Loans and leases and the allowance for credit losses

9 Months Ended

Sep. 30, 2011

Loans and leases and the allowance for credit losses [Abstract]

Loans and leases and the allowance for credit losses

4. Loans and leases and the allowance for credit losses

Interest income on acquired loans that were recorded at fair value at the acquisition date for the three months and nine months ended September 30, 2011 was approximately $97 million and $207 million, respectively, and for the three months and nine months ended September 30, 2010 was approximately $46 million and $132 million, respectively. The outstanding principal balance and the carrying amount of such loans that is included in the consolidated balance sheet were as follows:

	September 30, 2011		December 31, 2010
	(in thousands)
Outstanding principal balance	$	9,843,549		3,681,488
Carrying amount:
Commercial, financial, leasing, etc.		1,341,567		337,969
Commercial real estate		4,267,754		1,420,239
Residential real estate		959,714		348,225
Consumer		2,130,840		1,231,292
	$	8,699,875		3,337,725

Purchased impaired loans totaled $704 million at September 30, 2011, representing less than 1% of the Company’s assets and $97 million at December 31, 2010, representing less than .2% of the Company’s assets. Interest income earned on purchased impaired loans was $11 million and $18 million during the three- and nine-month periods ended September 30, 2011, respectively, and $2 million and $4 million during the three- and nine-month periods ended September 30, 2010, respectively.

A summary of current, past due and nonaccrual loans as of September 30, 2011 and December 31, 2010 were as follows:

		00000000		00000000		00000000		00000000		00000000		00000000		00000000
	Current		30-89 Days past due		90 Days or more past due and accruing		Purchased impaired (a)		Other acquired impaired (b)		Nonaccrual		Total
	(in thousands)
September 30, 2011
Commercial, financial, leasing, etc.	$	14,943,399		45,226		31,459		25,792		21,924		150,702		15,218,502
Real estate:
Commercial		18,746,145		197,412		19,207		207,523		82,815		182,953		19,436,055
Residential builder and developer		813,855		116,705		32,767		338,182		49,483		318,957		1,669,949
Other commercial construction		2,600,321		57,034		1,972		67,045		24,035		104,895		2,855,302
Residential		5,787,582		261,641		218,434		59,120		25,724		165,058		6,517,559
Residential Alt-A		415,267		23,832		—		—		—		108,793		547,892
Consumer:
Home equity lines and loans		6,671,948		45,028		—		4,794		12,607		41,593		6,775,970
Automobile		2,691,109		49,756		—		—		777		27,032		2,768,674
Other		2,531,909		57,950		6,127		1,176		394		13,805		2,611,361
Total	$	55,201,535		854,584		309,966		703,632		217,759		1,113,788		58,401,264

		00000000		00000000		00000000		00000000		00000000		00000000		00000000
	Current		30-89 Days past due		90 Days or more past due and accruing		Purchased impaired (a)		Other acquired impaired (b)		Nonaccrual		Total
	(in thousands)
December 31, 2010
Commercial, financial, leasing, etc.	$	13,088,887		96,087		16,647		2,250		13,374		173,365		13,390,610
Real estate:
Commercial		16,589,240		89,906		35,338		8,275		24,670		184,361		16,931,790
Residential builder and developer		891,764		30,805		9,763		72,710		29,637		316,811		1,351,490
Other commercial construction		2,723,399		36,420		11,323		2,098		10,376		116,265		2,899,881
Residential		4,699,711		229,641		192,276		9,320		10,728		162,001		5,303,677
Residential Alt-A		475,236		42,674		—		—		—		106,469		624,379
Consumer:
Home equity lines and loans		6,472,563		38,367		—		2,366		9,692		33,363		6,556,351
Automobile		2,608,230		44,604		—		—		26		31,866		2,684,726
Other		2,190,353		36,689		4,246		—		951		15,239		2,247,478
Total	$	49,739,383		645,193		269,593		97,019		99,454		1,139,740		51,990,382

(a) Accruing loans that were specifically identified as impaired at acquisition date and recorded at fair value.

(b) Acquired loans that ceased performing in accordance with their contractual terms subsequent to the acquisition date, but are included in accounting pools that continue to accrue interest.

