LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans and Loans Held for Sale

Loans are summarized as follows according to major portfolio segment and specific loan class:



(In thousands)	September 30, 2013		December 31, 2012

Loans held for sale	$	114,810	$	251,651
Commercial:
Commercial and industrial	$	11,904,477	$	11,256,945
Leasing	375,125		422,513
Owner occupied	7,378,586		7,589,082
Municipal	448,643		494,183
Total commercial	20,106,831		19,762,723
Commercial real estate:
Construction and land development	2,240,295		1,939,413
Term	7,928,540		8,062,819
Total commercial real estate	10,168,835		10,002,232
Consumer:
Home equity credit line	2,124,328		2,177,680
1-4 family residential	4,636,895		4,350,329
Construction and other consumer real estate	321,436		321,235
Bankcard and other revolving plans	331,966		306,428
Other	207,578		216,379
Total consumer	7,622,203		7,372,051
FDIC-supported loans	374,861		528,241
Total loans	$	38,272,730	$	37,665,247

FDIC-supported loans were acquired during 2009 and are indemnified by the Federal Deposit Insurance Corporation (“FDIC”) under loss sharing agreements. The FDIC-supported loan balances presented in the accompanying schedules include purchased credit-impaired loans accounted for at their carrying values rather than their outstanding balances. See subsequent discussion under Purchased Loans.

Loan balances are presented net of unearned income and fees, which amounted to $132.4 million at September 30, 2013 and $137.5 million at December 31, 2012.

Owner occupied and commercial real estate loans include unamortized premiums of approximately $49.9 million at September 30, 2013 and $59.3 million at December 31, 2012.

Municipal loans generally include loans to municipalities with the debt service being repaid from general funds or pledged revenues of the municipal entity, or to private commercial entities or 501(c)(3) not-for-profit entities utilizing a pass-through municipal entity to achieve favorable tax treatment.

Loans with a carrying value of approximately $22.4 billion at September 30, 2013 and $21.1 billion at December 31, 2012 have been pledged at the Federal Reserve and various Federal Home Loan Banks as collateral for current and potential borrowings.

We sold loans totaling $421 million and $1,315 million for the three and nine months ended September 30, 2013 and $369 million and $1,244 million for the three and nine months ended September 30, 2012, respectively, that were previously classified as loans held for sale. At the time of origination, we determine whether loans will be held for investment or held for sale. We may subsequently change our original intent to hold loans for investment and reclassify them as held for sale. Loans classified as loans held for sale primarily consist of conforming residential mortgages. Amounts added to loans held for sale during these periods were $374 million and $1,152 million for the three and nine months ended September 30, 2013 and $452 million and $1,260 million for the three and nine months ended September 30, 2012, respectively. Income from loans sold, excluding servicing, was $5 million and $22 million for the three and nine months ended September 30, 2013 and $8 million and $22 million for the three and nine months ended September 30, 2012, respectively.

Allowance for Credit Losses

The allowance for credit losses (“ACL”) consists of the allowance for loan and lease losses (“ALLL,” also referred to as the allowance for loan losses) and the reserve for unfunded lending commitments (“RULC”).

Allowance for Loan and Lease Losses

The ALLL represents our estimate of probable and estimable losses inherent in the loan and lease portfolio as of the balance sheet date. Losses are charged to the ALLL when recognized. Generally, commercial loans are charged off or charged down at the point at which they are determined to be uncollectible in whole or in part, or when 180 days past due unless the loan is well secured and in the process of collection. Consumer loans are either charged off or charged down to net realizable value no later than the month in which they become 180 days past due. Closed-end consumer loans that are not secured by residential real estate are either charged off or charged down to net realizable value no later than the month in which they become 120 days past due. We establish the amount of the ALLL by analyzing the portfolio at least quarterly, and we adjust the provision for loan losses so the ALLL is at an appropriate level at the balance sheet date.

We determine our ALLL as the best estimate within a range of estimated losses. The methodologies we use to estimate the ALLL depend upon the impairment status and portfolio segment of the loan. The methodology for impaired loans is discussed subsequently. For the commercial and commercial real estate (“CRE”) segments, we use a comprehensive loan grading system to assign probability of default (“PD”) and loss given default (“LGD”) grades to each loan. The credit quality indicators discussed subsequently are based on this grading system. PD and LGD grades are based on both financial and statistical models and loan officers’ judgment. We create groupings of these grades for each subsidiary bank and loan class and calculate historic loss rates using a loss migration analysis that attributes historic realized losses to these loan grade groupings over the period of January 2008 through the most recent full quarter.

For the consumer loan segment, we use roll rate models to forecast probable inherent losses. Roll rate models measure the rate at which consumer loans migrate from one delinquency category to the next worse delinquency category, and eventually to loss. We estimate roll rates for consumer loans using recent delinquency and loss experience by segmenting our consumer loan portfolio into separate pools based on common risk characteristics and separately calculating historical delinquency and loss experience for each pool. These roll rates are then applied to current delinquency levels to estimate probable inherent losses. Roll rates incorporate housing market trends inasmuch as these trends manifest themselves in charge-offs and delinquencies. In addition, our qualitative and environmental factors discussed subsequently incorporate the most recent housing market trends.

For FDIC-supported loans purchased with evidence of credit deterioration, we determine the ALLL according to separate accounting guidance. The accounting for these loans, including the allowance calculation, is described in the Purchased Loans section following.

The current status and historical changes in qualitative and environmental factors may not be reflected in our quantitative models. Thus, after applying historical loss experience, as described above, we review the quantitatively derived level of ALLL for each segment using qualitative criteria and use those criteria to determine our estimate within the range. We track various risk factors that influence our judgment regarding the level of the ALLL across the portfolio segments. These factors primarily include:


•	Asset quality trends


•	Risk management and loan administration practices


•	Risk identification practices


•	Effect of changes in the nature and volume of the portfolio


•	Existence and effect of any portfolio concentrations


•	National economic and business conditions


•	Regional and local economic and business conditions


•	Data availability and applicability

The magnitude of the impact of these factors on our qualitative assessment of the ALLL changes from quarter to quarter according to the extent these factors are already reflected in historic loss rates and according to the extent these factors diverge from one to another. We also consider the uncertainty inherent in the estimation process when evaluating the ALLL.

Reserve for Unfunded Lending Commitments

We also estimate a reserve for potential losses associated with off-balance sheet commitments, including standby letters of credit. We determine the RULC using the same procedures and methodologies that we use for the ALLL. The loss factors used in the RULC are the same as the loss factors used in the ALLL, and the qualitative adjustments used in the RULC are the same as the qualitative adjustments used in the ALLL. We adjust the Company’s unfunded lending commitments that are not unconditionally cancelable to an outstanding amount equivalent using credit conversion factors and we apply the loss factors to the outstanding equivalents.

