Loans and leases and the allowance for credit losses

3 Months Ended

Mar. 31, 2013

Receivables [Abstract]

Loans and leases and the allowance for credit losses

4. Loans and leases and the allowance for credit losses

The outstanding principal balance and the carrying amount of acquired loans that were recorded at fair value at the acquisition date that is included in the consolidated balance sheet were as follows:

	March 31, 2013		December 31, 2012
	(in thousands)
Outstanding principal balance	$	6,148,875		6,705,120
Carrying amount:
Commercial, financial, leasing, etc.		754,913		928,107
Commercial real estate		2,322,317		2,567,050
Residential real estate		677,306		707,309
Consumer		1,560,598		1,637,887
	$	5,315,134		5,840,353

Purchased impaired loans included in the table above totaled $425 million at March 31, 2013 and $447 million at December 31, 2012, representing less than 1% of the Company’s assets as of each date. A summary of changes in the accretable yield for acquired loans for the three months ended March 31, 2013 and 2012 follows:

	Three months ended March 31, 2013
	Purchased impaired			Other acquired			Total
	(in thousands)
Balance at beginning of period	$	42,252			638,272			680,524
Interest income		(8,704	)		(61,747	)		(70,451	)
Reclassifications from (to) nonaccretable balance, net		180			10,817			10,997
Other (a)		—			(9,733	)		(9,733	)
Balance at end of period	$	33,728			577,609			611,337

	Three months ended March 31, 2012
	Purchased impaired			Other acquired			Total
	(in thousands)
Balance at beginning of period	$	30,805			807,960			838,765
Interest income		(7,664	)		(73,723	)		(81,387	)
Reclassifications from (to) nonaccretable balance, net		(576	)		1,000			424
Other (a)		—			12,229			12,229
Balance at end of period	$	22,565			747,466			770,031

(a) Other changes in expected cash flows including changes in interest rates and prepayment assumptions.

A summary of current, past due and nonaccrual loans as of March 31, 2013 and December 31, 2012 were as follows:

	Current		30-89 Days past  due		90 Days or more past due and accruing				Purchased impaired (b)		Nonaccrual		Total
					Non- acquired		Acquired (a)
					(in thousands)
March 31, 2013
Commercial, financial, leasing, etc.	$	17,144,615		90,708		3,669		9,206		16,741		204,199		17,469,138
Real estate:
Commercial		21,513,598		185,101		11,444		41,268		121,090		186,239		22,058,740
Residential builder and developer		781,748		30,019		513		20,365		167,207		166,796		1,166,648
Other commercial construction		2,541,578		42,849		2,279		14,301		78,254		40,170		2,719,431
Residential		9,742,192		279,879		309,366		43,050		38,709		252,799		10,665,995
Residential Alt-A		315,500		24,779		—		—		—		88,303		428,582
Consumer:
Home equity lines and loans		6,068,137		33,433		—		27,359		3,231		72,021		6,204,181
Automobile		2,466,577		30,363		—		158		—		20,095		2,517,193
Other		2,634,775		32,039		4,012		1,361		—		22,172		2,694,359
Total	$	63,208,720		749,170		331,283		157,068		425,232		1,052,794		65,924,267

	Current		30-89 Days past due		90 Days or more past due and accruing				Purchased impaired (b)		Nonaccrual		Total
					Non- acquired		Acquired (a)
					(in thousands)
December 31, 2012
Commercial, financial, leasing, etc.	$	17,511,052		62,479		23,490		10,587		17,437		151,908		17,776,953
Real estate:
Commercial		21,759,997		118,249		13,111		54,995		132,962		193,859		22,273,173
Residential builder and developer		757,311		35,419		3,258		23,909		187,764		181,865		1,189,526
Other commercial construction		2,379,953		35,274		509		9,572		68,971		36,812		2,531,091
Residential		9,811,956		337,969		313,184		45,124		36,769		249,314		10,794,316
Residential Alt-A		331,021		19,692		—		—		—		95,808		446,521
Consumer:
Home equity lines and loans		6,199,591		40,759		—		20,318		3,211		58,071		6,321,950
Automobile		2,442,502		40,461		—		251		—		25,107		2,508,321
Other		2,661,432		40,599		4,845		1,798		—		20,432		2,729,106
Total	$	63,854,815		730,901		358,397		166,554		447,114		1,013,176		66,570,957

(a) Acquired loans that were recorded at fair value at acquisition date. This category does not include purchased impaired loans that are presented separately.

