4. LOANS

The following loan portfolio and credit quality disclosures exclude covered loans. Covered loans represent loans acquired through a Federal Deposit Insurance Corporation (“FDIC”)-assisted transaction that are subject to a loss share agreement and are presented separately in the Consolidated Statements of Financial Condition. Refer to Note 6 for a detailed discussion regarding covered loans.

Loan Portfolio

(Amounts in thousands)


	June 30, 2012		December 31, 2011
Commercial and industrial	$	4,523,780	$	4,192,842
Commercial – owner-occupied commercial real estate		1,384,831		1,130,932

Total commercial		5,908,611		5,323,774

Commercial real estate		2,124,492		2,233,851
Commercial real estate – multi-family		499,250		452,595

Total commercial real estate		2,623,742		2,686,446
Construction		171,014		287,002
Residential real estate		330,254		297,229
Home equity		174,131		181,158
Personal		228,483		232,952

Total loans	$	9,436,235	$	9,008,561

Deferred loan fees included as a reduction in total loans	$	40,129	$	39,259
Overdrawn demand deposits included in total loans	$	2,471	$	1,919

We primarily lend to businesses and consumers in the market areas in which we have physical locations. We seek to diversify our loan portfolio by loan type, industry, and borrower.

Carrying Value of Loans Pledged

(Amounts in thousands)


	June 30, 2012		December 31, 2011
Loans pledged to secure outstanding borrowings or availability:
FRB discount window borrowings ⁽¹⁾	$	1,065,690	$	1,352,012
FHLB advances		1,019,390		583,507

Total	$	2,085,080	$	1,935,519

⁽¹⁾	No borrowings were outstanding at June 30, 2012 or December 31, 2011.

Loan Portfolio Aging

Loan Portfolio Aging

(Amounts in thousands)


			Delinquent
	Current		30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days Past Due and Accruing		Total Accruing Loans		Nonaccrual		Total Loans
*As of June 30, 2012*
Commercial	$	5,842,805	$	901	$	5,064	$	—	$	5,848,770	$	59,841	$	5,908,611
Commercial real estate		2,500,441		1,314		2,543		—		2,504,298		119,444		2,623,742
Construction		170,459		—		—		—		170,459		555		171,014
Residential real estate		318,864		341		21		—		319,226		11,028		330,254
Home equity		159,076		1,983		1,009		—		162,068		12,063		174,131
Personal		222,067		—		8		—		222,075		6,408		228,483

Total loans	$	9,213,712	$	4,539	$	8,645	$	—	$	9,226,896	$	209,339	$	9,436,235

*As of December 31, 2011*
Commercial	$	5,250,875	$	6,018	$	923	$	—	$	5,257,816	$	65,958	$	5,323,774
Commercial real estate		2,539,889		3,523		9,777		—		2,553,189		133,257		2,686,446
Construction		262,742		—		2,381		—		265,123		21,879		287,002
Residential real estate		278,195		3,800		645		—		282,640		14,589		297,229
Home equity		168,322		433		800		—		169,555		11,603		181,158
Personal		220,364		13		9		—		220,386		12,566		232,952

Total loans	$	8,720,387	$	13,787	$	14,535	$	—	$	8,748,709	$	259,852	$	9,008,561

Impaired Loans

Impaired loans consist of nonaccrual loans (which include nonaccrual troubled debt restructurings (“TDRs”)) and loans classified as accruing TDRs. A loan is considered impaired when, based on current information and events, management believes that it is probable that we will be unable to collect all amounts due (both principal and interest) according to the original contractual terms of the loan agreement.

