Allowance for Credit Losses and Credit Quality

3 Months Ended

Mar. 31, 2020

Allowance for Credit Losses and Credit Quality

Effective January 1, 2020, the Corporation adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and related ASUs on a modified retrospective basis. Financial information at or for the quarter ended March 31, 2020 is reflected as such. The historical financial information disclosed is in accordance with ASC Topic 310.

Allowance for Credit Losses The rollforwards of the allowance for credit losses were as follows:



(In thousands)	Consumer Loan Portfolio			Commercial Loan and Lease Portfolio			Total Loans and Leases			Unfunded Commitments⁽¹⁾		Total
At or For the Three Months Ended March 31, 2020
Balance, beginning of period	$	28,572		$	84,480		$	113,052		$	3,528	$	116,580
Impact of CECL adoption	107,337			98,655			205,992			14,707		220,699
Adjusted balance, beginning of period	135,909			183,135			319,044			18,235		337,279
Charge-offs	(5,900		)	(9,749		)	(15,649		)	—		(15,649		)
Recoveries	4,760			5,412			10,172			—		10,172
Net (charge-offs) recoveries	(1,140		)	(4,337		)	(5,477		)	—		(5,477		)
Provision for credit losses⁽²⁾	40,288			52,702			92,990			3,953		96,943
Other	—			(174		)	(174		)	—		(174		)
Balance, end of period	$	175,057		$	231,326		$	406,383		$	22,188	$	428,571
At or For the Three Months Ended March 31, 2019
Balance, beginning of period	$	80,017		$	77,429		$	157,446		$	1,428	$	158,874
Charge-offs	(16,866		)	(7,565		)	(24,431		)	—		(24,431		)
Recoveries	4,857			920			5,777			—		5,777
Net (charge-offs) recoveries	(12,009		)	(6,645		)	(18,654		)	—		(18,654		)
Provision for credit losses⁽²⁾	7,258			2,864			10,122			513		10,635
Other	(969		)	27			(942		)	—		(942		)
Balance, end of period	$	74,297		$	73,675		$	147,972		$	1,941	$	149,913


(1)	Reserve for unfunded commitments is recognized within other liabilities on the Consolidated Statements of Financial Condition.


(2)	As a result of the adoption of CECL, effective January 1, 2020, the provision for credit losses includes the provision for unfunded commitments that was previously included within other noninterest expense.

Additional disclosures previously required by ASC Topic 310 related to the Corporation's December 31, 2019 balances are included as follows.

The allowance for loan and lease losses and loans and leases outstanding by type of allowance methodology was as follows:



	At December 31, 2019
(In thousands)	Consumer Loan Portfolio		Commercial Loan and Lease Portfolio		Total Loans and Leases
Allowance for loan and lease losses
Collectively evaluated for impairment	$	26,430	$	75,756	$	102,186
Individually evaluated for impairment	1,468		5,769		7,237
Loans acquired with deteriorated credit quality	674		2,955		3,629
Total	$	28,572	$	84,480	$	113,052
Loans and leases outstanding
Collectively evaluated for impairment	$	11,087,534	$	22,986,607	$	34,074,141
Individually evaluated for impairment	60,694		115,843		176,537
Loans acquired with deteriorated credit quality	72,895		173,891		246,786
Total	$	11,221,123	$	23,276,341	$	34,497,464

Information on impaired loans and leases at December 31, 2019 was as follows:



	At December 31, 2019
(In thousands)	Unpaid Contractual Balance		Loan and Lease Balance		Related Allowance Recorded
Impaired loans and leases with an allowance recorded:
Commercial loan and lease portfolio:
Commercial and industrial	$	20,069	$	20,090	$	2,844
Commercial real estate	4,225		3,962		333
Lease financing	10,956		10,956		2,592
Total commercial loan and lease portfolio	35,250		35,008		5,769
Consumer loan portfolio:
Residential mortgage	24,297		22,250		1,030
Home equity	9,418		8,791		438
Total consumer loan portfolio	33,715		31,041		1,468
Total impaired loans and leases with an allowance recorded	68,965		66,049		7,237
Impaired loans and leases without an allowance recorded:
Commercial loan and lease portfolio:
Commercial and industrial	55,889		39,098		—
Commercial real estate	69,143		41,737		—
Total commercial loan and lease portfolio	125,032		80,835		—
Consumer loan portfolio:
Residential mortgage	31,142		22,594		—
Consumer installment	2,095		880		—
Home equity	24,709		6,179		—
Total consumer loan portfolio	57,946		29,653		—
Total impaired loans and leases without an allowance recorded	182,978		110,488		—
Total impaired loans and leases	$	251,943	$	176,537	$	7,237

