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Allowance for Credit Losses
6 Months Ended
Jun. 30, 2020
Allowance for Credit Losses  
Allowance for Credit Losses

4. Allowance for Credit Losses

The Company maintains an ACL that is deducted from the amortized cost basis of loans and leases to present the net carrying value of loans and leases expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount of loans and leases.

The Company also maintains an estimated reserve for unfunded commitments on the unaudited interim consolidated balance sheets. The reserve for unfunded commitments is reduced in the period in which the OBS financial instruments expire, loan funding occurs, or is otherwise settled.

In response to the COVID-19 pandemic, on March 27, 2020, the CARES Act was signed into law. The CARES Act creates a forbearance program for federally backed mortgage loans, protects borrowers from negative credit reporting due to loan accommodations related to the National Emergency, and provides financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. Financial institutions accounting for eligible loans under the CARES Act are not required to report such loans as TDRs in accordance with GAAP. In addition, Interagency Statements were issued on March 22, 2020 and April 7, 2020 to encourage financial institutions to work prudently with borrowers and to describe the agencies’ interpretation of how current accounting rules under GAAP apply to certain COVID-19 related modifications. The agencies confirmed with the FASB that short-term modifications (e.g., six months or less) for payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant and made on a good faith basis in response to borrowers impacted by COVID-19 who were current prior to any relief are not TDRs under GAAP. The agencies also confirmed that these short-term modifications should not be reported as being on nonaccrual status and should not be considered past due during the period of the deferral. The Company has adopted the provisions of both the CARES Act and Interagency Statements. The Company is first applying the CARES Act guidance in determining if certain loan modifications are not required to be reported as TDRs. If the loan modification does not qualify under the CARES Act, then the Interagency Statement guidance is applied. The interim consolidated financial information below reflects the application of this guidance.

Rollforward of the Allowance for Credit Losses

The following presents the activity in the ACL by class of loans and leases for the three and six months ended June 30, 2020:

Three Months Ended June 30, 2020

Commercial Lending

Residential Lending

Commercial

Commercial

Home

and

Real

Lease

Residential

Equity

(dollars in thousands)

    

Industrial

    

Estate

    

Construction

    

Financing

    

Mortgage

    

Line

    

Consumer

    

Total

 

Allowance for credit losses:

Balance at beginning of period

$

20,884

$

42,838

$

8,824

$

851

$

30,021

$

6,556

$

56,039

$

166,013

Charge-offs

(13,974)

(2,723)

(379)

(14)

(8,907)

(25,997)

Recoveries

100

30

17

8

2,456

2,611

Increase (decrease) in Provision

14,289

13,007

(3,199)

2,986

3,850

1,071

17,489

49,493

Balance at end of period

$

21,299

$

53,122

$

5,276

$

3,837

$

33,874

$

7,635

$

67,077

$

192,120

Six Months Ended June 30, 2020

Commercial Lending

Residential Lending

Commercial

Commercial

Home

and

Real

Lease

Residential

Equity

(dollars in thousands)

  

Industrial

  

Estate

  

Construction

  

Financing

  

Mortgage

    

Line

  

Consumer

  

Unallocated

  

Total

 

Allowance for credit losses:

Balance at beginning of period

$

28,975

$

22,325

$

4,844

$

424

$

29,303

$

9,876

$

34,644

$

139

$

130,530

Adoption of ASU No. 2016-13

(16,105)

10,559

(1,803)

207

(2,793)

(4,731)

15,575

(139)

770

Charge-offs

(14,175)

(2,723)

(379)

(14)

(8)

(17,504)

(34,803)

Recoveries

320

140

152

130

4,539

5,281

Increase in Provision

22,284

22,961

2,474

3,206

7,226

2,368

29,823

90,342

Balance at end of period

$

21,299

$

53,122

$

5,276

$

3,837

$

33,874

$

7,635

$

67,077

$

$

192,120

The following presents the activity in the ACL by class of loans and leases for the three and six months ended June 30, 2019, presented in accordance with Topic 310, Receivables:

Three Months Ended June 30, 2019

Commercial Lending

Commercial

Commercial

and

Real

Lease

(dollars in thousands)

    

Industrial

    

Estate

    

Construction

    

Financing

    