Changes in the allowance for credit losses for the three months ended September 30, 2011 were as follows:

	Commercial, Financial, Leasing, etc.			Real Estate						Consumer			Unallocated			Total
				Commercial			Residential
	(in thousands)
Beginning balance	$	209,879			401,111			87,341			137,309			71,949			907,589
Provision for credit losses		23,145			(545	)		8,264			27,231			(95	)		58,000
Net charge-offs
Charge-offs		(12,073	)		(13,712	)		(12,135	)		(28,576	)		—			(66,496	)
Recoveries		2,613			839			1,750			4,230			—			9,432
Net charge-offs		(9,460	)		(12,873	)		(10,385	)		(24,346	)		—			(57,064	)
Ending balance	$	223,564			387,693			85,220			140,194			71,854			908,525

Changes in the allowance for credit losses for the nine months ended September 30, 2011 were as follows:

	Commercial, Financial, Leasing, etc.			Real Estate						Consumer			Unallocated		Total
				Commercial			Residential
	(in thousands)
Beginning balance	$	212,579			400,562			86,351			133,067			70,382		902,941
Provision for credit losses		44,957			36,965			37,759			74,847			1,472		196,000
Net charge-offs
Charge-offs		(41,023	)		(54,206	)		(44,174	)		(81,837	)		—		(221,240	)
Recoveries		7,051			4,372			5,284			14,117			—		30,824
Net charge-offs		(33,972	)		(49,834	)		(38,890	)		(67,720	)		—		(190,416	)
Ending balance	$	223,564			387,693			85,220			140,194			71,854		908,525

Despite the above allocation, the allowance for credit losses is general in nature and is available to absorb losses from any portfolio segment. Changes in the allowance for credit losses for the three months and nine months ended September 30, 2010 were as follows:

	Three months ended September 30, 2010			Nine months ended September 30, 2010
	(in thousands)
Beginning balance	$	894,667		$	878,022
Provision for credit losses		93,000			283,000
Consolidation of loan securitization trusts		—			2,752
Net charge-offs
Charge-offs		(101,782	)		(313,167	)
Recoveries		8,835			44,113
Net charge-offs		(92,947	)		(269,054	)
Ending balance	$	894,720		$	894,720

In establishing the allowance for credit losses, the Company estimates losses attributable to specific troubled credits identified through both normal and detailed or intensified credit review processes and also estimates losses inherent in other loans and leases on a collective basis. For purposes of determining the level of the allowance for credit losses, the Company evaluates its loan and lease portfolio by loan type. The amounts of loss components in the Company’s loan and lease portfolios are determined through a loan by loan analysis of larger balance commercial and commercial real estate loans that are in nonaccrual status and by applying loss factors to groups of loan balances based on loan type and management’s classification of such loans under the Company’s loan grading system. Measurement of the specific loss components is typically based on expected future cash flows, collateral values and other factors that may impact the borrower’s ability to pay. In determining the allowance for credit losses, the Company utilizes a loan grading system which is applied to all commercial and commercial real estate credits. Loan officers are responsible for continually assigning grades to these loans based on standards outlined in the Company’s Credit Policy. Internal loan grades are also monitored by the Company’s loan review department to ensure consistency and strict adherence to the prescribed standards. Loan grades are assigned loss component factors that reflect the Company’s loss estimate for each group of loans and leases. Factors considered in assigning loan grades and loss component factors include borrower-specific information related to expected future cash flows and operating results, collateral values, financial condition, payment status, and other information; levels of and trends in portfolio charge-offs and recoveries; levels of and trends in portfolio delinquencies and impaired loans; changes in the risk profile of specific portfolios; trends in volume and terms of loans; effects of changes in credit concentrations; and observed trends and practices in the banking industry. Except for consumer and residential mortgage loans that are considered smaller balance homogenous loans and are evaluated collectively and purchased-impaired and other acquired impaired loans, the Company considers a loan to be impaired for purposes of applying GAAP when, based on current information and events, it is probable that the Company will be unable to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days. Purchased-impaired loans are considered impaired under GAAP when it is probable that the Company will be unable to collect all cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimates after acquisition. Regardless of loan type, the Company considers a loan to be impaired if it qualifies as a troubled debt restructuring. Modified loans, including smaller balance homogenous loans, that are considered to be troubled debt restructurings are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows. Other acquired impaired loans were not specifically identified as impaired as of the acquisition date, but ceased performing in accordance with their contractual terms subsequent to their respective acquisition date. In accordance with GAAP, such loans are not considered impaired in the aggregate because they are included in accounting pools that continue to accrue interest. Impairment of expected cash flows for acquired loans is evaluated at the pool level. The following tables provide information with respect to loans and leases that were considered impaired as of September 30, 2011 and December 31, 2010 and for the three months and nine months ended September 30, 2011 and September 30, 2010.

