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Allowance for Loan Losses Allowance for Losses on Lending-Related Commitments and Impaired Loans
12 Months Ended
Dec. 31, 2013
Loans and Leases Receivable, Allowance [Abstract]  
Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments nd Impaired Loans
Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans
The tables below show the aging of the Company’s loan portfolio at December 31, 2013 and 2012:
 
As of December 31, 2013
(Dollars in thousands)
 
Nonaccrual
 
90+ days
and still
accruing
 
60-89
days past
due
 
30-59
days past
due
 
Current
 
Total Loans
Loan Balances:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
10,143

 
$

 
$
4,938

 
$
7,404

 
$
1,813,721

 
$
1,836,206

Franchise
 

 

 
400

 

 
219,983

 
220,383

Mortgage warehouse lines of credit
 

 

 

 

 
67,470

 
67,470

Community Advantage — homeowners association
 

 

 

 

 
90,894

 
90,894

Aircraft
 

 

 

 

 
10,241

 
10,241

Asset-based lending
 
637

 

 
388

 
1,878

 
732,190

 
735,093

Tax exempt
 

 

 

 

 
161,239

 
161,239

Leases
 

 

 

 
788

 
109,043

 
109,831

Other
 

 

 

 

 
11,147

 
11,147

Purchased non-covered
commercial (1)
 

 
274

 
156

 
1,685

 
9,068

 
11,183

Total commercial
 
10,780

 
274

 
5,882

 
11,755

 
3,224,996

 
3,253,687

Commercial real-estate:
 
 
 
 
 
 
 
 
 
 
 
 
Residential construction
 
149

 

 

 

 
38,351

 
38,500

Commercial construction
 
6,969

 

 

 
505

 
129,232

 
136,706

Land
 
2,814

 

 
4,224

 
619

 
99,128

 
106,785

Office
 
10,087

 

 
2,265

 
3,862

 
626,027

 
642,241

Industrial
 
5,654

 

 
585

 
914

 
626,785

 
633,938

Retail
 
10,862

 

 
837

 
2,435

 
642,125

 
656,259

Multi-family
 
2,035

 

 

 
348

 
564,154

 
566,537

Mixed use and other
 
8,088

 
230

 
3,943

 
15,949

 
1,344,244

 
1,372,454

Purchased non-covered commercial real-estate (1)
 

 
18,582

 
3,540

 
5,238

 
49,255

 
76,615

Total commercial real-estate
 
46,658

 
18,812

 
15,394

 
29,870

 
4,119,301

 
4,230,035

Home equity
 
10,071

 

 
1,344

 
3,060

 
704,662

 
719,137

Residential real estate
 
14,974

 

 
1,689

 
5,032

 
410,430

 
432,125

Purchased non-covered residential real estate (1)
 

 
1,988

 

 

 
879

 
2,867

Premium finance receivables
 
 
 
 
 
 
 
 
 
 
 
 
Commercial insurance loans
 
10,537

 
8,842

 
6,912

 
24,094

 
2,117,180

 
2,167,565

Life insurance loans
 

 

 
2,524

 
1,808

 
1,495,460

 
1,499,792

Purchased life insurance loans (1)
 

 

 

 

 
423,906

 
423,906

Indirect consumer
 
55

 
105

 
29

 
353

 
50,138

 
50,680

Consumer and other
 
1,082

 

 
47

 
657

 
113,818

 
115,604

Purchased non-covered consumer and other (1)
 

 
181

 

 

 
1,023

 
1,204

Total loans, net of unearned income, excluding covered loans
 
$
94,157

 
$
30,202

 
$
33,821

 
$
76,629

 
$
12,661,793

 
$
12,896,602

Covered loans
 
9,425

 
56,282

 
5,877

 
7,937

 
266,910

 
346,431

Total loans, net of unearned income
 
$
103,582

 
$
86,484

 
$
39,698

 
$
84,566

 
$
12,928,703

 
$
13,243,033

(1)
Purchased loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments. See Note 4 - Loans for further discussion of these purchased loans.
As of December 31, 2012
(Dollars in thousands)
 
Nonaccrual
 
90+ days
and still
accruing
 
60-89
days past
due
 
30-59
days past
due
 
Current
 
Total Loans
Loan Balances:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
19,409

 
$

 
$
5,520

 
$
15,410

 
$
1,587,864

 
$
1,628,203

Franchise
 
1,792

 

 

 

 
194,603

 
196,395

Mortgage warehouse lines of credit
 

 

 

 

 
215,076

 
215,076

Community Advantage — homeowners association
 

 

 

 

 
81,496

 
81,496

Aircraft
 

 

 
148

 

 
17,216

 
17,364

Asset-based lending
 
536

 

 
1,126

 
6,622

 
564,154

 
572,438

Tax exempt
 

 

 

 

 
91,824

 
91,824

Leases
 

 

 

 
896

 
89,547

 
90,443

Other
 

 

 

 

 
16,549

 
16,549

Purchased non-covered
commercial (1)
 

 
496

 
432

 
7

 
4,075

 
5,010

Total commercial
 
21,737

 
496

 
7,226

 
22,935

 
2,862,404

 
2,914,798

Commercial real-estate
 
 
 
 
 
 
 
 
 
 
 
 
Residential construction
 
3,110

 

 
4

 
41

 
37,246

 
40,401

Commercial construction
 
2,159

 

