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Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2020
Receivables [Abstract]  
Allowance for Credit Losses Allowance for Credit Losses
In accordance with ASC 326, the Company is required to measure the allowance for credit losses of financial assets with similar risk characteristics on a collective or pooled basis. In considering the segmentation of financial assets measured at amortized cost into pools, the Company considered various risk characteristics in its analysis. Generally, the segmentation utilized represents the level at which the Company develops and documents its systematic methodology to determine the allowance for credit losses for the financial asset held at amortized cost, specifically the Company's loan portfolio and debt securities classified as held-to-maturity. Below is a summary of the Company's loan portfolio segments and major debt security types:

Commercial loans, including PPP loans: The Company makes commercial loans for many purposes, including working capital lines and leasing arrangements, that are generally renewable annually and supported by business assets, personal guarantees and additional collateral. Underlying collateral includes receivables, inventory, enterprise value and the assets of the business. Commercial business lending is generally considered to involve a slightly higher degree of risk than traditional consumer bank lending. This portfolio includes a range of industries, including manufacturing, restaurants, franchise, professional services, equipment finance and leasing, mortgage warehouse lending and industrial.
The Company also originates loans through PPP. Administered by the SBA, PPP provides short-term relief primarily related to the disruption from COVID-19 to companies and non-profits that meet the SBA’s definition of an eligible small business. Under the program, the SBA will forgive all or a portion of the loan if, during a certain period, loans are used for qualifying expenses. If all or a portion of the loan is not forgiven, the borrower is responsible for repayment. PPP loans are fully guaranteed by the SBA, including any portion not forgiven. The SBA guarantee exists at the inception of the loan and throughout its life and is not separated from the loan if the loan is subsequently sold or transferred. As it is not considered a freestanding contract, the Company considers the impact of the SBA guarantee when measuring the allowance for credit losses.

Commercial real estate loans, including construction and development, and non-construction: The Company's commercial real estate loans are generally secured by a first mortgage lien and assignment of rents on the underlying property. Since most of the Company's bank branches are located in the Chicago metropolitan area and southern Wisconsin, a significant portion of the Company's commercial real estate loan portfolio is located in this region. As the risks and circumstances of such loans in construction phase vary from that of non-construction commercial real estate loans, the Company assessed the allowance for credit losses separately for these two segments.

Home equity loans: The Company's home equity loans and lines of credit are primarily originated by each of the bank subsidiaries in their local markets where there is a strong understanding of the underlying real estate value. The Company's banks monitor and manage these loans, and conduct an automated review of all home equity loans and lines of credit at least twice per year. The banks subsidiaries use this information to manage loans that may be higher risk and to determine whether to obtain additional credit information or updated property valuations. In a limited number of cases, the Company may issue home equity credit together with first mortgage financing, and requests for such financing are evaluated on a combined basis.

Residential real estate loans: The Company's residential real estate portfolio predominantly includes one- to four-family adjustable rate mortgages that have repricing terms generally from one to three years, construction loans to individuals and bridge financing loans for qualifying customers. The Company's adjustable rate mortgages relate to properties located principally in the Chicago metropolitan area and southern Wisconsin or vacation homes owned by local residents. The Company believes that since this loan portfolio consists primarily of locally originated loans, and since the majority of the borrowers are longer-term customers with lower LTV ratios, the Company faces a relatively low risk of borrower default and delinquency. It is not the Company's current practice to underwrite, and there are no plans to underwrite subprime, Alt A, no or little documentation loans, or option ARM loans.

Premium finance receivables: The Company makes loans to businesses to finance the insurance premiums they pay on their commercial insurance policies. The loans are indirectly originated by working through independent medium and large insurance agents and brokers located throughout the United States and Canada. The insurance premiums financed are primarily for commercial customers’ purchases of liability, property and casualty and other commercial insurance. This lending involves relatively rapid turnover of the loan portfolio and high volume of loan originations. The Company performs ongoing credit and other reviews of the agents and brokers to mitigate against the risk of fraud.

