Loans and Leases, Net

12 Months Ended

Dec. 31, 2011

Loans, Net [Abstract]

Loans, Net

NOTE 4: Loans and Leases, Net

Recorded Investment in Loans and Leases. The following table summarizes recorded investment, principal amounts outstanding, net of unamortized premiums and discounts, net of deferred fees and/or costs, plus accrued interest in loans and leases by portfolio segment at December 31, 2011 and 2010:

	At December 31, 2011
(In thousands)	Residential		Consumer		Commercial		Commercial Real Estate		Equipment Financing		Total
Loans and Leases:
Ending balance	$	3,219,890	$	2,760,030	$	2,385,791	$	2,384,889	$	474,804	$	11,225,404
Accrued interest		10,992		8,777		6,585		7,186		—		33,540
Total recorded investment (b)	$	3,230,882	$	2,768,807	$	2,392,376	$	2,392,075	$	474,804	$	11,258,944
Total recorded investment: individually evaluated for impairment	$	135,311	$	36,629	$	107,218	$	212,850	$	3,268	$	495,276
Total recorded investment: collectively evaluated for impairment	$	3,095,571	$	2,732,178	$	2,285,158	$	2,179,225	$	471,536	$	10,763,668

	At December 31, 2010
(In thousands)	Residential		Consumer		Commercial (a)		Commercial Real Estate (a)		Equipment Financing		Total
Loans and Leases:
Ending balance (a)	$	3,147,492	$	2,859,221	$	2,103,570	$	2,196,989	$	710,925	$	11,018,197
Accrued interest		11,100		8,927		5,899		6,875		—		32,801
Total recorded investment (b)	$	3,158,592	$	2,868,148	$	2,109,469	$	2,203,864	$	710,925	$	11,050,998
Total recorded investment: individually evaluated for impairment	$	122,514	$	32,157	$	148,751	$	248,196	$	17,479	$	569,097
Total recorded investment: collectively evaluated for impairment	$	3,036,078	$	2,835,991	$	1,960,718	$	1,955,668	$	693,446	$	10,481,901

(a) Certain previously reported information has been corrected to reflect the deferment of certain commercial loan fees. For more information refer to Note 1.

(b) The recorded investment balance includes net deferred fees and unamortized premiums of $20.6 million and $31.8 million at December 31, 2011 and 2010, respectively.

As of December 31, 2011, the Company had pledged $4.2 billion of net eligible loan collateral to support available borrowing capacity at either the FHLB of Boston or the Federal Reserve discount window.

Allowance for Loan and Lease Losses. The following table summarizes the allowance for loan and lease losses by portfolio segment for the years ended December 31, 2011, 2010 and 2009:

	Year ended December 31, 2011
(In thousands)	Residential			Consumer			Commercial			Commercial Real Estate			Equipment Financing			Unallocated			Total
Allowance for loan and lease losses:
Balance, beginning of period	$	30,792		$	95,071		$	74,470		$	77,695		$	21,637		$	22,000		$	321,665
Provision (benefit) charged to expense		14,364			20,262			20,868			(10,505	)		(16,989	)		(5,500	)		22,500
Losses charged off		(11,524	)		(52,997	)		(39,933	)		(22,721	)		(2,154	)		—			(129,329	)
Recoveries		933			5,449			5,276			544			6,449			—			18,651
Balance, end of period	$	34,565		$	67,785		$	60,681		$	45,013		$	8,943		$	16,500		$	233,487
Ending balance: individually evaluated for impairment	$	19,367		$	5,167		$	12,996		$	9,071		$	4		$	—		$	46,605
Ending balance: collectively evaluated for impairment	$	15,198		$	62,618		$	47,685		$	35,942		$	8,939		$	16,500		$	186,882

