3. Loans and Allowance for Loan Losses

Loans, net of unearned income, consisted of the following:


	September 30,		December 31,
	2014		2013
	(In thousands)
Originated loans:
Commercial non-real estate	$	4,806,740	$	4,113,837
Construction and land development		974,442		752,381
Commercial real estate		2,245,855		2,022,528
Residential mortgages		1,635,462		1,196,256
Consumer		1,623,069		1,409,130

Total originated loans	$	11,285,568	$	9,494,132

Acquired loans:
Commercial non-real estate	$	769,226	$	926,997
Construction and land development		110,294		142,931
Commercial real estate		813,429		967,148
Residential mortgages		37,739		315,340
Consumer		51,488		119,603

Total acquired loans	$	1,782,176	$	2,472,019

Covered loans:
Commercial non-real estate	$	11,171	$	23,390
Construction and land development		11,166		20,229
Commercial real estate		41,550		53,165
Residential mortgages		185,289		209,018
Consumer		31,654		52,864

Total covered loans	$	280,830	$	358,666

Total loans:
Commercial non-real estate	$	5,587,137	$	5,064,224
Construction and land development		1,095,902		915,541
Commercial real estate		3,100,834		3,042,841
Residential mortgages		1,858,490		1,720,614
Consumer		1,706,211		1,581,597

Total loans	$	13,348,574	$	12,324,817

The following briefly describes the distinction between originated, acquired and covered loans and certain significant accounting policies relevant to each category.

Originated loans

Loans originated for investment are reported at the principal balance outstanding net of unearned income. Interest on loans and accretion of unearned income, including deferred loan fees, are computed in a manner that approximates a level yield on recorded principal. Interest on loans is recognized as income as earned.

The accrual of interest on an originated loan is discontinued when, in management’s opinion, it is probable that the borrower will be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. When accrual of interest is discontinued on a loan, all unpaid accrued interest is reversed and payments subsequently received are applied first to reduce principal, and interest income is recognized only for payments received after contractual principal has been satisfied. Loans are returned to accrual status when all the principal and interest contractually due are brought current and future payment performance is reasonably assured.

Acquired loans

Acquired loans are those purchased in the Whitney Holding Corporation acquisition on June 4, 2011. These loans were recorded at their estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The acquired loans were segregated between those considered to be performing (“acquired-performing”) and those with evidence of credit deterioration (“acquired-impaired”), based on such factors as past due status, nonaccrual status and credit risk ratings (rated substandard or worse). The acquired loans were further segregated into loan pools designed to facilitate the development of expected cash flows to be used in estimating their fair value.

Acquired-performing loans were segregated into pools based on common risk characteristics such as loan type, credit risk ratings, and contractual interest rate and repayment terms. The major loan types included commercial and industrial loans not secured by real estate, real estate construction and land development loans, commercial real estate loans, residential mortgage loans, and consumer loans, with further segregation within certain loan types as appropriate. Aggregate cash flows, both principal and interest, expected to be generated by each loan pool were estimated based on key assumptions covering such factors as prepayments, default rates, and severity of loss given a default. These assumptions were developed using both Whitney Holding Corporation’s historical experience and the portfolio characteristics at acquisition as well as available market research.

The difference at the acquisition date between the fair value and the contractual amounts due of an acquired-performing loan pool (the “fair value discount”) is accreted into income over the estimated life of the pool. Acquired-performing loans are placed on nonaccrual status and reported as nonperforming or past due using the same criteria applied to the originated portfolio.

Acquired-impaired loans were segregated into pools by identifying loans with common credit risk profiles based primarily on characteristics such as loan type and market area in which originated. Loan types included most of the major types used for the acquired-performing portfolio. The acquired-impaired loans that had been originated in Louisiana and Texas were further disaggregated from loans originated in Mississippi, Alabama and Florida, in recognition of the differences in general economic conditions affecting borrowers in these market areas. The fair value estimate for each pool of acquired performing and acquired-impaired loans was based on the estimate of expected cash flows from the pool discounted at prevailing market rates.

The excess of estimated cash flows expected to be collected from an acquired-impaired loan pool over the pool’s carrying value is referred to as the accretable yield and is recognized in interest income using an effective yield method over the estimated remaining life of the loan pool. Each pool of acquired-impaired loans is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Acquired-impaired loans in pools with an accretable yield and expected cash flows that are reasonably estimable are considered to be accruing and performing even though collection of contractual payments on loans within the pool may be in doubt, because the pool is the unit of accounting. Management recasts the estimate of cash flows expected to be collected on each acquired-impaired loan pool at each reporting date. If the present value of expected cash flows for a pool is less than its carrying value, impairment is recognized by an increase in the allowance for loan losses and a charge to the provision for loan losses. If the present value of expected cash flows for a pool is greater than its carrying value, any previously established allowance for loan losses is reversed and any remaining difference increases the accretable yield which will be taken into interest income over the remaining life of the loan pool. Acquired-impaired loans are generally not subject to individual evaluation for impairment and are not reported with impaired loans or troubled debt restructurings even if they would otherwise qualify for such treatment.

Covered loans and the related loss share receivable

The loans purchased in the 2009 acquisition of Peoples First Community Bank (Peoples First) are covered by two loss share agreements between the FDIC and the Company which afford the Company significant loss protection. These covered loans are accounted for as acquired-impaired loans as described above in the section on acquired loans. The Company treated all loans for the Peoples First acquisition as acquired-impaired loans based on the significant amount of deteriorating and nonperforming loans comprised mainly of adjustable rate mortgages and home equity loans located in Florida. The loss share receivable is measured separately from the related covered loans as it is not contractually embedded in the loans and is not transferrable if the loans are sold. The fair value of the loss share receivable at acquisition was estimated by discounting expected reimbursements for losses from the loans covered by the loss share agreements, including appropriate consideration of possible true-up payments to the FDIC at the expiration of the agreements.