	September 30, 2011						December 31, 2010
	Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance
	(in thousands)
With an allowance recorded:
Commercial, financial, leasing, etc.	$	104,806		124,624		41,474		121,744		170,888		40,909
Real estate:
Commercial		120,070		160,518		22,084		110,975		140,015		17,393
Residential builder and developer		189,304		242,088		81,048		263,545		295,031		78,597
Other commercial construction		86,961		91,053		13,182		80,934		85,432		22,067
Residential		93,210		113,852		2,247		73,006		85,279		3,375
Residential Alt-A		155,027		166,870		26,000		180,665		191,445		36,000
Consumer:
Home equity lines and loans		11,730		12,920		2,863		11,799		13,378		2,227
Automobile		54,748		54,748		11,513		58,858		58,858		12,597
Other		7,283		7,283		1,805		2,978		2,978		768
		823,139		973,956		202,216		904,504		1,043,304		213,933
With no related allowance recorded:
Commercial, financial, leasing, etc.		55,175		66,315		—		52,453		66,692		—
Real estate:
Commercial		66,572		71,403		—		77,269		81,800		—
Residential builder and developer		146,743		174,243		—		71,162		86,039		—
Other commercial construction		18,490		18,734		—		36,280		37,107		—
Residential		9,000		13,634		—		5,035		7,723		—
Residential Alt-A		34,437		59,606		—		28,967		47,879		—
		330,417		403,935		—		271,166		327,240		—
Total:
Commercial, financial, leasing, etc.		159,981		190,939		41,474		174,197		237,580		40,909
Real estate:
Commercial		186,642		231,921		22,084		188,244		221,815		17,393
Residential builder and developer		336,047		416,331		81,048		334,707		381,070		78,597
Other commercial construction		105,451		109,787		13,182		117,214		122,539		22,067
Residential		102,210		127,486		2,247		78,041		93,002		3,375
Residential Alt-A		189,464		226,476		26,000		209,632		239,324		36,000
Consumer:
Home equity lines and loans		11,730		12,920		2,863		11,799		13,378		2,227
Automobile		54,748		54,748		11,513		58,858		58,858		12,597
Other		7,283		7,283		1,805		2,978		2,978		768
Total	$	1,153,556		1,377,891		202,216		1,175,670		1,370,544		213,933

		$1,148,537		$1,148,537		$1,148,537		$1,148,537		$1,148,537		$1,148,537
	Three months ended September 30, 2011						Three months ended September 30, 2010
			Interest income recognized						Interest income recognized
	Average recorded investment		Total		Cash basis		Average recorded investment		Total		Cash basis
	(in thousands)
Commercial, financial, leasing, etc.	$	152,368		1,172		1,166		219,225		334		326
Real estate:
Commercial		195,832		810		808		167,462		1,089		949
Residential builder and developer		338,897		422		98		268,579		352		72
Other commercial construction		96,482		62		51		26,550		79		65
Residential		98,885		1,183		630		70,418		774		477
Residential Alt-A		192,609		1,872		494		219,778		2,082		453
Consumer:
Home equity lines and loans		11,814		174		26		11,128		177		26
Automobile		56,071		957		262		55,871		951		293
Other		5,579		75		32		3,186		57		12
Total	$	1,148,537		6,727		3,567		1,042,197		5,895		2,673

		$1,148,537		$1,148,537		$1,148,537		$1,148,537		$1,148,537		$1,148,537
	Nine months ended September 30, 2011						Nine months ended September 30, 2010
			Interest income recognized						Interest income recognized
	Average recorded investment		Total		Cash basis		Average recorded investment		Total		Cash basis
	(in thousands)
Commercial, financial, leasing, etc.	$	163,005		2,844		2,820		262,310		1,509		1,492
Real estate:
Commercial		191,818		1,705		1,630		219,816		1,585		1,426
Residential builder and developer		321,386		1,261		338		282,762		1,058		513
Other commercial construction		102,978		759		522		28,342		368		354
Residential		92,918		3,209		1,770		58,120		1,985		1,256
Residential Alt-A		199,066		5,858		1,455		223,328		6,410		1,338
Consumer:
Home equity lines and loans		11,989		523		74		11,809		536		88
Automobile		57,704		2,925		850		53,062		2,722		959
Other		4,124		187		51		3,211		186		42
Total	$	1,144,988		19,271		9,510		1,142,760		16,359		7,468

