10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

or

oTRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 001-36308

TALMER BANCORP, INC.

(Exact name of registrant as specified in its charter)

Michigan	61-1511150
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2301 West Big Beaver Rd, Suite 525 Troy, Michigan	48084
(Address of principal executive offices)	(Zip Code)

(248) 498-2802

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x   No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x   No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x  (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No  x

The number of shares outstanding of the issuer’s Class A common stock, as of May 14, 2014 was 69,991,613.

EXPLANATORY NOTE

This Form 10Q/A amends the Quarterly Report on Form 10-Q of Talmer Bancorp, Inc. for the quarterly period ended March 31, 2014 (the “Form 10-Q”), as filed with the Securities and Exchange Commission on May 15, 2014, for the sole purpose of furnishing the Interactive Data Files as Exhibit 101 in accordance with Rule 405 of Regulation S-T. Exhibit 101 provides the financial statements and related notes from the Form 10-Q formatted in eXtensible Business Reporting Language (XBRL).

No other changes have been made to the Form 10-Q other than furnishing the exhibit described above. This Form 10-Q/A speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the Form 10-Q.

Item 6.  Exhibits.

Exhibit No.	Description of Exhibit
10.1	Third Amendment to Equity Incentive Plan dated March 26, 2014(1)
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer(1)
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer(1)
32.1	Section 1350 Certifications(1)
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, formatted in eXtensible Business Reporting Language (XBRL); (i) Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013, (ii) Consolidated Statements of Income for the three months ended March 31, 2014 and 2013, (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2014 and 2013, (iv) Consolidated Statement of Changes in Shareholders’ Equity for the three months ended March 31, 2014 and 2013, (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013, and (vi) Notes to Consolidate Financial Statements.(2)

(1)Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed on May 15, 2014.

(2)Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TALMER BANCORP, INC.
June 10, 2014	By:	/s/ David T. Provost
		David T. Provost
		Chief Executive Officer
		(Principal Executive Officer)
June 10, 2014	By:	/s/ Dennis Klaeser
		Dennis Klaeser
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

3

Exhibit List

Exhibit No.	Description of Exhibit
10.1	Third Amendment to Equity Incentive Plan dated March 26, 2014(1)
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer(1)
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer(1)
32.1	Section 1350 Certifications(1)
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, formatted in eXtensible Business Reporting Language (XBRL); (i) Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013, (ii) Consolidated Statements of Income for the three months ended March 31, 2014 and 2013, (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2014 and 2013, (iv) Consolidated Statement of Changes in Shareholders’ Equity for the three months ended March 31, 2014 and 2013, (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013, and (vi) Notes to Consolidate Financial Statements.(2)

(1)Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed on May 15, 2014.

(2)Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

4

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INCOME TAXES (Tables)

3 Months Ended

Mar. 31, 2014

INCOME TAXES

Schedule of current and deferred components of the provision for income taxes

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Current income tax expense (benefit)
Federal	$	(2,545	)	$	(8,034	)
State	(476		)	1,376
Total current income tax benefit	(3,021		)	(6,658		)
Deferred income tax expense (benefit)
Federal	1,086			5,094
State	897			(1,486		)
Total deferred income tax expense (benefit)	1,983			3,608
Change in valuation allowance	(34		)	—
Income tax benefit	$	(1,072	)	$	(3,050	)

Schedule of reconciliation of expected income tax expense (benefit) at the federal statutory rate to the Company's provision for income taxes and effective tax rate

	For the three months ended March 31,
	2014					2013
(Dollars in thousands)	Amount			Rate		Amount			Rate
Tax based on federal statutory rate	$	11,058		35.0	%	$	20,091		35.0	%
Effect of:
Tax exempt income	(727		)	(2.3	)	(428		)	(0.7	)
State taxes, net of federal benefit	274			0.9		(71		)	(0.1	)
Change in valuation allowance	(34		)	(0.1	)	—			—
Bargain purchase gain	(12,948		)	(41.0	)	(25,096		)	(43.7	)
Transaction costs	28			0.1		2,581			4.5
Other, net	1,277			4.0		(127		)	(0.2	)
Income tax expense (benefit)	$	(1,072	)	(3.4	)%	$	(3,050	)	(5.3	)%

Schedule of significant components of the deferred tax assets and liabilities

	March 31,			December 31,
(Dollars in thousands)	2014			2013
Deferred tax assets:
Allowance for loan losses	$	57,938		$	51,527
Other real estate losses	7,249			3,702
Organizational costs	299			311
Accrued stock-based compensation	5,922			5,926
Loss and tax credit carry forwards	32,239			19,298
Other reserves	1,858			1,988
Goodwill and other intangibles	1,433			1,494
Nonaccrual interest	11,213			10,150
Business combination adjustments	80,135			53,890
Net unrealized loss on available for sale securities	1,300			4,306
Other	816			—
Total deferred tax assets	200,402			152,592
Deferred tax liabilities:
Depreciation	4,360			3,996
FHLB stock dividends	283			1,541
Deferred loan fees	1,247			1,229
Prepaid expenses	439			799
Loan servicing rights	26,533			27,334
Other	—			247
Total deferred tax liabilities	32,862			35,146
Net deferred tax asset before valuation allowance	167,540			117,446
Valuation allowance	(11,054		)	(10,127		)
Net deferred tax asset	$	156,486		$	107,319

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FAIR VALUE (Details 8) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014		Dec. 31, 2013		Mar. 31, 2013	Dec. 31, 2012
Financial assets:
Net loans, excluding covered loans	$ 3,123,018		$ 2,456,170
Net covered loans	459,920		489,687
FDIC indemnification asset	119,045		131,861		202,202	226,356
FDIC receivable	8,130		7,783		15,090	17,999
Company-owned life insurance	39,814		39,500
Deposits:
Time deposits	1,270,927		927,313
Total deposits	4,386,332		3,600,837
FDIC clawback liability	25,593		24,887
Short-term borrowings	89,562		71,876
Long-term debt	177,483		199,037
FDIC warrants payable	4,423		4,118
Uncovered
Deposits:
Impaired loans	23,240		21,876
Covered
Deposits:
Impaired loans	26,649		27,024
Recurring basis | Covered
Deposits:
Impaired loans	17,900		17,700
Non-recurring basis | Uncovered
Deposits:
Impaired loans	6,600		2,300
Non-recurring basis | Covered
Deposits:
Impaired loans	3,200		644
Total | Recurring basis
Financial assets:
Cash and cash equivalents	530,538		375,356
Net loans, excluding covered loans	3,193,719	[1]	2,574,109	[1]
Net covered loans	533,149	[2]	534,857	[2]
Accrued interest receivable	9,955		7,968
FDIC indemnification asset	77,063		84,010
FDIC receivable	8,130		7,783
Company-owned life insurance	39,814		39,500
Deposits:
Savings and demand deposits	3,115,405		2,673,524
Time deposits	1,274,210		928,128
Total deposits	4,389,615		3,601,652
FDIC clawback liability	25,593		24,887
Short-term borrowings	89,562		71,876
Long-term debt	170,053		190,420
FDIC warrants payable	4,423		4,118
Accrued interest payable	598		626
Total | Non-recurring basis
Deposits:
Impaired loans	9,763		2,975
Level 1 | Recurring basis
Financial assets:
Cash and cash equivalents	107,170		97,167
Level 2 | Recurring basis
Financial assets:
Cash and cash equivalents	423,368		278,189
Accrued interest receivable	9,955		7,968
FDIC receivable	8,130		7,783
Company-owned life insurance	39,814		39,500
Deposits:
Savings and demand deposits	3,115,405		2,673,524
Time deposits	1,274,210		928,128
Total deposits	4,389,615		3,601,652
Short-term borrowings	89,562		71,876
Long-term debt	170,053		190,420
Accrued interest payable	598		626
Level 3 | Recurring basis
Financial assets:
Net loans, excluding covered loans	3,193,719		2,574,109
Net covered loans	533,149		534,857
FDIC indemnification asset	77,063		84,010
Deposits:
FDIC clawback liability	25,593		24,887
FDIC warrants payable	4,423		4,118
Level 3 | Non-recurring basis
Deposits:
Impaired loans	9,763		2,975
Carrying Value | Recurring basis
Financial assets:
Cash and cash equivalents	530,538		375,356
Federal Home Loan Bank stock	12,335		16,303
Net loans, excluding covered loans	3,123,018	[1]	2,456,170	[1]
Net covered loans	459,920	[2]	489,687	[2]
Accrued interest receivable	9,955		7,968
FDIC indemnification asset	119,045		131,861
FDIC receivable	8,130		7,783
Company-owned life insurance	39,814		39,500
Deposits:
Savings and demand deposits	3,115,405		2,673,524
Time deposits	1,270,927		927,313
Total deposits	4,386,332		3,600,837
FDIC clawback liability	25,593		24,887
Short-term borrowings	89,562		71,876
Long-term debt	177,483		199,037
FDIC warrants payable	4,423		4,118
Accrued interest payable	$ 598		$ 626

[1] Included $6.6 million of impaired loans recorded at fair value on a nonrecurring basis and $17.9 million of loans recorded at fair value on a recurring basis as of March 31, 2014. Included $2.3 million of impaired loans recorded at fair value on a nonrecurring basis and $17.7 million of loans recorded at fair value on a recurring basis as of December 31, 2013.

[2] Included $3.2 million of impaired loans recorded at fair value on a nonrecurring basis as of March 31, 2014. Included $644 thousand of impaired loans recorded at fair value on a nonrecurring basis as of December 31, 2013.

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FAIR VALUE (Details 2) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Fair Value
Period of expected receipt of payment for FDIC receivable	90 days
Assumption used in FDIC Warrants Payable
Annualized growth rate for FDIC warrants payable (as a percent)	8.00%
Commercial Real Estate
Fair Value
WA discount rate (as a percent)	19.32%	20.00%
WA cost to service/per year	$ 471	$ 467
WA float range (as a percent)	0.56%	0.56%
Commercial Real Estate | Minimum
Fair Value
Prepayment speed (as a percent)	7.08%	8.50%
Commercial Real Estate | Maximum
Fair Value
Prepayment speed (as a percent)	50.00%	50.00%
Agricultural loan servicing rights
Fair Value
WA discount rate (as a percent)	15.00%	15.00%
WA cost to service/per year	200	200
WA float range (as a percent)	0.56%	0.56%
Agricultural loan servicing rights | Minimum
Fair Value
Prepayment speed (as a percent)	5.34%	4.98%
Agricultural loan servicing rights | Maximum
Fair Value
Prepayment speed (as a percent)	52.66%	53.16%
Mortgage
Fair Value
WA discount rate (as a percent)	9.66%	10.17%
WA cost to service/per year	57	57
WA Ancillary income/per year	$ 36	$ 45
Mortgage | Minimum
Fair Value
Prepayment speed (as a percent)	3.67%	3.55%
WA float range (as a percent)	0.87%	0.73%
Mortgage | Maximum
Fair Value
Prepayment speed (as a percent)	41.26%	44.49%
WA float range (as a percent)	1.69%	1.54%

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ALLOWANCE FOR LOAN LOSSES (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	$ 40,381
Provision (benefit) for loan and lease losses	6,424	1,176
Ending allowance for loan losses	38,000
Allowance for loan losses:
Allowance for loan losses	38,000
Balance of loans:
Total loans, covered	497,920		530,068
Covered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	40,381	51,473
Provision (benefit) for loan and lease losses	(2,498)	1,084
Gross charge-offs	(3,948)	(6,577)
Recoveries	4,065	3,934
Net recoveries (charge-offs)	117	(2,643)
Ending allowance for loan losses	38,000	49,914
Allowance for loan losses:
Individually evaluated for impairment	1,506		1,529
Collectively evaluated for impairment	3,879		3,782
Allowance for loan losses	38,000	49,914
Balance of loans:
Individually evaluated for impairment	26,649		27,024
Collectively evaluated for impairment	57,404		62,058
Covered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			35,070
Ending allowance for loan losses	32,615		35,070
Allowance for loan losses:
Allowance for loan losses	32,615		35,070
Residential real estate | Covered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	4,696	5,716
Provision (benefit) for loan and lease losses	692	(144)
Gross charge-offs	(863)	(749)
Recoveries	552	261
Net recoveries (charge-offs)	(311)	(488)
Ending allowance for loan losses	5,077	5,084
Allowance for loan losses:
Individually evaluated for impairment	463		360
Collectively evaluated for impairment	168		192
Allowance for loan losses	5,077	5,084
Balance of loans:
Individually evaluated for impairment	3,905		2,678
Collectively evaluated for impairment	18,969		20,622
Residential real estate | Covered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			4,144
Ending allowance for loan losses	4,446		4,144
Allowance for loan losses:
Allowance for loan losses	4,446		4,144
Commercial real estate | Covered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	26,394	30,150
Provision (benefit) for loan and lease losses	(1,991)	769
Gross charge-offs	(1,986)	(4,610)
Recoveries	1,645	2,709
Net recoveries (charge-offs)	(341)	(1,901)
Ending allowance for loan losses	24,062	29,018
Allowance for loan losses:
Individually evaluated for impairment	95		230
Collectively evaluated for impairment	2,912		3,010
Allowance for loan losses	24,062	29,018
Balance of loans:
Individually evaluated for impairment	18,577		18,062
Collectively evaluated for impairment	16,835		18,570
Commercial real estate | Covered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			23,154
Ending allowance for loan losses	21,055		23,154
Allowance for loan losses:
Allowance for loan losses	21,055		23,154
Commercial and industrial | Covered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	7,227	10,915
Provision (benefit) for loan and lease losses	(1,090)	1,523
Gross charge-offs	(1,027)	(835)
Recoveries	1,649	547
Net recoveries (charge-offs)	622	(288)
Ending allowance for loan losses	6,759	12,150
Allowance for loan losses:
Individually evaluated for impairment	945		937
Collectively evaluated for impairment	753		471
Allowance for loan losses	6,759	12,150
Balance of loans:
Individually evaluated for impairment	2,955		5,121
Collectively evaluated for impairment	20,712		21,909
Commercial and industrial | Covered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			5,819
Ending allowance for loan losses	5,061		5,819
Allowance for loan losses:
Allowance for loan losses	5,061		5,819
Real estate construction | Covered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	1,984	4,509
Provision (benefit) for loan and lease losses	(83)	(935)
Gross charge-offs	(25)	(364)
Recoveries	127	367
Net recoveries (charge-offs)	102	3
Ending allowance for loan losses	2,003	3,577
Allowance for loan losses:
Collectively evaluated for impairment	44		108
Allowance for loan losses	2,003	3,577
Balance of loans:
Individually evaluated for impairment	1,187		1,138
Collectively evaluated for impairment	731		812
Real estate construction | Covered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			1,876
Ending allowance for loan losses	1,959		1,876
Allowance for loan losses:
Allowance for loan losses	1,959		1,876
Consumer | Covered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	80	183
Provision (benefit) for loan and lease losses	(26)	(129)
Gross charge-offs	(47)	(19)
Recoveries	92	50
Net recoveries (charge-offs)	45	31
Ending allowance for loan losses	99	85
Allowance for loan losses:
Individually evaluated for impairment	3		2
Collectively evaluated for impairment	2		1
Allowance for loan losses	99	85
Balance of loans:
Individually evaluated for impairment	25		25
Collectively evaluated for impairment	157		145
Consumer | Covered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			77
Ending allowance for loan losses	94		77
Allowance for loan losses:
Allowance for loan losses	$ 94		$ 77

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SECURITIES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Investment securities available-for-sale
Amortized Cost	$ 635,763	$ 632,385
Gross Unrealized Gains	4,053	3,252
Gross Unrealized Losses	(7,769)	(15,554)
Fair Value	632,047	620,083
U.S. Treasury securities
Investment securities available-for-sale
Amortized Cost	3,250
Fair Value	3,250
U.S. government sponsored agency obligations
Investment securities available-for-sale
Amortized Cost	116,091	102,597
Gross Unrealized Gains	129
Gross Unrealized Losses	(2,066)	(4,360)
Fair Value	114,154	98,237
Obligations of state and political subdivisions: Taxable
Investment securities available-for-sale
Amortized Cost	397	396
Fair Value	397	396
Obligations of state and political subdivisions: Tax exempt
Investment securities available-for-sale
Amortized Cost	167,400	184,351
Gross Unrealized Gains	2,362	2,102
Gross Unrealized Losses	(2,183)	(4,453)
Fair Value	167,579	182,000
SBA Pools
Investment securities available-for-sale
Amortized Cost	38,065	42,956
Gross Unrealized Gains	115	162
Gross Unrealized Losses	(296)	(692)
Fair Value	37,884	42,426
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Investment securities available-for-sale
Amortized Cost	233,179	223,518
Gross Unrealized Gains	1,087	729
Gross Unrealized Losses	(2,809)	(5,325)
Fair Value	231,457	218,922
Privately issued
Investment securities available-for-sale
Amortized Cost	3,490	4,453
Gross Unrealized Gains	27	22
Gross Unrealized Losses	(1)	(29)
Fair Value	3,516	4,446
Privately issued commercial mortgage-backed securities
Investment securities available-for-sale
Amortized Cost	5,168	5,181
Gross Unrealized Losses	(12)	(34)
Fair Value	5,156	5,147
Corporate debt securities
Investment securities available-for-sale
Amortized Cost	68,223	68,433
Gross Unrealized Gains	333	237
Gross Unrealized Losses	(394)	(650)
Fair Value	68,162	68,020
Equity securities
Investment securities available-for-sale
Amortized Cost	500	500
Gross Unrealized Losses	(8)	(11)
Fair Value	$ 492	$ 489

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DERIVATIVE INSTRUMENTS (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014 derivative	Dec. 31, 2013
DERIVATIVE INSTRUMENTS
Number of derivatives designated as qualifying accounting hedging instruments	0
Derivative instruments
Notional Amount	$ 319,783	$ 236,431
Derivative Assets, Fair Value
Net derivatives assets	1,420	2,630
Derivative Liabilities, Fair Value
Net derivatives liabilities	52
Forward contracts related to mortgage loans to be delivered for sale
Derivative instruments
Notional Amount	215,125	168,746
Derivative Assets, Fair Value
Gross Derivative Assets	181	1,484
Interest rate lock commitments
Derivative instruments
Notional Amount	92,714	67,685
Derivative Assets, Fair Value
Gross Derivative Assets	1,007	1,146
Customer-initiated derivatives
Derivative instruments
Notional Amount	11,944
Derivative Assets, Fair Value
Gross Derivative Assets	232
Derivative Liabilities, Fair Value
Gross Derivative Liabilities	$ 52

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BUSINESS COMBINATIONS (Details) (USD $)	3 Months Ended											0 Months Ended		3 Months Ended			3 Months Ended	0 Months Ended	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Jan. 02, 2014	Dec. 31, 2013	Jan. 02, 2013	Mar. 31, 2014 Accounted for under ASC 310-30	Jan. 02, 2014 Accounted for under ASC 310-30	Dec. 31, 2013 Accounted for under ASC 310-30	Jan. 02, 2013 Accounted for under ASC 310-30	Jan. 02, 2014 Excluded from ASC 310-30 accounting	Jan. 02, 2013 Excluded from ASC 310-30 accounting	Jan. 02, 2014 Financial Commerce Corporation's wholly-owned subsidiary banks and Capital Bancorp Ltd.	Jan. 02, 2014 Talmer West Bank branch	Mar. 31, 2014 Talmer West Bank	Mar. 31, 2013 Talmer West Bank	Jan. 02, 2014 Talmer West Bank Core deposit	Mar. 31, 2014 Talmer West Bank Senior unsecured line of credit	Jan. 02, 2013 First Place Bank	Mar. 31, 2014 First Place Bank	Mar. 31, 2013 First Place Bank	Mar. 31, 2013 First Place Bank Core deposit	Jan. 02, 2013 First Place Bank Core deposit
BUSINESS COMBINATIONS
Percentage of capital stock purchased												100.00%
Cash												$ 4,000,000	$ 6,500,000					$ 45,000,000
Payment to fund escrow account												2,500,000
Additional capital contributed in order to recapitalize														99,500,000				179,000,000
Amount borrowed																	35,000,000
Amount of net proceeds from the initial public offering used for repayment of debt																	35,000,000
Acquisition related expenses														1,600,000						7,200,000
Number of branches acquired that are outside the entity's target market areas													5
Number of branches acquired that are within the entity's target market areas													12
Percentage of branches acquired that are within the entity's target market areas													70.00%
Consideration paid:
Cash												4,000,000	6,500,000					45,000,000
Fair value of identifiable assets acquired:
Cash and cash equivalents													216,331,000					439,805,000
Investment securities													13,619,000					139,764,000
Federal home loan bank stock													5,933,000					12,993,000
Loans held for sale																		213,946,000
Loans													572,173,000					1,530,376,000
Premises and equipment													4,912,000					22,168,000
Loan servicing rights													767,000					41,967,000
Company-owned life insurance																		38,172,000
Other real estate owned													30,878,000					18,448,000
Intangible asset																3,633,000						9,816,000
Other assets													56,552,000					128,278,000
Total identifiable assets acquired													904,798,000					2,595,733,000
Fair value of liabilities assumed:
Deposits													857,769,000					2,121,258,000
Short-term borrowings																		21,892,000
Long-term debt																		312,956,000
Other liabilities													3,535,000					22,925,000
Total liabilities assumed													861,304,000					2,479,031,000
Fair Value of net identifiable assets acquired													43,494,000					116,702,000
Bargain purchase gain resulting from acquisition	36,994,000	71,702,000											36,994,000					71,702,000
Estimated life of asset																					10 years
Separate allowance for loan losses	22,771,000			17,746,000									0
Information regarding acquired loans
Contractual cash flows							331,514,000		738,639,000
Contractual cash flows not expected to be collected (nonaccretable difference)						320,822,000	85,806,000	251,108,000	150,008,000
Expected cash flows						1,593,665,000	245,708,000	1,357,070,000	588,631,000
Interest component of expected cash flows (accretable yield)						317,467,000	32,852,000	302,287,000	158,221,000
Unpaid principal balance										362,782,000	1,094,223,000
Fair value premium										(3,465,000)	5,743,000
Fair value at acquisition			572,173,000		1,530,376,000		212,856,000		430,410,000	359,317,000	1,099,966,000
Income statement items
Net interest and other income	101,135,000
Net income	32,667,000	60,455,000
Pro Forma Combined
Net Interest and other income															157,271,000
Net income															61,064,000
Earnings per share:
Basic (in dollars per share)															$ 0.92
Diluted (in dollars per share)															$ 0.90
Bank acquisition and due diligence fees	0																		130,000
Basic (in dollars per share)	$ 0.48	$ 0.91
Diluted (in dollars per share)	$ 0.45	$ 0.89
Subordinated notes assumed, which are issued to Trust Preferred Issuers																		60,000,000
Subordinated notes assumed, retired immediately																		$ 45,000,000

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OTHER REAL ESTATE OWNED (Tables)

3 Months Ended

Mar. 31, 2014

OTHER REAL ESTATE OWNED

Tabular disclosure of the changes in non-covered and covered other real estate on properties owned

(Dollars in thousands)	Uncovered			Covered			Total
Balance at January 1, 2014	$	18,384		$	11,571		$	29,955
Additions due to acquisitions	30,878			—			30,878
Transferred to other real estate owned (1)	3,942			2,063			6,005
Disposals	(5,239		)	(3,102		)	(8,341		)
Write-downs	(679		)	(367		)	(1,046		)
Balance at March 31, 2014	$	47,286		$	10,165		$	57,451
Balance at January 1, 2013	$	869		$	23,834		$	24,703
Additions due to acquisitions	18,448			—			18,448
Transferred to other real estate owned (1)	2,614			4,639			7,253
Disposals	(2,539		)	(3,408		)	(5,947		)
Write-downs	(361		)	(1,152		)	(1,513		)
Balance at March 31, 2013	$	19,031		$	23,913		$	42,944

(1) Includes loans transferred to other real estate owned and transfers to other real estate owned due to branch or building operation closings/consolidations.

Schedule of income and expenses related to other real estate owned

(Dollars in thousands)	Uncovered			Covered			Total
For the three months ended March 31, 2014
Net gain on sale	$	866		$	140		$	1,006
Write-downs	(679		)	(367		)	(1,046		)
Net operating expenses	(500		)	(43		)	(543		)
Total	$	(313	)	$	(270	)	$	(583	)
For the three months ended March 31, 2013
Net gain on sale	$	1,370		$	82		$	1,452
Write-downs	(361		)	(1,152		)	(1,513		)
Net operating (expenses) income	(321		)	47			(274		)
Total	$	688		$	(1,023	)	$	(335	)

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DERIVATIVE INSTRUMENTS (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Derivative instruments
Net gains (losses) relating to free-standing derivative instruments	$ (3,119)	$ 158
Forward contracts related to mortgage loans to be delivered for sale
Derivative instruments
Net gains (losses) relating to free-standing derivative instruments	(2,994)	1,649
Interest rate lock commitments
Derivative instruments
Net gains (losses) relating to free-standing derivative instruments	(138)	(1,491)
Customer-initiated derivatives
Derivative instruments
Net gains (losses) relating to free-standing derivative instruments	$ 13

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OTHER REAL ESTATE OWNED (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Changes in other real estate owned
Balance at the beginning of the period	$ 29,955	$ 24,703
Additions due to acquisitions	30,878	18,448
Transfer from loans to other real estate owned	5,730	4,782
Disposals	(8,341)	(5,947)
Write-downs	(1,046)	(1,513)
Balance at the end of the period	57,451	42,944
Income and expenses related to other real estate owned
Net gain on sale	1,006	1,452
Write-downs	(1,046)	(1,513)
Net operating (expenses) income	(543)	(274)
Total	(583)	(335)
Uncovered
Changes in other real estate owned
Balance at the beginning of the period	18,384	869
Additions due to acquisitions	30,878	18,448
Transfer from loans to other real estate owned	3,942	2,614
Disposals	(5,239)	(2,539)
Write-downs	(679)	(361)
Balance at the end of the period	47,286	19,031
Income and expenses related to other real estate owned
Net gain on sale	866	1,370
Write-downs	(679)	(361)
Net operating (expenses) income	(500)	(321)
Total	(313)	688
Covered
Changes in other real estate owned
Balance at the beginning of the period	11,571	23,834
Transfer from loans to other real estate owned	2,063	4,639
Disposals	(3,102)	(3,408)
Write-downs	(367)	(1,152)
Balance at the end of the period	10,165	23,913
Income and expenses related to other real estate owned
Net gain on sale	140	82
Write-downs	(367)	(1,152)
Net operating (expenses) income	(43)	47
Total	$ (270)	$ (1,023)

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PARENT COMPANY FINANCIAL STATEMENTS (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Gain on acquisition	$ (36,994)	$ (71,702)
Stock-based compensation expense	180	8,270
Decrease in other assets, net	(2,478)	7,835
Increase in accrued expenses and other liabilities, net	4,243	46,792
Net cash from operating activities	29,962	55,438
Cash flows from investing activities
Net cash from investing activities	159,355	346,353
Cash flows from financing activities
Issuance of common stock	42,025
Repayment of senior unsecured line of credit	52,668	28,805
Net cash used in financing activities	(34,135)	(110,812)
Net change in cash and cash equivalents	155,182	290,979
Beginning cash and cash equivalents	375,356	362,771
Ending cash and cash equivalents	530,538	653,750
Talmer Bancorp, Inc.
Cash flows from operating activities
Net income	32,667	60,455
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Equity in (over)/under distributed earnings of subsidiaries	24,487	46,584
Gain on acquisition	(36,994)	(71,702)
Stock-based compensation expense	48	7,836
Increase (decrease) in income tax benefit	(2,102)	2,565
Decrease in other assets, net	1,115	10,560
Increase in accrued expenses and other liabilities, net	1,139	4,123
Net cash from operating activities	20,360	60,421
Cash flows from investing activities
Cash (used in) proceeds from acquisitions	(6,500)	(45,000)
Capital contributions to subsidiaries	(99,500)	(179,000)
Net cash from investing activities	(106,000)	(224,000)
Cash flows from financing activities
Issuance of common stock	42,025
Repayment of senior unsecured line of credit	(35,000)
Net cash used in financing activities	7,025
Net change in cash and cash equivalents	(78,615)	(163,579)
Beginning cash and cash equivalents	98,411	211,849
Ending cash and cash equivalents	$ 19,796	$ 48,270

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SECURITIES (Details 3) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Securities with contractual maturities:
Within one year	$ 7,820,000
After one year through five years	62,382,000
After five years through ten years	201,454,000
After ten years	363,607,000
Equity securities	500,000
Total available-for-sale securities	635,763,000	632,385,000
Securities with contractual maturities:
Within one year	7,826,000
After one year through five years	63,242,000
After five years through ten years	200,432,000
After ten years	360,055,000
Equity securities	492,000
Total available-for-sale securities	632,047,000	620,083,000
Available-for-sale securities pledged as collateral
Securities with amortized cost pledged to secure borrowings and deposits	$ 230,400,000	$ 271,300,000

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LOAN SERVICING RIGHTS (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Activity for loan servicing rights and the related fair value changes
Fair value, beginning of period	$ 78,603	$ 5,657
Additions due to acquisition	767	41,967
Additions from loans sold with servicing retained	(1,589)	(6,229)
Changes in fair value due to reductions from loans paid off during the period	(862)	(599)
Changes due to valuation inputs or assumptions	3,067	92
Fair value, end of period	77,892	53,761
Principal balance of loans serviced	7,432,223	6,794,428
Commercial Real Estate
Activity for loan servicing rights and the related fair value changes
Fair value, beginning of period	368	518
Additions due to acquisition	767
Changes in fair value due to reductions from loans paid off during the period	(57)	(4)
Changes due to valuation inputs or assumptions	1	(53)
Fair value, end of period	1,079	461
Principal balance of loans serviced	249,806	297,796
Agricultural
Activity for loan servicing rights and the related fair value changes
Fair value, beginning of period	962	1,456
Additions from loans sold with servicing retained	66	31
Changes in fair value due to reductions from loans paid off during the period	(69)	(156)
Changes due to valuation inputs or assumptions	(65)	(77)
Fair value, end of period	894	1,254
Principal balance of loans serviced	42,775	59,024
Mortgage
Activity for loan servicing rights and the related fair value changes
Fair value, beginning of period	77,273	3,683
Additions due to acquisition		41,967
Additions from loans sold with servicing retained	1,523	6,198
Changes in fair value due to reductions from loans paid off during the period	(736)	(439)
Changes due to valuation inputs or assumptions	(2,141)	637
Fair value, end of period	75,919	52,046
Principal balance of loans serviced	$ 7,139,642	$ 6,437,608

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REGULATORY CAPITAL MATTERS (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Total capital to risk-weighted assets
Actual Amount	$ 649,036	$ 583,370
Actual Ratio (as a percent)	17.70%	19.20%
For Capital Adequacy Purposes Amount	293,023	242,885
For Capital Adequacy Purposes Ratio (as a percent)	8.00%	8.00%
Tier 1 capital to risk-weighted assets
Actual Amount	610,160	555,350
Actual Ratio (as a percent)	16.70%	18.30%
For Capital Adequacy Purposes Amount	146,512	121,443
For Capital Adequacy Purposes Ratio (as a percent)	4.00%	4.00%
Tier 1 leverage ratio
Actual Amount	610,160	555,350
Actual Ratio (as a percent)	11.20%	12.20%
For Capital Adequacy Purposes Amount	217,796	182,221
For Capital Adequacy Purposes Ratio (as a percent)	4.00%	4.00%
Talmer Bank and Trust
Total capital to risk-weighted assets
Actual Amount	538,922	253,044
Actual Ratio (as a percent)	17.50%	18.40%
For Capital Adequacy Purposes Amount	246,569	110,123
For Capital Adequacy Purposes Ratio (as a percent)	8.00%	8.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount	308,211	137,654
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio (as a percent)	10.00%	10.00%
Tier 1 capital to risk-weighted assets
Actual Amount	500,114	235,448
Actual Ratio (as a percent)	16.20%	17.10%
For Capital Adequacy Purposes Amount	123,284	55,062
For Capital Adequacy Purposes Ratio (as a percent)	4.00%	4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount	184,927	82,593
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio (as a percent)	6.00%	6.00%
Tier 1 leverage ratio
Actual Amount	500,114	235,448
Actual Ratio (as a percent)	11.30%	10.30%
For Capital Adequacy Purposes Amount	177,633	91,363
For Capital Adequacy Purposes Ratio (as a percent)	4.00%	4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount	222,041	114,204
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio (as a percent)	5.00%	5.00%
Talmer Bank and Trust | Minimum
Tier 1 leverage ratio
Surplus required for declaration or payment of dividend as a percentage of capital remaining after dividend payment	20.00%
First Place Bank
Total capital to risk-weighted assets
Actual Amount		263,297
Actual Ratio (as a percent)		15.90%
For Capital Adequacy Purposes Amount		132,207
For Capital Adequacy Purposes Ratio (as a percent)		8.00%
Tier 1 capital to risk-weighted assets
Actual Amount		252,873
Actual Ratio (as a percent)		15.30%
For Capital Adequacy Purposes Amount		66,104
For Capital Adequacy Purposes Ratio (as a percent)		4.00%
Tier 1 leverage ratio
Actual Amount		252,873
Actual Ratio (as a percent)		11.70%
For Capital Adequacy Purposes Amount		86,521
For Capital Adequacy Purposes Ratio (as a percent)		4.00%
Talmer West Bank
Total capital to risk-weighted assets
Actual Amount	86,737
Actual Ratio (as a percent)	15.20%
For Capital Adequacy Purposes Amount	45,773
For Capital Adequacy Purposes Ratio (as a percent)	8.00%
Tier 1 capital to risk-weighted assets
Actual Amount	86,669
Actual Ratio (as a percent)	15.20%
For Capital Adequacy Purposes Amount	22,887
For Capital Adequacy Purposes Ratio (as a percent)	4.00%
Tier 1 leverage ratio
Actual Amount	86,669
Actual Ratio (as a percent)	9.50%
For Capital Adequacy Purposes Amount	$ 36,365
For Capital Adequacy Purposes Ratio (as a percent)	4.00%
Talmer West Bank | Minimum
REGULATORY CAPITAL MATTERS
Total capital (to risk-weighted assets) ratio prescribed in the Consent Order (as a percent)	12.00%
Tier 1 capital (to adjusted total assets) ratio prescribed in the Consent Order (as a percent)	9.00%

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COMMITMENTS, CONTINGENCIES AND GUARANTEES (Details 2) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Contingencies and Guarantees
Standby letters of credit outstanding	$ 864,540,000	$ 809,152,000
Warranty liabilities	4,000,000	4,800,000
Performance guarantee
Contingencies and Guarantees
Outstanding balance of loans	74,300,000	79,500,000
Maximum potential amount of undiscounted future payments	41,500,000	42,900,000
Recourse liability	450,000	567,000
Standby letters of credit
Contingencies and Guarantees
Standby letters of credit outstanding	$ 72,500,000	$ 69,000,000

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PARENT COMPANY FINANCIAL STATEMENTS (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012
Assets
Cash and cash equivalents	$ 530,538	$ 375,356	$ 653,750	$ 362,771
Income tax benefit	178,882	126,200
Other assets	29,744	26,402
Total assets	5,417,201	4,547,361
Liabilities
Short-term borrowings	89,562	71,876
Long-term debt	177,483	199,037
Total liabilities	4,719,733	3,930,346
Shareholders' equity	697,468	617,015	588,993	520,743
Total liabilities and shareholders' equity	5,417,201	4,547,361
Parent Co.
Assets
Cash and cash equivalents	19,796	98,411	48,270	211,849
Investment in banking subsidiaries	686,601	562,381
Income tax benefit	7,506	5,404
Other assets	668	1,783
Total assets	714,571	667,979
Liabilities
Short-term borrowings		35,000
Long-term debt	10,623	10,590	10,590
Accrued expenses and other liabilities	6,480	5,374
Total liabilities	17,103	50,964
Shareholders' equity	697,468	617,015
Total liabilities and shareholders' equity	$ 714,571	$ 667,979

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LOAN SERVICING RIGHTS (Details 3) (USD $)	3 Months Ended			12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 Commercial Real Estate	Dec. 31, 2013 Commercial Real Estate	Mar. 31, 2014 Commercial Real Estate Minimum	Dec. 31, 2013 Commercial Real Estate Minimum	Mar. 31, 2014 Commercial Real Estate Maximum	Dec. 31, 2013 Commercial Real Estate Maximum	Mar. 31, 2014 Agricultural loan servicing rights	Dec. 31, 2013 Agricultural loan servicing rights	Mar. 31, 2014 Agricultural loan servicing rights Minimum	Dec. 31, 2013 Agricultural loan servicing rights Minimum	Mar. 31, 2014 Agricultural loan servicing rights Maximum	Dec. 31, 2013 Agricultural loan servicing rights Maximum	Mar. 31, 2014 Mortgage	Dec. 31, 2013 Mortgage	Mar. 31, 2014 Mortgage Minimum	Dec. 31, 2013 Mortgage Minimum	Mar. 31, 2014 Mortgage Maximum	Dec. 31, 2013 Mortgage Maximum
Fair Value
Prepayment speed (as a percent)					7.08%	8.50%	50.00%	50.00%			5.34%	4.98%	52.66%	53.16%			3.67%	3.55%	41.26%	44.49%
WA discount rate (as a percent)			19.32%	20.00%					15.00%	15.00%					9.66%	10.17%
WA cost to service/per year			$ 471	$ 467					$ 200	$ 200					$ 57	$ 57
WA ancillary income/per year															36	45
WA float range (as a percent)			0.56%	0.56%					0.56%	0.56%							0.87%	0.73%	1.69%	1.54%
Loan servicing fee income	$ 3,500,000	$ 4,200,000

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ACQUIRED LOANS AND LOSS SHARE ACCOUNTING (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Jan. 02, 2014	Dec. 31, 2013	Jan. 02, 2013
ACQUIRED LOANS AND LOSS SHARE ACCOUNTING
Percentage of losses incurred to be reimbursed by FDIC for loans covered by loss sharing agreements	80.00%
Period of clawback payment to FDIC following the acquisition in event actual losses fail to reach stated levels	10 years 45 days
Estimated FDIC clawback liability	$ 25,593,000			$ 24,887,000
A roll forward is a reconciliation of a concept from the beginning of a period to the end of a period.
Balance at beginning of period	302,287,000	216,970,000
Additions due to acquisitions	32,852,000	158,221,000
Discount accretion	(21,966,000)	(26,410,000)
Reclassifications from nonaccretable discount and other additions to accretable discount due to results of cash flow re-estimations	16,364,000	17,989,000
Other activity, net	(12,070,000)	(15,367,000)
Balance at end of period	317,467,000	351,403,000
Expected cash flows for loans
Identified improvement in the cash flow expectations	16,400,000	18,000,000
Provision for loan losses - covered:
Total provision (benefit) for loan losses-covered	(2,498,000)	1,084,000
Less: FDIC loss share income:
Total loss sharing expense due to provision for loan losses-covered	(1,457,000)	(1,775,000)
Net (increase) decrease to income before taxes:
Net (increase) decrease to income before taxes	(1,041,000)	2,859,000
Accounted for under ASC 310-30
Expected cash flows for loans
Contractual cash flows	1,593,665,000		245,708,000	1,357,070,000	588,631,000
Non-accretable difference	(320,822,000)		(85,806,000)	(251,108,000)	(150,008,000)
Accretable yield	(317,467,000)		(32,852,000)	(302,287,000)	(158,221,000)
Loans accounted	955,376,000			803,675,000
Provision for loan losses - covered:
Impairment recorded as a result of re-estimation of cash flows on loans	1,299,000	5,821,000
Less: FDIC loss share income:
Income recorded as a result of re-estimation of cash flows on loans	1,581,000	2,015,000
Net (increase) decrease to income before taxes:
Net (income) expense recorded as a result of re-estimation of cash flows on loans	(282,000)	3,806,000
Accounted for under ASC 310-20 and ASC 310-40
Provision for loan losses - covered:
Additional benefit recorded, net of recoveries, for covered loans	(3,797,000)	(4,737,000)
Less: FDIC loss share income:
Expense recorded, to offset provision (benefit), for covered loans	(3,038,000)	(3,790,000)
Net (increase) decrease to income before taxes:
Net income recorded, for covered loans	(759,000)	(947,000)
CF Bancorp
ACQUIRED LOANS AND LOSS SHARE ACCOUNTING
Estimated FDIC clawback liability	21,700,000			21,000,000
First Banking Center
ACQUIRED LOANS AND LOSS SHARE ACCOUNTING
Estimated FDIC clawback liability	3,900,000			3,900,000
Peoples State Bank
ACQUIRED LOANS AND LOSS SHARE ACCOUNTING
Estimated FDIC clawback liability	$ 0			$ 0

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PARENT COMPANY FINANCIAL STATEMENTS

3 Months Ended

Mar. 31, 2014

PARENT COMPANY FINANCIAL STATEMENTS

Condensed Financial Statements for Parent Company [Text Block]

17.  PARENT COMPANY FINANCIAL STATEMENTS

Balance Sheets - Parent Co.