Residential

    

Consumer

    

Unallocated

    

Total

 

Allowance for credit losses:

Balance at beginning of period

$

31,793

$

21,197

$

5,381

$

411

$

44,911

$

35,099

$

2,754

$

141,546

Charge-offs

(2,000)

(7,505)

(9,505)

Recoveries

25

32

185

2,382

2,624

Increase (decrease) in Provision

1,870

975

(367)

35

(1,676)

3,662

(629)

3,870

Balance at end of period

$

31,688

$

22,204

$

5,014

$

446

$

43,420

$

33,638

$

2,125

$

138,535

Six Months Ended June 30, 2019

Commercial Lending

Commercial

Commercial

and

Real

Lease

(dollars in thousands)

  

Industrial

  

Estate

  

Construction

  

Financing

  

Residential

  

Consumer

  

Unallocated

  

Total

 

Allowance for credit losses:

Balance at beginning of period

$

34,501

$

19,725

$

5,813

$

432

$

44,906

$

35,813

$

528

$

141,718

Charge-offs

(2,000)

(24)

(16,103)

(18,127)

Recoveries

62

63

435

4,834

5,394

Increase (decrease) in Provision

(875)

2,416

(799)

38

(1,921)

9,094

1,597

9,550

Balance at end of period

$

31,688

$

22,204

$

5,014

$

446

$

43,420

$

33,638

$

2,125

$

138,535

The disaggregation of the ACL and recorded investment in loans by impairment methodology as of December 31, 2019, presented in accordance with Topic 310, Receivables, was as follows:

December 31, 2019

Commercial Lending

Commercial

Commercial

and

Real

Lease

(dollars in thousands)

  

Industrial

  

Estate

  

Construction

  

Financing

  

Residential

  

Consumer

  

Unallocated

  

Total

 

Allowance for credit losses:

Individually evaluated for impairment

$

46

$

27

$

$

$

130

$

$

$

203

Collectively evaluated for impairment

28,929

22,298

4,844

424

39,049

34,644

139

130,327

Balance at end of period

$

28,975

$

22,325

$

4,844

$

424

$

39,179

$

34,644

$

139

$

130,530

Loans and leases:

Individually evaluated for impairment

$

4,951

$

723

$

$

$

14,964

$

$

$

20,638

Collectively evaluated for impairment

2,738,291

3,463,230

519,241

202,483

4,647,211

1,620,556

13,191,012

Balance at end of period

$

2,743,242

$

3,463,953

$

519,241

$

202,483

$

4,662,175

$

1,620,556

$

$

13,211,650

Rollforward of the Reserve for Unfunded Commitments

The following presents the activity in the Reserve for Unfunded Commitments for the three and six months ended June 30, 2020:

Three Months Ended June 30, 2020

Commercial Lending

Residential Lending

Commercial

Commercial

Home

and

Real

Lease

Residential

Equity

(dollars in thousands)

    

Industrial

    

Estate

    

Construction

    

Financing

    

Mortgage

    

Line

    

Consumer

    

Total

 

Reserve for unfunded commitments:

Balance at beginning of period

$

4,791

$

696

$

4,813

$

$

1

$

6,927

$

23

$

17,251

Increase in Provision

3,390

472

1,095

2

963

31

5,953

Balance at end of period

$

8,181

$

1,168

$

5,908

$

$

3

$

7,890

$

54

$

23,204

Six Months Ended June 30, 2020

Commercial Lending

Residential Lending

Commercial

Commercial

Home

and

Real

Lease

Residential

Equity

(dollars in thousands)

  

Industrial

  

Estate

  

Construction

  

Financing

  

Mortgage

  

Line

  

Consumer

  

Total

 

Reserve for unfunded commitments:

Balance at beginning of period

$

$

$

$

$

$

$

600

$

600

Adoption of ASU No. 2016-13

5,390

778

4,119

7

6,587

(581)

16,300

Increase (decrease) in Provision

2,791

390

1,789

(4)

1,303

35

6,304

Balance at end of period

$

8,181

$

1,168

$

5,908

$

$

3

$

7,890

$

54

$

23,204

Credit Quality Information

The Company performs an internal loan review and grading or scoring procedures on an ongoing basis. The review provides management with periodic information as to the quality of the loan portfolio and effectiveness of the Company’s lending policies and procedures. The objective of the loan review and grading or scoring procedures is to identify, in a timely manner, existing or emerging credit quality issues so that appropriate steps can be initiated to avoid or minimize future losses.

