The Company maintains the allowance for credit losses for loans and leases (the “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 collectibility 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 off-balance sheet 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 troubled debt restructurings (“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. On December 27, 2020, the Consolidated Appropriations Act – 2021 (the “CAA”) was signed into law, which extends the temporary relief from TDR reporting through the earlier of (1) January 1, 2022, or (2) 60 days after the date on which the national emergency concerning COVID-19 terminates. The interim consolidated financial information below reflects the application of this guidance.

The following presents the activity in the ACL by class of loans and leases for the three months ended March 31, 2021 and 2020:

The following presents the activity in the Reserve for Unfunded Commitments for the three months ended March 31, 2021 and 2020:

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 mortgage 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 March 31, 2021 was as follows:

(1)	Other credit quality indicators used for monitoring purposes are primarily FICO scores. The majority of the loans in this population were originated to borrowers with a prime FICO score.

(2)	Other credit quality indicators used for monitoring purposes are primarily internal risk ratings. The majority of the loans in this population were graded with a “Pass” rating.

(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.

The amortized cost basis by year of origination and credit quality indicator of the Company’s loans and leases as of December 31, 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	$	873,639	$	324,030	$	183,329	$	73,000	$	49,886	$	94,360	$	1,058,786	$	28,853	$	2,685,883
Special Mention		20,937		10,370		20,164		2,099		279		8,316		101,183		1,549		164,897
Substandard		23,804		2,023		2,568		677		4,063		8,113		33,775		250		75,273
Other ⁽¹⁾		13,142		13,426		9,246		5,337		1,867		280		50,156		—		93,454
Total Commercial and Industrial		931,522		349,849		215,307		81,113		56,095		111,069		1,243,900		30,652		3,019,507

Commercial Real Estate
Risk rating:
Pass		342,845		611,243		541,104		447,366		295,426		814,398		47,604		323		3,100,309
Special Mention		1,500		63,617		26,187		33,482		37,841		61,279		2,999		—		226,905
Substandard		29		3,964		18,983		3,779		10,615		18,083		9,511		—		64,964
Other ⁽¹⁾		—		—		—		—		—		498		—		—		498
Total Commercial Real Estate		344,374		678,824		586,274		484,627		343,882		894,258		60,114		323		3,392,676

Construction
Risk rating:
Pass		53,931		233,730		202,808		83,792		23,171		41,536		28,386		—		667,354
Special Mention		—		508		707		4,717		—		9,172		—		—		15,104
Substandard		—		—		541		1,840		521		989		—		—		3,891
Other ⁽¹⁾		16,578		16,393		7,775		3,685		1,800		2,656		583		—		49,470
Total Construction		70,509		250,631		211,831		94,034		25,492		54,353		28,969		—		735,819

Lease Financing
Risk rating:
Pass		79,064		60,717		13,669		17,207		3,010		61,266		—		—		234,933
Special Mention		950		892		311		1,300		351		295		—		—		4,099
Substandard		2,708		1,677		327		1,141		—		526		—		—		6,379
Total Lease Financing		82,722		63,286		14,307		19,648		3,361		62,087		—		—		245,411

Total Commercial Lending	$	1,429,127	$	1,342,590	$	1,027,719	$	679,422	$	428,830	$	1,121,767	$	1,332,983	$	30,975	$	7,393,413

(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	$	728,807	$	384,248	$	290,484	$	361,297	$	314,971	$	830,795	$	—	$	—	$	2,910,602
680 - 739		85,151		53,090		44,616		50,703		39,230		144,537		—		—		417,327
620 - 679		15,767		7,604		11,460		9,628		7,982		43,393		—		—		95,834
550 - 619		—		1,971		2,818		2,920		4,474		10,144		—		—		22,327
Less than 550		—		861		593		2,916		594		2,138		—		—		7,102
No Score ⁽³⁾		13,823		18,861		21,214		21,821		14,355		45,147		—		—		135,221
Other ⁽²⁾		21,011		15,860		18,540		22,677		9,550		13,426		578		163		101,805
Total Residential Mortgage		864,559		482,495		389,725		471,962		391,156		1,089,580		578		163		3,690,218