	March 31,		December 31,
(Dollars in thousands)	2014		2013
Assets
Cash and cash equivalents	$	19,796	$	98,411
Investment in banking subsidiaries	686,601		562,381
Income tax benefit	7,506		5,404
Other assets	668		1,783
Total assets	$	714,571	$	667,979
Liabilities
Short-term borrowings	$	—	$	35,000
Long-term debt	10,623		10,590
Accrued expenses and other liabilities	6,480		5,374
Total liabilities	17,103		50,964
Shareholders’ equity	697,468		617,015
Total liabilities and shareholders’ equity	$	714,571	$	667,979

Statements of Income and Comprehensive Income - Parent Co.

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Income
Dividend income from subsidiary	$	25,000		$	55,000
Bargain purchase gain	36,994			71,702
Other noninterest income	2			—
Total income	61,996			126,702
Expenses
Salaries and employee benefits	3,913			16,925
Bank acquisition professional fees	1,708			7,232
Professional services	594			834
Marketing expense	165			1,013
Interest on short-term borrowings	151			—
Interest on long-term debt	127			171
Other	221			102
Total expenses	6,879			26,277
Income before income taxes and equity in undistributed net earnings of subsidiaries	55,117			100,425
Income tax benefit	2,037			6,614
Equity in (over)/under distributed earnings of subsidiaries	(24,487		)	(46,584		)
Net income	$	32,667		$	60,455
Total comprehensive income, net of tax	$	32,667		$	60,455

Statements of Cash Flows - Parent Co.

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Cash flows from operating activities
Net income	$	32,667		$	60,455
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Equity in (over)/under distributed earnings of subsidiaries	24,487			46,584
Gain on acquisition	(36,994		)	(71,702		)
Stock-based compensation expense	48			7,836
Increase (decrease) in income tax benefit	(2,102		)	2,565
Decrease in other assets, net	1,115			10,560
Increase in accrued expenses and other liabilities, net	1,139			4,123
Net cash from (used in) operating activities	20,360			60,421
Cash flows from investing activities
Cash (used in) proceeds from acquisitions	(6,500		)	(45,000		)
Capital contributions to subsidiaries	(99,500		)	(179,000		)
Net cash used in investing activities	(106,000		)	(224,000		)
Cash flows from financing activities
Issuance of common stock	42,025			—
Repayment of senior unsecured line of credit	(35,000		)	—
Net cash from financing activities	7,025			—
Net decrease in cash and cash equivalents	(78,615		)	(163,579		)
Beginning cash and cash equivalents	98,411			211,849
Ending cash and cash equivalents	$	19,796		$	48,270

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FAIR VALUE (Details 4) (USD $) In Thousands, unless otherwise specified	0 Months Ended	3 Months Ended												3 Months Ended
	Jan. 02, 2013 Change in accounting principle for loan servicing rights Restatement adjustment	Mar. 31, 2013 Loan servicing rights Change in accounting principle for loan servicing rights Restatement adjustment	Mar. 31, 2014 Recurring basis Loans held for investment	Mar. 31, 2014 Recurring basis Loans held for investment Mortgage banking and other loan fees	Mar. 31, 2014 Recurring basis Loan servicing rights	Mar. 31, 2013 Recurring basis Loan servicing rights		Mar. 31, 2014 Recurring basis Loan servicing rights Mortgage banking and other loan fees	Mar. 31, 2013 Recurring basis Loan servicing rights Mortgage banking and other loan fees	Mar. 31, 2014 Recurring basis Taxable obligations of state and political subdivisions	Dec. 31, 2013 Recurring basis Taxable obligations of state and political subdivisions	Mar. 31, 2013 Recurring basis Taxable obligations of state and political subdivisions	Dec. 31, 2012 Recurring basis Taxable obligations of state and political subdivisions	Mar. 31, 2014 Recurring basis Taxable obligations of state and political subdivisions Interest on investments	Mar. 31, 2014 Recurring basis Corporate debt securities	Mar. 31, 2013 Recurring basis Corporate debt securities	Mar. 31, 2014 Recurring basis Corporate debt securities Interest on investments
Changes in Level 3 assets during period
Balance, beginning of period			$ 17,708		$ 78,603					$ 397	$ 396	$ 396	$ 396		$ 405	$ 15,250
Transfers based on new accounting policy election						5,657	[1]
Additions due to acquisition					767	41,967										440
Transfers from loans held for sale			236
Total gains (losses) recorded in earnings (realized)				12				(3,067)	(92)					1			1
Total gains (losses) recorded in other comprehensive income (OCI) (pre-tax)															14	54
New originations					1,589	6,229
Repayments			(170)
Draws on previously issued lines of credits			128
Balance, end of period			17,914		77,892	53,761				397	396	396	396		420	15,744
Cumulative adjustment to retained earnings due to change in policy	$ 31	$ 31

[1] The balance transferred includes $31 thousand of cumulative adjustment related to the change in accounting policy referenced in Note 1 to our audited financial statements included in our 2013 Annual Report.

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PARENT COMPANY FINANCIAL STATEMENTS (Tables)

3 Months Ended

Mar. 31, 2014

PARENT COMPANY FINANCIAL STATEMENTS

Balance Sheets

	March 31,		December 31,
(Dollars in thousands)	2014		2013
Assets
Cash and cash equivalents	$	19,796	$	98,411
Investment in banking subsidiaries	686,601		562,381
Income tax benefit	7,506		5,404
Other assets	668		1,783
Total assets	$	714,571	$	667,979
Liabilities
Short-term borrowings	$	—	$	35,000
Long-term debt	10,623		10,590
Accrued expenses and other liabilities	6,480		5,374
Total liabilities	17,103		50,964
Shareholders’ equity	697,468		617,015
Total liabilities and shareholders’ equity	$	714,571	$	667,979

Statements of Income

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Income
Dividend income from subsidiary	$	25,000		$	55,000
Bargain purchase gain	36,994			71,702
Other noninterest income	2			—
Total income	61,996			126,702
Expenses
Salaries and employee benefits	3,913			16,925
Bank acquisition professional fees	1,708			7,232
Professional services	594			834
Marketing expense	165			1,013
Interest on short-term borrowings	151			—
Interest on long-term debt	127			171
Other	221			102
Total expenses	6,879			26,277
Income before income taxes and equity in undistributed net earnings of subsidiaries	55,117			100,425
Income tax benefit	2,037			6,614
Equity in (over)/under distributed earnings of subsidiaries	(24,487		)	(46,584		)
Net income	$	32,667		$	60,455
Total comprehensive income, net of tax	$	32,667		$	60,455

Statements of Cash Flows

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Cash flows from operating activities
Net income	$	32,667		$	60,455
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Equity in (over)/under distributed earnings of subsidiaries	24,487			46,584
Gain on acquisition	(36,994		)	(71,702		)
Stock-based compensation expense	48			7,836
Increase (decrease) in income tax benefit	(2,102		)	2,565
Decrease in other assets, net	1,115			10,560
Increase in accrued expenses and other liabilities, net	1,139			4,123
Net cash from (used in) operating activities	20,360			60,421
Cash flows from investing activities
Cash (used in) proceeds from acquisitions	(6,500		)	(45,000		)
Capital contributions to subsidiaries	(99,500		)	(179,000		)
Net cash used in investing activities	(106,000		)	(224,000		)
Cash flows from financing activities
Issuance of common stock	42,025			—
Repayment of senior unsecured line of credit	(35,000		)	—
Net cash from financing activities	7,025			—
Net decrease in cash and cash equivalents	(78,615		)	(163,579		)
Beginning cash and cash equivalents	98,411			211,849
Ending cash and cash equivalents	$	19,796		$	48,270

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LOAN SERVICING RIGHTS (Details) (Change in accounting principle for loan servicing rights, Restatement adjustment, USD $) In Thousands, unless otherwise specified	0 Months Ended
	Jan. 02, 2013
Change in accounting principle for loan servicing rights | Restatement adjustment
Change in accounting principle
Cumulative adjustment to retained earnings due to change in policy	$ 31

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COMMITMENTS, CONTINGENCIES AND GUARANTEES (Tables)

3 Months Ended

Mar. 31, 2014

COMMITMENTS, CONTINGENCIES AND GUARANTEES

Summary of the contractual amounts of the entity's exposure to off-balance sheet risk

	March 31, 2014						December 31, 2013
(Dollars in thousands)	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Commitments to extend credit	$	493,206	$	298,884	$	792,090	$	523,666	$	216,473	$	740,139
Standby letters of credit	70,209		2,241		72,450		68,452		561		69,013
Total commitments	$	563,415	$	301,125	$	864,540	$	592,118	$	217,034	$	809,152

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FAIR VALUE (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Other information with respect to fair value
Loans held for sale that are 90 days past due or on nonaccrual	$ 0		$ 0
Aggregate fair value	75,931		85,252
Contractual balance	71,870		82,567
Unrealized gain	4,061		2,685
Gains/(losses) from changes in fair value included in earnings	$ 1,376	$ (552)

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LOANS (Details 9) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Loans by credit quality
Uncovered loans	$ 3,145,789	$ 2,473,916
Covered loans	497,920	530,068
Residential real estate
Loans by credit quality
Uncovered loans	1,268,200	1,085,453
Covered loans	119,408	123,334
Consumer
Loans by credit quality
Uncovered loans	12,932	9,754
Covered loans	11,313	11,678
Residential real estate and consumer loans
Loans by credit quality
Uncovered loans	1,281,132	1,095,207
Covered loans	130,721	135,012
Performing assets
Loans by credit quality
Uncovered loans	1,267,208	1,079,692
Covered loans	129,366	133,993
Performing assets | Residential real estate
Loans by credit quality
Uncovered loans	1,254,378	1,070,038
Covered loans	118,078	122,346
Performing assets | Consumer
Loans by credit quality
Uncovered loans	12,830	9,654
Covered loans	11,288	11,647
Nonperforming assets
Loans by credit quality
Uncovered loans	13,924	15,515
Covered loans	1,355	1,019
Nonperforming assets | Residential real estate
Loans by credit quality
Uncovered loans	13,822	15,415
Covered loans	1,330	988
Nonperforming assets | Consumer
Loans by credit quality
Uncovered loans	102	100
Covered loans	$ 25	$ 31

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LOANS (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014		Dec. 31, 2013
Loans and Allowance for Loan Losses
90 days or more past due	$ 251		$ 301
Total loans	3,145,789		2,473,916
Uncovered
Loans and Allowance for Loan Losses
Total loans	3,145,789		2,473,916
Covered
Loans and Allowance for Loan Losses
Total loans, covered	497,920		530,068
Residential real estate
Loans and Allowance for Loan Losses
Total loans	1,268,200	[1]	1,085,453	[1]
Residential real estate | Uncovered
Loans and Allowance for Loan Losses
Total loans	1,268,200		1,085,453
Residential real estate | Covered
Loans and Allowance for Loan Losses
Total loans, covered	119,408		123,334
Commercial real estate
Loans and Allowance for Loan Losses
Total loans	1,147,820		755,839
Commercial real estate | Uncovered
Loans and Allowance for Loan Losses
Total loans	1,147,820		755,839
Commercial real estate | Covered
Loans and Allowance for Loan Losses
Total loans, covered	279,149		299,401
Commercial and industrial
Loans and Allowance for Loan Losses
Total loans	573,268		446,644
Commercial and industrial | Uncovered
Loans and Allowance for Loan Losses
Total loans	573,268		446,644
Commercial and industrial | Covered
Loans and Allowance for Loan Losses
Total loans, covered	71,155		78,437
Real estate construction
Loans and Allowance for Loan Losses
Total loans	160,464	[1]	193,444	[1]
Real estate construction | Uncovered
Loans and Allowance for Loan Losses
Total loans	143,569		176,226
Real estate construction | Covered
Loans and Allowance for Loan Losses
Total loans, covered	16,895		17,218
Consumer
Loans and Allowance for Loan Losses
Total loans	12,932		9,754
Consumer | Uncovered
Loans and Allowance for Loan Losses
Total loans	12,932		9,754
Consumer | Covered
Loans and Allowance for Loan Losses
Total loans, covered	11,313		11,678
Excluding loans accounted for under ASC 310-30 | Uncovered
Loans and Allowance for Loan Losses
30-59 days past due	15,437		18,025
60-89 days past due	3,256		7,260
90 days or more past due	13,882		8,686
Total past due	32,575		33,971
Current	2,571,705		2,077,256
Total loans	2,604,280		2,111,227
90 days or more past due and still accruing	3		539
Excluding loans accounted for under ASC 310-30 | Covered
Loans and Allowance for Loan Losses
30-59 days past due	1,319		2,771
60-89 days past due	1,485		954
90 days or more past due	11,131		11,753
Total past due	13,935		15,478
Current	70,118		73,604
Total loans, covered	84,053		89,082
90 days or more past due and still accruing	7
Excluding loans accounted for under ASC 310-30 | Residential real estate | Uncovered
Loans and Allowance for Loan Losses
30-59 days past due	7,900		11,244
60-89 days past due	676		1,849
90 days or more past due	6,616		6,641
Total past due	15,192		19,734
Current	980,088		812,191
Total loans	995,280		831,925
90 days or more past due and still accruing	3		539
Excluding loans accounted for under ASC 310-30 | Residential real estate | Covered
Loans and Allowance for Loan Losses
30-59 days past due	835		827
60-89 days past due	403		260
90 days or more past due	141		224
Total past due	1,379		1,311
Current	21,495		21,989
Total loans, covered	22,874		23,300
90 days or more past due and still accruing	7
Excluding loans accounted for under ASC 310-30 | Commercial real estate | Uncovered
Loans and Allowance for Loan Losses
30-59 days past due	2,461		1,400
60-89 days past due	1,929		4,992
90 days or more past due	6,089		1,122
Total past due	10,479		7,514
Current	901,935		650,026
Total loans	912,414		657,540
Excluding loans accounted for under ASC 310-30 | Commercial real estate | Covered
Loans and Allowance for Loan Losses
30-59 days past due	444		324
60-89 days past due	404		558
90 days or more past due	5,344		5,681
Total past due	6,192		6,563
Current	29,220		30,069
Total loans, covered	35,412		36,632
Excluding loans accounted for under ASC 310-30 | Commercial and industrial | Uncovered
Loans and Allowance for Loan Losses
30-59 days past due	1,946		136
60-89 days past due	212		25
90 days or more past due	1,174		560
Total past due	3,332		721
Current	551,526		439,938
Total loans	554,858		440,659
Excluding loans accounted for under ASC 310-30 | Commercial and industrial | Covered
Loans and Allowance for Loan Losses
30-59 days past due	38		1,619
60-89 days past due	677		119
90 days or more past due	4,214		4,476
Total past due	4,929		6,214
Current	18,738		20,816
Total loans, covered	23,667		27,030
Excluding loans accounted for under ASC 310-30 | Real estate construction | Uncovered
Loans and Allowance for Loan Losses
30-59 days past due	2,852		5,038
60-89 days past due	436		356
90 days or more past due			359
Total past due	3,288		5,753
Current	128,890		168,503
Total loans	132,178		174,256
Excluding loans accounted for under ASC 310-30 | Real estate construction | Covered
Loans and Allowance for Loan Losses
90 days or more past due	1,413		1,365
Total past due	1,413		1,365
Current	505		585
Total loans, covered	1,918		1,950
Excluding loans accounted for under ASC 310-30 | Consumer | Uncovered
Loans and Allowance for Loan Losses
30-59 days past due	278		207
60-89 days past due	3		38
90 days or more past due	3		4
Total past due	284		249
Current	9,266		6,598
Total loans	9,550		6,847
Excluding loans accounted for under ASC 310-30 | Consumer | Covered
Loans and Allowance for Loan Losses
30-59 days past due	2		1
60-89 days past due	1		17
90 days or more past due	19		7
Total past due	22		25
Current	160		145
Total loans, covered	$ 182		$ 170

[1] Amounts represent loans for which the Company has elected the fair value option. See Note 3 "Fair Value."

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FAIR VALUE (Details) (USD $)	3 Months Ended
	Mar. 31, 2014
General disclosure on fair value
Percentage of available for sale securities that are categorized as Level 3	1.00%
Amount of impaired premises and equipment	$ 0
Minimum
General disclosure on fair value
Adjustments to loan values during the appraisal process (as a percent)	0.00%
Adjustments by management to loan values (as a percent)	0.00%
Adjustments to other real estate owned values during the appraisal process (as a percent)	0.00%
Maximum
General disclosure on fair value
Adjustments to loan values during the appraisal process (as a percent)	40.00%
Adjustments by management to loan values (as a percent)	40.00%
Adjustments to other real estate owned values during the appraisal process (as a percent)	40.00%

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BASIS OF PRESENTATION AND RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS

3 Months Ended

Mar. 31, 2014

BASIS OF PRESENTATION AND RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS

BASIS OF PRESENTATION AND RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS

1. BASIS OF PRESENTATION AND RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS

The accompanying unaudited consolidated financial statements of Talmer Bancorp, Inc. (“the Company”), and its wholly-owned subsidiaries have been prepared in accordance with United States (U.S.) generally accepted accounting principles (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the Consolidated Financial Statements, primarily consisting of normal recurring adjustments, have been included. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year or for any other interim period. Certain items in prior periods were reclassified to conform to the current presentation.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s consolidated financial statements and footnotes included in the Annual Report of Talmer Bancorp, Inc. on Form 10-K for the year ended December 31, 2013.

On February 11, 2014, the Securities and Exchange Commission declared effective the Company’s registration statement on Form S-1 registering the shares of the Company’s common stock as “TLMR” on the Nasdaq Capital Market.  On February 14, 2014, the Company completed the initial public offering of 15,555,555 shares of Class A common stock for $13 per share.  Of the 15,555,555 shares sold, 3,703,703 shares were sold by the Company and 11,851,852 shares were sold by certain selling shareholders.  In addition, on February 21, 2014, the selling shareholders sold an additional 2,333,333 shares of Class A common stock to cover the exercise of the underwriters’ over-allotment option.  The Company received net proceeds of approximately $42.0 million from the offering, after deducting the underwriting discounts and commissions and estimated offering expenses.  The Company did not receive any proceeds from the sale of shares by the selling shareholders.

Customer Initiated Derivatives

In the first quarter 2014, the Company began entering into interest rate derivatives to provide a service to certain qualifying customers to help facilitate their respective risk management strategies (“customer-initiated derivatives”).  Therefore, these derivatives are not used to manage interest rate risk in the Company’s assets or liabilities. The Company generally takes offsetting positions with dealer counterparties to mitigate the valuation risk of the customer-initiated derivative.  Income primarily results from the spread between the customer derivative and the offsetting dealer positions. The accounting for changes in the fair value (i.e. gains or losses) of a derivative instrument is determined by whether it has been designated and qualifies as part of a hedging relationship and, further by the type of hedging relationship.  The Company presents derivative instruments at fair value in the Consolidated Balance Sheets on a net basis when a right of offset exists, based on transactions with a single counterparty and any cash collateral paid to and/or received from that counterparty for derivative contracts that are subject to legally enforceable master netting arrangements.  The Company has no derivatives designated as qualifying accounting hedging instruments.  For derivative instruments not designated as hedging instruments, the gain or loss derived from changes in fair value are recognized in current earnings during the period of change.

Subsequent Events

In April 2014, the Company entered into an agreement to sell its 11 branch offices in Wisconsin to Town Bank, a wholly owned bank subsidiary of Wintrust Financial Corporation.  Town Bank will assume all of the Company’s deposits in Wisconsin.  As of March 31, 2014, the Company’s deposits in Wisconsin were approximately $360 million.  The Company will not sell any loans to Town Bank in the transaction.  The closing of the transaction, which is expected in the third quarter of 2014, is pending regulatory approval, an environmental review of the 11 branch offices and other customary terms and conditions.  Under the terms of the purchase and assumption agreement, the Company will sell the owned branch offices for approximately $13.5 million more than the net book value of the assets.  The transaction is also expected to eliminate approximately $1 million of the Company’s core deposit intangibles related to the deposits sold.  The Company expects to incur approximately $1 million in expenses related to the transaction.

Also in April 2014, Talmer West Bank agreed to sell its single branch office in Albuquerque, New Mexico along with its approximate $37 million of deposits and approximately $20 million of loans to Grants State Bank, a unit of First Bancorp of Durango Inc. The transaction is expected to be completed in the third quarter of 2014, subject to regulatory approval and other customary terms and conditions.

Recently Adopted and Issued Accounting Standards

In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure” (“ASU 2014-04”), which clarifies the time at which a creditor is considered to have physical possession of residential real estate that is collateral for a residential mortgage loan.  The creditor is considered to have physical possession when legal title to the collateral or a deed in lieu of foreclosure or similar legal agreement is completed.  Consequently it should reclassify the loan to other real estate owned at that time.  ASU 2014-04 is effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2014, as such, the Company will adopt ASU 2014-04 as of January 1, 2015.  Under the provisions, the Company will have the option to adopt the amendments in the ASU using either a modified retrospective transition method or a prospective transition method.  The Company is currently evaluating the provisions of ASU 2014-04.

In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”), which raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation.  The ASU is intended to reduce the frequency of disposals reported as discontinued operations by focusing on strategic shifts that have or will have a major effect on an entity’s operations and financial results and will permit companies to have continuing cash flows and significant continuing involvement with the disposed component.  ASU 2014-08 is effective for disposals (or classifications as held for sale) and acquired businesses or nonprofit activities that  are classified as held for sale upon acquisition that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years.  As such, the Company will evaluate the provisions of ASU 2014-08 as it relates to any potential disposals or acquisitions beginning on or after January 1, 2015.

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LOANS (Details 4) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013
Information as to total impaired loans
Troubled debt restructurings	$ 2,693		$ 1,801
Performing
Information as to total impaired loans
Troubled debt restructurings	26,100	24,500
Uncovered
Information as to total impaired loans
Nonaccrual loans	25,593	24,297
Troubled debt restructurings	2,107		536
Impaired loans	23,240	21,876
Uncovered | Residential real estate
Information as to total impaired loans
Troubled debt restructurings	300
Impaired loans	13,872	14,014
Uncovered | Commercial real estate
Information as to total impaired loans
Troubled debt restructurings	1,650
Impaired loans	7,820	4,588
Uncovered | Commercial and industrial
Information as to total impaired loans
Troubled debt restructurings	157
Impaired loans	1,420	2,882
Uncovered | Real estate construction
Information as to total impaired loans
Impaired loans		359
Uncovered | Consumer
Information as to total impaired loans
Troubled debt restructurings			3
Impaired loans	128	33	3
Uncovered | Performing
Information as to total impaired loans
Troubled debt restructurings	5,322	3,452
Uncovered | Performing | Residential real estate
Information as to total impaired loans
Troubled debt restructurings	828	328
Uncovered | Performing | Commercial real estate
Information as to total impaired loans
Troubled debt restructurings	3,003	1,637
Uncovered | Performing | Commercial and industrial
Information as to total impaired loans
Troubled debt restructurings	1,365	1,367
Uncovered | Performing | Real estate construction
Information as to total impaired loans
Troubled debt restructurings	96	90
Uncovered | Performing | Consumer
Information as to total impaired loans
Troubled debt restructurings	30	30
Covered
Information as to total impaired loans
Nonaccrual loans	15,522	17,716
Troubled debt restructurings	586		1,265
Impaired loans	26,649	27,024
Covered | Residential real estate
Information as to total impaired loans
Troubled debt restructurings	116
Impaired loans	3,905	2,678
Covered | Commercial real estate
Information as to total impaired loans
Troubled debt restructurings	443
Impaired loans	18,577	18,062
Covered | Commercial and industrial
Information as to total impaired loans
Troubled debt restructurings	27
Impaired loans	2,955	5,121
Covered | Real estate construction
Information as to total impaired loans
Impaired loans	1,187	1,138
Covered | Consumer
Information as to total impaired loans
Impaired loans	25	25
Covered | Performing
Information as to total impaired loans
Troubled debt restructurings	20,779	21,047
Covered | Performing | Residential real estate
Information as to total impaired loans
Troubled debt restructurings	2,582	2,691
Covered | Performing | Commercial real estate
Information as to total impaired loans
Troubled debt restructurings	15,056	14,391
Covered | Performing | Commercial and industrial
Information as to total impaired loans
Troubled debt restructurings	3,030	3,802
Covered | Performing | Real estate construction
Information as to total impaired loans
Troubled debt restructurings	$ 111	$ 163

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EARNINGS PER COMMON SHARE (Tables)

3 Months Ended

Mar. 31, 2014

EARNINGS PER COMMON SHARE

Schedule of factors used in the basic and diluted earnings per share ("EPS") computation

	Three months ended March 31,
(In thousands, except per share data)	2014		2013
Numerator for basic and diluted EPS:
Net income	$	32,667	$	60,455
Denominator for basic EPS - weighted average shares	68,121		66,229
Effect of dilutive securities -
Employee and director stock options	3,851		1,394
Warrants	1,405		577
Denominator for diluted EPS - adjusted weighted average shares	73,377		68,200
EPS available to common shareholders
Basic	$	0.48	$	0.91
Diluted	$	0.45	$	0.89

Schedule of average shares related to outstanding options and warrants to purchase shares of common stock were not included in the computation of diluted net income available to common shareholders because they were antidilutive

	For the three months ended
(Shares in thousands)	March 31, 2013
Average outstanding options	3,758
Outstanding exercise prices:
Low end	$	7.25
High end	$	8.25
Average outstanding warrants	39
Outstanding exercise prices:
Low end	$	10.00
High end	$	10.00

XML

SECURITIES (Tables)

3 Months Ended

Mar. 31, 2014

SECURITIES

Summary of the Company's investment securities available-for-sale

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2014
U.S. Treasury securities	$	3,250	$	—	$	—		$	3,250
U.S. government sponsored agency obligations	116,091		129		(2,066		)	114,154
Obligations of state and political subdivisions:
Taxable	397		—		—			397
Tax-exempt	167,400		2,362		(2,183		)	167,579
SBA Pools	38,065		115		(296		)	37,884
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	233,179		1,087		(2,809		)	231,457
Privately issued	3,490		27		(1		)	3,516
Privately issued commercial mortgage-backed securities	5,168		—		(12		)	5,156
Corporate debt securities	68,223		333		(394		)	68,162
Equity securities	500		—		(8		)	492
Total securities available-for-sale	$	635,763	$	4,053	$	(7,769	)	$	632,047
December 31, 2013
U.S. government sponsored agency obligations	$	102,597	$	—	$	(4,360	)	$	98,237
Obligations of state and political subdivisions:
Taxable	396		—		—			396
Tax-exempt	184,351		2,102		(4,453		)	182,000
SBA Pools	42,956		162		(692		)	42,426
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	223,518		729		(5,325		)	218,922
Privately issued	4,453		22		(29		)	4,446
Privately issued commercial mortgage-backed securities	5,181		—		(34		)	5,147
Corporate debt securities	68,433		237		(650		)	68,020
Equity securities	500		—		(11		)	489
Total securities available-for-sale	$	632,385	$	3,252	$	(15,554	)	$	620,083

Schedule of proceeds from sales of securities and the associated gains and losses recorded in earnings

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Proceeds	$	54,458		$	5,514
Gross gains	—			55
Gross losses	(2,310		)	(24		)

Schedule of amortized cost and fair value of debt securities by contractual maturity

	March 31, 2014
(Dollars in thousands)	Amortized Cost		Fair Value
Securities with contractual maturities:
Within one year	$	7,820	$	7,826
After one year through five years	62,382		63,242
After five years through ten years	201,454		200,432
After ten years	363,607		360,055
Equity securities	500		492
Total securities available-for-sale	$	635,763	$	632,047

Summary of the investment securities available-for-sale in an unrealized loss position

	Less than 12 Months					More than 12 Months					Total
(Dollars in thousands)	Fair Value		Unrealized losses			Fair Value		Unrealized losses			Fair Value		Unrealized losses
March 31, 2014
U.S. government sponsored agency obligations	$	105,543	$	(2,066	)	$	—	$	—		$	105,543	$	(2,066	)
Obligations of state and political subdivisions:
Tax-exempt	82,151		(1,926		)	6,326		(257		)	88,477		(2,183		)
SBA Pools	14,308		(191		)	8,104		(105		)	22,412		(296		)
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored agencies	142,978		(2,550		)	18,457		(259		)	161,435		(2,809		)
Privately issued	275		(1		)	—		—			275		(1		)
Privately issued commercial mortgage-backed securities	5,156		(12		)	—		—			5,156		(12		)
Corporate debt securities	23,698		(369		)	420		(25		)	24,118		(394		)
Equity securities	492		(8		)	—		—			492		(8		)
Total securities available-for-sale	$	374,601	$	(7,123	)	$	33,307	$	(646	)	$	407,908	$	(7,769	)
December 31, 2013
U.S. government sponsored agency obligations	$	98,237	$	(4,360	)	$	—	$	—		$	98,237	$	(4,360	)
Obligations of state and political subdivisions:
Tax-exempt	102,585		(4,159		)	5,794		(294		)	108,379		(4,453		)
SBA Pools	26,498		(692		)	—		—			26,498		(692		)
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored agencies	155,028		(4,952		)	18,846		(373		)	173,874		(5,325		)
Privately issued	557		(1		)	1,746		(28		)	2,303		(29		)
Privately issued commercial mortgage-backed securities	5,147		(34		)	—		—			5,147		(34		)
Corporate debt securities	34,487		(650		)	—		—			34,487		(650		)
Equity securities	489		(11		)	—		—			489		(11		)
Total securities available-for-sale	$	423,028	$	(14,859	)	$	26,386	$	(695	)	$	449,414	$	(15,554	)

XML

FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2014

FAIR VALUE

Schedule of assumptions included in loan servicing rights

	Commercial Real Estate		Agricultural		Mortgage
As of March 31, 2014
Prepayment speed	7.08-50.00%		5.34-52.66%		3.67-41.26%
Weighted average (“WA”) discount rate	19.32%		15.00%		9.66%
WA cost to service/per year	$	471	$	200	$	57
WA ancillary income/per year	N/A		N/A		36
WA float range	0.56%		0.56%		0.87-1.69%
As of December 31, 2013
Prepayment speed	8.50-50.00%		4.98-53.16%		3.55-44.49%
WA discount rate	20.00%		15.00%		10.17%
WA cost to service/per year	$	467	$	200	$	57
WA ancillary income/per year	N/A		N/A		45
WA float range	0.56%		0.56%		0.73-1.54%

Schedule of the recorded amount of assets and liabilities measured at fair value, including financial assets and liabilities for which the Company has elected the fair value option, on a recurring basis

(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2014
Securities available-for-sale:
U.S. Treasury securities	$	3,250	$	3,250	$	—	$	—
U.S. government sponsored agency obligations	114,154		—		114,154		—
Obligations of state and political subdivisions:
Taxable	397		—		—		397
Tax-exempt	167,579		—		167,579		—
Small Business Administration (“SBA”) Pools	37,884		—		37,884		—
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	231,457		—		231,457		—
Privately issued	3,516		—		3,516		—
Privately issued commercial mortgage-backed securities	5,156		—		5,156		—
Corporate debt securities	68,162		—		67,742		420
Equity securities	492		492		—		—
Total securities available-for-sale	632,047		3,742		627,488		817
Loans measured at fair value:
Residential real estate	17,636		—		—		17,636
Real estate construction	278		—		—		278
Loans held for sale	75,931		—		75,931		—
Loan servicing rights	77,892		—		—		77,892
Derivative assets	1,420		—		1,420		—
Total assets at fair value	$	805,204	$	3,742	$	704,839	$	96,623
Derivative liabilities	52		—		52		—
Total liabilties at fair value	$	52	$	—	$	52	$	—
December 31, 2013
Securities available-for-sale:
U.S. government sponsored agency obligations	$	98,237	$	—	$	98,237	$	—
Obligations of state and political subdivisions:
Taxable	396		—		—		396
Tax-exempt	182,000		—		182,000		—
Small Business Administration (“SBA”) Pools	42,426		—		42,426		—
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	218,922		—		218,922		—
Privately issued	4,446		—		4,446		—
Privately issued commercial mortgage-backed securities	5,147		—		5,147		—
Corporate debt securities	68,020		—		67,615		405
Equity securities	489		489		—		—
Total securities available-for-sale	620,083		489		618,793		801
Loans measured at fair value:
Residential real estate	16,334		—		—		16,334
Real estate construction	1,374		—		—		1,374
Loans held for sale	85,252		—		85,252		—
Loans servicing rights	78,603		—		—		78,603
Derivative assets	2,630		—		2,630		—
Total assets at fair value	$	804,276	$	489	$	706,675	$	97,112

Summary of the changes in Level 3 assets and liabilities measured at fair value on a recurring basis

	Three months ended March 31, 2014
	Securities available-for-sale
(Dollars in thousands)	Taxable obligations of state and political subdivisions		Corporate debt securities		Loans held for investment			Loan servicing rights
Balance, beginning of period	$	396	$	405	$	17,708		$	78,603
Additions due to acquisition								767
Transfers from loans held for sale	—		—		236			—
Total gains (losses)
Recorded in earnings (realized):
Recorded in “Interest on investments”	1		1		—			—
Recorded in “Mortgage banking and other loan fees”	—		—		12			(3,067		)
Recorded in other comprehensive income (OCI) (pre-tax)	—		14		—			—
New originations	—		—		—			1,589
Repayments	—		—		(170		)	—
Draws on previously issued lines of credits	—		—		128			—
Balance, end of period	$	397	$	420	$	17,914		$	77,892

	Three months ended March 31, 2013
	Securities available-for-sale
(Dollars in thousands)	Taxable obligations of state and political subdivisions		Corporate debt securities		Loans held for investment		Loan servicing rights
Balance, beginning of period	$	396	$	15,250	$	—	$	—
Transfers based on new accounting policy election	—		—		—		5,657		(1)
Additions due to acquisition	—		440		—		41,967
Total gains (losses)
Recorded in earnings (realized):
Recorded in “Mortgage banking and other loan fees”	—		—		—		(92		)
Recorded in OCI (pre-tax)	—		54		—		—
New originations	—		—		—		6,229
Balance, end of period	$	396	$	15,744	$	—	$	53,761

(1)   The balance transferred includes $31 thousand of cumulative adjustment related to the change in accounting policy referenced in Note 1 to our audited financial statements included in our 2013 Annual Report.

Schedule of aggregate fair value, contractual balance (including accrued interest), and gain or loss for loans position held for investment

(Dollars in thousands)	March 31, 2014			December 31, 2013
Aggregate fair value	$	17,914		$	17,708
Contractual balance	18,216			18,022
Fair market value loss	(302		)	(314		)

Schedule of aggregate fair value, contractual balance (including accrued interest), and gain or loss for loans held for sale

(Dollars in thousands)	March 31, 2014		December 31, 2013
Aggregate fair value	$	75,931	$	85,252
Contractual balance	71,870		82,567
Unrealized gain	4,061		2,685

Schedule of total amount of gains/(losses) from changes in fair value included in earnings

	For the three months ended March 31,
(Dollars in thousands)	2014		2013
Change in fair value	$	1,376	$	(552	)

Schedule of the recorded amount of assets and liabilities measured at fair value on a nonrecurring basis

(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2014
Impaired loans:(1)
Uncovered
Residential real estate	$	2,908	$	—	$	—	$	2,908
Commercial real estate	2,930		—		—		2,930
Commercial and industrial	724		—		—		724
Total uncovered impaired loans	6,562		—		—		6,562
Covered
Residential real estate	1,573		—		—		1,573
Commercial real estate	741		—		—		741
Commercial and industrial	874		—		—		874
Consumer	13		—		—		13
Total covered impaired loans	3,201		—		—		3,201
Total impaired loans	9,763		—		—		9,763
Other real estate owned (uncovered)(2)	1,616		—		—		1,616
Other real estate owned (covered)(3)	337		—		—		337
Total	$	11,716	$	—	$	—	$	11,716
December 31, 2013
Impaired loans:(1)
Uncovered
Residential real estate	$	1,569	$	—	$	—	$	1,569
Commercial and industrial	762		—		—		762
Total uncovered impaired loans	2,331		—		—		2,331
Covered
Commercial real estate	644		—		—		644
Total covered impaired loans	644		—		—		644
Total impaired loans	2,975		—		—		2,975
Other real estate owned (uncovered) (2)	2,216		—		—		2,216
Other real estate owned (covered) (3)	4,596		—		—		4,596
Premises and equipment	105		—		105		—
Total	$	9,892	$	—	$	105	$	9,787

(1) Specific reserves of $3.5 million and $1.4 million were provided to reduce the fair value of these loans at March 31, 2014 and December 31, 2013, respectively, based on the estimated fair value of the underlying collateral. In addition, charge-offs of $3 thousand and $6 thousand reduced the fair value of these loans for the three months ended March 31, 2014 and 2013, respectively.

