Company Quick10K Filing
Quick10K
Commerce Bancshares
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$59.80 111 $6,660
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-01-23 Officers
8-K 2019-01-17 Earnings, Exhibits
8-K 2018-10-11 Earnings, Exhibits
8-K 2018-07-12 Earnings, Exhibits
8-K 2018-06-04 Officers
8-K 2018-04-18 Shareholder Vote
8-K 2018-04-12 Earnings, Exhibits
8-K 2018-04-02 Officers
8-K 2018-02-15 Officers
8-K 2018-01-26 Officers
8-K 2018-01-18 Earnings, Exhibits
8-K 2018-01-09 Officers
STL Sterling Bancorp
GBCI Glacier Bancorp
SFBS Servisfirst Bancshares
WSFS WSFS Financial
SBSI Southside Bancshares
NCOM National Commerce
SYBT Stock Yards Bancorp
NCBS Nicolet Bankshares
NKSH National Bankshares
ASRV Ameriserv Financial
CBSH 2018-09-30
Part I: Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition And
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii: Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 cbsh09302018ex311.htm
EX-31.2 cbsh09302018ex312.htm
EX-32 cbsh09302018ex32.htm

Commerce Bancshares Earnings 2018-09-30

CBSH 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 cbsh0930201810q.htm 10-Q Document

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
_________________________________________________________

For the quarterly period ended September 30, 2018

OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
____________________________________________________________

For the transition period from           to          
Commission File No. 0-2989
 
COMMERCE BANCSHARES, INC.
 
(Exact name of registrant as specified in its charter)
Missouri
 
43-0889454
(State of Incorporation)
 
(IRS Employer Identification No.)
 
 
 
1000 Walnut,
Kansas City, MO
 
64106
(Address of principal executive offices)
 
(Zip Code)
 
 
 
(816) 234-2000
 
 
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ     No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ     No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company £
Emerging growth company £
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No þ
As of November 1, 2018, the registrant had outstanding 106,227,582 shares of its $5 par value common stock, registrant’s only class of common stock.



Commerce Bancshares, Inc. and Subsidiaries

Form 10-Q
 

 
 
 
Page
INDEX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
 
 
September 30, 2018
 
December 31, 2017
 
(Unaudited)
 
 
 
(In thousands)
ASSETS
 
 
 
Loans
$
13,955,559

 
$
13,983,674

  Allowance for loan losses
(159,732
)
 
(159,532
)
Net loans
13,795,827

 
13,824,142

Loans held for sale (including $10,256,000 and $15,327,000 of residential mortgage loans carried at fair value at September 30, 2018 and December 31, 2017, respectively)
16,890

 
21,398

Investment securities:
 
 
 

Available for sale debt ($553,227,000 and $662,515,000 pledged at September 30, 2018 and
 
 
 
    December 31, 2017, respectively, to secure swap and repurchase agreements)
8,674,986

 
8,725,442

Trading debt
19,676

 
18,269

Equity
4,467

 
50,591

Other
127,120

 
99,005

Total investment securities
8,826,249

 
8,893,307

Federal funds sold and short-term securities purchased under agreements to resell
14,375

 
42,775

Long-term securities purchased under agreements to resell
700,000

 
700,000

Interest earning deposits with banks
334,752

 
30,631

Cash and due from banks
443,004

 
438,439

Land, buildings and equipment, net
331,869

 
335,110

Goodwill
138,921

 
138,921

Other intangible assets, net
8,470

 
7,618

Other assets
452,035

 
401,074

Total assets
$
25,062,392

 
$
24,833,415

LIABILITIES AND EQUITY
 
 
 
Deposits:
 
 
 

   Non-interest bearing
$
6,728,605

 
$
7,158,962

   Savings, interest checking and money market
11,733,057

 
11,499,620

   Time open and C.D.'s of less than $100,000
585,765

 
634,646

   Time open and C.D.'s of $100,000 and over
1,086,193

 
1,132,218

Total deposits
20,133,620

 
20,425,446

Federal funds purchased and securities sold under agreements to repurchase
1,862,117

 
1,507,138

Other borrowings
1,534

 
1,758

Other liabilities
257,311

 
180,889

Total liabilities
22,254,582

 
22,115,231

Commerce Bancshares, Inc. stockholders’ equity:
 
 
 

   Preferred stock, $1 par value
 
 
 
      Authorized 2,000,000 shares; issued 6,000 shares
144,784

 
144,784

   Common stock, $5 par value
 
 
 

 Authorized 120,000,000 shares;
 
 
 
   issued 107,081,397 shares
535,407

 
535,407

   Capital surplus
1,804,031

 
1,815,360

   Retained earnings
493,641

 
221,374

   Treasury stock of 516,507 shares at September 30, 2018
 
 
 
     and 276,968 shares at December 31, 2017, at cost
(33,174
)
 
(14,473
)
   Accumulated other comprehensive income (loss)
(141,596
)
 
14,108

Total Commerce Bancshares, Inc. stockholders' equity
2,803,093

 
2,716,560

Non-controlling interest
4,717

 
1,624

Total equity
2,807,810

 
2,718,184

Total liabilities and equity
$
25,062,392

 
$
24,833,415

See accompanying notes to consolidated financial statements.