 
885

 
386

 
167,525

 
170,955

Land
 
11,299

 

 
632

 
9,014

 
113,252

 
134,197

Office
 
4,196

 

 
1,889

 
3,280

 
560,346

 
569,711

Industrial
 
2,089

 

 
6,042

 
4,512

 
565,294

 
577,937

Retail
 
7,792

 

 
1,372

 
998

 
558,734

 
568,896

Multi-family
 
2,586

 

 
3,949

 
1,040

 
389,116

 
396,691

Mixed use and other
 
16,742

 

 
6,660

 
13,349

 
1,312,503

 
1,349,254

Purchased non-covered commercial real-estate (1)
 

 
749

 
2,663

 
2,508

 
50,156

 
56,076

Total commercial real-estate
 
49,973

 
749

 
24,096

 
35,128

 
3,754,172

 
3,864,118

Home equity
 
13,423

 
100

 
1,592

 
5,043

 
768,316

 
788,474

Residential real estate
 
11,728

 

 
2,763

 
8,250

 
343,616

 
366,357

Purchased non-covered residential real estate (1)
 

 

 
200

 

 
656

 
856

Premium finance receivables
 
 
 
 
 
 
 
 
 
 
 
 
Commercial insurance loans
 
9,302

 
10,008

 
6,729

 
19,597

 
1,942,220

 
1,987,856

Life insurance loans
 
25

 

 

 
5,531

 
1,205,151

 
1,210,707

Purchased life insurance loans (1)
 

 

 

 

 
514,459

 
514,459

Indirect consumer
 
55

 
189

 
51

 
442

 
76,596

 
77,333

Consumer and other
 
1,511

 
32

 
167

 
433

 
99,010

 
101,153

Purchased non-covered consumer and other (1)
 

 
66

 
32

 
101

 
2,633

 
2,832

Total loans, net of unearned income, excluding covered loans
 
$
107,754

 
$
11,640

 
$
42,856

 
$
97,460

 
$
11,569,233

 
$
11,828,943

Covered loans
 
1,988

 
122,350

 
16,108

 
7,999

 
411,642

 
560,087

Total loans, net of unearned income
 
$
109,742

 
$
133,990

 
$
58,964

 
$
105,459

 
$
11,980,875

 
$
12,389,030

 
(1)
Purchased loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments. See Note 4 - Loans for further discussion of these purchased loans.

Our ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans. To do so, we operate a credit risk rating system under which our credit management personnel assign a credit risk rating (1 to 10 rating) to each loan at the time of origination and review loans on a regular basis.
Each loan officer is responsible for monitoring his or her loan portfolio, recommending a credit risk rating for each loan in his or her portfolio and ensuring the credit risk ratings are appropriate. These credit risk ratings are then ratified by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors including: a borrower’s financial strength, cash flow coverage, collateral protection and guarantees.
The Company’s Problem Loan Reporting system automatically includes all loans with credit risk ratings of 6 through 9. This system is designed to provide an on-going detailed tracking mechanism for each problem loan. Once management determines that a loan has deteriorated to a point where it has a credit risk rating of 6 or worse, the Company’s Managed Asset Division performs an overall credit and collateral review. As part of this review, all underlying collateral is identified and the valuation methodology is analyzed and tracked. As a result of this initial review by the Company’s Managed Asset Division, the credit risk rating is reviewed and a portion of the outstanding loan balance may be deemed uncollectible or an impairment reserve may be established. The Company’s impairment analysis utilizes an independent re-appraisal of the collateral (unless such a third-party evaluation is not possible due to the unique nature of the collateral, such as a closely-held business or thinly traded securities). In the case of commercial real estate collateral, an independent third party appraisal is ordered by the Company’s Real Estate Services Group to determine if there has been any change in the underlying collateral value. These independent appraisals are reviewed by the Real Estate Services Group and sometimes by independent third party valuation experts and may be adjusted depending upon market conditions.
Through the credit risk rating process, loans are reviewed to determine if they are performing in accordance with the original contractual terms. If the borrower has failed to comply with the original contractual terms, further action may be required by the Company, including a downgrade in the credit risk rating, movement to non-accrual status, a charge-off or the establishment of a specific impairment reserve. If we determine that a loan amount or portion thereof is uncollectible the loan’s credit risk rating is immediately downgraded to an 8 or 9 and the uncollectible amount is charged-off. Any loan that has a partial charge-off continues to be assigned a credit risk rating of an 8 or 9 for the duration of time that a balance remains outstanding. The Company undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses.
If, based on current information and events, it is probable that the Company will be unable to collect all amounts due to it according to the contractual terms of the loan agreement, a specific impairment reserve is established. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.
Non-performing loans include all non-accrual loans (8 and 9 risk ratings) as well as loans 90 days past due and still accruing interest, excluding loans acquired with evidence of credit quality deterioration since origination. The remainder of the portfolio is considered performing under the contractual terms of the loan agreement. The following table presents the recorded investment based on performance of loans by class, excluding covered loans, per the most recent analysis at December 31, 2013 and 2012:
 
 
 
Performing
 
Non-performing
 
Total
 
 
December 31,
 
December 31,
 
December 31,
 
December 31,
 
December 31,
 
December 31,
(Dollars in thousands)
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Loan Balances:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
1,826,063

