Finance Receivables and Allowance for Credit Losses | 12 Months Ended |
Dec. 31, 2014 |
Text Block [Abstract] | |
Finance Receivables and Allowance for Credit Losses | NOTE 6 – FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES |
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Old National’s finance receivables consist primarily of loans made to consumers and commercial clients in various industries including manufacturing, agribusiness, transportation, mining, wholesaling and retailing. Most of Old National’s lending activity occurs within our principal geographic markets of Indiana, southeastern Illinois, western Kentucky and southwestern Michigan. Old National has no concentration of commercial loans in any single industry exceeding 10% of its portfolio. |
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The composition of loans at December 31 by lending classification was as follows: |
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(dollars in thousands) | | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | |
Commercial (1) | | $ | 1,629,600 | | | $ | 1,373,415 | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | 134,552 | | | | 88,630 | | | | | | | | | | | | | | | | | | | | | |
Other | | | 1,576,558 | | | | 1,072,260 | | | | | | | | | | | | | | | | | | | | | |
Residential real estate | | | 1,519,156 | | | | 1,359,569 | | | | | | | | | | | | | | | | | | | | | |
Consumer credit: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Heloc | | | 360,320 | | | | 251,102 | | | | | | | | | | | | | | | | | | | | | |
Auto | | | 846,969 | | | | 620,473 | | | | | | | | | | | | | | | | | | | | | |
Other | | | 103,338 | | | | 99,683 | | | | | | | | | | | | | | | | | | | | | |
Covered loans | | | 147,708 | | | | 217,832 | | | | | | | | | | | | | | | | | | | | | |
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Total loans | | | 6,318,201 | | | | 5,082,964 | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses | | | (44,297 | ) | | | (41,741 | ) | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses – covered loans | | | (3,552 | ) | | | (5,404 | ) | | | | | | | | | | | | | | | | | | | | |
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Net loans | | $ | 6,270,352 | | | $ | 5,035,819 | | | | | | | | | | | | | | | | | | | | | |
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-1 | Includes direct finance leases of $19.3 million and $27.8 million at December 31, 2014 and 2013, respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The risk characteristics of each loan portfolio segment are as follows: |
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Commercial |
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Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. |
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Commercial real estate |
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These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing Old National’s commercial real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. As a general rule, Old National avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. |
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Included with commercial real estate are construction loans, which are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from Old National until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing. |
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Residential |
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With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, Old National typically establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in residential property values. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers. |
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Consumer |
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Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in residential property values. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers. |
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Covered Loans |
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Covered loans represent loans acquired from the FDIC that are subject to loss share agreements whereby Old National is indemnified against 80% of losses up to $275.0 million, losses in excess of $275.0 million up to $467.2 million at 0% reimbursement, and 80% of losses in excess of $467.2 million. As of December 31, 2014, we do not expect losses to exceed $275.0 million. See Notes 1 and 7 to the consolidated financial statements for further details on our covered loans. |
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Related Party Loans |
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In the ordinary course of business, Old National grants loans to certain executive officers, directors, and significant subsidiaries (collectively referred to as “related parties”). |
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Activity in related party loans during 2014 is presented in the following table: |
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(dollars in thousands) | | 2014 | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, January 1 | | $ | 12,750 | | | | | | | | | | | | | | | | | | | | | | | | | |
New loans | | | 5,101 | | | | | | | | | | | | | | | | | | | | | | | | | |
Repayments | | | (4,896 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Officer and director changes | | | 7,605 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Balance, December 31 | | $ | 20,560 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Allowance for loan losses |
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The allowance for loan losses is maintained at a level believed adequate by management to absorb probable losses incurred in the consolidated loan portfolio. Management’s evaluation of the adequacy of the allowance is an estimate based on reviews of individual loans, pools of homogeneous loans, assessments of the impact of current and anticipated economic conditions on the portfolio and historical loss experience. The allowance is increased through a provision charged to operating expense. Loans deemed to be uncollectible are charged to the allowance. Recoveries of loans previously charged-off are added to the allowance. |
