Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans

The tables below show the aging of the Company’s loan portfolio at September 30, 2018, December 31, 2017 and September 30, 2017:



As of September 30, 2018			90+ days and still accruing		60-89 days past due		30-59 days past due
(Dollars in thousands)	Nonaccrual								Current		Total Loans
Loan Balances:
Commercial
Commercial, industrial and other	$	41,322	$	—	$	2,535	$	16,451	$	4,745,178	$	4,805,486
Franchise	16,351		5,122		—		—		915,817		937,290
Mortgage warehouse lines of credit	—		—		3,000		—		168,860		171,860
Asset-based lending	910		—		590		9,083		1,023,268		1,033,851
Leases	4		—		—		80		509,591		509,675
PCI - commercial ⁽¹⁾	—		3,372		15		—		12,409		15,796
Total commercial	58,587		8,494		6,140		25,614		7,375,123		7,473,958
Commercial real estate:
Construction	1,554		—		1,823		16,228		778,725		798,330
Land	228		—		365		—		118,411		119,004
Office	1,532		—		4,058		3,021		932,166		940,777
Industrial	178		—		122		145		885,486		885,931
Retail	10,586		—		4,570		10,645		861,901		887,702
Multi-family	318		—		—		1,162		922,413		923,893
Mixed use and other	3,119		—		9,654		11,503		2,062,179		2,086,455
PCI - commercial real estate ⁽¹⁾	—		5,578		6,448		1,380		91,276		104,682
Total commercial real estate	17,515		5,578		27,040		44,084		6,652,557		6,746,774
Home equity	8,523		—		1,075		3,478		565,768		578,844
Residential real estate, including PCI	16,062		1,865		1,714		603		904,006		924,250
Premium finance receivables
Commercial insurance loans	13,802		7,028		5,945		13,239		2,845,313		2,885,327
Life insurance loans	—		—		—		22,016		4,203,465		4,225,481
PCI - life insurance loans ⁽¹⁾	—		—		—		—		173,490		173,490
Consumer and other, including PCI	355		295		430		329		114,418		115,827
Total loans, net of unearned income	$	114,844	$	23,260	$	42,344	$	109,363	$	22,834,140	$	23,123,951



As of December 31, 2017			90+ days and still accruing		60-89 days past due		30-59 days past due
(Dollars in thousands)	Nonaccrual								Current		Total Loans
Loan Balances:
Commercial
Commercial, industrial and other	$	11,260	$	—	$	3,746	$	13,392	$	4,314,107	$	4,342,505
Franchise	2,447		—		—		—		845,150		847,597
Mortgage warehouse lines of credit	—		—		—		4,000		190,523		194,523
Asset-based lending	1,550		—		283		10,057		968,576		980,466
Leases	439		—		3		1,958		410,772		413,172
PCI - commercial ⁽¹⁾	—		877		186		—		8,351		9,414
Total commercial	15,696		877		4,218		29,407		6,737,479		6,787,677
Commercial real estate
Construction	3,143		—		—		200		742,171		745,514
Land	188		—		—		5,156		121,140		126,484
Office	2,438		—		—		4,458		887,937		894,833
Industrial	811		—		—		2,412		879,796		883,019
Retail	12,328		—		668		148		938,383		951,527
Multi-family	—		—		—		1,034		914,610		915,644
Mixed use and other	3,140		—		1,423		9,641		1,921,501		1,935,705
PCI - commercial real estate ⁽¹⁾	—		7,135		2,255		6,277		112,225		127,892
Total commercial real estate	22,048		7,135		4,346		29,326		6,517,763		6,580,618
Home equity	8,978		—		518		4,634		648,915		663,045
Residential real estate, including PCI	17,977		5,304		1,303		8,378		799,158		832,120
Premium finance receivables
Commercial insurance loans	12,163		9,242		17,796		15,849		2,579,515		2,634,565
Life insurance loans	—		—		4,837		10,017		3,820,936		3,835,790
PCI - life insurance loans ⁽¹⁾	—		—		—		—		199,269		199,269
Consumer and other, including PCI	740		101		242		727		105,903		107,713
Total loans, net of unearned income	$	77,602	$	22,659	$	33,260	$	98,338	$	21,408,938	$	21,640,797


(1)	PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments.



