10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2015

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 August 12, 2015 was 71,140,611.

TABLE OF CONTENTS

		Page
Cautionary Note Regarding Forward-Looking Statements		1
PART I — FINANCIAL INFORMATION		2
ITEM 1.	Financial Statements (Unaudited)	2
	Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	3
	Consolidated Statements of Income for the three and six months ended June 30, 2015 and 2014	4
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 and 2014	5
	Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2015 and 2014	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014	7
	Notes to Consolidated Statements	9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	69
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	111
ITEM 4.	Controls and Procedures	113
PART II — OTHER INFORMATION		114
ITEM 1.	Legal Proceedings	115
ITEM 1A.	Risk Factors	115
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	115
ITEM 3.	Defaults Upon Senior Securities	115
ITEM 4.	Mine Safety Disclosures	115
ITEM 5.	Other Information	115
ITEM 6.	Exhibits	115

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements included in this report that are not historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended.  The words “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements.  These forward-looking statements include statements related to our projected growth, our expectations related to loan concentrations, bank subsidiary consolidations, including the anticipated costs associated with such consolidations, anticipated future financial performance, and management’s long-term performance goals, as well as statements relating to the anticipated effects on results of operations and financial condition from expected developments or events, including our expected collections from the FDIC under our loss share agreements and future amortization of the related FDIC indemnification asset, or business and growth strategies, including anticipated internal growth and plans to establish or acquire banks or the assets of failed banks.

These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ materially from those anticipated in such statements.  Potential risks and uncertainties include the following:

• the reaction to the anticipated consolidation of the banks’ customers, employees and counterparties or difficulties and costs related to the consolidation;

• general economic conditions (both generally and in our markets) may be less favorable than expected, which could result in, among other things, a deterioration in credit quality, a reduction in demand for credit and a decline in real estate values;

• the general decline in the real estate and lending markets, particularly in our market areas, may continue to negatively affect our financial results;

• our ability to raise additional capital may be impaired if current levels of market disruption and volatility continue or worsen;

• our inability to be reimbursed by the FDIC for any further losses on non-single family covered assets as our reimbursement rights expire over the next year;

• prior to termination of our loss share agreements, we may be unable to collect reimbursements on losses that we incur on our assets covered under loss share agreements with the FDIC as we anticipate;

• costs or difficulties related to the integration of the banks we acquired or may acquire, including Talmer West Bank, may be greater than expected;

• restrictions or conditions imposed by our regulators on our operations or the operations of banks we acquire, including the terms of the Talmer West Bank Consent Order with the FDIC and the Michigan Department of Insurance and Financial Services, may make it more difficult for us to achieve our goals;

• legislative or regulatory changes, including changes in accounting standards and compliance requirements, may adversely affect us;

• competitive pressures among depository and other financial institutions may increase significantly;

• changes in the interest rate environment may reduce margins or the volumes or values of the loans we make or have acquired;

• other financial institutions have greater financial resources and may be able to develop or acquire products that enable them to compete more successfully than we can;

• our ability to attract and retain key personnel can be affected by the increased competition for experienced employees in the banking industry;

• adverse changes may occur in the bond and equity markets;

• war or terrorist activities may cause further deterioration in the economy or cause instability in credit markets; and

• economic, governmental or other factors may prevent the projected population, residential and commercial growth in the markets in which we operate.

You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report.  All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.  We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  See Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2014, for a description of some of the important factors that may affect actual outcomes.

1

PART I

Item 1.  Financial Statements.

2

Talmer Bancorp, Inc.

Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except per share data)	June 30, 2015			December 31, 2014
Assets
Cash and due from banks	$	79,357		$	86,185
Interest-bearing deposits with other banks	161,201			96,551
Federal funds sold and other short-term investments	170,000			71,000
Total cash and cash equivalents	410,558			253,736
Securities available-for-sale	845,319			740,819
Federal Home Loan Bank stock	25,418			20,212
Loans held for sale, at fair value	117,042			93,453
Loans:
Residential real estate (includes $20.9 million and $18.3 million respectively, measured at fair value) (1)	1,434,678			1,426,012
Commercial real estate	1,395,783			1,310,938
Commercial and industrial	1,066,353			869,477
Real estate construction (includes $1.2 million measured at fair value at December 31, 2014) (1)	175,192			131,686
Consumer	172,120			164,524
Total loans, excluding covered loans	4,244,126			3,902,637
Less: Allowance for loan losses - uncovered	(36,566		)	(33,819		)
Net loans - excluding covered loans	4,207,560			3,868,818
Covered loans	280,847			346,490
Less: Allowance for loan losses - covered	(16,340		)	(21,353		)
Net loans - covered	264,507			325,137
Net total loans	4,472,067			4,193,955
Premises and equipment	44,857			48,389
FDIC indemnification asset	36,997			67,026
Other real estate owned and repossessed assets	46,373			48,743
Loan servicing rights	58,894			70,598
Core deposit intangible	14,131			13,035
Goodwill	3,524			—
FDIC receivable	5,543			6,062
Company-owned life insurance	104,972			97,782
Income tax benefit	188,755			177,472
Other assets	43,173			40,982
Total assets	$	6,417,623		$	5,872,264
Liabilities
Deposits:
Noninterest-bearing demand deposits	$	1,002,053		$	887,567
Interest-bearing demand deposits	821,557			660,697
Money market and savings deposits	1,276,726			1,170,236
Time deposits	1,427,126			1,188,178
Other brokered funds	380,611			642,185
Total deposits	4,908,073			4,548,863
FDIC clawback liability	28,588			26,905
FDIC warrants payable	4,441			4,633
Short-term borrowings	253,945			135,743
Long-term debt	414,947			353,972
Other liabilities	41,223			40,541
Total liabilities	5,651,217			5,110,657
Shareholders’ equity
Preferred stock - $1.00 par value
Authorized - 20,000,000 shares at 6/30/2015 and 12/31/2014
Issued and outstanding - 0 shares at 6/30/2015 and 12/31/2014	—			—
Common stock:
Class A Voting Common Stock - $1.00 par value
Authorized - 198,000,000 shares at 6/30/2015 and at 12/31/2014
Issued and outstanding -71,128,894 shares at 6/30/2015 and 70,532,122 shares at 12/31/2014	71,129			70,532
Class B Non-Voting Common Stock - $1.00 par value
Authorized - 2,000,000 shares at 6/30/2015 and 12/31/2014
Issued and outstanding - 0 shares at 6/30/2015 and 12/31/2014	—			—
Additional paid-in-capital	385,686			405,436
Retained earnings	307,355			281,789
Accumulated other comprehensive income, net of tax	2,236			3,850
Total shareholders’ equity	766,406			761,607
Total liabilities and shareholders’ equity	$	6,417,623		$	5,872,264

(1)  Amounts represent loans for which the Company has elected the fair value option.  See Note 3.

See notes to Consolidated Financial Statements.

3

Talmer Bancorp, Inc.

Consolidated Statements of Income

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands, except per share data)	2015			2014			2015			2014
Interest income
Interest and fees on loans	$	58,319		$	56,774		$	118,257		$	110,275
Interest on investments
Taxable	2,375			2,139			4,698			4,005
Tax-exempt	1,658			1,213			3,273			3,178
Total interest on securities	4,033			3,352			7,971			7,183
Interest on interest-earning cash balances	117			171			203			387
Interest on federal funds and other short-term investments	269			131			434			271
Dividends on FHLB stock	224			291			469			513
FDIC indemnification asset	(8,548		)	(5,506		)	(17,798		)	(12,224		)
Total interest income	54,414			55,213			109,536			106,405
Interest Expense
Interest-bearing demand deposits	382			216			672			440
Money market and savings deposits	562			492			1,033			986
Time deposits	2,131			1,432			3,958			2,923
Other brokered funds	607			35			1,230			64
Interest on short-term borrowings	209			33			288			208
Interest on long-term debt	914			627			1,714			1,201
Total interest expense	4,805			2,835			8,895			5,822
Net interest income	49,609			52,378			100,641			100,583
Provision for loan losses - uncovered	1,069			3,219			4,481			9,643
Benefit for loan losses - covered	(8,382		)	(7,321		)	(9,801		)	(9,819		)
Net interest income after provision for loan losses	56,922			56,480			105,961			100,759
Noninterest income
Deposit fee income	2,561			3,188			4,881			6,486
Mortgage banking and other loan fees	4,698			(1,122		)	3,437			(37		)
Net gain on sales of loans	8,748			5,681			17,366			8,725
Bargain purchase gain	—			—			—			41,977
FDIC loss sharing income	(5,928		)	(3,434		)	(6,996		)	(3,547		)
Accelerated discount on acquired loans	7,444			4,326			15,642			10,792
Net gain (loss) on sales of securities	6			—			(101		)	(2,310		)
Other income	4,569			5,312			9,299			9,605
Total noninterest income	22,098			13,951			43,528			71,691
Noninterest expense
Salary and employee benefits	28,685			30,466			57,897			66,317
Occupancy and equipment expense	8,415			7,871			16,081			16,914
Data processing fees	1,805			2,260			3,659			4,000
Professional service fees	3,275			2,628			6,818			6,665
FDIC loss sharing expense	133			983			1,082			1,507
Bank acquisition and due diligence fees	419			268			1,831			3,197
Marketing expense	1,483			1,605			2,578			2,696
Other employee expense	826			752			1,760			1,395
Insurance expense	1,527			868			3,057			2,699
Other expense	6,725			6,370			15,125			14,129
Total noninterest expense	53,293			54,071			109,888			119,519
Income before income taxes	25,727			16,360			39,601			52,931
Income tax provision (benefit)	8,179			(4,246		)	12,620			(5,902		)
Net income	$	17,548		$	20,606		$	26,981		$	58,833
Earnings per common share:
Basic	$	0.25		$	0.29		$	0.38		$	0.85
Diluted	$	0.23		$	0.27		$	0.36		$	0.79
Average common shares outstanding - basic	70,301			70,021			70,259			69,071
Average common shares outstanding - diluted	74,900			75,659			75,046			74,531

See notes to Consolidated Financial Statements.

4

Talmer Bancorp, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Net income	$	17,548		$	20,606		$	26,981		$	58,833
Other comprehensive income:
Unrealized holding gains (losses) on securities available-for-sale arising during the period	(7,431		)	7,151			(3,008		)	13,427
Reclassification adjustment for (gains) losses on realized income	(6		)	—			101			2,310
Tax effect	2,603			(2,503		)	1,017			(5,508		)
Net unrealized gains (losses) on securities available-for-sale, net of tax	(4,834		)	4,648			(1,890		)	10,229
Unrealized gains on interest rate swaps designated as cash flow hedges	558			—			233			—
Reclassification adjustment for losses included in net income	104			—			192			—
Tax effect	(232		)	—			(149		)	—
Net unrealized gains on interest rate swaps designated as cash flow hedges, net of tax	430			—			276			—
Other comprehensive income (loss), net of tax	(4,404		)	4,648			(1,614		)	10,229
Total comprehensive income, net of tax	$	13,144		$	25,254		$	25,367		$	69,062

See notes to Consolidated Financial Statements.

5

Talmer Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

				Additional						Accumulated Other			Total
	Common Stock			Paid in			Retained			Comprehensive			Shareholders’
(In thousands)	Shares	Amount		Capital			Earnings			Income (Loss)			Equity
Balance at December 31, 2013	66,234	$	66,234	$	366,428		$	192,349		$	(7,996	)	$	617,015
Net income	—	—		—			58,833			—			58,833
Other comprehensive income	—	—		—			—			10,229			10,229
Stock-based compensation expense	—	—		454			—			—			454
Restricted stock awards	378	378		(378		)	—			—			—
Issuance of common shares, including tax benefit	3,839	3,839		37,575			—			—			41,414
Balance at June 30, 2014	70,451	$	70,451	$	404,079		$	251,182		$	2,233		$	727,945
Balance at December 31, 2014	70,532	$	70,532	$	405,436		$	281,789		$	3,850		$	761,607
Net income	—	—		—			26,981			—			26,981
Other comprehensive income	—	—		—			—			(1,614		)	(1,614		)
Stock-based compensation expense	—	—		866			—			—			866
Restricted stock awards, including tax benefit	352	352		(336		)	—			—			16
Issuance of common shares, including tax benefit	245	245		(388		)	—			—			(143		)
Repurchase of warrants to repurchase 2.5 million shares, at fair value	—	—		(19,892		)	—			—			(19,892		)
Cash dividends paid on common stock ($0.02 per share)	—	—		—			(1,415		)	—			(1,415		)
Balance at June 30, 2015	71,129	$	71,129	$	385,686		$	307,355		$	2,236		$	766,406

See notes to Consolidated Financial Statements.

6

Talmer Bancorp, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Six months ended June 30,
(Dollars in thousands)	2015			2014
Cash flows from operating activities
Net income	$	26,981		$	58,833
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,730			3,386
Amortization of core deposit intangibles	1,314			1,460
Stock-based compensation expense	866			454
Benefit for loan losses	(5,320		)	(176		)
Originations of loans held for sale	(664,111		)	(510,154		)
Proceeds from sales of loans	653,291			489,401
Net gain from sales of loans	(17,366		)	(8,725		)
Net loss on sales of securities	101			2,310
Gain on acquisition	—			(41,977		)
Valuation allowance and writedowns on other real estate and other repossessed assets	5,017			2,404
Valuation change in Company-owned life insurance	(2,471		)	(1,080		)
Valuation change in loan servicing rights	4,850			9,014
Additions to loan servicing rights	(5,848		)	(3,748		)
Net decrease in FDIC indemnification asset and receivable	27,428			25,698
Net (gain)/loss on sales of other real estate owned and repossessed assets	(2,806		)	(4,229		)
Net (increase)/decrease in accrued interest receivable and other assets	2,399			(21,146		)
Net increase/(decrease) in accrued expenses and other liabilities	(1,286		)	17,037
Net securities premium amortization	3,535			2,286
Deferred income tax benefit (expense)	(8,543		)	20,665
Change in valuation allowance of deferred income tax asset	—			(10,127		)
Other, net	867			342
Net cash from operating activities	22,628			31,928
Cash flows from investing activities
Net increase in uncovered loans	(201,262		)	(288,526		)
Net decrease in covered loans	57,433			68,023
Purchases of loans	(30,793		)	—
Purchases of FHLB stock	(6,716		)	(5,300		)
Purchases of securities available-for-sale	(187,009		)	(185,687		)
Purchases of Company-owned life insurance	—			(55,000		)
Purchases of premises and equipment	(1,907		)	(6,995		)
Payments received from FDIC under loss sharing agreements	3,120			4,054
Proceeds from:
Maturities and redemptions of securities available-for-sale	85,238			44,619
Redemption of FHLB Stock	2,384			10,995
Sale of securities available-for-sale	24,750			54,211
Sale of loan servicing rights	12,702			—
Sale of loans	49,839			5,526
Sale of other real estate owned and repossessed assets	20,454			24,329
Sale of premises and equipment	2,737			1,621
Net cash provided from acquisition	810			209,831
Net cash used in investing activities	(168,220		)	(118,299		)
Cash flows from financing activities
Net increase/(decrease) in deposits	157,757			(162,100		)
Draw on senior unsecured line of credit	30,000			—
Repayments of senior unsecured line of credit	—			(35,000		)
Net increase in other short-term borrowings	88,202			201,932
Issuances of long-term FHLB advances	200,000			90,000
Repayments of long-term FHLB advances	(147,870		)	(21,880		)
Repayments on long-term sweep repurchase agreements	(821		)	(816		)
Repayments of subordinated debt	(3,500		)	—
Other changes in long-term debt	80			66
Repurchase of warrants to repurchase 2.5 million shares, at fair value	(19,892		)	—
Proceeds from issuance of common stock, including tax benefit	(127		)	41,414
Cash dividends paid on common stock ($0.02 per share)	(1,415		)	—
Net cash from financing activities	302,414			113,616

7

Net change in cash and cash equivalents	156,822			27,245
Beginning cash and cash equivalents	253,736			375,356
Ending cash and cash equivalents	$	410,558		$	402,601
Supplemental disclosure of cash flow information:
Interest paid	$	8,292		$	6,125
Income taxes paid	16,745			4,344
Transfer from loans to other real estate owned and repossessed assets	18,753			13,334
Net transfer of loans held for sale (to) from loans held for investment	(3,983		)	21,456
Transfer from premises and equipment to other real estate owned	455			675
Non-cash transactions:
Increase in assets and liabilities in acquisitions:
Securities	34,022			13,619
FHLB stock	874			5,933
Uncovered loans	162,265			571,666
Premises and equipment	2,077			6,540
Loan servicing rights	—			767
Company-owned life insurance	4,719			—
Other real estate owned and repossessed assets	1,260			30,878
Core deposit intangible	2,410			3,633
Other assets	6,462			62,542
Deposits	201,453			857,769
Short-term borrowings	—			18
Long-term debt	13,086			—
Other liabilities	3,884			5,645

See notes to Consolidated Financial Statements.

8

TALMER BANCORP, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

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, 2014.

On February 6, 2015, the Company acquired First of Huron Corp. which resulted in the recognition of goodwill on the Consolidated Balance Sheets. For further information, refer to Note 2, “Business Combinations”.  Goodwill is initially recorded as the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination.  Goodwill is required to be tested annually for impairment or whenever events occur that may indicate that the recoverability of the carrying amount is not probable.  In the event of impairment, the amount by which the carrying amount exceeds the fair value is charged to earnings.

On February 17, 2015, the Company repurchased an aggregate of 2,529,416 warrants to repurchase shares of Class A common stock including 1,623,162 of warrants issued on April 30, 2010, 109,122 of warrants issued on February 21, 2012 and 797,132 of warrants issued on December 27, 2012.  The purchase price was based upon the fair value of the warrants on February 17, 2015, determined utilizing the closing price of our stock on the date of repurchase, and resulted in an aggregate purchase price of $19.9 million.

Recently Adopted and Issued Accounting Standards:  The following provides a description of recently adopted or newly issued not yet effective accounting standards that had or could have a material effect on our financial statements.

In May of 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including revenue recognition guidance.  The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU is intended to clarify and converge the revenue recognition principles under U.S. GAAP and International Financial Reporting Standards and to streamline revenue recognition requirements in addition to expanding required revenue recognition disclosures.  The FASB recently approved a one year deferral of the effective date, therefore, ASU 2014-09 is effective for public companies for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2017.  As such, the Company will adopt ASU 2014-09 as of January 1, 2018.  Under the provision, the Company will have the option to adopt the guidance using either a full retrospective method or a modified transition approach.  The Company is currently evaluating the provisions of ASU 2014-09.

2.  BUSINESS COMBINATIONS

The Company has determined that the acquisitions of First of Huron Corp. (“FHC”), and its subsidiary bank, Signature Bank, and Talmer West Bank (formerly known as Michigan Commerce Bank) constitute business combinations as defined by FASB 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 February 6, 2015, the Company acquired FHC for aggregate cash consideration of $13.4 million. In connection with the merger, FHC merged with Talmer Bancorp, Inc., with Talmer Bancorp, Inc. as the surviving company in the merger. 

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Immediately following the merger, Signature Bank, a Michigan state-chartered bank and wholly owned subsidiary of FHC, merged with and into Talmer Bank and Trust, with Talmer Bank and Trust as the surviving bank.  The Company assumed $3.5 million in subordinated notes issued to FHC and $1.4 million of related interest. The subordinated debt was immediately retired and the interest was paid in full in accordance with the provision of the purchase agreement. The Company also received FHC’s common securities issued by trust preferred issuers and assumed $876 thousand of outstanding interest. The outstanding interest on the trust preferred securities was immediately paid off in accordance with the provisions of the purchase agreement. The Company received certain tax assets and all cash and cash equivalents held by FHC. The Company incurred $144 thousand and $1.2 million of acquisition related expenses during the three and six months ended June 30, 2015, related to the acquisition of FHC, included within “Bank acquisition and diligence fees” in the Consolidated Statements of Income. All of the branches acquired fit squarely within the Company’s target market areas.

The acquisition resulted in a recorded $4.8 million in net deferred tax assets at acquisition.  Upon acquisition, FHC incurred an ownership change within the meaning of Section 382 of the Internal Revenue Code, but the acquisition did not result in built-in losses within the meaning of Section 382. At February 6, 2015, FHC had an estimated $1.7 million in gross federal net operating loss carry forwards expiring in 2030, 2032 and 2033 and $303 thousand in federal alternative minimum tax credits with an indefinite life.  As a result of the ownership change, the Company’s ability to benefit from the use of FHC’s pre-ownership change net operating loss and tax credit carry forwards will be limited to approximately $366 thousand per year.  No valuation allowance was established against the deferred tax assets associated with FHC’s pre-change net operating losses and tax credit carry forwards based on management’s estimate that none of the amounts will expire unused.

The assets and liabilities associated with the acquisition of FHC were recorded in the Consolidated Balance Sheets at estimated fair value as of the acquisition date. The following allocation is based on the information that was available to make preliminary estimates of the fair value and may change as additional information becomes available and additional analyses are completed. While the Company believes that information provided a reasonable basis for estimating the fair values, it expects that it could 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 date or the date we receive the information about the facts and circumstances that existed at the acquisition date. Subsequent adjustments are, and if necessary, will be retrospectively reflected in future filings. These refinements include: (1) changes in the estimated fair value of loans acquired; (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 and (4) a change in the goodwill caused by the net effect of these adjustments.

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(Dollars in thousands)
Consideration paid:
Cash	$	13,395
Fair value of identifiable assets acquired:
Cash and cash equivalents	14,205
Investment securities	34,022
Federal Home Loan Bank stock	874
Loans	162,265
Premises and equipment	2,077
Company-owned life insurance	4,719
Other real estate owned and repossessed assets	1,260
Core deposit intangible	2,410
Other assets	6,462
Total identifiable assets acquired	228,294
Fair value of liabilities assumed:
Deposits	201,453
Long-term debt	13,086
Other liabilities	3,884
Total liabilities assumed	218,423
Fair value of net identifiable assets acquired	9,871
Goodwill recognized in the acquisition	$	3,524

The estimated fair values presented in the above table reflect additional information that the Company obtained following the acquisition, which resulted in changes to certain fair value estimates made as of the acquisition date within the measurement period. Material adjustments to the acquisition date estimated fair values are recorded in the period in which the acquisition occurred and, as a result, previously recorded results have changed. After considering this additional information, the estimated fair value of the deferred tax assets included within “other assets” increased $331 thousand, the estimated fair value of loans decreased $686 thousand and the estimated fair value of long-term debt increased $243 thousand. These revised fair value estimates resulted in a net increase to the recognition of goodwill resulting from acquisition of $598 thousand to $3.5 million, which is recognized in the Consolidated Balance Sheets as of June 30, 2015.

The FHC acquisition resulted in recognition of $3.5 million of goodwill which is the excess of the consideration paid over the fair value of net assets acquired, and is the result of expected operational synergies and other factors.

Loans acquired in the FHC 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

11

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 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.

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

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	$	53,807
Contractual cash flows not expected to be collected (nonaccretable difference)	8,084
Expected cash flows	45,723
Interest component of expected cash flows (accretable yield)	5,268
Fair value at acquisition	$	40,455
Excluded from ASC 310-30 accounting:
Unpaid principal balance	$	124,538
Fair value discount	(2,728		)
Fair value at acquisition	121,810
Total fair value at acquisition	$	162,265

FHC’s results of operations have been included in the Company’s financial results since the February 6, 2015 acquisition date. The acquisition was not considered material to the Company’s financial statements; therefore pro forma financial data and related disclosures are not included.

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.  Following the acquisition, the Company contributed $99.5 million of additional capital 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 of 2014.  The Company incurred $260 thousand and $191 thousand of acquisition related expenses related to the acquisition of Talmer West Bank during the three months ended June 30, 2015 and 2014, respectively, and $638 thousand and $1.8 million during the six months ended June 30, 2015 and 2014 respectively. These acquisition related expenses are included within “Bank acquisition and due diligence fees” in the Consolidated Statements of Income.  Twelve 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.

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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 as presented in the following table.

(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	571,666
Premises and equipment	6,540
Loan servicing rights	767
Other real estate owned	30,878
Core deposit intangible	3,633
Other assets	62,542
Total identifiable assets acquired	911,909
Fair value of liabilities assumed:
Deposits	857,769
Other liabilities	5,663
Total liabilities assumed	863,432
Fair value of net identifiable assets acquired	48,477
Bargain purchase gain resulting from acquisition	$	41,977

The Talmer West Bank acquisition resulted in a pre-tax bargain purchase gain of $42.0 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.  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:

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(Dollars in thousands)
Accounted for under ASC 310-30:
Contractual cash flows	$	331,523
Contractual cash flows not expected to be collected (nonaccretable difference)	86,410
Expected cash flows	245,113
Interest component of expected cash flows (accretable yield)	32,764
Fair value at acquisition	$	212,349
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	$	571,666

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

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 U.S. 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 U.S. 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 or 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.

Investment securities:  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

14

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 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, 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 a trust preferred security (included within “Corporate debt securities”) and an obligation of a political subdivision as of June 30, 2015, represent securities in less liquid markets requiring significant management assumptions when determining fair value. As of December 31, 2014, securities classified as Level 3 also included a privately issued subordinated corporate debt security (included within “Corporate debt securities”).  The fair values of these investment securities represent less than one percent of the total available-for-sale securities.  The fair value of the trust preferred security is 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 has been determined to be equal to the carrying cost since the securities were acquired.  The issuers have continued to pay their obligations without fail and the Company has not received any information to question future payments.   Since the purchase of these securities, no credit related concerns have come to the Company’s attention, therefore no adjustment for credit loss assumptions were made.

Investment securities classified as held-to-maturity are carried at amortized cost.  Due to limited liquidity of these securities, held-to-maturity securities are classified as Level 3.  The fair value of the held-to-maturity security is determined to be equal to the carrying value.  No credit related concerns have come to the Company’s attention; therefore, no 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. These loans currently consist of one-to-four family residential real estate loans originated for sale to qualified third parties. The fair value is determined based on quoted market rates and other market conditions considered relevant. 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 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 is 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 made relating to 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

15

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.  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.  Impaired premises and equipment at both June 30, 2015 and December 31, 2014 were recorded at fair value based on a recent appraisal through a valuation allowance.  The Company classifies impaired premises and equipment as nonrecurring Level 3.

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 and repossessed assets: Other real estate owned and repossessed assets 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 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, the income approach and existing offers. 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.

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Loan servicing rights: Loan servicing rights are accounted for under the fair value measurement method based on accounting election.  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.  Refer to Note 10, “Loan Servicing Rights”, for assumptions included in the valuation of loan servicing rights.

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 and deferred compensation plan liabilities: The Company holds life insurance policies on certain officers, both for investment purposes and for the Company’s deferred compensation plan. 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.  Deferred compensation plan liabilities represent the fair value of the obligation to the employee, which corresponds to the fair value of the invested assets.  Deferred compensation plan liabilities are recorded with “other liabilities” and are classified by the Company 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 interest rate lock commitments and forward contracts related to mortgage loans to be delivered for sale as recurring Level 2.

Derivative instruments held or issued for risk management or 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 both June 30, 2015 and December 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 risk management interest rate swaps designated as cash flow hedges and customer-initiated derivatives 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.

Clawback liability: The CF Bancorp, First Banking Center and Peoples State Bank loss sharing agreements contain a provision where if losses do not exceed a calculated threshold, the Company is obligated to compensate the FDIC.  The carrying amount of these instruments approximates the estimated fair value.  The estimated fair value requires management’s assumption of what estimated losses will be, which is a significant component.  As such, the Company classifies the estimated fair value of the FDIC clawback liability as Level 3.

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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 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)
June 30, 2015
Securities available-for-sale:
U.S. government sponsored agency obligations	$	98,283	$	—	$	98,283	$	—
Obligations of state and political subdivisions:
Taxable	4,361		—		4,043		318
Tax-exempt	271,754		—		271,754		—
Small Business Administration (“SBA”) Pools	32,349		—		32,349		—
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	334,034		—		334,034		—
Privately issued	26,460		—		26,460		—
Privately issued commercial mortgage-backed securities	19,509		—		19,509		—
Corporate debt securities	58,569		—		58,121		448
Total securities available-for-sale	845,319		—		844,553		766
Loans measured at fair value:
Residential real estate	20,907		—		—		20,907
Loans held for sale	117,042		—		117,042		—
Loan servicing rights	58,894		—		—		58,894
Derivative assets:
Forward contracts related to mortgage loans to be delivered for sale	863		—		863		—
Interest rate lock commitments	2,029		—		2,029		—
Customer-initiated derivatives	2,011		—		2,011		—
Risk management derivatives	337		—		337		—
Total derivatives	5,240		—		5,240		—
Total assets at fair value	$	1,047,402	$	—	$	966,835	$	80,567
Derivative liabilities:
Customer-initiated derivatives	1,870		—		1,870		—
Risk management derivatives	134		—		134		—
Total derivatives	2,004		—		2,004		—
Total liabilities at fair value	$	2,004	$	—	$	2,004	$	—
December 31, 2014
Securities available-for-sale:
U.S. government sponsored agency obligations	$	98,358	$	—	$	98,358	$	—
Obligations of state and political subdivisions:
Taxable	397		—		—		397
Tax-exempt	232,259		—		232,259		—
SBA Pools	33,933		—		33,933		—
Residential mortgage-backed securities:

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Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	291,759		—		291,759		—
Privately issued	18,800		—		18,800		—
Privately issued commercial mortgage-backed securities	5,130		—		5,130		—
Corporate debt securities	60,183		—		56,758		3,425
Total securities available-for-sale	740,819		—		736,997		3,822
Loans measured at fair value:
Residential real estate	18,311		—		—		18,311
Real estate construction	1,215		—		—		1,215
Loans held for sale	93,453		—		93,453		—
Loan servicing rights	70,598		—		—		70,598
Derivative assets:
Interest rate lock commitments	1,489		—		1,489		—
Customer-initiated derivatives	1,588		—		1,588		—
Total derivatives	3,077		—		3,077		—
Total assets at fair value	$	927,473	$	—	$	833,527	$	93,946
Derivative liabilities:
Forward contracts related to mortgage loans to be delivered for sale	803		—		803		—
Customer-initiated derivatives	1,477		—		1,477		—
Risk management derivatives	222		—		222		—
Total derivatives	2,502		—		2,502		—
Total liabilities at fair value	$	2,502	$	—	$	2,502	$	—

During the six months ended June 30, 2015, a privately issued subordinated debt security (included within “Corporate debt securities”) was transferred from Level 3 in the fair value hierarchy to Level 2 due to the market for this security becoming active during the period.  There were no transfers between levels within the fair value hierarchy during the three and six months ended June 30, 2014.

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

	Three months ended June 30, 2015
	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	$	397		$	430	$	22,158		$	54,409
Transfers from loans held for sale	—			—		764			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	1			1		—			—
Recorded in “Net gain on sales of loans”						12
Recorded in “Mortgage banking and other loan fees”	—			—		(347		)	1,552
Recorded in OCI (pre-tax)	—			17		—			—
New originations	—			—		—			2,933
Repayments	(80		)	—		(1,680		)	—
Balance, end of period	$	318		$	448	$	20,907		$	58,894

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	Six months ended June 30, 2015
	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	$	397		$	3,425		$	19,526		$	70,598
Transfer between levels within fair value hierarchy	—			(3,000		)	—			—
Transfers from loans held for sale	—			—			3,983			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	1			2			—			—
Recorded in “Net gain on sales of loans”	—			—			139			—
Recorded in “Mortgage banking and other loan fees”	—			—			(239		)	(4,850		)
Recorded in OCI (pre-tax)	—			21			—			—
New originations	—			—			—			5,848
Reduction from servicing rights sold	—			—			—			(12,702		)
Repayments	(80		)	—			(2,502		)	—
Balance, end of period	$	318		$	448		$	20,907		$	58,894

	Three months ended June 30, 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	$	397	$	420	$	17,914		$	77,892
Transfers from loans held for sale	—		—		542			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	—		1		—			—
Recorded in “Net gain on sales of loans”	—		—		15			—
Recorded in “Mortgage banking and other loan fees”	—		—		386			(5,947		)
Recorded in OCI (pre-tax)	—		12		—			—
New originations	—		—		—			2,159
Repayments	—		—		(332		)	—
Balance, end of period	$	397	$	433	$	18,525		$	74,104

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	Six months ended June 30, 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	—		—		778			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	1		2		—			—
Recorded in “Net gain on sales of loans”	—		—		8			—
Recorded in “Mortgage banking and other loan fees”	—		—		467			(9,014		)
Recorded in OCI (pre-tax)	—		26		—			—
New originations	—		—		—			3,748
Repayments	—		—		(564		)	—
Draws on previously issued lines of credits	—		—		128			—
Balance, end of period	$	397	$	433	$	18,525		$	74,104

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)	June 30, 2015		December 31, 2014
Aggregate fair value	$	20,907	$	19,526
Contractual balance	20,581		19,100
Fair market value gain	326		426

There were no gains (losses) included in the fair value above that were associated with instrument specific credit risk. The aggregate fair value of loans held for investment measured and recorded at fair value that were on nonaccrual status as of June 30, 2015 and December 31, 2014 was $150 thousand and $155 thousand, respectively. There were no loans held for investment measured and recorded at fair value that were 90 days or more past due as of June 30, 2015.  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, 2014 was $155 thousand and $191 thousand, respectively. 

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 June 30, 2015 and 2014, there were $208 thousand and $168 thousand, respectively, and $413 thousand thousand and $259 thousand for the six months ended June 30, 2015 and 2014, respectively, of interest income earned on loans transferred from loans held for sale to loans held for investment.

The total amount of gains (losses) from changes in fair value of loans held for investment measured at fair value in the Consolidated Statements of Income were as follows:

	For the three months ended June 30,					For the six months ended June 30,
(Dollars in thousands)	2015			2014		2015			2014
Change in fair value:
Included in “Net gain on sales of loans”	$	12		$	15	$	139		$	8
Included in “Mortgage banking and other loan fees”	(347		)	386		(239		)	467

21

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 June 30, 2015 or December 31, 2014.

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

(Dollars in thousands)	June 30, 2015		December 31, 2014
Aggregate fair value	$	117,042	$	93,453
Contractual balance	113,851		89,138
Unrealized gain	3,191		4,315

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

	For the three months ended June 30,				For the six months ended June 30,
(Dollars in thousands)	2015		2014		2015			2014
Change in fair value	$	417	$	3,458	$	(1,124	)	$	4,834

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.

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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)
June 30, 2015
Impaired loans:(1)
Uncovered
Residential real estate	$	6,673	$	—	$	—	$	6,673
Commercial real estate	3,684		—		—		3,684
Commercial and industrial	370		—		—		370
Real estate construction	198		—		—		198
Consumer	29		—		—		29
Total uncovered impaired loans	10,954		—		—		10,954
Covered
Residential real estate	68		—		—		68
Commercial real estate	177		—		—		177
Commercial and industrial	155		—		—		155
Total covered impaired loans	400		—		—		400
Total impaired loans	11,354		—		—		11,354
Other real estate owned (uncovered)(2)	2,267		—		—		2,267
Other real estate owned (covered)(3)	1,811		—		—		1,811
Repossessed assets(4)	6,896		—		—		6,896
Premises and equipment(5)	1,575		—		—		1,575
Total	$	23,903	$	—	$	—	$	23,903
December 31, 2014
Impaired loans:(1)
Uncovered
Residential real estate	$	2,898	$	—	$	—	$	2,898
Commercial real estate	4,115		—		—		4,115
Commercial and industrial	579		—		—		579
Consumer	12		—		—		12
Total uncovered impaired loans	7,604		—		—		7,604
Covered
Residential real estate	152		—		—		152
Commercial and industrial	350		—		—		350
Total covered impaired loans	502		—		—		502
Total impaired loans	8,106		—		—		8,106
Other real estate owned (uncovered) (2)	9,670		—		—		9,670
Other real estate owned (covered) (3)	3,807		—		—		3,807
Repossessed assets(4)	9,654		—		—		9,654
Premises and equipment(5)	675		—		—		675
Total	$	31,912	$	—	$	—	$	31,912

(1) Specific reserves of $4.0 million and $2.9 million were provided to reduce the fair value of these loans at June 30, 2015 and December 31, 2014, respectively, based on the estimated fair value of the underlying collateral. In addition, charge-

23

offs of $31 thousand and $1.9 million reduced the fair value of these loans for the three months ended June 30, 2015 and 2014, respectively, and $67 thousand and $2.0 million for the six months ended June 30, 2015 and 2014, respectively.

(2) The Company charged $487 thousand and $821 thousand through other noninterest expense during the three months ended June 30, 2015 and 2014, respectively, and $1.3 million and $1.5 million during the six months ended June 30, 2015 and 2014, respectively, to reduce the fair value of these properties.

(3) The Company charged $98 thousand and $537 thousand through other noninterest expense during the three months ended June 30, 2015 and 2014, respectively, and $636 thousand and $904 thousand during the six months ended June 30, 2015 and 2014, 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.

(4) The Company charged $274 thousand and $468 thousand through other noninterest expense during the three and six months ended June 30, 2015, respectively, to reduce the fair value of these assets.  As of June 30, 2014, there were no repossessed assets deemed impaired and there were no charges taken relating to these assets during the three and six months ended June 30, 2014. A valuation allowance of $3.1 million and $460 thousand was provided to reduce the fair value of these repossessed assets at June 30, 2015 and December 31, 2014, respectively, based on the estimated fair value as of each respective date.

(5) The company charged $1.1 million through other noninterest expenses during both the three and six months ended June 30, 2015 to reduce the value of premises and equipment deemed impaired during the period. As of June 30, 2014, there were no premises and equipment deemed impaired and there were no charges taken relating to these assets during the three and six months ended June 30, 2014.

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.

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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
June 30, 2015
Financial assets:
Cash and cash equivalents	$	410,558	$	410,558	$	79,357	$	331,201	$	—
Federal Home Loan Bank stock	25,418		N/A
Net loans, excluding covered loans(1)	4,207,560		4,281,316		—		—		4,281,316
Net covered loans(2)	264,507		349,004		—		—		349,004
Accrued interest receivable	14,409		14,409		—		14,409		—
FDIC indemnification asset	36,997		18,875		—		—		18,875
FDIC receivable	5,543		5,543		—		5,543		—
Company-owned life insurance	104,972		104,972		—		104,972		—
Securities held-to-maturity	1,692		1,692		—		—		1,692
Financial liabilities:
Deposits:
Savings and demand deposits	$	3,414,192	$	3,414,192	$	—	$	3,414,192	$	—
Time deposits(3)	1,493,881		1,493,607		—		1,493,607		—
Total deposits	4,908,073		4,907,799		—		4,907,799		—
FDIC clawback liability	28,588		28,588		—		—		28,588
Short-term borrowings	253,945		253,945		—		253,945		—
Long-term debt	414,947		409,580		—		409,580		—
FDIC warrants payable	4,441		4,441		—		—		4,441
Accrued interest payable	2,079		2,079		—		2,079		—
Deferred compensation plan liabilities	1,475		1,475		—		1,475		—

(1) Included $11.0 million of impaired loans recorded at fair value on a nonrecurring basis and $20.9 million of loans recorded at fair value on a recurring basis.

(2) Included $400 thousand of impaired loans recorded at fair value on a nonrecurring basis.

(3) Includes $66.8 million of other brokered funds.

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			Estimated Fair Value
(Dollars in thousands)	Carrying Value		Total		Level 1		Level 2		Level 3
December 31, 2014
Financial assets:
Cash and cash equivalents	$	253,736	$	253,736	$	86,185	$	167,551	$	—
Federal Home Loan Bank stock	20,212		N/A
Net loans, excluding covered loans(1)	3,868,818		3,948,847		—		—		3,948,847
Net covered loans(2)	325,137		420,627		—		—		420,627
Accrued interest receivable	12,533		12,533		—		12,533		—
FDIC indemnification asset	67,026		34,572		—		—		34,572
FDIC receivable	6,062		6,062		—		6,062		—
Company-owned life insurance	97,782		97,782		—		97,782		—
Securities held-to-maturity	1,226		1,226		—		—		1,226
Financial liabilities:
Deposits:
Savings and demand deposits	$	3,288,414	$	3,288,414	$	—	$	3,288,414	$	—
Time deposits(3)	1,260,449		1,260,453		—		1,260,453		—
Total deposits	4,548,863		4,548,867		—		4,548,867		—
FDIC clawback liability	26,905		26,905		—		—		26,905
Short-term borrowings	135,743		135,743		—		135,743		—
Long-term debt	353,972		348,373		—		348,373		—
FDIC warrants payable	4,633		4,633		—		—		4,633
Accrued interest payable	1,476		1,476		—		1,476		—
Deferred compensation plan liabilities	587		587		—		587		—

(1) Included $7.6 million of impaired loans recorded at fair value on a nonrecurring basis and $19.5 million of loans recorded at fair value on a recurring basis.

(2) Included $502 thousand of impaired loans recorded at fair value on a nonrecurring basis.

(3) Includes $72.3 million of other brokered funds.

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4.  SECURITIES

The following summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses.

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2015
Securities available-for-sale:
U.S. government sponsored agency obligations	$	97,860	$	819	$	(396	)	$	98,283
Obligations of state and political subdivisions:
Taxable	4,361		7		(7		)	4,361
Tax-exempt	271,102		2,601		(1,949		)	271,754
SBA Pools	31,960		389		—			32,349
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	332,457		2,766		(1,189		)	334,034
Privately issued	26,604		1		(145		)	26,460
Privately issued commercial mortgage-backed securities	19,547		12		(50		)	19,509
Corporate debt securities	58,190		445		(66		)	58,569
Total securities available-for-sale	$	842,081	$	7,040	$	(3,802	)	$	845,319

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Securities held-to-maturity	$	1,692	$	—	$	—	$	1,692

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	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2014
Securities available-for-sale:
U.S. government sponsored agency obligations	$	97,746	$	791	$	(179	)	$	98,358
Obligations of state and political subdivisions:
Taxable	397		—		—			397
Tax-exempt	229,404		3,578		(723		)	232,259
SBA Pools	33,824		209		(100		)	33,933
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	289,156		2,886		(283		)	291,759
Privately issued	18,814		27		(41		)	18,800
Privately issued commercial mortgage-backed securities	5,127		3		—			5,130
Corporate debt securities	60,206		209		(232		)	60,183
Total securities available-for-sale	$	734,674	$	7,703	$	(1,558	)	$	740,819

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Securities held-to-maturity	$	1,226	$	—	$	—	$	1,226

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

	For the three months ended June 30,				For the six months ended June 30,
(Dollars in thousands)	2015		2014		2015			2014
Proceeds	$	135	$	—	$	24,750		$	54,211
Gross gains	6		—		9			—
Gross losses	—		—		(110		)	(2,310		)

The amortized cost and fair value of debt securities by contractual maturity at June 30, 2015 are shown below. Contractual maturity is utilized for 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.

	June 30, 2015
(Dollars in thousands)	Amortized Cost		Fair Value
Securities with contractual maturities:
Within one year	$	5,921	$	5,954
After one year through five years	142,325		143,842
After five years through ten years	185,443		185,589
After ten years	508,392		509,934
Total securities available-for-sale	$	842,081	$	845,319
Securities held-to-maturity:
After one year through five years	$	1,692	$	1,692
Total securities held-to-maturity	$	1,692	$	1,692

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Securities with a carrying value of $453.2 million and $337.8 million were pledged at June 30, 2015 and December 31, 2014, respectively, to secure borrowings and deposits.

At June 30, 2015 and December 31, 2014, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

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
June 30, 2015
U.S. government sponsored agency obligations	$	54,604	$	(396	)	$	—	$	—		$	54,604	$	(396	)
Obligations of state and political subdivisions:
Taxable	953		(7		)	—		—			953		(7		)
Tax-exempt	137,675		(1,730		)	8,026		(219		)	145,701		(1,949		)
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	112,083		(1,164		)	907		(25		)	112,990		(1,189		)
Privately issued	25,984		(145		)	—		—			25,984		(145		)
Privately issued commercial mortgage-backed securities	14,398		(50		)	—		—			14,398		(50		)
Corporate debt securities	21,237		(64		)	448		(2		)	21,685		(66		)
Total securities available-for-sale	$	366,934	$	(3,556	)	$	9,381	$	(246	)	$	376,315	$	(3,802	)
December 31, 2014
U.S. government sponsored agency obligations	$	—	$	—		$	14,821	$	(179	)	$	14,821	$	(179	)
Obligations of state and political subdivisions:
Tax-exempt	31,054		(260		)	33,650		(463		)	64,704		(723		)
SBA Pools	1,844		(4		)	17,682		(96		)	19,526		(100		)
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	36,261		(85		)	27,361		(198		)	63,622		(283		)
Privately issued	7,801		(41		)	8		—			7,809		(41		)
Corporate debt securities	22,520		(162		)	8,912		(70		)	31,432		(232		)
Total securities available-for-sale	$	99,480	$	(552	)	$	102,434	$	(1,006	)	$	201,914	$	(1,558	)

As of June 30, 2015, the Company’s security portfolio consisted of 375 securities, 151 of which were in an unrealized loss position. The unrealized losses for these securities resulted primarily from changes in benchmark U.S. Treasury 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 June 30, 2015.

The unrealized losses are spread across asset classes, primarily in those securities carrying fixed interest rates. At June 30, 2015, the combination of these security asset class holdings in an unrealized loss position had an estimated fair value of $376.3 million with gross unrealized losses of $3.8 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 in select assets classes since their respective acquisition dates.

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

29

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 lines 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, service industry, professional service areas and agricultural.  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.

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Loans at June 30, 2015 and December 31, 2014 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
June 30, 2015
Residential real estate	$	75,655	$	20,716	$	96,371	$	226,382	$	1,208,296	$	1,434,678	$	1,531,049
Commercial real estate	124,722		19,176		143,898		184,620		1,211,163		1,395,783		1,539,681
Commercial and industrial	18,220		6,574		24,794		16,730		1,049,623		1,066,353		1,091,147
Real estate construction	6,761		665		7,426		7,298		167,894		175,192		182,618
Consumer	8,274		84		8,358		2,157		169,963		172,120		180,478
Total	$	233,632	$	47,215	$	280,847	$	437,187	$	3,806,939	$	4,244,126	$	4,524,973	(1)
December 31, 2014
Residential real estate	$	86,515	$	21,711	$	108,226	$	239,523	$	1,186,489	$	1,426,012	$	1,534,238
Commercial real estate	160,886		25,776		186,662		190,148		1,120,790		1,310,938		1,497,600
Commercial and industrial	23,752		8,896		32,648		15,499		853,978		869,477		902,125
Real estate construction	8,415		974		9,389		8,309		123,377		131,686		141,075
Consumer	9,469		96		9,565		2,389		162,135		164,524		174,089
Total	$	289,037	$	57,453	$	346,490	$	455,868	$	3,446,769	$	3,902,637	$	4,249,127	(1)

(1) Reported net of deferred fees totaling $2.7 million and $4.6 million at June 30, 2015 and December 31, 2014, 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 acquisitions, other real estate owned obtained through foreclosure and other repossessed assets.

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.

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Information as to nonperforming assets was as follows:

(Dollars in thousands)	June 30, 2015		December 31, 2014
Uncovered nonperforming assets
Nonaccrual loans
Residential real estate	$	20,133	$	17,374
Commercial real estate	15,727		13,756
Commercial and industrial	3,119		3,550
Real estate construction	438		174
Consumer	308		257
Total nonaccrual loans	39,725		35,111
Other real estate owned and repossessed assets (1)	37,612		36,872
Total uncovered nonperforming assets	77,337		71,983
Covered nonperforming assets
Nonaccrual loans
Residential real estate	2,071		1,848
Commercial real estate	14,968		15,723
Commercial and industrial	2,369		3,560
Real estate construction	365		713
Consumer	20		13
Total nonaccrual loans	19,793		21,857
Other real estate owned and repossessed assets	8,261		10,719
Total covered nonperforming assets	28,054		32,576
Total nonperforming assets	$	105,391	$	104,559
Uncovered loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30
Residential real estate	$	120	$	12
Commercial and industrial	4		—
Real estate construction	5		—
Consumer	211		41
Total loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30	$	340	$	53

(1) Excludes closed branches and operating facilities.

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

	June 30, 2015
(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	$	3,973	$	3,005	$	8,739	$	15,717	$	1,192,579	$	1,208,296	$	120
Commercial real estate	3,589		1,764		10,985		16,338		1,194,825		1,211,163		—
Commercial and industrial	6,184		42		2,465		8,691		1,040,932		1,049,623		4
Real estate construction	151		243		173		567		167,327		167,894		5
Consumer	1,203		517		329		2,049		167,914		169,963		211
Total	$	15,100	$	5,571	$	22,691	$	43,362	$	3,763,577	$	3,806,939	$	340
Covered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	537	$	140	$	1,307	$	1,984	$	18,732	$	20,716	$	—
Commercial real estate	101		—		2,350		2,451		16,725		19,176		—
Commercial and industrial	29		67		2,308		2,404		4,170		6,574		—
Real estate construction	—		—		288		288		377		665		—
Consumer	—		—		2		2		82		84		—
Total	$	667	$	207	$	6,255	$	7,129	$	40,086	$	47,215	$	—

	December 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	$	11,709	$	2,044	$	9,593	$	23,346	$	1,163,143	$	1,186,489	$	12
Commercial real estate	4,870		1,083		11,333		17,286		1,103,504		1,120,790		—
Commercial and industrial	4,679		184		2,960		7,823		846,155		853,978		—
Real estate construction	1,004		136		174		1,314		122,063		123,377		—
Consumer	964		152		150		1,266		160,869		162,135		41
Total	$	23,226	$	3,599	$	24,210	$	51,035	$	3,395,734	$	3,446,769	$	53
Covered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	238	$	35	$	1,179	$	1,452	$	20,259	$	21,711	$	—
Commercial real estate	—		—		4,569		4,569		21,207		25,776		—
Commercial and industrial	373		7		2,923		3,303		5,593		8,896		—
Real estate construction	—		—		710		710		264		974		—
Consumer	—		—		2		2		94		96		—
Total	$	611	$	42	$	9,383	$	10,036	$	47,417	$	57,453	$	—

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Impaired Loans

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

(Dollars in thousands)	June 30, 2015		December 31, 2014
Uncovered
Nonaccrual loans	$	39,725	$	35,111
Performing troubled debt restructurings:
Residential real estate	2,392		1,368
Commercial real estate	3,741		3,785
Commercial and industrial	2,597		840
Real estate construction	131		90
Consumer	233		234
Total uncovered performing troubled debt restructurings	9,094		6,317
Total uncovered impaired loans	$	48,819	$	41,428
Covered
Nonaccrual loans	$	19,793	$	21,857
Performing troubled debt restructurings:
Residential real estate	3,584		3,046
Commercial real estate	3,055		9,017
Commercial and industrial	569		1,137
Real estate construction	300		264
Consumer	7		—
Total covered performing troubled debt restructurings	7,515		13,464
Total covered impaired loans	$	27,308	$	35,321

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 effective yield after the modification is less than the effective yield at the time the loan was acquired in association with consideration of qualitative factors included within ASC 310-40, “Receivables — Troubled Debt Restructurings by Creditors” (“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 June 30, 2015, there were $28.1 million of nonperforming TDRs and $16.6 million of performing TDRs included in impaired loans.  As of December 31, 2014, there were $25.0 million of nonperforming TDRs and $19.8 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. If a TDR is subsequently restructured under current market terms, no cumulative concession has been granted to the borrower and the borrower is not experiencing financial difficulties, which is documented by a current credit evaluation, the loan is no longer required to be reported as a TDR.

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The following tables present the recorded investment of loans modified in TDRs during the three and six months ended June 30, 2015 and 2014 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 June 30, 2015		Net charge-offs (recoveries)			Provision (benefit) for loan losses (2)
For the three months ended June 30, 2015
Uncovered
Residential real estate	$	403	$	114	$	224	$	—	17	$	741	$	—		$	162
Commercial real estate	93		—		1,304		532		9	1,929		—			—
Commercial and industrial	231		—		542		152		14	925		192			232
Real estate construction	44		—		72		—		2	116		—			—
Consumer	17		—		—		—		1	17		—			—
Total uncovered	$	788	$	114	$	2,142	$	684	43	$	3,728	$	192		$	394
Covered
Residential real estate	$	747	$	—	$	112	$	—	6	$	859	$	—		$	5
Commercial real estate	—		—		2,442		—		8	2,442		—			2
Real estate construction	46		—		76		—		2	122		30			30
Total covered	$	793	$	—	$	2,630	$	—	16	$	3,423	$	30		$	37
Total loans	$	1,581	$	114	$	4,772	$	684	59	$	7,151	$	222		$	431
For the six months ended June 30, 2015
Uncovered
Residential real estate	$	1,286	$	114	$	785	$	—	26	$	2,185	$	1		$	192
Commercial real estate	93		—		1,402		1,639		12	3,134		37			129
Commercial and industrial	567		—		1,254		178		22	1,999		192			280
Real estate construction	44		—		72		130		3	246		—			—
Consumer	17		—		—		—		1	17		—			—
Total uncovered	$	2,007	$	114	$	3,513	$	1,947	64	$	7,581	$	230		$	601
Covered
Residential real estate	$	812	$	—	$	187	$	—	9	$	999	$	5		$	77
Commercial real estate	—		—		2,694		—		10	2,694		—			81
Commercial and industrial	—		—		95		—		1	95		—			92
Real estate construction	46		—		76		—		2	122		(8		)	(8		)
Consumer	15		—		—		—		1	15		—			—
Total covered	$	873	$	—	$	3,052	$	—	23	$	3,925	$	(3	)	$	242
Total loans	$	2,880	$	114	$	6,565	$	1,947	87	$	11,506	$	227		$	843

(1) Loan forgiveness related to loans modified in TDRs for both the three and six months ended June 30, 2015 totaled $187 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.

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	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 June 30, 2014		Net  charge-offs (recoveries)			Provision for loan losses (2)
For the three months ended June 30, 2014
Uncovered
Residential real estate	$	144	$	159	$	—	$	147	9	$	450	$	—		$	22
Commercial real estate	—		—		180		99		3	279		—			—
Commercial and industrial	7		—		61		—		6	68		—			(3		)
Consumer	—		88		—		—		2	88		—			—
Total uncovered	$	151	$	247	$	241	$	246	20	$	885	$	—		$	19
Covered
Residential real estate	$	—	$	14	$	345	$	—	9	$	359	$	—		$	22
Commercial real estate	—		—		652		—		2	652		—			6
Commercial and industrial	—		—		177		100		5	277		—			11
Total covered	$	—	$	14	$	1,174	$	100	16	$	1,288	$	—		$	39
Total loans	$	151	$	261	$	1,415	$	346	36	$	2,173	$	—		$	58
For the six months ended June 30, 2014
Uncovered
Residential real estate	$	144	$	227	$	230	$	147	15	$	748	$	—		$	127
Commercial real estate	—		—		894		1,026		8	$	1,920	(9		)	197
Commercial and industrial	50		—		61		117		11	$	228	—			31
Consumer	—		88		—		—		2	88		—			26
Total uncovered	$	194	$	315	$	1,185	$	1,290	36	$	2,984	$	(9	)	$	381
Covered
Residential real estate	$	113	$	14	$	345	$	—	14	$	472	$	6		$	29
Commercial real estate	—		—		652		446		3	$	1,098	—			66
Commercial and industrial	—		—		203		100		8	303		—			14
Total covered	$	113	$	14	$	1,200	$	546	25	$	1,873	$	6		$	109
Total loans	$	307	$	329	$	2,385	$	1,836	61	$	4,857	$	(3	)	$	490

(1) Loan forgiveness related to loans modified in TDRs for the three and six months ended June 30, 2014 totaled $51 thousand and $178 thousand, respectively.

(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 quarterly 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 and six months ended June 30, 2015 and 2014, including the recorded investment as of June 30, 2015 and 2014.  A payment on a TDR is considered to be in default once it is greater than 30 days past due.