	Year ended December 31, 2010
(In thousands)	Residential			Consumer			Commercial			Commercial Real Estate			Equipment Financing			Unallocated		Total
Allowance for loan and lease losses:
Balance, beginning of period	$	26,895		$	102,017		$	88,406		$	74,753		$	29,113		$	20,000	$	341,184
Provision charged to expense		19,217			54,632			13,349			21,085			4,717			2,000		115,000
Losses charged off		(16,991	)		(66,215	)		(31,570	)		(19,139	)		(16,760	)		—		(150,675	)
Recoveries		1,671			4,637			4,285			996			4,567			—		16,156
Balance, end of period	$	30,792		$	95,071		$	74,470		$	77,695		$	21,637		$	22,000	$	321,665
Ending balance: individually evaluated for impairment	$	13,562		$	3,466		$	10,722		$	8,166		$	81		$	—	$	35,997
Ending balance: collectively evaluated for impairment	$	17,230		$	91,605		$	63,748		$	69,529		$	21,556		$	22,000	$	285,668

	Year ended December 31, 2009
(In thousands)	Residential			Consumer			Commercial			Commercial Real Estate			Equipment Financing			Unallocated		Total
Allowance for loan and lease losses:
Balance, beginning of period	$	23,578		$	57,665		$	75,285		$	52,649		$	9,355		$	16,797	$	235,329
Provision charged to expense (a)		20,803			121,120			70,989			39,235			47,350			3,203		302,700
Losses charged off		(20,013	)		(79,967	)		(58,978	)		(17,140	)		(29,801	)		—		(205,899	)
Allowance for loans sold		—			—			(469	)		—			—			—		(469	)
Recoveries		2,527			3,199			1,579			9			2,209			—		9,523
Balance, end of period	$	26,895		$	102,017		$	88,406		$	74,753		$	29,113		$	20,000	$	341,184
Ending balance: individually evaluated for impairment	$	8,728		$	1,865		$	18,983		$	7,443		$	11		$	—	$	37,030
Ending balance: collectively evaluated for impairment	$	18,167		$	100,152		$	69,423		$	67,310		$	29,102		$	20,000	$	304,154

(a) Excludes $0.3 million for unfunded credit commitments as compared to the Consolidated Statements of Operations.

Impaired Loans and Leases. At December 31, 2011, the recorded investment balance of impaired loans and leases totaled $495.3 million and included $338.9 million of loans and leases with $46.6 million of established specific reserves and included $444.3 million of TDRs. At December 31, 2010, the recorded investment of impaired loans and leases totaled $569.1 million and included $363.0 million of loans and leases with established specific reserves of $36.0 million and included $450.2 million of TDRs.

The following tables summarize impaired loans and leases by class as of December 31, 2011 and 2010:

	At December 31, 2011
(In thousands)	Unpaid Principal Balance		Total Recorded Investment		Recorded Investment No Allowance		Recorded Investment With Allowance		Related Valuation Allowance
Residential:
1-4 family	$	133,123	$	124,461	$	—	$	124,461	$	16,611
Permanent-NCLC		12,005		10,718		—		10,718		2,747
Construction		129		132		—		132		9
Liquidating portfolio-construction loans		—		—		—		—		—
Consumer:
Home equity loans		35,285		31,153		4		31,149		4,116
Liquidating portfolio-home equity loans		7,277		5,469		3		5,466		1,050
Other consumer		7		7		—		7		1
Commercial:
Commercial non-mortgage		118,293		105,359		30,207		75,152		12,996
Asset-based loans		7,814		1,859		1,859		—		—
Commercial real estate:
Commercial real estate		195,838		189,575		105,618		83,957		8,514
Commercial construction		7,347		7,373		—		7,373		557
Residential development		16,495		15,902		15,902		—		—
Equipment Financing		11,241		3,268		2,751		517		4
Totals:
Residential		145,257		135,311		—		135,311		19,367
Consumer		42,569		36,629		7		36,622		5,167
Commercial		126,107		107,218		32,066		75,152		12,996
Commercial real estate		219,680		212,850		121,520		91,330		9,071
Equipment Financing		11,241		3,268		2,751		517		4
Total	$	544,854	$	495,276	$	156,344	$	338,932	$	46,605

