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 six months ended June 30 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 24,067 15,581 Transfer of balance to OREO and other (2,863 ) (3,943 ) Charge-offs (19,194 ) (22,734 ) Recoveries 3,805 6,781 Allowance for loan and lease losses at end of period $ 146,386 $ 136,576 Reserve for unfunded commitments at beginning of period $ 14,830 $ 13,208 Balance created in acquisition accounting — 900 Provision for unfunded lending commitments 451 325 Reserve for unfunded commitments at end of period $ 15,281 $ 14,433 Allowance for credit losses at end of period $ 161,667 $ 151,009 A summary of changes in the allowance for credit losses, by loan portfolio type, for the six months ended June 30 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 (Reversal of) loan and lease losses 15,204 5,077 (584 ) 4,370 24,067 Transfer of balance to OREO and other (256 ) (1 ) (2,862 ) 256 (2,863 ) Charge-offs (641 ) (11,880 ) (168 ) (6,505 ) (19,194 ) Recoveries 318 1,796 157 1,534 3,805 Allowance for loan and lease losses at end of period $ 66,431 $ 49,088 $ 9,541 $ 21,326 $ 146,386 Reserve for unfunded commitments at beginning of period $ 4,869 $ 6,198 $ 866 $ 2,897 $ 14,830 Provision for (Reversal of) unfunded commitments 603 (313 ) (206 ) 367 451 Reserve for unfunded commitments at end of period $ 5,472 $ 5,885 $ 660 $ 3,264 $ 15,281 Allowance on loans individually evaluated for impairment $ 4,673 $ 7,656 $ 349 $ 3,176 $ 15,854 Allowance on loans collectively evaluated for impairment 56,251 39,854 5,127 18,008 119,240 Allowance on loans acquired with deteriorated credit quality 5,507 1,578 4,065 142 11,292 Loans and leases, net of unearned income: Balance at end of period $ 9,818,270 $ 6,161,759 $ 4,538,194 $ 2,837,088 $ 23,355,311 Balance at end of period individually evaluated for impairment 74,331 54,860 41,363 39,127 209,681 Balance at end of period collectively evaluated for impairment 9,596,594 6,084,342 4,414,038 2,742,354 22,837,328 Balance at end of period acquired with deteriorated credit quality 147,345 22,557 82,793 55,607 308,302 2018 (in thousands) Commercial Real Estate Commercial and Industrial Residential Mortgage Consumer and Other 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 (3,404 ) 10,083 1,112 7,790 15,581 Transfer of balance to OREO and other (506 ) (18 ) 6 (3,425 ) (3,943 ) Charge-offs (1,258 ) (13,575 ) (196 ) (7,705 ) (22,734 ) Recoveries 384 4,403 44 1,950 6,781 Allowance for loan and lease losses at end of period $ 49,417 $ 54,809 $ 10,083 $ 22,267 $ 136,576 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 467 (306 ) 160 4 325 Reserve for unfunded commitments at end of period $ 5,127 $ 5,084 $ 715 $ 3,507 $ 14,433 Allowance on loans individually evaluated for impairment $ 2,274 $ 11,946 $ 168 $ 3,199 $ 17,587 Allowance on loans collectively evaluated for impairment 40,763 40,540 3,816 18,742 103,861 Allowance on loans acquired with deteriorated credit quality 6,380 2,323 6,099 326 15,128 Loans and leases, net of unearned income: Balance at end of period $ 9,292,304 $ 5,512,416 $ 4,124,538 $ 3,146,525 $ 22,075,783 Balance at end of period individually evaluated for impairment 84,217 66,683 5,873 35,550 192,323 Balance at end of period collectively evaluated for impairment 9,017,756 5,415,093 3,984,086 3,029,027 21,445,962 Balance at end of period acquired with deteriorated credit quality 190,331 30,640 134,579 81,948 437,498 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 commercial 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 commercial 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 June 30, 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. June 30, 2019 December 31, 2018 (in thousands) Pass Special Mention Sub- Doubtful Total Pass Special