Impaired Loans

(Amounts in thousands)


	Unpaid Contractual Principal Balance		Recorded Investment With No Specific Reserve		Recorded Investment With Specific Reserve		Total Recorded Investment		Specific Reserve
*As of June 30, 2012*
Commercial	$	142,273	$	88,348	$	53,711	$	142,059	$	17,975
Commercial real estate		147,973		44,084		88,337		132,421		30,786
Construction		1,182		—		555		555		146
Residential real estate		12,727		6,676		5,226		11,902		1,629
Home equity		14,963		3,014		10,670		13,684		2,864
Personal		6,830		—		6,408		6,408		4,697

Total impaired loans	$	325,948	$	142,122	$	164,907	$	307,029	$	58,097

Impaired Loans (Continued)

(Amounts in thousands)


	Unpaid Contractual Principal Balance		Recorded Investment With No Specific Reserve		Recorded Investment With Specific Reserve		Total Recorded Investment		Specific Reserve
*As of December 31, 2011*
Commercial	$	118,118	$	57,230	$	46,098	$	103,328	$	14,163
Commercial real estate		190,486		65,571		114,233		179,804		38,905
Construction		24,135		1,548		20,331		21,879		5,202
Residential real estate		18,577		10,502		7,325		17,827		976
Home equity		12,881		2,310		9,293		11,603		1,272
Personal		38,515		14,751		11,569		26,320		9,426

Total impaired loans	$	402,712	$	151,912	$	208,849	$	360,761	$	69,944

Average Recorded Investment and Interest Income Recognized on Impaired Loans ⁽¹⁾

(Amounts in thousands)


	Quarters Ended June 30,
	2012				2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial	$	137,872	$	2,069	$	101,875	$	574
Commercial real estate		162,404		389		253,823		682
Construction		2,175		—		46,046		46
Residential real estate		13,667		14		17,799		9
Home equity		12,762		24		12,414		2
Personal		17,819		—		31,865		124

Total	$	346,699	$	2,496	$	463,822	$	1,437


	Six Months Ended June 30,
	2012				2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial	$	127,625	$	2,824	$	93,836	$	669
Commercial real estate		176,949		987		269,082		1,497
Construction		3,461		—		40,027		74
Residential real estate		15,644		34		18,061		19
Home equity		12,301		47		11,352		3
Personal		21,096		119		34,763		253

Total	$	357,076	$	4,011	$	467,121	$	2,515

⁽¹⁾	Represents amounts while classified as impaired for the periods presented.

Credit Quality Indicators

The Company has adopted an internal risk rating policy in which each loan is rated for credit quality with a numerical rating of 1 through 8. Loans rated 5 and better (1-5 ratings, inclusive) are credits that exhibit acceptable financial performance, cash flow, and leverage. We attempt to mitigate risk by structure, collateral, monitoring, or other meaningful controls. Credits rated 6 are performing in accordance with contractual terms but are considered special mention as these credits demonstrate potential weakness that if left unresolved, may result in deterioration in the Company’s credit position and the repayment prospects for the credit. Borrowers rated special mention may exhibit adverse operating trends, high leverage, tight liquidity or other credit concerns. Loans rated 7 may be classified as either accruing (“potential problem”) or nonaccrual (“nonperforming”). Potential problem loans, like special mention, are also loans that are performing in accordance with contractual terms, but for which management has some level of concern about the ability of the borrowers to meet existing repayment terms in future periods. The ultimate collection of these potential problem loans is subject to some uncertainty due to the same conditions that characterize a 6-rated credit. These credits may also have somewhat increased risk profiles as a result of the current net worth and/or paying capacity of the obligor or guarantors or the collateral pledged. These loans generally have a well-defined weakness that may jeopardize collection of the debt and are characterized by the distinct possibility that the Company will sustain some loss if left unresolved. Although these loans are generally identified as potential problem loans and require additional attention by management, they may never become nonperforming. Nonperforming loans include nonaccrual loans risk rated 7 or 8 and have all the weaknesses inherent in a 7-rated potential problem loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently-existing facts, conditions and values, highly questionable and improbable. Special mention, potential problem and nonperforming loans are reviewed at a minimum on a quarterly basis, while all other rated credits over a certain dollar threshold, depending on loan type, are reviewed annually or as the situation warrants.

