| Loans | Loans Loans consist of the following at (in thousands): June 30, December 31, Commercial loans $ 3,354,889 $ 3,245,206 Commercial loans collateralized by assignment of lease payments 1,690,866 1,692,258 Commercial real estate 2,539,991 2,544,867 Residential real estate 533,118 503,287 Construction real estate 189,599 247,068 Indirect vehicle 303,777 268,840 Home equity 230,478 251,909 Other consumer loans 86,463 78,137 Total loans, excluding purchased credit-impaired loans 8,929,181 8,831,572 Purchased credit-impaired loans 164,775 251,645 Total loans $ 9,093,956 $ 9,083,217 Loans are made to individuals as well as commercial and tax exempt entities. Specific loan terms vary as to interest rate, repayment, and collateral requirements based on the type of loan requested and the credit worthiness of the prospective borrower. Except for commercial loans collateralized by assignment of lease payments and asset-based loans, credit risk tends to be geographically concentrated in that a majority of the loan customers are located in the markets serviced by MB Financial Bank. The Company's extension of credit is governed by its Credit Risk Policy, which was established to control the quality of the Company's loans. This policy is reviewed and approved by the Company's Board of Directors on a regular basis. Commercial Loans. Commercial credit is extended primarily to middle market customers. Such credits are typically comprised of working capital loans, loans for physical asset expansion, asset acquisition loans and other business loans. Loans to closely held businesses will generally be guaranteed in full or for a significant amount by the businesses' principal owners. Commercial loans are made based primarily on the historical and projected cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to economic or individual performance factors. Minimum standards and underwriting guidelines have been established for all commercial loan types. Asset-based loans, also included in commercial loans, are made to businesses with the primary source of repayment derived from payments on the related assets securing the loan. Collateral for these loans may include accounts receivable, inventory and equipment, and is monitored regularly to ensure ongoing sufficiency of collateral coverage and quality. The primary risk for these loans is a significant decline in collateral values due to general market conditions. Loan terms that mitigate these risks include typical industry amortization schedules, percentage of collateral advances, maintenance of cash collateral accounts and regular asset monitoring. Because of the national scope of our asset-based lending, the risk of these loans is also diversified by geography. Commercial Loans Collateralized by Assignment of Lease Payments ("Lease Loans"). The Company makes lease loans to lessors where the underlying leases are with both investment grade and non-investment grade companies. Investment grade lessees are companies rated in one of the four highest categories by Moody's Investor Services or Standard & Poor's Rating Services or, in the event the related lessee has not received any such rating, where the related lessee would be viewed under the underwriting policies of the Company as an investment grade company. Whether or not companies fall into this category, each lease loan is considered on its individual merit based on the financial wherewithal of the lessee using financial information available at the time of underwriting. Commercial Real Estate Loans. Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property. Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market such as geographic location and/or property type. Construction Real Estate Loans. The Company defines construction loans as loans where the loan proceeds are controlled by the Company and used exclusively for the improvement of real estate in which the Company holds a mortgage. Due to the inherent risk in this type of loan, they are subject to other industry specific policy guidelines outlined in the Company's Credit Risk Policy. Consumer Related Loans. The Company originates direct and indirect consumer loans, including primarily residential real estate, home equity lines and loans, credit cards, and indirect vehicle loans (motorcycle, powersports, recreational and marine vehicles). Each loan type is underwritten based upon several factors including debt to income, type of collateral and loan to collateral value, credit history and Company relationship with the borrower. Indirect loan and credit card underwriting involves the use of risk-based pricing in the underwriting process. Purchased credit-impaired loans. Purchased credit-impaired loans are loans accounted for under ASC 310-30, which include purchased credit-impaired loans acquired through a business combination, FDIC-assisted transactions and re-purchase transactions with the Government National Mortgage Association ("GNMA"). The loans re-purchased from GNMA were originally sold by the Company with servicing retained and subsequently became delinquent. These loans are also insured by the Federal Housing Administration (commonly referred to as "FHA") or the U.S. Department of Veterans Affairs (commonly referred to as "VA") where the Company would be able to recover the principal balance of these loans. All re-purchases from GNMA are at the Company's discretion. A collateral pledge agreement exists whereby at all times, the Company must keep on hand, free of all other pledges, liens, and encumbrances, first mortgage loans and home equity loans with unpaid principal balances aggregating no less than 133% for first mortgage loans and 250% for home equity loans of the outstanding advances from the Federal Home Loan Bank. As of June 30, 2015 and December 31, 2014 , the Company had $3.3 billion and $2.0 billion , respectively, of loans pledged as collateral for long-term Federal Home Loan Bank advances and third party letters of credit, while only $2.3 billion and $1.3 billion were required to be pledged at June 30, 2015 and December 31, 2014 , respectively. The following table presents the contractual aging of the recorded investment in past due loans by class of loans as of June 30, 2015 and December 31, 2014 (in thousands): Current 30-59 Days 60-89 Days Loans Past Due Total Total June 30, 2015 Commercial $ 3,322,336 $ 2,129 $ 20,734 $ 9,690 $ 32,553 $ 3,354,889 Commercial collateralized by assignment of lease payments 1,677,305 2,129 4,979 6,453 13,561 1,690,866 Commercial real estate Healthcare 379,218 — — — — 379,218 Industrial 350,957 — — 1,425 1,425 352,382 Multifamily 362,636 795 234 1,517 2,546 365,182 Retail 423,627 134 108 3,173 3,415 427,042 Office 233,567 1,199 2,179 2,868 6,246 239,813 Other 772,628 1,086 847 1,793 3,726 776,354 Residential real estate 520,930 2,710 1,358 8,120 12,188 533,118 Construction real estate 189,262 — — 337 337 189,599 Indirect vehicle 301,239 1,930 432 176 2,538 303,777 Home equity 221,627 1,522 1,150 6,179 8,851 230,478 Other consumer 86,107 178 70 108 356 86,463 Total loans, excluding purchased credit-impaired loans 8,841,439 13,812 32,091 41,839 87,742 8,929,181 Purchased credit-impaired loans 104,520 345 1,731 58,179 60,255 164,775 Total loans $ 8,945,959 $ 14,157 $ 33,822 $ 100,018 $ 147,997 $ 9,093,956 Non-performing loan aging $ 46,777 $ 1,636 $ 7,864 $ 41,778 $ 51,278 $ 98,055 December 31, 2014 Commercial $ 3,231,571 $ 8,222 $ — $ 5,413 $ 13,635 $ 3,245,206 Commercial collateralized by assignment of lease payments 1,679,991 2,025 6,095 4,147 12,267 1,692,258 Commercial real estate Healthcare 342,984 — — — — 342,984 Industrial 333,907 944 — 3,182 4,126 338,033 Multifamily 417,504 1,377 — 1,517 2,894 420,398 Retail 432,718 2,481 652 2,325 5,458 438,176 