Loans and leases subject to grading primarily include: commercial and industrial loans, commercial real estate loans, construction loans and lease financing. Other loans subject to grading include installment loans to businesses or individuals for business and commercial purposes, overdraft lines of credit, commercial credit cards, and other credits as may be determined. Credit quality indicators for internally graded loans and leases are generally updated on an annual basis or on a quarterly basis for those loans  and leases deemed to be of potentially higher risk.

An internal credit risk rating system is used to determine loan grade and is based on borrower credit risk and transactional risk. The loan grading process is a mechanism used to determine the risk of a particular borrower and is based on the following factors of a borrower: character, earnings and operating cash flow, asset and liability structure, debt capacity, management and controls, borrowing entity, and industry and operating environment.

Pass – “Pass” (uncriticized) loans and leases, are not considered to carry greater than normal risk. The borrower has the apparent ability to satisfy obligations to the Company, and therefore no loss in ultimate collection is anticipated.

Special Mention – Loans and leases that have potential weaknesses deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for assets or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard – Loans and leases that are inadequately protected by the current financial condition and paying capacity of the obligor or by any collateral pledged. Loans and leases so classified must have a well-defined weakness or weaknesses that jeopardize the collection of the debt. They are characterized by the distinct possibility that the bank may sustain some loss if the deficiencies are not corrected.

Doubtful – Loans and leases that have weaknesses found in substandard borrowers with the added provision that the weaknesses make collection of debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss – Loans and leases classified as loss are considered uncollectible and of such little value that their continuance as an asset is not warranted. This classification does not mean that the loan or lease has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be effected in the future.

Loans that are primarily monitored for credit quality using FICO scores include: residential real estate loans, home equity lines and consumer loans. FICO scores are calculated primarily based on a consideration of payment history, the current amount of debt, the length of credit history available, a recent history of new sources of credit and the mix of credit type. FICO scores are updated on a monthly, quarterly or bi-annual basis, depending on the product type.

The amortized cost basis by year of origination and credit quality indicator of the Company's loans and leases as of June 30, 2020 was as follows:

Revolving

Loans

Converted

Term Loans

Revolving

to Term

Amortized Cost Basis by Origination Year

Loans

Loans

Amortized

Amortized

(dollars in thousands)

2020

2019

2018

2017

2016

Prior

Cost Basis

Cost Basis

Total

Commercial Lending

Commercial and Industrial

Risk rating:

Pass

$

989,501

$

349,261

$

271,941

$

76,742

$

62,113

$

68,468

$

1,182,299

$

39,617

$

3,039,942

Special Mention

28,136

9,235

8,460

841

335

27,174

113,642

509

188,332

Substandard

16,621

1,724

1,836

2,000

4,321

9,788

52,225

938

89,453

Other (1)

9,091

16,661

12,574

7,884

3,199

811

55,761

105,981

Total Commercial and Industrial

1,043,349

376,881

294,811

87,467

69,968

106,241

1,403,927

41,064

3,423,708

Commercial Real Estate

Risk rating:

Pass

171,445

618,501

523,149

440,549

296,474

927,232

33,878

3,011,228

Special Mention

113,286

53,391

62,165

47,790

66,008

2,999

345,639

Substandard

16,304

14,617

1,655

6,630

17,947

8,970

66,123

Other (1)

509

509

Total Commercial Real Estate

171,445

748,091

591,157

504,369

350,894

1,011,696

45,847

3,423,499

Construction

Risk rating:

Pass

16,615

135,963

192,016

96,137

24,106

41,457

29,297

535,591

Special Mention

2,152

4,782

10,850

196

17,980

Substandard

541

1,840

528

1,000

3,909

Other (1)

8,415

31,038

8,546

5,562

1,795

4,514

585

60,455

Total Construction

25,030

167,001

203,255

108,321

26,429

57,821

30,078

617,935

Lease Financing

Risk rating:

Pass

45,489

67,806

11,965

18,915

3,764

59,364

207,303

Special Mention

9,142

1,931

4,626

1,545

1,440

5,854

24,538

Substandard

2,697

1,651

368

1,207

523

6,446

Total Lease Financing

57,328

71,388

16,959

21,667

5,204

65,741

238,287

Total Commercial Lending

$

1,297,152

$

1,363,361

$

1,106,182

$

721,824

$

452,495

$

1,241,499

$

1,479,852

$

41,064

$

7,703,429

(continued)

Revolving

Loans

Converted

Term Loans

Revolving

to Term

Amortized Cost Basis by Origination Year

Loans

Loans

(continued)

Amortized

Amortized

(dollars in thousands)

2020

2019

2018

2017

2016

Prior

Cost Basis

Cost Basis

Total

Residential Lending

Residential Mortgage

FICO:

740 and greater

$

300,079

$

411,883

$

353,197

$

411,670

$

362,197

$

988,771

$

$

$

2,827,797

680 - 739

50,937

72,139

64,920

65,992

43,666

161,897

459,551

620 - 679

6,098

12,708

12,060

12,648

10,789

55,000

109,303

550 - 619

2,006

1,824

3,533

3,389

3,032

13,329

27,113

Less than 550

1,204

1,907

528

6,324

9,963

No Score (3)

15,676

21,603

24,182

23,736

16,298

51,943

153,438

Other (2)

8,244

20,308

22,241

23,435

12,412

17,063

579

503

104,785

Total Residential Mortgage

383,040

540,465

481,337

542,777

448,922

1,294,327

579

503

3,691,950

Home Equity Line

FICO:

740 and greater

626,897

858

627,755

680 - 739

169,547

1,283

170,830

620 - 679

48,655

1,013

49,668

550 - 619

14,276

562

14,838

Less than 550

6,661

212

6,873

No Score (3)

6,527

6,527

Total Home Equity Line

872,563

3,928

876,491

Total Residential Lending

383,040

540,465

481,337

542,777

448,922

1,294,327

873,142

4,431

4,568,441

Consumer Lending

FICO:

740 and greater

65,206

141,704

120,178

71,525

35,932

12,451

109,702

556,698

680 - 739

47,584

109,728

87,056

48,728

24,478

10,094

83,021

410,689

620 - 679

24,185

65,310

43,282

31,318

16,144

7,013

42,511

229,763

550 - 619

5,881

26,220

22,891

20,874

10,869

5,467

18,429

110,631

Less than 550

1,562

12,306

13,110

10,628

5,397

2,567

7,777

53,347

No Score (3)

3,799

124

125

126

27

1

34,281

38,483

Other (2)

594

9,160

96

2,225

72

6,804

73,598

92,549

Total Consumer Lending

148,811

364,552

286,738

185,424

92,919

44,397

369,319

1,492,160

Total Loans and Leases

$

1,829,003

$

2,268,378

$

1,874,257

$

1,450,025

$

994,336

$

2,580,223

$

2,722,313

$

45,495

$

13,764,030

(1)Other credit quality indicators used for monitoring purposes are primarily FICO scores.
(2)Other credit quality indicators used for monitoring purposes are primarily internal risk ratings.
(3)No FICO scores are primarily related to loans and leases extended to non-residents.  Loans and leases of this nature are primarily secured by collateral and/or are closely monitored for performance.

There were no loans and leases graded as Loss as of June 30, 2020.

The amortized cost basis of revolving loans that were converted to term loans during the three and six months ended June 30, 2020 was as follows:

Three Months Ended

(dollars in thousands)

June 30, 2020

Commercial and industrial

$

294

Home equity line

3,928

Total Revolving Loans Converted to Term Loans During the Period

$

4,222

Six Months Ended

(dollars in thousands)

June 30, 2020

Commercial and industrial

$

28,522

Residential mortgage

296

Home equity line

3,928

Total Revolving Loans Converted to Term Loans During the Period

$

32,746

The credit risk profiles by internally assigned grade for loans and leases as of December 31, 2019, presented in accordance with Topic 310, Receivables, were as follows:

December 31, 2019

Commercial

Commercial

and

Real

Lease

(dollars in thousands)

  

Industrial

  

Estate

  

Construction

  

Financing

  

Total

Grade:

Pass

$

2,585,908

$

3,327,659

$

515,993

$

201,461

$

6,631,021

Special mention

91,365

106,331

127

1,022

198,845

Substandard

65,969

29,963

3,121

99,053

Total

$

2,743,242

$

3,463,953

$

519,241

$

202,483

$

6,928,919

There were no loans and leases graded as Loss as of December 31, 2019.

