ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses is established as losses are estimated to have occurred through a provision charged to earnings. Losses are charged against the allowance for credit losses when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for credit losses. Allowances for impaired commercial loans over $500 are generally determined based on collateral values or the present value of estimated cash flows. All other impaired loans and leases are evaluated in the aggregate based on loan segment loss given default. Changes in the allowance for credit losses related to impaired loans and leases are charged or credited to the provision for credit losses.

The allowance for credit losses is maintained at a level that, in management’s judgment, is believed adequate to absorb probable losses associated with specifically identified loans and leases, as well as estimated probable credit losses inherent in the remainder of the portfolio. Adequacy of the allowance for credit losses is based on management’s evaluation of potential losses in the portfolio, which includes an assessment of past experience, current economic conditions in specific industries and geographic areas, general economic conditions, known and inherent risks in the portfolio, the estimated value of underlying collateral and residuals and changes in the composition of the portfolio. Determination of the allowance for credit losses is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans and leases, estimated losses on pools of homogeneous loans and leases based on transition matrices with predefined loss emergence periods and consideration of qualitative factors, all of which are susceptible to significant change.

Credit impaired loans obtained through acquisitions are accounted for under the provisions of ASC 310-30. The Corporation also accounts for certain acquired loans considered performing at the time of acquisition by analogy to ASC 310-30. ASC 310-30 requires the initial recognition of acquired loans at the present value of amounts expected to be received. Any deterioration in the credit quality of acquired loans subsequent to acquisition would be considered in the allowance for credit losses.

Following is a summary of changes in the allowance for credit losses, by loan and lease class:


	Balance at Beginning of Period		Charge- Offs			Recoveries		Net Charge- Offs			Provision for credit losses			Balance at End of Period
Three Months Ended June 30, 2015
Commercial real estate	$	38,792	$	(977	)	$	200	$	(777	)	$	1,857		$	39,872
Commercial and industrial		32,803		(1,416	)		976		(440	)		(58	)		32,305
Commercial leases		2,576		(111	)		35		(76	)		(277	)		2,223

Total commercial loans and leases		74,171		(2,504	)		1,211		(1,293	)		1,522			74,400
Direct installment		21,204		(2,953	)		297		(2,656	)		3,731			22,279
Residential mortgages		8,471		(112	)		24		(88	)		196			8,579
Indirect installment		7,657		(1,503	)		332		(1,171	)		2,423			8,909
Consumer lines of credit		8,890		(323	)		36		(287	)		515			9,118
Other		854		(325	)		25		(300	)		357			911

Total allowance on originated loans and leases		121,247		(7,720	)		1,925		(5,795	)		8,744			124,196

Purchased credit-impaired loans		621		—			—		—			37			658
Other acquired loans		6,631		(468	)		41		(427	)		83			6,287

Total allowance on acquired loans		7,252		(468	)		41		(427	)		120			6,945

Total allowance	$	128,499	$	(8,188	)	$	1,966	$	(6,222	)	$	8,864		$	131,141

Six Months Ended June 30, 2015
Commercial real estate	$	37,588	$	(1,978	)	$	409	$	(1,569	)	$	3,853		$	39,872
Commercial and industrial		32,645		(2,100	)		1,096		(1,004	)		664			32,305
Commercial leases		2,398		(204	)		45		(159	)		(16	)		2,223

Total commercial loans and leases		72,631		(4,282	)		1,550		(2,732	)		4,501			74,400
Direct installment		20,538		(5,386	)		566		(4,820	)		6,561			22,279
Residential mortgages		8,024		(623	)		39		(584	)		1,139			8,579
Indirect installment		7,504		(2,783	)		634		(2,149	)		3,554			8,909
Consumer lines of credit		8,496		(733	)		76		(657	)		1,279			9,118
Other		759		(660	)		36		(624	)		776			911

Total allowance on originated loans and leases		117,952		(14,467	)		2,901		(11,566	)		17,810			124,196

Purchased credit-impaired loans		660		(64	)		19		(45	)		43			658
Other acquired loans		7,314		(545	)		371		(174	)		(853	)		6,287