As of September 30, 2017			90+ days and still accruing		60-89 days past due		30-59 days past due
(Dollars in thousands)	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
Loan Balances:
Commercial
Commercial, industrial and other	$	12,281	$	—	$	3,161	$	13,710	$	4,091,381	$	4,120,533
Franchise	—		—		—		16,719		836,997		853,716
Mortgage warehouse lines of credit	—		—		—		312		194,058		194,370
Asset-based lending	1,141		—		1,533		4,515		889,147		896,336
Leases	509		—		281		1,194		379,410		381,394
PCI - commercial ⁽¹⁾	—		1,489		61		—		8,135		9,685
Total commercial	13,931		1,489		5,036		36,450		6,399,128		6,456,034
Commercial real estate:
Construction	1,607		—		366		2,064		669,940		673,977
Land	196		—		—		—		102,557		102,753
Office	5,148		—		—		1,220		874,583		880,951
Industrial	1,848		—		137		438		834,062		836,485
Retail	2,200		—		3,030		3,674		925,335		934,239
Multi-family	569		—		68		3,058		861,290		864,985
Mixed use and other	3,310		—		843		3,561		1,966,601		1,974,315
PCI - commercial real estate ⁽¹⁾	—		8,443		1,394		2,940		120,299		133,076
Total commercial real estate	14,878		8,443		5,838		16,955		6,354,667		6,400,781
Home equity	7,581		—		446		2,590		662,352		672,969
Residential real estate, including PCI	14,743		1,120		2,055		165		771,416		789,499
Premium finance receivables
Commercial insurance loans	9,827		9,584		7,421		9,966		2,628,114		2,664,912
Life insurance loans	—		6,740		946		6,937		3,571,388		3,586,011
PCI - life insurance loans ⁽¹⁾	—		—		—		—		209,463		209,463
Consumer and other, including PCI	540		221		242		685		131,424		133,112
Total loans, net of unearned income, excluding covered loans	$	61,500	$	27,597	$	21,984	$	73,748	$	20,727,952	$	20,912,781
Covered loans	1,936		2,233		1,074		45		41,313		46,601
Total loans, net of unearned income	$	63,436	$	29,830	$	23,058	$	73,793	$	20,769,265	$	20,959,382


(1)	PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments.

The Company's ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans. To do so, the Company operates a credit risk rating system under which our credit management personnel assign a credit risk rating (1 to 10 rating) to each loan at the time of origination and review loans on a regular basis.

Each loan officer is responsible for monitoring his or her loan portfolio, recommending a credit risk rating for each loan in his or her portfolio and ensuring the credit risk ratings are appropriate. These credit risk ratings are then ratified by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors including: a borrower’s financial strength, cash flow coverage, collateral protection and guarantees.

The Company’s Problem Loan Reporting system automatically includes all loans with credit risk ratings of 6 through 9. This system is designed to provide an on-going detailed tracking mechanism for each problem loan. Once management determines that a loan has deteriorated to a point where it has a credit risk rating of 6 or worse, the Company’s Managed Asset Division performs an overall credit and collateral review. As part of this review, all underlying collateral is identified and the valuation methodology is analyzed and tracked. As a result of this initial review by the Company’s Managed Asset Division, the credit risk rating is reviewed and a portion of the outstanding loan balance may be deemed uncollectible or an impairment reserve may be established. The Company’s impairment analysis utilizes an independent re-appraisal of the collateral (unless such a third-party evaluation is not possible due to the unique nature of the collateral, such as a closely-held business or thinly traded securities). In the case of commercial real estate collateral, an independent third party appraisal is ordered by the Company’s Real Estate Services Group to determine if there has been any change in the underlying collateral value. These independent appraisals are reviewed by the Real Estate Services Group and sometimes by independent third party valuation experts and may be adjusted depending upon market conditions.

Through the credit risk rating process, loans are reviewed to determine if they are performing in accordance with the original contractual terms. If the borrower has failed to comply with the original contractual terms, further action may be required by the Company, including a downgrade in the credit risk rating, movement to non-accrual status, a charge-off or the establishment of a specific impairment reserve. If a loan amount, or portion thereof, is determined to be uncollectible, the loan’s credit risk rating is immediately downgraded to an 8 or 9 and the uncollectible amount is charged-off. Any loan that has a partial charge-off continues to be assigned a credit risk rating of an 8 or 9 for the duration of time that a balance remains outstanding. The Company undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses.

If, based on current information and events, it is probable that the Company will be unable to collect all amounts due to it according to the contractual terms of the loan agreement, a specific impairment reserve is established. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.

