Loans Allowance for Loan Losses and Credit Quality

6 Months Ended

Jun. 30, 2011

Loans Allowance for Loan Losses and Credit Quality Disclosure [Abstract]

Loans, Allowance for Loan Losses, and Credit Quality

NOTE 6: Loans, Allowance for Loan Losses, and Credit Quality

The period end loan composition was as follows.

	June 30,		December 31,
	2011		2010
	($ in Thousands)
Commercial and industrial	$	3,202,301	$	3,049,752
Commercial real estate		3,423,686		3,389,213
Real estate construction		533,804		553,069
Lease financing		54,001		60,254
Total commercial		7,213,792		7,052,288
Home equity		2,594,029		2,523,057
Installment		589,714		695,383
Total retail		3,183,743		3,218,440
Residential mortgage		2,692,054		2,346,007
Total consumer		5,875,797		5,564,447
Total loans	$	13,089,589	$	12,616,735

A summary of the changes in the allowance for loan losses was as follows.

	June 30,			December 31,
	2011			2010
	($ in Thousands)
Balance at beginning of period	$	476,813		$	573,533
Provision for loan losses		47,000			390,010
Charge offs		(117,521	)		(528,492	)
Recoveries		19,669			41,762
Net charge offs		(97,852	)		(486,730	)
Balance at end of period	$	425,961		$	476,813

The level of the allowance for loan losses represents management’s estimate of an amount appropriate to provide for probable credit losses in the loan portfolio at the balance sheet date. In general, the change in the allowance for loan losses is a function of a number of factors, including but not limited to changes in the loan portfolio, net charge offs, trends in past due and impaired loans, and the level of potential problem loans. Management considers the allowance for loan losses a critical accounting policy, as assessing these numerous factors involves significant judgment.

A summary of the changes in the allowance for loan losses by portfolio segment for the six months ended June 30, 2011, was as follows.

	Commercial
	and			Commercial			Real estate			Lease			Home						Residential
$ in Thousands	industrial			real estate			construction			financing			equity			Installment			mortgage			Total
Balance at Dec 31, 2010	$	137,770		$	165,584		$	56,772		$	7,396		$	55,090		$	17,328		$	36,873		$	476,813
Provision for loan losses		19,193			(12,739	)		(6,969	)		(5,200	)		48,586			4,742			(613	)		47,000
Charge offs		(28,870	)		(19,934	)		(21,920	)		(112	)		(23,896	)		(14,356	)		(8,433	)		(117,521	)
Recoveries		10,530			2,684			3,953			24			1,323			1,022			133			19,669
Balance at June 30, 2011	$	138,623		$	135,595		$	31,836		$	2,108		$	81,103		$	8,736		$	27,960		$	425,961
Allowance for loan losses:
Ending balance impaired loans individually evaluated for impairment	$	8,305		$	29,045		$	14,924		$	—		$	1,448		$	—		$	1,258		$	54,980
Ending balance impaired loans collectively evaluated for impairment	$	12,304		$	9,543		$	2,894		$	49		$	33,009		$	3,213		$	11,718		$	72,730
Ending balance all other loans collectively evaluated for impairment	$	118,014		$	97,007		$	14,018		$	2,059		$	46,646		$	5,523		$	14,984		$	298,251
Loans:
Ending balance impaired loans individually evaluated for impairment	$	51,207		$	164,163		$	63,801		$	11,685		$	9,854		$	3		$	15,463		$	316,176
Ending balance impaired loans collectively evaluated for impairment	$	42,736		$	65,523		$	19,687		$	1,213		$	48,376		$	4,738		$	69,505		$	251,778
Ending balance all other loans collectively evaluated for impairment	$	3,108,358		$	3,194,000		$	450,316		$	41,103		$	2,535,799		$	584,973		$	2,607,086		$	12,521,635

The allocation methodology used by the Corporation includes allocations for specifically identified impaired loans and loss factor allocations, (used for both criticized and non-criticized loan categories) with a component primarily based on historical loss rates and a component primarily based on other qualitative factors. Management allocates the allowance for loan losses by pools of risk within each loan portfolio. While the methodology used at June 30, 2011 and December 31, 2010 was generally comparable, several refinements were incorporated into the historical loss factor allocation process during the first quarter of 2011. The refinements, which impacted individual portfolio allocation amounts, did not materially impact the overall level of the allowance for loan losses.