Changes in ACL Assumptions

We regularly evaluate the appropriateness of our loss estimation methods to reduce differences between estimated incurred losses and actual losses. During the third quarter of 2013, we changed certain assumptions, including the credit conversion factors, in our RULC estimation process, specifically the rate at which unfunded commitments are likely to convert into funded balances. This change resulted in a decrease of $18.4 million to the provision for unfunded lending commitments. Additionally during the third quarter of 2013, we made refinements to our risk grading methodology for certain smaller balance loans to be more consistent with regulatory guidance and the manner in which those loans are managed. These refinements decreased the classified loan balances by approximately $137 million and did not have a material effect on the overall level of the ACL or the provision for loan losses.

During the second quarter of 2013, we changed certain assumptions in our ACL estimation process including our loss migration model that we use to quantitatively estimate the ALLL and RULC for the commercial and commercial real estate segments. Prior to the second quarter of 2013, we used loss migration models based on loss experience over the most recent 60 months. During the second quarter of 2013 and subsequently, the loss migration models are based on loss experience from January 2008 through the most recent full quarter. We extended the period of loss experience to include the beginning of the year 2008 to encompass the last economic downturn period, as the improving charge-off rates experienced during recent periods may not be reflective of current incurred losses, given the environment of continued economic uncertainty. These refinements in the quantitative portion of the ACL did not have a material effect on the overall level of the ACL or the provision for loan losses.

Changes in the allowance for credit losses are summarized as follows:

	Three Months Ended September 30, 2013
(In thousands)	Commercial			Commercial real estate			Consumer			FDIC- supported ¹			Total
Allowance for loan losses:
Balance at beginning of period	$	486,353		$	251,278		$	70,366		$	5,915		$	813,912
Additions:
Provision for loan losses	(1,768		)	(4,520		)	569			146			(5,573		)
Adjustment for FDIC-supported loans	—			—			—			(2,118		)	(2,118		)
Deductions:
Gross loan and lease charge-offs	(11,465		)	(5,738		)	(5,535		)	(88		)	(22,826		)
Recoveries	6,155			2,988			3,109			1,876			14,128
Net loan and lease charge-offs	(5,310		)	(2,750		)	(2,426		)	1,788			(8,698		)
Balance at end of period	$	479,275		$	244,008		$	68,509		$	5,731		$	797,523

Reserve for unfunded lending commitments:
Balance at beginning of period	$	63,272		$	39,454		$	1,356		$	—		$	104,082
Provision charged (credited) to earnings	(16,133		)	(6,010		)	2,208			—			(19,935		)
Balance at end of period	$	47,139		$	33,444		$	3,564		$	—		$	84,147

Total allowance for credit losses at end of period:
Allowance for loan losses	$	479,275		$	244,008		$	68,509		$	5,731		$	797,523
Reserve for unfunded lending commitments	47,139			33,444			3,564			—			84,147
Total allowance for credit losses	$	526,414		$	277,452		$	72,073		$	5,731		$	881,670



	Nine Months Ended September 30, 2013
(In thousands)	Commercial			Commercial real estate			Consumer			FDIC- supported ¹			Total
Allowance for loan losses:
Balance at beginning of period	$	510,908		$	276,976		$	95,656		$	12,547		$	896,087
Additions:
Provision for loan losses	(10,179		)	(34,370		)	(12,725		)	676			(56,598		)
Adjustment for FDIC-supported loans	—			—			—			(9,756		)	(9,756		)
Deductions:
Gross loan and lease charge-offs	(48,073		)	(19,069		)	(24,574		)	(1,676		)	(93,392		)
Recoveries	26,619			20,471			10,152			3,940			61,182
Net loan and lease charge-offs	(21,454		)	1,402			(14,422		)	2,264			(32,210		)
Balance at end of period	$	479,275		$	244,008		$	68,509		$	5,731		$	797,523

Reserve for unfunded lending commitments:
Balance at beginning of period	$	67,374		$	37,852		$	1,583		$	—		$	106,809
Provision charged (credited) to earnings	(20,235		)	(4,408		)	1,981			—			(22,662		)
Balance at end of period	$	47,139		$	33,444		$	3,564		$	—		$	84,147

Total allowance for credit losses at end of period:
Allowance for loan losses	$	479,275		$	244,008		$	68,509		$	5,731		$	797,523
Reserve for unfunded lending commitments	47,139			33,444			3,564			—			84,147
Total allowance for credit losses	$	526,414		$	277,452		$	72,073		$	5,731		$	881,670



	Three Months Ended September 30, 2012
(In thousands)	Commercial			Commercial real estate			Consumer			FDIC- supported ¹			Total
Allowance for loan losses:
Balance at beginning of period	$	542,170		$	307,965		$	102,391		$	20,917		$	973,443
Additions:
Provision for loan losses	(4,324		)	2,157			3,351			(3,073		)	(1,889		)
Adjustment for FDIC-supported loans	—			—			—			(5,908		)	(5,908		)
Deductions:
Gross loan and lease charge-offs	(26,424		)	(20,264		)	(11,391		)	(702		)	(58,781		)
Recoveries	12,013			3,312			3,262			1,616			20,203
Net loan and lease charge-offs	(14,411		)	(16,952		)	(8,129		)	914			(38,578		)
Balance at end of period	$	523,435		$	293,170		$	97,613		$	12,850		$	927,068

Reserve for unfunded lending commitments:
Balance at beginning of period	$	70,553		$	31,663		$	1,370		$	—		$	103,586
Provision charged (credited) to earnings	542			1,741			(19		)	—			2,264
Balance at end of period	$	71,095		$	33,404		$	1,351		$	—		$	105,850

Total allowance for credit losses at end of period:
Allowance for loan losses	$	523,435		$	293,170		$	97,613		$	12,850		$	927,068
Reserve for unfunded lending commitments	71,095			33,404			1,351			—			105,850
Total allowance for credit losses	$	594,530		$	326,574		$	98,964		$	12,850		$	1,032,918