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	For the three months ended June 30, 2015					For the six months ended June 30, 2015
(Dollars in thousands)	Total number of loans	Total recorded investment at June 30, 2015		Charged off following a subsequent default		Total number of loans	Total recorded investment at June 30, 2015		Charged off following a subsequent default
Uncovered
Residential real estate	14	$	1,701	$	—	18	$	1,875	$	29
Commercial real estate	11	2,812		144		11	2,812		218
Commercial and industrial	3	30		—		3	30		—
Total uncovered	28	4,543		144		32	4,717		247
Covered
Residential real estate	3	111		—		3	111		—
Commercial real estate	1	130		—		1	130		—
Commercial and industrial	1	95		—		1	95		—
Total covered	5	336		—		5	336		—
Total loans	33	$	4,879	$	144	37	$	5,053	$	247

	For the three months ended June 30, 2014					For the six months ended June 30, 2014
(Dollars in thousands)	Total number of loans	Total recorded investment at June 30, 2014		Charged off following a subsequent default		Total number of loans	Total recorded investment at June 30, 2014		Charged off following a subsequent default
Uncovered
Residential real estate	14	$	951	$	13	20	$	1,245	$	95
Commercial real estate	1	546		—		3	1,797		176
Commercial and industrial	2	135		—		2	135		—
Consumer	1	—		—		3	—		—
Total uncovered	18	1,632		13		28	3,177		271
Covered
Residential real estate	5	175		—		7	219		12
Commercial real estate	2	546		—		6	669		—
Commercial and industrial	2	53		—		9	188		2
Real estate construction	—	—		—		1	346		483
Consumer	1	—		—		2	—		—
Total covered	10	774		—		25	1,422		497
Total loans	28	$	2,406	$	13	53	$	4,599	$	768

At June 30, 2015, commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled $352 thousand.

The terms of certain other loans that were modified during the years ended June 30, 2015 and 2014 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 a lower effective yield 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

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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 (1)		Total
June 30, 2015
Uncovered loans
Commercial real estate	$	1,250,671	$	47,245	$	97,867	$	—	$	1,395,783
Commercial and industrial	1,008,042		35,986		22,325		—		1,066,353
Real estate construction	169,484		71		5,637		—		175,192
Total	$	2,428,197	$	83,302	$	125,829	$	—	$	2,637,328
Covered loans
Commercial real estate	$	88,649	$	6,565	$	48,684	$	—	$	143,898
Commercial and industrial	13,396		932		10,466		—		24,794
Real estate construction	4,144		67		3,215		—		7,426
Total	$	106,189	$	7,564	$	62,365	$	—	$	176,118
December 31, 2014
Uncovered loans
Commercial real estate	$	1,153,132	$	63,567	$	94,239	$	—	$	1,310,938
Commercial and industrial	824,239		29,511		15,727		—		869,477
Real estate construction	123,822		1,981		5,883		—		131,686
Total	$	2,101,193	$	95,059	$	115,849	$	—	$	2,312,101
Covered loans
Commercial real estate	$	102,952	$	16,073	$	67,637	$	—	$	186,662
Commercial and industrial	16,718		1,875		14,055		—		32,648
Real estate construction	3,817		792		4,780		—		9,389
Total	$	123,487	$	18,740	$	86,472	$	—	$	228,699

(1)Prior to January 1, 2015, all nonaccrual loans were included in the “Doubtful” risk category. After further review of regulatory guidance, we have reclassified nonaccrual loans with a determinable value to the “Substandard” risk category; therefore, “Substandard” now includes accrual and nonaccrual loans. This change in classification has been made retrospectively and the reclassification is presented within the December 31, 2014 disclosure.

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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
June 30, 2015
Uncovered loans
Residential real estate	$	1,414,545	$	20,133	$	1,434,678
Consumer	171,812		308		172,120
Total	$	1,586,357	$	20,441	$	1,606,798
Covered loans
Residential real estate	$	94,300	$	2,071	$	96,371
Consumer	8,338		20		8,358
Total	$	102,638	$	2,091	$	104,729
December 31, 2014
Uncovered
Residential real estate	$	1,408,638	$	17,374	$	1,426,012
Consumer	164,267		257		164,524
Total	$	1,572,905	$	17,631	$	1,590,536
Covered loans
Residential real estate	$	106,378	$	1,848	$	108,226
Consumer	9,552		13		9,565
Total	$	115,930	$	1,861	$	117,791

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 nonaccrual loans and TDRs.

39

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
June 30, 2015
Uncovered individually evaluated impaired loans
Residential real estate	$	14,124	$	8,401	$	22,525	$	30,095	$	2,280
Commercial real estate	12,684		6,784		19,468		33,628		1,449
Commercial and industrial	3,647		2,069		5,716		12,386		497
Real estate construction	333		236		569		643		66
Consumer	292		249		541		786		144
Total uncovered individually evaluated impaired loans	$	31,080	$	17,739	$	48,819	$	77,538	$	4,436
Covered individually evaluated impaired loans
Residential real estate	$	2,903	$	2,752	$	5,655	$	7,424	$	407
Commercial real estate	4,594		13,429		18,023		24,656		1,950
Commercial and industrial	2,130		808		2,938		5,706		327
Real estate construction	619		46		665		989		—
Consumer	26		1		27		76		—
Total covered individually evaluated impaired loans	$	10,272	$	17,036	$	27,308	$	38,851	$	2,684
December 31, 2014
Uncovered individually evaluated impaired loans
Residential real estate	$	14,316	$	4,268	$	18,584	$	23,080	$	1,110
Commercial real estate	7,609		5,956		13,565		17,016		1,276
Commercial and industrial	915		1,884		2,799		2,807		982
Real estate construction	174		—		174		174		—
Consumer	296		176		472		610		82
Total uncovered individually evaluated impaired loans	$	23,310	$	12,284	$	35,594	$	43,687	$	3,450
Covered individually evaluated impaired loans
Residential real estate	$	2,155	$	2,583	$	4,738	$	6,388	$	417
Commercial real estate	10,400		11,985		22,385		28,755		1,277
Commercial and industrial	1,545		779		2,324		2,668		109
Real estate construction	670		—		670		994		—
Consumer	11		1		12		39		—
Total covered individually evaluated impaired loans	$	14,781	$	15,348	$	30,129	$	38,844	$	1,803

40

	For the three months ended June 30, 2015				For the six months ended June 30, 2015
(Dollars in thousands)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Uncovered individually evaluated impaired loans
Residential real estate	$	23,128	$	302	$	23,277	$	500
Commercial real estate	20,005		807		20,445		1,282
Commercial and industrial	5,942		93		6,784		282
Real estate construction	580		4		573		25
Consumer	570		10		589		20
Total uncovered individually evaluated impaired loans	$	50,225	$	1,216	$	51,668	$	2,109
Covered individually evaluated impaired loans
Residential real estate	$	5,775	$	98	$	5,803	$	174
Commercial real estate	18,203		260		18,329		497
Commercial and industrial	3,094		89		3,333		161
Real estate construction	842		72		901		79
Consumer	27		1		28		2
Total covered individually evaluated impaired loans	$	27,941	$	520	$	28,394	$	913

	For the three months ended June 30, 2014				For the six months ended June 30, 2014
(Dollars in thousands)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Uncovered individually evaluated impaired loans
Residential real estate	$	14,870	$	134	$	15,038	$	279
Commercial real estate	5,686		38		6,280		84
Commercial and industrial	1,668		15		1,676		39
Consumer	34		1		35		2
Total uncovered individually evaluated impaired loans	$	22,258	$	188	$	23,029	$	404
Covered individually evaluated impaired loans
Residential real estate	$	4,364	$	63	$	4,378	$	127
Commercial real estate	17,615		266		17,689		533
Commercial and industrial	2,299		21		2,399		44
Real estate construction	412		—		413		9
Consumer	21		1		22		2
Total covered individually evaluated impaired loans	$	24,711	$	351	$	24,901	$	715

41

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 June 30, 2015
Allowance for loan losses - uncovered:
Balance at beginning of period	$	10,879		$	11,161		$	9,475		$	1,685		$	1,277		$	34,477
Provision (benefit) for loan losses	282			154			679			(93		)	47			1,069
Gross charge-offs	(1,081		)	(2,929		)	(735		)	(272		)	(256		)	(5,273		)
Recoveries	1,008			3,796			1,326			128			35			6,293
Net (charge-offs) recoveries	(73		)	867			591			(144		)	(221		)	1,020
Ending allowance for loan losses	$	11,088		$	12,182		$	10,745		$	1,448		$	1,103		$	36,566
For the six months ended June 30, 2015
Allowance for loan losses - uncovered:
Balance at beginning of period	$	12,193		$	11,128		$	7,835		$	1,599		$	1,064		$	33,819
Provision (benefit) for loan losses	659			47			3,366			(129		)	538			4,481
Gross charge-offs	(3,218		)	(4,547		)	(2,002		)	(307		)	(579		)	(10,653		)
Recoveries	1,454			5,554			1,546			285			80			8,919
Net (charge-offs) recoveries	(1,764		)	1,007			(456		)	(22		)	(499		)	(1,734		)
Ending allowance for loan losses	$	11,088		$	12,182		$	10,745		$	1,448		$	1,103		$	36,566
As of June 30, 2015
Allowance for loan losses - uncovered:
Individually evaluated for impairment	$	2,280		$	1,449		$	497		$	66		$	144		$	4,436
Collectively evaluated for impairment	3,677			5,185			9,485			584			845			19,776
Accounted for under ASC 310-30	5,131			5,548			763			798			114			12,354
Allowance for loan losses - uncovered:	$	11,088		$	12,182		$	10,745		$	1,448		$	1,103		$	36,566
Balance of uncovered loans:
Individually evaluated for impairment	$	22,525		$	19,468		$	5,716		$	569		$	541		$	48,819
Collectively evaluated for impairment	1,185,771			1,191,695			1,043,907			167,325			169,422			3,758,120
Accounted for under ASC 310-30	226,382			184,620			16,730			7,298			2,157			437,187
Total uncovered loans	$	1,434,678		$	1,395,783		$	1,066,353		$	175,192		$	172,120		$	4,244,126
For the three months ended June 30, 2014
Allowance for loan losses - uncovered:
Balance at beginning of period	$	9,896		$	6,776		$	4,757		$	1,083		$	259		$	22,771
Provision (benefit) for loan losses	695			2,786			425			(618		)	(69		)	3,219
Gross charge-offs	(1,381		)	(3,586		)	(481		)	(28		)	(57		)	(5,533		)
Recoveries	540			1,870			439			961			93			3,903
Net (charge-offs) recoveries	(841		)	(1,716		)	(42		)	933			36			(1,630		)
Ending allowance for loan losses	$	9,750		$	7,846		$	5,140		$	1,398		$	226		$	24,360
For the six months ended June 30, 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	3,559			5,924			1,761			(1,483		)	(118		)	9,643
Gross charge-offs	(2,817		)	(4,831		)	(626		)	(109		)	(123		)	(8,506		)
Recoveries	1,300			2,486			601			963			127			5,477
Net (charge-offs) recoveries	(1,517		)	(2,345		)	(25		)	854			4			(3,029		)
Ending allowance for loan losses	$	9,750		$	7,846		$	5,140		$	1,398		$	226		$	24,360

42

(Dollars in thousands)	Residential real estate		Commercial real estate		Commercial and industrial		Real estate construction		Consumer		Total
As of December 31, 2014
Allowance for loan losses - uncovered:
Individually evaluated for impairment	$	1,110	$	1,276	$	982	$	—	$	82	$	3,450
Collectively evaluated for impairment	4,850		4,623		5,968		649		820		16,910
Accounted for under ASC 310-30	6,233		5,229		885		950		162		13,459
Allowance for loan losses - uncovered:	$	12,193	$	11,128	$	7,835	$	1,599	$	1,064	$	33,819
Balance of uncovered loans:
Individually evaluated for impairment	$	18,584	$	13,565	$	2,799	$	174	$	472	$	35,594
Collectively evaluated for impairment	1,167,905		1,107,225		851,179		123,203		161,663		3,411,175
Accounted for under ASC 310-30	239,523		190,148		15,499		8,309		2,389		455,868
Total uncovered loans	$	1,426,012	$	1,310,938	$	869,477	$	131,686	$	164,524	$	3,902,637

43

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 June 30, 2015
Allowance for loan losses - covered:
Balance at beginning of period	$	4,159		$	9,904		$	2,812		$	1,075		$	38		$	17,988
Provision (benefit) for loan losses	(162		)	(6,267		)	(2,083		)	207			(77		)	(8,382		)
Gross charge-offs	(152		)	(777		)	(1,274		)	(454		)	(7		)	(2,664		)
Recoveries	251			6,306			2,638			126			77			9,398
Net (charge-offs) recoveries	99			5,529			1,364			(328		)	70			6,734
Ending allowance for loan losses	$	4,096		$	9,166		$	2,093		$	954		$	31		$	16,340
For the six months ended June 30, 2015
Allowance for loan losses - covered:
Balance at beginning of period	$	3,981		$	13,663		$	2,577		$	1,086		$	46		$	21,353
Provision (benefit) for loan losses	151			(8,700		)	(1,558		)	326			(20		)	(9,801		)
Gross charge-offs	(476		)	(4,588		)	(2,091		)	(962		)	(165		)	(8,282		)
Recoveries	440			8,791			3,165			504			170			13,070
Net (charge-offs) recoveries	(36		)	4,203			1,074			(458		)	5			4,788
Ending allowance for loan losses	$	4,096		$	9,166		$	2,093		$	954		$	31		$	16,340
As of June 30, 2015
Allowance for loan losses - covered:
Individually evaluated for impairment	$	407		$	1,950		$	327		$	—		$	—		$	2,684
Collectively evaluated for impairment	222			4			29			—			1			256
Accounted for under ASC 310-30	3,467			7,212			1,737			954			30			13,400
Allowance for loan losses - covered:	$	4,096		$	9,166		$	2,093		$	954		$	31		$	16,340
Balance of covered loans:
Individually evaluated for impairment	$	5,655		$	18,023		$	2,938		$	665		$	27		$	27,308
Collectively evaluated for impairment	15,061			1,153			3,636			—			57			19,907
Accounted for under ASC 310-30	75,655			124,722			18,220			6,761			8,274			233,632
Total covered loans	$	96,371		$	143,898		$	24,794		$	7,426		$	8,358		$	280,847
For the three months ended June 30, 2014
Allowance for loan losses - covered:
Balance at beginning of period	$	5,077		$	24,062		$	6,759		$	2,003		$	99		$	38,000
Provision (benefit) for loan losses	91			(5,848		)	(1,411		)	(95		)	(58		)	(7,321		)
Gross charge-offs	(412		)	(1,209		)	(1,500		)	(979		)	(30		)	(4,130		)
Recoveries	556			4,270			692			590			86			6,194
Net (charge-offs) recoveries	144			3,061			(808		)	(389		)	56			2,064
Ending allowance for loan losses	$	5,312		$	21,275		$	4,540		$	1,519		$	97		$	32,743
For the six months ended June 30, 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	783			(7,839		)	(2,501		)	(178		)	(84		)	(9,819		)
Gross charge-offs	(1,275		)	(3,195		)	(2,527		)	(1,004		)	(77		)	(8,078		)
Recoveries	1,108			5,915			2,341			717			178			10,259
Net (charge-offs) recoveries	(167		)	2,720			(186		)	(287		)	101			2,181
Ending allowance for loan losses	$	5,312		$	21,275		$	4,540		$	1,519		$	97		$	32,743

44

(Dollars in thousands)	Residential real estate		Commercial real estate		Commercial and industrial		Real estate construction		Consumer		Total
As of December 31, 2014
Allowance for loan losses - covered:
Individually evaluated for impairment	$	417	$	1,277	$	109	$	—	$	—	$	1,803
Collectively evaluated for impairment	123		57		89		7		1		277
Accounted for under ASC 310-30	3,441		12,329		2,379		1,079		45		19,273
Allowance for loan losses - covered:	$	3,981	$	13,663	$	2,577	$	1,086	$	46	$	21,353
Balance of covered loans:
Individually evaluated for impairment	$	4,738	$	22,385	$	2,324	$	670	$	12	$	30,129
Collectively evaluated for impairment	16,973		3,391		6,572		304		84		27,324
Accounted for under ASC 310-30	86,515		160,886		23,752		8,415		9,469		289,037
Total covered loans	$	108,226	$	186,662	$	32,648	$	9,389	$	9,565	$	346,490

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 $28.6 million ($24.0 million related to the CF Bancorp acquisition, $4.5 million related to the First Banking Center acquisition and $119 thousand related to the Peoples State Bank acquisition) at June 30, 2015 compared to $26.9 million ($22.6 million related to the CF Bancorp acquisition, $4.3 million related to the First Banking Center acquisition and $4 thousand related to the Peoples State Bank acquisition) at December 31, 2014.

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, Talmer West Bank and First of Huron, Corp. 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.

45

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 June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Balance at beginning of period	$	278,825		$	311,171		$	277,058		$	302,287
Additions due to acquisitions	—			—			5,268			32,764
Discount accretion	(19,242		)	(24,342		)	(40,206		)	(47,007		)
Reclassifications from nonaccretable discount and other additions to accretable discount due to results of cash flow re-estimations	21,642			24,543			51,073			40,907
Other activity, net (1)	(21,161		)	(13,952		)	(33,129		)	(31,531		)
Balance at end of period	$	260,064		$	297,420		$	260,064		$	297,420

(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.  To the extent impairment is recorded on covered loans, 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.  To the extent improvement relates to covered loans, 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 resulting in yield adjustments on a prospective basis during the three months ended June 30, 2015 and 2014 for both covered and uncovered purchased credit impaired loans was $21.6 million and $24.5 million, respectively.  During the six months ended June 30, 2015 and 2014, the total identified improvement in the cash flow expectations was $51.1 million and $40.9 million respectively. 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 June 30, 2015 and December 31, 2014.

(Dollars in thousands)	June 30, 2015			December 31, 2014
Contractual cash flows	$	1,163,849		$	1,281,482
Non-accretable difference	(232,966		)	(259,519		)
Accretable yield	(260,064		)	(277,058		)
Loans accounted for under ASC 310-30	$	670,819		$	744,905

46

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 June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Benefit for loan losses - covered:
Net impairment recorded as a result of re-estimation of cash flows on loans accounted for under ASC 310-30 (1)	$	1,223		$	1,066		$	2,938		$	2,365
Additional benefit recorded, net of charge-offs, for covered loans	(9,605		)	(8,387		)	(12,739		)	(12,184		)
Total benefit for loan losses-covered	$	(8,382	)	$	(7,321	)	$	(9,801	)	$	(9,819	)
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)	765			1,923			1,042			3,504
Expense recorded, to offset benefit, for covered loans	(6,534		)	(5,942		)	(8,324		)	(7,459		)
Total loss sharing expense due to provision for loan losses-covered	(5,769		)	(4,019		)	(7,282		)	(3,955		)
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)	458			(857		)	1,896			(1,139		)
Net income recorded, for covered loans including those accounted for under ASC 310-20 and ASC 310-40	(3,071		)	(2,445		)	(4,415		)	(4,725		)
Net (increase) decrease to income before taxes	$	(2,613	)	$	(3,302	)	$	(2,519	)	$	(5,864	)

(1) The results of re-estimations also included cash flow improvements to be recognized prospectively as an adjustment to the accretable yield on the related covered loans of $8.6 million and $8.0 million for the three months ended June 30, 2015 and 2014, respectively, and $16.7 million and $16.4 million for the six months ended June 30, 2015 and 2014, respectively.

47

The following table summarizes the activity related to the FDIC indemnification asset and the FDIC receivable for the three and six months ended June 30, 2015 and 2014.  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  June 30, 2015						For the six months ended June 30, 2015
(Dollars in thousands)	FDIC Indemnification Asset			FDIC Receivable			FDIC Indemnification Asset			FDIC Receivable
Balance at beginning of period	$	50,702		$	7,839		$	67,026		$	6,062
Accretion	(8,548		)	—			(17,798		)	—
Sales and write-downs of other real estate owned (covered)	(475		)	150			(828		)	16
Net effect of change in allowance on covered assets (1)	490			—			(1,200		)	—
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(5,172		)	5,172			(10,203		)	10,203
Decreases due to recoveries net of additional claimable expenses incurred (2)	—			(6,261		)	—			(7,618		)
Claim payments received from the FDIC	—			(1,357		)	—			(3,120		)
Balance at end of period	$	36,997		$	5,543		$	36,997		$	5,543

(1) Primarily includes adjustments for fully claimed and exited loans and the results of remeasurement of expected cash flows under ASC 310-30 accounting.

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

	For the three months ended  June 30, 2014						For the six months ended June 30, 2014
(Dollars in thousands)	FDIC Indemnification Asset			FDIC Receivable			FDIC Indemnification Asset			FDIC Receivable
Balance at beginning of period	$	119,045		$	8,130		$	131,861		$	7,783
Accretion	(5,506		)	—			(12,224		)	—
Sales and write-downs of other real estate owned (covered)	(281		)	(55		)	(753		)	(247		)
Net effect of change in allowance on covered assets (1)	(6,130		)	—			(8,155		)	—
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(4,434		)	4,434			(8,035		)	8,035
Decreases due to recoveries net of additional claimable expenses incurred (2)	—			(3,433		)	—			(4,319		)
Claim payments received from the FDIC	—			(1,878		)	—			(4,054		)
Balance at end of period	$	102,694		$	7,198		$	102,694		$	7,198

(1) Primarily includes adjustments for fully claimed and exited loans and the results of remeasurement of expected cash flows under ASC 310-30 accounting.

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

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8. OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS

Changes in other real estate owned and repossessed assets were as follows:

	Other real estate owned
(Dollars in thousands)	Uncovered			Covered			Total other real estate owned			Repossessed assets
Balance at January 1, 2015	$	28,247		$	10,661		$	38,908		$	9,835
Additions due to acquisitions	1,260			—			1,260			—
Additions due to the adoption of ASU 2014-04 (1)	455			85			540			—
Transfers in (2)	12,151			5,670			17,821			847
Capitalized expenditures	—			—			—			2,681
Payments received	—			—			—			(2,854		)
Disposals	(9,777		)	(7,553		)	(17,330		)	(318		)
Write-downs	(1,311		)	(636		)	(1,947		)	(468		)
Change in valuation allowance	—			—			—			(2,602		)
Balance at June 30, 2015	$	31,025		$	8,227		$	39,252		$	7,121
Balance at January 1, 2014	$	18,384		$	11,571		$	29,955		$	27
Additions due to acquisitions	30,878			—			30,878			—
Transfers in (2)	8,826			4,946			13,772			237
Disposals	(15,241		)	(4,687		)	(19,928		)	(172		)
Write-downs	(1,500		)	(904		)	(2,404		)	—
Balance at June 30, 2014	$	41,347		$	10,926		$	52,273		$	92

(1) The Company adopted the provisions of FASB ASU No. 2014-04, “Reclassification of Residential Real Estate Collaterized Consumer Mortgage Loans Upon Foreclosure” (“ASU 2014-04”) utilizing the prospective transition method.

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

At June 30, 2015, the Company had $727 thousand of other real estate owned and repossessed assets as a

result of obtaining physical possession in accordance with ASU 2014-04. In addition, there are $9.6 million of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process, as of June 30, 2015.

Activity in the valuation allowance for repossessed assets during the three and six months ended June 30, 2015 is summarized below.  There was no valuation allowance for repossessed assets at any time during the three or six months ended June 30, 2014.

(Dollars in thousands)	Valuation allowance for repossessed assets
For the three months ended June 30, 2015
Beginning balance	$	2,819
Provision for valuation allowance	243
Ending Balance	$	3,062
For the six months ended June 30, 2015
Beginning balance	$	460
Provision for valuation allowance	2,602
Ending Balance	$	3,062

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

(Dollars in thousands)	Uncovered			Covered			Total other real estate owned			Repossessed assets
For the three months ended June 30, 2015
Net gain on sale	$	1,315		$	90		$	1,405		$	—
Write-downs	(487		)	(98		)	(585		)	(274		)
Provision for valuation allowance (1)	—			—			—			(243		)
Net operating expenses	(686		)	(27		)	(713		)	—
Total	$	142		$	(35	)	$	107		$	(517	)
For the six months ended June 30, 2015
Net gain (loss) on sale	$	3,173		$	(353	)	$	2,820		$	(14	)
Write-downs	(1,311		)	(636		)	(1,947		)	(468		)
Provision for valuation allowance (1)	—			—			—			(2,602		)
Net operating expenses	(890		)	(118		)	(1,008		)	(25		)
Total	$	972		$	(1,107	)	$	(135	)	$	(3,109	)
For the three months ended June 30, 2014
Net gain on sale	$	2,998		$	91		$	3,089		$	—
Write-downs	(821		)	(537		)	(1,358		)	—
Net operating expenses	(919		)	(82		)	(1,001		)	(19		)
Total	$	1,258		$	(528	)	$	730		$	(19	)
For the six months ended June 30, 2014
Net gain (loss) on sale	$	4,002		$	231		$	4,233		$	(4	)
Write-downs	(1,500		)	(904		)	(2,404		)	—
Net operating expenses	(1,545		)	(74		)	(1,619		)	(49		)
Total	$	957		$	(747	)	$	210		$	(53	)

(1) Recorded as a component of “Other expense” in the Consolidated Statements of Income

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

9.  INTANGIBLE ASSETS

Core Deposit Intangibles

The Company recorded core deposit intangibles (CDIs) associated with each of its acquisitions. CDIs are amortized on an accelerated basis over their estimated useful lives and have an estimated remaining weighted-average useful life of 7.1 years as of June 30, 2015.

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

(Dollars in thousands)	June 30, 2015			December 31, 2014
Gross carrying amount	$	23,068		$	20,658
Accumulated amortization	(8,937		)	(7,623		)
Net carrying amount	$	14,131		$	13,035

Amortization expense recognized on CDIs was $665 thousand and $724 thousand for the three months ended June 30, 2015 and 2014, respectively, and $1.3 million and $1.5 million for the six months ended June 30, 2015 and 2014, respectively, included as a component of “other expense” in the Consolidated Statements of Income.

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Goodwill

The Company recorded goodwill in the amount of $3.5 million associated with the acquisition of First of Huron Corporation completed February 6, 2015. Goodwill is deemed to have an indefinite life and is not amortized but instead is subject to an annual review for impairment.

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 commercial real estate servicing rights and the origination and purchase of agricultural servicing rights.  Loans serviced for others are not reported as assets in the Consolidated Balance Sheets.

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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 June 30, 2015
Fair value, beginning of period	$	621		$	—		$	53,788		$	54,409
Additions from loans sold with servicing retained	—			—			2,933			2,933
Changes in fair value due to:
Reductions from loans paid off during the period	(24		)	—			(1,570		)	(1,594		)
Changes due to valuation inputs or assumptions (1)	(17		)	—			3,163			3,146
Fair value, end of period	$	580		$	—		$	58,314		$	58,894
For the six months ended June 30, 2015
Fair value, beginning of period	$	691		$	—		$	69,907		$	70,598
Additions from loans sold with servicing retained	—			—			5,848			5,848
Reduction from loans sold and servicing rights sold (2)	—			—			(12,702		)	(12,702		)
Changes in fair value due to:
Reductions from loans paid off during the period	(53		)	—			(3,859		)	(3,912		)
Changes due to valuation inputs or assumptions (1)	(58		)	—			(880		)	(938		)
Fair value, end of period	$	580		$	—		$	58,314		$	58,894
Principal balance of loans serviced	$	187,948		$	—		$	5,835,932		$	6,023,880
For the three months ended June 30, 2014
Fair value, beginning of period	$	1,079		$	894		$	75,919		$	77,892
Additions from loans sold with servicing retained	—			57			2,102			2,159
Changes in fair value due to:
Reductions from loans paid off during the period	(11		)	(68		)	(1,668		)	(1,747		)
Changes due to valuation inputs or assumptions (1)	(231		)	(7		)	(3,962		)	(4,200		)
Fair value, end of period	$	837		$	876		$	72,391		$	74,104
For the six months ended June 30, 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	—			123			3,625			3,748
Changes in fair value due to:
Reductions from loans paid off during the period	(68		)	(137		)	(2,404		)	(2,609		)
Changes due to valuation inputs or assumptions (1)	(230		)	(72		)	(6,103		)	(6,405		)
Fair value, end of period	$	837		$	876		$	72,391		$	74,104
Principal balance of loans serviced	$	234,921		$	41,518		$	7,109,497		$	7,385,936

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

(2) $12.7 million of servicing rights were sold during the six months ended June 30, 2015 in connection with the sale of $1.2 billion of principal balance of loans serviced.

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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 June 30, 2015 and December 31, 2014.

	Commercial Real Estate			Mortgage
As of June 30, 2015
Prepayment speed	6.08 - 50.00%			3.68 - 36.97%
Weighted average (“WA”) discount rate	19.48		%	9.16		%
WA cost to service/per year	$	470		$	61
WA ancillary income/per year	N/A			35
WA float range	0.56		%	1.19-1.69%
As of December 31, 2014
Prepayment speed	6.41-50.00%			3.63-40.07%
WA discount rate	19.48		%	9.14		%
WA cost to service/per year	$	470		$	61
WA ancillary income/per year	N/A			35
WA float range	0.56		%	1.16-1.74%

The Company realized total loan servicing fee income of $2.5 million and $3.7 million for the three months ended June 30, 2015 and 2014, respectively, and $5.1 million and $7.3 million for the six months ended June 30, 2015 and 2014, respectively, recorded as a component of “Mortgage banking and other loan fees” in the Consolidated Statements of Income.

11.  DERIVATIVE INSTRUMENTS AND BALANCE SHEET OFFSETTING

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 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 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 for interest rate risk management purposes. 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 additionally utilizes interest rate swaps designated as cash flow hedges for risk management purposes to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  These interest rate swaps designated as cash flow hedges are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings and/or deposits.  The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative instrument with the changes in cash flows of the designated hedged transactions.  The interest rate swaps designated as cash flow hedges were determined to be fully effective during all periods presented.  As such, no amount of ineffectiveness has been included in net income.  Therefore, the aggregate fair value of the swaps is recorded in other assets (liabilities) with changes in fair value recorded in other comprehensive income (loss).  The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedge no longer be considered effective.  The Company expects the hedges to remain fully effective and does not expect any amounts to be reclassified from accumulated other comprehensive income due to ineffectiveness during the remaining terms of the swaps.

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The following table presents the notional amount and fair value of the Company’s derivative instruments held or issued for risk management purposes or in connection with customer-initiated and mortgage banking activities.

	June 30, 2015						December 31, 2014
			Fair Value						Fair Value
(Dollars in thousands)	Notional Amount (1)		Gross Derivative Assets (2)		Gross Derivative Liabilities (2)		Notional Amount (1)		Gross Derivative Assets (2)		Gross Derivative Liabilities (2)
Risk management purposes:
Derivatives designated as hedging instruments:
Interest rate swaps	$	22,000	$	337	$	134	$	12,000	$	—	$	222
Total risk management purposes	22,000		337		134		12,000		—		222
Customer-initiated and mortgage banking activities:
Forward contracts related to mortgage loans to be delivered for sale	196,416		863		—		114,828		—		803
Interest rate lock commitments	122,622		2,029		—		67,817		1,489		—
Customer-initiated derivatives	226,551		2,011		1,870		125,356		1,588		1,477
Total customer-initiated and mortgage banking activities	545,589		4,903		1,870		308,001		3,077		2,280
Total gross derivatives	$	567,589	$	5,240	$	2,004	$	320,001	$	3,077	$	2,502

(1) Notional or contract amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordance with the terms of the agreement.  These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in the Consolidated Balance Sheets.

(2) Derivative assets are included within “Other assets”  and derivative liabilities are included within “Other liabilities” on the Consolidated Balance Sheets.  Included in the fair value of the derivative assets are credit valuation adjustments for counterparty credit risk totaling $66 thousand at June 30, 2015 and $103 thousand at December 31, 2014.

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” in the Consolidated Statements of Income and is considered a cost of executing a forward contract.

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

		For the three months ended June 30,						For the the six months ended June 30,
(Dollars in thousands)	Location of Gain (Loss)	2015			2014			2015			2014
Forward contracts related to mortgage loans to be delivered for sale	Net gain on sale of loans	$	2,355		$	(6,915	)	$	1,211		$	(9,909	)
Interest rate lock commitments	Net gain on sale of loans	(1,620		)	1,274			542			1,136
Customer-initiated derivatives	Other noninterest income	(122		)	6			(38		)	19
Total gain (loss) recognized in income		$	613		$	(5,635	)	$	1,715		$	(8,754	)

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The following table presents the net gains (losses) recorded in accumulated other comprehensive income and the Consolidated Statements of Income relating to interest rate swaps designated as cash flow hedges for the three and six months ended June 30, 2015.  We had no interest rate swaps designated as cash flow hedges in the three and six months ended June 30, 2014.

(Dollars in thousands)	Amount of gain (loss) recognized in other comprehensive income (Effective portion)		Amount of gain (loss) reclassified from other comprehensive income to interest income or expense (Effective portion)			Amount of gain (loss) recognized in other non interest income (Ineffective portion)
For the three months ended June 30, 2015
Interest rate swaps designated as cash flow hedges	$	558	$	(104	)	$	—
For the six months ended June 30, 2015
Interest rate swaps designated as cash flow hedges	$	233	$	(192	)	$	—

At June 30, 2015, the Company expected $363 thousand of unrealized losses to be reclassified as an increase to interest expense during the following 12 months.

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

Balance Sheet Offsetting

Certain financial instruments, including derivatives (interest rate swaps designated as cash flow hedges and customer-initiated derivatives), may be eligible for offset in the Consolidated Balance Sheet and/or subject to master netting arrangements or similar agreements.  The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes.  The tables below present information about the Company’s financial instruments that are eligible for offset.

							Gross amounts not offset in the statement of financial position
(Dollars in thousands)	Gross amounts recognized		Gross amounts offset in the statement of financial condition		Net amounts presented in the statement of financial position		Financial instruments			Collateral (received)/posted		Net Amount
June 30, 2015
Offsetting derivative assets
Derivative assets	$	2,348	$	—	$	2,348	$	(2,004	)	$	1,570	$	1,914
Offsetting derivative liabilities
Derivative liabilities	2,004		—		2,004		(2,004		)	—		—
December 31, 2014
Offsetting derivative assets
Derivative assets	$	1,588	$	—	$	1,588	$	(1,588	)	$	1,689	$	1,689
Offsetting derivative liabilities
Derivative liabilities	1,699		—		1,699		(1,588		)	111		—

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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, accounts receivable, 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 $617 thousand and $539 thousand at June 30, 2015 and December 31, 2014, 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:

	June 30, 2015						December 31, 2014
(Dollars in thousands)	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Commitments to extend credit	$	642,049	$	623,846	$	1,265,895	$	502,762	$	463,362	$	966,124
Standby letters of credit	62,313		3,441		65,754		69,305		4,197		73,502
Total commitments	$	704,362	$	627,287	$	1,331,649	$	572,067	$	467,559	$	1,039,626

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 $26.8 million and $39.8 million at June 30, 2015 and December 31, 2014, 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 $20.2 million and $31.6 million at June 30, 2015 and December 31, 2014, respectively.  In the event of nonperformance, we have rights to the underlying collateral securing the loans.  As of June 30, 2015 and December 31, 2014, we had recorded a liability of $170 thousand and $355 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 June 30, 2015 and December 31, 2014, our standby letters of credit totaled $65.8 million and $73.5 million, respectively.

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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 June 30, 2015 and December 31, 2014, our liability recorded in connection with these representations and warranties totaled $2.0 million and $4.0 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.

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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.

	June 30, 2015				December 31, 2014
(Dollars in thousands)	Amount		Weighted Average Rate (1)		Amount		Weighted Average Rate (1)
Short-term borrowings:
Securities sold under agreements to repurchase: 0.05% - 0.10% variable-rate notes	$	23,945	0.10	%	$	25,743	0.10	%
FHLB advances: 0.24% - 0.30% fixed-rate notes	200,000		0.27		100,000		0.29
FHLB advances: 0.43% variable-rate notes	—		—		10,000		0.43
Holding company line of credit: floating-rate based on one-month LIBOR plus 3.00%	30,000		3.19		—		—
Total short-term borrowings	253,945		0.60		135,743		0.26
Long-term debt:
FHLB advances: 0.26% - 7.44% fixed-rate notes due 2015 to 2027 (2)	344,001		1.40		286,804		1.57
Securities sold under agreements to repurchase: 4.11% - 4.30% fixed-rate notes due 2016 to 2037 (3)	55,623		4.19		56,444		4.19
Subordinated notes related to trust preferred securities: floating-rate based on three-month LIBOR plus 1.45% - 2.85% due 2034 to 2035 (4)	10,794		2.52		10,724		2.48
Subordinated notes related to trust preferred securities: floating-rate based on three-month LIBOR plus 3.25% due September 2032 (5)	4,529		3.53		—		—
Total long-term debt	414,947		1.83		353,972		2.02
Total short-term borrowings and long-term debt	$	668,892	1.36	%	$	489,715	1.53	%

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

(2) The June 30, 2015 balance includes advances payable of $338.5 million and purchase accounting premiums of $5.5 million. The December 31, 2014 balance includes advances payable of $280.1 million and purchase accounting premiums of $6.7 million.

(3) The June 30, 2015 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting premiums of $5.6 million. The December 31, 2014 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting premiums of $6.4 million.

(4) The June 30, 2015 balance includes subordinated notes related to trust preferred securities of $15.0 million and purchase accounting discounts of $4.2 million.  The December 31, 2014 balance includes subordinated notes related to trust preferred securities of $15.0 million and purchase accounting discounts of $4.3 million.

(5) The June 30, 2015 balance includes subordinated notes related to trust preferred securities of $5.0 million and purchase accounting discounts of $471 thousand.

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

	For the three months ended June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Securities sold under agreement to repurchase:
Average daily balance	$	19,390		$	86,444		$	19,911		$	77,054
Average interest rate during the period	0.10		%	0.13		%	0.10		%	0.11		%
Maximum month-end balance	$	23,945		$	148,826		$	23,945		$	148,826
FHLB advances:
Average daily balance	$	33,517		$	38,806		$	26,022		$	19,634
Average interest rate during the period	0.27		%	0.13		%	0.27		%	0.16		%
Maximum month-end balance	$	200,000		$	90,000		$	200,000		$	90,000
Federal funds purchased:
Average daily balance	$	—		$	1,132		$	696		$	2,254
Average interest rate during the period	—		%	0.28		%	0.31		%	0.25		%
Maximum month-end balance	$	—		$	—		$	126,000		$	—
FHLB overnight repurchase agreements:
Average daily balance	$	—		$	—		$	—		$	4,420
Average interest rate during the period	—		%	—		%	—		%	0.10		%
Maximum month-end balance	$	—		$	—		$	—		$	—
Holding company line of credit:
Average daily balance	$	22,912		$	—		$	16,271		$	11,215
Average interest rate during the period	3.18		%	—		%	3.18		%	3.17		%
Maximum month-end balance	$	30,000		$	—		$	30,000		$	35,000

Securities sold under agreements to repurchase represent funds deposited with the banks by retail customers (short-term borrowings), of which up to $250 thousand is covered by FDIC insurance for each depositor.  Securities sold under agreements to repurchase are typically delivered to the counterparty when they are wholesale borrowings with brokerage firms (long-term debt). At maturity, the securities underlying the agreements are returned to the banks.  Securities sold under agreements to repurchase are additionally collateralized by residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government sponsored enterprises with a carrying value of $83.7 million at June 30, 2015 which are not covered by FDIC insurance. The Company's securities sold under agreements to repurchase do not qualify as sales for accounting purposes.

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.  At June 30, 2015, FHLB advances were collateralized by $2.1 billion of commercial and mortgage loans, with $1.2 billion in the form of a blanket lien arrangement and $903.4 million under specific lien arrangements.  Based on this collateral, the Company is eligible to borrow up to an additional $808.5 million at June 30, 2015; however, due to Board resolutions, this amount is limited to an additional $440.3 million.

 In the first half of 2015, we drew $20.0 million in order to facilitate our repurchase of 2.5 million warrants to repurchase shares of our Class A common stock of an aggregate purchase price of $19.9 million and $10.0 million for working capital on our existing line of credit.

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14. INCOME TAXES

Provision for income taxes is computed by applying an estimated annual effective tax rate, based on our forecast of annual income from continuing operations, and then adjusting for any additional tax effects required to be recorded discreetly 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 June 30,										For the six months ended June 30,
	2015					2014					2015					2014
(Dollars in thousands)	Amount			Rate		Amount			Rate		Amount			Rate		Amount			Rate
Tax based on federal statutory rate	$	9,004		35.0	%	$	5,726		35.0	%	$	13,860		35.0	%	$	18,526		35.0	%
Effect of:
Tax exempt income	(644		)	(2.6	)	(475		)	(2.9	)	(1,275		)	(3.2	)	(1,202		)	(2.3	)
State taxes, net of federal benefit	194			0.8		201			1.2		460			1.2		469			0.9
Change in valuation allowance	—			—		(9,749		)	(59.6	)	—			—		(10,127		)	(19.1	)
Bargain purchase gain	—			—		—			—		—			—		(14,692		)	(27.9	)
Transaction costs	18			0.1		426			2.6		47			0.1		454			0.9
Other, net	(393		)	(1.5	)	(375		)	(2.3	)	(472		)	(1.2	)	670			1.3
Income tax expense (benefit)	$	8,179		31.8	%	$	(4,246	)	(26.0	)%	$	12,620		31.9	%	$	(5,902	)	(11.2	)%

15.  STOCK-BASED COMPENSATION

The Company’s 2009 Equity Incentive Plan (the “Plan”), along with amendments made to the Plan, limits the number of shares issued or issuable to employees, directors and certain consultants at 9.8 million shares of common stock.  As of June 30, 2015, 1.2 million shares were available to be awarded under the Plan.

Stock Options

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.  For the six months ended June 30, 2015, there were no stock options granted. During the six months ended June 30, 2014, the Company granted 35 thousand stock options that were fully vested upon issuance and will remain outstanding for 10 years after the grant date.

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 the relatively short history of Company stock being publicly traded during the six months ended June 30, 2014, post our public offering in February of 2014, it was not practicable for the Company to estimate volatility of its share price. For the six months ended June 30, 2014 the Company used the average volatility of comparable public Bank holding companies as an input to the valuation model. Since limited historical data is available, the expected term of options granted was estimated to be six years for the six months ended June 30, 2014 based on expected lives used by a sample of other Midwest banks. 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. The expected dividend yield is based on historical and projected dividend patterns of the Company’s common shares. At the time the shares were granted in 2014 there were not any expected dividends projected. All shares granted are expected to vest and the Company intends to issue already authorized shares to satisfy options upon exercise.

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The fair value of options granted during the six months ended June 30, 2014 was determined using the following weighted-average assumptions as of the grant date.

	For the six months ended
	June 30, 2014
Fair value of options granted	$	4.77
Expected dividend yield	—		%
Expected volatility	30.02		%
Risk-free interest rate	1.98		%
Expected life (in years)	6.00

Activity in the Plan during the six months ended June 30, 2015 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, 2015	7,958		$	6.96
Exercised (1)	(599	)	6.77
Outstanding at June 30, 2015	7,359		6.98		6.22	71,894
Options fully vested	7,359		6.98		6.22	71,894
Exercisable at June 30, 2015	7,359		6.98		6.22	71,894

(1) Options exercised during the six months ended June 30, 2015 had a weighted average fair value of $15.74, at respective exercise dates.

The total intrinsic value of stock options exercised was $5.4 million for the six months ended June 30, 2015.

Total cash received from option exercises during the six months ended June 30, 2015 was $210 thousand, resulting in the issuance of 35 thousand shares.  During the three months ended June 30, 2015, there were 210 thousand shares issued under the net-settlement option.  The tax benefit realized from option exercises during the six months ended June 30, 2015 was $1.4 million.

All of the Company’s shares were fully vested prior to January 1, 2015 and there was no unrecognized compensation cost related to nonvested stock options granted under the Plan.  Total compensation expense for stock options, included in “Salary and employee benefits” in the Consolidated Statements of Income, was $207 thousand and $387 thousand for the three and six months ended June 30, 2014, respectively.

Restricted Stock Awards

Under the Plan, the Company can grant restricted stock awards that vest upon completion of future service requirements or specified performance criteria.  The fair value of these awards is equal to the market price of the common stock at the date of grant.  The Company recognizes stock-based compensation expense for these awards over the vesting period, using the straight-line method, based upon the number of shares of restricted stock ultimately expected to vest.  Restricted stock awards granted vest in their entirety following a five-year service period for employees and over a one-year service period for directors.  Restricted stock awards granted to directors during the six months ended June 30, 2015 additionally contain performance-based vesting conditions. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  If an individual awarded restricted stock awards terminates employment prior to the end of the vesting period, the unvested portion of the stock award is forfeited.

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The following table provides information regarding nonvested restricted stock awards:

Nonvested Restricted Stock Awards	Shares (in thousands)		Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2015	378		$	14.44
Granted	354		14.98
Vested	(19	)	14.44
Forfeited	(2	)	14.44
Nonvested at June 30, 2015	711		$	14.71

Total expense for restricted stock awards totaled $515 thousand for the three months ended June 30, 2015, of which $441 thousand was included in “Salary and employee benefits” related to employees and $74 thousand was included in “Professional fees” related to directors in the Consolidated Statements of Income.  For the six months ended June 30, 2015, total expense for restricted stock awards totaled $866 thousand, of which $739 thousand was included in "Salary and employee benefits" related to employees and $127 thousand was included in "Professional fees" related to directors in the Consolidated Statements of Income. For the three and six months ended June 30, 2014, total expense for restricted stock awards totaled $67 thousand for both periods, of which $50 thousand was included in "Salary and employee benefits" related to employees and $17 thousand was included in "Professional fees" related to director in the Consolidated Statements of Income. As of June 30, 2015, the total compensation costs related to nonvested restricted stock that has not yet been recognized totaled $9.2 million and the weighted-average period over which these costs are expected to be recognized is 4.2 years.

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 June 30, 2015, 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.

Effective January 1, 2015 we adopted the new Basel III regulatory capital framework as approved by federal banking agencies, which are subject to a multi-year phase-in period.  The adoption of this new framework modified the calculation of the various capital ratios, added a new ratio, common equity tier 1, and revised the adequately and well capitalized thresholds. In addition, Basel III establishes a new capital conservation buffer of 2.5% of risk-weighted assets, which is phased-in over a four-year period beginning January 1, 2016.

At June 30, 2015 and December 31, 2014, 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 June 30, 2015 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.

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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.

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The following is a summary of actual and required capital amounts and ratios in accordance with current regulatory standards:

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2015 (Basel III Transitional)
Total capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	$	772,889	15.0	%	$	412,749	8.0	%	N/A		N/A
Talmer Bank and Trust	653,191		14.2		368,064		8.0		$	460,080	10.0	%
Talmer West Bank (1)	136,659		24.8		44,168		8.0		N/A		N/A
Common equity tier 1 capital
Talmer Bancorp, Inc. (Consolidated)	717,196		13.9		232,171		4.5		N/A		N/A
Talmer Bank and Trust	606,576		13.2		207,036		4.5		299,052		6.5
Talmer West Bank (1)	129,474		23.5		24,844		4.5		N/A		N/A
Tier 1 capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	717,196		13.9		309,561		6.0		N/A		N/A
Talmer Bank and Trust	606,576		13.2		276,048		6.0		368,064		8.0
Talmer West Bank (1)	129,474		23.5		33,126		6.0		N/A		N/A
Tier 1 leverage ratio
Talmer Bancorp, Inc. (Consolidated)	717,196		11.5		249,398		4.0		N/A		N/A
Talmer Bank and Trust	606,576		11.1		217,889		4.0		272,361		5.0
Talmer West Bank (1)	129,474		16.6		31,213		4.0		N/A		N/A
December 31, 2014 (Basel I)
Total capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	$	720,552	16.4	%	$	350,645	8.0	%	N/A		N/A
Talmer Bank and Trust	627,851		16.3		308,374		8.0		$	385,468	10.0	%
Talmer West Bank (1)	101,926		19.6		41,628		8.0		N/A		N/A
Tier 1 capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	666,035		15.2		175,323		4.0		N/A		N/A
Talmer Bank and Trust	579,604		15.0		154,187		4.0		231,281		6.0
Talmer West Bank (1)	95,656		18.4		20,814		4.0		N/A		N/A
Tier 1 leverage ratio
Talmer Bancorp, Inc. (Consolidated)	666,035		11.6		230,546		4.0		N/A		N/A
Talmer Bank and Trust	579,604		11.6		200,128		4.0		250,160		5.0
Talmer West Bank (1)	95,656		12.4		30,786		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.

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.  These limitations can affect Talmer Bank and Trust’s ability to pay dividends. During the three months ended June 30, 2015 and 2014, Talmer Bank and Trust paid no dividends, while for the six months ended June 30, 2015 and 2014, dividends of $15.0 million and $25.0 million, respectively, were paid to the Company.

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Under FDIC regulations, limitations are imposed on all of Talmer West Bank’s capital distributions, including cash dividends.  As of June 30, 2015, Talmer West Bank was not able to pay any dividends without prior regulatory approval.

On July 29, 2015, a cash dividend on the Company’s Class A common stock of $0.01 per share was declared.  The dividend will be paid on August 21, 2015, to the Company’s Class A common shareholders of record as of August 10, 2015.

17.  PARENT COMPANY FINANCIAL STATEMENTS

Balance Sheets - Parent Company

(Dollars in thousands)	June 30, 2015		December 31, 2014
Assets
Cash and cash equivalents	$	10,628	$	9,497
Investment in banking subsidiaries	792,467		756,452
Income tax benefit	8,429		7,975
Other assets	681		655
Total assets	$	812,205	$	774,579
Liabilities
Short-term borrowings	$	30,000	$	—
Long-term debt	15,322		10,724
Accrued expenses and other liabilities	477		2,248
Total liabilities	45,799		12,972
Shareholders’ equity	766,406		761,607
Total liabilities and shareholders’ equity	$	812,205	$	774,579

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Statements of Income and Comprehensive Income - Parent Company

	For the three months ended June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015		2014
Income
Dividend income from subsidiary	$	—		$	—		$	15,000	$	25,000
Bargain purchase gain	—			—			—		41,977
Other noninterest income	4			3			9		5
Total income	4			3			15,009		66,982
Expenses
Salaries and employee benefits	1,671			2,042			2,892		5,955
Bank acquisition and due diligence fees	159			266			1,155		1,974
Professional service fees	491			492			868		1,086
Insurance expense	33			213			113		367
Marketing expense	35			26			49		191
Interest on short-term borrowings	187			—			261		151
Interest on long-term debt	182			125			344		252
Other	59			80			173		147
Total expenses	2,817			3,244			5,855		10,123
Income (loss) before income taxes and equity in undistributed net earnings of subsidiaries	(2,813		)	(3,241		)	9,154		56,859
Income tax benefit	1,082			420			1,735		2,457
Equity in (over)/under distributed earnings of subsidiaries	19,279			23,427			16,092		(483		)
Net income	$	17,548		$	20,606		$	26,981	$	58,833
Total comprehensive income, net of tax	$	17,548		$	20,606		$	26,981	$	58,833

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Statements of Cash Flows - Parent Company

	For the six months ended June 30,
(Dollars in thousands)	2015			2014
Cash flows from operating activities
Net income	$	26,981		$	58,833
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in over (under) distributed earnings of subsidiaries	(16,092		)	483
Gain on acquisition	—			(41,977		)
Stock-based compensation expense	371			248
(Increase) decrease in income tax benefit	(71		)	139
Decrease in other assets, net	168			629
Increase (decrease) in accrued expenses and other liabilities, net	(4,194		)	317
Net cash from operating activities	7,163			18,672
Cash flows from investing activities
Cash (used in) proceeds from acquisitions	(13,323		)	(6,500		)
Capital contributions to subsidiaries	—			(99,500		)
Refund of investment	2,225			—
Net cash used in investing activities	(11,098		)	(106,000		)
Cash flows from financing activities
Issuance of common stock	—			42,075
Restricted stock awards tax benefits	16			—
Exercise of stock options, including tax benefit	(143		)	(661		)
Repurchase of warrants to repurchase 2.5 million shares, at fair value	(19,892		)	—
Cash dividends paid on common stock (1)	(1,415		)	—
Draw on senior unsecured line of credit	30,000			—
Repayment of senior unsecured line of credit	—			(35,000		)
Repayment of long-term debt	(3,500		)	—
Net cash from financing activities	5,066			6,414
Net increase (decrease) in cash and cash equivalents	1,131			(80,914		)
Beginning cash and cash equivalents	9,497			98,411
Ending cash and cash equivalents	$	10,628		$	17,497

(1) $0.02 per share for the six months ended June 30, 2015.

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18.  EARNINGS PER COMMON SHARE

The two-class method is used in the calculation of basic and diluted earnings per share.  Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participating rights in undistributed earnings.  Common shares outstanding include common stock and vested restricted stock awards, when applicable. The factors used in the earnings per share computation follow:

	For the three months ended June 30,						For the six months ended June 30,
(In thousands, except per share data)	2015			2014			2015			2014
Net income	$	17,548		$	20,606		$	26,981		$	58,833
Net income allocated to participating securities	174			26			211			37
Net income allocated to common shareholders (1)	$	17,374		$	20,580		$	26,770		$	58,796
Weighted average common shares - issued	71,006			70,107			70,814			69,115
Average unvested restricted share awards	(705		)	(86		)	(555		)	(44		)
Weighted average common shares outstanding - basic	70,301			70,021			70,259			69,071
Effect of dilutive securities -
Employee and director stock options	4,339			4,112			4,174			3,991
Warrants	260			1,526			613			1,469
Weighted average common shares outstanding - diluted	74,900			75,659			75,046			74,531
EPS available to common shareholders
Basic	$	0.25		$	0.29		$	0.38		$	0.85
Diluted	$	0.23		$	0.27		$	0.36		$	0.79

(1) Net income allocated to common shareholders for basic and diluted earnings per share may differ under the two-class method as a result of adding common share equivalents for options and warrants to dilutive shares outstanding, which alters the ratio used to allocate net income to common shareholders and participating securities for the purposes of calculating diluted earnings per share.

For the effect of dilutive securities, the average stock valuation is $16.14 per share and $13.77 per share for the three months ended June 30, 2015 and 2014, respectively and the average stock valuation is $15.12 per share and assumed to be $13.24 per share for the six months ended June 30, 2015 and 2014, respectively.

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 because they were antidilutive.  There were no outstanding antidilutive warrants or options during the three and six months ended June 30, 2015 and no outstanding antidilutive warrants or options for the three and six months ended June 30, 2014.

(Shares in thousands)	For the three months ended June 30, 2014		For the six months ended June 30, 2014
Average outstanding options	8		4
Outstanding exercise prices:
Low end	$	14.44	$	14.44
High end	$	14.44	$	14.44

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19. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss) by component, net of tax, were as follows:

(Dollars in thousands)	Unrealized gains (losses) on securities available-for-sale, net of tax				Unrealized gains (losses) on cash flow hedges, net of tax				Total unrealized gains (losses), net of tax
Three months ended June 30, 2015
Beginning balance	$	6,939			$	(299	)		$	6,640
Other comprehensive income (loss) before reclassifications	(4,831		)		362				(4,469		)
Amounts reclassified from accumulated other comprehensive income	(3		)	(1)	68			(2)	65
Net current period other comprehensive income (loss)	(4,834		)		430				(4,404		)
Ending balance	$	2,105			$	131			$	2,236
Three months ended June 30, 2014
Beginning balance	$	(2,415	)		$	—			$	(2,415	)
Other comprehensive income before reclassifications	4,648				—				4,648
Amounts reclassified from accumulated other comprehensive income	—			(1)	—				—
Net current period other comprehensive income	4,648				—				4,648
Ending balance	$	2,233			$	—			$	2,233
Six months ended June 30, 2015
Beginning balance	$	3,995			$	(145	)		$	3,850
Other comprehensive income (loss) before reclassifications	(1,956		)		151				(1,805		)
Amounts reclassified from accumulated other comprehensive income	66			(1)	125			(2)	191
Net current period other comprehensive income (loss)	(1,890		)		276				(1,614		)
Ending balance	$	2,105			$	131			$	2,236
Six months ended June 30, 2014
Beginning balance	$	(7,996	)		$	—			$	(7,996	)
Other comprehensive income before reclassifications	8,728				—				8,728
Amounts reclassified from accumulated other comprehensive income	1,501			(1)	—				1,501
Net current period other comprehensive income	10,229				—				10,229
Ending balance	$	2,233			$	—			$	2,233

(1) Amounts are included in “Net gain (loss) on sales of securities” in the Consolidated Statements of Income within total noninterest income and were net gains of $6 thousand and $0 for the three months ended June 30, 2015 and 2014, respectively, and net losses of $101 thousand and $2.3 million for the six months ended June 30, 2015 and 2014, respectively.  Income tax provision (benefit) associated with the reclassification adjustments for three months ended June 30, 2015 and 2014 was an expense of $3 thousand and $0, respectively, and for the six months ended June 30, 2015 and 2014 was a benefit of $35 thousand and $809 thousand, respectively, and are included in “Income tax provision (benefit)” in the Consolidated Statements of Income.

