3. Loans and leases and the allowance for credit losses

A summary of current, past due and nonaccrual loans as of September 30, 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)
September 30, 2018
Commercial, financial, leasing, etc.	$	21,317,925		81,323		1,390		100		—		234,656	$	21,635,394
Real estate:
Commercial		24,650,660		97,630		52,436		4,277		9,948		207,584		25,022,535
Residential builder and developer		1,631,501		7,354		1,656		114		—		2,786		1,643,411
Other commercial construction		6,792,917		39,598		440		16		571		18,887		6,852,429
Residential		13,989,937		437,170		193,604		7,065		224,618		227,619		15,080,013
Residential — limited documentation		2,373,778		93,582		729		—		90,843		82,454		2,641,386
Consumer:
Home equity lines and loans		4,850,989		35,212		—		4,694		—		66,303		4,957,198
Automobile		3,527,867		71,184		—		—		—		20,949		3,620,000
Other		5,144,471		41,992		4,105		27,957		—		9,594		5,228,119
Total	$	84,280,045		905,045		254,360		44,223		325,980		870,832	$	86,680,485

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 $258 million and $356 million at September 30, 2018 and December 31, 2017, respectively. Commercial real estate loans held for sale were $381 million at September 30, 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:

	September 30,		December 31,
	2018		2017
	(In thousands)

Outstanding principal balance	$	1,124,232		1,394,188
Carrying amount:
Commercial, financial, leasing, etc.		26,473		31,105
Commercial real estate		165,431		228,054
Residential real estate		507,475		620,827
Consumer		97,125		123,413
	$	796,504		1,003,399

Purchased impaired loans included in the table above totaled $326 million at September 30, 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 months and nine months ended September 30, 2018 and 2017 follows:

	Three Months Ended September 30
	2018						2017
	Purchased			Other			Purchased			Other
	Impaired			Acquired			Impaired			Acquired
	(In thousands)

Balance at beginning of period	$	149,388		$	117,715		$	133,532		$	163,099
Interest income		(8,105	)		(18,001	)		(10,815	)		(20,064	)
Reclassifications from nonaccretable balance		8,445			25			30,799			6,041
Other (a)		—			2,001			—			1,545
Balance at end of period	$	149,728			101,740		$	153,516		$	150,621

	Nine Months Ended September 30
	2018						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		(25,893	)		(48,507	)		(32,546	)		(66,505	)
Reclassifications from nonaccretable balance		17,703			11,230			31,829			11,076
Other (a)		—			5,855			—			4,897
Balance at end of period	$	149,728		$	101,740		$	153,516			150,621

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

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

Changes in the allowance for credit losses for the three months ended September 30, 2018 were as follows:

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

Beginning balance	$	328,830			353,761			76,123			182,987			77,547	$	1,019,248
Provision for credit losses		(6,972	)		(11,394	)		741			32,887			738		16,000
Net charge-offs
Charge-offs		(11,792	)		(1,941	)		(3,338	)		(34,995	)		—		(52,066	)
Recoveries		7,123			14,577			1,655			12,951			—		36,306
Net (charge-offs) recoveries		(4,669	)		12,636			(1,683	)		(22,044	)		—		(15,760	)
Ending balance	$	317,189			355,003			75,181			193,830			78,285	$	1,019,488

Changes in the allowance for credit losses for the three months ended September 30, 2017 were as follows:

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

Beginning balance	$	339,314		$	366,229			66,006			158,559			78,117	$	1,008,225
Provision for credit losses		2,451			(7,699	)		1,267			33,886			95		30,000
Net charge-offs
Charge-offs		(9,714	)		(258	)		(4,206	)		(32,874	)		—		(47,052	)
Recoveries		4,423			5,895			2,028			9,807			—		22,153
Net (charge-offs) recoveries		(5,291	)		5,637			(2,178	)		(23,067	)		—		(24,899	)
Ending balance	$	336,474		$	364,167			65,095			169,378			78,212	$	1,013,326

Changes in the allowance for credit losses for the nine months ended September 30, 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		11,508			(27,464	)		16,469			93,502			(15	)		94,000
Net charge-offs
Charge-offs		(41,273	)		(7,855	)		(11,658	)		(105,479	)		—			(166,265	)
Recoveries		18,355			16,237			4,965			34,998			—			74,555
Net (charge-offs) recoveries		(22,918	)		8,382			(6,693	)		(70,481	)		—			(91,710	)
Ending balance	$	317,189			355,003			75,181			193,830			78,285		$	1,019,488

