Loans and leases and the allowance for credit losses

3 Months Ended

Mar. 31, 2023

Loans and leases and the allowance for credit losses

4. Loans and leases and the allowance for credit losses

A summary of current, past due and nonaccrual loans as of March 31, 2023 and December 31, 2022 follows:


	Current		30-89 Days Past Due		Accruing Loans Past Due 90 Days or More		Nonaccrual		Total
	(In thousands)
March 31, 2023
Commercial, financial, leasing, etc.	$	42,825,221	$	489,322	$	61,550	$	382,268	$	43,758,361
Real estate:
Commercial		35,250,019		399,114		37,137		1,516,655		37,202,925
Residential builder and developer		1,126,693		111,894		—		3,303		1,241,890
Other commercial construction		6,231,642		242,226		10,843		143,015		6,627,726
Residential		21,726,963		496,225		292,950		253,646		22,769,784
Residential — limited documentation		925,180		26,046		—		68,935		1,020,161
Consumer:
Home equity lines and loans		4,751,822		26,679		—		80,766		4,859,267
Recreational finance		9,066,587		48,448		—		34,186		9,149,221
Automobile		4,249,035		35,270		—		26,842		4,311,147
Other		1,928,364		16,686		4,977		47,183		1,997,210
Total	$	128,081,526	$	1,891,910	$	407,457	$	2,556,799	$	132,937,692

December 31, 2022
Commercial, financial, leasing, etc.	$	40,982,398	$	448,462	$	72,502	$	347,204	$	41,850,566
Real estate:
Commercial		34,972,627		311,188		67,696		1,396,662		36,748,173
Residential builder and developer		1,304,798		8,703		—		1,229		1,314,730
Other commercial construction		6,936,661		239,521		549		124,937		7,301,668
Residential		21,491,506		595,897		345,402		272,090		22,704,895
Residential — limited documentation		950,782		22,456		—		77,814		1,051,052
Consumer:
Home equity lines and loans		4,891,311		30,787		—		84,788		5,006,886
Recreational finance		8,974,171		54,593		—		44,630		9,073,394
Automobile		4,393,206		44,486		—		39,584		4,477,276
Other		1,958,196		22,961		4,869		49,497		2,035,523
Total	$	126,855,656	$	1,779,054	$	491,018	$	2,438,435	$	131,564,163

4. Loans and leases and the allowance for credit losses, continued

One-to-four family residential mortgage loans held for sale were $152 million and $32 million at March 31, 2023 and December 31, 2022, respectively. Commercial real estate loans held for sale were $321 million at March 31, 2023 and $131 million at December 31, 2022.

Credit quality indicators

The Company utilizes a loan grading system to differentiate risk amongst its commercial loans and commercial real estate loans. Loans with a lower expectation of default are assigned one of ten possible “pass” loan grades and are generally ascribed lower loss factors when determining the allowance for credit losses. Loans with an elevated level of credit risk are classified as “criticized” and are ascribed a higher loss factor when determining the allowance for credit losses. Criticized loans may be classified as “nonaccrual” if the Company no longer expects to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more.

Line of business personnel in different geographic locations with support from and review by the Company’s credit risk personnel review and reassign loan grades based on their detailed knowledge of individual borrowers and their judgment of the impact on such borrowers resulting from changing conditions in their respective regions. Factors considered in assigning loan grades include borrower-specific information related to expected future cash flows and operating results, collateral values, geographic location, financial condition and performance, payment status, and other information. The Company’s policy is that at least annually, updated financial information be obtained from commercial borrowers associated with pass grade loans and additional analysis performed. On a quarterly basis, the Company’s credit personnel review all criticized commercial loans and commercial real estate loans greater than $1 million to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or nonaccruing.

4. Loans and leases and the allowance for credit losses, continued

The following table summarizes the loan grades applied at March 31, 2023 to the various classes of the Company’s commercial loans and commercial real estate loans and gross charge-offs for those types of loans for the three months ended March 31, 2023 by origination year.