(2) The Company charged $679 thousand and $361 thousand through other noninterest expenses during the three months ended March 31, 2014 and 2013, respectively, to reduce the fair value of these properties.

(3) The Company charged $367 thousand and $1.2 million through other noninterest expenses during the three months ended March 31, 2014 and 2013, respectively, to reduce the fair value of these properties. These expenses were partially offset by FDIC loss sharing income recorded due to the associated loss share coverage.

Recurring basis

Fair Value

Schedule of the carrying amount and estimated fair values of financial instruments not recorded at fair value in their entirety on a recurring basis on the Company's consolidated balance sheets

			Estimated Fair Value
(Dollars in thousands)	Carrying Value		Total		Level 1		Level 2		Level 3
March 31, 2014
Financial assets:
Cash and cash equivalents	$	530,538	$	530,538	$	107,170	$	423,368	$	—
Federal Home Loan Bank stock	12,335		N/A
Net loans, excluding covered loans(1)	3,123,018		3,193,719		—		—		3,193,719
Net covered loans(2)	459,920		533,149		—		—		533,149
Accrued interest receivable	9,955		9,955		—		9,955		—
FDIC indemnification asset	119,045		77,063		—		—		77,063
FDIC receivable	8,130		8,130		—		8,130		—
Company-owned life insurance	39,814		39,814		—		39,814		—
Financial liabilities:
Deposits:
Savings and demand deposits	$	3,115,405	$	3,115,405	$	—	$	3,115,405	$	—
Time deposits	1,270,927		1,274,210		—		1,274,210		—
Total deposits	4,386,332		4,389,615		—		4,389,615
FDIC clawback liability	25,593		25,593		—		—		25,593
Short term borrowings	89,562		89,562		—		89,562		—
Long-term debt	177,483		170,053		—		170,053		—
FDIC warrants payable	4,423		4,423		—		—		4,423
Accrued interest payable	598		598		—		598		—

(1) Included $6.6 million of impaired loans recorded at fair value on a nonrecurring basis and $17.9 million of loans recorded at fair value on a recurring basis.

(2) Included $3.2 million of impaired loans recorded at fair value on a nonrecurring basis.

			Estimated Fair Value
(Dollars in thousands)	Carrying Value		Total		Level 1		Level 2		Level 3
December 31, 2013
Financial assets:
Cash and cash equivalents	$	375,356	$	375,356	$	97,167	$	278,189	$	—
Federal Home Loan Bank stock	16,303		N/A
Net loans, excluding covered loans(1)	2,456,170		2,574,109		—		—		2,574,109
Net covered loans(2)	489,687		534,857		—		—		534,857
Accrued interest receivable	7,968		7,968		—		7,968		—
FDIC indemnification asset	131,861		84,010		—		—		84,010
FDIC receivable	7,783		7,783		—		7,783		—
Company-owned life insurance	39,500		39,500		—		39,500		—
Financial liabilities:
Deposits:
Savings and demand deposits	$	2,673,524	$	2,673,524	$	—	$	2,673,524	$	—
Time deposits	927,313		928,128		—		928,128		—
Total deposits	3,600,837		3,601,652		—		3,601,652		—
FDIC clawback liability	24,887		24,887		—		—		24,887
Short term borrowings	71,876		71,876		—		71,876		—
Long-term debt	199,037		190,420		—		190,420		—
FDIC warrants payable	4,118		4,118		—		—		4,118
Accrued interest payable	626		626		—		626		—

(1) Included $2.3 million of impaired loans recorded at fair value on a nonrecurring basis and $17.7 million of loans recorded at fair value on a recurring basis.

(2) Included $644 thousand of impaired loans recorded at fair value on a nonrecurring basis.

XML

SECURITIES (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Information with respect to proceeds from sales of securities and the associated gains and losses
Proceeds	$ 54,458	$ 5,514
Gross gains		55
Gross losses	$ (2,310)	$ (24)

XML

BASIS OF PRESENTATION AND RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS (Details) (USD $) In Millions, except Share data, unless otherwise specified		0 Months Ended
	Mar. 31, 2014 derivative	Feb. 21, 2014 Class A common stock	Feb. 14, 2014 Class A common stock
Stock issuances and other information
Aggregate number of shares of common stock sold in initial public offering by the company and certain shareholders			15,555,555
Stock price assumed (in dollars per share)			$ 13
Number of shares of common stock sold			3,703,703
Number of shares of stock sold by the selling shareholders			11,851,852
Number of shares of common stock sold by the selling shareholders pursuant to an option granted to the underwriters to cover over-allotments		2,333,333
Net proceeds from initial public offering after deducting the underwriting discounts and commissions and estimated offering expenses			$ 42.0
Customer Initiated Derivatives
Number of derivatives designated as qualifying accounting hedging instruments	0

XML

LOANS (Table)

3 Months Ended

Mar. 31, 2014

Loans

Schedule of loans

	Covered loans						Uncovered loans
(Dollars in thousands)	Accounted for under ASC 310-30		Excluded from ASC 310-30 accounting		Total covered loans		Accounted for under ASC 310-30		Excluded from ASC 310-30 accounting		Total uncovered loans		Total
March 31, 2014
Residential real estate	$	96,534	$	22,874	$	119,408	$	272,920	$	995,280	$	1,268,200	$	1,387,608
Commercial real estate	243,737		35,412		279,149		235,406		912,414		1,147,820		1,426,969
Commercial and industrial	47,488		23,667		71,155		18,410		554,858		573,268		644,423
Real estate construction	14,977		1,918		16,895		11,391		132,178		143,569		160,464
Consumer	11,131		182		11,313		3,382		9,550		12,932		24,245
Total	$	413,867	$	84,053	$	497,920	$	541,509	$	2,604,280	$	3,145,789	$	3,643,709	(1)
December 31, 2013
Residential real estate	$	100,034	$	23,300	$	123,334	$	253,528	$	831,925	$	1,085,453	$	1,208,787
Commercial real estate	262,769		36,632		299,401		98,299		657,540		755,839		1,055,240
Commercial and industrial	51,407		27,030		78,437		5,985		440,659		446,644		525,081
Real estate construction	15,268		1,950		17,218		1,970		174,256		176,226		193,444
Consumer	11,508		170		11,678		2,907		6,847		9,754		21,432
Total	$	440,986	$	89,082	$	530,068	$	362,689	$	2,111,227	$	2,473,916	$	3,003,984	(1)

(1) Reported net of deferred fees and costs totaling $10.5 million and $9.8 million at March 31, 2014 and December 31, 2013, respectively.

Schedule of information as to nonperforming assets

	March 31,		December 31,
(Dollars in thousands)	2014		2013
Uncovered nonperforming assets
Nonaccrual loans
Residential real estate	$	13,822	$	15,415
Commercial real estate	8,838		5,591
Commercial and industrial	2,249		2,681
Real estate construction	582		510
Consumer	102		100
Total nonaccrual loans	25,593		24,297
Other real estate owned	47,286		18,384
Total uncovered nonperforming assets	72,879		42,681
Covered nonperforming assets
Nonaccrual loans
Residential real estate	1,330		988
Commercial real estate	7,798		8,124
Commercial and industrial	4,904		7,201
Real estate construction	1,465		1,372
Consumer	25		31
Total nonaccrual loans	15,522		17,716
Other real estate owned	10,165		11,571
Total covered nonperforming assets	25,687		29,287
Total nonperforming assets	$	98,566	$	71,968
Uncovered loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30
Residential real estate	3		539
Total loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30	$	3	$	539
Covered loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30
Residential real estate	7		—
Total loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30	$	7	$	—

Schedule of information as to impaired loans both individually and collectively evaluated for impairment

	March 31,		December 31,
(Dollars in thousands)	2014		2013
Uncovered
Nonaccrual loans	$	25,593	$	24,297
Performing troubled debt restructurings:
Residential real estate	828		328
Commercial real estate	3,003		1,637
Commercial and industrial	1,365		1,367
Real estate construction	96		90
Consumer	30		30
Total uncovered performing troubled debt restructurings	5,322		3,452
Total uncovered impaired loans	$	30,915	$	27,749
Covered
Nonaccrual loans	$	15,522	$	17,716
Performing troubled debt restructurings:
Residential real estate	2,582		2,691
Commercial real estate	15,056		14,391
Commercial and industrial	3,030		3,802
Real estate construction	111		163
Total covered performing troubled debt restructurings	20,779		21,047
Total covered impaired loans	$	36,301	$	38,763

Schedule of the recorded investment of loans modified in TDRs during the period by type of concession granted

	Concession type											Financial effects of modification
(Dollars in thousands)	Principal deferral		Principal reduction (1)		Interest rate		Forbearance agreement		Total number of loans	Total recorded investment at March 31, 2014		Net charge-offs (recoveries)			Provision for loan losses (2)
For the three months ended March 31, 2014
Uncovered
Residential real estate	$	—	$	67	$	233	$	—	6	$	300	$	—		$	—
Commercial real estate	—		—		713		937		5	1,650		(9		)	133
Commercial and industrial	34		—		—		123		4	157		—			34
Total uncovered	$	34	$	67	$	946	$	1,060	15	$	2,107	$	(9	)	$	167
Covered
Residential real estate	$	116	$	—	$	—	$	—	5	$	116	$	6		$	6
Commercial real estate	—		—		—		443		1	443		—			—
Commercial and industrial	—		—		27		—		3	27		—			—
Total covered	$	116	$	—	$	27	$	443	9	$	586	$	6		$	6
Total loans	$	150	$	67	$	973	$	1,503	24	$	2,693	$	(3	)	$	173

(1) Loan forgiveness related to loans modified in TDRs for the three months ended March 31, 2014 totaled $127 thousand.

(2) The provision for loan losses for covered loans is partially offset by the build of an associated FDIC indemnification asset on covered loans.

	Concession type						Total	Total recorded		Financial effect of modification
(Dollars in thousands)	Principal deferral (1)		Interest rate		Forbearance agreement		number of loans	investment at March 31, 2013		Net charge-offs		Provision for loan losses (2)
For the three months ended March 31, 2013
Uncovered
Residential real estate	$	—	$	—	$	177	4	$	177	$	—	$	—
Commercial real estate	252		—		19		2	271		—		6
Commercial and industrial	—		—		85		1	85		—		—
Consumer	—		—		3		3	3		—		—
Total uncovered	$	252	$	—	$	284	10	$	536	$	—	$	6
Covered
Residential real estate	$	578	$	—	$	—	6	$	578	$	—	$	35
Commercial real estate	—		228		—		4	228		—		20
Commercial and industrial	20		369		64		14	453		—		15
Real estate construction	—		6		—		1	6		—		—
Total covered	$	598	$	603	$	64	25	$	1,265	$	—	$	70
Total loans	$	850	$	603	$	348	35	$	1,801	$	—	$	76

(1) No amounts were forgiven for the three months ended March 31, 2013 as a result of modification.

(2) The provision for loan losses for covered loans is partially offset by the build of an associated FDIC indemnification asset on covered loans.

Schedule of the number of loans modified in TDRs during the previous 12 months for which there was payment default during the period, including the recorded investment

(Dollars in thousands)	Total number of loans	Total recorded investment		Charge-offs following a subsequent default
For the three months ended March 31, 2014
Uncovered
Residential real estate	20	$	1,157	$	81
Commercial real estate	2	1,487		150
Commercial and industrial	1	135		—
Total uncovered	23	2,779		231
Covered
Residential real estate	7	171		7
Commercial real estate	5	222		—
Commercial and industrial	10	230		7
Real estate construction	1	776		—
Total covered	23	1,399		14
Total loans	46	$	4,178	$	245
For the three months ended March 31, 2013
Uncovered
Residential real estate	1	$	133	$	—
Consumer	2	3		—
Total uncovered	3	136		—
Covered
Residential real estate	1	174		—
Commercial real estate	9	1,320		—
Commercial and industrial	8	722		—
Consumer	1	—		—
Total covered	19	2,216		—
Total loans	22	$	2,352	$	—

Commercial and industrial, Commercial real estate and Real estate construction

Loans

Schedule of loans by credit quality

(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
March 31, 2014
Uncovered loans
Commercial real estate	$	1,018,275	$	63,219	$	57,488	$	8,838	$	1,147,820
Commercial and industrial	549,174		11,680		10,165		2,249		573,268
Real estate construction	139,026		2,215		1,746		582		143,569
Total	$	1,706,475	$	77,114	$	69,399	$	11,669	$	1,864,657
Covered loans
Commercial real estate	$	149,456	$	23,514	$	98,381	$	7,798	$	279,149
Commercial and industrial	41,153		6,939		18,159		4,904		71,155
Real estate construction	5,685		3,192		6,553		1,465		16,895
Total	$	196,294	$	33,645	$	123,093	$	14,167	$	367,199
December 31, 2013
Uncovered loans
Commercial real estate	$	645,276	$	43,597	$	61,375	$	5,591	$	755,839
Commercial and industrial	423,295		10,237		10,431		2,681		446,644
Real estate construction	164,466		19		11,231		510		176,226
Total	$	1,233,037	$	53,853	$	83,037	$	8,782	$	1,378,709
Covered loans
Commercial real estate	$	163,167	$	17,058	$	111,052	$	8,124	$	299,401
Commercial and industrial	43,917		6,951		20,368		7,201		78,437
Real estate construction	6,193		2,803		6,850		1,372		17,218
Total	$	213,277	$	26,812	$	138,270	$	16,697	$	395,056

Residential real estate and consumer loans

Loans

Schedule of loans by credit quality

(Dollars in thousands)	Performing		Nonperforming		Total
March 31, 2014
Uncovered loans
Residential real estate	$	1,254,378	$	13,822	$	1,268,200
Consumer	12,830		102		12,932
Total	$	1,267,208	$	13,924	$	1,281,132
Covered loans
Residential real estate	$	118,078	$	1,330	$	119,408
Consumer	11,288		25		11,313
Total	$	129,366	$	1,355	$	130,721
December 31, 2013
Uncovered
Residential real estate	$	1,070,038	$	15,415	$	1,085,453
Consumer	9,654		100		9,754
Total	$	1,079,692	$	15,515	$	1,095,207
Covered loans
Residential real estate	$	122,346	$	988	$	123,334
Consumer	11,647		31		11,678
Total	$	133,993	$	1,019	$	135,012

Excluding loans accounted for under ASC 310-30

Loans

Schedule of loan delinquency

	March 31, 2014
(Dollars in thousands)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total loans		90 days or more past due and still accruing
Uncovered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	7,900	$	676	$	6,616	$	15,192	$	980,088	$	995,280	$	3
Commercial real estate	2,461		1,929		6,089		10,479		901,935		912,414		—
Commercial and industrial	1,946		212		1,174		3,332		551,526		554,858		—
Real estate construction	2,852		436		—		3,288		128,890		132,178		—
Consumer	278		3		3		284		9,266		9,550		—
Total	$	15,437	$	3,256	$	13,882	$	32,575	$	2,571,705	$	2,604,280	$	3
Covered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	835	$	403	$	141	$	1,379	$	21,495	$	22,874	$	7
Commercial real estate	444		404		5,344		6,192		29,220		35,412		—
Commercial and industrial	38		677		4,214		4,929		18,738		23,667		—
Real estate construction	—		—		1,413		1,413		505		1,918		—
Consumer	2		1		19		22		160		182		—
Total	$	1,319	$	1,485	$	11,131	$	13,935	$	70,118	$	84,053	$	7

	December 31, 2013
(Dollars in thousands)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total loans		90 days or more past due and still accruing
Uncovered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	11,244	$	1,849	$	6,641	$	19,734	$	812,191	$	831,925	$	539
Commercial real estate	1,400		4,992		1,122		7,514		650,026		657,540		—
Commercial and industrial	136		25		560		721		439,938		440,659		—
Real estate construction	5,038		356		359		5,753		168,503		174,256		—
Consumer	207		38		4		249		6,598		6,847		—
Total	$	18,025	$	7,260	$	8,686	$	33,971	$	2,077,256	$	2,111,227	$	539
Covered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	827	$	260	$	224	$	1,311	$	21,989	$	23,300	$	—
Commercial real estate	324		558		5,681		6,563		30,069		36,632		—
Commercial and industrial	1,619		119		4,476		6,214		20,816		27,030		—
Real estate construction	—		—		1,365		1,365		585		1,950		—
Consumer	1		17		7		25		145		170		—
Total	$	2,771	$	954	$	11,753	$	15,478	$	73,604	$	89,082	$	—

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ALLOWANCE FOR LOAN LOSSES (Tables)

3 Months Ended

Mar. 31, 2014

ALLOWANCE FOR LOAN LOSSES

Schedule of information as to impaired loans individually evaluated for impairment

(Dollars in thousands)	Recorded investment with no related allowance		Recorded investment with related allowance		Total recorded investment		Contractual principal balance		Related allowance
March 31, 2014
Uncovered individually evaluated impaired loans
Residential real estate	$	9,782	$	4,090	$	13,872	$	17,965	$	1,451
Commercial real estate	3,207		4,613		7,820		9,652		1,287
Commercial and industrial	653		767		1,420		1,829		217
Consumer	32		96		128		134		99
Total uncovered individually evaluated impaired loans	$	13,674	$	9,566	$	23,240	$	29,580	$	3,054
Covered individually evaluated impaired loans
Residential real estate	$	2,174	$	1,731	$	3,905	$	4,864	$	463
Commercial real estate	17,675		902		18,577		23,685		95
Commercial and industrial	1,232		1,723		2,955		3,211		945
Real estate construction	1,187		—		1,187		2,678		—
Consumer	6		19		25		45		3
Total covered individually evaluated impaired loans	$	22,274	$	4,375	$	26,649	$	34,483	$	1,506
December 31, 2013
Uncovered individually evaluated impaired loans
Residential real estate	$	8,143	$	5,871	$	14,014	$	17,005	$	1,923
Commercial real estate	4,588		—		4,588		4,423		—
Commercial and industrial	1,817		1,065		2,882		3,548		284
Real estate construction	359		—		359		359		—
Consumer	3		30		33		33		1
Total covered individually evaluated impaired loans	$	14,910	$	6,966	$	21,876	$	25,368	$	2,208
Covered individually evaluated impaired loans
Residential real estate	$	1,141	$	1,537	$	2,678	$	3,389	$	360
Commercial real estate	17,138		924		18,062		21,814		230
Commercial and industrial	3,704		1,417		5,121		5,503		937
Real estate construction	1,138		—		1,138		2,672		—
Consumer	6		19		25		45		2
Total covered individually evaluated impaired loans	$	23,127	$	3,897	$	27,024	$	33,423	$	1,529

	For the three months ended March 31, 2014				For the three months ended March 31, 2013
(Dollars in thousands)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Uncovered individually evaluated impaired loans
Residential real estate	$	14,178	$	150	$	—	$	—
Commercial real estate	8,394		316		253		3
Commercial and industrial	1,426		20		1,493		25
Consumer	129		2		—		—
Total uncovered individually evaluated impaired loans	$	24,127	$	488	$	1,746	$	28
Covered individually evaluated impaired loans
Residential real estate	$	3,928	$	57	$	270	$	3
Commercial real estate	18,652		282		18,778		283
Commercial and industrial	3,055		31		3,460		32
Real estate construction	1,163		25		450		—
Consumer	25		1		—		—
Total covered individually evaluated impaired loans	$	26,823	$	396	$	22,958	$	318

Noncovered [Member]

Allowance for loan losses

Schedule of changes in the allowance for loan losses and the allocation of the allowance for loans

(Dollars in thousands)	Residential real estate			Commercial real estate			Commercial and industrial			Real estate construction			Consumer			Total
For the three months ended March 31, 2014
Allowance for loan losses - uncovered:
Balance at beginning of period	$	7,708		$	4,267		$	3,404		$	2,027		$	340		$	17,746
Provision (benefit) for loan losses	2,864			3,138			1,336			(865		)	(49		)	6,424
Gross charge-offs	(1,436		)	(1,245		)	(145		)	(81		)	(66		)	(2,973		)
Recoveries	760			616			162			2			34			1,574
Net (charge-offs) recoveries	(676		)	(629		)	17			(79		)	(32		)	(1,399		)
Ending allowance for loan losses	$	9,896		$	6,776		4,757			$	1,083		$	259		$	22,771
As of March 31, 2014
Allowance for loan losses - uncovered:
Individually evaluated for impairment	$	1,451		$	1,287		$	217		$	—		$	99		$	3,054
Collectively evaluated for impairment	3,749			3,170			4,342			1,083			25			12,369
Accounted for under ASC 310-30	4,696			2,319			198			—			135			7,348
Allowance for loan losses - uncovered:	$	9,896		$	6,776		$	4,757		$	1,083		$	259		$	22,771
Balance of loans - uncovered:
Individually evaluated for impairment	$	13,872		$	7,820		$	1,420		$	—		$	128		$	23,240
Collectively evaluated for impairment	981,408			904,594			553,438			132,178			9,422			2,581,040
Accounted for under ASC 310-30	272,920			235,406			18,410			11,391			3,382			541,509
Total uncovered loans	$	1,268,200		$	1,147,820		$	573,268		$	143,569		$	12,932		$	3,145,789
For the three months ended March 31, 2013
Allowance for loan losses - uncovered:
Balance at beginning of peiod	$	2,059		$	4,265		$	4,162		$	268		$	191		$	10,945
Provision (benefit) for loan losses	1,218			(28		)	(300		)	147			139			1,176
Gross charge-offs	(1,129		)	(432		)	(126		)	—			(148		)	(1,835		)
Recoveries	37			171			42			—			62			312
Net charge-offs	(1,092		)	(261		)	(84		)	—			(86		)	(1,523		)
Ending allowance for loan losses	$	2,185		$	3,976		$	3,778		$	415		$	244		$	10,598

(Dollars in thousands)	Residential real estate		Commercial real estate		Commercial and industrial		Real estate construction		Consumer		Total
As of December 31, 2013
Allowance for loan losses - uncovered:
Individually evaluated for impairment	$	1,923	$	—	$	284	$	—	$	1	$	2,208
Collectively evaluated for impairment	2,697		2,862		2,959		2,025		224		10,767
Accounted for under ASC 310-30	3,088		1,405		161		2		115		4,771
Allowance for loan losses - uncovered:	$	7,708	$	4,267	$	3,404	$	2,027	$	340	$	17,746
Balance of loans - uncovered:
Individually evaluated for impairment	$	14,014	$	4,588	$	2,882	$	359	$	33	$	21,876
Collectively evaluated for impairment	817,911		652,952		437,777		173,897		6,814		2,089,351
Accounted for under ASC 310-30	253,528		98,299		5,985		1,970		2,907		362,689
Total uncovered loans	$	1,085,453	$	755,839	$	446,644	$	176,226	$	9,754	$	2,473,916

Covered [Member]

Allowance for loan losses

Schedule of changes in the allowance for loan losses and the allocation of the allowance for loans

(Dollars in thousands)	Residential real estate			Commercial real estate			Commercial and industrial			Real estate construction			Consumer			Total
For the three months ended March 31, 2014
Allowance for loan losses - covered:
Balance at beginning of period	$	4,696		$	26,394		$	7,227		$	1,984		$	80		$	40,381
Provision (benefit) for loan losses	692			(1,991		)	(1,090		)	(83		)	(26		)	(2,498		)
Gross charge-offs	(863		)	(1,986		)	(1,027		)	(25		)	(47		)	(3,948		)
Recoveries	552			1,645			1,649			127			92			4,065
Net (charge-offs) recoveries	(311		)	(341		)	622			102			45			117
Ending allowance for loan losses	$	5,077		$	24,062		$	6,759		$	2,003		$	99		$	38,000
As of March 31, 2014
Allowance for loan losses- covered:
Individually evaluated for impairment	$	463		$	95		$	945		$	—		$	3		$	1,506
Collectively evaluated for impairment	168			2,912			753			44			2			3,879
Accounted for under ASC 310-30	4,446			21,055			5,061			1,959			94			32,615
Allowance for loan losses	$	5,077		$	24,062		$	6,759		$	2,003		$	99		$	38,000
Balance of covered loans:
Individually evaluated for impairment	$	3,905		$	18,577		$	2,955		$	1,187		$	25		$	26,649
Collectively evaluated for impairment	18,969			16,835			20,712			731			157			57,404
Accounted for under ASC 310-30	96,534			243,737			47,488			14,977			11,131			413,867
Total covered loans	$	119,408		$	279,149		$	71,155		$	16,895		$	11,313		$	497,920
For the three months ended March 31, 2013
Allowance for loan losses - covered:
Balance at beginning of period	$	5,716		$	30,150		$	10,915		$	4,509		$	183		$	51,473
Provision (benefit) for loan losses	(144		)	769			1,523			(935		)	(129		)	1,084
Gross charge-offs	(749		)	(4,610		)	(835		)	(364		)	(19		)	(6,577		)
Recoveries	261			2,709			547			367			50			3,934
Net charge-offs	(488		)	(1,901		)	(288		)	3			31			(2,643		)
Ending allowance for loan losses	$	5,084		$	29,018		$	12,150		$	3,577		$	85		$	49,914

(Dollars in thousands)	Residential real estate		Commercial real estate		Commercial and industrial		Real estate construction		Consumer		Total
As of December 31, 2013
Allowance for loan losses- covered:
Individually evaluated for impairment	$	360	$	230	$	937	$	—	$	2	$	1,529
Collectively evaluated for impairment	192		3,010		471		108		1		3,782
Accounted for under ASC 310-30	4,144		23,154		5,819		1,876		77		35,070
Allowance for loan losses	$	4,696	$	26,394	$	7,227	$	1,984	$	80	$	40,381
Balance of covered loans:
Individually evaluated for impairment	$	2,678	$	18,062	$	5,121	$	1,138	$	25	$	27,024
Collectively evaluated for impairment	20,622		18,570		21,909		812		145		62,058
Accounted for under ASC 310-30	100,034		262,769		51,407		15,268		11,508		440,986
Total covered loans	$	123,334	$	299,401	$	78,437	$	17,218	$	11,678	$	530,068

XML

Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities
Net income	$ 32,667	$ 60,455
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,198	2,197
Amortization of core deposit intangibles	736	688
Stock-based compensation expense	180	8,270
Provisions for loan losses	3,926	2,260
Originations of loans held for sale	(239,275)	(744,770)
Proceeds from sales of loans	251,347	738,460
Net gain from sales of loans	(3,040)	(16,815)
Net (gain)/loss on sales of securities	2,310	(31)
Gain on acquisition	(36,994)	(71,702)
Valuation writedowns on other real estate	1,046	1,513
Valuation change in Company owned life insurance	(314)	(334)
Valuation change in loan servicing rights	3,067	92
Net additions to loan servicing rights	(1,589)	(6,229)
Net decrease in FDIC indemnification asset and receivable	12,469	27,063
Net gain on sales of other real estate owned	(1,006)	(1,452)
Net (increase)/decrease in accrued interest receivable and other assets	(2,478)	7,835
Net decrease in accrued expenses and other liabilities	4,243	46,792
Net securities premium/discount amortization	748	1,134
Other, net	721	11
Net cash from operating activities	29,962	55,438
Cash flows from investing activities
Net increase in uncovered loans	(107,499)	(9,548)
Net decrease in covered loans	30,202	49,264
Net decrease in FHLB stock	9,901
Purchases of available-for-sale securities	(61,288)	(257,771)
Purchases of premises and equipment	(4,263)	(959)
Proceeds from:
Maturities and redemptions of available-for-sale securities	14,014	156,213
Sale of available-for-sale securities	54,458	5,514
Sale of uncovered loans	3,034	1,426
Sale of other real estate owned	9,347	7,399
Sale of premises and equipment	1,618	10
Net cash provided from acquisition	209,831	394,805
Net cash from investing activities	159,355	346,353
Cash flows from financing activities
Net decrease in deposits	(72,274)	(48,151)
Repayments of long-term FHLB advances	(21,179)	(110,491)
Issuances of long-term FHLB advances		18,935
Repayment of senior unsecured line of credit	(35,000)
Net increase in other short-term borrowings	52,668	28,805
Other changes in long-term debt	(375)	90
Proceeds from issuance of common stock	42,025
Net cash used in financing activities	(34,135)	(110,812)
Net change in cash and cash equivalents	155,182	290,979
Beginning cash and cash equivalents	375,356	362,771
Ending cash and cash equivalents	530,538	653,750
Supplemental disclosure of cash flow information:
Interest paid	3,312	2,282
Income taxes paid	2,226	15,775
Transfer from loans to other real estate owned	5,730	4,782
Transfer from loans held for sale to loans held for investment	236
Transfer from premises and equipment to other real estate owned	275	2,471
Increase in assets and liabilities in acquisitions:
Securities	13,619	139,764
FHLB stock	5,933	12,993
Loans held for sale		213,946
Uncovered loans	572,173	1,530,376
Premises and equipment	4,912	22,168
Loan servicing rights	767	41,967
Company-owned life insurance		38,172
Other real estate owned	30,878
Core deposit intangible	3,633	9,816
Other assets	56,552	128,278
Deposits	857,769	2,121,258
Short-term borrowings	18	21,892
Long-term debt		312,956
Other liabilities	$ 3,517	$ 22,925

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ACQUIRED LOANS AND LOSS SHARE ACCOUNTING (Tables)

3 Months Ended

Mar. 31, 2014

ACQUIRED LOANS AND LOSS SHARE ACCOUNTING

Schedule of changes in the carrying amount of accretable discount for purchased loans

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Balance at beginning of period	$	302,287		$	216,970
Additions due to acquisitions	32,852			158,221
Discount accretion	(21,966		)	(26,410		)
Reclassifications from nonaccretable discount and other additions to accretable discount due to results of cash flow re-estimations	16,364			17,989
Other activity, net (1)	(12,070		)	(15,367		)
Balance at end of period	$	317,467		$	351,403

(1) Primarily includes changes in the accretable discount due to loan payoffs, foreclosures and charge-offs.

Summary of composition of the recorded investment for loans

	March 31,			December 31,
(Dollars in thousands)	2014			2013
Contractual cash flows	$	1,593,665		$	1,357,070
Non-accretable difference	(320,822		)	(251,108		)
Accretable yield	(317,467		)	(302,287		)
Loans accounted for under ASC 310-30	$	955,376		$	803,675

Schedule of the components and impact of the provision for loan losses-covered and the related FDIC loss sharing income

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Provision (benefit) for loan losses - covered:
Impairment recorded as a result of re-estimation of cash flows on loans accounted for under ASC 310-30 (1)	$	1,299		$	5,821
Additional benefit recorded, net of recoveries, for covered loans including those accounted for under ASC 310-20 and ASC 310-40	(3,797		)	(4,737		)
Total provision (benefit) for loan losses-covered	$	(2,498	)	$	1,084
Less: FDIC loss share income:
Income recorded as a result of re-estimation of cash flows on loans accounted for under ASC 310-30 (1)	$	1,581		$	2,015
Expense recorded, to offset provision (benefit), for covered loans including those accounted for under ASC 310-20 and ASC 310-40	(3,038		)	(3,790		)
Total loss sharing expense due to provision for loan losses-covered	$	(1,457	)	$	(1,775	)
Net (increase) decrease to income before taxes:
Net (income) expense recorded as a result of re-estimation of cash flows on loans accounted for under ASC 310-30 (1)	$	(282	)	$	3,806
Net income recorded, for covered loans including those accounted for under ASC 310-20 and ASC 310-40	(759		)	(947		)
Net (increase) decrease to income before taxes	$	(1,041	)	$	2,859

(1)  The results of re-estimation also included $8.4 million and $18.0 million of cash flow improvements related to covered loans for the three months ended March 31, 2014 and 2013, respectively.  Improvements in cash flows from the re-estimation process are recognized prospectively as an adjustment to the accretable yield on the loan.

Summary of the activity related to the FDIC indemnification asset and the FDIC receivable

	For the three months ended March 31,
	2014						2013
(Dollars in thousands)	FDIC Indemnification Asset			FDIC Receivable			FDIC Indemnification Asset			FDIC Receivable
Balance at beginning of period	$	131,861		$	7,783		$	226,356		$	17,999
Accretion	(6,718		)	—			(8,148		)	—
Sales and write-downs of other real estate owned (covered)	(473		)	(192		)	(862		)	618
Net effect of change in allowance on covered assets (1)	(2,024		)	—			(5,064		)	—
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(3,601		)	3,601			(10,080		)	10,080
Increase (decrease) due to additional claimable expenses incurred net of recoveries (2)	—			(886		)	—			194
Claim payments received from the FDIC	—			(2,176		)	—			(13,801		)
Balance at end of period	$	119,045		$	8,130		$	202,202		$	15,090

(1) Includes the impact of remeasurement of expected cash flows under ASC 310-30 accounting.

(2) Primarily includes expenses associated with maintaining the underlying properties and legal fees.

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INCOME TAXES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Current income tax expense (benefit)
Federal	$ (2,545)	$ (8,034)
State	(476)	1,376
Total current income tax expense	(3,021)	(6,658)
Deferred income tax expense (benefit)
Federal	1,086	5,094
State	897	(1,486)
Total deferred income tax expense (benefit)	1,983	3,608
Change in valuation allowance	(34)	0
Current income tax expense (benefit)	(1,072)	(3,050)
Amount
Tax based on federal statutory rate	11,058	20,091
Effect of:
Tax exempt income	(727)	(428)
State taxes, net of federal benefit	274	(71)
Change in valuation allowance	(34)
Bargain purchase gain	(12,948)	(25,096)
Transaction costs	28	2,581
Other, net	1,277	(127)
Current income tax expense (benefit)	(1,072)	(3,050)
Rate
Tax based on federal statutory rate (as a percent)	35.00%	35.00%
Effect of:
Tax exempt income (as a percent)	(2.30%)	(0.70%)
State taxes, net of federal benefit (as a percent)	0.90%	(0.10%)
Change in valuation allowance (as a percent)	(0.10%)
Bargain purchase gain (as a percent)	(41.00%)	(43.70%)
Transaction costs (as a percent)	0.10%	4.50%
Other, net (as a percent)	4.00%	(0.20%)
Income tax expense (benefit) (as a percent)	(3.40%)	(5.30%)
Pre-tax income	31,595	57,405
Bargain purchase gain	36,994	71,702
Deferred tax assets:
Allowance for loan losses	57,938		51,527
Other real estate losses	7,249		3,702
Organizational costs	299		311
Accrued stock-based compensation	5,922		5,926
Loss and tax credit carry forwards	32,239		19,298
Other reserves	1,858		1,988
Goodwill and other intangibles	1,433		1,494
Nonaccrual interest	11,213		10,150
Business combination adjustments	80,135		53,890
Net unrealized loss on available for sale securities	1,300		4,306
Other	816
Total deferred tax assets	200,402		152,592
Deferred tax liabilities:
Depreciation	4,360		3,996
FHLB stock dividends	283		1,541
Deferred loan fees	1,247		1,229
Prepaid expenses	439		799
Loan servicing rights	26,533		27,334
Other			247
Total deferred tax liabilities	32,862		35,146
Net deferred tax asset before valuation allowance	167,540		117,446
Valuation allowance	(11,054)		(10,127)
Net deferred tax asset	$ 156,486		$ 107,319

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STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2014

STOCK-BASED COMPENSATION

Schedule of weighted-average assumptions used in determination of the fair value of options granted

	For the three months ended
	March 31, 2013
Fair value of options granted	$	2.13
Expected dividend yield	0.00		%
Expected volatility	24.52		%
Risk-free interest rate	0.96		%
Expected life (in years)	6.00

Summary of activity in the Plan

		Weighted Average
	Number of Shares (in thousands)	Exercise Price per Share		Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2014	8,441	$	6.88
Exercised (1)	70	7.25
Outstanding at March 31, 2014	8,371	6.87		7.41	$	65,008
Options fully vested and expected to vest	8,371	6.87		7.41	65,008
Exercisable at March 31, 2014	8,298	6.87		7.34	64,470

(1) Options exercised during the three months ended March 31, 2014 had a weighted average fair value of $13.28 and were exercised using a net-share settlement, therefore no cash was received.