Non-performing loans include all non-accrual loans (8 and 9 risk ratings) as well as loans 90 days past due and still accruing interest, excluding PCI and covered loans. The remainder of the portfolio is considered performing under the contractual terms of the loan agreement. The following table presents the recorded investment based on performance of loans by class, excluding covered loans, per the most recent analysis at September 30, 2018, December 31, 2017 and September 30, 2017:



	Performing						Non-performing						Total
(Dollars in thousands)	September 30, 2018		December 31, 2017		September 30, 2017		September 30, 2018		December 31, 2017		September 30, 2017		September 30, 2018		December 31, 2017		September 30, 2017
Loan Balances:
Commercial
Commercial, industrial and other	$	4,764,164	$	4,331,245	$	4,108,252	$	41,322	$	11,260	$	12,281	$	4,805,486	$	4,342,505	$	4,120,533
Franchise	915,817		845,150		853,716		21,473		2,447		—		937,290		847,597		853,716
Mortgage warehouse lines of credit	171,860		194,523		194,370		—		—		—		171,860		194,523		194,370
Asset-based lending	1,032,941		978,916		895,195		910		1,550		1,141		1,033,851		980,466		896,336
Leases	509,671		412,733		380,885		4		439		509		509,675		413,172		381,394
PCI - commercial ⁽¹⁾	15,796		9,414		9,685		—		—		—		15,796		9,414		9,685
Total commercial	7,410,249		6,771,981		6,442,103		63,709		15,696		13,931		7,473,958		6,787,677		6,456,034
Commercial real estate
Construction	796,776		742,371		672,370		1,554		3,143		1,607		798,330		745,514		673,977
Land	118,776		126,296		102,557		228		188		196		119,004		126,484		102,753
Office	939,245		892,395		875,803		1,532		2,438		5,148		940,777		894,833		880,951
Industrial	885,753		882,208		834,637		178		811		1,848		885,931		883,019		836,485
Retail	877,116		939,199		932,039		10,586		12,328		2,200		887,702		951,527		934,239
Multi-family	923,575		915,644		864,416		318		—		569		923,893		915,644		864,985
Mixed use and other	2,083,336		1,932,565		1,971,005		3,119		3,140		3,310		2,086,455		1,935,705		1,974,315
PCI - commercial real estate⁽¹⁾	104,682		127,892		133,076		—		—		—		104,682		127,892		133,076
Total commercial real estate	6,729,259		6,558,570		6,385,903		17,515		22,048		14,878		6,746,774		6,580,618		6,400,781
Home equity	570,321		654,067		665,388		8,523		8,978		7,581		578,844		663,045		672,969
Residential real estate, including PCI	908,188		810,865		774,756		16,062		21,255		14,743		924,250		832,120		789,499
Premium finance receivables
Commercial insurance loans	2,864,497		2,613,160		2,645,501		20,830		21,405		19,411		2,885,327		2,634,565		2,664,912
Life insurance loans	4,225,481		3,835,790		3,579,271		—		—		6,740		4,225,481		3,835,790		3,586,011
PCI - life insurance loans ⁽¹⁾	173,490		199,269		209,463		—		—		—		173,490		199,269		209,463
Consumer and other, including PCI	115,239		106,933		132,413		588		780		699		115,827		107,713		133,112
Total loans, net of unearned income, excluding covered loans	$	22,996,724	$	21,550,635	$	20,834,798	$	127,227	$	90,162	$	77,983	$	23,123,951	$	21,640,797	$	20,912,781


(1)	PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. See Note 6 - Loans for further discussion of these purchased loans.

A summary of activity in the allowance for credit losses by loan portfolio (excluding covered loans) for the nine months ended September 30, 2018 and 2017 is as follows:



Three months ended September 30, 2018				Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total, Excluding Covered Loans
(Dollars in thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total, Excluding Covered Loans
Allowance for credit losses
Allowance for loan losses at beginning of period	$	60,727		$	57,660		$	9,551		$	6,336		$	7,734		$	1,394		$	143,402
Other adjustments	(1		)	(15		)	(2		)	(14		)	14			—			(18		)
Reclassification from allowance for unfunded lending-related commitments	—			(2		)	—			—			—			—			(2		)
Charge-offs	(3,219		)	(208		)	(561		)	(337		)	(2,512		)	(144		)	(6,981		)
Recoveries	304			193			142			466			1,142			66			2,313
Provision for credit losses	8,934			619			13			(160		)	1,796			(160		)	11,042
Allowance for loan losses at period end	$	66,745		$	58,247		$	9,143		$	6,291		$	8,174		$	1,156		$	149,756
Allowance for unfunded lending-related commitments at period end	$	—		$	1,245		$	—		$	—		$	—		$	—		$	1,245
Allowance for credit losses at period end	$	66,745		$	59,492		$	9,143		$	6,291		$	8,174		$	1,156		$	151,001
Individually evaluated for impairment	$	10,164		$	3,158		$	611		$	325		$	—		$	117		$	14,375
Collectively evaluated for impairment	55,987			56,316			8,532			5,894			8,174			1,039			135,942
Loans acquired with deteriorated credit quality	594			18			—			72			—			—			684
Loans at period end
Individually evaluated for impairment	$	67,381		$	31,952		$	11,284		$	21,781		$	—		$	401		$	132,799
Collectively evaluated for impairment	7,390,781			6,610,140			567,560			815,442			7,110,808			113,812			22,608,543
Loans acquired with deteriorated credit quality	15,796			104,682			—			9,144			173,490			1,614			304,726
Loans held at fair value	—			—			—			77,883			—			—			77,883



