Allowance for Credit Losses and Credit Quality | ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY Allowance for Credit Losses Activity A summary of changes in the allowance for credit losses for the nine months ended September 30 is as follows: (Dollars in thousands) 2018 2017 Allowance for credit losses Allowance for loan and lease losses at beginning of period $ 140,891 $ 144,719 Provision for loan and lease losses 26,678 36,718 Transfer of balance to OREO and other (5,709 ) 963 Charge-offs (34,740 ) (49,939 ) Recoveries 9,830 4,167 Allowance for loan and lease losses at end of period $ 136,950 $ 136,628 Reserve for unfunded commitments at beginning of period $ 13,208 $ 11,241 Balance created in acquisition accounting 900 7,626 Provision for unfunded lending commitments 613 2,165 Reserve for unfunded commitments at end of period $ 14,721 $ 21,032 Allowance for credit losses at end of period $ 151,671 $ 157,660 A summary of changes in the allowance for credit losses, by loan portfolio type, for the nine months ended September 30 is as follows: 2018 (Dollars in thousands) Commercial Real Estate Commercial and Industrial Residential Mortgage Consumer Total Allowance for loan and lease losses at beginning of period $ 54,201 $ 53,916 $ 9,117 $ 23,657 $ 140,891 Provision for (Reversal of) loan and lease losses (4,020 ) 20,372 2,318 8,008 26,678 Transfer of balance to OREO and other (1,556 ) (814 ) (45 ) (3,294 ) (5,709 ) Charge-offs (1,281 ) (22,447 ) (365 ) (10,647 ) (34,740 ) Recoveries 1,019 5,665 53 3,093 9,830 Allowance for loan and lease losses at end of period $ 48,363 $ 56,692 $ 11,078 $ 20,817 $ 136,950 Reserve for unfunded commitments at beginning of period $ 4,531 $ 5,309 $ 555 $ 2,813 $ 13,208 Balance created in acquisition accounting 129 81 — 690 900 Provision for (Reversal of) unfunded commitments (134 ) 169 246 332 613 Reserve for unfunded commitments at end of period $ 4,526 $ 5,559 $ 801 $ 3,835 $ 14,721 Allowance on loans individually evaluated for impairment $ 2,650 $ 10,471 $ 154 $ 2,973 $ 16,248 Allowance on loans collectively evaluated for impairment 40,519 44,727 5,063 17,661 107,970 Allowance on loans acquired with deteriorated credit quality 5,194 1,494 5,861 183 12,732 Loans and leases, net of unearned income: Balance at end of period $ 9,381,883 $ 5,581,040 $ 4,300,163 $ 3,080,820 $ 22,343,906 Balance at end of period individually evaluated for impairment 73,469 75,625 6,230 33,863 189,187 Balance at end of period collectively evaluated for impairment 9,126,653 5,478,377 4,174,524 2,970,301 21,749,855 Balance at end of period acquired with deteriorated credit quality 181,761 27,038 119,409 76,656 404,864 2017 (Dollars in thousands) Commercial Real Estate Commercial and Industrial Residential Mortgage Consumer Total Allowance for loan losses at beginning of period $ 49,231 $ 60,939 $ 11,249 $ 23,300 $ 144,719 Provision for (Reversal of) loan and lease losses 4,888 23,574 (1,333 ) 9,589 36,718 Transfer of balance to OREO and other 879 (69 ) 2 151 963 Charge-offs (1,410 ) (37,110 ) (265 ) (11,154 ) (49,939 ) Recoveries 668 605 148 2,746 4,167 Allowance for loan losses at end of period $ 54,256 $ 47,939 $ 9,801 $ 24,632 $ 136,628 Reserve for unfunded commitments at beginning of period $ 3,207 $ 4,537 $ 657 $ 2,840 $ 11,241 Balance created in acquisition accounting 1,358 4,903 1,303 62 7,626 Provision for (Reversal of) unfunded commitments 1,239 752 (30 ) 204 2,165 Reserve for unfunded commitments at end of period $ 5,804 $ 10,192 $ 1,930 $ 3,106 $ 21,032 Allowance on loans individually evaluated for impairment $ 1,957 $ 9,744 $ 164 $ 2,445 $ 14,310 Allowance on loans collectively evaluated for impairment 30,016 35,964 3,801 18,768 88,549 Allowance on loans acquired with deteriorated credit quality 22,283 2,231 5,836 3,419 33,769 Loans, net of unearned income: Balance at end of period 8,767,886 5,016,437 3,024,970 2,985,792 19,795,085 Balance at end of period individually evaluated for impairment 68,241 85,054 5,384 29,140 187,819 Balance at end of period collectively evaluated for impairment 8,457,950 4,899,842 2,890,206 2,877,383 19,125,381 Balance at end of period acquired with deteriorated credit quality 241,695 31,541 129,380 79,269 481,885 