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No allowance was brought forward on any of the acquired loans as any credit deterioration evident in the loans was included in the determination of the fair value of the loans at the acquisition date. Purchased credit impaired (“PCI”) loans are not considered impaired until after the point at which there has been a degradation of cash flows below our expected cash flows at acquisition. Impairment on PCI loans would be recognized in the current period as provision expense. |
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Old National’s activity in the allowance for loan losses for the years ended December 31, 2014, 2013 and 2012 is as follows: |
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(dollars in thousands) | | Commercial | | | Commercial | | | Consumer | | | Residential | | | Unallocated | | | Total | | | | | |
Real Estate | | | | |
2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 16,565 | | | $ | 22,401 | | | $ | 4,940 | | | $ | 3,239 | | | $ | — | | | $ | 47,145 | | | | | |
Charge-offs | | | (3,396 | ) | | | (2,352 | ) | | | (4,675 | ) | | | (793 | ) | | | — | | | | (11,216 | ) | | | | |
Recoveries | | | 2,986 | | | | 2,576 | | | | 3,056 | | | | 205 | | | | — | | | | 8,823 | | | | | |
Provision | | | 4,515 | | | | (5,277 | ) | | | 3,548 | | | | 311 | | | | — | | | | 3,097 | | | | | |
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Ending balance | | $ | 20,670 | | | $ | 17,348 | | | $ | 6,869 | | | $ | 2,962 | | | $ | — | | | $ | 47,849 | | | | | |
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2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 14,642 | | | $ | 31,289 | | | $ | 5,155 | | | $ | 3,677 | | | $ | — | | | $ | 54,763 | | | | | |
Charge-offs | | | (3,810 | ) | | | (5,427 | ) | | | (6,279 | ) | | | (1,487 | ) | | | — | | | | (17,003 | ) | | | | |
Recoveries | | | 4,098 | | | | 2,963 | | | | 4,333 | | | | 310 | | | | — | | | | 11,704 | | | | | |
Provision | | | 1,635 | | | | (6,424 | ) | | | 1,731 | | | | 739 | | | | — | | | | (2,319 | ) | | | | |
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Ending balance | | $ | 16,565 | | | $ | 22,401 | | | $ | 4,940 | | | $ | 3,239 | | | $ | — | | | $ | 47,145 | | | | | |
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2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 19,964 | | | $ | 26,993 | | | $ | 6,954 | | | $ | 4,149 | | | $ | — | | | $ | 58,060 | | | | | |
Charge-offs | | | (7,636 | ) | | | (4,386 | ) | | | (8,094 | ) | | | (2,204 | ) | | | — | | | | (22,320 | ) | | | | |
Recoveries | | | 5,166 | | | | 5,104 | | | | 3,259 | | | | 464 | | | | — | | | | 13,993 | | | | | |
Provision | | | (2,852 | ) | | | 3,578 | | | | 3,036 | | | | 1,268 | | | | — | | | | 5,030 | | | | | |
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Ending balance | | $ | 14,642 | | | $ | 31,289 | | | $ | 5,155 | | | $ | 3,677 | | | $ | — | | | $ | 54,763 | | | | | |
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The following table provides Old National’s recorded investment in financing receivables by portfolio segment at December 31, 2014 and 2013 and other information regarding the allowance: |
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(dollars in thousands) | | Commercial | | | Commercial | | | Consumer | | | Residential | | | Unallocated | | | Total | | | | | |
Real Estate | | | | |
2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance: individually evaluated for impairment | | $ | 7,280 | | | $ | 2,945 | | | $ | — | | | $ | — | | | $ | — | | | $ | 10,225 | | | | | |
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Ending balance: collectively evaluated for impairment | | $ | 12,163 | | | $ | 13,354 | | | $ | 6,519 | | | $ | 2,945 | | | $ | — | | | $ | 34,981 | | | | | |
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Ending balance: noncovered loans acquired with deteriorated credit quality | | $ | 406 | | | $ | 1,049 | | | $ | 67 | | | $ | 17 | | | $ | — | | | $ | 1,539 | | | | | |
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Ending balance: covered loans acquired with deteriorated credit quality | | $ | 821 | | | $ | — | | | $ | 283 | | | $ | — | | | $ | — | | | $ | 1,104 | | | | | |
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Total allowance for credit losses | | $ | 20,670 | | | $ | 17,348 | | | $ | 6,869 | | | $ | 2,962 | | | $ | — | | | $ | 47,849 | | | | | |
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Loans and leases outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance: individually evaluated for impairment | | $ | 38,485 | | | $ | 45,335 | | | $ | — | | | $ | — | | | $ | — | | | $ | 83,820 | | | | | |
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Ending balance: collectively evaluated for impairment | | $ | 1,598,352 | | | $ | 1,631,794 | | | $ | 1,359,537 | | | $ | 1,519,171 | | | $ | — | | | $ | 6,108,854 | | | | | |
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Ending balance: loans acquired with deteriorated credit quality | | $ | 2,770 | | | $ | 37,394 | | | $ | 7,073 | | | $ | 133 | | | $ | — | | | $ | 47,370 | | | | | |
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Ending balance: covered loans acquired with deteriorated credit quality | | $ | 7,160 | | | $ | 37,384 | | | $ | 12,507 | | | $ | 21,106 | | | $ | — | | | $ | 78,157 | | | | | |
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Total loans and leases outstanding | | $ | 1,646,767 | | | $ | 1,751,907 | | | $ | 1,379,117 | | | $ | 1,540,410 | | | $ | — | | | $ | 6,318,201 | | | | | |
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(dollars in thousands) | | Commercial | | | Commercial | | | Consumer | | | Residential | | | Unallocated | | | Total | | | | | |
Real Estate | | | | |
2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance: individually evaluated for impairment | | $ | 6,156 | | | $ | 2,190 | | | $ | — | | | $ | — | | | $ | — | | | $ | 8,346 | | | | | |
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Ending balance: collectively evaluated for impairment | | $ | 9,980 | | | $ | 14,816 | | | $ | 4,494 | | | $ | 3,088 | | | $ | — | | | $ | 32,378 | | | | | |