(2) Amount is included in “Other brokered funds” in the Consolidated Statements of Income within total interest expense and was $104 thousand for the three months ended June 30, 2015, and $192 thousand for the six months ended June 30, 2015. Income tax benefit associated with the reclassification adjustment for the three months ended June 30, 2015 was $36 thousand and for the six months ended June 30, 2015 was $67 thousand and included in “Income tax provision (benefit)” in the Consolidated Statements of Income.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion describes our results of operations for the three and six months ended June 30, 2015 and June 30, 2014 and also analyzes our financial condition as of June 30, 2015 as compared to December 31, 2014. This discussion should be read in conjunction with our consolidated financial statements and accompanying footnotes appearing in this report and in conjunction with the financial statements and related notes and disclosures in our 2014 Annual Report on Form 10-K.

In this report, unless the context suggests otherwise, references to “Talmer Bancorp, Inc.,” “the Company,” “we,” “us,” and “our” mean the combined business of Talmer Bancorp, Inc. and its subsidiary banks, Talmer Bank and Trust (“Talmer Bank”) and Talmer West Bank.

We have made, and will continue to make, various forward-looking statements with respect to financial and business matters. Comments regarding our business that are not historical facts are considered forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in these forward-looking statements. For additional information regarding our cautionary disclosures, see the “Cautionary Note Regarding Forward-Looking Statements” beginning on page 1 of this report.

Business Overview

Talmer Bancorp, Inc. is a bank holding company headquartered in Troy, Michigan.  Between April 30, 2010 and June 30, 2015, we successfully completed eight acquisitions totaling $6.0 billion in assets and $6.1 billion in liabilities.  Through our wholly-owned subsidiary banks, Talmer Bank and Talmer West Bank, we are a full service community bank offering a full suite of commercial banking, retail banking, mortgage banking, wealth management and trust services to small and medium-sized businesses and individuals primarily within Southeastern Michigan, Western Michigan and in smaller communities in Northeastern Michigan, as well as Northeastern Ohio, Chicago, Illinois, Northern Indiana, and Las Vegas, Nevada.

Given our strong capital position, local market knowledge and experienced leadership team, management believes we have a competitive advantage in the markets that we serve.  We have retained a seasoned community bank management team with executive management experience in community banks located in our Midwest markets. With a well-managed, financially sound and well-capitalized Talmer Bank, management believes it has significant opportunities to expand in the current market environment through organic growth and strategic acquisitions of banking franchises in our concentrated markets of Michigan, Ohio and Indiana, as well as the Chicago Metropolitan area of Illinois.

Our product line includes loans to small and medium-sized businesses, residential mortgage loans, commercial real estate loans, residential and commercial construction and development loans, farmland and agricultural production loans, home equity loans, consumer loans and a variety of commercial and consumer demand, savings and time deposit products.  We also offer online banking and bill payment services, online cash management, safe deposit box rentals, debit card and ATM card services and the availability of a network of ATMs for our customers.

We have grown substantially since our operations began in August of 2007 through a combination of organic growth and acquisitions.  Since April 30, 2010, Talmer Bank has acquired the following four banks from the FDIC, as receiver, all of which have been fully integrated into our operations:

•CF Bancorp, Port Huron, Michigan on April 30, 2010;

•First Banking Center, Burlington, Wisconsin on November 19, 2010;

•Peoples State Bank, Hamtramck, Michigan on February 11, 2011; and

•Community Central Bank, Mount Clemens, Michigan on April 29, 2011.

On December 15, 2011, we closed on the acquisition of Lake Shore Wisconsin Corporation, which divested its subsidiary, Hiawatha National Bank, to its shareholders prior to closing.  Lake Shore Wisconsin Corporation’s

remaining assets consisted of approximately $26.0 million in cash and cash equivalents, which we acquired in the transaction.

On January 1, 2013, we closed on the acquisition of First Place Bank acquiring $2.6 billion in assets at fair value, including $1.5 billion in loans, net of unearned income, $139.8 million in investment securities, $42.0 million in loan servicing rights, and $18.4 million of other real estate owned. We also acquired $2.5 billion of liabilities at fair value, including $2.1 billion of retail deposits with a core deposit intangible of $9.8 million, and $334.8 million of debt.  First Place Bank was merged into Talmer Bank on February 10, 2014.

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On January 1, 2014, we closed on the acquisition of Talmer West Bank, formerly Michigan Commerce Bank, acquiring $910.3 million in assets at a fair value, including $571.7 million in loans, net of unearned income, $13.6 million in investment securities, $30.9 million in other real estate owned and $767 thousand in loan servicing rights. We also acquired $861.8 million of liabilities at fair value, including $857.8 million of retail deposits with a core deposit intangible of $3.6 million.  At the time of our acquisition of Talmer West Bank on January 1, 2014, Talmer West Bank was subject to a Consent Order with its regulators, which remains in effect.  For a further discussion of the Consent Order, see “Talmer West Bank Consent Order with the FDIC and Michigan Department of Insurance and Financial Services” in “Supervision and Regulation” of our 2014 Annual Report on Form 10-K.

On February 6, 2015, we closed on the acquisition of First of Huron Corp. acquiring $228.3 million in assets at fair value, including $162.3 million in loans, net of unearned income and $34.0 million in investment securities.  We also acquired $218.4 million of liabilities at fair value, including $201.5 million of retail deposits and $13.1 million of debt.

As of June 30, 2015, we had $4.5 billion in total loans, compared to $4.2 billion at December 31, 2014.  Over 63% of our total loans at June 30, 2015 were generated through non-acquisition growth, primarily as a result of the various commercial and residential lenders that we hired over the past five years.  Of the $4.5 billion in total loans at June 30, 2015, $1.6 billion, or 36.4%, consisted of loans we acquired in transactions discussed above (all of which were adjusted to their estimated fair values at the time of acquisition).

We had net income of $27.0 million for the six months ended June 30, 2015, compared to $58.8 million for the six months ended June 30, 2014.  During the six months ended June 30, 2015 we incurred $3.8 million of transaction and integration related expenses including severance expense, data processing fees, professional service fees and bank acquisition and due diligence fees primarily related to our successful acquisition of First of Huron Corp.  Net income for the six months ended June 30, 2014, included a bargain purchase gain of $42.0 million resulting from our acquisition of Talmer West Bank and $11.9 million of transaction and integration related expenses.  While we continue to explore additional acquisition opportunities, there is no certainty that bargain purchase gains of any amount will be recognized as a result of any future closed transactions.  We completed the operational integrations of both Talmer West Bank and First of Huron Corp. in February of 2015.  We continue to centralize the back-office functions of our acquired banks, as well as realize cost savings through the use of third party vendors and technology, in order to take advantage of economies of scale as we continue to grow.  We place our focus on initiatives that we believe will provide opportunities to enhance earnings, including the continued rationalization of our retail banking footprint through the evaluation of possible branch consolidations or opportunities to sell branches.

As of June 30, 2015, our total assets were $6.4 billion, our net total loans were $4.5 billion, our total deposits were $4.9 billion and our total shareholder’s equity was $766.4 million.

In this report, we refer to our eight completed acquisitions collectively as the “acquisitions.” In addition, we refer to loans subject to loss share agreements with the FDIC as “covered loans” and loans that are not subject to loss share agreements with the FDIC as “uncovered loans.” All of the loans and other real estate covered under the loss share agreements with the FDIC are referred to as “covered assets.” We refer to our loans acquired in our acquisitions as “acquired loans,” regardless of whether they are covered under loss share agreements with the FDIC.

Economic Overview

Gross Domestic Product (“GDP”) growth in the first quarter 2015 decreased 0.2% compared to the fourth quarter 2014 growth of 2.2% and the third quarter 2014 growth of 5.0%, as indicated by the Bureau of Economic Analysis report published by the U.S. Department of Commerce. Economists believe this decrease to be the result of an unusually hard winter and expect second quarter 2015 to show a return to growth.

According to the U.S. Bureau Labor Statistics, the unemployment rate (seasonally adjusted) continued to fall to 5.3% as of June 30, 2015, down from 5.6% as of December 31, 2014 and 6.7% as of December 31, 2013. While the unemployment rate did show continued signs of improvement, recent jobs reports have been lower than expected by leading economists.

Total home sales in the U.S., as indicated by the National Association of Realtors, showed mixed signs with existing home sales at a seasonally adjusted 4.7 million units for the rolling twelve months ended May 31, 2015, up 9.7% from the rolling twelve month total of 4.3 million units as of May 31, 2014. Inventory levels fell to a 5.2 months’ supply, or 2 million units, as of May 31, 2015, compared to a 5.6 months’ supply as of May 31, 2014. New home sales were up to a seasonally adjusted annual rate of 546 thousand units as of May 31, 2015, up 19.5% from 457 thousand as of May 31, 2014. Inventory for new homes decreased to a 4.5 months’ supply as of May 31, 2015 versus a 5.1 months’ supply as of May 31, 2014, while the median sales price of new homes fell 1% to $283 thousand for the same period. Home values of existing homes, as indicated

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by the Case-Shiller 20 city index (seasonally adjusted), showed an increase of 4.9% from April 2014 to April 2015. However, the pace of increasing values has fallen from the April 2014 year over year increase of 10.8%.

Bankruptcy filings, per the U.S. Court Statistics, also improved with total filings down 6.1% for the 12 months ending June 30, 2015, compared to the 12 months ending December 31, 2014, with business filings down 7.2% and personal filings down 6.1% for the period. It should be noted that the pace of reduction has slowed, and that business filings in Northern Illinois were up 6.8%, the first increases in over 3 years.

Consumer delinquencies saw some improvement during the period with prime mortgage delinquency falling to 3.18% as of May 31, 2015 versus 3.25% as of December 31, 2014 and 3.53% as of December 31, 2013, according to the Mortgage Bankers Association. New foreclosures on prime loans were at 0.28% as of May 31, 2015, unchanged from December 31, 2014 but down from 0.35% as of December 31, 2013. According to S&P Indices, first mortgages in default were also down at 0.74% as of May 31, 2015 from 0.92% as of May 31, 2014.

According to the Beige Book published by the Federal Reserve Board in June 2015, overall economic activity was improved. The Fourth (Cleveland) Federal Reserve District reported a slight pace of expansion, while the Seventh (Chicago) Federal Reserve District and the twelfth District (San Francisco) reported moderate growth. 

On balance, the Cleveland District’s economy expanded at a slight pace. Activity at manufacturing plants was mixed. Nonresidential building contractors reported a strong boost in activity; homebuilders saw a mild pickup in single-family starts during April following a slow first quarter. Retail sales were marginally higher than those of a year ago, while new car sales fell slightly year-over-year. Activity in the Marcellus and Utica Shales leveled out after a sharp decline in the first quarter. Most freight haulers indicated that volume has softened over the period. The demand for business and consumer credit continued to move slowly higher. Payrolls in the Cleveland District showed little changed on net. Staffing firms reported a pickup in the number of job openings in healthcare, IT, and manufacturing. However, job placements did not keep pace because of difficulty in finding qualified applicants, especially for technical positions. Upward pressure on wages is limited to experienced and technically skilled personnel. Overall, input and finished-goods prices were steady. There were reports about declines in prices for steel, beef, and dairy products, and rising prices for some building materials and diesel fuel.

Growth in economic activity in the Chicago District remained moderate in April and early May, and contacts expected growth to continue at a similar pace over the next six to twelve months. Consumer spending, business spending, and manufacturing production all grew moderately, while construction and real estate activity increased at a somewhat slower pace. Credit conditions improved some. Cost pressures generally changed little, with low prices for most raw materials and a slight increase in wages. Overall, crops prices fell and livestock prices rose. Growth in consumer spending was moderate in April and early May. Contacts reported strong sales in the restaurant, entertainment, and sporting goods sectors, while the seasonal pickup in home furnishings and lawn and garden equipment came in as expected. Relatively slower growth persisted in apparel and food and beverages. Growth in business spending remained moderate. Most manufacturers and retailers reported comfortable inventory levels. Exceptions included steel service centers, where stocks remained elevated because of the large volume of imports in the beginning of the year, and auto dealers that sell high volumes of cars, where inventories were elevated because of the shift in demand towards light trucks. The pace of capital spending picked up somewhat and plans for the next six to twelve months continued to indicate steady growth in expenditures. Outlays were again primarily for replacement of industrial and IT equipment, though many contacts also reported spending for capacity expansion. Of those currently expanding capacity, most reported that increased demand was motivating the increase, though many also said the increase was a by-product of replacing obsolete equipment with newer capital.

Economic activity in the San Francisco District expanded at a moderate pace during the reporting period of early April to late May. Overall price inflation firmed somewhat, while wage gains picked up a bit but remained moderate on balance. Retail sales and demand for consumer services grew moderately. Manufacturing activity was mixed but appeared to have been flat overall. Agricultural output expanded. Real estate activity strengthened, predominantly in the multifamily sector. Lending activity expanded, largely spurred by growth in real estate financing. Retail sales grew at a moderate pace. Several contacts mentioned that low fuel prices provided a tailwind for consumer spending on other products. Automobile sales grew robustly relative to the same period last year, particularly for light trucks and SUVs. Consumers exhibited strong demand for entertainment and gaming products, and some contacts reported difficulties meeting this demand growth due to inadequate availability of skilled labor. Sales of food and beverages rose, but contacts noted a shift towards lower-priced products. Business investment spending in the retail sector held largely steady, with most investment activity aimed at enhancing productivity.

The economy in the state of Michigan noted slow improvements during the period.  The unemployment rate, as indicated by the U.S. Bureau of Labor Statistics, improved to 5.5% as of May 31, 2015, down from 6.4% as of December 31,

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2014 and 8.3% as of December 31, 2013. Other improvements included a 6.0% decline in total bankruptcies, per the U.S. Court Statistics, during the 12 months ending June 30, 2015 compared to the 12 months ending December 31, 2014.

As of June 30, 2015, $1.6 billion, or 34.7% of our total loans are to businesses and consumers in the Detroit-Warren-Livonia metropolitan statistical area (“MSA”), which includes Wayne, Oakland, Macomb, Livingston, St. Clair and Lapeer counties in the state of Michigan. Unemployment in the Detroit-Warren-Livonia MSA, as indicated by the U.S. Bureau of Labor Statistics, was up at 6.6% as of May 31, 2015, from 6.5% as of December 31, 2014, but down from 8.0% at December 31, 2013. The Detroit-Warren-Livonia MSA has been experiencing a recovery in the housing market and showed an increase in home prices as reported in the Case-Shiller index (seasonally adjusted) of 4.1% for the rolling twelve months ending April 30, 2015. It should be noted that the pace of increase has slowed from 15% for the 12 months ending April 30, 2014.

The Ohio economy also showed signs of slowing recovery. Unemployment was up slightly at 5.2% as of May 31, 2015, compared to 5.1% as of December 31, 2014 and 7.1% as of December 31, 2013. The Cleveland MSA showed higher unemployment of 6.0% as of May 31, 2015, up from 5.2% as of December 31, 2014. Bankruptcies in Ohio, per the U.S. Court Statistics, were down 3.4% during the 12 months ending June 30, 2015 when compared to the 12 months ending December 31, 2014.  The Case-Shiller index for the Cleveland market indicates housing prices increases have cooled and were up only 1.4% for the twelve month period ending April 30, 2015, versus 2.7% increase for the 12 months ending April 30, 2014.

The Illinois economy also showed signs of a slowing recovery. Unemployment was down at 6.0% as of May 31, 2015, compared to 6.2% as of December 31, 2014 and 8.9% as of December 31, 2013. This is the lowest rate since April 2008. Unemployment in the Chicago MSA increased slightly to 5.8% as of May 31, 2015, up from 5.7% as of December 31, 2014 but down from 8.3% as of December 31, 2013. Bankruptcies in the Northern Illinois region were down 4.0% for the 12 months ending June 30, 2015 compared to the 12 months ending December 31, 2014. However, business filings were up 6.8% for the same period. Home values, as indicated by the Case-Shiller index for the Chicago MSA were up 2.4% for the twelve month period ending April 30, 2015, compared to 10.8% increase for the 12 months ending April 30, 2014.

The Indiana economy continued to recover.  The unemployment rate was down at 5.1% as of May 31, 2015, compared to 5.9% as of December 31, 2014 and from 6.8% as of December 31, 2013. This is the lowest unemployment rate in Indiana since March 2008. Unemployment in the Elkhart MSA was also down at 3.8% as of May 31, 2015 versus 5.1% as of December 31, 2014, and from 6.4% as of December 31, 2013. In addition, personal and business bankruptcy filings in Northern Indiana, per the U.S. Court Statistics, for the 12 months ending June 30, 2015 was down 2.9% compared to the 12 months ending December 31, 2014. Real estate values have improved according to statistics from Zillow with prices increasing 0.3% for the twelve months ending June 30, 2015.

The Nevada economy also showed signs a slowing recovery. Unemployment was flat at 7.0% as of May 31, 2015 compared to 7.0% as of December 31, 2014 and down from 9.0% as of December 31, 2013. This is Nevada’s lowest rate since June 2008. Bankruptcies in the Nevada region, according to Department of Justice reports, were down 9.2% for the 12 months ending June 30, 2015 compared to the 12 months ending December 31, 2014. Home values, as indicated by the Case-Shiller index for the Las Vegas MSA were up 6.3% for the 12 months ending April 30, 2015 versus an increase of 18.8% for the 12 months ending April 30, 2014.

Summary of Acquisition and Loss Share Accounting

We determined the fair value of our acquired assets and liabilities in accordance with accounting requirements for fair value measurement and acquisition transactions as promulgated in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”), ASC Topic 805, “Business Combinations” (“ASC 805”), and ASC Topic 820, “Fair Value Measurements and Disclosures.” The determination of the initial fair values on loans and other real estate purchased in an acquisition and the related FDIC indemnification asset require significant judgment and complexity.

At the time of each respective acquisition, we determine the fair value of our acquired loans on a loan by loan basis by dividing the loans into two categories: (1) specifically reviewed loans - loans where the future cash flows are estimated based on a specific review of the loan, and (2) non-specifically reviewed loans - loans where the future cash flows for each loan are estimated using an automated cash flow calculation model. For specifically reviewed loans, a designated group of credit officers, specialized in loan workouts and credit quality assessment, work with personnel from the acquired institution to review borrower cash payment activity, current appraisals, loan write ups, and watch list reports (including the current past due status and risk ratings assigned) to estimate future cash flows on the acquired loans. The estimated future cash flows are then discounted to determine initial fair value. For our acquisition of CF Bancorp approximately 50% of the acquired loan portfolio was specifically reviewed. For our acquisitions of First Banking Center and Peoples State Bank approximately 60% of the acquired loan portfolios were specifically reviewed for each of these acquisitions. For our acquisition of First Place Bank

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approximately 30% of the acquired loan portfolio was specifically reviewed. For our acquisition of Talmer West Bank approximately 50% of the acquired loan portfolio was specifically reviewed. For our acquisition of First of Huron Corp., the specifically reviewed loan population included all loans with an outstanding balance of $250 thousand or more and a substantial portion of impaired loans with a balance of $200 thousand or more as of the February 6, 2015 acquisition date, resulting in approximately 35% of the acquired loan portfolio being specifically reviewed.

Non-specifically reviewed loans are categorized by risk profile and processed through an automated cash flow calculation model to generate expected cash flows on a loan by loan basis using contractual loan payment information such as coupon, payment type and amounts, and remaining maturity, along with assumptions that are assigned to each individual loan based on risk cohorts. Risk profiles are determined based on loan type, risk rating, delinquency history, current delinquency status, vintage, and collateral type. For our non-specifically reviewed loans, we apply life of loan default and loss assumptions, defined at a cohort level, to estimate future cash-flows. The assumptions are based on credit migration (migration of risk rating and past due status) combined with default, severity and prepayment data indicative of the market based upon market experience and benchmarking analysis of similar loans and/or portfolio sales and valuation. This information is captured through observation of comparable market transactions. Estimated future cash flows are discounted for each loan to determine initial fair value.

Where a loan exhibits evidence of credit deterioration since origination and it is probable at the acquisition date that we will not collect all principal and interest payments in accordance with the terms of the loan agreement, we account for the loan under ASC 310-30, as a purchased credit impaired loan. At the date of acquisition, the majority of loans acquired in the CF Bancorp, First Banking Center, People State Bank and Community Central Bank acquisitions, as well as approximately 30% of the loans acquired in our acquisition of First Place Bank, approximately 40% of the loans acquired in our acquisition of Talmer West Bank and approximately 25% of the loans acquired in our acquisition of First of Huron Corp. were accounted for under ASC 310-30 as purchased credit impaired loans. We account for all purchased credit impaired loans on a loan by loan basis. We recognize the expected shortfall of expected future cash flows on these loans, 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 accretable yield. The accretable yield includes both the expected coupon of the loan and the discount accretion. We recognize accretable discount as interest income over the expected remaining life of the purchased credit impaired loan using a method that approximates the level yield method.

Fair value premiums and discounts established on acquired loans accounted for outside the scope of ASC 310-30 fall under FASB ASC Subtopic 310-20, “Receivables - Nonrefundable Fees and Other Costs” (“ASC 310-20”) and are accreted or amortized into interest income over the remaining term of the loan as an adjustment to the related loan's yield.

Because we record all acquired loans at fair value, we do not record an allowance for loan losses related to acquired loans on the acquisition date. We re-estimate expected cash flows on our purchased credit impaired loans on a quarterly basis. This re-estimation process is performed on a loan by loan basis and replicates the methods used in determining the initial fair value at the acquisition date. We aim to segment the purchased credit impaired loan portfolio between those that are specifically reviewed and those that are non-specifically reviewed loans to maintain similar or greater coverage as at the acquisition date in the specifically reviewed loan population.

Any decline in expected cash flows identified during the quarterly re-estimation process results in impairment which is measured based on the present value of the new expected cash flows, discounted using the pre-impairment accounting yield of the loan, compared to the recorded investment in the loan. An impairment that is due to a decline in expected cash flows is known as credit impairment, while an impairment that is due to a change in the expected timing of such cash flows is known as timing impairment. If any portion of the impairment is due to credit impairment, we record all of the impairment as provision for loan losses during the period. However, if the impairment is only related to a change in the expected timing of the cash flows, the impairment is recognized prospectively as a decrease in yield on the loan. Declines in cash flow expectations on covered loans which are due to credit impairment also result in an increase to the FDIC indemnification asset which is recorded as noninterest income in “FDIC loss sharing income” in our consolidated statements of income in the period. Any improvements in expected cash flows and the effect of changes in expected timing in the receipt of the expected cash flows, once any previously recorded impairment is recaptured, is recognized prospectively as an adjustment to the accretable yield on the loan. Improvements in cash flows on loans covered by a loss share agreement result in a decline in the expected indemnification cash flows which are reflected as a downward yield adjustment on the FDIC indemnification assets.

We modify loans in the normal course of business and assess all loan modifications to determine whether a modification constitutes a troubled debt restructuring (“TDR”) in accordance with ASC 310-40, “Receivables - Troubled Debt Restructurings by Creditors” (“ASC 310-40”). For non-purchased credit impaired loans excluded from ASC 310-30 accounting, a modification is considered a TDR when a borrower is experiencing difficulties and we have granted a concession to the borrower that we would not normally consider and we conclude the concession results in an inability to collect all

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amounts due, including interest accrued at the original contractual terms. The concessions granted may include: principal deferral, interest rate concession, forbearance, principal reduction or A/B note restructure (where the original loan is restructured into two notes where, one reflects the portion of the modified loan which is expected to be collected, and one that is fully charged off). None of the modifications to date were due to partial satisfaction of the loan.

For purchased credit impaired loans accounted for individually under ASC 310-30 (which is all of our purchased credit impaired loans), a modification is considered a TDR when a borrower is experiencing financial difficulties and the effective yield after the modification is less than the effective yield at the time of the purchase in association with consideration of qualitative factors included within ASC 310-40. 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 results in the recognition of impairment and an allowance for loan loss. 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.

Acquired loans that are paid in full or are otherwise settled results in accelerated recognition of any remaining loan discount through “Accelerated discount on acquired loans” in our consolidated statements of income in the period. If such loans are covered loans, any remaining FDIC indemnification asset no longer expected to be received is also written off through “Accelerated discount on acquired loans” in our consolidated statements of income in the corresponding period.

The loss share agreements from our FDIC-assisted acquisitions and the purchase accounting impact from our acquisitions create volatility in our cash flows and operating results. The effects of the loss share agreements and purchase accounting, primarily on purchased credit impaired loans, on cash flows and operating results following an acquisition can create volatility as we work with borrowers to determine appropriate repayment terms or alternate resolutions. The effects will depend primarily on the ability of borrowers to make required payments over an extended period of time. At acquisition, management believes sufficient inherent discounts representing the expected losses compared to their acquired contractual payment amounts, were established. As a result, our operating results would only be adversely affected by losses to the extent that those losses exceed the expected losses reflected in the fair value at the acquisition date.In addition, as the loss share agreements cover up to a 10-year period (five years for loans other than single family residential mortgage loans), changing economic conditions will likely affect the timing of future charge-offs and the resulting reimbursements from the FDIC. Management believes that any recapture of interest income and recognition of cash flows from borrowers or amounts received from the FDIC as part of the FDIC indemnification asset may be incurred unevenly over this period, as we exhaust our collection efforts under our normal practices.

Critical Accounting Policies

Our consolidated financial statements are prepared based on the application of accounting policies generally accepted in the United States, the most significant of which are described in Note 1, “Summary of Significant Accounting Policies,” in our 2014 Annual Report on 10-K. These policies require the reliance on estimates and assumptions, which may prove inaccurate or are subject to variations. Changes in underlying factors, assumptions, or estimates could have a material impact on our future financial condition and results of operations. The most critical of these significant accounting policies are the policies related to the allowance for loan losses, fair valuation methodologies, purchased loans, the FDIC indemnification asset and income taxes. These policies were reviewed with the Audit Committee of the Board of Directors and are discussed more fully on pages 76 through 81 in our 2014 Annual Report on Form 10-K. As of the date of this report, we did not believe there were any material changes in the nature of categories of the critical accounting policies or estimates and assumptions from those discussed in our 2014 Annual Report on Form 10-K.

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Financial Results

We had net income for the three months ended June 30, 2015 of $17.5 million, or $0.23 per average diluted share, compared to $20.6 million, or $0.27 per average diluted share, for the same period ended June 30, 2014. The decrease in net income of $3.1 million for the three months ended June 30, 2015, compared to the three months ended June 30, 2014, primarily reflects an increase in income tax provision of $12.4 million and a decrease in net interest income of $2.8 million, partially offset by an increase in noninterest income of $8.1 million and a decline in total provision for loan losses of $3.2 million to a net benefit.

We had net income for the six months ended June 30, 2015 of $27.0 million, or $0.36 per average diluted share, compared to $58.8 million, or $0.79 per average diluted share, for the same period ended June 30, 2014. Net income for the six months ended June 30, 2015 increased $10.1 million, excluding the bargain purchase gain of $42.0 million from the January 1, 2014 acquisition of Talmer West Bank, when compared to the results for the six months ended June 30, 2014. This increase primarily reflects an increase in noninterest income of $13.8 million and decreases in noninterest expense of $9.6 million and total provision for loan losses of $5.1 million, partially offset by an increase in income tax provision of $18.5 million.

Net Interest Income

Net interest income is the difference between interest income and yield-related fees earned on assets and interest expense paid on liabilities. Adjustments are made to the yields on tax-exempt assets in order to present tax-exempt income and fully taxable income on a comparable basis. The “Analysis of Net Interest Income-Fully Taxable Equivalent” tables within this financial review provide an analysis of net interest income for the three and six months ended June 30, 2015 and 2014. The “Rate/Volume Analysis” tables describe the extent to which changes in interest rates and changes in volume of earning assets and interest-bearing liabilities have affected our net interest income on a fully taxable equivalent (“FTE”) basis for the three and six months ended June 30, 2015 and 2014.

We had net interest income of $49.6 million for the three months ended June 30, 2015, a decrease of $2.8 million from $52.4 million for the same period in 2014. The decrease in net interest income in the three months ended June 30, 2015, compared to the same period in 2014, was primarily due to increases of $3.0 million in negative accretion of the FDIC indemnification asset and $2.0 million in total interest expense, partially offset by a $1.5 million increase in interest and fees on loans. The increase in negative accretion of the FDIC indemnification asset was primarily driven by our continued increases in cash flow expectations on covered loans as a result of our quarterly re-estimations. The increases in interest expense and interest and fees on loans were primarily driven by the significant growth in total deposits and loans, respectively. Our net interest margin (FTE) for the three months ended June 30, 2015 decreased 84 basis points to 3.50% from 4.34% for the comparable period in 2014. The decrease in net interest margin was primarily due to a decline in the benefit provided by our higher yielding covered loan portfolio, significantly comprised of purchased credit impaired loans, as the balances continue to run-off and an increase in the impact of the negative accretion of the FDIC indemnification asset as we continue to experience increases in cash flow expectations on covered loans as a result of our quarterly re-estimation process.

We had net interest income of $100.6 million for both the six months ended June 30, 2015 and 2014. The six months ended June 30, 2015 included a $3.1 million increase in interest income offset by a $3.1 million increase in interest expense compared to the same period in 2014. The increase in interest income was primarily driven by an increase of $8.0 million in interest and fees on loans, partially offset by a $5.6 million increase in negative accretion of the FDIC indemnification asset. The changes in interest expense, interest and fees on loans and the negative accretion of the FDIC indemnification asset for the six months ended June 30, 2015 compared to the same period in 2014, are reflective of the same reasons described in three months analysis above. Our net interest margin (FTE) for the six months ended June 30, 2015 decreased 50 basis points to 3.64% from 4.14% for the comparable period in 2014. The decrease in net interest margin was primarily due to a decline in the benefit provided by our higher yielding covered loan portfolio, significantly comprised of purchased credit impaired loans, as the balances continue to run-off and an increase in the impact of the negative accretion of the FDIC indemnification asset as we continue to experience increases in cash flow expectations on covered loans as a result of our quarterly re-estimation process.

Our net interest margin benefits from discount accretion on our purchased credit impaired loan portfolios, a component of our accretable yield. The accretable yield represents the excess of the net present value of expected future cash flows over the acquisition date fair value and includes both the expected coupon of the loan and the discount accretion. The accretable yield is recognized as interest income over the expected remaining life of the purchased credit impaired loan. For the three months ended June 30, 2015 and 2014, the yield on total loans was 5.14% and 6.10%, respectively, while the yield on total loans generated using only the expected coupon (with respect to purchased credit impaired loans) would have been 4.28% and 4.68%, respectively. For the six months ended June 30, 2015 and 2014, the yield on total loans was 5.31% and 5.96%, respectively, while the yield on total loans generated using only the expected coupon (with respect to purchased credit impaired

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loans) would have been 4.43% and 4.85%, respectively. The difference between the actual yield earned on total loans and the yield generated based on the contractual coupon (not including any interest income for loans in nonaccrual status) represents excess accretable yield.

Our net interest margin is also adversely impacted by the negative yield on the FDIC indemnification asset. Because our quarterly cash flow re-estimations have continuously resulted in improvements in overall expected cash flows on covered loans, our expected payments from the FDIC under our loss share agreements have declined, resulting in a negative yield on the FDIC indemnification asset, which partially offsets the benefits provided by the excess accretable yield discussed above. The negative yield on the FDIC indemnification asset was 73.00% and 65.63% for the three and six months ended June 30, 2015, respectively, compared to 19.11% and 20.25% for the three and six months ended June 30, 2014, respectively. The combination of the excess accretable yield and the negative yield on the FDIC indemnification asset benefited net interest margin by nine basis points and six basis points for the three and six months ended June 30, 2015, compared to 64 basis points and 33 basis points for the three and six months ended June 30, 2014. The following tables set forth information related to our average balance sheet, average yields on assets, and average costs of liabilities. We derived these yields by dividing income or expense by the average balance of the corresponding assets or liabilities. We derived average balances from the daily balances throughout the periods indicated.

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Analysis of Net Interest Income — Fully Taxable Equivalent

	For the three months ended June 30,
	2015								2014
(Dollars in thousands)	Average Balance			Interest (1)			Average Rate (2)		Average Balance			Interest (1)			Average Rate (2)
Earning assets:
Interest earning balances	$	195,874		$	117		0.24	%	$	250,239		$	171		0.28	%
Federal funds sold and other short-term investments	152,593			269			0.71		76,474			131			0.69
Investment securities (3):
Taxable	527,632			2,375			1.81		512,692			2,139			1.67
Tax-exempt	250,765			1,658			3.52		176,075			1,213			3.73
Federal Home Loan Bank stock	20,380			224			4.40		12,980			291			9.01
Gross uncovered loans (4)	4,250,403			48,919			4.62		3,254,119			41,198			5.08
Gross covered loans (4)	302,078			9,400			12.48		477,238			15,576			13.09
FDIC indemnification asset	46,971			(8,548		)	(73.00	)	115,565			(5,506		)	(19.11	)
Total earning assets	5,746,696			54,414			3.84	%	4,875,382			55,213			4.58	%
Non-earning assets:
Cash and due from banks	86,290								111,501
Allowance for loan losses	(51,033		)						(58,562		)
Premises and equipment	47,775								57,661
Core deposit intangible	14,465								15,740
Goodwill	3,524								—
Other real estate owned and repossessed assets	44,888								56,155
Loan servicing rights	55,986								76,431
FDIC receivable	6,830								6,380
Company-owned life insurance	104,327								90,228
Other non-earning assets	236,881								215,431
Total assets	$	6,296,629							$	5,446,347
Interest-bearing liabilities:
Deposits:
Interest-bearing demand deposits	$	828,482		$	382		0.19	%	$	714,231		$	216		0.12	%
Money market and savings deposits	1,267,347			562			0.18		1,352,163			492			0.15
Time deposits	1,353,226			2,131			0.63		1,215,585			1,432			0.47
Other brokered funds	483,716			607			0.50		80,478			35			0.17
Short-term borrowings	75,819			209			1.10		126,382			33			0.11
Long-term debt	463,210			914			0.79		209,721			627			1.20
Total interest-bearing liabilities	4,471,800			4,805			0.43	%	3,698,560			2,835			0.31	%
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits	976,044								965,966
FDIC clawback liability	28,087								25,787
Other liabilities	62,414								46,052
Shareholders’ equity	758,284								709,982
Total liabilities and shareholders’ equity	$	6,296,629							$	5,446,347
Net interest income				$	49,609							$	52,378
Interest spread							3.41	%							4.27	%
Net interest margin as a percentage of interest earning assets							3.46	%							4.31	%
Tax equivalent effect							0.04	%							0.03	%
Net interest margin on a fully tax equivalent basis							3.50	%							4.34	%

(1) Interest income is shown on an actual basis and does not include taxable equivalent adjustments.

(2) Average rates are presented on an annual basis and include a taxable equivalent adjustment to interest income of $540 thousand and $425 thousand on tax-exempt securities for the three months ended June 30, 2015 and 2014, respectively, using the statutory tax rate of 35%.

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(3) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(4) Includes nonaccrual loans.

	For the six months ended June 30,
	2015								2014
(Dollars in thousands)	Average Balance			Interest (1)			Average Rate (2)		Average Balance			Interest (1)			Average Rate (2)
Earning assets:
Interest earning balances	$	176,459		$	203		0.23	%	$	324,900		$	387		0.24	%
Federal funds sold and other short-term investments	125,159			434			0.70		73,597			271			0.74
Investment securities (3):
Taxable	510,948			4,698			1.85		500,586			4,005			1.61
Tax-exempt	243,657			3,273			3.54		174,161			3,178			4.97
Federal Home Loan Bank stock	20,529			469			4.61		17,677			513			5.86
Gross uncovered loans (4)	4,175,903			98,424			4.75		3,236,360			80,890			5.04
Gross covered loans (4)	315,846			19,833			12.66		495,323			29,385			11.96
FDIC indemnification asset	54,685			(17,798		)	(65.63	)	121,740			(12,224		)	(20.25	)
Total earning assets	5,623,186			109,536			3.96	%	4,944,344			106,405			4.39	%
Non-earning assets:
Cash and due from banks	88,729								100,634
Allowance for loan losses	(52,145		)						(58,027		)
Premises and equipment	48,074								56,694
Core deposit intangible	14,334								16,264
Goodwill	2,803								—
Other real estate owned and repossessed assets	46,715								57,847
Loan servicing rights	58,074								78,238
FDIC receivable	6,155								6,722
Company-owned life insurance	102,634								65,732
Other non-earning assets	235,798								215,133
Total assets	$	6,174,357							$	5,483,581
Interest-bearing liabilities:
Deposits:
Interest-bearing demand deposits	$	800,487		$	672		0.17	%	$	711,766		$	440		0.12	%
Money market and savings deposits	1,239,805			1,033			0.17		1,374,101			986			0.14
Time deposits	1,308,911			3,958			0.61		1,268,122			2,923			0.46
Other brokered funds	536,186			1,230			0.46		80,240			64			0.16
Short-term borrowings	62,900			288			0.92		114,577			208			0.37
Long-term debt	432,786			1,714			0.80		210,722			1,201			1.15
Total interest-bearing liabilities	4,381,075			8,895			0.41	%	3,759,528			5,822			0.31	%
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits	948,856								951,432
FDIC clawback liability	27,600								25,433
Other liabilities	58,004								43,078
Shareholders’ equity	758,822								704,110
Total liabilities and shareholders’ equity	$	6,174,357							$	5,483,581
Net interest income				$	100,641							$	100,583
Interest spread							3.55	%							4.08	%
Net interest margin as a percentage of interest earning assets							3.61	%							4.10	%
Tax equivalent effect							0.03	%							0.04	%
Net interest margin on a fully tax equivalent basis							3.64	%							4.14	%

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(1) Interest income is shown on an actual basis and does not include taxable equivalent adjustments.

(2) Average rates are presented on an annual basis and include a taxable equivalent adjustment to interest income of $1.0 million and $1.1 million on tax-exempt securities for the six months ended June 30, 2015 and 2014, respectively, using the statutory tax rate of 35%.

(3) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(4) Includes nonaccrual loans.

Rate-Volume Analysis

The tables below present the effect of volume and rate changes on interest income and expense.  Changes in volume are changes in in the average balance multiplied by the previous year’s average rate.  Changes in rate are changes in the average rate multiplied by the average balance from the previous year.  The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.

	For the three months ended June 30, 2015 vs. 2014
	Increase (Decrease) Due to:						Net Increase
(Dollars in thousands)	Rate			Volume			(Decrease)
Interest earning assets
Interest earning balances	$	(20	)	$	(34	)	$	(54	)
Federal funds sold and other short-term investments	4			134			138
Investment securities:
Taxable	172			64			236
Tax-exempt	(51		)	496			445
FHLB stock	(188		)	121			(67		)
Gross uncovered loans	(4,008		)	11,729			7,721
Gross covered loans	(695		)	(5,481		)	(6,176		)
FDIC indemnification asset	(7,913		)	4,871			(3,042		)
Total interest income	(12,699		)	11,900			(799		)
Interest-bearing liabilities
Interest-bearing demand deposits	127			39			166
Money market and savings deposits	102			(32		)	70
Time deposits	523			176			699
Other brokered funds	156			416			572
Short-term borrowings	194			(18		)	176
Long-term debt	(270		)	557			287
Total interest expense	832			1,138			1,970
Change in net interest income	$	(13,531	)	$	10,762		$	(2,769	)

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	For the six months ended June, 2015 vs. 2014
	Increase (Decrease) Due to:						Net Increase
(Dollars in thousands)	Rate			Volume			(Decrease)
Interest earning assets
Interest earning balances	$	(13	)	$	(171	)	$	(184	)
Federal funds sold and other short-term investments	(17		)	180			163
Investment securities:
Taxable	609			84			693
Tax-exempt	(972		)	1,067			95
FHLB stock	(119		)	75			(44		)
Gross uncovered loans	(4,830		)	22,364			17,534
Gross covered loans	1,631			(11,183		)	(9,552		)
FDIC indemnification asset	(15,284		)	9,710			(5,574		)
Total interest income	(18,995		)	22,126			3,131
Interest-bearing liabilities
Interest-bearing demand deposits	172			60			232
Money market and savings deposits	149			(102		)	47
Time deposits	938			97			1,035
Other brokered funds	289			877			1,166
Short-term borrowings	206			(126		)	80
Long-term debt	(453		)	966			513
Total interest expense	1,301			1,772			3,073
Change in net interest income	$	(20,296	)	$	20,354		$	58

Provision for Loan Losses

We established an allowance for loan losses on both covered and uncovered loans through a provision for loan losses charged as an expense in our consolidated statements of income.  Management reviews our loan portfolio, consisting of originated loans and purchased loans that are not covered by loss sharing agreements with the FDIC, on a quarterly basis to evaluate our outstanding loans and to measure both the performance of the portfolio and the adequacy of the allowance for loan losses.

We did not record an allowance for loan losses at acquisition for purchased uncovered or covered loans as these loans were recorded at fair value, based on a discounted cash flow methodology, at the date of each respective acquisition.  We re-estimate expected cash flows on a quarterly basis for all loans purchased with credit impairment.  We record a provision for loan losses during the period for any decline in expected cash flows. Conversely, any improvement in expected cash flows is recognized prospectively as an adjustment to the yield on the loan once any previously recorded impairment is recaptured.

The provision for credit losses on off balance sheet items, a component of “other expense” in our consolidated statements of income, reflects management’s assessment of the adequacy of the allowance for credit losses on lending-related commitments.

For a further discussion of the allowance for loan losses, refer to the “Allowance for Loan Losses” section of this financial review.

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Uncovered loans

The provision for loan losses on uncovered loans was $1.1 million for the three months ended June 30, 2015, compared to $3.2 million for the three months ended June 30, 2014. The provision for loan losses on uncovered loans was $4.5 million for the six months ended June 30, 2015, compared to $9.6 million for the six months ended June 30, 2014. Our allowance for loan losses was $36.6 million, or 0.86% of uncovered loans at June 30, 2015, compared to $33.8 million, or 0.87% of uncovered loans, at December 31, 2014. The provision for loan losses on uncovered loans for the three and six months ended June 30, 2015 primarily reflects impairment recorded as a result of our re-estimation of cash flows for uncovered purchased credit impaired loans, additional provisions for loan growth outside of the First of Huron Corp. acquisition and an increase in provisions for impaired loans individually evaluated, partially offset by the relief of allowance for loan losses due to payments received on uncovered loans previously carrying an allowance for loan losses. The provision for loan losses on uncovered loans for the three and six months ended June 30, 2014 primarily reflects impairment recorded as a result of our re-estimation of cash flows for uncovered purchased credit impaired loans and additional provisions for organic loan growth outside of the Talmer West Bank acquisition, partially offset by the impact of improvements in historical loss factors. We recorded impairment related to re-estimations of cash flows for uncovered purchased credit impaired loans of $1.4 million and $2.3 million for the three and six months ended June 30, 2015, respectively, and $4.3 million and $8.1 million, for the three and six months ended June 30, 2014, respectively. The re-estimations also resulted in improvements in gross cash flow expectations on uncovered purchased credit impaired loans of $13.1 million and $34.4 million for the three and six months ended June 30, 2015, respectively, and $16.5 million and $24.5 million for the three and six months ended June 30, 2014, respectively, which will be recognized prospectively as an increase in the accretable yield and accreted into interest income over the expected remaining life of the related uncovered purchased credit impaired loan.

Covered loans

For the three months ended June 30, 2015, we had a provision benefit for covered loan losses of $8.4 million, compared to a provision benefit for covered loans of $7.3 million for the three months ended June 30, 2014. For both the six months ended June 30, 2015 and 2014 we had a provision benefit for covered loan losses of $9.8 million. Our allowance for loan losses on covered loans was $16.3 million, or 5.82% of total covered loans, at June 30, 2015 compared to $21.4 million, or 6.16% of total covered loans, at December 31, 2014. The provision benefit for covered loan losses for the three and six months ended June 30, 2015 and 2014 primarily reflects the relief of allowance for loan losses due to payments received on covered loans previously charged-off and/or carrying an allowance for loan loss, partially offset by impairment recorded as a result of our re-estimation of cash flows for covered purchased credit impaired loans. We recorded impairment related to re-estimations of cash flows for covered purchased credit impaired loans of $1.2 million and $2.9 million for the three and six months ended June 30, 2015, respectively, and $1.1 million and $2.4 million for the three and six months ended June 30, 2014, respectively. The re-estimations also resulted in improvements in gross cash flow expectations on covered purchased credit impaired loans of $8.6 million and $16.7 million, respectively, compared to the re-estimations completed for the three and six months ended June 30, 2014 of $8.0 million and $16.5 million for the three and six months ended June 30, 2015, respectively, which will be recognized prospectively as an increase in the accretable yield and accreted into interest income over the expected remaining life of the related covered purchased credit impaired loan. Many of our covered loans were originated prior to or during the recession and these loans typically have weak credit metrics such as high loan to value ratios and low debt service coverage ratios. Therefore, the ultimate credit outcome for the covered loans can be volatile. As the economy continues to stabilize, we have seen many of these covered loans perform better than expected, while some are performing worse than expected.

A substantial portion of the provision or benefit for loan loss on covered loans is offset by FDIC loss sharing income. An analysis of the changes in the allowance for loan losses, including charge-offs and recoveries by loan category, is provided in the “Analysis of the Allowance for Loan Losses - Uncovered” and the “Analysis of the Allowance for Loan Losses - Covered” tables in this financial review.

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The following table details the components of the provision for loan losses on covered loans and the impact to net income.

	For the three months ended June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Benefit for loan losses - covered:
Net impairment recorded as a result of re-estimation of cash flows on loans accounted for under ASC 310-30 (1)	$	1,223		$	1,066		$	2,938		$	2,365
Additional benefit recorded, net of charge-offs, for covered loans	(9,605		)	(8,387		)	(12,739		)	(12,184		)
Total benefit for loan losses-covered	$	(8,382	)	$	(7,321	)	$	(9,801	)	$	(9,819	)
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)	765			1,923			1,042			3,504
Expense recorded, to offset benefit, for covered loans	(6,534		)	(5,942		)	(8,324		)	(7,459		)
Total loss sharing income (expense) due to provision for loan losses-covered	(5,769		)	(4,019		)	(7,282		)	(3,955		)
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)	458			(857		)	1,896			(1,139		)
Net income recorded, for covered loans including those accounted for under ASC 310-20 and ASC 310-40	(3,071		)	(2,445		)	(4,415		)	(4,725		)
Net (increase) decrease to income before taxes	$	(2,613	)	$	(3,302	)	$	(2,519	)	$	(5,864	)

(1) The results of re-estimations also included cash flow improvements to be recognized prospectively as an adjustment to the accretable yield on the related covered loans of $8.6 million and $8.0 million for the three months ended June 30, 2015 and 2014, respectively and $16.7 million and $16.5 million for the six months ended June 30, 2015 and 2014, respectively. 

Noninterest Income

The following table presents noninterest income for the three and six months ended June 30, 2015 and 2014.

	For the three months ended  June 30,						For the six months ended  June 30,
(Dollars in thousands)	2015			2014			2015			2014
Noninterest income
Deposit fee income	$	2,561		$	3,188		$	4,881		$	6,486
Mortgage banking and other loan fees	4,698			(1,122		)	3,437			(37		)
Net gain on sales of loans	8,748			5,681			17,366			8,725
Bargain purchase gain	—			—			—			41,977
FDIC loss sharing income	(5,928		)	(3,434		)	(6,996		)	(3,547		)
Accelerated discount on acquired loans	7,444			4,326			15,642			10,792
Net gain (loss) on sales of securities	6			—			(101		)	(2,310		)
Other income	4,569			5,312			9,299			9,605
Total noninterest income	$	22,098		$	13,951		$	43,528		$	71,691

Noninterest income increased $8.1 million to $22.1 million for the three months ended June 30, 2015, from $14.0 million for the same period of 2014. The increase in noninterest income for the three months ended June 30, 2015, compared to 2014, was primarily due to increases in mortgage banking and other loan fees of $5.8 million, in accelerated discount on acquired loans of $3.1 million and in net gain on sales of loans of $3.1 million, partially offset by a decrease in FDIC loss sharing income of $2.5 million. The increase in mortgage banking and other loan fees primarily reflects the change in the fair value of loan servicing rights. Changes in the fair value of loan servicing rights due to interest rate fluctuations that impacted assumed prepayment speeds increased earnings by $3.1 million in the three months ended June 30, 2015, compared to a

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detriment to earnings of $4.2 million for the same period in 2014. Changes in the fair value of loan servicing rights due to reductions in servicing rights from loans paid off during the period were a detriment to earnings of $1.6 million for the three months ended June 30, 2015 and $1.7 million for the same period in 2014. Changes in accelerated discount on acquired loans was as a result of cash payments received outside of expected terms. The increase in net gain on sales of loans was driven by an increase in the volume of loans originated and sold in the second quarter 2015. The decline in FDIC loss sharing income primarily reflects the amounts owed to the FDIC related to recoveries received on previously claimed charge-offs.

Noninterest income decreased $28.2 million to $43.5 million for the six months ended June 30, 2015, from $71.7 million for the same period of 2014. The decrease in noninterest income for the six months ended June 30, 2015, compared to 2014, was primarily due to the recognition of $42.0 million of bargain purchase gain related to our acquisition of Talmer West Bank in the first quarter of 2014. Excluding the bargain purchase gain recognized in the first quarter of 2014, noninterest income increased $13.8 million in the six months ended June 30, 2015, compared to the same period in 2014, primarily due to increases in net gain on sales of loans of $8.6 million, in accelerated discount on acquired loans of $4.9 million, and in mortgage banking and other loans fees of $3.5 million, partially offset by a decrease in FDIC loss sharing income of $3.4 million. The increase in mortgage banking and other loan fees was primarily driven by changes in the fair value of loan servicing rights. The increase in net gain on sales of loans was driven by an increase in the volume of loans originated and sold in the first half of 2015. Changes in accelerated discount on acquired loans was as a result of cash payments received outside of expected terms. Changes in the fair value of loan servicing rights due to interest rate fluctuations that impacted assumed prepayment speeds were a detriment to earnings of $938 thousand in the six months ended June 30, 2015, compared to a detriment of $6.4 million for the same period in 2014. Changes in the fair value of loan servicing rights due to reductions in servicing rights from loans paid off during the period were a detriment to earnings of $3.9 million for the six months ended June 30, 2015 and a detriment of $2.6 million for the same period in 2014. The decline in FDIC loss sharing income primarily reflects the amounts owed to the FDIC related to recoveries received on previously claimed charge-offs.

Noninterest Expenses

The following table presents noninterest expenses for the three and six months ended June 30, 2015 and 2014.

	For the three months ended  June 30,				For the six months ended  June 30,
(Dollars in thousands)	2015		2014		2015		2014
Noninterest expense
Salary and employee benefits	$	28,685	$	30,466	$	57,897	$	66,317
Occupancy and equipment expense	8,415		7,871		16,081		16,914
Data processing fees	1,805		2,260		3,659		4,000
Professional service fees	3,275		2,628		6,818		6,665
FDIC loss sharing expense	133		983		1,082		1,507
Bank acquisition and due diligence fees	419		268		1,831		3,197
Marketing expense	1,483		1,605		2,578		2,696
Other employee expense	826		752		1,760		1,395
Insurance expense	1,527		868		3,057		2,699
Other expense	6,725		6,370		15,125		14,129
Total noninterest expense	$	53,293	$	54,071	$	109,888	$	119,519

Noninterest expenses decreased $778 thousand to $53.3 million for the three months ended June 30, 2015, from $54.1 million for the same period in 2014. The decrease in noninterest expense was primarily due to a decrease of $1.8 million in salary and employee benefits.

Noninterest expenses decreased $9.6 million to $109.9 million for the six months ended June 30, 2015, from $119.5 million for the same period in 2014. The decrease in noninterest expense included a decrease in transaction and integration related expenses of $8.1 million, which is more fully discussed below. The decrease in noninterest expenses excluding transaction and integration related expenses was $1.5 million for the six months ended June 30, 2015 compared to 2014 was primarily due to a decrease of $3.9 million in salary and employee benefits.

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Transaction and integration related expenses of $3.8 million for the six months ended June 30, 2015 included anticipated and paid severance payments for reductions in the work force following the acquisition and integration of First of Huron Corp. and the operational integration of Talmer West Bank which were each completed in February of 2015, system conversion expenses and bank acquisition and due diligence fees. Transaction and integration related expenses of $11.9 million for the six months ended June 30, 2014 included severance expense, bank acquisition and due diligence fees, bonus payments related to our successful acquisition of Talmer West Bank, the merger of First Place Bank and Talmer Bank and the completion of our initial public offering, as well as expenses incurred related to termination of certain software contracts. Transaction and integration related expenses for the six months ended June 30, 2015 and 2014 are detailed in the tables below.

	For the six months ended June 30, 2015
(Dollars in thousands)	Actual		Transaction and integration related expenses		Excluding transaction and integration related expenses
Noninterest expense
Salary and employee benefits	$	57,897	$	972	$	56,925
Occupancy and equipment expense	16,081		—		16,081
Data processing fees	3,659		875		2,784
Professional service fees	6,818		88		6,730
FDIC loss sharing expense	1,082		—		1,082
Bank acquisition and due diligence fees	1,831		1,831		—
Marketing expense	2,578		—		2,578
Other employee expense	1,760		—		1,760
Insurance expense	3,057		—		3,057
Other expense	15,125		—		15,125
Total noninterest expense	$	109,888	$	3,766	$	106,122

	For the six months ended June 30, 2014
(Dollars in thousands)	Actual		Transaction and integration related expenses		Excluding transaction and integration related expenses
Noninterest expense
Salary and employee benefits	$	66,317	$	5,516	$	60,801
Occupancy and equipment expense	16,914		2,050		14,864
Data processing fees	4,000		—		4,000
Professional service fees	6,665		400		6,265
FDIC loss sharing expense	1,507		—		1,507
Bank acquisition and due diligence fees	3,197		3,197		—
Marketing expense	2,696		449		2,247
Other employee expense	1,395		—		1,395
Insurance expense	2,699		—		2,699
Other expense	14,129		240		13,889
Total noninterest expense	$	119,519	$	11,852	$	107,667

Our core operating efficiency ratio improved to 68.6% for the six months ended June 30, 2015, compared to 76.8% for the six months ended June 30, 2014. The efficiency ratio is a measure of noninterest expense as a percentage of net interest income and noninterest income. Our core efficiency ratio begins with the efficiency ratio and then excludes certain items deemed by management to not be related to regular operations including bargain purchase gains, the fair value adjustment to our loan servicing rights, transaction and integration related costs, FDIC loss sharing income and $1.8 million of net expense recognized in the second quarter of 2015 related to our targeted review of property efficiency which included a review of certain lease contracts resulting in lease buyouts, final sales of unused properties and impairments recognized on owned properties under review for potential upcoming sales. Management believes this non-GAAP financial measure provides useful information to both management and investors that is supplementary to our financial condition and results of operations in

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accordance with GAAP; however, we do acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.

Income Taxes and Tax-Related Items

During the three months ended June 30, 2015, we recognized income tax expense of $8.2 million on $25.7 million of pre-tax income resulting in an effective tax rate of 31.8%, compared to the three months ended June 30, 2014, in which we recognized an income tax benefit of $4.2 million on $16.4 million of pre-tax income, resulting in an effective tax rate of a negative 26.0%. The difference between the negative effective income tax rate for the three months ended June 30, 2014 and the effective income tax rate for the three months ended June 30, 2015 resulted primarily from the relief of $9.7 million of valuation allowance related to the deferred tax assets acquired in the First Place Bank acquisition.  The effective income tax rate for the three months ended June 30, 2014 would have been a positive 33.6% without the valuation allowance adjustment.