The loss share receivable is reviewed at each reporting period and updated prospectively as loss estimates related to covered loan pools change. Increases in expected reimbursements under the loss sharing agreements will lead to an increase in the loss share receivable. A decrease in expected reimbursements is reflected first as a reversal of any previously recorded increase in the loss share receivable on the covered loan pool with the remainder reflected as a reduction in the loss share receivable’s accretion rate. Increases and decreases in the loss share receivable related to changes in loss estimates result in reductions in or additions to the provision for loan losses, which serves to offset the impact on the provision from impairments or impairment reversals recognized on the underlying covered loan pool. The excess (or shortfall) of expected claims as compared to the carrying value of the loss share receivable is accreted (amortized) into noninterest income over the shorter of the remaining life of the covered loan pool or the life of the loss share agreement. The impact on operations of a reduction in the loss share receivable’s accretion rate is associated with an increase in the accretable yield on the underlying loan pool. The indemnification asset is reduced as cash is received from the FDIC related to losses incurred on covered assets.

The following schedule shows activity in the loss share receivable for the nine months ended September 30, 2014 and 2013 (in thousands):


	Nine Months Ended
	September 30,			September 30,
	2014			2013
Balance, January 1	$	113,834		$	177,844
Amortization		(9,989	)		(590	)
Charge-offs, write-downs and other losses (recoveries)		(793	)		(190	)
External expenses qualifying under loss share agreement		3,325			7,918
Changes due to changes in cash flow projections		(14,569	)		—
Settlement of disallowed loss claims		(10,268	)		—
Net payments to (from) FDIC		366			(60,886	)

Ending balance	$	81,906		$	124,096

The loss share agreements contain specific terms and conditions regarding the management of the covered assets that the Company must follow in order to receive reimbursement for losses from the FDIC. During the second quarter of 2014, the Company reached a settlement agreement to reimburse the FDIC $10.3 million for certain claims previously received under the agreements. The disagreement arose from a targeted review of the Company’s compliance with the terms of the agreements and related to the matter in which certain assets were administered and losses were calculated. The FDIC had suspended processing the Company’s claims as of September 2013 pending settlement of these issues and outstanding claims. During the third quarter, the settlement was paid and the FDIC began payment of claims. The total due from the FDIC for the period December 2013 through August 2014 is $21.1 million.

The following schedule shows activity in the allowance for loan losses by portfolio segment for the nine months ended September 30, 2014 and 2013 as well as the corresponding recorded investment in loans at the end of each period.


	Commercial non-real estate			Construction and land development			Commercial real estate			Residential mortgages			Consumer			Total
(In thousands)	Nine Months Ended September 30, 2014
Originated loans
Allowance for loan losses:
Beginning balance	$	33,091		$	6,180		$	20,649		$	6,892		$	12,073		$	78,885
Charge-offs		(4,690	)		(2,615	)		(2,255	)		(1,793	)		(11,920	)		(23,273	)
Recoveries		2,118			1,220			1,231			501			3,722			8,792
Net provision for loan losses		3,929			2,151			(3,231	)		3,647			10,921			17,417

Ending balance	$	34,448		$	6,936		$	16,394		$	9,247		$	14,796		$	81,821

Ending balance:
Individually evaluated for impairment	$	24		$	250		$	98		$	382		$	—		$	754
Collectively evaluated for impairment		34,424			6,686			16,296			8,865			14,796			81,067
Loans:
Ending balance:	$	4,806,740		$	974,442		$	2,245,855		$	1,635,462		$	1,623,069		$	11,285,568
Individually evaluated for impairment		5,582			6,617			14,486			2,712			—			29,397
Collectively evaluated for impairment		4,801,158			967,825			2,231,369			1,632,750			1,623,069			11,256,171

Acquired loans
Allowance for loan losses:
Beginning balance	$	1,603		$	10		$	34		$	—		$	—		$	1,647
Charge-offs		—			—			—			—			—			—
Recoveries		—			—			—			—			—			—
Net provision for loan losses		5,800			1,436			57			(4	)		182			7,471

Ending balance	$	7,403		$	1,446		$	91		$	(4	)	$	182		$	9,118

Ending balance:
Individually evaluated for impairment	$	92		$	426		$	46		$	—		$	—		$	564
Amounts related to acquired-impaired loans		—			—			—			—			—			—
Collectively evaluated for impairment		7,311			1,020			45			(4	)		182			8,554
Loans:
Ending balance:	$	769,226		$	110,294		$	813,429		$	37,739		$	51,488		$	1,782,176
Individually evaluated for impairment		931			2,284			458			28			—			3,701
Acquired-impaired loans		4,064			19,200			27,392			5,038			143			55,837
Collectively evaluated for impairment		764,231			88,810			785,579			32,673			51,345			1,722,638


	Commercial non-real estate			Construction and land development			Commercial real estate			Residential mortgages			Consumer			Total
(In thousands)	Nine Months Ended September 30, 2014
Covered loans
Allowance for loan losses:
Beginning balance	$	2,323		$	2,655		$	10,929		$	27,989		$	9,198		$	53,094
Charge-offs		(176	)		(350	)		(4,480	)		(677	)		(1,192	)		(6,875	)
Recoveries		467			1,504			1,408			1			370			3,750
Net provision for loan losses		(79	)		(138	)		(125	)		(257	)		(167	)		(766	)
Decrease in FDIC loss share receivable		(1,507	)		(2,404	)		(2,418	)		(4,873	)		(3,368	)		(14,570	)