At June 30, 2011, the allowance for loan loss allocations for the home equity and commercial loan portfolios increased, with all other loan portfolio allocations declining from December 31, 2010. The increase in the home equity allocation was due to higher loss rates and a slight decline in credit quality. The decline in the installment allocation was impacted by the $10 million write down on installment loans transferred to held for sale during the first quarter of 2011. Other portfolio allocations declined primarily due to improved credit quality metrics. The allocation of the allowance for loan losses by loan portfolio is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular category. The total allowance for loan losses is available to absorb losses from any segment of the loan portfolio.

The following table presents nonaccrual loans, accruing loans past due 90 days or more, and restructured loans.

	June 30,		December 31,
	2011		2010
	($ in Thousands)
Nonaccrual loans	$	467,611	$	574,356
Accruing loans past due 90 days or more		12,123		3,418
Restructured loans (accruing)		100,343		79,935

The following table presents nonaccrual loans.

	June 30,		December 31,
	2011		2010
	($ in Thousands)
Commercial and industrial	$	71,183	$	99,845
Commercial real estate		193,495		223,927
Real estate construction		72,782		94,929
Lease financing		12,898		17,080
Total commercial		350,358		435,781
Home equity		46,777		51,712
Installment		3,724		10,544
Total retail		50,501		62,256
Residential mortgage		66,752		76,319
Total consumer		117,253		138,575
Total nonaccrual loans	$	467,611	$	574,356

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments, unless the loan is well secured and in the process of collection. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectability of principal or interest on loans, it is management’s practice to place such loans on nonaccrual status immediately, rather than delaying such action until the loans become 90 days past due. When a loan is placed on nonaccrual status, previously accrued and uncollected interest is reversed, amortization of related deferred loan fees or costs is suspended, and income is recorded only to the extent that interest payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible. If collectability of the principal is in doubt, payments received are applied to loan principal.

While an asset is in nonaccrual status, some or all of the cash interest payments received may be treated as interest income on a cash basis as long as the remaining recorded investment in the asset (i.e., after charge off of identified losses, if any) is deemed to be fully collectible. The determination as to the ultimate collectability of the asset’s remaining recorded investment must be supported by a current, well documented credit evaluation of the borrower’s financial condition and prospects for repayment, including consideration of the borrower’s sustained historical repayment performance and other relevant factors. A nonaccrual loan is returned to accrual status when all delinquent principal and interest payments become current in accordance with the terms of the loan agreement, the borrower has demonstrated a period of sustained performance, and the ultimate collectability of the total contractual principal and interest is no longer in doubt. A sustained period of repayment performance generally would be a minimum of six months.

Restructured loans involve the granting of some concession to the borrower involving the modification of terms of the loan, such as changes in payment schedule or interest rate, which generally would not otherwise be considered. Restructured loans can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Generally, restructured loans remain on nonaccrual until the customer has attained a sustained period of repayment performance under the modified loan terms. However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan remains on nonaccrual. See section “Future Accounting Pronouncements,” within Part I, Item 2, for new accounting guidance on restructured loans which will be effective for the third quarter of 2011.

The following table presents commercial loans by credit quality indicator at June 30, 2011.

			Special
	Pass		Mention		Potential Problem		Impaired		Total
					($ in Thousands)
Commercial and industrial	$	2,704,682	$	174,269	$	229,407	$	93,943	$	3,202,301
Commercial real estate		2,631,730		180,214		382,056		229,686		3,423,686
Real estate construction		360,806		26,324		63,186		83,488		533,804
Lease financing		39,326		378		1,399		12,898		54,001
Total commercial	$	5,736,544	$	381,185	$	676,048	$	420,015	$	7,213,792

The following table presents commercial loans by credit quality indicator at December 31, 2010.

	Pass		Special Mention		Potential Problem		Impaired		Total
					($ in Thousands)
Commercial and industrial	$	2,363,554	$	222,089	$	354,284	$	109,825	$	3,049,752
Commercial real estate		2,429,339		227,557		492,778		239,539		3,389,213
Real estate construction		311,810		32,180		91,618		117,461		553,069
Lease financing		40,101		456		2,617		17,080		60,254
Total commercial	$	5,144,804	$	482,282	$	941,297	$	483,905	$	7,052,288

The following table presents consumer loans by credit quality indicator at June 30, 2011.