 
$
1,608,794

 
$
10,143

 
$
19,409

 
$
1,836,206

 
$
1,628,203

Franchise
 
220,383

 
194,603

 

 
1,792

 
220,383

 
196,395

Mortgage warehouse lines of credit
 
67,470

 
215,076

 

 

 
67,470

 
215,076

Community Advantage—homeowners association
 
90,894

 
81,496

 

 

 
90,894

 
81,496

Aircraft
 
10,241

 
17,364

 

 

 
10,241

 
17,364

Asset-based lending
 
734,456

 
571,902

 
637

 
536

 
735,093

 
572,438

Tax exempt
 
161,239

 
91,824

 

 

 
161,239

 
91,824

Leases
 
109,831

 
90,443

 

 

 
109,831

 
90,443

Other
 
11,147

 
16,549

 

 

 
11,147

 
16,549

Purchased non-covered commercial (1)
 
11,183

 
5,010

 

 

 
11,183

 
5,010

Total commercial
 
3,242,907

 
2,893,061

 
10,780

 
21,737

 
3,253,687

 
2,914,798

Commercial real-estate
 
 
 
 
 
 
 
 
 
 
 
 
Residential construction
 
38,351

 
37,291

 
149

 
3,110

 
38,500

 
40,401

Commercial construction
 
129,737

 
168,796

 
6,969

 
2,159

 
136,706

 
170,955

Land
 
103,971

 
122,898

 
2,814

 
11,299

 
106,785

 
134,197

Office
 
632,154

 
565,515

 
10,087

 
4,196

 
642,241

 
569,711

Industrial
 
628,284

 
575,848

 
5,654

 
2,089

 
633,938

 
577,937

Retail
 
645,397

 
561,104

 
10,862

 
7,792

 
656,259

 
568,896

Multi-family
 
564,502

 
394,105

 
2,035

 
2,586

 
566,537

 
396,691

Mixed use and other
 
1,364,136

 
1,332,512

 
8,318

 
16,742

 
1,372,454

 
1,349,254

Purchased non-covered commercial real-estate (1)
 
76,615

 
56,076

 

 

 
76,615

 
56,076

Total commercial real-estate
 
4,183,147

 
3,814,145

 
46,888

 
49,973

 
4,230,035

 
3,864,118

Home equity
 
709,066

 
774,951

 
10,071

 
13,523

 
719,137

 
788,474

Residential real estate
 
417,151

 
354,629

 
14,974

 
11,728

 
432,125

 
366,357

Purchased non-covered residential real estate (1)
 
2,867

 
856

 

 

 
2,867

 
856

Premium finance receivables
 
 
 
 
 
 
 
 
 
 
 
 
Commercial insurance loans
 
2,148,186

 
1,968,546

 
19,379

 
19,310

 
2,167,565

 
1,987,856

Life insurance loans
 
1,499,792

 
1,210,682

 

 
25

 
1,499,792

 
1,210,707

Purchased life insurance loans (1)
 
423,906

 
514,459

 

 

 
423,906

 
514,459

Indirect consumer
 
50,520

 
77,089

 
160

 
244

 
50,680

 
77,333

Consumer and other
 
114,522

 
99,610

 
1,082

 
1,543

 
115,604

 
101,153

Purchased non-covered consumer and other (1)
 
1,204

 
2,832

 

 

 
1,204

 
2,832

Total loans, net of unearned income, excluding covered loans
 
$
12,793,268

 
$
11,710,860

 
$
103,334

 
$
118,083

 
$
12,896,602

 
$
11,828,943

(1)
Purchased loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. See Note 4 - Loans for further discussion of these purchased loans.

A summary of the activity in the allowance for credit losses by loan portfolio (excluding covered loans) for the years ended December 31, 2013 and 2012 is as follows:
 
Year Ended 
December 31, 2013
(Dollars in thousands)
 
Commercial
 
Commercial
Real-estate
 
Home
Equity
 
Residential
Real-estate
 
Premium
Finance
Receivable
 
Indirect
Consumer
 
Consumer
and Other
 
Total,
Excluding
Covered 
Loans
Allowance for credit losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses at beginning of period
 
$
28,794

 
$
52,135

 
$
12,734

 
$
5,560

 
$
6,096

 
$
267

 
$
1,765

 
$
107,351

Other adjustments
 
(51
)
 
(783
)
 
3

 
(88
)
 
(19
)
 

 

 
(938
)
Reclassification to/from allowance for unfunded lending-related commitments
 

 
640

 

 

 

 

 

 
640

Charge-offs
 
(14,123
)
 
(32,745
)
 
(6,361
)
 
(2,958
)
 
(5,080
)
 
(130
)
 
(980
)
 
(62,377
)
Recoveries
 
1,655

 
2,526

 
432

 
289

 
1,121

 
53

 
186

 
6,262

Provision for credit losses
 
6,817

 
26,885

 
5,803

 
2,305

 
3,465

 
(8
)
 
717

 
45,984

Allowance for loan losses at period end
 
$
23,092

 
$
48,658

 
$
12,611

 
$
5,108

 
$
5,583

 
$
182

 
$
1,688

 
$
96,922

Allowance for unfunded lending-related commitments at period end
 
$

 
$
719

 
$

 
$

 
$

 
$

 
$

 
$
719

Allowance for credit losses at period end
 
$
23,092

 
$
49,377

 
$
12,611

 
$
5,108

 
$
5,583

 
$
182

 
$
1,688

 
$
97,641

Individually evaluated for impairment
 
1,392

 
4,653

 
1,593

 
655

 

