5. Allowance for credit losses

Changes in the allowance for credit losses for the years ended December 31, 2016, 2015 and 2014 were as follows:

	Commercial, Financial,			Real Estate
2016	Leasing, etc.			Commercial			Residential			Consumer			Unallocated			Total
	(In thousands)
Beginning balance	$	300,404			326,831			72,238			178,320			78,199		$	955,992
Provision for credit losses		59,506			33,627			6,902			90,134			(169	)		190,000
Net charge-offs
Charge-offs		(59,244	)		(4,805	)		(26,133	)		(141,073	)		—			(231,255	)
Recoveries		30,167			7,066			8,120			28,907			—			74,260
Net (charge-offs) recoveries		(29,077	)		2,261			(18,013	)		(112,166	)		—			(156,995	)
Ending balance	$	330,833			362,719			61,127			156,288			78,030		$	988,997

	Commercial, Financial,			Real Estate
2015	Leasing, etc.			Commercial			Residential			Consumer			Unallocated		Total
	(In thousands)
Beginning balance	$	288,038			307,927			61,910			186,033			75,654	$	919,562
Provision for credit losses		43,065			25,768			19,133			79,489			2,545		170,000
Net charge-offs
Charge-offs		(60,983	)		(16,487	)		(13,116	)		(107,787	)		—		(198,373	)
Recoveries		30,284			9,623			4,311			20,585			—		64,803
Net charge-offs		(30,699	)		(6,864	)		(8,805	)		(87,202	)		—		(133,570	)
Ending balance	$	300,404			326,831			72,238			178,320			78,199	$	955,992

2014

Beginning balance	$	273,383			324,978			78,656			164,644			75,015	$	916,676
Provision for credit losses		51,410			(13,779	)		(3,974	)		89,704			639		124,000
Net charge-offs
Charge-offs		(58,943	)		(14,058	)		(21,351	)		(84,390	)		—		(178,742	)
Recoveries		22,188			10,786			8,579			16,075			—		57,628
Net charge-offs		(36,755	)		(3,272	)		(12,772	)		(68,315	)		—		(121,114	)
Ending balance	$	288,038			307,927			61,910			186,033			75,654	$	919,562

Despite the above allocation, the allowance for credit losses is general in nature and is available to absorb losses from any loan or lease type.

In establishing the allowance for credit losses, the Company estimates losses attributable to specific troubled credits identified through both normal and detailed or intensified credit review processes and also estimates losses inherent in other loans and leases on a collective basis. For purposes of determining the level of the allowance for credit losses, the Company evaluates its loan and lease portfolio by loan type. The amounts of 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 and by applying loss factors to groups of loan balances based on loan type and management’s classification of such loans under the Company’s loan grading system. Measurement of the specific loss components is typically based on expected future cash flows, collateral values and other factors that may impact the borrower’s ability to pay. In determining the allowance for credit losses, the Company utilizes a loan grading system which is applied to commercial and commercial real estate credits on an individual loan basis. Loan officers are responsible for continually assigning grades to these loans based on standards outlined in the Company’s Credit Policy. Internal loan grades are also monitored by the Company’s credit review department to ensure consistency and strict adherence to the prescribed standards. Loan grades are assigned loss component factors that reflect the Company’s loss estimate for each group of loans and leases. Factors considered in assigning loan grades and loss component factors 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; levels of and trends in portfolio charge-offs and recoveries; levels of and trends in portfolio delinquencies and impaired loans; changes in the risk profile of specific portfolios; trends in volume and terms of loans; effects of changes in credit concentrations; and observed trends and practices in the banking industry. As updated appraisals are obtained on individual loans or other events in the market place indicate that collateral values have significantly changed, individual loan grades are adjusted as appropriate. Changes in other factors cited may also lead to loan grade changes at any time. Except for consumer loans and residential real estate loans that are considered smaller balance homogenous loans and acquired loans that are evaluated on an aggregated basis, the Company considers a loan to be impaired for purposes of applying GAAP when, based on current information and events, it is probable that the Company will be unable to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days. Regardless of loan type, the Company considers a loan to be impaired if it qualifies as a troubled debt restructuring. Modified loans, including smaller balance homogenous loans, that are considered to be troubled debt restructurings are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows.

The following tables provide information with respect to loans and leases that were considered impaired as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014.