Ending balance	$	1,028		$	1,267		$	5,314		$	22,183		$	4,841		$	34,633

Ending balance:
Individually evaluated for impairment	$	—		$	—		$	—		$	—		$	—		$	—
Amounts related to acquired-impaired loans		1,028			1,267			5,314			22,183			4,841			34,633
Collectively evaluated for impairment		—			—			—			—			—			—
Loans:
Ending balance:	$	11,171		$	11,166		$	41,550		$	185,289		$	31,654		$	280,830
Individually evaluated for impairment		—			—			—			—			—			—
Acquired-impaired loans		11,171			11,166			41,550			185,289			31,654			280,830
Collectively evaluated for impairment		—			—			—			—			—			—

Total loans
Allowance for loan losses:
Beginning balance	$	37,017		$	8,845		$	31,612		$	34,881		$	21,271		$	133,626
Charge-offs		(4,866	)		(2,965	)		(6,735	)		(2,470	)		(13,112	)		(30,148	)
Recoveries		2,585			2,724			2,639			502			4,092			12,542
Net provision for loan losses		9,650			3,449			(3,299	)		3,386			10,936			24,122
Decrease in FDIC loss share receivable		(1,507	)		(2,404	)		(2,418	)		(4,873	)		(3,368	)		(14,570	)

Ending balance	$	42,879		$	9,649		$	21,799		$	31,426		$	19,819		$	125,572

Ending balance:
Individually evaluated for impairment	$	116		$	676		$	144		$	382		$	—		$	1,318
Amounts related to acquired-impaired loans		1,028			1,267			5,314			22,183			4,841			34,633
Collectively evaluated for impairment		41,735			7,706			16,341			8,861			14,978			89,621
Loans:
Ending balance:	$	5,587,137		$	1,095,902		$	3,100,834		$	1,858,490		$	1,706,211		$	13,348,574
Individually evaluated for impairment		6,513			8,901			14,944			2,740			—			33,098
Acquired-impaired loans		15,235			30,366			68,942			190,327			31,797			336,667
Collectively evaluated for impairment		5,565,389			1,056,635			3,016,948			1,665,423			1,674,414			12,978,809


	Commercial non-real estate			Construction and land development			Commercial real estate			Residential mortgages			Consumer			Total
(In thousands)	Nine Months Ended September 30, 2013
Originated loans
Allowance for loan losses:
Beginning balance	$	20,775		$	11,415		$	26,959		$	6,406		$	13,219		$	78,774
Charge-offs		(5,199	)		(7,548	)		(3,718	)		(1,549	)		(13,372	)		(31,386	)
Recoveries		3,381			1,243			2,340			991			4,336			12,291
Net provision for loan losses		11,152			2,072			(3,698	)		64			8,152			17,742

Ending balance	$	30,109		$	7,182		$	21,883		$	5,912		$	12,335		$	77,421

Ending balance:
Individually evaluated for impairment	$	325		$	211		$	946		$	—		$	—		$	1,482
Collectively evaluated for impairment		29,784			6,971			20,937			5,912			12,335			75,939
Loans:
Ending balance:	$	3,633,490		$	738,983		$	1,816,402		$	1,124,649		$	1,387,243		$	8,700,767
Individually evaluated for impairment		8,911			16,044			21,170			—			—			46,125
Collectively evaluated for impairment		3,624,579			722,939			1,795,232			1,124,649			1,387,243			8,654,642

Acquired loans
Allowance for loan losses:
Beginning balance	$	788		$	—		$	—		$	—		$	—		$	788
Charge-offs		—			—			—			—			—			—
Recoveries		—			—			—			—			—			—
Net provision for loan losses		(788	)		—			463			—			—			(325	)

Ending balance	$	—		$	—		$	463		$	—		$	—		$	463

Ending balance:
Individually evaluated for impairment	$	—		$	—		$	463		$	—		$	—		$	463
Amounts related to acquired-impaired loans		—			—			—			—			—			—
Collectively evaluated for impairment		—			—			—			—			—			—
Loans:
Ending balance:	$	967,485		$	158,228		$	1,038,287		$	347,054		$	130,649		$	2,641,703
Individually evaluated for impairment		2,179			730			2,371			502			—			5,782
Acquired-impaired loans		18,967			15,080			25,432			5,387			105			64,971
Collectively evaluated for impairment		946,339			142,418			1,010,484			341,165			130,544			2,570,950


	Commercial non-real estate			Construction and land development			Commercial real estate			Residential mortgages			Consumer			Total
(In thousands)	Nine Months Ended September 30, 2013
Covered loans
Allowance for loan losses:
Beginning balance	$	2,162		$	5,623		$	9,433		$	30,471		$	8,920		$	56,609
Charge-offs		(681	)		(1,784	)		(4,316	)		(947	)		(1,145	)		(8,873	)
Recoveries		90			554			2,395			13			67			3,119
Net provision for loan losses		(328	)		(1,600	)		1,197			4,723			3,995			7,987
Increase (Decrease) in FDIC loss share receivable		447			(314	)		(732	)		1,261			835			1,497