Total allowance on acquired loans		7,974		(609	)		390		(219	)		(810	)		6,945

Total allowance	$	125,926	$	(15,076	)	$	3,291	$	(11,785	)	$	17,000		$	131,141


	Balance at Beginning of Period		Charge- Offs			Recoveries		Net Charge- Offs			Provision for credit losses			Balance at End of Period
Three Months Ended June 30, 2014
Commercial real estate	$	38,534	$	(1,572	)	$	263	$	(1,309	)	$	1,253		$	38,478
Commercial and industrial		29,971		(540	)		168		(372	)		3,418			33,017
Commercial leases		1,944		(63	)		53		(10	)		145			2,079

Total commercial loans and leases		70,449		(2,175	)		484		(1,691	)		4,816			73,574
Direct installment		16,630		(2,264	)		283		(1,981	)		2,195			16,844
Residential mortgages		5,307		(137	)		44		(93	)		292			5,506
Indirect installment		6,500		(696	)		230		(466	)		659			6,693
Consumer lines of credit		7,658		(340	)		38		(302	)		308			7,664
Other		579		(307	)		5		(302	)		630			907

Total allowance on originated loans and leases		107,123		(5,919	)		1,084		(4,835	)		8,900			111,188

Purchased credit-impaired loans		708		(1,653	)		—		(1,653	)		1,393			448
Other acquired loans		4,388		(126	)		738		612			112			5,112

Total allowance on acquired loans		5,096		(1,779	)		738		(1,041	)		1,505			5,560

Total allowance	$	112,219	$	(7,698	)	$	1,822	$	(5,876	)	$	10,405		$	116,748

Six Months Ended June 30, 2014
Commercial real estate	$	32,548	$	(3,795	)	$	562	$	(3,233	)	$	9,163		$	38,478
Commercial and industrial		32,603		(1,053	)		538		(515	)		929			33,017
Commercial leases		1,903		(150	)		82		(68	)		244			2,079

Total commercial loans and leases		67,054		(4,998	)		1,182		(3,816	)		10,336			73,574
Direct installment		17,824		(4,785	)		550		(4,235	)		3,255			16,844
Residential mortgages		5,836		(269	)		48		(221	)		(109	)		5,506
Indirect installment		6,409		(1,498	)		447		(1,051	)		1,335			6,693
Consumer lines of credit		7,231		(663	)		93		(570	)		1,003			7,664
Other		530		(569	)		10		(559	)		936			907

Total allowance on originated loans and leases		104,884		(12,782	)		2,330		(10,452	)		16,756			111,188

Purchased credit-impaired loans		1,000		(1,902	)		—		(1,902	)		1,350			448
Other acquired loans		4,900		(117	)		1,024		907			(695	)		5,112

Total allowance on acquired loans		5,900		(2,019	)		1,024		(995	)		655			5,560

Total allowance	$	110,784	$	(14,801	)	$	3,354	$	(11,447	)	$	17,411		$	116,748

Following is a summary of the individual and collective originated allowance for credit losses and corresponding loan and lease balances by class:


	Allowance				Loans and Leases Outstanding
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Loans and Leases		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
June 30, 2015
Commercial real estate	$	655	$	39,217	$	3,178,219	$	13,713	$	3,164,506
Commercial and industrial		1,570		30,735		2,343,213		5,585		2,337,628
Commercial leases		—		2,223		190,881		—		190,881

Total commercial loans and leases		2,225		72,175		5,712,313		19,298		5,693,015
Direct installment		—		22,279		1,623,290		—		1,623,290
Residential mortgages		—		8,579		953,840		—		953,840
Indirect installment		—		8,909		941,851		—		941,851
Consumer lines of credit		—		9,118		972,474		—		972,474
Other		—		911		40,809		—		40,809

	$	2,225	$	121,971	$	10,244,577	$	19,298	$	10,225,279

December 31, 2014
Commercial real estate	$	399	$	37,189	$	3,031,810	$	13,952	$	3,017,858
Commercial and industrial		780		31,865		2,197,793		5,837		2,191,956
Commercial leases		—		2,398		177,824		—		177,824

Total commercial loans and leases		1,179		71,452		5,407,427		19,789		5,387,638
Direct installment		—		20,538		1,579,770		—		1,579,770
Residential mortgages		—		8,024		817,586		—		817,586
Indirect installment		—		7,504		873,645		—		873,645
Consumer lines of credit		—		8,496		946,427		—		946,427
Other		—		759		41,290		—		41,290

	$	1,179	$	116,773	$	9,666,145	$	19,789	$	9,646,356