3


Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
 
For the Three Months Ended September 30
 
For the Nine Months Ended September 30
(In thousands, except per share data)
2018
2017
 
2018
2017
 
(Unaudited)
INTEREST INCOME
 
 
 
 
 
Interest and fees on loans
$
159,182

$
138,827

 
$
460,332

$
401,423

Interest and fees on loans held for sale
315

287

 
991

746

Interest on investment securities
59,792

50,585

 
178,598

160,825

Interest on federal funds sold and short-term securities purchased under
 
 
 
 
 
   agreements to resell
69

78

 
426

138

Interest on long-term securities purchased under agreements to resell
3,915

3,805

 
11,814

11,282

Interest on deposits with banks
1,478

662

 
4,208

1,421

Total interest income
224,751

194,244

 
656,369

575,835

INTEREST EXPENSE
 
 
 
 
 
Interest on deposits:
 
 
 
 
 
   Savings, interest checking and money market
7,230

4,441

 
19,338

12,673

   Time open and C.D.'s of less than $100,000
834

676

 
2,190

1,994

   Time open and C.D.'s of $100,000 and over
3,899

2,784

 
10,221

8,369

Interest on federal funds purchased and securities sold under
 
 
 
 
 
   agreements to repurchase
5,022

2,846

 
12,979

6,423

Interest on other borrowings
12

906

 
36

2,705

Total interest expense
16,997

11,653

 
44,764

32,164

Net interest income
207,754

182,591

 
611,605

543,671

Provision for loan losses
9,999

10,704

 
30,438

32,590

Net interest income after provision for loan losses
197,755

171,887

 
581,167

511,081

NON-INTEREST INCOME
 
 
 
 
 
Bank card transaction fees
42,427

39,166

 
127,095

112,212

Trust fees
37,400

34,620

 
110,498

99,754

Deposit account charges and other fees
23,755

22,659

 
70,630

67,462

Capital market fees
1,595

1,755

 
5,878

6,253

Consumer brokerage services
3,884

3,679

 
11,623

11,054

Loan fees and sales
3,579

3,590

 
9,670

10,849

Other
11,074

11,418

 
32,860

34,296

Total non-interest income
123,714

116,887

 
368,254

341,880

INVESTMENT SECURITIES GAINS (LOSSES), NET
4,306

(3,037
)
 
6,641

(2,158
)
NON-INTEREST EXPENSE
 
 
 
 
 
Salaries and employee benefits
116,194

111,382

 
347,677

332,580

Net occupancy
11,631

11,459

 
34,333

34,332

Equipment
4,592

4,491

 
13,617

13,876

Supplies and communication
5,103

5,517

 
15,542

16,672

Data processing and software
22,056

19,968

 
63,762

59,908

Marketing
4,999

4,676

 
14,946

12,388

Deposit insurance
3,167

3,479

 
9,750

10,542

Community service
580

3,006

 
1,965

8,866

Other
16,737

15,239

 
47,604

46,320

Total non-interest expense
185,059

179,217

 
549,196

535,484

Income before income taxes
140,716

106,520

 
406,866

315,319

Less income taxes
26,647

32,294

 
79,412

90,402

Net income
114,069

74,226

 
327,454

224,917

Less non-controlling interest expense (income)
1,493

(338
)
 
3,564

(111
)
Net income attributable to Commerce Bancshares, Inc.
112,576

74,564

 
323,890

225,028

Less preferred stock dividends
2,250

2,250

 
6,750

6,750

Net income available to common shareholders
$
110,326

$
72,314

 
$
317,140

$
218,278

Net income per common share — basic
$
1.03

$
.68

 
$
2.97

$
2.04

Net income per common share — diluted
$
1.03

$
.67

 
$
2.96

$
2.03

See accompanying notes to consolidated financial statements.

4


Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
For the Three Months Ended September 30
 
For the Nine Months Ended September 30
(In thousands)
 
2018
2017
 
2018
2017
 
 
(Unaudited)
Net income
 
$
114,069

$
74,226

 
$
327,454

$
224,917

Other comprehensive income (loss):
 
 
 
 
 
 
Net unrealized gains (losses) on securities for which a portion of an other-than-temporary impairment has been recorded in earnings
 
53

286

 
(25
)
457

Net unrealized gains (losses) on other securities
 
(32,232
)
24,356

 
(125,442
)
54,599

Pension loss amortization
 
393

349

 
1,180

1,030

Unrealized losses on cash flow hedge derivatives
 
(1,029
)

 
(1,029
)

Other comprehensive income (loss)
 
(32,815
)
24,991

 
(125,316
)
56,086

Comprehensive income
 
81,254

99,217

 
202,138

281,003

Less non-controlling interest expense (income)
 
1,493

(338
)
 
3,564

(111
)
Comprehensive income attributable to Commerce Bancshares, Inc.
$
79,761

$
99,555

 
$
198,574

$
281,114

See accompanying notes to consolidated financial statements.














5


Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 
 
Commerce Bancshares, Inc. Shareholders
 
 
 
 

(In thousands, except per share data)
Preferred Stock
Common Stock
Capital Surplus
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive Income (Loss)
Non-Controlling Interest
Total
 
(Unaudited)
Balance December 31, 2017
$
144,784

$
535,407

$
1,815,360

$
221,374

$
(14,473
)
$
14,108

$
1,624

$
2,718,184

Adoption of ASU 2018-02
 
 


(2,932
)
 
2,932

 

Adoption of ASU 2016-01
 




33,320



(33,320
)



Net income
 




323,890





3,564

327,454

Other comprehensive loss
 








(125,316
)


(125,316
)
Distributions to non-controlling interest
 










(471
)
(471
)
Purchases of treasury stock
 






(39,575
)




(39,575
)
Issuance of stock under purchase and equity compensation plans
 


(20,884
)


20,874





(10
)
Stock-based compensation
 


9,555









9,555

Cash dividends on common stock ($.705 per share)
 




(75,261
)






(75,261
)
Cash dividends on preferred stock ($1.125 per depositary share)
 




(6,750
)






(6,750
)
Balance September 30, 2018
$
144,784

$
535,407

$
1,804,031

$
493,641

$
(33,174
)
$
(141,596
)
$
4,717

$
2,807,810

Balance December 31, 2016
$
144,784

$
510,015

$
1,552,454

$
292,849

$
(15,294
)
$
10,975

$
5,349

$
2,501,132

Adoption of ASU 2016-09




3,441

(2,144
)






1,297

Net income
 




225,028





(111
)
224,917

Other comprehensive income
 








56,086



56,086

Distributions to non-controlling interest
 










(1,305
)
(1,305
)
Purchases of treasury stock
 






(11,320
)




(11,320
)
Issuance of stock under purchase and equity compensation plans
 


(16,726
)


16,719





(7
)
Stock-based compensation
 


9,149









9,149

Cash dividends on common stock ($.643 per share)
 




(68,722
)






(68,722
)
Cash dividends on preferred stock ($1.125 per depositary share)
 
 
 
(6,750
)
 
 
 
(6,750
)
Balance September 30, 2017
$
144,784

$
510,015

$
1,548,318

$
440,261

$
(9,895
)
$
67,061

$
3,933

$
2,704,477

See accompanying notes to consolidated financial statements.