Ending balance	$	1,690		$	2,479		$	7,977		$	35,521		$	12,672		$	60,339

Ending balance:
Individually evaluated for impairment	$	—		$	—		$	—		$	—		$	—		$	—
Amounts related to acquired-impaired loans		1,690			2,479			7,977			35,521			12,672			60,339
Collectively evaluated for impairment		—			—			—			—			—			—
Loans:
Ending balance:	$	24,340		$	23,197		$	60,280		$	223,494		$	60,691		$	392,002
Individually evaluated for impairment		—			—			—			—			—			—
Acquired-impaired loans		24,340			23,197			60,280			223,494			60,691			392,002
Collectively evaluated for impairment		—			—			—			—			—			—

Total loans
Allowance for loan losses:
Beginning balance	$	23,725		$	17,038		$	36,392		$	36,877		$	22,139		$	136,171
Charge-offs		(5,880	)		(9,332	)		(8,034	)		(2,496	)		(14,517	)		(40,259	)
Recoveries		3,471			1,797			4,735			1,004			4,403			15,410
Net provision for loan losses		10,036			472			(2,038	)		4,787			12,147			25,404
Increase (Decrease) in FDIC loss share receivable		447			(314	)		(732	)		1,261			835			1,497

Ending balance	$	31,799		$	9,661		$	30,323		$	41,433		$	25,007		$	138,223

Ending balance:
Individually evaluated for impairment	$	325		$	211		$	1,409		$	—		$	—		$	1,945
Amounts related to acquired-impaired loans		1,690			2,479			7,977			35,521			12,672			60,339
Collectively evaluated for impairment		29,784			6,971			20,937			5,912			12,335			75,939
Loans:
Ending balance:	$	4,625,315		$	920,408		$	2,914,969		$	1,695,197		$	1,578,583		$	11,734,472
Individually evaluated for impairment		11,090			16,774			23,541			502			—			51,907
Acquired-impaired loans		43,307			38,277			85,712			228,881			60,796			456,973
Collectively evaluated for impairment		4,570,918			865,357			2,805,716			1,465,814			1,517,787			11,225,592

The following tables show the composition of nonaccrual loans by portfolio segment and class. Acquired-impaired and certain covered loans are considered to be performing due to the application of the accretion method and are excluded from the table. Covered loans accounted for using the cost recovery method do not have an accretable yield and are included below as nonaccrual loans. Acquired-performing loans that have subsequently been placed on nonaccrual status are also included below.


	September 30,		December 31,
Nonaccrual Loans	2014		2013
	(In thousands)
Originated loans:
Commercial non-real estate	$	9,279	$	10,119
Construction and land development		6,083		13,171
Commercial real estate		26,432		32,772
Residential mortgages		21,326		13,449
Consumer		5,242		4,802

Total originated loans	$	68,362	$	74,313

Acquired loans:
Commercial non-real estate	$	1,857	$	3,209
Construction and land development		3,275		1,990
Commercial real estate		4,210		6,525
Residential mortgages		1,353		8,262
Consumer		877		1,814

Total acquired loans	$	11,572	$	21,800

Covered loans:
Commercial non-real estate	$	—	$	2
Construction and land development		1,539		1,539
Commercial real estate		1,107		1,163
Residential mortgages		394		544
Consumer		180		296

Total covered loans	$	3,220	$	3,544

Total loans:
Commercial non-real estate	$	11,136	$	13,330
Construction and land development		10,897		16,700
Commercial real estate		31,749		40,460
Residential mortgages		23,073		22,255
Consumer		6,299		6,912

Total loans	$	83,154	$	99,657

The estimated amount of interest that would have been recorded on nonaccrual loans had the loans not been classified as nonaccrual in the nine months ended September 30, 2014 was approximately $1 million. Interest actually received and recorded as income on nonaccrual loans during the nine months ended September 30, 2014 was approximately $1 million.

Nonaccrual loans include loans modified in troubled debt restructurings (TDRs) of $10 million. Total TDRs were $18 million as of September 30, 2014 and $25 million at December 31, 2013. Modified acquired-impaired loans are not removed from their accounting pool and accounted for as TDRs, even if those loans would otherwise be deemed TDRs.

The tables below detail TDRs that were modified during the nine months ended September 30, 2014 and September 30, 2013 by portfolio segment and TDRs that subsequently defaulted within twelve months of modification (dollar amounts in thousands). All TDRs are rated substandard and individually evaluated for impairment.


	Nine Months Ended
	September 30, 2014						September 30, 2013
Troubled Debt Restructurings:	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Originated loans:
Commercial non-real estate		—	$	—	$	—		1	$	925	$	920
Construction and land development		—		—		—		—		—		—
Commercial real estate		2		2,430		2,385		5		1,844		1,789
Residential mortgages		4		1,495		848		2		971		854
Consumer		—		—		—		—		—		—

Total originated loans		6	$	3,925	$	3,233		8	$	3,740	$	3,563

Acquired loans:
Commercial non-real estate		—	$	—	$	—		—	$	—	$	—
Construction and land development		—		—		—		—		—		—
Commercial real estate		—		—		—		1		512		501
Residential mortgages		—		—		—		1		515		493
Consumer		—		—		—		—		—		—

Total acquired loans		—	$	—	$	—		2	$	1,027	$	994

Covered loans:
Commercial non-real estate		—	$	—	$	—		—	$	—	$	—
Construction and land development		—		—		—		—		—		—
Commercial real estate		—		—		—		—		—		—
Residential mortgages		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

Total covered loans		—	$	—	$	—		—	$	—	$	—

Total loans:
Commercial non-real estate		—	$	—	$	—		1	$	925	$	920
Construction and land development		—		—		—		—		—		—
Commercial real estate		2		2,430		2,385		6		2,356		2,290
Residential mortgages		4		1,495		848		3		1,486		1,347
Consumer		—		—		—		—		—		—

