Allowance for Credit Losses and Credit Quality

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Allowance for Credit Losses and Credit Quality

ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

Allowance for Credit Losses Activity

A summary of changes in the allowance for credit losses for the six months ended June 30 is as follows:

(in thousands)	2019			2018
Allowance for loan and lease losses at beginning of period	$	140,571		$	140,891
Provision for loan and lease losses	24,067			15,581
Transfer of balance to OREO and other	(2,863		)	(3,943		)
Charge-offs	(19,194		)	(22,734		)
Recoveries	3,805			6,781
Allowance for loan and lease losses at end of period	$	146,386		$	136,576
Reserve for unfunded commitments at beginning of period	$	14,830		$	13,208
Balance created in acquisition accounting	—			900
Provision for unfunded lending commitments	451			325
Reserve for unfunded commitments at end of period	$	15,281		$	14,433
Allowance for credit losses at end of period	$	161,667		$	151,009

A summary of changes in the allowance for credit losses, by loan portfolio type, for the six months ended June 30 is as follows:

	2019
(in thousands)	Commercial Real Estate			Commercial and Industrial			Residential Mortgage			Consumer and Other			Total
Allowance for loan and lease losses at beginning of period	$	51,806		$	54,096		$	12,998		$	21,671		$	140,571
Provision for (Reversal of) loan and lease losses	15,204			5,077			(584		)	4,370			24,067
Transfer of balance to OREO and other	(256		)	(1		)	(2,862		)	256			(2,863		)
Charge-offs	(641		)	(11,880		)	(168		)	(6,505		)	(19,194		)
Recoveries	318			1,796			157			1,534			3,805
Allowance for loan and lease losses at end of period	$	66,431		$	49,088		$	9,541		$	21,326		$	146,386
Reserve for unfunded commitments at beginning of period	$	4,869		$	6,198		$	866		$	2,897		$	14,830
Provision for (Reversal of) unfunded commitments	603			(313		)	(206		)	367			451
Reserve for unfunded commitments at end of period	$	5,472		$	5,885		$	660		$	3,264		$	15,281
Allowance on loans individually evaluated for impairment	$	4,673		$	7,656		$	349		$	3,176		$	15,854
Allowance on loans collectively evaluated for impairment	56,251			39,854			5,127			18,008			119,240
Allowance on loans acquired with deteriorated credit quality	5,507			1,578			4,065			142			11,292
Loans and leases, net of unearned income:
Balance at end of period	$	9,818,270		$	6,161,759		$	4,538,194		$	2,837,088		$	23,355,311
Balance at end of period individually evaluated for impairment	74,331			54,860			41,363			39,127			209,681
Balance at end of period collectively evaluated for impairment	9,596,594			6,084,342			4,414,038			2,742,354			22,837,328
Balance at end of period acquired with deteriorated credit quality	147,345			22,557			82,793			55,607			308,302

	2018
(in thousands)	Commercial Real Estate			Commercial and Industrial			Residential Mortgage			Consumer and Other			Total
Allowance for loan and lease losses at beginning of period	$	54,201		$	53,916		$	9,117		$	23,657		$	140,891
Provision for (Reversal of) loan and lease losses	(3,404		)	10,083			1,112			7,790			15,581
Transfer of balance to OREO and other	(506		)	(18		)	6			(3,425		)	(3,943		)
Charge-offs	(1,258		)	(13,575		)	(196		)	(7,705		)	(22,734		)
Recoveries	384			4,403			44			1,950			6,781
Allowance for loan and lease losses at end of period	$	49,417		$	54,809		$	10,083		$	22,267		$	136,576
Reserve for unfunded commitments at beginning of period	$	4,531		$	5,309		$	555		$	2,813		$	13,208
Balance created in acquisition accounting	129			81			—			690			900
Provision for (Reversal of) unfunded commitments	467			(306		)	160			4			325
Reserve for unfunded commitments at end of period	$	5,127		$	5,084		$	715		$	3,507		$	14,433
Allowance on loans individually evaluated for impairment	$	2,274		$	11,946		$	168		$	3,199		$	17,587
Allowance on loans collectively evaluated for impairment	40,763			40,540			3,816			18,742			103,861
Allowance on loans acquired with deteriorated credit quality	6,380			2,323			6,099			326			15,128
Loans and leases, net of unearned income:
Balance at end of period	$	9,292,304		$	5,512,416		$	4,124,538		$	3,146,525		$	22,075,783
Balance at end of period individually evaluated for impairment	84,217			66,683			5,873			35,550			192,323
Balance at end of period collectively evaluated for impairment	9,017,756			5,415,093			3,984,086			3,029,027			21,445,962
Balance at end of period acquired with deteriorated credit quality	190,331			30,640			134,579			81,948			437,498