	December 31, 2016						December 31, 2015
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
With an allowance recorded:
Commercial, financial, leasing, etc.	$	168,072		184,432		48,480		179,037		195,821		44,752
Real estate:
Commercial		71,862		86,666		11,620		85,974		95,855		18,764
Residential builder and developer		7,396		8,361		506		3,316		5,101		196
Other commercial construction		2,475		2,731		448		3,548		3,843		348
Residential		86,680		105,944		3,457		79,558		96,751		4,727
Residential-limited documentation		82,547		97,718		6,000		90,356		104,251		8,000
Consumer:
Home equity lines and loans		44,693		48,965		8,027		25,220		26,195		3,777
Automobile		16,982		18,272		3,740		22,525		22,525		4,709
Other		3,791		5,296		776		17,620		17,620		4,820
		484,498		558,385		83,054		507,154		567,962		90,093
With no related allowance recorded:
Commercial, financial, leasing, etc.		100,805		124,786		—		93,190		110,735		—
Real estate:
Commercial		113,276		121,846		—		101,340		116,230		—
Residential builder and developer		14,368		21,124		—		27,651		47,246		—
Other commercial construction		15,933		35,281		—		13,221		31,477		—
Residential		16,823		24,161		—		19,621		30,940		—
Residential-limited documentation		15,429		24,590		—		18,414		31,113		—
		276,634		351,788		—		273,437		367,741		—
Total:
Commercial, financial, leasing, etc.		268,877		309,218		48,480		272,227		306,556		44,752
Real estate:
Commercial		185,138		208,512		11,620		187,314		212,085		18,764
Residential builder and developer		21,764		29,485		506		30,967		52,347		196
Other commercial construction		18,408		38,012		448		16,769		35,320		348
Residential		103,503		130,105		3,457		99,179		127,691		4,727
Residential-limited documentation		97,976		122,308		6,000		108,770		135,364		8,000
Consumer:
Home equity lines and loans		44,693		48,965		8,027		25,220		26,195		3,777
Automobile		16,982		18,272		3,740		22,525		22,525		4,709
Other		3,791		5,296		776		17,620		17,620		4,820
Total	$	761,132		910,173		83,054		780,591		935,703		90,093

	Year Ended December 31, 2016						Year Ended December 31, 2015
			Interest Income Recognized						Interest Income Recognized
	Average Recorded Investment		Total		Cash Basis		Average Recorded Investment		Total		Cash Basis
	(In thousands)
Commercial, financial, leasing, etc.	$	277,647		8,342		8,342		236,201		2,933		2,933
Real estate:
Commercial		175,877		4,878		4,878		166,628		6,243		6,243
Residential builder and developer		29,237		2,300		2,300		59,457		335		335
Other commercial construction		19,697		644		644		20,276		2,311		2,311
Residential		98,394		6,227		3,154		101,483		6,188		4,037
Residential-limited documentation		103,060		5,999		1,975		118,449		6,380		2,638
Consumer:
Home equity lines and loans		36,493		1,325		410		21,523		905		261
Automobile		19,636		1,242		99		25,675		1,619		175
Other		9,218		440		83		18,809		729		113
Total	$	769,259		31,397		21,885		768,501		27,643		19,046

	Year Ended December 31, 2014
			Interest Income Recognized
	Average Recorded Investment		Total		Cash Basis
	(In thousands)
Commercial, financial, leasing, etc.	$	181,932		2,251		2,251
Real estate:
Commercial		184,773		4,029		4,029
Residential builder and developer		91,149		142		142
Other commercial construction		62,734		1,893		1,893
Residential		126,005		9,180		6,978
Residential-limited documentation		133,800		6,613		2,546
Consumer:
Home equity lines and loans		18,083		750		248
Automobile		35,173		2,251		295
Other		18,378		690		191
Total	$	852,027		27,799		18,573

In accordance with the previously described policies, the Company utilizes a loan grading system that is applied to all commercial loans and commercial real estate loans. Loan grades are utilized to differentiate risk within the portfolio and consider the expectations of default for each loan. Commercial loans and commercial real estate 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. All larger-balance criticized commercial loans and commercial real estate loans are individually reviewed by centralized credit personnel each quarter to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or nonaccruing. Smaller-balance criticized loans are analyzed by business line risk management areas to ensure proper loan grade classification. Furthermore, criticized nonaccrual commercial loans and commercial real estate loans are considered impaired and, as a result, specific loss allowances on such loans are established within the allowance for credit losses to the extent appropriate in each individual instance.

The following table summarizes the loan grades applied to the various classes of the Company’s commercial loans and commercial real estate loans.