Total loans		6	$	3,925	$	3,233		10	$	4,767	$	4,557


	Nine Months Ended
	September 30, 2014				September 30, 2013
Troubled Debt Restructurings That Subsequently Defaulted:	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Originated loans:
Commercial non-real estate		1	$	909		—	$	—
Construction and land development		—		—		—		—
Commercial real estate		—		—		—		—
Residential mortgages		—		—		—		—
Consumer		—		—		—		—

Total originated loans		1	$	909		—	$	—

Acquired loans:
Commercial non-real estate		—	$	—		—	$	—
Construction and land development		—		—		—		—
Commercial real estate		—		—		—		—
Residential mortgages		—		—		—		—
Consumer		—		—		—		—

Total acquired loans		—	$	—		—	$	—

Covered loans:
Commercial non-real estate		—	$	—		—	$	—
Construction and land development		—		—		—		—
Commercial real estate		—		—		—		—
Residential mortgages		—		—		—		—
Consumer		—		—		—		—

Total covered loans		—	$	—		—	$	—

Total loans:
Commercial non-real estate		1	$	909		—	$	—
Construction and land development		—		—		—		—
Commercial real estate		—		—		—		—
Residential mortgages		—		—		—		—
Consumer		—		—		—		—

Total loans		1	$	909		—	$	—

Those loans that are determined to be impaired and have balances of $1 million or more are individually evaluated for impairment. The tables below present loans that are individually evaluated for impairment disaggregated by class at September 30, 2014 and December 31, 2013:


September 30, 2014	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Originated loans:
With no related allowance recorded:
Commercial non-real estate	$	1,498	$	2,111	$	—	$	1,157	$	31
Construction and land development		3,320		5,459		—		3,218		112
Commercial real estate		10,502		13,011		—		8,428		246
Residential mortgages		263		647		—		88		1
Consumer		—		—		—		—		—

		15,583		21,228		—		12,891		390
With an allowance recorded:
Commercial non-real estate	$	4,084	$	4,173	$	24	$	5,922		77
Construction and land development		3,297		3,815		250		6,578		100
Commercial real estate		3,984		4,304		98		7,417		75
Residential mortgages		2,449		2,758		382		2,189		28
Consumer		—		—		—		—		—

		13,814		15,050		754		22,106		280
Total:
Commercial non-real estate		5,582		6,284		24		7,079		108
Construction and land development		6,617		9,274		250		9,796		212
Commercial real estate		14,486		17,315		98		15,845		321
Residential mortgages		2,712		3,405		382		2,277		29
Consumer		—		—		—		—		—

Total originated loans	$	29,397	$	36,278	$	754	$	34,997	$	670

Acquired loans:
With no related allowance recorded:
Commercial non-real estate	$	—	$	1,730	$	—	$	357	$	—
Construction and land development		—		—		—		121		—
Commercial real estate		—		—		—		311		—
Residential mortgages		28		68		—		88		—
Consumer		—		—		—		—		—

		28		1,798		—		877		—
With an allowance recorded:
Commercial non-real estate		931		1,070		92	$	1,304		118
Construction and land development		2,284		4,835		426		1,130		45
Commercial real estate		458		493		46		1,305		61
Residential mortgages		—		—		—		—		—
Consumer		—		—		—		—		—

		3,673		6,398		564		3,739		224
Total:
Commercial non-real estate		931		2,800		92		1,661		118
Construction and land development		2,284		4,835		426		1,251		45
Commercial real estate		458		493		46		1,616		61
Residential mortgages		28		68		—		88		—
Consumer		—		—		—		—		—

Total acquired loans	$	3,701	$	8,196	$	564	$	4,616	$	224


September 30, 2014	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Covered loans:
With no related allowance recorded:
Commercial non-real estate	$	—	$	—	$	—	$	—	$	—
Construction and land development		—		—		—		—		—
Commercial real estate		—		—		—		—		—
Residential mortgages		—		—		—		—		—
Consumer		—		—		—		—		—

		—		—		—		—		—
With an allowance recorded:
Commercial non-real estate		—		—		—		—		—
Construction and land development		—		—		—		—		—
Commercial real estate		—		—		—		—		—
Residential mortgages		—		—		—		—		—
Consumer		—		—		—		—		—

		—		—		—		—		—
Total:
Commercial non-real estate		—		—		—		—		—
Construction and land development		—		—		—		—		—
Commercial real estate		—		—		—		—		—
Residential mortgages		—		—		—		—		—
Consumer		—		—		—		—		—

Total covered loans	$	—	$	—	$	—	$	—	$	—

Total loans:
With no related allowance recorded:
Commercial non-real estate	$	1,498	$	3,841	$	—	$	1,514	$	31
Construction and land development		3,320		5,459		—		3,339		112
Commercial real estate		10,502		13,011		—		8,739		246
Residential mortgages		291		715		—		176		1
Consumer		—		—		—		—		—

		15,611		23,026		—		13,768		390
With an allowance recorded:
Commercial non-real estate		5,015		5,243		116		7,226		195
Construction and land development		5,581		8,650		676		7,708		145
Commercial real estate		4,442		4,797		144		8,722		136
Residential mortgages		2,449		2,758		382		2,189		28
Consumer		—		—		—		—		—

		17,487		21,448		1,318		25,845		504
Total:
Commercial non-real estate		6,513		9,084		116		8,740		226
Construction and land development		8,901		14,109		676		11,047		257
Commercial real estate		14,944		17,808		144		17,461		382
Residential mortgages		2,740		3,473		382		2,365		29
Consumer		—		—		—		—		—