During the six months ended June 30, 2015, we recognized income tax expense of $12.6 million on $39.6 million of pre-tax income resulting in an effective tax rate of 31.9%, compared to the six months ended June 30, 2014, in which we recognized an income tax benefit of $5.9 million on $52.9 million of pre-tax income, resulting in an effective tax rate of a negative 11.2%. The difference between the negative effective income tax rate for the six months ended June 30, 2014 and the effective income tax rate for the six months ended June 30, 2015 resulted primarily from treating the $42.0 million bargain purchase gain resulting from our acquisition of Talmer West Bank on January 1, 2014 as non-taxable based on the tax structure of the acquisition and the relief of $10.1 million of valuation allowance related to the deferred tax asset acquired in the First Place Bank acquisition.

Financial Condition

Balance Sheet

Total assets were $6.4 billion at June 30, 2015, an increase of $545.4 million compared to $5.9 billion at December 31, 2014. Of the $545.4 million increase, $217.8 million was related to the acquisition date fair value of assets acquired in our acquisition of First of Huron, Corp. and its subsidiary bank, Signature Bank, net of the $13.4 million of cash consideration paid. The acquisition resulted in goodwill of $3.5 million that was recognized at the acquisition date and added $162.3 million of loans acquired at fair value. The increase in total assets of $327.5 million, setting aside the fair value of assets acquired in our acquisition of First of Huron Corp., was primarily due to increases in cash and cash equivalents of $156.0 million, $179.2 million in uncovered loans, $70.5 million in securities available-for-sale and $23.6 million in loans held for sale. These increases were partially offset by decreases in covered loans of $65.6 million and the FDIC indemnification asset of $30.0 million. The increase in uncovered loans reflects loan growth in Talmer Bank’s portfolio primarily driven by growth in our commercial and industrial and commercial real estate portfolios, partially offset by loan run-off in Talmer West Bank’s portfolio. The increase in securities available-for-sale reflects management's decision to invest in liquid assets while retaining accessibility to the funds for potential liquidity needs. The increase in loans held for sale primarily reflects strong mortgage banking loan production and the strategic decision to increase the percentage of loans sold to the secondary market. The decrease in covered loans reflects run-off of covered loans. The decrease in the FDIC indemnification asset is primarily the result of the negative accretion on the indemnification asset resulting from improvements in expected cash flows on covered loans and new claims filed with the FDIC for losses incurred on covered loans.

Total liabilities were $5.7 billion at June 30, 2015, compared to $5.1 billion at December 31, 2014. The acquisition date fair value of liabilities assumed in our acquisition of First of Huron, Corp. and its subsidiary bank, Signature Bank, increased liabilities by $218.4 million. The $540.6 million increase in liabilities for the six months ended June 30, 2015, was primarily due to increases in total deposits of $359.2 million, short-term borrowings of $118.2 million and long-term debt of $61.0 million. The $359.2 million growth in total deposits includes $201.5 million of deposits acquired at fair value in the First of Huron Corp. acquisition, in addition to growth in time deposits of $190.9 million, interest-bearing demand deposits of $160.9 million, money market and savings deposits of $44.1 million and noninterest-bearing demand deposits of $23.4 million. These increases were partially offset by a substantial decline in other brokered funds of $261.6 million. The strong growth in core deposit balances and the decreases in non-core deposit balances were reflective of management’s drive to increase core deposit growth achieved through programs initiated in the first half of 2015.

Total shareholders’ equity at June 30, 2015 was $766.4 million, an increase of $4.8 million compared to December 31, 2014. The increase was primarily the result of our net income for the six months ended June 30, 2015 of $27.0 million, partially offset by our repurchase of warrants to purchase 2.5 million shares of our Class A common stock for $19.9 million.

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Loans

Our loan portfolio represents a broad range of borrowers primarily in the Michigan, Ohio, Illinois, Indiana, Wisconsin and Nevada markets, comprised of residential real estate, commercial real estate, commercial and industrial, real estate construction and consumer financing loans.  All loans acquired in the CF Bancorp acquisition and all loans (except consumer loans) acquired in the First Banking Center, Peoples State Bank and Community Central Bank acquisitions were acquired under loss share agreements with the FDIC that call for the FDIC to reimburse us for a portion of our losses incurred on such loans, and we present covered loans separately from uncovered loans due to these loss share agreements.

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.  Residential real estate loans also include home equity loans and lines 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.

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.

Commercial and industrial loans include financing for commercial purposes in various lines of businesses, including manufacturing, service industry, professional service areas and agricultural.  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 pre-sold, pre-leased, 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.

Concentrations of credit risk can exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries or certain geographic regions. Credit risk associated with these concentrations could arise when a significant amount of loans or other financial instruments, related by similar characteristics, are simultaneously impacted by changes in economic or other conditions that cause their probability of repayment or other type of settlement to be adversely affected. Our uncovered loan portfolio is managed to a risk-appropriate level as to not create a collateral, industry or geographic concentration. As of June 30, 2015, we do not have any significant concentrations to any one particular industry or borrower. Our largest geographic concentration of loans is in the Detroit-Warren-Livonia metropolitan statistical area (“MSA”), which includes borrowers located in Wayne, Oakland, Macomb, Livingston, St. Clair and Lapeer counties in the state of Michigan.  Loans to borrowers in the Detroit-Warren-Livonia MSA totaled $1.6 billion, or approximately 34.7% of total loans, at June 30, 2015, of which approximately $210.3 million, or 13.4% of the total Detroit-Warren-Livonia MSA loans, were covered by loss share agreements with the FDIC. 

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The following tables detail our loan portfolio by loan type and geographic location as of June 30, 2015 and December 31, 2014. Geographic location is primarily determined by the domicile of the borrower and in some instances, the location of the collateral.

(Dollars in thousands)	Michigan		Ohio		Wisconsin		Illinois		Indiana		Nevada		Other		Total
June 30, 2015
Uncovered loans
Residential real estate (1)(2)	$	652,833	$	496,203	$	11,890	$	42,970	$	90,633	$	11,888	$	128,261	$	1,434,678
Commercial real estate (3)(4)	808,635		282,563		41,215		105,191		35,765		77,348		45,066		1,395,783
Commercial and industrial (5)	480,590		156,853		22,841		153,056		20,755		21,189		211,069		1,066,353
Real estate construction	83,422		29,391		8,913		26,063		19,544		2,943		4,916		175,192
Consumer	34,320		4,613		1,312		4,362		2,528		3,315		121,670		172,120
Total uncovered loans	2,059,800		969,623		86,171		331,642		169,225		116,683		510,982		4,244,126
Covered loans
Residential real estate (1)	73,672		280		20,317		959		1,143		—		—		96,371
Commercial real estate (3)	125,905		—		16,177		1,181		74		—		561		143,898
Commercial and industrial (5)	16,116		66		8,288		324		—		—		—		24,794
Real estate construction	3,606		—		3,054		766		—		—		—		7,426
Consumer	8,294		48		2		4		10		—		—		8,358
Total covered loans	227,593		394		47,838		3,234		1,227		—		561		280,847
Total loans	$	2,287,393	$	970,017	$	134,009	$	334,876	$	170,452	$	116,683	$	511,543	$	4,524,973

(1) Residential real estate loans to borrowers in the Detroit-Warren-Livonia MSA totaled $453.3 million of uncovered loans and $67.8 million of covered loans.  The Detroit-Warren-Livonia MSA includes borrowers located in Wayne, Oakland, Macomb, Livingston, St. Clair and Lapeer counties in the State of Michigan.

(2) Residential real estate loans to borrowers in the Cleveland-Elyria-Mentor metropolitan statistical area (Cleveland MSA) totaled $122.2 million of uncovered loans.  The Cleveland MSA includes borrowers located in Cuyahoga, Geauga, Lake, Lorain, and Medina counties in the State of Ohio.

(3) Commercial real estate loans to borrowers in the Detroit-Warren-Livonia MSA totaled $513.2 million of uncovered loans and $118.3 million of covered loans.

(4) Commercial real estate loans to borrowers in the Cleveland MSA totaled $194.2 million of uncovered loans.

(5) Commercial and industrial loans to borrowers in the Detroit-Warren-Livonia MSA totaled $303.5 million of uncovered loans and $14.4 million of covered loans. 

(Dollars in thousands)	Michigan		Ohio		Wisconsin		Illinois		Indiana		Nevada		Other		Total
December 31, 2014
Uncovered loans
Residential real estate (1)(2)	$	603,480	$	535,024	$	12,555	$	42,059	$	100,955	$	11,921	$	120,018	$	1,426,012
Commercial real estate (3)(4)	748,098		276,292		43,670		89,763		37,557		90,847		24,711		1,310,938
Commercial and industrial (5)	388,039		118,089		23,452		135,350		24,419		22,489		157,639		869,477
Real estate construction	63,042		19,279		8,897		17,151		16,317		4,402		2,598		131,686
Consumer	34,941		4,567		1,649		4,861		2,332		3,964		112,210		164,524
Total uncovered loans	1,837,600		953,251		90,223		289,184		181,580		133,623		417,176		3,902,637
Covered loans
Residential real estate (1)	82,399		280		22,984		1,005		1,461		97		—		108,226
Commercial real estate (3)	161,364		—		23,536		1,182		74		—		506		186,662
Commercial and industrial (5)	21,147		80		10,951		351		—		—		119		32,648
Real estate construction	4,689		—		3,913		787		—		—		—		9,389
Consumer	9,494		54		3		4		10		—		—		9,565
Total covered loans	279,093		414		61,387		3,329		1,545		97		625		346,490
Total loans	$	2,116,693	$	953,665	$	151,610	$	292,513	$	183,125	$	133,720	$	417,801	$	4,249,127

(1) Residential real estate loans to borrowers in the Detroit-Warren-Livonia MSA totaled $437.0 million of uncovered loans and $76.0 million of covered loans.  The Detroit-Warren-Livonia MSA includes borrowers located in Wayne, Oakland, Macomb, Livingston, St. Clair and Lapeer counties in the State of Michigan.

(2) Residential real estate loans to borrowers in the Cleveland-Elyria-Mentor metropolitan statistical area (Cleveland MSA) totaled $132.3 million of uncovered loans.  The Cleveland MSA includes borrowers located in Cuyahoga, Geauga, Lake, Lorain, and Medina counties in the State of Ohio.

(3) Commercial real estate loans to borrowers in the Detroit-Warren-Livonia MSA totaled $501.0 million of uncovered loans and $152.5 million of covered loans.

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(4) Commercial real estate loans to borrowers in the Cleveland MSA totaled $183.9 million of uncovered loans.

(5) Commercial and industrial loans to borrowers in the Detroit-Warren-Livonia MSA totaled $257.0 million of uncovered loans and $19.2 million of covered loans. 

The following table details our loan portfolio by loan type for the periods presented.

(Dollars in thousands)	June 30, 2015		December 31, 2014
Uncovered loans
Residential real estate	$	1,434,678	$	1,426,012
Commercial real estate
Non-owner occupied	924,174		888,650
Owner-occupied	445,927		417,843
Farmland	25,682		4,445
Total commercial real estate	1,395,783		1,310,938
Commercial and industrial	1,066,353		869,477
Real estate construction	175,192		131,686
Consumer	172,120		164,524
Total uncovered loans	4,244,126		3,902,637
Covered loans
Residential real estate	96,371		108,226
Commercial real estate
Non-owner occupied	85,889		108,692
Owner-occupied	53,614		70,492
Farmland	4,395		7,478
Total commercial real estate	143,898		186,662
Commercial and industrial	24,794		32,648
Real estate construction	7,426		9,389
Consumer	8,358		9,565
Total covered loans	280,847		346,490
Total loans	$	4,524,973	$	4,249,127

Total loans were $4.5 billion at June 30, 2015, an increase of $275.8 million from December 31, 2014, resulting from the acquisition of $162.3 million of loans at fair value in our acquisition of First of Huron Corp. on February 6, 2015 and $179.1 million of uncovered loan growth outside of the acquisition, partially offset by $65.6 million in covered loan run-off. The $179.1 million of uncovered loan growth is the result of $229.7 million of loan growth in Talmer Bank’s portfolio driven by growth in our commercial and industrial and commercial real estate portfolios, partially offset by $50.6 million of loan run-off in Talmer West Bank’s portfolio. The total increase in uncovered loans of $341.5 million at June 30, 2015, compared to December 31, 2014, including loans acquired in our acquisition of First of Huron Corp., represented increases in commercial and industrial loans of $196.9 million, commercial real estate loans of $84.8 million, real estate construction loans of $43.5 million, residential real estate loans of $8.7 million and consumer loans of $7.6 million. The covered loan run-off for the six months ended June 30, 2015, resulted from decreases in commercial real estate loans of $42.7 million, or 22.9%, residential real estate loans of $11.8 million, or 11.0%, commercial and industrial loans of $7.9 million, or 24.1%, real estate construction loans of $2.0 million, or 20.9% and consumer loans of $1.2 million, or 12.6%. Long term, we expect to increase our concentration in commercial and industrial while decreasing our concentration in residential real estate, with a goal of our overall loan portfolio mix to be approximately one-third commercial and industrial loans, approximately one-third commercial real estate loans, and the remaining to be a mix of residential real estate and consumer loans.

We originate both fixed and adjustable rate residential real estate loans conforming to the underwriting guidelines of the Federal National Mortgage Association, the Government National Mortgage Association or the Federal Home Loan Mortgage Corporation, home equity loans and lines of credit that are secured by first or junior liens, and a limited amount of other secured high credit quality jumbo loans.  We have not originated or purchased a material amount of high-risk products, such as subprime, option adjustable rate or Alternative A-paper mortgage loans as of June 30, 2015.

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Residential real estate loans totaled $1.5 billion at June 30, 2015, of which $1.4 billion were uncovered and $96.4 million were covered. Of the $1.5 billion of residential real estate loans outstanding at June 30, 2015, $22.2 million (consisting of $20.1 million of uncovered loans and $2.1 million of covered loans) were on nonaccrual status. Included in residential real estate loans are $217.8 million of home equity loans and lines of credit (consisting of $170.0 million of uncovered loans and $47.8 million of covered loans) of which $64.6 million have interest only payment terms. These loans are generally secured by junior liens and represent interest only residential real estate loans that we held as of June 30, 2015. Also included in residential real estate loans are $171.0 million of uncovered jumbo adjustable rate mortgages and $38.8 million of residential real estate loans with balloon payment terms (consisting of $32.4 million of uncovered loans and $6.4 million of covered loans) of which $1.7 million were on nonaccrual status as of June 30, 2015.

Real estate construction loans totaled $182.6 million at June 30, 2015, of which $175.2 million were uncovered loans and $7.4 million were covered loans.  Of the $182.6 million of real estate construction loans outstanding at June 30, 2015, $803 thousand (consisting of $438 thousand of uncovered loans and $365 thousand of covered loans) were on nonaccrual status. Included in real estate construction loans are $11.2 million of loans with balloon payment terms (consisting of $9.5 million of uncovered loans and $1.7 million of covered loans), of which $365 thousand were on nonaccrual status as of June 30, 2015.

Loan Maturity/Rate Sensitivity

The following tables show the contractual maturities of our uncovered and covered loans for the periods presented.

	Loans Maturing
(Dollars in thousands)	One year or less		After one but within five years		After five years		Total
June 30, 2015
Uncovered loans:
Residential real estate	$	83,394	$	143,811	$	1,207,473	$	1,434,678
Commercial real estate	196,840		881,629		317,314		1,395,783
Commercial and industrial	224,077		671,271		171,005		1,066,353
Real estate construction	38,689		39,701		96,802		175,192
Consumer	109,108		8,181		54,831		172,120
Total uncovered loans	$	652,108	$	1,744,593	$	1,847,425	$	4,244,126
Sensitivity of loans to changes in interest rates:
Predetermined (fixed) interest rates			1,179,153		930,199
Floating interest rates			565,440		917,226
Total			$	1,744,593	$	1,847,425
Covered loans:
Residential real estate	$	9,558	$	38,544	$	48,269	$	96,371
Commercial real estate	58,195		61,814		23,889		143,898
Commercial and industrial	15,709		7,951		1,134		24,794
Real estate construction	4,007		2,753		666		7,426
Consumer	61		1,023		7,274		8,358
Total covered loans	$	87,530	$	112,085	$	81,232	$	280,847
Sensitivity of loans to changes in interest rates:
Predetermined (fixed) interest rates			104,926		44,170
Floating interest rates			7,159		37,062
Total			$	112,085	$	81,232

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	Loans Maturing
(Dollars in thousands)	One year or less		After one but within five years		After five years		Total
December 31, 2014
Uncovered loans:
Residential real estate	$	72,086	$	97,641	$	1,256,285	$	1,426,012
Commercial real estate	221,617		818,219		271,102		1,310,938
Commercial and industrial	208,568		502,798		158,111		869,477
Real estate construction	21,211		34,933		75,542		131,686
Consumer	3,399		52,986		108,139		164,524
Total uncovered loans	$	526,881	$	1,506,577	$	1,869,179	$	3,902,637
Sensitivity of loans to changes in interest rates:
Predetermined (fixed) interest rates			982,520		1,003,759
Floating interest rates			524,057		865,420
Total			$	1,506,577	$	1,869,179
Covered loans:
Residential real estate	$	9,056	$	44,691	$	54,479	$	108,226
Commercial real estate	101,226		63,945		21,491		186,662
Commercial and industrial	22,165		9,095		1,388		32,648
Real estate construction	6,579		2,181		629		9,389
Consumer	178		871		8,516		9,565
Total covered loans	$	139,204	$	120,783	$	86,503	$	346,490
Sensitivity of loans to changes in interest rates:
Predetermined (fixed) interest rates			112,362		44,806
Floating interest rates			8,421		41,697
Total			$	120,783	$	86,503

Allowance for Loan Losses

We maintain the allowance for loan losses at a level we believe is sufficient to absorb probable, incurred losses in our loan portfolio given the conditions at the time. Management determines the adequacy of the allowance based on periodic evaluations of the loan portfolio and other factors. These evaluations are inherently subjective as they require management to make material estimates, all of which may be susceptible to significant change. The allowance is increased by provisions charged to expense and decreased by actual charge-offs, net of recoveries or previous amounts charged-off.

Purchased Loans

We maintain an allowance for loan losses on purchased loans based on credit deterioration subsequent to the acquisition date.  In accordance with the accounting guidance for business combinations, there was no allowance brought forward on any of the acquired loans as any credit deterioration evident in the loans was included in the determination of the fair value of the loans at the acquisition date.  For purchased credit impaired loans, accounted for under FASB Topic ASC 310-30 “Receivables — Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”) and troubled debt restructurings previously individually accounted for under ASC 310-30, management establishes an allowance for credit deterioration subsequent to the date of acquisition by re-estimating expected cash flows on a quarterly basis with any decline in expected cash flows recorded as provision for loan losses. Impairment is measured as the excess of the recorded investment in a loan over the present value of expected future cash flows discounted at the pre-impairment accounting yield of the loan.  For any increases in cash flows expected to be collected, we first reverse only previously recorded allowance for loan losses, then adjust the amount of accretable yield recognized on a prospective basis over the loan’s remaining life.  These cash flow evaluations are inherently subjective as they require material estimates, all of which may be susceptible to significant change. For non-purchased credit impaired loans acquired in our acquisitions of First Place Bank, Talmer West Bank and First of

Huron Corp. that are accounted for under ASC 310-20, the historical loss estimates are based on the historical losses experienced by First Place Bank or First of Huron Corp., or Talmer Bank following the merger, and by Talmer West Bank for

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loans with similar characteristics as those acquired other than purchased credit impaired loans.  We record an allowance for loan losses only when the calculated amount exceeds the estimated credit mark at acquisition that was established for the similar period covered in the allowance for loan loss calculation. For all other purchased loans accounted for under ASC 310-20 or under ASC 310-40, the allowance is calculated in accordance with the methods used to calculate the allowance for loan losses for originated loans.

Originated loans

The allowance for loan losses represents management’s assessment of probable, incurred credit losses inherent 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.

Impaired loans include loans placed on nonaccrual status and troubled debt restructurings. Loans are considered impaired when based on current information and events it is probable that we will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. When determining if we will be unable to collect all principal and interest payments due in accordance with the original contractual terms of the loan agreement, we consider the borrower’s overall financial condition, resources and payment record, support from guarantors, and the realizable value of any collateral.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

All impaired loans are identified to be individually evaluated for impairment.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the discounted expected future cash flows or at the fair value of collateral if repayment is collateral dependent.

The allowance for our business loans, which includes commercial and industrial, commercial real estate and real estate construction loans, that are not individually evaluated for impairment begins with a process of estimating the probable incurred losses in the portfolio. These estimates are established based on our internal credit risk ratings and historical loss data. Internal credit risk ratings are assigned to each business loan at the time of approval and are subjected to subsequent periodic reviews by senior management, at least annually or more frequently upon the occurrence of a circumstance that affects the credit risk of the loan. As our operating history is limited and we are growing rapidly, the historical loss estimates for loans are based primarily on the actual historical loss experienced by all banks in our markets of Michigan, Ohio, Wisconsin, Illinois and Nevada combined with a small factor representing our own loss history from the same time period.  These estimates are established by loan type including commercial and industrial, commercial real estate and real estate construction, and further segregated by region, including Michigan, Ohio, Wisconsin, Illinois and Nevada, where applicable. In addition, consideration is given to borrower rating migration experience and trends, industry concentrations and conditions, changes in collateral values of properties securing loans and trends with respect to past due and nonaccrual amounts. Given our limited operating history, the estimate of losses for single family residential and consumer loans which are not individually evaluated is also based primarily on historical loss rates experienced in the respective loan classes by all banks in Michigan, Ohio, Wisconsin, Illinois and Nevada. This estimate is also adjusted to give consideration to borrower rating migration experience and trends, changes in collateral values of properties securing loans and trends with respect to past due and nonaccrual amounts.

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The following tables present, by loan type, the changes in the allowance for loan losses on both uncovered and covered loans for the periods presented.

Analysis of the Allowance for Loan Losses — Uncovered

	For the three months ended June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Balance at beginning of period	$	34,477		$	22,771		$	33,819		$	17,746
Loan charge-offs:
Residential real estate	(1,081		)	(1,381		)	(3,218		)	(2,817		)
Commercial real estate	(2,929		)	(3,586		)	(4,547		)	(4,831		)
Commercial and industrial	(735		)	(481		)	(2,002		)	(626		)
Real estate construction	(272		)	(28		)	(307		)	(109		)
Consumer	(256		)	(57		)	(579		)	(123		)
Total loan charge-offs	(5,273		)	(5,533		)	(10,653		)	(8,506		)
Recoveries of loans previously charged-off:
Residential real estate	1,008			540			1,454			1,300
Commercial real estate	3,796			1,870			5,554			2,486
Commercial and industrial	1,326			439			1,546			601
Real estate construction	128			961			285			963
Consumer	35			93			80			127
Total loan recoveries	6,293			3,903			8,919			5,477
Net recoveries (charge-offs)	1,020			(1,630		)	(1,734		)	(3,029		)
Provision for loan losses	1,069			3,219			4,481			9,643
Balance at end of period	$	36,566		$	24,360		$	36,566		$	24,360
Allowance for loan losses as a percentage of total uncovered loans at period end	0.86		%	0.74		%	0.86		%	0.74		%
Annualized net loan (recoveries) charge-offs on uncovered loans as a percentage of average uncovered loans	(0.10		)%	0.21		%	0.08		%	0.19		%

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Analysis of the Allowance for Loan Losses — Covered

	For the three months ended June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Balance at beginning of period	$	17,988		$	38,000		$	21,353		$	40,381
Loan charge-offs:
Residential real estate	(152		)	(412		)	(476		)	(1,275		)
Commercial real estate	(777		)	(1,209		)	(4,588		)	(3,195		)
Commercial and industrial	(1,274		)	(1,500		)	(2,091		)	(2,527		)
Real estate construction	(454		)	(979		)	(962		)	(1,004		)
Consumer	(7		)	(30		)	(165		)	(77		)
Total loan charge-offs	(2,664		)	(4,130		)	(8,282		)	(8,078		)
Recoveries of loans previously charged-off:
Residential real estate	251			556			440			1,108
Commercial real estate	6,306			4,270			8,791			5,915
Commercial and industrial	2,638			692			3,165			2,341
Real estate construction	126			590			504			717
Consumer	77			86			170			178
Total loan recoveries	9,398			6,194			13,070			10,259
Net recoveries	6,734			2,064			4,788			2,181
Provision (benefit) for loan losses	(8,382		)	(7,321		)	(9,801		)	(9,819		)
Balance at end of period	$	16,340		$	32,743		$	16,340		$	32,743
Allowance for loan losses as a percentage of total covered loans at period end	5.82		%	7.13		%	5.82		%	7.13		%
Annualized net loan recoveries on covered loans as a percentage of average covered loans	(8.92		)	(1.73		)	(3.03		)	(0.88		)

Our uncovered allowance for loan losses was $36.6 million, or 0.86% of uncovered loans, at June 30, 2015, compared to $33.8 million, or 0.87% of uncovered loans, at December 31, 2014. The $2.7 million increase in the uncovered allowance for loan losses during the six months ended June 30, 2015 was primarily due to additional allowance resulting from our quarterly re-estimation of expected cash flows for our uncovered purchased credit impaired loans, the impact of organic loan growth and additional specific allowance based on individual evaluation of certain loans.

The covered allowance for loan losses was $16.3 million, or 5.82% of covered loans, at June 30, 2015, compared to $21.4 million, or 6.16% of total covered loans, at December 31, 2014. The $5.0 million decrease in the covered allowance for loan losses during the six months ended June 30, 2015 was primarily driven by payments received on covered loans previously carrying an allowance for loan loss, partially offset by the additional allowance resulting from our quarterly re-estimation of expected cash flows of our covered purchased credit impaired loans.

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The following tables present, by loan type, the allocation of the allowance for loan losses on both uncovered and covered loans for the periods presented.

Allocation of the Allowance for Loan Losses — Uncovered

	Accounted for under ASC 310-30						Excluded from ASC 310-30 accounting
(Dollars in thousands)	Allocated Allowance		Allowance Ratio (1)		Percent of loans in each category to total loans		Allocated Allowance		Allowance Ratio (1)		Percent of loans in each category to total loans
June 30, 2015
Balance at end of period applicable to:
Residential real estate	$	5,131	2.27	%	51.8	%	$	5,957	0.49	%	31.6	%
Commercial real estate	5,548		3.01		42.2		6,634		0.55		31.8
Commercial and industrial	763		4.56		3.8		9,982		0.95		27.6
Real estate construction	798		10.93		1.7		650		0.39		4.4
Consumer	114		5.29		0.5		989		0.58		4.6
Total uncovered loans	$	12,354	2.83	%	100.0	%	$	24,212	0.64	%	100.0	%
December 31, 2014
Balance at end of period applicable to:
Residential real estate	$	6,233	2.60	%	52.6	%	$	5,960	0.50	%	34.4	%
Commercial real estate	5,229		2.75		41.7		5,899		0.53		32.5
Commercial and industrial	885		5.71		3.4		6,950		0.81		24.8
Real estate construction	950		11.43		1.8		649		0.53		3.6
Consumer	162		6.78		0.5		902		0.56		4.7
Total uncovered loans	$	13,459	2.95	%	100.0	%	$	20,360	0.59	%	100.0	%

(1) Allocated allowance as a percentage of related loans outstanding.

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Allocation of the Allowance for Loan Losses — Covered

(Dollars in thousands)	Allocated Allowance		Allowance Ratio (1)		Percent of loans in each category to total loans
June 30, 2015
Balance at end of period applicable to:
Residential real estate	$	4,096	4.25	%	34.3	%
Commercial real estate	9,166		6.37		51.3
Commercial and industrial	2,093		8.44		8.8
Real estate construction	954		12.85		2.6
Consumer	31		0.37		3.0
Total covered loans	$	16,340	5.82	%	100.0	%
December 31, 2014
Balance at end of period applicable to:
Residential real estate	$	3,981	3.68	%	31.2	%
Commercial real estate	13,663		7.32		53.9
Commercial and industrial	2,577		7.89		9.4
Real estate construction	1,086		11.57		2.7
Consumer	46		0.48		2.8
Total covered loans	$	21,353	6.16	%	100.0	%

(1) Allocated allowance as a percentage of related loans outstanding.

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Summary of Impaired Assets and Past Due Loans

(Dollars in thousands)	June 30, 2015		December 31, 2014
Uncovered
Nonperforming troubled debt restructurings
Residential real estate	$	4,364	$	3,984
Commercial real estate	4,652		2,644
Commercial and industrial	414		180
Real estate construction	202		—
Consumer	91		83
Total nonperforming troubled debt restructurings	9,723		6,891
Nonaccrual loans other than nonperforming troubled debt restructurings
Residential real estate	$	15,769	$	13,390
Commercial real estate	11,075		11,112
Commercial and industrial	2,705		3,370
Real estate construction	236		174
Consumer	217		174
Total nonaccrual loans other than nonperforming troubled debt restructurings	30,002		28,220
Total nonaccrual loans	39,725		35,111
Other real estate and repossessed assets (1)	37,612		36,872
Total nonperforming assets	77,337		71,983
Performing troubled debt restructurings
Residential real estate	2,392		1,368
Commercial real estate	3,741		3,785
Commercial and industrial	2,597		840
Real estate construction	131		90
Consumer	233		234
Total performing troubled debt restructurings	9,094		6,317
Total uncovered impaired assets	$	86,431	$	78,300
Loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30	$	340	$	53

(1) Excludes closed branches and operating facilities.

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(Dollars in thousands)	June 30, 2015		December 31, 2014
Covered
Nonperforming troubled debt restructurings
Residential real estate	$	1,606	$	1,363
Commercial real estate	14,717		14,343
Commercial and industrial	1,652		2,043
Real estate construction	336		272
Consumer	20		13
Total nonperforming troubled debt restructurings	18,331		18,034
Nonaccrual loans other than nonperforming troubled debt restructurings
Residential real estate	$	465	$	485
Commercial real estate	251		1,380
Commercial and industrial	717		1,517
Real estate construction	29		441
Total nonaccrual loans other than nonperforming troubled debt restructurings	1,462		3,823
Total nonaccrual loans	19,793		21,857
Other real estate and repossessed assets	8,261		10,719
Total nonperforming assets	28,054		32,576
Performing troubled debt restructurings
Residential real estate	3,584		3,046
Commercial real estate	3,055		9,017
Commercial and industrial	569		1,137
Real estate construction	300		264
Consumer	7		—
Total performing troubled debt restructurings	7,515		13,464
Total covered impaired assets	$	35,569	$	46,040
Loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30	$	—	$	—

Nonperforming assets consist of nonaccrual loans, other real estate owned, excluding closed branches and operating facilities, and repossessed assets. We do not consider performing TDRs to be nonperforming assets. The level of nonaccrual loans is an important element in assessing asset quality. Loans are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful. Generally, loans are placed on nonaccrual status due to the continued failure by the borrower to adhere to contractual payment terms coupled with other pertinent factors, such as insufficient collateral value.

Purchased credit impaired 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 covered loan loss provision or future period yield adjustments.

Total nonperforming assets were $105.4 million as of June 30, 2015, compared to $104.6 million as of December 31, 2014.

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FDIC Indemnification Asset and Receivable

In connection with our FDIC-assisted acquisitions, we entered into loss share agreements with the FDIC.  At each acquisition date, we account for amounts receivable from the FDIC under the loss share agreements as an indemnification asset. Subsequent to initial recognition, the FDIC indemnification asset is reviewed quarterly and adjusted for any changes in expected cash flows. These adjustments are measured on the same basis as the related covered assets.  A decline in expected cash flows on covered loans is referred to as impairment and recorded as provision for loan losses, resulting in an increase to the allowance for loan losses on covered loans. Estimated reimbursements due from the FDIC under loss share agreements related to any declines in expected cash flows are recorded as noninterest income in “FDIC loss sharing income” in our consolidated statements of income and result in an increase to the FDIC indemnification asset in the same period.  An improvement in expected cash flows on covered loans, once any previously recorded impairment is recaptured, is recognized prospectively as an upward adjustment to the yield on the related loan and a downward adjustment to the yield on the FDIC indemnification asset. As such, overall improvements in expected cash flows on covered loans can result in a negative yield on the FDIC indemnification asset, which is recorded in “interest income” in our consolidated statements of income, while increases to the FDIC indemnification asset are recorded as adjustments to noninterest income in “FDIC loss sharing income” in our consolidated statements of income.  When covered loans payoff sooner than expected, any remaining FDIC indemnification asset is reviewed and may result in a direct write off as an adjustment to  noninterest income in “Accelerated discount on acquired loans” in our consolidated statements of income. The FDIC indemnification asset is also reduced for claims submitted to the FDIC for reimbursement.  We have established an FDIC receivable which represents claims submitted to the FDIC for reimbursement for which we expect to receive payment within 90 days.

Our loss share agreements for CF Bancorp, First Banking Center and Peoples State Bank include provisions where a clawback payment, calculated using formulas included within the agreements, is to be made to the FDIC ten years and 45 days following the acquisition in the event actual losses fail to reach stated levels. As of June 30, 2015, the estimated FDIC clawback liability totaled $28.6 million, including $24.0 million, $4.5 million and $119 thousand related to the CF Bancorp, First Banking Center and Peoples State Bank acquisitions, respectively.

The FDIC indemnification asset balance was $37.0 million at June 30, 2015. Of this amount, we expect approximately $19.7 million to be collected from the FDIC and the remaining $17.3 million to be amortized prior to the end of the associated loss share agreement, as a result of improvements in cash flow expectations on covered loans. Effective July 1, 2015, the first of our four non-single family loss share agreements expired. At June 30, 2015, there was no FDIC indemnification asset remaining related to $77.0 million of covered loans ($64.8 million accounted for under ASC 310-30 and $12.2 million excluded from ASC 310-30 accounting) and $2.2 million of covered other real estate related to this agreement. The second of our non-single family loss share agreements expires on January 1, 2016, of which the FDIC indemnification asset included $2.5 million related to covered loans and covered other real estate related to this agreement. Any losses on covered assets after the applicable loss share agreement expires will not be eligible for reimbursement from the FDIC. As such, to the extent that loss share coverage ends prior to the loss triggering event on a covered asset, impairment on any remaining FDIC indemnification asset associated with the covered asset would be required. Management is closely monitoring the outcome of anticipated losses on covered assets and has proactively reviewed the portfolios of covered loans and other real estate that are under loss share agreements that are expiring in the year ending December 31, 2015 to evaluate the appropriateness of the associated remaining FDIC indemnification asset.

99

The following table summarizes the activity related to the FDIC indemnification asset and the FDIC receivable for the periods indicated.

	For the three months ended  June 30, 2015						For the six months ended  June 30, 2015
(Dollars in thousands)	FDIC Indemnification Asset			FDIC Receivable			FDIC Indemnification Asset			FDIC Receivable
Balance at beginning of period	$	50,702		$	7,839		$	67,026		$	6,062
Accretion	(8,548		)	—			(17,798		)	—
Sales and write-downs of other real estate owned (covered)	(475		)	150			(828		)	16
Net effect of change in allowance on covered assets (1)	490			—			(1,200		)	—
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(5,172		)	5,172			(10,203		)	10,203
Decreases due to recoveries net of additional claimable expenses incurred (2)	—			(6,261		)	—			(7,618		)
Claim payments received from the FDIC	—			(1,357		)	—			(3,120		)
Balance at end of period	$	36,997		$	5,543		$	36,997		$	5,543

(1) Primarily includes adjustments for fully claimed and exited loans and the results of re-estimations of expected cash flows under ASC 310-30 accounting.

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

	For the three months ended  June 30, 2014						For the six months ended  June 30, 2014
(Dollars in thousands)	FDIC Indemnification Asset			FDIC Receivable			FDIC Indemnification Asset			FDIC Receivable
Balance at beginning of period	$	119,045		$	8,130		$	131,861		$	7,783
Accretion	(5,506		)	—			(12,224		)	—
Sales and write-downs of other real estate owned (covered)	(281		)	(55		)	(753		)	(247		)
Net effect of change in allowance on covered assets (1)	(6,130		)	—			(8,155		)	—
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(4,434		)	4,434			(8,035		)	8,035
Decreases due to recoveries net of additional claimable expenses incurred (2)	—			(3,433		)	—			(4,319		)
Claim payments received from the FDIC	—			(1,878		)	—			(4,054		)
Balance at end of period	$	102,694		$	7,198		$	102,694		$	7,198

(1) Primarily includes adjustments for fully claimed and exited loans and the results of re-estimations of expected cash flows under ASC 310-30 accounting.

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

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Investment Securities

	June 30,		December 31,
(Dollars in thousands)	2015		2014
Securities available-for-sale:
U.S. government sponsored agency obligations	$	98,283	$	98,358
Obligations of state and political subdivisions:
Taxable	4,361		397
Tax exempt	271,754		232,259
Small Business Administration (SBA) Pools	32,349		33,933
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	334,034		291,759
Privately issued	26,460		18,800
Privately issued commercial mortgage backed securities	19,509		5,130
Corporate debt securities:
Senior debt	37,479		39,513
Subordinated debt	21,090		20,670
Total securities available-for-sale	845,319		740,819
Securities held-to-maturity (1)	1,692		1,226
Total investment securities	$	847,011	$	742,045

(1) Included within “Other assets” in the Consolidated Balance Sheet.

The composition of our investment securities portfolio reflects our investment strategy of maintaining an appropriate level of liquidity for both normal operations and potential acquisitions while providing an additional source of revenue. The investment portfolio also provides a balance to interest rate risk and credit risk in other categories of the balance sheet, while providing a vehicle for the investment of available funds, furnishing liquidity, and supplying securities to pledge as collateral. At June 30, 2015, total investment securities were $847.0 million, or 13.2% of total assets, compared to $742.0 million, or 12.6% of total assets, at December 31, 2014. The increase from December 31, 2014 to June 30, 2015, primarily reflected increases in a diverse mix of residential mortgage-backed securities, tax exempt obligations of state and political subdivisions and privately issued commercial mortgage backed securities. Securities with a carrying value of $453.2 million and $337.8 million were pledged at June 30, 2015 and December 31, 2014, respectively, to secure borrowings and deposits.

101

 The following tables show maturities and yields for the investment securities portfolio at June 30, 2015 and December 31, 2014.

	Maturity as of June 30, 2015
	One Year or Less				One to Five Years				Five to Ten Years				After Ten Years
	Amortized		Average		Amortized		Average		Amortized		Average		Amortized		Average
(Dollars in thousands)	Cost		Yield (1)		Cost		Yield (1)		Cost		Yield (1)		Cost		Yield (1)
Securities available-for-sale:
U.S. government sponsored agency obligations (1)	$	—	—	%	$	44,705	1.85	%	$	51,387	1.75	%	$	1,768	3.28	%
Obligations of state and political subdivisions:
Taxable	827		0.99		3,045		2.16		489		2.52		—		—
Tax exempt (2)	2,027		3.76		52,114		3.89		121,406		4.23		95,555		4.43
SBA Pools (3) (4)	—		—		1,502		1.22		30,458		0.87		—		—
Residential mortgage-backed securities (3):															—
Issued and/or guaranteed by U.S. government agencies or sponsored enterprises	3,714		2.80		177,571		2.40		151,172		2.61		—		—
Privately issued (1)	482		1.65		15,870		2.63		10,252		2.52		—		—
Commercial mortgage-backed securities (3)	7,367		2.31		12,180		2.10		—		—		—		—
Corporate debt securities (5)	3,067		1.61		33,261		1.97		10,000		4.97		11,862		2.28
Total securities available-for-sale	17,484		1.40	%	340,248		2.51	%	375,164		2.94	%	109,185		4.18	%
Securities held-to-maturity	—		—		1,692		—		—		—		—		—
Total investment securities	$	17,484	1.40	%	$	341,940	2.49	%	$	375,164	2.94	%	$	109,185	4.18	%

(1) Average yields assume a yield to call approach where embedded call options exist, such as in certain callable U.S. government sponsored agency obligations and non-agency MBS’s. $38.7 million of U.S. government sponsored agency obligations maturing beyond five years contain step-up coupon structures which, if were not to be called prior to stated maturities, would positively impact average yields for balances maturing in the five-to-ten years bucket and after ten years bucket by 117 basis points and 106 basis points, respectively, or resulting in average yields of 2.91% and 4.34%, respectively.

(2) Average yields on tax-exempt obligations have been computed on a tax equivalent basis, based on a 35% federal tax rate.

(3) Maturity distributions for SBA pools, residential mortgage-backed securities and commercial mortgage backed securities are based on estimated average lives.

(4) All indicated balances in the one-to-five years bucket and five-to-ten years bucket encompass floating rate holdings indexed to Prime, which are contractually adjustable on a quarterly basis, in which the current June 30, 2015 indexed coupon rates are assumed to remain constant until maturity.

(5) Average yields on corporate debt securities in the one-to-five year maturity bucket and after ten year maturity bucket includes yields on $5.9 million and $11.9 million, respectively, of floating rate holdings indexed to 3-month LIBOR, in which the current June 30, 2015 indexed coupon rates are assumed to remain constant until maturity.

102

	Maturity as of December 31, 2014
	One Year or Less				One to Five Years				Five to Ten Years				After Ten Years
	Amortized		Average		Amortized		Average		Amortized		Average		Amortized		Average
(Dollars in thousands)	Cost		Yield (1)		Cost		Yield (1)		Cost		Yield (1)		Cost		Yield (1)
Securities available-for-sale:
U.S. government sponsored agency obligations (1)	$	—	—	%	$	10,000	1.65	%	$	60,995	1.88	%	$	26,751	1.15	%
Obligations of state and political subdivisions:
Taxable	—		—		397		6.19		—		—		—		—
Tax exempt (2)	76		2.28		42,357		3.88		120,881		4.39		66,090		4.72
SBA Pools (3) (4)	—		—		1,650		1.06		32,174		0.87		—		—
Residential mortgage-backed securities (3):
Issued and/or guaranteed by U.S. government agencies or sponsored enterprises	6,268		2.73		234,666		2.42		48,222		2.44		—		—
Privately issued (1)	1,106		2.45		17,708		2.37		—		—		—		—
Commercial mortgage-backed securities (3)	—		—		5,127		2.19		—		—		—		—
Corporate debt securities (5)	1,752		1.54		36,667		1.94		10,000		5.00		11,787		2.23
Total securities available-for-sale	9,202		2.47		348,572		2.52		272,272		3.09		104,628		3.53
Securities held-to-maturity	—		—		1,226		—		—		—		—		—
Total investment securities	$	9,202	2.47	%	$	349,798	2.51	%	$	272,272	3.09	%	$	104,628	3.53	%

(1) Average yields assume a yield to call approach where embedded call options exist, such as in certain callable U.S. government sponsored agency obligations and non-agency MBS’s. $73.6 million of U.S. government sponsored agency obligations maturing beyond five years contain step-up coupon structures which, if were not to be called prior to stated maturities, would positively impact average yields for balances maturing in the five-to-ten years bucket and after ten years bucket by 79 basis points and 200 basis points, respectively, or resulting in average yields of 2.67% and 3.15%, respectively.

(2) Average yields on tax-exempt obligations have been computed on a tax equivalent basis, based on a 35% federal tax rate.

(3) Maturity distributions for SBA pools, residential mortgage-backed securities and commercial mortgage backed securities are based on estimated average lives.

(4) All indicated balances in the one-to-five years bucket and five-to-ten years bucket encompass floating rate holdings indexed to Prime, which are contractually adjustable on a quarterly basis, in which the current December 31, 2014 indexed coupon rates are assumed to remain constant until maturity.

(5) Average yields on corporate debt securities in the one-to-five year maturity bucket and after ten year maturity bucket includes yields on $5.9 million and $11.8 million, respectively, of floating rate holdings indexed to 3-month LIBOR, in which the current December 31, 2014 indexed coupon rates are assumed to remain constant until maturity.

Loan servicing rights

Loan servicing rights are created as a result of our mortgage banking origination activities, the purchase of mortgage servicing rights, the origination and purchase of commercial real estate servicing rights and the origination and purchase of agricultural servicing rights. Loans serviced for others are not reported as assets in the Consolidated Balance Sheets. As of June 30, 2015, we serviced loans for others with an aggregate outstanding principal balance of $6.0 billion.

Total loan servicing rights were $58.9 million as of June 30, 2015, compared to $70.6 million as of December 31, 2014. The $11.7 million decrease was primarily due to the sale of $12.7 million of mortgage servicing rights and $4.8 million of change in the fair value of loan servicing rights from December 31, 2014 to June 30, 2015 due to a combination of changes in market interest rates and reduced fair value due to loans paid off, partially offset by $5.8 million of loan servicing rights added to the portfolio. The sale of mortgage servicing rights in the first half of 2015 included substantially all of the mortgage servicing rights we had owned for mortgages located outside of our primary target markets. Management made the strategic decision not to hedge loan servicing assets at this point. Therefore, any future declines in interest rates would likely cause

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further decreases in the fair value of the loan servicing rights, and a corresponding detriment to earnings, whereas increases in interest rates would result in increases in fair value, and a corresponding benefit to earnings. Management may choose to hedge the loan servicing assets in the future.

Deposits

(Dollars in thousands)	June 30, 2015		December 31, 2014
Noninterest-bearing demand deposits	$	1,002,053	$	887,567
Interest-bearing demand deposits	821,557		660,697
Money market and savings deposits	1,276,726		1,170,236
Time deposits	1,427,126		1,188,178
Other brokered funds	380,611		642,185
Total deposits	$	4,908,073	$	4,548,863

Total deposits were $4.9 billion at June 30, 2015 and $4.5 billion at December 31, 2014, representing 86.9% and 89.0% of total liabilities at each period end, respectively. The fair value of deposits acquired in our acquisition of First of Huron Corp. totaled $201.5 million consisting of demand deposits of $91.1 million, money market and savings deposits of $62.4 million and time deposits of $48.0 million. Deposit growth outside of the acquisition of First of Huron Corp. was $157.7 million. The growth in deposits was primarily due to increases of $190.9 million in time deposits, $184.2 million in demand deposits and $44.1 million in money market and savings deposits, partially offset by a decrease in other brokered funds of $261.6 million. Our interest-bearing deposit costs were 36 basis points and 26 basis points for the six months ended June 30, 2015 and 2014, respectively.

The following table shows the contractual maturity of time deposits, including CDARs and IRA deposits and other brokered funds, of $100 thousand and over that were outstanding for the periods presented.

(Dollars in thousands)	June 30, 2015		December 31, 2014
Maturing in
3 months or less	$	256,754	$	180,288
3 months to 6 months	169,319		157,599
6 months to 1 year	306,797		201,234
1 year or greater	195,150		154,046
Total	$	928,020	$	693,167

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Borrowings

(Dollars in thousands)	June 30, 2015		December 31, 2014
Short-term borrowings:
FHLB advances	$	200,000	$	110,000
Securities sold under agreements to repurchase	23,945		25,743
Holding company line of credit	30,000		—
Total short-term borrowings	253,945		135,743
Long-term debt:
FHLB advances (1)	344,001		286,804
Securities sold under agreements to repurchase (2)	55,623		56,444
Subordinated notes related to trust preferred securities (3)	15,323		10,724
Total long-term debt	414,947		353,972
Total short-term borrowings and long-term debt	$	668,892	$	489,715

(1) The June 30, 2015 balance includes advances payable of $338.5 million and purchase accounting premiums of $5.5 million. The December 31, 2014 balance includes advances payable of $280.1 million and purchase accounting premiums of $6.7 million.

(2) The June 30, 2015 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting premiums of $5.6 million. The December 31, 2014 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting premiums of $6.4 million.

(3) The June 30, 2015 balance includes subordinated notes related to trust preferred securities of $20.0 million and purchase accounting discounts of $4.7 million, respectively.  The December 31, 2014 balance includes subordinated notes related to trust preferred securities of $15.0 million and purchase accounting discounts of $4.3 million, respectively.

Total short-term borrowings and long-term debt outstanding at June 30, 2015 was $668.9 million, an increase of $179.2 million from $489.7 million at December 31, 2014. The increase in total borrowings was primarily due to an increase in $147.2 million in FHLB advances. In addition, we drew $30.0 million on our line of credit in the six months ended June 30, 2015 to facilitate the repurchase of 2.5 million warrants to purchase shares of our Class A common stock with an aggregate purchase price of $19.9 million and for working capital.

Total debt was collateralized by $2.5 billion of commercial and mortgage loans, mortgage-backed securities and bonds at June 30, 2015, compared to $2.4 billion of commercial and mortgage loans, mortgage-backed securities and bonds at December 31, 2014. See the “Contractual Obligations” section of this financial review for maturity information.

Capital Resources

The following table summarizes the changes in our shareholders’ equity for the periods indicated:

	For the three months ended June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Balance at beginning of period	$	753,849		$	703,028		$	761,607		$	617,015
Net income	17,548			20,606			26,981			58,833
Other comprehensive income	(4,404		)	4,648			(1,614		)	10,229
Stock-based compensation expense	515			274			866			454
Restricted stock awards, including tax benefit	16			—			16			—
Issuance of common shares, including tax benefit	(409		)	(611		)	(143		)	41,414
Repurchase of warrants to repurchase 2.5 million shares, at fair value	—			—			(19,892		)	—
Cash dividends paid on common stock (1)	(709		)	—			(1,415		)	—
Balance at end of period	$	766,406		$	727,945		$	766,406		$	727,945

(1) The Company declared common stock cash dividends of $0.01 in each of the first and second quarters of 2015.

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On February 17, 2015, we repurchased an aggregate of 2,529,416 warrants to repurchase shares of our Class A common stock issued to WLR Recovery Fund IV, L.P. and WLR IV Parallel ESC, L.P. (the “WL Ross Funds”). The purchase price, determined utilizing the closing price of our stock on the date of repurchase, was $19.9 million and was funded by a draw on our line of credit.

We strive to maintain an adequate capital base to support our activities in a safe and sound manner while at the same time attempting to maximize shareholder value. We assess capital adequacy against the risk inherent in our balance sheet, recognizing that unexpected loss is the common denominator of risk and that common equity has the greatest capacity to absorb unexpected loss.

At June 30, 2015, the most recent regulatory notifications categorized Talmer Bank as well capitalized under the regulatory framework for prompt corrective action.

The capital ratios of Talmer West Bank at June 30, 2015 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 issued 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.

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Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts and bank holding companies. During the first quarter of 2015, we adopted the new Basel III regulatory capital framework as approved by federal banking agencies, which are subject to a multi-year phase-in period. The adoption of this new framework modified the calculation of the various capital ratios, added a new ratio, common equity tier 1, and revised the adequately and well capitalized thresholds. In addition, Basel III establishes a new capital conservation buffer of 2.5% of risk-weighted assets, which is phased-in over a four-year period beginning January 1, 2016. Our capital ratios exceeded the current well capitalized regulatory requirements as follows: 

	Well Capitalized Regulatory Requirement		Capital Ratio
June 30, 2015 (Basel III Transitional)
Total risk-based capital
Consolidated	N/A		15.0	%
Talmer Bank and Trust	10.0	%	14.2
Talmer West Bank (1)	N/A		24.8
Common equity tier 1 capital
Consolidated	N/A		13.9
Talmer Bank and Trust	6.50		13.2
Talmer West Bank (1)	N/A		23.5
Tier 1 risk-based capital
Consolidated	N/A		13.9
Talmer Bank and Trust	8.0		13.2
Talmer West Bank (1)	N/A		23.5
Tier 1 leverage ratio
Consolidated	N/A		11.5
Talmer Bank and Trust	5.0		11.1
Talmer West Bank (1)	N/A		16.6
December 31, 2014 (Basel I)
Total risk-based capital
Consolidated	N/A		16.4	%
Talmer Bank and Trust	10.0	%	16.3
Talmer West Bank (1)	N/A		19.6
Tier 1 risk-based capital
Consolidated	N/A		15.2
Talmer Bank and Trust	6.0		15.0
Talmer West Bank (1)	N/A		18.4
Tier 1 leverage ratio
Consolidated	N/A		11.6
Talmer Bank and Trust	5.0		11.6
Talmer West Bank (1)	N/A		12.4

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

A cash dividend on our Class A common stock of $0.01 per share was declared on July 29, 2015. The dividend will be paid out on August 21, 2015, to our Class A common shareholders of record as of August 10, 2015.

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Off-Balance Sheet Arrangements

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

Our 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 same credit policies are used in making commitments and conditional obligations as are 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. We evaluate each customer’s creditworthiness on an individual basis. The amount of collateral obtained, if deemed necessary by us 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 we are committed.

Letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. Our 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 us arises from our obligation to make payment in the event of the customers’ contractual default to produce the contracted good or service to a third party. Management conducts regular reviews of these instruments on an individual customer basis and does not anticipate any material losses as a result of these letters of credit.

We maintain an allowance to cover probable losses inherent in our financial instruments with off-balance sheet risk. At June 30, 2015 and December 31, 2014, the allowance for off-balance sheet risk was $617 thousand and $539 thousand, respectively, and included in “Other liabilities” on our consolidated balance sheets.

A summary of the contractual amounts of our exposure to off-balance sheet risk is as follows.

	June 30, 2015						December 31, 2014
(Dollars in thousands)	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Commitments to extend credit	$	642,049	$	623,846	$	1,265,895	$	502,762	$	463,362	$	966,124
Standby letters of credit	62,313		3,441		65,754		69,305		4,197		73,502
Total commitments	$	704,362	$	627,287	$	1,331,649	$	572,067	$	467,559	$	1,039,626

We 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 our commitments to fund the loans.  These commitments to fund mortgage loans (interest rate lock commitments) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives.

We also enter into interest rate derivatives to provide a service to certain qualifying customers to help facilitate their respective risk management strategies (“customer-initiated derivatives”).  These derivatives are not used to manage interest rate risk in our assets or liabilities.  We generally take offsetting positions with dealer counterparts to mitigate the inherent risk in these derivatives.

We additionally utilize interest rate swaps designated as cash flow hedges for risk management purposes to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  These interest rate swaps designated as cash flow hedges are used to manage differences in the amount, timing and duration of our known or expected cash receipts and our known or expected cash payments principally related to certain variable rate borrowings and/or deposits.

The agreements with our derivative counterparties contain a provision where, if we default on any of our indebtedness, then we could also be declared in default on our derivative obligations.  In addition, these agreements contain a provision

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where, if we fail to maintain our status as a well-capitalized institution, then the counterparty could terminate the derivative positions and we would be required to settle our obligations under the agreements. As of June 30, 2015, the fair value of derivatives in a net liability position, which includes accrued interest, but excludes any adjustment for nonperformance risk, related to these agreements was $2.0 million.

The following table reflects the amount and fair value of our derivatives.

	June 30, 2015						December 31, 2014
			Fair Value						Fair Value
(Dollars in thousands)	Notional Amount (1)		Gross Derivative Assets (2)		Gross Derivative Liabilities (2)		Notional Amount (1)		Gross Derivative Assets (2)		Gross  Derivative Liabilities (2)
Risk management purposes:
Derivatives designated as hedging instruments:
Interest rate swaps	$	22,000	$	337	$	134	$	12,000	$	—	$	222
Total risk management purposes	22,000		337		134		12,000		—		222
Customer-initiated and mortgage banking activities:
Forward contracts related to mortgage loans to be delivered for sale	196,416		863		—		114,828		—		803
Interest rate lock commitments	122,622		2,029		—		67,817		1,489		—
Customer-initiated derivatives	226,551		2,011		1,870		125,356		1,588		1,477
Total customer-initiated and mortgage banking activities	545,589		4,903		1,870		308,001		3,077		2,280
Total gross derivatives	$	567,589	$	5,240	$	2,004	$	320,001	$	3,077	$	2,502

(1) Notional or contract amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordance with the terms of the agreement.  These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in the Consolidated Balance Sheets.

(2) Derivative assets are included within “Other assets” and derivative liabilities are included within “Other liabilities” on the Consolidated Balance Sheets.  Included in the fair value of the derivative assets are credit valuation adjustments for counterparty credit risk totaling $66 thousand at June 30, 2015 and $103 thousand at December 31, 2014.

Note 11, “Derivative Instruments,” to our consolidated financial statements includes additional information about these derivative contracts.

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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.  The following table represents the activity related to our liability recorded in connection with these representations and warranties.

	For the six months ended June 30,
(Dollars in thousands)	2015			2014
Reserve balance at beginning of period	$	4,000		$	4,450
Addition of fair value of representations and warranties due to acquisition	—			500
Provision expense (benefit)	(271		)	960
Charge-offs	(1,729		)	(1,910		)
Ending reserve balance	$	2,000		$	4,000
Reserve balance	June 30, 2015			December 31, 2014
Liability for specific claims	$	1,055		$	2,431
General allowance	945			1,569
Total reserve balance	$	2,000		$	4,000

The liability for specific claims includes liability for the estimated likelihood of payment of the claims while the general allowance is developed using a model to estimate the unknown liability including inputs such as the loans sold by year, the number and dollar amount of claims to-date by year, the rate of claims being rescinded and the estimate of the amount of the loss as a percent of the loan balance.