The Company also originates life insurance premium finance receivables. These loans are originated directly with the borrowers with assistance from life insurance carriers, independent insurance agents, financial advisors and legal counsel. The life insurance policy is the primary form of collateral. In addition, these loans often are secured with a letter of credit, marketable securities or certificates of deposit. In some cases, the Company may make a loan that has a partially unsecured position.

Consumer and other loans: Included in the consumer and other loan category is a wide variety of personal and consumer loans to individuals. The Company originates consumer loans in order to provide a wider range of financial services to their customers. Consumer loans generally have shorter terms and higher interest rates than mortgage loans but generally involve more credit risk than mortgage loans due to the type and nature of the collateral.

U.S. government agency securities: This security type includes debt obligations of certain government-sponsored entities of the U.S. government such as the Federal Home Loan Bank, Federal Agricultural Mortgage Corporation, Federal Farm Credit Banks Funding Corporation and Fannie Mae. Such securities often contain an explicit or implicit guarantee of the U.S. government.

Municipal securities: The Company's municipal securities portfolio include bond issues for various municipal government entities located throughout the United States, including the Chicago metropolitan area and southern Wisconsin, some of which are privately placed and non-rated. Though the risk of loss is typically low, including within the Company, default history exists on municipal securities within the United States.

The tables below show the aging of the Company’s loan portfolio by the segmentation noted above at December 31, 2020 and 2019. For periods prior to January 1, 2020, PCI loans are disclosed in segmentation consistent with that discussed above for
comparative purposes. For accounting purposes, including recognition of interest income, PCI loans were aggregated into pools by common risk characteristics separate from non-acquired loans. As a result of the implementation of ASU 2016-13 in 2020, PCI loans transitioned to a PCD classification, which no longer maintains the prior pools and related accounting concepts. Recognition of interest income on PCD loans is considered at the individual asset level following the Company's accrual policies, instead of based upon the entire pool of loans. As a result, such PCD loans are included within nonaccrual status, if applicable.
 
As of December 31, 2020
(Dollars in thousands)
Nonaccrual90+ days
and still
accruing		60-89
days past
due		30-59
days past
due		CurrentTotal Loans
Loan Balances (1):
Commercial
Commercial, industrial and other, excluding PPP loans$21,743 $307 $6,900 $44,345 $9,166,751 $9,240,046 
Commercial PPP loans— — — 36 2,715,885 2,715,921 
Commercial real estate:
Construction and development5,633 — — 5,344 1,360,825 1,371,802 
Non-construction40,474 — 5,178 26,772 7,049,906 7,122,330 
Home equity6,529 — 47 637 418,050 425,263 
Residential real estate26,071 — 1,635 12,584 1,219,308 1,259,598 
Premium finance receivables
Commercial insurance loans13,264 12,792 6,798 18,809 4,002,826 4,054,489 
Life insurance loans— — 21,003 30,465 5,805,968 5,857,436 
Consumer and other436 264 24 136 31,328 32,188 
Total loans, net of unearned income$114,150 $13,363 $41,585 $139,128 $31,770,847 $32,079,073 
(1)Includes PCD loans and, for periods prior to the adoption of ASU 2016-13, PCI loans. PCI loans represented loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings disclosed in comparative periods are based upon contractually required payments. As a result of the adoption of ASU 2016-13, the Company transitioned all previously classified PCI loans to PCD loans effective January 1, 2020.
As of December 31, 2019
(Dollars in thousands)		Nonaccrual90+ days
and still
accruing		60-89
days past
due		30-59
days past
due		CurrentTotal Loans
Loan Balances (1):
Commercial
Commercial, industrial and other, excluding PPP loans$37,224 $1,855 $3,275 $77,324 $8,166,242 $8,285,920 
Commercial PPP loans— — — — — — 
Commercial real estate
Construction and development2,112 3,514 5,292 48,964 1,223,567 1,283,449 
Non-construction24,001 11,432 26,254 48,603 6,626,537 6,736,827 
Home equity7,363 — 454 3,533 501,716 513,066 
Residential real estate13,797 5,771 3,089 18,041 1,313,523 1,354,221 
Premium finance receivables
Commercial insurance loans20,590 11,517 12,119 18,783 3,379,018 3,442,027 
Life insurance loans590 — — 32,559 5,041,453 5,074,602 
Consumer and other231 287 40 344 109,276 110,178 
Total loans, net of unearned income$105,908 $34,376 $50,523 $248,151 $26,361,332 $26,800,290 
(1)Includes PCD loans and, for periods prior to the adoption of ASU 2016-13, PCI loans. PCI loans represented loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings disclosed in comparative periods are based upon contractually required payments. As a result of the adoption of ASU 2016-13, the Company transitioned all previously classified PCI loans to PCD loans effective January 1, 2020.
Credit Quality Indicators