			Real Estate
	Commercial,				Residential		Other
	Financial,				Builder and		Commercial
	Leasing, etc.		Commercial		Developer		Construction
	(In thousands)
December 31, 2016
Pass	$	21,398,581		24,570,269		1,789,071		5,912,351
Criticized accrual		950,032		741,274		116,548		165,862
Criticized nonaccrual		261,434		176,201		16,707		18,111
Total	$	22,610,047		25,487,744		1,922,326		6,096,324
December 31, 2015
Pass	$	19,442,183		22,697,398		1,497,465		3,834,137
Criticized accrual		738,238		655,257		59,779		228,877
Criticized nonaccrual		241,917		179,606		28,429		16,363
Total	$	20,422,338		23,532,261		1,585,673		4,079,377

In determining the allowance for credit losses, residential real estate loans and consumer loans are generally evaluated collectively after considering such factors as payment performance and recent loss experience and trends, which are mainly driven by current collateral values in the market place as well as the amount of loan defaults. Loss rates on such loans are determined by reference to recent charge-off history and are evaluated (and adjusted if deemed appropriate) through consideration of other factors including near-term forecasted loss estimates developed by the Company’s credit department. In arriving at such forecasts, the Company considers the current estimated fair value of its collateral based on geographical adjustments for home price depreciation/appreciation and overall borrower repayment performance. With regard to collateral values, the realizability of such values by the Company contemplates repayment of any first lien position prior to recovering amounts on a second lien position. However, residential real estate loans and outstanding balances of home equity loans and lines of credit that are more than 150 days past due are generally evaluated for collectibility on a loan-by-loan basis giving consideration to estimated collateral values. The carrying value of residential real estate loans and home equity loans and lines of credit for which a partial charge-off has been recognized aggregated $44 million and $32 million, respectively, at December 31, 2016 and $55 million and $21 million, respectively, at December 31, 2015. Residential real estate loans and home equity loans and lines of credit that were more than 150 days past due but did not require a partial charge-off because the net realizable value of the collateral exceeded the outstanding customer balance totaled $16 million and $39 million, respectively, at December 31, 2016 and $20 million and $28 million, respectively, at December 31, 2015.

The Company also measures additional losses for purchased impaired loans when it is probable that the Company will be unable to collect all cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimates after acquisition. The determination of the allocated portion of the allowance for credit losses is very subjective. Given that inherent subjectivity and potential imprecision involved in determining the allocated portion of the allowance for credit losses, the Company also provides an inherent unallocated portion of the allowance. The unallocated portion of the allowance is intended to recognize probable losses that are not otherwise identifiable and includes management’s subjective determination of amounts necessary to provide for the possible use of imprecise estimates in determining the allocated portion of the allowance. Therefore, the level of the unallocated portion of the allowance is primarily reflective of the inherent imprecision in the various calculations used in determining the allocated portion of the allowance for credit losses. Other factors that could also lead to changes in the unallocated portion include the effects of expansion into new markets for which the Company does not have the same degree of familiarity and experience regarding portfolio performance in changing market conditions, the introduction of new loan and lease product types, and other risks associated with the Company’s loan portfolio that may not be specifically identifiable.

The allocation of the allowance for credit losses summarized on the basis of the Company’s impairment methodology was as follows:

	Commercial, Financial,		Real Estate
	Leasing, etc.		Commercial		Residential		Consumer		Total
	(In thousands)
December 31, 2016
Individually evaluated for impairment	$	48,480		12,500		9,457		12,543	$	82,980
Collectively evaluated for impairment		282,353		348,301		47,993		143,745		822,392
Purchased impaired		—		1,918		3,677		—		5,595
Allocated	$	330,833		362,719		61,127		156,288		910,967
Unallocated										78,030
Total									$	988,997
December 31, 2015
Individually evaluated for impairment	$	44,752		19,175		12,727		13,306	$	89,960
Collectively evaluated for impairment		255,615		307,000		57,624		163,511		783,750
Purchased impaired		37		656		1,887		1,503		4,083
Allocated	$	300,404		326,831		72,238		178,320		877,793
Unallocated										78,199
Total									$	955,992

The recorded investment in loans and leases summarized on the basis of the Company’s impairment methodology was as follows:

	Commercial, Financial,		Real Estate
	Leasing, etc.		Commercial		Residential		Consumer		Total
	(In thousands)
December 31, 2016
Individually evaluated for impairment	$	268,877		224,630		201,479		65,466	$	760,452
Collectively evaluated for impairment		22,340,529		33,222,080		21,871,726		12,080,597		89,514,932
Purchased impaired		641		59,684		517,707		—		578,032
Total	$	22,610,047		33,506,394		22,590,912		12,146,063	$	90,853,416
December 31, 2015
Individually evaluated for impairment	$	272,227		234,132		207,949		65,365	$	779,673
Collectively evaluated for impairment		20,148,209		28,863,130		25,398,037		11,532,121		85,941,497
Purchased impaired		1,902		100,049		664,117		2,261		768,329
Total	$	20,422,338		29,197,311		26,270,103		11,599,747	$	87,489,499