Credit Quality Indicators

(Dollars in thousands)


	Special Mention		% of Portfolio Loan Type		Potential Problem Loans		% of Portfolio Loan Type		Non- Performing Loans		% of Portfolio Loan Type		Total Loans
*As of June 30, 2012*
Commercial	$	55,978		0.9	$	62,922		1.1	$	59,841		1.0	$	5,908,611
Commercial real estate		42,978		1.6		74,864		2.9		119,444		4.6		2,623,742
Construction		5,844		3.4		—		—		555		0.3		171,014
Residential real estate		2,729		0.8		19,612		5.9		11,028		3.3		330,254
Home equity		516		0.3		5,856		3.4		12,063		6.9		174,131
Personal		7		*		823		0.4		6,408		2.8		228,483

Total	$	108,052		1.1	$	164,077		1.7	$	209,339		2.2	$	9,436,235

*As of December 31, 2011*
Commercial	$	54,326		1.0	$	79,328		1.5	$	65,958		1.2	$	5,323,774
Commercial real estate		132,915		4.9		62,193		2.3		133,257		5.0		2,686,446
Construction		7,272		2.5		9,283		3.2		21,879		7.6		287,002
Residential real estate		9,344		3.1		17,931		6.0		14,589		4.9		297,229
Home equity		758		0.4		6,384		3.5		11,603		6.4		181,158
Personal		350		0.2		1,976		0.8		12,566		5.4		232,952

Total	$	204,965		2.3	$	177,095		2.0	$	259,852		2.9	$	9,008,561

*	Less than 0.1%

Troubled Debt Restructured Loans

Troubled Debt Restructured Loans Outstanding

(Amounts in thousands)


	June 30, 2012				December 31, 2011
	Accruing		Nonaccrual		Accruing		Nonaccrual
Commercial	$	82,218	$	47,839	$	42,569	$	28,409
Commercial real estate		12,977		34,764		41,348		32,722
Construction		—		—		—		960
Residential real estate		874		1,860		3,238		3,592
Home equity		1,621		2,489		—		2,082
Personal		—		5,052		13,754		7,639

Total	$	97,690	$	92,004	$	100,909	$	75,404

At June 30, 2012 and December 31, 2011, commitments to lend additional funds to debtors whose loan terms have been modified in a troubled debt restructuring (“TDR”) (both accruing and nonaccruing) totaled $9.1 million and $16.1 million, respectively.

Additions to Accruing Troubled Debt Restructurings during the Period

(Dollars in thousands)


	Quarters Ended June 30,
	2012						2011
			Outstanding Recorded Investment ⁽¹⁾						Outstanding Recorded Investment ⁽¹⁾
	Number of Borrowers		Pre- Modification		Post- Modification		Number of Borrowers		Pre- Modification		Post- Modification
Commercial
Extension of maturity date ⁽²⁾		2	$	1,800	$	1,650		8	$	41,230	$	41,230
Other concession ⁽³⁾		—		—		—		3		10,471		10,471

Total commercial		2		1,800		1,650		11		51,701		51,701
Commercial real estate
Extension of maturity date ⁽²⁾		1		219		219		5		3,323		3,323
Residential real estate
Extension of maturity date ⁽²⁾		—		—		—		2		374		374
Home equity
Extension of maturity date ⁽²⁾		—		—		—		1		26		26

Total accruing		3	$	2,019	$	1,869		19	$	55,424	$	55,424

Change in recorded investment due to principal paydown at time of modification					$	150					$	—

⁽¹⁾	Represents amounts as of the date immediately prior to and immediately after the modification is effective.

⁽²⁾	Extension of maturity date also includes loans renewed at existing rate of interest which is considered a below market rate for that particular loan’s risk profile.

⁽³⁾	Other concessions primarily include interest rate reductions, loan increases, and deferral of principal.