Mention Sub- Doubtful Total Real estate - construction $ 1,320,007 $ 12,262 $ 10,715 $ — $ 1,342,984 $ 1,182,554 $ 1,062 $ 12,740 $ 10 $ 1,196,366 Real estate - owner-occupied 2,308,176 25,114 37,126 2,727 2,373,143 2,328,999 25,526 41,297 — 2,395,822 Real estate - non-owner-occupied 6,011,800 48,323 39,832 2,188 6,102,143 5,687,963 78,009 26,512 3,633 5,796,117 Commercial and industrial 6,018,866 53,075 73,667 16,151 6,161,759 5,586,482 52,632 73,853 24,050 5,737,017 Total $ 15,658,849 $ 138,774 $ 161,340 $ 21,066 $ 15,980,029 $ 14,785,998 $ 157,229 $ 154,402 $ 27,693 $ 15,125,322 June 30, 2019 December 31, 2018 (in thousands) Current 30+ Days Past Due Total Current 30+ Days Past Due Total Residential mortgage $ 4,459,706 $ 78,488 $ 4,538,194 $ 4,290,152 $ 69,004 $ 4,359,156 Consumer - home equity 2,113,237 34,660 2,147,897 2,258,659 46,035 2,304,694 Consumer - other 682,860 6,331 689,191 721,231 9,412 730,643 Total $ 7,255,803 $ 119,479 $ 7,375,282 $ 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. June 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 - construction $ 12,138 $ 11,139 $ — $ 10,261 $ 9,262 $ — Real estate - owner-occupied 27,142 27,064 — 25,037 19,044 — Real estate - non-owner-occupied 21,234 20,271 — 15,265 14,288 — Commercial and industrial 33,989 30,157 — 55,554 43,886 — Residential mortgage 32,448 31,645 — 1,244 1,221 — Consumer - home equity 1,995 1,998 — 4,183 4,176 — Consumer - other — — — — — — With an allowance recorded: Real estate - construction 140 127 (2 ) 228 140 (11 ) Real estate - owner-occupied 8,811 8,248 (4,061 ) 5,032 4,773 (520 ) Real estate - non-owner-occupied 7,683 7,482 (610 ) 6,445 6,398 (105 ) Commercial and industrial 37,969 24,703 (7,656 ) 46,387 27,915 (12,646 ) Residential mortgage 10,366 9,718 (349 ) 5,870 5,358 (145 ) Consumer - home equity 33,194 32,702 (2,662 ) 29,284 28,818 (2,427 ) Consumer - other 4,743 4,427 (514 ) 4,956 4,446 (488 ) Total $ 231,852 $ 209,681 $ (15,854 ) $ 209,746 $ 169,725 $ (16,342 ) Total commercial loans and leases $ 149,106 $ 129,191 $ (12,329 ) $ 164,209 $ 125,706 $ (13,282 ) Total residential mortgage loans 42,814 41,363 (349 ) 7,114 6,579 (145 ) Total consumer and other loans 39,932 39,127 (3,176 ) 38,423 37,440 (2,915 ) Three Months Ended June 30, 2019 Three Months Ended June 30, 2018 Six Months Ended June 30, 2019 Six Months Ended June 30, 2018 Average Interest Average Interest Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized (in thousands) With no related allowance recorded: Real estate - construction $ 21,339 $ 341 $ 12,952 $ 198 $ 21,340 $ 678 $ 12,597 $ 393 Real estate - owner-occupied 24,134 326 30,899 209 27,314 569 31,265 609 Real estate - non-owner-occupied 20,305 100 15,929 121 20,360 207 16,558 250 Commercial and industrial 29,315 151 37,859 389 29,816 331 37,806 836 Residential mortgage 27,129 235 1,272 13 18,804 374 1,280 27 Consumer - home equity 1,998 22 1,910 28 1,943 44 1,922 52 With an allowance recorded: Real estate - construction 131 1 152 — 135 2 152 — Real estate - owner-occupied 8,578 57 19,582 82 8,628 116 19,696 192 Real estate - non-owner-occupied 7,557 42 1,631 14 7,643 122 1,705 39 Commercial and industrial 23,891 177 38,134 158 21,400 371 38,981 357 Residential mortgage 9,833 73 4,657 47 9,881 169 4,678 92 Consumer - home equity 32,885 332 28,595 304 32,341 656 28,173 600 Consumer - other 4,533 63 5,220 67 4,597 128 5,267 139 Total $ 211,628 $ 1,920 $ 198,792 $ 1,630 $ 204,202 $ 3,767 $ 200,080 $ 3,586 Total commercial loans and leases $ 135,250 $ 1,195 $ 157,138 $ 1,171 $ 136,636 $ 2,396 $ 158,760 $ 2,676 Total residential mortgage loans 36,962 308 5,929 60 28,685 543 5,958 119 Total consumer and other loans 39,416 417 35,725 399 38,881 828 35,362 791 As of June 30, 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. |