Summary of changes in the Company's nonvested shares

Nonvested Shares	Shares  (in thousands)	Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2014	348	$	2.24
Vested	275
Nonvested at March 31, 2014	73	$	2.21

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FAIR VALUE (Details 7) (USD $)					3 Months Ended	12 Months Ended						3 Months Ended	12 Months Ended															3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2014 Non-recurring basis	Dec. 31, 2013 Non-recurring basis	Mar. 31, 2014 Non-recurring basis Total	Dec. 31, 2013 Non-recurring basis Total	Dec. 31, 2013 Non-recurring basis Significant Other Observable Inputs (Level 2)	Mar. 31, 2014 Non-recurring basis Significant Unobservable Inputs (Level 3)	Dec. 31, 2013 Non-recurring basis Significant Unobservable Inputs (Level 3)	Mar. 31, 2014 Non-recurring basis Uncovered	Dec. 31, 2013 Non-recurring basis Uncovered	Mar. 31, 2014 Non-recurring basis Uncovered Total	Dec. 31, 2013 Non-recurring basis Uncovered Total	Mar. 31, 2014 Non-recurring basis Uncovered Total Residential real estate	Dec. 31, 2013 Non-recurring basis Uncovered Total Residential real estate	Mar. 31, 2014 Non-recurring basis Uncovered Total Commercial real estate	Mar. 31, 2014 Non-recurring basis Uncovered Total Commercial and industrial	Dec. 31, 2013 Non-recurring basis Uncovered Total Commercial and industrial	Mar. 31, 2014 Non-recurring basis Uncovered Significant Unobservable Inputs (Level 3)	Dec. 31, 2013 Non-recurring basis Uncovered Significant Unobservable Inputs (Level 3)	Mar. 31, 2014 Non-recurring basis Uncovered Significant Unobservable Inputs (Level 3) Residential real estate	Dec. 31, 2013 Non-recurring basis Uncovered Significant Unobservable Inputs (Level 3) Residential real estate	Mar. 31, 2014 Non-recurring basis Uncovered Significant Unobservable Inputs (Level 3) Commercial real estate	Mar. 31, 2014 Non-recurring basis Uncovered Significant Unobservable Inputs (Level 3) Commercial and industrial	Dec. 31, 2013 Non-recurring basis Uncovered Significant Unobservable Inputs (Level 3) Commercial and industrial	Mar. 31, 2014 Non-recurring basis Covered	Dec. 31, 2013 Non-recurring basis Covered	Mar. 31, 2014 Non-recurring basis Covered Total	Dec. 31, 2013 Non-recurring basis Covered Total	Mar. 31, 2014 Non-recurring basis Covered Total Residential real estate	Mar. 31, 2014 Non-recurring basis Covered Total Commercial real estate	Dec. 31, 2013 Non-recurring basis Covered Total Commercial real estate	Mar. 31, 2014 Non-recurring basis Covered Total Commercial and industrial	Mar. 31, 2014 Non-recurring basis Covered Total Consumer	Mar. 31, 2014 Non-recurring basis Covered Significant Unobservable Inputs (Level 3)	Dec. 31, 2013 Non-recurring basis Covered Significant Unobservable Inputs (Level 3)	Mar. 31, 2014 Non-recurring basis Covered Significant Unobservable Inputs (Level 3) Residential real estate	Mar. 31, 2014 Non-recurring basis Covered Significant Unobservable Inputs (Level 3) Commercial real estate	Dec. 31, 2013 Non-recurring basis Covered Significant Unobservable Inputs (Level 3) Commercial real estate	Mar. 31, 2014 Non-recurring basis Covered Significant Unobservable Inputs (Level 3) Commercial and industrial	Mar. 31, 2014 Non-recurring basis Covered Significant Unobservable Inputs (Level 3) Consumer
Fair Value
Impaired loans							$ 9,763,000	$ 2,975,000		$ 9,763,000	$ 2,975,000			$ 6,562,000	$ 2,331,000	$ 2,908,000	$ 1,569,000	$ 2,930,000	$ 724,000	$ 762,000	$ 6,562,000	$ 2,331,000	$ 2,908,000	$ 1,569,000	$ 2,930,000	$ 724,000	$ 762,000			$ 3,201,000	$ 644,000	$ 1,573,000	$ 741,000	$ 644,000	$ 874,000	$ 13,000	$ 3,201,000	$ 644,000	$ 1,573,000	$ 741,000	$ 644,000	$ 874,000	$ 874,000
Other real estate owned
Total OREO	57,451,000	29,955,000	42,944,000	24,703,000										1,616,000	2,216,000						1,616,000	2,216,000								337,000	4,596,000						337,000	4,596,000
Premises and equipment:								105,000	105,000
Total assets at fair value							11,716,000	9,892,000	105,000	11,716,000	9,787,000
Specific reserves for impaired loans, nonrecurring					3,500,000	1,400,000
Charge-offs for impaired loans, nonrecurring					3,000	6,000
Amount charged through other non-interest expense to reduce the fair value of other real estate												$ 679,000	$ 361,000															$ 367,000	$ 1,200,000

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ACQUIRED LOANS AND LOSS SHARE ACCOUNTING (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
FDIC Indemnification Asset
Balance at beginning of period	$ 131,861	$ 226,356
Accretion	(6,718)	(8,148)
Sales and write-downs of other real estate owned	(473)	(862)
Net effect of change in allowance on covered assets	(2,024)	(5,064)
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(3,601)	(10,080)
Balance at the end of the period	119,045	202,202
FDIC Receivable
Balance at beginning of period	7,783	17,999
Sales and write-downs of other real estate owned (covered)	(192)	618
Reimbursements requested from FDIC (reclassification to FDIC receivable)	3,601	10,080
Increase (decrease) due to additional claimable expenses incurred net of recoveries	(886)	194
Claim payments received from the FDIC	(2,176)	(13,801)
Balance at the end of the period	$ 8,130	$ 15,090

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014		Dec. 31, 2013
Assets
Cash and due from banks	$ 107,170		$ 97,167
Interest-bearing deposits with other banks	318,368		206,160
Federal funds sold and other short-term investments	105,000		72,029
Total cash and cash equivalents	530,538		375,356
Securities available-for-sale	632,047		620,083
Federal Home Loan Bank stock	12,335		16,303
Loans held for sale, at fair value	75,931		85,252
Loans:
Total loans, excluding covered loans	3,145,789		2,473,916
Less: Allowance for loan losses - uncovered	(22,771)		(17,746)
Net loans - excluding covered loans	3,123,018		2,456,170
Covered loans	497,920		530,068
Less: Allowance for loan losses - covered	(38,000)		(40,381)
Net loans - covered	459,920		489,687
Net total loans	3,582,938		2,945,857
Premises and equipment	56,352		51,001
FDIC indemnification asset	119,045		131,861
Other real estate owned	57,451		29,955
Loan servicing rights	77,892		78,603
Core deposit intangible	16,102		13,205
FDIC receivable	8,130		7,783
Company-owned life insurance	39,814		39,500
Income tax benefit	178,882		126,200
Other assets	29,744		26,402
Total assets	5,417,201		4,547,361
Deposits:
Noninterest-bearing demand deposits	950,671		779,379
Interest-bearing demand deposits	714,043		598,281
Savings and demand deposits	1,370,691		1,215,864
Time deposits	1,270,927		927,313
Other brokered funds	80,000		80,000
Total deposits	4,386,332		3,600,837
FDIC clawback liability	25,593		24,887
FDIC warrants payable	4,423		4,118
Short-term borrowings	89,562		71,876
Long-term debt	177,483		199,037
Other liabilities	36,340		29,591
Total liabilities	4,719,733		3,930,346
Shareholders' equity
Preferred stock - $1.00 par value Authorized - 20,000,000 shares at 3/31/2014 and 12/31/2013 Issued and outstanding - 0 shares at 3/31/2014 and 12/31/2013
Common stock:
Additional paid-in-capital	404,905		366,428
Retained earnings	225,016		192,349
Accumulated other comprehensive income (loss), net of tax	(2,415)		(7,996)
Total shareholders' equity	697,468		617,015
Total liabilities and shareholders' equity	5,417,201		4,547,361
Class A Voting Common Stock
Common stock:
Common Stock	69,962		66,234
Class B Non-Voting Common Stock
Common stock:
Common Stock
Residential real estate
Loans:
Total loans, excluding covered loans	1,268,200	[1]	1,085,453	[1]
Commercial real estate
Loans:
Total loans, excluding covered loans	1,147,820		755,839
Commercial and industrial
Loans:
Total loans, excluding covered loans	573,268		446,644
Real estate construction
Loans:
Total loans, excluding covered loans	160,464	[1]	193,444	[1]
Consumer
Loans:
Total loans, excluding covered loans	$ 12,932		$ 9,754

[1] Amounts represent loans for which the Company has elected the fair value option. See Note 3 "Fair Value."

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BASIS OF PRESENTATION AND RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS (Details 2) (USD $)				3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2014 Branch offices in Wisconsin	Sep. 30, 2014 Subsequent event Branch offices in Wisconsin Forecast branch	Mar. 31, 2014 Subsequent event Branch office in Albuquerque, New Mexico Talmer West Bank branch	Sep. 30, 2014 Subsequent event Branch office in Albuquerque, New Mexico Forecast Talmer West Bank
Subsequent Events
Number of branch offices sold				11	1
Deposits	$ 4,386,332,000	$ 3,600,837,000	$ 360,000,000
Sale price more than net book value of the assets				13,500,000
Core deposit intangibles related to deposits sold				1,000,000
Expected transaction costs				1,000,000
Deposits						37,000,000
Loans						$ 20,000,000

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Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Consolidated Statements of Comprehensive Income
Income tax expense (benefit) associated with the reclassification adjustments	$ (808)	$ 11

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LOANS (Details) (USD $)																			3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2014 Uncovered	Dec. 31, 2013 Uncovered	Mar. 31, 2014 Uncovered Accounted for under ASC 310-30	Dec. 31, 2013 Uncovered Accounted for under ASC 310-30	Mar. 31, 2014 Uncovered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Uncovered Excluded from ASC 310-30 accounting	Mar. 31, 2014 Covered	Dec. 31, 2013 Covered	Mar. 31, 2014 Covered Accounted for under ASC 310-30	Dec. 31, 2013 Covered Accounted for under ASC 310-30	Mar. 31, 2014 Covered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Covered Excluded from ASC 310-30 accounting	Mar. 31, 2014 Residential real estate		Dec. 31, 2013 Residential real estate		Mar. 31, 2014 Residential real estate Minimum	Mar. 31, 2014 Residential real estate Maximum	Mar. 31, 2014 Residential real estate Uncovered	Dec. 31, 2013 Residential real estate Uncovered	Mar. 31, 2014 Residential real estate Uncovered Accounted for under ASC 310-30	Dec. 31, 2013 Residential real estate Uncovered Accounted for under ASC 310-30	Mar. 31, 2014 Residential real estate Uncovered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Residential real estate Uncovered Excluded from ASC 310-30 accounting	Mar. 31, 2014 Residential real estate Covered	Dec. 31, 2013 Residential real estate Covered	Mar. 31, 2014 Residential real estate Covered Accounted for under ASC 310-30	Dec. 31, 2013 Residential real estate Covered Accounted for under ASC 310-30	Mar. 31, 2014 Residential real estate Covered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Residential real estate Covered Excluded from ASC 310-30 accounting	Mar. 31, 2014 Commercial real estate	Dec. 31, 2013 Commercial real estate	Mar. 31, 2014 Commercial real estate Uncovered	Dec. 31, 2013 Commercial real estate Uncovered	Mar. 31, 2014 Commercial real estate Uncovered Accounted for under ASC 310-30	Dec. 31, 2013 Commercial real estate Uncovered Accounted for under ASC 310-30	Mar. 31, 2014 Commercial real estate Uncovered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Commercial real estate Uncovered Excluded from ASC 310-30 accounting	Mar. 31, 2014 Commercial real estate Covered	Dec. 31, 2013 Commercial real estate Covered	Mar. 31, 2014 Commercial real estate Covered Accounted for under ASC 310-30	Dec. 31, 2013 Commercial real estate Covered Accounted for under ASC 310-30	Mar. 31, 2014 Commercial real estate Covered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Commercial real estate Covered Excluded from ASC 310-30 accounting	Mar. 31, 2014 Commercial and industrial	Dec. 31, 2013 Commercial and industrial	Mar. 31, 2014 Commercial and industrial Uncovered	Dec. 31, 2013 Commercial and industrial Uncovered	Mar. 31, 2014 Commercial and industrial Uncovered Accounted for under ASC 310-30	Dec. 31, 2013 Commercial and industrial Uncovered Accounted for under ASC 310-30	Mar. 31, 2014 Commercial and industrial Uncovered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Commercial and industrial Uncovered Excluded from ASC 310-30 accounting	Mar. 31, 2014 Commercial and industrial Covered	Dec. 31, 2013 Commercial and industrial Covered	Mar. 31, 2014 Commercial and industrial Covered Accounted for under ASC 310-30	Dec. 31, 2013 Commercial and industrial Covered Accounted for under ASC 310-30	Mar. 31, 2014 Commercial and industrial Covered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Commercial and industrial Covered Excluded from ASC 310-30 accounting	Mar. 31, 2014 Real estate construction		Dec. 31, 2013 Real estate construction		Mar. 31, 2014 Real estate construction Uncovered	Dec. 31, 2013 Real estate construction Uncovered	Mar. 31, 2014 Real estate construction Uncovered Accounted for under ASC 310-30	Dec. 31, 2013 Real estate construction Uncovered Accounted for under ASC 310-30	Mar. 31, 2014 Real estate construction Uncovered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Real estate construction Uncovered Excluded from ASC 310-30 accounting	Mar. 31, 2014 Real estate construction Covered	Dec. 31, 2013 Real estate construction Covered	Mar. 31, 2014 Real estate construction Covered Accounted for under ASC 310-30	Dec. 31, 2013 Real estate construction Covered Accounted for under ASC 310-30	Mar. 31, 2014 Real estate construction Covered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Real estate construction Covered Excluded from ASC 310-30 accounting	Mar. 31, 2014 Consumer	Dec. 31, 2013 Consumer	Mar. 31, 2014 Consumer Uncovered	Dec. 31, 2013 Consumer Uncovered	Mar. 31, 2014 Consumer Uncovered Accounted for under ASC 310-30	Dec. 31, 2013 Consumer Uncovered Accounted for under ASC 310-30	Mar. 31, 2014 Consumer Uncovered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Consumer Uncovered Excluded from ASC 310-30 accounting	Mar. 31, 2014 Consumer Covered	Dec. 31, 2013 Consumer Covered	Mar. 31, 2014 Consumer Covered Accounted for under ASC 310-30	Dec. 31, 2013 Consumer Covered Accounted for under ASC 310-30	Mar. 31, 2014 Consumer Covered Excluded from ASC 310-30 accounting	Dec. 31, 2013 Consumer Covered Excluded from ASC 310-30 accounting
Loans
Term of finance																			15 years	30 years
Total covered loans									$ 497,920,000	$ 530,068,000	$ 413,867,000	$ 440,986,000	$ 84,053,000	$ 89,082,000													$ 119,408,000	$ 123,334,000	$ 96,534,000	$ 100,034,000	$ 22,874,000	$ 23,300,000									$ 279,149,000	$ 299,401,000	$ 243,737,000	$ 262,769,000	$ 35,412,000	$ 36,632,000									$ 71,155,000	$ 78,437,000	$ 47,488,000	$ 51,407,000	$ 23,667,000	$ 27,030,000											$ 16,895,000	$ 17,218,000	$ 14,977,000	$ 15,268,000	$ 1,918,000	$ 1,950,000									$ 11,313,000	$ 11,678,000	$ 11,131,000	$ 11,508,000	$ 182,000	$ 170,000
Total uncovered loans	3,145,789,000	2,473,916,000	3,145,789,000	2,473,916,000	541,509,000	362,689,000	2,604,280,000	2,111,227,000							1,268,200,000	[1]	1,085,453,000	[1]			1,268,200,000	1,085,453,000	272,920,000	253,528,000	995,280,000	831,925,000							1,147,820,000	755,839,000	1,147,820,000	755,839,000	235,406,000	98,299,000	912,414,000	657,540,000							573,268,000	446,644,000	573,268,000	446,644,000	18,410,000	5,985,000	554,858,000	440,659,000							160,464,000	[1]	193,444,000	[1]	143,569,000	176,226,000	11,391,000	1,970,000	132,178,000	174,256,000							12,932,000	9,754,000	12,932,000	9,754,000	3,382,000	2,907,000	9,550,000	6,847,000
Total	3,643,709,000	3,003,984,000													1,387,608,000		1,208,787,000																1,426,969,000	1,055,240,000													644,423,000	525,081,000													160,464,000		193,444,000														24,245,000	21,432,000
Deferred fees and costs	$ 10,500,000	$ 9,800,000

[1] Amounts represent loans for which the Company has elected the fair value option. See Note 3 "Fair Value."

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LOAN SERVICING RIGHTS (Tables)

3 Months Ended

Mar. 31, 2014

LOAN SERVICING RIGHTS

Schedule of activity for loan servicing rights and the related fair value changes

(Dollars in thousands)	Commercial Real Estate			Agricultural			Mortgage			Total
For the three months ended March 31, 2014
Fair value, beginning of period	$	368		$	962		$	77,273		$	78,603
Additions due to acquisition	767			—			—			767
Additions from loans sold with servicing retained	—			66			1,523			1,589
Changes in fair value due to:
Reductions from loans paid off during the period	(57		)	(69		)	(736		)	(862		)
Changes due to valuation inputs or assumptions (1)	1			(65		)	(2,141		)	(2,205		)
Fair value, end of period	$	1,079		$	894		$	75,919		$	77,892
Principal balance of loans serviced	$	249,806		$	42,775		$	7,139,642		$	7,432,223
For the three months ended March 31, 2013
Fair value, beginning of period	$	518		$	1,456		$	3,683		$	5,657
Additions due to acquisition	—			—			41,967			41,967
Additions from loans sold with servicing retained	—			31			6,198			6,229
Changes in fair value due to:
Reductions from loans paid off during the period	(4		)	(156		)	(439		)	(599		)
Changes due to valuation inputs or assumptions (1)	(53		)	(77		)	637			507
Fair value, end of period	$	461		$	1,254		$	52,046		$	53,761
Principal balance of loans serviced	$	297,796		$	59,024		$	6,437,608		$	6,794,428

(1)  Represents estimated fair value changes primarily due to prepayment speeds and market-driven changes in interest rates.

Schedule of assumptions included in loan servicing rights

	Commercial Real Estate		Agricultural		Mortgage
As of March 31, 2014
Prepayment speed	7.08-50.00%		5.34-52.66%		3.67-41.26%
Weighted average (“WA”) discount rate	19.32%		15.00%		9.66%
WA cost to service/per year	$	471	$	200	$	57
WA ancillary income/per year	N/A		N/A		36
WA float range	0.56%		0.56%		0.87-1.69%
As of December 31, 2013
Prepayment speed	8.50-50.00%		4.98-53.16%		3.55-44.49%
WA discount rate	20.00%		15.00%		10.17%
WA cost to service/per year	$	467	$	200	$	57
WA ancillary income/per year	N/A		N/A		45
WA float range	0.56%		0.56%		0.73-1.54%

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LOANS (Details 7) (USD $)	3 Months Ended
	Mar. 31, 2014 loan	Mar. 31, 2013 loan
Troubled Debt Restructurings
Total number of loans	46	22
Total recorded investment	$ 4,178,000	$ 2,352,000
Charged-off following a subsequent default	245,000
Commitments to lend additional funds to borrowers whose terms have been modified in TDRs	2,100,000
Uncovered loans
Troubled Debt Restructurings
Total number of loans	23	3
Total recorded investment	2,779,000	136,000
Charged-off following a subsequent default	231,000
Uncovered loans | Residential real estate
Troubled Debt Restructurings
Total number of loans	20	1
Total recorded investment	1,157,000	133,000
Charged-off following a subsequent default	81,000
Uncovered loans | Commercial real estate
Troubled Debt Restructurings
Total number of loans	2
Total recorded investment	1,487,000
Charged-off following a subsequent default	150,000
Uncovered loans | Commercial and industrial
Troubled Debt Restructurings
Total number of loans	1
Total recorded investment	135,000
Uncovered loans | Consumer
Troubled Debt Restructurings
Total number of loans		2
Total recorded investment		3,000
Covered loans
Troubled Debt Restructurings
Total number of loans	23	19
Total recorded investment	1,399,000	2,216,000
Charged-off following a subsequent default	14,000
Covered loans | Residential real estate
Troubled Debt Restructurings
Total number of loans	7	1
Total recorded investment	171,000	174,000
Charged-off following a subsequent default	7,000
Covered loans | Commercial real estate
Troubled Debt Restructurings
Total number of loans	5	9
Total recorded investment	222,000	1,320,000
Covered loans | Commercial and industrial
Troubled Debt Restructurings
Total number of loans	10	8
Total recorded investment	230,000	722,000
Charged-off following a subsequent default	7,000
Covered loans | Real estate construction
Troubled Debt Restructurings
Total number of loans	1
Total recorded investment	$ 776,000
Covered loans | Consumer
Troubled Debt Restructurings
Total number of loans		1

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INCOME TAXES

3 Months Ended

Mar. 31, 2014

INCOME TAXES

INCOME TAXES

14.  INCOME TAXES

The current and deferred components of the provision for income taxes were as follows:

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Current income tax expense (benefit)
Federal	$	(2,545	)	$	(8,034	)
State	(476		)	1,376
Total current income tax benefit	(3,021		)	(6,658		)
Deferred income tax expense (benefit)
Federal	1,086			5,094
State	897			(1,486		)
Total deferred income tax expense (benefit)	1,983			3,608
Change in valuation allowance	(34		)	—
Income tax benefit	$	(1,072	)	$	(3,050	)

Provision for income taxes is computed by applying an estimated annual effective tax rate, based on our forecast of annual income from continuing operations, to year-to-date pre-tax income from continuing operations, and then adjusting for any additional tax effects required to be recorded discretely in the quarter to which they relate.

A reconciliation of expected income tax expense (benefit) at the federal statutory rate to the Company’s provision for income taxes and effective tax rate follows:

	For the three months ended March 31,
	2014					2013
(Dollars in thousands)	Amount			Rate		Amount			Rate
Tax based on federal statutory rate	$	11,058		35.0	%	$	20,091		35.0	%
Effect of:
Tax exempt income	(727		)	(2.3	)	(428		)	(0.7	)
State taxes, net of federal benefit	274			0.9		(71		)	(0.1	)
Change in valuation allowance	(34		)	(0.1	)	—			—
Bargain purchase gain	(12,948		)	(41.0	)	(25,096		)	(43.7	)
Transaction costs	28			0.1		2,581			4.5
Other, net	1,277			4.0		(127		)	(0.2	)
Income tax expense (benefit)	$	(1,072	)	(3.4	)%	$	(3,050	)	(5.3	)%

For the three months ended March 31, 2014, the Company recognized an income tax benefit of $1.1 million on $31.6 million of pre-tax income, an effective tax rate of negative 3.4%, compared to an income tax benefit of $3.1 million on $57.4 million of pre-tax income, an effective tax rate of negative 5.3% for the period ended March 31, 2013.  The income tax benefit for the three months ended March 31, 2014 and March 31, 2013, respectively, resulted primarily from treating the $37.0 million bargain purchase gain resulting from the acquisition ofTalmer West Bank on January 1, 2014, and the $71.7 million bargain purchase gain resulting from the acquisition of First Place Bank on January 1, 2013 as non-taxable, based on the tax structure of the acquisitions.

The significant components of the deferred tax assets and liabilities at March 31, 2014 and December 31, 2013 were as follows:

	March 31,			December 31,
(Dollars in thousands)	2014			2013
Deferred tax assets:
Allowance for loan losses	$	57,938		$	51,527
Other real estate losses	7,249			3,702
Organizational costs	299			311
Accrued stock-based compensation	5,922			5,926
Loss and tax credit carry forwards	32,239			19,298
Other reserves	1,858			1,988
Goodwill and other intangibles	1,433			1,494
Nonaccrual interest	11,213			10,150
Business combination adjustments	80,135			53,890
Net unrealized loss on available for sale securities	1,300			4,306
Other	816			—
Total deferred tax assets	200,402			152,592
Deferred tax liabilities:
Depreciation	4,360			3,996
FHLB stock dividends	283			1,541
Deferred loan fees	1,247			1,229
Prepaid expenses	439			799
Loan servicing rights	26,533			27,334
Other	—			247
Total deferred tax liabilities	32,862			35,146
Net deferred tax asset before valuation allowance	167,540			117,446
Valuation allowance	(11,054		)	(10,127		)
Net deferred tax asset	$	156,486		$	107,319

The valuation allowance against the Company’s deferred tax asset is related to Section 382 ownership changes incurred by First Place Bank, upon its acquisition by the Company on January 1, 2013, and by Talmer West Bank, upon its acquisition by the Company on January 1, 2014. Section 382 limits the Company’s ability to benefit from the use of pre-ownership change net operating loss and tax credit carry forwards as well as the deductibility of certain built-in losses. The valuation allowance is based on management’s estimate of the amount and timing of built-in losses more likely than not to be realized over the Section 382 recognition period, and the impact on our utilization of pre-ownership change operating loss and tax credit carry forwards.

On January 1, 2014, the Company acquired Talmer West Bank and recorded $54.4 million in deferred tax assets, net of a $961 thousand valuation allowance, at acquisition.  Upon acquisition, Talmer West Bank incurred a Section 382 ownership change.  As such, the Company’s ability to benefit from the use of Talmer West Bank’s pre-ownership change net operating loss carry forwards, as well as the deductibility of certain of its built-in losses if realized during a five-year recognition period (one year with respect to bad debt deductions), will be limited to approximately $3.0 million per year, putting at risk the utilization of associated deferred tax assets before they expire.  A valuation allowance of $961 thousand was established against the deferred tax assets associated with Talmer West Bank’s pre-change losses based on management’s estimate of the amount and timing of built-in losses more likely than not to be realized over the Section 382 recognition period, and the impact on our utilization of pre-ownership change net operating loss carry forwards.  In determining its estimate of built-in losses more likely than not to be realized within the Section 382 recognition period, management focused primarily on tax losses embedded in Talmer West Bank’s loan portfolio and other real estate owned and, to a lesser extent, on tax losses embedded in fixed assets, investments in partnerships and certain accrued expenses, and anticipated when these losses might create actual tax deductions, either through bad debt deductions, depreciation, amortization, payment, or disposition of the assets in question.

The valuation allowance against the Company’s deferred tax asset at March 31, 2014 related to the valuation allowance for the deferred tax assets acquired in the Talmer West Bank transaction discussed above and the remaining valuation allowance related to the deferred tax assets acquired in the First Place Bank acquisition on January 1, 2013 which also incurred a Section 382 ownership change.

Outside of the deferred tax assets acquired in both the Talmer West Bank and First Place Bank acquisitions, management concluded that no valuation allowance was necessary on the remainder of the Company’s net deferred tax assets at either December 31, 2013 or March 31, 2014.  This determination was based on the Company’s history of pre-tax and taxable income over the prior three years, as well as management’s expectations for sustainable profitability in the future.  Management monitors deferred tax assets quarterly for changes affecting realizability and the valuation allowance could be adjusted in future periods. The change in the valuation allowance during the three months ended March 31, 2014 was insignificant.  There was no change in the valuation allowance during the three months ended March 31, 2013.

Actual outcomes could vary from the Company’s current estimates, resulting in future increases or decreases in the valuation allowance and corresponding future tax expense or benefit.

At January 1, 2014, Talmer West Bank had an estimated $32.7 million in gross federal loss carry forwards expiring in 2032 and 2033.  The exact amount of pre-ownership change carry forwards cannot be determined until the finalization of Capitol Bancorp, Ltd.’s consolidated tax return (parent of Talmer West Bank’s former parent) for the year ended December 31, 2014, at which time final allocations will be made from that return to the entity acquired by the Company.  At December 31, 2013, the Company, including First Place Bank and its related acquired affiliates had the following estimated loss and tax credit carry forwards:  $27.1 million in gross federal loss carry forwards, $856 thousand in tax credits expiring between 2027 and 2032, and $1.9 million in federal alternative minimum tax credits with an indefinite life. The use of $24.8 million in estimated gross federal loss carry forwards and $856 thousand in tax credits related to First Place Bank and its acquired affiliates, expiring between 2027 and 2032, is limited to $1.7 million annually due to an ownership change within the meaning of Section 382 of the Internal Revenue Code incurred at January 1, 2013. The use of $3.7 million of gross federal loss carry forwards, expiring between 2027 and 2029, is limited to $145 thousand annually due to an ownership change within the meaning of Section 382 of the Internal Revenue Code incurred in November 2009.

At March 31, 2014, Talmer Bank and Trust had approximately $36.0 million of bad debt reserve in equity for which no provision for federal income taxes was recorded. This amount represents First Place Bank’s qualifying thrift bad debt reserve at December 31, 1987, which is only required to be recaptured into taxable income if certain events occur. At March 31, 2014, the potential tax on the above amount was approximately $13.0 million. The Company does not intend to take any action that would result in a recapture of any portion of its bad debt reserve.

In the ordinary course of business, the Company enters into certain transactions that have tax consequences.  From time to time, the Internal Revenue Service (“IRS”) and state taxing authorities may review and/or challenge specific interpretive tax positions taken by the Company with respect to those transactions.  The Company believes that its tax returns, as well as First Place Bank and Talmer West Bank’s tax returns for periods prior to the acquisitions, were filed based upon applicable statutes, regulations and case law in effect at the time of the transactions.  The IRS, various state and other jurisdictions, if presented with the transactions, could disagree with the Company’s interpretation of the tax law.

The Company’s prior wholly-owned subsidiary, First Place Bank, had received notice that the IRS had denied refund claims in amended tax returns filed by First Place Bank on a consolidated basis with its former parent company, First Place Financial Corp., for fiscal years ended June 30, 2009, 2008, 2007, 2006 and 2005.  The Company disagrees with the IRS position and is working with First Place Financial Corp. to appeal the examination-level decision.  Though not anticipated, an adverse result on appeal could impact the $11.7 million refund receivable recorded by the Company upon acquisition of First Place Bank.  Federal tax returns for First Place Bank for the short period ended January 1, 2013 and for fiscal years ended June 30, 2012, 2011 and 2010 are currently subject to potential examination as well.  There are several years of returns that are still open to examination by various taxing authorities for Talmer West Bank.

During 2013, the Company substantially closed an examination by the IRS of Talmer Bancorp, Inc. and subsidiaries’ federal returns for the years ended December 31, 2011 and 2010, with no significant tax changes. The Company’s federal tax return for the years ended December 31, 2012 to present are open to potential examination.  The Company’s most significant states of operation, Michigan and Ohio, do not impose income-based taxes on financial institutions. The Company and/or its subsidiaries are subject to minor amounts of income tax in various other states, with varying years open to potential examination.  The Company is not aware of any pending income tax examinations by any state jurisdiction other than Ohio as mentioned above.

The Company had no unrecognized tax benefits at March 31, 2014 or 2013 and does not expect to record unrecognized tax benefits of any significance during the next twelve months.  The Company recognizes interest and/or penalties related to income tax matters in income tax expense, when applicable.  There are no liabilities accrued for interest or penalties at March 31, 2014 or 2013.

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DERIVATIVE INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2014

DERIVATIVE INSTRUMENTS

Schedule reflecting the amount and fair value of mortgage banking and customer initiated derivatives included in Other assets and Other liabilities

			Fair Value
(Dollars in thousands)	Notional Amount		Gross Derivative Assets (1)		Gross Derivative Liabilities (1)
March 31, 2014
Derivative instruments
Forward contracts related to mortgage loans to be delivered for sale	$	215,125	$	181	$	—
Interest rate lock commitments	92,714		1,007		—
Customer-initiated derivatives	11,944		232		52
Total derivative instruments	$	319,783	$	1,420	$	52
December 31, 2013
Derivative instruments
Forward contracts related to mortgage loans to be delivered for sale	$	168,746	$	1,484	$	—
Interest rate lock commitments	67,685		1,146		—
Total derivative instruments	$	236,431	$	2,630	$	—

(1) Net derivative assets are included in “Other income” and net derivative liabilities are included in “Other liabilies” on the consolidated balance sheets.

Schedule reflecting the net gains (losses) relating to derivative instruments related to the changes in fair value

		For the three months ended March 31,
(Dollars in thousands)	Location of Gain (Loss)	2014			2013
Derivative Instruments
Forward contracts related to mortgage loans to be delivered for sale	Net gain on sale of loans	$	(2,994	)	$	1,649
Interest rate lock commitments	Net gain on sale of loans	(138		)	(1,491		)
Customer-inititated derivatives	Other noninterest income	13			—
Total gain (loss) recognized in income		$	(3,119	)	$	158

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REGULATORY CAPITAL MATTERS

3 Months Ended

Mar. 31, 2014

REGULATORY CAPITAL MATTERS

REGULATORY CAPITAL MATTERS

16. REGULATORY CAPITAL MATTERS

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators.

Failure to meet capital requirements can initiate regulatory action. Management believes as of March 31, 2014, the Company and its subsidiary banks met all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide five classifications:  well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

Talmer Bank and Trust is required to maintain Tier 1 common equity to total assets ratio of at least 10% under the FDIC’s Statement of Policy on Qualifications for Failed Bank Acquisitions for a period of three years following the Company’s most recent failed bank acquisition, and thereafter must maintain a capital level sufficient to be well capitalized under regulatory standards during the remaining period of ownership of the investors covered by the FDIC’s Statement of Policy. Talmer Bank and Trust’s last failed bank acquisition closed on April 29, 2011 and, therefore, we will remain subject to the heightened capital requirement until April 29, 2014.  At March 31, 2014 and December 31, 2013, the most recent regulatory notifications categorized Talmer Bank and Trust as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

The capital ratios of Talmer West Bank at March 31, 2014 exceed the total capital (to risk-weighted assets) ratio of at least 12.0% and a Tier 1 capital (to adjusted total assets) ratio of at least 9.0% as prescribed in the Consent Order by the FDIC and the Michigan Department of Insurance and Financial Services on April 5, 2010.  Notwithstanding its capital levels, Talmer West Bank will not be categorized as well capitalized while it is subject to the Consent Order.

Consent Order

On April 5, 2010, Michigan Commerce Bank consented to the issuance of the Consent Order by the FDIC and the Michigan Department of Insurance and Financial Services, which remains in effect following our acquisition of Talmer West Bank, as the surviving bank in the merger, on January 1, 2014.  The Consent Order represents an agreement to take certain actions, including, among other things: assessing and retaining qualified management; achieving and maintaining specified capital ratios; reducing certain classified assets, including the charge-off of loans classified ‘‘loss;’’ reviewing the allowance for loan and lease losses policy; implementing a comprehensive profit plan and budget; implementing a plan to manage concentrations of credit; and revising the bank’s policies governing interest rate risk.

The Consent Order also prohibits Talmer West Bank, without prior regulatory approval, from paying dividends, retaining new directors or senior executive officers, or entering into any material transaction.

Cease and Desist Order

On July 13, 2011, First Place Bank consented to a Cease and Desist Order which replaced the separate supervisory agreement entered into with the OTS on March 1, 2011. The Cease and Desist Order represents an agreement to take certain actions, including the submission of capital and business plans to, among other things, preserve and enhance the capital of First Place Bank and strengthen and improve its earnings and profitability.  On January 28, 2014, the FDIC approved the consolidation of First Place Bank with and into Talmer Bank and Trust.  Effective February 10, 2014, First Place Bank was merged with Talmer Bank and Trust and the Cease and Desist Order has no further force or effect.

The following is a summary of actual and required capital amounts and ratios:

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2014
Total capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	$	649,036	17.7	%	$	293,023	8.0	%	N/A		N/A
Talmer Bank and Trust	538,922		17.5		246,569		8.0		$	308,211	10.0	%
Talmer West Bank (1)	86,737		15.2		45,773		8.0		N/A		N/A
Tier 1 capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	610,160		16.7		146,512		4.0		N/A		N/A
Talmer Bank and Trust	500,114		16.2		123,284		4.0		184,927		6.0
Talmer West Bank (1)	86,669		15.2		22,887		4.0		N/A		N/A
Tier 1 leverage ratio
Talmer Bancorp, Inc. (Consolidated)	610,160		11.2		217,796		4.0		N/A		N/A
Talmer Bank and Trust	500,114		11.3		177,633		4.0		222,041		5.0
Talmer West Bank (1)	86,669		9.5		36,365		4.0		N/A		N/A
December 31, 2013
Total capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	$	583,370	19.2	%	$	242,885	8.0	%	N/A		N/A
Talmer Bank and Trust	253,044		18.4		110,123		8.0		$	137,654	10.0	%
First Place Bank (2)	263,297		15.9		132,207		8.0		N/A		N/A
Tier 1 capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	555,350		18.3		121,443		4.0		N/A		N/A
Talmer Bank and Trust	235,448		17.1		55,062		4.0		82,593		6.0
First Place Bank (2)	252,873		15.3		66,104		4.0		N/A		N/A
Tier 1 leverage ratio
Talmer Bancorp, Inc. (Consolidated)	555,350		12.2		182,221		4.0		N/A		N/A
Talmer Bank and Trust	235,448		10.3		91,363		4.0		114,204		5.0
First Place Bank (2)	252,873		11.7		86,521		4.0		N/A		N/A

(1) Notwithstanding its capital levels, Talmer West Bank will not be categorized as well capitalized while it is subject to the Consent Order.

(2) Notwithstanding its capital levels, First Place Bank was not categorized as well capitalized while it was subject to the Cease and Desist Order. On February 10, 2014, First Place Bank was merged with and into Talmer Bank and Trust and the Cease and Desist Order had no further force or effect.

The Company’s principal source of funds for dividend payments is dividends received from its subsidiary banks. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Talmer Bank and Trust cannot declare or pay a cash dividend or dividend in kind unless Talmer Bank and Trust will have a surplus amounting to not less than 20% of its capital after payment of the dividend.  In addition, Talmer Bank and Trust may pay dividends only out of net income then on hand, after deducting its losses and bad debts.  Further, Talmer Bank and Trust may not declare or pay a dividend until cumulative dividends on preferred stock, if any, are paid in full.  These limitations can affect Talmer Bank and Trust’s ability to pay dividends.

Under FDIC regulations, limitations are imposed on all of Talmer West Bank’s capital distributions, including cash dividends.  As of March 31, 2014, Talmer West Bank was not able to pay any dividends without prior regulatory approval.