6


Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Nine Months Ended September 30
(In thousands)
2018
 
2017
 
(Unaudited)
OPERATING ACTIVITIES:
 
 
 
Net income
$
327,454

 
$
224,917

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
  Provision for loan losses
30,438

 
32,590

  Provision for depreciation and amortization
28,824

 
29,521

  Amortization of investment security premiums, net
18,758

 
28,173

  Investment securities (gains) losses, net (A)
(6,641
)
 
2,158

  Net gains on sales of loans held for sale
(4,770
)
 
(6,200
)
  Originations of loans held for sale
(149,397
)
 
(162,552
)
  Proceeds from sales of loans held for sale
156,637

 
164,588

  Net (increase) decrease in trading debt securities
(4,886
)
 
7,234

  Stock-based compensation
9,555

 
9,149

  Increase in interest receivable
(5,021
)
 
(3,757
)
  Increase (decrease) in interest payable
689

 
(223
)
  Increase in income taxes payable
30,107

 
201

  Other changes, net
14,964

 
8,511

Net cash provided by operating activities
446,711

 
334,310

INVESTING ACTIVITIES:
 
 
 
Proceeds from sales of investment securities (A)
193,047

 
369,036

Proceeds from maturities/pay downs of investment securities (A)
1,222,998

 
1,384,993

Purchases of investment securities (A)
(1,520,235
)
 
(1,072,782
)
Net increase in loans
(3,588
)
 
(364,765
)
Long-term securities purchased under agreements to resell
(100,000
)
 
(75,000
)
Repayments of long-term securities purchased under agreements to resell
100,000

 
100,000

Purchases of land, buildings and equipment
(21,358
)
 
(22,853
)
Sales of land, buildings and equipment
2,342

 
2,570

Net cash provided by (used in) investing activities
(126,794
)
 
321,199

FINANCING ACTIVITIES:
 
 
 
Net decrease in non-interest bearing, savings, interest checking and money market deposits
(177,368
)
 
(12,490
)
Net decrease in time open and C.D.'s
(94,906
)
 
(424,462
)
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase
354,979

 
(314,921
)
Repayment of long-term borrowings
(224
)
 
(218
)
Net increase in short-term borrowings

 
722

Purchases of treasury stock
(39,575
)
 
(11,320
)
Issuance of stock under equity compensation plans
(10
)
 
(7
)
Cash dividends paid on common stock
(75,261
)
 
(68,722
)
Cash dividends paid on preferred stock
(6,750
)
 
(6,750
)
Net cash used in financing activities
(39,115
)
 
(838,168
)
Increase (decrease) in cash, cash equivalents and restricted cash
280,802

 
(182,659
)
Cash, cash equivalents and restricted cash at beginning of year
524,352

 
782,435

Cash, cash equivalents and restricted cash at September 30
$
805,154

 
$
599,776

(A) Available for sale debt securities, equity securities and other securities
 
 
 
Income tax payments, net
$
46,122

 
$
87,449

Interest paid on deposits and borrowings
$
44,074

 
$
32,387

Loans transferred to foreclosed real estate
$
1,312

 
$
1,166

See accompanying notes to consolidated financial statements.

Restricted cash is comprised of cash collateral posted by the Company to secure interest rate swap agreements. This balance is included in other assets in the consolidated balance sheets and totaled $13.0 million and $12.8 million at September 30, 2018 and 2017, respectively.


7


Commerce Bancshares, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018 (Unaudited)
 
1. Principles of Consolidation and Presentation
The accompanying consolidated financial statements include the accounts of Commerce Bancshares, Inc. and all majority-owned subsidiaries (the Company). Most of the Company's operations are conducted by its subsidiary bank, Commerce Bank (the Bank). The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments necessary to present fairly the financial position and the results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications were made to 2017 data to conform to current year presentation. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Management has evaluated subsequent events for potential recognition or disclosure. The results of operations for the three and nine month periods ended September 30, 2018 are not necessarily indicative of results to be attained for the full year or any other interim period.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company's most recent Annual Report on Form 10-K, containing the latest audited consolidated financial statements and notes thereto.

These financial statements reflect the adoption of several FASB Accounting Standards Updates (ASUs) on January 1, 2018. In some cases, the adoption of these ASUs resulted in changes to former accounting policies as described in Note 1 to the financial statements in the 2017 Annual Report on Form 10-K. The ASUs which affected the Company's 2018 financial statements include:
ASU 2014-09, Revenue from Contracts with Customers, which is discussed further in Note 13.
ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which is discussed further in Note 3 - Investment Securities, Note 8 - Accumulated Other Comprehensive Income, and Note 15 - Fair Value of Financial Instruments.
ASU 2016-18, Restricted Cash, which requires that the beginning and end of period amounts shown on the statement of cash flows include not only cash and cash equivalents, but also restricted cash and restricted cash equivalents, as considered such by the reporting entity.
ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which is discussed further in Note 6 - Pension.
ASU 2018-02, Reclassification for Certain Tax Effects from Accumulated Other Comprehensive Income, which is discussed further in Note 8 - Accumulated Other Comprehensive Income.







