5. Allowance for credit losses

Changes in the allowance for credit losses for the years ended December 31, 2017, 2016 and 2015 were as follows:

	Commercial, Financial,			Real Estate
	Leasing, etc.			Commercial			Residential			Consumer			Unallocated			Total
	(In thousands)
2017
Beginning balance	$	330,833			362,719			61,127			156,288			78,030		$	988,997
Provision for credit losses		41,511			6,715			16,094			103,410			270			168,000
Net charge-offs
Charge-offs		(64,941	)		(7,931	)		(20,799	)		(130,927	)		—			(224,598	)
Recoveries		21,196			12,582			8,983			42,038			—			84,799
Net (charge-offs) recoveries		(43,745	)		4,651			(11,816	)		(88,889	)		—			(139,799	)
Ending balance	$	328,599			374,085			65,405			170,809			78,300		$	1,017,198

2016
Beginning balance	$	300,404			326,831			72,238			178,320			78,199		$	955,992
Provision for credit losses		59,506			33,627			6,902			90,134			(169	)		190,000
Net charge-offs
Charge-offs		(59,244	)		(4,805	)		(26,133	)		(141,073	)		—			(231,255	)
Recoveries		30,167			7,066			8,120			28,907			—			74,260
Net (charge-offs) recoveries		(29,077	)		2,261			(18,013	)		(112,166	)		—			(156,995	)
Ending balance	$	330,833			362,719			61,127			156,288			78,030		$	988,997

2015
Beginning balance	$	288,038			307,927			61,910			186,033			75,654		$	919,562
Provision for credit losses		43,065			25,768			19,133			79,489			2,545			170,000
Net charge-offs
Charge-offs		(60,983	)		(16,487	)		(13,116	)		(107,787	)		—			(198,373	)
Recoveries		30,284			9,623			4,311			20,585			—			64,803
Net charge-offs		(30,699	)		(6,864	)		(8,805	)		(87,202	)		—			(133,570	)
Ending balance	$	300,404			326,831			72,238			178,320			78,199		$	955,992

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 targeted 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 loans 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 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.

The following tables provide information with respect to loans and leases that were considered impaired as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015.

	December 31, 2017						December 31, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
With an allowance recorded:
Commercial, financial, leasing, etc.	$	177,250		194,257		45,488		168,072		184,432		48,480
Real estate:
Commercial		67,199		75,084		9,140		71,862		86,666		11,620
Residential builder and developer		5,320		5,641		308		7,396		8,361		506
Other commercial construction		4,817		20,357		647		2,475		2,731		448
Residential		101,724		122,602		4,000		86,680		105,944		3,457
Residential — limited documentation		77,277		92,439		3,900		82,547		97,718		6,000
Consumer:
Home equity lines and loans		48,847		53,914		8,812		44,693		48,965		8,027
Automobile		13,498		15,737		2,811		16,982		18,272		3,740
Other		3,220		5,872		656		3,791		5,296		776
		499,152		585,903		75,762		484,498		558,385		83,054
With no related allowance recorded:
Commercial, financial, leasing, etc.		89,126		115,327		—		100,805		124,786		—
Real estate:
Commercial		138,356		149,716		—		113,276		121,846		—
Residential builder and developer		5,057		5,296		—		14,368		21,124		—
Other commercial construction		5,456		9,130		—		15,933		35,281		—
Residential		13,574		18,980		—		16,823		24,161		—
Residential — limited documentation		9,588		16,138		—		15,429		24,590		—
		261,157		314,587		—		276,634		351,788		—
Total:
Commercial, financial, leasing, etc.		266,376		309,584		45,488		268,877		309,218		48,480
Real estate:
Commercial		205,555		224,800		9,140		185,138		208,512		11,620
Residential builder and developer		10,377		10,937		308		21,764		29,485		506
Other commercial construction		10,273		29,487		647		18,408		38,012		448
Residential		115,298		141,582		4,000		103,503		130,105		3,457
Residential — limited documentation		86,865		108,577		3,900		97,976		122,308		6,000
Consumer:
Home equity lines and loans		48,847		53,914		8,812		44,693		48,965		8,027
Automobile		13,498		15,737		2,811		16,982		18,272		3,740
Other		3,220		5,872		656		3,791		5,296		776
Total	$	760,309		900,490		75,762		761,132		910,173		83,054

	Year Ended December 31, 2017						Year Ended December 31, 2016
			Interest Income Recognized						Interest Income Recognized
	Average Recorded Investment		Total		Cash Basis		Average Recorded Investment		Total		Cash Basis
	(In thousands)