	Performing		30-89 Days Past Due		Potential Problem		Impaired		Total
	($ in Thousands)
Home equity	$	2,516,884	$	14,400	$	4,515	$	58,230	$	2,594,029
Installment		580,965		3,792		216		4,741		589,714
Total retail		3,097,849		18,192		4,731		62,971		3,183,743
Residential mortgage		2,579,126		9,385		18,575		84,968		2,692,054
Total consumer	$	5,676,975	$	27,577	$	23,306	$	147,939	$	5,875,797

The following table presents consumer loans by credit quality indicator at December 31, 2010.

	Performing		30-89 Days Past Due		Potential Problem		Impaired		Total
	($ in Thousands)
Home equity	$	2,442,661	$	13,886	$	3,057	$	63,453	$	2,523,057
Installment		673,820		9,624		703		11,236		695,383
Total retail		3,116,481		23,510		3,760		74,689		3,218,440
Residential mortgage		2,222,916		8,722		18,672		95,697		2,346,007
Total consumer	$	5,339,397	$	32,232	$	22,432	$	170,386	$	5,564,447

Factors that are important to managing overall credit quality are sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early identification of potential problems, an appropriate allowance for loan losses, and sound nonaccrual and charge off policies.

For commercial loans, management has determined pass to include credits that exhibit acceptable financial statements, cash flow, and leverage. If any risk exists, it is mitigated by their structure, collateral, monitoring, or control. For consumer loans, performing loans include credits that are performing in accordance with the original contractual terms. Special mention credits have potential weaknesses that deserve management’s attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credit. Potential problem loans are considered inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged. These loans generally have a well-defined weakness, or weaknesses, that may jeopardize liquidation of the debt and are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected. Lastly, management considers a loan to be impaired when it is probable that the Corporation will be unable to collect all amounts due according to the original contractual terms of the note agreement, including both principal and interest. Management has determined that commercial and consumer loan relationships that have nonaccrual status or have had their terms restructured in a troubled debt restructuring meet this definition. Commercial loans classified as special mention, potential problem, and impaired are reviewed at a minimum on a quarterly basis, while pass and performing rated credits are reviewed on an annual basis or more frequently if the loan renewal is less than one year or if otherwise warranted.

The following table presents loans by past due status at June 30, 2011.

	30-89 Days		90 Days or More
	Past Due		Past Due		Total Past Due		Current		Total
	($ in Thousands)
Accruing loans
Commercial and industrial	$	7,581	$	4,216	$	11,797	$	3,119,321	$	3,131,118
Commercial real estate		61,240		7,297		68,537		3,161,654		3,230,191
Real estate construction		13,217		—		13,217		447,805		461,022
Lease financing		79		—		79		41,024		41,103
Total commercial		82,117		11,513		93,630		6,769,804		6,863,434
Home equity		14,818		—		14,818		2,532,434		2,547,252
Installment		3,851		610		4,461		581,529		585,990
Total retail		18,669		610		19,279		3,113,963		3,133,242
Residential mortgage		12,573		—		12,573		2,612,729		2,625,302
Total consumer		31,242		610		31,852		5,726,692		5,758,544
Total accruing loans	$	113,359	$	12,123	$	125,482	$	12,496,496	$	12,621,978
Nonaccrual loans
Commercial and industrial	$	7,500	$	28,436	$	35,936	$	35,247	$	71,183
Commercial real estate		15,015		82,967		97,982		95,513		193,495
Real estate construction		894		44,763		45,657		27,125		72,782
Lease financing		311		111		422		12,476		12,898
Total commercial		23,720		156,277		179,997		170,361		350,358
Home equity		4,281		31,480		35,761		11,016		46,777
Installment		533		950		1,483		2,241		3,724
Total retail		4,814		32,430		37,244		13,257		50,501
Residential mortgage		4,642		45,123		49,765		16,987		66,752
Total consumer		9,456		77,553		87,009		30,244		117,253
Total nonaccrual loans	$	33,176	$	233,830	$	267,006	$	200,605	$	467,611
Total loans
Commercial and industrial	$	15,081	$	32,652	$	47,733	$	3,154,568	$	3,202,301
Commercial real estate		76,255		90,264		166,519		3,257,167		3,423,686
Real estate construction		14,111		44,763		58,874		474,930		533,804
Lease financing		390		111		501		53,500		54,001
Total commercial		105,837		167,790		273,627		6,940,165		7,213,792
Home equity		19,099		31,480		50,579		2,543,450		2,594,029
Installment		4,384		1,560		5,944		583,770		589,714
Total retail		23,483		33,040		56,523		3,127,220		3,183,743
Residential mortgage		17,215		45,123		62,338		2,629,716		2,692,054
Total consumer		40,698		78,163		118,861		5,756,936		5,875,797
Total loans	$	146,535	$	245,953	$	392,488	$	12,697,101	$	13,089,589

