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Loans, Allowance for Loan Losses and Credit Quality
 3 Months Ended
Mar. 31, 2020
Loans, Allowance for Loan Losses and Credit Quality [Abstract]  
LOANS, ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY LOANS AND ALLOWANCE FOR LOAN LOSSES
As disclosed in Note 4 - Loans, Allowance for Credit Losses and Credit Quality, the Company adopted the CECL standard, effective January 1, 2020. As required by disclosure guidance, the Company has included relevant disclosures from the prior year and prior to the adoption of CECL within this footnote, as it relates to loans and allowance for loan losses.
The following table bifurcates the amount of loans and the allowance allocated to each loan category based on the type of impairment analysis as of December 31, 2019:
 
December 31, 2019
 
 
Commercial
and
Industrial
 
Commercial
Real Estate
 
Commercial
Construction
 
Small
Business
 
Residential
Real
Estate
 
Home
Equity
 
Other Consumer
 
Total
 
 
(Dollars in thousands)
 
Financing receivables ending balance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Collectively evaluated for impairment
$
1,370,580

 
$
3,987,848

 
$
547,293

 
$
173,960

 
$
1,571,848

 
$
1,127,963

 
$
29,663

 
$
8,809,155

 
Individually evaluated for impairment
24,456

 
8,337

 
—

 
537

 
11,228

 
4,948

 
122

 
49,628

  
Purchased credit impaired loans
—

 
6,174

 
—

 
—

 
7,493

 
887

 
302

 
14,856

 
Total loans by group
$
1,395,036

 
$
4,002,359

 
$
547,293

 
$
174,497

 
$
1,590,569

 
$
1,133,798

 
$
30,087

 
$
8,873,639

(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
The amount of net deferred costs on originated loans included in the ending balance was $7.1 million at December 31, 2019. Net unamortized discounts on acquired loans not deemed to be purchased credit impaired ("PCI") included in the ending balance was $21.6 million at December 31, 2019.
At December 31, 2019, the reserve for unfunded loan commitments was $2.1 million.
The following table summarizes changes in allowance for loan losses by loan category for the period indicated:
 
Three Months Ended March 31, 2019
 
(Dollars in thousands)
 
Commercial and
Industrial
 
Commercial
Real Estate
 
Commercial
Construction
 
Small
Business
 
Residential
Real Estate
 

Home Equity
 
Other Consumer
 
Total
Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
15,760

 
$
32,370

 
$
5,158

 
$
1,756

 
$
3,219

 
$
5,608

 
$
422

 
$
64,293

Charge-offs
—

 
—

 
—

 
(145
)
 
—

 
(113
)
 
(301
)
 
(559
)
Recoveries
124

 
33

 
—

 
27

 
1

 
66

 
155

 
406

Provision (benefit)
988

 
(354
)
 
197

 
146

 
14

 
(54
)
 
63

 
1,000

Ending balance
$
16,872

 
$
32,049

 
$
5,355

 
$
1,784

 
$
3,234

 
$
5,507

 
$
339

 
$
65,140

Ending balance: collectively evaluated for impairment
$
16,814

 
$
31,974

 
$
5,355

 
$
1,783

 
$
2,432

 
$
5,346

 
$
332

 
$
64,036

Ending balance: individually evaluated for impairment
$
58

 
$
75

 
$
—

 
$
1

 
$
802

 
$
161

 
$
7

 
$
1,104


The Company's historical approach to loan portfolio segmentation by risk characteristics and monitoring of credit quality for commercial loans under previous accounting guidance was consistent with that applied under the newly adopted CECL standard. See Note 4 - Loans, Allowance for Credit Losses and Credit Quality further discussion surrounding the Company's policies for loan segmentation and credit quality monitoring.

