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 was 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 32,190 26,678 Transfer of balance to OREO and other (2,696 ) (5,709 ) Charge-offs (29,971 ) (34,740 ) Recoveries 6,141 9,830 Allowance for loan and lease losses at end of period $ 146,235 $ 136,950 Reserve for unfunded commitments at beginning of period $ 14,830 $ 13,208 Balance created in acquisition accounting — 900 Provision for unfunded lending commitments 1,314 613 Reserve for unfunded commitments at end of period $ 16,144 $ 14,721 Allowance for credit losses at end of period $ 162,379 $ 151,671 A summary of changes in the allowance for credit losses, by loan portfolio type, for the nine months ended September 30 was 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 9,205 15,819 (152 ) 7,318 32,190 Transfer of balance to OREO and other (309 ) 236 (2,879 ) 256 (2,696 ) Charge-offs (2,179 ) (17,799 ) (219 ) (9,774 ) (29,971 ) Recoveries 474 3,163 169 2,335 6,141 Allowance for loan and lease losses at end of period $ 58,997 $ 55,515 $ 9,917 $ 21,806 $ 146,235 Reserve for unfunded commitments at beginning of period $ 4,869 $ 6,198 $ 866 $ 2,897 $ 14,830 Provision for (Reversal of) unfunded commitments 357 493 (216 ) 680 1,314 Reserve for unfunded commitments at end of period $ 5,226 $ 6,691 $ 650 $ 3,577 $ 16,144 Allowance on loans individually evaluated for impairment $ 2,721 $ 7,974 $ 281 $ 3,039 $ 14,015 Allowance on loans collectively evaluated for impairment 50,809 45,990 5,393 18,630 120,822 Allowance on loans acquired with deteriorated credit quality 5,467 1,551 4,243 137 11,398 Loans and leases, net of unearned income: Balance at end of period $ 9,809,756 $ 6,490,125 $ 4,649,745 $ 2,726,911 $ 23,676,537 Balance at end of period individually evaluated for impairment 73,715 51,350 42,423 37,907 205,395 Balance at end of period collectively evaluated for impairment 9,605,296 6,417,426 4,526,508 2,636,015 23,185,245 Balance at end of period acquired with deteriorated credit quality 130,745 21,349 80,814 52,989 285,897 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 (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 Portfolio Segment Risk Factors Commercial real estate loans include loans to commercial customers for medium-term financing of land and buildings or for land development or construction of a building. These loans are repaid from revenues through 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 and industrial 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 September 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. September 30, 2019 December 31, 2018 (in thousands) Pass Special Mention Sub- Doubtful Loss Total Pass Special Mention Sub- Doubtful Total Real estate - construction $ 1,300,847 $ 19,631 $ 9,536 $ — $ — $ 1,330,014 $ 1,182,554 $ 1,062 $ 12,740 $ 10 $ 1,196,366 Real estate - owner-occupied 2,409,221 19,786 38,214 840 — 2,468,061 2,328,999 25,526 41,297 — 2,395,822 Real estate - non-owner-occupied 5,926,537 47,494 37,193 447 10 6,011,681 5,687,963 78,009 26,512 3,633 5,796,117 Commercial and industrial 6,340,738 71,431 63,303 14,653 — 6,490,125 5,586,482 52,632 73,853 24,050 5,737,017 Total $ 15,977,343 $ 158,342 $ 148,246 $ 15,940 $ 10 $ 16,299,881 $ 14,785,998 $ 157,229 $ 154,402 $ 27,693 $ 15,125,322 September 30, 2019 December 31, 2018 (in thousands) Current 30+ Days Past Due Total Current 30+ Days Past Due Total Residential mortgage $ 4,567,633 $ 82,112 $ 4,649,745 $ 4,290,152 $ 69,004 $ 4,359,156 Consumer - home equity 2,011,913 41,675 2,053,588 2,258,659 46,035 2,304,694 Consumer - other 665,702 7,621 673,323 721,231 9,412 730,643 Total $ 7,245,248 $ 131,408 $ 7,376,656 $ 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. 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 - construction $ 9,540 $ 8,531 $ — $ 10,261 $ 9,262 $ — Real estate - owner-occupied 33,985 33,590 — 25,037 19,044 — Real estate - non-owner-occupied 23,964 22,652 — 15,265 14,288 — Commercial and industrial 21,813 17,771 — 55,554 43,886 — Residential mortgage 36,182 35,089 — 1,244 1,221 — Consumer - home equity 4,736 4,734 — 4,183 4,176 — With an allowance recorded: Real estate - construction 98 85 (1 ) 228 140 (11 ) Real estate - owner-occupied 5,135 4,921 (2,529 ) 5,032 4,773 (520 ) Real estate - non-owner-occupied 4,149 3,936 (191 ) 6,445 6,398 (105 ) Commercial and industrial 45,409 33,579 (7,974 ) 46,387 27,915 (12,646 ) Residential mortgage 8,010 7,334 (281 ) 5,870 5,358 (145 ) Consumer - home equity 29,773 29,124 (2,577 ) 29,284 28,818 (2,427 ) Consumer - other 4,308 4,049 (462 ) 4,956 4,446 (488 ) Total $ 227,102 $ 205,395 $ (14,015 ) $ 209,746 $ 169,725 $ (16,342 ) Total commercial loans and leases $ 144,093 $ 125,065 $ (10,695 ) $ 164,209 $ 125,706 $ (13,282 ) Total residential mortgage loans 44,192 42,423 (281 ) 7,114 6,579 (145 ) Total consumer and other loans 38,817 37,907 (3,039 ) 38,423 37,440 (2,915 ) Three Months Ended September 30, 2019 Three Months Ended September 30, 2018 Nine Months Ended September 30, 2019 Nine Months Ended September 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 $ 7,333 $ 82 $ 10,806 $ 164 $ 7,145 $ 242 $ 10,371 $ 460 Real estate - owner-occupied 33,895 355 34,118 209 34,437 1,235 34,505 903 Real estate - non-owner-occupied 22,794 72 22,091 249 22,910 301 22,988 746 Commercial and industrial 20,594 108 43,409 523 20,727 401 40,564 1,543 Residential mortgage 35,896 136 1,254 9 31,315 391 1,271 36 Consumer - home equity 4,736 47 705 2 4,613 137 708 16 With an allowance recorded: Real estate - construction 87 — 148 — 93 — 151 1 Real estate - owner-occupied 4,952 10 4,006 83 5,050 113 4,044 102 Real estate - non-owner-occupied 4,155 46 2,398 20 4,090 137 2,442 76 Commercial and industrial 36,824 173 40,357 150 36,765 582 47,098 720 Residential mortgage 7,414 74 5,014 50 7,502 232 5,066 149 Consumer - home equity 29,200 298 28,577 305 28,982 890 27,905 892 Consumer - other 4,175 59 4,710 65 4,326 184 4,884 208 Total $ 212,055 $ 1,460 $ 197,593 $ 1,829 $ 207,955 $ 4,845 $ 201,997 $ 5,852 Total commercial loans and leases $ 130,634 $ 846 $ 157,333 $ 1,398 $ 131,217 $ 3,011 $ 162,163 $ 4,551 Total residential mortgage loans 43,310 210 6,268 59 38,817 623 6,337 185 Total consumer and other loans 38,111 404 33,992 372 37,921 1,211 33,497 1,116 As of September 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. |