Three months ended September 30, 2017	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total, Excluding Covered Loans
(Dollars in thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total, Excluding Covered Loans
Allowance for credit losses
Allowance for loan losses at beginning of period	$	52,358		$	52,339		$	11,134		$	6,143		$	6,352		$	1,265		$	129,591
Other adjustments	(2		)	(38		)	—			(31		)	32			—			(39		)
Reclassification from allowance for unfunded lending-related commitments	500			(406		)	—			—			—			—			94
Charge-offs	(2,265		)	(989		)	(968		)	(267		)	(1,716		)	(213		)	(6,418		)
Recoveries	801			323			178			55			499			93			1,949
Provision for credit losses	4,343			811			212			757			1,386			433			7,942
Allowance for loan losses at period end	$	55,735		$	52,040		$	10,556		$	6,657		$	6,553		$	1,578		$	133,119
Allowance for unfunded lending-related commitments at period end	$	—		$	1,276		$	—		$	—		$	—		$	—		$	1,276
Allowance for credit losses at period end	$	55,735		$	53,316		$	10,556		$	6,657		$	6,553		$	1,578		$	134,395
Individually evaluated for impairment	$	4,568		$	1,184		$	691		$	758		$	—		$	34		$	7,235
Collectively evaluated for impairment	50,623			52,048			9,865			5,813			6,553			1,544			126,446
Loans acquired with deteriorated credit quality	544			84			—			86			—			—			714
Loans at period end
Individually evaluated for impairment	$	18,086		$	31,698		$	7,729		$	21,263		$	—		$	544		$	79,320
Collectively evaluated for impairment	6,428,263			6,236,007			665,240			735,185			6,250,923			13,581			20,447,199
Loans acquired with deteriorated credit quality	9,685			133,076			—			3,637			209,463			987			356,848
Loans held at fair value	—			—			—			29,414			—			—			29,414



Nine months ended September 30, 2018				Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
(Dollars in thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
Allowance for credit losses
Allowance for loan losses at beginning of period	$	57,811		$	55,227		$	10,493		$	6,688		$	6,846		$	840		$	137,905
Other adjustments	(3		)	(66		)	(2		)	(19		)	(12		)	—			(102		)
Reclassification from allowance for unfunded lending-related commitments	—			24			—			—			—			—			24
Charge-offs	(8,116		)	(1,176		)	(1,530		)	(1,088		)	(10,487		)	(732		)	(23,129		)
Recoveries	1,232			4,267			436			2,028			2,502			162			10,627
Provision for credit losses	15,821			(29		)	(254		)	(1,318		)	9,325			886			24,431
Allowance for loan losses at period end	$	66,745		$	58,247		$	9,143		$	6,291		$	8,174		$	1,156		$	149,756
Allowance for unfunded lending-related commitments at period end	$	—		$	1,245		$	—		$	—		$	—		$	—		$	1,245
Allowance for credit losses at period end	$	66,745		$	59,492		$	9,143		$	6,291		$	8,174		$	1,156		$	151,001



Nine months ended September 30, 2017				Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
(Dollars in thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
Allowance for credit losses
Allowance for loan losses at beginning of period	$	44,493		$	51,422		$	11,774		$	5,714		$	7,625		$	1,263		$	122,291
Other adjustments	(23		)	(121		)	—			(38		)	57			—			(125		)
Reclassification from allowance for unfunded lending-related commitments	500			(438		)	—			—			—			—			62
Charge-offs	(3,819		)	(3,235		)	(3,224		)	(742		)	(5,021		)	(522		)	(16,563		)
Recoveries	1,635			1,153			387			287			1,515			267			5,244
Provision for credit losses	12,949			3,259			1,619			1,436			2,377			570			22,210
Allowance for loan losses at period end	$	55,735		$	52,040		$	10,556		$	6,657		$	6,553		$	1,578		$	133,119
Allowance for unfunded lending-related commitments at period end	$	—		$	1,276		$	—		$	—		$	—		$	—		$	1,276
Allowance for credit losses at period end	$	55,735		$	53,316		$	10,556		$	6,657		$	6,553		$	1,578		$	134,395

A summary of activity in the allowance for covered loan losses for the three and nine months ended September 30, 2017 is as follows:



	Three Months Ended			Nine Months Ended
	September 30,			September 30,
(Dollars in thousands)	2017			2017
Balance at beginning of period	$	1,074		$	1,322
Provision for covered loan losses before benefit attributable to FDIC loss share agreements	(225		)	(1,063		)
Benefit attributable to FDIC loss share agreements	180			850
Net provision for covered loan losses	(45		)	(213		)
Increase in FDIC indemnification liability	(180		)	(850		)
Loans charged-off	(155		)	(491		)
Recoveries of loans charged-off	64			990
Net (charge-offs) recoveries	(91		)	499
Balance at end of period	$	758		$	758

In conjunction with FDIC-assisted transactions, the Company entered into loss share agreements with the FDIC. Additional expected losses, to the extent such expected losses resulted in the recognition of an allowance for loan losses, increased the FDIC loss share asset or reduced any FDIC loss share liability. The allowance for loan losses for loans acquired in FDIC-assisted transactions was determined without giving consideration to the amounts recoverable through loss share agreements (since the loss share agreements were separately accounted for and thus presented “gross” on the balance sheet). On the Consolidated Statements of Income, the provision for credit losses was reported net of changes in the amount recoverable under the loss share agreements. Reductions to expected losses, to the extent such reductions to expected losses were the result of an improvement to the actual or expected cash flows from the covered assets, reduced the FDIC loss share asset or increased any FDIC loss share liability. Additions to expected losses required an increase to the allowance for covered loan losses, and a corresponding increase to the FDIC loss share asset or reduction to any FDIC loss share liability. See “FDIC-Assisted Transactions” within Note 3 – Business Combinations for more detail.

On October 16, 2017, the Company entered into agreements with the FDIC that terminated all existing loss share agreements with the FDIC. As a result, the allowance for covered loan losses previously measured is included within the allowance for credit losses, excluding covered loans, presented above for subsequent periods. See Note 3 - Business Combinations for further discussion of the termination of FDIC loss share agreements.

Impaired Loans

A summary of impaired loans, including troubled debt restructurings ("TDRs"), is as follows:



	September 30,		December 31,		September 30,
(Dollars in thousands)	2018		2017		2017
Impaired loans (included in non-performing and TDRs):
Impaired loans with an allowance for loan loss required ⁽¹⁾	$	83,349	$	36,084	$	30,864
Impaired loans with no allowance for loan loss required	49,173		69,004		47,730
Total impaired loans ⁽²⁾	$	132,522	$	105,088	$	78,594
Allowance for loan losses related to impaired loans	$	14,365	$	8,023	$	7,218
TDRs	$	66,219	$	49,786	$	33,183


(1)	These impaired loans require an allowance for loan losses because the estimated fair value of the loans or related collateral is less than the recorded investment in the loans.


(2)	Impaired loans are considered by the Company to be non-accrual loans, TDRs or loans with principal and/or interest at risk, even if the loan is current with all payments of principal and interest.

The following tables present impaired loans by loan class, excluding covered loans, for the periods ended as follows:



							For the Nine Months Ended
	As of September 30, 2018						September 30, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
Impaired loans with a related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	36,564	$	36,699	$	8,242	$	30,259	$	1,404
Franchise	16,316		18,504		1,638		18,387		771
Asset-based lending	646		646		283		724		39
Leases	1,777		1,777		1		1,836		69
Commercial real estate
Construction	1,554		1,554		390		1,554		56
Land	1,375		1,375		1		1,508		53
Office	579		647		26		591		19
Industrial	45		154		1		56		6
Retail	15,325		15,567		2,413		15,376		535
Multi-family	1,197		1,197		8		1,209		32
Mixed use and other	1,590		1,801		309		1,754		76
Home equity	2,287		2,651		611		2,303		78
Residential real estate	3,977		4,291		325		3,998		128
Consumer and other	117		130		117		119		5
Impaired loans with no related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	5,758	$	7,022	$	—	$	9,325	$	465
Franchise	5,157		5,158		—		5,376		302
Asset-based lending	264		1,088		—		1,623		89
Leases	899		930		—		974		43
Commercial real estate
Construction	1,117		1,117		—		1,252		40
Land	2,325		2,431		—		2,366		98
Office	1,532		2,077		—		1,541		86
Industrial	178		195		—		188		9
Retail	777		946		—		874		42
Multi-family	318		412		—		329		9
Mixed use and other	3,763		4,362		—		3,950		194
Home equity	8,997		12,131		—		9,015		462
Residential real estate	17,804		20,291		—		18,193		643
Consumer and other	284		408		—		295		15
Total impaired loans, net of unearned income	$	132,522	$	145,561	$	14,365	$	134,975	$	5,768



