2. Loans and Allowance for Loan Losses

Major classifications within the Company's held to maturity loan portfolio at June 30, 2011 and December 31, 2010 are as follows:


	June 30		December 31
(In thousands)	2011		2010

Commercial:
Business	$	2,921,556	$	2,957,043
Real estate – construction and land		433,464		460,853
Real estate – business		2,097,691		2,065,837
Personal Banking:
Real estate – personal		1,438,030		1,440,386
Consumer		1,108,909		1,164,327
Revolving home equity		467,391		477,518
Consumer credit card		764,844		831,035
Overdrafts		5,193		13,983

Total loans	$	9,237,078	$	9,410,982

At June 30, 2011, loans of $3.0 billion were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits. Additional loans of $1.2 billion were pledged at the Federal Reserve Bank as collateral for discount window borrowings.

Allowance for loan losses

A summary of the activity in the allowance for loan losses during the three and six months ended June 30, 2011 follows:


	For the Three Months						For the Six Months
	Ended June 30						Ended June 30
			Personal						Personal
(In thousands)	Commercial		Banking		Total		Commercial		Banking		Total

Balance at beginning of period	$	128,351	$	66,187	$	194,538	$	119,946	$	77,592	$	197,538
Provision		1,815		10,373		12,188		15,280		12,697		27,977
Deductions:
Loans charged off		3,946		15,656		19,602		10,310		32,681		42,991
Less recoveries on loans		1,043		3,371		4,414		2,347		6,667		9,014

Net loans charged off		2,903		12,285		15,188		7,963		26,014		33,977

Balance at June 30, 2011	$	127,263	$	64,275	$	191,538	$	127,263	$	64,275	$	191,538

A summary of the activity in the allowance for loan losses during the three and six months ended June 30, 2010 follows:


	For the Three Months		For the Six Months
(In thousands)	Ended June 30		Ended June 30

Balance at beginning of period	$	197,538	$	194,480
Provision for loan losses		22,187		56,509
Deductions:
Loans charged off		26,818		62,338
Less recoveries on loans		4,631		8,887

Net loans charged off		22,187		53,451

Balance at June 30, 2010	$	197,538	$	197,538

The following table shows the balance in the allowance for loan losses and the related loan balance at June 30, 2011 and December 31, 2010, disaggregated on the basis of impairment methodology. Impaired loans evaluated under ASC 310-10-35 include loans on non-accrual status which are individually evaluated for impairment, and other impaired loans deemed to have similar risk characteristics, which are collectively evaluated. All other loans are collectively evaluated for impairment under ASC 450-20.

Personal

(In thousands)

Commercial

Banking

Total

June 30, 2011

Allowance for loan losses:

Impaired loans

6,862

3,599

10,461

All other loans

120,401

60,676

181,077

Loans outstanding:

Impaired loans

119,133

30,464

149,597

All other loans

5,333,578

3,753,903

9,087,481

December 31, 2010

Allowance for loan losses:

Impaired loans

6,127

3,243

9,370

All other loans

113,819

74,349

188,168

Loans outstanding:

Impaired loans

118,532

26,828

145,360

All other loans

5,365,201

3,900,421

9,265,622

Impaired loans

The table below shows the Company's investment in impaired loans at June 30, 2011 and December 31, 2010. These loans consist of loans on non-accrual status and other restructured loans whose terms have been modified and classified as troubled debt restructurings under ASC 310-40. The restructured loans have been extended to borrowers who are experiencing financial difficulty and who have been granted a concession. They are largely comprised of certain business, construction and business real estate loans classified as substandard. Upon maturity, the loans renewed at interest rates judged not to be market rates for new debt with similar risk, and as a result were classified as troubled debt restructurings. These loans totaled $48.5 million and $41.3 million at June 30, 2011 and December 31, 2010, respectively. These restructured loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. Troubled debt restructurings also include certain credit card loans under various debt management and assistance programs, which totaled $21.4 million at June 30, 2011 and $18.8 million at December 31, 2010.