Contractual Obligations

In the normal course of business, we have various outstanding contractual obligations that will require future cash outflows.  The following table represents the largest contractual obligations as of June 30, 2015.

(Dollars in thousands)	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Future minimum lease payments (1)	$	31,148	$	6,006	$	10,085	$	8,056	$	7,001
FHLB borrowings	538,550		464,700		62,300		1,050		10,500
Securities sold under agreements to repurchase	73,945		23,945		40,000		—		10,000
Holding company line of credit	30,000		30,000		—		—		—
Subordinated notes related to trust preferred securities	20,000		—		—		—		20,000
Time deposits (2)	1,493,677		1,064,521		353,427		68,778		6,951
Total	$	2,187,320	$	1,589,172	$	465,812	$	77,884	$	54,452

(1) Future minimum lease payments are reduced by $493 thousand related to sublease income to be received in the following periods: $321 thousand (less than one year); $155 thousand (1-3 years); and $17 thousand (3-5 years).

(2) At June 30, 2015, the total includes $66.8 million of time deposits included within “Other brokered funds.”

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Liquidity

Liquidity management is the process by which we manage the flow of funds necessary to meet our financial commitments on a timely basis and at a reasonable cost and to take advantage of earnings enhancement opportunities. These financial commitments include withdrawals by depositors, credit commitments to borrowers, expenses of our operations, and capital expenditures.  Liquidity is monitored and closely managed by our Asset and Liability Committee (“ALCO”), a group of senior officers from the finance, enterprise risk management, treasury, and lending areas.  It is ALCO’s responsibility to ensure we have the necessary level of funds available for normal operations as well as maintain a contingency funding policy to ensure that potential liquidity stress events are planned for, quickly identified, and management has plans in place to respond. ALCO has created policies which establish limits and require measurements to monitor liquidity trends, including modeling and management reporting that identifies the amounts and costs of all available funding sources.  In addition, we have implemented modeling software that projects cash flows from the balance sheet under a broad range of potential scenarios, including severe changes in the interest rate environment.

At June 30, 2015, we had liquidity on hand of $802.6 million, compared to $656.8 million at December 31, 2014. Liquid assets include cash and due from banks, federal funds sold, interest-bearing deposits with banks and unencumbered securities available-for-sale.

Each of our subsidiary banks are members of the FHLB, which provide short- and long-term funding to its members through advances collateralized by real estate-related assets and other select collateral, most typically in the form of U.S. government issued debt securities. The actual borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. As of June 30, 2015, we had $538.5 million of outstanding borrowings from the FHLB with remaining maturities ranging from the years 2015 to 2027. We also maintain relationships with correspondent banks which could provide funds on short notice, if needed. In addition, because Talmer Bank is “well capitalized,” it can accept wholesale deposits up to approximately $1.7 billion based on current policy limits. Management believes that we had adequate resources to fund all of our commitments as of June 30, 2015.

The following liquidity ratios compare certain assets and liabilities to total deposits or total assets.

	June 30, 2015		December 31, 2014
Investment securities available-for-sale	17.22	%	16.29	%
Loans (net of unearned income) to total deposits	92.19		93.41
Interest-earning assets to total assets	91.64		90.91
Interest-bearing deposits to total deposits	79.58		80.49

 Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates.  Interest-rate risk is the risk to earnings and equity value arising from changes in market interest rates and arises in the normal course of business to the extent that there is a divergence between the amount of our interest-earning assets and the amount of interest-bearing liabilities that are prepaid/withdrawn, re-price, or mature in specified periods. We seek to achieve consistent growth in net interest income and equity while managing volatility arising from shifts in market interest rates.  ALCO oversees market risk management, monitoring risk measures, limits, and policy guidelines for managing the amount of interest-rate risk and its effect on net interest income and capital. Our Board of Directors approves policy limits with respect to interest rate risk.

Interest Rate Risk

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective interest rate risk management begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk position given business activities, management objectives, market expectations and ALCO policy limits and guidelines.

Interest rate risk can come in a variety of forms, including repricing risk, basis risk, yield curve risk and option risk.  Repricing risk is the risk of adverse consequences from a change in interest rates that arises because of differences in the timing of when those interest rate changes impact our assets and liabilities.  Basis risk is the risk of adverse consequence resulting from unequal change in the spread between two or more rates for different instruments with the same maturity. Yield curve risk

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is the risk of adverse consequence resulting from unequal changes in the spread between two or more rates for different maturities for the same or different instruments. Option risk in financial instruments arises from embedded options such as options provided to borrowers to make unscheduled loan prepayments, options provided to debt issuers to exercise call options prior to maturity, and depositor options to make withdrawals and early redemptions.

We regularly review our exposure to changes in interest rates.  Among the factors we consider are changes in the mix of interest-earning assets and interest-bearing liabilities, interest rate spreads and repricing periods.  ALCO reviews, on at least a quarterly basis, our interest rate risk position.

The interest-rate risk position is measured and monitored at each bank subsidiary using net interest income simulation models and economic value of equity sensitivity analysis that capture both short-term and long-term interest-rate risk exposure. In addition, periodic Earnings at Risk analyses incorporate the expected change in the value of loan servicing rights and the net interest income simulation results.

Net interest income simulation involves forecasting net interest income under a variety of interest rate scenarios including instantaneous shocks.

The estimated impact on our net interest income as of June 30, 2015 and December 31, 2014, assuming immediate parallel moves in interest rates is presented in the table below. Simulation results for June 30, 2015 reflect the addition of First of Huron Corp.’s acquired assets and assumed liabilities.

	June 30, 2015				December 31, 2014
	Following 12  months		Following 24 months		Following 12 months		Following 24 months
+400 basis points	5.2	%	4.1	%	1.6	%	3.2	%
+300 basis points	3.7		3.1		1.0		2.3
+200 basis points	2.4		2.3		0.6		1.7
+100 basis points	1.1		1.2		0.3		0.9
-100 basis points	(3.3	)	(4.2	)	(4.2	)	(5.2	)
-200 basis points	(8.0	)	(10.9	)	(9.0	)	(11.2	)
-300 basis points	(10.2	)	(13.4	)	(11.3	)	(13.6	)
-400 basis points	(10.7	)	(13.9	)	(11.8	)	(14.2	)

Modeling the sensitivity of net interest income and the economic value of equity to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process. The models used for these measurements rely on estimates of the potential impact that changes in interest rates may have on the value and prepayment speeds on all components of our loan portfolio, investment portfolio, loan servicing rights, any hedge or derivative instruments, as well as embedded options and cash flows of other assets and liabilities. Balance sheet growth assumptions are also included in the simulation modeling process. The model includes the effects of off-balance sheet instruments such as interest rate swap derivatives. Due to the current low interest rate environment, we assumed that market interest rates would not fall below 0% for the scenarios that used the down 100, 200, 300 and 400 basis point parallel shifts in market interest rates. The analysis provides a framework as to what our overall sensitivity position is as of our most recent reported position and the impact that potential changes in interest rates may have on net interest income and the economic value of our equity.

Management strategies may impact future reporting periods, as our actual results may differ from simulated results due to the timing, magnitude, and frequency of interest rate changes, the difference between actual experience, and the characteristics assumed, as well as changes in market conditions. Market based prepayment speeds are factored into the analysis for loan and securities portfolios. Rate sensitivity for transactional deposit accounts is modeled based on both historical experience and external industry studies.

We use economic value of equity sensitivity analysis to understand the impact of interest rate changes on long-term cash flows, income, and capital. Economic value of equity is based on discounting the cash flows for all balance sheet instruments under different interest rate scenarios. Deposit premiums are based on external industry studies and utilizing historical experience.

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The table below presents the change in our economic value of equity as of June 30, 2015 and December 31, 2014 assuming immediate parallel shifts in interest rates.

	June 30, 2015		December 31, 2014
+400 basis points	(18.6	)%	(22.2	)%
+300 basis points	(13.7	)	(15.8	)
+200 basis points	(8.6	)	(8.9	)
+100 basis points	(4.1	)	(3.9	)
-100 basis points	(0.8	)	—
-200 basis points	(4.5	)	(0.2	)
-300 basis points	(4.6	)	0.4
-400 basis points	(4.4	)	0.8

Operational Risk

Operational risk is the risk of loss due to human behavior, inadequate or failed internal systems and controls, and external influences such as market conditions, fraudulent activities, disasters, and security risks. We continuously strive to strengthen our system of internal controls, enterprise risk management, operating processes and employee awareness to assess the impact on earnings and capital and to improve the oversight of our operational risk.

Compliance Risk

Compliance risk represents the risk of regulatory sanctions, reputational impact or financial loss resulting from our failure to comply with rules and regulations issued by the various banking agencies and standards of good banking practice. Activities which may expose us to compliance risk include, but are not limited to, those dealing with the prevention of money laundering, privacy and data protection, community reinvestment initiatives, fair lending challenges resulting from the expansion of our banking center network and employment and tax matters.

Strategic and/or Reputation Risk

Strategic and/or reputation risk represents the risk of loss due to impairment of reputation, failure to fully develop and execute business plans, failure to assess current and new opportunities in business, markets and products, and any other event not identified in the defined risk types mentioned previously. Mitigation of the various risk elements that represent strategic and/or reputation risk is achieved through initiatives to help us better understand and report on various risks, including those related to the development of new products and business initiatives.

Item 4.  Controls and Procedures.

Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer), as of June 30, 2015, the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There was no change in our internal control over financial reporting that occurred during the period to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

113

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

114

PART II

Item 1.  Legal Proceedings.

From time to time we are a party to various litigation matters incidental to the conduct of our business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels.

Item 1A.  Risk Factors.

There have been no material changes to the risk factors disclosed in Item 1A. of Part I in our Annual Report on Form 10-K for the year ended December 31, 2014.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information.

None.

Item 6.  Exhibits.

Exhibit No.	Description of Exhibit
10.1	Fourth Amendment to Equity Incentive Plan dated March 25, 2015
10.2	Third Amendment to Loan Agreement between U.S. Bank National Association and Talmer Bancorp, Inc.
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer
32.1	Section 1350 Certifications
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in eXtensible Business Reporting Language (XBRL); (i) Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014, (ii) Consolidated Statements of Income for the three and six months ended June 30, 2015 and 2014, (iii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 and 2014, (iv) Consolidated Statement of Changes in Shareholders’ Equity for the six months ended June 30, 2015 and 2014, (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014, and (vi) Notes to Consolidated Financial Statements.

115

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.
August 14, 2015	By:	/s/ David T. Provost
		David T. Provost
		Chief Executive Officer
		(Principal Executive Officer)
August 14, 2015	By:	/s/ Dennis Klaeser
		Dennis Klaeser
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

116

EX-10.1

Exhibit 10.1

FOURTH AMENDMENT TO

TALMER BANCORP, INC. EQUITY INCENTIVE PLAN

March 25, 2015

THIS FOURTH AMENDMENT to the Talmer Bancorp, Inc. Equity Incentive Plan (the “Amendment”) is effective as of March 25, 2015. All capitalized terms used, but not defined, in this Amendment have the same meanings as in the Talmer Bancorp, Inc. Equity Incentive Plan, as amended (the “Plan”).

Recitals

The Plan has been approved and adopted by the board of directors and shareholders of Talmer Bancorp, Inc. (the “Company”).

Pursuant to Section 11.01 of the Plan, the board of directors of the Company has adopted this Amendment to the Plan as of March 25, 2015.

Amendments

The Plan is hereby amended as follows:

1.Section 8.06 of the Plan is hereby deleted and replaced with the following:

8.06Rights as a Shareholder. Any dividends or distributions made with respect to any Restricted Share Rights shall, in the sole discretion of the Administrator, be either paid out to the Participants or held by the Company and not distributed to the Participants until such time, and to the extent that, the Restricted Share Rights vest in accordance with the terms hereof.

2.After the date of this Amendment, all references in the Plan to the “Plan” shall mean the Plan, as amended by this Amendment. The Plan is hereby amended accordingly.

3.The Plan and this Amendment, together, set forth the entire agreement and understanding of the parties to them, and supersede all prior agreements, arrangements and communications, whether oral or written, with respect to their subject matter. Except as modified by this Amendment, the Plan remains unchanged and, as modified, continues in full force and effect. In the event of any conflict between the terms of the Plan and the terms of this Amendment, the terms of this Amendment shall control.

EX-10.2

Exhibit 10.2

EXECUTION COPY

THIRD AMENDMENT

to

LOAN AGREEMENT

between

U.S. BANK NATIONAL ASSOCIATION

and

TALMER BANCORP, INC.

Third Amendment: Dated as of June 30, 2015

Second Amendment: Dated as of March 26, 2015

First Amendment: Dated as of December 19, 2014

Original Loan Agreement: Dated as of December 20, 2013

THIRD AMENDMENT TO

LOAN AGREEMENT

This THIRD AMENDMENT TO LOAN AGREEMENT (this “Third Amendment”) is dated as of June 30, 2015, and is made by and between TALMER BANCORP, INC., a Michigan corporation (“Borrower”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association (“Lender”).

R E C I T A L S

A.Borrower is a bank holding company that owns 100% of the issued and outstanding capital stock of TALMER BANK AND TRUST, a Michigan chartered state bank, and TALMER WEST BANK, a Michigan chartered state bank. Talmer Bank maintains its principal banking offices in Troy, Michigan and Talmer West maintains its principal banking offices in Ann Arbor, Michigan.

B.Borrower and Lender are party to a Loan Agreement dated as of December 20, 2013 (as amended by that certain First Amendment to Loan Agreement dated December 19, 2014 and that certain Second Amendment to Loan Agreement dated March 26, 2015, collectively, the “Original Agreement”).

C.The parties hereto desire to amend and modify the Original Agreement in accordance with the terms and subject to the conditions set forth in this Third Amendment.

D.Capitalized terms not otherwise defined in this Third Amendment shall have the meanings respectively ascribed to them in the Original Agreement.

NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows:

A G R E E M E N T

SECTION 1.AMENDMENTS TO THE ORIGINAL AGREEMENT

1.1Reporting - Quarterly (Section 6.2). Section 6.2 of the Original Agreement shall be amended in its entirety to read as follows:

“6.2Quarterly. As soon as available, but in any event not more than 60 days after the close of each quarterly period of each fiscal year of Borrower: (a) if required by the rules, regulations or other guidance of the SEC, a copy of the quarterly report filed on Form 10-Q with the SEC including the consolidated financial statements of Borrower regarding such quarter, including balance sheet, statements of income and retained earnings and statements of cash flows for the quarter then ended; (b) the call reports filed by any depository institution Subsidiary with federal bank regulatory agencies; and (c) Forms FRY 9C and FRY 9LP filed by Borrower with federal bank regulatory agencies.”

1.2Reporting - Compliance Certificate (Section 6.3). Section 6.3 of the Original Agreement shall be amended in its entirety to read as follows:

“6.3Compliance Certificate. Borrower shall furnish Lender, at the same time as the financial reports referred to in Section 6.1 and not more than 60 days after the close of each of the first three quarterly periods of each fiscal year of Borrower with respect to the reposts referred to in Section 6.2, a quarterly compliance certificate in the form attached as Exhibit D hereto. Such quarterly compliance certificate shall be signed by the Chief Executive Officer, President, Chief Financial

2

Officer or Chief Investment Officer of Borrower and shall also contain, in a form and with such specificity as is reasonably satisfactory to Lender, such additional information as Lender shall have reasonably requested by Borrower prior to the submission thereof.”

SECTION 2.REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants to Lender as of the date hereof as follows:

(i)No Event of Default or Unmatured Event of Default has occurred and is continuing, and no Event of Default or Unmatured Event of Default would result from the amendments contemplated hereby.

(ii)The execution, delivery and performance by Borrower of this Third Amendment have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, or notice to or action by any Person (including any Governmental Agency) in order to be effective and enforceable.

(iii)This Third Amendment and the other Transaction Documents (as amended by this Third Amendment) constitute the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms.

(iv)All representations and warranties of Borrower in the Original Agreement are true and correct in accordance with the standards and requirements set forth in Section 3.3.3 of the Original Agreement.

(v)Borrower’s obligations under the Original Agreement and under the other Transaction Documents are not subject to any defense, counterclaim, set-off, right to recoupment, abatement or other claim.

SECTION 3.ADDITIONAL TERMS.

3.1Acknowledgement of Indebtedness under Agreement. Borrower acknowledges and confirms that, as of the date hereof, Borrower is indebted to Lender, without defense, setoff, or counterclaim, in the aggregate principal amount of Thirty Million Dollars ($30,000,000) under the Original Agreement.

3.2The Agreement.On and after the Effective Date: (i) each reference in the Original Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of like import shall mean and be a reference to the Original Agreement as amended hereby, (b) each reference to the Original Agreement in all Transaction Documents shall mean and be a reference to the Original Agreement, as amended hereby, and (c) this Third Amendment shall be deemed a “Transaction Document” for the purposes of the Original Agreement.

3.3Third Amendment and Original Agreement to be Read Together. This Third Amendment supplements and is hereby made a part of the Original Agreement, and the Original Agreement and this Third Amendment shall from and after the Effective Date be read together and shall constitute one agreement. Except as otherwise set forth herein, the Original Agreement shall remain in full force and effect.

3.4Acknowledgements. Borrower acknowledges that (i) it has been advised by counsel of its choice of law with respect to this Third Amendment, the Original Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, (ii) any waiver of Borrower set forth herein has been knowingly and voluntarily made, and (iii) the obligations of Lender hereunder shall be strictly

3

construed and shall be expressly subject to Borrower’s compliance in all respects with the terms and conditions of the Original Agreement.

3.5No Waiver.The execution, delivery and effectiveness of this Third Amendment shall not operate as a waiver of any Event of Default (including without limitation any Event of Default existing on the date hereof), nor operate as a waiver of any right, power or remedy of Lender (including without limitation any rights, powers or remedies of Lender with respect to any Event of Default existing on the date hereof), nor constitute a waiver of, or consent to any departure from, any provision of the Original Agreement, or any of the other Transaction Documents.

3.6No Novation. The terms and conditions of the Original Agreement are amended as set forth in this Third Amendment. It is expressly understood and acknowledged that nothing in this Third Amendment shall be deemed to cause or otherwise give rise to a novation of the indebtedness contemplated in the agreement. All “Borrower’s Liabilities” under the Original Agreement shall in all respects be continuing and this Third Amendment shall not be deemed to evidence or result in a novation or repayment and re-borrowing of such “Borrower’s Liabilities.”

SECTION 4.CONDITIONS PRECEDENT. The amendments set forth in Section 1 above shall become effective as of the date (the “Effective Date”) on which each of the following conditions shall have been satisfied: (i) Lender shall have received a fully executed Third Amendment; and (ii) Lender shall have received payment from Borrower, in immediately available funds, of an amount sufficient to reimburse Lender for all reasonable out-of-pocket costs, fees and expenses incurred by Lender, or for which Lender has become obligated, in connection with the negotiation, preparation and consummation of this Third Amendment, including but not limited to, reasonable attorneys’ fees and expenses.

SECTION 5.RELEASE. Borrower, for itself and its successors and assigns, does hereby fully, finally and unconditionally release and forever discharge, and agrees to hold harmless, Lender and each of its equity holders and affiliates, and their respective agents, advisors, managers, parents, subsidiaries, attorneys, representatives, employees, officers and directors, and the successors, assigns, heirs and representatives of each of the foregoing, from any and all debts, claims, counterclaims, setoffs, obligations, damages, costs, attorneys’ fees and expenses, suits, demands, liabilities, actions, proceedings and causes of action, in each case whether known or unknown, contingent or fixed, direct or indirect and of whatever kind, nature or description, and whether in law or in equity, under contract, tort, statute or otherwise, that Borrower has heretofore had or now or hereafter can, shall or may have by reason of any act, omission or thing whatsoever done or omitted to be done on or prior to the Effective Date arising out of, connected with or related in any way to this Third Amendment, the Original Agreement, the other Transaction Documents, the transactions described therein, the Loan, Lender’s administration thereof, or the financing or banking relationships of Borrower with Lender.

SECTION 6.Miscellaneous. This Third Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Third Amendment by signing any such counterpart. This Third Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York.

4

IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be duly executed and delivered as of the day and year first above written.

TALMER BANCORP, INC.

By: __________________________________

Name:

       Title:

U.S. BANK NATIONAL ASSOCIATION

By: __________________________________

Name: Peter G. Caligiuri

Title: Vice President

5

EX-31.1

Exhibit 31.1

Rule 13a-14(a) Certification of the Chief Executive Officer

I, David T. Provost, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Talmer Bancorp, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 15, 2015

/s/ David T. Provost

David T. Provost, Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Rule 13a-14(a) Certification of the Chief Financial Officer

I, Dennis Klaeser, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Talmer Bancorp, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 15, 2015

/s/ Dennis Klaeser

Dennis Klaeser, Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Talmer Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief Executive Officer and the Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David T. Provost

David T. Provost

Chief Executive Officer

May 15, 2015

/s/ Dennis Klaeser

Dennis Klaeser

Chief Financial Officer

May 15, 2015

XML

COMMITMENTS, CONTINGENCIES AND GUARANTEES (Tables)

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

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

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

	June 30, 2015						December 31, 2014
(Dollars in thousands)	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Commitments to extend credit	$	642,049	$	623,846	$	1,265,895	$	502,762	$	463,362	$	966,124
Standby letters of credit	62,313		3,441		65,754		69,305		4,197		73,502
Total commitments	$	704,362	$	627,287	$	1,331,649	$	572,067	$	467,559	$	1,039,626

XML

FAIR VALUE (Details 6) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Gains/(losses) from changes in fair value included in earnings			$ 0
Loans held for sale
Gains/(losses) from changes in fair value included in earnings	$ 417,000	$ 3,458,000	(1,124,000)	$ 4,834,000
Net gain on sales of loans | Loans held for investment
Gains/(losses) from changes in fair value included in earnings	12,000	15,000	139,000	8,000
Mortgage banking and other loan fees | Loans held for investment
Gains/(losses) from changes in fair value included in earnings	$ (347,000)	$ 386,000	$ (239,000)	$ 467,000

XML

BUSINESS COMBINATIONS (Details) $ in Thousands			3 Months Ended			5 Months Ended	6 Months Ended
	Feb. 06, 2015 USD ($)	Jan. 01, 2014 USD ($) location	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Mar. 31, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Fair value of liabilities assumed:
Goodwill			$ 3,524			$ 3,524	$ 3,524		$ 0
Bargain purchase gain resulting from acquisition			0	$ 0			0	$ 41,977
Accounted for under ASC 310-30
Information regarding acquired loans
Contractual cash flows not expected to be collected (nonaccretable difference)			232,966			232,966	232,966		259,519
Expected cash flows			1,163,849			1,163,849	1,163,849		1,281,482
Interest component of expected cash flows (accretable yield)			260,064			260,064	$ 260,064		$ 277,058
Core deposit
Changes in initial fair value estimates
Estimated life of asset							7 years 1 month 6 days
Financial Commerce Corporation's wholly-owned subsidiary banks and Capital Bancorp Ltd.
BUSINESS COMBINATIONS
Cash consideration		$ 4,000
Consideration paid:
Cash		4,000
Changes in initial fair value estimates
Payment to fund escrow account		$ 2,500
Percentage of capital stock purchased		100.00%
FHC
BUSINESS COMBINATIONS
Cash consideration	$ 13,395
Subordinated notes assumed, retired immediately	3,500
Interest assumed from subordinated notes and retired	1,400
Interest assumed from Trust Preferred Securities and retired	876
Acquisition related expenses			144				$ 1,200
Deferred tax assets, valuation allowance	4,800
Net deferred tax assets at acquisition	4,800
Consideration paid:
Cash	13,395
Fair value of identifiable assets acquired:
Cash and cash equivalents	14,205
Investment securities	34,022
Federal home loan bank stock	874
Loans	162,265
Premises and equipment	2,077
Company-owned life insurance	4,719
Other real estate owned and repossessed assets	1,260
Core deposit intangible	2,410
Other assets	6,462
Total identifiable assets acquired	228,294
Fair value of liabilities assumed:
Deposits	201,453
Long-term debt	13,086
Other liabilities	3,884
Total liabilities assumed	218,423
Fair value of net identifiable assets acquired	9,871
Goodwill	3,524		3,500			3,500	3,500
Changes in initial fair value estimates
Increase in fair value of deferred tax assets						331
Decrease in fair value of loans						686
Increase in fair value of long-term debt						243
Net increase to the recognition of goodwill						$ 598
Information regarding acquired loans
Fair value at acquisition	162,265
FHC | Maximum
BUSINESS COMBINATIONS
Net operating loss and tax credit carry forwards that can be used annually	366
FHC | Federal
BUSINESS COMBINATIONS
Net operating loss carryforwards	1,700
Alternative minimum tax credits	303
Valuation allowance	0
FHC | Accounted for under ASC 310-30
Information regarding acquired loans
Contractual cash flows	53,807
Contractual cash flows not expected to be collected (nonaccretable difference)	8,084
Expected cash flows	45,723
Interest component of expected cash flows (accretable yield)	5,268
Fair value at acquisition	40,455
FHC | Excluded from ASC 310-30 accounting
Information regarding acquired loans
Unpaid principal balance	124,538
Fair value discount	(2,728)
Fair value at acquisition	$ 121,810
Talmer West Bank
BUSINESS COMBINATIONS
Cash consideration		$ 6,500
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		571,666
Premises and equipment		6,540
Loan servicing rights		767
Other real estate owned and repossessed assets		30,878
Other assets		62,542
Total identifiable assets acquired		911,909
Fair value of liabilities assumed:
Deposits		857,769
Other liabilities		5,663
Total liabilities assumed		863,432
Fair value of net identifiable assets acquired		48,477
Bargain purchase gain resulting from acquisition		$ 41,977
Changes in initial fair value estimates
Additional capital contributed in order to recapitalize					$ 99,500
Acquisition related expenses			$ 260	$ 191			$ 638	$ 1,800
Number of branches acquired that are within the entity's target market areas | location		12
Percentage of branches acquired that are within the entity's target market areas		70.00%
Information regarding acquired loans
Fair value at acquisition		$ 571,666
Talmer West Bank | Senior unsecured line of credit
Changes in initial fair value estimates
Amount borrowed					35,000
Amount of net proceeds from the initial public offering used for repayment of debt					$ 35,000
Talmer West Bank | Accounted for under ASC 310-30
Information regarding acquired loans
Contractual cash flows		331,523
Contractual cash flows not expected to be collected (nonaccretable difference)		86,410
Expected cash flows		245,113
Interest component of expected cash flows (accretable yield)		32,764
Fair value at acquisition		212,349
Talmer West Bank | Excluded from ASC 310-30 accounting
Information regarding acquired loans
Unpaid principal balance		362,782
Fair value discount		(3,465)
Fair value at acquisition		359,317
Talmer West Bank | Core deposit
Fair value of identifiable assets acquired:
Core deposit intangible		$ 3,633
First Place Bank | Core deposit
Changes in initial fair value estimates
Estimated life of asset							10 years

XML

LOANS (Details 9) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Loans by credit quality
Uncovered loans	$ 4,244,126	$ 3,902,637
Covered loans	280,847	346,490
Residential real estate
Loans by credit quality
Uncovered loans	1,434,678	1,426,012
Covered loans	96,371	108,226
Consumer
Loans by credit quality
Uncovered loans	172,120	164,524
Covered loans	8,358	9,565
Residential real estate and consumer loans
Loans by credit quality
Uncovered loans	1,606,798	1,590,536
Covered loans	104,729	117,791
Performing assets | Residential real estate
Loans by credit quality
Uncovered loans	1,414,545	1,408,638
Covered loans	94,300	106,378
Performing assets | Consumer
Loans by credit quality
Uncovered loans	171,812	164,267
Covered loans	8,338	9,552
Performing assets | Residential real estate and consumer loans
Loans by credit quality
Uncovered loans	1,586,357	1,572,905
Covered loans	102,638	115,930
Nonperforming assets | Residential real estate
Loans by credit quality
Uncovered loans	20,133	17,374
Covered loans	2,071	1,848
Nonperforming assets | Consumer
Loans by credit quality
Uncovered loans	308	257
Covered loans	20	13
Nonperforming assets | Residential real estate and consumer loans
Loans by credit quality
Uncovered loans	20,441	17,631
Covered loans	$ 2,091	$ 1,861

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FAIR VALUE (Details 7) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
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	117,042,000	93,453,000
Contractual balance	113,851,000	89,138,000
Unrealized gain	$ 3,191,000	$ 4,315,000

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LOAN SERVICING RIGHTS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Activity for loan servicing rights and the related fair value changes
Fair value, beginning of period	$ 54,409	$ 77,892	$ 70,598	$ 78,603
Additions due to acquisition				767
Additions from loans sold with servicing retained	2,933	2,159	5,848	3,748
Reduction from loans and servicing rights sold			(12,702)
Changes in fair value due to reductions from loans paid off during the period	(1,594)	(1,747)	(3,912)	(2,609)
Changes due to valuation inputs or assumptions	3,146	(4,200)	(938)	(6,405)
Fair value, end of period	58,894	74,104	58,894	74,104
Principal balance of loans serviced	6,023,880	7,385,936	6,023,880	7,385,936
Loan servicing rights sold			12,702	0
Principal balance of loans sold that are serviced			1,200,000
Commercial real estate
Activity for loan servicing rights and the related fair value changes
Fair value, beginning of period	621	1,079	691	368
Additions due to acquisition				767
Additions from loans sold with servicing retained	0	0	0	0
Reduction from loans and servicing rights sold			0
Changes in fair value due to reductions from loans paid off during the period	(24)	(11)	(53)	(68)
Changes due to valuation inputs or assumptions	(17)	(231)	(58)	(230)
Fair value, end of period	580	837	580	837
Principal balance of loans serviced	187,948	234,921	187,948	234,921
Agricultural
Activity for loan servicing rights and the related fair value changes
Fair value, beginning of period	0	894	0	962
Additions due to acquisition				0
Additions from loans sold with servicing retained	0	57	0	123
Reduction from loans and servicing rights sold			0
Changes in fair value due to reductions from loans paid off during the period	0	(68)	0	(137)
Changes due to valuation inputs or assumptions	0	(7)	0	(72)
Fair value, end of period	0	876	0	876
Principal balance of loans serviced	0	41,518	0	41,518
Mortgage
Activity for loan servicing rights and the related fair value changes
Fair value, beginning of period	53,788	75,919	69,907	77,273
Additions due to acquisition				0
Additions from loans sold with servicing retained	2,933	2,102	5,848	3,625
Reduction from loans and servicing rights sold			(12,702)
Changes in fair value due to reductions from loans paid off during the period	(1,570)	(1,668)	(3,859)	(2,404)
Changes due to valuation inputs or assumptions	3,163	(3,962)	(880)	(6,103)
Fair value, end of period	58,314	72,391	58,314	72,391
Principal balance of loans serviced	$ 5,835,932	$ 7,109,497	$ 5,835,932	$ 7,109,497

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

6 Months Ended

Jun. 30, 2015

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of changes in accumulated other comprehensive income (loss) by component

Changes in accumulated other comprehensive income (loss) by component, net of tax, were as follows:

(Dollars in thousands)	Unrealized gains (losses) on securities available-for-sale, net of tax				Unrealized gains (losses) on cash flow hedges, net of tax				Total unrealized gains (losses), net of tax
Three months ended June 30, 2015
Beginning balance	$	6,939			$	(299	)		$	6,640
Other comprehensive income (loss) before reclassifications	(4,831		)		362				(4,469		)
Amounts reclassified from accumulated other comprehensive income	(3		)	(1)	68			(2)	65
Net current period other comprehensive income (loss)	(4,834		)		430				(4,404		)
Ending balance	$	2,105			$	131			$	2,236
Three months ended June 30, 2014
Beginning balance	$	(2,415	)		$	—			$	(2,415	)
Other comprehensive income before reclassifications	4,648				—				4,648
Amounts reclassified from accumulated other comprehensive income	—			(1)	—				—
Net current period other comprehensive income	4,648				—				4,648
Ending balance	$	2,233			$	—			$	2,233
Six months ended June 30, 2015
Beginning balance	$	3,995			$	(145	)		$	3,850
Other comprehensive income (loss) before reclassifications	(1,956		)		151				(1,805		)
Amounts reclassified from accumulated other comprehensive income	66			(1)	125			(2)	191
Net current period other comprehensive income (loss)	(1,890		)		276				(1,614		)
Ending balance	$	2,105			$	131			$	2,236
Six months ended June 30, 2014
Beginning balance	$	(7,996	)		$	—			$	(7,996	)
Other comprehensive income before reclassifications	8,728				—				8,728
Amounts reclassified from accumulated other comprehensive income	1,501			(1)	—				1,501
Net current period other comprehensive income	10,229				—				10,229
Ending balance	$	2,233			$	—			$	2,233

(1) Amounts are included in “Net gain (loss) on sales of securities” in the Consolidated Statements of Income within total noninterest income and were net gains of $6 thousand and $0 for the three months ended June 30, 2015 and 2014, respectively, and net losses of $101 thousand and $2.3 million for the six months ended June 30, 2015 and 2014, respectively.  Income tax provision (benefit) associated with the reclassification adjustments for three months ended June 30, 2015 and 2014 was an expense of $3 thousand and $0, respectively, and for the six months ended June 30, 2015 and 2014 was a benefit of $35 thousand and $809 thousand, respectively, and are included in “Income tax provision (benefit)” in the Consolidated Statements of Income.

(2) Amount is included in “Other brokered funds” in the Consolidated Statements of Income within total interest expense and was $104 thousand for the three months ended June 30, 2015, and $192 thousand for the six months ended June 30, 2015. Income tax benefit associated with the reclassification adjustment for the three months ended June 30, 2015 was $36 thousand and for the six months ended June 30, 2015 was $67 thousand and included in “Income tax provision (benefit)” in the Consolidated Statements of Income.

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ALLOWANCE FOR LOAN LOSSES (Tables)

6 Months Ended

Jun. 30, 2015

Allowance for loan losses

Schedule of information as to impaired loans individually evaluated for impairment

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
June 30, 2015
Uncovered individually evaluated impaired loans
Residential real estate	$	14,124	$	8,401	$	22,525	$	30,095	$	2,280
Commercial real estate	12,684		6,784		19,468		33,628		1,449
Commercial and industrial	3,647		2,069		5,716		12,386		497
Real estate construction	333		236		569		643		66
Consumer	292		249		541		786		144
Total uncovered individually evaluated impaired loans	$	31,080	$	17,739	$	48,819	$	77,538	$	4,436
Covered individually evaluated impaired loans
Residential real estate	$	2,903	$	2,752	$	5,655	$	7,424	$	407
Commercial real estate	4,594		13,429		18,023		24,656		1,950
Commercial and industrial	2,130		808		2,938		5,706		327
Real estate construction	619		46		665		989		—
Consumer	26		1		27		76		—
Total covered individually evaluated impaired loans	$	10,272	$	17,036	$	27,308	$	38,851	$	2,684
December 31, 2014
Uncovered individually evaluated impaired loans
Residential real estate	$	14,316	$	4,268	$	18,584	$	23,080	$	1,110
Commercial real estate	7,609		5,956		13,565		17,016		1,276
Commercial and industrial	915		1,884		2,799		2,807		982
Real estate construction	174		—		174		174		—
Consumer	296		176		472		610		82
Total uncovered individually evaluated impaired loans	$	23,310	$	12,284	$	35,594	$	43,687	$	3,450
Covered individually evaluated impaired loans
Residential real estate	$	2,155	$	2,583	$	4,738	$	6,388	$	417
Commercial real estate	10,400		11,985		22,385		28,755		1,277
Commercial and industrial	1,545		779		2,324		2,668		109
Real estate construction	670		—		670		994		—
Consumer	11		1		12		39		—
Total covered individually evaluated impaired loans	$	14,781	$	15,348	$	30,129	$	38,844	$	1,803

Schedule showing the average recorded investment and interest income recognized on loans

	For the three months ended June 30, 2015				For the six months ended June 30, 2015
(Dollars in thousands)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Uncovered individually evaluated impaired loans
Residential real estate	$	23,128	$	302	$	23,277	$	500
Commercial real estate	20,005		807		20,445		1,282
Commercial and industrial	5,942		93		6,784		282
Real estate construction	580		4		573		25
Consumer	570		10		589		20
Total uncovered individually evaluated impaired loans	$	50,225	$	1,216	$	51,668	$	2,109
Covered individually evaluated impaired loans
Residential real estate	$	5,775	$	98	$	5,803	$	174
Commercial real estate	18,203		260		18,329		497
Commercial and industrial	3,094		89		3,333		161
Real estate construction	842		72		901		79
Consumer	27		1		28		2
Total covered individually evaluated impaired loans	$	27,941	$	520	$	28,394	$	913

	For the three months ended June 30, 2014				For the six months ended June 30, 2014
(Dollars in thousands)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Uncovered individually evaluated impaired loans
Residential real estate	$	14,870	$	134	$	15,038	$	279
Commercial real estate	5,686		38		6,280		84
Commercial and industrial	1,668		15		1,676		39
Consumer	34		1		35		2
Total uncovered individually evaluated impaired loans	$	22,258	$	188	$	23,029	$	404
Covered individually evaluated impaired loans
Residential real estate	$	4,364	$	63	$	4,378	$	127
Commercial real estate	17,615		266		17,689		533
Commercial and industrial	2,299		21		2,399		44
Real estate construction	412		—		413		9
Consumer	21		1		22		2
Total covered individually evaluated impaired loans	$	24,711	$	351	$	24,901	$	715

Uncovered

Allowance for loan losses

Schedule of changes in the allowance for loan losses and the allocation of the allowance for 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 June 30, 2015
Allowance for loan losses - uncovered:
Balance at beginning of period	$	10,879		$	11,161		$	9,475		$	1,685		$	1,277		$	34,477
Provision (benefit) for loan losses	282			154			679			(93		)	47			1,069
Gross charge-offs	(1,081		)	(2,929		)	(735		)	(272		)	(256		)	(5,273		)
Recoveries	1,008			3,796			1,326			128			35			6,293
Net (charge-offs) recoveries	(73		)	867			591			(144		)	(221		)	1,020
Ending allowance for loan losses	$	11,088		$	12,182		$	10,745		$	1,448		$	1,103		$	36,566
For the six months ended June 30, 2015
Allowance for loan losses - uncovered:
Balance at beginning of period	$	12,193		$	11,128		$	7,835		$	1,599		$	1,064		$	33,819
Provision (benefit) for loan losses	659			47			3,366			(129		)	538			4,481
Gross charge-offs	(3,218		)	(4,547		)	(2,002		)	(307		)	(579		)	(10,653		)
Recoveries	1,454			5,554			1,546			285			80			8,919
Net (charge-offs) recoveries	(1,764		)	1,007			(456		)	(22		)	(499		)	(1,734		)
Ending allowance for loan losses	$	11,088		$	12,182		$	10,745		$	1,448		$	1,103		$	36,566
As of June 30, 2015
Allowance for loan losses - uncovered:
Individually evaluated for impairment	$	2,280		$	1,449		$	497		$	66		$	144		$	4,436
Collectively evaluated for impairment	3,677			5,185			9,485			584			845			19,776
Accounted for under ASC 310-30	5,131			5,548			763			798			114			12,354
Allowance for loan losses - uncovered:	$	11,088		$	12,182		$	10,745		$	1,448		$	1,103		$	36,566
Balance of uncovered loans:
Individually evaluated for impairment	$	22,525		$	19,468		$	5,716		$	569		$	541		$	48,819
Collectively evaluated for impairment	1,185,771			1,191,695			1,043,907			167,325			169,422			3,758,120
Accounted for under ASC 310-30	226,382			184,620			16,730			7,298			2,157			437,187
Total uncovered loans	$	1,434,678		$	1,395,783		$	1,066,353		$	175,192		$	172,120		$	4,244,126
For the three months ended June 30, 2014
Allowance for loan losses - uncovered:
Balance at beginning of period	$	9,896		$	6,776		$	4,757		$	1,083		$	259		$	22,771
Provision (benefit) for loan losses	695			2,786			425			(618		)	(69		)	3,219
Gross charge-offs	(1,381		)	(3,586		)	(481		)	(28		)	(57		)	(5,533		)
Recoveries	540			1,870			439			961			93			3,903
Net (charge-offs) recoveries	(841		)	(1,716		)	(42		)	933			36			(1,630		)
Ending allowance for loan losses	$	9,750		$	7,846		$	5,140		$	1,398		$	226		$	24,360
For the six months ended June 30, 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	3,559			5,924			1,761			(1,483		)	(118		)	9,643
Gross charge-offs	(2,817		)	(4,831		)	(626		)	(109		)	(123		)	(8,506		)
Recoveries	1,300			2,486			601			963			127			5,477
Net (charge-offs) recoveries	(1,517		)	(2,345		)	(25		)	854			4			(3,029		)
Ending allowance for loan losses	$	9,750		$	7,846		$	5,140		$	1,398		$	226		$	24,360

(Dollars in thousands)	Residential real estate		Commercial real estate		Commercial and industrial		Real estate construction		Consumer		Total
As of December 31, 2014
Allowance for loan losses - uncovered:
Individually evaluated for impairment	$	1,110	$	1,276	$	982	$	—	$	82	$	3,450
Collectively evaluated for impairment	4,850		4,623		5,968		649		820		16,910
Accounted for under ASC 310-30	6,233		5,229		885		950		162		13,459
Allowance for loan losses - uncovered:	$	12,193	$	11,128	$	7,835	$	1,599	$	1,064	$	33,819
Balance of uncovered loans:
Individually evaluated for impairment	$	18,584	$	13,565	$	2,799	$	174	$	472	$	35,594
Collectively evaluated for impairment	1,167,905		1,107,225		851,179		123,203		161,663		3,411,175
Accounted for under ASC 310-30	239,523		190,148		15,499		8,309		2,389		455,868
Total uncovered loans	$	1,426,012	$	1,310,938	$	869,477	$	131,686	$	164,524	$	3,902,637

Covered loans

Allowance for loan losses

Schedule of changes in the allowance for loan losses and the allocation of the allowance for 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 June 30, 2015
Allowance for loan losses - covered:
Balance at beginning of period	$	4,159		$	9,904		$	2,812		$	1,075		$	38		$	17,988
Provision (benefit) for loan losses	(162		)	(6,267		)	(2,083		)	207			(77		)	(8,382		)
Gross charge-offs	(152		)	(777		)	(1,274		)	(454		)	(7		)	(2,664		)
Recoveries	251			6,306			2,638			126			77			9,398
Net (charge-offs) recoveries	99			5,529			1,364			(328		)	70			6,734
Ending allowance for loan losses	$	4,096		$	9,166		$	2,093		$	954		$	31		$	16,340
For the six months ended June 30, 2015
Allowance for loan losses - covered:
Balance at beginning of period	$	3,981		$	13,663		$	2,577		$	1,086		$	46		$	21,353
Provision (benefit) for loan losses	151			(8,700		)	(1,558		)	326			(20		)	(9,801		)
Gross charge-offs	(476		)	(4,588		)	(2,091		)	(962		)	(165		)	(8,282		)
Recoveries	440			8,791			3,165			504			170			13,070
Net (charge-offs) recoveries	(36		)	4,203			1,074			(458		)	5			4,788
Ending allowance for loan losses	$	4,096		$	9,166		$	2,093		$	954		$	31		$	16,340
As of June 30, 2015
Allowance for loan losses - covered:
Individually evaluated for impairment	$	407		$	1,950		$	327		$	—		$	—		$	2,684
Collectively evaluated for impairment	222			4			29			—			1			256
Accounted for under ASC 310-30	3,467			7,212			1,737			954			30			13,400
Allowance for loan losses - covered:	$	4,096		$	9,166		$	2,093		$	954		$	31		$	16,340
Balance of covered loans:
Individually evaluated for impairment	$	5,655		$	18,023		$	2,938		$	665		$	27		$	27,308
Collectively evaluated for impairment	15,061			1,153			3,636			—			57			19,907
Accounted for under ASC 310-30	75,655			124,722			18,220			6,761			8,274			233,632
Total covered loans	$	96,371		$	143,898		$	24,794		$	7,426		$	8,358		$	280,847
For the three months ended June 30, 2014
Allowance for loan losses - covered:
Balance at beginning of period	$	5,077		$	24,062		$	6,759		$	2,003		$	99		$	38,000
Provision (benefit) for loan losses	91			(5,848		)	(1,411		)	(95		)	(58		)	(7,321		)
Gross charge-offs	(412		)	(1,209		)	(1,500		)	(979		)	(30		)	(4,130		)
Recoveries	556			4,270			692			590			86			6,194
Net (charge-offs) recoveries	144			3,061			(808		)	(389		)	56			2,064
Ending allowance for loan losses	$	5,312		$	21,275		$	4,540		$	1,519		$	97		$	32,743
For the six months ended June 30, 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	783			(7,839		)	(2,501		)	(178		)	(84		)	(9,819		)
Gross charge-offs	(1,275		)	(3,195		)	(2,527		)	(1,004		)	(77		)	(8,078		)
Recoveries	1,108			5,915			2,341			717			178			10,259
Net (charge-offs) recoveries	(167		)	2,720			(186		)	(287		)	101			2,181
Ending allowance for loan losses	$	5,312		$	21,275		$	4,540		$	1,519		$	97		$	32,743

(Dollars in thousands)	Residential real estate		Commercial real estate		Commercial and industrial		Real estate construction		Consumer		Total
As of December 31, 2014
Allowance for loan losses - covered:
Individually evaluated for impairment	$	417	$	1,277	$	109	$	—	$	—	$	1,803
Collectively evaluated for impairment	123		57		89		7		1		277
Accounted for under ASC 310-30	3,441		12,329		2,379		1,079		45		19,273
Allowance for loan losses - covered:	$	3,981	$	13,663	$	2,577	$	1,086	$	46	$	21,353
Balance of covered loans:
Individually evaluated for impairment	$	4,738	$	22,385	$	2,324	$	670	$	12	$	30,129
Collectively evaluated for impairment	16,973		3,391		6,572		304		84		27,324
Accounted for under ASC 310-30	86,515		160,886		23,752		8,415		9,469		289,037
Total covered loans	$	108,226	$	186,662	$	32,648	$	9,389	$	9,565	$	346,490

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LOAN SERVICING RIGHTS (Details 2) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Fair Value
Loan servicing fee income	$ 2,500,000	$ 3,700,000	$ 5,100,000	$ 7,300,000
Commercial Real Estate
Fair Value
WA discount rate (as a percent)			19.48%		19.48%
WA cost to service/per year			$ 470		$ 470
WA float range (as a percent)			0.56%		0.56%
Commercial Real Estate | Minimum
Fair Value
Prepayment speed (as a percent)			6.08%		6.41%
Commercial Real Estate | Maximum
Fair Value
Prepayment speed (as a percent)			50.00%		50.00%
Mortgage
Fair Value
WA discount rate (as a percent)			9.16%		9.14%
WA cost to service/per year			$ 61		$ 61
WA ancillary income/per year			$ 35		$ 35
Mortgage | Minimum
Fair Value
Prepayment speed (as a percent)			3.68%		3.63%
WA float range (as a percent)			1.19%		1.16%
Mortgage | Maximum
Fair Value
Prepayment speed (as a percent)			36.97%		40.07%
WA float range (as a percent)			1.69%		1.74%

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ALLOWANCE FOR LOAN LOSSES (Details 3) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Dec. 31, 2014
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			$ 21,353
Ending allowance for loan losses	$ 16,340		16,340
Allowance for loan losses:
Allowance for loan losses	16,340		21,353		$ 16,340	$ 21,353
Balance of loans:
Total loans, covered					280,847	346,490
Covered loans
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	17,988	$ 38,000	21,353	$ 40,381
Provision (benefit) for loan and lease losses	(8,382)	(7,321)	(9,801)	(9,819)
Gross charge-offs	(2,664)	(4,130)	(8,282)	(8,078)
Recoveries	9,398	6,194	13,070	10,259
Net (charge-offs) recoveries	6,734	2,064	4,788	2,181
Ending allowance for loan losses	16,340	32,743	16,340	32,743
Allowance for loan losses:
Individually evaluated for impairment					2,684	1,803
Collectively evaluated for impairment					256	277
Allowance for loan losses	17,988	38,000	21,353	40,381	16,340	21,353
Balance of loans:
Individually evaluated for impairment					27,308	30,129
Collectively evaluated for impairment					19,907	27,324
Total loans, covered					280,847	346,490
Covered loans | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			19,273
Ending allowance for loan losses	13,400		13,400
Allowance for loan losses:
Allowance for loan losses	13,400		19,273		13,400	19,273
Balance of loans:
Total loans, covered					233,632	289,037
Residential real estate | Covered loans
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	4,159	5,077	3,981	4,696
Provision (benefit) for loan and lease losses	(162)	91	151	783
Gross charge-offs	(152)	(412)	(476)	(1,275)
Recoveries	251	556	440	1,108
Net (charge-offs) recoveries	99	144	(36)	(167)
Ending allowance for loan losses	4,096	5,312	4,096	5,312
Allowance for loan losses:
Individually evaluated for impairment					407	417
Collectively evaluated for impairment					222	123
Allowance for loan losses	4,159	5,077	3,981	4,696	4,096	3,981
Balance of loans:
Individually evaluated for impairment					5,655	4,738
Collectively evaluated for impairment					15,061	16,973
Total loans, covered					96,371	108,226
Residential real estate | Covered loans | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			3,441
Ending allowance for loan losses	3,467		3,467
Allowance for loan losses:
Allowance for loan losses	3,467		3,441		3,467	3,441
Balance of loans:
Total loans, covered					75,655	86,515
Commercial real estate | Covered loans
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	9,904	24,062	13,663	26,394
Provision (benefit) for loan and lease losses	(6,267)	(5,848)	(8,700)	(7,839)
Gross charge-offs	(777)	(1,209)	(4,588)	(3,195)
Recoveries	6,306	4,270	8,791	5,915
Net (charge-offs) recoveries	5,529	3,061	4,203	2,720
Ending allowance for loan losses	9,166	21,275	9,166	21,275
Allowance for loan losses:
Individually evaluated for impairment					1,950	1,277
Collectively evaluated for impairment					4	57
Allowance for loan losses	9,904	24,062	13,663	26,394	9,166	13,663
Balance of loans:
Individually evaluated for impairment					18,023	22,385
Collectively evaluated for impairment					1,153	3,391
Total loans, covered					143,898	186,662
Commercial real estate | Covered loans | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			12,329
Ending allowance for loan losses	7,212		7,212
Allowance for loan losses:
Allowance for loan losses	7,212		12,329		7,212	12,329
Balance of loans:
Total loans, covered					124,722	160,886
Commercial and industrial | Covered loans
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	2,812	6,759	2,577	7,227
Provision (benefit) for loan and lease losses	(2,083)	(1,411)	(1,558)	(2,501)
Gross charge-offs	(1,274)	(1,500)	(2,091)	(2,527)
Recoveries	2,638	692	3,165	2,341
Net (charge-offs) recoveries	1,364	(808)	1,074	(186)
Ending allowance for loan losses	2,093	4,540	2,093	4,540
Allowance for loan losses:
Individually evaluated for impairment					327	109
Collectively evaluated for impairment					29	89
Allowance for loan losses	2,812	6,759	2,577	7,227	2,093	2,577
Balance of loans:
Individually evaluated for impairment					2,938	2,324
Collectively evaluated for impairment					3,636	6,572
Total loans, covered					24,794	32,648
Commercial and industrial | Covered loans | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			2,379
Ending allowance for loan losses	1,737		1,737
Allowance for loan losses:
Allowance for loan losses	1,737		2,379		1,737	2,379
Balance of loans:
Total loans, covered					18,220	23,752
Real estate construction | Covered loans
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	1,075	2,003	1,086	1,984
Provision (benefit) for loan and lease losses	207	(95)	326	(178)
Gross charge-offs	(454)	(979)	(962)	(1,004)
Recoveries	126	590	504	717
Net (charge-offs) recoveries	(328)	(389)	(458)	(287)
Ending allowance for loan losses	954	1,519	954	1,519
Allowance for loan losses:
Individually evaluated for impairment					0	0
Collectively evaluated for impairment					0	7
Allowance for loan losses	1,075	2,003	1,086	1,984	954	1,086
Balance of loans:
Individually evaluated for impairment					665	670
Collectively evaluated for impairment					0	304
Total loans, covered					7,426	9,389
Real estate construction | Covered loans | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			1,079
Ending allowance for loan losses	954		954
Allowance for loan losses:
Allowance for loan losses	954		1,079		954	1,079
Balance of loans:
Total loans, covered					6,761	8,415
Consumer | Covered loans
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period	38	99	46	80
Provision (benefit) for loan and lease losses	(77)	(58)	(20)	(84)
Gross charge-offs	(7)	(30)	(165)	(77)
Recoveries	77	86	170	178
Net (charge-offs) recoveries	70	56	5	101
Ending allowance for loan losses	31	97	31	97
Allowance for loan losses:
Individually evaluated for impairment					0	0
Collectively evaluated for impairment					1	1
Allowance for loan losses	38	$ 99	46	$ 80	31	46
Balance of loans:
Individually evaluated for impairment					27	12
Collectively evaluated for impairment					57	84
Total loans, covered					8,358	9,565
Consumer | Covered loans | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period			45
Ending allowance for loan losses	30		30
Allowance for loan losses:
Allowance for loan losses	$ 30		$ 45		30	45
Balance of loans:
Total loans, covered					$ 8,274	$ 9,469

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STOCK-BASED COMPENSATION - Valuation Assumptions (Details) - 6 months ended Jun. 30, 2015 - $ / shares	Total
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Fair value of options granted (in dollars per share)	$ 4.77
Expected dividend yield	0.00%
Expected volatility	30.02%
Risk-free interest rate	1.98%
Expected life (in years)	6 years