	Nine Months Ended September 30, 2012
(In thousands)	Commercial		Commercial real estate		Consumer		FDIC- supported ¹		Total
Allowance for loan losses:
Balance at beginning of period	561,351		343,747		123,115		23,472		1,051,685
Additions:
Provision for loan losses	20,859		(2,769	)	9,989		(3,451	)	24,628
Adjustment for FDIC-supported loans	—		—		—		(12,821	)	(12,821	)
Deductions:
Gross loan and lease charge-offs	(91,477	)	(70,098	)	(45,722	)	(5,183	)	(212,480	)
Recoveries	32,702		22,290		10,231		10,833		76,056
Net loan and lease charge-offs	(58,775	)	(47,808	)	(35,491	)	5,650		(136,424	)
Balance at end of period	523,435		293,170		97,613		12,850		927,068

Reserve for unfunded lending commitments:
Balance at beginning of period	77,232		23,572		1,618		—		102,422
Provision charged (credited) to earnings	(6,137	)	9,832		(267	)			3,428
Balance at end of period	71,095		33,404		1,351		—		105,850

Total allowance for credit losses at end of period:
Allowance for loan losses	523,435		293,170		97,613		12,850		927,068
Reserve for unfunded lending commitments	71,095		33,404		1,351		—		105,850
Total allowance for credit losses	594,530		326,574		98,964		12,850		1,032,918

¹The Purchased Loans section following contains further discussion related to FDIC-supported loans.

During the first quarter of 2013, we modified the reporting of certain ALLL balances in the previous schedules. This change in reporting resulted in the reclassification of approximately $83.2 million at December 31, 2012, $83.1 million at September 30, 2012, and $68.2 million at December 31, 2011 of ALLL balances from the commercial to the commercial real estate loan segments. There was no change to the methodology or assumptions used to estimate the ALLL, nor was the change the result of any changes in credit quality.

The ALLL and outstanding loan balances according to the Company’s impairment method are summarized as follows:

	September 30, 2013
(In thousands)	Commercial		Commercial real estate		Consumer		FDIC- supported		Total
Allowance for loan losses:
Individually evaluated for impairment	$	39,950	$	15,117	$	12,189	$	—	$	67,256
Collectively evaluated for impairment	439,325		228,891		56,320		607		725,143
Purchased loans with evidence of credit deterioration	—		—		—		5,124		5,124
Total	$	479,275	$	244,008	$	68,509	$	5,731	$	797,523

Outstanding loan balances:
Individually evaluated for impairment	$	327,999	$	322,996	$	104,308	$	1,051	$	756,354
Collectively evaluated for impairment	19,778,832		9,845,839		7,517,895		40,559		37,183,125
Purchased loans with evidence of credit deterioration	—		—		—		333,251		333,251
Total	$	20,106,831	$	10,168,835	$	7,622,203	$	374,861	$	38,272,730



	December 31, 2012
(In thousands)	Commercial		Commercial real estate		Consumer		FDIC- supported		Total
Allowance for loan losses:
Individually evaluated for impairment	$	30,587	$	22,295	$	13,758	$	—	$	66,640
Collectively evaluated for impairment	480,321		254,681		81,898		422		817,322
Purchased loans with evidence of credit deterioration	—		—		—		12,125		12,125
Total	$	510,908	$	276,976	$	95,656	$	12,547	$	896,087

Outstanding loan balances:
Individually evaluated for impairment	$	353,380	$	437,647	$	112,320	$	1,149	$	904,496
Collectively evaluated for impairment	19,409,343		9,564,585		7,259,731		57,896		36,291,555
Purchased loans with evidence of credit deterioration	—		—		—		469,196		469,196
Total	$	19,762,723	$	10,002,232	$	7,372,051	$	528,241	$	37,665,247

Nonaccrual and Past Due Loans

Loans are generally placed on nonaccrual status when payment in full of principal and interest is not expected, or the loan is 90 days or more past due as to principal or interest, unless the loan is both well secured and in the process of collection. Factors we consider in determining whether a loan is placed on nonaccrual include delinquency status, collateral value, borrower or guarantor financial statement information, bankruptcy status, and other information which would indicate that the full and timely collection of interest and principal is uncertain.

A nonaccrual loan may be returned to accrual status when all delinquent interest and principal become current in accordance with the terms of the loan agreement; the loan, if secured, is well secured; the borrower has paid according to the contractual terms for a minimum of six months; and analysis of the borrower indicates a reasonable assurance of the ability and willingness to maintain payments. Payments received on nonaccrual loans are applied as a reduction to the principal outstanding.

Closed-end loans with payments scheduled monthly are reported as past due when the borrower is in arrears for two or more monthly payments. Similarly, open-end credit such as charge-card plans and other revolving credit plans are reported as past due when the minimum payment has not been made for two or more billing cycles. Other multi-payment obligations (i.e., quarterly, semiannual, etc.), single payment, and demand notes are reported as past due when either principal or interest is due and unpaid for a period of 30 days or more.

Nonaccrual loans are summarized as follows:

(In thousands)	September 30, 2013		December 31, 2012

Commercial:
Commercial and industrial	$	100,188	$	90,859
Leasing	796		838
Owner occupied	157,609		206,031
Municipal	10,006		9,234
Total commercial	268,599		306,962
Commercial real estate:
Construction and land development	65,320		107,658
Term	60,378		124,615
Total commercial real estate	125,698		232,273
Consumer:
Home equity credit line	8,425		14,247
1-4 family residential	57,658		70,180
Construction and other consumer real estate	4,080		4,560
Bankcard and other revolving plans	1,186		1,190
Other	1,149		1,398
Total consumer loans	72,498		91,575
FDIC-supported loans	4,744		17,343
Total	$	471,539	$	648,153

Past due loans (accruing and nonaccruing) are summarized as follows:

	September 30, 2013
(In thousands)	Current		30-89 days past due		90+ days past due		Total past due		Total loans		Accruing loans 90+ days past due		Nonaccrual loans that are current¹

Commercial:
Commercial and industrial	$	11,820,258	$	28,268	$	55,951	$	84,219	$	11,904,477	$	2,280	$	44,546
Leasing	374,200		323		602		925		375,125		—		—
Owner occupied	7,289,080		39,538		49,968		89,506		7,378,586		3,106		97,378
Municipal	448,643		—		—		—		448,643		—		10,006
Total commercial	19,932,181		68,129		106,521		174,650		20,106,831		5,386		151,930
Commercial real estate:
Construction and land development	2,200,392		21,609		18,294		39,903		2,240,295		—		28,140
Term	7,885,730		17,940		24,870		42,810		7,928,540		2,361		33,780
Total commercial real estate	10,086,122		39,549		43,164		82,713		10,168,835		2,361		61,920
Consumer:
Home equity credit line	2,116,048		4,357		3,923		8,280		2,124,328		—		3,226
1-4 family residential	4,598,613		13,816		24,466		38,282		4,636,895		551		28,850
Construction and other consumer real estate	317,305		1,574		2,557		4,131		321,436		368		1,738
Bankcard and other revolving plans	329,055		1,951		960		2,911		331,966		669		840
Other	205,798		822		958		1,780		207,578		63		70
Total consumer loans	7,566,819		22,520		32,864		55,384		7,622,203		1,651		34,724
FDIC-supported loans	339,085		11,162		24,614		35,776		374,861		22,450		2,400
Total	$	37,924,207	$	141,360	$	207,163	$	348,523	$	38,272,730	$	31,848	$	250,974