The following tables detail the amount of outstanding principal balances relative to each of the risk-rating categories for the Company’s loan portfolio as of December 31, 2019:
 
 
 
December 31, 2019
Category
Risk
Rating
 
Commercial  and
Industrial
 
Commercial
Real Estate
 
Commercial
Construction
 
Small Business
 
Total
 
 
 
(Dollars in thousands)
Pass
1 - 6
 
$
1,274,155

 
$
3,860,555

 
$
542,608

 
$
171,213

 
$
5,848,531

Potential weakness
7
 
63,485

 
97,268

 
2,247

 
1,416

 
164,416

Definite weakness-loss unlikely
8
 
57,396

 
44,536

 
2,438

 
1,868

 
106,238

Partial loss probable
9
 
—

 
—

 
—

 
—

 
—

Definite loss
10
 
—

 
—

 
—

 
—

 
—

Total
 
 
$
1,395,036

 
$
4,002,359

 
$
547,293

 
$
174,497

 
$
6,119,185


Impaired Loans
Under previous accounting guidance, a loan was considered impaired when, based on current information and events, it was probable that the Company would be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment included payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experienced insignificant payment delays and payment shortfalls generally were not classified as impaired. Management determined the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
The table below sets forth information regarding the Company’s impaired loans by loan portfolio at the date indicated:
 
December 31, 2019
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
(Dollars in thousands)
With no related allowance recorded
 
 
 
 
 
Commercial and industrial
$
23,786

 
$
34,970

 
$
—

Commercial real estate
6,213

 
12,101

 
—

Small business
469

 
484

 
—

Residential real estate
4,976

 
5,123

 
—

Home equity
3,764

 
3,893

 
—

Other consumer
34

 
34

 
—

Subtotal
39,242

 
56,605

 
—

With an allowance recorded
 
 
 
 
 
Commercial and industrial
$
670

 
$
670

 
$
126

Commercial real estate
2,124

 
2,124

 
48

Small business
68

 
105

 
8

Residential real estate
6,252

 
7,163

 
637

Home equity
1,184

 
1,382

 
156

Other consumer
88

 
91

 
5

Subtotal
10,386

 
11,535

 
980

Total
$
49,628

 
$
68,140

 
$
980


The following table sets forth information regarding interest income recognized on impaired loans, by portfolio, for the period indicated:
 
Three Months Ended
 
March 31, 2019
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
(Dollars in thousands)
With no related allowance recorded
 
 
 
Commercial and industrial
$
30,198

 
$
35

Commercial real estate
8,873

 
104

Commercial construction
311

 
—

Small business
323

 
2

Residential real estate
4,421

 
54

Home equity
4,952

 
55

Other consumer
53

 
1

Subtotal
49,131

 
251

With an allowance recorded
 
 
 
Commercial and industrial
$
498

 
$
3

Commercial real estate
1,682

 
24

Small business
181

 
2

Residential real estate
7,665

 
64

Home equity
985

 
12

Other consumer
138

 
1

Subtotal
11,149

 
106

Total
$
60,280

 
$
357



Purchased Credit Impaired Loans

Under previous accounting guidance, certain loans acquired by the Company which may have shown evidence of deterioration of credit quality since origination at purchase date and was therefore deemed unlikely that the Company would be able to collect all contractually required payments. As such, these loans were deemed to be PCI loans and the carrying value and prospective income recognition are predicated upon future cash flows expected to be collected. The following table displays certain information pertaining to PCI loans at the date indicated:
 
 
December 31, 2019
 
 
(Dollars in thousands)
Outstanding balance
 
$
18,358

Carrying amount
 
$
14,856


The following table summarizes activity in the accretable yield for the PCI loan portfolio for the period indicated:
 
 
Three Months Ended March 31
 
 
2019
 
 
(Dollars in thousands)
Beginning balance
 
$
1,191

Accretion
 
(141
)
Other change in expected cash flows (1)
 
114

Reclassification from nonaccretable difference for loans which have paid off
 
—

Ending balance
 
$
1,164



(1) Represents changes in cash flows expected to be collected and resulting in increased interest income as a prospective yield adjustment over the remaining life of the loan(s).