Additions to Nonaccrual Troubled Debt Restructurings during the Period (Continued)

(Dollars in thousands)


	Quarters Ended June 30,
	2012						2011
			Outstanding Recorded Investment ⁽¹⁾						Outstanding Recorded Investment ⁽¹⁾
	Number of Borrowers		Pre- Modification		Post- Modification		Number of Borrowers		Pre- Modification		Post- Modification
Commercial
Extension of maturity date ⁽²⁾		1	$	1,573	$	1,573		—	$	—	$	—
Other concession ⁽³⁾		1		14,322		14,512		—		—		—

Total commercial		2		15,895		16,085		—		—		—
Commercial real estate
Extension of maturity date ⁽²⁾		—		—		—		1		662		662
Other concession ⁽³⁾		1		16,281		16,186		1		1,021		1,021

Total commercial real estate		1		16,281		16,186		2		1,683		1,683
Construction
Extension of maturity date ⁽²⁾		—		—		—		1		179		179
Residential real estate
Extension of maturity date ⁽²⁾		1		223		223		2		1,208		1,208
Other concession ⁽³⁾		—		—		—		1		696		696

Total residential real estate		1		223		223		3		1,904		1,904
Home equity
Extension of maturity date ⁽²⁾		—		—		—		1		147		147
Other concession ⁽³⁾		1		488		488		1		490		490

Total home equity		1		488		488		2		637		637

Total nonaccrual		5	$	32,887	$	32,982		8	$	4,403	$	4,403

Change in recorded investment due to principal paydown at time of modification					$	95					$	—

⁽¹⁾	Represents amounts as of the date immediately prior to and immediately after the modification is effective.

⁽²⁾	Extension of maturity date also includes loans renewed at existing rate of interest which is considered a below market rate for that particular loan’s risk profile.

⁽³⁾	Other concessions primarily include interest rate reductions, loan increases, and deferral of principal.

Additions to Accruing Troubled Debt Restructurings during the Period (Continued)

(Dollars in thousands)


	Six Months Ended June 30,
	2012						2011
			Outstanding Recorded Investment ⁽¹⁾						Outstanding Recorded Investment ⁽¹⁾
	Number of Borrowers		Pre- Modification		Post- Modification		Number of Borrowers		Pre- Modification		Post- Modification
Commercial
Extension of maturity date ⁽²⁾		5	$	33,488	$	33,338		13	$	44,986	$	44,986
Other concession ⁽³⁾		—		—		—		4		12,165		12,165
Multiple note structuring		1		17,596		11,796		—		—		—

Total commercial		6		51,084		45,134		17		57,151		57,151
Commercial real estate
Extension of maturity date ⁽²⁾		2		3,313		2,513		10		6,496		6,496
Multiple note structuring		—		—		—		3		18,827		10,610

Total commercial real estate		2		3,313		2,513		13		25,323		17,106
Residential real estate
Extension of maturity date ⁽²⁾		3		2,182		2,182		2		374		374
Other concession ⁽³⁾		1		200		200		—		—		—

Total residential real estate		4		2,382		2,382		2		374		374
Home equity
Extension of maturity date ⁽²⁾		1		125		125		2		203		203
Personal
Extension of maturity date ⁽²⁾		—		—		—		1		265		265
Other concession ⁽³⁾		—		—		—		1		252		252

Total personal		—		—		—		2		517		517

Total accruing		13	$	56,904	$	50,154		36	$	83,568	$	75,351

Change in recorded investment due to principal paydown at time of modification					$	950					$	400
Change in recorded investment due to charge- offs as part of the multiple note structuring					$	5,800					$	7,817

⁽¹⁾	Represents amounts as of the date immediately prior to and immediately after the modification is effective.

⁽²⁾	Extension of maturity date also includes loans renewed at existing rate of interest which is considered a below market rate for that particular loan’s risk profile.

⁽³⁾	Other concessions primarily include interest rate reductions, loan increases, and deferral of principal.