	Term Loans by Origination Year												Revolving		Revolving Loans Converted to Term
	2023		2022		2021		2020		2019		Prior		Loans		Loans		Total
	(In thousands)
Commercial, financial, leasing, etc.:
Loan grades:
Pass	$	2,250,004		8,170,214		4,708,911		1,809,434		1,606,622		2,562,970		20,254,352		42,666	$	41,405,173
Criticized accrual		42,754		280,361		271,872		190,293		134,573		305,353		726,296		19,418		1,970,920
Criticized nonaccrual		258		24,490		44,960		32,392		27,903		92,676		152,114		7,475		382,268
Total commercial, financial, leasing, etc.	$	2,293,016		8,475,065		5,025,743		2,032,119		1,769,098		2,960,999		21,132,762		69,559	$	43,758,361
Gross charge-offs	$	107		4,104		3,405		2,753		2,303		5,557		773		—	$	19,002

Real estate:
Commercial:
Loan grades:
Pass	$	1,325,649		3,942,090		3,262,243		3,261,936		4,618,336		13,821,937		765,232		—	$	30,997,423
Criticized accrual		2,491		385,474		463,714		344,587		800,868		2,662,161		29,552		—		4,688,847
Criticized nonaccrual		—		27,340		26,015		260,829		247,845		932,736		21,890		—		1,516,655
Total commercial real estate	$	1,328,140		4,354,904		3,751,972		3,867,352		5,667,049		17,416,834		816,674		—	$	37,202,925
Gross charge-offs	$	—		—		—		—		26,390		2,478		—		—	$	28,868

Residential builder and developer:
Loan grades:
Pass	$	83,843		602,093		175,624		11,345		18,198		14,911		120,680		—	$	1,026,694
Criticized accrual		987		8,381		25,225		4,161		113,186		30,928		29,025		—		211,893
Criticized nonaccrual		—		1		720		—		518		2,064		—		—		3,303
Total residential builder and developer	$	84,830		610,475		201,569		15,506		131,902		47,903		149,705		—	$	1,241,890
Gross charge-offs	$	—		—		—		—		—		11		1,506		—	$	1,517

Other commercial construction:
Loan grades:
Pass	$	155,587		1,193,762		1,064,242		1,125,568		873,449		370,721		28,802		—	$	4,812,131
Criticized accrual		196		26,116		124,624		325,712		796,275		399,657		—		—		1,672,580
Criticized nonaccrual		—		—		9,976		43,194		61,154		26,265		2,426		—		143,015
Total other commercial construction	$	155,783		1,219,878		1,198,842		1,494,474		1,730,878		796,643		31,228		—	$	6,627,726
Gross charge-offs	$	—		—		—		—		—		—		—		—	$	—

4. Loans and leases and the allowance for credit losses, continued

The Company considers repayment performance a significant indicator of credit quality for its residential real estate loan and consumer loan portfolios. A summary of loans in accrual and nonaccrual status at March 31, 2023 for the various classes of the Company’s residential real estate loans and consumer loans and gross charge-offs for those types of loans for the three months ended March 31, 2023 by origination year follows.


	Term Loans by Origination Year												Revolving		Revolving Loans Converted to Term
	2023		2022		2021		2020		2019		Prior		Loans		Loans		Total
	(In thousands)
Residential:
Current	$	497,138		5,056,599		3,968,015		2,722,670		1,360,032		8,098,258		24,251		—	$	21,726,963
30-89 days past due		1,408		55,995		50,487		25,710		19,711		340,852		2,062		—		496,225
Accruing loans past due 90 days or more		—		14,957		28,430		17,231		11,726		220,606		—		—		292,950
Nonaccrual		—		7,087		12,270		2,528		8,859		216,014		6,888		—		253,646
Total residential	$	498,546		5,134,638		4,059,202		2,768,139		1,400,328		8,875,730		33,201		—	$	22,769,784
Gross charge-offs	$	—		75		115		21		68		1,286		—		—	$	1,565

Residential - limited documentation:
Current	$	—		—		—		—		—		925,180		—		—	$	925,180
30-89 days past due		—		—		—		—		—		26,046		—		—		26,046
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		68,935		—		—		68,935
Total residential - limited documentation	$	—		—		—		—		—		1,020,161		—		—	$	1,020,161
Gross charge-offs	$	—		—		—		—		—		136		—		—	$	136