Total loans	$	33,098	$	44,474	$	1,318	$	39,613	$	894


December 31, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Originated loans:
With no related allowance recorded:
Commercial non-real estate	$	329	$	442	$	—	$	235	$	18
Construction and land development		4,101		5,131		—		2,780		82
Commercial real estate		5,321		7,458		—		15,886		374
Residential mortgages		—		—		—		262		—
Consumer		—		—		—		1,013		—

		9,751		13,031		—		20,176		474
With an allowance recorded:
Commercial non-real estate		4,965		5,303		477		8,936		180
Construction and land development		6,498		8,343		22		2,549		—
Commercial real estate		8,708		9,090		268		19,683		460
Residential mortgages		605		620		1		228		—
Consumer		—		—		—		1,025		—

		20,776		23,356		768		32,421		640
Total:
Commercial non-real estate		5,294		5,745		477		9,171		198
Construction and land development		10,599		13,474		22		5,329		82
Commercial real estate		14,029		16,548		268		35,569		834
Residential mortgages		605		620		1		490		—
Consumer		—		—		—		2,038		—

Total originated loans	$	30,527	$	36,387	$	768	$	52,597	$	1,114

Acquired loans:
With no related allowance recorded:
Commercial non-real estate	$	2,141	$	3,275	$	—	$	865	$	8
Construction and land development		728		1,142		—		296		3
Commercial real estate		1,865		2,634		—		1,339		49
Residential mortgages		473		507		—		407		—
Consumer		—		—		—		—		—

		5,207		7,558		—		2,907		60
With an allowance recorded:
Commercial non-real estate		—		—		—		2,747		63
Construction and land development		—		—		—		157		—
Commercial real estate		—		—		—		2,663		—
Residential mortgages		—		—		—		845		—
Consumer		—		—		—		—		—

		—		—		—		6,412		63
Total:
Commercial non-real estate		2,141		3,275		—		3,612		71
Construction and land development		728		1,142		—		453		3
Commercial real estate		1,865		2,634		—		4,002		49
Residential mortgages		473		507		—		1,252		—
Consumer		—		—		—		—		—

Total acquired loans	$	5,207	$	7,558	$	—	$	9,319	$	123


			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
December 31, 2013	Investment		Balance		Allowance		Investment		Recognized
Covered loans:
With no related allowance recorded:
Commercial non-real estate	$	—	$	—	$	—	$	—	$	—
Construction and land development		—		—		—		—		—
Commercial real estate		—		—		—		—		—
Residential mortgages		—		—		—		—		—
Consumer		—		—		—		—		—

		—		—		—		—		—
With an allowance recorded:
Commercial non-real estate		—		—		—		—		—
Construction and land development		—		—		—		—		—
Commercial real estate		—		—		—		—		—
Residential mortgages		—		—		—		—		—
Consumer		—		—		—		—		—

		—		—		—		—		—
Total:
Commercial non-real estate		—		—		—		—		—
Construction and land development		—		—		—		—		—
Commercial real estate		—		—		—		—		—
Residential mortgages		—		—		—		—		—
Consumer		—		—		—		—		—

Total covered loans	$	—	$	—	$	—	$	—	$	—

Total loans:
With no related allowance recorded:
Commercial non-real estate	$	2,470	$	3,717	$	—	$	1,100	$	26
Construction and land development		4,829		6,273		—		3,076		85
Commercial real estate		7,186		10,092		—		17,225		423
Residential mortgages		473		507		—		669		—
Consumer		—		—		—		1,013		—

		14,958		20,589		—		23,083		534
With an allowance recorded:
Commercial non-real estate		4,965		5,303		477		11,683		243
Construction and land development		6,498		8,343		22		2,706		—
Commercial real estate		8,708		9,090		268		22,346		460
Residential mortgages		605		620		1		1,073		—
Consumer		—		—		—		1,025		—

		20,776		23,356		768		38,833		703
Total:
Commercial non-real estate		7,435		9,020		477		12,783		269
Construction and land development		11,327		14,616		22		5,782		85
Commercial real estate		15,894		19,182		268		39,571		883
Residential mortgages		1,078		1,127		1		1,742		—
Consumer		—		—		—		2,038		—

Total loans	$	35,734	$	43,945	$	768	$	61,916	$	1,237

Covered loans and acquired-impaired loans with an accretable yield are considered to be current in the following delinquency table. Certain covered loans accounted for using the cost recovery method are disclosed according to their contractual payment status below. The following tables present the age analysis of past due loans at September 30, 2014 and December 31, 2013:


													Recorded
					Greater than								investment
	30-59 days		60-89 days		90 days		Total				Total		> 90 days
September 30, 2014	past due		past due		past due		past due		Current		Loans		and still accruing
							(In thousands)
Originated loans:
Commercial non-real estate	$	4,137	$	4,039	$	3,111	$	11,287	$	4,795,453	$	4,806,740	$	259
Construction and land development		1,159		651		6,185		7,995		966,447		974,442		1,443
Commercial real estate		3,524		2,170		12,271		17,965		2,227,890		2,245,855		257
Residential mortgages		606		5,071		10,503		16,180		1,619,282		1,635,462		220
Consumer		4,539		2,556		4,290		11,385		1,611,684		1,623,069		2,970