Home Equity Line
FICO:
740 and greater		—		—		—		—		—		—		608,282		2,163		610,445
680 - 739		—		—		—		—		—		—		159,886		3,155		163,041
620 - 679		—		—		—		—		—		—		44,005		1,571		45,576
550 - 619		—		—		—		—		—		—		11,644		884		12,528
Less than 550		—		—		—		—		—		—		5,159		330		5,489
No Score ⁽³⁾		—		—		—		—		—		—		4,545		—		4,545
Total Home Equity Line		—		—		—		—		—		—		833,521		8,103		841,624
Total Residential Lending		864,559		482,495		389,725		471,962		391,156		1,089,580		834,099		8,266		4,531,842

Consumer Lending
FICO:
740 and greater		113,373		122,965		99,678		54,691		24,029		6,034		114,748		275		535,793
680 - 739		83,316		90,853		66,143		36,426		16,358		4,985		76,391		773		375,245
620 - 679		40,469		48,904		33,917		24,705		11,144		3,788		36,622		1,221		200,770
550 - 619		9,125		20,274		17,693		15,126		7,825		2,883		12,980		1,458		87,364
Less than 550		3,017		10,139		9,189		6,517		3,123		1,118		5,261		799		39,163
No Score ⁽³⁾		339		103		64		109		10		—		33,854		356		34,835
Other ⁽²⁾		380		1,890		73		2,214		45		6,768		69,302		—		80,672
Total Consumer Lending		250,019		295,128		226,757		139,788		62,534		25,576		349,158		4,882		1,353,842

Total Loans and Leases	$	2,543,705	$	2,120,213	$	1,644,201	$	1,291,172	$	882,520	$	2,236,923	$	2,516,240	$	44,123	$	13,279,097

(1)	Other credit quality indicators used for monitoring purposes are primarily FICO scores. The majority of the loans in this population were originated to borrowers with a prime FICO score.

(2)	Other credit quality indicators used for monitoring purposes are primarily internal risk ratings. The majority of the loans in this population were graded with a “Pass” rating.

(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 March 31, 2021 and December 31, 2020.

The amortized cost basis of revolving loans that were converted to term loans during the three months ended March 31, 2021 and 2020 was as follows:


	Three Months Ended
(dollars in thousands)	March 31, 2021
Commercial and industrial	$	229
Home equity line		1,079
Consumer		493
Total Revolving Loans Converted to Term Loans During the Period	$	1,801


	Three Months Ended
(dollars in thousands)	March 31, 2020
Commercial and industrial	$	28,228
Residential mortgage		296
Total Revolving Loans Converted to Term Loans During the Period	$	28,524

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 March 31, 2021 and December 31, 2020, the aging analysis of the amortized cost basis of the Company’s past due loans and leases was as follows:

March 31, 2021

Past Due

Loans and

Greater

Leases Past

Than or

Due 90 Days

30-59

60-89

Equal to

or More and

Days

90 Days

Total

Total Loans

Still Accruing

(dollars in thousands)

Past Due

Current

and Leases

Interest

Commercial and industrial

4,710

786

1,751

7,247

3,114,189

3,121,436

1,365

Commercial real estate

1,727

443

1,990

4,160

3,392,073

3,396,233

1,054

Construction

1,383

—

668

2,051

737,220

739,271

Lease financing

—

238,148

—

Residential mortgage

11,659

904

3,152

15,715

3,699,961

3,715,676

—

Home equity line

1,744

126

4,975

6,845

798,901

805,746

4,975

Consumer

10,611

2,282

2,024

14,917

1,268,862

1,283,779

2,024

Total

31,834

4,541

14,560

50,935

13,249,354

13,300,289

9,507


	December 31, 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	$	2,585	$	604	$	2,626	$	5,815	$	3,013,692	$	3,019,507	$	2,108
Commercial real estate		75		2,568		963		3,606		3,389,070		3,392,676		882
Construction		779		376		2,137		3,292		732,527		735,819		93
Lease financing		—		—		—		—		245,411		245,411		—
Residential mortgage		3,382		4,125		3,372		10,879		3,679,339		3,690,218		—
Home equity line		1,375		743		4,818		6,936		834,688		841,624		4,818
Consumer		18,492		5,205		3,266		26,963		1,326,879		1,353,842		3,266
Total	$	26,688	$	13,621	$	17,182	$	57,491	$	13,221,606	$	13,279,097	$	11,167