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Ending balance: noncovered loans acquired with deteriorated credit quality | | $ | 429 | | | $ | 2,025 | | | $ | 80 | | | $ | 35 | | | $ | — | | | $ | 2,569 | | | | | |
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Ending balance: covered loans acquired with deteriorated credit quality | | $ | — | | | $ | 3,370 | | | $ | 366 | | | $ | 116 | | | $ | — | | | $ | 3,852 | | | | | |
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Total allowance for credit losses | | $ | 16,565 | | | $ | 22,401 | | | $ | 4,940 | | | $ | 3,239 | | | $ | — | | | $ | 47,145 | | | | | |
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Loans and leases outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance: individually evaluated for impairment | | $ | 34,213 | | | $ | 34,997 | | | $ | — | | | $ | — | | | $ | — | | | $ | 69,210 | | | | | |
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Ending balance: collectively evaluated for impairment | | $ | 1,355,608 | | | $ | 1,106,971 | | | $ | 1,019,576 | | | $ | 1,359,564 | | | $ | — | | | $ | 4,841,719 | | | | | |
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Ending balance: loans acquired with deteriorated credit quality | | $ | 648 | | | $ | 23,618 | | | $ | 12,725 | | | $ | 154 | | | $ | — | | | $ | 37,145 | | | | | |
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Ending balance: covered loans acquired with deteriorated credit quality | | $ | 12,281 | | | $ | 77,232 | | | $ | 17,673 | | | $ | 27,704 | | | $ | — | | | $ | 134,890 | | | | | |
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Total loans and leases outstanding | | $ | 1,402,750 | | | $ | 1,242,818 | | | $ | 1,049,974 | | | $ | 1,387,422 | | | $ | — | | | $ | 5,082,964 | | | | | |
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Credit Quality |
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Old National’s management monitors the credit quality of its financing receivables in an on-going manner. Internally, management assigns a credit quality grade to each non-homogeneous commercial and commercial real estate loan in the portfolio. The primary determinants of the credit quality grade are based upon the reliability of the primary source of repayment and the past, present, and projected financial condition of the borrower. The credit quality rating also reflects current economic and industry conditions. Major factors used in determining the grade can vary based on the nature of the loan, but commonly include factors such as debt service coverage, internal cash flow, liquidity, leverage, operating performance, debt burden, FICO scores, occupancy, interest rate sensitivity, and expense burden. Old National uses the following definitions for risk ratings: |
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Criticized. Special mention loans that have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. |
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Classified – Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. |
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Classified – Nonaccrual. Loans classified as nonaccrual have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection in full, on the basis of currently existing facts, conditions, and values, in doubt. |
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Classified – Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as nonaccrual, with the added characteristic that the weaknesses make collection in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. |
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Pass rated loans are those loans that are other than criticized, classified – substandard, classified – nonaccrual or classified – doubtful. |
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As of December 31, 2014 and 2013, the risk category of loans, excluding covered loans, by class of loans is as follows: |
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(dollars in thousands) | | Commercial | | | Commercial Real Estate- | | | Commercial Real Estate- | | | | | |
| Construction | Other | | | | |
Corporate Credit Exposure Credit Risk Profile by Internally | | | | | | |
Assigned Grade | | 2014 | | | 2013 | | | 2014 | | | 2013 | | | 2014 | | | 2013 | | | | | |
Grade: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,442,904 | | | $ | 1,237,983 | | | $ | 119,958 | | | $ | 74,815 | | | $ | 1,374,191 | | | $ | 943,781 | | | | | |
Criticized | | | 89,775 | | | | 90,545 | | | | 2,229 | | | | 9,383 | | | | 102,805 | | | | 35,473 | | | | | |
Classified – substandard | | | 58,461 | | | | 16,252 | | | | 5,866 | | | | 2,559 | | | | 38,659 | | | | 42,516 | | | | | |
Classified – nonaccrual | | | 38,003 | | | | 27,635 | | | | 6,499 | | | | 1,873 | | | | 59,771 | | | | 49,406 | | | | | |
Classified – doubtful | | | 457 | | | | 1,000 | | | | — | | | | — | | | | 1,132 | | | | 1,084 | | | | | |
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Total | | $ | 1,629,600 | | | $ | 1,373,415 | | | $ | 134,552 | | | $ | 88,630 | | | $ | 1,576,558 | | | $ | 1,072,260 | | | | | |
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Old National considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, Old National also evaluates credit quality based on the aging status of the loan and by payment activity. The following table presents the recorded investment in residential and consumer loans based on payment activity as of December 31, 2014 and 2013, excluding covered loans: |
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2014 | | Consumer | | | Residential | | | | | | | | | | | | | |
(dollars in thousands) | | Heloc | | | Auto | | | Other | | | | | | | | | | | | | | |
Performing | | $ | 357,205 | | | $ | 845,708 | | | $ | 101,811 | | | $ | 1,505,188 | | | | | | | | | | | | | |
Nonperforming | | | 3,115 | | | | 1,261 | | | | 1,527 | | | | 13,968 | | | | | | | | | | | | | |
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Total | | $ | 360,320 | | | $ | 846,969 | | | $ | 103,338 | | | $ | 1,519,156 | | | | | | | | | | | | | |
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2013 | | Consumer | | | Residential | | | | | | | | | | | | | |