	December 31, 2012
(In thousands)	Current		30-89 days past due		90+ days past due		Total past due		Total loans		Accruing loans 90+ days past due		Nonaccrual loans that are current¹

Commercial:
Commercial and industrial	$	11,124,639	$	73,555	$	58,751	$	132,306	$	11,256,945	$	4,013	$	32,389
Leasing	421,590		115		808		923		422,513		—		—
Owner occupied	7,447,083		56,504		85,495		141,999		7,589,082		1,822		100,835
Municipal	494,183		—		—		—		494,183		—		9,234
Total commercial	19,487,495		130,174		145,054		275,228		19,762,723		5,835		142,458
Commercial real estate:
Construction and land development	1,836,284		66,139		36,990		103,129		1,939,413		853		50,044
Term	7,984,819		24,730		53,270		78,000		8,062,819		107		54,546
Total commercial real estate	9,821,103		90,869		90,260		181,129		10,002,232		960		104,590
Consumer:
Home equity credit line	2,169,722		4,036		3,922		7,958		2,177,680		—		8,846
1-4 family residential	4,282,611		24,060		43,658		67,718		4,350,329		1,423		21,945
Construction and other consumer real estate	314,931		4,344		1,960		6,304		321,235		395		2,500
Bankcard and other revolving plans	302,587		2,439		1,402		3,841		306,428		1,010		721
Other	213,930		1,411		1,038		2,449		216,379		107		275
Total consumer loans	7,283,781		36,290		51,980		88,270		7,372,051		2,935		34,287
FDIC-supported loans	454,333		12,407		61,501		73,908		528,241		52,033		7,393
Total	$	37,046,712	$	269,740	$	348,795	$	618,535	$	37,665,247	$	61,763	$	288,728

¹Represents nonaccrual loans that are not past due more than 30 days; however, full payment of principal and interest is still not expected.

Credit Quality Indicators

In addition to the past due and nonaccrual criteria, we also analyze loans using a loan grading system. We generally assign internal grades to loans with commitments less than $750,000 based on the performance of those loans. Performance-based grades follow our definitions of Pass, Special Mention, Substandard, and Doubtful, which are consistent with published definitions of regulatory risk classifications.

Definitions of Pass, Special Mention, Substandard, and Doubtful are summarized as follows:

Pass: A Pass asset is higher quality and does not fit any of the other categories described below. The likelihood of loss is considered remote.

Special Mention: A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the bank’s credit position at some future date.

Substandard: A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have well defined weaknesses and are characterized by the distinct possibility that the bank may sustain some loss if deficiencies are not corrected.

Doubtful: A Doubtful asset has all the weaknesses inherent in a Substandard asset with the added characteristics that the weaknesses make collection or liquidation in full highly questionable and improbable.

We generally assign internal grades to commercial and CRE loans with commitments equal to or greater than $750,000 based on financial and statistical models, individual credit analysis, and loan officer judgment. For these larger loans, we assign multiple grades within the Pass classification or one of the following four grades: Special Mention, Substandard, Doubtful, and Loss. Loss indicates that the outstanding balance has been charged off. We evaluate our credit quality information such as risk grades at least quarterly, or as soon as we identify information that might warrant an upgrade or downgrade. Risk grades are then updated as necessary.

For consumer loans, we generally assign internal risk grades similar to those described previously based on payment performance. These are generally assigned either a Pass or Substandard grade and are reviewed as we identify information that might warrant an upgrade or downgrade. During the third quarter of 2013, we refined our risk grading methodology for certain smaller balance loans.

Outstanding loan balances (accruing and nonaccruing) categorized by these credit quality indicators are summarized as follows:



	September 30, 2013
(In thousands)	Pass		Special Mention		Sub- standard		Doubtful		Total loans		Total allowance

Commercial:
Commercial and industrial	$	11,176,352	$	331,846	$	391,335	$	4,944	$	11,904,477
Leasing	369,152		2,875		3,098		—		375,125
Owner occupied	6,760,607		131,895		484,779		1,305		7,378,586
Municipal	438,637		—		10,006		—		448,643
Total commercial	18,744,748		466,616		889,218		6,249		20,106,831		$	479,275
Commercial real estate:
Construction and land development	2,094,934		15,250		127,875		2,236		2,240,295
Term	7,414,358		213,538		300,644		—		7,928,540
Total commercial real estate	9,509,292		228,788		428,519		2,236		10,168,835		244,008
Consumer:
Home equity credit line	2,105,327		—		19,001		—		2,124,328
1-4 family residential	4,563,611		—		73,284		—		4,636,895
Construction and other consumer real estate	312,046		—		9,390		—		321,436
Bankcard and other revolving plans	329,442		—		2,524		—		331,966
Other	206,174		—		1,404		—		207,578
Total consumer loans	7,516,600		—		105,603		—		7,622,203		68,509
FDIC-supported loans	253,788		20,401		100,672		—		374,861		5,731
Total	$	36,024,428	$	715,805	$	1,524,012	$	8,485	$	38,272,730	$	797,523



	December 31, 2012
(In thousands)	Pass		Special Mention		Sub- standard		Doubtful		Total loans		Total allowance

Commercial:
Commercial and industrial	$	10,717,594	$	198,645	$	336,230	$	4,476	$	11,256,945
Leasing	419,482		226		2,805		—		422,513
Owner occupied	6,833,923		138,539		612,011		4,609		7,589,082
Municipal	453,193		31,756		9,234		—		494,183
Total commercial	18,424,192		369,166		960,280		9,085		19,762,723		$	510,908
Commercial real estate:
Construction and land development	1,648,215		57,348		233,374		476		1,939,413
Term	7,433,789		237,201		388,914		2,915		8,062,819
Total commercial real estate	9,082,004		294,549		622,288		3,391		10,002,232		276,976
Consumer:
Home equity credit line	2,138,693		85		38,897		5		2,177,680
1-4 family residential	4,234,426		4,316		111,063		524		4,350,329
Construction and other consumer real estate	313,499		218		7,518		—		321,235
Bankcard and other revolving plans	298,665		23		7,740		—		306,428
Other	209,293		3,211		3,875		—		216,379
Total consumer loans	7,194,576		7,853		169,093		529		7,372,051		95,656
FDIC-supported loans	327,609		24,980		175,652		—		528,241		12,547
Total	$	35,028,381	$	696,548	$	1,927,313	$	13,005	$	37,665,247	$	896,087