Credit quality indicators, specifically the Company's internal risk rating systems, reflect how the Company monitors credit losses and represents factors used by the Company when measuring the allowance for credit losses. The following discusses the Company's credit quality indicators by financial asset.

Loan portfolios

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 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. These credit risk ratings are also an important aspect of the Company's allowance for credit losses measurement methodology. The credit risk rating structure and classifications are shown below:

Pass (risk rating 1 to 5): Based on various factors (liquidity, leverage, etc.), the Company believes asset quality is acceptable and is deemed to not require additional monitoring by the Company.

Special mention (risk rating 6): Assets in this category are currently protected, potentially weak, but not to the point of substandard classification. Loss potential is moderate if corrective action is not taken.

Substandard accrual (risk rating 7): Assets in this category have well defined weaknesses that jeopardize the liquidation of the debt. Loss potential is distinct but with no discernible impairment.

Substandard nonaccrual/doubtful (risk rating 8 and 9): Assets have all the weaknesses in those classified “substandard accrual” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, improbable.

Loss/fully charged-off (risk rating 10): Assets in this category are considered fully uncollectible. As such, these assets have no carrying balance on the Company's Consolidated Statements of Condition.

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 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 and, as a result, no longer share similar risk characteristics as its related pool. If that is the case, the individual loan is considered collateral dependent and individually assessed for an allowance for credit loss. The Company’s individual assessment 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 or a charge-off. If the Company determines that a loan amount or portion thereof is 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. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.
The table below shows the Company’s loan portfolio by credit quality indicator and year of origination at December 31, 2020:

As of December 31, 2020Year of OriginationRevolvingTotal
(In thousands)20202019201820172016PriorRevolvingto TermLoans
Loan Balances:
Commercial, industrial and other
Pass$2,050,767 $1,199,104 $882,508 $649,206 $282,664 $513,418 $2,922,136 $16,515 $8,516,318 
Special mention35,305 77,741 44,642 31,131 17,329 12,695 113,137 367 332,347 
Substandard accrual19,848 90,112 74,527 37,499 48,356 30,277 68,257 762 369,638 
Substandard nonaccrual/doubtful821 1,619 3,470 2,699 867 8,934 2,473 860 21,743 
Total commercial, industrial and other$2,106,741 $1,368,576 $1,005,147 $720,535 $349,216 $565,324 $3,106,003 $18,504 $9,240,046 
Commercial PPP
Pass$2,715,915 $— $— $— $— $— $— $— $2,715,915 
Special mention— — — — — — — — — 
Substandard accrual6 — — — — — — — 6 
Substandard nonaccrual/doubtful— — — — — — — — — 
Total commercial PPP$2,715,921 $— $— $— $— $— $— $— $2,715,921 
Construction and development
Pass$301,565 $448,704 $213,508 $135,583 $71,883 $58,088 $28,822 $— $1,258,153 
Special mention3,700 9,032 48,174 27,439 2,675 6,338 — — 97,358 
Substandard accrual— 1,200 5,846 2,897 — 566 150 — 10,659 
Substandard nonaccrual/doubtful— — 1,596 1,860 1,072 1,104 — — 5,632 
Total construction and development$305,265 $458,936 $269,124 $167,779 $75,630 $66,096 $28,972 $— $1,371,802 
Non-construction
Pass$1,346,139 $1,027,293 $833,289 $750,825 $642,371 $1,623,135 $179,489 $7,371 $6,409,912 
Special mention10,885 63,482 70,128 87,985 94,122 155,080 100 2,693 484,475 
Substandard accrual2,533 42,091 10,112 20,133 20,381 92,208 10 — 187,468 
Substandard nonaccrual/doubtful— 270 1,609 2,134 5,240 31,222 — — 40,475 
Total non-construction$1,359,557 $1,133,136 $915,138 $861,077 $762,114 $1,901,645 $179,599 $10,064 $7,122,330 
Home equity
Pass$45 $— $47 $28 $15 $6,391 $388,649 $170 $395,345 
Special mention— — — — — 2,302 6,337 687 9,326 
Substandard accrual— — 319 — 249 10,817 1,059 1,619 14,063 
Substandard nonaccrual/doubtful— — — 159 223 3,039 2,986 122 6,529 
Total home equity$45 $— $366 $187 $487 $22,549 $399,031 $2,598 $425,263 
Residential real estate
Pass$357,381 $318,601 $119,071 $133,055 $110,950 $162,876 $— $— $1,201,934 
Special mention308 644 2,690 2,429 1,997 7,527 — — 15,595 
Substandard accrual2,412 626 904 2,339 4,354 5,364 — — 15,999 
Substandard nonaccrual/doubtful— 845 1,639 5,329 5,629 12,628 — — 26,070 
Total residential real estate$360,101 $320,716 $124,304 $143,152 $122,930 $188,395 $— $— $1,259,598 
Premium finance receivables - commercial
Pass$3,976,384 $34,372 $4,368 $48 $— $— $— $— $4,015,172 
Special mention23,830 333 — — — — — — 24,163 
Substandard accrual1,455 344 89 — — — — — 1,888 
Substandard nonaccrual/doubtful8,100 5,135 30 1 — — — — 13,266 
Total premium finance receivables - commercial$4,009,769 $40,184 $4,487 $49 $— $— $— $— $4,054,489 
Premium finance receivables - life
Pass$579,716 $599,479 $605,635 $654,513 $763,327 $2,654,178 $— $— $5,856,848 
Special mention— — — 588 — — — — 588 
Substandard accrual— — — — — — — — — 
Substandard nonaccrual/doubtful— — — — — — — — — 
Total premium finance receivables - life$579,716 $599,479 $605,635 $655,101 $763,327 $2,654,178 $— $— $5,857,436 
Consumer and other
Pass$2,303 $2,100 $1,820 $550 $495 $6,472 $17,569 $— $31,309 
Special mention16 22 — 80 — 96 6 — 220 
Substandard accrual8 1 — — — 212 3 — 224 
Substandard nonaccrual/doubtful1 — 3 9 — 422 — — 435 
Total consumer and other$2,328 $2,123 $1,823 $639 $495 $7,202 $17,578 $— $32,188 
Total loans (1)
Pass$11,330,215 $3,629,653 $2,660,246 $2,323,808 $1,871,705 $5,024,558 $3,536,665 $24,056 $30,400,906 
Special mention74,044 151,254 165,634 149,652 116,123 184,038 119,580 3,747 964,072 
Substandard accrual26,262 134,374 91,797 62,868 73,340 139,444 69,479 2,381 599,945 
Substandard nonaccrual/doubtful8,922 7,869 8,347 12,191 13,031 57,349 5,459 982 114,150 
Total loans$11,439,443 $3,923,150 $2,926,024 $2,548,519 $2,074,199 $5,405,389 $3,731,183 $31,166 $32,079,073 
(1)Includes $235.6 million of loans with COVID-19 related modifications that migrated from pass as of March 1, 2020 to special mention or substandard accrual as of December 31, 2020. These loans were qualitatively evaluated as a part of the measurement of the allowance for credit losses as of December 31, 2020.