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ALLOWANCE FOR LOAN LOSSES (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	$ 13,674,000		$ 14,910,000
Recorded investment with related allowance	9,566,000		6,966,000
Total recorded investment	23,240,000		21,876,000
Contractual principal balance	29,580,000		25,368,000
Average recorded investment	24,127,000	1,746,000
Interest income recognized	488,000	28,000
Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	22,274,000		23,127,000
Recorded investment with related allowance	4,375,000		3,897,000
Total recorded investment	26,649,000		27,024,000
Contractual principal balance	34,483,000		33,423,000
Average recorded investment	26,823,000	22,958,000
Interest income recognized	396,000	318,000
Residential real estate | Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	9,782,000		8,143,000
Recorded investment with related allowance	4,090,000		5,871,000
Total recorded investment	13,872,000		14,014,000
Contractual principal balance	17,965,000		17,005,000
Average recorded investment	14,178,000
Interest income recognized	150,000
Residential real estate | Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	2,174,000		1,141,000
Recorded investment with related allowance	1,731,000		1,537,000
Total recorded investment	3,905,000		2,678,000
Contractual principal balance	4,864,000		3,389,000
Average recorded investment	3,928,000	270,000
Interest income recognized	57,000	3,000
Commercial real estate | Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	3,207,000		4,588,000
Recorded investment with related allowance	4,613,000
Total recorded investment	7,820,000		4,588,000
Contractual principal balance	9,652,000		4,423,000
Average recorded investment	8,394,000	253,000
Interest income recognized	316,000	3,000
Commercial real estate | Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	17,675,000		17,138,000
Recorded investment with related allowance	902,000		924,000
Total recorded investment	18,577,000		18,062,000
Contractual principal balance	23,685,000		21,814,000
Average recorded investment	18,652,000	18,778,000
Interest income recognized	282,000	283,000
Commercial and industrial | Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	653,000		1,817,000
Recorded investment with related allowance	767,000		1,065,000
Total recorded investment	1,420,000		2,882,000
Contractual principal balance	1,829,000		3,548,000
Average recorded investment	1,426,000	1,493,000
Interest income recognized	20,000	25,000
Commercial and industrial | Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	1,232,000		3,704,000
Recorded investment with related allowance	1,723,000		1,417,000
Total recorded investment	2,955,000		5,121,000
Contractual principal balance	3,211,000		5,503,000
Average recorded investment	3,055,000	3,460,000
Interest income recognized	31,000	32,000
Real estate construction | Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance			359,000
Total recorded investment			359,000
Contractual principal balance			359,000
Real estate construction | Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	1,187,000		1,138,000
Total recorded investment	1,187,000		1,138,000
Contractual principal balance	2,678,000		2,672,000
Average recorded investment	1,163,000	450,000
Interest income recognized	25,000
Consumer | Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	32,000		3,000
Recorded investment with related allowance	96,000		30,000
Total recorded investment	128,000		33,000
Contractual principal balance	134,000		33,000
Average recorded investment	129,000
Interest income recognized	2,000
Consumer | Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	6,000		6,000
Recorded investment with related allowance	19,000		19,000
Total recorded investment	25,000		25,000
Contractual principal balance	45,000		45,000
Average recorded investment	25,000
Interest income recognized	1,000
Loans not accounted for under ASC 310-30 | Greater than
Impaired loans individually evaluated for impairment
Nonaccrual loans and troubled debt restructurings individually assesses for impairment	$ 250,000

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Consolidated Statements of Changes in Shareholders' Equity (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Additional Paid in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Balance at Dec. 31, 2012	$ 520,743	$ 66,229	$ 356,836	$ 93,760	$ 3,918
Balance (in shares) at Dec. 31, 2012		66,229
Increase (Decrease) in Stockholders' Equity
Cumulative effect adjustment of change in accounting policy to beginning retained earnings (Change in accounting policy)	31			31
Net income	60,455			60,455
Other comprehensive income (loss)	(507)				(507)
Stock based compensation expense	8,271		8,271
Balance at Mar. 31, 2013	588,993	66,229	365,107	154,246	3,411
Balance (in shares) at Mar. 31, 2013		66,229
Balance at Dec. 31, 2013	617,015	66,234	366,428	192,349	(7,996)
Balance (in shares) at Dec. 31, 2013		66,234
Increase (Decrease) in Stockholders' Equity
Net income	32,667			32,667
Other comprehensive income (loss)	5,581				5,581
Stock based compensation expense	180		180
Issuance of common shares	42,025	3,728	38,297
Issuance of common shares (in shares)		3,728
Balance at Mar. 31, 2014	$ 697,468	$ 69,962	$ 404,905	$ 225,016	$ (2,415)
Balance (in shares) at Mar. 31, 2014		69,962

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Preferred stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock, Authorized shares	20,000,000	20,000,000
Preferred stock, Issued shares	0	0
Preferred stock, outstanding shares	0	0
Residential real estate
Total loans, excluding covered loans, measured at fair value (in dollars)	$ 17,600	$ 16,300
Real estate construction
Total loans, excluding covered loans, measured at fair value (in dollars)	$ 278	$ 1,400
Class A Voting Common Stock
Common Stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common Stock, Authorized shares	198,000,000	198,000,000
Common Stock, Issued shares	69,962,461	66,234,397
Common stock, outstanding shares	69,962,461	66,234,397
Class B Non-Voting Common Stock
Common Stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common Stock, Authorized shares	2,000,000	2,000,000
Common Stock, Issued shares	0	0
Common stock, outstanding shares	0	0

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CORE DEPOSIT INTANGIBLES

3 Months Ended

Mar. 31, 2014

CORE DEPOSIT INTANGIBLES

CORE DEPOSIT INTANGIBLES

9.  CORE DEPOSIT INTANGIBLES

The Company recorded core deposit intangibles (CDIs) associated with the acquisitions of CF Bancorp, First Banking Center, Peoples State Bank, Community Central Bank, First Place Bank and Talmer West Bank. CDIs are amortized on an accelerated basis over their estimated useful lives and have an estimated remaining weighted-average useful life of 7.25 years as of March 31, 2014. The Company had no other intangible assets as of March 31, 2014 or December 31, 2013.

The table below presents the Company’s net carrying amount of CDIs.

	March 31,			December 31,
(Dollars in thousands)	2014			2013
Gross carrying amount	$	22,964		$	19,331
Accumulated amortization	(6,862		)	(6,126		)
Net carrying amount	$	16,102		$	13,205

Amortization expense recognized on CDIs was $736 thousand and $688 thousand for the three months ended March 31, 2014 and 2013, respectively, included as a component of “other expense” on the consolidated statements of income.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 14, 2014
Document and Entity Information
Entity Registrant Name	TALMER BANCORP, INC.
Entity Central Index Key	0001360683
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		69,991,613
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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LOAN SERVICING RIGHTS

3 Months Ended

Mar. 31, 2014

LOAN SERVICING RIGHTS

LOAN SERVICING RIGHTS

10.  LOAN SERVICING RIGHTS

Loan servicing rights are created as a result of the Company’s mortgage banking origination activities, the purchase of mortgage servicing rights, the origination and purchase of agricultural servicing rights and the origination and purchase of commercial real estate servicing rights.  Loans serviced for others are not reported as assets in the Consolidated Balance Sheets.

The Company elected as of January 1, 2013 to account for all loan servicing rights under the fair value method.  This change in accounting policy resulted in a cumulative adjustment to retained earnings as of January 1, 2013 in the amount of $31 thousand.  For further information on this election, refer to the Consolidated Financial Statements in the Company’s 2013 Annual Report.  The following table represents the activity for loan servicing rights and the related fair value changes.

(Dollars in thousands)	Commercial Real Estate			Agricultural			Mortgage			Total
For the three months ended March 31, 2014
Fair value, beginning of period	$	368		$	962		$	77,273		$	78,603
Additions due to acquisition	767			—			—			767
Additions from loans sold with servicing retained	—			66			1,523			1,589
Changes in fair value due to:
Reductions from loans paid off during the period	(57		)	(69		)	(736		)	(862		)
Changes due to valuation inputs or assumptions (1)	1			(65		)	(2,141		)	(2,205		)
Fair value, end of period	$	1,079		$	894		$	75,919		$	77,892
Principal balance of loans serviced	$	249,806		$	42,775		$	7,139,642		$	7,432,223
For the three months ended March 31, 2013
Fair value, beginning of period	$	518		$	1,456		$	3,683		$	5,657
Additions due to acquisition	—			—			41,967			41,967
Additions from loans sold with servicing retained	—			31			6,198			6,229
Changes in fair value due to:
Reductions from loans paid off during the period	(4		)	(156		)	(439		)	(599		)
Changes due to valuation inputs or assumptions (1)	(53		)	(77		)	637			507
Fair value, end of period	$	461		$	1,254		$	52,046		$	53,761
Principal balance of loans serviced	$	297,796		$	59,024		$	6,437,608		$	6,794,428

(1)  Represents estimated fair value changes primarily due to prepayment speeds and market-driven changes in interest rates.

Expected and actual loan prepayment speeds are the most significant factors driving the fair value of loan servicing rights. The following table presents assumptions utilized in determining the fair value of loan servicing rights as of March 31, 2014 and December 31, 2013.

	Commercial Real Estate		Agricultural			Mortgage
As of March 31, 2014
Prepayment speed	7.08-50.00%		5.34-52.66%			3.67-41.26%
Weighted average (“WA”) discount rate	19.32%		15.00%			9.66%
WA cost to service/per year	$	471	$	200		$	57
WA ancillary income/per year	N/A		N/A			36
WA float range	0.56%		0.56		%	0.87-1.69%
As of December 31, 2013
Prepayment speed	8.50-50.00%		4.98-53.16%			3.55-44.49%
WA discount rate	20.00%		15.00%			10.17%
WA cost to service/per year	$	467	$	200		$	57
WA ancillary income/per year	N/A		N/A			45
WA float range	0.56%		0.56%			0.73-1.54%

The Company realized total loan servicing fee income of $3.5 million and $4.2 million for the three months ended March 31, 2014 and 2013, respectively, recorded as a component of “Mortgage banking and other loan fees” in the Consolidated Statements of Income.

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COMMITMENTS, CONTINGENCIES AND GUARANTEES (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
COMMITMENTS, CONTINGENCIES AND GUARANTEES
Allowance for credit losses on lending-related commitments	$ 626	$ 1,000
Contingencies and Guarantees
Total commitments	864,540	809,152
Fixed Rate
Contingencies and Guarantees
Total commitments	563,415	592,118
Variable Rate
Contingencies and Guarantees
Total commitments	301,125	217,034
Commitments to extend credit
Contingencies and Guarantees
Total commitments	792,090	740,139
Commitments to extend credit | Fixed Rate
Contingencies and Guarantees
Total commitments	493,206	523,666
Commitments to extend credit | Variable Rate
Contingencies and Guarantees
Total commitments	298,884	216,473
Standby letters of credit
Contingencies and Guarantees
Total commitments	72,450	69,013
Standby letters of credit | Fixed Rate
Contingencies and Guarantees
Total commitments	70,209	68,452
Standby letters of credit | Variable Rate
Contingencies and Guarantees
Total commitments	$ 2,241	$ 561

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EARNINGS PER COMMON SHARE (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Numerator for basic and diluted EPS:
Net income (in dollars)	$ 32,667	$ 60,455
Denominator for basic EPS - weighted average shares	68,121	66,229
Effect of dilutive securities -
Employee and director stock options (in shares)	3,851	1,394
Warrants (in shares)	1,405	577
Denominator for diluted EPS - adjusted weighted average shares	73,377	68,200
Basic (in dollars per share)	$ 0.48	$ 0.91
Diluted (in dollars per share)	$ 0.45	$ 0.89
Other information on EPS
Average stock valuation (in dollars per share)	$ 12.70	$ 8.25
Options
Antidilutive average shares related to outstanding options and warrants
Shares not included in the computation of diluted net income available to common shareholders	0	3,758
Range of exercise prices, lower range limit (in dollars per share)		$ 7.25
Range of exercise prices, upper range limit (in dollars per share)		$ 8.25
Warrants
Antidilutive average shares related to outstanding options and warrants
Shares not included in the computation of diluted net income available to common shareholders	0	39
Warrants | Minimum
Antidilutive average shares related to outstanding options and warrants
Range of exercise prices (in dollars per share)		$ 10.00
Warrants | Maximum
Antidilutive average shares related to outstanding options and warrants
Range of exercise prices (in dollars per share)		$ 10.00

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Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Interest income
Interest and fees on loans	$ 53,420	$ 48,738
Taxable	1,878	1,364
Tax-exempt	1,952	994
Total interest on securities	3,830	2,358
Interest on interest earning cash balances	216	290
Interest on federal funds and other short term investments	177	200
Dividends on FHLB stock	185	407
FDIC indemnification asset	(6,718)	(8,148)
Total interest income	51,110	43,845
Interest Expense
Interest-bearing demand deposits	224	167
Money market and savings deposits	494	518
Time deposits	1,491	1,661
Other brokered funds	29	24
Interest on short-term borrowings	175	22
Interest Expense, Long-term Debt	574	796
Total interest expense	2,987	3,188
Net interest income	48,123	40,657
Provision for loan losses - uncovered	6,424	1,176
Provision (benefit) for loan losses - covered	(2,498)	1,084
Net interest income after provision for loan losses	44,197	38,397
Noninterest income
Deposit fee income	3,274	4,512
Mortgage banking and other loan fees	1,264	5,185
Net gain on sales of loans	3,040	16,815
Bargain purchase gain	36,994	71,702
FDIC loss sharing income	(113)	130
Accelerated discount on acquired loans	6,466	2,293
Net gain (loss) on sales of securities	(2,310)	31
Other income	4,397	2,951
Total noninterest income	53,012	103,619
Noninterest expenses
Salary and employee benefits	35,726	52,896
Occupancy and equipment expense	9,148	7,022
Data processing fees	1,740	1,647
Professional service fees	4,290	3,887
FDIC loss sharing expense	524	696
Bank acquisition and due diligence fees	1,711	7,229
Marketing expense	1,091	1,537
Other employee expense	729	896
Insurance expense	1,849	2,932
Other expense	8,806	5,869
Total noninterest expenses	65,614	84,611
Income before income taxes	31,595	57,405
Income tax provision (benefit)	(1,072)	(3,050)
Net income	$ 32,667	$ 60,455
Earnings per share:
Basic (in dollars per share)	$ 0.48	$ 0.91
Diluted (in dollars per share)	$ 0.45	$ 0.89
Average shares outstanding - basic (in shares)	68,121	66,229
Average shares outstanding - diluted (in shares)	73,377	68,200

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SECURITIES

3 Months Ended

Mar. 31, 2014

SECURITIES

SECURITIES

4.   SECURITIES

A summary of the Company’s securities available-for-sale is as follows:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2014
U.S. Treasury securities	$	3,250	$	—	$	—		$	3,250
U.S. government sponsored agency obligations	116,091		129		(2,066		)	114,154
Obligations of state and political subdivisions:
Taxable	397		—		—			397
Tax-exempt	167,400		2,362		(2,183		)	167,579
SBA Pools	38,065		115		(296		)	37,884
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	233,179		1,087		(2,809		)	231,457
Privately issued	3,490		27		(1		)	3,516
Privately issued commercial mortgage-backed securities	5,168		—		(12		)	5,156
Corporate debt securities	68,223		333		(394		)	68,162
Equity securities	500		—		(8		)	492
Total securities available-for-sale	$	635,763	$	4,053	$	(7,769	)	$	632,047
December 31, 2013
U.S. government sponsored agency obligations	$	102,597	$	—	$	(4,360	)	$	98,237
Obligations of state and political subdivisions:
Taxable	396		—		—			396
Tax-exempt	184,351		2,102		(4,453		)	182,000
SBA Pools	42,956		162		(692		)	42,426
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	223,518		729		(5,325		)	218,922
Privately issued	4,453		22		(29		)	4,446
Privately issued commercial mortgage-backed securities	5,181		—		(34		)	5,147
Corporate debt securities	68,433		237		(650		)	68,020
Equity securities	500		—		(11		)	489
Total securities available-for-sale	$	632,385	$	3,252	$	(15,554	)	$	620,083

Proceeds from sales of securities and the associated gains and losses recorded in earnings are listed below:

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Proceeds	$	54,458		$	5,514
Gross gains	—			55
Gross losses	(2,310		)	(24		)

The amortized cost and fair value of debt securities by contractual maturity at March 31, 2014 are shown below. Contractual maturity is utilized for U.S treasury securities, U.S. Government sponsored agency obligations, obligations of state and political subdivisions and corporate debt securities. Securities with multiple maturity dates are classified in the period of final maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	March 31, 2014
(Dollars in thousands)	Amortized Cost		Fair Value
Securities with contractual maturities:
Within one year	$	7,820	$	7,826
After one year through five years	62,382		63,242
After five years through ten years	201,454		200,432
After ten years	363,607		360,055
Equity securities	500		492
Total securities available-for-sale	$	635,763	$	632,047

Securities with amortized cost of $230.4 million and $271.3 million were pledged at March 31, 2014 and December 31, 2013, respectively, to secure borrowings and deposits.

A summary of the Company’s investment securities available-for-sale in an unrealized loss position is as follows:

	Less than 12 Months					More than 12 Months					Total
(Dollars in thousands)	Fair Value		Unrealized losses			Fair Value		Unrealized losses			Fair Value		Unrealized losses
March 31, 2014
U.S. government sponsored agency obligations	$	105,543	$	(2,066	)	$	—	$	—		$	105,543	$	(2,066	)
Obligations of state and political subdivisions:
Tax-exempt	82,151		(1,926		)	6,326		(257		)	88,477		(2,183		)
SBA Pools	14,308		(191		)	8,104		(105		)	22,412		(296		)
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored agencies	142,978		(2,550		)	18,457		(259		)	161,435		(2,809		)
Privately issued	275		(1		)	—		—			275		(1		)
Privately issued commercial mortgage-backed securities	5,156		(12		)	—		—			5,156		(12		)
Corporate debt securities	23,698		(369		)	420		(25		)	24,118		(394		)
Equity securities	492		(8		)	—		—			492		(8		)
Total securities available-for-sale	$	374,601	$	(7,123	)	$	33,307	$	(646	)	$	407,908	$	(7,769	)
December 31, 2013
U.S. government sponsored agency obligations	$	98,237	$	(4,360	)	$	—	$	—		$	98,237	$	(4,360	)
Obligations of state and political subdivisions:
Tax-exempt	102,585		(4,159		)	5,794		(294		)	108,379		(4,453		)
SBA Pools	26,498		(692		)	—		—			26,498		(692		)
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored agencies	155,028		(4,952		)	18,846		(373		)	173,874		(5,325		)
Privately issued	557		(1		)	1,746		(28		)	2,303		(29		)
Privately issued commercial mortgage-backed securities	5,147		(34		)	—		—			5,147		(34		)
Corporate debt securities	34,487		(650		)	—		—			34,487		(650		)
Equity securities	489		(11		)	—		—			489		(11		)
Total securities available-for-sale	$	423,028	$	(14,859	)	$	26,386	$	(695	)	$	449,414	$	(15,554	)

As of March 31, 2014, the Company’s security portfolio consisted of 309 securities, 153 of which were in an unrealized loss position. The unrealized losses for these securities resulted primarily from changes in interest rates. The Company expects full collection of the carrying amount of these securities and does not intend to sell the securities in an unrealized loss position nor does it believe it will be required to sell securities in an unrealized loss position before the value is recovered.  The Company does not consider these securities to be other-than-temporarily impaired at March 31, 2014.

The unrealized losses are spread across asset classes, primarily in those securities carrying fixed interest rates. At March 31, 2014, the combination of these security asset class holdings in an unrealized loss position had an estimated fair value of $407.9 million with gross unrealized losses of $7.8 million. Unrealized losses in these security holdings were mainly impacted by increases in benchmark U.S. Treasury rates and, to a lesser extent, widened liquidity spreads since their respective acquisition dates.

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FAIR VALUE

3 Months Ended

Mar. 31, 2014

FAIR VALUE

FAIR VALUE

3.  FAIR VALUE

The fair value framework as detailed by FASB ASC Topic 820, “Fair Value Measurement” requires the categorization of assets and liabilities into a three-level hierarchy based on the markets in which the financial instruments are traded and the reliability of the assumptions used to determine fair value. A brief description of each level follows.

Level 1 — Valuation is based upon quoted prices (unadjusted) for identical instruments in active markets.

Level 2 — Valuation is based upon quoted prices for identical or similar instruments in markets that are not active; quoted prices for similar instruments in active markets; or model-based valuation techniques for which all significant assumptions are observable or can be corroborated by observable market data.

Level 3 — Valuation is measured through utilization of model-based techniques that rely on at least one significant assumption not observable in the market. Any necessary unobservable assumptions used reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of discounted cash flow models and similar techniques.

Fair value estimates are based on existing financial instruments and, in accordance with GAAP, do not attempt to estimate the value of anticipated future business or the value of assets and liabilities that are not considered financial instruments. In addition, tax ramifications related to the recognition of unrealized gains and losses, such as those within the investment securities portfolio, can have a significant effect on estimated fair values and, in accordance with GAAP, have not been considered in the estimates. For these reasons, the aggregate fair value should not be considered an indication of the value of the Company.

Following is a description of the valuation methodologies and key inputs used to measure financial assets and liabilities recorded at fair value, as well as a description of the methods and any significant assumptions used to estimate fair value disclosures for financial assets and liabilities not recorded at fair value in their entirety on a recurring basis. For financial assets and liabilities recorded at fair value, the description includes the level of the fair value hierarchy in which the assets for liabilities are classified. Transfers of asset or liabilities between levels of the fair value hierarchy are recognized at the beginning of the reporting period, when applicable.

Cash and cash equivalents: Due to the short-term nature, the carrying amount of these assets approximates the estimated fair value.  The Company classifies cash and due from banks as Level 1 and interest-bearing deposits with other banks and federal funds and other short-term investments as Level 2.

Securities available-for-sale:  Investment securities classified as available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available or the market is deemed to be inactive at the measurement date, fair values are measured utilizing independent valuation techniques of identical or similar investment securities. Third-party vendors compile prices from various sources and may apply such techniques as matrix pricing to determine the value of identical or similar investment securities. Management reviews the methodologies and assumptions used by the third-party pricing services and evaluates the values provided, principally by comparison with other available market quotes for similar instruments and/or analysis based on internal models using available third-party market data.  Level 1 securities include equity securities traded on an active exchange, such as the New York Stock Exchange and U.S Treasury securities traded in active over-the-counter markets.  Level 2 securities include obligations issued by U.S. government-sponsored enterprises, state and municipal obligations, mortgage-backed securities issued by both U.S. government-sponsored enterprises and non-agency enterprises securities, corporate debt securities, Small Business Administration Pools and privately issued commercial mortgage-backed securities that have active markets at the measurement date. The fair value of Level 2 securities was determined using quoted prices of securities with similar characteristics or pricing models based on observable market data inputs, primarily interest rates, spreads and prepayment information.

Securities classified as Level 3, including an obligation of a political subdivision and a trust preferred security (included within “Corporate debt securities”) as of March 31, 2014, represent securities in less liquid markets requiring significant management assumptions when determining fair value. The fair values of these investment securities represent less than one percent of the total available-for-sale securities.  The Troubled Asset Relief Program preferred securities and the trust preferred security fair values are compiled by a third-party vendor through consideration of recent trades and/or auctions of comparable securities, where applicable and are presented without adjustment.  Comparable securities consider credit, structure, tenor, trade flows and cash flow characteristics.  Due to the limited sales of these types of securities, significant unobservable assumptions are included to determine comparable securities to be included in the analysis.  The fair value of the political subdivision obligation is determined using a discounted cash flow model prepared internally which includes a significant unobservable input related to the credit assumption of the security.  Since the purchase of this security, no credit related concerns have come to the Company’s attention, therefore no additional credit loss assumptions were made.

Federal Home Loan Bank (“FHLB”) Stock: Restricted equity securities are not readily marketable and are recorded at cost and evaluated for impairment based on the ultimate recoverability of initial cost. No significant observable market data is available for these instruments. The Company considers the profitability and asset quality of the issuer, dividend payment history and recent redemption experience, when determining the ultimate recoverability of cost.  The Company believes its investments in FHLB stock are ultimately recoverable at cost.

Loans held for sale:  Loans held for sale are carried at fair value based on the Company’s election of the fair value option. The fair value is determined based on quoted market rates and other market conditions considered relevant. These loans currently consist of one-to-four family residential real estate loans originated for sale to qualified third parties. The Company classifies loans held for sale as recurring Level 2.

Loans measured at fair value:  During the normal course of business, loans originated with the initial intention to sell but are not ultimately sold, are transferred from held for sale to our portfolio of loans held for investment at fair value as the Company adopted the fair value option at origination.  The fair value of these loans are estimated using discounted cash flows taking into consideration current market interest rates, loan repricing characteristics and expected loan prepayment speeds, while also taking into consideration other significant unobservable inputs such as the payment history and credit quality characteristic of each individual loan, and an illiquidity discount reflecting the relative illiquidity of the market. Due to the adjustments for unobservable inputs, the Company classifies the loans transferred from loans held for sale as recurring Level 3.

Loans:  The Company does not record loans at fair value on a recurring basis other than those discussed in “Loans measured at fair value” above. However, periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements. Loans, outside the scope of ASC 310-30, are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. Impaired loans, which include all nonaccrual loans and troubled debt restructurings, are disclosed as nonrecurring fair value measurements when an allowance is established based on the fair value of the underlying collateral.  Appraisals for collateral-dependent impaired loans are prepared by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties). These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. The comparable sales approach evaluates the sales price of similar properties in the same market area.  This approach is inherently subjective due to the wide range of comparable sale dates. The income approach considers net operating income generated by the property and the investor’s required return.  This approach utilizes various inputs including lease rates and cap rates which are subject to judgment. Adjustments are routinely made in the appraisal process by the appraisers to account for differences between the comparable sales and income data available. These adjustments generally range from 0% to 40% depending on the property type, as well as various sales and property characteristics including but not limited to: date of sale, size and condition of facility, quality of construction and proximity to the subject property. Once received, management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics to determine if additional downward adjustments should be made, which generally range from 0% to 40%. Property values are typically adjusted when management is aware of circumstances, economic changes or other conditions, since the date of the appraisal that would impact the expected selling price. Such adjustments are usually significant and result in a nonrecurring Level 3 classification.

Estimated fair values for loans accounted for under ASC 310-30 are based on a discounted cash flow methodology that considers factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and a discount rate reflecting the Company’s assessment of risk inherent in the cash flow estimates. Cash flows expected to be collected on these loans are estimated based upon the expected remaining life of the underlying loans, which includes the effects of estimated prepayments. The Company classifies the estimated fair value of loans accounted for under ASC 310-30 as Level 3.

For loans excluded from ASC 310-30 accounting that are not individually evaluated for impairment, fair value is estimated using a discounted cash flow model. The cash flows take into consideration current portfolio interest rates and repricing characteristics as well as assumptions relating to prepayment speeds. The discount rates take into consideration the current market interest rate environment, a credit risk component based on the credit characteristics of each loan portfolio, and a liquidity premium reflecting the liquidity or illiquidity of the market. The Company classifies the estimated fair value of non-collateral dependent loans excluded from ASC 310-30 accounting as Level 3.

Premises and equipment:  Premises and equipment are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows.  As of March 31, 2014 there were no impaired premises and equipment.  Impaired premises and equipment at December 31, 2013 was recorded at fair value based on a recent appraisal through a valuation allowance.  The Company classifies impaired premises and equipment as nonrecurring Level 2.

FDIC indemnification asset: The fair value of the FDIC indemnification asset is estimated using projected cash flows related to the loss sharing agreements based on the expected reimbursements for losses and the applicable loss sharing percentages. The Company re-estimates the expected indemnification asset cash flows in conjunction with the quarterly re-estimation of cash flows on covered loans accounted for under ASC 310-30. The expected cash flows are discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursement from the FDIC.  These cash flow evaluations are inherently subjective as they require material estimates, all of which may be subject to significant change.  The estimates used in calculating the value of the FDIC indemnification asset are reflective of the estimates utilized to determine the estimated fair value of loans accounted for under ASC 310-30. The Company classifies the estimated fair value of the FDIC indemnification asset as Level 3.

Other real estate owned: Other real estate owned represents property acquired by the Company as part of an acquisition, through the loan foreclosure or repossession process, or any other resolution activity that results in partial or total satisfaction of problem covered loans, or by closing of branches or operating facilities. Properties are initially recorded at fair value, less estimated costs to sell, establishing a new cost basis. Subsequently, the assets are valued at the lower of cost or fair value less estimated costs to sell based on periodic valuations performed. Fair value is based upon independent market prices, appraised value or management’s estimate of the value, using a single valuation approach or a combination of approaches including comparable sales and the income approach. The comparable sales approach evaluates the sales price of similar properties in the same market area.  This approach is inherently subjective due to the wide range of comparable sale dates. The income approach considers net operating income generated by the property and the investor’s required return.  This approach utilizes various inputs including lease rates and cap rates which are subject to judgment. Adjustments are routinely made in the appraisal process by the appraisers to account for differences between the comparable sales and income data available. These adjustments generally range from 0% to 40% depending on the property type, as well as various sales and property characteristics including but not limited to: date of sale, size and condition of facility, quality of construction and proximity to the subject property.  Adjustments are typically significant and result in a Level 3 classification.

Loan servicing rights: Loan servicing rights are accounted for under the fair value measurement method.  A third party valuation model is used to determine the fair value at the end of each reporting period utilizing a discounted cash flow analysis using interest rates and prepayment speed assumptions currently quoted for comparable instruments and a discount rate determined by management.  Changes in fair value of loan servicing rights are recorded in “Mortgage banking and other loan fees”.  Because of the nature of the valuation inputs, the company classifies loan servicing rights as Level 3.

At March 31, 2014 and December 31, 2013, loan servicing rights included the following assumptions:

	Commercial Real Estate		Agricultural		Mortgage
As of March 31, 2014
Prepayment speed	7.08-50.00%		5.34-52.66%		3.67-41.26%
Weighted average (“WA”) discount rate	19.32%		15.00%		9.66%
WA cost to service/per year	$	471	$	200	$	57
WA ancillary income/per year	N/A		N/A		36
WA float range	0.56%		0.56%		0.87-1.69%
As of December 31, 2013
Prepayment speed	8.50-50.00%		4.98-53.16%		3.55-44.49%
WA discount rate	20.00%		15.00%		10.17%
WA cost to service/per year	$	467	$	200	$	57
WA ancillary income/per year	N/A		N/A		45
WA float range	0.56%		0.56%		0.73-1.54%

FDIC receivable: The FDIC receivable represents claims submitted to the Federal Deposit Insurance Corporation (“FDIC”) for reimbursement for which the Company expects to receive payment within 90 days. Due to their short term nature, the carrying amount of these instruments approximates the estimated fair value. The Company classifies the estimated fair value of FDIC receivable as Level 2.

Company-owned life insurance: The Company holds life insurance policies on certain officers. The carrying value of these policies approximates fair value as it is based on the cash surrender value adjusted for other charges or amounts due that are probable at settlement. As such, the Company classifies the estimated fair value of Company-owned life insurance as Level 2.

Derivative instruments: The Company enters into interest rate lock commitments with prospective borrowers to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors, which are carried at fair value on a recurring basis. The fair value of these commitments is based on the fair value of related mortgage loans determined using observable market data.  Interest rate lock commitments are adjusted for expectations of exercise and funding.  This adjustment is not considered to be a material input.  The Company classifies derivatives as recurring Level 2.

Derivative instruments held or issued for customer-initiated activities are traded in over-the counter markets where quoted market prices are not readily available.  Fair value for over-the-counter derivative instruments is measured on a recurring basis using third party models that use primarily market observable inputs, such as yield curves and option volatilities.  The fair value for these derivatives may include a credit valuation adjustment that is determined by applying a credit spread for the counterparty or the Company, as appropriate, to the total expected exposure of the derivative after considering collateral and other master netting arrangements.  These adjustments, which are considered Level 3 inputs, are based on estimates of current credit spreads to evaluate the likelihood of default.  The Company assesses the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and at March 31, 2014 it was determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives.  As a result, the company classifies its over-the-counter derivative valuations in Level 2 of the fair value hierarchy.

Accrued interest receivable and payable: Due to their short term nature, the carrying amount of these instruments approximates the estimated fair value; therefore, the Company classifies the estimated fair value of accrued interest receivable and payable as Level 2.

Deposits: The estimated fair value of demand deposits (e.g., noninterest and interest-bearing demand, savings, other brokered funds and certain types of money market accounts) is, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for certificates of deposit are based on the discounted value of contractual cash flows at current interest rates. The estimated fair value of deposits does not take into account the value of the Company’s long-term relationships with depositors, commonly known as core deposit intangibles, which are not considered financial instruments.  The Company classifies the estimated fair value of deposits as Level 2.

Short-term borrowings: Short-term borrowings represent federal funds purchased, a senior unsecured line of credit and certain short-term FHLB advances. Due to their short term nature, the carrying amount of these instruments approximates the estimated fair value. The Company classifies the estimated fair value of short-term borrowings as Level 2.

Long-term debt: Long-term debt includes securities sold under agreements to repurchase, FHLB advances and subordinated notes related to trust preferred securities.  The estimated fair value is based on current rates for similar financing or market quotes to settle those liabilities.  The Company classifies the estimated fair value of long-term debt as Level 2.

FDIC warrants payable: FDIC warrants payable represent stock warrants that were issued to the FDIC in connection with the 2010 FDIC-assisted acquisition of CF Bancorp. These warrants are recorded at net present value based on management estimates used in a discounted pricing model. The inputs into the pricing model include management’s assumption of an 8% annualized growth rate.  The carrying amount of these instruments approximates the estimated fair value.  The Company classifies the estimated fair value of FDIC warrants payable as Level 3.

The following tables present the recorded amount of assets and liabilities measured at fair value, including financial assets and liabilities for which the Company has elected the fair value option, on a recurring basis:

(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2014
Securities available-for-sale:
U.S. Treasury securities	$	3,250	$	3,250	$	—	$	—
U.S. government sponsored agency obligations	114,154		—		114,154		—
Obligations of state and political subdivisions:
Taxable	397		—		—		397
Tax-exempt	167,579		—		167,579		—
Small Business Administration (“SBA”) Pools	37,884		—		37,884		—
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	231,457		—		231,457		—
Privately issued	3,516		—		3,516		—
Privately issued commercial mortgage-backed securities	5,156		—		5,156		—
Corporate debt securities	68,162		—		67,742		420
Equity securities	492		492		—		—
Total securities available-for-sale	632,047		3,742		627,488		817
Loans measured at fair value:
Residential real estate	17,636		—		—		17,636
Real estate construction	278		—		—		278
Loans held for sale	75,931		—		75,931		—
Loan servicing rights	77,892		—		—		77,892
Derivative assets	1,420		—		1,420		—
Total assets at fair value	$	805,204	$	3,742	$	704,839	$	96,623
Derivative liabilities	52		—		52		—
Total liabilties at fair value	$	52	$	—	$	52	$	—
December 31, 2013
Securities available-for-sale:
U.S. government sponsored agency obligations	$	98,237	$	—	$	98,237	$	—
Obligations of state and political subdivisions:
Taxable	396		—		—		396
Tax-exempt	182,000		—		182,000		—
Small Business Administration (“SBA”) Pools	42,426		—		42,426		—
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	218,922		—		218,922		—
Privately issued	4,446		—		4,446		—
Privately issued commercial mortgage-backed securities	5,147		—		5,147		—
Corporate debt securities	68,020		—		67,615		405
Equity securities	489		489		—		—
Total securities available-for-sale	620,083		489		618,793		801
Loans measured at fair value:
Residential real estate	16,334		—		—		16,334
Real estate construction	1,374		—		—		1,374
Loans held for sale	85,252		—		85,252		—
Loans servicing rights	78,603		—		—		78,603
Derivative assets	2,630		—		2,630		—
Total assets at fair value	$	804,276	$	489	$	706,675	$	97,112

There were no transfers between levels within the fair value hierarchy during the three months ended March 31, 2014 or 2013.

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis.

	Three months ended March 31, 2014
	Securities available-for-sale
(Dollars in thousands)	Taxable obligations of state and political subdivisions		Corporate debt securities		Loans held for investment			Loan servicing rights
Balance, beginning of period	$	396	$	405	$	17,708		$	78,603
Additions due to acquisition								767
Transfers from loans held for sale	—		—		236			—
Total gains (losses)
Recorded in earnings (realized):
Recorded in “Interest on investments”	1		1		—			—
Recorded in “Mortgage banking and other loan fees”	—		—		12			(3,067		)
Recorded in other comprehensive income (OCI) (pre-tax)	—		14		—			—
New originations	—		—		—			1,589
Repayments	—		—		(170		)	—
Draws on previously issued lines of credits	—		—		128			—
Balance, end of period	$	397	$	420	$	17,914		$	77,892

	Three months ended March 31, 2013
	Securities available-for-sale
(Dollars in thousands)	Taxable obligations of state and political subdivisions		Corporate debt securities		Loans held for investment		Loan servicing rights
Balance, beginning of period	$	396	$	15,250	$	—	$	—
Transfers based on new accounting policy election	—		—		—		5,657		(1)
Additions due to acquisition	—		440		—		41,967
Total gains (losses)
Recorded in earnings (realized):
Recorded in “Mortgage banking and other loan fees”	—		—		—		(92		)
Recorded in OCI (pre-tax)	—		54		—		—
New originations	—		—		—		6,229
Balance, end of period	$	396	$	15,744	$	—	$	53,761

(1)   The balance transferred includes $31 thousand of cumulative adjustment related to the change in accounting policy referenced in Note 1 to our audited financial statements included in our 2013 Annual Report.

The aggregate fair value, contractual balance (including accrued interest), and gain or loss position for loans held for investment measured and recorded at fair value was as follows:

(Dollars in thousands)	March 31, 2014			December 31, 2013
Aggregate fair value	$	17,914		$	17,708
Contractual balance	18,216			18,022
Fair market value loss	(302		)	(314		)

There were no gains (losses) included in the fair value above that were associated with instrument specific credit risk. The aggregate fair value and contractual principal balance of loans held for investment measured and recorded at fair value that were 90 days or more past due as of March 31, 2014 was $214 thousand and $251 thousand, respectively.  Of the aggregate fair value of loans that were 90 days or more past due, $214 thousand were on nonaccrual status.  The aggregate fair value and contractual principal balance of loans held for investment measured and recorded at fair value that were 90 days or more past due as of December 31, 2013 was $293 thousand and $301 thousand, respectively. Of the aggregate fair value of loans that were 90 days or more past due, $252 thousand were on nonaccrual status

Interest income is recorded based on the contractual terms of the loans in accordance with the Company’s policy on loans held for investment and is recorded in “interest and fees on loans” in the Consolidated Statements of Income. For the three months ended March 31, 2014, there was $91 thousand of interest income earned on loans transferred from loans held for sale to loans held for investment.

The Company has elected the fair value option for loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loans in accordance with the Company policy on loans held for investment in “interest and fees on loans” in the Consolidated Statements of Income. None of these loans are 90 days past due or on nonaccrual status as of March 31, 2014 or December 31, 2013.