							For the Twelve Months Ended
	As of December 31, 2017						December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
Impaired loans with a related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	6,233	$	7,323	$	3,951	$	7,220	$	452
Franchise	—		—		—		—		—
Asset-based lending	948		949		355		1,302		72
Leases	2,331		2,337		158		2,463		117
Commercial real estate
Construction	3,097		3,897		403		3,690		197
Land	—		—		—		—		—
Office	471		471		5		481		24
Industrial	408		408		40		414		25
Retail	15,599		15,657		1,336		15,736		624
Multi-family	—		—		—		—		—
Mixed use and other	1,567		1,586		379		1,599		77
Home equity	1,606		1,869		784		1,626		81
Residential real estate	3,798		3,910		586		3,790		146
Consumer and other	26		28		26		27		2
Impaired loans with no related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	8,460	$	12,259	$	—	$	10,170	$	683
Franchise	16,256		16,256		—		17,089		780
Asset-based lending	602		602		—		688		40
Leases	782		782		—		845		49
Commercial real estate
Construction	1,367		1,678		—		1,555		84
Land	3,961		4,192		—		4,129		182
Office	2,438		6,140		—		3,484		330
Industrial	403		2,010		—		1,849		174
Retail	2,393		3,538		—		2,486		221
Multi-family	1,231		2,078		—		1,246		76
Mixed use and other	5,275		6,731		—		5,559		351
Home equity	7,648		11,648		—		9,114		603
Residential real estate	17,455		20,327		—		17,926		860
Consumer and other	733		890		—		773		48
Total impaired loans, net of unearned income	$	105,088	$	127,566	$	8,023	$	115,261	$	6,298



							For the Nine Months Ended
	As of September 30, 2017						September 30, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
Impaired loans with a related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	7,312	$	8,458	$	4,191	$	8,390	$	407
Franchise	—		—		—		—		—
Asset-based lending	588		589		161		588		21
Leases	2,440		2,444		215		2,539		91
Commercial real estate
Construction	1,607		2,408		94		2,319		93
Land	—		—		—		—		—
Office	2,225		2,291		570		2,280		94
Industrial	408		408		75		415		19
Retail	5,932		6,072		158		5,998		191
Multi-family	1,239		1,239		8		1,250		33
Mixed use and other	1,537		1,695		263		1,580		60
Home equity	1,511		1,721		691		1,528		53
Residential real estate	5,842		6,154		758		5,842		177
Consumer and other	223		224		34		225		10
Impaired loans with no related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	5,995	$	7,260	$	—	$	6,662	$	294
Franchise	—		—		—		—		—
Asset-based lending	553		553		—		728		31
Leases	817		817		—		862		38
Commercial real estate
Construction	1,504		1,504		—		1,524		49
Land	3,968		4,217		—		4,110		136
Office	3,400		3,585		—		3,565		147
Industrial	1,440		2,729		—		2,885		183
Retail	1,978		1,988		—		2,008		103
Multi-family	569		653		—		571		23
Mixed use and other	5,546		6,267		—		5,745		241
Home equity	6,218		9,523		—		7,231		339
Residential real estate	15,421		17,859		—		15,726		575
Consumer and other	321		433		—		334		16
Total impaired loans, net of unearned income	$	78,594	$	91,091	$	7,218	$	84,905	$	3,424

TDRs

At September 30, 2018, the Company had $66.2 million in loans modified in TDRs. The $66.2 million in TDRs represents 111 credits in which economic concessions were granted to certain borrowers to better align the terms of their loans with their current ability to pay.

The Company’s approach to restructuring loans, excluding PCI loans, is built on its credit risk rating system which requires credit management personnel to assign a credit risk rating to each loan. In each case, the loan officer is responsible for recommending a credit risk rating for each loan and ensuring the credit risk ratings are appropriate. These credit risk ratings are then reviewed and approved by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors including a borrower’s financial strength, cash flow coverage, collateral protection and guarantees. The Company’s credit risk rating scale is one through ten with higher scores indicating higher risk. In the case of loans rated six or worse following modification, the Company’s Managed Assets Division evaluates the loan and the credit risk rating and determines that the loan has been restructured to be reasonably assured of repayment and of performance according to the modified terms and is supported by a current, well-documented credit assessment of the borrower’s financial condition and prospects for repayment under the revised terms.

A modification of a loan, excluding PCI loans, with an existing credit risk rating of 6 or worse or a modification of any other credit, which will result in a restructured credit risk rating of six or worse, must be reviewed for possible TDR classification. In that event, our Managed Assets Division conducts an overall credit and collateral review. A modification of these loans is considered to be a TDR if both (1) the borrower is experiencing financial difficulty and (2) for economic or legal reasons, the bank grants a concession to a borrower that it would not otherwise consider. The modification of a loan, excluding PCI loans, where the credit risk rating is 5 or better both before and after such modification is not considered to be a TDR. Based on the Company’s credit risk rating system, it considers that borrowers whose credit risk rating is 5 or better are not experiencing financial difficulties and therefore, are not considered TDRs.