Held-to-maturity debt securities

The Company conducts an assessment of its investment securities, including those classified as held-to-maturity, at the time of purchase and on at least an annual basis to ensure such investment securities remain within appropriate levels of risk and continue to perform satisfactorily in fulfilling its obligations. The Company considers, among other factors, the nature of the securities and credit ratings or financial condition of the issuer. If available, the Company obtains a credit rating for issuers from a Nationally Recognized Statistical Rating Organization (“NRSRO”) for consideration. If no such rating is available for an issuer, the Company performs an internal rating based on the scale utilized within the loan portfolio as discussed above. For purposes of the table below, the Company has converted any issuer rating from an NRSRO into the Company’s internal ratings based on Investment Policy and review by the Company’s management.

As of December 31, 2020Year of OriginationTotal
(In thousands)20202019201820172016PriorBalance
Amortized Cost Balances:
U.S. government agencies
1-4 internal grade$124,575 $— $50,000 $— $— $3,384 $177,959 
5-7 internal grade— — — — — — — 
8-10 internal grade— — — — — — — 
Total U.S. government agencies$124,575 $— $50,000 $— $— $3,384 $177,959 
Municipal
1-4 internal grade$— $161 $7,570 $43,633 $10,139 $139,204 $200,707 
5-7 internal grade— — — — — — — 
8-10 internal grade— — — — — — — 
Total municipal$— $161 $7,570 $43,633 $10,139 $139,204 $200,707 
Mortgage-backed securities
1-4 internal grade$200,531 $— $— $— $— $— $200,531 
5-7 internal grade— — — — — — — 
8-10 internal grade— — — — — — — 
Total mortgage-backed securities$200,531 $— $— $— $— $— $200,531 
Total held-to-maturity securities$579,197 
Less: Allowance for credit losses(59)
Held-to-maturity securities, net of allowance for credit losses$579,138 

Measurement of Allowance for Credit Losses

The Company's allowance for credit losses consists of the allowance for loan losses, the allowance for unfunded commitment losses and the allowance for held-to-maturity debt security losses. In accordance with ASC 326, the Company measures the allowance for credit losses at the time of origination or purchase of a financial asset, representing an estimate of lifetime expected credit losses on the related asset. When developing its estimate, the Company considers available information relevant to assessing the collectability of cash flows, from both internal and external sources. Historical credit loss experience is one input in the estimation process as well as inputs relevant to current conditions and reasonable and supportable forecasts. In considering past events, the Company considers the relevance, or lack thereof, of historical information due to changes in such things as financial asset underwriting or collection practices, and changes in portfolio mix due to changing business plans and strategies. In considering current conditions and forecasts, the Company considers both the current economic environment and the forecasted direction of the economic environment with emphasis on those factors deemed relevant to or driving changes in expected credit losses. As significant judgment is required, the review of the appropriateness of the allowance for credit losses is performed quarterly by various committees with participation by the Company's executive management.
December 31,December 31,
(In thousands)20202019
Allowance for loan losses$319,374 $156,828 
Allowance for unfunded lending-related commitments losses60,536 1,633 
Allowance for loan losses and unfunded lending-related commitments losses379,910 158,461 
Allowance for held-to-maturity securities losses59 — 
Allowance for credit losses$379,969 $158,461 

The allowance for credit losses is measured on a collective or pooled basis when similar risk characteristics exist, based upon the segmentation discussed above. The Company utilizes modeling methodologies that estimate lifetime credit loss rates on each pool, including methodologies estimating the probability of default and loss given default on specific segments. Historical credit loss history is adjusted for reasonable and supportable forecasts developed by the Company on a quantitative or qualitative basis. Reasonable and supportable forecasts consider the macroeconomic factors that are most relevant to evaluating and predicting expected credit losses in the Company's financial assets. Currently, the Company utilizes an eight quarter forecast period using a single macroeconomic scenario provided by a third-party and reviewed within the Company's governance structure. For periods beyond the ability to develop reasonable and supportable forecasts, the Company reverts to historical loss rates at an input level, straight-line over a four quarter reversion period. Expected credit losses are measured over the contractual term of the financial asset with consideration of expected prepayments. Expected extensions, renewals or modifications of the financial asset are only considered when either 1) the expected extension, renewal or modification is contained within the existing agreement and is not unconditionally cancelable, or 2) the expected extension, renewal or modification is reasonably expected to result in a TDR. The methodologies discussed above are applied to both current asset balances on the Company's Consolidated Statements of Condition and off-balance sheet commitments (i.e. unfunded lending-related commitments).