Accruing and Nonaccrual Loans and Leases The Corporation's key credit quality indicator is the receivable's payment performance status, defined as accruing or not accruing. Nonaccrual loans and leases are those which management believes have a higher risk of loss. Delinquent balances are determined based on the contractual terms of the loan or lease. Loans and leases that are over 90 days delinquent are a leading indicator for future charge-off trends and are generally placed on nonaccrual status. The Corporation's accruing and nonaccrual loans and leases were as follows:



(In thousands)	Current		30-89 Days Delinquent and Accruing		90 Days or More Delinquent and Accruing		Total Accruing		Nonaccrual⁽¹⁾		Total
At March 31, 2020
Commercial loan and lease portfolio:
Commercial and industrial	$	12,188,493	$	54,183	$	110	$	12,242,786	$	84,157	$	12,326,943
Commercial real estate	9,395,692		42,738		1,442		9,439,872		47,032		9,486,904
Lease financing	2,653,675		39,108		3,045		2,695,828		13,170		2,708,998
Total commercial loan and lease portfolio	24,237,860		136,029		4,597		24,378,486		144,359		24,522,845
Consumer loan portfolio:
Residential mortgage	6,350,832		21,949		553		6,373,334		61,980		6,435,314
Consumer installment	1,504,344		4,615		5		1,508,964		989		1,509,953
Home equity	3,380,076		29,864		415		3,410,355		43,147		3,453,502
Total consumer loan portfolio	11,235,252		56,428		973		11,292,653		106,116		11,398,769
Total	$	35,473,112	$	192,457	$	5,570	$	35,671,139	$	250,475	$	35,921,614
At December 31, 2019
Commercial loan and lease portfolio:
Commercial and industrial	$	11,283,832	$	29,780	$	331	$	11,313,943	$	53,812	$	11,367,755
Commercial real estate	8,993,360		10,291		1,440		9,005,091		29,735		9,034,826
Lease financing	2,662,354		24,657		1,901		2,688,912		10,957		2,699,869
Total commercial loan and lease portfolio	22,939,546		64,728		3,672		23,007,946		94,504		23,102,450
Consumer loan portfolio:
Residential mortgage	6,056,817		17,245		559		6,074,621		38,577		6,113,198
Consumer installment	1,536,714		4,292		108		1,541,114		714		1,541,828
Home equity	3,434,771		22,568		—		3,457,339		35,863		3,493,202
Total consumer loan portfolio	11,028,302		44,105		667		11,073,074		75,154		11,148,228
Purchased credit impaired loans⁽¹⁾	217,206		3,843		25,737		246,786		—		246,786
Total	$	34,185,054	$	112,676	$	30,076	$	34,327,806	$	169,658	$	34,497,464

(1)

Prior to the adoption of CECL as of January 1, 2020, purchased credit impaired loans were not classified as nonaccrual loans because they were recorded at their net realizable value based on the principal and interest expected to be collected on the loans. At January 1, 2020, $73.4 million of previous purchased credit impaired loans were reclassified to nonaccrual loans as a result of the adoption of CECL.