Consumer:
Home equity lines and loans:
Current	$	172		33		2,007		2,265		15,068		113,605		3,138,593		1,480,079	$	4,751,822
30-89 days past due		—		—		10		55		26		1,563		—		25,025		26,679
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		15		—		65		8,110		1,880		70,696		80,766
Total home equity lines and loans	$	172		33		2,032		2,320		15,159		123,278		3,140,473		1,575,800	$	4,859,267
Gross charge-offs	$	—		—		—		—		—		31		1,298		704	$	2,033

Recreational finance:
Current	$	521,520		2,711,445		2,171,200		1,511,470		918,584		1,232,368		—		—	$	9,066,587
30-89 days past due		280		8,378		9,892		9,833		7,475		12,590		—		—		48,448
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		—		2,875		6,473		7,112		5,256		12,470		—		—		34,186
Total recreational finance	$	521,800		2,722,698		2,187,565		1,528,415		931,315		1,257,428		—		—	$	9,149,221
Gross charge-offs	$	—		2,369		3,013		2,985		2,412		4,042		—		—	$	14,821

Automobile:
Current	$	253,110		1,414,115		1,419,830		625,620		328,506		207,854		—		—	$	4,249,035
30-89 days past due		397		6,688		10,828		5,844		5,330		6,183		—		—		35,270
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		—		2,669		8,430		4,674		4,445		6,624		—		—		26,842
Total automobile	$	253,507		1,423,472		1,439,088		636,138		338,281		220,661		—		—	$	4,311,147
Gross charge-offs	$	—		1,636		2,068		1,169		957		881		—		—	$	6,711

Other:
Current		72,524		246,430		156,659		51,040		31,557		26,567		1,337,730		5,857		1,928,364
30-89 days past due	$	2,119		1,617		1,336		198		272		555		10,045		544	$	16,686
Accruing loans past due 90 days or more		—		—		—		—		—		198		4,779		—		4,977
Nonaccrual		1,711		588		535		195		149		258		43,631		116		47,183
Total other	$	76,354		248,635		158,530		51,433		31,978		27,578		1,396,185		6,517	$	1,997,210
Gross charge-offs	$	912		8,657		2,735		1,395		1,581		4,986		20		—	$	20,286

Total loans and leases at March 31, 2023	$	5,212,148		24,189,798		18,024,543		12,395,896		12,015,988		32,747,215		26,700,228		1,651,876	$	132,937,692
Total gross charge-offs for the three months ended March 31, 2023	$	1,019		16,841		11,336		8,323		33,711		19,408		3,597		704	$	94,939

4. Loans and leases and the allowance for credit losses, continued

The following table summarizes the loan grades applied at December 31, 2022 to the various classes of the Company’s commercial loans and commercial real estate loans by origination year.


	Term Loans by Origination Year												Revolving		Revolving Loans Converted to Term
	2022		2021		2020		2019		2018		Prior		Loans		Loans		Total
	(In thousands)
Commercial, financial, leasing, etc.:
Loan grades:
Pass	$	8,575,130		4,952,758		2,024,603		1,796,047		817,569		1,970,947		19,444,247		40,471	$	39,621,772
Criticized accrual		247,626		222,861		190,368		116,881		71,485		246,846		768,497		17,026		1,881,590
Criticized nonaccrual		18,379		52,067		37,608		36,241		35,689		59,146		100,972		7,102		347,204
Total commercial, financial, leasing, etc.	$	8,841,135		5,227,686		2,252,579		1,949,169		924,743		2,276,939		20,313,716		64,599	$	41,850,566

Real estate:
Commercial:
Loan grades:
Pass	$	4,136,890		3,379,900		3,388,590		4,557,065		3,293,380		10,905,956		869,981		—	$	30,531,762
Criticized accrual		324,652		463,484		467,557		688,239		937,421		1,890,297		48,099		—		4,819,749
Criticized nonaccrual		11,541		22,459		183,986		297,106		170,382		688,079		23,109		—		1,396,662
Total commercial real estate	$	4,473,083		3,865,843		4,040,133		5,542,410		4,401,183		13,484,332		941,189		—	$	36,748,173