The aggregate fair value, contractual balance (including accrued interest), and gain or loss for loans held for sale was as follows:

(Dollars in thousands)	March 31, 2014		December 31, 2013
Aggregate fair value	$	75,931	$	85,252
Contractual balance	71,870		82,567
Unrealized gain	4,061		2,685

The total amount of gains (losses) from changes in fair value included in “Net gain on sales of loans” in the Consolidated Statements of Income were as follows:

	For the three months ended March 31,
(Dollars in thousands)	2014		2013
Change in fair value	$	1,376	$	(552	)

Certain financial assets and liabilities are measured at fair value on a nonrecurring basis. These include assets that are recorded at the lower of cost or fair value that were recognized at fair value below cost at the end of the period.

The following table presents the recorded amount of assets and liabilities measured at fair value on a non-recurring basis:

(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2014
Impaired loans:(1)
Uncovered
Residential real estate	$	2,908	$	—	$	—	$	2,908
Commercial real estate	2,930		—		—		2,930
Commercial and industrial	724		—		—		724
Total uncovered impaired loans	6,562		—		—		6,562
Covered
Residential real estate	1,573		—		—		1,573
Commercial real estate	741		—		—		741
Commercial and industrial	874		—		—		874
Consumer	13		—		—		13
Total covered impaired loans	3,201		—		—		3,201
Total impaired loans	9,763		—		—		9,763
Other real estate owned (uncovered)(2)	1,616		—		—		1,616
Other real estate owned (covered)(3)	337		—		—		337
Total	$	11,716	$	—	$	—	$	11,716
December 31, 2013
Impaired loans:(1)
Uncovered
Residential real estate	$	1,569	$	—	$	—	$	1,569
Commercial and industrial	762		—		—		762
Total uncovered impaired loans	2,331		—		—		2,331
Covered
Commercial real estate	644		—		—		644
Total covered impaired loans	644		—		—		644
Total impaired loans	2,975		—		—		2,975
Other real estate owned (uncovered) (2)	2,216		—		—		2,216
Other real estate owned (covered) (3)	4,596		—		—		4,596
Premises and equipment	105		—		105		—
Total	$	9,892	$	—	$	105	$	9,787

(1) Specific reserves of $3.5 million and $1.4 million were provided to reduce the fair value of these loans at March 31, 2014 and December 31, 2013, respectively, based on the estimated fair value of the underlying collateral. In addition, charge-offs of $3 thousand and $6 thousand reduced the fair value of these loans for the three months ended March 31, 2014 and 2013, respectively.

(2) The Company charged $679 thousand and $361 thousand through other noninterest expenses during the three months ended March 31, 2014 and 2013, respectively, to reduce the fair value of these properties.

(3) The Company charged $367 thousand and $1.2 million through other noninterest expenses during the three months ended March 31, 2014 and 2013, respectively, to reduce the fair value of these properties. These expenses were partially offset by FDIC loss sharing income recorded due to the associated loss share coverage.

The Company typically holds the majority of its financial instruments until maturity and thus does not expect to realize many of the estimated fair value amounts disclosed.  The disclosures also do not include estimated fair value amounts for items that are not defined as financial instruments, but which have significant value.  These include such items as core deposit intangibles, the future earnings potential of significant customer relationships and the value of fee generating businesses.  The Company believes the imprecision of an estimate could be significant.

The following tables present the carrying amount and estimated fair values of financial instruments not recorded at fair value in their entirety on a recurring basis on the Company’s Consolidated Balance Sheets.

			Estimated Fair Value
(Dollars in thousands)	Carrying Value		Total		Level 1		Level 2		Level 3
March 31, 2014
Financial assets:
Cash and cash equivalents	$	530,538	$	530,538	$	107,170	$	423,368	$	—
Federal Home Loan Bank stock	12,335		N/A
Net loans, excluding covered loans(1)	3,123,018		3,193,719		—		—		3,193,719
Net covered loans(2)	459,920		533,149		—		—		533,149
Accrued interest receivable	9,955		9,955		—		9,955		—
FDIC indemnification asset	119,045		77,063		—		—		77,063
FDIC receivable	8,130		8,130		—		8,130		—
Company-owned life insurance	39,814		39,814		—		39,814		—
Financial liabilities:
Deposits:
Savings and demand deposits	$	3,115,405	$	3,115,405	$	—	$	3,115,405	$	—
Time deposits	1,270,927		1,274,210		—		1,274,210		—
Total deposits	4,386,332		4,389,615		—		4,389,615
FDIC clawback liability	25,593		25,593		—		—		25,593
Short term borrowings	89,562		89,562		—		89,562		—
Long-term debt	177,483		170,053		—		170,053		—
FDIC warrants payable	4,423		4,423		—		—		4,423
Accrued interest payable	598		598		—		598		—

(1) Included $6.6 million of impaired loans recorded at fair value on a nonrecurring basis and $17.9 million of loans recorded at fair value on a recurring basis.

(2) Included $3.2 million of impaired loans recorded at fair value on a nonrecurring basis.

			Estimated Fair Value
(Dollars in thousands)	Carrying Value		Total		Level 1		Level 2		Level 3
December 31, 2013
Financial assets:
Cash and cash equivalents	$	375,356	$	375,356	$	97,167	$	278,189	$	—
Federal Home Loan Bank stock	16,303		N/A
Net loans, excluding covered loans(1)	2,456,170		2,574,109		—		—		2,574,109
Net covered loans(2)	489,687		534,857		—		—		534,857
Accrued interest receivable	7,968		7,968		—		7,968		—
FDIC indemnification asset	131,861		84,010		—		—		84,010
FDIC receivable	7,783		7,783		—		7,783		—
Company-owned life insurance	39,500		39,500		—		39,500		—
Financial liabilities:
Deposits:
Savings and demand deposits	$	2,673,524	$	2,673,524	$	—	$	2,673,524	$	—
Time deposits	927,313		928,128		—		928,128		—
Total deposits	3,600,837		3,601,652		—		3,601,652		—
FDIC clawback liability	24,887		24,887		—		—		24,887
Short term borrowings	71,876		71,876		—		71,876		—
Long-term debt	199,037		190,420		—		190,420		—
FDIC warrants payable	4,118		4,118		—		—		4,118
Accrued interest payable	626		626		—		626		—

(1) Included $2.3 million of impaired loans recorded at fair value on a nonrecurring basis and $17.7 million of loans recorded at fair value on a recurring basis.

(2) Included $644 thousand of impaired loans recorded at fair value on a nonrecurring basis.

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STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2014

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

15.  STOCK-BASED COMPENSATION

The Company’s 2009 Equity Incentive Plan (the “Plan”), along with amendments made to the Plan, limits the number of share options issued or are issuable to employees, directors and certain consultants at 9.8 million shares of common stock.  Options are granted with an exercise price equal to or greater than the fair market price of the Company’s common stock at the date of grant.  The vesting and terms of option awards are determined by the Company’s Compensation Committee of the Board of Directors.

During the three months ended March 31, 2013, the Company granted 3.5 million stock options that were fully vested upon issuance and will remain outstanding for 10 years after the grant date.  There were no stock options granted during the three months ended March 31, 2014. As of March 31, 2014, 1.4 million option shares were available to be granted.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the table below.  Given minimal trading in the Company’s stock during the three months ended March 31, 2013, it was not practicable for the Company to estimate volatility of its share price; therefore, the Company used the volatility of an appropriate industry index (the ABA NASDAQ Community Bank Index) as an input in the valuation model. Since no historical data is available, the expected term of options granted was estimated to be six years based on expected lives used by a sample of other Midwest banks and taking into consideration the Company’s business strategy and the circumstances of its capitalization. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of the grant corresponding with the expected life of the options. All shares granted are expected to vest and the Company intends to issue already authorized shares to satisfy options upon exercise.

The fair value of options granted during the three months ended March 31, 2013 was determined using the following weighted-average assumptions as of the grant date.

	For the three months ended
	March 31, 2013
Fair value of options granted	$	2.13
Expected dividend yield	0.00		%
Expected volatility	24.52		%
Risk-free interest rate	0.96		%
Expected life (in years)	6.00

Activity in the Plan during the three months ended March 31, 2014 is summarized below:

		Weighted Average
	Number of Shares (in thousands)	Exercise Price per Share		Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2014	8,441	$	6.88
Exercised (1)	70	7.25
Outstanding at March 31, 2014	8,371	6.87		7.41	$	65,008
Options fully vested and expected to vest	8,371	6.87		7.41	65,008
Exercisable at March 31, 2014	8,298	6.87		7.34	64,470

(1) Options exercised during the three months ended March 31, 2014 had a weighted average fair value of $13.28 and were exercised using a net-share settlement, therefore no cash was received.

The total intrinsic value of stock options exercised was $422 thousand for the three months ended March 31, 2014. The options exercised during the three months ended March 31, 2014 were exercised using a net-share settlement, therefore no cash was received. There were no option exercises during the three months ended March 31, 2013.

Total compensation expense for stock options, included in “Salary and employee benefits” in the Consolidated Statements of Income, was $180 thousand and $8.3 million for the three months ended March 31, 2014 and 2013, respectively.

A summary of changes in the Company’s nonvested shares for the three months ended March 31, 2014 follows:

Nonvested Shares	Shares  (in thousands)	Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2014	348	$	2.24
Vested	275
Nonvested at March 31, 2014	73	$	2.21

As of March 31, 2014, there was $113 thousand of total unrecognized compensation cost related to nonvested stock options granted under the Plan.  The cost is expected to be recognized during the year ended December 31, 2014.

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DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2014

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

11.  DERIVATIVE INSTRUMENTS

In the normal course of business, the Company enters into various transactions involving derivative instruments to manage exposure to fluctuations in interest rates and to meet the financing needs of customers (customer initiated derivatives).  These financial instruments involve, to varying degrees, elements of market and credit risk.  Market and credit risk are included in in the determination of fair value.

Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Company’s practice to enter into forward commitments for the future delivery of mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans.

The Company additionally enters into interest rate derivatives to provide a service to certain qualifying customers to help facilitate their respective risk management strategies (“customer-initiated derivatives”) and, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company generally takes offsetting positions with dealer counterparts to mitigate the inherent risk.  Income primarily results from the spread between the customer derivative and the offsetting dealer positions.

The Company has no derivatives designated as qualifying accounting hedging instruments.

The following table reflects the amount and fair value of mortgage banking and customer initiated derivatives included in “Other assets” and “Other liabilities” in the Consolidated Balance Sheets. Fair values of customer-initiated derivative instruments represent the net unrealized gains or losses on such contracts and are recorded in the consolidated balance sheets.  Changes in fair value are recognized in the consolidated statements of income.

			Fair Value
(Dollars in thousands)	Notional Amount		Gross Derivative Assets (1)		Gross Derivative Liabilities (1)
March 31, 2014
Derivative instruments
Forward contracts related to mortgage loans to be delivered for sale	$	215,125	$	181	$	—
Interest rate lock commitments	92,714		1,007		—
Customer-initiated derivatives	11,944		232		52
Total derivative instruments	$	319,783	$	1,420	$	52
December 31, 2013
Derivative instruments
Forward contracts related to mortgage loans to be delivered for sale	$	168,746	$	1,484	$	—
Interest rate lock commitments	67,685		1,146		—
Total derivative instruments	$	236,431	$	2,630	$	—

(1) Net derivative assets are included in “Other income” and net derivative liabilities are included in “Other liabilies” on the consolidated balance sheets.

In the normal course of business, the Company may decide to settle a forward contract rather than fulfill the contract.  Cash received or paid in this settlement manner is included in “Net gain on sales of loans” and is considered a cost of executing a forward contract.

The following table reflects the net gains (losses) relating to derivative instruments related to the changes in fair value.

		For the three months ended March 31,
(Dollars in thousands)	Location of Gain (Loss)	2014			2013
Derivative Instruments
Forward contracts related to mortgage loans to be delivered for sale	Net gain on sale of loans	$	(2,994	)	$	1,649
Interest rate lock commitments	Net gain on sale of loans	(138		)	(1,491		)
Customer-inititated derivatives	Other noninterest income	13			—
Total gain (loss) recognized in income		$	(3,119	)	$	158

Methods and assumptions used by the Company in estimating the fair value of its forward contracts, interest rate lock commitments and customer-initiated derivatives are discussed in Note 3, “Fair Value”.

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INCOME TAXES (Details 2) (USD $)	3 Months Ended							3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Dec. 31, 2013 Loss carry forwards and tax credits expiring between 2027 and 2032	Dec. 31, 2013 Federal	Dec. 31, 2013 Federal Loss carry forwards and tax credits expiring between 2027 and 2032	Dec. 31, 2013 Federal Loss carry forwards expiring between 2027 and 2029	Mar. 31, 2014 Talmer West Bank	Jan. 02, 2014 Talmer West Bank	Jan. 02, 2014 Talmer West Bank Federal Loss carry forwards expiring in 2032 and 2033	Mar. 31, 2014 First Place Bank	Dec. 31, 2013 First Place Bank Federal Loss carry forwards and tax credits expiring between 2027 and 2032
INCOME TAXES
Deferred tax assets, gross	$ 200,402,000		$ 152,592,000						$ 54,400,000
Deferred tax assets, net	156,486,000		107,319,000
Valuation allowance	11,054,000		10,127,000						961,000
Valuation allowance on remainder of the Company's net deferred tax assets	0		0
Net operating loss carry forwards and built-in losses realization period								5 years
Bad debts deductions period								1 year
Net operating loss carry forwards and built-in losses expected amount to be realized within specified period								3,000,000
Gross loss carry forwards						27,100,000	3,700,000			32,700,000		24,800,000
Tax credits carryforwards				856,000								856,000
Alternative minimum tax credits with an indefinite life					1,900,000
Annual limitation on use of federal tax loss carry forwards and tax credits												1,700,000
Annual limitation on use of federal tax loss carry forwards							145,000
Bad debt reserve in equity for which no provision for tax has been recorded								36,000,000
Provision for federal income taxes for the bad debt reserve established in 1987								0
Potential tax amount for the bad debt reserve								13,000,000
Anticipated tax refund related to amended tax return											11,700,000
Unrecognized tax benefits	0	0
Liabilities accrued for interest or penalties	0	0
Change in valuation allowance	$ 34,000	$ 0

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ACQUIRED LOANS AND LOSS SHARE ACCOUNTING

3 Months Ended

Mar. 31, 2014

ACQUIRED LOANS AND LOSS SHARE ACCOUNTING

ACQUIRED LOANS AND LOSS SHARE ACCOUNTING

7.  ACQUIRED LOANS AND LOSS SHARE ACCOUNTING

A significant amount of loans acquired in the CF Bancorp and First Banking Center acquisitions during the year 2010 and the Peoples State Bank and Community Central Bank acquisitions during the year 2011 are covered by loss sharing agreements with the FDIC, whereby the FDIC generally reimburses the Bank for the 80% of losses incurred.  The CF Bancorp, First Banking Center and Peoples State Bank loss share agreements also include provisions where a clawback payment, calculated using formulas included within the contracts, is to be made to the FDIC 10 years and 45 days following the acquisition in the event actual losses fail to reach stated levels.  The estimated FDIC clawback liability totaled $25.6 million ($21.7 million related to the CF Bancorp acquisition and $3.9 million related to the First Banking Center acquisition) at March 31, 2014 compared to $24.9 million ($21.0 million related to the CF Bancorp acquisition and $3.9 million related to the First Banking Center acquisition) at December 31, 2013. No clawback liability was recorded in relation to Peoples State Bank as of both March 31, 2014 and December 31, 2013.

Acquired loans were recorded at fair value as of the acquisition date, which includes loans acquired in each FDIC-assisted acquisition and in the First Place Bank and Talmer West Bank acquisitions.  At the acquisition date, where a loan exhibits evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all principal and interest payments in accordance with the terms of the loan agreement, the Company accounts for the loan under ASC 310-30 and recognizes the expected shortfall of expected future cash flows, as compared to the contractual amount due, as a nonaccretable discount. Any excess of the net present value of expected future cash flows over the acquisition date fair value is recognized as the accretable discount, or accretable yield.  We recognize accretion of the accretable discount as interest income over the expected remaining life of the purchased loan.  Fair value discounts/premiums created on acquired loans accounted for outside the scope of ASC 310-30 are accounted for under ASC 310-20 and are accreted/amortized into interest income over the remaining term of the loan as an adjustment to the related loans yield.

Changes in the carrying amount of accretable discount for purchased loans accounted for under ASC 310-30 were as follows:

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Balance at beginning of period	$	302,287		$	216,970
Additions due to acquisitions	32,852			158,221
Discount accretion	(21,966		)	(26,410		)
Reclassifications from nonaccretable discount and other additions to accretable discount due to results of cash flow re-estimations	16,364			17,989
Other activity, net (1)	(12,070		)	(15,367		)
Balance at end of period	$	317,467		$	351,403

(1) Primarily includes changes in the accretable discount due to loan payoffs, foreclosures and charge-offs.

For loans accounted for under ASC 310-30, the Company remeasures expected cash flows on a quarterly basis.  For loans where the remeasurement process results in a decline in expected cash flows, impairment is recorded.  As a result of this impairment, the indemnification asset is increased to reflect anticipated future cash to be received from the FDIC.  Alternatively, when a loan’s remeasurement results in an increase in expected cash flows, the effective yield of the related loan is increased through an addition to the accretable discount.  As a result of the improved cash flows, the indemnification asset is first reduced by the writing off of any indemnification asset related to impairment previously recorded with any remaining indemnification asset accreting off over the shorter of the expected term of the loan or the remaining life of the related loss-sharing agreement.

The total identified improvement in the cash flow expectations during the three months ended March 31, 2014 and 2013 for both covered and uncovered purchased credit impaired loans was $16.4 million and $18.0 million, respectively.  These reclassifications resulted in yield adjustments on these loans on a prospective basis. The Company also identified declines in the cash flow expectations of certain loans.  A decline in the present value of current expected cash flows compared to the previously estimated expected cash flows, due in any part to change in credit, is referred to as credit impairment and recorded as provision for loan losses during the period.  Declines in the present value of expected cash flows only from the expected timing of such cash flows is referred to as timing impairment and recognized prospectively as a decrease in yield on the loan.

Below is the composition of the recorded investment for loans accounted for under ASC 310-30 at March 31, 2014 and December 31, 2013.

	March 31,			December 31,
(Dollars in thousands)	2014			2013
Contractual cash flows	$	1,593,665		$	1,357,070
Non-accretable difference	(320,822		)	(251,108		)
Accretable yield	(317,467		)	(302,287		)
Loans accounted for under ASC 310-30	$	955,376		$	803,675

The following table details the components and impact of the provision for loan losses on covered loans and the related FDIC loss sharing income.

	For the three months ended March 31,
(Dollars in thousands)	2014			2013
Provision (benefit) for loan losses - covered:
Impairment recorded as a result of re-estimation of cash flows on loans accounted for under ASC 310-30 (1)	$	1,299		$	5,821
Additional benefit recorded, net of recoveries, for covered loans including those accounted for under ASC 310-20 and ASC 310-40	(3,797		)	(4,737		)
Total provision (benefit) for loan losses-covered	$	(2,498	)	$	1,084
Less: FDIC loss share income:
Income recorded as a result of re-estimation of cash flows on loans accounted for under ASC 310-30 (1)	$	1,581		$	2,015
Expense recorded, to offset provision (benefit), for covered loans including those accounted for under ASC 310-20 and ASC 310-40	(3,038		)	(3,790		)
Total loss sharing expense due to provision for loan losses-covered	$	(1,457	)	$	(1,775	)
Net (increase) decrease to income before taxes:
Net (income) expense recorded as a result of re-estimation of cash flows on loans accounted for under ASC 310-30 (1)	$	(282	)	$	3,806
Net income recorded, for covered loans including those accounted for under ASC 310-20 and ASC 310-40	(759		)	(947		)
Net (increase) decrease to income before taxes	$	(1,041	)	$	2,859

(1)  The results of re-estimation also included $8.4 million and $18.0 million of cash flow improvements related to covered loans for the three months ended March 31, 2014 and 2013, respectively.  Improvements in cash flows from the re-estimation process are recognized prospectively as an adjustment to the accretable yield on the loan.

The following table summarizes the activity related to the FDIC indemnification asset and the FDIC receivable for the three months ended March 31, 2014 and 2013.  For further detail on impairment and provision expense related to loans accounted for under ASC Topic 310-30, refer to Note 6 “Allowance for Loan Losses.”

	For the three months ended March 31,
	2014						2013
(Dollars in thousands)	FDIC Indemnification Asset			FDIC Receivable			FDIC Indemnification Asset			FDIC Receivable
Balance at beginning of period	$	131,861		$	7,783		$	226,356		$	17,999
Accretion	(6,718		)	—			(8,148		)	—
Sales and write-downs of other real estate owned (covered)	(473		)	(192		)	(862		)	618
Net effect of change in allowance on covered assets (1)	(2,024		)	—			(5,064		)	—
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(3,601		)	3,601			(10,080		)	10,080
Increase (decrease) due to additional claimable expenses incurred net of recoveries (2)	—			(886		)	—			194
Claim payments received from the FDIC	—			(2,176		)	—			(13,801		)
Balance at end of period	$	119,045		$	8,130		$	202,202		$	15,090

(1) Includes the impact of remeasurement of expected cash flows under ASC 310-30 accounting.

(2) Primarily includes expenses associated with maintaining the underlying properties and legal fees.

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LOANS (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012
Information on nonperforming assets
Other real estate owned	$ 57,451	$ 29,955	$ 42,944	$ 24,703
Covered
Information on nonperforming assets
Nonaccrual loans	15,522	17,716
Uncovered
Information on nonperforming assets
Nonaccrual loans	25,593	24,297
Nonperforming assets
Information on nonperforming assets
Total assets	98,566	71,968
Nonperforming assets | Covered
Information on nonperforming assets
Nonaccrual loans	15,522	17,716
Other real estate owned	10,165	11,571
Total assets	25,687	29,287
Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	25,593	24,297
Other real estate owned	47,286	18,384
Total assets	72,879	42,681
Residential real estate | Nonperforming assets | Covered
Information on nonperforming assets
Nonaccrual loans	1,330	988
Residential real estate | Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	13,822	15,415
Commercial real estate | Nonperforming assets | Covered
Information on nonperforming assets
Nonaccrual loans	7,798	8,124
Commercial real estate | Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	8,838	5,591
Commercial and industrial | Nonperforming assets | Covered
Information on nonperforming assets
Nonaccrual loans	4,904	7,201
Commercial and industrial | Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	2,249	2,681
Real estate construction | Nonperforming assets | Covered
Information on nonperforming assets
Nonaccrual loans	1,465	1,372
Real estate construction | Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	582	510
Consumer | Nonperforming assets | Covered
Information on nonperforming assets
Nonaccrual loans	25	31
Consumer | Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	$ 102	$ 100

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LOANS

3 Months Ended

Mar. 31, 2014

LOANS

LOANS

5. LOANS

Residential real estate loans represent loans to consumers for the purchase or refinance of a residence. These loans are generally financed over a 15 to 30 year term, and in most cases, are extended to borrowers to finance their primary residence with both fixed-rate and adjustable-rate terms. The majority of these loans originated by the Company conform to secondary market underwriting standards and are sold within a short timeframe to unaffiliated third parties. As such, the credit underwriting standards adhere to the underwriting standards and documentation requirements established by the respective investor or correspondent bank.  Residential real estate loans also include home equity loans and line of credit that are secured by a first- or second-lien on the borrower’s residence.  Home equity lines of credit consist mainly of revolving lines of credit secured by residential real estate.  Home equity lines of credit are generally governed by the same lending policies and subject to the same credit risk as described previously for residential real estate loans.

Commercial real estate loans consist of term loans secured by a mortgage lien on the real property such as apartment buildings, office and industrial buildings, retail shopping centers, and farmland. The credit underwriting for both owner-occupied and non-owner occupied commercial real estate loans includes detailed market analysis, historical and projected cash flow analysis, appropriate equity margins, assessment of lessees and lessors, type of real estate and other analysis. Risk of loss is managed by adherence to standard loan policies that establish certain levels of performance prior to the extension of a loan to the borrower. Geographic diversification, as well as diversification across industries, are other means by which the risk of loss is managed by the Company.

Commercial and industrial loans include financing for commercial purposes in various lines of business, including manufacturing, agricultural, service industry and professional service areas.  The Company works with businesses to meet their short-term working capital needs while also providing long-term financing for their business plans. Credit risk is managed through standardized loan policies, established and authorized credit limits, centralized portfolio management and the diversification of market area and industries. The overall strength of the borrower is evaluated through the credit underwriting process and includes a variety of analytical activities including the review of historical and projected cash flows, historical financial performance, financial strength of the principals and guarantors, and collateral values, where applicable. Commercial and industrial loans are generally secured with the assets of the company and/or the personal guarantee of the business owners.

Real estate construction loans are term loans to individuals, companies or developers used for the construction of a commercial or residential property for which repayment will be generated by the sale or permanent financing of the property.  Generally, these loans are for construction projects that have been either presold, preleased, or have secured permanent financing, as well as loans to real estate companies with significant equity invested in the project.

Consumer loans include loans made to individuals not secured by real estate, including loans secured by automobiles or watercraft, and personal unsecured loans. Risk elements in the consumer loan portfolio are primarily focused on the borrower’s cash flow and credit history, key indicators of the ability to repay and borrower credit scores. A certain level of security is provided through liens on automobile or watercraft titles, where applicable. Economic conditions that affect consumers in the Company’s markets have a direct impact on the credit quality of these loans. Higher levels of unemployment, lower levels of income growth and weaker economic growth are factors that may adversely impact consumer loan credit quality.

Loans at March 31, 2014 and December 31, 2013 were as follows:

	Covered loans						Uncovered loans
(Dollars in thousands)	Accounted for under ASC 310-30		Excluded from ASC 310-30 accounting		Total covered loans		Accounted for under ASC 310-30		Excluded from ASC 310-30 accounting		Total uncovered loans		Total
March 31, 2014
Residential real estate	$	96,534	$	22,874	$	119,408	$	272,920	$	995,280	$	1,268,200	$	1,387,608
Commercial real estate	243,737		35,412		279,149		235,406		912,414		1,147,820		1,426,969
Commercial and industrial	47,488		23,667		71,155		18,410		554,858		573,268		644,423
Real estate construction	14,977		1,918		16,895		11,391		132,178		143,569		160,464
Consumer	11,131		182		11,313		3,382		9,550		12,932		24,245
Total	$	413,867	$	84,053	$	497,920	$	541,509	$	2,604,280	$	3,145,789	$	3,643,709	(1)
December 31, 2013
Residential real estate	$	100,034	$	23,300	$	123,334	$	253,528	$	831,925	$	1,085,453	$	1,208,787
Commercial real estate	262,769		36,632		299,401		98,299		657,540		755,839		1,055,240
Commercial and industrial	51,407		27,030		78,437		5,985		440,659		446,644		525,081
Real estate construction	15,268		1,950		17,218		1,970		174,256		176,226		193,444
Consumer	11,508		170		11,678		2,907		6,847		9,754		21,432
Total	$	440,986	$	89,082	$	530,068	$	362,689	$	2,111,227	$	2,473,916	$	3,003,984	(1)

(1) Reported net of deferred fees and costs totaling $10.5 million and $9.8 million at March 31, 2014 and December 31, 2013, respectively.

Nonperforming Assets and Past Due Loans

Nonperforming assets consist of loans for which the accrual of interest has been discontinued, other real estate owned acquired through the acquisitions of CF Bancorp, First Banking Center, Peoples State Bank, Community Central Bank, First Place Bank or Talmer West Bank and other real estate owned obtained through foreclosure or closing of branch or operating facilities.

Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment. Loans outside of those accounted for under ASC 310-30 are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful. The accrual of interest income is discontinued when a loan is placed in nonaccrual status and any payments received reduce the carrying value of the loan. A loan may be placed back on accrual status if all contractual payments have been received and collection of future principal and interest payments are no longer doubtful. Loans accounted for under ASC 310-30 are classified as performing, even though they may be contractually past due, as any nonpayment of contractual principal or interest is considered in the quarterly re-estimation of expected cash flows and is included in the resulting recognition of current period provision for loan losses or future yield adjustments.

Information as to nonperforming assets was as follows:

	March 31,		December 31,
(Dollars in thousands)	2014		2013
Uncovered nonperforming assets
Nonaccrual loans
Residential real estate	$	13,822	$	15,415
Commercial real estate	8,838		5,591
Commercial and industrial	2,249		2,681
Real estate construction	582		510
Consumer	102		100
Total nonaccrual loans	25,593		24,297
Other real estate owned	47,286		18,384
Total uncovered nonperforming assets	72,879		42,681
Covered nonperforming assets
Nonaccrual loans
Residential real estate	1,330		988
Commercial real estate	7,798		8,124
Commercial and industrial	4,904		7,201
Real estate construction	1,465		1,372
Consumer	25		31
Total nonaccrual loans	15,522		17,716
Other real estate owned	10,165		11,571
Total covered nonperforming assets	25,687		29,287
Total nonperforming assets	$	98,566	$	71,968
Uncovered loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30
Residential real estate	3		539
Total loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30	$	3	$	539
Covered loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30
Residential real estate	7		—
Total loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30	$	7	$	—

Loan delinquency, excluding loans accounted for under ASC 310-30 was as follows:

	March 31, 2014
(Dollars in thousands)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total loans		90 days or more past due and still accruing
Uncovered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	7,900	$	676	$	6,616	$	15,192	$	980,088	$	995,280	$	3
Commercial real estate	2,461		1,929		6,089		10,479		901,935		912,414		—
Commercial and industrial	1,946		212		1,174		3,332		551,526		554,858		—
Real estate construction	2,852		436		—		3,288		128,890		132,178		—
Consumer	278		3		3		284		9,266		9,550		—
Total	$	15,437	$	3,256	$	13,882	$	32,575	$	2,571,705	$	2,604,280	$	3
Covered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	835	$	403	$	141	$	1,379	$	21,495	$	22,874	$	7
Commercial real estate	444		404		5,344		6,192		29,220		35,412		—
Commercial and industrial	38		677		4,214		4,929		18,738		23,667		—
Real estate construction	—		—		1,413		1,413		505		1,918		—
Consumer	2		1		19		22		160		182		—
Total	$	1,319	$	1,485	$	11,131	$	13,935	$	70,118	$	84,053	$	7

	December 31, 2013
(Dollars in thousands)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total loans		90 days or more past due and still accruing
Uncovered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	11,244	$	1,849	$	6,641	$	19,734	$	812,191	$	831,925	$	539
Commercial real estate	1,400		4,992		1,122		7,514		650,026		657,540		—
Commercial and industrial	136		25		560		721		439,938		440,659		—
Real estate construction	5,038		356		359		5,753		168,503		174,256		—
Consumer	207		38		4		249		6,598		6,847		—
Total	$	18,025	$	7,260	$	8,686	$	33,971	$	2,077,256	$	2,111,227	$	539
Covered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	827	$	260	$	224	$	1,311	$	21,989	$	23,300	$	—
Commercial real estate	324		558		5,681		6,563		30,069		36,632		—
Commercial and industrial	1,619		119		4,476		6,214		20,816		27,030		—
Real estate construction	—		—		1,365		1,365		585		1,950		—
Consumer	1		17		7		25		145		170		—
Total	$	2,771	$	954	$	11,753	$	15,478	$	73,604	$	89,082	$	—

Impaired Loans

Information as to total impaired loans (both individually and collectively evaluated for impairment) is as follows:

	March 31,		December 31,
(Dollars in thousands)	2014		2013
Uncovered
Nonaccrual loans	$	25,593	$	24,297
Performing troubled debt restructurings:
Residential real estate	828		328
Commercial real estate	3,003		1,637
Commercial and industrial	1,365		1,367
Real estate construction	96		90
Consumer	30		30
Total uncovered performing troubled debt restructurings	5,322		3,452
Total uncovered impaired loans	$	30,915	$	27,749
Covered
Nonaccrual loans	$	15,522	$	17,716
Performing troubled debt restructurings:
Residential real estate	2,582		2,691
Commercial real estate	15,056		14,391
Commercial and industrial	3,030		3,802
Real estate construction	111		163
Total covered performing troubled debt restructurings	20,779		21,047
Total covered impaired loans	$	36,301	$	38,763

Troubled Debt Restructurings

The Company assesses all loan modifications to determine whether a modification constitutes a troubled debt restructuring (“TDR”). For loans excluded from ASC 310-30 accounting, a modification is considered a TDR when a borrower is experiencing financial difficulties and the Company grants a concession to the borrower.   For loans accounted for individually under ASC 310-30, a modification is considered a TDR when a borrower is experiencing financial difficulties and the expected cash flows after the modification is less than the expected cash flows at the time the loan was acquired in association with consideration of qualitative factors included within ASC 310-40.  All TDRs are considered impaired loans.  The nature and extent of impairment of TDRs, including those which have experienced a subsequent default, is considered in the determination of an appropriate level of charge off and/or allowance for loan losses.

As of March 31, 2014, there were $16.4 million of nonperforming TDRs and $26.1 million of performing TDRs included in impaired loans.  As of December 31, 2013, there were $17.9 million of nonperforming TDRs and $24.5 million of performing TDRs included in impaired loans.  All TDRs are considered impaired loans in the calendar year of their restructuring.  In subsequent years, a restructured obligation modified at a market rate and compliant with its modified terms for a minimum period of six months is no longer reported as a TDR. A loan that has been modified at a rate other than market will return to performing status if it satisfies the six month performance requirement; however, it will continue to be reported as a TDR and considered impaired.

The following tables present the recorded investment of loans modified in TDRs during the three months ended March 31, 2014 and 2013 by type of concession granted.  In cases where more than one type of concession was granted, the loans were categorized based on the most significant concession.

	Concession type											Financial effects of modification
(Dollars in thousands)	Principal deferral		Principal reduction (1)		Interest rate		Forbearance agreement		Total number of loans	Total recorded investment at March 31, 2014		Net charge-offs (recoveries)			Provision for loan losses (2)
For the three months ended March 31, 2014
Uncovered
Residential real estate	$	—	$	67	$	233	$	—	6	$	300	$	—		$	—
Commercial real estate	—		—		713		937		5	1,650		(9		)	133
Commercial and industrial	34		—		—		123		4	157		—			34
Total uncovered	$	34	$	67	$	946	$	1,060	15	$	2,107	$	(9	)	$	167
Covered
Residential real estate	$	116	$	—	$	—	$	—	5	$	116	$	6		$	6
Commercial real estate	—		—		—		443		1	443		—			—
Commercial and industrial	—		—		27		—		3	27		—			—
Total covered	$	116	$	—	$	27	$	443	9	$	586	$	6		$	6
Total loans	$	150	$	67	$	973	$	1,503	24	$	2,693	$	(3	)	$	173

(1) Loan forgiveness related to loans modified in TDRs for the three months ended March 31, 2014 totaled $127 thousand.

(2) The provision for loan losses for covered loans is partially offset by the build of an associated FDIC indemnification asset on covered loans.

	Concession type						Total	Total recorded		Financial effect of modification
(Dollars in thousands)	Principal deferral (1)		Interest rate		Forbearance agreement		number of loans	investment at March 31, 2013		Net charge-offs		Provision for loan losses (2)
For the three months ended March 31, 2013
Uncovered
Residential real estate	$	—	$	—	$	177	4	$	177	$	—	$	—
Commercial real estate	252		—		19		2	271		—		6
Commercial and industrial	—		—		85		1	85		—		—
Consumer	—		—		3		3	3		—		—
Total uncovered	$	252	$	—	$	284	10	$	536	$	—	$	6
Covered
Residential real estate	$	578	$	—	$	—	6	$	578	$	—	$	35
Commercial real estate	—		228		—		4	228		—		20
Commercial and industrial	20		369		64		14	453		—		15
Real estate construction	—		6		—		1	6		—		—
Total covered	$	598	$	603	$	64	25	$	1,265	$	—	$	70
Total loans	$	850	$	603	$	348	35	$	1,801	$	—	$	76

(1) No amounts were forgiven for the three months ended March 31, 2013 as a result of modification.

(2) The provision for loan losses for covered loans is partially offset by the build of an associated FDIC indemnification asset on covered loans.

When a modification qualifies as a TDR and was initially individually accounted for under ASC 310-30, the loan is required to be moved from ASC 310-30 accounting and accounted for under ASC 310-40.  In order to accomplish the transfer of the accounting for the TDR from ASC 310-30 to ASC 310-40, the loan is essentially retained in the ASC 310-30 accounting model and subject to the periodic cash flow re-estimation process. Similar to loans accounted for under ASC 310-30, deterioration in expected cash flows result in the recognition of allowance for loan losses. However, unlike loans accounted for under ASC 310-30, improvements in estimated cash flows on these loans result only in recapturing previously recognized allowance for loan losses and the yield remains at the last yield recognized under ASC 310-30.

On an ongoing basis, the Company monitors the performance of TDRs to their modified terms. The following table presents the number of loans modified in TDRs during the previous 12 months for which there was payment default during the three months ended March 31, 2014 and 2013, including the recorded investment as of March 31, 2014 and 2013.  A payment on a TDR is considered to be in default once it is greater than 30 days past due.

(Dollars in thousands)	Total number of loans	Total recorded investment		Charge-offs following a subsequent default
For the three months ended March 31, 2014
Uncovered
Residential real estate	20	$	1,157	$	81
Commercial real estate	2	1,487		150
Commercial and industrial	1	135		—
Total uncovered	23	2,779		231
Covered
Residential real estate	7	171		7
Commercial real estate	5	222		—
Commercial and industrial	10	230		7
Real estate construction	1	776		—
Total covered	23	1,399		14
Total loans	46	$	4,178	$	245
For the three months ended March 31, 2013
Uncovered
Residential real estate	1	$	133	$	—
Consumer	2	3		—
Total uncovered	3	136		—
Covered
Residential real estate	1	174		—
Commercial real estate	9	1,320		—
Commercial and industrial	8	722		—
Consumer	1	—		—
Total covered	19	2,216		—
Total loans	22	$	2,352	$	—

At March 31, 2014, commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled $2.1 million.

The terms of certain other loans that were modified during the three months ending March 31, 2014 and 2013 that did not meet the definition of a TDR generally involved a modification of the terms of a loan to borrowers who were not deemed to be experiencing financial difficulties or a loan accounted for under ASC 310-30 that did not result in lower expected cash flows than at the date of acquisition after the modification in association with consideration of qualitative factors included within ASC 310-40. The evaluation of whether or not a borrower is deemed to be experiencing financial difficulty is completed during loan committee meetings at the time of the loan approval.

Credit Quality Indicators

Credit risk monitoring and management is a continuous process to manage the quality of the loan portfolio.