The credit risk profiles based on payment activity for loans and leases that were not subject to loan grading as of December 31, 2019 presented in accordance with Topic 310, Receivables, were as follows:

December 31, 2019

(dollars in thousands)

  

Residential Mortgage

  

Home Equity Line

  

Consumer

  

Consumer - Auto

  

Credit Cards

  

Total

Performing

$

3,759,799

$

886,879

$

219,046

$

1,016,142

$

347,264

$

6,229,130

Non-performing and delinquent

9,137

6,360

7,258

24,326

6,520

53,601

Total

$

3,768,936

$

893,239

$

226,304

$

1,040,468

$

353,784

$

6,282,731

Past-Due Status

The Company continually updates its aging analysis for loans and leases to monitor the migration of loans and leases into past due categories. The Company considers loans and leases that are delinquent for 30 days or more to be past due. As of June 30, 2020, the aging analysis of the amortized cost basis of the Company’s past due loans and leases was as follows:

June 30, 2020

Past Due

Loans and

Greater

Leases Past

Than or

Due 90 Days

30-59

60-89

Equal to

or More and

Days

Days

90 Days

Total

Total Loans

Still Accruing

(dollars in thousands)

  

Past Due

  

Past Due

  

Past Due

  

Past Due

  

Current

  

and Leases

Interest

Commercial and industrial

$

2,535

$

2,501

$

2,374

$

7,410

$

3,416,298

$

3,423,708

$

2,309

Commercial real estate

2,761

94

1,655

4,510

3,418,989

3,423,499

900

Construction

2,737

2,292

5,029

612,906

617,935

248

Lease financing

238,287

238,287

Residential mortgage

2,630

4,778

4,152

11,560

3,680,390

3,691,950

Home equity line

2,041

1,591

4,496

8,128

868,363

876,491

4,496

Consumer

11,053

3,103

2,167

16,323

1,475,837

1,492,160

2,167

Total

$

23,757

$

12,067

$

17,136

$

52,960

$

13,711,070

$

13,764,030

$

10,120

As of December 31, 2019, the aging analysis of the Company’s past due loans and leases, presented in accordance with Topic 310, Receivables, was as follows:

December 31, 2019

Accruing Loans and Leases

Greater

Total Non

Than or

Total

Accruing

30-59

60-89

Equal to

Total

Accruing

Loans

Days

Days

90 Days

Past

Loans and

and

Total

(dollars in thousands)

  

Past Due

  

Past Due

  

Past Due

  

Due

  

Current

  

Leases

  

Leases

  

Outstanding

Commercial and industrial

$

1,525

$

808

$

1,429

$

3,762

$

2,739,448

$

2,743,210

$

32

$

2,743,242

Commercial real estate

1,664

1,125

1,013

3,802

3,460,121

3,463,923

30

3,463,953

Construction

2,367

2,367

516,874

519,241

519,241

Lease financing

202,483

202,483

202,483

Residential mortgage

3,258

399

74

3,731

3,759,799

3,763,530

5,406

3,768,936

Home equity line

2,971

394

2,995

6,360

886,879

893,239

893,239

Consumer

26,810

7,022

4,272

38,104

1,582,452

1,620,556

1,620,556

Total

$

36,228

$

9,748

$

12,150

$

58,126

$

13,148,056

$

13,206,182

$

5,468

$

13,211,650

Nonaccrual Loans and Leases

The Company generally places a loan or lease on nonaccrual status when management believes that collection of principal or interest has become doubtful or when a loan or lease becomes 90 days past due as to principal or interest, unless it is well secured and in the process of collection. The Company charges off a loan or lease when facts indicate that the loan or lease is considered uncollectible.