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due in accordance with the contractual terms of the loan agreement, including scheduled interest payments. For our non-purchased credit impaired loans, if a nonaccrual loan has a balance greater than $1 million or if a loan is a troubled debt restructuring (“TDR”), including TDRs that subsequently default, we evaluate the loan for impairment and estimate a specific reserve for the loan for all portfolio segments under applicable accounting guidance. Smaller nonaccrual loans are pooled for ALLL estimation purposes. Purchased credit impaired (“PCI”) loans in our FDIC-supported portfolio segment are included in impaired loans and are accounted for under separate accounting guidance. See subsequent discussion under Purchased Loans.

When a loan is impaired, we estimate a specific reserve for the loan based on the projected present value of the loan’s future cash flows discounted at the loan’s effective interest rate, the observable market price of the loan, or the fair value of the loan’s underlying collateral less the cost to sell. The process of estimating future cash flows also incorporates the same determining factors discussed previously under nonaccrual loans. When we base the impairment amount on the fair value of the loan’s underlying collateral, we generally charge off the portion of the balance that is impaired, such that these loans do not have a specific reserve in the ALLL. Payments received on impaired loans that are accruing are recognized in interest income, according to the contractual loan agreement. Payments received on impaired loans that are on nonaccrual are not recognized in interest income, but are applied as a reduction to the principal outstanding. The amount of interest income recognized on a cash basis during the time the loans were impaired within the three and nine months ended September 30, 2013 and 2012 was not significant.

Information on impaired loans individually evaluated is summarized as follows, including the average recorded investment and interest income recognized for the three and nine months ended September 30, 2013 and 2012:



	September 30, 2013
(In thousands)	Unpaid principal balance		Recorded investment				Total recorded investment		Related allowance
			with no allowance		with allowance
Commercial:
Commercial and industrial	$	176,337	$	29,242	$	124,439	$	153,681	$	20,670
Owner occupied	166,488		50,883		102,850		153,733		15,668
Total commercial	342,825		80,125		227,289		307,414		36,338
Commercial real estate:
Construction and land development	130,435		48,912		64,479		113,391		3,572
Term	207,519		47,754		134,593		182,347		10,243
Total commercial real estate	337,954		96,666		199,072		295,738		13,815
Consumer:
Home equity credit line	15,056		9,780		2,464		12,244		182
1-4 family residential	101,913		39,774		46,529		86,303		11,778
Construction and other consumer real estate	6,238		3,169		1,603		4,772		229
Other	753		753		—		753		—
Total consumer loans	123,960		53,476		50,596		104,072		12,189
FDIC-supported loans	441,347		121,381		212,921		334,302		5,124
Total	$	1,246,086	$	351,648	$	689,878	$	1,041,526	$	67,466



	December 31, 2012
(In thousands)	Unpaid principal balance		Recorded investment				Total recorded investment		Related allowance
			with no allowance		with allowance
Commercial:
Commercial and industrial	$	176,521	$	27,035	$	119,780	$	146,815	$	12,198
Owner occupied	210,319		79,413		106,282		185,695		17,105
Total commercial	386,840		106,448		226,062		332,510		29,303
Commercial real estate:
Construction and land development	182,385		67,241		85,855		153,096		5,178
Term	310,242		70,718		187,112		257,830		16,725
Total commercial real estate	492,627		137,959		272,967		410,926		21,903
Consumer:
Home equity credit line	14,339		8,055		3,444		11,499		297
1-4 family residential	108,934		42,602		49,867		92,469		12,921
Construction and other consumer real estate	7,054		2,710		3,085		5,795		517
Bankcard and other revolving plans	287		—		287		287		1
Other	2,454		1,832		175		2,007		22
Total consumer loans	133,068		55,199		56,858		112,057		13,758
FDIC-supported loans	895,804		275,187		195,158		470,345		12,125
Total	$	1,908,339	$	574,793	$	751,045	$	1,325,838	$	77,089



	Three Months Ended September 30, 2013					Nine Months Ended September 30, 2013
(In thousands)	Average recorded investment		Interest income recognized			Average recorded investment		Interest income recognized
Commercial:
Commercial and industrial	$	199,217	$	1,105		$	175,040	$	2,594
Owner occupied	217,439		915			211,225		2,810
Municipal	—		—			—		—
Total commercial	416,656		2,020			386,265		5,404
Commercial real estate:
Construction and land development	135,013		623			139,194		2,754
Term	288,980		1,969			285,307		5,571
Total commercial real estate	423,993		2,592			424,501		8,325
Consumer:
Home equity credit line	14,606		120			12,943		262
1-4 family residential	103,379		457			100,012		1,171
Construction and other consumer real estate	5,501		49			5,767		141
Bankcard and other revolving plans	—		—			—		—
Other	1,751		—			1,784		—
Total consumer loans	125,237		626			120,506		1,574
FDIC-supported loans	363,293		20,004		¹	404,826		79,153		¹
Total	$	1,329,179	$	25,242		$	1,336,098	$	94,456



	Three Months Ended September 30, 2012					Nine Months Ended September 30, 2012
(In thousands)	Average recorded investment		Interest income recognized			Average recorded investment		Interest income recognized
Commercial:
Commercial and industrial	$	133,120	$	830		$	128,930	$	2,395
Owner occupied	187,072		558			168,328		1,729
Municipal	3,943		—			1,314		—
Total commercial	324,135		1,388			298,572		4,124
Commercial real estate:
Construction and land development	205,295		1,133			188,064		2,780
Term	288,735		1,723			258,159		5,806
Total commercial real estate	494,030		2,856			446,223		8,586
Consumer:
Home equity credit line	742		3			847		6
1-4 family residential	86,103		431			79,993		1,162
Construction and other consumer real estate	6,764		43			6,641		128
Bankcard and other revolving plans	287		—			128		—
Other	1,972		—			2,320		—
Total consumer loans	95,868		477			89,929		1,296
FDIC-supported loans	94,890		14,055		¹	102,709		34,202		¹
Total	$	1,008,923	$	18,776		$	937,433	$	48,208

¹The balance of interest income recognized results primarily from accretion of interest income on impaired FDIC-supported loans.