(b) Accruing loans that were impaired at acquisition date and were recorded at fair value.

Changes in the allowance for credit losses for the three months ended March 31, 2013 and 2012 were as follows:

	Commercial, Financial, Leasing, etc.			Real Estate
				Commercial			Residential			Consumer			Unallocated		Total
	(in thousands)
2013
Beginning balance	$	246,759			337,101			88,807			179,418			73,775		925,860
Provision for credit losses		17,880			(312	)		5,036			14,836			560		38,000
Net charge-offs
Charge-offs		(9,544	)		(9,588	)		(8,171	)		(21,645	)		—		(48,948	)
Recoveries		2,756			815			4,450			4,184			—		12,205
Net charge-offs		(6,788	)		(8,773	)		(3,721	)		(17,461	)		—		(36,743	)
Ending balance	$	257,851			328,016			90,122			176,793			74,335		927,117
2012
Beginning balance	$	234,022			367,637			91,915			143,121			71,595		908,290
Provision for credit losses		10,121			(2,260	)		16,230			23,538			1,371		49,000
Net charge-offs
Charge-offs		(8,037	)		(10,540	)		(12,718	)		(28,981	)		—		(60,276	)
Recoveries		3,167			1,717			1,874			5,234			—		11,992
Net charge-offs		(4,870	)		(8,823	)		(10,844	)		(23,747	)		—		(48,284	)
Ending balance	$	239,273			356,554			97,301			142,912			72,966		909,006

Despite the above allocation, the allowance for credit losses is general in nature and is available to absorb losses from any loan or lease type.

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 commercial and commercial real estate credits on an individual loan basis. 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, geographic location, financial condition and performance, 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. As updated appraisals are obtained on individual loans or other events in the market place indicate that collateral values have significantly changed, individual loan grades are adjusted as appropriate. Changes in other factors cited may also lead to loan grade changes at any time. Except for consumer and residential mortgage loans that are considered smaller balance homogenous loans and acquired loans that are evaluated on an aggregated basis, 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. 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.

The following tables provide information with respect to loans and leases that were considered impaired as of March 31, 2013 and December 31, 2012 and for the three month periods ended March 31, 2013 and 2012.

	March 31, 2013						December 31, 2012
	Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance
	(in thousands)
With an allowance recorded:
Commercial, financial, leasing, etc.	$	165,867		186,405		45,277		127,282		149,534		33,829
Real estate:
Commercial		116,111		142,349		19,859		121,542		143,846		23,641
Residential builder and developer		106,510		202,139		19,956		115,306		216,218		25,661
Other commercial construction		73,622		77,164		6,533		73,544		76,869		6,836
Residential		104,096		123,244		5,464		103,451		121,819		3,521
Residential Alt-A		125,781		139,779		17,000		128,891		141,940		17,000
Consumer:
Home equity lines and loans		12,457		13,805		2,315		12,360		13,567		2,254
Automobile		45,876		45,876		12,916		49,210		49,210		14,273
Other		15,280		15,280		5,519		14,408		14,408		5,667
		765,600		946,041		134,839		745,994		927,411		132,682
With no related allowance recorded:
Commercial, financial, leasing, etc.		46,187		58,422		—		32,631		42,199		—
Real estate:
Commercial		76,396		98,494		—		78,380		100,337		—
Residential builder and developer		67,685		93,936		—		74,307		105,438		—
Other commercial construction		26,298		27,170		—		23,018		23,532		—
Residential		86,240		96,741		—		86,342		96,448		—
Residential Alt-A		28,083		53,057		—		31,354		58,768		—
		330,889		427,820		—		326,032		426,722		—
Total:
Commercial, financial, leasing, etc.		212,054		244,827		45,277		159,913		191,733		33,829
Real estate:
Commercial		192,507		240,843		19,859		199,922		244,183		23,641
Residential builder and developer		174,195		296,075		19,956		189,613		321,656		25,661
Other commercial construction		99,920		104,334		6,533		96,562		100,401		6,836
Residential		190,336		219,985		5,464		189,793		218,267		3,521
Residential Alt-A		153,864		192,836		17,000		160,245		200,708		17,000
Consumer:
Home equity lines and loans		12,457		13,805		2,315		12,360		13,567		2,254
Automobile		45,876		45,876		12,916		49,210		49,210		14,273
Other		15,280		15,280		5,519		14,408		14,408		5,667
Total	$	1,096,489		1,373,861		134,839		1,072,026		1,354,133		132,682