Portfolio Segment Risk Factors

Commercial real estate loans include loans to commercial customers for long-term financing of land and buildings or for land development or construction of a building. These loans are repaid through revenues from operations of the businesses, rents of properties, sales of properties and refinances. Commercial and industrial loans and leases represent loans to commercial customers to finance general working capital needs, equipment purchases and leases and other projects where repayment is derived from cash flows resulting from business operations. The Company originates commercial business loans on a secured and, to a lesser extent, unsecured basis.

Residential mortgage loans consist of loans to consumers to finance a primary residence. The vast majority of the residential mortgage loan portfolio is comprised of non-conforming 1-4 family mortgage loans secured by properties located in the Company's market areas and originated under terms and documentation that permit their sale in a secondary market.

Consumer loans are offered by the Company in order to provide a full range of retail financial services to its customers and include home equity, credit card and other direct consumer installment loans. The Company originates substantially all of its consumer loans in its primary market areas. Loans in the consumer segment are sensitive to unemployment and other key consumer economic measures.

Credit Quality Indicators

For commercial loans and leases, the Company utilizes regulatory classification ratings to monitor credit quality. Loans with a "pass" rating are those that the Company believes will be fully repaid in accordance with the contractual loan terms. Commercial loans and leases that are "criticized" are those that have some weakness or potential weakness that indicate an increased probability of future loss. "Criticized" loans are grouped into three categories: "special mention", "substandard", and "doubtful". Special mention loans have potential weaknesses that, if left uncorrected, may result in deterioration of the Company's credit position at some future date.

Substandard commercial loans have well-defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful commercial loans have the same weaknesses as substandard loans with the added characteristics that the probability of loss is high and collection of the full amount is improbable. Substandard and doubtful loans are collectively referred to as "classified" loans. For residential mortgage loans and consumer loans, the Company primarily uses the loan's payment and delinquency status to monitor credit quality. These credit quality indicators are continually updated and monitored.

The recorded investment in loans and leases by credit quality indicator is presented in the following tables. Asset risk classifications for commercial loans and leases reflect the classification as of June 30, 2019 and December 31, 2018. Credit quality information in the tables below includes total loans acquired (including acquired impaired loans) at the net loan balance, after the application of premiums and discounts. Loan premiums and discounts represent the adjustment of acquired loans to fair value at the acquisition date, as adjusted for income accretion and changes in cash flow estimates in subsequent periods.

	June 30, 2019										December 31, 2018
(in thousands)	Pass		Special Mention		Sub- standard		Doubtful		Total		Pass		Special Mention		Sub- standard		Doubtful		Total
Real estate - construction	$	1,320,007	$	12,262	$	10,715	$	—	$	1,342,984	$	1,182,554	$	1,062	$	12,740	$	10	$	1,196,366
Real estate - owner-occupied	2,308,176		25,114		37,126		2,727		2,373,143		2,328,999		25,526		41,297		—		2,395,822
Real estate - non-owner-occupied	6,011,800		48,323		39,832		2,188		6,102,143		5,687,963		78,009		26,512		3,633		5,796,117
Commercial and industrial	6,018,866		53,075		73,667		16,151		6,161,759		5,586,482		52,632		73,853		24,050		5,737,017
Total	$	15,658,849	$	138,774	$	161,340	$	21,066	$	15,980,029	$	14,785,998	$	157,229	$	154,402	$	27,693	$	15,125,322

	June 30, 2019						December 31, 2018
(in thousands)	Current		30+ Days Past Due		Total		Current		30+ Days Past Due		Total
Residential mortgage	$	4,459,706	$	78,488	$	4,538,194	$	4,290,152	$	69,004	$	4,359,156
Consumer - home equity	2,113,237		34,660		2,147,897		2,258,659		46,035		2,304,694
Consumer - other	682,860		6,331		689,191		721,231		9,412		730,643
Total	$	7,255,803	$	119,479	$	7,375,282	$	7,270,042	$	124,451	$	7,394,493

Impaired Loans

Information on the Company’s investment in impaired loans, which include all TDRs and all other non-accrual loans evaluated or measured individually for impairment for purposes of determining the ALLL, is presented in the following tables as of and for the periods indicated.