The following table presents loans by past due status at December 31, 2010.

	30-89 Days		90 Days or More
	Past Due		Past Due		Total Past Due		Current		Total
	($ in Thousands)
Accruing loans
Commercial and industrial	$	33,013	$	—	$	33,013	$	2,916,894	$	2,949,907
Commercial real estate		46,486		2,096		48,582		3,116,704		3,165,286
Real estate construction		8,016		—		8,016		450,124		458,140
Lease financing		132		—		132		43,042		43,174
Total commercial		87,647		2,096		89,743		6,526,764		6,616,507
Home equity		13,886		796		14,682		2,456,663		2,471,345
Installment		9,624		526		10,150		674,689		684,839
Total retail		23,510		1,322		24,832		3,131,352		3,156,184
Residential mortgage		8,722		—		8,722		2,260,966		2,269,688
Total consumer		32,232		1,322		33,554		5,392,318		5,425,872
Total accruing loans	$	119,879	$	3,418	$	123,297	$	11,919,082	$	12,042,379
Nonaccrual loans
Commercial and industrial	$	3,426	$	57,215	$	60,641	$	39,204	$	99,845
Commercial real estate		12,429		82,675		95,104		128,823		223,927
Real estate construction		297		56,443		56,740		38,189		94,929
Lease financing		283		998		1,281		15,799		17,080
Total commercial		16,435		197,331		213,766		222,015		435,781
Home equity		5,727		37,169		42,896		8,816		51,712
Installment		1,091		7,141		8,232		2,312		10,544
Total retail		6,818		44,310		51,128		11,128		62,256
Residential mortgage		8,249		50,609		58,858		17,461		76,319
Total consumer		15,067		94,919		109,986		28,589		138,575
Total nonaccrual loans	$	31,502	$	292,250	$	323,752	$	250,604	$	574,356
Total loans
Commercial and industrial	$	36,439	$	57,215	$	93,654	$	2,956,098	$	3,049,752
Commercial real estate		58,915		84,771		143,686		3,245,527		3,389,213
Real estate construction		8,313		56,443		64,756		488,313		553,069
Lease financing		415		998		1,413		58,841		60,254
Total commercial		104,082		199,427		303,509		6,748,779		7,052,288
Home equity		19,613		37,965		57,578		2,465,479		2,523,057
Installment		10,715		7,667		18,382		677,001		695,383
Total retail		30,328		45,632		75,960		3,142,480		3,218,440
Residential mortgage		16,971		50,609		67,580		2,278,427		2,346,007
Total consumer		47,299		96,241		143,540		5,420,907		5,564,447
Total loans	$	151,381	$	295,668	$	447,049	$	12,169,686	$	12,616,735

The following table presents impaired loans at June 30, 2011.

