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 three months ended March 31 is as follows: (in thousands) 2019 2018 Allowance for loan and lease losses at beginning of period $ 140,571 $ 140,891 Provision for loan and lease losses 12,612 7,987 Transfer of balance to OREO and other (2,885 ) (48 ) Charge-offs (8,918 ) (9,116 ) Recoveries 1,586 4,813 Allowance for loan and lease losses at end of period $ 142,966 $ 144,527 Reserve for unfunded commitments at beginning of period $ 14,830 $ 13,208 Provision for unfunded lending commitments 1,151 224 Reserve for unfunded commitments at end of period $ 15,981 $ 13,432 Allowance for credit losses at end of period $ 158,947 $ 157,959 A summary of changes in the allowance for credit losses, by loan portfolio type, for the three months ended March 31 is as follows: 2019 (in thousands) Commercial Real Estate Commercial and Industrial Residential Mortgage Consumer and Other Total Allowance for loan and lease losses at beginning of period $ 51,806 $ 54,096 $ 12,998 $ 21,671 $ 140,571 Provision for loan and lease losses 6,887 2,876 1,749 1,100 12,612 Transfer of balance to OREO and other — — (2,881 ) (4 ) (2,885 ) Charge-offs (72 ) (4,931 ) (28 ) (3,887 ) (8,918 ) Recoveries 103 446 32 1,005 1,586 Allowance for loan and lease losses at end of period $ 58,724 $ 52,487 $ 11,870 $ 19,885 $ 142,966 Reserve for unfunded commitments at beginning of period $ 4,869 $ 6,198 $ 866 $ 2,897 $ 14,830 Provision for unfunded commitments 794 128 22 207 1,151 Reserve for unfunded commitments at end of period $ 5,663 $ 6,326 $ 888 $ 3,104 $ 15,981 Allowance on loans individually evaluated for impairment $ 3,078 $ 10,988 $ 258 $ 2,624 $ 16,948 Allowance on loans collectively evaluated for impairment 50,210 39,997 7,404 17,087 114,698 Allowance on loans acquired with deteriorated credit quality 5,436 1,502 4,208 174 11,320 Loans and leases, net of unearned income: Balance at end of period $ 9,775,590 $ 5,852,568 $ 4,415,267 $ 2,924,870 $ 22,968,295 Balance at end of period individually evaluated for impairment 67,909 63,889 7,679 35,835 175,312 Balance at end of period collectively evaluated for impairment 9,546,809 5,764,084 4,323,051 2,830,797 22,464,741 Balance at end of period acquired with deteriorated credit quality 160,872 24,595 84,537 58,238 328,242 2018 (in thousands) Commercial Real Estate Commercial and Industrial Residential Mortgage Consumer and Other Total Allowance for loan losses at beginning of period $ 54,201 $ 53,916 $ 9,117 $ 23,657 $ 140,891 Provision for (Reversal of) loan and lease losses 6,378 294 (686 ) 2,001 7,987 Transfer of balance to OREO and other (48 ) — — — (48 ) Charge-offs (114 ) (5,378 ) (105 ) (3,519 ) (9,116 ) Recoveries 191 3,698 22 902 4,813 Allowance for loan losses at end of period $ 60,608 $ 52,530 $ 8,348 $ 23,041 $ 144,527 Reserve for unfunded commitments at beginning of period $ 4,531 $ 5,309 $ 555 $ 2,813 $ 13,208 Provision for (Reversal of) unfunded commitments 1,476 (1,004 ) (15 ) (233 ) 224 Reserve for unfunded commitments at end of period $ 6,007 $ 4,305 $ 540 $ 2,580 $ 13,432 Allowance on loans individually evaluated for impairment $ 2,506 $ 14,040 $ 178 $ 2,974 $ 19,698 Allowance on loans collectively evaluated for impairment 35,871 36,208 2,073 16,544 90,696 Allowance on loans acquired with deteriorated credit quality 22,231 2,282 6,097 3,523 34,133 Loans, net of unearned income: Balance at end of period $ 9,248,951 $ 5,325,682 $ 3,971,067 $ 3,160,390 $ 21,706,090 Balance at end of period individually evaluated for impairment 78,489 78,725 6,041 33,277 196,532 Balance at end of period collectively evaluated for impairment 8,946,138 5,211,736 3,826,721 3,043,085 21,027,680 Balance at end of period acquired with deteriorated credit quality 224,324 35,221 138,305 84,028 481,878 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 Indicators For commercial loans and leases, the Company utilizes regulatory classification ratings to monitor credit quality. Loans with a "pass" rating are those that the Company believes will be fully repaid in accordance with the contractual loan terms. Commercial loans and leases that are "criticized" are those that have some weakness or potential weakness that indicate an increased probability of future loss. "Criticized" loans are grouped into three categories: "special mention", "substandard", and "doubtful". Special mention loans have potential weaknesses that, if left uncorrected, may result