	June 30, 2019							December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance			Unpaid Principal Balance		Recorded Investment		Related Allowance
(in thousands)
With no related allowance recorded:
Real estate - construction	$	12,138	$	11,139	$	—		$	10,261	$	9,262	$	—
Real estate - owner-occupied	27,142		27,064		—			25,037		19,044		—
Real estate - non-owner-occupied	21,234		20,271		—			15,265		14,288		—
Commercial and industrial	33,989		30,157		—			55,554		43,886		—
Residential mortgage	32,448		31,645		—			1,244		1,221		—
Consumer - home equity	1,995		1,998		—			4,183		4,176		—
Consumer - other	—		—		—			—		—		—
With an allowance recorded:
Real estate - construction	140		127		(2		)	228		140		(11		)
Real estate - owner-occupied	8,811		8,248		(4,061		)	5,032		4,773		(520		)
Real estate - non-owner-occupied	7,683		7,482		(610		)	6,445		6,398		(105		)
Commercial and industrial	37,969		24,703		(7,656		)	46,387		27,915		(12,646		)
Residential mortgage	10,366		9,718		(349		)	5,870		5,358		(145		)
Consumer - home equity	33,194		32,702		(2,662		)	29,284		28,818		(2,427		)
Consumer - other	4,743		4,427		(514		)	4,956		4,446		(488		)
Total	$	231,852	$	209,681	$	(15,854	)	$	209,746	$	169,725	$	(16,342	)
Total commercial loans and leases	$	149,106	$	129,191	$	(12,329	)	$	164,209	$	125,706	$	(13,282	)
Total residential mortgage loans	42,814		41,363		(349		)	7,114		6,579		(145		)
Total consumer and other loans	39,932		39,127		(3,176		)	38,423		37,440		(2,915		)

	Three Months Ended June 30, 2019				Three Months Ended June 30, 2018				Six Months Ended June 30, 2019				Six Months Ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
(in thousands)
With no related allowance recorded:
Real estate - construction	$	21,339	$	341	$	12,952	$	198	$	21,340	$	678	$	12,597	$	393
Real estate - owner-occupied	24,134		326		30,899		209		27,314		569		31,265		609
Real estate - non-owner-occupied	20,305		100		15,929		121		20,360		207		16,558		250
Commercial and industrial	29,315		151		37,859		389		29,816		331		37,806		836
Residential mortgage	27,129		235		1,272		13		18,804		374		1,280		27
Consumer - home equity	1,998		22		1,910		28		1,943		44		1,922		52
With an allowance recorded:
Real estate - construction	131		1		152		—		135		2		152		—
Real estate - owner-occupied	8,578		57		19,582		82		8,628		116		19,696		192
Real estate - non-owner-occupied	7,557		42		1,631		14		7,643		122		1,705		39
Commercial and industrial	23,891		177		38,134		158		21,400		371		38,981		357
Residential mortgage	9,833		73		4,657		47		9,881		169		4,678		92
Consumer - home equity	32,885		332		28,595		304		32,341		656		28,173		600
Consumer - other	4,533		63		5,220		67		4,597		128		5,267		139
Total	$	211,628	$	1,920	$	198,792	$	1,630	$	204,202	$	3,767	$	200,080	$	3,586
Total commercial loans and leases	$	135,250	$	1,195	$	157,138	$	1,171	$	136,636	$	2,396	$	158,760	$	2,676
Total residential mortgage loans	36,962		308		5,929		60		28,685		543		5,958		119
Total consumer and other loans	39,416		417		35,725		399		38,881		828		35,362		791

As of June 30, 2019 and December 31, 2018, the Company was not committed to lend a material amount of additional funds to any customer whose loan was classified as impaired or as a TDR.