Portfolio Segment Risk Factors Commercial real estate loans include loans to commercial customers for long-term financing of land and buildings or for land development or construction of a building. These loans are repaid through revenues from operations of the businesses, rents of properties, sales of properties and refinances. Commercial and industrial loans and leases represent loans to commercial customers to finance general working capital needs, equipment purchases and leases and other projects where repayment is derived from cash flows resulting from business operations. The Company originates commercial business loans on a secured and, to a lesser extent, unsecured basis. Residential mortgage loans consist of loans to consumers to finance a primary residence. The vast majority of the residential mortgage loan portfolio is comprised of non-conforming 1-4 family mortgage loans secured by properties located in the Company's market areas and originated under terms and documentation that permit their sale in a secondary market. Consumer loans are offered by the Company in order to provide a full range of retail financial services to its customers and include home equity, credit card and other direct consumer installment loans. The Company originates substantially all of its consumer loans in its primary market areas. Loans in the consumer segment are sensitive to unemployment and other key consumer economic measures. Credit Quality The Company utilizes an asset risk classification system in accordance with guidelines established by the Federal Reserve Board as part of its efforts to monitor commercial asset quality. “Special mention” loans are defined as loans with potential weaknesses that may, if not corrected, result in future deterioration of the loan. Special mention loans do not expose the Company to sufficient risk to warrant adverse classification. For problem assets with identified credit issues, the Company has two primary classifications: “substandard” and “doubtful.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full satisfaction of the loan balance outstanding questionable, which makes probability of loss higher based on currently existing facts, conditions, and values. Loans classified as substandard, doubtful, and loss are collectively referred to as classified loans. Criticized loans include all classified loans, as well as loans classified as special mention loans. Loans classified as “Pass” do not meet the criteria set forth for special mention, substandard, or doubtful classification and are not considered criticized. Asset risk classifications are determined at origination or acquisition and reviewed on an ongoing basis. Risk classifications are changed if, in the opinion of management, the risk profile of the customer has changed since the last review of the loan relationship. The Company’s investment in loans by credit quality indicator is presented in the following tables. Asset risk classifications for commercial loans and leases reflect the classification as of September 30, 2018 and December 31, 2017 . Credit quality information in the tables below includes total loans acquired (including acquired impaired loans) at the net loan balance, after the application of premiums/discounts, at September 30, 2018 and December 31, 2017 . Loan premiums/discounts represent the adjustment of acquired loans to fair value at the acquisition date, as adjusted for income accretion and changes in cash flow estimates in subsequent periods. Loan premiums/discounts include preliminary discounts recorded on acquired Gibraltar loans, which are subject to change upon receipt of final fair value estimates during the measurement period. Loan delinquency is the primary credit quality indicator that the Company utilizes to monitor consumer asset quality. September 30, 2018 December 31, 2017 (Dollars in thousands) Pass Special Mention Sub- Doubtful Total Pass Special Mention Sub- Doubtful Loss Total Commercial real estate - construction $ 1,094,240 $ 19,033 $ 14,704 $ 11 $ 1,127,988 $ 1,189,490 $ 20,351 $ 30,541 $ 14 $ — $ 1,240,396 Commercial real estate - owner-occupied 2,382,053 31,588 45,058 265 2,458,964 2,234,151 82,114 56,590 2,466 — 2,375,321 Commercial real estate - non-owner-occupied 5,692,007 49,121 49,415 4,388 5,794,931 5,258,638 19,311 42,702 1,744 118 5,322,513 Commercial and industrial 5,366,990 96,303 86,903 30,844 5,581,040 4,882,554 88,149 128,961 35,403 — 5,135,067 Total $ 14,535,290 $ 196,045 $ 196,080 $ 35,508 $ 14,962,923 $ 13,564,833 $ 209,925 $ 258,794 $ 39,627 $ 118 $ 14,073,297 September 30, 2018 December 31, 2017 (Dollars in thousands) Current 30+ Days Past Due Total Current 30+ Days Past Due Total Residential mortgage $ 4,212,447 $ 87,716 $ 4,300,163 $ 2,962,043 $ 94,309 $ 3,056,352 Consumer - home equity 2,306,712 43,464 2,350,176 2,250,205 42,070 2,292,275 Consumer - other 723,183 7,461 730,644 645,498 10,759 656,257 Total $ 7,242,342 $ 138,641 $ 7,380,983 $ 5,857,746 $ 147,138 $ 6,004,884 Impaired Loans Information on the Company’s investment in impaired loans, which include all TDRs and all other non-accrual loans evaluated or measured individually for impairment for purposes of determining the ALLL, is presented in the following tables as of and for the periods indicated. September 30, 2018 December 31, 2017 Unpaid Principal Balance Recorded Investment Related Allowance Unpaid Principal Balance Recorded Investment Related Allowance (Dollars in thousands) With no related allowance recorded: Commercial real estate - construction $ 11,176 $ 11,176 $ — $ 13,763 $ 13,013 $ — Commercial real estate - owner-occupied 33,816 33,816 — 50,867 44,482 — Commercial real estate - non-owner-occupied 21,996 21,996 — 15,370 14,975 — Commercial and industrial 41,717 41,717 — 103,013 70,254 — Residential mortgage 1,254 1,241 — 2,004 2,001 — Consumer - home equity 701 701 — 5,906 5,634 — Consumer - other — — — 75 75 — With an allowance recorded: Commercial real estate - construction 146 146 (11 ) 238 156 (19 ) Commercial real estate - owner-occupied 3,987 3,987 (535 ) 13,314 13,287 (949 ) Commercial real estate - non-owner-occupied 2,348 2,348 (2,104 ) 6,051 5,872 (620 ) Commercial and industrial 33,894 33,908 (10,471 ) 35,306 32,162 (12,736 ) Residential mortgage 5,420 4,989 (154 ) 5,179 4,748 (172 ) Consumer - home equity 28,700 28,695 (2,469 ) 27,189 26,575 (2,358 ) Consumer - other 4,526 4,467 (504 ) 5,354 4,893 (498 ) Total $ 189,681 $ 189,187 $ (16,248 ) $ 283,629 $ 238,127 $ (17,352 ) Total commercial loans and leases $ 149,080 $ 149,094 $ (13,121 ) $ 237,922 $ 194,201 $ (14,324 ) Total mortgage loans 6,674 6,230 (154 ) 7,183 6,749 (172 ) Total consumer loans 33,927 33,863 (2,973 ) 38,524 37,177 (2,856 ) Three Months Ended September 30, 2018 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2018 Nine Months Ended September 30, 2017 Average Interest Average Interest Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized (Dollars in thousands) With no related allowance recorded: Commercial real estate - construction $ 10,806 $ 164 $ 2,722 $ 11 $ 10,371 $ 460 $ 2,538 $ 57 Commercial real estate - owner-occupied 34,118 209 36,850 88 34,505 903 37,185 517 Commercial real estate - non-owner-occupied 22,091 249 7,858 83 22,988 746 7,908 231 Commercial and industrial 43,409 523 64,863 240 40,564 1,543 71,611 975 Residential mortgage 1,254 9 1,114 13 1,271 36 1,129 36 Consumer - home equity 705 2 364 6 708 16 367 18 With an allowance recorded: Commercial real estate - construction 148 — 166 1 151 1 209 5 Commercial real estate - owner-occupied 4,006 83 11,154 89 4,044 102 11,206 269 Commercial real estate - non-owner-occupied 2,398 20 4,874 29 2,442 76 4,808 109 Commercial and industrial 40,357 150 55,042 261 47,098 720 57,020 788 Residential mortgage 5,014 50 4,290 38 5,066 149 4,338 115 Consumer - home equity 28,577 305 23,730 254 27,905 892 21,639 690 Consumer - other 4,710 65 4,330 64 4,884 208 4,010 180 Total $ 197,593 $ 1,829 $ 217,357 $ 1,177 $ 201,997 $ 5,852 $ 223,968 $ 3,990 Total commercial loans and leases $ 157,333 $ 1,398 $ 183,529 $ 802 $ 162,163 $ 4,551 $ 192,485 $ 2,951 Total mortgage loans 6,268 59 5,404 51 6,337 185 5,467 151 Total consumer loans 33,992 372 28,424 324 33,497 1,116 26,016 888 As of September 30, 2018 and December 31, 2017 , the Company was not committed to lend a material amount of additional funds to any customer whose loan was classified as impaired or as a troubled debt restructuring. |