing TDRs 58,910 61,605 Non-accrual TDRs (1) 23,553 28,659 Total TDRs $ 82,463 $ 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 and nine months ended September 30, 2019 and 2018: Three months ended September 30 Nine months ended September 30 2019 2018 2019 2018 Number of Loans Recorded Investment Number of Loans Recorded Investment Number of Loans Recorded Investment Number of Loans Recorded Investment (dollars in thousands) Real estate - residential mortgage 1 $ 830 4 $ 597 6 $ 2,263 6 $ 679 Real estate - commercial mortgage 1 81 — — 1 81 — — Real estate - home equity 12 327 24 1,002 46 2,281 71 4,045 Commercial 3 97 2 913 13 4,928 13 10,325 Total 17 $ 1,335 30 $ 2,512 66 $ 9,553 90 $ 15,049 Restructured loan modifications may include payment schedule modifications, interest rate concessions, bankruptcies, principal reduction or some combination of these concessions. During the three and nine months ended September 30, 2019, restructured loan modifications of residential mortgages, home equity and commercial loans primarily included maturity date extensions, rate modifications and payment schedule modifications. The following table presents TDRs, by class segment, as of September 30, 2019 and 2018 that were modified in the previous 12 months and had a post-modification payment default during the nine months ended September 30, 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 1 $ 231 6 $ 724 Real estate - commercial mortgage — — 2 452 Real estate - home equity 16 657 25 1,591 Commercial 4 190 4 5,042 Total 21 $ 1,078 37 $ 7,809 |