8


2. Loans and Allowance for Loan Losses
Major classifications within the Company’s held for investment loan portfolio at September 30, 2018 and December 31, 2017 are as follows:

(In thousands)
 
September 30, 2018
 
December 31, 2017
Commercial:
 
 
 
 
Business
 
$
4,966,722

 
$
4,958,554

Real estate – construction and land
 
999,691

 
968,820

Real estate – business
 
2,726,042

 
2,697,452

Personal Banking:
 
 
 
 
Real estate – personal
 
2,120,672

 
2,062,787

Consumer
 
1,967,465

 
2,104,487

Revolving home equity
 
375,322

 
400,587

Consumer credit card
 
788,111

 
783,864

Overdrafts
 
11,534

 
7,123

Total loans
 
$
13,955,559

 
$
13,983,674


At September 30, 2018, loans of $3.7 billion were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits. Additional loans of $1.7 billion were pledged at the Federal Reserve Bank as collateral for discount window borrowings.

Allowance for loan losses    
A summary of the activity in the allowance for loan losses during the three and nine months ended September 30, 2018 and 2017, respectively, follows:
 
 
For the Three Months Ended September 30
 
For the Nine Months Ended September 30
(In thousands)
 
Commercial
Personal Banking

Total
 
Commercial
Personal Banking

Total
Balance at beginning of period
$
93,851

$
65,681

$
159,532

 
$
93,704

$
65,828

$
159,532

Provision
411

9,588

9,999

 
2

30,436

30,438

Deductions:
 
 
 
 
 
 
 
   Loans charged off
485

12,515

13,000

 
1,213

39,203

40,416

   Less recoveries on loans
314

2,887

3,201

 
1,598

8,580

10,178

Net loan charge-offs (recoveries)
171

9,628

9,799

 
(385
)
30,623

30,238

Balance September 30, 2018
$
94,091

$
65,641

$
159,732

 
$
94,091

$
65,641

$
159,732

Balance at beginning of period
$
92,739

$
65,093

$
157,832

 
$
91,361

$
64,571

$
155,932

Provision
24

10,680

10,704

 
1,026

31,564

32,590

Deductions:
 
 
 
 
 
 
 
   Loans charged off
378

13,592

13,970

 
1,455

39,337

40,792

   Less recoveries on loans
651

2,615

3,266

 
2,104

7,998

10,102

Net loan charge-offs (recoveries)
(273
)
10,977

10,704

 
(649
)
31,339

30,690

Balance September 30, 2017
$
93,036

$
64,796

$
157,832

 
$
93,036

$
64,796

$
157,832



9


The following table shows the balance in the allowance for loan losses and the related loan balance at September 30, 2018 and December 31, 2017, disaggregated on the basis of impairment methodology. Impaired loans evaluated under Accounting Standards Codification (ASC) 310-10-35 include loans on non-accrual status, which are individually evaluated for impairment, and other impaired loans discussed below, which are deemed to have similar risk characteristics and are collectively evaluated. All other loans are collectively evaluated for impairment under ASC 450-20.
 
Impaired Loans
 
All Other Loans

(In thousands)
Allowance for Loan Losses
Loans Outstanding
 
Allowance for Loan Losses
Loans Outstanding
September 30, 2018
 
 
 
 
 
Commercial
$
2,746

$
91,119

 
$
91,345

$
8,601,336

Personal Banking
898

17,641

 
64,743

5,245,463

Total
$
3,644

$
108,760

 
$
156,088

$
13,846,799

December 31, 2017
 
 
 
 
 
Commercial
$
3,067

$
92,613

 
$
90,637

$
8,532,213

Personal Banking
1,176

22,182

 
64,652

5,336,666

Total
$
4,243

$
114,795

 
$
155,289

$
13,868,879


Impaired loans
The table below shows the Company’s investment in impaired loans at September 30, 2018 and December 31, 2017. These loans consist of all loans on non-accrual status and other restructured loans whose terms have been modified and classified as troubled debt restructurings. These restructured loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. They are discussed further in the "Troubled debt restructurings" section on page 15.
(In thousands)
 
Sept. 30, 2018
 
Dec. 31, 2017
Non-accrual loans
 
$
8,369

 
$
11,983

Restructured loans (accruing)
 
100,391

 
102,812

Total impaired loans
 
$
108,760

 
$
114,795



10


The following table provides additional information about impaired loans held by the Company at September 30, 2018 and December 31, 2017, segregated between loans for which an allowance for credit losses has been provided and loans for which no allowance has been provided.


(In thousands)
Recorded Investment
Unpaid Principal
Balance
 Related
Allowance
September 30, 2018
 
 
 
With no related allowance recorded:
 
 
 
Business
$
4,871

$
8,936

$

 
$
4,871

$
8,936

$

With an allowance recorded:
 
 
 
Business
$
75,324

$
75,612

$
2,262

Real estate – construction and land
412

416

11

Real estate – business
10,512

11,112

473

Real estate – personal
5,177

7,347

274

Consumer
5,309

5,309

48

Revolving home equity
68

68


Consumer credit card
7,087

7,087

576

 
$
103,889

$
106,951

$
3,644

Total
$
108,760

$
115,887

$
3,644

December 31, 2017
 
 
 
With no related allowance recorded:
 
 
 
Business
$
5,356

$
9,000

$

Real estate – business
1,299

1,303


Consumer
779

817


 
$
7,434

$
11,120

$

With an allowance recorded:
 
 
 
Business
$
72,589

$
73,168

$
2,455

Real estate – construction and land
837

841

27

Real estate – business
12,532

13,071

585

Real estate – personal
9,126

11,914

532

Consumer
5,388

5,426

67

Revolving home equity
204

204

11

Consumer credit card
6,685

6,685

566

 
$
107,361

$
111,309

$
4,243

Total
$
114,795

$
122,429

$
4,243




11


Total average impaired loans for the three and nine month periods ended September 30, 2018 and 2017, respectively, are shown in the table below.