Additions to Nonaccrual Troubled Debt Restructurings during the Period (Continued)

(Dollars in thousands)


	Six Months Ended June 30,
	2012						2011
			Outstanding Recorded Investment ⁽¹⁾						Outstanding Recorded Investment ⁽¹⁾
	Number of Borrowers		Pre- Modification		Post- Modification		Number of Borrowers		Pre- Modification		Post- Modification
Commercial
Extension of maturity date ⁽²⁾		1	$	1,573	$	1,573		1	$	119	$	119
Other concession ⁽³⁾		2		17,322		17,512		1		128		128

Total commercial		3		18,895		19,085		2		247		247
Commercial real estate
Extension of maturity date ⁽²⁾		4		823		823		3		4,015		4,015
Other concession ⁽³⁾		1		16,281		16,186		2		6,208		6,208

Total commercial real estate		5		17,104		17,009		5		10,223		10,223
Construction
Extension of maturity date ⁽²⁾		—		—		—		1		179		179
Residential real estate
Extension of maturity date ⁽²⁾		1		223		223		3		1,446		1,446
Other concession ⁽³⁾		—		—		—		1		696		696

Total residential real estate		1		223		223		4		2,142		2,142
Home equity
Extension of maturity date ⁽²⁾		—		—		—		1		147		147
Other concession ⁽³⁾		1		488		488		1		490		490

Total home equity		1		488		488		2		637		637
Personal
Extension of maturity date ⁽²⁾		—		—		—		2		125		110

Total nonaccrual		10	$	36,710	$	36,805		16	$	13,553	$	13,538

Change in recorded investment due to principal paydown at time of modification					$	95					$	15

⁽¹⁾	Represents amounts as of the date immediately prior to and immediately after the modification is effective.

⁽²⁾	Extension of maturity date also includes loans renewed at existing rate of interest which is considered a below market rate for that particular loan’s risk profile.

⁽³⁾	Other concessions primarily include interest rate reductions, loan increases, and deferral of principal.

At the time an accruing loan becomes modified and meets the definition of a TDR, it is considered impaired and no longer included as part of the general loan loss reserve determination. However, our general reserve methodology considers the amount and characteristics of the TDRs removed as one of many credit or portfolio considerations in establishing final reserve requirements.

As impaired loans, TDRs (both accruing and nonaccruing) are specifically evaluated for impairment at the end of each quarter with a specific valuation reserve created, if necessary, as a component of the allowance for loan losses. Refer to the “Impaired Loan” and “Allowance for Loan Loss” sections of Note 1, “Summary of Significant Accounting Policies” to the Notes to Consolidated Financial Statements of our 2011 Annual Report on Form 10-K regarding our policy for assessing potential impairment on such loans. Our allowance for loan losses included $27.5 million and $25.7 million in specific reserves for nonaccrual TDRs at June 30, 2012 and December 31, 2011, respectively. At June 30, 2012, there was $47,000 in specific reserves for accruing TDRs. There were no specific reserves for accruing TDRs at December 31, 2011.

The following table presents the recorded investment and number of loans modified as an accruing TDR during the previous 12 months which subsequently became nonperforming during the quarter and six months ended June 30, 2012 and 2011. A loan becomes nonperforming and placed on nonaccrual status typically when the principal or interest payments are 90 days past due based on contractual terms or when an individual analysis of a borrower’s creditworthiness indicates a loan should be placed on nonaccrual status earlier than when the loan becomes 90 days past due.

Troubled Debt Restructurings

That Became Nonperforming Within 12 Months of Restructuring

(Dollars in thousands)


	2012				2011
	Number of Borrowers		Recorded Investment⁽¹⁾		Number of Borrowers		Recorded Investment⁽¹⁾
*Quarters Ended June 30*
Commercial		1	$	16,500		1	$	245
Commercial real estate		—		—		9		8,751

Total		1	$	16,500		10	$	8,996


*Six Months Ended June 30*
Commercial		1	$	16,500		3	$	400
Commercial real estate		1		97		10		9,095
Construction		—		—		1		960

Total		2	$	16,597		14	$	10,455

⁽¹⁾	Represents amounts as of the balance sheet date from the quarter the default was first reported.