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 March 31, 2021 and December 31, 2020 and the amortized cost basis of loans and leases on nonaccrual status with no ACL as of March 31, 2021 and December 31, 2020 were as follows:


	March 31, 2021
	Nonaccrual
	Loans
	and Leases
	With No		Nonaccrual
	Allowance		Loans
(dollars in thousands)	for Credit Losses		and Leases
Commercial and industrial	$	—	$	593
Commercial real estate		857		937
Construction		—		579
Residential mortgage		1,311		6,999
Total Nonaccrual Loans and Leases	$	2,168	$	9,108


	December 31, 2020
	Nonaccrual
	Loans
	and Leases
	With No		Nonaccrual
	Allowance		Loans
(dollars in thousands)	for Credit Losses		and Leases
Commercial and industrial	$	—	$	518
Commercial real estate		—		80
Construction		1,840		2,043
Residential mortgage		1,316		6,441
Total Nonaccrual Loans and Leases	$	3,156	$	9,082

For the three months ended March 31, 2021 and 2020, the Company recognized interest income of $0.1 million and nil, respectively, on nonaccrual loans and leases. Furthermore, for the three months ended March 31, 2021 and 2020, the amount of accrued interest receivables written off by reversing interest income was $0.4 million and not material, 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 March 31, 2021 and December 31, 2020, the amortized cost basis of collateral-dependent loans were $23.3 million and $21.0 million, respectively. These loans were primarily collateralized by residential real estate property and borrower assets. As of March 31, 2021 and December 31, 2020, the fair value of collateral on substantially all collateral-dependent loans were significantly in excess of their amortized cost basis.

Modifications

Commercial and industrial loans modified in a TDR may involve temporary interest-only payments, term and amortization 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. 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, including extended interest-only periods and re-amortization of the balance. Modifications of consumer loans in a TDR may involve temporary or permanent reduced payments, temporary interest-only payments and below-market interest rates.

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 months ended March 31, 2021 and 2020:


	Three Months Ended					Three Months Ended
	March 31, 2021					March 31, 2020
	Number of	Recorded		Related		Number of	Recorded		Related
(dollars in thousands)	Contracts	Investment⁽¹⁾		ACL		Contracts⁽¹⁾	Investment⁽²⁾		ACL
Commercial and industrial	17	$	2,945	$	1,648	1	$	500	$	30
Construction	2		716		342	—		—		—
Residential mortgage	10		4,916		374	—		—		—
Consumer	1,690		15,763		11,832	—		—		—
Total	1,719	$	24,340	$	14,196	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.

The above loans were modified in a TDR through an extension of maturity dates, temporary interest-only payments, temporary payment deferrals, reduced payments, converting revolving credit lines to term loans 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 March 31, 2021 and December 31, 2020, respectively. Of the $6.3 billion at March 31, 2021, there were commitments of $0.4 million related to borrowers who had loan terms modified in a TDR. Of the $6.1 billion at December 31, 2020, there were commitments of $0.2 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			Three Months Ended
	March 31, 2021			March 31, 2020
	Number of	Recorded		Number of	Recorded
(dollars in thousands)	Contracts	Investment⁽¹⁾		Contracts	Investment⁽¹⁾
Commercial and industrial⁽²⁾	2	$	397	—	$	—
Construction⁽³⁾	1		361	—		—
Residential mortgage⁽⁴⁾	1		372	—		—
Consumer⁽⁵⁾	93		1,068	—		—
Total	97	$	2,198	—	$	—

(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 months ended March 31, 2021, the types of modifications for the commercial and industrial loans that subsequently defaulted include temporary deferrals of principal and interest and temporary reduced payments.

(3)	For the three months ended March 31, 2021, the construction loan that subsequently defaulted was modified through temporary deferral of principal and interest.

(4)	For the three months ended March 31, 2021, the residential mortgage loan that subsequently defaulted was modified through temporary interest-only payments.

(5)	For the three months ended March 31, 2021, the types of modifications for the consumers loans that subsequently defaulted include temporary reduced payments, temporary interest-only payments and below-market interest rates.

Foreclosure Proceedings

As of March 31, 2021 and December 31, 2020, there were no residential mortgage loans collateralized by real estate property that was modified in a TDR that was in process of foreclosure.

Foreclosed Property

As of March 31, 2021 and December 31, 2020, there were no residential real estate properties held from foreclosed residential real estate loans.