The amortized cost basis of loans and leases on nonaccrual status as of June 30, 2020 and January 1, 2020 and the amortized cost basis of loans and leases on nonaccrual status with no allowance for credit losses as of June 30, 2020 were as follows:

June 30, 2020

January 1, 2020

Nonaccrual

Loans

and Leases

With No

Nonaccrual

Nonaccrual

Allowance

Loans

Loans

(dollars in thousands)

  

for Credit Losses

and Leases

and Leases

Commercial and industrial

$

11,494

$

11,559

$

32

Commercial real estate

13,088

13,168

30

Construction

1,840

2,043

Residential mortgage

1,475

6,059

5,406

Total Nonaccrual Loans and Leases

$

27,897

$

32,829

$

5,468

For both the three and six months ended June 30, 2020, the Company recognized interest income of $0.1 million on nonaccrual loans and leases. Furthermore, for the three and six months ended June 30, 2020, the amount of accrued interest receivables written off by reversing interest income was $0.5 million and $0.9 million, respectively.

Collateral-Dependent Loans and Leases

Collateral-dependent loans and leases are those for which repayment (on the basis of the Company’s assessment as of the reporting date) is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. As of June 30, 2020, the amortized cost basis of collateral-dependent loans was $55.9 million. These loans were primarily collateralized by commercial and residential real estate property and borrower assets. As of June 30, 2020, the fair value of collateral on substantially all collateral-dependent loans were significantly in excess of their amortized cost basis.

Impaired Loans

The total carrying amounts and the total unpaid principal balances of impaired loans and leases as of December 31, 2019, presented in accordance with Topic 310, Receivables, were as follows:

December 31, 2019

Unpaid

Recorded

Principal

Related

(dollars in thousands)

  

Investment

  

Balance

  

Allowance

Impaired loans with no related allowance recorded:

Commercial and industrial

$

3,825

$

3,841

$

Commercial real estate

30

30

Residential mortgage

10,425

10,718

Total

$

14,280

$

14,589

$

Impaired loans with a related allowance recorded:

Commercial and industrial

$

1,126

$

1,126

$

46

Commercial real estate

693

693

27

Residential mortgage

4,539

4,819

130

Total

$

6,358

$

6,638

$

203

Total impaired loans:

Commercial and industrial

$

4,951

$

4,967

$

46

Commercial real estate

723

723

27

Residential mortgage

14,964

15,537

130

Total

$

20,638

$

21,227

$

203

The following table provides information with respect to the Company’s average balances, and of interest income recognized from, impaired loans for the three and six months ended June 30, 2019, presented in accordance with Topic 310, Receivables:

Three Months Ended

Six Months Ended

June 30, 2019

June 30, 2019

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

(dollars in thousands)

  

Investment

    

Recognized

    

Investment

  

Recognized

Impaired loans with no related allowance recorded:

Commercial and industrial

$

3,833

$

94

$

4,038

$

175

Commercial real estate

3,102

40

3,740

212

Residential mortgage

7,948

92

8,336

191

Total

$

14,883

$

226

$

16,114

$

578

Impaired loans with a related allowance recorded:

Commercial and industrial

$

5,645

$

61

$

5,187

$

117

Commercial real estate

715

10

719

20

Residential mortgage

7,220

103

7,147

199

Total

$

13,580

$

174

$

13,053

$

336

Total impaired loans:

Commercial and industrial

$

9,478

$

155

$

9,225

$

292

Commercial real estate

3,817

50

4,459

232

Residential mortgage

15,168

195

15,483

390

Total

$

28,463

$

400

$

29,167

$

914

Modifications

Commercial and industrial loans modified in a TDR may involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Modifications of commercial real estate and construction loans in a TDR may involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Modifications of construction loans in a TDR may also involve extending the interest-only payment period. Interest continues to accrue on the missed payments and as a result, the effective yield on the loan remains unchanged. As the forbearance period usually involves an insignificant payment delay, lease financing modifications typically do not meet the reporting criteria for a TDR. Residential real estate loans modified in a TDR may be comprised of loans where monthly payments are lowered to accommodate the borrowers' financial needs for a period of time, normally two years. Generally, consumer loans

are not classified as a TDR as they are normally charged off upon reaching a predetermined delinquency status that ranges from 120 to 180 days and varies by product type.