The Company categorizes commercial and industrial, commercial real estate and real estate construction loans into risk categories based on relevant information about the ability of borrowers to service their debt including, current financial information, historical payment experience, credit documentation and current economic trends, among other factors.  The risk rating system is used as a tool to analyze and monitor loan portfolio quality.  Risk ratings meeting an internally specified exposure threshold are updated annually, or more frequently upon the occurrence of a circumstance that affects the credit risk of the loan.  The following describes each risk category:

Pass:  Includes all loans without weaknesses or potential weaknesses identified in the categories of special mention, substandard or doubtful.

Special Mention:  Loans with potential credit weakness or credit deficiency, which, if not corrected, pose an unwarranted financial risk that could weaken the loan by adversely impacting the future repayment ability of the borrower.

Substandard:  Loans with a well-defined weakness, or weaknesses, such as loans to borrowers who may be experiencing losses from operations or inadequate liquidity of a degree and duration that jeopardizes the orderly repayment of the loan.  Substandard loans also are distinguished by the distinct possibility of loss in the future if these weaknesses are not corrected.

Doubtful:  Loans with all the characteristics of a loan classified as Substandard, with the added characteristic that credit weaknesses make collection in full highly questionable and improbable.

Commercial and industrial, commercial real estate and real estate construction loans by credit risk category were as follows:

(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
March 31, 2014
Uncovered loans
Commercial real estate	$	1,018,275	$	63,219	$	57,488	$	8,838	$	1,147,820
Commercial and industrial	549,174		11,680		10,165		2,249		573,268
Real estate construction	139,026		2,215		1,746		582		143,569
Total	$	1,706,475	$	77,114	$	69,399	$	11,669	$	1,864,657
Covered loans
Commercial real estate	$	149,456	$	23,514	$	98,381	$	7,798	$	279,149
Commercial and industrial	41,153		6,939		18,159		4,904		71,155
Real estate construction	5,685		3,192		6,553		1,465		16,895
Total	$	196,294	$	33,645	$	123,093	$	14,167	$	367,199
December 31, 2013
Uncovered loans
Commercial real estate	$	645,276	$	43,597	$	61,375	$	5,591	$	755,839
Commercial and industrial	423,295		10,237		10,431		2,681		446,644
Real estate construction	164,466		19		11,231		510		176,226
Total	$	1,233,037	$	53,853	$	83,037	$	8,782	$	1,378,709
Covered loans
Commercial real estate	$	163,167	$	17,058	$	111,052	$	8,124	$	299,401
Commercial and industrial	43,917		6,951		20,368		7,201		78,437
Real estate construction	6,193		2,803		6,850		1,372		17,218
Total	$	213,277	$	26,812	$	138,270	$	16,697	$	395,056

For residential real estate loans and consumer loans, the Company evaluates credit quality based on the aging status of the loan and by payment activity. Residential real estate loans and consumer loans secured by a residence where the debt has been discharged but the borrower continues to make payments are considered nonperforming. The following table presents residential real estate and consumer loans by credit quality:

(Dollars in thousands)	Performing		Nonperforming		Total
March 31, 2014
Uncovered loans
Residential real estate	$	1,254,378	$	13,822	$	1,268,200
Consumer	12,830		102		12,932
Total	$	1,267,208	$	13,924	$	1,281,132
Covered loans
Residential real estate	$	118,078	$	1,330	$	119,408
Consumer	11,288		25		11,313
Total	$	129,366	$	1,355	$	130,721
December 31, 2013
Uncovered
Residential real estate	$	1,070,038	$	15,415	$	1,085,453
Consumer	9,654		100		9,754
Total	$	1,079,692	$	15,515	$	1,095,207
Covered loans
Residential real estate	$	122,346	$	988	$	123,334
Consumer	11,647		31		11,678
Total	$	133,993	$	1,019	$	135,012

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ALLOWANCE FOR LOAN LOSSES

3 Months Ended

Mar. 31, 2014

ALLOWANCE FOR LOAN LOSSES

ALLOWANCE FOR LOAN LOSSES

6.  ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses represents management’s assessment of probable, incurred credit losses in the loan portfolio. The allowance for loan losses consists of specific allowances, based on individual evaluation of certain loans, and allowances for homogeneous pools of loans with similar risk characteristics. Management’s evaluation in establishing the adequacy of the allowance includes evaluation of actual past loan loss experience, probable incurred losses in the portfolio, adverse situations that may affect a specific borrower’s ability to repay (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, and other pertinent factors, such as periodic internal and external evaluations of delinquent, nonaccrual, and classified loans. The evaluation is inherently subjective as it requires utilizing material estimates. The evaluation of these factors is the responsibility of certain senior officers from the credit administration, finance, and lending areas.

The Company established an allowance for loan losses associated with purchased credit impaired loans (accounted for under ASC 310-30) based on credit deterioration subsequent to the acquisition date. The Company re-estimates cash flows expected to be collected for purchased credit impaired loans on a quarterly basis, with any decline in expected cash flows recorded as provision for loan losses on a discounted basis during the period. For any increases in cash flows expected to be collected, the Company first reverses any previously recorded allowance for loan loss, then adjusts the amount of accretable yield recognized on a prospective basis over the loan’s remaining life.

For loans not accounted for under ASC 310-30, the Company individually assesses for impairment all commercial real estate, commercial and industrial and real estate construction nonaccrual loans and TDRs greater than $250,000.  For residential real estate loans and consumer loans, the Company assesses all loans for impairment if on nonaccrual status or if the loan is a TDR.

Information as to impaired loans individually evaluated for impairment is as follows:

(Dollars in thousands)	Recorded investment with no related allowance		Recorded investment with related allowance		Total recorded investment		Contractual principal balance		Related allowance
March 31, 2014
Uncovered individually evaluated impaired loans
Residential real estate	$	9,782	$	4,090	$	13,872	$	17,965	$	1,451
Commercial real estate	3,207		4,613		7,820		9,652		1,287
Commercial and industrial	653		767		1,420		1,829		217
Consumer	32		96		128		134		99
Total uncovered individually evaluated impaired loans	$	13,674	$	9,566	$	23,240	$	29,580	$	3,054
Covered individually evaluated impaired loans
Residential real estate	$	2,174	$	1,731	$	3,905	$	4,864	$	463
Commercial real estate	17,675		902		18,577		23,685		95
Commercial and industrial	1,232		1,723		2,955		3,211		945
Real estate construction	1,187		—		1,187		2,678		—
Consumer	6		19		25		45		3
Total covered individually evaluated impaired loans	$	22,274	$	4,375	$	26,649	$	34,483	$	1,506
December 31, 2013
Uncovered individually evaluated impaired loans
Residential real estate	$	8,143	$	5,871	$	14,014	$	17,005	$	1,923
Commercial real estate	4,588		—		4,588		4,423		—
Commercial and industrial	1,817		1,065		2,882		3,548		284
Real estate construction	359		—		359		359		—
Consumer	3		30		33		33		1
Total covered individually evaluated impaired loans	$	14,910	$	6,966	$	21,876	$	25,368	$	2,208
Covered individually evaluated impaired loans
Residential real estate	$	1,141	$	1,537	$	2,678	$	3,389	$	360
Commercial real estate	17,138		924		18,062		21,814		230
Commercial and industrial	3,704		1,417		5,121		5,503		937
Real estate construction	1,138		—		1,138		2,672		—
Consumer	6		19		25		45		2
Total covered individually evaluated impaired loans	$	23,127	$	3,897	$	27,024	$	33,423	$	1,529

	For the three months ended March 31, 2014				For the three months ended March 31, 2013
(Dollars in thousands)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Uncovered individually evaluated impaired loans
Residential real estate	$	14,178	$	150	$	—	$	—
Commercial real estate	8,394		316		253		3
Commercial and industrial	1,426		20		1,493		25
Consumer	129		2		—		—
Total uncovered individually evaluated impaired loans	$	24,127	$	488	$	1,746	$	28
Covered individually evaluated impaired loans
Residential real estate	$	3,928	$	57	$	270	$	3
Commercial real estate	18,652		282		18,778		283
Commercial and industrial	3,055		31		3,460		32
Real estate construction	1,163		25		450		—
Consumer	25		1		—		—
Total covered individually evaluated impaired loans	$	26,823	$	396	$	22,958	$	318

Uncovered Loans

Changes in the allowance for loan losses and the allocation of the allowance for uncovered loans were as follows:

(Dollars in thousands)	Residential real estate			Commercial real estate			Commercial and industrial			Real estate construction			Consumer			Total
For the three months ended March 31, 2014
Allowance for loan losses - uncovered:
Balance at beginning of period	$	7,708		$	4,267		$	3,404		$	2,027		$	340		$	17,746
Provision (benefit) for loan losses	2,864			3,138			1,336			(865		)	(49		)	6,424
Gross charge-offs	(1,436		)	(1,245		)	(145		)	(81		)	(66		)	(2,973		)
Recoveries	760			616			162			2			34			1,574
Net (charge-offs) recoveries	(676		)	(629		)	17			(79		)	(32		)	(1,399		)
Ending allowance for loan losses	$	9,896		$	6,776		4,757			$	1,083		$	259		$	22,771
As of March 31, 2014
Allowance for loan losses - uncovered:
Individually evaluated for impairment	$	1,451		$	1,287		$	217		$	—		$	99		$	3,054
Collectively evaluated for impairment	3,749			3,170			4,342			1,083			25			12,369
Accounted for under ASC 310-30	4,696			2,319			198			—			135			7,348
Allowance for loan losses - uncovered:	$	9,896		$	6,776		$	4,757		$	1,083		$	259		$	22,771
Balance of loans - uncovered:
Individually evaluated for impairment	$	13,872		$	7,820		$	1,420		$	—		$	128		$	23,240
Collectively evaluated for impairment	981,408			904,594			553,438			132,178			9,422			2,581,040
Accounted for under ASC 310-30	272,920			235,406			18,410			11,391			3,382			541,509
Total uncovered loans	$	1,268,200		$	1,147,820		$	573,268		$	143,569		$	12,932		$	3,145,789
For the three months ended March 31, 2013
Allowance for loan losses - uncovered:
Balance at beginning of peiod	$	2,059		$	4,265		$	4,162		$	268		$	191		$	10,945
Provision (benefit) for loan losses	1,218			(28		)	(300		)	147			139			1,176
Gross charge-offs	(1,129		)	(432		)	(126		)	—			(148		)	(1,835		)
Recoveries	37			171			42			—			62			312
Net charge-offs	(1,092		)	(261		)	(84		)	—			(86		)	(1,523		)
Ending allowance for loan losses	$	2,185		$	3,976		$	3,778		$	415		$	244		$	10,598

(Dollars in thousands)	Residential real estate		Commercial real estate		Commercial and industrial		Real estate construction		Consumer		Total
As of December 31, 2013
Allowance for loan losses - uncovered:
Individually evaluated for impairment	$	1,923	$	—	$	284	$	—	$	1	$	2,208
Collectively evaluated for impairment	2,697		2,862		2,959		2,025		224		10,767
Accounted for under ASC 310-30	3,088		1,405		161		2		115		4,771
Allowance for loan losses - uncovered:	$	7,708	$	4,267	$	3,404	$	2,027	$	340	$	17,746
Balance of loans - uncovered:
Individually evaluated for impairment	$	14,014	$	4,588	$	2,882	$	359	$	33	$	21,876
Collectively evaluated for impairment	817,911		652,952		437,777		173,897		6,814		2,089,351
Accounted for under ASC 310-30	253,528		98,299		5,985		1,970		2,907		362,689
Total uncovered loans	$	1,085,453	$	755,839	$	446,644	$	176,226	$	9,754	$	2,473,916

Covered Loans

Changes in the allowance and the allocation of the allowance for covered loans were as follows:

(Dollars in thousands)	Residential real estate			Commercial real estate			Commercial and industrial			Real estate construction			Consumer			Total
For the three months ended March 31, 2014
Allowance for loan losses - covered:
Balance at beginning of period	$	4,696		$	26,394		$	7,227		$	1,984		$	80		$	40,381
Provision (benefit) for loan losses	692			(1,991		)	(1,090		)	(83		)	(26		)	(2,498		)
Gross charge-offs	(863		)	(1,986		)	(1,027		)	(25		)	(47		)	(3,948		)
Recoveries	552			1,645			1,649			127			92			4,065
Net (charge-offs) recoveries	(311		)	(341		)	622			102			45			117
Ending allowance for loan losses	$	5,077		$	24,062		$	6,759		$	2,003		$	99		$	38,000
As of March 31, 2014
Allowance for loan losses- covered:
Individually evaluated for impairment	$	463		$	95		$	945		$	—		$	3		$	1,506
Collectively evaluated for impairment	168			2,912			753			44			2			3,879
Accounted for under ASC 310-30	4,446			21,055			5,061			1,959			94			32,615
Allowance for loan losses	$	5,077		$	24,062		$	6,759		$	2,003		$	99		$	38,000
Balance of covered loans:
Individually evaluated for impairment	$	3,905		$	18,577		$	2,955		$	1,187		$	25		$	26,649
Collectively evaluated for impairment	18,969			16,835			20,712			731			157			57,404
Accounted for under ASC 310-30	96,534			243,737			47,488			14,977			11,131			413,867
Total covered loans	$	119,408		$	279,149		$	71,155		$	16,895		$	11,313		$	497,920
For the three months ended March 31, 2013
Allowance for loan losses - covered:
Balance at beginning of period	$	5,716		$	30,150		$	10,915		$	4,509		$	183		$	51,473
Provision (benefit) for loan losses	(144		)	769			1,523			(935		)	(129		)	1,084
Gross charge-offs	(749		)	(4,610		)	(835		)	(364		)	(19		)	(6,577		)
Recoveries	261			2,709			547			367			50			3,934
Net charge-offs	(488		)	(1,901		)	(288		)	3			31			(2,643		)
Ending allowance for loan losses	$	5,084		$	29,018		$	12,150		$	3,577		$	85		$	49,914

(Dollars in thousands)	Residential real estate		Commercial real estate		Commercial and industrial		Real estate construction		Consumer		Total
As of December 31, 2013
Allowance for loan losses- covered:
Individually evaluated for impairment	$	360	$	230	$	937	$	—	$	2	$	1,529
Collectively evaluated for impairment	192		3,010		471		108		1		3,782
Accounted for under ASC 310-30	4,144		23,154		5,819		1,876		77		35,070
Allowance for loan losses	$	4,696	$	26,394	$	7,227	$	1,984	$	80	$	40,381
Balance of covered loans:
Individually evaluated for impairment	$	2,678	$	18,062	$	5,121	$	1,138	$	25	$	27,024
Collectively evaluated for impairment	20,622		18,570		21,909		812		145		62,058
Accounted for under ASC 310-30	100,034		262,769		51,407		15,268		11,508		440,986
Total covered loans	$	123,334	$	299,401	$	78,437	$	17,218	$	11,678	$	530,068

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OTHER REAL ESTATE OWNED

3 Months Ended

Mar. 31, 2014

OTHER REAL ESTATE OWNED

OTHER REAL ESTATE OWNED

8. OTHER REAL ESTATE OWNED

Changes in other real estate owned were as follows:

(Dollars in thousands)	Uncovered			Covered			Total
Balance at January 1, 2014	$	18,384		$	11,571		$	29,955
Additions due to acquisitions	30,878			—			30,878
Transferred to other real estate owned (1)	3,942			2,063			6,005
Disposals	(5,239		)	(3,102		)	(8,341		)
Write-downs	(679		)	(367		)	(1,046		)
Balance at March 31, 2014	$	47,286		$	10,165		$	57,451
Balance at January 1, 2013	$	869		$	23,834		$	24,703
Additions due to acquisitions	18,448			—			18,448
Transferred to other real estate owned (1)	2,614			4,639			7,253
Disposals	(2,539		)	(3,408		)	(5,947		)
Write-downs	(361		)	(1,152		)	(1,513		)
Balance at March 31, 2013	$	19,031		$	23,913		$	42,944

(1) Includes loans transferred to other real estate owned and transfers to other real estate owned due to branch or building operation closings/consolidations.

Income and expenses related to other real estate owned were as follows:

(Dollars in thousands)	Uncovered			Covered			Total
For the three months ended March 31, 2014
Net gain on sale	$	866		$	140		$	1,006
Write-downs	(679		)	(367		)	(1,046		)
Net operating expenses	(500		)	(43		)	(543		)
Total	$	(313	)	$	(270	)	$	(583	)
For the three months ended March 31, 2013
Net gain on sale	$	1,370		$	82		$	1,452
Write-downs	(361		)	(1,152		)	(1,513		)
Net operating (expenses) income	(321		)	47			(274		)
Total	$	688		$	(1,023	)	$	(335	)

Note that covered other real estate expenses and income are partially offset by the corresponding recording of FDIC loss share income or expense.

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LOANS (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 loan	Mar. 31, 2013 loan
Troubled Debt Restructurings
Total number of loans	24	35
Total recorded investment	$ 2,693	$ 1,801
Net charge-offs	(3)
Provision (benefit) for loan losses	173	76
Loan forgiven	127
Uncovered loans
Troubled Debt Restructurings
Total number of loans	15	10
Total recorded investment	2,107	536
Net charge-offs	(9)
Provision (benefit) for loan losses	167	6
Uncovered loans | Residential real estate
Troubled Debt Restructurings
Total number of loans	6	4
Total recorded investment	300	177
Uncovered loans | Commercial real estate
Troubled Debt Restructurings
Total number of loans	5	2
Total recorded investment	1,650	271
Net charge-offs	(9)
Provision (benefit) for loan losses	133	6
Uncovered loans | Commercial and industrial
Troubled Debt Restructurings
Total number of loans	4	1
Total recorded investment	157	85
Provision (benefit) for loan losses	34
Uncovered loans | Consumer
Troubled Debt Restructurings
Total number of loans		3
Covered loans
Troubled Debt Restructurings
Total number of loans	9	25
Total recorded investment	586	1,265
Net charge-offs	6
Provision (benefit) for loan losses	6	70
Covered loans | Residential real estate
Troubled Debt Restructurings
Total number of loans	5	6
Total recorded investment	116	578
Net charge-offs	6
Provision (benefit) for loan losses	6	35
Covered loans | Commercial real estate
Troubled Debt Restructurings
Total number of loans	1	4
Total recorded investment	443	228
Provision (benefit) for loan losses		20
Covered loans | Commercial and industrial
Troubled Debt Restructurings
Total number of loans	3	14
Total recorded investment	27	453
Provision (benefit) for loan losses		15
Covered loans | Real estate construction
Troubled Debt Restructurings
Total number of loans		1
Total recorded investment		6
Principal deferral
Troubled Debt Restructurings
Total recorded investment	150	850
Principal deferral | Uncovered loans
Troubled Debt Restructurings
Total recorded investment	34	252
Principal deferral | Uncovered loans | Commercial real estate
Troubled Debt Restructurings
Total recorded investment		252
Principal deferral | Uncovered loans | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment	34
Principal deferral | Covered loans
Troubled Debt Restructurings
Total recorded investment	116	598
Principal deferral | Covered loans | Residential real estate
Troubled Debt Restructurings
Total recorded investment	116	578
Principal deferral | Covered loans | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment		20
Principal reduction
Troubled Debt Restructurings
Total recorded investment	67
Principal reduction | Uncovered loans
Troubled Debt Restructurings
Total recorded investment	67
Principal reduction | Uncovered loans | Residential real estate
Troubled Debt Restructurings
Total recorded investment	67
Interest rate
Troubled Debt Restructurings
Total recorded investment	973	603
Interest rate | Uncovered loans
Troubled Debt Restructurings
Total recorded investment	946
Interest rate | Uncovered loans | Residential real estate
Troubled Debt Restructurings
Total recorded investment	233
Interest rate | Uncovered loans | Commercial real estate
Troubled Debt Restructurings
Total recorded investment	713
Interest rate | Covered loans
Troubled Debt Restructurings
Total recorded investment	27	603
Interest rate | Covered loans | Commercial real estate
Troubled Debt Restructurings
Total recorded investment		228
Interest rate | Covered loans | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment	27	369
Interest rate | Covered loans | Real estate construction
Troubled Debt Restructurings
Total recorded investment		6
Forbearance agreement
Troubled Debt Restructurings
Total recorded investment	1,503	348
Forbearance agreement | Uncovered loans
Troubled Debt Restructurings
Total recorded investment	1,060	284
Forbearance agreement | Uncovered loans | Residential real estate
Troubled Debt Restructurings
Total recorded investment		177
Forbearance agreement | Uncovered loans | Commercial real estate
Troubled Debt Restructurings
Total recorded investment	937	19
Forbearance agreement | Uncovered loans | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment	123	85
Forbearance agreement | Uncovered loans | Consumer
Troubled Debt Restructurings
Total recorded investment		3
Forbearance agreement | Covered loans
Troubled Debt Restructurings
Total recorded investment	443	64
Forbearance agreement | Covered loans | Commercial real estate
Troubled Debt Restructurings
Total recorded investment	443
Forbearance agreement | Covered loans | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment		$ 64

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STOCK-BASED COMPENSATION (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Stock-based compensation
Shares of common stock issued or issuable	9,800,000
Granted (in shares)	0
Option shares available for grant	1,400,000
Weighted-average assumptions used in determination of the fair value of options granted
Fair value of options granted (in dollars per share)		$ 2.13
Expected dividend yield (as a percent)		0.00%
Expected volatility (as a percent)		24.52%
Risk-free interest rate (as a percent)		0.96%
Expected life		6 years
Number of Shares
Outstanding at the beginning of the period (in shares)	8,411,000
Exercised (in shares)	70,000
Outstanding at the end of the period (in shares)	8,371,000
Options fully vested and expected to vest (in shares)	8,371,000
Exercisable at the end of the period (in shares)	8,298,000
Weighted Average Exercise Price per Share
Outstanding at the beginning of the period (in dollars per share)	$ 6.88
Exercised (in dollars per share)	$ 7.25
Outstanding at the end of the period (in dollars per share)	$ 6.87
Options fully vested and expected to vest (in dollars per share)	$ 6.87
Exercisable at the end of the period (in dollars per share)	$ 6.87
Weighted Average Remaining Contractual Life
Outstanding at the end of the period	7 years 4 months 28 days
Options fully vested and expected to vest	7 years 4 months 28 days
Exercisable at the end of the period	7 years 4 months 2 days
Aggregate Intrinsic Value
Outstanding at the end of the period	$ 65,008
Options fully vested and expected to vest	65,008
Exercisable at the end of the period	64,470
Weighted average fair value of options exercised (in dollars per share)	$ 13.28
Cash received from exercise of options	0
Additional information
Total intrinsic value of stock options exercised	422
Total compensation expense	180	8,300
Total unrecognized compensation cost related to stock options	$ 113
Shares
Nonvested at the beginning of the period (in shares)	348,000
Vested (in shares)	275,000
Nonvested at the beginning of the period (in shares)	73,000
Weighted-Average Grant-Date Fair Value
Nonvested at the beginning of the period (in dollars per share)	$ 2.24
Nonvested at the beginning of the period (in dollars per share)	$ 2.21
Vesting on grant date
Stock-based compensation
Granted (in shares)		3,500,000
Expiration period from the grant date	10 years

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LOANS (Details 8) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	$ 3,145,789	$ 2,473,916
Covered loans	497,920	530,068
Commercial real estate
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	1,147,820	755,839
Covered loans	279,149	299,401
Commercial and industrial
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	573,268	446,644
Covered loans	71,155	78,437
Real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	160,464	193,444
Covered loans	16,895	17,218
Commercial and industrial, Commercial real estate and Real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	1,864,657	1,378,709
Covered loans	367,199	395,056
Pass
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	1,706,475	1,233,037
Covered loans	196,294	213,277
Pass | Commercial real estate
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	1,018,275	645,276
Covered loans	149,456	163,167
Pass | Commercial and industrial
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	549,174	423,295
Covered loans	41,153	43,917
Pass | Real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	139,026	164,466
Covered loans	5,685	6,193
Special Mention
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	77,114	53,853
Covered loans	33,645	26,812
Special Mention | Commercial real estate
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	63,219	43,597
Covered loans	23,514	17,058
Special Mention | Commercial and industrial
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	11,680	10,237
Covered loans	6,939	6,951
Special Mention | Real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	2,215	19
Covered loans	3,192	2,803
Substandard
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	69,399	83,037
Covered loans	123,093	138,270
Substandard | Commercial real estate
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	57,488	61,375
Covered loans	98,381	111,052
Substandard | Commercial and industrial
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	10,165	10,431
Covered loans	18,159	20,368
Substandard | Real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	1,746	11,231
Covered loans	6,553	6,850
Doubtful
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	11,669	8,782
Covered loans	14,167	16,697
Doubtful | Commercial real estate
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	8,838	5,591
Covered loans	7,798	8,124
Doubtful | Commercial and industrial
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	2,249	2,681
Covered loans	4,904	7,201
Doubtful | Real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	582	510
Covered loans	$ 1,465	$ 1,372

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LOANS (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 Nonperforming	Dec. 31, 2013 Nonperforming	Mar. 31, 2014 Performing	Dec. 31, 2013 Performing
Information as to total impaired loans
Troubled debt restructurings	$ 2,693	$ 1,801	$ 16,400	$ 17,900	$ 26,100	$ 24,500
Period of required compliance for restructured obligation modified at market rate for not reporting it as TDR	6 months
Period of required compliance for restructured obligation modified at other than market rate for reconsidering it as performing	6 months

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CORE DEPOSIT INTANGIBLES (Tables)

3 Months Ended

Mar. 31, 2014

CORE DEPOSIT INTANGIBLES

Schedule of the Company's net carrying amount of CDIs

	March 31,			December 31,
(Dollars in thousands)	2014			2013
Gross carrying amount	$	22,964		$	19,331
Accumulated amortization	(6,862		)	(6,126		)
Net carrying amount	$	16,102		$	13,205

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FAIR VALUE (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Loans held for investment measured and recorded at fair value
Aggregate fair value	$ 17,914		$ 17,708
Contractual balance	18,216		18,022
Fair market value loss	(302)		(314)
Gains (losses) from changes in fair value included in earnings	1,376	(552)
Aggregate fair value of loans held for investment that are 90 days or more past due	214		293
Contractual principal balance of loans held for investment that are 90 days or more past due	251		301
Nonaccrual status of loans that were 90 days or more past due	214		252
Interest income earned on loans transferred from loans held for sale to loans held for investment	$ 91

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SHORT-TERM BORROWINGS AND LONG-TERM DEBT

3 Months Ended

Mar. 31, 2014

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

13.  SHORT-TERM BORROWINGS AND LONG-TERM DEBT

The following table presents the components of the Company’s short-term borrowings and long-term debt.

	March 31, 2014				December 31, 2013
(Dollars in thousands)	Amount		Weighted Average Rate (1)		Amount		Weighted Average Rate (1)
Short-term borrowings:
Securities sold under agreements to repurchase: 0.05% - 0.15% floating-rate notes	$	69,544	0.10	%	$	36,876	0.20	%
FHLB advances: 0.07% floating-rate	20,000		0.07	%	—		—
FHLB advances: 4.74% fixed-rate notes	18		4.74	%	—		—
Holding company line of credit: floating-rate based on one-month LIBOR plus 3.00%	—		N/A		35,000		3.17	%
Total short-term borrowings	89,562		0.09	%	71,876		1.64	%
Long-term debt:
FHLB advances: 0.92% - 7.44% fixed-rate notes due June 2014 to 2027 (2)	109,189		3.85	%	130,368		3.28	%
Securities sold under agreements to repurchase: 4.11%-4.30% fixed-rate notes due 2016 to 2037 (3)	57,671		4.19	%	58,079		4.19	%
Subordinated notes related to trust preferred securities: floating-rate based on three-month LIBOR plus 1.45% due 2034 to 2035 (4)	10,623		2.48	%	10,590		2.49	%
Total long-term debt	177,483		3.88	%	199,037		3.50	%
Total short-term borrowings and long-term debt:	$	267,045	2.61	%	$	270,913	3.01	%

(1) Weighted average rate presented is the contractual rate which excludes premiums and discounts related to purchase accounting.

(2) The March 31, 2014 balance includes advances payable of $100.6 million and purchase accounting premiums of $8.6 million. The December 31, 2013 balance includes advances payable of $121.2 million and purchase accounting premiums of $9.2 million.

(3) The March 31, 2014 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting

premiums of $7.7 million. The December 31, 2013 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting premiums of $8.1 million.

(4) The March 31, 2014 and December 31, 2013 balances include subordinated notes related to trust preferred securities of $15.0 million and purchase accounting discounts of $4.4 million, respectively.

Selected financial information pertaining to the components of our short-term borrowings is as follows:

	For the three months ended
(Dollars in thousands)	March 31, 2014
Securities sold under agreement to repurchase:
Average daily balance	$	67,559
Average interest rate during the period	0.09		%
Weighted-average interest rate at period end	0.10		%
Maximum month-end balance	$	74,273
FHLB advances:
Average daily balance	$	240
Average interest rate during the period	2.41		%
Weighted-average interest rate at period end	0.07		%
Maximum month-end balance	$	20,018
Federal funds purchased:
Average daily balance	$	3,389
Average interest rate during the period	0.23		%
Interest rate at period end	N/A		(1)
Maximum month-end balance	$	—
FHLB overnight repurchase agreements:
Average daily balance	$	8,889
Average interest rate during the period	0.10		%
Interest rate at period end	N/A		(1)
Maximum month-end balance	$	30,000
Holding company line of credit:
Average daily balance	$	22,556
Average interest rate during the period	3.17		%
Interest rate at period end	N/A		(1)
Maximum month-end balance	$	35,000

(1) The holding company line of credit, Federal funds purchased and FHLB overnight repurchase agreements did not have oustanding balances at March 31, 2014.

Securities sold under agreements to repurchase are typically held by an independent third party when they are for retail customers (short-term borrowings) and are delivered to the counterparty when they are wholesale borrowings with brokerage firms (long-term borrowings).  At maturity, the securities underlying the agreements are returned to the banks.  Securities sold under agreements to repurchase are secured by mortgage-backed securities and bonds with an amortized cost of $230.4 million at March 31, 2014.

Our subsidiary banks are members of the FHLB, which provides short- and long-term funding collateralized by mortgage-related assets to its members.  Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances.  The advances were collateralized by $736.9 million of commercial and mortgage loans under specific liens at March 31, 2014.  Based on this collateral, the Company is eligible to borrow up to an additional $123.4 million at March 31, 2014.

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EARNINGS PER COMMON SHARE

3 Months Ended

Mar. 31, 2014

EARNINGS PER COMMON SHARE

EARNINGS PER COMMON SHARE

18.  EARNINGS PER COMMON SHARE

The factors used in the basic and diluted earnings per share (“EPS”) computation follow:

	Three months ended March 31,
(In thousands, except per share data)	2014		2013
Numerator for basic and diluted EPS:
Net income	$	32,667	$	60,455
Denominator for basic EPS - weighted average shares	68,121		66,229
Effect of dilutive securities -
Employee and director stock options	3,851		1,394
Warrants	1,405		577
Denominator for diluted EPS - adjusted weighted average shares	73,377		68,200
EPS available to common shareholders
Basic	$	0.48	$	0.91
Diluted	$	0.45	$	0.89

For the effect of dilutive securities, it was assumed that the average stock valuation is $12.70 per share for the three months ended March 31, 2014, and $8.25 per share for the three months ended March 31, 2013.

The following average shares related to outstanding options and warrants to purchase shares of common stock were not included in the computation of diluted net income available to common shareholders for the three months ended March 31, 2013, because they were antidilutive. There were no outstanding antidilutive options or warrants during the three months ended March 31, 2014.

	For the three months ended
(Shares in thousands)	March 31, 2013
Average outstanding options	3,758
Outstanding exercise prices:
Low end	$	7.25
High end	$	8.25
Average outstanding warrants	39
Outstanding exercise prices:
Low end	$	10.00
High end	$	10.00

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FAIR VALUE (Details 3) (USD $)	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012
Fair Value
Available-for-sale securities	$ 632,047,000	$ 620,083,000
Loans held for investment, recorded at fair value	17,914,000	17,708,000
Loans held for sale	75,931,000	85,252,000
Loan servicing rights	77,892,000	78,603,000	53,761,000	5,657,000
Derivative assets	1,420,000	2,630,000
Derivative liabilities	52,000
Transfers between levels within the fair value hierarchy
Transfers of assets from level 1 to level 2	0		0
Transfers of assets from level 2 to level 1	0		0
Transfers of liabilities from level 1 to level 2	0		0
Transfers of liabilities from level 2 to level 1	0		0
U.S. Treasury securities
Fair Value
Available-for-sale securities	3,250,000
U.S. government sponsored agency obligations
Fair Value
Available-for-sale securities	114,154,000	98,237,000
Obligations of state and political subdivisions: Taxable
Fair Value
Available-for-sale securities	397,000	396,000
Obligations of state and political subdivisions: Tax exempt
Fair Value
Available-for-sale securities	167,579,000	182,000,000
Small Business Administration (SBA) Pools
Fair Value
Available-for-sale securities	37,884,000	42,426,000
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Fair Value
Available-for-sale securities	231,457,000	218,922,000
Privately issued
Fair Value
Available-for-sale securities	3,516,000	4,446,000
Privately issued commercial mortgage-backed securities
Fair Value
Available-for-sale securities	5,156,000	5,147,000
Corporate debt securities
Fair Value
Available-for-sale securities	68,162,000	68,020,000
Equity securities
Fair Value
Available-for-sale securities	492,000	489,000
Recurring basis | Total
Fair Value
Available-for-sale securities	632,047,000	620,083,000
Loans held for sale	75,931,000	85,252,000
Loan servicing rights	77,892,000	78,603,000
Derivative assets	1,420,000	2,630,000
Total assets at fair value	805,204,000	804,276,000
Derivative liabilities	52,000
Total liabilities at fair value	52,000
Recurring basis | Total | Residential real estate
Fair Value
Loans held for investment, recorded at fair value	17,636,000	16,334,000
Recurring basis | Total | Real estate construction
Fair Value
Loans held for investment, recorded at fair value	278,000	1,374,000
Recurring basis | Total | U.S. Treasury securities
Fair Value
Available-for-sale securities	3,250,000
Recurring basis | Total | U.S. government sponsored agency obligations
Fair Value
Available-for-sale securities	114,154,000	98,237,000
Recurring basis | Total | Obligations of state and political subdivisions: Taxable
Fair Value
Available-for-sale securities	397,000	396,000
Recurring basis | Total | Obligations of state and political subdivisions: Tax exempt
Fair Value
Available-for-sale securities	167,579,000	182,000,000
Recurring basis | Total | Small Business Administration (SBA) Pools
Fair Value
Available-for-sale securities	37,884,000	42,426,000
Recurring basis | Total | Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Fair Value
Available-for-sale securities	231,457,000	218,922,000
Recurring basis | Total | Privately issued
Fair Value
Available-for-sale securities	3,516,000	4,446,000
Recurring basis | Total | Privately issued commercial mortgage-backed securities
Fair Value
Available-for-sale securities	5,156,000	5,147,000
Recurring basis | Total | Corporate debt securities
Fair Value
Available-for-sale securities	68,162,000	68,020,000
Recurring basis | Total | Equity securities
Fair Value
Available-for-sale securities	492,000	489,000
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value
Available-for-sale securities	3,742,000	489,000
Total assets at fair value	3,742,000	489,000
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasury securities
Fair Value
Available-for-sale securities	3,250,000
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity securities
Fair Value
Available-for-sale securities	492,000	489,000
Recurring basis | Significant Other Observable Inputs (Level 2)
Fair Value
Available-for-sale securities	627,488,000	618,793,000
Loans held for sale	75,931,000	85,252,000
Derivative assets	1,420,000	2,630,000
Total assets at fair value	704,839,000	706,675,000
Derivative liabilities	52,000
Total liabilities at fair value	52,000
Recurring basis | Significant Other Observable Inputs (Level 2) | U.S. government sponsored agency obligations
Fair Value
Available-for-sale securities	114,154,000	98,237,000
Recurring basis | Significant Other Observable Inputs (Level 2) | Obligations of state and political subdivisions: Tax exempt
Fair Value
Available-for-sale securities	167,579,000	182,000,000
Recurring basis | Significant Other Observable Inputs (Level 2) | Small Business Administration (SBA) Pools
Fair Value
Available-for-sale securities	37,884,000	42,426,000
Recurring basis | Significant Other Observable Inputs (Level 2) | Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Fair Value
Available-for-sale securities	231,457,000	218,922,000
Recurring basis | Significant Other Observable Inputs (Level 2) | Privately issued
Fair Value
Available-for-sale securities	3,516,000	4,446,000
Recurring basis | Significant Other Observable Inputs (Level 2) | Privately issued commercial mortgage-backed securities
Fair Value
Available-for-sale securities	5,156,000	5,147,000
Recurring basis | Significant Other Observable Inputs (Level 2) | Corporate debt securities
Fair Value
Available-for-sale securities	67,742,000	67,615,000
Recurring basis | Significant Unobservable Inputs (Level 3)
Fair Value
Available-for-sale securities	817,000	801,000
Loan servicing rights	77,892,000	78,603,000
Total assets at fair value	96,623,000	97,112,000
Recurring basis | Significant Unobservable Inputs (Level 3) | Residential real estate
Fair Value
Loans held for investment, recorded at fair value	17,636,000	16,334,000
Recurring basis | Significant Unobservable Inputs (Level 3) | Real estate construction
Fair Value
Loans held for investment, recorded at fair value	278,000	1,374,000
Recurring basis | Significant Unobservable Inputs (Level 3) | Obligations of state and political subdivisions: Taxable
Fair Value
Available-for-sale securities	397,000	396,000
Recurring basis | Significant Unobservable Inputs (Level 3) | Corporate debt securities
Fair Value
Available-for-sale securities	$ 420,000	$ 405,000

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REGULATORY CAPITAL MATTERS (Tables)

3 Months Ended

Mar. 31, 2014

REGULATORY CAPITAL MATTERS

Summary of actual and required capital amounts and ratios

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2014
Total capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	$	649,036	17.7	%	$	293,023	8.0	%	N/A		N/A
Talmer Bank and Trust	538,922		17.5		246,569		8.0		$	308,211	10.0	%
Talmer West Bank (1)	86,737		15.2		45,773		8.0		N/A		N/A
Tier 1 capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	610,160		16.7		146,512		4.0		N/A		N/A
Talmer Bank and Trust	500,114		16.2		123,284		4.0		184,927		6.0
Talmer West Bank (1)	86,669		15.2		22,887		4.0		N/A		N/A
Tier 1 leverage ratio
Talmer Bancorp, Inc. (Consolidated)	610,160		11.2		217,796		4.0		N/A		N/A
Talmer Bank and Trust	500,114		11.3		177,633		4.0		222,041		5.0
Talmer West Bank (1)	86,669		9.5		36,365		4.0		N/A		N/A
December 31, 2013
Total capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	$	583,370	19.2	%	$	242,885	8.0	%	N/A		N/A
Talmer Bank and Trust	253,044		18.4		110,123		8.0		$	137,654	10.0	%
First Place Bank (2)	263,297		15.9		132,207		8.0		N/A		N/A
Tier 1 capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	555,350		18.3		121,443		4.0		N/A		N/A
Talmer Bank and Trust	235,448		17.1		55,062		4.0		82,593		6.0
First Place Bank (2)	252,873		15.3		66,104		4.0		N/A		N/A
Tier 1 leverage ratio
Talmer Bancorp, Inc. (Consolidated)	555,350		12.2		182,221		4.0		N/A		N/A
Talmer Bank and Trust	235,448		10.3		91,363		4.0		114,204		5.0
First Place Bank (2)	252,873		11.7		86,521		4.0		N/A		N/A

(1) Notwithstanding its capital levels, Talmer West Bank will not be categorized as well capitalized while it is subject to the Consent Order.