Residential builder and developer:
Loan grades:
Pass	$	680,705		230,079		11,280		22,111		12,812		9,865		150,404		—	$	1,117,256
Criticized accrual		2,969		28,472		9,952		108,968		15,069		—		30,815		—		196,245
Criticized nonaccrual		57		654		—		518		—		—		—		—		1,229
Total residential builder and developer	$	683,731		259,205		21,232		131,597		27,881		9,865		181,219		—	$	1,314,730

Other commercial construction:
Loan grades:
Pass	$	1,032,774		1,080,141		1,225,845		1,185,685		366,686		297,355		15,575		—	$	5,204,061
Criticized accrual		37,893		145,199		320,463		1,025,371		299,350		144,394		—		—		1,972,670
Criticized nonaccrual		—		9,992		44,037		35,841		10,542		22,099		2,426		—		124,937
Total other commercial construction	$	1,070,667		1,235,332		1,590,345		2,246,897		676,578		463,848		18,001		—	$	7,301,668

4. Loans and leases and the allowance for credit losses, continued

A summary of loans in accrual and nonaccrual status at December 31, 2022 for the various classes of the Company’s residential real estate loans and consumer loans by origination year follows.


	Term Loans by Origination Year												Revolving		Revolving Loans Converted to Term
	2022		2021		2020		2019		2018		Prior		Loans		Loans		Total
	(In thousands)
Residential:
Current	$	5,071,379		4,001,652		2,717,371		1,392,866		753,908		7,523,890		30,440		—	$	21,491,506
30-89 days past due		59,477		51,308		40,337		21,849		23,126		399,301		499		—		595,897
Accruing loans past due 90 days or more		12,012		39,934		20,067		14,050		14,007		245,332		—		—		345,402
Nonaccrual		5,686		10,865		2,583		9,860		4,650		231,093		7,353		—		272,090
Total residential	$	5,148,554		4,103,759		2,780,358		1,438,625		795,691		8,399,616		38,292		—	$	22,704,895

Residential - limited documentation:
Current	$	—		—		—		—		—		950,782		—		—	$	950,782
30-89 days past due		—		—		—		—		—		22,456		—		—		22,456
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		77,814		—		—		77,814
Total residential - limited documentation	$	—		—		—		—		—		1,051,052		—		—	$	1,051,052

Consumer:
Home equity lines and loans:
Current	$	930		2,109		2,441		15,361		23,321		97,282		3,262,533		1,487,334	$	4,891,311
30-89 days past due		—		—		—		171		126		2,030		—		28,460		30,787
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		—		15		—		536		334		6,458		2,799		74,646		84,788
Total home equity lines and loans	$	930		2,124		2,441		16,068		23,781		105,770		3,265,332		1,590,440	$	5,006,886

Recreational finance:
Current	$	2,842,091		2,280,627		1,587,629		963,907		486,964		812,953		—		—	$	8,974,171
30-89 days past due		8,648		9,525		12,412		8,387		5,202		10,419		—		—		54,593
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		3,533		7,440		9,427		7,625		5,344		11,261		—		—		44,630
Total recreational finance	$	2,854,272		2,297,592		1,609,468		979,919		497,510		834,633		—		—	$	9,073,394

Automobile:
Current	$	1,491,076		1,557,676		702,711		378,962		167,438		95,343		—		—	$	4,393,206
30-89 days past due		6,926		13,324		7,284		7,239		5,464		4,249		—		—		44,486
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		2,493		10,698		7,372		7,520		5,620		5,881		—		—		39,584
Total automobile	$	1,500,495		1,581,698		717,367		393,721		178,522		105,473		—		—	$	4,477,276

Other:
Current	$	274,530		172,238		58,339		38,439		8,217		23,163		1,375,049		8,221	$	1,958,196
30-89 days past due		3,783		1,450		326		386		141		569		15,655		651		22,961
Accruing loans past due 90 days or more		—		—		—		—		—		226		4,643		—		4,869
Nonaccrual		2,745		830		332		371		120		465		44,449		185		49,497
Total other	$	281,058		174,518		58,997		39,196		8,478		24,423		1,439,796		9,057	$	2,035,523