The Company utilizes a loan grading system that is applied to all commercial loans and commercial real estate loans. Loan grades are utilized to differentiate risk within the portfolio and consider the expectations of default for each loan. Commercial loans and commercial real estate loans with a lower expectation of default are assigned one of ten possible “pass” loan grades and are generally ascribed lower loss factors when determining the allowance for credit losses. Loans with an elevated level of credit risk are classified as “criticized” and are ascribed a higher loss factor when determining the allowance for credit losses. Criticized loans may be classified as “nonaccrual” if the Company no longer expects to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more. All larger balance criticized commercial and commercial real estate loans are individually reviewed by centralized loan review personnel each quarter to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or nonaccruing. Smaller balance criticized loans are analyzed by business line risk management areas to ensure proper loan grade classification. Furthermore, criticized nonaccrual commercial loans and commercial real estate loans are considered impaired and, as a result, specific loss allowances on such loans are established within the allowance for credit losses to the extent appropriate in each individual instance. The following table summarizes the loan grades applied to the various classes of the Company’s commercial and commercial real estate loans as of September 30, 2011 and December 31, 2010.

			Real Estate
	Commercial, Financial, Leasing, etc.		Commercial		Residential Builder and Developer		Other Commercial Construction
	(in thousands)
September 30, 2011
Pass	$	14,350,581		18,851,277		412,916		2,600,236
Criticized accrual		717,219		401,825		938,076		150,171
Criticized nonaccrual		150,702		182,953		318,957		104,895
Total	$	15,218,502		19,436,055		1,669,949		2,855,302
December 31, 2010
Pass	$	12,384,512		15,855,774		722,747		2,263,965
Criticized accrual		832,733		891,655		311,932		519,651
Criticized nonaccrual		173,365		184,361		316,811		116,265
Total	$	13,390,610		16,931,790		1,351,490		2,899,881

In determining the allowance for credit losses, residential real estate loans and consumer loans are generally evaluated collectively after considering such factors as payment performance, recent loss experience and trends related thereto. However, residential real estate loans and outstanding balances of home equity loans and lines of credit that are more than 150 days past due are generally evaluated for collectibility on a loan-by-loan basis giving consideration to estimated collateral values.

The Company also measures additional losses for purchased impaired loans when it is probable that the Company will be unable to collect all cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimates after acquisition. Given the inherent subjectivity and potential imprecision involved in determining the allocated portion of the allowance for credit losses, the Company also provides an inherent unallocated portion of the allowance. The unallocated portion of the allowance is intended to recognize probable losses that are not otherwise identifiable and includes management’s subjective determination of amounts necessary to provide for the possible use of imprecise estimates in determining the allocated portion of the allowance. The determination of the allocated portion of the allowance for credit losses is very subjective. Factors that influence the precision in developing loss estimates for the allocated allowance impact the level of the unallocated portion of the allowance. Such factors might include the effects of expansion into new markets for which the Company does not have the same degree of familiarity and experience regarding portfolio performance in changing market conditions, the introduction of new loan and lease product types, and other risks associated with the Company’s loan portfolio that may not be specifically identifiable.

At September 30, 2011 and December 31, 2010, the allocation of the allowance for credit losses summarized on the basis of the Company’s impairment methodology was as follows:

	Commercial, Financial, Leasing, etc.		Real Estate
			Commercial		Residential		Consumer		Total
					(in thousands)
September 30, 2011
Individually evaluated for impairment	$	41,152		113,009		28,000		15,533	$	197,694
Collectively evaluated for impairment		182,090		271,379		56,973		124,013		634,455
Purchased impaired		322		3,305		247		648		4,522
Allocated	$	223,564		387,693		85,220		140,194		836,671
Unallocated										71,854
Total									$	908,525
December 31, 2010
Individually evaluated for impairment	$	40,459		114,082		39,000		15,492	$	209,033
Collectively evaluated for impairment		171,670		282,505		46,976		117,475		618,626
Purchased impaired		450		3,975		375		100		4,900
Allocated	$	212,579		400,562		86,351		133,067		832,559
Unallocated										70,382
Total									$	902,941

The recorded investment in loans and leases summarized on the basis of the Company’s impairment methodology as of September 30, 2011 and December 31, 2010 was as follows:

	Commercial, Financial, Leasing, etc.		Real Estate
			Commercial		Residential		Consumer		Total
	(in thousands)
September 30, 2011
Individually evaluated for impairment	$	159,287		611,034		287,510		71,866	$	1,129,697
Collectively evaluated for impairment		15,033,423		22,737,522		6,718,821		12,078,169		56,567,935
Purchased impaired		25,792		612,750		59,120		5,970		703,632
Total	$	15,218,502		23,961,306		7,065,451		12,156,005	$	58,401,264
December 31, 2010
Individually evaluated for impairment	$	173,365		617,437		286,612		72,082	$	1,149,496
Collectively evaluated for impairment		13,214,995		20,482,641		5,632,124		11,414,107		50,743,867
Purchased impaired		2,250		83,083		9,320		2,366		97,019
Total	$	13,390,610		21,183,161		5,928,056		11,488,555	$	51,990,382