(dollars in thousands) | | Heloc | | | Auto | | | Other | | | | | | | | | | | | | | |
Performing | | $ | 249,152 | | | $ | 618,911 | | | $ | 97,877 | | | $ | 1,349,236 | | | | | | | | | | | | | |
Nonperforming | | | 1,950 | | | | 1,562 | | | | 1,806 | | | | 10,333 | | | | | | | | | | | | | |
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Total | | $ | 251,102 | | | $ | 620,473 | | | $ | 99,683 | | | $ | 1,359,569 | | | | | | | | | | | | | |
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Impaired Loans |
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Large commercial credits are subject to individual evaluation for impairment. Retail credits and other small balance credits that are part of a homogeneous group are not tested for individual impairment unless they are modified as a troubled debt restructuring. A loan is considered impaired when it is probable that contractual interest and principal payments will not be collected either for the amounts or by the dates as scheduled in the loan agreement. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Old National’s policy, for all but purchased credit impaired loans, is to recognize interest income on impaired loans unless the loan is placed on nonaccrual status. No additional funds are committed to be advanced in connection with these impaired loans. |
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The following table shows Old National’s impaired loans, excluding covered loans, which are individually evaluated as of December 31, 2014 and 2013, respectively. Of the loans purchased without FDIC loss share coverage, only those that have experienced subsequent impairment since the date acquired are included in the table below. |
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(dollars in thousands) | | Recorded | | | Unpaid | | | Related | | | | | | | | | | | | | | | | | |
Investment | Principal | Allowance | | | | | | | | | | | | | | | | |
| Balance | | | | | | | | | | | | | | | | | |
December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 25,483 | | | $ | 25,854 | | | $ | — | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Construction | | | 2,168 | | | | 1,397 | | | | — | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Other | | | 28,637 | | | | 30,723 | | | | — | | | | | | | | | | | | | | | | | |
Consumer | | | 685 | | | | 748 | | | | — | | | | | | | | | | | | | | | | | |
Residential | | | 588 | | | | 658 | | | | — | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 7,471 | | | | 10,488 | | | | 4,883 | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Construction | | | 98 | | | | 98 | | | | 11 | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Other | | | 14,432 | | | | 16,503 | | | | 2,934 | | | | | | | | | | | | | | | | | |
Consumer | | | 1,543 | | | | 1,543 | | | | 77 | | | | | | | | | | | | | | | | | |
Residential | | | 1,476 | | | | 1,476 | | | | 74 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Loans | | $ | 82,581 | | | $ | 89,488 | | | $ | 7,979 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 17,066 | | | $ | 17,417 | | | $ | — | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Construction | | | 525 | | | | 633 | | | | — | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Other | | | 15,746 | | | | 22,550 | | | | — | | | | | | | | | | | | | | | | | |
Consumer | | | 324 | | | | 342 | | | | — | | | | | | | | | | | | | | | | | |
Residential | | | 106 | | | | 106 | | | | — | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 9,282 | | | | 12,304 | | | | 4,723 | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Construction | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Other | | | 18,726 | | | | 19,358 | | | | 2,190 | | | | | | | | | | | | | | | | | |
Consumer | | | 835 | | | | 888 | | | | 43 | | | | | | | | | | | | | | | | | |
Residential | | | 2,239 | | | | 2,295 | | | | 112 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Loans | | $ | 64,849 | | | $ | 75,893 | | | $ | 7,068 | | | | | | | | | | | | | | | | | |
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The average balance of impaired loans, excluding covered loans, and interest income recognized on impaired loans for the years ended December 31, 2014 and 2013 are included in the table below. |
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(dollars in thousands) | | Average | | | Interest | | | | | | | | | | | | | | | | | | | | | |
Recorded | Income | | | | | | | | | | | | | | | | | | | | |
Investment | Recognized (1) | | | | | | | | | | | | | | | | | | | | |
December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 21,592 | | | $ | 325 | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Construction | | | 1,347 | | | | 69 | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Other | | | 21,560 | | | | 328 | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | 505 | | | | 14 | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 347 | | | | 1 | | | | | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 7,579 | | | | 94 | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Construction | | | 49 | | | | 4 | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Other | | | 12,160 | | | | 409 | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | 1,189 | | | | 58 | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 1,857 | | | | 69 | | | | | | | | | | | | | | | | | | | | | |
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Total Loans | | $ | 68,185 | | | $ | 1,371 | | | | | | | | | | | | | | | | | | | | | |
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December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 11,815 | | | $ | 135 | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Construction | | | 852 | | | | — | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Other | | | 16,345 | | | | 140 | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | 138 | | | | 10 | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 62 | | | | 1 | | | | | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 16,351 | | | | 123 | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Construction | | | 1,614 | | | | — | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate – Other | | | 22,317 | | | | 134 | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | 526 | | | | 40 | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 1,180 | | | | 73 | | | | | | | | | | | | | | | | | | | | | |