Total loans and leases at December 31, 2022	$	24,853,925		18,747,757		13,072,920		12,737,602		7,534,367		26,755,951		26,197,545		1,664,096	$	131,564,163

4. Loans and leases and the allowance for credit losses, continued

Allowance for credit losses

For purposes of determining the level of the allowance for credit losses, the Company evaluates its loan and lease portfolio by type. Changes in the allowance for credit losses for the three months ended March 31, 2023 and 2022 were as follows:


	Commercial, Financial,			Real Estate
	Leasing, etc.			Commercial			Residential			Consumer			Total
	(In thousands)
Three Months Ended March 31, 2023
Beginning balance	$	502,153			676,684			115,092			631,402		$	1,925,331
Provision for credit losses		12,187			95,992			(1,522	)		13,343			120,000
Net charge-offs
Charge-offs		(19,002	)		(30,385	)		(1,701	)		(43,851	)		(94,939	)
Recoveries		9,441			1,330			1,323			12,624			24,718
Net charge-offs		(9,561	)		(29,055	)		(378	)		(31,227	)		(70,221	)
Ending balance	$	504,779			743,621			113,192			613,518		$	1,975,110


	Commercial, Financial,			Real Estate
	Leasing, etc.			Commercial			Residential			Consumer			Total
	(In thousands)
Three Months Ended March 31, 2022
Beginning balance	$	283,899			557,239			71,726			556,362		$	1,469,226
Provision for credit losses		28,725			(30,938	)		1,720			10,493			10,000
Net charge-offs
Charge-offs		(19,234	)		(1,800	)		(3,972	)		(26,032	)		(51,038	)
Recoveries		13,665			14,943			3,107			12,456			44,171
Net (charge-offs) recoveries		(5,569	)		13,143			(865	)		(13,576	)		(6,867	)
Ending balance	$	307,055			539,444			72,581			553,279		$	1,472,359

4. Loans and leases and the allowance for credit losses, continued

Despite the allocation in the preceding tables, the allowance for credit losses is general in nature and is available to absorb losses from any loan or lease type. In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. The Company utilizes statistically developed models to project principal balances over the remaining contractual lives of the loan portfolios and to determine estimated credit losses through a reasonable and supportable forecast period. Individual loan credit quality indicators, including loan grade and borrower repayment performance, can inform the models, which have been statistically developed based on historical correlations of credit losses with prevailing economic metrics, including unemployment, gross domestic product and real estate prices. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results. At each of March 31, 2023 and December 31, 2022, the Company utilized a reasonable and supportable forecast period of two years. Subsequent to this forecast period the Company reverted, ratably over a one-year period, to historical loss experience to inform its estimate of losses for the remaining contractual life of each portfolio. The Company also estimates losses attributable to specific troubled credits identified through both normal and targeted credit review processes. The amounts of specific loss components in the Company’s loan and lease portfolios are determined through a loan-by-loan analysis of larger balance commercial loans and commercial real estate loans that are in nonaccrual status. Such loss estimates are typically based on expected future cash flows, collateral values and other factors that may impact the borrower’s ability to pay. To the extent that those loans are collateral-dependent, they are evaluated based on the fair value of the loan’s collateral as estimated at or near the financial statement date. As the quality of a loan deteriorates to the point of classifying the loan as “criticized,” the process of obtaining updated collateral valuation information is usually initiated, unless it is not considered warranted given factors such as the relative size of the loan, the characteristics of the collateral or the age of the last valuation. In those cases where current appraisals may not yet be available, prior appraisals are utilized with adjustments, as deemed necessary, for estimates of subsequent declines in values as determined by line of business and/or loan workout personnel. Those adjustments are reviewed and assessed for reasonableness by the Company’s credit risk personnel. Accordingly, for real estate collateral securing larger nonaccrual commercial loans and commercial real estate loans, estimated collateral values are based on current appraisals and estimates of value. For non-real estate loans, collateral is assigned a discounted estimated liquidation value and, depending on the nature of the collateral, is verified through field exams or other procedures. In assessing collateral, real estate and non-real estate values are reduced by an estimate of selling costs.