Assets that do not share similar risk characteristics with a pool are assessed for the allowance for credit losses on an individual basis. These typically include assets experiencing financial difficulties, including asset rated as substandard nonaccrual and doubtful as well as assets currently classified or expected to be classified as TDRs. If foreclosure is probable or the asset is considered collateral-dependent, expected credit losses are measured based upon the fair value of the underlying collateral adjusted for selling costs, if appropriate. Underlying collateral across the Company's segments consist primarily of real estate, land and construction assets as well as general business assets of the borrower. As of December 31, 2020, substandard nonaccrual and doubtful loans totaling $78.5 million in carrying balance had no related allowance for credit losses. For certain accruing current and expected TDRs, expected credit losses are measured based upon the present value of future cash flows of the modified asset terms compared to the amortized cost of the asset. Considering accounting relief provided under Section 4013 of the CARES Act, loans identified as being reasonably expected to be modified into TDRs in the future totaled $2.4 million as of December 31, 2020.

The Company does not measure an allowance for credit losses on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when assets are placed on nonaccrual status.
A summary of the activity in the allowance for credit losses by loan portfolio for the years ended December 31, 2020 and 2019 is as follows:
 
Year Ended 
December 31, 2020
(Dollars in thousands)
CommercialCommercial
Real Estate		Home
Equity		Residential
Real Estate		Premium
Finance
Receivable		Consumer
and Other		Total
Loans
Allowance for credit losses at beginning of period$64,920 $68,511 $3,878 $9,800 $9,647 $1,705 158,461 
Cumulative effect adjustment from the adoption of ASU 2016-139,039 32,064 9,061 3,002 (4,959)(863)47,344 
Other adjustments— — — — 179 — 179 
Charge-offs(18,293)(15,960)(2,061)(891)(15,472)(528)(53,205)
Recoveries5,092 1,835 528 184 5,108 149 12,896 
Provision for credit losses33,454 157,153 31 364 23,274 (41)214,235 
Allowance for credit losses at period end$94,212 $243,603 $11,437 $12,459 $17,777 $422 $379,910 
By measurement method:
Individually evaluated for impairment4,820 2,237 197 684 — 88 8,026 
Collectively evaluated for impairment89,392 241,366 11,240 11,775 17,777 334 371,884 
Loans at period end:
Individually evaluated for impairment$29,442 $56,656 $23,173 $29,886 $— $505 $139,662 
Collectively evaluated for impairment11,926,525 8,437,476 402,090 1,174,578 9,911,925 31,683 31,884,277 
Loans held at fair value— — — 55,134 — — 55,134 
Year Ended 
December 31, 2019
(Dollars in thousands)		CommercialCommercial
Real Estate		Home
Equity		Residential
Real Estate		Premium
Finance
Receivable		Consumer
and Other		Total
Loans
Allowance for credit losses at beginning of period$67,826 $61,661 $8,507 $7,194 $7,715 $1,261 $154,164 
Other adjustments — (34)(20)(15)49 (1)(21)
Charge-offs(35,880)(5,402)(3,702)(798)(12,902)(522)(59,206)
Recoveries2,845 2,516 479 422 3,203 195 9,660 
Provision for credit losses30,129 9,770 (1,386)2,997 11,582 772 53,864 
Allowance for credit losses at period end$64,920 $68,511 $3,878 $9,800 $9,647 $1,705 $158,461 
By measurement method:
Individually evaluated for impairment5,719 5,638 450 387 — 142 12,336 
Collectively evaluated for impairment59,171 62,759 3,428 9,386 9,647 1,563 145,954 
Loans acquired with deteriorated credit quality(1)
30 114 — 27 — — 171 
Loans at period end:
Individually evaluated for impairment$42,130 $35,867 $19,108 $22,528 $— $412 $120,045 
Collectively evaluated for impairment8,215,484 7,746,969 493,958 1,313,565 8,377,347 107,550 26,254,873 
Loans acquired with deteriorated credit quality(1)
28,306 237,440 — 18,128 139,282 2,216 425,372 
Loan held at fair value— — — 132,718 — — 132,718 
(1)Prior to January 1, 2020, measurement of any allowance for loan losses on PCI loans were offset by the remaining discount related to the acquired pool. As a result of the adoption of ASU 2016-13, PCI loans transitioned to a classification of PCD. Measurement of any allowance for loan losses on PCD loans is no longer offset by the remaining amount.