	At December 31, 2010
(In thousands)	Unpaid Principal Balance		Total Recorded Investment		Recorded Investment No Allowance		Recorded Investment With Allowance		Related Valuation Allowance
Residential: (a)
1-4 family	$	117,997	$	112,402	$	146	$	112,256	$	11,358
Permanent-NCLC		10,789		10,111		—		10,111		2,204
Construction		—		—		—		—		—
Liquidating portfolio-construction loans		165		1		1		—		—
Consumer: (a)
Home equity loans		31,174		26,664		95		26,569		2,577
Liquidating portfolio-home equity loans		9,707		5,485		39		5,446		888
Other consumer		8		8		—		8		1
Commercial:
Commercial non-mortgage		140,284		134,944		52,772		82,172		10,589
Asset-based loans		15,731		13,807		10,382		3,425		133
Commercial real estate:
Commercial real estate		183,521		180,137		88,638		91,499		5,054
Commercial construction		39,468		36,296		17,823		18,473		2,015
Residential development		33,082		31,763		21,139		10,624		1,097
Equipment Financing		29,059		17,479		15,020		2,459		81
Totals:
Residential		128,951		122,514		147		122,367		13,562
Consumer		40,889		32,157		134		32,023		3,466
Commercial		156,015		148,751		63,154		85,597		10,722
Commercial real estate		256,071		248,196		127,600		120,596		8,166
Equipment Financing		29,059		17,479		15,020		2,459		81
Total	$	610,985	$	569,097	$	206,055	$	363,042	$	35,997

(a) As permitted in accordance with applicable accounting guidance, non-TDR residential and consumer loans that are collectively evaluated for impairment on a pooled basis have been removed from the "Residential" and "Consumer" data with respect to impaired loans and leases with no valuation allowance as originally presented at December 31, 2010. Management believes that these changes are immaterial to Webster's financial statements and align reporting of such data more closely with peer banks.

The following table summarizes interest income recognized by class of impaired loans and leases for the periods presented:

	Years ended December 31,
	2011				2010				2009
(In thousands)	Average Recorded Investment		Total Interest Income		Average Recorded Investment		Total Interest Income		Average Recorded Investment		Total Interest Income (a)
Residential:
1-4 family	$	118,432	$	4,750	$	77,814	$	2,643	$	32,665	$	935
Permanent-NCLC		10,414		420		11,168		243		13,434		193
Construction		66		8		—		—		489		—
Liquidating portfolio-construction loans		1		—		2		4		4,231		6
Consumer:
Home equity loans		28,909		1,434		16,613		716		8,726		228
Liquidating portfolio-home equity loans		5,477		349		3,797		217		4,277		141
Other consumer		7		—		4		—		83		—
Commercial:
Commercial non-mortgage		120,152		4,529		123,480		4,409		80,375		3,639
Asset-based loans		7,833		251		13,847		609		14,540		—
Commercial real estate:
Commercial real estate		184,856		6,499		133,846		5,390		51,796		3,852
Commercial construction		21,835		887		37,669		603		25,673		—
Residential development		23,832		527		53,956		1,023		76,553		1,073
Equipment Financing		10,373		78		18,458		287		9,719		—
Totals:
Residential		128,913		5,178		88,984		2,890		50,819		1,134
Consumer		34,393		1,783		20,414		933		13,086		369
Commercial		127,985		4,780		137,327		5,018		94,915		3,639
Commercial real estate		230,523		7,913		225,471		7,016		154,022		4,925
Equipment Financing		10,373		78		18,458		287		9,719		—
Total	$	532,187	$	19,732	$	490,654	$	16,144	$	322,561	$	10,067

(a) Interest income calculated on impaired loans as of December 31, 2009.

Of the total interest income recognized for the residential and consumer portfolios, $1.8 million, $1.9 million and $1.5 million of interest income was recognized on a cash basis method of accounting for the years ended December 31, 2011, 2010 and 2009, respectively.