Loans and leases that are 90 days or more delinquent and accruing by year of origination were as follows:



			Amortized Cost Basis
(In thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Revolving Loans and Leases Converted to Term Loans and Leases
At March 31, 2020	2020		2019		2018		2017		2016		Prior		Revolving Loans and Leases				Total
Commercial loan and lease portfolio:
Commercial and industrial	$	—	$	—	$	—	$	67	$	39	$	4	$	—	$	—	$	110
Commercial real estate	—		—		115		—		—		1,327		—		—		1,442
Lease financing	—		2,012		691		152		60		130		—		—		3,045
Total commercial loan and lease portfolio	—		2,012		806		219		99		1,461		—		—		4,597
Consumer loan portfolio:
Residential mortgage	—		—		—		—		—		553		—		—		553
Consumer installment	5		—		—		—		—		—		—		—		5
Home equity	—		—		—		—		—		—		415		—		415
Total consumer loan portfolio	5		—		—		—		—		553		415		—		973
Total 90 days or more delinquent and accruing	$	5	$	2,012	$	806	$	219	$	99	$	2,014	$	415	$	—	$	5,570

Nonaccrual loans and leases by year of origination were as follows:



			Amortized Cost Basis
(In thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Revolving Loans and Leases Converted to Term Loans and Leases
At March 31, 2020	2020		2019		2018		2017		2016		Prior		Revolving Loans and Leases				Total
Commercial loan and lease portfolio:
Commercial and industrial	$	296	$	5,192	$	12,329	$	15,382	$	13,883	$	29,984	$	7,091	$	—	$	84,157
Commercial real estate	—		457		3,758		4,457		9,707		28,653		—		—		47,032
Lease financing	—		1,413		2,065		4,496		1,764		2,546		—		886		13,170
Total commercial loan and lease portfolio	296		7,062		18,152		24,335		25,354		61,183		7,091		886		144,359
Consumer loan portfolio:
Residential mortgage	267		1,517		2,383		2,673		1,857		52,338		—		945		61,980
Consumer installment	—		33		241		122		70		438		85		—		989
Home equity	528		1,883		684		365		215		4,895		33,688		889		43,147
Total consumer loan portfolio	795		3,433		3,308		3,160		2,142		57,671		33,773		1,834		106,116
Total nonaccrual loans and leases	$	1,091	$	10,495	$	21,460	$	27,495	$	27,496	$	118,854	$	40,864	$	2,720	$	250,475

The average balance of nonaccrual loans and leases and interest income recognized on nonaccrual loans and leases were as follows:



	Three Months Ended March 31,
	2020				2019
(In thousands)	Average Loan and Lease Balance⁽¹⁾		Interest Income Recognized⁽¹⁾		Average Loan and Lease Balance		Interest Income Recognized
Commercial loan and lease portfolio:
Commercial and industrial	$	68,985	$	1,709	$	21,605	$	71
Commercial real estate	38,383		1,784		2,562		—
Lease financing	12,063		51		9,485		34
Total commercial loan and lease portfolio	119,431		3,544		33,652		105
Consumer loan portfolio:
Residential mortgage	50,278		638		34,169		78
Consumer installment	852		25		8,807		—
Home equity	39,505		156		27,973		40
Total consumer loan portfolio	90,635		819		70,949		118
Total nonaccrual loans and leases	$	210,066	$	4,363	$	104,601	$	223


(1)	At January 1, 2020, $73.4 million of previously purchased credit impaired loans were reclassified to nonaccrual loans as a result of the adoption of CECL. Beginning January 1, 2020, interest income, including the related purchase accounting accretion and amortization is included related to these loans.

In addition to the receivable's payment performance status, credit quality is also analyzed using risk categories, which vary based on the size and type of credit risk exposure and additionally measure liquidity, debt capacity, coverage and payment behavior as shown in the borrower's financial statements. The risk categories also measure the quality of the borrower's management and the repayment support offered by any guarantors. Loan and lease credit classifications are derived from standard regulatory rating definitions, which include: pass, special mention, substandard, doubtful and loss. Substandard and doubtful loans and leases have well-defined weaknesses, but may never result in a loss.

