Note 6. Allowances for Loan Losses

The following tables provide information regarding the Company’s allowances for losses on non-covered and covered loans, based upon the method of evaluating loan impairment:


(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at September 30, 2015:
Loans individually evaluated for impairment	$	--	$	--	$	--
Loans collectively evaluated for impairment		119,509		23,977		143,486
Acquired loans with deteriorated credit quality		18,593		21,598		40,191

Total	$	138,102	$	45,575	$	183,677


(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at December 31, 2014:
Loans individually evaluated for impairment	$	26	$	--	$	26
Loans collectively evaluated for impairment		122,590		17,241		139,831
Acquired loans with deteriorated credit quality		23,538		21,943		45,481

Total	$	146,154	$	39,184	$	185,338

The following tables provide information regarding loans receivable, based upon the method of evaluating impairment:


(in thousands)	Mortgage		Other		Total
Loans Receivable at September 30, 2015:
Loans individually evaluated for impairment	$	59,187	$	4,747	$	63,934
Loans collectively evaluated for impairment		32,616,459		1,431,536		34,047,995
Acquired loans with deteriorated credit quality		2,005,488		156,543		2,162,031

Total	$	34,681,134	$	1,592,826	$	36,273,960


(in thousands)	Mortgage		Other		Total
Loans Receivable at December 31, 2014:
Loans individually evaluated for impairment	$	81,574	$	6,806	$	88,380
Loans collectively evaluated for impairment		31,781,623		1,134,358		32,915,981
Acquired loans with deteriorated credit quality		2,227,572		201,050		2,428,622

Total	$	34,090,769	$	1,342,214	$	35,432,983

Allowance for Losses on Non-Covered Loans

The following table summarizes activity in the allowance for losses on non-covered loans for the nine months ended September 30, 2015 and 2014:


	September 30,
	2015						2014
(in thousands)	Mortgage		Other		Total		Mortgage		Other		Total
Balance, beginning of period		$122,616		$17,241		$139,857		$127,840		$14,106		$141,946
Charge-offs		(935)		(388)		(1,323)		(2,610)		(5,194)		(7,804)
Recoveries		4,197		4,152		8,349		1,368		4,234		5,602
Transfer from the allowance for losses on covered loans ⁽¹⁾		2,250		166		2,416		--		--		--
(Recovery of) provision for non-covered loan losses		(6,560)		3,306		(3,254)		--		--		--

Balance, end of period		$121,568		$24,477		$146,045		$126,598		$13,146		$139,744

(1)	Represents the allowance associated with $14.2 million of loans acquired in the Desert Hills transaction that were transferred from covered loans to non-covered loans upon expiration of the related FDIC loss sharing agreement.

Please see “Critical Accounting Policies” for additional information regarding the Company’s allowance for losses on non-covered loans.

The following table presents additional information about the Company’s impaired non-covered loans at September 30, 2015:


(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Multi-family	$	30,181	$	38,041	$	--	$	35,445	$	1,086
Commercial real estate		26,194		30,053		--		29,159		1,143
One-to-four family		2,287		2,716		--		1,963		51
Acquisition, development, and construction		525		923		--		590		28
Other		4,747		9,862		--		8,969		76

Total impaired loans with no related allowance	$	63,934	$	81,595	$	--	$	76,126	$	2,384


Impaired loans with an allowance recorded:
Multi-family	$	--	$	--	$	--	$	785	$	--
Commercial real estate		--		--		--		--		--
One-to-four family		--		--		--		--		--
Acquisition, development, and construction		--		--		--		--		--
Other		--		--		--		--		--

Total impaired loans with an allowance recorded	$	--	$	--	$	--	$	785	$	--


Total impaired loans:
Multi-family	$	30,181	$	38,041	$	--	$	36,230	$	1,086
Commercial real estate		26,194		30,053		--		29,159		1,143
One-to-four family		2,287		2,716		--		1,963		51
Acquisition, development, and construction		525		923		--		590		28
Other		4,747		9,862		--		8,969		76

Total impaired loans	$	63,934	$	81,595	$	--	$	76,911	$	2,384

The following table presents additional information about the Company’s impaired non-covered loans at December 31, 2014:


(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Multi-family	$	45,383	$	52,593	$	--	$	54,051	$	1,636
Commercial real estate		30,370		32,460		--		29,935		1,629
One-to-four family		2,028		2,069		--		1,254		--
Acquisition, development, and construction		654		1,024		--		505		218
Commercial and industrial		6,806		12,155		--		7,749		307

Total impaired loans with no related allowance	$	85,241	$	100,301	$	--	$	93,494	$	3,790


Impaired loans with an allowance recorded:
Multi-family	$	3,139	$	3,139	$	26	$	628	$	72
Commercial real estate		--		--		--		490		--
One-to-four family		--		--		--		61		--
Acquisition, development, and construction		--		--		--		--		--
Commercial and industrial		--		--		--		--		--

Total impaired loans with an allowance recorded	$	3,139	$	3,139	$	26	$	1,179	$	72


Total impaired loans:
Multi-family	$	48,522	$	55,732	$	26	$	54,679	$	1,708
Commercial real estate		30,370		32,460		--		30,425		1,629
One-to-four family		2,028		2,069		--		1,315		--
Acquisition, development, and construction		654		1,024		--		505		218
Commercial and industrial		6,806		12,155		--		7,749		307

Total impaired loans	$	88,380	$	103,440	$	26	$	94,673	$	3,862

Allowance for Losses on Covered Loans

Covered loans are reported exclusive of the FDIC loss share receivable. The covered loans acquired in the AmTrust and Desert Hills acquisitions are, and will continue to be, reviewed for collectability based on the expectations of cash flows from these loans. Covered loans have been aggregated into pools of loans with common characteristics. In determining the allowance for losses on covered loans, the Company periodically performs an analysis to estimate the expected cash flows for each of the pools of loans. The Company records a provision for (recovery of) losses on covered loans to the extent that the expected cash flows from a loan pool have decreased or increased since the acquisition date.

Accordingly, if there is a decrease in expected cash flows due to an increase in estimated credit losses (as compared to the estimates made at the respective acquisition dates), the decrease in the present value of expected cash flows is recorded as a provision for covered loan losses charged to earnings, and an allowance for covered loan losses is established. A related credit to non-interest income and an increase in the FDIC loss share receivable is recognized at the same time, and measured based on the applicable loss sharing agreement percentage.

If there is an increase in expected cash flows due to a decrease in estimated credit losses (as compared to the estimates made at the respective acquisition dates), the increase in the present value of expected cash flows is recorded as a recovery of the prior-period impairment charged to earnings, and the allowance for covered loan losses is reduced. A related debit to non-interest income and a decrease in the FDIC loss share receivable is recognized at the same time, and measured based on the applicable loss sharing agreement percentage.

The following table summarizes activity in the allowance for losses on covered loans for the nine months ended September 30, 2015 and 2014:


	September 30,
(in thousands)	2015			2014
Balance, beginning of period	$	45,481		$	64,069
(Recovery of) losses on covered loans		(5,433	)		(18,387	)
Transfer to the allowance for losses on non-covered loans ⁽¹⁾		(2,416	)		--

Balance, end of period	$	37,632		$	45,682

(1)	Represents the allowance associated with $14.2 million of loans acquired in the Desert Hills transaction that were transferred from covered loans to non-covered loans upon expiration of the related FDIC loss sharing agreement.