Loans and Leases Portfolio Aging. The following table summarizes the recorded investment of the Company's loan and lease portfolio aging by class as of December 31, 2011 and 2010:

	At December 31, 2011
(In thousands)	30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		> 90 Days Past Due and Accruing		Non-accrual		Total Past Due		Current		Total Loans and Leases
Residential:
1-4 family	$	15,939	$	7,245	$	—	$	75,977	$	99,161	$	3,080,870	$	3,180,031
Permanent-NCLC		802		408		—		4,636		5,846		15,656		21,502
Construction		292		—		—		1,234		1,526		27,815		29,341
Liquidating portfolio-construction loans		—		—		—		—		—		8		8
Consumer:
Home equity loans		14,859		5,891		—		25,115		45,865		2,534,998		2,580,863
Liquidating portfolio-home equity loans		3,231		1,459		—		5,174		9,864		140,247		150,111
Other consumer		346		119		—		117		582		37,251		37,833
Commercial:
Commercial non-mortgage		3,267		1,399		162		27,969		32,797		1,905,085		1,937,882
Asset-based loans		—		—		—		1,904		1,904		452,590		454,494
Commercial real estate:
Commercial real estate		1,330		452		433		32,202		34,417		2,244,357		2,278,774
Commercial construction		—		—		—		—		—		73,525		73,525
Residential development		—		—		135		6,760		6,895		32,881		39,776
Equipment Financing		2,685		2,115		—		7,154		11,954		462,850		474,804
Total	$	42,751	$	19,088	$	730	$	188,242	$	250,811	$	11,008,133	$	11,258,944

	At December 31, 2010
(In thousands)	30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		> 90 Days Past Due and Accruing		Non-accrual		Total Past Due		Current		Total Loans and Leases
Residential:
1-4 family	$	13,836	$	7,431	$	—	$	91,711	$	112,978	$	2,997,718	$	3,110,696
Permanent-NCLC		—		—		—		6,805		6,805		18,235		25,040
Construction		—		541		—		855		1,396		21,443		22,839
Liquidating portfolio-construction loans		—		—		—		9		9		8		17
Consumer:
Home equity loans		15,540		6,006		—		34,892		56,438		2,599,624		2,656,062
Liquidating portfolio-home equity loans		4,330		2,000		—		10,299		16,629		163,701		180,330
Other consumer		295		114		—		119		528		31,228		31,756
Commercial:
Commercial non-mortgage		3,840		1,420		93		34,363		39,716		1,613,880		1,653,596
Asset-based loans		—		—		—		7,801		7,801		448,072		455,873
Commercial real estate:
Commercial real estate		4,031		7,126		—		41,106		52,263		2,016,919		2,069,182
Commercial construction		—		—		—		10,856		10,856		63,987		74,843
Residential development		198		—		—		15,458		15,656		44,183		59,839
Equipment Financing		6,360		1,577		—		20,482		28,419		682,506		710,925
Total	$	48,430	$	26,215	$	93	$	274,756	$	349,494	$	10,701,504	$	11,050,998

Loans and Leases on Non-accrual Status. Accrual of interest is discontinued if a loan or lease is placed on non-accrual status. When placed on non-accrual status, unpaid accrued interest is reversed and charged against interest income. Residential and consumer loans are placed on non-accrual status after 90 days past due. All commercial and commercial real estate loans and equipment financing leases are subject to a detailed review by the Company's credit risk team when 90 days past due or when payment is uncertain and a specific determination is made to put a loan or lease on non-accrual status.

Interest on non-accrual loans and leases that would have been recorded as additional interest income for the years ended December 31, 2011, 2010 and 2009 had the loans and leases been current in accordance with their original terms, totaled $13.8 million, $13.3 million and $20.0 million, respectively.