	Recorded		Unpaid Principal				Average Recorded		Interest Income
	Investment		Balance		Related Allowance		Investment		Recognized *
					($ in Thousands)
Loans with a related allowance
Commercial and industrial	$	72,756	$	85,050	$	20,609	$	81,789	$	1,314
Commercial real estate		169,017		194,532		38,588		176,767		1,385
Real estate construction		62,404		78,171		17,818		68,221		416
Lease financing		1,213		1,213		49		1,689		—
Total commercial		305,390		358,966		77,064		328,466		3,115
Home equity		52,418		58,455		34,457		53,539		779
Installment		4,738		5,163		3,213		5,005		132
Total retail		57,156		63,618		37,670		58,544		911
Residential mortgage		77,313		84,376		12,976		79,601		927
Total consumer		134,469		147,994		50,646		138,145		1,838
Total loans	$	439,859	$	506,960	$	127,710	$	466,611	$	4,953
Loans with no related allowance
Commercial and industrial	$	21,187	$	26,720	$	—	$	21,785	$	351
Commercial real estate		60,669		74,524		—		66,830		600
Real estate construction		21,084		36,215		—		23,874		132
Lease financing		11,685		11,685		—		12,590		—
Total commercial		114,625		149,144		—		125,079		1,083
Home equity		5,812		7,891		—		6,275		19
Installment		3		3		—		3		—
Total retail		5,815		7,894		—		6,278		19
Residential mortgage		7,655		9,979		—		8,865		20
Total consumer		13,470		17,873		—		15,143		39
Total loans	$	128,095	$	167,017	$	—	$	140,222	$	1,122
Total
Commercial and industrial	$	93,943	$	111,770	$	20,609	$	103,574	$	1,665
Commercial real estate		229,686		269,056		38,588		243,597		1,985
Real estate construction		83,488		114,386		17,818		92,095		548
Lease financing		12,898		12,898		49		14,279		—
Total commercial		420,015		508,110		77,064		453,545		4,198
Home equity		58,230		66,346		34,457		59,814		798
Installment		4,741		5,166		3,213		5,008		132
Total retail		62,971		71,512		37,670		64,822		930
Residential mortgage		84,968		94,355		12,976		88,466		947
Total consumer		147,939		165,867		50,646		153,288		1,877
Total loans	$	567,954	$	673,977	$	127,710	$	606,833	$	6,075

* Interest income recognized included $2.6 million of interest income recognized on accruing restructured loans for the six months ended June 30, 2011.

The following table presents impaired loans at December 31, 2010.

	Recorded		Unpaid Principal				Average Recorded		Interest Income
	Investment		Balance		Related Allowance		Investment		Recognized *
					($ in Thousands)
Loans with a related allowance
Commercial and industrial	$	80,507	$	100,297	$	29,900	$	93,966	$	2,399
Commercial real estate		137,808		151,723		33,487		146,880		3,224
Real estate construction		77,312		85,173		29,098		64,049		920
Lease financing		16,680		16,680		6,364		18,832		74
Total commercial		312,307		353,873		98,849		323,727		6,617
Home equity		59,975		61,894		28,933		62,805		1,652
Installment		11,231		11,649		7,776		12,481		294
Total retail		71,206		73,543		36,709		75,286		1,946
Residential mortgage		86,163		91,749		8,832		92,602		2,514
Total consumer		157,369		165,292		45,541		167,888		4,460
Total loans	$	469,676	$	519,165	$	144,390	$	491,615	$	11,077
Loans with no related allowance
Commercial and industrial	$	29,318	$	35,841	$	—	$	28,831	$	806
Commercial real estate		101,731		119,963		—		111,267		2,203
Real estate construction		40,149		58,662		—		55,376		1,483
Lease financing		400		400		—		745		—
Total commercial		171,598		214,866		—		196,219		4,492
Home equity		3,478		3,483		—		3,414		102
Installment		5		5		—		7		—
Total retail		3,483		3,488		—		3,421		102
Residential mortgage		9,534		11,267		—		10,675		246
Total consumer		13,017		14,755		—		14,096		348
Total loans	$	184,615	$	229,621	$	—	$	210,315	$	4,840
Total
Commercial and industrial	$	109,825	$	136,138	$	29,900	$	122,797	$	3,205
Commercial real estate		239,539		271,686		33,487		258,147		5,427
Real estate construction		117,461		143,835		29,098		119,425		2,403
Lease financing		17,080		17,080		6,364		19,577		74
Total commercial		483,905		568,739		98,849		519,946		11,109
Home equity		63,453		65,377		28,933		66,219		1,754
Installment		11,236		11,654		7,776		12,488		294
Total retail		74,689		77,031		36,709		78,707		2,048
Residential mortgage		95,697		103,016		8,832		103,277		2,760
Total consumer		170,386		180,047		45,541		181,984		4,808
Total loans	$	654,291	$	748,786	$	144,390	$	701,930	$	15,917

* Interest income recognized included $4.0 million of interest income recognized on accruing restructured loans for the year ended December 31, 2010.