 

 
109

 
8,402

Collectively evaluated for impairment
 
21,637

 
44,724

 
11,018

 
4,390

 
5,583

 
182

 
1,578

 
89,112

Loans acquired with deteriorated credit quality
 
63

 

 

 
63

 

 

 
1

 
127

Loans at period end
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
17,628

 
$
117,149

 
$
10,297

 
$
17,901

 
$

 
$
55

 
$
1,534

 
$
164,564

Collectively evaluated for impairment
 
3,224,876

 
4,036,271

 
708,840

 
414,224

 
3,667,357

 
50,625

 
114,070

 
12,216,263

Loans acquired with deteriorated credit quality
 
11,183

 
76,615

 

 
2,867

 
423,906

 

 
1,204

 
515,775

 
Year Ended 
December 31, 2012
(Dollars in thousands)
 
Commercial
 
Commercial
Real-estate
 
Home
Equity
 
Residential
Real-estate
 
Premium
Finance
Receivable
 
Indirect
Consumer
 
Consumer
and Other
 
Total,
Excluding
Covered 
Loans
Allowance for credit losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses at beginning of period
 
$
31,237

 
$
56,405

 
$
7,712

 
$
5,028

 
$
7,214

 
$
645

 
$
2,140

 
$
110,381

Other adjustments
 
(151
)
 
(1,054
)
 
(4
)
 
(124
)
 

 

 

 
(1,333
)
Reclassification to/from allowance for unfunded lending-related commitments
 
45

 
648

 

 

 

 

 

 
693

Charge-offs
 
(22,405
)
 
(43,539
)
 
(9,361
)
 
(4,060
)
 
(3,780
)
 
(221
)
 
(1,024
)
 
(84,390
)
Recoveries
 
1,220

 
6,635

 
428

 
22

 
940

 
103

 
240

 
9,588

Provision for credit losses
 
18,848

 
33,040

 
13,959

 
4,694

 
1,722

 
(260
)
 
409

 
72,412

Allowance for loan losses at period end
 
$
28,794

 
$
52,135

 
$
12,734

 
$
5,560

 
$
6,096

 
$
267

 
$
1,765

 
$
107,351

Allowance for unfunded lending-related commitments at period end
 
$

 
$
14,647

 
$

 
$

 
$

 
$

 
$

 
$
14,647

Allowance for credit losses at period end
 
$
28,794

 
$
66,782

 
$
12,734

 
$
5,560

 
$
6,096

 
$
267

 
$
1,765

 
$
121,998

Individually evaluated for impairment
 
$
3,296

 
$
20,481

 
$
2,569

 
$
1,169

 
$

 
$

 
$
142

 
$
27,657

Collectively evaluated for impairment
 
$
25,471

 
$
46,233

 
$
10,165

 
$
4,388

 
$
6,096

 
$
267

 
$
1,623

 
$
94,243

Loans acquired with deteriorated credit quality
 
$
27

 
$
68

 
$

 
$
3

 
$

 
$

 
$

 
$
98

Loans at period end
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
33,608

 
$
139,878

 
$
14,590

 
$
14,810

 
$

 
$
53

 
$
1,606

 
$
204,545

Collectively evaluated for impairment
 
2,876,180

 
3,668,164

 
773,884

 
351,547

 
3,198,563

 
77,280

 
99,547

 
11,045,165

Loans acquired with deteriorated credit quality
 
5,010

 
56,076

 

 
856

 
514,459

 

 
2,832

 
579,233



A summary of activity in the allowance for covered loan losses for the years ended December 31, 2013 and 2012 is as follows:
 
 
 
Years Ended
 
 
December 31,
 
December 31,
(Dollars in thousands)
 
2013
 
2012
Balance at beginning of period
 
$
13,454

 
$
12,977

Provision for covered loan losses before benefit attributable to FDIC loss share agreements
 
246

 
20,282

Benefit attributable to FDIC loss share agreements
 
(197
)
 
(16,258
)
Net provision for covered loan losses
 
49

 
4,024

Increase in FDIC indemnification asset
 
197

 
16,258

Loans charged-off
 
(15,085
)
 
(19,921
)
Recoveries of loans charged-off
 
11,477

 
116

Net charge-offs
 
(3,608
)
 
(19,805
)
Balance at end of period
 
$
10,092

 
$
13,454


In conjunction with FDIC-assisted transactions, the Company entered into loss share agreements with the FDIC. Additional expected losses, to the extent such expected losses result in the recognition of an allowance for loan losses, will increase the FDIC indemnification asset. The allowance for loan losses for loans acquired in FDIC-assisted transactions is determined without giving consideration to the amounts recoverable through loss share agreements (since the loss share agreements are separately accounted for and thus presented “gross” on the balance sheet). On the Consolidated Statements of Income, the provision for credit losses is reported net of changes in the amount recoverable under the loss share agreements. Reductions to expected losses, to the extent such reductions to expected losses are the result of an improvement to the actual or expected cash flows from the covered assets, will reduce the FDIC indemnification asset. Additions to expected losses will require an increase to the allowance for loan losses, and a corresponding increase to the FDIC indemnification asset. See "FDIC-Assisted Transactions" within Note 8 - Business Combinations for more detail.
Impaired Loans
A summary of impaired loans, including TDRs, at December 31, 2013 and 2012 is as follows:
 