For residential real estate loans, including home equity loans and lines of credit, the excess of the loan balance over the net realizable value of the property collateralizing the loan is charged-off when the loan becomes 150 days delinquent. That charge-off is based on recent indications of value from external parties that are generally obtained shortly after a loan becomes nonaccrual. Loans to consumers that file for bankruptcy are generally charged-off to estimated net collateral value shortly after the Company is notified of such filings. When evaluating individual home equity loans and lines of credit for charge off and for purposes of estimating losses in determining the allowance for credit losses, the Company gives consideration to the required repayment of any first lien positions related to collateral property.

Changes in the amount of the allowance for credit losses reflect the outcome of the procedures described herein, including the impact of changes in macroeconomic forecasts as compared with previous forecasts, as well as the impact of portfolio concentrations, imprecision in economic forecasts, geopolitical conditions and other risk factors that might influence the loss estimation process.

The Company’s reserve for off-balance sheet credit exposures was not material at March 31, 2023 and December 31, 2022.

4. Loans and leases and the allowance for credit losses, continued

Information with respect to loans and leases that were considered nonaccrual at the beginning and end of the reporting period and the interest income recognized on such loans for three-month periods ended March 31, 2023 and 2022 follows.


	Amortized Cost with Allowance		Amortized Cost without Allowance		Total		Amortized Cost		Interest Income Recognized
	March 31, 2023						January 1, 2023		Three Months Ended March 31, 2023
	(In thousands)
Commercial, financial, leasing, etc.	$	185,867	$	196,401	$	382,268	$	347,204	$	2,279
Real estate:
Commercial		404,564		1,112,091		1,516,655		1,396,662		5,501
Residential builder and developer		3,303		—		3,303		1,229		366
Other commercial construction		94,188		48,827		143,015		124,937		1,662
Residential		124,574		129,072		253,646		272,090		4,376
Residential — limited documentation		40,165		28,770		68,935		77,814		164
Consumer:
Home equity lines and loans		39,131		41,635		80,766		84,788		2,221
Recreational finance		24,409		9,777		34,186		44,630		171
Automobile		22,926		3,916		26,842		39,584		35
Other		47,152		31		47,183		49,497		88
Total	$	986,279	$	1,570,520	$	2,556,799	$	2,438,435	$	16,863

	March 31, 2022						January 1, 2022		Three Months Ended March 31, 2022
	(In thousands)
Commercial, financial, leasing, etc.	$	171,322	$	103,824	$	275,146	$	221,022	$	13,594
Real estate:
Commercial		222,771		934,915		1,157,686		1,069,280		6,131
Residential builder and developer		524		2,392		2,916		3,005		1,428
Other commercial construction		29,914		20,941		50,855		111,405		626
Residential		191,495		150,176		341,671		355,858		6,541
Residential — limited documentation		80,590		42,922		123,512		122,888		196
Consumer:
Home equity lines and loans		32,783		38,706		71,489		70,488		809
Recreational finance		24,350		7,196		31,546		27,811		161
Automobile		30,129		5,221		35,350		34,037		38
Other		43,964		96		44,060		44,289		92
Total	$	827,842	$	1,306,389	$	2,134,231	$	2,060,083	$	29,616

Loan modifications

During the normal course of business, the Company modifies loans to maximize recovery efforts from borrowers experiencing financial difficulty. Such loan modifications typically include payment deferrals and interest rate reductions, but may also include other modified terms. Those modified loans may be considered nonaccrual if the Company does not expect to collect the contractual cash flows owed under the loan agreement. On January 1, 2023 the Company adopted amended guidance that eliminated the accounting guidance for troubled debt restructurings while expanding disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The amended guidance also requires disclosure of current period gross charge-offs by year of origination.