At January 1, 2020, the Company adopted ASU 2016-13, which replaced the previous incurred loss methodology for measuring the allowance for credit losses with a lifetime expected loss methodology. At adoption, the allowance for credit losses related to loans and lending agreements increased approximately $47.3 million, including an increase of approximately $33.2 million recorded to the allowance for unfunded commitment losses within accrued interest and other liabilities on the Company's Consolidated Statements of Condition, with an offsetting amount recorded directly to retained earnings, net of taxes. The remaining $14.2 million cumulative effect adjustment was recorded to the allowance for loan losses, presented separately on the Company's Consolidated Statements of Condition. Of the amount recorded to the allowance for loan losses, $11.0 million related to PCD loans with such offsetting amount added directly to the carrying balance of the loans and the remaining $3.2 million not related to PCD loans recorded directly to retained earnings, net of taxes, on the Company's Consolidated Statements of Condition.

For the year ending December 31, 2020, the Company recognized approximately $214.2 million of provision for credit losses related to loans and lending agreements. The provision was primarily the result of the continued change to macroeconomic
conditions throughout 2020 created by the COVID-19 pandemic, and the impact on the Company's macroeconomic forecasts of key model inputs (Commercial Real Estate Price Index, Baa corporate credit spreads, gross domestic product and Dow Jones Total Stock Market Index) as well as changes in the Company's loan portfolios. A deterioration in the Commercial Real Estate Price Index macroeconomic forecast during the Company's reasonable and supportable forecast period was a primary driver of the increase in provision for credit losses within the commercial real estate portfolio during 2020 compared to 2019. Other key drivers of provision for credit losses in these portfolios include, but are not limited to, net new loan growth and loan risk rating migration. Net charge-offs in 2020 totaled $40.3 million.

Held-to-maturity debt securities

At January 1, 2020, the Company established an allowance for credit losses on its held-to-maturity debt securities totaling approximately $74,000, which is presented as a reduction to the amortized cost basis of held-to-maturity securities on the Company's Consolidated Statements of Condition. Such adjustment was recorded directly to the Company's retained earnings, net of taxes. During the year ended December 31, 2020, the Company recognized an approximately $15,000 credit to provision for credit losses related to held-to-maturity securities.

TDRs

At December 31, 2020, the Company had $68.2 million in loans modified in TDRs. The $68.2 million in TDRs represents 286 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 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 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 6 or worse must be reviewed for possible TDR classification. In that event, the Company’s Managed Assets Division conducts an overall credit and collateral review. A modification of a 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 where the credit risk rating is 5 or better 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 individually assessed at the time of modification and on a quarterly basis to measure an allowance for credit loss. 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 reserve. Each TDR was individually assessed at December 31, 2020 and approximately $2.9 million of reserve was measured through the Company’s normal reserving methodology in the Company’s allowance for credit losses.
TDRs may arise in which, 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 December 31, 2020, the Company had $4.0 million of foreclosed residential real estate properties included within OREO. Further, the recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $18.9 million and $13.5 million at December 31, 2020 and 2019, respectively.

