3. Loans and leases and the allowance for credit losses

A summary of current, past due and nonaccrual loans as of March 31, 2018 and December 31, 2017 follows:

	Current		30-89 Days Past Due		Accruing Loans Past Due 90 Days or More (a)		Accruing Loans Acquired at a Discount Past Due 90 days or More (b)		Purchased Impaired (c)		Nonaccrual		Total
	(In thousands)
March 31, 2018
Commercial, financial, leasing, etc.	$	21,377,917		51,438		5,547		26		2		262,592	$	21,697,522
Real estate:
Commercial		24,919,508		250,993		3,311		4,569		11,744		152,832		25,342,957
Residential builder and developer		1,641,644		1,974		—		—		357		4,519		1,648,494
Other commercial construction		6,680,584		71,115		—		—		1,194		9,162		6,762,055
Residential		14,942,659		407,773		221,666		8,416		263,939		234,309		16,078,762
Residential — limited documentation		2,599,705		82,738		—		—		100,764		98,977		2,882,184
Consumer:
Home equity lines and loans		5,037,213		32,100		—		8,157		—		73,169		5,150,639
Automobile		3,468,893		64,995		—		—		—		20,613		3,554,501
Other		4,523,469		28,686		4,801		28,181		—		8,498		4,593,635
Total	$	85,191,592		991,812		235,325		49,349		378,000		864,671	$	87,710,749

December 31, 2017
Commercial, financial, leasing, etc.	$	21,332,234		167,756		1,322		327		21		240,991	$	21,742,651
Real estate:
Commercial		24,910,381		166,305		4,444		6,016		16,815		184,982		25,288,943
Residential builder and developer		1,618,973		5,159		—		—		1,135		6,451		1,631,718
Other commercial construction		6,407,451		23,467		—		—		4,706		10,088		6,445,712
Residential		15,376,759		474,372		233,437		7,582		282,102		235,834		16,610,086
Residential — limited documentation		2,718,019		83,898		—		—		105,236		96,105		3,003,258
Consumer:
Home equity lines and loans		5,171,345		38,546		—		9,391		—		74,500		5,293,782
Automobile		3,441,371		78,511		—		—		—		23,781		3,543,663
Other		4,349,071		40,929		5,202		24,102		—		9,866		4,429,170
Total	$	85,325,604		1,078,943		244,405		47,418		410,015		882,598	$	87,988,983

(a)	Excludes loans acquired at a discount.

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

(c)	Accruing loans acquired at a discount that were impaired at acquisition date and recorded at fair value.

3. Loans and leases and the allowance for credit losses, continued

One-to-four family residential mortgage loans held for sale were $288 million and $356 million at March 31, 2018 and December 31, 2017, respectively. Commercial real estate loans held for sale were $167 million at March 31, 2018 and $22 million at December 31, 2017.

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

	March 31,		December 31,
	2018		2017
	(In thousands)

Outstanding principal balance	$	1,305,611		1,394,188
Carrying amount:
Commercial, financial, leasing, etc.		28,637		31,105
Commercial real estate		200,932		228,054
Residential real estate		587,562		620,827
Consumer		122,073		123,413
	$	939,204		1,003,399

Purchased impaired loans included in the table above totaled $378 million at March 31, 2018 and $410 million at December 31, 2017, representing less than 1% of the Company’s assets as of each date. A summary of changes in the accretable yield for loans acquired at a discount for the three-month periods ended March 31, 2018 and 2017 follows:


	Three Months Ended March 31, 2018						Three Months Ended March 31, 2017
	Purchased			Other			Purchased			Other
	Impaired			Acquired			Impaired			Acquired
	(In thousands)

Balance at beginning of period	$	157,918			133,162		$	154,233			201,153
Interest income		(9,819	)		(15,112	)		(10,925	)		(25,518	)
Reclassifications from nonaccretable balance		908			207			146			3,183
Other (a)		—			(73	)		—			2,492
Balance at end of period	$	149,007			118,184		$	143,454			181,310

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

Changes in the allowance for credit losses for the three months ended March 31, 2018 were as follows:

	Commercial, Financial,			Real Estate
	Leasing, etc.			Commercial			Residential			Consumer			Unallocated		Total
	(In thousands)