(Dollars in thousands)
 
2013
 
2012
Impaired loans (included in non-performing and restructured loans):
 
 
 
 
Impaired loans with an allowance for loan loss required (1)
 
$
92,184

 
$
89,983

Impaired loans with no allowance for loan loss required
 
70,045

 
114,562

Total impaired loans (2)
 
$
162,229

 
$
204,545

Allowance for loan losses related to impaired loans
 
$
8,265

 
$
13,575

Troubled debt restructurings
 
$
107,103

 
$
126,473

Reduction of interest income from non-accrual loans
 
$
3,971

 
$
3,866

Interest income recognized on impaired loans
 
$
8,920

 
$
10,819

(1)
These impaired loans require an allowance for loan losses because the estimated fair value of the loans or related collateral is less than the recorded investment in the loans.
(2)
Impaired loans are considered by the Company to be non-accrual loans, TDRs or loans with principal and/or interest at risk, even if the loan is current with all payments of principal and interest.

The following tables present impaired loans evaluated for impairment by loan class as of December 31, 2013 and 2012:
 
 
As of
 
For the Year Ended
December 31, 2013
(Dollars in thousands)
 
Recorded
Investment
 
Unpaid 
Principal
Balance
 
Related
Allowance
 
Average 
Recorded
Investment
 
Interest Income
Recognized
Impaired loans with a related ASC 310 allowance recorded
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
6,297

 
$
7,001

 
$
1,078

 
$
6,611

 
$
354

Franchise
 

 

 

 

 

Mortgage warehouse lines of credit
 

 

 

 

 

Community Advantage—homeowners association
 

 

 

 

 

Aircraft
 

 

 

 

 

Asset-based lending
 
282

 
294

 
282

 
295

 
14

Tax exempt
 

 

 

 

 

Leases
 

 

 

 

 

Other
 

 

 

 

 

Commercial real-estate
 
 
 
 
 
 
 
 
 
 
Residential construction
 

 

 

 

 

Commercial construction
 
3,099

 
3,099

 
18

 
3,098

 
115

Land
 
10,518

 
11,871

 
259

 
10,323

 
411

Office
 
7,792

 
8,444

 
1,253

 
8,148

 
333

Industrial
 
3,385

 
3,506

 
193

 
3,638

 
179

Retail
 
17,511

 
17,638

 
1,253

 
17,678

 
724

Multi-family
 
3,237

 
3,730

 
235

 
2,248

 
139

Mixed use and other
 
28,935

 
29,051

 
1,366

 
26,792

 
1,194

Home equity
 
3,985

 
5,238

 
1,593

 
4,855

 
236

Residential real estate
 
6,876

 
7,023

 
626

 
6,335

 
273

Premium finance receivables
 
 
 
 
 
 
 
 
 
 
Commercial insurance
 

 

 

 

 

Life insurance
 

 

 

 

 

Purchased life insurance
 

 

 

 

 

Indirect consumer
 

 

 

 

 

Consumer and other
 
267

 
269

 
109

 
273

 
11

Impaired loans with no related ASC 310 allowance recorded
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
9,890

 
$
16,333

 
$

 
$
13,928

 
$
1,043

Franchise
 

 

 

 

 

Mortgage warehouse lines of credit
 

 

 

 

 

Community Advantage—homeowners association
 

 

 

 

 

Aircraft
 

 

 

 

 

Asset-based lending
 
354

 
2,311

 

 
2,162

 
121

Tax exempt
 

 

 

 

 

Leases
 

 

 

 

 

Other
 

 

 

 

 

Commercial real-estate
 
 
 
 
 
 
 
 
 
 
Residential construction
 
1,463

 
1,530

 

 
1,609

 
64

Commercial construction
 
7,710

 
13,227

 

 
9,680

 
722

Land
 
5,035

 
8,813

 

 
5,384

 
418

Office
 
10,379

 
11,717

 

 
10,925

 
610

Industrial
 
5,087

 
5,267

 

 
5,160

 
328

Retail
 
7,047

 
8,610

 

 
8,462

 
400

Multi-family
 
608

 
1,030

 

 
903

 
47

Mixed use and other
 
4,077

 
6,213

 

 
5,046

 
352

Home equity
 
6,312

 
7,790

 

 
6,307

 
324

Residential real estate
 
10,761

 
13,585

 

 
9,443

 
393

Premium finance receivables
 
 
 
 
 
 
 
 
 
 
Commercial insurance
 

 

 

 

 

Life insurance
 

 

 

 

 

Purchased life insurance
 

 

 

 

 

Indirect consumer
 
55

 
61

 

 
48

 
6

Consumer and other
 
1,267

 
1,804

 

 
1,307

 
109

Total loans, net of unearned income, excluding covered loans
 
$
162,229

 
$
195,455

 
$
8,265

 
$
170,658

 
$
8,920

 
 
As of
 
For the Year Ended
December 31, 2012
(Dollars in thousands)
 
Recorded
Investment
 
Unpaid 
Principal
Balance
 
Related
Allowance
 
Average 
Recorded
Investment
 
Interest Income
Recognized
Impaired loans with a related ASC 310 allowance recorded
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
11,010