The amortized cost basis of loans and leases by credit risk categories and year of origination was as follows:



	Amortized Cost Basis
(In thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases⁽¹⁾		Revolving Loans and Leases Converted to Term Loans and Leases⁽²⁾
At March 31, 2020	2020		2019		2018		2017		2016		Prior						Total
Commercial loan and lease portfolio:
Commercial and industrial
Pass	$	791,458	$	2,781,870	$	1,607,788	$	940,905	$	630,425	$	917,788	$	4,058,569	$	40,089	$	11,768,892
Special mention	667		15,050		47,411		37,612		26,010		45,499		139,147		1,259		312,655
Substandard	1,526		17,159		43,437		14,028		29,873		45,130		88,036		—		239,189
Doubtful	—		—		1,500		4,199		—		508		—		—		6,207
Total commercial and industrial	793,651		2,814,079		1,700,136		996,744		686,308		1,008,925		4,285,752		41,348		12,326,943
Commercial real estate
Pass	685,194		2,328,888		2,141,432		1,671,351		889,876		1,436,544		1,077		—		9,154,362
Special mention	—		38,094		16,882		97,826		36,102		50,891		—		—		239,795
Substandard	—		662		5,516		9,043		16,622		60,904		—		—		92,747
Total commercial real estate	685,194		2,367,644		2,163,830		1,778,220		942,600		1,548,339		1,077		—		9,486,904
Lease financing
Pass	262,563		935,170		549,772		357,029		212,876		89,606		44,682		200,917		2,652,615
Special mention	660		5,154		3,781		4,256		2,899		2,327		—		11,524		30,601
Substandard	3,371		3,596		3,371		6,365		2,596		3,533		—		2,950		25,782
Total lease financing	266,594		943,920		556,924		367,650		218,371		95,466		44,682		215,391		2,708,998
Total commercial	1,745,439		6,125,643		4,420,890		3,142,614		1,847,279		2,652,730		4,331,511		256,739		24,522,845
Consumer loan portfolio:
Residential mortgage
Pass	504,871		1,526,611		1,045,969		668,442		618,565		1,987,061		—		16,554		6,368,073
Special mention	—		393		—		—		—		382		—		—		775
Substandard	267		1,517		2,599		2,807		1,857		56,474		—		945		66,466
Total residential mortgage	505,138		1,528,521		1,048,568		671,249		620,422		2,043,917		—		17,499		6,435,314
Consumer installment
Pass	97,037		483,133		258,519		266,110		189,150		179,147		35,851		—		1,508,947
Substandard	—		42		241		122		70		438		93		—		1,006
Total consumer installment	97,037		483,175		258,760		266,232		189,220		179,585		35,944		—		1,509,953
Home equity
Pass	11,857		68,988		68,945		56,168		41,278		172,810		2,956,158		29,015		3,405,219
Special mention	—		230		—		37		—		372		30		—		669
Substandard	625		2,166		757		365		267		5,353		37,129		952		47,614
Total home equity	12,482		71,384		69,702		56,570		41,545		178,535		2,993,317		29,967		3,453,502
Total consumer	614,657		2,083,080		1,377,030		994,051		851,187		2,402,037		3,029,261		47,466		11,398,769
Total loans and leases	$	2,360,096	$	8,208,723	$	5,797,920	$	4,136,665	$	2,698,466	$	5,054,767	$	7,360,772	$	304,205	$	35,921,614


(1)	This balance includes $44.7 million of leased equipment that has been provided to lessees under certain master lease agreements. Under these agreements, the total amount of equipment included in each lease is provided over time, and additional amounts are required to be provided to the respective lessees in future accounting periods.


(2)	This balance includes $256.7 million of leased equipment that has been provided to lessees under certain master lease agreements. Under these agreements, the total amount of equipment included in each lease was provided over time, and all equipment required by the lease has been provided to the respective lessees in current or previous accounting periods.