	Three months ended March 31, 2013						Three months ended March 31, 2012
			Interest income recognized						Interest income recognized
	Average recorded investment		Total		Cash basis		Average recorded investment		Total		Cash basis
	(in thousands)
Commercial, financial, leasing, etc.	$	167,793		2,434		2,434		167,724		409		409
Real estate:
Commercial		194,446		303		303		178,315		318		318
Residential builder and developer		183,853		140		65		282,495		341		179
Other commercial construction		98,318		635		635		104,105		170		170
Residential		188,075		1,470		922		126,376		1,342		878
Residential Alt-A		156,971		1,740		591		181,018		1,843		546
Consumer:
Home equity lines and loans		12,454		167		39		9,998		166		42
Automobile		47,606		776		146		53,289		898		178
Other		14,930		151		54		8,302		93		39
Total	$	1,064,446		7,816		5,189		1,111,622		5,580		2,759

In accordance with the previously described policies, 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.

	Commercial, Financial, Leasing, etc.		Real Estate
			Commercial		Residential Builder and Developer		Other Commercial Construction
	(in thousands)
March 31, 2013
Pass	$	16,590,137		21,086,718		929,857		2,533,617
Criticized accrual		674,802		785,783		69,995		145,644
Criticized nonaccrual		204,199		186,239		166,796		40,170
Total	$	17,469,138		22,058,740		1,166,648		2,719,431
December 31, 2012
Pass	$	16,889,753		21,275,182		922,141		2,307,436
Criticized accrual		735,292		804,132		85,520		186,843
Criticized nonaccrual		151,908		193,859		181,865		36,812
Total	$	17,776,953		22,273,173		1,189,526		2,531,091

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 and recent loss experience and trends, which are mainly driven by current collateral values in the market place as well as the amount of loan defaults. Loss rates on such loans are determined by reference to recent charge-off history and are evaluated (and adjusted if deemed appropriate) through consideration of other factors including near-term forecasted loss estimates developed by the Company’s Credit Department. In arriving at such forecasts, the Company considers the current estimated fair value of its collateral based on geographical adjustments for home price depreciation/appreciation and overall borrower repayment performance. With regard to collateral values, the realizability of such values by the Company contemplates repayment of the original balance of any first lien position prior to recovering amounts on a second lien position. 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. The determination of the allocated portion of the allowance for credit losses is very subjective. Given that 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. Therefore, the level of the unallocated portion of the allowance is primarily reflective of the inherent imprecision in the various calculations used in determining the allocated portion of the allowance for credit losses. Other factors that could also lead to changes in the unallocated portion 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.