	June 30	December 31
(In thousands)	2011	2010

Non-accrual loans	$79,717	$	85,275
Restructured loans	69,880		60,085

Total impaired loans	$149,597	$	145,360

The Company had commitments of $11.4 million at June 30, 2011 to lend additional funds to borrowers with impaired loans, of which $2.5 million relate to restructured loans.

The following table provides additional information about impaired loans held by the Company at June 30, 2011 and December 31, 2010, segregated between loans for which an allowance for credit losses has been provided and loans for which no allowance has been provided.


			Unpaid				Interest Income Recognized *
	Recorded		Principal		Related		For the Period Ended June 30, 2011
(In thousands)	Investment		Balance		Allowance		Three Months		Six Months

June 30, 2011
With no related allowance recorded:
Business	$	12,315	$	14,189	$	—	$	—	$	—
Real estate – construction and land		21,943		49,812		—		—		—
Real estate – business		6,876		9,009		—		—		—
Real estate – personal		757		757		—		—		—

	$	41,891	$	73,767	$	—	$	—	$	—

With an allowance recorded:
Business	$	24,961	$	28,128	$	2,192	$	85	$	170
Real estate – construction and land		25,576		30,928		2,097		186		373
Real estate – business		27,462		31,126		2,573		204		407
Real estate – personal		8,311		10,555		1,019		7		14
Consumer credit card		21,396		21,396		2,580		447		894

	$	107,706	$	122,133	$	10,461	$	929	$	1,858

Total	$	149,597	$	195,900	$	10,461	$	929	$	1,858

December 31, 2010
With no related allowance recorded:
Business	$	3,544	$	5,095	$	—
Real estate – construction and land		30,979		55,790		—
Real estate – business		4,245		5,295		—
Real estate – personal		755		755		—

	$	39,523	$	66,935	$	—

With an allowance recorded:
Business	$	18,464	$	21,106	$	1,665
Real estate – construction and land		39,719		52,587		2,538
Real estate – business		21,581		25,713		1,924
Real estate – personal		7,294		9,489		936

Consumer credit card		18,779		18,779		2,307

	$	105,837	$	127,674	$	9,370

Total	$	145,360	$	194,609	$	9,370


*		Represents interest income recognized on impaired loans held at June 30, 2011. Interest shown is interest recognized on accruing restructured loans as noted above.

Total average impaired loans, shown in the table below, were $143.9 million and $144.8 million, respectively, during the three and six month periods ended June 30, 2011, compared to total average impaired loans of $173.0 million during the entire year ended December 31, 2010.


			Personal
(In thousands)	Commercial		Banking		Total

Average impaired loans:
For the three months ended June 30, 2011:
Non-accrual loans	$	69,104	$	7,063	$	76,167
Restructured loans		46,037		21,679		67,716

Total	$	115,141	$	28,742	$	143,883

For the six months ended June 30, 2011:
Non-accrual loans	$	72,186	$	7,045	$	79,231
Restructured loans		44,495		21,107		65,602

Total	$	116,681	$	28,152	$	144,833

Delinquent and non-accrual loans

The following table provides aging information on the Company's past due and accruing loans, in addition to the balances of loans on non-accrual status, at June 30, 2011 and December 31, 2010.


	Current or Less
	Than 30 Days Past		30 - 89		90 Days Past Due
(In thousands)	Due		Days Past Due		and Still Accruing		Non-accrual		Total

June 30, 2011
Commercial:
Business	$	2,884,367	$	10,404	$	755	$	26,030	$	2,921,556
Real estate – construction and land		399,555		4,329		871		28,709		433,464
Real estate – business		2,058,387		15,960		6,564		16,780		2,097,691
Personal Banking:
Real estate – personal		1,414,558		10,713		4,561		8,198		1,438,030
Consumer		1,094,631		12,790		1,488		—		1,108,909
Revolving home equity		465,795		836		760		—		467,391
Consumer credit card		746,505		9,740		8,599		—		764,844
Overdrafts		4,809		384		—		—		5,193