The recorded investment of loans and leases by credit risk categories as of December 31, 2019 was as follows:



(In thousands)	Pass		Special Mention		Substandard		Total
At December 31, 2019
Commercial loan and lease portfolio:
Commercial and industrial	$	10,930,939	$	315,097	$	193,566	$	11,439,602
Commercial real estate	8,891,361		170,114		75,395		9,136,870
Lease financing	2,646,874		28,091		24,904		2,699,869
Total commercial loan and lease portfolio	22,469,174		513,302		293,865		23,276,341
Consumer loan portfolio:
Residential mortgage	6,135,096		565		44,144		6,179,805
Consumer installment	1,541,524		—		887		1,542,411
Home equity	3,457,292		456		41,159		3,498,907
Total consumer loan portfolio	11,133,912		1,021		86,190		11,221,123
Total loans and leases	$	33,603,086	$	514,323	$	380,055	$	34,497,464

Troubled Debt Restructurings In certain circumstances, The Corporation may consider modifying the terms of a loan for economic or legal reasons related to the customer's financial difficulties. If the Corporation grants a concession, the modified loan is classified as a troubled debt restructuring ("TDR"). TDRs typically involve a deferral of the principal balance of the loan, a reduction of the stated interest rate of the loan or, in certain limited circumstances, a reduction of the principal balance of the loan or the loan's accrued interest. All loans classified as TDR loans are considered to be impaired.

The following table presents the recorded investment of loan modifications first classified as TDRs during the periods presented:



	Three Months Ended March 31,
	2020				2019
(In thousands)	Pre-modification Investment		Post-modification Investment		Pre-modification Investment		Post-modification Investment
Commercial loan and lease portfolio:
Commercial and industrial	$	5,751	$	5,751	$	1,195	$	1,195
Commercial real estate	106		106		569		569
Total commercial loan and lease portfolio	5,857		5,857		1,764		1,764
Consumer loan portfolio:
Residential mortgage	3,222		3,157		1,385		1,378
Consumer installment	376		353		—		—
Home equity	997		996		1,666		1,654
Total consumer loan portfolio	4,595		4,506		3,051		3,032
Total	$	10,452	$	10,363	$	4,815	$	4,796

The following table presents TDR loans:



	At March 31, 2020						At December 31, 2019
(In thousands)	Accruing TDR Loans		Nonaccrual TDR Loans		Total TDR Loans		Accruing TDR Loans		Nonaccrual TDR Loans		Total TDR Loans
Commercial loan and lease portfolio	$	9,655	$	10,313	$	19,968	$	12,986	$	5,356	$	18,342
Consumer loan portfolio	13,248		17,331		30,579		12,403		14,875		27,278
Total	$	22,903	$	27,644	$	50,547	$	25,389	$	20,231	$	45,620

Commitments to lend additional funds to borrowers whose terms have been modified in TDRs were $840 thousand and $638 thousand at March 31, 2020 and December 31, 2019, respectively.

Loan modifications to troubled borrowers are no longer disclosed as TDR loans in the calendar years after modification if the loans were modified to an interest rate equal to or greater than the yields of new loan originations with comparable risk at the time of restructuring and if the loan is performing based on the restructured terms; however, these loans are still considered impaired and follow the Corporation's impaired loan reserve policies.

The following table summarizes the TDR loans that defaulted during the periods presented that were modified during the respective reporting period or within one year of the beginning of the respective reporting period. The Corporation considers a loan to have defaulted when under the modified terms it becomes 90 or more days delinquent, has been transferred to nonaccrual status, has been charged down or has been transferred to other real estate owned or repossessed and returned assets.



	Three Months Ended March 31,
(In thousands)	2020		2019
Defaulted TDR loan balances modified during the applicable period
Consumer loan portfolio:
Residential mortgage	$	630	$	190
Consumer installment	—		536
Home equity	59		94
Total consumer loan portfolio	689		820
Defaulted TDR loan balances	$	689	$	820

Other Real Estate Owned and Repossessed and Returned Assets Other real estate owned and repossessed and returned assets were as follows:



(In thousands)	At March 31, 2020		At December 31, 2019
Other real estate owned	$	38,914	$	34,256
Repossessed and returned assets	10,196		8,045
Consumer loans in process of foreclosure	18,693		17,758

Other real estate owned and repossessed and returned assets were written down $842 thousand and $1.8 million during the three months ended March 31, 2020 and March 31, 2019, respectively, and were included in other assets on the Consolidated Statements of Financial Condition.