Office 244,166 — — 2,127 2,127 246,293 Other 754,031 307 2,421 2,224 4,952 758,983 Residential real estate 485,492 8,038 2,319 7,438 17,795 503,287 Construction real estate 246,731 — — 337 337 247,068 Indirect vehicle 265,296 2,516 702 326 3,544 268,840 Home equity 242,756 2,717 1,039 5,397 9,153 251,909 Other consumer 78,106 16 12 3 31 78,137 Total loans, excluding purchased credit-impaired loans 8,755,253 28,643 13,240 34,436 76,319 8,831,572 Purchased credit-impaired loans 158,215 4,432 585 88,413 93,430 251,645 Total loans $ 8,913,468 $ 33,075 $ 13,825 $ 122,849 $ 169,749 $ 9,083,217 Non-performing loan aging $ 46,149 $ 5,764 $ 1,099 $ 34,075 $ 40,938 $ 87,087 The following table presents the recorded investment in non-accrual loans and loans past due ninety days or more and still accruing by class of loans, excluding purchased credit-impaired loans, as of June 30, 2015 and December 31, 2014 (in thousands): June 30, 2015 December 31, 2014 Loans past due Loans past due Non-accrual 90 days or more and still accruing Non-accrual 90 days or more and still accruing Commercial $ 15,807 $ — $ 14,088 $ — Commercial collateralized by assignment of lease payments 10,930 4,316 2,404 3,566 Commercial real estate: Healthcare — — — — Industrial 4,382 — 6,371 — Multifamily 5,116 — 5,333 — Office 2,848 1,446 3,644 464 Retail 5,047 — 2,986 — Other 13,519 — 13,541 324 Residential real estate 17,210 265 17,311 — Construction real estate 337 — 337 — Indirect vehicle 1,368 — 1,542 — Home equity 15,343 — 15,171 — Other consumer 36 85 5 — Total $ 91,943 $ 6,112 $ 82,733 $ 4,354 The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Under the Company's risk rating system, the Company classifies potential problem and problem loans as “Special Mention,” “Substandard,” and “Doubtful.” Substandard loans include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses that deserve management's close attention are deemed to be Special Mention. Risk ratings are updated any time the situation warrants and at least annually. Loans listed as not rated are included in groups of homogeneous loans with similar risk and loss characteristics. The following tables present the risk category of loans by class of loans based on the most recent analysis performed, excluding purchased credit-impaired loans, as of June 30, 2015 and December 31, 2014 (in thousands): Pass Special Substandard Doubtful Total June 30, 2015 Commercial $ 3,100,715 $ 156,718 $ 97,456 $ — $ 3,354,889 Commercial collateralized by assignment of lease payments 1,677,745 683 12,438 — 1,690,866 Commercial real estate Healthcare 379,218 — — — 379,218 Industrial 334,463 12,894 5,025 — 352,382 Multifamily 357,937 739 6,506 — 365,182 Retail 416,120 2,879 8,043 — 427,042 Office 220,939 9,301 9,573 — 239,813 Other 727,399 13,903 35,052 — 776,354 Construction real estate 189,262 — 337 — 189,599 Total $ 7,403,798 $ 197,117 $ 174,430 $ — $ 7,775,345 December 31, 2014 Commercial $ 3,036,069 $ 178,984 $ 30,153 $ — $ 3,245,206 Commercial collateralized by assignment of lease payments 1,680,736 6,853 4,669 — 1,692,258 Commercial real estate Healthcare 338,622 4,362 — — 342,984 Industrial 314,225 8,817 14,991 — 338,033 Multifamily 412,824 920 6,654 — 420,398 Retail 423,842 2,740 11,594 — 438,176 Office 229,947 8,524 7,822 — 246,293 Other 708,447 22,013 28,523 — 758,983 Construction real estate 246,204 527 337 — 247,068 Total $ 7,390,916 $ 233,740 $ 104,743 $ — $ 7,729,399 Approximately $58.0 million and $49.1 million of the substandard and doubtful loans were non-performing as of June 30, 2015 and December 31, 2014 , respectively. For residential real estate, home equity, indirect vehicle and other consumer loan classes, which are not rated, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in those loan classes based on payment activity, excluding purchased credit-impaired loans, as of June 30, 2015 and