(In thousands)
Commercial
Personal Banking
Total
Average Impaired Loans:
 
 
 
For the three months ended September 30, 2018
 
 
 
Non-accrual loans
$
7,477

$
1,862

$
9,339

Restructured loans (accruing)
83,493

16,409

99,902

Total
$
90,970

$
18,271

$
109,241

For the nine months ended September 30, 2018
 
 
 
Non-accrual loans
$
7,888

$
2,261

$
10,149

Restructured loans (accruing)
81,543

17,426

98,969

Total
$
89,431

$
19,687

$
109,118

For the three months ended September 30, 2017
 
 
 
Non-accrual loans
$
8,938

$
4,238

$
13,176

Restructured loans (accruing)
42,930

18,691

61,621

Total
$
51,868

$
22,929

$
74,797

For the nine months ended September 30, 2017
 
 
 
Non-accrual loans
$
9,800

$
4,098

$
13,898

Restructured loans (accruing)
36,567

16,901

53,468

Total
$
46,367

$
20,999

$
67,366


The table below shows interest income recognized during the three and nine month periods ended September 30, 2018 and 2017, respectively, for impaired loans held at the end of each period. This interest all relates to accruing restructured loans, as discussed in the "Troubled debt restructurings" section on page 15.
 
For the Three Months Ended September 30
 
For the Nine Months Ended September 30
(In thousands)
2018
2017
 
2018
2017
Interest income recognized on impaired loans:
 
 
 
 
 
Business
$
939

$
473

 
$
2,817

$
1,418

Real estate – construction and land
6

10

 
19

30

Real estate – business
110

118

 
329

354

Real estate – personal
47

104

 
142

311

Consumer
79

79

 
238

236

Revolving home equity
2

7

 
6

20

Consumer credit card
129

162

 
386

486

Total
$
1,312

$
953

 
$
3,937

$
2,855



12


Delinquent and non-accrual loans
The following table provides aging information on the Company’s past due and accruing loans, in addition to the balances of loans on non-accrual status, at September 30, 2018 and December 31, 2017.




(In thousands)
Current or Less Than 30 Days Past Due

30 – 89
Days Past Due
90 Days Past Due and Still Accruing
Non-accrual



Total
September 30, 2018
 
 
 
 
 
Commercial:
 
 
 
 
 
Business
$
4,957,570

$
3,673

$
348

$
5,131

$
4,966,722

Real estate – construction and land
995,134

4,553


4

999,691

Real estate – business
2,708,294

16,281


1,467

2,726,042

Personal Banking:
 
 
 
 
 
Real estate – personal
2,110,198

7,571

1,136

1,767

2,120,672

Consumer
1,936,208

28,249

3,008


1,967,465

Revolving home equity
372,931

1,517

874


375,322

Consumer credit card
769,158

10,328

8,625


788,111

Overdrafts
11,199

335



11,534

Total
$
13,860,692

$
72,507

$
13,991

$
8,369

$
13,955,559

December 31, 2017
 
 
 
 
 
Commercial:
 
 
 
 
 
Business
$
4,949,148

$
3,085

$
374

$
5,947

$
4,958,554

Real estate – construction and land
967,321

1,473

21

5

968,820

Real estate – business
2,694,234

482


2,736

2,697,452

Personal Banking:
 
 
 
 
 
Real estate – personal
2,050,787

6,218

3,321

2,461

2,062,787

Consumer
2,067,025

32,674

3,954

834

2,104,487

Revolving home equity
397,349

1,962

1,276


400,587

Consumer credit card
764,568

10,115

9,181


783,864

Overdrafts
6,840

283



7,123

Total
$
13,897,272

$
56,292

$
18,127

$
11,983

$
13,983,674


Credit quality
The following table provides information about the credit quality of the Commercial loan portfolio, using the Company’s internal rating system as an indicator. The internal rating system is a series of grades reflecting management’s risk assessment, based on its analysis of the borrower’s financial condition. The “pass” category consists of a range of loan grades that reflect increasing, though still acceptable, risk. Movement of risk through the various grade levels in the “pass” category is monitored for early identification of credit deterioration. The “special mention” rating is applied to loans where the borrower exhibits negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten its capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. It is a transitional grade that is closely monitored for improvement or deterioration. The “substandard” rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on “non-accrual” when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment.

13


Commercial Loans


(In thousands)


Business
Real
 Estate-Construction
Real
Estate-
Business


Total
September 30, 2018
 
 
 
 
Pass
$
4,772,286

$
987,352

$
2,649,964

$
8,409,602

Special mention
40,307

11,474

29,016

80,797

Substandard
148,998

861

45,595

195,454

Non-accrual
5,131

4

1,467

6,602

Total
$
4,966,722

$
999,691

$
2,726,042

$
8,692,455

December 31, 2017
 
 
 
 
Pass
$
4,740,013

$
955,499

$
2,593,005

$
8,288,517

Special mention
59,177

10,614

50,577

120,368

Substandard
153,417

2,702

51,134

207,253

Non-accrual
5,947

5

2,736

8,688

Total
$
4,958,554

$
968,820

$
2,697,452

$
8,624,826


The credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided in the table in the above "Delinquent and non-accrual loans" section. In addition, FICO scores are obtained and updated on a quarterly basis for most of the loans in the Personal Banking portfolio. This is a published credit score designed to measure the risk of default by taking into account various factors from a borrower's financial history. The Bank normally obtains a FICO score at the loan's origination and renewal dates, and updates are obtained on a quarterly basis. Excluded from the table below are certain personal real estate loans for which FICO scores are not obtained because they generally pertain to commercial customer activities and are often underwritten with other collateral considerations. These loans totaled $205.4 million at September 30, 2018 and $219.2 million at December 31, 2017. The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled $170.3 million at September 30, 2018 and $145.0 million at December 31, 2017. As the healthcare loans are guaranteed by the hospital, FICO scores are not considered relevant for this program. The personal real estate loans and consumer loans excluded below totaled less than 8% of the Personal Banking portfolio. For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at September 30, 2018 and December 31, 2017 by FICO score.
   Personal Banking Loans
 