(2) Notwithstanding its capital levels, First Place Bank was not categorized as well capitalized while it was subject to the Cease and Desist Order. On February 10, 2014, First Place Bank was merged with and into Talmer Bank and Trust and the Cease and Desist Order had no further force or effect.

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Consolidated Statements of Comprehensive Income
Net income	$ 32,667		$ 60,455
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available-for-sale arising during the period	6,277		(759)
Reclassification adjustment for (gains) losses on realized income	2,310	[1]	(31)	[1]
Net unrealized gains (losses) on securities available-for-sale	8,587		(790)
Tax effect	(3,006)		283
Other comprehensive income (loss), net of tax	5,581		(507)
Total comprehensive income, net of tax	$ 38,248		$ 59,948

[1] Amounts are included in "Net gain on sales of securities" in the Consolidated Statements of Income in total noninterest income. Income tax expense associated with the reclassification adjustments for the three months ended March 31, 2014 and 2013 was $808 thousand and $11 thousand, respectively, and are included in "Income tax provision (benefit)" in the Consolidated Statements of Income.

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PARENT COMPANY FINANCIAL STATEMENTS (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Income
Bargain purchase gain	$ 36,994	$ 71,702
Other noninterest income	4,397	2,951
Expenses
Salaries and employee benefits	35,726	52,896
Bank acquisition professional fees	0
Professional services	4,290	3,887
Marketing expense	1,091	1,537
Interest on short-term borrowings	175	22
Interest Expense, Long-term Debt	574	796
Other	8,806	5,869
Income tax benefit	1,072	3,050
Total comprehensive income, net of tax	38,248	59,948
Talmer Bancorp, Inc.
Income
Dividend income from subsidiary	25,000	55,000
Bargain purchase gain	36,994	71,702
Other noninterest income	2
Total income	61,996	126,702
Expenses
Salaries and employee benefits	3,913	16,925
Bank acquisition professional fees	1,708	7,232
Professional services	594	834
Marketing expense	165	1,013
Interest on short-term borrowings	151
Interest Expense, Long-term Debt	127	171
Other	221	102
Total expenses	6,879	26,277
Income before income taxes and equity in undistributed net earnings of subsidiaries	55,117	100,425
Income tax benefit	2,037	6,614
Equity in (over)/under distributed earnings of subsidiaries	(24,487)	(46,584)
Net income	32,667	60,455
Total comprehensive income, net of tax	$ 32,667	$ 60,455

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BUSINESS COMBINATIONS

3 Months Ended

Mar. 31, 2014

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS

2.  BUSINESS COMBINATIONS

The Company has determined that the acquisitions of First Place Bank and Talmer West Bank (formerly known as Michigan Commerce Bank) constitute business combinations as defined by the FASB Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations.”  Accordingly, the assets acquired and liabilities assumed were recorded at their fair values on the date of acquisition, as required. Fair values were determined based on the requirements of FASB ASC Topic 820, “Fair Value Measurement”. In many cases the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change.

On January 1, 2014, the Company purchased 100% of the capital stock of Financial Commerce Corporation’s wholly-owned subsidiary banks, Michigan Commerce Bank, a Michigan state-chartered bank, Indiana Community Bank, an Indiana state-chartered bank, Bank of Las Vegas, a Nevada state-chartered bank and Sunrise Bank of Albuquerque, a New Mexico state-chartered bank, and certain other bank-related assets from Financial Commerce Corporation and its parent holding company, Capitol Bancorp Ltd., in a transaction facilitated under Section 363 of the U.S. Bankruptcy Code, for cash consideration of $4.0 million and a separate $2.5 million payment to fund an escrow account to pay the post-petition administrative fees and expenses of the professionals in the bankruptcy cases of Financial Commerce Corporation and Capital Bancorp, Ltd., each of which filed voluntary bankruptcy petitions under Chapter 11 of the U.S. Bankruptcy Code on August 9, 2012, with any unused escrowed funds to be refunded to the Company.

Immediately prior to consummation of the acquisition, Capitol Bancorp Ltd. merged Indiana Community Bank, Bank of Las Vegas and Sunrise Bank of Albuquerque with and into Michigan Commerce Bank, with Michigan Commerce Bank as the surviving bank in the merger.  Simultaneously with the merger, Michigan Commerce Bank changed its name to Talmer West Bank.  The Company contributed $99.5 million of additional capital during the three months ended March 31, 2014 to Talmer West Bank in order to recapitalize the bank.  In order to support the acquisition and recapitalization of Talmer West Bank, the Company borrowed $35.0 million under a senior unsecured line of credit. The Company used a portion of the net proceeds from the initial public offering that closed on February 14, 2014 to repay the $35.0 million during the first quarter 2014.  The Company incurred $1.6 million of acquisition related expenses during the three months ended March 31, 2014 related to the acquisition of Talmer West Bank, included within “Bank acquisition and due diligence fees” in the Consolidated Statements of Income.  Although the acquisition included five branches in Nevada and New Mexico that are outside of the Company’s target markets, 12 of the branches acquired, or 70% of the total number of branches acquired in the acquisition, fit squarely within the Company’s target market areas.

The assets and liabilities associated with the acquisition of Talmer West Bank were recorded in the consolidated balance sheets at estimated fair value as of the acquisition date.  The initial accounting for the acquisition was incomplete at the time these financial statements were issued.  The following allocation is preliminary and may change as additional information becomes available and additional analyses are completed.

(Dollars in thousands)
Consideration paid:
Cash	$	6,500
Fair value of identifiable assets acquired:
Cash and cash equivalents	216,331
Investment securities	13,619
Federal Home Loan Bank stock	5,933
Loans	572,173
Premises and equipment	4,912
Loan servicing rights	767
Other real estate owned	30,878
Core deposit intangible	3,633
Other assets	56,552
Total identifiable assets acquired	904,798
Fair value of liabilities assumed:
Deposits	857,769
Other liabilities	3,535
Total liabilities assumed	861,304
Fair value of net identifiable assets acquired	43,494
Bargain purchase gain resulting from acquisition	$	36,994

The above estimated fair values of assets acquired and liabilities assumed are based on the information that was available to make preliminary estimates of the fair value. While the Company believes that information provides a reasonable basis for estimating the fair values, it expects to obtain additional information and evidence during the measurement period that may result in changes to the estimated fair value amounts. This measurement period ends on the earlier of one year after the acquisition or the date we receive the information about the facts and circumstances that existed at acquisition date. Subsequent adjustments, if any, will be retrospectively reflected in future filings. These refinements include: (1) changes in the estimated fair value of loans acquired and changes in the determination on whether such loans are considered purchased credit impaired; (2) changes in the estimated fair value of certain  premises and equipment acquired; (3) changes in deferred tax assets related to fair value estimates and a change in the expected realization of items considered to be built in losses; (4) changes in the estimated fair value of time deposits and (5) a change in the bargain purchase gain caused by the net effect of these adjustments.

The Talmer West Bank acquisition resulted in a pre-tax bargain purchase gain of $37.0 million as the estimated fair value of assets acquired exceeded the estimated fair value of liabilities assumed and consideration paid.  The gain was included within “Bargain purchase gain” in the Consolidated Statements of Income.

Loans acquired in the Talmer West Bank acquisition were initially recorded at fair value with no separate allowance for loan losses.  The Company reviewed the loans at acquisition to determine which should be considered purchased credit impaired loans (i.e. loans accounted for under FASB ASC Subtopic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”)) defining impaired loans as those that were either not accruing interest or exhibited credit risk factors consistent with nonperforming loans at the acquisition date.

Fair values for purchased loans are based on a discounted cash flow methodology that considers various factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of the loan and whether or not the loan was amortizing, and a discount rate reflecting the Company’s assessment of risk inherent in the cash flow estimates.  Larger purchased loans are individually evaluated while smaller purchased loans are grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques.

The Company accounts for purchased credit impaired loans in accordance with the provisions of ASC 310-30.  The cash flows expected to be collected on purchased loans are estimated based upon the expected remaining life of the underlying loans, which includes the effects of estimated prepayments.  Purchased loans are considered credit impaired if there is evidence of credit deterioration at the date of purchase and if it is probable that not all contractually required payments will be collected.  Interest income, through accretion of the difference between the carrying value of the loans and the expected cash flows is recognized on the acquired loans accounted for under ASC 310-30.

Purchased loans outside the scope of ASC 310-30 are accounted for under FASB ASC Subtopic 310-20, “Receivables - Nonrefundable Fees and Other Costs” (“ASC 310-20”).  Premiums and discounts created when the loans were recorded at their fair values at acquisition are amortized over the remaining terms of the loans as an adjustment to the related loan’s yield.

Information regarding acquired loans accounted for under ASC 310-30 as well as those excluded from ASC 310-30 accounting at acquisition date is as follows:

(Dollars in thousands)
Accounted for under ASC 310-30:
Contractual cash flows	$	331,514
Contractual cash flows not expected to be collected (nonaccretable difference)	85,806
Expected cash flows	245,708
Interest component of expected cash flows (accretable yield)	32,852
Fair value at acquisition	$	212,856
Excluded from ASC 310-30 accounting:
Unpaid principal balance	$	362,782
Fair value discount	(3,465		)
Fair value at acquisition	359,317
Total fair value at acquisition	$	572,173

Talmer West Bank’s results of operations have been included in the Company’s financial results since the January 1, 2014 acquisition date.

The following unaudited pro forma financial information presents the consolidated results of operations of the Company and Talmer West Bank as if the acquisition had occurred as of January 1, 2013 with pro forma adjustments to give effect of any change in interest income due to the accretion of the discount (premium) associated with the fair value adjustments to acquired loans, any change in interest expense due to estimated premium amortization/discount accretion associated with the fair value adjustments to acquired time deposits and borrowings and other debt and the amortization of the core deposit intangible that would have resulted had the deposits been acquired as of January 1, 2013.

	For the three months ended March 31,
(Dollars in thousands)	2014 (1)		2013
Net Interest and other income	$	101,135	$	157,271
Net Income	32,667		61,064
Earnings per share:
Basic	$	0.48	$	0.92
Diluted	0.45		0.90

(1) As the business combination was effective January 1, 2014, there were no proforma adjustments for the three months ended March 31, 2014.

On January 1, 2013, the Company purchased substantially all of the assets of First Place Financial Corp. (FPFC) including all of the issued and outstanding shares of common stock of First Place Bank, a wholly-owned subsidiary of FPFC, headquartered in Warren, Ohio, in a transaction facilitated under Section 363 of the U.S. Bankruptcy Code, for cash consideration of $45.0 million.  Under the provisions of the asset purchase agreement, the Company assumed $60.0 million in subordinated notes issued to First Place Capital Trust, First Place Capital Trust II, and First Place Capital III, of which $45.0 million was immediately retired.  Following the acquisition, the Company contributed $179.0 million of additional capital in order to recapitalize First Place Bank with commitments to contribute additional capital if needed.  For the three months ended March 31, 2014, the Company incurred $130 thousand of acquisition and due diligence fees related to costs associated with the First Place Bank transaction.  The Company incurred $7.2 million of acquisition related expenses during the three months ended March 31, 2013 primarily related to the acquisition of First Place Bank included within “Bank acquisition and due diligence fees” in the Consolidated Statements of Income.  First Place Bank was consolidated with and into Talmer Bank and Trust on February 10, 2014.

The following table presents a summary of the assets and liabilities purchased in the First Place Bank acquisition recorded at fair value.

(Dollars in thousands)
Consideration paid:
Cash	$	45,000
Fair value of identifiable assets acquired:
Cash and cash equivalents	439,805
Investment securities	139,764
Federal Home Loan Bank stock	12,993
Loans held-for-sale	213,946
Loans	1,530,376
Premises and equipment	22,168
Loan servicing rights	41,967
Company-owned life insurance	38,172
Other real estate owned	18,448
Core deposit intangible	9,816
Other assets	128,278
Total identifiable assets acquired	2,595,733
Fair value of liabilities assumed:
Deposits	2,121,258
Short-term borrowings	21,892
Long-term debt	312,956
Other liabilities	22,925
Total liabilities assumed	2,479,031
Fair value of net identifiable assets acquired	116,702
Bargain purchase gain resulting from acquisition	$	71,702

The First Place Bank acquisition resulted in a pre-tax bargain purchase gain of $71.7 million as the estimated fair value of assets acquired exceeded the estimated fair value of liabilities assumed and consideration paid. The gain was included within “Bargain purchase gain” in the Consolidated Statements of Income.

The core deposit intangible is being amortized on an accelerated basis over the estimated life, currently expected to be 10 years.

Loans acquired in the First Place Bank acquisition were initially recorded at fair value with no separate allowance for loan losses.

Information regarding acquired loans accounted for under ASC 310-30 as well as those excluded from ASC 310-30 accounting at acquisition date is as follows:

(Dollars in thousands)
Accounted for under ASC 310-30:
Contractual cash flows	$	738,639
Contractual cash flows not expected to be collected (nonaccretable difference)	150,008
Expected cash flows	588,631
Interest component of expected cash flows (accretable yield)	158,221
Fair value at acquisition	$	430,410
Excluded from ASC 310-30 accounting:
Unpaid principal balance	$	1,094,223
Fair value premium	5,743
Fair value at acquisition	1,099,966
Total fair value at acquisition	$	1,530,376

First Place Bank’s results of operations have been included in the Company’s financial results since the January 1, 2013 acquisition date.

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SECURITIES (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014 item	Dec. 31, 2013
Less than 12 Months
Fair Value	$ 374,601	$ 423,028
Unrealized losses	(7,123)	(14,859)
More than 12 Months
Fair Value	33,307	26,386
Unrealized losses	(646)	(695)
Total
Fair Value	407,908	449,414
Unrealized losses	(7,769)	(15,554)
Other information with respect to available-for-sale securities
Number of securities in portfolio	309
Number of securities in an unrealized loss position	153
U.S. government sponsored agency obligations
Less than 12 Months
Fair Value	105,543	98,237
Unrealized losses	(2,066)	(4,360)
Total
Fair Value	105,543	98,237
Unrealized losses	(2,066)	(4,360)
Obligations of state and political subdivisions: Tax exempt
Less than 12 Months
Fair Value	82,151	102,585
Unrealized losses	(1,926)	(4,159)
More than 12 Months
Fair Value	6,326	5,794
Unrealized losses	(257)	(294)
Total
Fair Value	88,477	108,379
Unrealized losses	(2,183)	(4,453)
SBA Pools
Less than 12 Months
Fair Value	14,308	26,498
Unrealized losses	(191)	(692)
More than 12 Months
Fair Value	8,104
Unrealized losses	(105)
Total
Fair Value	22,412	26,498
Unrealized losses	(296)	(692)
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Less than 12 Months
Fair Value	142,978	155,028
Unrealized losses	(2,550)	(4,952)
More than 12 Months
Fair Value	18,457	18,846
Unrealized losses	(259)	(373)
Total
Fair Value	161,435	173,874
Unrealized losses	(2,809)	(5,325)
Privately issued
Less than 12 Months
Fair Value	275	557
Unrealized losses	(1)	(1)
More than 12 Months
Fair Value		1,746
Unrealized losses		(28)
Total
Fair Value	275	2,303
Unrealized losses	(1)	(29)
Privately issued commercial mortgage-backed securities
Less than 12 Months
Fair Value	5,156	5,147
Unrealized losses	(12)	(34)
Total
Fair Value	5,156	5,147
Unrealized losses	(12)	(34)
Corporate debt securities
Less than 12 Months
Fair Value	23,698	34,487
Unrealized losses	(369)	(650)
More than 12 Months
Fair Value	420
Unrealized losses	(25)
Total
Fair Value	24,118	34,487
Unrealized losses	(394)	(650)
Equity securities
Less than 12 Months
Fair Value	492	489
Unrealized losses	(8)	(11)
Total
Fair Value	492	489
Unrealized losses	$ (8)	$ (11)

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SHORT-TERM BORROWINGS AND LONG-TERM DEBT (Details) (USD $)																	3 Months Ended		3 Months Ended				3 Months Ended					3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2014 Maximum	Mar. 31, 2014 Securities sold under agreements to repurchase: 0.05% - 0.15% floating-rate notes	Dec. 31, 2013 Securities sold under agreements to repurchase: 0.05% - 0.15% floating-rate notes	Mar. 31, 2014 Securities sold under agreements to repurchase: 0.05% - 0.15% floating-rate notes Minimum	Mar. 31, 2014 Securities sold under agreements to repurchase: 0.05% - 0.15% floating-rate notes Maximum	Mar. 31, 2014 FHLB advances: 0.07% floating-rate	Mar. 31, 2014 FHLB advances: fixed-rate notes	Dec. 31, 2013 FHLB advances: fixed-rate notes	Mar. 31, 2014 FHLB advances: fixed-rate notes Minimum	Mar. 31, 2014 FHLB advances: fixed-rate notes Maximum	Mar. 31, 2014 Securities sold under agreements to repurchase: 4.11%-4.30% fixed-rate notes due 2016 to 2037	Dec. 31, 2013 Securities sold under agreements to repurchase: 4.11%-4.30% fixed-rate notes due 2016 to 2037	Mar. 31, 2014 Securities sold under agreements to repurchase: 4.11%-4.30% fixed-rate notes due 2016 to 2037 Minimum	Mar. 31, 2014 Securities sold under agreements to repurchase: 4.11%-4.30% fixed-rate notes due 2016 to 2037 Maximum	Mar. 31, 2014 Subordinated notes related to trust preferred securities: Floating-rate based on three-month LIBOR plus 1.45% due 2034 to 2035	Dec. 31, 2013 Subordinated notes related to trust preferred securities: Floating-rate based on three-month LIBOR plus 1.45% due 2034 to 2035	Mar. 31, 2014 Securities sold under agreement to repurchase	Mar. 31, 2014 Federal funds purchased	Mar. 31, 2014 FHLB overnight repurchase agreements:	Mar. 31, 2014 FHLB collaterized advances for fixed rate notes:	Mar. 31, 2014 FHLB short-term advances:	Mar. 31, 2014 Securities sold under agreements to repurchase: X.XX% - X.XX% fixed-rate notes due XXXX to XXXX Mortgage-backed securities	Mar. 31, 2014 Holding Company	Dec. 31, 2013 Holding Company	Mar. 31, 2013 Holding Company	Mar. 31, 2014 Holding Company Line of credit	Dec. 31, 2013 Holding Company Line of credit
Short-term borrowings and long-term debt
Amount, short-term borrowings and long-term debt	$ 267,045,000	$ 270,913,000
Weighted Average Rate, short-term borrowings and long-term debt (as a percent)	2.61%	3.01%
Amount, short-term borrowings	89,562,000	71,876,000		69,544,000	36,876,000			20,000,000	18,000																	35,000,000			35,000,000
Weighted Average Rate, short-term borrowings (as a percent)	0.09%	1.64%		0.10%	0.20%			0.07%	4.74%										0.10%				0.07%						3.17%
Amount, long-term debt	177,483,000	199,037,000							109,189,000	130,368,000			57,671,000	58,079,000			10,623,000	10,590,000							10,623,000	10,590,000	10,590,000
Weighted Average Rate, long-term debt (as a percent)	3.88%	3.50%							3.85%	3.28%			4.19%	4.19%			2.48%	2.49%
Interest rate (as a percent)						0.05%	0.15%	0.70%	4.74%		0.92%	7.44%			4.11%	4.30%
Variable rate basis																	three-month LIBOR											one-month LIBOR
Spread on variable rate (as a percent)																	1.45%											3.00%
Advances payable									100,600,000	121,200,000
Purchase accounting premiums									8,600,000	9,200,000			7,700,000	8,100,000
Balance amount																	15,000,000	15,000,000
Balance amount													50,000,000	50,000,000
Purchase accounting discounts																	4,400,000	4,400,000
Short-term borrowings
Average daily balance																			67,559,000	3,389,000	8,889,000		240,000					22,556,000
Average interest rate (as a percent)																			0.09%	0.23%	0.10%		2.41%					3.17%
Weighted-average interest rate at year end (as a percent)	0.09%	1.64%		0.10%	0.20%			0.07%	4.74%										0.10%				0.07%						3.17%
Maximum month-end balance																			74,273,000		30,000,000		20,018,000					35,000,000
Amount of collateral for total borrowing capacity																						736,900,000
Amortized Cost	635,763,000	632,385,000																						230,400,000
Additional maximum borrowing capacity			$ 123,400,000

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ALLOWANCE FOR LOAN LOSSES (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013	Dec. 31, 2013
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	$ 17,746
Provision (benefit) for loan and lease losses	6,424		1,176
Ending allowance for loan losses	22,771
Allowance for loan losses:
Allowance for loan losses	22,771
Balance of loans:
Total loans	3,145,789			2,473,916
Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	17,746		10,945
Provision (benefit) for loan and lease losses	6,424		1,176
Gross charge-offs	(2,973)		(1,835)
Recoveries	1,574		312
Net recoveries (charge-offs)	(1,399)		(1,523)
Ending allowance for loan losses	22,771		10,598
Allowance for loan losses:
Individually evaluated for impairment	3,054			2,208
Collectively evaluated for impairment	12,369			10,767
Allowance for loan losses	22,771		10,598
Balance of loans:
Individually evaluated for impairment	23,240			21,876
Collectively evaluated for impairment	2,581,040			2,089,351
Total loans	3,145,789			2,473,916
Uncovered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period				4,771
Ending allowance for loan losses	7,348			4,771
Allowance for loan losses:
Allowance for loan losses	7,348			4,771
Balance of loans:
Total loans	541,509			362,689
Residential real estate
Balance of loans:
Total loans	1,268,200	[1]		1,085,453	[1]
Residential real estate | Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	7,708		2,059
Provision (benefit) for loan and lease losses	2,864		1,218
Gross charge-offs	(1,436)		(1,129)
Recoveries	760		37
Net recoveries (charge-offs)	(676)		(1,092)
Ending allowance for loan losses	9,896		2,185
Allowance for loan losses:
Individually evaluated for impairment	1,451			1,923
Collectively evaluated for impairment	3,749			2,697
Allowance for loan losses	9,896		2,185
Balance of loans:
Individually evaluated for impairment	13,872			14,014
Collectively evaluated for impairment	981,408			817,911
Total loans	1,268,200			1,085,453
Residential real estate | Uncovered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period				3,088
Ending allowance for loan losses	4,696			3,088
Allowance for loan losses:
Allowance for loan losses	4,696			3,088
Balance of loans:
Total loans	272,920			253,528
Commercial real estate
Balance of loans:
Total loans	1,147,820			755,839
Commercial real estate | Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	4,267		4,265
Provision (benefit) for loan and lease losses	3,138		(28)
Gross charge-offs	(1,245)		(432)
Recoveries	616		171
Net recoveries (charge-offs)	(629)		(261)
Ending allowance for loan losses	6,776		3,976
Allowance for loan losses:
Individually evaluated for impairment	1,287
Collectively evaluated for impairment	3,170			2,862
Allowance for loan losses	6,776		3,976
Balance of loans:
Individually evaluated for impairment	7,820			4,588
Collectively evaluated for impairment	904,594			652,952
Total loans	1,147,820			755,839
Commercial real estate | Uncovered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period				1,405
Ending allowance for loan losses	2,319			1,405
Allowance for loan losses:
Allowance for loan losses	2,319			1,405
Balance of loans:
Total loans	235,406			98,299
Commercial and industrial
Balance of loans:
Total loans	573,268			446,644
Commercial and industrial | Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	3,404		4,162
Provision (benefit) for loan and lease losses	1,336		(300)
Gross charge-offs	(145)		(126)
Recoveries	162		42
Net recoveries (charge-offs)	17		(84)
Ending allowance for loan losses	4,757		3,778
Allowance for loan losses:
Individually evaluated for impairment	217			284
Collectively evaluated for impairment	4,342			2,959
Allowance for loan losses	4,757		3,778
Balance of loans:
Individually evaluated for impairment	1,420			2,882
Collectively evaluated for impairment	553,438			437,777
Total loans	573,268			446,644
Commercial and industrial | Uncovered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period				161
Ending allowance for loan losses	198			161
Allowance for loan losses:
Allowance for loan losses	198			161
Balance of loans:
Total loans	18,410			5,985
Real estate construction
Balance of loans:
Total loans	160,464	[1]		193,444	[1]
Real estate construction | Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	2,027		268
Provision (benefit) for loan and lease losses	(865)		147
Gross charge-offs	(81)
Recoveries	2
Net recoveries (charge-offs)	(79)
Ending allowance for loan losses	1,083		415
Allowance for loan losses:
Collectively evaluated for impairment	1,083			2,025
Allowance for loan losses	1,083		415
Balance of loans:
Individually evaluated for impairment				359
Collectively evaluated for impairment	132,178			173,897
Total loans	143,569			176,226
Real estate construction | Uncovered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period				2
Ending allowance for loan losses				2
Allowance for loan losses:
Allowance for loan losses				2
Balance of loans:
Total loans	11,391			1,970
Consumer
Balance of loans:
Total loans	12,932			9,754
Consumer | Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	340		191
Provision (benefit) for loan and lease losses	(49)		139
Gross charge-offs	(66)		(148)
Recoveries	34		62
Net recoveries (charge-offs)	(32)		(86)
Ending allowance for loan losses	259		244
Allowance for loan losses:
Individually evaluated for impairment	99			1
Collectively evaluated for impairment	25			224
Allowance for loan losses	259		244
Balance of loans:
Individually evaluated for impairment	128			33
Collectively evaluated for impairment	9,422			6,814
Total loans	12,932			9,754
Consumer | Uncovered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period				115
Ending allowance for loan losses	135			115
Allowance for loan losses:
Allowance for loan losses	135			115
Balance of loans:
Total loans	$ 3,382			$ 2,907

[1] Amounts represent loans for which the Company has elected the fair value option. See Note 3 "Fair Value."

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BUSINESS COMBINATIONS (Tables)

3 Months Ended

Mar. 31, 2014

BUSINESS COMBINATIONS

Schedule of unaudited pro forma financial information presented in the consolidated results of operations of the Company and Talmer West Bank as if the acquisition had occurred as of January 1, 2013

	For the three months ended March 31,
(Dollars in thousands)	2014 (1)		2013
Net Interest and other income	$	101,135	$	157,271
Net Income	32,667		61,064
Earnings per share:
Basic	$	0.48	$	0.92
Diluted	0.45		0.90

(1) As the business combination was effective January 1, 2014, there were no proforma adjustments for the three months ended March 31, 2014.

Talmer West Bank

BUSINESS COMBINATIONS

Summary of the assets and liabilities purchased in acquisition recorded at fair value

(Dollars in thousands)
Consideration paid:
Cash	$	6,500
Fair value of identifiable assets acquired:
Cash and cash equivalents	216,331
Investment securities	13,619
Federal Home Loan Bank stock	5,933
Loans	572,173
Premises and equipment	4,912
Loan servicing rights	767
Other real estate owned	30,878
Core deposit intangible	3,633
Other assets	56,552
Total identifiable assets acquired	904,798
Fair value of liabilities assumed:
Deposits	857,769
Other liabilities	3,535
Total liabilities assumed	861,304
Fair value of net identifiable assets acquired	43,494
Bargain purchase gain resulting from acquisition	$	36,994

Schedule of information regarding acquired loans accounted for under ASC 310-30 as well as excluded from ASC 310-30 accounting at acquisition date

(Dollars in thousands)
Accounted for under ASC 310-30:
Contractual cash flows	$	331,514
Contractual cash flows not expected to be collected (nonaccretable difference)	85,806
Expected cash flows	245,708
Interest component of expected cash flows (accretable yield)	32,852
Fair value at acquisition	$	212,856
Excluded from ASC 310-30 accounting:
Unpaid principal balance	$	362,782
Fair value discount	(3,465		)
Fair value at acquisition	359,317
Total fair value at acquisition	$	572,173

First Place Bank

BUSINESS COMBINATIONS

Summary of the assets and liabilities purchased in acquisition recorded at fair value

(Dollars in thousands)
Consideration paid:
Cash	$	45,000
Fair value of identifiable assets acquired:
Cash and cash equivalents	439,805
Investment securities	139,764
Federal Home Loan Bank stock	12,993
Loans held-for-sale	213,946
Loans	1,530,376
Premises and equipment	22,168
Loan servicing rights	41,967
Company-owned life insurance	38,172
Other real estate owned	18,448
Core deposit intangible	9,816
Other assets	128,278
Total identifiable assets acquired	2,595,733
Fair value of liabilities assumed:
Deposits	2,121,258
Short-term borrowings	21,892
Long-term debt	312,956
Other liabilities	22,925
Total liabilities assumed	2,479,031
Fair value of net identifiable assets acquired	116,702
Bargain purchase gain resulting from acquisition	$	71,702

Schedule of information regarding acquired loans accounted for under ASC 310-30 as well as excluded from ASC 310-30 accounting at acquisition date

(Dollars in thousands)
Accounted for under ASC 310-30:
Contractual cash flows	$	738,639
Contractual cash flows not expected to be collected (nonaccretable difference)	150,008
Expected cash flows	588,631
Interest component of expected cash flows (accretable yield)	158,221
Fair value at acquisition	$	430,410
Excluded from ASC 310-30 accounting:
Unpaid principal balance	$	1,094,223
Fair value premium	5,743
Fair value at acquisition	1,099,966
Total fair value at acquisition	$	1,530,376

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CORE DEPOSIT INTANGIBLES (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Net carrying amount of CDIs
Gross carrying amount	$ 0		$ 0
Net carrying amount	16,102,000		13,205,000
Amortization expense recognized	736,000	688,000
Core deposit intangibles
Core deposit intangibles
Estimated remaining average useful life	7 years 3 months
Net carrying amount of CDIs
Gross carrying amount	22,964,000		19,331,000
Accumulated amortization	(6,862,000)		(6,126,000)
Net carrying amount	16,102,000		13,205,000
Amortization expense recognized	$ 736,000	$ 688,000

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SHORT-TERM BORROWINGS AND LONG-TERM DEBT (Tables)

3 Months Ended

Mar. 31, 2014

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Schedule of short-term borrowings and long-term debt

	March 31, 2014				December 31, 2013
(Dollars in thousands)	Amount		Weighted Average Rate (1)		Amount		Weighted Average Rate (1)
Short-term borrowings:
Securities sold under agreements to repurchase: 0.05% - 0.15% floating-rate notes	$	69,544	0.10	%	$	36,876	0.20	%
FHLB advances: 0.07% floating-rate	20,000		0.07	%	—		—
FHLB advances: 4.74% fixed-rate notes	18		4.74	%	—		—
Holding company line of credit: floating-rate based on one-month LIBOR plus 3.00%	—		N/A		35,000		3.17	%
Total short-term borrowings	89,562		0.09	%	71,876		1.64	%
Long-term debt:
FHLB advances: 0.92% - 7.44% fixed-rate notes due June 2014 to 2027 (2)	109,189		3.85	%	130,368		3.28	%
Securities sold under agreements to repurchase: 4.11%-4.30% fixed-rate notes due 2016 to 2037 (3)	57,671		4.19	%	58,079		4.19	%
Subordinated notes related to trust preferred securities: floating-rate based on three-month LIBOR plus 1.45% due 2034 to 2035 (4)	10,623		2.48	%	10,590		2.49	%
Total long-term debt	177,483		3.88	%	199,037		3.50	%
Total short-term borrowings and long-term debt:	$	267,045	2.61	%	$	270,913	3.01	%

(1) Weighted average rate presented is the contractual rate which excludes premiums and discounts related to purchase accounting.

(2) The March 31, 2014 balance includes advances payable of $100.6 million and purchase accounting premiums of $8.6 million. The December 31, 2013 balance includes advances payable of $121.2 million and purchase accounting premiums of $9.2 million.

(3) The March 31, 2014 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting

premiums of $7.7 million. The December 31, 2013 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting premiums of $8.1 million.

(4) The March 31, 2014 and December 31, 2013 balances include subordinated notes related to trust preferred securities of $15.0 million and purchase accounting discounts of $4.4 million, respectively.

Schedule of selected financial information pertaining to the components of short-term borrowings

	For the three months ended
(Dollars in thousands)	March 31, 2014
Securities sold under agreement to repurchase:
Average daily balance	$	67,559
Average interest rate during the period	0.09		%
Weighted-average interest rate at period end	0.10		%
Maximum month-end balance	$	74,273
FHLB advances:
Average daily balance	$	240
Average interest rate during the period	2.41		%
Weighted-average interest rate at period end	0.07		%
Maximum month-end balance	$	20,018
Federal funds purchased:
Average daily balance	$	3,389
Average interest rate during the period	0.23		%
Interest rate at period end	N/A		(1)
Maximum month-end balance	$	—
FHLB overnight repurchase agreements:
Average daily balance	$	8,889
Average interest rate during the period	0.10		%
Interest rate at period end	N/A		(1)
Maximum month-end balance	$	30,000
Holding company line of credit:
Average daily balance	$	22,556
Average interest rate during the period	3.17		%
Interest rate at period end	N/A		(1)
Maximum month-end balance	$	35,000

(1) The holding company line of credit, Federal funds purchased and FHLB overnight repurchase agreements did not have oustanding balances at March 31, 2014.

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COMMITMENTS, CONTINGENCIES AND GUARANTEES

3 Months Ended

Mar. 31, 2014

COMMITMENTS, CONTINGENCIES AND GUARANTEES

COMMITMENTS, CONTINGENCIES AND GUARANTEES

12.  COMMITMENTS, CONTINGENCIES AND GUARANTEES

Commitments

In the normal course of business, the Company offers a variety of financial instruments with off-balance sheet risk to meet the financing needs of its customers. These financial instruments include outstanding commitments to extend credit, credit lines, commercial letters of credit and standby letters of credit.

The Company’s exposure to credit loss, in the event of nonperformance by the counterparty to the financial instrument, is represented by the contractual amounts of those instruments. The credit policies used in making commitments and conditional obligations are the same as those used for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the commitment. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on an individual basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. The collateral held varies, but may include securities, real estate, inventory, plant, or equipment. Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are included in commitments to extend credit. These lines of credit are generally uncollateralized, usually do not contain a specified maturity date and may be drawn upon only to the total extent to which the Company is committed.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The Company’s portfolio of standby letters of credit consists primarily of performance assurances made on behalf of customers who have a contractual commitment to produce or deliver goods or services. The risk to the Company arises from its obligation to make payment in the event of the customers’ contractual default to produce the contracted good or service to a third party.

The allowance for credit losses on lending-related commitments included $626 thousand and $1.0 million at March 31, 2014 and December 31, 2013, respectively, for probable credit losses inherent in the Company’s unused commitments and was recorded in “Other liabilities” in the Consolidated Balance Sheets.

A summary of the contractual amounts of the Company’s exposure to off-balance sheet risk is as follows:

	March 31, 2014						December 31, 2013
(Dollars in thousands)	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Commitments to extend credit	$	493,206	$	298,884	$	792,090	$	523,666	$	216,473	$	740,139
Standby letters of credit	70,209		2,241		72,450		68,452		561		69,013
Total commitments	$	563,415	$	301,125	$	864,540	$	592,118	$	217,034	$	809,152

Contingencies and Guarantees

The Company has originated and sold certain loans for which the buyer has limited recourse to us in the event the loans do not perform as specified in the agreements.  These loans had an outstanding balance of $74.3 million and $79.5 million at March 31, 2014 and December 31, 2013, respectively. The maximum potential amount of undiscounted future payments that we could be required to make in the event of nonperformance by the borrower totaled $41.5 million and $42.9 million, at March 31, 2014 and December 31, 2013, respectively.  In the event of nonperformance, we have rights to the underlying collateral securing the loans.  As of March 31, 2014 and December 31, 2013, we had recorded a liability of $450 thousand and $567 thousand, respectively, in connection with the recourse agreements, recorded in “Other liabilities” in the Consolidated Balance Sheets.

We issue standby letters of credit for commercial customers to third parties to guarantee the performance of those customers to the third parties.  If the customer fails to perform, we perform in their place and record the funds advanced as an interest-bearing loan.  These letters of credit are underwritten using the same policies and criteria applied to commercial loans.  Therefore, they represent the same risk to us as a loan to that commercial loan customer.  At March 31, 2014 and December 31, 2013, our standby letters of credit totaled $72.5 million and $69.0 million, respectively.

Representations and Warranties

In connection with our mortgage banking loan sales, we make certain representations and warranties that the loans meet certain criteria, such as collateral type and underwriting standards.  We may be required to repurchase individual loans and/or indemnify the purchaser against losses if the loan fails to meet established criteria.  At March 31, 2014 and December 31, 2013, our liability recorded in connection with these representations and warranties totaled $4.0 million and $4.8 million, respectively.

Legal Proceedings

The Company and certain of its subsidiaries are subject to various pending or threatened legal proceedings arising out of the normal course of business. Some of these claims are against entities or assets of which the Company has acquired in business acquisitions, and certain of these claims, or future claims, will be covered by loss sharing agreements with the FDIC.

The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. While the ultimate liability with respect to these litigation matters and claims cannot be determined at this time, in the opinion of management, any liabilities arising from pending legal proceedings would not have a material adverse effect on the Company’s financial statements.