Modified and Restructured Loans

Loans may be modified in the normal course of business for competitive reasons or to strengthen the Company’s position. Loan modifications and restructurings may also occur when the borrower experiences financial difficulty and needs temporary or permanent relief from the original contractual terms of the loan. These modifications are structured on a loan-by-loan basis and, depending on the circumstances, may include extended payment terms, a modified interest rate, forgiveness of principal, or other concessions. Loans that have been modified to accommodate a borrower who is experiencing financial difficulties, and for which the Company has granted a concession that it would not otherwise consider, are considered TDRs.

We consider many factors in determining whether to agree to a loan modification involving concessions, and seek a solution that will both minimize potential loss to the Company and attempt to help the borrower. We evaluate borrowers’ current and forecasted future cash flows, their ability and willingness to make current contractual or proposed modified payments, the value of the underlying collateral (if applicable), the possibility of obtaining additional security or guarantees, and the potential costs related to a repossession or foreclosure and the subsequent sale of the collateral.

TDRs are classified as either accrual or nonaccrual loans. A loan on nonaccrual and restructured as a TDR will remain on nonaccrual status until the borrower has proven the ability to perform under the modified structure for a minimum of six months, and there is evidence that such payments can and are likely to continue as agreed. Performance prior to the restructuring, or significant events that coincide with the restructuring, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of restructuring or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains classified as a nonaccrual loan. A TDR loan that specifies an interest rate that at the time of the restructuring is greater than or equal to the rate the bank is willing to accept for a new loan with comparable risk may not be reported as a TDR or an impaired loan in the calendar years subsequent to the restructuring if it is in compliance with its modified terms.

Selected information on TDRs that includes the recorded investment on an accruing and nonaccruing basis by loan class and modification type is summarized in the following schedules:



	September 30, 2013
	Recorded investment resulting from the following modification types:
(In thousands)	Interest rate below market		Maturity or term extension		Principal forgiveness		Payment deferral		Other¹		Multiple modification types²		Total
Accruing
Commercial:
Commercial and industrial	$	355	$	15,794	$	—	$	6,856	$	14,326	$	34,928	$	72,259
Owner occupied	22,121		4,768		994		2,961		10,145		19,866		60,855
Total commercial	22,476		20,562		994		9,817		24,471		54,794		133,114
Commercial real estate:
Construction and land development	2,062		11,688		—		1,120		8,836		27,962		51,668
Term	34,482		9,516		5,331		5,766		22,405		58,945		136,445
Total commercial real estate	36,544		21,204		5,331		6,886		31,241		86,907		188,113
Consumer:
Home equity credit line	743		—		8,922		—		325		335		10,325
1-4 family residential	2,649		1,294		7,861		647		4,482		33,613		50,546
Construction and other consumer real estate	133		963		—		—		144		1,455		2,695
Other	—		—		—		—		—		—		—
Total consumer loans	3,525		2,257		16,783		647		4,951		35,403		63,566
Total accruing	62,545		44,023		23,108		17,350		60,663		177,104		384,793
Nonaccruing
Commercial:
Commercial and industrial	2,609		8,958		68		156		1,362		13,416		26,569
Owner occupied	3,096		1,471		1,074		3,823		11,182		12,944		33,590
Total commercial	5,705		10,429		1,142		3,979		12,544		26,360		60,159
Commercial real estate:
Construction and land development	11,822		1,750		—		—		5,591		40,008		59,171
Term	2,480		—		—		2,051		325		9,780		14,636
Total commercial real estate	14,302		1,750		—		2,051		5,916		49,788		73,807
Consumer:
Home equity credit line	—		—		1,575		—		222		130		1,927
1-4 family residential	4,455		1,420		1,787		—		4,440		16,353		28,455
Construction and other consumer real estate	5		926		—		—		—		1,034		1,965
Bankcard and other revolving plans	—		260		—		—		—		—		260
Total consumer loans	4,460		2,606		3,362		—		4,662		17,517		32,607
Total nonaccruing	24,467		14,785		4,504		6,030		23,122		93,665		166,573
Total	$	87,012	$	58,808	$	27,612	$	23,380	$	83,785	$	270,769	$	551,366



	December 31, 2012
	Recorded investment resulting from the following modification types:
(In thousands)	Interest rate below market		Maturity or term extension		Principal forgiveness		Payment deferral		Other¹		Multiple modification types²		Total
Accruing
Commercial:
Commercial and industrial	$	5,388	$	6,139	$	—	$	3,585	$	17,647	$	44,684	$	77,443
Owner occupied	20,963		12,104		—		4,013		9,305		13,598		59,983
Total commercial	26,351		18,243		—		7,598		26,952		58,282		137,426
Commercial real estate:
Construction and land development	1,718		9,868		2		59		8,432		30,248		50,327
Term	30,118		1,854		8,433		3,807		32,302		82,809		159,323
Total commercial real estate	31,836		11,722		8,435		3,866		40,734		113,057		209,650
Consumer:
Home equity credit line	744		—		5,965		—		300		218		7,227
1-4 family residential	2,665		1,324		5,923		147		3,319		36,199		49,577
Construction and other consumer real estate	147		—		—		—		641		2,354		3,142
Other	—		3		—		—		1		—		4
Total consumer loans	3,556		1,327		11,888		147		4,261		38,771		59,950
Total accruing	61,743		31,292		20,323		11,611		71,947		210,110		407,026
Nonaccruing
Commercial:
Commercial and industrial	318		5,667		—		480		2,035		17,379		25,879
Owner occupied	3,822		4,816		654		4,701		7,643		7,803		29,439
Total commercial	4,140		10,483		654		5,181		9,678		25,182		55,318
Commercial real estate:
Construction and land development	18,255		1,308		—		—		1,807		68,481		89,851
Term	3,042		536		—		2,645		9,389		17,718		33,330
Total commercial real estate	21,297		1,844		—		2,645		11,196		86,199		123,181
Consumer:
Home equity credit line	—		—		4,008		—		131		143		4,282
1-4 family residential	4,697		5,637		4,048		—		1,693		14,240		30,315
Construction and other consumer real estate	7		1,671		—		—		—		243		1,921
Bankcard and other revolving plans	—		287		—		—		—		—		287
Other	—		—		—		172		—		—		172
Total consumer loans	4,704		7,595		8,056		172		1,824		14,626		36,977
Total nonaccruing	30,141		19,922		8,710		7,998		22,698		126,007		215,476
Total	$	91,884	$	51,214	$	29,033	$	19,609	$	94,645	$	336,117	$	622,502

¹Includes TDRs that resulted from other modification types including, but not limited to, a legal judgment awarded on different terms, a bankruptcy plan confirmed on different terms, a settlement that includes the delivery of collateral in exchange for debt reduction, etc.