Total	$	13,965	$	14,487	$	36,360	$	64,812	$	11,220,756	$	11,285,568	$	5,149

Acquired loans:
Commercial non-real estate	$	151	$	95	$	1,734	$	1,980	$	767,246	$	769,226	$	—
Construction and land development		231		1,649		1,400		3,280		107,014		110,294		17
Commercial real estate		522		641		3,534		4,697		808,732		813,429		1,471
Residential mortgages		27		—		228		255		37,484		37,739		—
Consumer		358		241		593		1,192		50,296		51,488		30

Total	$	1,289	$	2,626	$	7,489	$	11,404	$	1,770,772	$	1,782,176	$	1,518

Covered loans:
Commercial non-real estate	$	—	$	—	$	—	$	—	$	11,171	$	11,171	$	—
Construction and land development		—		—		—		—		11,166		11,166		—
Commercial real estate		—		—		—		—		41,550		41,550		—
Residential mortgages		—		149		—		149		185,140		185,289		—
Consumer		1		—		35		36		31,618		31,654		—

Total	$	1	$	149	$	35	$	185	$	280,645	$	280,830	$	—

Total loans:
Commercial non-real estate	$	4,288	$	4,134	$	4,845	$	13,267	$	5,573,870	$	5,587,137	$	259
Construction and land development		1,390		2,300		7,585		11,275		1,084,627		1,095,902		1,460
Commercial real estate		4,046		2,811		15,805		22,662		3,078,172		3,100,834		1,728
Residential mortgages		633		5,220		10,731		16,584		1,841,906		1,858,490		220
Consumer		4,898		2,797		4,918		12,613		1,693,598		1,706,211		3,000

Total	$	15,255	$	17,262	$	43,884	$	76,401	$	13,272,173	$	13,348,574	$	6,667


													Recorded
					Greater than								investment
	30-59 days		60-89 days		90 days		Total				Total		> 90 days
December 31, 2013	past due		past due		past due		past due		Current		Loans		and still accruing
							(In thousands)
Originated loans:
Commercial non-real estate	$	11,645	$	1,203	$	4,803	$	17,651	$	4,096,186	$	4,113,837	$	521
Construction and land development		5,877		1,264		5,970		13,111		739,270		752,381		—
Commercial real estate		8,178		5,744		14,620		28,542		1,993,986		2,022,528		420
Residential mortgages		12,410		3,870		3,540		19,820		1,176,436		1,196,256		—
Consumer		8,798		1,913		3,823		14,534		1,394,596		1,409,130		2,344

Total	$	46,908	$	13,994	$	32,756	$	93,658	$	9,400,474	$	9,494,132	$	3,285

Acquired loans:
Commercial non-real estate	$	1,982	$	2,332	$	1,467	$	5,781	$	921,216	$	926,997	$	541
Construction and land development		862		1,529		1,161		3,552		139,379		142,931		541
Commercial real estate		3,742		1,345		9,026		14,113		953,035		967,148		5,853
Residential mortgages		5,632		2,698		5,503		13,833		301,507		315,340		72
Consumer		1,029		120		1,013		2,162		117,441		119,603		82

Total	$	13,247	$	8,024	$	18,170	$	39,441	$	2,432,578	$	2,472,019	$	7,089

Covered loans:
Commercial non-real estate	$	—	$	—	$	—	$	—	$	23,390	$	23,390	$	—
Construction and land development		—		—		1,539		1,539		18,690		20,229		—
Commercial real estate		—		—		675		675		52,490		53,165		—
Residential mortgages		—		—		3		3		209,015		209,018		—
Consumer		—		—		—		—		52,864		52,864		—

Total	$	—	$	—	$	2,217	$	2,217	$	356,449	$	358,666	$	—

Total loans:
Commercial non-real estate	$	13,627	$	3,535	$	6,270	$	23,432	$	5,040,792	$	5,064,224	$	1,062
Construction and land development		6,739		2,793		8,670		18,202		897,339		915,541		541
Commercial real estate		11,920		7,089		24,321		43,330		2,999,511		3,042,841		6,273
Residential mortgages		18,042		6,568		9,046		33,656		1,686,958		1,720,614		72
Consumer		9,827		2,033		4,836		16,696		1,564,901		1,581,597		2,426

Total	$	60,155	$	22,018	$	53,143	$	135,316	$	12,189,501	$	12,324,817	$	10,374

The following tables present the credit quality indicators of the Company’s various classes of loans at September 30, 2014 and December 31, 2013.

Commercial Non-Real Estate Credit Exposure

Credit Risk Profile Based on Payment Activity


	September 30, 2014								December 31, 2013
	Originated		Acquired		Covered		Total		Originated		Acquired		Covered		Total
			(In thousands)								(In thousands)
Grade:
Pass	$	4,656,899	$	698,111	$	1,856	$	5,356,866	$	3,990,320	$	846,134	$	10,477	$	4,846,931
Pass-Watch		58,894		32,372		—		91,266		46,734		44,105		9		90,848
Special Mention		26,869		26,635		521		54,025		41,812		19,915		2,897		64,624
Substandard		63,959		12,108		8,794		84,861		34,276		16,125		9,662		60,063
Doubtful		119		—		—		119		695		718		345		1,758
Loss		—		—		—		—		—		—		—		—

Total	$	4,806,740	$	769,226	$	11,171	$	5,587,137	$	4,113,837	$	926,997	$	23,390	$	5,064,224