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Total Loans | | $ | 71,200 | | | $ | 656 | | | | | | | | | | | | | | | | | | | | | |
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-1 | The Company does not record interest on nonaccrual loans until principal is recovered. | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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For all loan classes, a loan is generally placed on nonaccrual status when principal or interest becomes 90 days past due unless it is well secured and in the process of collection, or earlier when concern exists as to the ultimate collectibility of principal or interest. Interest accrued during the current year on such loans is reversed against earnings. Interest accrued in the prior year, if any, is charged to the allowance for loan losses. Cash interest received on these loans is applied to the principal balance until the principal is recovered or until the loan returns to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, remain current for six months and future payments are reasonably assured. |
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Loans accounted for under FASB ASC Topic 310-30 accrue interest, even though they may be contractually past due, as any nonpayment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period covered loan loss provision or prospective yield adjustments. Similar to noncovered loans, covered loans accounted for outside FASB ASC Topic 310-30 are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful. Information for covered loans accounted for both under and outside FASB ASC Topic 310-30 is included in the table below in the row labeled covered loans. |
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Old National’s past due financing receivables as of December 31 are as follows: |
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(dollars in thousands) | | 30-59 Days | | | 60-89 Days | | | Recorded | | | Nonaccrual | | | Total | | | Current | | | | | |
Past Due | Past Due | Investment > | Past Due | | | | |
| | 90 Days and | | | | | |
| | Accruing | | | | | |
December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 649 | | | $ | 813 | | | $ | 33 | | | $ | 38,460 | | | $ | 39,955 | | | $ | 1,589,645 | | | | | |
Commercial Real Estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | 6,499 | | | | 6,499 | | | | 128,053 | | | | | |
Other | | | 3,834 | | | | 1,468 | | | | 138 | | | | 60,903 | | | | 66,343 | | | | 1,510,215 | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Heloc | | | 577 | | | | 376 | | | | — | | | | 3,115 | | | | 4,068 | | | | 356,252 | | | | | |
Auto | | | 3,349 | | | | 695 | | | | 203 | | | | 1,261 | | | | 5,508 | | | | 841,461 | | | | | |
Other | | | 969 | | | | 129 | | | | 83 | | | | 1,527 | | | | 2,708 | | | | 100,630 | | | | | |
Residential | | | 11,606 | | | | 3,959 | | | | 1 | | | | 13,968 | | | | 29,534 | | | | 1,489,622 | | | | | |
Covered loans | | | 1,477 | | | | 584 | | | | — | | | | 15,124 | | | | 17,185 | | | | 130,523 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 22,461 | | | $ | 8,024 | | | $ | 458 | | | $ | 140,857 | | | $ | 171,800 | | | $ | 6,146,401 | | | | | |
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December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 1,532 | | | $ | 13 | | | $ | — | | | $ | 28,635 | | | $ | 30,180 | | | $ | 1,343,235 | | | | | |
Commercial Real Estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | 139 | | | | — | | | | 1,873 | | | | 2,012 | | | | 86,618 | | | | | |
Other | | | 1,017 | | | | 27 | | | | — | | | | 50,490 | | | | 51,534 | | | | 1,020,726 | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Heloc | | | 527 | | | | 119 | | | | — | | | | 1,950 | | | | 2,596 | | | | 248,506 | | | | | |
Auto | | | 3,795 | | | | 716 | | | | 89 | | | | 1,562 | | | | 6,162 | | | | 614,311 | | | | | |
Other | | | 844 | | | | 317 | | | | 100 | | | | 1,806 | | | | 3,067 | | | | 96,616 | | | | | |
Residential | | | 8,588 | | | | 2,823 | | | | 35 | | | | 10,333 | | | | 21,779 | | | | 1,337,790 | | | | | |
Covered Loans | | | 1,831 | | | | 730 | | | | 14 | | | | 31,793 | | | | 34,368 | | | | 183,464 | | | | | |
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Total | | $ | 18,134 | | | $ | 4,884 | | | $ | 238 | | | $ | 128,442 | | | $ | 151,698 | | | $ | 4,931,266 | | | | | |
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Loan Participations |
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Old National has loan participations, which qualify as participating interests, with other financial institutions. At December 31, 2014, these loans totaled $285.9 million, of which $160.1 million had been sold to other financial institutions and $125.8 million was retained by Old National. The loan participations convey proportionate ownership rights with equal priority to each participating interest holder, involve no recourse (other than ordinary representations and warranties) to, or subordination by, any participating interest holder, all cash flows are divided among the participating interest holders in proportion to each holder’s share of ownership and no holder has the right to pledge the entire financial asset unless all participating interest holders agree. |
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Troubled Debt Restructurings |
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Old National may choose to restructure the contractual terms of certain loans. The decision to restructure a loan, versus aggressively enforcing the collection of the loan, may benefit Old National by increasing the ultimate probability of collection. |
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Any loans that are modified are reviewed by Old National to identify if a troubled debt restructuring (“TDR”) has occurred, which is when for economic or legal reasons related to a borrower’s financial difficulties, the Bank grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan, an extension of the maturity date at a stated rate of interest lower than the current market rate of new debt with similar risk, or a permanent reduction of the recorded investment of the loan. |