²Includes TDRs that resulted from a combination of any of the previous modification types.

Unused commitments to extend credit on TDRs amounted to approximately $6 million at September 30, 2013 and $13 million at December 31, 2012.

The total recorded investment of all TDRs in which interest rates were modified below market was $204.9 million at September 30, 2013 and $225.6 million at December 31, 2012. These loans are included in the previous table in the columns for interest rate below market and multiple modification types.

The net financial impact on interest income due to interest rate modifications below market for accruing TDRs is summarized in the following schedule:



(In thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Commercial:
Commercial and industrial	$	(107	)	$	(134	)	$	(308	)	$	(157	)
Owner occupied	(1,061		)	(309		)	(3,158		)	(1,012		)
Total commercial	(1,168		)	(443		)	(3,466		)	(1,169		)
Commercial real estate:
Construction and land development	(237		)	(273		)	(755		)	(742		)
Term	(2,134		)	(1,443		)	(7,285		)	(4,469		)
Total commercial real estate	(2,371		)	(1,716		)	(8,040		)	(5,211		)
Consumer:
Home equity credit line	(24		)	(18		)	(97		)	(51		)
1-4 family residential	(3,700		)	(4,204		)	(11,313		)	(12,045		)
Construction and other consumer real estate	(106		)	(230		)	(324		)	(445		)
Total consumer loans	(3,830		)	(4,452		)	(11,734		)	(12,541		)
Total decrease to interest income¹	$	(7,369	)	$	(6,611	)	$	(23,240	)	$	(18,921	)

¹Calculated based on the difference between the modified rate and the premodified rate applied to the recorded investment.

On an ongoing basis, we monitor the performance of all TDRs according to their restructured terms. Subsequent payment default is defined in terms of delinquency, when principal or interest payments are past due 90 days or more for commercial loans, or 60 days or more for consumer loans.

The recorded investment of accruing and nonaccruing TDRs that had a payment default during the period listed below (and are still in default at period-end) and are within 12 months or less of being modified as TDRs is as follows:



	Three Months Ended September 30, 2013						Nine Months Ended September 30, 2013
(In thousands)	Accruing		Nonaccruing		Total		Accruing		Nonaccruing		Total
Commercial:
Commercial and industrial	$	—	$	660	$	660	$	—	$	660	$	660
Owner occupied	—		—		—		—		511		511
Total commercial	—		660		660		—		1,171		1,171
Commercial real estate:
Construction and land development	—		—		—		—		—		—
Term	—		—		—		—		—		—
Total commercial real estate	—		—		—		—		—		—
Consumer:
Home equity credit line	—		222		222		—		307		307
1-4 family residential	—		—		—		—		1,372		1,372
Total consumer loans	—		222		222		—		1,679		1,679
Total	$	—	$	882	$	882	$	—	$	2,850	$	2,850



	Three Months Ended September 30, 2012						Nine Months Ended September 30, 2012
(In thousands)	Accruing		Nonaccruing		Total		Accruing		Nonaccruing		Total
Commercial:
Commercial and industrial	$	—	$	107	$	107	$	—	$	1,441	$	1,441
Owner occupied	—		—		—		—		5,405		5,405
Total commercial	—		107		107		—		6,846		6,846
Commercial real estate:
Construction and land development	—		2,229		2,229		—		2,525		2,525
Term	—		—		—		—		—		—
Total commercial real estate	—		2,229		2,229		—		2,525		2,525
Consumer:
Home equity credit line					—						—
1-4 family residential	—		—		—		—		1,089		1,089
Total consumer loans	—		—		—		—		1,089		1,089
Total	$	—	$	2,336	$	2,336	$	—	$	10,460	$	10,460

Note: Total loans modified as TDRs during the 12 months previous to September 30, 2013 and 2012 were $178.8 million and $164.6 million, respectively.

Concentrations of Credit Risk

We perform an ongoing analysis of our loan portfolio to evaluate whether there is any significant exposure to any concentrations of credit risk. These potential concentrations include, but are not limited to, individual borrowers, groups of borrowers, industries, geographies, collateral types, sponsors, etc. Such credit risks (whether on- or off-balance sheet) may occur when groups of borrowers or counterparties have similar economic characteristics and are similarly affected by changes in economic or other conditions. Credit risk also includes the loss that would be recognized subsequent to the reporting date if counterparties failed to perform as contracted. Our analysis as of September 30, 2013 concluded that no significant exposure exists from such credit risk concentrations. See Note 6 for a discussion of counterparty risk associated with the Company’s derivative transactions.

Purchased Loans

Background and Accounting

We purchase loans in the ordinary course of business and account for them and the related interest income based on their performing status at the time of acquisition. PCI loans have evidence of credit deterioration at the time of acquisition and it is probable that not all contractual payments will be collected. Interest income for PCI loans is accounted for on an expected cash flow basis. Certain other loans acquired by the Company that are not credit-impaired include loans with revolving privileges and are excluded from the PCI tabular disclosures following. Interest income for these loans is accounted for on a contractual cash flow basis. Certain acquired loans with similar characteristics such as risk exposure, type, size, etc., are grouped and accounted for in loan pools.

During 2009, CB&T and NSB acquired failed banks from the FDIC as receiver and entered into loss sharing agreements with the FDIC for the acquired loans and foreclosed assets. According to the agreements, the FDIC assumes 80% of credit losses up to a threshold specified for each acquisition and 95% above that threshold for a period of five years, or in 2014. The covered portfolio primarily consists of commercial loans. The agreements expire after ten years, or in 2019, for single family residential loans. The loans acquired from the FDIC are presented separately in the Company’s balance sheet as “FDIC-supported loans” and include both PCI and certain other acquired loans. Upon acquisition, in accordance with applicable accounting guidance, the acquired loans were recorded at their fair value without a corresponding ALLL.

Outstanding Balances and Accretable Yield

The outstanding balances of all required payments and the related carrying amounts for PCI loans are as follows:



(In thousands)	September 30, 2013		December 31, 2012

Commercial	$	164,760	$	227,414
Commercial real estate	254,507		382,068
Consumer	31,675		41,398
Outstanding balance	$	450,942	$	650,880

Carrying amount	$	334,473	$	472,040
ALLL	5,077		12,077
Carrying amount, net	$	329,396	$	459,963

At the time of acquisition of PCI loans, we determine the loan’s contractually required payments in excess of all cash flows expected to be collected as an amount that should not be accreted (nonaccretable difference). With respect to the cash flows expected to be collected, the portion representing the excess of the loan’s expected cash flows over our initial investment (accretable yield) is accreted into interest income on a level yield basis over the remaining expected life of the loan or pool of loans. The effects of estimated prepayments are considered in estimating the expected cash flows.