Construction Credit Exposure Credit Risk Profile Based on Payment Activity

	September 30, 2014								December 31, 2013
	Originated		Acquired		Covered		Total		Originated		Acquired		Covered		Total
			(In thousands)								(In thousands)
Grade:
Pass	$	923,800	$	82,067	$	2,323	$	1,008,190	$	709,261	$	112,773	$	1	$	822,035
Pass-Watch		17,576		2,911		1,000		21,487		7,817		1,907		1,226		10,950
Special Mention		5,832		5,737		29		11,598		3,926		9,409		276		13,611
Substandard		27,234		19,579		7,814		54,627		31,377		18,842		11,498		61,717
Doubtful		—		—		—		—		—		—		7,228		7,228
Loss		—		—		—		—		—		—		—		—

Total	$	974,442	$	110,294	$	11,166	$	1,095,902	$	752,381	$	142,931	$	20,229	$	915,541


Commercial Real Estate Credit Exposure Credit Risk Profile by Internally Assigned Grade

	September 30, 2014								December 31, 2013
	Originated		Acquired		Covered		Total		Originated		Acquired		Covered		Total
			(In thousands)								(In thousands)
Grade:
Pass	$	2,048,886	$	758,092	$	6,805	$	2,813,783	$	1,864,115	$	896,578	$	1,678	$	2,762,371
Pass-Watch		83,729		8,725		5,811		98,265		49,578		9,530		10,266		69,374
Special Mention		25,842		9,029		863		35,734		15,785		19,798		1,999		37,582
Substandard		87,369		37,583		28,039		152,991		93,034		41,242		31,350		165,626
Doubtful		29		—		32		61		16		—		7,872		7,888
Loss		—		—		—		—		—		—		—		—

Total	$	2,245,855	$	813,429	$	41,550	$	3,100,834	$	2,022,528	$	967,148	$	53,165	$	3,042,841

Residential Mortgage Credit Exposure

Credit Risk Profile Based on Payment Activity


	September 30, 2014								December 31, 2013
	Originated		Acquired		Covered		Total		Originated		Acquired		Covered		Total
			(In thousands)								(In thousands)
Performing	$	1,624,959	$	37,511	$	185,289	$	1,847,759	$	1,182,266	$	307,078	$	209,015	$	1,698,359
Nonperforming		10,503		228		—		10,731		13,990		8,262		3		22,255

Total	$	1,635,462	$	37,739	$	185,289	$	1,858,490	$	1,196,256	$	315,340	$	209,018	$	1,720,614


Consumer Credit Exposure Credit Risk Profile Based on Payment Activity

	September 30, 2014								December 31, 2013
	Originated		Acquired		Covered		Total		Originated		Acquired		Covered		Total
			(In thousands)								(In thousands)
Performing	$	1,618,779	$	50,895	$	31,619	$	1,701,293	$	1,404,032	$	117,789	$	52,864	$	1,574,685
Nonperforming		4,290		593		35		4,918		5,098		1,814		—		6,912

Total	$	1,623,069	$	51,488	$	31,654	$	1,706,211	$	1,409,130	$	119,603	$	52,864	$	1,581,597

Loan review uses a risk-focused continuous monitoring program that provides for an independent, objective and timely review of credit risk within the company’s loan portfolio. Below are the definitions of the Company’s internally assigned grades:

Commercial:

•

Pass - Loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.

•

Pass - Watch - Credits in this category are of sufficient risk to cause concern. This category is reserved for credits that display negative performance trends. The “Watch” grade should be regarded as a transition category.

•

Special Mention - These credits exhibit some signs of “Watch,” but to a greater magnitude. These credits constitute an undue and unwarranted credit risk, but not to a point of justifying a classification of “Substandard.” They have weaknesses that, if not checked or corrected, weaken the asset or inadequately protect the bank.

•

Substandard - These credits constitute an unacceptable risk to the bank. They have recognized credit weaknesses that jeopardize the repayment of the debt. Repayment sources are marginal or unclear.

•

Doubtful - A doubtful credit has all of the weaknesses inherent in one classified “Substandard” with the added characteristic that weaknesses make collection in full highly questionable or improbable.

•

Loss - Credits classified as Loss are considered uncollectable and are charged off promptly once so classified.

Residential and Consumer:

•

Performing - Loans on which payments of principal and interest are less than 90 days past due.

•

Nonperforming - A nonperforming loan is a loan that is in default or close to being in default and there are good reasons to doubt that payments will be made in full. All loans rated as nonaccrual loans are also classified as nonperforming.

Changes in the carrying amount of acquired-impaired loans and accretable yield are presented in the following table for the nine months ended September 30, 2014 and the year ended December 31, 2013:


	September 30, 2014												December 31, 2013
	Covered						Noncovered						Covered						Noncovered
	Carrying						Carrying						Carrying						Carrying
	Amount			Accretable			Amount			Accretable			Amount			Accretable			Amount			Accretable
	of Loans			Yield			of Loans			Yield			of Loans			Yield			of Loans			Yield
(In thousands)
Balance at beginning of period	$	358,666		$	122,715		$	68,075		$	131,370		$	515,823		$	115,594		$	141,201		$	203,186
Additions		—			—			—			—			—			—			—			—
Payments received, net		(92,890	)		(953	)		(47,979	)		(28,487	)		(189,987	)		(1,298	)		(116,187	)		(47,330	)
Accretion		15,054			(15,054	)		35,741			(35,741	)		32,830			(32,830	)		43,061			(43,061	)
Increase (Decrease) in expected cash flows based on actual cash flows and changes in cash flow assumptions		—			1,783			—			(380	)		—			(17,433	)		—			3,894
Net transfers from nonaccretable difference to accretable yield		—			11,917			—			19,076			—			58,682			—			14,681

Balance at end of period	$	280,830		$	120,408		$	55,837		$	85,838		$	358,666		$	122,715		$	68,075		$	131,370