Beginning balance	$	328,599			374,085			65,405			170,809			78,300	$	1,017,198
Provision for credit losses		7,230			(5,225	)		10,486			29,814			695		43,000
Net charge-offs
Charge-offs		(14,581	)		(1,366	)		(4,354	)		(36,451	)		—		(56,752	)
Recoveries		4,823			223			1,510			9,669			—		16,225
Net charge-offs		(9,758	)		(1,143	)		(2,844	)		(26,782	)		—		(40,527	)
Ending balance	$	326,071			367,717			73,047			173,841			78,995	$	1,019,671

3. Loans and leases and the allowance for credit losses, continued

Changes in the allowance for credit losses for the three months ended March 31, 2017 were as follows:

	Commercial, Financial,			Real Estate
	Leasing, etc.			Commercial			Residential			Consumer			Unallocated		Total
	(In thousands)

Beginning balance	$	330,833			362,719			61,127			156,288			78,030	$	988,997
Provision for credit losses		28,823			1,262			5,637			18,832			446		55,000
Net charge-offs
Charge-offs		(16,357	)		(5,445	)		(6,259	)		(34,503	)		—		(62,564	)
Recoveries		4,461			1,474			1,507			12,555			—		19,997
Net (charge-offs) recoveries		(11,896	)		(3,971	)		(4,752	)		(21,948	)		—		(42,567	)
Ending balance	$	347,760			360,010			62,012			153,172			78,476	$	1,001,430

Despite the allocation in the preceding table, 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.

3. Loans and leases and the allowance for credit losses, continued

The following tables provide information with respect to loans and leases that were considered impaired as of March 31, 2018 and December 31, 2017 and for the three-month periods ended March 31, 2018 and 2017.

	March 31, 2018						December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
With an allowance recorded:
Commercial, financial, leasing, etc.	$	172,385		203,464		45,501		177,250		194,257		45,488
Real estate:
Commercial		77,118		88,313		9,981		67,199		75,084		9,140
Residential builder and developer		5,536		5,828		187		5,320		5,641		308
Other commercial construction		3,893		19,598		456		4,817		20,357		647
Residential		112,068		134,431		4,048		101,724		122,602		4,000
Residential — limited documentation		76,984		92,586		4,000		77,277		92,439		3,900
Consumer:
Home equity lines and loans		48,991		54,032		8,913		48,847		53,914		8,812
Automobile		12,797		15,461		2,694		13,498		15,737		2,811
Other		3,082		5,857		629		3,220		5,872		656
		512,854		619,570		76,409		499,152		585,903		75,762
With no related allowance recorded:
Commercial, financial, leasing, etc.		115,336		145,450		—		89,126		115,327		—
Real estate:
Commercial		96,267		104,911		—		138,356		149,716		—
Residential builder and developer		3,760		3,832		—		5,057		5,296		—
Other commercial construction		5,425		9,142		—		5,456		9,130		—
Residential		13,868		19,105		—		13,574		18,980		—
Residential — limited documentation		7,751		12,960		—		9,588		16,138		—
		242,407		295,400		—		261,157		314,587		—
Total:
Commercial, financial, leasing, etc.		287,721		348,914		45,501		266,376		309,584		45,488
Real estate:
Commercial		173,385		193,224		9,981		205,555		224,800		9,140
Residential builder and developer		9,296		9,660		187		10,377		10,937		308
Other commercial construction		9,318		28,740		456		10,273		29,487		647
Residential		125,936		153,536		4,048		115,298		141,582		4,000
Residential — limited documentation		84,735		105,546		4,000		86,865		108,577		3,900
Consumer:
Home equity lines and loans		48,991		54,032		8,913		48,847		53,914		8,812
Automobile		12,797		15,461		2,694		13,498		15,737		2,811
Other		3,082		5,857		629		3,220		5,872		656
Total	$	755,261		914,970		76,409		760,309		900,490		75,762

3. Loans and leases and the allowance for credit losses, continued

	Three Months Ended March 31, 2018						Three Months Ended March 31, 2017
			Interest Income Recognized						Interest Income Recognized
	Average Recorded Investment		Total		Cash Basis		Average Recorded Investment		Total		Cash Basis
	(In thousands)