% of Loan Category
 
Real Estate - Personal
Consumer
Revolving Home Equity
Consumer Credit Card
September 30, 2018
 
 
 
 
FICO score:
 
 
 
 
Under 600
1.0
%
3.2
%
1.0
%
4.4
%
600 - 659
2.0

4.9

1.8

14.2

660 - 719
9.2

18.3

9.5

35.3

720 - 779
25.4

25.8

23.4

26.6

780 and over
62.4

47.8

64.3

19.5

Total
100.0
%
100.0
%
100.0
%
100.0
%
December 31, 2017
 
 
 
 
FICO score:
 
 
 
 
Under 600
1.3
%
3.3
%
1.1
%
4.7
%
600 - 659
2.1

5.5

1.7

14.4

660 - 719
10.5

17.3

9.5

34.4

720 - 779
25.6

26.8

21.4

26.0

780 and over
60.5

47.1

66.3

20.5

Total
100.0
%
100.0
%
100.0
%
100.0
%



14


Troubled debt restructurings
As mentioned previously, the Company's impaired loans include loans which have been classified as troubled debt restructurings, as shown in the table below. Restructured loans are those extended to borrowers who are experiencing financial difficulty and who have been granted a concession. Restructured loans are placed on non-accrual status if the Company does not believe it probable that amounts due under the contractual terms will be collected. Commercial performing restructured loans are primarily comprised of certain business, construction and business real estate loans classified as substandard, but renewed at rates judged to be non market. These loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. Troubled debt restructurings also include certain credit card and other small consumer loans under various debt management and assistance programs. Modifications to these loans generally involve removing the available line of credit, placing loans on amortizing status, and lowering the contractual interest rate. The Company also classified as consumer bankruptcy certain personal real estate, revolving home equity, and consumer loans as troubled debt restructurings because they were not reaffirmed by the borrower in bankruptcy proceedings. Interest on these loans is being recognized on an accrual basis, as the borrowers are continuing to make payments. Other consumer loans classified as troubled debt restructurings consist of various other workout arrangements with consumer customers.
(In thousands)
September 30, 2018
December 31, 2017
Accruing restructured loans:
 
 
 
Commercial
$
85,232

$
88,588

 
Assistance programs
7,386

6,941

 
Consumer bankruptcy
4,327

3,916

 
Other consumer
3,446

3,367

Non-accrual loans
5,831

7,796

Total troubled debt restructurings
$
106,222

$
110,608


The table below shows the balance of troubled debt restructurings by loan classification at September 30, 2018, in addition to the outstanding balances of these restructured loans which the Company considers to have been in default at any time during the past twelve months. For purposes of this disclosure, the Company considers "default" to mean 90 days or more past due as to interest or principal.
(In thousands)
September 30, 2018
Balance 90 days past due at any time during previous 12 months
Commercial:
 
 
Business
$
79,963

$
28

Real estate - construction and land
408


Real estate - business
9,045


Personal Banking:
 
 
Real estate - personal
4,342

292

Consumer
5,309

89

Revolving home equity
68


Consumer credit card
7,087

591

Total troubled debt restructurings
$
106,222

$
1,000


For those loans on non-accrual status also classified as restructured, the modification did not create any further financial effect on the Company as those loans were already recorded at net realizable value. For those performing commercial loans classified as restructured, there were no concessions involving forgiveness of principal or interest and, therefore, there was no financial impact to the Company as a result of modification to these loans. No financial impact resulted from those performing loans where the debt was not reaffirmed in bankruptcy, as no changes to loan terms occurred in that process. The effects of modifications to loans under various debt management and assistance programs were estimated to decrease interest income by approximately $792 thousand on an annual, pre-tax basis, compared to amounts contractually owed. Other modifications to consumer loans mainly involve extensions and other small modifications that did not include the forgiveness of principal or interest.

The allowance for loan losses related to troubled debt restructurings on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status which are not classified as troubled debt

15


restructurings. Those performing loans classified as troubled debt restructurings are accruing loans which management expects to collect under contractual terms. Performing commercial loans having no other concessions granted other than being renewed at non-market interest rates are judged to have similar risk characteristics as non-troubled debt commercial loans and are collectively evaluated based on internal risk rating, loan type, delinquency, historical experience and current economic factors. Performing personal banking loans classified as troubled debt restructurings resulted from the borrower not reaffirming the debt during bankruptcy and have had no other concession granted, other than the Bank's future limitations on collecting payment deficiencies or in pursuing foreclosure actions. As such, they have similar risk characteristics as non-troubled debt personal banking loans and are evaluated collectively based on loan type, delinquency, historical experience and current economic factors.

If a troubled debt restructuring defaults and is already on non-accrual status, the allowance for loan losses continues to be based on individual evaluation, using discounted expected cash flows or the fair value of collateral. If an accruing troubled debt restructuring defaults, the loan's risk rating is downgraded to non-accrual status and the loan's related allowance for loan losses is determined based on individual evaluation, or if necessary, the loan is charged off and collection efforts begun.

The Company had commitments of $7.7 million at September 30, 2018 to lend additional funds to borrowers with restructured loans.

Loans held for sale
The Company designates certain long-term fixed rate personal real estate loans as held for sale, and the Company has elected the fair value option for these loans. The election of the fair value option aligns the accounting for these loans with the related economic hedges discussed in Note 10. The loans are primarily sold to FNMA, FHLMC, and GNMA. At September 30, 2018, the fair value of these loans was $10.3 million, and the unpaid principal balance was $10.0 million.