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

Changes in the allowance for credit losses for the nine months ended September 30, 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		44,642			1,201			14,067			76,908			182		137,000
Net charge-offs
Charge-offs		(51,318	)		(7,556	)		(16,364	)		(96,060	)		—		(171,298	)
Recoveries		12,317			7,803			6,265			32,242			—		58,627
Net (charge-offs) recoveries		(39,001	)		247			(10,099	)		(63,818	)		—		(112,671	)
Ending balance	$	336,474			364,167			65,095			169,378			78,212	$	1,013,326

Despite the allocation in the preceding tables, 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

Information with respect to loans and leases that were considered impaired as of September 30, 2018 and December 31, 2017 and for the three-month and nine-month periods ended September 30, 2018 and 2017 follows.

	September 30, 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.	$	171,272		193,161		46,554		177,250		194,257		45,488
Real estate:
Commercial		123,451		135,167		11,851		67,199		75,084		9,140
Residential builder and developer		6,248		6,782		352		5,320		5,641		308
Other commercial construction		11,287		11,650		878		4,817		20,357		647
Residential		122,627		145,231		5,695		101,724		122,602		4,000
Residential — limited documentation		75,183		91,149		4,000		77,277		92,439		3,900
Consumer:
Home equity lines and loans		48,711		53,869		9,269		48,847		53,914		8,812
Automobile		3,445		4,118		705		13,498		15,737		2,811
Other		11,536		17,010		2,365		3,220		5,872		656
		573,760		658,137		81,669		499,152		585,903		75,762
With no related allowance recorded:
Commercial, financial, leasing, etc.		84,235		115,654		—		89,126		115,327		—
Real estate:
Commercial		104,753		114,998		—		138,356		149,716		—
Residential builder and developer		1,174		1,174		—		5,057		5,296		—
Other commercial construction		7,698		11,428		—		5,456		9,130		—
Residential		14,651		19,742		—		13,574		18,980		—
Residential — limited documentation		5,873		10,190		—		9,588		16,138		—
		218,384		273,186		—		261,157		314,587		—
Total:
Commercial, financial, leasing, etc.		255,507		308,815		46,554		266,376		309,584		45,488
Real estate:
Commercial		228,204		250,165		11,851		205,555		224,800		9,140
Residential builder and developer		7,422		7,956		352		10,377		10,937		308
Other commercial construction		18,985		23,078		878		10,273		29,487		647
Residential		137,278		164,973		5,695		115,298		141,582		4,000
Residential — limited documentation		81,056		101,339		4,000		86,865		108,577		3,900
Consumer:
Home equity lines and loans		48,711		53,869		9,269		48,847		53,914		8,812
Automobile		3,445		4,118		705		13,498		15,737		2,811
Other		11,536		17,010		2,365		3,220		5,872		656
Total	$	792,144		931,323		81,669		760,309		900,490		75,762

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

	Three Months Ended September 30, 2018						Three Months Ended September 30, 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.	$	256,196		1,985		1,985	$	224,526		391		391
Real estate:
Commercial		204,315		1,489		1,489		233,572		1,425		1,425
Residential builder and developer		9,000		—		—		8,550		895		895
Other commercial construction		9,623		3,379		3,379		16,578		25		25
Residential		133,337		1,959		773		113,892		1,903		905
Residential — limited documentation		81,729		1,607		481		91,974		1,624		569
Consumer:
Home equity lines and loans		48,542		421		62		47,831		419		99
Automobile		7,805		181		20		14,588		251		22
Other		7,450		126		6		3,269		80		2
Total	$	757,997		11,147		8,195		754,780		7,013		4,333

	Nine Months Ended September 30, 2018						Nine Months Ended September 30, 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.	$	266,594		4,101		4,101		242,410		1,674		1,674
Real estate:
Commercial		184,795		8,447		8,447		205,814		3,213		3,213
Residential builder and developer		9,111		1,682		1,682		14,551		1,791		1,791
Other commercial construction		9,056		3,438		3,438		15,474		958		958
Residential		126,910		6,190		2,612		108,741		5,004		2,285
Residential — limited documentation		83,700		4,763		1,494		94,680		4,573		1,292
Consumer:
Home equity lines and loans		48,661		1,268		220		46,829		1,240		290
Automobile		11,189		630		49		15,483		788		62
Other		4,545		299		12		3,430		227		8
Total	$	744,561		30,818		22,055		747,412		19,468		11,573

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.