The tables below present a summary of the post-modification balance of loans restructured during the years ended December 31, 2020, 2019, and 2018, which represent TDRs:
Year ended 
December 31, 2020
Total (1)(2)
Extension at
Below Market
Terms (2)
Reduction of
Interest Rate (2)
Modification to
Interest-only
Payments (2)
Forgiveness of Debt (2)
(Dollars in thousands)CountBalanceCountBalanceCountBalanceCountBalanceCountBalance
Commercial
Commercial, industrial and other21 $12,362 17 $8,089 1 $991 6 $4,436 1 $432 
Commercial real estate
Non-construction18 19,281 15 14,657 3 921 8 5,853 — — 
Residential real estate and other85 14,229 70 13,721 38 5,809 1 190 — — 
Total loans124 $45,872 102 $36,467 42 $7,721 15 $10,479 1 $432 
Year ended
December 31, 2019
Total (1)(2)
Extension at
Below Market
Terms (2)
Reduction of
Interest Rate (2)
Modification to
Interest-only
Payments (2)
Forgiveness of Debt (2)
(Dollars in thousands)CountBalanceCountBalanceCountBalanceCountBalanceCountBalance
Commercial
Commercial, industrial and other24 $26,341 12 $6,993 2 $605 13 $20,872 — $— 
Commercial real estate
Non-construction7 7,018 5 6,465 — — 3 5,493 — — 
Residential real estate and other145 20,206 117 17,258 28 5,415 1 311 — — 
Total loans176 $53,565 134 $30,716 30 $6,020 17 $26,676 — $— 
Year ended
December 31, 2018
Total (1)(2)
Extension at
Below Market
Terms (2)
Reduction of
Interest Rate (2)
Modification to
Interest-only
Payments (2)
Forgiveness of Debt (2)
(Dollars in thousands)CountBalanceCountBalanceCountBalanceCountBalanceCountBalance
Commercial
Commercial, industrial and other9 $18,967 6 $1,095 — $— 3 $17,872 — $— 
Commercial real estate
Non-construction3 514 3 514 1 85 — — — — 
Residential real estate and other59 9,762 58 9,523 27 2,789 — — 1 239 
Total loans71 $29,243 67 $11,132 28 $2,874 3 $17,872 1 $239 
 
(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 year ended December 31, 2020, $45.9 million, or 124 loans, were determined to be TDRs, compared to $53.6 million, or 176 loans, and $29.2 million, or 71 loans, in the years ended 2019 and 2018, respectively. Of these loans extended at below market terms, the weighted average extension had a term of approximately 14 months in 2020 compared to 18 months in 2019 and 48 months in 2018. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately 129 basis points, 218 basis points and 172 basis points during the years ended December 31, 2020, 2019, and 2018, respectively. Interest-only payment terms were approximately 12 months during the year ended 2020 compared to five months and seven months for the years ended 2019 and 2018, respectively. Additionally, $453,000 of principal balances were forgiven on the loans noted above in 2020 compared to no principal balance forgiven during 2019 and $8,000 of principal balance forgiven during 2018.

The tables below present a summary of all loans restructured in TDRs during the years ended December 31, 2020, 2019, and 2018, and such loans which were in payment default under the restructured terms during the respective periods: 
 Year Ended December 31, 2020Year Ended December 31, 2019Year Ended December 31, 2018
 
Total (1)(3)
Payments in
Default  (2)(3)
Total (1)(3)
Payments in
Default  (2)(3)
Total (1)(3)
Payments in
Default  (2)(3)
(Dollars in thousands)CountBalanceCountBalanceCountBalanceCountBalanceCountBalanceCountBalance
Commercial
Commercial, industrial and other21 $12,362 7 $4,041 24 $26,341 12 $22,575 9 $18,967 4 $5,296 
Commercial real-estate
Non-construction18 19,281 12 14,343 7 7,018 3 865 3 514 2 455 
Residential real estate and other85 14,229 8 834 145 20,206 12 5,126 59 9,762 9 1,957 
Total loans124 $45,872 27 $19,218 176 $53,565 27 $28,566 71 $29,243 15 $7,708 
(1)Total TDRs represent all loans restructured in TDRs during the year 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.