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FAIR VALUE (Details 9) - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Financial assets:
Net loans, excluding covered loans	$ 4,207,560		$ 3,868,818
Net covered loans	264,507		325,137
FDIC indemnification asset	36,997	$ 50,702	67,026	$ 102,694	$ 119,045	$ 131,861
FDIC receivable	5,543	$ 7,839	6,062	$ 7,198	$ 8,130	$ 7,783
Company-owned life insurance	104,972		97,782
Security held-to-maturity	1,692		1,226
Deposits:
Time deposits	1,427,126		1,188,178
Total deposits	4,908,073		4,548,863
Loans and other liabilities:
FDIC clawback liability	28,588		26,905
Short-term borrowings	253,945		135,743
Long-term debt	414,947		353,972
FDIC warrants payable	4,441		4,633
Other brokered funds	380,611		642,185
Uncovered
Loans and other liabilities:
Impaired loans	48,819		41,428
Covered loans
Loans and other liabilities:
Impaired loans	27,308		35,321
Recurring basis
Loans and other liabilities:
Other brokered funds	66,800		72,300
Recurring basis | Covered loans
Loans and other liabilities:
Impaired loans	20,900		19,500
Non-recurring basis | Uncovered
Loans and other liabilities:
Impaired loans	11,000		7,600
Non-recurring basis | Covered loans
Loans and other liabilities:
Impaired loans	400		502
Level 1 | Recurring basis
Financial assets:
Cash and cash equivalents	79,357		86,185
Net loans, excluding covered loans	0		0
Net covered loans	0		0
Accrued interest receivable	0		0
FDIC indemnification asset	0		0
FDIC receivable	0		0
Company-owned life insurance	0		0
Security held-to-maturity	0		0
Deposits:
Savings and demand deposits	0		0
Time deposits	0		0
Total deposits	0		0
Loans and other liabilities:
FDIC clawback liability	0		0
Short-term borrowings	0		0
Long-term debt	0		0
FDIC warrants payable	0		0
Accrued interest payable	0		0
Deferred compensation plan liabilities	0		0
Level 1 | Non-recurring basis
Loans and other liabilities:
Impaired loans	0		0
Level 2 | Recurring basis
Financial assets:
Cash and cash equivalents	331,201		167,551
Net loans, excluding covered loans	0		0
Net covered loans	0		0
Accrued interest receivable	14,409		12,533
FDIC indemnification asset	0		0
FDIC receivable	5,543		6,062
Company-owned life insurance	104,972		97,782
Security held-to-maturity	0		0
Deposits:
Savings and demand deposits	3,414,192		3,288,414
Time deposits	1,493,607		1,260,453
Total deposits	4,907,799		4,548,867
Loans and other liabilities:
FDIC clawback liability	0		0
Short-term borrowings	253,945		135,743
Long-term debt	409,580		348,373
FDIC warrants payable	0		0
Accrued interest payable	2,079		1,476
Deferred compensation plan liabilities	1,475		587
Level 2 | Non-recurring basis
Loans and other liabilities:
Impaired loans	0		0
Level 3 | Recurring basis
Financial assets:
Cash and cash equivalents	0		0
Net loans, excluding covered loans	4,281,316		3,948,847
Net covered loans	349,004		420,627
Accrued interest receivable	0		0
FDIC indemnification asset	18,875		34,572
FDIC receivable	0		0
Company-owned life insurance	0		0
Security held-to-maturity	1,692		1,226
Deposits:
Savings and demand deposits	0		0
Time deposits	0		0
Total deposits	0		0
Loans and other liabilities:
FDIC clawback liability	28,588		26,905
Short-term borrowings	0		0
Long-term debt	0		0
FDIC warrants payable	4,441		4,633
Accrued interest payable	0		0
Deferred compensation plan liabilities	0		0
Level 3 | Non-recurring basis
Loans and other liabilities:
Impaired loans	11,354		8,106
Carrying Value | Recurring basis
Financial assets:
Cash and cash equivalents	410,558		253,736
Federal Home Loan Bank stock	25,418		20,212
Net loans, excluding covered loans	4,207,560		3,868,818
Net covered loans	264,507		325,137
Accrued interest receivable	14,409		12,533
FDIC indemnification asset	36,997		67,026
FDIC receivable	5,543		6,062
Company-owned life insurance	104,972		97,782
Security held-to-maturity	1,692		1,226
Deposits:
Savings and demand deposits	3,414,192		3,288,414
Time deposits	1,493,881		1,260,449
Total deposits	4,908,073		4,548,863
Loans and other liabilities:
FDIC clawback liability	28,588		26,905
Short-term borrowings	253,945		135,743
Long-term debt	414,947		353,972
FDIC warrants payable	4,441		4,633
Accrued interest payable	2,079		1,476
Deferred compensation plan liabilities	1,475		587
Total Fair Value | Recurring basis
Financial assets:
Cash and cash equivalents	410,558		253,736
Net loans, excluding covered loans	4,281,316		3,948,847
Net covered loans	349,004		420,627
Accrued interest receivable	14,409		12,533
FDIC indemnification asset	18,875		34,572
FDIC receivable	5,543		6,062
Company-owned life insurance	104,972		97,782
Security held-to-maturity	1,692		1,226
Deposits:
Savings and demand deposits	3,414,192		3,288,414
Time deposits	1,493,607		1,260,453
Total deposits	4,907,799		4,548,867
Loans and other liabilities:
FDIC clawback liability	28,588		26,905
Short-term borrowings	253,945		135,743
Long-term debt	409,580		348,373
FDIC warrants payable	4,441		4,633
Accrued interest payable	2,079		1,476
Deferred compensation plan liabilities	1,475		587
Total Fair Value | Non-recurring basis
Loans and other liabilities:
Impaired loans	$ 11,354		$ 8,106

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OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015
Changes in other real estate owned
Balance at the beginning of the period			$ 38,908,000	$ 29,955,000
Additions due to acquisitions			1,260,000	30,878,000
Additions due to adoption			540,000
Transfer from loans to other real estate owned			17,821,000	13,772,000
Disposals			(17,330,000)	(19,928,000)
Write-downs			(1,947,000)	(2,404,000)
Balance at the end of the period	$ 39,252,000	$ 52,273,000	39,252,000	52,273,000
Changes in repossessed assets
Other real estate owned and repossessed assets acquired in accordance with ASU 2014-04					$ 727,000
Real estate properties for which formal foreclosure proceedings are in process					9,600,000
Income and expenses related to other real estate owned
Net gain (loss) on sale	1,405,000	3,089,000	2,820,000	4,233,000
Write-downs	(585,000)	(1,358,000)	(1,947,000)	(2,404,000)
Net operating expenses	(713,000)	(1,001,000)	(1,008,000)	(1,619,000)
Total	107,000	730,000	(135,000)	210,000
Uncovered
Changes in other real estate owned
Balance at the beginning of the period			28,247,000	18,384,000
Additions due to acquisitions			1,260,000	30,878,000
Additions due to adoption			455,000
Transfer from loans to other real estate owned			12,151,000	8,826,000
Disposals			(9,777,000)	(15,241,000)
Write-downs			(1,311,000)	(1,500,000)
Balance at the end of the period	31,025,000	41,347,000	31,025,000	41,347,000
Income and expenses related to other real estate owned
Net gain (loss) on sale	1,315,000	2,998,000	3,173,000	4,002,000
Write-downs	(487,000)	(821,000)	(1,311,000)	(1,500,000)
Net operating expenses	(686,000)	(919,000)	(890,000)	(1,545,000)
Total	142,000	1,258,000	972,000	957,000
Covered
Changes in other real estate owned
Balance at the beginning of the period			10,661,000	11,571,000
Additions due to acquisitions			0	0
Additions due to adoption			85,000
Transfer from loans to other real estate owned			5,670,000	4,946,000
Disposals			(7,553,000)	(4,687,000)
Write-downs			(636,000)	(904,000)
Balance at the end of the period	8,227,000	10,926,000	8,227,000	10,926,000
Income and expenses related to other real estate owned
Net gain (loss) on sale	90,000	91,000	(353,000)	231,000
Write-downs	(98,000)	(537,000)	(636,000)	(904,000)
Net operating expenses	(27,000)	(82,000)	(118,000)	(74,000)
Total	(35,000)	(528,000)	(1,107,000)	(747,000)
Repossessed Assets
Changes in repossessed assets
Balance at the beginning of the period			9,835,000	27,000
Transfers in		237,000		237,000	847,000
Capitalized expenditures					2,681,000
Payments received					(2,854,000)
Disposals		(172,000)		(172,000)	(318,000)
Write-downs of repossessed assets			(468,000)	0
Change in valuation allowance					(2,602,000)
Balance at the end of the period	7,121,000	92,000	7,121,000	92,000
Repossessed assets valuation allowance reconciliation
Balance at the beginning of the period	2,819,000		460,000
Provision for valuation allowance	243,000		2,602,000
Balance at the end of the period	3,062,000	0	3,062,000	0
Repossessed assets valuation allowance	2,819,000	0	460,000	0	$ 3,062,000
Income and expenses related to repossessed assets
Net gain (loss) on sale	0	0	(14,000)	(4,000)
Write - downs of repossessed assets expense	(274,000)		(468,000)
Provision for valuation allowance	(243,000)		(2,602,000)
Net operating expenses	0	(19,000)	(25,000)	(49,000)
Total	$ (517,000)	$ (19,000)	$ (3,109,000)	$ (53,000)

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SHORT-TERM BORROWINGS AND LONG-TERM DEBT (Details) - USD ($) $ in Thousands, shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Short-term borrowings and long-term debt
Amount, short-term borrowings	$ 253,945		$ 253,945		$ 135,743
Amount, long-term debt	414,947		414,947		353,972
Amount, short-term borrowings and long-term debt	$ 668,892		$ 668,892		$ 489,715
Weighted Average Rate, short-term borrowings (as a percent)	0.60%		0.60%		0.26%
Weighted Average Rate, long-term debt (as a percent)	1.83%		1.83%		2.02%
Weighted Average Rate, short-term borrowings and long-term debt (as a percent)	1.36%		1.36%		1.53%
Short-term borrowings
Amortized Cost	$ 842,081		$ 842,081		$ 734,674
Draw on existing line of credit			$ 20,000
Number of warrants repurchased (in shares)			2.5
Aggregate purchase price			$ 19,892	$ 0
Mortgage-backed securities
Short-term borrowings
Blanket lien arrangement	1,200,000		1,200,000
Specific lien arrangement	903,400		903,400
Additional maximum borrowing capacity	808,500		808,500
Additional maximum borrowing capacity as limited by Board resolutions	440,300		440,300
Line of Credit
Short-term borrowings
Draw on existing line of credit			10,000
Securities sold under agreements to repurchase: 0.05%-0.10% variable-rate notes
Short-term borrowings and long-term debt
Amount, short-term borrowings	$ 23,945		$ 23,945		$ 25,743
Weighted Average Rate, short-term borrowings (as a percent)	0.10%		0.10%		0.10%
Securities sold under agreements to repurchase: 0.05%-0.10% variable-rate notes | Minimum
Short-term borrowings and long-term debt
Interest rate (as a percent)	0.05%		0.05%
Securities sold under agreements to repurchase: 0.05%-0.10% variable-rate notes | Maximum
Short-term borrowings and long-term debt
Interest rate (as a percent)	0.10%		0.10%
FHLB advances fixed-rate notes
Short-term borrowings and long-term debt
Amount, short-term borrowings	$ 200,000		$ 200,000		$ 100,000
Amount, long-term debt	$ 344,001		$ 344,001		$ 286,804
Weighted Average Rate, short-term borrowings (as a percent)	0.27%		0.27%		0.29%
Weighted Average Rate, long-term debt (as a percent)	1.40%		1.40%		1.57%
Advances payable	$ 338,500		$ 338,500		$ 280,100
Purchase accounting premiums	$ 5,500		$ 5,500		6,700
FHLB advances fixed-rate notes | Minimum
Short-term borrowings and long-term debt
Weighted Average Rate, short-term borrowings (as a percent)	0.24%		0.24%
Interest rate (as a percent)	0.26%		0.26%
FHLB advances fixed-rate notes | Maximum
Short-term borrowings and long-term debt
Weighted Average Rate, short-term borrowings (as a percent)	0.30%		0.30%
Interest rate (as a percent)	7.44%		7.44%
FHLB advances: 0.43% variable-rate notes
Short-term borrowings and long-term debt
Amount, short-term borrowings	$ 0		$ 0		$ 10,000
Weighted Average Rate, short-term borrowings (as a percent)	0.00%		0.00%		0.43%
Interest rate (as a percent)	0.43%		0.43%
Securities sold under agreements to repurchase: 4.11%-4.30% fixed-rate notes due 2016 to 2037
Short-term borrowings and long-term debt
Amount, long-term debt	$ 55,623		$ 55,623		$ 56,444
Weighted Average Rate, long-term debt (as a percent)	4.19%		4.19%		4.19%
Purchase accounting premiums	$ 5,600		$ 5,600		$ 6,400
Balance amount	50,000		50,000		50,000
Securities sold under agreements to repurchase: 4.11%-4.30% fixed-rate notes due 2016 to 2037 | Mortgage-backed securities
Short-term borrowings
Amortized Cost	$ 83,700		$ 83,700
Securities sold under agreements to repurchase: 4.11%-4.30% fixed-rate notes due 2016 to 2037 | Minimum
Short-term borrowings and long-term debt
Interest rate (as a percent)	4.11%		4.11%
Securities sold under agreements to repurchase: 4.11%-4.30% fixed-rate notes due 2016 to 2037 | Maximum
Short-term borrowings and long-term debt
Interest rate (as a percent)	4.30%		4.30%
Subordinated notes related to trust preferred securities: Floating-rate based on three-month LIBOR plus 1.45% - 2.85% due 2034 to 2035
Short-term borrowings and long-term debt
Amount, long-term debt	$ 10,794		$ 10,794		$ 10,724
Weighted Average Rate, long-term debt (as a percent)	2.52%		2.52%		2.48%
Variable rate basis			three-month LIBOR
Balance amount	$ 15,000		$ 15,000		$ 15,000
Purchase accounting discounts	4,200		$ 4,200		4,300
Subordinated notes related to trust preferred securities: Floating-rate based on three-month LIBOR plus 1.45% - 2.85% due 2034 to 2035 | Minimum
Short-term borrowings and long-term debt
Spread on variable rate (as a percent)			1.45%
Subordinated notes related to trust preferred securities: Floating-rate based on three-month LIBOR plus 1.45% - 2.85% due 2034 to 2035 | Maximum
Short-term borrowings and long-term debt
Spread on variable rate (as a percent)			2.85%
Subordinated notes related to trust preferred securities: floating-rate based on three-month LIBOR plus 3.25% due September 2032 (5)
Short-term borrowings and long-term debt
Amount, long-term debt	$ 4,529		$ 4,529		$ 0
Weighted Average Rate, long-term debt (as a percent)	3.53%		3.53%		0.00%
Variable rate basis			three-month LIBOR
Spread on variable rate (as a percent)			3.25%
Balance amount	$ 5,000		$ 5,000
Purchase accounting discounts	471		471
Securities sold under agreement to repurchase
Short-term borrowings
Average daily balance	$ 19,390	$ 86,444	$ 19,911	$ 77,054
Average interest rate (as a percent)	0.10%	0.13%	0.10%	0.11%
Maximum month-end balance	$ 23,945	$ 148,826	$ 23,945	$ 148,826
FHLB advances:
Short-term borrowings
Average daily balance (FHLB)	$ 33,517	$ 38,806	$ 26,022	$ 19,634
Average interest rate - FHLB (as a percent)	0.27%	0.13%	0.27%	0.16%
Maximum month-end balance	$ 200,000	$ 90,000	$ 200,000	$ 90,000
Federal funds purchased
Short-term borrowings
Average daily balance	$ 0	$ 1,132	$ 696	$ 2,254
Average interest rate (as a percent)	0.00%	0.28%	0.31%	0.25%
Maximum month-end balance	$ 0	$ 0	$ 126,000	$ 0
FHLB overnight repurchase agreements:
Short-term borrowings
Average daily balance (FHLB)	$ 0	$ 0	$ 0	$ 4,420
Average interest rate - FHLB (as a percent)	0.00%	0.00%	0.00%	0.10%
Maximum month-end balance	$ 0	$ 0	$ 0	$ 0
FHLB collateralized advances for fixed rate notes:
Short-term borrowings
Amount of collateral for total borrowing capacity	2,100,000		2,100,000
Holding Company
Short-term borrowings and long-term debt
Amount, short-term borrowings	30,000		30,000		$ 0
Amount, long-term debt	15,322		15,322		10,724
Short-term borrowings
Aggregate purchase price			19,892	0
Holding Company | Line of Credit
Short-term borrowings and long-term debt
Amount, short-term borrowings	$ 30,000		$ 30,000		$ 0
Weighted Average Rate, short-term borrowings (as a percent)	3.19%		3.19%		0.00%
Variable rate basis			one-month Libor
Spread on variable rate (as a percent)			3.00%
Short-term borrowings
Average daily balance	$ 22,912	$ 0	$ 16,271	$ 11,215
Average interest rate (as a percent)	3.18%	0.00%	3.18%	3.17%
Maximum month-end balance	$ 30,000	$ 0	$ 30,000	$ 35,000

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DERIVATIVE INSTRUMENTS AND BALANCE SHEET OFFSETTING (Details 2) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Derivative instruments
Net gains (losses) relating to free-standing derivative instruments	$ 613	$ (5,635)	$ 1,715	$ (8,754)
Forward contracts related to mortgage loans to be delivered for sale | Net gain on sales of loans
Derivative instruments
Net gains (losses) relating to free-standing derivative instruments	2,355	(6,915)	1,211	(9,909)
Interest rate lock commitments | Net gain on sales of loans
Derivative instruments
Net gains (losses) relating to free-standing derivative instruments	(1,620)	1,274	542	1,136
Customer-initiated derivatives | Other noninterest income
Derivative instruments
Net gains (losses) relating to free-standing derivative instruments	$ (122)	$ 6	$ (38)	$ 19

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Amount
Tax based on federal statutory rate	$ 9,004	$ 5,726	$ 13,860	$ 18,526
Effect of:
Tax exempt income	(644)	(475)	(1,275)	(1,202)
State taxes, net of federal benefit	194	201	460	469
Change in valuation allowance	0	(9,749)	0	(10,127)
Bargain purchase gain	0	0	0	(14,692)
Transaction costs	18	426	47	454
Other, net	(393)	(375)	(472)	670
Income tax expense (benefit)	$ 8,179	$ (4,246)	$ 12,620	$ (5,902)
Rate
Tax based on federal statutory rate (as a percent)	35.00%	35.00%	35.00%	35.00%
Effect of:
Tax exempt income (as a percent)	(2.60%)	(2.90%)	(3.20%)	(2.30%)
State taxes, net of federal benefit (as a percent)	0.80%	1.20%	1.20%	0.90%
Change in valuation allowance (as a percent)	0.00%	(59.60%)	0.00%	(19.10%)
Bargain purchase gain (as a percent)	(0.00%)	(0.00%)	(0.00%)	(27.90%)
Transaction costs (as a percent)	0.10%	2.60%	0.10%	0.90%
Other, net (as a percent)	(1.50%)	(2.30%)	(1.20%)	1.30%
Income tax expense (benefit) (as a percent)	31.80%	(26.00%)	31.90%	(11.20%)

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INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Net carrying amount of CDIs
Net carrying amount	$ 14,131		$ 14,131		$ 13,035
Amortization expense recognized			1,314	$ 1,460
FHC
Net carrying amount of CDIs
Increase in goodwill			$ 3,500
Core deposit
Intangible assets
Estimated remaining average useful life			7 years 1 month 6 days
Net carrying amount of CDIs
Gross carrying amount	23,068		$ 23,068		20,658
Accumulated amortization	(8,937)		(8,937)		(7,623)
Net carrying amount	14,131		14,131		$ 13,035
Amortization expense recognized	$ 665	$ 724	$ 1,300	$ 1,500

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ALLOWANCE FOR LOAN LOSSES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	$ 31,080		$ 31,080		$ 23,310
Recorded investment with related allowance	17,739		17,739		12,284
Impaired loans, total recorded investment	48,819		48,819		35,594
Contractual principal balance	77,538		77,538		43,687
Related allowance	4,436		4,436		3,450
Average recorded investment	50,225	$ 22,258	51,668	$ 23,029
Interest income recognized	1,216	188	2,109	404
Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	10,272		10,272		14,781
Recorded investment with related allowance	17,036		17,036		15,348
Impaired loans, total recorded investment	27,308		27,308		30,129
Contractual principal balance	38,851		38,851		38,844
Related allowance	2,684		2,684		1,803
Average recorded investment	27,941	24,711	28,394	24,901
Interest income recognized	520	351	913	715
Residential real estate | Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	14,124		14,124		14,316
Recorded investment with related allowance	8,401		8,401		4,268
Impaired loans, total recorded investment	22,525		22,525		18,584
Contractual principal balance	30,095		30,095		23,080
Related allowance	2,280		2,280		1,110
Average recorded investment	23,128	14,870	23,277	15,038
Interest income recognized	302	134	500	279
Residential real estate | Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	2,903		2,903		2,155
Recorded investment with related allowance	2,752		2,752		2,583
Impaired loans, total recorded investment	5,655		5,655		4,738
Contractual principal balance	7,424		7,424		6,388
Related allowance	407		407		417
Average recorded investment	5,775	4,364	5,803	4,378
Interest income recognized	98	63	174	127
Commercial real estate | Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	12,684		12,684		7,609
Recorded investment with related allowance	6,784		6,784		5,956
Impaired loans, total recorded investment	19,468		19,468		13,565
Contractual principal balance	33,628		33,628		17,016
Related allowance	1,449		1,449		1,276
Average recorded investment	20,005	5,686	20,445	6,280
Interest income recognized	807	38	1,282	84
Commercial real estate | Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	4,594		4,594		10,400
Recorded investment with related allowance	13,429		13,429		11,985
Impaired loans, total recorded investment	18,023		18,023		22,385
Contractual principal balance	24,656		24,656		28,755
Related allowance	1,950		1,950		1,277
Average recorded investment	18,203	17,615	18,329	17,689
Interest income recognized	260	266	497	533
Commercial and industrial | Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	3,647		3,647		915
Recorded investment with related allowance	2,069		2,069		1,884
Impaired loans, total recorded investment	5,716		5,716		2,799
Contractual principal balance	12,386		12,386		2,807
Related allowance	497		497		982
Average recorded investment	5,942	1,668	6,784	1,676
Interest income recognized	93	15	282	39
Commercial and industrial | Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	2,130		2,130		1,545
Recorded investment with related allowance	808		808		779
Impaired loans, total recorded investment	2,938		2,938		2,324
Contractual principal balance	5,706		5,706		2,668
Related allowance	327		327		109
Average recorded investment	3,094	2,299	3,333	2,399
Interest income recognized	89	21	161	44
Real estate construction | Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	333		333		174
Recorded investment with related allowance	236		236		0
Impaired loans, total recorded investment	569		569		174
Contractual principal balance	643		643		174
Related allowance	66		66		0
Average recorded investment	580		573
Interest income recognized	4		25
Real estate construction | Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	619		619		670
Recorded investment with related allowance	46		46		0
Impaired loans, total recorded investment	665		665		670
Contractual principal balance	989		989		994
Related allowance	0		0		0
Average recorded investment	842	412	901	413
Interest income recognized	72	0	79	9
Consumer | Uncovered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	292		292		296
Recorded investment with related allowance	249		249		176
Impaired loans, total recorded investment	541		541		472
Contractual principal balance	786		786		610
Related allowance	144		144		82
Average recorded investment	570	34	589	35
Interest income recognized	10	1	20	2
Consumer | Covered loans individually evaluated
Impaired loans individually evaluated for impairment
Recorded investment with no related allowance	26		26		11
Recorded investment with related allowance	1		1		1
Impaired loans, total recorded investment	27		27		12
Contractual principal balance	76		76		39
Related allowance	0		0		$ 0
Average recorded investment	27	21	28	22
Interest income recognized	$ 1	$ 1	$ 2	$ 2

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REGULATORY CAPITAL MATTERS

6 Months Ended

Jun. 30, 2015

Banking and Thrift [Abstract]

REGULATORY CAPITAL MATTERS

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 June 30, 2015, 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.

Effective January 1, 2015 we adopted the new Basel III regulatory capital framework as approved by federal banking agencies, which are subject to a multi-year phase-in period.  The adoption of this new framework modified the calculation of the various capital ratios, added a new ratio, common equity tier 1, and revised the adequately and well capitalized thresholds. In addition, Basel III establishes a new capital conservation buffer of 2.5% of risk-weighted assets, which is phased-in over a four-year period beginning January 1, 2016.

At June 30, 2015 and December 31, 2014, 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 June 30, 2015 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.

The following is a summary of actual and required capital amounts and ratios in accordance with current regulatory standards:

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2015 (Basel III Transitional)
Total capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	$	772,889	15.0	%	$	412,749	8.0	%	N/A		N/A
Talmer Bank and Trust	653,191		14.2		368,064		8.0		$	460,080	10.0	%
Talmer West Bank (1)	136,659		24.8		44,168		8.0		N/A		N/A
Common equity tier 1 capital
Talmer Bancorp, Inc. (Consolidated)	717,196		13.9		232,171		4.5		N/A		N/A
Talmer Bank and Trust	606,576		13.2		207,036		4.5		299,052		6.5
Talmer West Bank (1)	129,474		23.5		24,844		4.5		N/A		N/A
Tier 1 capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	717,196		13.9		309,561		6.0		N/A		N/A
Talmer Bank and Trust	606,576		13.2		276,048		6.0		368,064		8.0
Talmer West Bank (1)	129,474		23.5		33,126		6.0		N/A		N/A
Tier 1 leverage ratio
Talmer Bancorp, Inc. (Consolidated)	717,196		11.5		249,398		4.0		N/A		N/A
Talmer Bank and Trust	606,576		11.1		217,889		4.0		272,361		5.0
Talmer West Bank (1)	129,474		16.6		31,213		4.0		N/A		N/A
December 31, 2014 (Basel I)
Total capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	$	720,552	16.4	%	$	350,645	8.0	%	N/A		N/A
Talmer Bank and Trust	627,851		16.3		308,374		8.0		$	385,468	10.0	%
Talmer West Bank (1)	101,926		19.6		41,628		8.0		N/A		N/A
Tier 1 capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	666,035		15.2		175,323		4.0		N/A		N/A
Talmer Bank and Trust	579,604		15.0		154,187		4.0		231,281		6.0
Talmer West Bank (1)	95,656		18.4		20,814		4.0		N/A		N/A
Tier 1 leverage ratio
Talmer Bancorp, Inc. (Consolidated)	666,035		11.6		230,546		4.0		N/A		N/A
Talmer Bank and Trust	579,604		11.6		200,128		4.0		250,160		5.0
Talmer West Bank (1)	95,656		12.4		30,786		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.

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.  These limitations can affect Talmer Bank and Trust’s ability to pay dividends. During the three months ended June 30, 2015 and 2014, Talmer Bank and Trust paid no dividends, while for the six months ended June 30, 2015 and 2014, dividends of $15.0 million and $25.0 million, respectively, were paid to the Company.

Under FDIC regulations, limitations are imposed on all of Talmer West Bank’s capital distributions, including cash dividends.  As of June 30, 2015, Talmer West Bank was not able to pay any dividends without prior regulatory approval.

On July 29, 2015, a cash dividend on the Company’s Class A common stock of $0.01 per share was declared.  The dividend will be paid on August 21, 2015, to the Company’s Class A common shareholders of record as of August 10, 2015.

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FAIR VALUE (Details 2)	6 Months Ended
	Jun. 30, 2015
Fair Value Disclosures [Abstract]
Period of expected receipt of payment for FDIC receivable	90 days

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STOCK-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of share-based payment award, valuation assumptions

The fair value of options granted during the six months ended June 30, 2014 was determined using the following weighted-average assumptions as of the grant date.

	For the six months ended
	June 30, 2014
Fair value of options granted	$	4.77
Expected dividend yield	—		%
Expected volatility	30.02		%
Risk-free interest rate	1.98		%
Expected life (in years)	6.00

Summary of activity in the Plan

Activity in the Plan during the six months ended June 30, 2015 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, 2015	7,958		$	6.96
Exercised (1)	(599	)	6.77
Outstanding at June 30, 2015	7,359		6.98		6.22	71,894
Options fully vested	7,359		6.98		6.22	71,894
Exercisable at June 30, 2015	7,359		6.98		6.22	71,894

(1) Options exercised during the six months ended June 30, 2015 had a weighted average fair value of $15.74, at respective exercise dates.

Summary of changes in the Company's nonvested shares

The following table provides information regarding nonvested restricted stock awards:

Nonvested Restricted Stock Awards	Shares (in thousands)		Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2015	378		$	14.44
Granted	354		14.98
Vested	(19	)	14.44
Forfeited	(2	)	14.44
Nonvested at June 30, 2015	711		$	14.71

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ACQUIRED LOANS AND LOSS SHARE ACCOUNTING (Details 2) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
FDIC Indemnification Asset
Balance at beginning of period	$ 50,702	$ 119,045	$ 67,026	$ 131,861
Accretion	(8,548)	(5,506)	(17,798)	(12,224)
Sales and write-downs of other real estate owned	(475)	(281)	(828)	(753)
Net effect of change in expected cash flows on covered assets	490	(6,130)	(1,200)	(8,155)
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(5,172)	(4,434)	(10,203)	(8,035)
Balance at the end of the period	36,997	102,694	36,997	102,694
FDIC Receivable
Balance at beginning of period	7,839	8,130	6,062	7,783
Sales and write-downs of other real estate owned (covered)	150	(55)	16	(247)
Reimbursements requested from FDIC (reclassification to FDIC receivable)	5,172	4,434	10,203	8,035
Decrease due to recoveries net of additional claimable expenses	(6,261)	(3,433)	(7,618)	(4,319)
Claim payments received from the FDIC	(1,357)	(1,878)	(3,120)	(4,054)
Balance at the end of the period	$ 5,543	$ 7,198	$ 5,543	$ 7,198

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at the beginning of the period	$ 6,640	$ (2,415)	$ 3,850	$ (7,996)
Other comprehensive income (loss) before reclassifications	(4,469)	4,648	(1,805)	8,728
Amounts reclassified from accumulated other comprehensive income	65	0	191	1,501
Net current period other comprehensive income (loss)	(4,404)	4,648	(1,614)	10,229
Balance at the end of the period	2,236	2,233	2,236	2,233
Net gain (loss) on sales of securities	6	0	(101)	(2,310)
Income tax benefit with the reclassification adjustments related to available-for-sale securities	3	0	35	809
Other brokered funds included in total interest expense	104		192
Income tax benefit associated with the reclassification adjustments related to cash flow hedges	36		67
Unrealized gains (losses) on securities available-for-sale, net of tax
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at the beginning of the period	6,939	(2,415)	3,995	(7,996)
Other comprehensive income (loss) before reclassifications	(4,831)	4,648	(1,956)	8,728
Amounts reclassified from accumulated other comprehensive income	(3)	0	66	1,501
Net current period other comprehensive income (loss)	(4,834)	4,648	(1,890)	10,229
Balance at the end of the period	2,105	2,233	2,105	2,233
Unrealized gains (losses) on cash flow hedges, net of tax
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at the beginning of the period	(299)	0	(145)	0
Other comprehensive income (loss) before reclassifications	362	0	151	0
Amounts reclassified from accumulated other comprehensive income	68	0	125	0
Net current period other comprehensive income (loss)	430	0	276	0
Balance at the end of the period	$ 131	$ 0	$ 131	$ 0

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LOAN SERVICING RIGHTS (Tables)

6 Months Ended

Jun. 30, 2015

LOAN SERVICING RIGHTS

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

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 June 30, 2015
Fair value, beginning of period	$	621		$	—		$	53,788		$	54,409
Additions from loans sold with servicing retained	—			—			2,933			2,933
Changes in fair value due to:
Reductions from loans paid off during the period	(24		)	—			(1,570		)	(1,594		)
Changes due to valuation inputs or assumptions (1)	(17		)	—			3,163			3,146
Fair value, end of period	$	580		$	—		$	58,314		$	58,894
For the six months ended June 30, 2015
Fair value, beginning of period	$	691		$	—		$	69,907		$	70,598
Additions from loans sold with servicing retained	—			—			5,848			5,848
Reduction from loans sold and servicing rights sold (2)	—			—			(12,702		)	(12,702		)
Changes in fair value due to:
Reductions from loans paid off during the period	(53		)	—			(3,859		)	(3,912		)
Changes due to valuation inputs or assumptions (1)	(58		)	—			(880		)	(938		)
Fair value, end of period	$	580		$	—		$	58,314		$	58,894
Principal balance of loans serviced	$	187,948		$	—		$	5,835,932		$	6,023,880
For the three months ended June 30, 2014
Fair value, beginning of period	$	1,079		$	894		$	75,919		$	77,892
Additions from loans sold with servicing retained	—			57			2,102			2,159
Changes in fair value due to:
Reductions from loans paid off during the period	(11		)	(68		)	(1,668		)	(1,747		)
Changes due to valuation inputs or assumptions (1)	(231		)	(7		)	(3,962		)	(4,200		)
Fair value, end of period	$	837		$	876		$	72,391		$	74,104
For the six months ended June 30, 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	—			123			3,625			3,748
Changes in fair value due to:
Reductions from loans paid off during the period	(68		)	(137		)	(2,404		)	(2,609		)
Changes due to valuation inputs or assumptions (1)	(230		)	(72		)	(6,103		)	(6,405		)
Fair value, end of period	$	837		$	876		$	72,391		$	74,104
Principal balance of loans serviced	$	234,921		$	41,518		$	7,109,497		$	7,385,936

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

(2) $12.7 million of servicing rights were sold during the six months ended June 30, 2015 in connection with the sale of $1.2 billion of principal balance of loans serviced.

Schedule of assumptions included in loan servicing rights

The following table presents assumptions utilized in determining the fair value of loan servicing rights as of June 30, 2015 and December 31, 2014.

	Commercial Real Estate			Mortgage
As of June 30, 2015
Prepayment speed	6.08 - 50.00%			3.68 - 36.97%
Weighted average (“WA”) discount rate	19.48		%	9.16		%
WA cost to service/per year	$	470		$	61
WA ancillary income/per year	N/A			35
WA float range	0.56		%	1.19-1.69%
As of December 31, 2014
Prepayment speed	6.41-50.00%			3.63-40.07%
WA discount rate	19.48		%	9.14		%
WA cost to service/per year	$	470		$	61
WA ancillary income/per year	N/A			35
WA float range	0.56		%	1.16-1.74%

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FAIR VALUE (Details 4) - Recurring basis - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Loans held for investment
Changes in Level 3 assets during period
Balance, beginning of period	$ 22,158	$ 17,914	$ 19,526	$ 17,708
Transfer between levels within fair value hierarchy			0
Additions due to acquisition				0
Transfers from loans held for sale	764	542	3,983	778
Recorded in OCI (pre-tax)	0	0	0	0
New originations	0	0	0	0
Reduction from servicing rights sold			0
Repayments	(1,680)	(332)	(2,502)	(564)
Draws on previously issued lines of credits				128
Balance, end of period	20,907	18,525	20,907	18,525
Loans held for investment | Interest on investments
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)	0	0	0	0
Loans held for investment | Net gain on sales of loans
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)	12	15	139	8
Loans held for investment | Mortgage banking and other loan fees
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)	(347)	386	(239)	467
Loan servicing rights
Changes in Level 3 assets during period
Balance, beginning of period	54,409	77,892	70,598	78,603
Transfer between levels within fair value hierarchy			0
Additions due to acquisition				767
Transfers from loans held for sale	0	0	0	0
Recorded in OCI (pre-tax)	0	0	0	0
New originations	2,933	2,159	5,848	3,748
Reduction from servicing rights sold			(12,702)
Repayments	0	0	0	0
Draws on previously issued lines of credits				0
Balance, end of period	58,894	74,104	58,894	74,104
Loan servicing rights | Interest on investments
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)	0	0	0	0
Loan servicing rights | Net gain on sales of loans
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)		0	0	0
Loan servicing rights | Mortgage banking and other loan fees
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)	1,552	(5,947)	(4,850)	(9,014)
Taxable
Changes in Level 3 assets during period
Balance, beginning of period	397	397	397	396
Transfer between levels within fair value hierarchy			0
Additions due to acquisition				0
Transfers from loans held for sale	0	0	0	0
Recorded in OCI (pre-tax)	0	0	0	0
New originations	0	0	0	0
Reduction from servicing rights sold			0
Repayments	(80)	0	(80)	0
Draws on previously issued lines of credits				0
Balance, end of period	318	397	318	397
Taxable | Interest on investments
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)	1	0	1	1
Taxable | Net gain on sales of loans
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)		0	0	0
Taxable | Mortgage banking and other loan fees
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)	0	0	0	0
Corporate debt securities
Changes in Level 3 assets during period
Balance, beginning of period	430	420	3,425	405
Transfer between levels within fair value hierarchy			(3,000)
Additions due to acquisition				0
Transfers from loans held for sale	0	0	0	0
Recorded in OCI (pre-tax)	17	12	21	26
New originations	0	0	0	0
Reduction from servicing rights sold			0
Repayments	0	0	0	0
Draws on previously issued lines of credits				0
Balance, end of period	448	433	448	433
Corporate debt securities | Interest on investments
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)	1	1	2	2
Corporate debt securities | Net gain on sales of loans
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)		0	0	0
Corporate debt securities | Mortgage banking and other loan fees
Changes in Level 3 assets during period
Total gains (losses) recorded in earnings (realized)	$ 0	$ 0	$ 0	$ 0

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LOANS (Details 6) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($) loan	Jun. 30, 2014 USD ($) loan	Jun. 30, 2015 USD ($) loan	Jun. 30, 2014 USD ($) loan
Troubled Debt Restructurings
Total number of loans | loan	59	36	87	61
Total recorded investment (modified)	$ 7,151	$ 2,173	$ 11,506	$ 4,857
Net charge-offs (recoveries)	222	0	227	(3)
Provision (benefit) for loan losses	431	58	843	490
Loan forgiven	$ 187	$ 51	$ 187	$ 178
Uncovered
Troubled Debt Restructurings
Total number of loans | loan	43	20	64	36
Total recorded investment (modified)	$ 3,728	$ 885	$ 7,581	$ 2,984
Net charge-offs (recoveries)	192	0	230	(9)
Provision (benefit) for loan losses	$ 394	$ 19	$ 601	$ 381
Uncovered | Residential real estate
Troubled Debt Restructurings
Total number of loans | loan	17	9	26	15
Total recorded investment (modified)	$ 741	$ 450	$ 2,185	$ 748
Net charge-offs (recoveries)	0	0	1	0
Provision (benefit) for loan losses	$ 162	$ 22	$ 192	$ 127
Uncovered | Commercial real estate
Troubled Debt Restructurings
Total number of loans | loan	9	3	12	8
Total recorded investment (modified)	$ 1,929	$ 279	$ 3,134	$ 1,920
Net charge-offs (recoveries)	0	0	37	(9)
Provision (benefit) for loan losses	$ 0	$ 0	$ 129	$ 197
Uncovered | Commercial and industrial
Troubled Debt Restructurings
Total number of loans | loan	14	6	22	11
Total recorded investment (modified)	$ 925	$ 68	$ 1,999	$ 228
Net charge-offs (recoveries)	192	0	192	0
Provision (benefit) for loan losses	$ 232	$ (3)	$ 280	$ 31
Uncovered | Real estate construction
Troubled Debt Restructurings
Total number of loans | loan	2		3
Total recorded investment (modified)	$ 116		$ 246
Net charge-offs (recoveries)	0		0
Provision (benefit) for loan losses	$ 0		$ 0
Uncovered | Consumer
Troubled Debt Restructurings
Total number of loans | loan	1	2	1	2
Total recorded investment (modified)	$ 17	$ 88	$ 17	$ 88
Net charge-offs (recoveries)	0	0	0	0
Provision (benefit) for loan losses	$ 0	$ 0	$ 0	$ 26
Covered loans
Troubled Debt Restructurings
Total number of loans | loan	16	16	23	25
Total recorded investment (modified)	$ 3,423	$ 1,288	$ 3,925	$ 1,873
Net charge-offs (recoveries)	30	0	(3)	6
Provision (benefit) for loan losses	$ 37	$ 39	$ 242	$ 109
Covered loans | Residential real estate
Troubled Debt Restructurings
Total number of loans | loan	6	9	9	14
Total recorded investment (modified)	$ 859	$ 359	$ 999	$ 472
Net charge-offs (recoveries)	0	0	5	6
Provision (benefit) for loan losses	$ 5	$ 22	$ 77	$ 29
Covered loans | Commercial real estate
Troubled Debt Restructurings
Total number of loans | loan	8	2	10	3
Total recorded investment (modified)	$ 2,442	$ 652	$ 2,694	$ 1,098
Net charge-offs (recoveries)	0	0	0	0
Provision (benefit) for loan losses	$ 2	$ 6	$ 81	$ 66
Covered loans | Commercial and industrial
Troubled Debt Restructurings
Total number of loans | loan		5	1	8
Total recorded investment (modified)		$ 277	$ 95	$ 303
Net charge-offs (recoveries)		0	0	0
Provision (benefit) for loan losses		11	$ 92	14
Covered loans | Real estate construction
Troubled Debt Restructurings
Total number of loans | loan	2		2
Total recorded investment (modified)	$ 122		$ 122
Net charge-offs (recoveries)	30		(8)
Provision (benefit) for loan losses	30		$ (8)
Covered loans | Consumer
Troubled Debt Restructurings
Total number of loans | loan			1
Total recorded investment (modified)			$ 15
Net charge-offs (recoveries)			0
Provision (benefit) for loan losses			0
Principal deferral
Troubled Debt Restructurings
Total recorded investment (modified)	1,581	151	2,880	307
Principal deferral | Uncovered
Troubled Debt Restructurings
Total recorded investment (modified)	788	151	2,007	194
Principal deferral | Uncovered | Residential real estate
Troubled Debt Restructurings
Total recorded investment (modified)	403	144	1,286	144
Principal deferral | Uncovered | Commercial real estate
Troubled Debt Restructurings
Total recorded investment (modified)	93	0	93	0
Principal deferral | Uncovered | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment (modified)	231	7	567	50
Principal deferral | Uncovered | Real estate construction
Troubled Debt Restructurings
Total recorded investment (modified)	44		44
Principal deferral | Uncovered | Consumer
Troubled Debt Restructurings
Total recorded investment (modified)	17	0	17	0
Principal deferral | Covered loans
Troubled Debt Restructurings
Total recorded investment (modified)	793	0	873	113
Principal deferral | Covered loans | Residential real estate
Troubled Debt Restructurings
Total recorded investment (modified)	747	0	812	113
Principal deferral | Covered loans | Commercial real estate
Troubled Debt Restructurings
Total recorded investment (modified)	0	0	0	0
Principal deferral | Covered loans | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment (modified)		0	0	0
Principal deferral | Covered loans | Real estate construction
Troubled Debt Restructurings
Total recorded investment (modified)	46		46
Principal deferral | Covered loans | Consumer
Troubled Debt Restructurings
Total recorded investment (modified)			15
Principal reduction
Troubled Debt Restructurings
Total recorded investment (modified)	114	261	114	329
Principal reduction | Uncovered
Troubled Debt Restructurings
Total recorded investment (modified)	114	247	114	315
Principal reduction | Uncovered | Residential real estate
Troubled Debt Restructurings
Total recorded investment (modified)	114	159	114	227
Principal reduction | Uncovered | Commercial real estate
Troubled Debt Restructurings
Total recorded investment (modified)	0	0	0	0
Principal reduction | Uncovered | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment (modified)	0	0	0	0
Principal reduction | Uncovered | Real estate construction
Troubled Debt Restructurings
Total recorded investment (modified)	0		0
Principal reduction | Uncovered | Consumer
Troubled Debt Restructurings
Total recorded investment (modified)	0	88	0	88
Principal reduction | Covered loans
Troubled Debt Restructurings
Total recorded investment (modified)	0	14	0	14
Principal reduction | Covered loans | Residential real estate
Troubled Debt Restructurings
Total recorded investment (modified)	0	14	0	14
Principal reduction | Covered loans | Commercial real estate
Troubled Debt Restructurings
Total recorded investment (modified)	0	0	0	0
Principal reduction | Covered loans | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment (modified)		0	0	0
Principal reduction | Covered loans | Real estate construction
Troubled Debt Restructurings
Total recorded investment (modified)	0		0
Principal reduction | Covered loans | Consumer
Troubled Debt Restructurings
Total recorded investment (modified)			0
Interest rate
Troubled Debt Restructurings
Total recorded investment (modified)	4,772	1,415	6,565	2,385
Interest rate | Uncovered
Troubled Debt Restructurings
Total recorded investment (modified)	2,142	241	3,513	1,185
Interest rate | Uncovered | Residential real estate
Troubled Debt Restructurings
Total recorded investment (modified)	224	0	785	230
Interest rate | Uncovered | Commercial real estate
Troubled Debt Restructurings
Total recorded investment (modified)	1,304	180	1,402	894
Interest rate | Uncovered | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment (modified)	542	61	1,254	61
Interest rate | Uncovered | Real estate construction
Troubled Debt Restructurings
Total recorded investment (modified)	72		72
Interest rate | Uncovered | Consumer
Troubled Debt Restructurings
Total recorded investment (modified)	0	0	0	0
Interest rate | Covered loans
Troubled Debt Restructurings
Total recorded investment (modified)	2,630	1,174	3,052	1,200
Interest rate | Covered loans | Residential real estate
Troubled Debt Restructurings
Total recorded investment (modified)	112	345	187	345
Interest rate | Covered loans | Commercial real estate
Troubled Debt Restructurings
Total recorded investment (modified)	2,442	652	2,694	652
Interest rate | Covered loans | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment (modified)		177	95	203
Interest rate | Covered loans | Real estate construction
Troubled Debt Restructurings
Total recorded investment (modified)	76		76
Interest rate | Covered loans | Consumer
Troubled Debt Restructurings
Total recorded investment (modified)			0
Forbearance agreement
Troubled Debt Restructurings
Total recorded investment (modified)	684	346	1,947	1,836
Forbearance agreement | Uncovered
Troubled Debt Restructurings
Total recorded investment (modified)	684	246	1,947	1,290
Forbearance agreement | Uncovered | Residential real estate
Troubled Debt Restructurings
Total recorded investment (modified)	0	147	0	147
Forbearance agreement | Uncovered | Commercial real estate
Troubled Debt Restructurings
Total recorded investment (modified)	532	99	1,639	1,026
Forbearance agreement | Uncovered | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment (modified)	152	0	178	117
Forbearance agreement | Uncovered | Real estate construction
Troubled Debt Restructurings
Total recorded investment (modified)	0		130
Forbearance agreement | Uncovered | Consumer
Troubled Debt Restructurings
Total recorded investment (modified)	0	0	0	0
Forbearance agreement | Covered loans
Troubled Debt Restructurings
Total recorded investment (modified)	0	100	0	546
Forbearance agreement | Covered loans | Residential real estate
Troubled Debt Restructurings
Total recorded investment (modified)	0	0	0	0
Forbearance agreement | Covered loans | Commercial real estate
Troubled Debt Restructurings
Total recorded investment (modified)	0	0	0	446
Forbearance agreement | Covered loans | Commercial and industrial
Troubled Debt Restructurings
Total recorded investment (modified)		$ 100	0	$ 100
Forbearance agreement | Covered loans | Real estate construction
Troubled Debt Restructurings
Total recorded investment (modified)	$ 0		0
Forbearance agreement | Covered loans | Consumer
Troubled Debt Restructurings
Total recorded investment (modified)			$ 0

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SECURITIES (Details 4)	Jun. 30, 2015 USD ($) security	Dec. 31, 2014 USD ($)
Less than 12 Months
Fair Value	$ 366,934,000	$ 99,480,000
Unrealized losses	(3,556,000)	(552,000)
More than 12 Months
Fair Value	9,381,000	102,434,000
Unrealized losses	(246,000)	(1,006,000)
Total
Fair Value	376,315,000	201,914,000
Unrealized losses	$ (3,802,000)	(1,558,000)
Other information with respect to available-for-sale securities
Number of securities in portfolio | security	375
Number of securities in an unrealized loss position | security	151
Securities of any one issuer, other than U.S. Government, greater than 10% of shareholders equity	$ 0	0
Available-for-sale securities in unrealized loss position fair value	376,315,000	201,914,000
Available-for-sale securities, gross unrealized loss	3,802,000	1,558,000
U.S. government sponsored agency obligations
Less than 12 Months
Fair Value	54,604,000	0
Unrealized losses	(396,000)	0
More than 12 Months
Fair Value	0	14,821,000
Unrealized losses	0	(179,000)
Total
Fair Value	54,604,000	14,821,000
Unrealized losses	(396,000)	(179,000)
Other information with respect to available-for-sale securities
Available-for-sale securities in unrealized loss position fair value	54,604,000	14,821,000
Available-for-sale securities, gross unrealized loss	396,000	179,000
Taxable
Less than 12 Months
Fair Value	953,000
Unrealized losses	(7,000)
More than 12 Months
Fair Value	0
Unrealized losses	0
Total
Fair Value	953,000
Unrealized losses	(7,000)
Other information with respect to available-for-sale securities
Available-for-sale securities in unrealized loss position fair value	953,000
Available-for-sale securities, gross unrealized loss	7,000	0
Tax exempt
Less than 12 Months
Fair Value	137,675,000	31,054,000
Unrealized losses	(1,730,000)	(260,000)
More than 12 Months
Fair Value	8,026,000	33,650,000
Unrealized losses	(219,000)	(463,000)
Total
Fair Value	145,701,000	64,704,000
Unrealized losses	(1,949,000)	(723,000)
Other information with respect to available-for-sale securities
Available-for-sale securities in unrealized loss position fair value	145,701,000	64,704,000
Available-for-sale securities, gross unrealized loss	1,949,000	723,000
SBA Pools
Less than 12 Months
Fair Value		1,844,000
Unrealized losses		(4,000)
More than 12 Months
Fair Value		17,682,000
Unrealized losses		(96,000)
Total
Fair Value		19,526,000
Unrealized losses		(100,000)
Other information with respect to available-for-sale securities
Available-for-sale securities in unrealized loss position fair value		19,526,000
Available-for-sale securities, gross unrealized loss	0	100,000
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Less than 12 Months
Fair Value	112,083,000	36,261,000
Unrealized losses	(1,164,000)	(85,000)
More than 12 Months
Fair Value	907,000	27,361,000
Unrealized losses	(25,000)	(198,000)
Total
Fair Value	112,990,000	63,622,000
Unrealized losses	(1,189,000)	(283,000)
Other information with respect to available-for-sale securities
Available-for-sale securities in unrealized loss position fair value	112,990,000	63,622,000
Available-for-sale securities, gross unrealized loss	1,189,000	283,000
Privately issued
Less than 12 Months
Fair Value	25,984,000	7,801,000
Unrealized losses	(145,000)	(41,000)
More than 12 Months
Fair Value	0	8,000
Unrealized losses	0	0
Total
Fair Value	25,984,000	7,809,000
Unrealized losses	(145,000)	(41,000)
Other information with respect to available-for-sale securities
Available-for-sale securities in unrealized loss position fair value	25,984,000	7,809,000
Available-for-sale securities, gross unrealized loss	145,000	41,000
Privately issued commercial mortgage-backed securities
Less than 12 Months
Fair Value	14,398,000
Unrealized losses	(50,000)
More than 12 Months
Fair Value	0
Unrealized losses	0
Total
Fair Value	14,398,000
Unrealized losses	(50,000)
Other information with respect to available-for-sale securities
Available-for-sale securities in unrealized loss position fair value	14,398,000
Available-for-sale securities, gross unrealized loss	50,000	0
Corporate debt securities
Less than 12 Months
Fair Value	21,237,000	22,520,000
Unrealized losses	(64,000)	(162,000)
More than 12 Months
Fair Value	448,000	8,912,000
Unrealized losses	(2,000)	(70,000)
Total
Fair Value	21,685,000	31,432,000
Unrealized losses	(66,000)	(232,000)
Other information with respect to available-for-sale securities
Available-for-sale securities in unrealized loss position fair value	21,685,000	31,432,000
Available-for-sale securities, gross unrealized loss	66,000	$ 232,000
Securities carrying fixed interest rates
Total
Fair Value	376,300,000
Other information with respect to available-for-sale securities
Available-for-sale securities in unrealized loss position fair value	$ 376,300,000

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BASIS OF PRESENTATION AND RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS (Details) - USD ($) $ in Millions	Feb. 17, 2015	Dec. 27, 2012	Feb. 21, 2012	Apr. 30, 2010
Stock warrants issued in relation to April 2010 capital raise from private equity investors
Warrants issued (in shares)				1,623,162
Stock warrants issued in relation to February 2012 capital raise from private equity investors
Warrants issued (in shares)			109,122
Stock warrants issued in relation to December 2012 capital raise from private equity investors
Warrants issued (in shares)		797,132
Warrants repurchase
Number of warrants repurchased	2,529,416
Aggregate purchase price of warrants repurchased	$ 19.9

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Consolidated Statements of Cash Flows (Parenthetical) - 6 months ended Jun. 30, 2015 - $ / shares shares in Millions	Total
Statement of Cash Flows [Abstract]
Number of shares repurchased	2.5
Cash dividends declared on common stock (in dollars per share)	$ 0.02

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LOANS (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2015	Dec. 31, 2014
Loans
Total uncovered loans		$ 4,244,126	$ 3,902,637
Total		4,524,973	4,249,127
Deferred fees and costs		$ 2,700	4,600
Minimum
Loans
Term of finance		15 years
Maximum
Loans
Term of finance		30 years
Covered loans
Loans
Total covered loans		$ 280,847	346,490
Covered loans | Accounted for under ASC 310-30
Loans
Total covered loans		233,632	289,037
Covered loans | Excluded from ASC 310-30 accounting
Loans
Total covered loans		47,215	57,453
Uncovered
Loans
Total uncovered loans		4,244,126	3,902,637
Uncovered | Accounted for under ASC 310-30
Loans
Total uncovered loans		437,187	455,868
Uncovered | Excluded from ASC 310-30 accounting
Loans
Total uncovered loans		3,806,939	3,446,769
Residential real estate
Loans
Total uncovered loans	[1]	1,434,678	1,426,012
Total		1,531,049	1,534,238
Residential real estate | Covered loans
Loans
Total covered loans		96,371	108,226
Residential real estate | Covered loans | Accounted for under ASC 310-30
Loans
Total covered loans		75,655	86,515
Residential real estate | Covered loans | Excluded from ASC 310-30 accounting
Loans
Total covered loans		20,716	21,711
Residential real estate | Uncovered
Loans
Total uncovered loans		1,434,678	1,426,012
Residential real estate | Uncovered | Accounted for under ASC 310-30
Loans
Total uncovered loans		226,382	239,523
Residential real estate | Uncovered | Excluded from ASC 310-30 accounting
Loans
Total uncovered loans		1,208,296	1,186,489
Commercial real estate
Loans
Total uncovered loans		1,395,783	1,310,938
Total		1,539,681	1,497,600
Commercial real estate | Covered loans
Loans
Total covered loans		143,898	186,662
Commercial real estate | Covered loans | Accounted for under ASC 310-30
Loans
Total covered loans		124,722	160,886
Commercial real estate | Covered loans | Excluded from ASC 310-30 accounting
Loans
Total covered loans		19,176	25,776
Commercial real estate | Uncovered
Loans
Total uncovered loans		1,395,783	1,310,938
Commercial real estate | Uncovered | Accounted for under ASC 310-30
Loans
Total uncovered loans		184,620	190,148
Commercial real estate | Uncovered | Excluded from ASC 310-30 accounting
Loans
Total uncovered loans		1,211,163	1,120,790
Commercial and industrial
Loans
Total uncovered loans		1,066,353	869,477
Total		1,091,147	902,125
Commercial and industrial | Covered loans
Loans
Total covered loans		24,794	32,648
Commercial and industrial | Covered loans | Accounted for under ASC 310-30
Loans
Total covered loans		18,220	23,752
Commercial and industrial | Covered loans | Excluded from ASC 310-30 accounting
Loans
Total covered loans		6,574	8,896
Commercial and industrial | Uncovered
Loans
Total uncovered loans		1,066,353	869,477
Commercial and industrial | Uncovered | Accounted for under ASC 310-30
Loans
Total uncovered loans		16,730	15,499
Commercial and industrial | Uncovered | Excluded from ASC 310-30 accounting
Loans
Total uncovered loans		1,049,623	853,978
Real estate construction
Loans
Total uncovered loans	[1]	175,192	131,686
Total		182,618	141,075
Real estate construction | Covered loans
Loans
Total covered loans		7,426	9,389
Real estate construction | Covered loans | Accounted for under ASC 310-30
Loans
Total covered loans		6,761	8,415
Real estate construction | Covered loans | Excluded from ASC 310-30 accounting
Loans
Total covered loans		665	974
Real estate construction | Uncovered
Loans
Total uncovered loans		175,192	131,686
Real estate construction | Uncovered | Accounted for under ASC 310-30
Loans
Total uncovered loans		7,298	8,309
Real estate construction | Uncovered | Excluded from ASC 310-30 accounting
Loans
Total uncovered loans		167,894	123,377
Consumer
Loans
Total uncovered loans		172,120	164,524
Total		180,478	174,089
Consumer | Covered loans
Loans
Total covered loans		8,358	9,565
Consumer | Covered loans | Accounted for under ASC 310-30
Loans
Total covered loans		8,274	9,469
Consumer | Covered loans | Excluded from ASC 310-30 accounting
Loans
Total covered loans		84	96
Consumer | Uncovered
Loans
Total uncovered loans		172,120	164,524
Consumer | Uncovered | Accounted for under ASC 310-30
Loans
Total uncovered loans		2,157	2,389
Consumer | Uncovered | Excluded from ASC 310-30 accounting
Loans
Total uncovered loans		$ 169,963	$ 162,135

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

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REGULATORY CAPITAL MATTERS (Tables)

6 Months Ended

Jun. 30, 2015

Banking and Thrift [Abstract]

Summary of actual and required capital amounts and ratios

The following is a summary of actual and required capital amounts and ratios in accordance with current regulatory standards:

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2015 (Basel III Transitional)
Total capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	$	772,889	15.0	%	$	412,749	8.0	%	N/A		N/A
Talmer Bank and Trust	653,191		14.2		368,064		8.0		$	460,080	10.0	%
Talmer West Bank (1)	136,659		24.8		44,168		8.0		N/A		N/A
Common equity tier 1 capital
Talmer Bancorp, Inc. (Consolidated)	717,196		13.9		232,171		4.5		N/A		N/A
Talmer Bank and Trust	606,576		13.2		207,036		4.5		299,052		6.5
Talmer West Bank (1)	129,474		23.5		24,844		4.5		N/A		N/A
Tier 1 capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	717,196		13.9		309,561		6.0		N/A		N/A
Talmer Bank and Trust	606,576		13.2		276,048		6.0		368,064		8.0
Talmer West Bank (1)	129,474		23.5		33,126		6.0		N/A		N/A
Tier 1 leverage ratio
Talmer Bancorp, Inc. (Consolidated)	717,196		11.5		249,398		4.0		N/A		N/A
Talmer Bank and Trust	606,576		11.1		217,889		4.0		272,361		5.0
Talmer West Bank (1)	129,474		16.6		31,213		4.0		N/A		N/A
December 31, 2014 (Basel I)
Total capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	$	720,552	16.4	%	$	350,645	8.0	%	N/A		N/A
Talmer Bank and Trust	627,851		16.3		308,374		8.0		$	385,468	10.0	%
Talmer West Bank (1)	101,926		19.6		41,628		8.0		N/A		N/A
Tier 1 capital to risk-weighted assets
Talmer Bancorp, Inc. (Consolidated)	666,035		15.2		175,323		4.0		N/A		N/A
Talmer Bank and Trust	579,604		15.0		154,187		4.0		231,281		6.0
Talmer West Bank (1)	95,656		18.4		20,814		4.0		N/A		N/A
Tier 1 leverage ratio
Talmer Bancorp, Inc. (Consolidated)	666,035		11.6		230,546		4.0		N/A		N/A
Talmer Bank and Trust	579,604		11.6		200,128		4.0		250,160		5.0
Talmer West Bank (1)	95,656		12.4		30,786		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.