Total	$	9,068,607	$	65,156	$	23,598	$	79,717	$	9,237,078

December 31, 2010
Commercial:
Business	$	2,927,403	$	19,853	$	854	$	8,933	$	2,957,043
Real estate – construction and land		400,420		7,464		217		52,752		460,853
Real estate – business		2,040,794		8,801		—		16,242		2,065,837
Personal Banking:
Real estate – personal		1,413,905		15,579		3,554		7,348		1,440,386
Consumer		1,145,561		15,899		2,867		—		1,164,327
Revolving home equity		475,764		929		825		—		477,518
Consumer credit card		806,373		12,513		12,149		—		831,035
Overdrafts		13,555		428		—		—		13,983

Total	$	9,223,775	$	81,466	$	20,466	$	85,275	$	9,410,982

Credit quality

The following table provides information about the credit quality of the Commercial loan portfolio, using the Company's internal rating system as an indicator. The information below was updated as of June 30, 2011 and December 31, 2010 for this indicator. The credit quality of Personal Banking loans is monitored on the basis of aging/delinquency, and this information is provided in the table above.

The internal rating system is a series of grades reflecting management's risk assessment, based on its analysis of the borrower's financial condition. The "pass" category consists of a range of loan grades that reflect increasing, though still acceptable, risk. Movement of risk through the various grade levels in the "pass" category is monitored for early identification of credit deterioration. The "special mention" rating is attached to loans where the borrower exhibits material negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten its capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. It is a transitional grade that is closely monitored for improvement or deterioration. The "substandard" rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on "non-accrual" when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment.


			Commercial Loans		Real
			Real		Estate-
(In thousands)	Business		Estate-Construction		Business		Total

June 30, 2011
Pass	$	2,768,123	$	334,465	$	1,904,087	$	5,006,675
Special mention		50,266		9,751		50,274		110,291
Substandard		77,137		60,539		126,550		264,226
Non-accrual		26,030		28,709		16,780		71,519

Total	$	2,921,556	$	433,464	$	2,097,691	$	5,452,711

December 31, 2010
Pass	$	2,801,328	$	327,167	$	1,878,005	$	5,006,500
Special mention		67,142		29,345		77,527		174,014
Substandard		79,640		51,589		94,063		225,292
Non-accrual		8,933		52,752		16,242		77,927

Total	$	2,957,043	$	460,853	$	2,065,837	$	5,483,733

The Company's holdings of foreclosed real estate totaled $23.6 million and $12.0 million at June 30, 2011 and December 31, 2010, respectively. Personal property acquired in repossession, generally autos and marine and recreational vehicles, totaled $4.5 million and $10.4 million at June 30, 2011 and December 31, 2010, respectively. These assets are carried at the lower of the amount recorded at acquisition date or the current fair value less estimated costs to sell.

Loans held for sale

In addition to the portfolio of loans which are intended to be held to maturity, the Company originates loans which it intends to sell in secondary markets. Loans classified as held for sale primarily consist of loans originated to students while attending colleges and universities. Most of this portfolio was sold in 2010 under contracts with the Federal Department of Education and various student loan agencies. Significant future student loan originations are not anticipated, because under statutory requirements effective July 1, 2010, the Company is prohibited from making federally guaranteed student loans. Also included as held for sale are certain fixed rate residential mortgage loans which are sold in the secondary market, generally within three months of origination. The following table presents information about loans held for sale, including an impairment valuation allowance resulting from declines in fair value below cost, which is further discussed in Note 13 on Fair Value Measurements.


	June 30			December 31
(In thousands)	2011			2010

Balance outstanding:
Student loans, at cost	$	38,079		$	53,901
Residential mortgage loans, at cost		4,459			10,419
Valuation allowance on student loans		(179	)		(569	)

Total loans held for sale, at lower of cost or fair value	$	42,359		$	63,751


	For the Six Months
	Ended June 30
(In thousands)	2011		2010

Net gains on sales:
Student loans	$	386	$	1,689
Residential mortgage loans		761		777

Total gains on sales of loans held for sale, net	$	1,147	$	2,466