Commercial, financial, leasing, etc.	$	240,157		3,894		3,894		277,647		8,342		8,342
Real estate:
Commercial		207,616		4,497		4,497		175,877		4,878		4,878
Residential builder and developer		16,209		6,419		6,419		29,237		2,300		2,300
Other commercial construction		15,142		1,001		1,001		19,697		644		644
Residential		110,646		7,177		3,406		98,394		6,227		3,154
Residential — limited documentation		93,097		5,981		1,607		103,060		5,999		1,975
Consumer:
Home equity lines and loans		47,323		1,681		400		36,493		1,325		410
Automobile		15,045		1,025		81		19,636		1,242		99
Other		3,363		308		11		9,218		440		83
Total	$	748,598		31,983		21,316		769,259		31,397		21,885

	Year Ended December 31, 2015
			Interest Income Recognized
	Average Recorded Investment		Total		Cash Basis
	(In thousands)

Commercial, financial, leasing, etc.	$	236,201		2,933		2,933
Real estate:
Commercial		166,628		6,243		6,243
Residential builder and developer		59,457		335		335
Other commercial construction		20,276		2,311		2,311
Residential		101,483		6,188		4,037
Residential — limited documentation		118,449		6,380		2,638
Consumer:
Home equity lines and loans		21,523		905		261
Automobile		25,675		1,619		175
Other		18,809		729		113
Total	$	768,501		27,643		19,046

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. 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 loans and commercial real estate loans.

			Real Estate
	Commercial,				Residential		Other
	Financial,				Builder and		Commercial
	Leasing, etc.		Commercial		Developer		Construction
	(In thousands)
December 31, 2017
Pass	$	20,490,486		24,380,184		1,485,148		6,270,812
Criticized accrual		1,011,174		723,777		140,119		164,812
Criticized nonaccrual		240,991		184,982		6,451		10,088
Total	$	21,742,651		25,288,943		1,631,718		6,445,712
December 31, 2016
Pass	$	21,398,581		24,570,269		1,789,071		5,912,351
Criticized accrual		950,032		741,274		116,548		165,862
Criticized nonaccrual		261,434		176,201		16,707		18,111
Total	$	22,610,047		25,487,744		1,922,326		6,096,324

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 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 carrying value of residential real estate loans and home equity loans and lines of credit for which a partial charge-off has been recognized aggregated $34 million and $25 million, respectively, at December 31, 2017 and $44 million and $32 million, respectively, at December 31, 2016. Residential real estate loans and home equity loans and lines of credit that were more than 150 days past due but did not require a partial charge-off because the net realizable value of the collateral exceeded the outstanding customer balance totaled $20 million and $32 million, respectively, at December 31, 2017 and $16 million and $39 million, respectively, at December 31, 2016.

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. 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,		Real Estate
	Leasing, etc.		Commercial		Residential		Consumer		Total
	(In thousands)
December 31, 2017
Individually evaluated for impairment	$	45,488		10,095		7,900		12,279	$	75,762
Collectively evaluated for impairment		283,111		363,990		47,645		158,530		853,276
Purchased impaired		—		—		9,860		—		9,860
Allocated	$	328,599		374,085		65,405		170,809		938,898
Unallocated										78,300
Total									$	1,017,198
December 31, 2016
Individually evaluated for impairment	$	48,480		12,500		9,457		12,543	$	82,980
Collectively evaluated for impairment		282,353		348,301		47,993		143,745		822,392
Purchased impaired		—		1,918		3,677		—		5,595
Allocated	$	330,833		362,719		61,127		156,288		910,967
Unallocated										78,030
Total									$	988,997

The recorded investment in loans and leases summarized on the basis of the Company’s impairment methodology was as follows:

	Commercial, Financial,		Real Estate
	Leasing, etc.		Commercial		Residential		Consumer		Total
	(In thousands)
December 31, 2017
Individually evaluated for impairment	$	266,376		226,205		202,163		65,565	$	760,309
Collectively evaluated for impairment		21,476,254		33,117,512		19,023,843		13,201,050		86,818,659
Purchased impaired		21		22,656		387,338		—		410,015
Total	$	21,742,651		33,366,373		19,613,344		13,266,615	$	87,988,983
December 31, 2016
Individually evaluated for impairment	$	268,877		224,630		201,479		65,466	$	760,452
Collectively evaluated for impairment		22,340,529		33,222,080		21,871,726		12,080,597		89,514,932
Purchased impaired		641		59,684		517,707		—		578,032
Total	$	22,610,047		33,506,394		22,590,912		12,146,063	$	90,853,416