During the normal course of business, the Company modifies loans to maximize recovery efforts. If the borrower is experiencing financial difficulty and a concession is granted, the Company considers such modifications as troubled debt restructurings and classifies those loans as either nonaccrual loans or renegotiated loans. The types of concessions that the Company grants typically include principal deferrals and interest rate concessions, but may also include other types of concessions. As a result of adopting amendments to the accounting guidance in the third quarter of 2011, the Company was required to reassess any loan modifications that occurred on or after January 1, 2011 to determine if they qualified as troubled debt restructurings. The impact of the retrospective evaluation of loan modifications was not significant.

The table below summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the three months ended September 30, 2011:

	Number		Recorded investment				Financial effects  of modification
			Pre- modification		Post- modification		Recorded investment (a)			Interest (b)
	(Dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		13	$	1,021	$	1,115	$	94		$	—
Real estate:
Commercial
Principal deferral		6		1,361		1,301		(60	)		—
Residential builder and developer
Other		1		1,700		1,350		(350	)		—
Other commercial construction
Principal deferral		2		6,161		6,284		123			—
Residential
Principal deferral		12		2,099		2,124		25			—
Interest rate reduction		1		86		86		—			(7	)
Combination of concession types		22		2,972		3,044		72			(51	)
Residential Alt-A
Principal deferral		1		532		562		30			—
Combination of concession types		8		1,393		1,446		53			(341	)
Consumer:
Home equity lines and loans
Principal deferral		1		50		50		—			—
Other		1		43		43		—			—
Combination of concession types		9		696		697		1			(157	)
Automobile
Principal deferral		70		910		910		—			—
Interest rate reduction		1		11		11		—			—
Combination of concession types		84		924		924		—			(57	)
Other
Principal deferral		123		1,291		1,291		—			—
Interest rate reduction		6		50		50		—			(5	)
Combination of concession types		43		388		388		—			(63	)
Total		404	$	21,688	$	21,676	$	(12	)	$	(681	)

(a) Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages.

(b) Represents the present value of interest rate concessions discounted at the effective rate of the original loan.

The table below summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the nine months ended September 30, 2011:

			Recorded investment				Financial effects  of modification
	Number		Pre- modification		Post- modification		Recorded investment (a)			Interest (b)
			(Dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		46	$	8,302	$	8,396	$	94		$	—
Combination of concession types		1		1,945		1,945		—			(641	)
Real estate:
Commercial
Principal deferral		24		13,212		13,041		(171	)		—
Residential builder and developer
Principal deferral		4		18,586		17,661		(925	)		—
Other		6		118,114		110,156		(7,958	)		—
Combination of concession types		1		798		790		(8	)		—
Other commercial construction
Principal deferral		3		8,436		8,553		117			—
Residential
Principal deferral		24		2,869		2,884		15			—
Interest rate reduction		12		1,764		1,804		40			(70	)
Combination of concession types		81		16,066		16,385		319			(864	)
Residential Alt-A
Principal deferral		2		605		638		33			—
Combination of concession types		23		4,255		4,362		107			(572	)
Consumer:
Home equity lines and loans
Principal deferral		2		119		119		—			—
Other		1		43		43		—			—
Combination of concession types		19		1,484		1,486		2			(272	)
Automobile
Principal deferral		261		3,634		3,634		—			—
Interest rate reduction		3		49		49		—			(3	)
Combination of concession types		249		2,815		2,815		—			(205	)
Other
Principal deferral		424		5,338		5,338		—			—
Interest rate reduction		15		143		143		—			(10	)
Combination of concession types		146		2,714		2,714		—			(426	)
Total		1,347	$	211,291	$	202,956	$	(8,335	)	$	(3,063	)

(a) Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages.

(b) Represents the present value of interest rate concessions discounted at the effective rate of the original loan.

Troubled debt restructurings are considered to be impaired loans and for purposes of establishing the allowance for credit losses are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows. Impairment of troubled debt restructurings that have subsequently defaulted may also be measured based on the loan’s observable market price or the fair value of collateral if the loan is collateral-dependent. Charge-offs may also be recognized on troubled debt restructurings that have subsequently defaulted. Loans that were modified as troubled debt restructurings during the twelve months ended September 30, 2011 for which there was a subsequent payment default during the three- and nine-month periods ended September 30, 2011 were not material.