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

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)
September 30, 2018
Pass	$	20,498,610		24,190,472		1,499,791		6,709,973
Criticized accrual		902,128		624,479		140,834		123,569
Criticized nonaccrual		234,656		207,584		2,786		18,887
Total	$	21,635,394		25,022,535		1,643,411		6,852,429
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 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 $29 million and $23 million, respectively, at September 30, 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 $18 million and $29 million, respectively, at September 30, 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

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

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)
September 30, 2018
Individually evaluated for impairment	$	46,554		13,081		9,695		12,339	$	81,669
Collectively evaluated for impairment		270,635		341,922		50,576		181,491		844,624
Purchased impaired		—		—		14,910		—		14,910
Allocated	$	317,189		355,003		75,181		193,830	$	941,203
Unallocated										78,285
Total									$	1,019,488
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)
September 30, 2018
Individually evaluated for impairment	$	255,507		254,611		218,334		63,692	$	792,144
Collectively evaluated for impairment		21,379,887		33,253,245		17,187,604		13,741,625		85,562,361
Purchased impaired		—		10,519		315,461		—		325,980
Total	$	21,635,394		33,518,375		17,721,399		13,805,317	$	86,680,485
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-month and nine-month periods ended September 30, 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 September 30, 2018	(Dollars in thousands)

Commercial, financial, leasing, etc.	47		$	6,837	$	1,683	$	5	$	—	$	5,018	$	6,706
Real estate:
Commercial		18		11,581		1,493		—		3,475		6,297		11,265
Residential		34		8,182		6,026		—		—		3,002		9,028
Residential — limited documentation		3		716		—		—		—		847		847
Consumer:
Home equity lines and loans		17		1,651		220		—		—		1,450		1,670
Automobile		30		526		526		—		—		—		526
Other		2		44		44		—		—		—		44
Total		151	$	29,537	$	9,992	$	5	$	3,475	$	16,614	$	30,086

Three Months Ended September 30, 2017

Commercial, financial, leasing, etc.		49	$	15,812	$	5,888	$	—	$	97	$	9,251	$	15,236
Real estate:
Commercial		17		5,861		1,420		—		868		3,450		5,738
Residential		34		5,123		3,033		—		—		2,716		5,749
Residential — limited documentation		4		515		383		—		—		167		550
Consumer:
Home equity lines and loans		25		2,154		461		—		—		1,776		2,237
Automobile		17		342		326		—		—		16		342
Other		1		5		5		—		—		—		5
Total		147	$	29,812	$	11,516	$	—	$	965	$	17,376	$	29,857

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

					Post-modification (a)
Nine Months Ended September 30, 2018	Number		Pre- modification Recorded Investment		Principal Deferral		Interest Rate Reduction		Other		Combination of Concession Types		Total
	(Dollars in thousands)

Commercial, financial, leasing, etc.		150	$	96,221	$	47,029	$	658	$	6,111	$	43,086	$	96,884
Real estate:
Commercial		66		25,561		14,693		175		3,869		7,224		25,961
Other commercial construction		1		752		746		—		—		—		746
Residential		111		28,769		15,785		—		—		15,670		31,455
Residential — limited documentation		8		1,595		467		—		—		1,423		1,890
Consumer:
Home equity lines and loans		41		3,554		224		—		—		3,357		3,581
Automobile		57		1,007		995		—		—		12		1,007
Other		4		93		93		—		—		—		93
Total		438	$	157,552	$	80,032	$	833	$	9,980	$	70,772	$	161,617

Nine Months Ended September 30, 2017

Commercial, financial, leasing, etc.		162	$	93,346	$	18,449	$	—	$	6,459	$	47,211	$	72,119
Real estate:
Commercial		67		38,608		16,193		—		868		21,332		38,393
Residential builder and developer		3		12,291		—		—		—		10,879		10,879
Other commercial construction		2		168		168		—		—		—		168
Residential		105		22,459		11,608		—		—		12,557		24,165
Residential — limited documentation		17		3,724		618		—		—		3,352		3,970
Consumer:
Home equity lines and loans		85		7,885		1,040		—		491		6,442		7,973
Automobile		59		1,160		1,089		—		—		71		1,160
Other		6		85		85		—		—		—		85
Total		506	$	179,726	$	49,250	$	—	$	7,818	$	101,844	$	158,912

(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.

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, 2018 and 2017 and for which there was a subsequent payment default during the nine-month periods ended September 30, 2018 and 2017, respectively, were not material.

The amount of foreclosed residential real estate property held by the Company was $85 million and $108 million at September 30, 2018 and December 31, 2017, respectively. There were $404 million and $497 million at September 30, 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 September 30, 2018, approximately 40% were classified as purchased impaired and 20% were government guaranteed.