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, at the dates indicated:

(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at September 30, 2014:
Loans individually evaluated for impairment	$	--	$	--	$	--
Loans collectively evaluated for impairment		126,598		13,146		139,744
Acquired loans with deteriorated credit quality		23,972		21,710		45,682
Total	$	150,570	$	34,856	$	185,426

(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at December 31, 2013:
Loans individually evaluated for impairment	$	--	$	--	$	--
Loans collectively evaluated for impairment		127,840		14,106		141,946
Acquired loans with deteriorated credit quality		56,705		7,364		64,069
Total	$	184,545	$	21,470	$	206,015

The following tables provide additional information regarding the methods used to evaluate the Company’s loan portfolio for impairment:

(in thousands)	Mortgage		Other		Total
Loans Receivable at September 30, 2014:
Loans individually evaluated for impairment	$	66,923	$	6,713	$	73,636
Loans collectively evaluated for impairment		31,171,683		987,262		32,158,945
Acquired loans with deteriorated credit quality		2,282,064		222,558		2,504,622
Total	$	33,520,670	$	1,216,533	$	34,737,203

(in thousands)	Mortgage		Other		Total
Loans Receivable at December 31, 2013:
Loans individually evaluated for impairment	$	109,389	$	6,996	$	116,385
Loans collectively evaluated for impairment		28,859,599		845,731		29,705,330
Acquired loans with deteriorated credit quality		2,529,200		259,418		2,788,618
Total	$	31,498,188	$	1,112,145	$	32,610,333

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, 2014 and 2013:

	For the Nine Months Ended September 30,
	2014									2013
(in thousands)	Mortgage			Other			Total			Mortgage			Other			Total
Balance, beginning of period	$	127,840		$	14,106		$	141,946		$	127,934		$	13,014		$	140,948
Charge-offs		(2,610	)		(5,194	)		(7,804	)		(12,716	)		(7,039	)		(19,755	)
Recoveries		1,368			4,234			5,602			3,580			1,541			5,121
Provision for loan losses		--			--			--			6,851			8,149			15,000
Balance, end of period	$	126,598		$	13,146		$	139,744		$	125,649		$	15,665		$	141,314

Please see “Critical Accounting Policies” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” 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, 2014:

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(in thousands)	Investment		Balance		Allowance		Investment		Recognized
Impaired loans with no related allowance:
Multi-family	$	36,148	$	43,459	$	--	$	56,218	$	916
Commercial real estate		28,558		30,907		--		29,827		1,136
One-to-four family		1,282		1,281		--		1,061		--
Acquisition, development, and construction		935		1,245		--		467		158
Commercial and industrial		6,713		12,045		--		7,984		235
Total impaired loans with no related allowance	$	73,636	$	88,937	$	--	$	95,557	$	2,445

Impaired loans with an allowance recorded:
Multi-family	$	--	$	--	$	--	$	--	$	--
Commercial real estate		--		--		--		613		--
One-to-four family		--		--		--		77		--
Acquisition, development, and construction		--		--		--		--		--
Commercial and industrial		--		--		--		--		--
Total impaired loans with an allowance recorded	$	--	$	--	$	--	$	690	$	--

Total impaired loans:
Multi-family	$	36,148	$	43,459	$	--	$	56,218	$	916
Commercial real estate		28,558		30,907		--		30,440		1,136
One-to-four family		1,282		1,281		--		1,138		--
Acquisition, development, and construction		935		1,245		--		467		158
Commercial and industrial		6,713		12,045		--		7,984		235
Total impaired loans	$	73,636	$	88,937	$	--	$	96,247	$	2,445

The following table presents additional information about the Company’s impaired non-covered loans at December 31, 2013:

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(in thousands)	Investment		Balance		Allowance		Investment		Recognized
Impaired loans with no related allowance:
Multi-family	$	78,771	$	94,265	$	--	$	117,208	$	1,991
Commercial real estate		30,619		32,474		--		43,566		1,604
One-to-four family		--		--		--		3,611		89
Acquisition, development, and construction		--		--		--		275		--
Commercial and industrial		6,995		34,199		--		6,890		366
Total impaired loans with no related allowance	$	116,385	$	160,938	$	--	$	171,550	$	4,050

Impaired loans with an allowance recorded:
Multi-family	$	--	$	--	$	--	$	2,442	$	--
Commercial real estate		--		--		--		900		--
One-to-four family		--		--		--		--		--
Acquisition, development, and construction		--		--		--		--		--
Commercial and industrial		--		--		--		--		--
Total impaired loans with an allowance recorded	$	--	$	--	$	--	$	3,342	$	--

Total impaired loans:
Multi-family	$	78,771	$	94,265	$	--	$	119,650	$	1,991
Commercial real estate		30,619		32,474		--		44,466		1,604
One-to-four family		--		--		--		3,611		89
Acquisition, development, and construction		--		--		--		275		--
Commercial and industrial		6,995		34,199		--		6,890		366
Total impaired loans	$	116,385	$	160,938	$	--	$	174,892	$	4,050

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 loan pools. 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. Additionally, 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 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, 2014 and 2013:

	For the Nine Months
	Ended September 30,
(in thousands)	2014			2013
Balance, beginning of period	$	64,069		$	51,311
(Recovery of) provision for losses on covered loans		(18,387	)		18,586
Balance, end of period	$	45,682		$	69,897