 
$
12,562

 
$
1,982

 
$
13,312

 
$
881

Franchise
 
1,792

 
1,792

 
1,259

 
1,792

 
122

Mortgage warehouse lines of credit
 

 

 

 

 

Community Advantage—homeowners association
 

 

 

 

 

Aircraft
 

 

 

 

 

Asset-based lending
 
511

 
511

 
55

 
484

 
26

Tax exempt
 

 

 

 

 

Leases
 

 

 

 

 

Other
 

 

 

 

 

Commercial real-estate
 
 
 
 
 
 
 
 
 
 
Residential construction
 
2,007

 
2,007

 
389

 
2,007

 
98

Commercial construction
 
1,865

 
1,865

 
70

 
1,865

 
78

Land
 
12,184

 
12,860

 
1,414

 
12,673

 
483

Office
 
5,829

 
5,887

 
622

 
5,936

 
246

Industrial
 
1,150

 
1,200

 
224

 
1,208

 
75

Retail
 
13,240

 
13,314

 
343

 
13,230

 
584

Multi-family
 
3,954

 
3,954

 
348

 
3,972

 
157

Mixed use and other
 
22,249

 
23,166

 
2,989

 
23,185

 
1,165

Home equity
 
7,270

 
7,313

 
2,569

 
7,282

 
271

Residential real estate
 
6,420

 
6,931

 
1,169

 
6,424

 
226

Premium finance receivables
 
 
 
 
 
 
 
 
 
 
Commercial insurance
 

 

 

 

 

Life insurance
 

 

 

 

 

Purchased life insurance
 

 

 

 

 

Indirect consumer
 

 

 

 

 

Consumer and other
 
502

 
502

 
142

 
502

 
26

Impaired loans with no related ASC 310 allowance recorded
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
20,270

 
$
27,574

 
$

 
$
23,877

 
$
1,259

Franchise
 

 

 

 

 

Mortgage warehouse lines of credit
 

 

 

 

 

Community Advantage—homeowners association
 

 

 

 

 

Aircraft
 

 

 

 

 

Asset-based lending
 
25

 
1,362

 

 
252

 
76

Tax exempt
 

 

 

 

 

Leases
 

 

 

 

 

Other
 

 

 

 

 

Commercial real-estate
 
 
 
 
 
 
 
 
 
 
Residential construction
 
4,085

 
4,440

 

 
4,507

 
143

Commercial construction
 
12,263

 
13,395

 

 
13,635

 
540

Land
 
12,163

 
17,141

 

 
14,646

 
906

Office
 
8,939

 
9,521

 

 
9,432

 
437

Industrial
 
3,598

 
3,776

 

 
3,741

 
181

Retail
 
18,073

 
18,997

 

 
19,067

 
892

Multi-family
 
2,817

 
4,494

 

 
4,120

 
222

Mixed use and other
 
15,462

 
17,210

 

 
16,122

 
912

Home equity
 
7,320

 
8,758

 

 
8,164

 
376

Residential real estate
 
8,390

 
9,189

 

 
9,069

 
337

Premium finance receivables
 
 
 
 
 
 
 
 
 
 
Commercial insurance
 

 

 

 

 

Life insurance
 

 

 

 

 

Purchased life insurance
 

 

 

 

 

Indirect consumer
 
53

 
61

 

 
65

 
6

Consumer and other
 
1,104

 
1,558

 

 
1,507

 
94

Total loans, net of unearned income, excluding covered loans
 
$
204,545

 
$
231,340

 
$
13,575

 
$
222,076

 
$
10,819


Average recorded investment in impaired loans for the years ended December 31, 2013, 2012, and 2011 were $170.7 million, $222.1 million, and $247.1 million, respectively. Interest income recognized on impaired loans was $8.9 million, $10.8 million, and $12.5 million for the years ended December 31, 2013, 2012, and 2011, respectively.