Troubled Debt Restructurings. The recorded investment balance of TDRs approximated $444.3 million and $450.2 million at December 31, 2011 and 2010, respectively. TDRs on accrual status were $367.3 million and $352.9 million, while TDRs on non-accrual status were $77.0 million and $97.3 million at December 31, 2011 and 2010, respectively. Management has reviewed the potential TDR population from the beginning of 2011, under ASU No. 2011-02, to affirm the classification presented herewith. At December 31, 2011, approximately 76.0% of the accruing TDRs have been performing in accordance with the restructured terms for more than one year. At December 31, 2011 and 2010, the allowance for loan and lease losses included specific reserves of $44.8 million and $30.7 million related to TDRs, respectively. For the years ended December 31, 2011 and 2010, Webster charged off $28.7 million and $10.3 million for the portion of TDRs deemed to be uncollectible. The amount of additional funds committed to borrowers in TDR status was $5.5 million and $18.4 million at December 31, 2011 and 2010, respectively. The amount of such funds may be limited by contractual rights and/or the underlying collateral supporting the loan or lease.

The following table provides information on loans and leases modified as TDRs during the years ended December 31, 2011 and 2010:

	Years ended December 31,
	2011									2010
(Dollars in thousands)	Number of Loans and Leases		Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Post- Modification Coupon Rate			Number of Loans and Leases		Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Post- Modification Coupon Rate
Residential:
1-4 family		131	$	29,728	$	29,728		4.1	%		433	$	110,205	$	110,205		4.6	%
Permanent-NCLC		6		2,211		2,211		4.0			24		10,509		10,509		4.9
Construction		—		—		—		—			6		1,146		1,146		6.4
Consumer:
Home equity loans		106		9,422		9,422		4.3			337		26,702		26,702		4.8
Liquidating portfolio-home equity loans		26		1,428		1,428		5.4			95		5,695		5,695		5.7
Commercial:
Commercial non-mortgage		48		45,507		45,507		6.4			67		47,010		47,010		5.6
Asset-based loans		3		2,563		2,563		5.2			3		10,462		10,462		7.1
Commercial real estate:
Commercial real estate		21		47,544		47,544		4.1			32		114,091		114,091		4.2
Commercial construction		1		10,100		10,100		3.0			3		25,127		25,127		4.2
Residential development		2		719		719		5.3			5		11,545		11,545		3.7
Equipment Financing		2		216		216		7.9			8		1,444		1,444		7.2
TOTAL TDRs		346	$	149,438	$	149,438		4.8	%		1,013	$	363,936	$	363,936		4.7	%

TDR loans may be modified by means of extended maturity, below market adjusted interest rates, a combination of rate and maturity, or by other means including covenant modifications, or other concessions. The following table provides information on how loans and leases were modified as TDRs during the years ended December 31, 2011 and 2010:

	Years ended December 31,
	2011										2010
(In thousands)	Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other (a)		Total		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other (a)		Total
Residential:
1-4 family	$	8,332	$	2,706	$	16,555	$	2,135	$	29,728	$	20,166	$	16,193	$	60,727	$	13,119	$	110,205
Permanent-NCLC		—		—		2,211		—		2,211		600		1,918		7,733		258		10,509
Construction		—		—		—		—		—		133		—		1,013		—		1,146
Consumer:
Home equity loans		4,760		—		4,187		475		9,422		10,056		1,132		13,076		2,438		26,702
Liquidating portfolio-home equity loans		631		—		797		—		1,428		1,421		72		4,177		25		5,695
Commercial:
Commercial non-mortgage		5,607		3,217		301		36,382		45,507		18,507		895		8,635		18,973		47,010
Asset-based loans		—		—		2,563		—		2,563		—		—		—		10,462		10,462
Commercial real estate:
Commercial real estate		18,424		5,996		539		22,585		47,544		31,893		1,239		239		80,720		114,091
Commercial construction		—		—		—		10,100		10,100		7,601		—		—		17,526		25,127
Residential development		—		—		—		719		719		—		—		—		11,545		11,545
Equipment Financing		—		216		—		—		216		428		—		195		821		1,444
TOTAL TDRs	$	37,754	$	12,135	$	27,153	$	72,396	$	149,438	$	90,805	$	21,449	$	95,795	$	155,887	$	363,936

(a) Other includes covenant modifications, forbearance and/or other concessions.