December 31, 2014 (in thousands): Performing Non-performing Total June 30, 2015 Residential real estate $ 515,643 $ 17,475 $ 533,118 Indirect vehicle 302,409 1,368 303,777 Home equity 215,135 15,343 230,478 Other consumer 86,342 121 86,463 Total $ 1,119,529 $ 34,307 $ 1,153,836 December 31, 2014 Residential real estate $ 485,976 $ 17,311 $ 503,287 Indirect vehicle 267,297 1,543 268,840 Home equity 236,739 15,170 251,909 Other consumer 78,132 5 78,137 Total $ 1,068,144 $ 34,029 $ 1,102,173 The following tables present loans individually evaluated for impairment by class of loans, excluding purchased credit-impaired loans, as of June 30, 2015 and December 31, 2014 (in thousands): June 30, 2015 Three Months Ended Six Months Ended Unpaid Recorded Partial Allowance for Average Interest Average Interest With no related allowance recorded: Commercial $ 3,626 $ 3,626 $ — $ — $ 3,906 $ — $ 7,254 $ — Commercial collateralized by assignment of lease payments 1,138 1,138 — — 1,366 18 1,495 47 Commercial real estate: Healthcare — — — — — — — — Industrial 5,549 4,373 1,176 — 4,884 — 4,923 — Multifamily 1,814 1,814 — — 1,926 10 1,859 17 Retail 2,013 801 1,212 — 824 — 824 — Office 1,608 1,031 577 — 1,031 — 1,318 — Other 1,490 1,464 26 — 1,502 — 1,514 — Residential real estate 970 970 — — 959 — 482 — Construction real estate — — — — — — — — Indirect vehicle — — — — — — — — Home equity 1,327 1,025 302 — 1,327 — 667 — Other consumer — — — — — — — — With an allowance recorded: Commercial 13,396 12,636 760 3,706 12,210 — 9,500 — Commercial collateralized by assignment of lease payments 9,800 9,785 15 4,606 6,098 62 3,728 76 Commercial real estate: Healthcare — — — — — — — — Industrial 10 10 — 3 18 — 33 — Multifamily 4,916 4,066 850 661 3,798 19 4,856 27 Retail 7,713 7,043 670 738 7,160 — 7,433 — Office 4,519 4,016 503 1,438 2,319 — 2,297 — Other 12,543 12,522 21 250 13,322 — 13,265 — Residential real estate 13,249 13,249 — 2,831 13,762 — 14,083 — Construction real estate 2,708 337 2,371 162 431 — 431 — Indirect vehicle 132 132 — 10 248 — 310 — Home equity 27,482 27,482 — 2,506 27,384 — 27,299 — Other consumer — — — — — — — — Total $ 116,003 $ 107,520 $ 8,483 $ 16,911 $ 104,475 $ 109 $ 103,571 $ 167 December 31, 2014 Year Ended Unpaid Recorded Partial Allowance for Average Interest With no related allowance recorded: Commercial $ 9,752 $ 8,992 $ 760 $ — $ 10,324 $ — Commercial collateralized by assignment of lease payments 2,316 2,316 — — 2,569 121 Commercial real estate: Healthcare — — — — — — Industrial 9,115 5,858 3,257 — 7,870 — Multifamily 1,733 1,733 — — 1,928 52 Retail 2,025 813 1,212 — 3,465 — Office — — — — 1,127 — Other 1,479 1,465 14 — 5,249 — Residential real estate 1,941 1,941 — — 2,740 — Construction real estate — — — — 34 — Indirect vehicle — — — — — — Home equity 577 577 — — 762 — Other consumer — — — — — — With an allowance recorded: Commercial 7,987 7,987 — 2,395 14,227 — Commercial collateralized by assignment of lease payments 715 715 — 105 1,515 91 Commercial real estate: Healthcare — — — — — — Industrial 517 513 4 130 4,982 — Multifamily 5,680 4,709 971 996 6,354 131 Retail 9,264 7,897 1,367 720 8,547 — Office 4,528 2,986 1,542 545 2,833 — Other 12,612 12,527 85 136 11,022 12 Residential real estate 14,234 14,234 — 3,126 14,632 — Construction real estate 2,707 337 2,370 162 455 — Indirect vehicle 227 227 — 14 358 — Home equity 25,927 25,705 222 2,153 25,672 — Other consumer — — — — — — Total $ 113,336 $ 101,532 $ 11,804 $ 10,482 $ 126,665 $ 407 Impaired loans included accruing restructured loans of $16.9 million and $15.6 million that have been modified and are performing in accordance with those modified terms as of June 30, 2015 and December 31, 2014 , respectively. In addition, impaired loans included $24.5 million and $25.8 million of non-performing restructured loans as of June 30, 2015 and December 31, 2014 , respectively. Loans