All credits determined to be a TDR will continue to be classified as a TDR in all subsequent periods, unless the borrower has been in compliance with the loan’s modified terms for a period of six months (including over a calendar year-end) and the current interest rate represents a market rate at the time of restructuring. The Managed Assets Division, in consultation with the respective loan officer, determines whether the modified interest rate represented a current market rate at the time of restructuring. Using knowledge of current market conditions and rates, competitive pricing on recent loan originations, and an assessment of various characteristics of the modified loan (including collateral position and payment history), an appropriate market rate for a new borrower with similar risk is determined. If the modified interest rate meets or exceeds this market rate for a new borrower with similar risk, the modified interest rate represents a market rate at the time of restructuring. Additionally, before removing a loan from TDR classification, a review of the current or previously measured impairment on the loan and any concerns related to future performance by the borrower is conducted. If concerns exist about the future ability of the borrower to meet its obligations under the loans based on a credit review by the Managed Assets Division, the TDR classification is not removed from the loan.

TDRs are reviewed at the time of the modification and on a quarterly basis to determine if a specific reserve is necessary. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan's original rate, or for collateral dependent loans, to the fair value of the collateral. Any shortfall is recorded as a specific reserve. The Company, in accordance with ASC 310-10, continues to individually measure impairment of these loans after the TDR classification is removed.

Each TDR was reviewed for impairment at September 30, 2018 and approximately $3.9 million of impairment was present and appropriately reserved for through the Company’s normal reserving methodology in the Company’s allowance for loan losses. For TDRs in which impairment is calculated by the present value of future cash flows, the Company records interest income representing the decrease in impairment resulting from the passage of time during the respective period, which differs from interest income from contractually required interest on these specific loans. During the three months ended September 30, 2018 and 2017, the Company recorded $32,000 and $68,000, respectively, of interest income, which was reflected as a decrease in impairment. For the nine months ended September 30, 2018 and 2017, the Company recorded $89,000 and $172,000, respectively, of interest income, which was reflected as a decrease in impairment.

TDRs may arise when, due to financial difficulties experienced by the borrower, the Company obtains through physical possession one or more collateral assets in satisfaction of all or part of an existing credit. Once possession is obtained, the Company reclassifies the appropriate portion of the remaining balance of the credit from loans to OREO, which is included within other assets in the Consolidated Statements of Condition. For any residential real estate property collateralizing a consumer mortgage loan, the Company is considered to possess the related collateral only if legal title is obtained upon completion of foreclosure, or the borrower conveys all interest in the residential real estate property to the Company through completion of a deed in lieu of foreclosure or similar legal agreement. At September 30, 2018, the Company had $5.7 million of foreclosed residential real estate properties included within OREO. Furthermore, the recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $14.2 million and $12.1 million at September 30, 2018 and 2017, respectively.

The tables below present a summary of the post-modification balance of loans restructured during the three and nine months ended September 30, 2018 and 2017, respectively, which represent TDRs:



Three months ended September 30, 2018 (Dollars in thousands)	Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	1	$	519	1	$	519	—	$	—	—	$	—	—	$	—
Franchise	1	35		1	35		—	—		—	—		—	—
Leases	—	—		—	—		—	—		—	—		—	—
Commercial real estate
Office	—	—		—	—		—	—		—	—		—	—
Mixed use and other	—	—		—	—		—	—		—	—		—	—
Residential real estate and other	20	3,679		20	3,679		7	621		—	—		—	—
Total loans	22	$	4,233	22	$	4,233	7	$	621	—	$	—	—	$	—


(1)	TDRs may have more than one modification representing a concession. As such, TDRs during the period may be represented in more than one of the categories noted above.


(2)	Balances represent the recorded investment in the loan at the time of the restructuring.



Three months ended September 30, 2017 (Dollars in thousands)	Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	3	$	1,408	—	$	—	—	$	—	3	$	1,408	—	$	—
Franchise	—	—		—	—		—	—		—	—		—	—
Leases	—	—		—	—		—	—		—	—		—	—
Commercial real estate
Office	—	—		—	—		—	—		—	—		—	—
Mixed use and other	—	—		—	—		—	—		—	—		—	—
Residential real estate and other	2	255		1	186		2	255		—	—		1	69
Total loans	5	$	1,663	1	$	186	2	$	255	3	$	1,408	1	$	69


(1)	TDRs may have more than one modification representing a concession. As such, TDRs during the period may be represented in more than one of the categories noted above.