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BUSINESS COMBINATIONS (Tables)

6 Months Ended

Jun. 30, 2015

FHC

BUSINESS COMBINATIONS

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

(Dollars in thousands)
Consideration paid:
Cash	$	13,395
Fair value of identifiable assets acquired:
Cash and cash equivalents	14,205
Investment securities	34,022
Federal Home Loan Bank stock	874
Loans	162,265
Premises and equipment	2,077
Company-owned life insurance	4,719
Other real estate owned and repossessed assets	1,260
Core deposit intangible	2,410
Other assets	6,462
Total identifiable assets acquired	228,294
Fair value of liabilities assumed:
Deposits	201,453
Long-term debt	13,086
Other liabilities	3,884
Total liabilities assumed	218,423
Fair value of net identifiable assets acquired	9,871
Goodwill recognized in the acquisition	$	3,524

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

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	$	53,807
Contractual cash flows not expected to be collected (nonaccretable difference)	8,084
Expected cash flows	45,723
Interest component of expected cash flows (accretable yield)	5,268
Fair value at acquisition	$	40,455
Excluded from ASC 310-30 accounting:
Unpaid principal balance	$	124,538
Fair value discount	(2,728		)
Fair value at acquisition	121,810
Total fair value at acquisition	$	162,265

Talmer West Bank

BUSINESS COMBINATIONS

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

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 as presented in the following table.

(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	571,666
Premises and equipment	6,540
Loan servicing rights	767
Other real estate owned	30,878
Core deposit intangible	3,633
Other assets	62,542
Total identifiable assets acquired	911,909
Fair value of liabilities assumed:
Deposits	857,769
Other liabilities	5,663
Total liabilities assumed	863,432
Fair value of net identifiable assets acquired	48,477
Bargain purchase gain resulting from acquisition	$	41,977

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

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	$	331,523
Contractual cash flows not expected to be collected (nonaccretable difference)	86,410
Expected cash flows	245,113
Interest component of expected cash flows (accretable yield)	32,764
Fair value at acquisition	$	212,349
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	$	571,666

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

6 Months Ended

Jun. 30, 2015

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss) by component, net of tax, were as follows:

(Dollars in thousands)	Unrealized gains (losses) on securities available-for-sale, net of tax				Unrealized gains (losses) on cash flow hedges, net of tax				Total unrealized gains (losses), net of tax
Three months ended June 30, 2015
Beginning balance	$	6,939			$	(299	)		$	6,640
Other comprehensive income (loss) before reclassifications	(4,831		)		362				(4,469		)
Amounts reclassified from accumulated other comprehensive income	(3		)	(1)	68			(2)	65
Net current period other comprehensive income (loss)	(4,834		)		430				(4,404		)
Ending balance	$	2,105			$	131			$	2,236
Three months ended June 30, 2014
Beginning balance	$	(2,415	)		$	—			$	(2,415	)
Other comprehensive income before reclassifications	4,648				—				4,648
Amounts reclassified from accumulated other comprehensive income	—			(1)	—				—
Net current period other comprehensive income	4,648				—				4,648
Ending balance	$	2,233			$	—			$	2,233
Six months ended June 30, 2015
Beginning balance	$	3,995			$	(145	)		$	3,850
Other comprehensive income (loss) before reclassifications	(1,956		)		151				(1,805		)
Amounts reclassified from accumulated other comprehensive income	66			(1)	125			(2)	191
Net current period other comprehensive income (loss)	(1,890		)		276				(1,614		)
Ending balance	$	2,105			$	131			$	2,236
Six months ended June 30, 2014
Beginning balance	$	(7,996	)		$	—			$	(7,996	)
Other comprehensive income before reclassifications	8,728				—				8,728
Amounts reclassified from accumulated other comprehensive income	1,501			(1)	—				1,501
Net current period other comprehensive income	10,229				—				10,229
Ending balance	$	2,233			$	—			$	2,233

(1) Amounts are included in “Net gain (loss) on sales of securities” in the Consolidated Statements of Income within total noninterest income and were net gains of $6 thousand and $0 for the three months ended June 30, 2015 and 2014, respectively, and net losses of $101 thousand and $2.3 million for the six months ended June 30, 2015 and 2014, respectively.  Income tax provision (benefit) associated with the reclassification adjustments for three months ended June 30, 2015 and 2014 was an expense of $3 thousand and $0, respectively, and for the six months ended June 30, 2015 and 2014 was a benefit of $35 thousand and $809 thousand, respectively, and are included in “Income tax provision (benefit)” in the Consolidated Statements of Income.

(2) Amount is included in “Other brokered funds” in the Consolidated Statements of Income within total interest expense and was $104 thousand for the three months ended June 30, 2015, and $192 thousand for the six months ended June 30, 2015. Income tax benefit associated with the reclassification adjustment for the three months ended June 30, 2015 was $36 thousand and for the six months ended June 30, 2015 was $67 thousand and included in “Income tax provision (benefit)” in the Consolidated Statements of Income.

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FAIR VALUE (Details 8) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Dec. 31, 2013
Other real estate owned
Total OREO	$ 39,252	$ 52,273	$ 39,252	$ 52,273	$ 38,908	$ 29,955
Non-recurring basis
Impaired loans
Specific reserves for impaired loans, nonrecurring	4,000		4,000		2,900
Charge-offs for impaired loans, nonrecurring	31	1,900	67	2,000
Amount charged through other non-interest expense to reduce the fair value of other real estate	274		468
Valuation allowance to reduce the fair value of repossessed assets			3,100		460
Amount charged through other noninterest expenses on premises and equipment	1,100	0	1,100	0
Non-recurring basis | Level 1
Fair Value
Impaired loans	0		0		0
Other real estate owned
Repossessed assets	0		0		0
Premises and equipment:	0		0		0
Total assets at fair value	0		0		0
Non-recurring basis | Level 2
Fair Value
Impaired loans	0		0		0
Other real estate owned
Repossessed assets	0		0		0
Premises and equipment:	0		0		0
Total assets at fair value	0		0		0
Non-recurring basis | Level 3
Fair Value
Impaired loans	11,354		11,354		8,106
Other real estate owned
Repossessed assets	6,896		6,896		9,654
Premises and equipment:	1,575		1,575		675
Total assets at fair value	23,903		23,903		31,912
Non-recurring basis | Uncovered
Impaired loans
Amount charged through other non-interest expense to reduce the fair value of other real estate	487	821	1,300	1,500
Non-recurring basis | Uncovered | Level 1
Fair Value
Impaired loans	0		0		0
Other real estate owned
Total OREO	0		0		0
Non-recurring basis | Uncovered | Level 1 | Residential real estate
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Uncovered | Level 1 | Commercial real estate
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Uncovered | Level 1 | Commercial and industrial
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Uncovered | Level 1 | Real estate construction
Fair Value
Impaired loans	0		0
Non-recurring basis | Uncovered | Level 1 | Consumer
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Uncovered | Level 2
Fair Value
Impaired loans	0		0		0
Other real estate owned
Total OREO	0		0		0
Non-recurring basis | Uncovered | Level 2 | Residential real estate
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Uncovered | Level 2 | Commercial real estate
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Uncovered | Level 2 | Commercial and industrial
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Uncovered | Level 2 | Real estate construction
Fair Value
Impaired loans	0		0
Non-recurring basis | Uncovered | Level 2 | Consumer
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Uncovered | Level 3
Fair Value
Impaired loans	10,954		10,954		7,604
Other real estate owned
Total OREO	2,267		2,267		9,670
Non-recurring basis | Uncovered | Level 3 | Residential real estate
Fair Value
Impaired loans	6,673		6,673		2,898
Non-recurring basis | Uncovered | Level 3 | Commercial real estate
Fair Value
Impaired loans	3,684		3,684		4,115
Non-recurring basis | Uncovered | Level 3 | Commercial and industrial
Fair Value
Impaired loans	370		370		579
Non-recurring basis | Uncovered | Level 3 | Real estate construction
Fair Value
Impaired loans	198		198
Non-recurring basis | Uncovered | Level 3 | Consumer
Fair Value
Impaired loans	29		29		12
Non-recurring basis | Covered
Impaired loans
Valuation allowance to reduce the fair value of repossessed assets	98	$ 537	636	$ 904
Non-recurring basis | Covered | Level 1
Other real estate owned
Total OREO	0		0		0
Non-recurring basis | Covered | Level 1 | Residential real estate
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Covered | Level 1 | Commercial real estate
Fair Value
Impaired loans	0		0
Non-recurring basis | Covered | Level 1 | Commercial and industrial
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Covered | Level 2
Other real estate owned
Total OREO	0		0		0
Non-recurring basis | Covered | Level 2 | Residential real estate
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Covered | Level 2 | Commercial real estate
Fair Value
Impaired loans	0		0
Non-recurring basis | Covered | Level 2 | Commercial and industrial
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Covered | Level 3
Other real estate owned
Total OREO	1,811		1,811		3,807
Non-recurring basis | Covered | Level 3 | Residential real estate
Fair Value
Impaired loans	68		68		152
Non-recurring basis | Covered | Level 3 | Commercial real estate
Fair Value
Impaired loans	177		177
Non-recurring basis | Covered | Level 3 | Commercial and industrial
Fair Value
Impaired loans	155		155		350
Non-recurring basis | Total covered | Level 1
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Total covered | Level 2
Fair Value
Impaired loans	0		0		0
Non-recurring basis | Total covered | Level 3
Fair Value
Impaired loans	400		400		502
Total Fair Value | Non-recurring basis
Fair Value
Impaired loans	11,354		11,354		8,106
Other real estate owned
Repossessed assets	6,896		6,896		9,654
Premises and equipment:	1,575		1,575		675
Total assets at fair value	23,903		23,903		31,912
Total Fair Value | Non-recurring basis | Uncovered
Fair Value
Impaired loans	10,954		10,954		7,604
Other real estate owned
Total OREO	2,267		2,267		9,670
Total Fair Value | Non-recurring basis | Uncovered | Residential real estate
Fair Value
Impaired loans	6,673		6,673		2,898
Total Fair Value | Non-recurring basis | Uncovered | Commercial real estate
Fair Value
Impaired loans	3,684		3,684		4,115
Total Fair Value | Non-recurring basis | Uncovered | Commercial and industrial
Fair Value
Impaired loans	370		370		579
Total Fair Value | Non-recurring basis | Uncovered | Real estate construction
Fair Value
Impaired loans	198		198
Total Fair Value | Non-recurring basis | Uncovered | Consumer
Fair Value
Impaired loans	29		29		12
Total Fair Value | Non-recurring basis | Covered
Other real estate owned
Total OREO	1,811		1,811		3,807
Total Fair Value | Non-recurring basis | Covered | Residential real estate
Fair Value
Impaired loans	68		68		152
Total Fair Value | Non-recurring basis | Covered | Commercial real estate
Fair Value
Impaired loans	177		177
Total Fair Value | Non-recurring basis | Covered | Commercial and industrial
Fair Value
Impaired loans	155		155		350
Total Fair Value | Non-recurring basis | Total covered
Fair Value
Impaired loans	$ 400		$ 400		$ 502

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PARENT COMPANY FINANCIAL STATEMENTS (Tables)

6 Months Ended

Jun. 30, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Balance Sheets

Balance Sheets - Parent Company

(Dollars in thousands)	June 30, 2015		December 31, 2014
Assets
Cash and cash equivalents	$	10,628	$	9,497
Investment in banking subsidiaries	792,467		756,452
Income tax benefit	8,429		7,975
Other assets	681		655
Total assets	$	812,205	$	774,579
Liabilities
Short-term borrowings	$	30,000	$	—
Long-term debt	15,322		10,724
Accrued expenses and other liabilities	477		2,248
Total liabilities	45,799		12,972
Shareholders’ equity	766,406		761,607
Total liabilities and shareholders’ equity	$	812,205	$	774,579

Statements of Income

Statements of Income and Comprehensive Income - Parent Company

	For the three months ended June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015		2014
Income
Dividend income from subsidiary	$	—		$	—		$	15,000	$	25,000
Bargain purchase gain	—			—			—		41,977
Other noninterest income	4			3			9		5
Total income	4			3			15,009		66,982
Expenses
Salaries and employee benefits	1,671			2,042			2,892		5,955
Bank acquisition and due diligence fees	159			266			1,155		1,974
Professional service fees	491			492			868		1,086
Insurance expense	33			213			113		367
Marketing expense	35			26			49		191
Interest on short-term borrowings	187			—			261		151
Interest on long-term debt	182			125			344		252
Other	59			80			173		147
Total expenses	2,817			3,244			5,855		10,123
Income (loss) before income taxes and equity in undistributed net earnings of subsidiaries	(2,813		)	(3,241		)	9,154		56,859
Income tax benefit	1,082			420			1,735		2,457
Equity in (over)/under distributed earnings of subsidiaries	19,279			23,427			16,092		(483		)
Net income	$	17,548		$	20,606		$	26,981	$	58,833
Total comprehensive income, net of tax	$	17,548		$	20,606		$	26,981	$	58,833

Statements of Cash Flows

Statements of Cash Flows - Parent Company

	For the six months ended June 30,
(Dollars in thousands)	2015			2014
Cash flows from operating activities
Net income	$	26,981		$	58,833
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in over (under) distributed earnings of subsidiaries	(16,092		)	483
Gain on acquisition	—			(41,977		)
Stock-based compensation expense	371			248
(Increase) decrease in income tax benefit	(71		)	139
Decrease in other assets, net	168			629
Increase (decrease) in accrued expenses and other liabilities, net	(4,194		)	317
Net cash from operating activities	7,163			18,672
Cash flows from investing activities
Cash (used in) proceeds from acquisitions	(13,323		)	(6,500		)
Capital contributions to subsidiaries	—			(99,500		)
Refund of investment	2,225			—
Net cash used in investing activities	(11,098		)	(106,000		)
Cash flows from financing activities
Issuance of common stock	—			42,075
Restricted stock awards tax benefits	16			—
Exercise of stock options, including tax benefit	(143		)	(661		)
Repurchase of warrants to repurchase 2.5 million shares, at fair value	(19,892		)	—
Cash dividends paid on common stock (1)	(1,415		)	—
Draw on senior unsecured line of credit	30,000			—
Repayment of senior unsecured line of credit	—			(35,000		)
Repayment of long-term debt	(3,500		)	—
Net cash from financing activities	5,066			6,414
Net increase (decrease) in cash and cash equivalents	1,131			(80,914		)
Beginning cash and cash equivalents	9,497			98,411
Ending cash and cash equivalents	$	10,628		$	17,497

(1) $0.02 per share for the six months ended June 30, 2015.

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FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value

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

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)
June 30, 2015
Securities available-for-sale:
U.S. government sponsored agency obligations	$	98,283	$	—	$	98,283	$	—
Obligations of state and political subdivisions:
Taxable	4,361		—		4,043		318
Tax-exempt	271,754		—		271,754		—
Small Business Administration (“SBA”) Pools	32,349		—		32,349		—
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	334,034		—		334,034		—
Privately issued	26,460		—		26,460		—
Privately issued commercial mortgage-backed securities	19,509		—		19,509		—
Corporate debt securities	58,569		—		58,121		448
Total securities available-for-sale	845,319		—		844,553		766
Loans measured at fair value:
Residential real estate	20,907		—		—		20,907
Loans held for sale	117,042		—		117,042		—
Loan servicing rights	58,894		—		—		58,894
Derivative assets:
Forward contracts related to mortgage loans to be delivered for sale	863		—		863		—
Interest rate lock commitments	2,029		—		2,029		—
Customer-initiated derivatives	2,011		—		2,011		—
Risk management derivatives	337		—		337		—
Total derivatives	5,240		—		5,240		—
Total assets at fair value	$	1,047,402	$	—	$	966,835	$	80,567
Derivative liabilities:
Customer-initiated derivatives	1,870		—		1,870		—
Risk management derivatives	134		—		134		—
Total derivatives	2,004		—		2,004		—
Total liabilities at fair value	$	2,004	$	—	$	2,004	$	—
December 31, 2014
Securities available-for-sale:
U.S. government sponsored agency obligations	$	98,358	$	—	$	98,358	$	—
Obligations of state and political subdivisions:
Taxable	397		—		—		397
Tax-exempt	232,259		—		232,259		—
SBA Pools	33,933		—		33,933		—
Residential mortgage-backed securities:

Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	291,759		—		291,759		—
Privately issued	18,800		—		18,800		—
Privately issued commercial mortgage-backed securities	5,130		—		5,130		—
Corporate debt securities	60,183		—		56,758		3,425
Total securities available-for-sale	740,819		—		736,997		3,822
Loans measured at fair value:
Residential real estate	18,311		—		—		18,311
Real estate construction	1,215		—		—		1,215
Loans held for sale	93,453		—		93,453		—
Loan servicing rights	70,598		—		—		70,598
Derivative assets:
Interest rate lock commitments	1,489		—		1,489		—
Customer-initiated derivatives	1,588		—		1,588		—
Total derivatives	3,077		—		3,077		—
Total assets at fair value	$	927,473	$	—	$	833,527	$	93,946
Derivative liabilities:
Forward contracts related to mortgage loans to be delivered for sale	803		—		803		—
Customer-initiated derivatives	1,477		—		1,477		—
Risk management derivatives	222		—		222		—
Total derivatives	2,502		—		2,502		—
Total liabilities at fair value	$	2,502	$	—	$	2,502	$	—

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

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

	Three months ended June 30, 2015
	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	$	397		$	430	$	22,158		$	54,409
Transfers from loans held for sale	—			—		764			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	1			1		—			—
Recorded in “Net gain on sales of loans”						12
Recorded in “Mortgage banking and other loan fees”	—			—		(347		)	1,552
Recorded in OCI (pre-tax)	—			17		—			—
New originations	—			—		—			2,933
Repayments	(80		)	—		(1,680		)	—
Balance, end of period	$	318		$	448	$	20,907		$	58,894

	Six months ended June 30, 2015
	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	$	397		$	3,425		$	19,526		$	70,598
Transfer between levels within fair value hierarchy	—			(3,000		)	—			—
Transfers from loans held for sale	—			—			3,983			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	1			2			—			—
Recorded in “Net gain on sales of loans”	—			—			139			—
Recorded in “Mortgage banking and other loan fees”	—			—			(239		)	(4,850		)
Recorded in OCI (pre-tax)	—			21			—			—
New originations	—			—			—			5,848
Reduction from servicing rights sold	—			—			—			(12,702		)
Repayments	(80		)	—			(2,502		)	—
Balance, end of period	$	318		$	448		$	20,907		$	58,894

	Three months ended June 30, 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	$	397	$	420	$	17,914		$	77,892
Transfers from loans held for sale	—		—		542			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	—		1		—			—
Recorded in “Net gain on sales of loans”	—		—		15			—
Recorded in “Mortgage banking and other loan fees”	—		—		386			(5,947		)
Recorded in OCI (pre-tax)	—		12		—			—
New originations	—		—		—			2,159
Repayments	—		—		(332		)	—
Balance, end of period	$	397	$	433	$	18,525		$	74,104

	Six months ended June 30, 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	—		—		778			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	1		2		—			—
Recorded in “Net gain on sales of loans”	—		—		8			—
Recorded in “Mortgage banking and other loan fees”	—		—		467			(9,014		)
Recorded in OCI (pre-tax)	—		26		—			—
New originations	—		—		—			3,748
Repayments	—		—		(564		)	—
Draws on previously issued lines of credits	—		—		128			—
Balance, end of period	$	397	$	433	$	18,525		$	74,104

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

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)	June 30, 2015		December 31, 2014
Aggregate fair value	$	20,907	$	19,526
Contractual balance	20,581		19,100
Fair market value gain	326		426

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

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

(Dollars in thousands)	June 30, 2015		December 31, 2014
Aggregate fair value	$	117,042	$	93,453
Contractual balance	113,851		89,138
Unrealized gain	3,191		4,315

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

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)
June 30, 2015
Impaired loans:(1)
Uncovered
Residential real estate	$	6,673	$	—	$	—	$	6,673
Commercial real estate	3,684		—		—		3,684
Commercial and industrial	370		—		—		370
Real estate construction	198		—		—		198
Consumer	29		—		—		29
Total uncovered impaired loans	10,954		—		—		10,954
Covered
Residential real estate	68		—		—		68
Commercial real estate	177		—		—		177
Commercial and industrial	155		—		—		155
Total covered impaired loans	400		—		—		400
Total impaired loans	11,354		—		—		11,354
Other real estate owned (uncovered)(2)	2,267		—		—		2,267
Other real estate owned (covered)(3)	1,811		—		—		1,811
Repossessed assets(4)	6,896		—		—		6,896
Premises and equipment(5)	1,575		—		—		1,575
Total	$	23,903	$	—	$	—	$	23,903
December 31, 2014
Impaired loans:(1)
Uncovered
Residential real estate	$	2,898	$	—	$	—	$	2,898
Commercial real estate	4,115		—		—		4,115
Commercial and industrial	579		—		—		579
Consumer	12		—		—		12
Total uncovered impaired loans	7,604		—		—		7,604
Covered
Residential real estate	152		—		—		152
Commercial and industrial	350		—		—		350
Total covered impaired loans	502		—		—		502
Total impaired loans	8,106		—		—		8,106
Other real estate owned (uncovered) (2)	9,670		—		—		9,670
Other real estate owned (covered) (3)	3,807		—		—		3,807
Repossessed assets(4)	9,654		—		—		9,654
Premises and equipment(5)	675		—		—		675
Total	$	31,912	$	—	$	—	$	31,912

(1) Specific reserves of $4.0 million and $2.9 million were provided to reduce the fair value of these loans at June 30, 2015 and December 31, 2014, respectively, based on the estimated fair value of the underlying collateral. In addition, charge-offs of $31 thousand and $1.9 million reduced the fair value of these loans for the three months ended June 30, 2015 and 2014, respectively, and $67 thousand and $2.0 million for the six months ended June 30, 2015 and 2014, respectively.

(2) The Company charged $487 thousand and $821 thousand through other noninterest expense during the three months ended June 30, 2015 and 2014, respectively, and $1.3 million and $1.5 million during the six months ended June 30, 2015 and 2014, respectively, to reduce the fair value of these properties.

(3) The Company charged $98 thousand and $537 thousand through other noninterest expense during the three months ended June 30, 2015 and 2014, respectively, and $636 thousand and $904 thousand during the six months ended June 30, 2015 and 2014, 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.

(4) The Company charged $274 thousand and $468 thousand through other noninterest expense during the three and six months ended June 30, 2015, respectively, to reduce the fair value of these assets.  As of June 30, 2014, there were no repossessed assets deemed impaired and there were no charges taken relating to these assets during the three and six months ended June 30, 2014. A valuation allowance of $3.1 million and $460 thousand was provided to reduce the fair value of these repossessed assets at June 30, 2015 and December 31, 2014, respectively, based on the estimated fair value as of each respective date.

(5) The company charged $1.1 million through other noninterest expenses during both the three and six months ended June 30, 2015 to reduce the value of premises and equipment deemed impaired during the period. As of June 30, 2014, there were no premises and equipment deemed impaired and there were no charges taken relating to these assets during the three and six months ended June 30, 2014.

Loans held for investment

Fair Value

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

The total amount of gains (losses) from changes in fair value of loans held for investment measured at fair value in the Consolidated Statements of Income were as follows:

	For the three months ended June 30,					For the six months ended June 30,
(Dollars in thousands)	2015			2014		2015			2014
Change in fair value:
Included in “Net gain on sales of loans”	$	12		$	15	$	139		$	8
Included in “Mortgage banking and other loan fees”	(347		)	386		(239		)	467

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

	For the three months ended June 30,				For the six months ended June 30,
(Dollars in thousands)	2015		2014		2015			2014
Change in fair value	$	417	$	3,458	$	(1,124	)	$	4,834

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

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
June 30, 2015
Financial assets:
Cash and cash equivalents	$	410,558	$	410,558	$	79,357	$	331,201	$	—
Federal Home Loan Bank stock	25,418		N/A
Net loans, excluding covered loans(1)	4,207,560		4,281,316		—		—		4,281,316
Net covered loans(2)	264,507		349,004		—		—		349,004
Accrued interest receivable	14,409		14,409		—		14,409		—
FDIC indemnification asset	36,997		18,875		—		—		18,875
FDIC receivable	5,543		5,543		—		5,543		—
Company-owned life insurance	104,972		104,972		—		104,972		—
Securities held-to-maturity	1,692		1,692		—		—		1,692
Financial liabilities:
Deposits:
Savings and demand deposits	$	3,414,192	$	3,414,192	$	—	$	3,414,192	$	—
Time deposits(3)	1,493,881		1,493,607		—		1,493,607		—
Total deposits	4,908,073		4,907,799		—		4,907,799		—
FDIC clawback liability	28,588		28,588		—		—		28,588
Short-term borrowings	253,945		253,945		—		253,945		—
Long-term debt	414,947		409,580		—		409,580		—
FDIC warrants payable	4,441		4,441		—		—		4,441
Accrued interest payable	2,079		2,079		—		2,079		—
Deferred compensation plan liabilities	1,475		1,475		—		1,475		—

(1) Included $11.0 million of impaired loans recorded at fair value on a nonrecurring basis and $20.9 million of loans recorded at fair value on a recurring basis.

(2) Included $400 thousand of impaired loans recorded at fair value on a nonrecurring basis.

(3) Includes $66.8 million of other brokered funds.

			Estimated Fair Value
(Dollars in thousands)	Carrying Value		Total		Level 1		Level 2		Level 3
December 31, 2014
Financial assets:
Cash and cash equivalents	$	253,736	$	253,736	$	86,185	$	167,551	$	—
Federal Home Loan Bank stock	20,212		N/A
Net loans, excluding covered loans(1)	3,868,818		3,948,847		—		—		3,948,847
Net covered loans(2)	325,137		420,627		—		—		420,627
Accrued interest receivable	12,533		12,533		—		12,533		—
FDIC indemnification asset	67,026		34,572		—		—		34,572
FDIC receivable	6,062		6,062		—		6,062		—
Company-owned life insurance	97,782		97,782		—		97,782		—
Securities held-to-maturity	1,226		1,226		—		—		1,226
Financial liabilities:
Deposits:
Savings and demand deposits	$	3,288,414	$	3,288,414	$	—	$	3,288,414	$	—
Time deposits(3)	1,260,449		1,260,453		—		1,260,453		—
Total deposits	4,548,863		4,548,867		—		4,548,867		—
FDIC clawback liability	26,905		26,905		—		—		26,905
Short-term borrowings	135,743		135,743		—		135,743		—
Long-term debt	353,972		348,373		—		348,373		—
FDIC warrants payable	4,633		4,633		—		—		4,633
Accrued interest payable	1,476		1,476		—		1,476		—
Deferred compensation plan liabilities	587		587		—		587		—

(1) Included $7.6 million of impaired loans recorded at fair value on a nonrecurring basis and $19.5 million of loans recorded at fair value on a recurring basis.

(2) Included $502 thousand of impaired loans recorded at fair value on a nonrecurring basis.

(3) Includes $72.3 million of other brokered funds.

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SECURITIES (Tables)

6 Months Ended

Jun. 30, 2015

Investments, Debt and Equity Securities [Abstract]

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2014
Securities available-for-sale:
U.S. government sponsored agency obligations	$	97,746	$	791	$	(179	)	$	98,358
Obligations of state and political subdivisions:
Taxable	397		—		—			397
Tax-exempt	229,404		3,578		(723		)	232,259
SBA Pools	33,824		209		(100		)	33,933
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	289,156		2,886		(283		)	291,759
Privately issued	18,814		27		(41		)	18,800
Privately issued commercial mortgage-backed securities	5,127		3		—			5,130
Corporate debt securities	60,206		209		(232		)	60,183
Total securities available-for-sale	$	734,674	$	7,703	$	(1,558	)	$	740,819

The following summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses.

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2015
Securities available-for-sale:
U.S. government sponsored agency obligations	$	97,860	$	819	$	(396	)	$	98,283
Obligations of state and political subdivisions:
Taxable	4,361		7		(7		)	4,361
Tax-exempt	271,102		2,601		(1,949		)	271,754
SBA Pools	31,960		389		—			32,349
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	332,457		2,766		(1,189		)	334,034
Privately issued	26,604		1		(145		)	26,460
Privately issued commercial mortgage-backed securities	19,547		12		(50		)	19,509
Corporate debt securities	58,190		445		(66		)	58,569
Total securities available-for-sale	$	842,081	$	7,040	$	(3,802	)	$	845,319

Held-to-maturity securities

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Securities held-to-maturity	$	1,692	$	—	$	—	$	1,692

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Securities held-to-maturity	$	1,226	$	—	$	—	$	1,226

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

	For the three months ended June 30,				For the six months ended June 30,
(Dollars in thousands)	2015		2014		2015			2014
Proceeds	$	135	$	—	$	24,750		$	54,211
Gross gains	6		—		9			—
Gross losses	—		—		(110		)	(2,310		)

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

	June 30, 2015
(Dollars in thousands)	Amortized Cost		Fair Value
Securities with contractual maturities:
Within one year	$	5,921	$	5,954
After one year through five years	142,325		143,842
After five years through ten years	185,443		185,589
After ten years	508,392		509,934
Total securities available-for-sale	$	842,081	$	845,319
Securities held-to-maturity:
After one year through five years	$	1,692	$	1,692
Total securities held-to-maturity	$	1,692	$	1,692

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

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
June 30, 2015
U.S. government sponsored agency obligations	$	54,604	$	(396	)	$	—	$	—		$	54,604	$	(396	)
Obligations of state and political subdivisions:
Taxable	953		(7		)	—		—			953		(7		)
Tax-exempt	137,675		(1,730		)	8,026		(219		)	145,701		(1,949		)
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	112,083		(1,164		)	907		(25		)	112,990		(1,189		)
Privately issued	25,984		(145		)	—		—			25,984		(145		)
Privately issued commercial mortgage-backed securities	14,398		(50		)	—		—			14,398		(50		)
Corporate debt securities	21,237		(64		)	448		(2		)	21,685		(66		)
Total securities available-for-sale	$	366,934	$	(3,556	)	$	9,381	$	(246	)	$	376,315	$	(3,802	)
December 31, 2014
U.S. government sponsored agency obligations	$	—	$	—		$	14,821	$	(179	)	$	14,821	$	(179	)
Obligations of state and political subdivisions:
Tax-exempt	31,054		(260		)	33,650		(463		)	64,704		(723		)
SBA Pools	1,844		(4		)	17,682		(96		)	19,526		(100		)
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	36,261		(85		)	27,361		(198		)	63,622		(283		)
Privately issued	7,801		(41		)	8		—			7,809		(41		)
Corporate debt securities	22,520		(162		)	8,912		(70		)	31,432		(232		)
Total securities available-for-sale	$	99,480	$	(552	)	$	102,434	$	(1,006	)	$	201,914	$	(1,558	)

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities
Net income	$ 26,981	$ 58,833
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,730	3,386
Amortization of core deposit intangibles	1,314	1,460
Stock-based compensation expense	866	454
Benefit for loan losses	(5,320)	(176)
Originations of loans held for sale	(664,111)	(510,154)
Proceeds from sales of loans	653,291	489,401
Net gain from sales of loans	(17,366)	(8,725)
Net loss on sales of securities	101	2,310
Gain on acquisition	0	(41,977)
Valuation allowance and writedowns on other real estate and other repossessed assets	5,017	2,404
Valuation change in Company-owned life insurance	(2,471)	(1,080)
Valuation change in loan servicing rights	4,850	9,014
Additions to loan servicing rights	(5,848)	(3,748)
Net decrease in FDIC indemnification asset and receivable	27,428	25,698
Net (gain)/loss on sales of other real estate owned and repossessed assets	(2,806)	(4,229)
Net (increase)/decrease in accrued interest receivable and other assets	2,399	(21,146)
Net increase/(decrease) in accrued expenses and other liabilities	(1,286)	17,037
Net securities premium amortization	3,535	2,286
Deferred income tax benefit (expense)	(8,543)	20,665
Change in valuation allowance of deferred income tax asset	0	(10,127)
Other, net	867	342
Net cash from operating activities	22,628	31,928
Cash flows from investing activities
Net increase in uncovered loans	(201,262)	(288,526)
Net decrease in covered loans	57,433	68,023
Purchases of loans	(30,793)	0
Purchases of FHLB stock	(6,716)	(5,300)
Purchases of securities available-for-sale	(187,009)	(185,687)
Purchases of Company-owned life insurance	0	(55,000)
Purchases of premises and equipment	(1,907)	(6,995)
Payments received from FDIC under loss sharing agreements	3,120	4,054
Proceeds from:
Maturities and redemptions of securities available-for-sale	85,238	44,619
Redemption of FHLB Stock	2,384	10,995
Sale of securities available-for-sale	24,750	54,211
Sale of loan servicing rights	12,702	0
Sale of loans	49,839	5,526
Sale of other real estate owned and repossessed assets	20,454	24,329
Sale of premises and equipment	2,737	1,621
Net cash provided from acquisition	810	209,831
Net cash used in investing activities	(168,220)	(118,299)
Cash flows from financing activities
Net increase/(decrease) in deposits	157,757	(162,100)
Draw on senior unsecured line of credit	30,000	0
Repayment of senior unsecured line of credit	0	(35,000)
Net increase in other short-term borrowings	88,202	201,932
Issuances of long-term FHLB advances	200,000	90,000
Repayments of long-term FHLB advances	(147,870)	(21,880)
Repayments on long-term sweep repurchase agreements	(821)	(816)
Repayments of subordinated debt	(3,500)	0
Other changes in long-term debt	80	66
Repurchase of warrants to repurchase 2.5 million shares, at fair value	(19,892)	0
Proceeds from issuance of common stock, including tax benefit	(127)	41,414
Cash dividends paid on common stock ($0.02 per share)	(1,415)	0
Net cash from financing activities	302,414	113,616
Net increase (decrease) in cash and cash equivalents	156,822	27,245
Beginning cash and cash equivalents	253,736	375,356
Ending cash and cash equivalents	410,558	402,601
Supplemental disclosure of cash flow information:
Interest paid	8,292	6,125
Income taxes paid	16,745	4,344
Transfer from mortgage loans to other real estate owned and repossessed assets	18,753	13,334
Net transfer of loans held for sale to loans held for investment	(3,983)	21,456
Transfer from premises and equipment to other real estate owned	455	675
Increase in assets and liabilities in acquisitions:
Securities	34,022	13,619
FHLB stock	874	5,933
Uncovered loans	162,265	571,666
Premises and equipment	2,077	6,540
Loan servicing rights	0	767
Company-owned life insurance	4,719	0
Other real estate owned and repossessed assets	1,260	30,878
Core deposit intangible	2,410	3,633
Other assets	6,462	62,542
Deposits	201,453	857,769
Short-term borrowings	0	18
Long-term debt	13,086	0
Other liabilities	$ 3,884	$ 5,645

XML

LOANS (Tables)

6 Months Ended

Jun. 30, 2015

Loans

Schedule of loans

Loans at June 30, 2015 and December 31, 2014 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
June 30, 2015
Residential real estate	$	75,655	$	20,716	$	96,371	$	226,382	$	1,208,296	$	1,434,678	$	1,531,049
Commercial real estate	124,722		19,176		143,898		184,620		1,211,163		1,395,783		1,539,681
Commercial and industrial	18,220		6,574		24,794		16,730		1,049,623		1,066,353		1,091,147
Real estate construction	6,761		665		7,426		7,298		167,894		175,192		182,618
Consumer	8,274		84		8,358		2,157		169,963		172,120		180,478
Total	$	233,632	$	47,215	$	280,847	$	437,187	$	3,806,939	$	4,244,126	$	4,524,973	(1)
December 31, 2014
Residential real estate	$	86,515	$	21,711	$	108,226	$	239,523	$	1,186,489	$	1,426,012	$	1,534,238
Commercial real estate	160,886		25,776		186,662		190,148		1,120,790		1,310,938		1,497,600
Commercial and industrial	23,752		8,896		32,648		15,499		853,978		869,477		902,125
Real estate construction	8,415		974		9,389		8,309		123,377		131,686		141,075
Consumer	9,469		96		9,565		2,389		162,135		164,524		174,089
Total	$	289,037	$	57,453	$	346,490	$	455,868	$	3,446,769	$	3,902,637	$	4,249,127	(1)

(1) Reported net of deferred fees totaling $2.7 million and $4.6 million at June 30, 2015 and December 31, 2014, respectively.

Schedule of information as to nonperforming assets

Information as to nonperforming assets was as follows:

(Dollars in thousands)	June 30, 2015		December 31, 2014
Uncovered nonperforming assets
Nonaccrual loans
Residential real estate	$	20,133	$	17,374
Commercial real estate	15,727		13,756
Commercial and industrial	3,119		3,550
Real estate construction	438		174
Consumer	308		257
Total nonaccrual loans	39,725		35,111
Other real estate owned and repossessed assets (1)	37,612		36,872
Total uncovered nonperforming assets	77,337		71,983
Covered nonperforming assets
Nonaccrual loans
Residential real estate	2,071		1,848
Commercial real estate	14,968		15,723
Commercial and industrial	2,369		3,560
Real estate construction	365		713
Consumer	20		13
Total nonaccrual loans	19,793		21,857
Other real estate owned and repossessed assets	8,261		10,719
Total covered nonperforming assets	28,054		32,576
Total nonperforming assets	$	105,391	$	104,559
Uncovered loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30
Residential real estate	$	120	$	12
Commercial and industrial	4		—
Real estate construction	5		—
Consumer	211		41
Total loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30	$	340	$	53

(1) Excludes closed branches and operating facilities.

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

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

(Dollars in thousands)	June 30, 2015		December 31, 2014
Uncovered
Nonaccrual loans	$	39,725	$	35,111
Performing troubled debt restructurings:
Residential real estate	2,392		1,368
Commercial real estate	3,741		3,785
Commercial and industrial	2,597		840
Real estate construction	131		90
Consumer	233		234
Total uncovered performing troubled debt restructurings	9,094		6,317
Total uncovered impaired loans	$	48,819	$	41,428
Covered
Nonaccrual loans	$	19,793	$	21,857
Performing troubled debt restructurings:
Residential real estate	3,584		3,046
Commercial real estate	3,055		9,017
Commercial and industrial	569		1,137
Real estate construction	300		264
Consumer	7		—
Total covered performing troubled debt restructurings	7,515		13,464
Total covered impaired loans	$	27,308	$	35,321

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

The following tables present the recorded investment of loans modified in TDRs during the three and six months ended June 30, 2015 and 2014 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 June 30, 2015		Net charge-offs (recoveries)			Provision (benefit) for loan losses (2)
For the three months ended June 30, 2015
Uncovered
Residential real estate	$	403	$	114	$	224	$	—	17	$	741	$	—		$	162
Commercial real estate	93		—		1,304		532		9	1,929		—			—
Commercial and industrial	231		—		542		152		14	925		192			232
Real estate construction	44		—		72		—		2	116		—			—
Consumer	17		—		—		—		1	17		—			—
Total uncovered	$	788	$	114	$	2,142	$	684	43	$	3,728	$	192		$	394
Covered
Residential real estate	$	747	$	—	$	112	$	—	6	$	859	$	—		$	5
Commercial real estate	—		—		2,442		—		8	2,442		—			2
Real estate construction	46		—		76		—		2	122		30			30
Total covered	$	793	$	—	$	2,630	$	—	16	$	3,423	$	30		$	37
Total loans	$	1,581	$	114	$	4,772	$	684	59	$	7,151	$	222		$	431
For the six months ended June 30, 2015
Uncovered
Residential real estate	$	1,286	$	114	$	785	$	—	26	$	2,185	$	1		$	192
Commercial real estate	93		—		1,402		1,639		12	3,134		37			129
Commercial and industrial	567		—		1,254		178		22	1,999		192			280
Real estate construction	44		—		72		130		3	246		—			—
Consumer	17		—		—		—		1	17		—			—
Total uncovered	$	2,007	$	114	$	3,513	$	1,947	64	$	7,581	$	230		$	601
Covered
Residential real estate	$	812	$	—	$	187	$	—	9	$	999	$	5		$	77
Commercial real estate	—		—		2,694		—		10	2,694		—			81
Commercial and industrial	—		—		95		—		1	95		—			92
Real estate construction	46		—		76		—		2	122		(8		)	(8		)
Consumer	15		—		—		—		1	15		—			—
Total covered	$	873	$	—	$	3,052	$	—	23	$	3,925	$	(3	)	$	242
Total loans	$	2,880	$	114	$	6,565	$	1,947	87	$	11,506	$	227		$	843

(1) Loan forgiveness related to loans modified in TDRs for both the three and six months ended June 30, 2015 totaled $187 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											Financial effects of modification
(Dollars in thousands)	Principal deferral		Principal Reduction (1)		Interest rate		Forbearance agreement		Total number of loans	Total recorded investment at June 30, 2014		Net  charge-offs (recoveries)			Provision for loan losses (2)
For the three months ended June 30, 2014
Uncovered
Residential real estate	$	144	$	159	$	—	$	147	9	$	450	$	—		$	22
Commercial real estate	—		—		180		99		3	279		—			—
Commercial and industrial	7		—		61		—		6	68		—			(3		)
Consumer	—		88		—		—		2	88		—			—
Total uncovered	$	151	$	247	$	241	$	246	20	$	885	$	—		$	19
Covered
Residential real estate	$	—	$	14	$	345	$	—	9	$	359	$	—		$	22
Commercial real estate	—		—		652		—		2	652		—			6
Commercial and industrial	—		—		177		100		5	277		—			11
Total covered	$	—	$	14	$	1,174	$	100	16	$	1,288	$	—		$	39
Total loans	$	151	$	261	$	1,415	$	346	36	$	2,173	$	—		$	58
For the six months ended June 30, 2014
Uncovered
Residential real estate	$	144	$	227	$	230	$	147	15	$	748	$	—		$	127
Commercial real estate	—		—		894		1,026		8	$	1,920	(9		)	197
Commercial and industrial	50		—		61		117		11	$	228	—			31
Consumer	—		88		—		—		2	88		—			26
Total uncovered	$	194	$	315	$	1,185	$	1,290	36	$	2,984	$	(9	)	$	381
Covered
Residential real estate	$	113	$	14	$	345	$	—	14	$	472	$	6		$	29
Commercial real estate	—		—		652		446		3	$	1,098	—			66
Commercial and industrial	—		—		203		100		8	303		—			14
Total covered	$	113	$	14	$	1,200	$	546	25	$	1,873	$	6		$	109
Total loans	$	307	$	329	$	2,385	$	1,836	61	$	4,857	$	(3	)	$	490

(1) Loan forgiveness related to loans modified in TDRs for the three and six months ended June 30, 2014 totaled $51 thousand and $178 thousand, respectively.

(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

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 and six months ended June 30, 2015 and 2014, including the recorded investment as of June 30, 2015 and 2014.  A payment on a TDR is considered to be in default once it is greater than 30 days past due.

	For the three months ended June 30, 2015					For the six months ended June 30, 2015
(Dollars in thousands)	Total number of loans	Total recorded investment at June 30, 2015		Charged off following a subsequent default		Total number of loans	Total recorded investment at June 30, 2015		Charged off following a subsequent default
Uncovered
Residential real estate	14	$	1,701	$	—	18	$	1,875	$	29
Commercial real estate	11	2,812		144		11	2,812		218
Commercial and industrial	3	30		—		3	30		—
Total uncovered	28	4,543		144		32	4,717		247
Covered
Residential real estate	3	111		—		3	111		—
Commercial real estate	1	130		—		1	130		—
Commercial and industrial	1	95		—		1	95		—
Total covered	5	336		—		5	336		—
Total loans	33	$	4,879	$	144	37	$	5,053	$	247

	For the three months ended June 30, 2014					For the six months ended June 30, 2014
(Dollars in thousands)	Total number of loans	Total recorded investment at June 30, 2014		Charged off following a subsequent default		Total number of loans	Total recorded investment at June 30, 2014		Charged off following a subsequent default
Uncovered
Residential real estate	14	$	951	$	13	20	$	1,245	$	95
Commercial real estate	1	546		—		3	1,797		176
Commercial and industrial	2	135		—		2	135		—
Consumer	1	—		—		3	—		—
Total uncovered	18	1,632		13		28	3,177		271
Covered
Residential real estate	5	175		—		7	219		12
Commercial real estate	2	546		—		6	669		—
Commercial and industrial	2	53		—		9	188		2
Real estate construction	—	—		—		1	346		483
Consumer	1	—		—		2	—		—
Total covered	10	774		—		25	1,422		497
Total loans	28	$	2,406	$	13	53	$	4,599	$	768

Commercial and industrial, commercial real estate and real estate construction

Loans

Schedule of loans by credit quality

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 (1)		Total
June 30, 2015
Uncovered loans
Commercial real estate	$	1,250,671	$	47,245	$	97,867	$	—	$	1,395,783
Commercial and industrial	1,008,042		35,986		22,325		—		1,066,353
Real estate construction	169,484		71		5,637		—		175,192
Total	$	2,428,197	$	83,302	$	125,829	$	—	$	2,637,328
Covered loans
Commercial real estate	$	88,649	$	6,565	$	48,684	$	—	$	143,898
Commercial and industrial	13,396		932		10,466		—		24,794
Real estate construction	4,144		67		3,215		—		7,426
Total	$	106,189	$	7,564	$	62,365	$	—	$	176,118
December 31, 2014
Uncovered loans
Commercial real estate	$	1,153,132	$	63,567	$	94,239	$	—	$	1,310,938
Commercial and industrial	824,239		29,511		15,727		—		869,477
Real estate construction	123,822		1,981		5,883		—		131,686
Total	$	2,101,193	$	95,059	$	115,849	$	—	$	2,312,101
Covered loans
Commercial real estate	$	102,952	$	16,073	$	67,637	$	—	$	186,662
Commercial and industrial	16,718		1,875		14,055		—		32,648
Real estate construction	3,817		792		4,780		—		9,389
Total	$	123,487	$	18,740	$	86,472	$	—	$	228,699

(1)Prior to January 1, 2015, all nonaccrual loans were included in the “Doubtful” risk category. After further review of regulatory guidance, we have reclassified nonaccrual loans with a determinable value to the “Substandard” risk category; therefore, “Substandard” now includes accrual and nonaccrual loans. This change in classification has been made retrospectively and the reclassification is presented within the December 31, 2014 disclosure.

Residential real estate and consumer loans

Loans

Schedule of loans by credit quality

The following table presents residential real estate and consumer loans by credit quality:

(Dollars in thousands)	Performing		Nonperforming		Total
June 30, 2015
Uncovered loans
Residential real estate	$	1,414,545	$	20,133	$	1,434,678
Consumer	171,812		308		172,120
Total	$	1,586,357	$	20,441	$	1,606,798
Covered loans
Residential real estate	$	94,300	$	2,071	$	96,371
Consumer	8,338		20		8,358
Total	$	102,638	$	2,091	$	104,729
December 31, 2014
Uncovered
Residential real estate	$	1,408,638	$	17,374	$	1,426,012
Consumer	164,267		257		164,524
Total	$	1,572,905	$	17,631	$	1,590,536
Covered loans
Residential real estate	$	106,378	$	1,848	$	108,226
Consumer	9,552		13		9,565
Total	$	115,930	$	1,861	$	117,791

Excluded from ASC 310-30 accounting

Loans

Schedule of loan delinquency

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

	June 30, 2015
(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	$	3,973	$	3,005	$	8,739	$	15,717	$	1,192,579	$	1,208,296	$	120
Commercial real estate	3,589		1,764		10,985		16,338		1,194,825		1,211,163		—
Commercial and industrial	6,184		42		2,465		8,691		1,040,932		1,049,623		4
Real estate construction	151		243		173		567		167,327		167,894		5
Consumer	1,203		517		329		2,049		167,914		169,963		211
Total	$	15,100	$	5,571	$	22,691	$	43,362	$	3,763,577	$	3,806,939	$	340
Covered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	537	$	140	$	1,307	$	1,984	$	18,732	$	20,716	$	—
Commercial real estate	101		—		2,350		2,451		16,725		19,176		—
Commercial and industrial	29		67		2,308		2,404		4,170		6,574		—
Real estate construction	—		—		288		288		377		665		—
Consumer	—		—		2		2		82		84		—
Total	$	667	$	207	$	6,255	$	7,129	$	40,086	$	47,215	$	—

	December 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	$	11,709	$	2,044	$	9,593	$	23,346	$	1,163,143	$	1,186,489	$	12
Commercial real estate	4,870		1,083		11,333		17,286		1,103,504		1,120,790		—
Commercial and industrial	4,679		184		2,960		7,823		846,155		853,978		—
Real estate construction	1,004		136		174		1,314		122,063		123,377		—
Consumer	964		152		150		1,266		160,869		162,135		41
Total	$	23,226	$	3,599	$	24,210	$	51,035	$	3,395,734	$	3,446,769	$	53
Covered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	238	$	35	$	1,179	$	1,452	$	20,259	$	21,711	$	—
Commercial real estate	—		—		4,569		4,569		21,207		25,776		—
Commercial and industrial	373		7		2,923		3,303		5,593		8,896		—
Real estate construction	—		—		710		710		264		974		—
Consumer	—		—		2		2		94		96		—
Total	$	611	$	42	$	9,383	$	10,036	$	47,417	$	57,453	$	—

XML

DERIVATIVE INSTRUMENTS AND BALANCE SHEET OFFSETTING (Details 4) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Offsetting derivative assets
Gross amounts recognized	$ 5,240	$ 3,077
Financial instruments		0
Offsetting derivative liabilities
Gross amounts recognized	2,004	2,502
Interest rate swaps and customer-initiated derivatives
Offsetting derivative assets
Gross amounts recognized	2,348	1,588
Financial instruments	0
Net amounts presented in the statement of financial position	2,348	1,588
Gross amounts not offset in the statement of financial position
Financial Instruments	(2,004)	(1,588)
Collateral (received)/posted	1,570	1,689
Net Amount	1,914	1,689
Offsetting derivative liabilities
Gross amounts recognized	2,004	1,699
Financial instruments	0	0
Net amounts presented in the statement of financial position	2,004	1,699
Gross amounts not offset in the statement of financial position
Financial Instruments	(2,004)	(1,588)
Collateral (received)/posted	0	111
Net Amount	$ 0	$ 0

XML

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

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Schedule of short-term borrowings and long-term debt

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

	June 30, 2015				December 31, 2014
(Dollars in thousands)	Amount		Weighted Average Rate (1)		Amount		Weighted Average Rate (1)
Short-term borrowings:
Securities sold under agreements to repurchase: 0.05% - 0.10% variable-rate notes	$	23,945	0.10	%	$	25,743	0.10	%
FHLB advances: 0.24% - 0.30% fixed-rate notes	200,000		0.27		100,000		0.29
FHLB advances: 0.43% variable-rate notes	—		—		10,000		0.43
Holding company line of credit: floating-rate based on one-month LIBOR plus 3.00%	30,000		3.19		—		—
Total short-term borrowings	253,945		0.60		135,743		0.26
Long-term debt:
FHLB advances: 0.26% - 7.44% fixed-rate notes due 2015 to 2027 (2)	344,001		1.40		286,804		1.57
Securities sold under agreements to repurchase: 4.11% - 4.30% fixed-rate notes due 2016 to 2037 (3)	55,623		4.19		56,444		4.19
Subordinated notes related to trust preferred securities: floating-rate based on three-month LIBOR plus 1.45% - 2.85% due 2034 to 2035 (4)	10,794		2.52		10,724		2.48
Subordinated notes related to trust preferred securities: floating-rate based on three-month LIBOR plus 3.25% due September 2032 (5)	4,529		3.53		—		—
Total long-term debt	414,947		1.83		353,972		2.02
Total short-term borrowings and long-term debt	$	668,892	1.36	%	$	489,715	1.53	%

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

(2) The June 30, 2015 balance includes advances payable of $338.5 million and purchase accounting premiums of $5.5 million. The December 31, 2014 balance includes advances payable of $280.1 million and purchase accounting premiums of $6.7 million.

(3) The June 30, 2015 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting premiums of $5.6 million. The December 31, 2014 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting premiums of $6.4 million.

(4) The June 30, 2015 balance includes subordinated notes related to trust preferred securities of $15.0 million and purchase accounting discounts of $4.2 million.  The December 31, 2014 balance includes subordinated notes related to trust preferred securities of $15.0 million and purchase accounting discounts of $4.3 million.

(5) The June 30, 2015 balance includes subordinated notes related to trust preferred securities of $5.0 million and purchase accounting discounts of $471 thousand.