may be restructured in an effort to maximize collections from financially distressed borrowers. We use various restructuring techniques, including, but not limited to, deferring past due interest or principal, implementing an A/B note structure, redeeming past due taxes, reducing interest rates, extending maturities and modifying amortization schedules. Residential real estate loans are restructured in an effort to minimize losses while allowing borrowers to remain in their primary residences when possible. Programs that we offer to residential real estate borrowers include the Home Affordable Refinance Program (“HARP”), a restructuring program similar to the Home Affordable Modification Program (“HAMP”) for first mortgage borrowers, the Second Lien Modification Program (“2MP”) and similar programs for home equity borrowers in keeping with the restructuring techniques discussed above. Periodically, the Company will restructure a note into two separate notes (A/B structure), charging off the entire B portion of the note. The A note is structured with appropriate loan-to-value and cash flow coverage ratios that provide for a high likelihood of repayment. The A note is classified as a non-performing note until the borrower has displayed a historical payment performance for a reasonable time prior to and subsequent to the restructuring. A period of sustained repayment for at least six months generally is required to return the note to accrual status provided that management has determined that the performance is reasonably expected to continue. The A note will be classified as a restructured note (either performing or non-performing) through the calendar year of the restructuring that the historical payment performance has been established. As of June 30, 2015 and December 31, 2014 , there was one A/B structure with a recorded investment of $1.0 million , which is included above as an accruing restructured loan. A loan classified as a troubled debt restructuring will no longer be included in the troubled debt restructuring disclosures in the years after the restructuring if the loan performs in accordance with the terms specified by the restructuring agreement and the interest rate specified in the restructuring agreement represents a market rate at the time of modification. The specified interest rate is considered a market rate when the interest rate is equal to or greater than the rate the Company is willing to accept at the time of restructuring for a new loan with comparable risk. If there are concerns that the borrower will not be able to meet the modified terms of the loan, the loan will continue to be included in the troubled debt restructuring disclosures. Impairment analyses on commercial-related loans classified as troubled debt restructurings are performed in conjunction with the normal allowance for loan and lease losses process. Consumer loans classified as troubled debt restructurings are aggregated in two pools that share common risk characteristics, home equity and residential real estate loans, with impairment measured on a quarterly basis based on the present value of expected future cash flows discounted at the loan's effective interest rate. The following table presents loans that were restructured during the three months ended June 30, 2015 (dollars in thousands): June 30, 2015 Number of Pre-Modification Recorded Post-Modification Recorded Charge-offs and Performing: Commercial 1 $ 80 $ 80 $ — Home equity 6 1,467 1,467 — Total 7 $ 1,547 $ 1,547 $ — Non-Performing: Commercial real estate: Multifamily 1 $ 334 $ 334 $ — Residential real estate 1 140 140 17 Indirect vehicle 3 21 21 7 Total 5 $ 495 $ 495 $ 24 The following table presents loans that were restructured during the six months ended June 30, 2015 (dollars in thousands): June 30, 2015 Number of Pre-Modification Recorded Post-Modification Recorded