TDRs
At December 31, 2013, the Company had $107.1 million in loans modified in TDRs. The $107.1 million in TDRs represents 149 credits in which economic concessions were granted to certain borrowers to better align the terms of their loans with their current ability to pay.
The Company’s approach to restructuring loans, excluding those acquired with evidence of credit quality deterioration since origination, is built on its credit risk rating system which requires credit management personnel to assign a credit risk rating to each loan. In each case, the loan officer is responsible for recommending a credit risk rating for each loan and ensuring the credit risk ratings are appropriate. These credit risk ratings are then reviewed and approved by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors including a borrower’s financial strength, cash flow coverage, collateral protection and guarantees. The Company’s credit risk rating scale is one through ten with higher scores indicating higher risk. In the case of loans rated six or worse following modification, the Company’s Managed Assets Division evaluates the loan and the credit risk rating and determines that the loan has been restructured to be reasonably assured of repayment and of performance according to the modified terms and is supported by a current, well-documented credit assessment of the borrower’s financial condition and prospects for repayment under the revised terms.
A modification of a loan, excluding those acquired with evidence of credit quality deterioration since origination, with an existing credit risk rating of six or worse or a modification of any other credit, which will result in a restructured credit risk rating of six or worse must be reviewed for possible TDR classification. In that event, our Managed Assets Division conducts an overall credit and collateral review. A modification of these loans is considered to be a TDR if both (1) the borrower is experiencing financial difficulty and (2) for economic or legal reasons, the bank grants a concession to a borrower that it would not otherwise consider. The modification of a loan, excluding those acquired with evidence of credit quality deterioration since origination, where the credit risk rating is five or better both before and after such modification is not considered to be a TDR. Based on the Company’s credit risk rating system, it considers that borrowers whose credit risk rating is five or better are not experiencing financial difficulties and therefore, are not considered TDRs.
All credits determined to be a TDR will continue to be classified as a TDR in all subsequent periods, unless the borrower has been in compliance with the loan’s modified terms for a period of six months (including over a calendar year-end) and the modified interest rate represented a market rate at the time of a restructuring. The Managed Assets Division, in consultation with the respective loan officer, determines whether the modified interest rate represented a current market rate at the time of restructuring. Using knowledge of current market conditions and rates, competitive pricing on recent loan originations, and an assessment of various characteristics of the modified loan (including collateral position and payment history), an appropriate market rate for a new borrower with similar risk is determined. If the modified interest rate meets or exceeds this market rate for a new borrower with similar risk, the modified interest rate represents a market rate at the time of restructuring. Additionally, before removing a loan from TDR classification, a review of the current or previously measured impairment on the loan and any concerns related to future performance by the borrower is conducted. If concerns exist about the future ability of the borrower to meet its obligations under the loans based on a credit review by the Managed Assets Division, the TDR classification is not removed from the loan. Loans classified as TDRs that are re-modified subsequent to the initial determination will continue to be classified as a TDRs following the re-modification, unless the requirements for removal from TDR classification discussed above are satisfied at the time of the re-modification.
TDRs are reviewed at the time of modification and on a quarterly basis to determine if a specific reserve is necessary. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan’s original rate, or for collateral dependent loans, to the fair value of the collateral less the estimated cost to sell. Any shortfall is recorded as a specific reserve. The Company, in accordance with ASC 310-10, continues to individually measure impairment of these loans after the TDR classification is removed.
Each TDR was reviewed for impairment at December 31, 2013 and approximately $4.8 million of impairment was present and appropriately reserved for through the Company’s normal reserving methodology in the Company’s allowance for loan losses. For TDRs in which impairment is calculated by the present value of future cash flows, the Company records interest income representing the decrease in impairment resulting from the passage of time during the respective period, which differs from interest income from contractually required interest on these specific loans. For the year-ended December 31, 2013 and 2012, the Company recorded $901,000 and $1.3 million, respectively, in interest income representing this decrease in impairment.

The tables below present a summary of the post-modification balance of loans restructured during the years ended December 31, 2013, 2012, and 2011, which represent TDRs:
Year ended 
December 31, 2013
 
Total (1)(2)
 
Extension at
Below Market
Terms (2)
 
Reduction of
Interest Rate (2)
 
Modification to
Interest-only
Payments (2)
 
Forgiveness of Debt (2)
(Dollars in thousands)
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
6

 
$
708

 
5

 
$
573

 
4

 
$
553

 
2

 
$
185

 

 
$

Commercial real-estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential construction
 

 

 

 

 

 

 

 

 

 

Commercial construction
 
3

 
6,120

 
3

 
6,120

 

 

 
3

 
6,120

 

 

Land
 
3

 
2,639

 
3

 
2,639

 
2

 
287

 

 

 
1

 
73

Office
 
4

 
4,021

 
4

 
4,021

 
1

 
556

 

 

 

 

Industrial
 
1

 
949

 
1

 
949

 
1

 
949

 

 

 

 

Retail
 
1

 
200

 
1

 
200

 
1

 
200

 

 

 

 

Multi-family
 
1

 
705

 
1

 
705

 
1

 
705

 

 

 

 

Mixed use and other
 
6

 
5,042

 
6

 
5,042

 
5

 
4,947

 
1

 
932

 

 

Residential real estate and other
 
10

 
2,296

 
6

 
1,613

 
7

 
931

 
2

 
234

 
1

 
1,000

Total loans
 
35

 
$
22,680

 
30

 
$
21,862

 
22

 
$
9,128

 
8

 
$
7,471

 
2

 
$
1,073

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended
December 31, 2012
 
Total (1)(2)
 
Extension at
Below Market
Terms (2)
 
Reduction of
Interest Rate (2)
 
Modification to
Interest-only
Payments (2)
 
Forgiveness of Debt (2)
(Dollars in thousands)
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
18

 
$
14,311

 
11

 
$
3,603

 
11

 
$
13,691

 
7

 
$
10,579

 
3

 
$
2,311

Commercial real-estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential construction
 
3

 
2,147

 
3

 
2,147

 
1

 
496

 
1

 
496

 

 

Commercial construction
 
2

 
622

 
2

 
622

 
2

 
622

 
2

 
622

 

 

Land
 
17

 
31,836

 
17

 
31,836

 
14

 
30,561

 
13

 
26,511

 

 

Office
 

 

 

 

 

 

 

 

 

 

Industrial
 
1

 
727

 
1

 
727

 
1

 
727

 

 

 

 

Retail
 
8

 
13,518

 
8

 
13,518

 
6

 
8,865

 
6

 
12,897

 

 

Multi-family
 
1

 
380

 

 

 
1

 
380

 
1

 
380

 

 

Mixed use and other
 
15

 
7,333

 
9

 
4,769

 
11

 
6,268

 
8

 
3,974

 

 