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Loans modified in a TDR are typically placed on nonaccrual status until we determine the future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrate a period of performance according to the restructured terms for six months. |
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If we are unable to resolve a nonperforming loan issue, the credit will be charged off when it is apparent there will be a loss. For large commercial type loans, each relationship is individually analyzed for evidence of apparent loss based on quantitative benchmarks or subjectively based upon certain events or particular circumstances. It is Old National’s policy to charge off small commercial loans scored through our small business credit center with contractual balances under $250,000 that have been placed on nonaccrual status or became 90 days or more delinquent, without regard to the collateral position. For residential and consumer loans, a charge off is recorded at the time foreclosure is initiated or when the loan becomes 120 to 180 days past due, whichever is earlier. |
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For commercial TDRs, an allocated reserve is established within the allowance for loan losses for the difference between the carrying value of the loan and its computed value. To determine the value of the loan, one of the following methods is selected: (1) the present value of expected cash flows discounted at the loan’s original effective interest rate, (2) the loan’s observable market price, or (3) the fair value of the collateral value, if the loan is collateral dependent. The allocated reserve is established as the difference between the carrying value of the loan and the collectable value. If there are significant changes in the amount or timing of the loan’s expected future cash flows, impairment is recalculated and the valuation allowance is adjusted accordingly. |
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When a consumer or residential loan is identified as a troubled debt restructuring, the loan is written down to its collateral value less selling costs. |
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At December 31, 2014, our TDRs consisted of $15.2 million of commercial loans, $15.2 million of commercial real estate loans, $2.5 million of consumer loans and $2.1 million of residential loans, totaling $35.0 million. Approximately $22.1 million of the TDRs at December 31, 2014 were included with nonaccrual loans. At December 31, 2013, our TDRs consisted of $22.5 million of commercial loans, $22.6 million of commercial real estate loans, $1.4 million of consumer loans and $2.4 million of residential loans, totaling $48.9 million. Approximately $33.1 million of the TDRs at December 31, 2013 were included with nonaccrual loans. |
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As of December 31, 2014 and 2013, Old National has allocated $2.8 million and $4.1 million of specific reserves to customers whose loan terms have been modified in TDRs, respectively. As of December 31, 2014, Old National had committed to lend an additional $1.1 million to customers with outstanding loans that are classified as TDRs. |
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The pre-modification and post-modification outstanding recorded investments of loans modified as TDRs during the years ended December 31, 2014 and 2013 are the same since the loan modifications did not involve the forgiveness of principal. Old National did not record any charge-offs at the modification date. The following table presents loans by class modified as TDRs that occurred during the year ended December 31, 2014: |
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(dollars in thousands) | | Number of | | | Pre-modification | | | Post-modification | | | | | | | | | | | | | | | | | |
Loans | Outstanding Recorded | Outstanding Recorded | | | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | | | |
Troubled Debt Restructuring: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 32 | | | $ | 13,696 | | | $ | 13,696 | | | | | | | | | | | | | | | | | |
Commercial Real Estate – construction | | | 1 | | | | 484 | | | | 484 | | | | | | | | | | | | | | | | | |
Commercial Real Estate – other | | | 34 | | | | 3,070 | | | | 3,070 | | | | | | | | | | | | | | | | | |
Residential | | | 2 | | | | 175 | | | | 175 | | | | | | | | | | | | | | | | | |
Consumer – other | | | 28 | | | | 1,586 | | | | 1,586 | | | | | | | | | | | | | | | | | |
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Total | | | 97 | | | $ | 19,011 | | | $ | 19,011 | | | | | | | | | | | | | | | | | |
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The TDRs described above increased the allowance for loan losses by $0.5 million and resulted in charge-offs of $0.1 million during 2014. |
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The following table presents loans by class modified as TDRs that occurred during the year ended December 31, 2013: |
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(dollars in thousands) | | Number of | | | Pre-modification | | | Post-modification | | | | | | | | | | | | | | | | | |
Loans | Outstanding Recorded | Outstanding Recorded | | | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | | | |
Troubled Debt Restructuring: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 35 | | | $ | 15,155 | | | $ | 15,155 | | | | | | | | | | | | | | | | | |
Commercial Real Estate – construction | | | 1 | | | | 60 | | | | 60 | | | | | | | | | | | | | | | | | |
Commercial Real Estate – other | | | 36 | | | | 9,791 | | | | 9,791 | | | | | | | | | | | | | | | | | |
Residential | | | 14 | | | | 1,901 | | | | 1,901 | | | | | | | | | | | | | | | | | |
Consumer – other | | | 49 | | | | 1,484 | | | | 1,484 | | | | | | | | | | | | | | | | | |
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Total | | | 135 | | | $ | 28,391 | | | $ | 28,391 | | | | | | | | | | | | | | | | | |
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The TDRs described above increased the allowance for loan losses by $0.1 million and resulted in charge-offs of $0.2 million during 2013. |