Charge-offs and Performing: Commercial 1 $ 80 $ 80 $ — Home equity 12 3,813 3,813 — Total 13 $ 3,893 $ 3,893 $ — Non-Performing: Commercial real estate: Multifamily 1 $ 334 $ 334 $ — Residential real estate 1 140 140 17 Indirect vehicle 6 30 30 7 Home equity 5 798 798 122 Total 13 $ 1,302 $ 1,302 $ 146 The following table presents loans that were restructured during the three months ended June 30, 2014 (dollars in thousands): June 30, 2014 Number of Pre-Modification Recorded Post-Modification Recorded Charge-offs and Performing: Home equity 3 $ 843 $ 843 $ — Total 3 $ 843 $ 843 $ — Non-Performing: Commercial 1 $ 263 $ 263 $ 85 Commercial real estate: Multifamily 1 158 158 40 Indirect vehicle 11 59 59 27 Home equity 3 531 531 — Total 16 $ 1,011 $ 1,011 $ 152 The following table presents loans that were restructured during the six months ended June 30, 2014 (dollars in thousands): June 30, 2014 Number of Pre-Modification Recorded Post-Modification Recorded Charge-offs and Performing: Indirect vehicle 1 $ 5 $ 5 $ — Home equity 6 1,883 1,883 — Total 7 $ 1,888 $ 1,888 $ — Non-Performing: Commercial 1 $ 263 $ 263 $ 85 Commercial real estate: Multifamily 1 158 158 40 Residential real estate 4 1,439 1,439 — Indirect vehicle 29 167 167 27 Home equity 7 1,063 1,063 — Total 42 $ 3,090 $ 3,090 $ 152 Of the troubled debt restructurings entered into during the past twelve months, $224 thousand subsequently defaulted during the six months ended June 30, 2015 . Performing troubled debt restructurings are considered to have defaulted when they become 90 days or more past due post-restructuring or are placed on non-accrual status. The following table presents the troubled debt restructurings activity during the six months ended June 30, 2015 (in thousands): Performing Non-performing Beginning balance $ 15,603 $ 25,771 Additions 3,893 1,302 Charge-offs — (299 ) Principal payments, net (11 ) (946 ) Removals (3,093 ) (867 ) Transfer from/to performing 561 78 Transfer from/to non-performing (78 ) (561 ) Ending balance $ 16,875 $ 24,478 Loans removed from troubled debt restructuring status are those that were restructured in a previous calendar year at a market rate of interest and have performed in compliance with the modified terms. The following table presents the type of modification for loans that have been restructured during the six months ended June 30, 2015 (in thousands): June 30, 2015 Extended Maturity, Delay in Amortization Extended Payments or and Reduction Maturity and/or Reduction of of Interest Rate Amortization Interest Rate Total Commercial $ — $ — $ 80 $ 80 Commercial real estate: Multifamily — 334 — 334 Residential real estate 140 — — 140 Indirect vehicle — — 30 30 Home equity 1,991 267 2,353 4,611 Total $ 2,131 $ 601 $ 2,463 $ 5,195 The following table presents the activity in the allowance for credit losses, balance in allowance for credit losses and recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2015 and 2014 (in thousands): Commercial Commercial collateralized by assignment of lease payments Commercial real estate Residential real estate Construction real estate Indirect vehicle Home equity Other consumer Unfunded commitments Total June 30, 2015 Allowance for credit losses: Three Months Ended Beginning balance $ 32,827 $ 9,825 $ 41,958 $ 6,760 $ 9,473 $ 1,715 $ 8,780 $ 2,074 $ 3,777 $ 117,189 Charge-offs 57 100 108 318 3 627 276 500 — 1,989 Recoveries 816 340 2,561 8 35 545 160 169 — 4,634 Provision 5,556 1,203 (6,335 ) 219 2,954 276 (252 ) 392 283 4,296 Ending balance $ 39,142 $ 11,268 $ 38,076 $ 6,669 $ 12,459 $ 1,909 $ 8,412 $ 2,135 $ 4,060 $ 124,130 Six Months Ended Beginning balance $ 29,571 $ 9,962 $ 41,826 $ 6,646 $ 8,918 $ 1,687 $ 9,456 $ 1,960 $ 4,031 $ 114,057 Charge-offs 626 100 2,142 897 6 1,501 720 924 — 6,916 Recoveries 1,058 1,089 3,936 80 37 1,020 261 238 — 7,719 Provision 9,139 317 (5,544 ) 840 3,510 703 (585 ) 861 29 9,270 Ending balance $ 39,142 $ 11,268 $ 38,076 $ 6,669 $ 12,459 $ 1,909 $ 8,412 $ 2,135 $ 4,060 $ 124,130 Ending allowance balance attributable to loans: Individually evaluated for impairment $ 3,706 $ 4,606 $ 3,090 $ 2,831 $ 162 $ 10 $ 2,506 $ — $ 1,334 $ 18,245 Collectively evaluated for impairment 34,984 6,662 34,195 3,838 12,292 1,899 5,906 2,135 2,726 104,637 Acquired and accounted for under ASC 310-30 (1) 452 — 791 — 5 — — — — 1,248 Total ending allowance balance $ 39,142 $ 11,268 $ 38,076 $ 6,669 $ 12,459 $ 1,909 $ 8,412 $ 2,135 $ 4,060 $ 124,130 Loans: Individually evaluated for impairment $ 16,262 $ 10,923 $ 37,140 $ 14,219 $ 337 $ 132 $ 28,507 $ — $ — $ 107,520 Collectively evaluated for impairment 3,338,627 1,679,943 2,502,851 518,899 189,262 303,645 201,971 86,463 — 8,821,661 Acquired and accounted for under ASC 310-30 (1) 52,675 — 53,141 27,861 11,764 — 86 19,248 — 164,775 Total ending loans balance $ 3,407,564 $ 1,690,866 $ 2,593,132 $ 560,979 $ 201,363 $ 303,777 $ 230,564 $ 105,711 $ — $ 9,093,956 Commercial Commercial collateralized by assignment of lease payments Commercial real estate Residential real estate Construction real estate Indirect vehicle Home equity Other consumer Unfunded commitments Total June 30, 2014 Allowance for credit losses: Three Months Ended Beginning balance $ 23,938 $ 9,058 $ 47,540 $ 8,087 $ 6,484 $ 1,684 $ 8,397 $ 1,564 $ 1,643 $ 108,395 Charge-offs 446 40 1,727 433 14 583 817 590 — 4,650 Recoveries 696 130 567 6 77 439 127 68 — 2,110 Provision (1,034 ) 277 (2,447 ) (165 ) (1,934 ) 187 574 1,240 1,352 (1,950 ) Ending balance $ 23,154 $ 9,425 $ 43,933 $ 7,495 $ 4,613 $ 1,727 $ 8,281 $ 2,282 $ 2,995 $ 103,905 Six Months Ended Beginning balance $ 23,461 $ 9,159 $ 51,628 $ 8,872 $ 6,856 $ 1,662 $ 8,478 $ 1,630 $ 1,716 $ 113,462 Charge-offs 536 40 8,883 698 70 1,503 1,436 1,085 — 14,251 Recoveries 2,324 130 1,052 525 176 881 260 146 — 5,494 Provision (2,095 ) 176 136 (1,204 ) (2,349 ) 687 979 1,591 1,279 (800 ) Ending balance $ 23,154 $ 9,425 $ 43,933 $ 7,495 $ 4,613 $ 1,727 $ 8,281 $ 2,282 $ 2,995 $ 103,905 Ending allowance balance attributable to loans: Individually evaluated for impairment $ 5,500 $ 98 $ 4,511 $ 3,135 $ 161 $ 29 $ 1,727 $ — $ 1,307 $ 16,468 Collectively evaluated for impairment 17,128 9,327 38,734 4,360 4,447 1,698 6,554 2,282 1,688 86,218 Acquired and accounted for under ASC 310-30 (1) 526 — 688 — 5 — — — — 1,219 Total ending allowance balance $ 23,154 $ 9,425 $ 43,933 $ 7,495 $ 4,613 $ 1,727 $ 8,281 $ 2,282 $ 2,995 $ 103,905 Loans: Individually evaluated for impairment $ 34,117 $ 3,267 $ 57,587 $ 16,888 $ 337 $ 187 $ 25,451 $ — $ — $ 137,834 Collectively evaluated for impairment 1,217,963 1,512,179 1,561,735 288,813 116,659 272,654 219,684 70,584 — 5,260,271 Acquired and accounted for under ASC 310-30 (1) 26,680 — 73,708 5,695 28,554 — 121 23,861 — 158,619 Total ending loans balance $ 1,278,760 $ 1,515,446 $ 1,693,030 $ 311,396 $ 145,550 $ 272,841 $ 245,256 $ 94,445 $ — $ 5,556,724 (1) Loans acquired in business combinations and accounted for under ASC Subtopic 310-30 “Receivables — Loans and Debt Securities Acquired with Deteriorated Credit Quality.” Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan and lease losses. These acquired loans are segregated into three types: pass rated loans with no discount attributable to credit quality, non-impaired loans with a discount attributable at least in part to credit quality and impaired loans with evidence of significant credit deterioration. • Pass rated loans (typically performing loans) are accounted for in accordance with ASC 310-20 "Nonrefundable Fees and Other Costs" as these loans do not have evidence of credit deterioration since origination. • Non-impaired loans (typically performing substandard loans) are accounted for in accordance with ASC 310-30 if they display at least some level of credit