The Company's loan and lease portfolio at December 31, 2011 included nine loans with an A Note/B Note structure, with a recorded investment of $32.7 million. The loans were restructured into A Note/B Note structures as a result of evaluating the cash flow of the borrowers to support repayment. Webster immediately charged off the balance of B Notes totaling $11.8 million at the time of restructure. TDR classification may be removed on A Notes if the borrowers demonstrate compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which would be provided to a borrower with similar credit at the time of restructuring. The A Notes are paying under the terms of the modified loan agreements. Five of the nine A Notes are on accrual status, as the borrowers are paying under the terms of the loan agreements prior to and subsequent to the modification. The remaining A Notes are on non-accrual status due to the continuing financial difficulties of the borrowers.

The following table provides information on loans and leases modified as TDR's within the previous 12 months and for which there were payment defaults during the years ended December 31, 2011 and 2010.

	Years ended December 31,
	2011				2010
(Dollars in thousands)	Number of Loans and Leases		Recorded Investment		Number of Loans and Leases		Recorded Investment
Residential:
1-4 family		9	$	1,625		7	$	1,487
Permanent-NCLC		—		—		—		—
Construction		—		—		—		—
Consumer:
Home equity loans		8		1,195		8		469
Liquidating portfolio-home equity loans		2		108		2		104
Other consumer		—		—		—		—
Commercial:
Commercial non-mortgage		3		804		4		647
Asset-based loans		2		522		—		—
Commercial real estate:
Commercial real estate		3		1,371		1		312
Commercial construction		—		—		—		—
Residential development		—		—		—		—
Equipment Financing		—		—		—		—
TOTAL		27	$	5,625		22	$	3,019

The recorded investment in Commercial, Commercial Real Estate and Equipment Financing TDRs segregated by risk rating exposure at December 31, 2011 and December 31, 2010, are as follows:

	At December 31,
(In thousands)	2011		2010
(1) - (6) Pass	$	46,524	$	5,167
(7) Special Mention		4,622		8,347
(8) Substandard		220,899		280,834
(9) Doubtful		327		1,131
(10) Loss		—		—
Total	$	272,372	$	295,479

The Commercial TDR balance had a net decrease of $23.1 million from December 31, 2010 to December 31, 2011. During this period, increases in the Pass category are primarily due to $26.1 million in upgrades from the Substandard category coupled with the addition of three new pass rated Commercial Real Estate TDRs in the aggregate amount of $16.4 million. The decrease in the Special Mention category from December 31, 2010 to December 31, 2011 is due to the payoff of one Commercial Real Estate loan partially offset by the addition of one Commercial Non-Mortgage credit upgraded from the Substandard category. The net decrease in the Substandard category from December 31, 2010 to December 31, 2011 is due to the aforementioned upgrades to the Pass and Special Mention categories coupled with several large sales, payoffs and pay downs which are partially offset with new TDRs to this category.

Credit Risk Management. The Company has certain credit policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis and frequently reviews reports related to loan production, loan quality, concentration of credit, loan delinquencies and non-performing and potential problem loans.

Commercial and industrial loans are underwritten after evaluating and understanding the borrower's ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationships rather than transactional banking. Once it is determined that the borrower's management possesses sound ethics and solid business acumen, the Company's management examines current and projected cash flows to determine the ability of the borrower to repay obligations as agreed. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed and may incorporate a personal guarantee. However, some loans may be made on an unsecured basis.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those specific to real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is largely dependent on the successful operation of the property securing the loan, the market in which the property is located and the tenants that conduct business at the property securing the loan. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company's commercial real estate portfolio are diverse in terms of type and geographic location, which helps reduce its exposure to adverse economic events that may affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. The Company also utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting its loan portfolio.