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A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. |
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There were no loans that were modified as TDRs during 2014 for which there was a payment default within the last twelve months. |
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The following table presents loans by class modified as TDRs for which there was a payment default within the last twelve months following the modification during the year ended December 31, 2013. |
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(dollars in thousands) | | Number of | | | Recorded | | | | | | | | | | | | | | | | | | | | | |
Contracts | Investment | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructuring | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
That Subsequently Defaulted: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 3 | | | $ | 32 | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate | | | 2 | | | | 85 | | | | | | | | | | | | | | | | | | | | | |
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Total | | | 5 | | | $ | 117 | | | | | | | | | | | | | | | | | | | | | |
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The TDRs that subsequently defaulted described above had no material impact on the allowance for loan losses and resulted in charge-offs of $0.1 million during 2013. |
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The terms of certain other loans were modified during the year ended December 31, 2014 that did not meet the definition of a TDR. It is our process to review all classified and criticized loans that, during the period, have been renewed, have entered into a forbearance agreement, have gone from principal and interest to interest only, or have extended the maturity date. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on its debt in the foreseeable future without the modification. The evaluation is performed under our internal underwriting policy. We also evaluate whether a concession has been granted or if we were adequately compensated through a market interest rate, additional collateral or a bona fide guarantee. We also consider whether the modification was insignificant relative to the other terms of the agreement or if the delay in a payment was 90 days or less. |
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PCI loans are not considered impaired until after the point at which there has been a degradation of cash flows below our expected cash flows at acquisition. If a PCI loan is subsequently modified, and meets the definition of a TDR, it will be removed from PCI accounting and accounted for as a TDR only if the PCI loan was being accounted for individually. If the purchased credit impaired loan is being accounted for as part of a pool, it will not be removed from the pool. As of December 31, 2014, it has not been necessary to remove any loans from PCI accounting. |
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In general, once a modified loan is considered a TDR, the loan will always be considered a TDR, and therefore impaired, until it is paid in full, otherwise settled, sold or charged off. However, recent guidance also permits for loans to be removed from TDR status under these circumstances: (1) at the time of the subsequent restructuring, the borrower is not experiencing financial difficulties, and this is documented by a current credit evaluation at the time of the restructuring, (2) under the terms of the subsequent restructuring agreement, the institution has granted no concession to the borrower; and (3) the subsequent restructuring agreement includes market terms that are no less favorable than those that would be offered for a comparable new loan. For loans subsequently restructured that have cumulative principal forgiveness, the loan should continue to be measured in accordance with ASC 310-10, “Receivables – Overall”. However, consistent with ASC 310-40-50-2, “Troubled Debt Restructurings by Creditors, Creditor Disclosure of Troubled Debt Restructurings,” the loan would not be required to be reported in the years following the restructuring if the subsequent restructuring meets both of these criteria: (1) has an interest rate at the time of the subsequent restructuring that is not less than a market interest rate; and (2) is performing in compliance with its modified terms after the subsequent restructuring. |
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The following table presents activity in TDRs for the years ended December 31, 2014 and 2013: |
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(dollars in thousands) | | Commercial | | | Commercial | | | Consumer | | | Residential | | | Total | | | | | | | | | |
Real Estate | | | | | | | | |
2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled debt restructuring: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, January 1, 2014 | | $ | 22,443 | | | $ | 22,639 | | | $ | 1,441 | | | $ | 2,344 | | | $ | 48,867 | | | | | | | | | |
(Charge-offs)/recoveries | | | 126 | | | | 795 | | | | (102 | ) | | | 10 | | | | 829 | | | | | | | | | |
Payments | | | (18,281 | ) | | | (9,722 | ) | | | (466 | ) | | | (466 | ) | | | (28,935 | ) | | | | | | | | |
Additions | | | 13,696 | | | | 3,554 | | | | 1,586 | | | | 175 | | | | 19,011 | | | | | | | | | |
Removals – subsequent restructuring | | | (2,779 | ) | | | (2,040 | ) | | | — | | | | — | | | | (4,819 | ) | | | | | | | | |
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Balance December 31, 2014 | | $ | 15,205 | | | $ | 15,226 | | | $ | 2,459 | | | $ | 2,063 | | | $ | 34,953 | | | | | | | | | |
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2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled debt restructuring: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, January 1, 2013 | | $ | 12,660 | | | $ | 18,422 | | | $ | 473 | | | $ | 499 | | | $ | 32,054 | | | | | | | | | |
(Charge-offs)/recoveries | | | 879 | | | | 1 | | | | (61 | ) | | | 1 | | | | 820 | | | | | | | | | |
Payments | | | (6,251 | ) | | | (5,635 | ) | | | (455 | ) | | | (57 | ) | | | (12,398 | ) | | | | | | | | |