Loans modified in a TDR may already be on nonaccrual status and in some cases partial charge-offs may have already been taken against the outstanding loan balance. Loans modified in a TDR are evaluated for impairment. As a result, this may have a financial effect of increasing the specific ACL associated with the loan. An ACL for impaired commercial loans, including commercial real estate and construction loans, that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or if the loan is collateral dependent, the estimated fair value of the collateral, less any selling costs. An ACL for impaired residential real estate loans that have been modified in a TDR is measured based on the estimated fair value of the collateral, less any selling costs. Management exercises significant judgment in developing these estimates.

The following presents, by class, information related to loans modified in a TDR during the three and six months ended June 30, 2020 and 2019:

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2020

Number of

Recorded

Related

Number of

Recorded

Related

(dollars in thousands)

  

Contracts

  

Investment(1)

  

Allowance

  

Contracts

  

Investment(1)

  

Allowance

Commercial and industrial

$

$

1

$

500

$

30

Total

$

$

1

$

500

$

30

(1)The recorded investment balances reflect all partial paydowns and charge-offs since the modification date and do not include TDRs that have been fully paid off, charged off, or foreclosed upon by the end of the period.

Three Months Ended

Six Months Ended

June 30, 2019

June 30, 2019

Number of

Recorded

Related

Number of

Recorded

Related

(dollars in thousands)

  

Contracts

  

Investment(1)

  

Allowance

  

Contracts

  

Investment(1)

  

Allowance

Commercial and industrial

$

$

4

$

906

$

41

Residential mortgage

1

351

14

Total

$

$

5

$

1,257

$

55

(1)The recorded investment balances reflect all partial paydowns and charge-offs since the modification date and do not include TDRs that have been fully paid off, charged off, or foreclosed upon by the end of the period.

The above loans were modified in a TDR through an extension of maturity dates, temporary interest-only payments, reduced payments, or below-market interest rates.

The Company had commitments to extend credit, standby letters of credit, and commercial letters of credit totaling $6.3 billion and $6.1 billion as of June 30, 2020 and December 31, 2019, respectively. Of the $6.3 billion at June 30, 2020, there were no commitments related to borrowers who had loan terms modified in a TDR. Of the $6.1 billion at December 31, 2019, there were commitments of $4.5 million related to borrowers who had loan terms modified in a TDR.

The following table presents, by class, loans modified in TDRs that have defaulted in the current period within 12 months of their permanent modification date for the periods indicated. The Company is reporting these defaulted TDRs based on a payment default definition of 30 days past due:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2020

June 30, 2019

June 30, 2019

 

Number of

Recorded

Number of

Recorded

Number of

Recorded

Number of

Recorded

(dollars in thousands)

    

Contracts

  

Investment(1)

  

Contracts

  

Investment(1)

  

Contracts

  

Investment(1)

  

Contracts

  

Investment(1)

 

 

Commercial and industrial(2)

1

$

500

1

$

500

4

$

906

4

$

906

Residential mortgage(3)

1

351

1

351

Total

1

$

500

1

$

500

5

$

1,257

5

$

1,257

(1)The recorded investment balances reflect all partial paydowns and charge-offs since the modification date and do not include TDRs that have been fully paid off, charged off, or foreclosed upon by the end of the period.
(2)For the three and six months ended June 30, 2020, the maturity date for the commercial and industrial loan that subsequently defaulted was extended. For the three and six months ended June 30, 2019, the commercial and industrial loans that subsequently defaulted were temporarily modified to interest-only payments.
(3)For the three and six months ended June 30, 2019, the maturity date for the residential mortgage loan that subsequently defaulted was extended.

Foreclosure Proceedings

As of June 30, 2020, there were no residential mortgage loans collateralized by real estate property that was modified in a TDR that was in process of foreclosure. As of December 31, 2019, there was one residential mortgage loan collateralized by real estate property of $0.3 million that was modified in a TDR that was in process of foreclosure.

Foreclosed Property

As of June 30, 2020, residential real estate property held from one foreclosed residential real estate loan was held and included in other real estate owned and repossessed personal property with a carrying value of $0.4 million on the unaudited interim consolidated balance sheets. As of December 31, 2019, residential real estate properties from two foreclosed residential real estate loans were held and included in other real estate owned and repossessed personal property with a carrying value of $0.3 million on the unaudited interim consolidated balance sheets.