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)
March 31, 2013
Individually evaluated for impairment	$	45,277		45,503		22,444		20,750	$	133,974
Collectively evaluated for impairment		212,574		281,492		66,145		155,480		715,691
Purchased impaired		—		1,021		1,533		563		3,117
Allocated	$	257,851		328,016		90,122		176,793		852,782
Unallocated										74,335
Total									$	927,117
December 31, 2012
Individually evaluated for impairment	$	33,669		55,291		20,502		22,194	$	131,656
Collectively evaluated for impairment		212,930		280,789		66,684		156,661		717,064
Purchased impaired		160		1,021		1,621		563		3,365
Allocated	$	246,759		337,101		88,807		179,418		852,085
Unallocated										73,775
Total									$	925,860

The recorded investment in loans and leases 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)
March 31, 2013
Individually evaluated for impairment	$	212,054		461,084		343,642		73,611	$	1,090,391
Collectively evaluated for impairment		17,240,343		25,117,184		10,712,226		11,338,891		64,408,644
Purchased impaired		16,741		366,551		38,709		3,231		425,232
Total	$	17,469,138		25,944,819		11,094,577		11,415,733	$	65,924,267
December 31, 2012
Individually evaluated for impairment	$	159,761		480,335		349,477		75,978	$	1,065,551
Collectively evaluated for impairment		17,599,755		25,123,758		10,854,591		11,480,188		65,058,292
Purchased impaired		17,437		389,697		36,769		3,211		447,114
Total	$	17,776,953		25,993,790		11,240,837		11,559,377	$	66,570,957

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.

The table below summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the three months ended March 31, 2013:

			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		24	$	2,006	$	1,982	$	(24	)	$	—
Other		1		47,200		47,200		—			—
Combination of concession types		1		342		342		—			—
Real estate:
Commercial
Principal deferral		8		18,478		18,363		(115	)		—
Combination of concession types		2		582		581		(1	)		(56	)
Residential builder and developer
Principal deferral		8		1,357		1,340		(17	)		—
Combination of concession types		1		1,701		1,691		(10	)		—
Residential
Principal deferral		7		566		607		41			—
Other		1		195		195		—			—
Combination of concession types		20		2,449		2,536		87			(371	)
Residential Alt-A
Combination of concession types		5		907		925		18			(110	)
Consumer:
Home equity lines and loans
Principal deferral		2		79		79		—			—
Combination of concession types		2		211		211		—			(33	)
Automobile
Principal deferral		121		1,586		1,586		—			—
Interest rate reduction		2		36		36		—			(5	)
Other		17		159		159		—			—
Combination of concession types		61		553		553		—			(42	)
Other
Principal deferral		6		45		45		—			—
Other		1		12		12		—			—
Combination of concession types		42		1,217		1,217		—			(267	)
Total		332	$	79,681	$	79,660	$	(21	)	$	(884	)

(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 three months ended March 31, 2012:

			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		9	$	2,812	$	2,954	$	142		$	—
Other		1		972		1,098		126			—
Combination of concession types		1		45		44		(1	)		(33	)
Real estate:
Commercial
Principal deferral		2		2,425		2,405		(20	)		—
Residential builder and developer
Principal deferral		5		6,822		6,034		(788	)		—
Combination of concession types		2		2,350		2,726		376			—
Residential
Principal deferral		15		1,505		1,588		83			—
Combination of concession types		18		2,936		3,007		71			(200	)
Residential Alt-A
Principal deferral		3		397		407		10			—
Combination of concession types		8		1,360		1,394		34			(5	)
Consumer:
Home equity lines and loans
Principal deferral		1		117		117		—			—
Interest rate reduction		1		144		144		—			(6	)
Combination of concession types		2		235		235		—			(24	)
Automobile
Principal deferral		153		1,885		1,885		—			—
Interest rate reduction		4		57		57		—			(4	)
Other		10		19		19		—			—
Combination of concession types		112		1,609		1,609		—			(172	)
Other
Principal deferral		52		647		647		—			—
Interest rate reduction		3		23		23		—			(3	)
Other		9		49		49		—			—
Combination of concession types		34		219		219		—			(36	)
Total		445	$	26,628	$	26,661	$	33		$	(483	)

(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 March 31, 2013 and 2012 and for which there was a subsequent payment default during the three-month periods ended March 31, 2013 and 2012, respectively, were not material.