in deterioration of the Company's credit position at some future date. Substandard loans have well-defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful loans have the same weaknesses as substandard loans with the added characteristics that the probability of loss is high and collection of the full amount is improbable. Substandard and doubtful loans are collectively referred to as "classified" loans. For residential mortgage loans and consumer loans, the Company primarily uses the loan's payment and delinquency status to monitor credit quality. These credit quality indicators are continually updated and monitored. The recorded investment in loans and leases by credit quality indicator is presented in the following tables. Asset risk classifications for commercial loans and leases reflect the classification as of March 31, 2019 and December 31, 2018 . 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 and discounts. Loan premiums and 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. March 31, 2019 December 31, 2018 (in thousands) Pass Special Mention Sub- Doubtful Total Pass Special Mention Sub- Doubtful Total Real estate - construction $ 1,213,202 $ 147 $ 6,289 $ 9 $ 1,219,647 $ 1,182,554 $ 1,062 $ 12,740 $ 10 $ 1,196,366 Real estate - owner-occupied 2,332,819 33,359 41,087 814 2,408,079 2,328,999 25,526 41,297 — 2,395,822 Real estate - non-owner-occupied 6,028,301 82,839 34,015 2,709 6,147,864 5,687,963 78,009 26,512 3,633 5,796,117 Commercial and industrial 5,696,564 46,384 87,385 22,235 5,852,568 5,586,482 52,632 73,853 24,050 5,737,017 Total $ 15,270,886 $ 162,729 $ 168,776 $ 25,767 $ 15,628,158 $ 14,785,998 $ 157,229 $ 154,402 $ 27,693 $ 15,125,322 March 31, 2019 December 31, 2018 (in thousands) Current 30+ Days Past Due Total Current 30+ Days Past Due Total Residential mortgage $ 4,335,779 $ 79,488 $ 4,415,267 $ 4,290,152 $ 69,004 $ 4,359,156 Consumer - home equity 2,184,204 36,444 2,220,648 2,258,659 46,035 2,304,694 Consumer - other 698,074 6,148 704,222 721,231 9,412 730,643 Total $ 7,218,057 $ 122,080 $ 7,340,137 $ 7,270,042 $ 124,451 $ 7,394,493 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. 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 - construction $ 12,138 $ 11,139 $ — $ 10,261 $ 9,262 $ — Real estate - owner-occupied 33,670 27,732 — 25,037 19,044 — Real estate - non-owner-occupied 12,352 11,515 — 15,265 14,288 — Commercial and industrial 52,821 32,380 — 55,554 43,886 — Residential mortgage 1,456 1,456 — 1,244 1,221 — Consumer - home equity 1,783 1,783 — 4,183 4,176 — Consumer - other — — — — — — With an allowance recorded: Real estate - construction 224 134 (11 ) 228 140 (11 ) Real estate - owner-occupied 5,553 5,393 (613 ) 5,032 4,773 (520 ) Real estate - non-owner-occupied 12,113 11,996 (2,454 ) 6,445 6,398 (105 ) Commercial and industrial 36,243 31,509 (10,988 ) 46,387 27,915 (12,646 ) Residential mortgage 6,745 6,223 (258 ) 5,870 5,358 (145 ) Consumer - home equity 30,847 29,861 (2,132 ) 29,284 28,818 (2,427 ) Consumer - other 4,574 4,191 (492 ) 4,956 4,446 (488 ) Total $ 210,519 $ 175,312 $ (16,948 ) $ 209,746 $ 169,725 $ (16,342 ) Total commercial loans and leases $ 165,114 $ 131,798 $ (14,066 ) $ 164,209 $ 125,706 $ (13,282 ) Total residential mortgage loans 8,201 7,679 (258 ) 7,114 6,579 (145 ) Total consumer and other loans 37,204 35,835 (2,624 ) 38,423 37,440 (2,915 ) Three Months Ended March 31, 2019 Three Months Ended March 31, 2018 Average Interest Average Interest (in thousands) With no related allowance recorded: Real estate - construction $ 11,142 $ 169 $ 10,470 $ 144 Real estate - owner-occupied 27,865 301 36,277 334 Real estate - non-owner-occupied 11,566 69 10,557 98 Commercial and industrial 37,185 461 27,832 385 Residential mortgage 1,463 17 1,090 12 Consumer - home equity 1,204 10 32 — With an allowance recorded: Real estate - construction 136 — 153 1 Real estate - owner-occupied 5,433 8 17,608 112 Real estate - non-owner-occupied 12,042 79 3,302 10 Commercial and industrial 28,624 202 44,056 196 Residential mortgage 6,274 59 4,974 44 Consumer - home equity 30,345 292 28,203 292 Consumer - other 4,314 58 5,200 67 Total $ 177,593 $ 1,725 $ 189,754 $ 1,695 Total commercial loans and leases $ 133,993 $ 1,289 $ 150,255 $ 1,280 Total residential mortgage loans 7,737 76 6,064 56 Total consumer and other loans 35,863 360 33,435 359 As of March 31, 2019 and December 31, 2018 , 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 TDR. |