Additions | | | 15,155 | | | | 9,851 | | | | 1,484 | | | | 1,901 | | | | 28,391 | | | | | | | | | |
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Balance December 31, 2013 | | $ | 22,443 | | | $ | 22,639 | | | $ | 1,441 | | | $ | 2,344 | | | $ | 48,867 | | | | | | | | | |
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Purchased Impaired Loans (noncovered loans) |
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Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan and lease losses. In determining the estimated fair value of purchased loans, management considers a number of factors including the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, net present value of cash flows expected to be received, among others. Purchased loans are accounted for in accordance with guidance for certain loans acquired in a transfer (ASC 310-30), when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan and lease losses. Subsequent increases in expected cash flows will result in a reversal of the provision for loan losses to the extent of prior charges and then an adjustment to accretable yield, which would have a positive impact on interest income. |
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Old National has purchased loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. For these noncovered loans that meet the criteria of ASC 310-30 treatment, the carrying amount is as follows: |
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| | December 31, | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 2,770 | | | $ | 648 | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 37,394 | | | | 23,618 | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | 7,073 | | | | 12,725 | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 133 | | | | 154 | | | | | | | | | | | | | | | | | | | | | |
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Outstanding balance | | $ | 47,370 | | | $ | 37,145 | | | | | | | | | | | | | | | | | | | | | |
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Carrying amount, net of allowance | | $ | 45,831 | | | $ | 34,576 | | | | | | | | | | | | | | | | | | | | | |
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Allowance for loan losses | | $ | 1,539 | | | $ | 2,569 | | | | | | | | | | | | | | | | | | | | | |
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The outstanding balance of noncovered loans accounted for under ASC 310-30, including contractual principal, interest, fees and penalties, was $135.9 million and $115.0 million as of December 31, 2014 and 2013, respectively. |
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The accretable difference on purchased loans acquired in a business combination is the difference between the expected cash flows and the net present value of expected cash flows with such difference accreted into earnings using the effective yield method over the term of the loans. Accretion of $16.0 million has been recorded as loan interest income in 2014. Accretion of $16.8 million has been recorded as loan interest income in 2013. Improvement in cash flow expectations has resulted in a reclassification from nonaccretable difference to accretable yield. |
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Accretable yield of noncovered loans, or income expected to be collected, is as follows: |
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(dollars in thousands) | | Monroe | | | Integra | | | IBT | | | Tower | | | United | | | LSB | | | Total | |
Noncovered |
Balance at January 1, 2014 | | $ | 6,787 | | | $ | 2,425 | | | $ | 19,079 | | | $ | — | | | $ | — | | | $ | — | | | $ | 28,291 | |
New loans purchased | | | — | | | | — | | | | — | | | | 4,065 | | | | 1,605 | | | | 2,604 | | | | 8,274 | |
Accretion of income | | | (2,875 | ) | | | (823 | ) | | | (10,771 | ) | | | (984 | ) | | | (336 | ) | | | (195 | ) | | | (15,984 | ) |
Reclassifications from (to) nonaccretable difference | | | (1,185 | ) | | | (117 | ) | | | 5,046 | | | | 1,478 | | | | 247 | | | | — | | | | 5,469 | |
Disposals/other adjustments | | | 837 | | | | (96 | ) | | | — | | | | — | | | | — | | | | — | | | | 741 | |
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Balance at December 31, 2014 | | $ | 3,564 | | | $ | 1,389 | | | $ | 13,354 | | | $ | 4,559 | | | $ | 1,516 | | | $ | 2,409 | | | $ | 26,791 | |
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Included in Old National’s allowance for loan losses is $1.5 million related to the purchased loans disclosed above for 2014 and $2.6 million for 2013. An immaterial amount of allowances for loan losses were reversed during 2014 and 2013 related to these loans. |
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At acquisition, purchased loans, both covered and noncovered, for which it was probable at acquisition that all contractually required payments would not be collected were as follows: |
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(dollars in thousands) | | Monroe | | | Integra | | | IBT | | | Tower | | | United | | | LSB | | | | | |
Bancorp | Bank (1) | | | | |
Contractually required payments | | $ | 94,714 | | | $ | 921,856 | | | $ | 118,535 | | | $ | 22,746 | | | $ | 15,483 | | | $ | 24,493 | | | | | |
Nonaccretable difference | | | (45,157 | ) | | | (226,426 | ) | | | (53,165 | ) | | | (5,826 | ) | | | (5,487 | ) | | | (9,903 | ) | | | | |
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Cash flows expected to be collected at acquisition | | | 49,557 | | | | 695,430 | | | | 65,370 | | | | 16,920 | | | | 9,996 | | | | 14,590 | | | | | |
Accretable yield | | | (6,971 | ) | | | (98,487 | ) | | | (11,945 | ) | | | (4,065 | ) | | | (1,605 | ) | | | (2,604 | ) | | | | |
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Fair value of acquired loans at acquisition | | $ | 42,586 | | | $ | 596,943 | | | $ | 53,425 | | | $ | 12,855 | | | $ | 8,391 | | | $ | 11,986 | | | | | |
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-1 | Includes covered and noncovered. | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Income is not recognized on certain purchased loans if Old National cannot reasonably estimate cash flows to be collected. Old National had no purchased loans for which it could not reasonably estimate cash flows to be collected. |