4. Loans and leases and the allowance for credit losses, continued

The table that follows summarizes the Company’s loan modification activities to borrowers experiencing financial difficulty for the three-month period ended March 31, 2023:


	Payment Deferral		Interest Rate Reduction		Other		Combination of Modification Types (a)		Total (b)		Percent of Total Loan Class
	(Dollars in thousands)
Three Months Ended March 31, 2023

Commercial, financial, leasing, etc.	$	43,564	$	—	$	—	$	286	$	43,850		0.10	%
Real estate:
Commercial		120,304		—		—		—		120,304		0.32	%
Residential builder and developer		7,983		—		—		—		7,983		0.64	%
Other commercial construction		91,811		—		—		—		91,811		1.39	%
Residential		32,460		—		—		1,963		34,423		0.15	%
Residential — limited documentation		5,237		—		—		—		5,237		0.51	%
Consumer:
Home equity lines and loans		—		—		—		442		442		0.01	%
Recreational finance		136		—		—		—		136		0.00	%
Automobile		45		—		—		—		45		0.00	%
Other		—		—		—		—		—		—
Total	$	301,540	$	—	$	—	$	2,691	$	304,231		0.23	%

(a)

Predominantly payment deferrals combined with interest rate reductions.

(b)

Includes approximately $23 million of loans guaranteed by government-related entities (predominantly first lien residential mortgage loans).

The financial effects of the modifications in the previous table include an increase in the weighted-average remaining term for commercial loans of 1.1 years, commercial real estate loans of 1.2 years and residential real estate loans of 9.1 years.

Modified loans to borrowers experiencing financial difficulty are subject to the allowance for credit losses methodology described herein, including the use of models to inform credit loss estimates and, to the extent larger balance commercial and commercial real estate loans are in nonaccrual status, a loan-by-loan analysis of expected credit losses on those individual loans. Loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2023 and for which there was a subsequent payment default during that period were not material.

4. Loans and leases and the allowance for credit losses, continued

Prior to January 1, 2023, if the borrower was experiencing financial difficulty such that the Company did not expect to collect the contractual cash flows owed under the original loan agreement and a concession in loan terms was granted, the Company considered the loan modification as a troubled debt restructuring. The table that follows summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the three-month period ended March 31, 2022. The table is not comparative to the preceding table. The Company no longer designates modified loans as a troubled debt restructuring in conjunction with the adoption of amended accounting guidance on January 1, 2023.


					Post-modification (a)
	Number		Pre- modification Recorded Investment		Principal Deferral		Interest Rate Reduction		Other		Combination of Concession Types		Total
	(Dollars in thousands)

Three Months Ended March 31, 2022

Commercial, financial, leasing, etc.		37	$	10,003	$	6,920	$	—	$	54	$	2,780	$	9,754
Real estate:
Commercial		17		7,582		4,376		—		2,101		855		7,332
Residential		97		24,051		15,443		—		—		9,961		25,404
Residential — limited documentation		5		1,076		894		—		—		193		1,087
Consumer:
Home equity lines and loans		35		2,150		1,988		—		—		172		2,160
Recreational finance		177		5,997		5,990		—		—		—		5,990
Automobile		534		10,263		10,233		—		—		—		10,233
Other		33		334		334		—		—		—		334
Total		935	$	61,456	$	46,178	$	—	$	2,155	$	13,961	$	62,294

_____________________________________________

(a)

Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages. The present value of interest rate concessions, discounted at the effective rate of the original loan, was not material.

The amount of foreclosed property held by the Company, predominantly consisting of residential real estate, was $45 million and $41 million at March 31, 2023 and December 31, 2022, respectively. There were $194 million and $201 million at March 31, 2023 and December 31, 2022, respectively, of loans secured by residential real estate that were in the process of foreclosure. Of all loans in the process of foreclosure at March 31, 2023, approximately 44% were government guaranteed.

The Company pledged certain loans to secure outstanding borrowings and available lines of credit. At March 31, 2023, the Company pledged approximately $11.6 billion of commercial loans and leases, $16.5 billion of commercial real estate loans, $19.5 billion of one-to-four family residential real estate loans, $2.4 billion of home equity loans and lines of credit and $11.1 billion of other consumer loans. At December 31, 2022, the Company pledged approximately $10.5 billion of commercial loans and leases, $16.3 billion of commercial real estate loans, $19.5 billion of one-to-four family residential real estate loans, $2.4 billion of homes equity loans and lines of credit and $10.7 billion of other consumer loans.