Residential real estate and other
 
10

 
1,638

 
8

 
1,390

 
6

 
631

 
3

 
924

 
1

 
29

Total loans
 
75

 
$
72,512

 
59

 
$
58,612

 
53

 
$
62,241

 
41

 
$
56,383

 
4

 
$
2,340

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended
December 31, 2011
 
Total (1)(2)
 
Extension at
Below Market
Terms (2)
 
Reduction of
Interest Rate (2)
 
Modification to
Interest-only
Payments (2)
 
Forgiveness of Debt (2)
(Dollars in thousands)
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
24

 
$
6,956

 
11

 
$
2,273

 
14

 
$
1,933

 
13

 
$
3,780

 
2

 
$
135

Commercial real-estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential construction
 
1

 
1,105

 
1

 
1,105

 

 

 
1

 
1,105

 

 

Commercial construction
 
8

 
12,140

 
7

 
11,673

 
3

 
9,402

 
1

 
467

 

 

Land
 
7

 
7,971

 
7

 
7,971

 
2

 
2,981

 

 

 

 

Office
 
9

 
8,870

 
6

 
4,780

 
6

 
4,036

 
3

 
4,292

 

 

Industrial
 
5

 
5,334

 
5

 
5,334

 
4

 
3,494

 
2

 
2,181

 

 

Retail
 
14

 
19,113

 
11

 
16,981

 
5

 
3,963

 
5

 
5,191

 

 

Multi-family
 
6

 
4,415

 
6

 
4,415

 
5

 
3,866

 

 

 

 

Mixed use and other
 
33

 
28,708

 
21

 
14,775

 
28

 
25,921

 
10

 
8,068

 

 

Residential real estate and other
 
16

 
5,916

 
7

 
2,326

 
13

 
5,262

 
4

 
1,390

 

 

Total loans
 
123

 
$
100,528

 
82

 
$
71,633

 
80

 
$
60,858

 
39

 
$
26,474

 
2

 
$
135

 
(1)
TDRs may have more than one modification representing a concession. As such, TDRs during the period may be represented in more than one of the categories noted above.
(2)
Balances represent the recorded investment in the loan at the time of the restructuring.

During the year ended December 31, 2013, $22.7 million, or 35 loans, were determined to be TDRs, compared to $72.5 million, or 75 loans, and $100.5 million, or 123 loans, in the years ended 2012 and 2011, respectively. Of these loans extended at below market terms, the weighted average extension had a term of approximately 18 months in 2013 compared to nine months in 2012 and 11 months in 2011. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately 184 basis points, 157 basis points and 192 basis points during the years ended December 31, 2013, 2012, and 2011, respectively. Interest-only payment terms were approximately 11 months during the year ended 2013 compared to five months and nine months for the years ended 2012 and 2011, respectively. Additionally, approximately $1.0 million of principal balance was forgiven during 2013, compared to $800,000 and $67,000 forgiven during 2012 and 2011, respectively.
The tables below present a summary of all loans restructured in TDRs during the years ended December 31, 2013, 2012, and 2011, and such loans which were in payment default under the restructured terms during the respective periods: 
 
 
Year Ended December 31, 2013
 
Year Ended December 31, 2012
 
Year Ended December 31, 2011
 
 
Total (1)(3)
 
Payments in
Default  (2)(3)
 
Total (1)(3)
 
Payments in
Default  (2)(3)
 
Total (1)(3)
 
Payments in
Default  (2)(3)
(Dollars in thousands)
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
 
Count
 
Balance
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
6

 
$
708

 
1

 
$
20

 
18

 
$
14,311

 
4

 
$
9,925

 
24

 
$
6,956

 
6

 
$
1,742

Commercial real-estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential construction
 

 

 

 

 
3

 
2,147

 

 

 
1

 
1,105

 

 

Commercial construction
 
3

 
6,120

 

 

 
2

 
622

 
2

 
622

 
8

 
12,140

 
1

 
467

Land
 
3

 
2,639

 
1

 
215

 
17

 
31,836

 
2

 
3,786

 
7

 
7,971

 
2

 
1,667

Office
 
4

 
4,021

 
1

 
1,648

 

 

 

 

 
9

 
8,870

 
2

 
2,239

Industrial
 
1

 
949

 

 

 
1

 
727

 

 

 
5

 
5,334

 
2

 
3,224

Retail
 
1

 
200

 

 

 
8

 
13,518

 
1

 
3,607

 
14

 
19,113

 
2

 
2,694

Multi-family
 
1

 
705

 
1

 
705

 
1

 
380

 

 

 
6

 
4,415

 

 

Mixed use and other
 
6

 
5,042

 
1

 
95

 
15

 
7,333

 
4

 
1,445

 
33

 
28,708

 
6

 
5,283

Residential real estate and other
 
10

 
2,296

 

 

 
10

 
1,638

 
5

 
1,168

 
16

 
5,916

 
4

 
908

Total loans
 
35

 
$
22,680

 
5

 
$
2,683

 
75

 
$
72,512

 
18

 
$
20,553

 
123

 
$
100,528

 
25

 
$
18,224

(1)
Total TDRs represent all loans restructured in TDRs during the year indicated.
(2)
TDRs considered to be in payment default are over 30 days past-due subsequent to the restructuring.
(3)
Balances represent the recorded investment in the loan at the time of the restructuring.