(2)	Balances represent the recorded investment in the loan at the time of the restructuring.

During the three months ended September 30, 2018, 22 loans totaling $4.2 million were determined to be TDRs, compared to five loans totaling $1.7 million during the three months ended September 30, 2017. Of these loans extended at below market terms, the weighted average extension had a term of approximately 72 months during the quarter ended September 30, 2018 compared to 36 months for the quarter ended September 30, 2017. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately 140 basis points and 225 basis points during the three months ended September 30, 2018 and 2017, respectively. Interest-only payment terms were approximately two months during the three months ended September 30, 2017. Additionally, no principal balances were forgiven in the third quarter of 2018 compared to $73,000 of principal balances forgiven in the third quarter of 2017.



Nine months ended September 30, 2018 (Dollars in thousands)	Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	4	$	13,442	3	$	692	—	$	—	1	$	12,750	—	$	—
Franchise	3	5,157		1	35		—	—		2	5,122		—	—
Leases	1	239		1	239		—	—		—	—		—	—
Commercial real estate
Office	1	59		1	59		—	—		—	—		—	—
Mixed use and other	1	85		1	85		1	85		—	—		—	—
Residential real estate and other	31	5,846		31	5,846		12	1,417		—	—		—	—
Total loans	41	$	24,828	38	$	6,956	13	$	1,502	3	$	17,872	—	$	—



Nine months ended September 30, 2017 (Dollars in thousands)	Total⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	4	$	1,503	1	$	95	—	$	—	3	$	1,408	—	$	—
Franchise	—	—		—	—		—	—		—	—		—	—
Leases	—	—		—	—		—	—		—	—		—	—
Commercial real estate
Office	—	—		—	—		—	—		—	—		—	—
Mixed use and other	1	1,245		1	1,245		—	—		—	—		—	—
Residential real estate and other	8	2,638		7	2,569		7	2,589		—	—		1	69
Total loans	13	$	5,386	9	$	3,909	7	$	2,589	3	$	1,408	1	$	69


(1)	TDRs may have more than one modification representing a concession. As such, TDRs during the period may be represented in more than one of the categories noted above.


(2)	Balances represent the recorded investment in the loan at the time of the restructuring.

During the nine months ended September 30, 2018, 41 loans totaling $24.8 million were determined to be TDRs, compared to 13 loans totaling $5.4 million in the same period of 2017. Of these loans extended at below market terms, the weighted average extension had a term of approximately 64 months during the nine months ended September 30, 2018 compared to 36 months for the nine months ended September 30, 2017. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately 160 basis points and 188 basis points for the year-to-date periods September 30, 2018 and 2017, respectively. Interest-only payment terms were approximately seven months during the nine months ended September 30, 2018 compared to two months during the same period of 2017. Additionally, no principal balances were forgiven in the first nine months of 2018 compared to $73,000 of principal balances forgiven in the first nine months of 2017.

The following table presents a summary of all loans restructured in TDRs during the twelve months ended September 30, 2018 and 2017, and such loans which were in payment default under the restructured terms during the respective periods below:



(Dollars in thousands)	As of September 30, 2018			Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
	Total ⁽¹⁾⁽³⁾			Payments in Default⁽²⁾⁽³⁾			Payments in Default⁽²⁾⁽³⁾
	Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	5	$	15,714	3	$	2,447	3	$	2,447
Franchise	6	21,413		2	5,122		2	5,122
Leases	1	239		—	—		—	—
Commercial real estate
Office	1	59		—	—		—	—
Industrial	—	—		—	—		—	—
Mixed use and other	1	85		1	85		1	85
Residential real estate and other	35	6,257		7	1,457		7	1,457
Total loans	49	$	43,767	13	$	9,111	13	$	9,111



(Dollars in thousands)	As of September 30, 2017			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
	Total ⁽¹⁾⁽³⁾			Payments in Default ⁽²⁾⁽³⁾			Payments in Default ⁽²⁾⁽³⁾
	Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	4	$	1,503	—	$	—	—	$	—
Franchise	—	—		—	—		—	—
Leases	2	2,949		—	—		—	—
Commercial real estate
Office	—	—		—	—		—	—
Mixed use and other	1	1,245		1	1,245		1	1,245
Residential real estate and other	12	3,137		1	52		2	284
Total loans	19	$	8,834	2	$	1,297	3	$	1,529


(1)	Total TDRs represent all loans restructured in TDRs during the previous twelve months from the date indicated.


(2)	TDRs considered to be in payment default are over 30 days past-due subsequent to the restructuring.


(3)	Balances represent the recorded investment in the loan at the time of the restructuring.