Certain PCI loans are not accounted for as previously described because the estimation of cash flows to be collected involves a high degree of uncertainty. Under these circumstances, the accounting guidance provides that interest income is recognized on a cash basis similar to the cost recovery methodology for nonaccrual loans. The net carrying amounts in the preceding schedule also include the amounts for these loans, which were approximately $0.1 million at September 30, 2013 and $12.2 million at December 31, 2012.

Changes in the accretable yield for PCI loans were as follows:



(In thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2013			2012			2013			2012

Balance at beginning of period	$	104,483		$	157,040		$	134,461		$	184,679
Accretion	(19,941		)	(25,409		)	(78,994		)	(69,824		)
Reclassification from nonaccretable difference	7,908			9,565			31,092			25,112
Disposals and other	3,308			3,550			9,199			4,779
Balance at end of period	$	95,758		$	144,746		$	95,758		$	144,746

Note: Amounts have been adjusted based on refinements to the original estimates of the accretable yield. Because of the estimation process required, we expect that additional adjustments to these amounts may be necessary in future periods.

The primary drivers of reclassification to accretable yield from nonaccretable difference and increases in disposals and other resulted primarily from (1) changes in estimated cash flows, (2) unexpected payments on nonaccrual loans, and (3) recoveries on zero balance loans pools. See subsequent discussion under changes in cash flow estimates.

ALLL Determination

For all acquired loans, the ALLL is only established for credit deterioration subsequent to the date of acquisition and represents our estimate of the inherent losses in excess of the book value of acquired loans. The ALLL for acquired loans is determined without giving consideration to the amounts recoverable from the FDIC through loss sharing agreements. These amounts recoverable are separately accounted for in the FDIC indemnification asset (“IA”) and are thus presented “gross” in the balance sheet. The FDIC IA is included in other assets in the balance sheet and is discussed subsequently. The ALLL for acquired loans is included in the overall ALLL in the balance sheet. The provision for loan losses is reported net of changes in the amounts recoverable under the loss sharing agreements.

During the three and nine months ended September 30, we adjusted the ALLL for acquired loans by recording a provision for loan losses of $(2.0) million and $(9.1) million in 2013 and $(9.0) million and $(16.3) million in 2012, respectively. The provision is net of the ALLL reversals discussed subsequently. As separately discussed and in accordance with the loss sharing agreements, portions of the increases to the provision are recoverable from the FDIC and comprise part of the FDIC IA. For the three and nine months ended September 30, these adjustments, before FDIC indemnification, resulted in net recoveries of $1.9 million and $2.5 million in 2013, and $1.4 million and $8.1 million in 2012, respectively.

Changes in the provision for loan losses and related ALLL are driven in large part by the same factors that affect the changes in reclassification from nonaccretable difference to accretable yield, as discussed under changes in cash flow estimates.

Changes in Cash Flow Estimates

Over the life of the loan or loan pool, we continue to estimate cash flows expected to be collected. We evaluate quarterly at the balance sheet date whether the estimated present values of these loans using the effective interest rates have decreased below their carrying values. If so, we record a provision for loan losses.

For increases in carrying values that resulted from better-than-expected cash flows, we use such increases first to reverse any existing ALLL. During the three and nine months ended September 30, total reversals to the ALLL were $2.3 million and $13.2 million in 2013 and $8.3 million and $18.9 million in 2012, respectively. When there is no current ALLL, we increase the amount of accretable yield on a prospective basis over the remaining life of the loan and recognize this increase in interest income. Any related decrease to the FDIC IA is recorded through a charge to other noninterest expense. Changes that increase cash flows have been due primarily to (1) the enhanced economic status of borrowers compared to original evaluations, (2) improvements in the Southern California market where the majority of these loans were originated, and (3) efforts by our credit officers and loan workout professionals to resolve problem loans.

For the three and nine months ended September 30, the impact of increased cash flow estimates recognized in the statement of income for acquired loans with no ALLL was approximately $15.0 million and $62.4 million in 2013 and $17.6 million and $45.5 million in 2012, respectively, of additional interest income; and $13.0 million and $55.1 million in 2013 and $14.4 million and $35.6 million in 2012, respectively, of additional other noninterest expense due to the reduction of the FDIC IA.

FDIC Indemnification Asset

In October 2012, the FASB issued ASU 2012-06, Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution, a consensus of the FASB Emerging Issues Task Force. This new guidance under ASC 805, Business Combinations, provides that a change in measurement of the IA due to a change in expected cash flows would be accounted for on the same basis as the change in the indemnified loans. Any amortization period for the changes in value would be limited to the lesser of the term of the indemnification agreement or the remaining life of the indemnified loans. Our existing accounting was substantially similar to this new guidance, and our adoption effective January 1, 2013 did not have a significant impact on our financial position or results of operations.

The amount of the FDIC IA was initially recorded at fair value using estimated cash flows based on credit adjustments for each loan or loan pool and the loss sharing reimbursement of 80% or 95%, as appropriate. The timing of the cash flows was adjusted to reflect our expectations to receive the FDIC reimbursements within the estimated loss period. Discount rates were based on U.S. Treasury rates or the AAA composite yield on investment grade bonds of similar maturity. As previously discussed, the amount is adjusted as actual loss experience is developed and estimated losses covered under the loss sharing agreements are updated. Estimated loan losses, if any, in excess of the amounts recoverable are reflected as period expenses through the provision for loan losses.

Changes in the FDIC IA were as follows:



(In thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012

Balance at beginning of period	$	51,297		$	117,167		$	90,929		$	133,810
Amounts filed with the FDIC and collected or in process ¹	5,507			3,904			15,267			15,106
Net change in asset balance due to reestimation of projected cash flows ²	(15,033		)	(20,165		)	(64,425		)	(48,010		)
Balance at end of period	$	41,771		$	100,906		$	41,771		$	100,906


¹	The FDIC’s reimbursement process requires that submitted expenses be paid, not just incurred, to qualify for reimbursement.


²	Negative amounts result from the accretion of loan balances based on increases in cash flow estimates and on prepayments.

Any changes to the FDIC IA are recognized immediately in the quarterly period the change in estimated cash flows is determined. All claims submitted to the FDIC have been reimbursed in a timely manner.