Construction loans on commercial properties have unique risk characteristics and are provided to experienced developers/sponsors with strong track records of successful completion and sound financial condition and are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the complete project. These estimates may be subject to change as the construction project proceeds. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections performed by third-party professionals and the internal staff.

To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed, jointly by line and Risk Management personnel. Policies and procedures, coupled with relatively small loan amounts, and predominately collateralized structures spread across many individual borrowers, minimize risk. Trend and outlook reports are reviewed by management on a regular basis. Underwriting factors for mortgage and home equity loans include the borrower's FICO score, the loan amount relative to property value and the borrower's debt to income level and are also influenced by statutory requirements.

Credit Quality Indicators. To measure credit risk for the Commercial, Commercial Real Estate and Equipment Financing portfolios, the Company employs a dual grade credit risk grading system for estimating the probability of borrower default and the loss given default. The credit risk grade system assigns a rating to each borrower and to the facility, which together form Composite Credit Risk Profile ("CCRP"). The credit risk grade system categorizes borrowers by common financial characteristics that measure the credit strength of borrowers and facilities by common structural characteristics. The CCRP has ten grades, with each grade corresponding to a progressively greater risk of default. Grades 1 through 6 are considered pass ratings and 7 through 10 are criticized as defined by the regulatory agencies. The rating model assumptions are actively reviewed and tested against industry data and actual experience. Risk ratings are assigned to differentiate risk within the portfolio and are reviewed on an ongoing basis and revised, if needed, to reflect changes in the borrowers' current financial position and outlook, risk profiles and the related collateral and structural positions.

A "special mention" (7) credit has the potential weakness that, if left uncorrected, may result in deterioration of the repayment prospects for the asset. "Substandard" (8) assets have a well defined weakness that jeopardizes the full repayment of the debt. An asset rated "doubtful" (9) has all the same weaknesses as substandard credit with the added characteristic that the weakness makes collection or liquidation in full, given current facts, conditions, and values, improbable. Assets classified as "loss" (10) in accordance with regulatory guidelines are considered uncollectible and charged off.

At December 31, 2011 and 2010, the recorded investment of Commercial and Commercial Real Estate loans and Equipment Financing leases segregated by risk rating exposure are as follows:

	Commercial At December 31,				Commercial Real Estate At December 31,				Equipment Financing At December 31,
(In thousands)	2011		2010		2011		2010		2011		2010
(1) - (6) Pass	$	2,148,970	$	1,713,109	$	2,036,738	$	1,670,901	$	407,943	$	631,189
(7) Special Mention		32,578		59,162		58,238		71,919		15,416		30,745
(8) Substandard		208,555		329,017		296,478		460,209		51,445		48,991
(9) Doubtful		2,273		8,181		621		835		—		—
(10) Loss		—		—		—		—		—		—
Total	$	2,392,376	$	2,109,469	$	2,392,075	$	2,203,864	$	474,804	$	710,925

The Company utilizes the loan portfolio aging migration analysis to estimate reserves for the Consumer and Residential portfolios. Refer to the loan portfolio aging analysis table included in this footnote.

For Consumer and Residential loans, the Company considers factors such as updated FICO scores, unemployment, home prices, loan to value and geography as credit quality indicators. On an ongoing basis, the Company calculates an estimate of the current value of property secured as collateral for both home equity and residential first mortgage lending products ("current LTV"). The estimate is based on home price indices compiled by the S&P/Case-Shiller Home Price Indices. The Case-Shiller data indicates trends for 20 Metropolitan Statistical Areas ("MSA"). The trend data is applied to the loan portfolios taking into account the age of the most recent valuation and geographic area. The Case-Shiller estimates, using broad MSAs are informative for regional analysis but are not actionable on an individual loan basis. They are used to estimate the amount of loans that may have balances in excess of the underlying collateral.