The Company also designates student loan originations as held for sale. The borrowers are credit-worthy students who are attending colleges and universities. The loans are intended to be sold in the secondary market, and the Company maintains contracts with Sallie Mae to sell the loans within 210 days after the last disbursement to the student. These loans are carried at lower of cost or fair value, which at September 30, 2018 totaled $6.6 million.

At September 30, 2018, none of the loans held for sale were on non-accrual status or 90 days past due and still accruing.
 
Foreclosed real estate/repossessed assets
The Company’s holdings of foreclosed real estate totaled $1.2 million and $681 thousand at September 30, 2018 and December 31, 2017, respectively. Personal property acquired in repossession, generally autos and marine and recreational vehicles, totaled $2.3 million and $2.7 million at September 30, 2018 and December 31, 2017, respectively. Upon acquisition, these assets are recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. They are subsequently carried at the lower of this cost basis or fair value less estimated selling costs.

3. Investment Securities
Investment securities as shown in this report reflect revised categories as required by the Company’s adoption of ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”, on January 1, 2018. That new guidance refined the definition of equity securities and required their segregation from available for sale debt securities. For comparability purposes, prior period disclosures in this report have been revised to show the new categorization.
 
(In thousands)
September 30, 2018
December 31, 2017
Available for sale debt securities
$
8,674,986

$
8,725,442

Trading debt securities
19,676

18,269

Equity securities:
 
 
   Readily determinable fair value
2,765

48,838

   No readily determinable fair value
1,702

1,753

Other:


 
   Federal Reserve Bank stock
33,498

33,253

   Federal Home Loan Bank stock
10,000

10,000

   Private equity investments
83,622

55,752

Total investment securities
$
8,826,249

$
8,893,307



16


While changes in the fair value of available for sale debt securities continue to be recorded in the equity category of accumulated other comprehensive income, the new guidance requires changes in the fair value of equity securities to be recorded in current earnings. As required by the new guidance, the unrealized gain in fair value on equity securities (recorded in accumulated other comprehensive income at December 31, 2017) was reclassified to retained earnings on January 1, 2018. The amount of the reclassification was $33.3 million, net of tax.
Equity securities include common and preferred stock with readily determinable fair values that totaled $2.5 million at cost and $2.8 million at fair value at September 30, 2018. The decline in these balances from prior periods was due to a third party merger transaction in June 2018, in which the majority of these securities were redeemed for cash of $39.9 million. During the first nine months of 2018, unrealized net losses of $151 thousand were recognized in current earnings on equity securities still held at September 30, 2018.
Equity securities also include securities with a carrying value of $1.7 million that do not have readily determinable fair values. The Company has elected, under the ASU, to measure these at cost minus impairment, if any, plus or minus changes resulting from observable price changes for the identical or similar investment of the same issuer. The Company did not record any impairment or other adjustments to the carrying amount of these investments during the period.
Other investment securities whose accounting is not addressed in the ASU include Federal Reserve Bank (FRB) stock, Federal Home Loan Bank (FHLB) stock, and investments in portfolio concerns held by the Company's private equity subsidiaries. FRB stock and FHLB stock are held for debt and regulatory purposes. Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is tied to the level of borrowings from the FHLB. These holdings are carried at cost. The private equity investments, in the absence of readily ascertainable market values, are carried at estimated fair value.
The majority of the Company’s investment portfolio is comprised of available for sale debt securities, which are carried at fair value with changes in fair value reported in accumulated other comprehensive income (AOCI). A summary of the available for sale debt securities by maturity groupings as of September 30, 2018 is shown below. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as the FHLMC, FNMA, GNMA and FDIC, in addition to non-agency mortgage-backed securities, which have no guarantee but are collateralized by commercial and residential mortgages. Also included are certain other asset-backed securities, which are primarily collateralized by credit cards, automobiles, student loans, and commercial loans. These securities differ from traditional debt securities primarily in that they may have uncertain maturity dates and are priced based on estimated prepayment rates on the underlying collateral.

17


(In thousands)
Amortized Cost
Fair Value
U.S. government and federal agency obligations:
 
 
Within 1 year
$
23,624

$
23,532

After 1 but within 5 years
646,024

632,363

After 5 but within 10 years
183,500

177,790

After 10 years
69,283

67,430

Total U.S. government and federal agency obligations
922,431

901,115

Government-sponsored enterprise obligations:
 
 
Within 1 year
28,635

28,607

After 1 but within 5 years
121,588

119,494

After 5 but within 10 years
34,985

33,587

After 10 years
42,872

39,428

Total government-sponsored enterprise obligations
228,080

221,116

State and municipal obligations:
 
 
Within 1 year
124,946

125,248

After 1 but within 5 years
642,000

640,269

After 5 but within 10 years
551,184

545,707

After 10 years
79,516

77,674

Total state and municipal obligations
1,397,646

1,388,898

Mortgage and asset-backed securities:
 
 
  Agency mortgage-backed securities
3,351,134

3,266,524

  Non-agency mortgage-backed securities
1,103,357

1,091,382

  Asset-backed securities
1,489,750

1,475,425

Total mortgage and asset-backed securities
5,944,241

5,833,331

Other debt securities:
 
 
Within 1 year
9,002

8,984

After 1 but within 5 years
257,635

251,880

After 5 but within 10 years
73,254

69,662

Total other debt securities
339,891

330,526

Total available for sale debt securities
$
8,832,289

$
8,674,986


Investments in U.S. government and federal agency obligations include U.S. Treasury inflation-protected securities, which totaled $436.2 million, at fair value, at September 30, 2018. Interest paid on these securities increases with inflation and decreases with deflation, as measured by the Consumer Price Index. Included in state and municipal obligations are $14.7 million, at fair value, of auction rate securities, which were purchased from bank customers in 2008. Interest on these bonds is currently being paid at the maximum failed auction rates.