Commercial, financial, leasing, etc.	$	272,172		783		783		271,825		478		478
Real estate:
Commercial		181,846		3,147		3,147		182,857		975		975
Residential builder and developer		9,840		1,682		1,682		20,051		429		429
Other commercial construction		10,102		6		6		16,328		847		847
Residential		121,209		1,902		902		103,875		1,636		774
Residential — limited documentation		85,595		1,728		696		97,121		1,500		384
Consumer:
Home equity lines and loans		48,797		414		86		45,542		399		100
Automobile		13,125		224		15		16,504		275		19
Other		3,119		85		3		3,598		72		3
Total	$	745,805		9,971		7,320		757,701		6,611		4,009

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)
March 31, 2018
Pass	$	20,484,737		24,525,402		1,505,502		6,654,458
Criticized accrual		950,193		664,723		138,473		98,435
Criticized nonaccrual		262,592		152,832		4,519		9,162
Total	$	21,697,522		25,342,957		1,648,494		6,762,055
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

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

3. Loans and leases and the allowance for credit losses, continued

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 totaled $33 million and $25 million, respectively, at March 31, 2018 and $34 million and $25 million, respectively, at December 31, 2017. 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 were $19 million and $29 million, respectively, at March 31, 2018 and $20 million and $32 million, respectively, at December 31, 2017.

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.

3. Loans and leases and the allowance for credit losses, continued

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)
March 31, 2018
Individually evaluated for impairment	$	45,501		10,624		8,048		12,236	$	76,409
Collectively evaluated for impairment		280,570		357,093		51,093		161,605		850,361
Purchased impaired		—		—		13,906		—		13,906
Allocated	$	326,071		367,717		73,047		173,841		940,676
Unallocated										78,995
Total									$	1,019,671
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

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)
March 31, 2018
Individually evaluated for impairment	$	287,721		191,999		210,671		64,870	$	755,261
Collectively evaluated for impairment		21,409,799		33,548,212		18,385,572		13,233,905		86,577,488
Purchased impaired		2		13,295		364,703		—		378,000
Total	$	21,697,522		33,753,506		18,960,946		13,298,775	$	87,710,749
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

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.

3. Loans and leases and the allowance for credit losses, continued

The table that follows summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the three months ended March 31, 2018 and 2017:

					Post-modification (a)
	Number		Pre- modification recorded investment		Principal Deferral		Interest Rate Reduction		Other		Combination of Concession Types		Total
Three Months Ended March 31, 2018	(Dollars in thousands)

Commercial, financial, leasing, etc.	56		$	47,994	$	35,673	$	624	$	—	$	13,047	$	49,344
Real estate:
Commercial	20			6,780		5,824		—		—		927		6,751
Other commercial construction	1			752		746		—		—		—		746
Residential	47			12,636		6,945		—		—		6,902		13,847
Residential — limited documentation	2			295		267		—		—		118		385
Consumer:
Home equity lines and loans	14			1,348		4		—		—		1,348		1,352
Automobile	8			148		148		—		—		—		148
Other	2			49		49		—		—		—		49
Total		150	$	70,002	$	49,656	$	624	$	—	$	22,342	$	72,622

Three Months Ended March 31, 2017

Commercial, financial, leasing, etc.		50	$	11,921	$	4,389	$	—	$	806	$	2,728	$	7,923
Real estate:
Commercial		20		6,702		2,991		—		—		3,606		6,597
Residential builder and developer		3		12,291		—		—		—		10,879		10,879
Other commercial construction		1		102		102		—		—		—		102
Residential		41		9,380		5,593		—		—		4,355		9,948
Residential — limited documentation		6		1,378		—		—		—		1,525		1,525
Consumer:
Home equity lines and loans		25		2,502		163		—		491		1,848		2,502
Automobile		20		390		383		—		—		7		390
Other		2		26		26		—		—		—		26
Total		168	$	44,692	$	13,647	$	—	$	1,297	$	24,948	$	39,892

(a)	Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages. The present value of interest rate concessions, discounted at the effective rate of the original loan, was not material.

3. Loans and leases and the allowance for credit losses, continued

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, 2018 and 2017 and for which there was a subsequent payment default during the three-month periods ended March 31, 2018 and 2017, respectively, were not material.

The amount of foreclosed residential real estate property held by the Company was $100 million and $108 million at March 31, 2018 and December 31, 2017, respectively. There were $458 million and $497 million at March 31, 2018 and December 31, 2017, respectively, in loans secured by residential real estate that were in the process of foreclosure. Of all loans in the process of foreclosure at March 31, 2018, approximately 41% were classified as purchased impaired and 21% were government guaranteed.