deterioration since origination. • Impaired loans (typically substandard loans on non-accrual status) are accounted for in accordance with ASC 310-30 as they display significant credit deterioration since origination. For pass rated loans (non-purchased credit-impaired loans), the difference between the estimated fair value of the loans (computed on a loan by loan basis) and the principal outstanding is accreted over the remaining life of the loans. We anticipate recording a provision for the acquired portfolio in future quarters related to renewing Taylor loans which will largely offset the accretion from the pass rated loans. In accordance with ASC 310-30, for both purchased non-impaired loans and purchased credit-impaired loans, the difference between contractually required payments at acquisition and the cash flows expected to be collected is referred to as the non-accretable difference. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. Substantially all of the loans acquired in transactions with the FDIC displayed at least some level of credit deterioration and as such are included as non-impaired and impaired loans as described immediately above. During the six months ended June 30, 2015 , there was a negative provision for credit losses of $538 thousand and net recoveries of $503 thousand , in relation to 16 pools of purchased loans with a total carrying amount of $52.6 million as of June 30, 2015 . There was $1.2 million and $1.3 million in allowance for loan and lease losses related to these purchased loans at June 30, 2015 and December 31, 2014 , respectively. The provision for credit losses and accompanying charge-offs are included in the table above. Changes in the accretable yield for loans acquired and accounted for under ASC 310-30 were as follows for the six months ended June 30, 2015 and 2014 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Balance at beginning of period $ 6,367 $ 2,361 $ 7,434 $ 2,337 Accretion (1,817 ) (1,143 ) (3,747 ) (1,693 ) Other (1) 6,906 — 7,769 574 Balance at end of period $ 11,456 $ 1,218 $ 11,456 $ 1,218 (1) Primarily includes discount transfers from non-accretable discount to accretable discount due to better than expected performance of loans acquired and accounted for under ASC 310-30. In our FDIC-assisted transactions, the fair value of purchased credit-impaired loans, on the acquisition date, was determined based on assigned risk ratings, expected cash flows and the fair value of loan collateral. The fair value of loans that were non-impaired was determined based on estimates of losses on defaults and other market factors. Due to the loss-share agreements with the FDIC, we recorded a receivable (FDIC indemnification asset) from the FDIC equal to the present value of the corresponding reimbursement percentages on the estimated losses embedded in the loan portfolio. When cash flow estimates are adjusted downward for a particular loan pool, the FDIC indemnification asset is increased. An allowance for loan and lease losses is established for the impairment of the loans. A provision for credit losses is recognized for the difference between the increase in the FDIC indemnification asset and the decrease in cash flows. When cash flow estimates are adjusted upward for a particular loan pool, the FDIC indemnification asset is decreased. The difference between the decrease in the FDIC indemnification asset and the increase in cash flows is accreted over the estimated life of the loan pool. When cash flow estimates are adjusted downward for covered foreclosed real estate, the FDIC indemnification asset is increased. A charge is recognized for the difference between the increase in the FDIC indemnification asset and the decrease in cash flows. When cash flow estimates are adjusted upward for covered foreclosed real estate, the FDIC indemnification asset is decreased. Any write-d |