18


For debt securities classified as available for sale, the following table shows the unrealized gains and losses (pre-tax) in AOCI, by security type.
 
 
(In thousands)
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
September 30, 2018
 
 
 
 
U.S. government and federal agency obligations
$
922,431

$
41

$
(21,357
)
$
901,115

Government-sponsored enterprise obligations
228,080


(6,964
)
221,116

State and municipal obligations
1,397,646

3,541

(12,289
)
1,388,898

Mortgage and asset-backed securities:
 
 
 
 
  Agency mortgage-backed securities
3,351,134

3,875

(88,485
)
3,266,524

  Non-agency mortgage-backed securities
1,103,357

6,236

(18,211
)
1,091,382

  Asset-backed securities
1,489,750

2,174

(16,499
)
1,475,425

Total mortgage and asset-backed securities
5,944,241

12,285

(123,195
)
5,833,331

Other debt securities
339,891


(9,365
)
330,526

Total
$
8,832,289

$
15,867

$
(173,170
)
$
8,674,986

December 31, 2017
 
 
 
 
U.S. government and federal agency obligations
$
917,494

$
4,096

$
(4,443
)
$
917,147

Government-sponsored enterprise obligations
408,266

26

(1,929
)
406,363

State and municipal obligations
1,592,707

21,413

(2,754
)
1,611,366

Mortgage and asset-backed securities:
 
 
 
 
  Agency mortgage-backed securities
3,046,701

17,956

(23,744
)
3,040,913

  Non-agency mortgage-backed securities
903,920

6,710

(4,837
)
905,793

  Asset-backed securities
1,495,380

2,657

(5,237
)
1,492,800

Total mortgage and asset-backed securities
5,446,001

27,323

(33,818
)
5,439,506

Other debt securities
350,988

1,250

(1,178
)
351,060

Total
$
8,715,456

$
54,108

$
(44,122
)
$
8,725,442


The Company’s impairment policy requires a review of all securities for which fair value is less than amortized cost. Special emphasis and analysis is placed on securities whose credit rating has fallen below A3 (Moody's) or A- (Standard & Poor's), whose fair values have fallen more than 20% below purchase price for an extended period of time, or who have been identified based on management’s judgment. These securities are placed on a watch list, and for all such securities, cash flow analyses are prepared. For more complex analyses, detailed cash flow models are prepared which use inputs specific to each security. Inputs to these models include factors such as cash flow received, contractual payments required, and various other information related to the underlying collateral (including current delinquencies), collateral loss severity rates (including loan to values), expected delinquency rates, credit support from other tranches, and prepayment speeds. Stress tests are performed at varying levels of delinquency rates, prepayment speeds and loss severities in order to gauge probable ranges of credit loss. At September 30, 2018, the fair value of securities on this watch list was $53.5 million compared to $68.0 million at December 31, 2017.

As of September 30, 2018, the Company had recorded other-than-temporary impairment (OTTI) on certain non-agency mortgage-backed securities, part of the watch list mentioned above, which had an aggregate fair value of $20.4 million. The cumulative credit-related portion of the impairment on these securities, which was recorded in earnings, totaled $14.1 million. The Company does not intend to sell these securities and believes it is not likely that it will be required to sell the securities before the recovery of their amortized cost.

The credit-related portion of the loss on these securities was based on the cash flows projected to be received over the estimated life of the securities, discounted to present value, and compared to the current amortized cost bases of the securities. Significant inputs to the cash flow models used to calculate the credit losses on these securities at September 30, 2018 included the following:

Significant Inputs
Range
Prepayment CPR
0%
-
25%
Projected cumulative default
12%
-
51%
Credit support
0%
-
20%
Loss severity
14%
-
63%


19


The following table presents a rollforward of the cumulative OTTI credit losses recognized in earnings on all available for sale debt securities.
 
For the Nine Months Ended September 30
(In thousands)
2018
2017
Cumulative OTTI credit losses at January 1
$
14,199

$
14,080

Credit losses on debt securities for which impairment was not previously recognized
58

98

Credit losses on debt securities for which impairment was previously recognized
10

274

Increase in expected cash flows that are recognized over remaining life of security
(138
)
(207
)
Cumulative OTTI credit losses at September 30
$
14,129

$
14,245


Debt securities with unrealized losses recorded in AOCI are shown in the table below, along with the length of the impairment period.
 
Less than 12 months
 
12 months or longer
 
Total
 
(In thousands)
   Fair Value
Unrealized
Losses
 
Fair Value
Unrealized
Losses
 
Fair Value
Unrealized
Losses
September 30, 2018
 
 
 
 
 
 
 
 
U.S. government and federal agency obligations
$
572,747

$
12,285

 
$
270,313

$
9,072

 
$
843,060

$
21,357

Government-sponsored enterprise obligations
139,520

3,909

 
81,596

3,055

 
221,116

6,964

State and municipal obligations
715,673

7,472

 
130,190

4,817

 
845,863

12,289

Mortgage and asset-backed securities:
 
 
 
 
 
 
 
 
   Agency mortgage-backed securities
1,958,646

42,485

 
1,039,348

46,000

 
2,997,994

88,485

   Non-agency mortgage-backed securities
680,691

9,372

 
374,601

8,839

 
1,055,292

18,211

   Asset-backed securities
735,808

9,758

 
422,531

6,741

 
1,158,339

16,499

Total mortgage and asset-backed securities
3,375,145

61,615

 
1,836,480

61,580

 
5,211,625

123,195

Other debt securities
258,019

5,813

 
72,507

3,552

 
330,526

9,365

Total
$
5,061,104

$
91,094

 
$
2,391,086

$
82,076

 
$
7,452,190

$
173,170

December 31, 2017
 
 
 
 
 
 
 
 
U.S. government and federal agency obligations
$
618,617

$
4,443

 
$

$

 
$
618,617

$
4,443

Government-sponsored enterprise obligations
286,393