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

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

	For the three months ended June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Securities sold under agreement to repurchase:
Average daily balance	$	19,390		$	86,444		$	19,911		$	77,054
Average interest rate during the period	0.10		%	0.13		%	0.10		%	0.11		%
Maximum month-end balance	$	23,945		$	148,826		$	23,945		$	148,826
FHLB advances:
Average daily balance	$	33,517		$	38,806		$	26,022		$	19,634
Average interest rate during the period	0.27		%	0.13		%	0.27		%	0.16		%
Maximum month-end balance	$	200,000		$	90,000		$	200,000		$	90,000
Federal funds purchased:
Average daily balance	$	—		$	1,132		$	696		$	2,254
Average interest rate during the period	—		%	0.28		%	0.31		%	0.25		%
Maximum month-end balance	$	—		$	—		$	126,000		$	—
FHLB overnight repurchase agreements:
Average daily balance	$	—		$	—		$	—		$	4,420
Average interest rate during the period	—		%	—		%	—		%	0.10		%
Maximum month-end balance	$	—		$	—		$	—		$	—
Holding company line of credit:
Average daily balance	$	22,912		$	—		$	16,271		$	11,215
Average interest rate during the period	3.18		%	—		%	3.18		%	3.17		%
Maximum month-end balance	$	30,000		$	—		$	30,000		$	35,000

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FAIR VALUE (Details 5) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Loans held for investment measured and recorded at fair value
Aggregate fair value	$ 20,907,000		$ 20,907,000		$ 19,526,000
Contractual balance	20,581,000		20,581,000		19,100,000
Fair market value gain			326,000		426,000
Gains (losses) from changes in fair value included in earnings			0
Aggregate fair value of loans held for investment that are 90 days or more past due	0		0		155,000
Contractual principal balance of loans held for investment that are 90 days or more past due					191,000
Nonaccrual status of loans that were 90 days or more past due	150,000		150,000		$ 155,000
Interest income earned on loans transferred from loans held for sale to loans held for investment	$ 208,000	$ 168,000	$ 413,000	$ 259,000

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ALLOWANCE FOR LOAN LOSSES (Details 2) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Dec. 31, 2014
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period				$ 33,819
Ending allowance for loan losses		$ 36,566		36,566
Allowance for loan losses:
Allowance for loan losses		36,566		33,819		$ 36,566	$ 33,819
Balance of loans:
Total uncovered loans						4,244,126	3,902,637
Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period		34,477	$ 22,771	33,819	$ 17,746
Provision (benefit) for loan and lease losses		1,069	3,219	4,481	9,643
Gross charge-offs		(5,273)	(5,533)	(10,653)	(8,506)
Recoveries		6,293	3,903	8,919	5,477
Net (charge-offs) recoveries		1,020	(1,630)	(1,734)	(3,029)
Ending allowance for loan losses		36,566	24,360	36,566	24,360
Allowance for loan losses:
Individually evaluated for impairment						4,436	3,450
Collectively evaluated for impairment						19,776	16,910
Allowance for loan losses		34,477	22,771	33,819	17,746	36,566	33,819
Balance of loans:
Individually evaluated for impairment						48,819	35,594
Collectively evaluated for impairment						3,758,120	3,411,175
Total uncovered loans						4,244,126	3,902,637
Uncovered | Accounted for under ASC 310-30
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period				13,459
Ending allowance for loan losses		12,354		12,354
Allowance for loan losses:
Allowance for loan losses		12,354		13,459		12,354	13,459
Balance of loans:
Total uncovered loans						437,187	455,868
Residential real estate
Balance of loans:
Total uncovered loans	[1]					1,434,678	1,426,012
Residential real estate | Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period		10,879	9,896	12,193	7,708
Provision (benefit) for loan and lease losses		282	695	659	3,559
Gross charge-offs		(1,081)	(1,381)	(3,218)	(2,817)
Recoveries		1,008	540	1,454	1,300
Net (charge-offs) recoveries		(73)	(841)	(1,764)	(1,517)
Ending allowance for loan losses		11,088	9,750	11,088	9,750
Allowance for loan losses:
Individually evaluated for impairment						2,280	1,110
Collectively evaluated for impairment						3,677	4,850
Allowance for loan losses		10,879	9,896	12,193	7,708	11,088	12,193
Balance of loans:
Individually evaluated for impairment						22,525	18,584
Collectively evaluated for impairment						1,185,771	1,167,905
Total uncovered loans						1,434,678	1,426,012
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				6,233
Ending allowance for loan losses		5,131		5,131
Allowance for loan losses:
Allowance for loan losses		5,131		6,233		5,131	6,233
Balance of loans:
Total uncovered loans						226,382	239,523
Commercial real estate
Balance of loans:
Total uncovered loans						1,395,783	1,310,938
Commercial real estate | Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period		11,161	6,776	11,128	4,267
Provision (benefit) for loan and lease losses		154	2,786	47	5,924
Gross charge-offs		(2,929)	(3,586)	(4,547)	(4,831)
Recoveries		3,796	1,870	5,554	2,486
Net (charge-offs) recoveries		867	(1,716)	1,007	(2,345)
Ending allowance for loan losses		12,182	7,846	12,182	7,846
Allowance for loan losses:
Individually evaluated for impairment						1,449	1,276
Collectively evaluated for impairment						5,185	4,623
Allowance for loan losses		11,161	6,776	11,128	4,267	12,182	11,128
Balance of loans:
Individually evaluated for impairment						19,468	13,565
Collectively evaluated for impairment						1,191,695	1,107,225
Total uncovered loans						1,395,783	1,310,938
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				5,229
Ending allowance for loan losses		5,548		5,548
Allowance for loan losses:
Allowance for loan losses		5,548		5,229		5,548	5,229
Balance of loans:
Total uncovered loans						184,620	190,148
Commercial and industrial
Balance of loans:
Total uncovered loans						1,066,353	869,477
Commercial and industrial | Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period		9,475	4,757	7,835	3,404
Provision (benefit) for loan and lease losses		679	425	3,366	1,761
Gross charge-offs		(735)	(481)	(2,002)	(626)
Recoveries		1,326	439	1,546	601
Net (charge-offs) recoveries		591	(42)	(456)	(25)
Ending allowance for loan losses		10,745	5,140	10,745	5,140
Allowance for loan losses:
Individually evaluated for impairment						497	982
Collectively evaluated for impairment						9,485	5,968
Allowance for loan losses		9,475	4,757	7,835	3,404	10,745	7,835
Balance of loans:
Individually evaluated for impairment						5,716	2,799
Collectively evaluated for impairment						1,043,907	851,179
Total uncovered loans						1,066,353	869,477
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				885
Ending allowance for loan losses		763		763
Allowance for loan losses:
Allowance for loan losses		763		885		763	885
Balance of loans:
Total uncovered loans						16,730	15,499
Real estate construction
Balance of loans:
Total uncovered loans	[1]					175,192	131,686
Real estate construction | Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period		1,685	1,083	1,599	2,027
Provision (benefit) for loan and lease losses		(93)	(618)	(129)	(1,483)
Gross charge-offs		(272)	(28)	(307)	(109)
Recoveries		128	961	285	963
Net (charge-offs) recoveries		(144)	933	(22)	854
Ending allowance for loan losses		1,448	1,398	1,448	1,398
Allowance for loan losses:
Individually evaluated for impairment						66	0
Collectively evaluated for impairment						584	649
Allowance for loan losses		1,685	1,083	1,599	2,027	1,448	1,599
Balance of loans:
Individually evaluated for impairment						569	174
Collectively evaluated for impairment						167,325	123,203
Total uncovered loans						175,192	131,686
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				950
Ending allowance for loan losses		798		798
Allowance for loan losses:
Allowance for loan losses		798		950		798	950
Balance of loans:
Total uncovered loans						7,298	8,309
Consumer
Balance of loans:
Total uncovered loans						172,120	164,524
Consumer | Uncovered
Changes in the allowance and the allocation of the allowance for loans
Balance at beginning of period		1,277	259	1,064	340
Provision (benefit) for loan and lease losses		47	(69)	538	(118)
Gross charge-offs		(256)	(57)	(579)	(123)
Recoveries		35	93	80	127
Net (charge-offs) recoveries		(221)	36	(499)	4
Ending allowance for loan losses		1,103	226	1,103	226
Allowance for loan losses:
Individually evaluated for impairment						144	82
Collectively evaluated for impairment						845	820
Allowance for loan losses		1,277	$ 259	1,064	$ 340	1,103	1,064
Balance of loans:
Individually evaluated for impairment						541	472
Collectively evaluated for impairment						169,422	161,663
Total uncovered loans						172,120	164,524
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				162
Ending allowance for loan losses		114		114
Allowance for loan losses:
Allowance for loan losses		$ 114		$ 162		114	162
Balance of loans:
Total uncovered loans						$ 2,157	$ 2,389

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

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Consolidated Balance Sheets - USD ($) $ in Thousands		Jun. 30, 2015	Dec. 31, 2014
Assets
Cash and due from banks		$ 79,357	$ 86,185
Interest-bearing deposits with other banks		161,201	96,551
Federal funds sold and other short-term investments		170,000	71,000
Total cash and cash equivalents		410,558	253,736
Securities available-for-sale		845,319	740,819
Federal Home Loan Bank stock		25,418	20,212
Loans held for sale, at fair value		117,042	93,453
Loans:
Total loans, excluding covered loans		4,244,126	3,902,637
Less: Allowance for loan losses - uncovered		(36,566)	(33,819)
Net loans - excluding covered loans		4,207,560	3,868,818
Covered loans		280,847	346,490
Less: Allowance for loan losses - covered		(16,340)	(21,353)
Net loans - covered		264,507	325,137
Net total loans		4,472,067	4,193,955
Premises and equipment		44,857	48,389
FDIC indemnification asset		36,997	67,026
Other real estate owned and repossessed assets		46,373	48,743
Loan servicing rights		58,894	70,598
Core deposit intangible		14,131	13,035
Goodwill		3,524	0
FDIC receivable		5,543	6,062
Company-owned life insurance		104,972	97,782
Income tax benefit		188,755	177,472
Other assets		43,173	40,982
Total assets		6,417,623	5,872,264
Deposits:
Noninterest-bearing demand deposits		1,002,053	887,567
Interest-bearing demand deposits		821,557	660,697
Money market and savings deposits		1,276,726	1,170,236
Time deposits		1,427,126	1,188,178
Other brokered funds		380,611	642,185
Total deposits		4,908,073	4,548,863
FDIC clawback liability		28,588	26,905
FDIC warrants payable		4,441	4,633
Short-term borrowings		253,945	135,743
Long-term debt		414,947	353,972
Other liabilities		41,223	40,541
Total liabilities		5,651,217	5,110,657
Shareholders’ equity
Preferred stock - $1.00 par value Authorized - 20,000,000 shares at 6/30/2015 and 12/31/2014 Issued and outstanding - 0 shares at 6/30/2015 and 12/31/2014		0	0
Common stock:
Additional paid-in-capital		385,686	405,436
Retained earnings		307,355	281,789
Accumulated other comprehensive income, net of tax		2,236	3,850
Total shareholders' equity		766,406	761,607
Total liabilities and shareholders’ equity		6,417,623	5,872,264
Class A Voting Common Stock
Common stock:
Common Stock		71,129	70,532
Class B Non-Voting Common Stock
Common stock:
Common Stock		0	0
Residential real estate
Loans:
Total loans, excluding covered loans	[1]	1,434,678	1,426,012
Commercial real estate
Loans:
Total loans, excluding covered loans		1,395,783	1,310,938
Commercial and industrial
Loans:
Total loans, excluding covered loans		1,066,353	869,477
Real estate construction
Loans:
Total loans, excluding covered loans	[1]	175,192	131,686
Consumer
Loans:
Total loans, excluding covered loans		$ 172,120	$ 164,524

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

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EARNINGS PER COMMON SHARE (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

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

The factors used in the earnings per share computation follow:

	For the three months ended June 30,						For the six months ended June 30,
(In thousands, except per share data)	2015			2014			2015			2014
Net income	$	17,548		$	20,606		$	26,981		$	58,833
Net income allocated to participating securities	174			26			211			37
Net income allocated to common shareholders (1)	$	17,374		$	20,580		$	26,770		$	58,796
Weighted average common shares - issued	71,006			70,107			70,814			69,115
Average unvested restricted share awards	(705		)	(86		)	(555		)	(44		)
Weighted average common shares outstanding - basic	70,301			70,021			70,259			69,071
Effect of dilutive securities -
Employee and director stock options	4,339			4,112			4,174			3,991
Warrants	260			1,526			613			1,469
Weighted average common shares outstanding - diluted	74,900			75,659			75,046			74,531
EPS available to common shareholders
Basic	$	0.25		$	0.29		$	0.38		$	0.85
Diluted	$	0.23		$	0.27		$	0.36		$	0.79

(1) Net income allocated to common shareholders for basic and diluted earnings per share may differ under the two-class method as a result of adding common share equivalents for options and warrants to dilutive shares outstanding, which alters the ratio used to allocate net income to common shareholders and participating securities for the purposes of calculating diluted earnings per share.

Schedule of average outstanding options and warrants

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 because they were antidilutive.  There were no outstanding antidilutive warrants or options during the three and six months ended June 30, 2015 and no outstanding antidilutive warrants or options for the three and six months ended June 30, 2014.

(Shares in thousands)	For the three months ended June 30, 2014		For the six months ended June 30, 2014
Average outstanding options	8		4
Outstanding exercise prices:
Low end	$	14.44	$	14.44
High end	$	14.44	$	14.44

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EARNINGS PER COMMON SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator for basic and diluted EPS:
Net income	$ 17,548	$ 20,606	$ 26,981	$ 58,833
Net income allocated to participating securities	174	26	211	37
Net income allocated to shareholders	$ 17,374	$ 20,580	$ 26,770	$ 58,796
Weighted average common shares - issued (in shares)	71,006,000	70,107,000	70,814,000	69,115,000
Average unvested restricted share awards (in shares)	(705,000)	(86,000)	(555,000)	(44,000)
Weighted average common shares outstanding - basic (in shares)	70,301,000	70,021,000	70,259,000	69,071,000
Effect of dilutive securities -
Employee and director stock options (in shares)	4,339,000	4,112,000	4,174,000	3,991,000
Warrants (in shares)	260,000	1,526,000	613,000	1,469,000
Weighted average common shares outstanding - diluted (in shares)	74,900,000	75,659,000	75,046,000	74,531,000
EPS available to common shareholders
Basic (in dollars per share)	$ 0.25	$ 0.29	$ 0.38	$ 0.85
Diluted (in dollars per share)	0.23	0.27	0.36	0.79
Other information on EPS
Average stock valuation (in dollars per share)	$ 16.14	$ 13.77	$ 15.12	$ 13.24
Options
Other information on EPS
Shares not included in the computation of diluted net income available to common shareholders (shares)		8,000		4,000
Range of exercise prices, lower range limit (in dollars per share)		$ 14.44		$ 14.44
Range of exercise prices, upper range limit (in dollars per share)		$ 14.44		$ 14.44
Warrants repurchase
Other information on EPS
Shares not included in the computation of diluted net income available to common shareholders (shares)	0	0	0	0

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Consolidated Statements of Changes in Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
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	58,833			58,833
Other comprehensive income	10,229				10,229
Stock-based compensation expense	454		454
Restricted stock awards, including tax benefit	0	$ 378	(378)
Restricted stock awards (in shares)		378
Issuance of common shares, including tax benefit	41,414	$ 3,839	37,575
Issuance of common shares (in shares)		3,839
Balance at Jun. 30, 2014	727,945	$ 70,451	404,079	251,182	2,233
Balance (in shares) at Jun. 30, 2014		70,451
Balance at Dec. 31, 2014	761,607	$ 70,532	405,436	281,789	3,850
Balance (in shares) at Dec. 31, 2014		70,532
Increase (Decrease) in Stockholders' Equity
Net income	26,981			26,981
Other comprehensive income	(1,614)				(1,614)
Stock-based compensation expense	866		866
Restricted stock awards, including tax benefit	16	$ 352	(336)
Restricted stock awards (in shares)		352
Issuance of common shares, including tax benefit	(143)	$ 245	(388)
Issuance of common shares (in shares)		245
Repurchase of warrants to repurchase 2.5 million shares, at fair value	(19,892)		(19,892)
Cash dividends paid on common stock ($0.02 per share)	(1,415)			(1,415)
Balance at Jun. 30, 2015	$ 766,406	$ 71,129	$ 385,686	$ 307,355	$ 2,236
Balance (in shares) at Jun. 30, 2015		71,129

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PARENT COMPANY FINANCIAL STATEMENTS (Details 2) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income
Dividend income from subsidiary	$ 0	$ 0	$ 15,000,000	$ 25,000,000
Bargain purchase gain	0	0	0	41,977,000
Other noninterest income	4,569,000	5,312,000	9,299,000	9,605,000
Expenses
Salaries and employee benefits	28,685,000	30,466,000	57,897,000	66,317,000
Professional service fees	3,275,000	2,628,000	6,818,000	6,665,000
Insurance expense	1,527,000	868,000	3,057,000	2,699,000
Marketing expense	1,483,000	1,605,000	2,578,000	2,696,000
Interest on short-term borrowings	209,000	33,000	288,000	208,000
Interest on long-term debt	914,000	627,000	1,714,000	1,201,000
Other	6,725,000	6,370,000	15,125,000	14,129,000
Income tax benefit	(8,179,000)	4,246,000	(12,620,000)	5,902,000
Net income	17,548,000	20,606,000	26,981,000	58,833,000
Total comprehensive income, net of tax	13,144,000	25,254,000	25,367,000	69,062,000
Holding Company
Income
Dividend income from subsidiary	0	0	15,000,000	25,000,000
Bargain purchase gain	0	0	0	41,977,000
Other noninterest income	4,000	3,000	9,000	5,000
Total income	4,000	3,000	15,009,000	66,982,000
Expenses
Salaries and employee benefits	1,671,000	2,042,000	2,892,000	5,955,000
Bank acquisition and due diligence fees	159,000	266,000	1,155,000	1,974,000
Professional service fees	491,000	492,000	868,000	1,086,000
Insurance expense	33,000	213,000	113,000	367,000
Marketing expense	35,000	26,000	49,000	191,000
Interest on short-term borrowings	187,000	0	261,000	151,000
Interest on long-term debt	182,000	125,000	344,000	252,000
Other	59,000	80,000	173,000	147,000
Total expenses	2,817,000	3,244,000	5,855,000	10,123,000
Income (loss) before income taxes and equity in undistributed net earnings of subsidiaries	(2,813,000)	(3,241,000)	9,154,000	56,859,000
Income tax benefit	1,082,000	420,000	1,735,000	2,457,000
Equity in (over)/under distributed earnings of subsidiaries	19,279,000	23,427,000	16,092,000	(483,000)
Net income	17,548,000	20,606,000	26,981,000	58,833,000
Total comprehensive income, net of tax	$ 17,548,000	$ 20,606,000	$ 26,981,000	$ 58,833,000

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SECURITIES (Details 2) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Information with respect to proceeds from sales of securities and the associated gains and losses
Proceeds	$ 135	$ 0	$ 24,750	$ 54,211
Gross gains	6	0	9	0
Gross losses	$ 0	$ 0	$ (110)	$ (2,310)

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OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS (Tables)

6 Months Ended

Jun. 30, 2015

Other Real Estate [Abstract]

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

Changes in other real estate owned and repossessed assets were as follows:

	Other real estate owned
(Dollars in thousands)	Uncovered			Covered			Total other real estate owned			Repossessed assets
Balance at January 1, 2015	$	28,247		$	10,661		$	38,908		$	9,835
Additions due to acquisitions	1,260			—			1,260			—
Additions due to the adoption of ASU 2014-04 (1)	455			85			540			—
Transfers in (2)	12,151			5,670			17,821			847
Capitalized expenditures	—			—			—			2,681
Payments received	—			—			—			(2,854		)
Disposals	(9,777		)	(7,553		)	(17,330		)	(318		)
Write-downs	(1,311		)	(636		)	(1,947		)	(468		)
Change in valuation allowance	—			—			—			(2,602		)
Balance at June 30, 2015	$	31,025		$	8,227		$	39,252		$	7,121
Balance at January 1, 2014	$	18,384		$	11,571		$	29,955		$	27
Additions due to acquisitions	30,878			—			30,878			—
Transfers in (2)	8,826			4,946			13,772			237
Disposals	(15,241		)	(4,687		)	(19,928		)	(172		)
Write-downs	(1,500		)	(904		)	(2,404		)	—
Balance at June 30, 2014	$	41,347		$	10,926		$	52,273		$	92

(1) The Company adopted the provisions of FASB ASU No. 2014-04, “Reclassification of Residential Real Estate Collaterized Consumer Mortgage Loans Upon Foreclosure” (“ASU 2014-04”) utilizing the prospective transition method.

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

Schedule of activity in the valuation allowance of repossessed assets

Activity in the valuation allowance for repossessed assets during the three and six months ended June 30, 2015 is summarized below.  There was no valuation allowance for repossessed assets at any time during the three or six months ended June 30, 2014.

(Dollars in thousands)	Valuation allowance for repossessed assets
For the three months ended June 30, 2015
Beginning balance	$	2,819
Provision for valuation allowance	243
Ending Balance	$	3,062
For the six months ended June 30, 2015
Beginning balance	$	460
Provision for valuation allowance	2,602
Ending Balance	$	3,062

Schedule of income and expenses related to other real estate owned

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

(Dollars in thousands)	Uncovered			Covered			Total other real estate owned			Repossessed assets
For the three months ended June 30, 2015
Net gain on sale	$	1,315		$	90		$	1,405		$	—
Write-downs	(487		)	(98		)	(585		)	(274		)
Provision for valuation allowance (1)	—			—			—			(243		)
Net operating expenses	(686		)	(27		)	(713		)	—
Total	$	142		$	(35	)	$	107		$	(517	)
For the six months ended June 30, 2015
Net gain (loss) on sale	$	3,173		$	(353	)	$	2,820		$	(14	)
Write-downs	(1,311		)	(636		)	(1,947		)	(468		)
Provision for valuation allowance (1)	—			—			—			(2,602		)
Net operating expenses	(890		)	(118		)	(1,008		)	(25		)
Total	$	972		$	(1,107	)	$	(135	)	$	(3,109	)
For the three months ended June 30, 2014
Net gain on sale	$	2,998		$	91		$	3,089		$	—
Write-downs	(821		)	(537		)	(1,358		)	—
Net operating expenses	(919		)	(82		)	(1,001		)	(19		)
Total	$	1,258		$	(528	)	$	730		$	(19	)
For the six months ended June 30, 2014
Net gain (loss) on sale	$	4,002		$	231		$	4,233		$	(4	)
Write-downs	(1,500		)	(904		)	(2,404		)	—
Net operating expenses	(1,545		)	(74		)	(1,619		)	(49		)
Total	$	957		$	(747	)	$	210		$	(53	)

(1) Recorded as a component of “Other expense” in the Consolidated Statements of Income

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LOANS (Details 4) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Performing assets
Information as to total impaired loans
Troubled debt restructurings	$ 16,600	$ 19,800
Uncovered
Information as to total impaired loans
Nonaccrual loans	39,725	35,111
Impaired loans, total recorded investment	48,819	41,428
Uncovered | Performing assets
Information as to total impaired loans
Troubled debt restructurings	9,094	6,317
Uncovered | Performing assets | Residential real estate
Information as to total impaired loans
Troubled debt restructurings	2,392	1,368
Uncovered | Performing assets | Commercial real estate
Information as to total impaired loans
Troubled debt restructurings	3,741	3,785
Uncovered | Performing assets | Commercial and industrial
Information as to total impaired loans
Troubled debt restructurings	2,597	840
Uncovered | Performing assets | Real estate construction
Information as to total impaired loans
Troubled debt restructurings	131	90
Uncovered | Performing assets | Consumer
Information as to total impaired loans
Troubled debt restructurings	233	234
Covered loans
Information as to total impaired loans
Nonaccrual loans	19,793	21,857
Impaired loans, total recorded investment	27,308	35,321
Covered loans | Performing assets
Information as to total impaired loans
Troubled debt restructurings	7,515	13,464
Covered loans | Performing assets | Residential real estate
Information as to total impaired loans
Troubled debt restructurings	3,584	3,046
Covered loans | Performing assets | Commercial real estate
Information as to total impaired loans
Troubled debt restructurings	3,055	9,017
Covered loans | Performing assets | Commercial and industrial
Information as to total impaired loans
Troubled debt restructurings	569	1,137
Covered loans | Performing assets | Real estate construction
Information as to total impaired loans
Troubled debt restructurings	300	264
Covered loans | Performing assets | Consumer
Information as to total impaired loans
Troubled debt restructurings	$ 7	$ 0

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SHORT-TERM BORROWINGS AND LONG-TERM DEBT

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

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

	June 30, 2015				December 31, 2014
(Dollars in thousands)	Amount		Weighted Average Rate (1)		Amount		Weighted Average Rate (1)
Short-term borrowings:
Securities sold under agreements to repurchase: 0.05% - 0.10% variable-rate notes	$	23,945	0.10	%	$	25,743	0.10	%
FHLB advances: 0.24% - 0.30% fixed-rate notes	200,000		0.27		100,000		0.29
FHLB advances: 0.43% variable-rate notes	—		—		10,000		0.43
Holding company line of credit: floating-rate based on one-month LIBOR plus 3.00%	30,000		3.19		—		—
Total short-term borrowings	253,945		0.60		135,743		0.26
Long-term debt:
FHLB advances: 0.26% - 7.44% fixed-rate notes due 2015 to 2027 (2)	344,001		1.40		286,804		1.57
Securities sold under agreements to repurchase: 4.11% - 4.30% fixed-rate notes due 2016 to 2037 (3)	55,623		4.19		56,444		4.19
Subordinated notes related to trust preferred securities: floating-rate based on three-month LIBOR plus 1.45% - 2.85% due 2034 to 2035 (4)	10,794		2.52		10,724		2.48
Subordinated notes related to trust preferred securities: floating-rate based on three-month LIBOR plus 3.25% due September 2032 (5)	4,529		3.53		—		—
Total long-term debt	414,947		1.83		353,972		2.02
Total short-term borrowings and long-term debt	$	668,892	1.36	%	$	489,715	1.53	%

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

(2) The June 30, 2015 balance includes advances payable of $338.5 million and purchase accounting premiums of $5.5 million. The December 31, 2014 balance includes advances payable of $280.1 million and purchase accounting premiums of $6.7 million.

(3) The June 30, 2015 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting premiums of $5.6 million. The December 31, 2014 balance includes securities sold under agreements to repurchase of $50.0 million and purchase accounting premiums of $6.4 million.

(4) The June 30, 2015 balance includes subordinated notes related to trust preferred securities of $15.0 million and purchase accounting discounts of $4.2 million.  The December 31, 2014 balance includes subordinated notes related to trust preferred securities of $15.0 million and purchase accounting discounts of $4.3 million.

(5) The June 30, 2015 balance includes subordinated notes related to trust preferred securities of $5.0 million and purchase accounting discounts of $471 thousand.

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

	For the three months ended June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Securities sold under agreement to repurchase:
Average daily balance	$	19,390		$	86,444		$	19,911		$	77,054
Average interest rate during the period	0.10		%	0.13		%	0.10		%	0.11		%
Maximum month-end balance	$	23,945		$	148,826		$	23,945		$	148,826
FHLB advances:
Average daily balance	$	33,517		$	38,806		$	26,022		$	19,634
Average interest rate during the period	0.27		%	0.13		%	0.27		%	0.16		%
Maximum month-end balance	$	200,000		$	90,000		$	200,000		$	90,000
Federal funds purchased:
Average daily balance	$	—		$	1,132		$	696		$	2,254
Average interest rate during the period	—		%	0.28		%	0.31		%	0.25		%
Maximum month-end balance	$	—		$	—		$	126,000		$	—
FHLB overnight repurchase agreements:
Average daily balance	$	—		$	—		$	—		$	4,420
Average interest rate during the period	—		%	—		%	—		%	0.10		%
Maximum month-end balance	$	—		$	—		$	—		$	—
Holding company line of credit:
Average daily balance	$	22,912		$	—		$	16,271		$	11,215
Average interest rate during the period	3.18		%	—		%	3.18		%	3.17		%
Maximum month-end balance	$	30,000		$	—		$	30,000		$	35,000

Securities sold under agreements to repurchase represent funds deposited with the banks by retail customers (short-term borrowings), of which up to $250 thousand is covered by FDIC insurance for each depositor.  Securities sold under agreements to repurchase are typically delivered to the counterparty when they are wholesale borrowings with brokerage firms (long-term debt). At maturity, the securities underlying the agreements are returned to the banks.  Securities sold under agreements to repurchase are additionally collateralized by residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government sponsored enterprises with a carrying value of $83.7 million at June 30, 2015 which are not covered by FDIC insurance. The Company's securities sold under agreements to repurchase do not qualify as sales for accounting purposes.

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.  At June 30, 2015, FHLB advances were collateralized by $2.1 billion of commercial and mortgage loans, with $1.2 billion in the form of a blanket lien arrangement and $903.4 million under specific lien arrangements.  Based on this collateral, the Company is eligible to borrow up to an additional $808.5 million at June 30, 2015; however, due to Board resolutions, this amount is limited to an additional $440.3 million.

 In the first half of 2015, we drew $20.0 million in order to facilitate our repurchase of 2.5 million warrants to repurchase shares of our Class A common stock of an aggregate purchase price of $19.9 million and $10.0 million for working capital on our existing line of credit.

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INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of the Company's net carrying amount of CDIs

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

(Dollars in thousands)	June 30, 2015			December 31, 2014
Gross carrying amount	$	23,068		$	20,658
Accumulated amortization	(8,937		)	(7,623		)
Net carrying amount	$	14,131		$	13,035

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STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

The Company’s 2009 Equity Incentive Plan (the “Plan”), along with amendments made to the Plan, limits the number of shares issued or issuable to employees, directors and certain consultants at 9.8 million shares of common stock.  As of June 30, 2015, 1.2 million shares were available to be awarded under the Plan.

Stock Options

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.  For the six months ended June 30, 2015, there were no stock options granted. During the six months ended June 30, 2014, the Company granted 35 thousand stock options that were fully vested upon issuance and will remain outstanding for 10 years after the grant date.

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 the relatively short history of Company stock being publicly traded during the six months ended June 30, 2014, post our public offering in February of 2014, it was not practicable for the Company to estimate volatility of its share price. For the six months ended June 30, 2014 the Company used the average volatility of comparable public Bank holding companies as an input to the valuation model. Since limited historical data is available, the expected term of options granted was estimated to be six years for the six months ended June 30, 2014 based on expected lives used by a sample of other Midwest banks. 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. The expected dividend yield is based on historical and projected dividend patterns of the Company’s common shares. At the time the shares were granted in 2014 there were not any expected dividends projected. 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 six months ended June 30, 2014 was determined using the following weighted-average assumptions as of the grant date.

	For the six months ended
	June 30, 2014
Fair value of options granted	$	4.77
Expected dividend yield	—		%
Expected volatility	30.02		%
Risk-free interest rate	1.98		%
Expected life (in years)	6.00

Activity in the Plan during the six months ended June 30, 2015 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, 2015	7,958		$	6.96
Exercised (1)	(599	)	6.77
Outstanding at June 30, 2015	7,359		6.98		6.22	71,894
Options fully vested	7,359		6.98		6.22	71,894
Exercisable at June 30, 2015	7,359		6.98		6.22	71,894

(1) Options exercised during the six months ended June 30, 2015 had a weighted average fair value of $15.74, at respective exercise dates.

The total intrinsic value of stock options exercised was $5.4 million for the six months ended June 30, 2015.

Total cash received from option exercises during the six months ended June 30, 2015 was $210 thousand, resulting in the issuance of 35 thousand shares.  During the three months ended June 30, 2015, there were 210 thousand shares issued under the net-settlement option.  The tax benefit realized from option exercises during the six months ended June 30, 2015 was $1.4 million.

All of the Company’s shares were fully vested prior to January 1, 2015 and there was no unrecognized compensation cost related to nonvested stock options granted under the Plan.  Total compensation expense for stock options, included in “Salary and employee benefits” in the Consolidated Statements of Income, was $207 thousand and $387 thousand for the three and six months ended June 30, 2014, respectively.

Restricted Stock Awards

Under the Plan, the Company can grant restricted stock awards that vest upon completion of future service requirements or specified performance criteria.  The fair value of these awards is equal to the market price of the common stock at the date of grant.  The Company recognizes stock-based compensation expense for these awards over the vesting period, using the straight-line method, based upon the number of shares of restricted stock ultimately expected to vest.  Restricted stock awards granted vest in their entirety following a five-year service period for employees and over a one-year service period for directors.  Restricted stock awards granted to directors during the six months ended June 30, 2015 additionally contain performance-based vesting conditions. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  If an individual awarded restricted stock awards terminates employment prior to the end of the vesting period, the unvested portion of the stock award is forfeited.

The following table provides information regarding nonvested restricted stock awards:

Nonvested Restricted Stock Awards	Shares (in thousands)		Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2015	378		$	14.44
Granted	354		14.98
Vested	(19	)	14.44
Forfeited	(2	)	14.44
Nonvested at June 30, 2015	711		$	14.71

Total expense for restricted stock awards totaled $515 thousand for the three months ended June 30, 2015, of which $441 thousand was included in “Salary and employee benefits” related to employees and $74 thousand was included in “Professional fees” related to directors in the Consolidated Statements of Income.  For the six months ended June 30, 2015, total expense for restricted stock awards totaled $866 thousand, of which $739 thousand was included in "Salary and employee benefits" related to employees and $127 thousand was included in "Professional fees" related to directors in the Consolidated Statements of Income. For the three and six months ended June 30, 2014, total expense for restricted stock awards totaled $67 thousand for both periods, of which $50 thousand was included in "Salary and employee benefits" related to employees and $17 thousand was included in "Professional fees" related to director in the Consolidated Statements of Income. As of June 30, 2015, the total compensation costs related to nonvested restricted stock that has not yet been recognized totaled $9.2 million and the weighted-average period over which these costs are expected to be recognized is 4.2 years.

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LOANS (Details 7)	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($) loan	Jun. 30, 2014 USD ($) loan	Jun. 30, 2015 USD ($) loan	Jun. 30, 2014 USD ($) loan
Troubled Debt Restructurings
Total number of loans | loan	33	28	37	53
Total recorded investment	$ 4,879,000	$ 2,406,000	$ 5,053,000	$ 4,599,000
Charged-off following a subsequent default	144,000	$ 13,000	247,000	$ 768,000
Commitments to lend additional funds to borrowers whose terms have been modified in TDRs	$ 352,000		$ 352,000
Uncovered
Troubled Debt Restructurings
Total number of loans | loan	28	18	32	28
Total recorded investment	$ 4,543,000	$ 1,632,000	$ 4,717,000	$ 3,177,000
Charged-off following a subsequent default	$ 144,000	$ 13,000	$ 247,000	$ 271,000
Uncovered | Residential real estate
Troubled Debt Restructurings
Total number of loans | loan	14	14	18	20
Total recorded investment	$ 1,701,000	$ 951,000	$ 1,875,000	$ 1,245,000
Charged-off following a subsequent default	$ 0	$ 13,000	$ 29,000	$ 95,000
Uncovered | Commercial real estate
Troubled Debt Restructurings
Total number of loans | loan	11	1	11	3
Total recorded investment	$ 2,812,000	$ 546,000	$ 2,812,000	$ 1,797,000
Charged-off following a subsequent default	$ 144,000	$ 0	$ 218,000	$ 176,000
Uncovered | Commercial and industrial
Troubled Debt Restructurings
Total number of loans | loan	3	2	3	2
Total recorded investment	$ 30,000	$ 135,000	$ 30,000	$ 135,000
Charged-off following a subsequent default	$ 0	$ 0	$ 0	$ 0
Uncovered | Consumer
Troubled Debt Restructurings
Total number of loans | loan		1		3
Total recorded investment		$ 0		$ 0
Charged-off following a subsequent default		$ 0		$ 0
Covered loans
Troubled Debt Restructurings
Total number of loans | loan	5	10	5	25
Total recorded investment	$ 336,000	$ 774,000	$ 336,000	$ 1,422,000
Charged-off following a subsequent default	$ 0	$ 0	$ 0	$ 497,000
Covered loans | Residential real estate
Troubled Debt Restructurings
Total number of loans | loan	3	5	3	7
Total recorded investment	$ 111,000	$ 175,000	$ 111,000	$ 219,000
Charged-off following a subsequent default	$ 0	$ 0	$ 0	$ 12,000
Covered loans | Commercial real estate
Troubled Debt Restructurings
Total number of loans | loan	1	2	1	6
Total recorded investment	$ 130,000	$ 546,000	$ 130,000	$ 669,000
Charged-off following a subsequent default	$ 0	$ 0	$ 0	$ 0
Covered loans | Commercial and industrial
Troubled Debt Restructurings
Total number of loans | loan	1	2	1	9
Total recorded investment	$ 95,000	$ 53,000	$ 95,000	$ 188,000
Charged-off following a subsequent default	$ 0	$ 0	$ 0	$ 2,000
Covered loans | Real estate construction
Troubled Debt Restructurings
Total number of loans | loan		0		1
Total recorded investment		$ 0		$ 346,000
Charged-off following a subsequent default		$ 0		$ 483,000
Covered loans | Consumer
Troubled Debt Restructurings
Total number of loans | loan		1		2
Total recorded investment		$ 0		$ 0
Charged-off following a subsequent default		$ 0		$ 0

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Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - 6 months ended Jun. 30, 2015 - $ / shares shares in Millions	Total
Statement of Stockholders' Equity [Abstract]
Number of shares repurchased	2.5
Dividend paid (in dollars per share)	$ 0.02

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014
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)	$ 20.9	$ 18.3
Real estate construction
Total loans, excluding covered loans, measured at fair value (in dollars)	$ 0.0	$ 1.2
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	70,128,894	70,532,122
Common stock, outstanding shares	70,128,894	70,532,122
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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OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS

6 Months Ended

Jun. 30, 2015

Other Real Estate [Abstract]

OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS

OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS

Changes in other real estate owned and repossessed assets were as follows:

	Other real estate owned
(Dollars in thousands)	Uncovered			Covered			Total other real estate owned			Repossessed assets
Balance at January 1, 2015	$	28,247		$	10,661		$	38,908		$	9,835
Additions due to acquisitions	1,260			—			1,260			—
Additions due to the adoption of ASU 2014-04 (1)	455			85			540			—
Transfers in (2)	12,151			5,670			17,821			847
Capitalized expenditures	—			—			—			2,681
Payments received	—			—			—			(2,854		)
Disposals	(9,777		)	(7,553		)	(17,330		)	(318		)
Write-downs	(1,311		)	(636		)	(1,947		)	(468		)
Change in valuation allowance	—			—			—			(2,602		)
Balance at June 30, 2015	$	31,025		$	8,227		$	39,252		$	7,121
Balance at January 1, 2014	$	18,384		$	11,571		$	29,955		$	27
Additions due to acquisitions	30,878			—			30,878			—
Transfers in (2)	8,826			4,946			13,772			237
Disposals	(15,241		)	(4,687		)	(19,928		)	(172		)
Write-downs	(1,500		)	(904		)	(2,404		)	—
Balance at June 30, 2014	$	41,347		$	10,926		$	52,273		$	92

(1) The Company adopted the provisions of FASB ASU No. 2014-04, “Reclassification of Residential Real Estate Collaterized Consumer Mortgage Loans Upon Foreclosure” (“ASU 2014-04”) utilizing the prospective transition method.

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

At June 30, 2015, the Company had $727 thousand of other real estate owned and repossessed assets as a

result of obtaining physical possession in accordance with ASU 2014-04. In addition, there are $9.6 million of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process, as of June 30, 2015.

Activity in the valuation allowance for repossessed assets during the three and six months ended June 30, 2015 is summarized below.  There was no valuation allowance for repossessed assets at any time during the three or six months ended June 30, 2014.

(Dollars in thousands)	Valuation allowance for repossessed assets
For the three months ended June 30, 2015
Beginning balance	$	2,819
Provision for valuation allowance	243
Ending Balance	$	3,062
For the six months ended June 30, 2015
Beginning balance	$	460
Provision for valuation allowance	2,602
Ending Balance	$	3,062

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

(Dollars in thousands)	Uncovered			Covered			Total other real estate owned			Repossessed assets
For the three months ended June 30, 2015
Net gain on sale	$	1,315		$	90		$	1,405		$	—
Write-downs	(487		)	(98		)	(585		)	(274		)
Provision for valuation allowance (1)	—			—			—			(243		)
Net operating expenses	(686		)	(27		)	(713		)	—
Total	$	142		$	(35	)	$	107		$	(517	)
For the six months ended June 30, 2015
Net gain (loss) on sale	$	3,173		$	(353	)	$	2,820		$	(14	)
Write-downs	(1,311		)	(636		)	(1,947		)	(468		)
Provision for valuation allowance (1)	—			—			—			(2,602		)
Net operating expenses	(890		)	(118		)	(1,008		)	(25		)
Total	$	972		$	(1,107	)	$	(135	)	$	(3,109	)
For the three months ended June 30, 2014
Net gain on sale	$	2,998		$	91		$	3,089		$	—
Write-downs	(821		)	(537		)	(1,358		)	—
Net operating expenses	(919		)	(82		)	(1,001		)	(19		)
Total	$	1,258		$	(528	)	$	730		$	(19	)
For the six months ended June 30, 2014
Net gain (loss) on sale	$	4,002		$	231		$	4,233		$	(4	)
Write-downs	(1,500		)	(904		)	(2,404		)	—
Net operating expenses	(1,545		)	(74		)	(1,619		)	(49		)
Total	$	957		$	(747	)	$	210		$	(53	)

(1) Recorded as a component of “Other expense” in the Consolidated Statements of Income

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

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PARENT COMPANY FINANCIAL STATEMENTS (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Assets
Cash and cash equivalents	$ 410,558	$ 253,736	$ 402,601	$ 375,356
Income tax benefit	188,755	177,472
Other assets	43,173	40,982
Total assets	6,417,623	5,872,264
Liabilities
Short-term borrowings	253,945	135,743
Long-term debt	414,947	353,972
Total liabilities	5,651,217	5,110,657
Shareholders’ equity	766,406	761,607	727,945	617,015
Total liabilities and shareholders’ equity	6,417,623	5,872,264
Holding Company
Assets
Cash and cash equivalents	10,628	9,497	$ 17,497	$ 98,411
Investment in banking subsidiaries	792,467	756,452
Income tax benefit	8,429	7,975
Other assets	681	655
Total assets	812,205	774,579
Liabilities
Short-term borrowings	30,000	0
Long-term debt	15,322	10,724
Accrued expenses and other liabilities	477	2,248
Total liabilities	45,799	12,972
Shareholders’ equity	766,406	761,607
Total liabilities and shareholders’ equity	$ 812,205	$ 774,579

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STOCK-BASED COMPENSATION - Restricted Stock Activity (Details 2) - 6 months ended Jun. 30, 2015 - Restricted Stock - $ / shares shares in Thousands	Total
Shares
Nonvested at beginning of period (in shares)	378
Granted (in shares)	354
Vested (in shares)	(19)
Forfeited (in shares)	(2)
Nonvested at end of period (in shares)	711
Weighted-Average Grant-Date Fair Value
Nonvested at beginning of period (in dollars per share)	$ 14.44
Granted (in dollars per share)	14.98
Vested (in dollars per share)	14.44
Forfeited (in dollars per share)	14.44
Nonvested at end of period (in dollars per share)	$ 14.71

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 12, 2015
Document and Entity Information
Entity Registrant Name	TALMER BANCORP, INC.
Entity Central Index Key	0001360683
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
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		71,140,611
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2

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INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

INTANGIBLE ASSETS

Core Deposit Intangibles

The Company recorded core deposit intangibles (CDIs) associated with each of its acquisitions. CDIs are amortized on an accelerated basis over their estimated useful lives and have an estimated remaining weighted-average useful life of 7.1 years as of June 30, 2015.

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

(Dollars in thousands)	June 30, 2015			December 31, 2014
Gross carrying amount	$	23,068		$	20,658
Accumulated amortization	(8,937		)	(7,623		)
Net carrying amount	$	14,131		$	13,035

Amortization expense recognized on CDIs was $665 thousand and $724 thousand for the three months ended June 30, 2015 and 2014, respectively, and $1.3 million and $1.5 million for the six months ended June 30, 2015 and 2014, respectively, included as a component of “other expense” in the Consolidated Statements of Income.

Goodwill

The Company recorded goodwill in the amount of $3.5 million associated with the acquisition of First of Huron Corporation completed February 6, 2015. Goodwill is deemed to have an indefinite life and is not amortized but instead is subject to an annual review for impairment.

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DERIVATIVE INSTRUMENTS AND BALANCE SHEET OFFSETTING (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Amount of ineffective interest rate swaps included in net income	$ 0
Derivative instruments
Notional Amount	567,589,000	$ 320,001,000
Gross Derivative Assets	5,240,000	3,077,000
Gross Derivative Liabilities	2,004,000	2,502,000
Credit valuation adjustments for counterparty credit risk	66,000	103,000
Designated as hedges
Derivative instruments
Notional Amount	22,000,000	12,000,000
Gross Derivative Assets	337,000	0
Gross Derivative Liabilities	134,000	222,000
Designated as hedges | Interest rate swaps
Derivative instruments
Notional Amount	22,000,000	12,000,000
Gross Derivative Assets	337,000	0
Gross Derivative Liabilities	134,000	222,000
Not designated as hedging
Derivative instruments
Notional Amount	545,589,000	308,001,000
Gross Derivative Assets	4,903,000	3,077,000
Gross Derivative Liabilities	1,870,000	2,280,000
Not designated as hedging | Forward contracts related to mortgage loans to be delivered for sale
Derivative instruments
Notional Amount	196,416,000	114,828,000
Gross Derivative Assets	863,000	0
Gross Derivative Liabilities	0	803,000
Not designated as hedging | Interest rate lock commitments
Derivative instruments
Notional Amount	122,622,000	67,817,000
Gross Derivative Assets	2,029,000	1,489,000
Gross Derivative Liabilities	0	0
Not designated as hedging | Customer-initiated derivatives
Derivative instruments
Notional Amount	226,551,000	125,356,000
Gross Derivative Assets	2,011,000	1,588,000
Gross Derivative Liabilities	$ 1,870,000	$ 1,477,000

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STOCK-BASED COMPENSATION - Option Activity (Details) - Jun. 30, 2015 - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	Total
Number of Shares
Outstanding at the beginning of the period (in shares)	7,958
Exercised (in shares)	(599)
Outstanding at the end of the period (in shares)	7,359
Options fully vested and expected to vest (in shares)	7,359
Exercisable at the end of the period (in shares)	7,359
Weighted Average Exercise Price per Share
Outstanding at the beginning of the period (in dollars per share)	$ 6.96
Exercised (in dollars per share)	6.77
Outstanding at the end of the period (in dollars per share)	6.98
Options fully vested and expected to vest (in dollars per share)	6.98
Exercisable at the end of the period (in dollars per share)	$ 6.98
Weighted Average Remaining Contractual Life
Outstanding at the end of the period	6 years 2 months 19 days
Options fully vested and expected to vest	6 years 2 months 19 days
Exercisable at the end of the period	6 years 2 months 19 days
Aggregate Intrinsic Value
Outstanding at the end of the period	$ 71,894
Options fully vested and expected to vest	71,894
Exercisable at the end of the period	$ 71,894

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Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Interest income
Interest and fees on loans	$ 58,319	$ 56,774	$ 118,257	$ 110,275
Interest on investments
Taxable	2,375	2,139	4,698	4,005
Tax-exempt	1,658	1,213	3,273	3,178
Total interest on securities	4,033	3,352	7,971	7,183
Interest on interest-earning cash balances	117	171	203	387
Interest on federal funds and other short-term investments	269	131	434	271
Dividends on FHLB stock	224	291	469	513
FDIC indemnification asset	(8,548)	(5,506)	(17,798)	(12,224)
Total interest income	54,414	55,213	109,536	106,405
Interest Expense
Interest-bearing demand deposits	382	216	672	440
Money market and savings deposits	562	492	1,033	986
Time deposits	2,131	1,432	3,958	2,923
Other brokered funds	607	35	1,230	64
Interest on short-term borrowings	209	33	288	208
Interest on long-term debt	914	627	1,714	1,201
Total interest expense	4,805	2,835	8,895	5,822
Net interest income	49,609	52,378	100,641	100,583
Provision for loan losses - uncovered	1,069	3,219	4,481	9,643
Benefit for loan losses - covered	(8,382)	(7,321)	(9,801)	(9,819)
Net interest income after provision for loan losses	56,922	56,480	105,961	100,759
Noninterest income
Deposit fee income	2,561	3,188	4,881	6,486
Mortgage banking and other loan fees	4,698	(1,122)	3,437	(37)
Net gain on sales of loans	8,748	5,681	17,366	8,725
Bargain purchase gain	0	0	0	41,977
FDIC loss sharing income	(5,928)	(3,434)	(6,996)	(3,547)
Accelerated discount on acquired loans	7,444	4,326	15,642	10,792
Net gain (loss) on sales of securities	6	0	(101)	(2,310)
Other income	4,569	5,312	9,299	9,605
Total noninterest income	22,098	13,951	43,528	71,691
Noninterest expense
Salary and employee benefits	28,685	30,466	57,897	66,317
Occupancy and equipment expense	8,415	7,871	16,081	16,914
Data processing fees	1,805	2,260	3,659	4,000
Professional service fees	3,275	2,628	6,818	6,665
FDIC loss sharing expense	133	983	1,082	1,507
Bank acquisition and due diligence fees	419	268	1,831	3,197
Marketing expense	1,483	1,605	2,578	2,696
Other employee expense	826	752	1,760	1,395
Insurance expense	1,527	868	3,057	2,699
Other expense	6,725	6,370	15,125	14,129
Total noninterest expense	53,293	54,071	109,888	119,519
Income before income taxes	25,727	16,360	39,601	52,931
Income tax provision (benefit)	8,179	(4,246)	12,620	(5,902)
Net income	$ 17,548	$ 20,606	$ 26,981	$ 58,833
Earnings per common share:
Basic (in dollars per share)	$ 0.25	$ 0.29	$ 0.38	$ 0.85
Diluted (in dollars per share)	$ 0.23	$ 0.27	$ 0.36	$ 0.79
Average common shares outstanding - basic (in shares)	70,301	70,021	70,259	69,071
Average common shares outstanding - diluted (in shares)	74,900	75,659	75,046	74,531

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FAIR VALUE

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

FAIR VALUE

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 U.S. 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 U.S. 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 or 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.

Investment securities:  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 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, 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 a trust preferred security (included within “Corporate debt securities”) and an obligation of a political subdivision as of June 30, 2015, represent securities in less liquid markets requiring significant management assumptions when determining fair value. As of December 31, 2014, securities classified as Level 3 also included a privately issued subordinated corporate debt security (included within “Corporate debt securities”).  The fair values of these investment securities represent less than one percent of the total available-for-sale securities.  The fair value of the trust preferred security is 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 has been determined to be equal to the carrying cost since the securities were acquired.  The issuers have continued to pay their obligations without fail and the Company has not received any information to question future payments.   Since the purchase of these securities, no credit related concerns have come to the Company’s attention, therefore no adjustment for credit loss assumptions were made.

Investment securities classified as held-to-maturity are carried at amortized cost.  Due to limited liquidity of these securities, held-to-maturity securities are classified as Level 3.  The fair value of the held-to-maturity security is determined to be equal to the carrying value.  No credit related concerns have come to the Company’s attention; therefore, no 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. These loans currently consist of one-to-four family residential real estate loans originated for sale to qualified third parties. The fair value is determined based on quoted market rates and other market conditions considered relevant. 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 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 is 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 made relating to 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.  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.  Impaired premises and equipment at both June 30, 2015 and December 31, 2014 were recorded at fair value based on a recent appraisal through a valuation allowance.  The Company classifies impaired premises and equipment as nonrecurring Level 3.

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 and repossessed assets: Other real estate owned and repossessed assets 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 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, the income approach and existing offers. 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 based on accounting election.  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.  Refer to Note 10, “Loan Servicing Rights”, for assumptions included in the valuation of loan servicing rights.

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 and deferred compensation plan liabilities: The Company holds life insurance policies on certain officers, both for investment purposes and for the Company’s deferred compensation plan. 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.  Deferred compensation plan liabilities represent the fair value of the obligation to the employee, which corresponds to the fair value of the invested assets.  Deferred compensation plan liabilities are recorded with “other liabilities” and are classified by the Company 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 interest rate lock commitments and forward contracts related to mortgage loans to be delivered for sale as recurring Level 2.

Derivative instruments held or issued for risk management or 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 both June 30, 2015 and December 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 risk management interest rate swaps designated as cash flow hedges and customer-initiated derivatives 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.

Clawback liability: The CF Bancorp, First Banking Center and Peoples State Bank loss sharing agreements contain a provision where if losses do not exceed a calculated threshold, the Company is obligated to compensate the FDIC.  The carrying amount of these instruments approximates the estimated fair value.  The estimated fair value requires management’s assumption of what estimated losses will be, which is a significant component.  As such, the Company classifies the estimated fair value of the FDIC clawback liability as Level 3.

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 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)
June 30, 2015
Securities available-for-sale:
U.S. government sponsored agency obligations	$	98,283	$	—	$	98,283	$	—
Obligations of state and political subdivisions:
Taxable	4,361		—		4,043		318
Tax-exempt	271,754		—		271,754		—
Small Business Administration (“SBA”) Pools	32,349		—		32,349		—
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	334,034		—		334,034		—
Privately issued	26,460		—		26,460		—
Privately issued commercial mortgage-backed securities	19,509		—		19,509		—
Corporate debt securities	58,569		—		58,121		448
Total securities available-for-sale	845,319		—		844,553		766
Loans measured at fair value:
Residential real estate	20,907		—		—		20,907
Loans held for sale	117,042		—		117,042		—
Loan servicing rights	58,894		—		—		58,894
Derivative assets:
Forward contracts related to mortgage loans to be delivered for sale	863		—		863		—
Interest rate lock commitments	2,029		—		2,029		—
Customer-initiated derivatives	2,011		—		2,011		—
Risk management derivatives	337		—		337		—
Total derivatives	5,240		—		5,240		—
Total assets at fair value	$	1,047,402	$	—	$	966,835	$	80,567
Derivative liabilities:
Customer-initiated derivatives	1,870		—		1,870		—
Risk management derivatives	134		—		134		—
Total derivatives	2,004		—		2,004		—
Total liabilities at fair value	$	2,004	$	—	$	2,004	$	—
December 31, 2014
Securities available-for-sale:
U.S. government sponsored agency obligations	$	98,358	$	—	$	98,358	$	—
Obligations of state and political subdivisions:
Taxable	397		—		—		397
Tax-exempt	232,259		—		232,259		—
SBA Pools	33,933		—		33,933		—
Residential mortgage-backed securities:

Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	291,759		—		291,759		—
Privately issued	18,800		—		18,800		—
Privately issued commercial mortgage-backed securities	5,130		—		5,130		—
Corporate debt securities	60,183		—		56,758		3,425
Total securities available-for-sale	740,819		—		736,997		3,822
Loans measured at fair value:
Residential real estate	18,311		—		—		18,311
Real estate construction	1,215		—		—		1,215
Loans held for sale	93,453		—		93,453		—
Loan servicing rights	70,598		—		—		70,598
Derivative assets:
Interest rate lock commitments	1,489		—		1,489		—
Customer-initiated derivatives	1,588		—		1,588		—
Total derivatives	3,077		—		3,077		—
Total assets at fair value	$	927,473	$	—	$	833,527	$	93,946
Derivative liabilities:
Forward contracts related to mortgage loans to be delivered for sale	803		—		803		—
Customer-initiated derivatives	1,477		—		1,477		—
Risk management derivatives	222		—		222		—
Total derivatives	2,502		—		2,502		—
Total liabilities at fair value	$	2,502	$	—	$	2,502	$	—

During the six months ended June 30, 2015, a privately issued subordinated debt security (included within “Corporate debt securities”) was transferred from Level 3 in the fair value hierarchy to Level 2 due to the market for this security becoming active during the period.  There were no transfers between levels within the fair value hierarchy during the three and six months ended June 30, 2014.

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

	Three months ended June 30, 2015
	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	$	397		$	430	$	22,158		$	54,409
Transfers from loans held for sale	—			—		764			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	1			1		—			—
Recorded in “Net gain on sales of loans”						12
Recorded in “Mortgage banking and other loan fees”	—			—		(347		)	1,552
Recorded in OCI (pre-tax)	—			17		—			—
New originations	—			—		—			2,933
Repayments	(80		)	—		(1,680		)	—
Balance, end of period	$	318		$	448	$	20,907		$	58,894

	Six months ended June 30, 2015
	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	$	397		$	3,425		$	19,526		$	70,598
Transfer between levels within fair value hierarchy	—			(3,000		)	—			—
Transfers from loans held for sale	—			—			3,983			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	1			2			—			—
Recorded in “Net gain on sales of loans”	—			—			139			—
Recorded in “Mortgage banking and other loan fees”	—			—			(239		)	(4,850		)
Recorded in OCI (pre-tax)	—			21			—			—
New originations	—			—			—			5,848
Reduction from servicing rights sold	—			—			—			(12,702		)
Repayments	(80		)	—			(2,502		)	—
Balance, end of period	$	318		$	448		$	20,907		$	58,894

	Three months ended June 30, 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	$	397	$	420	$	17,914		$	77,892
Transfers from loans held for sale	—		—		542			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	—		1		—			—
Recorded in “Net gain on sales of loans”	—		—		15			—
Recorded in “Mortgage banking and other loan fees”	—		—		386			(5,947		)
Recorded in OCI (pre-tax)	—		12		—			—
New originations	—		—		—			2,159
Repayments	—		—		(332		)	—
Balance, end of period	$	397	$	433	$	18,525		$	74,104

	Six months ended June 30, 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	—		—		778			—
Gains (losses):
Recorded in earnings (realized):
Recorded in “Interest on investments”	1		2		—			—
Recorded in “Net gain on sales of loans”	—		—		8			—
Recorded in “Mortgage banking and other loan fees”	—		—		467			(9,014		)
Recorded in OCI (pre-tax)	—		26		—			—
New originations	—		—		—			3,748
Repayments	—		—		(564		)	—
Draws on previously issued lines of credits	—		—		128			—
Balance, end of period	$	397	$	433	$	18,525		$	74,104

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)	June 30, 2015		December 31, 2014
Aggregate fair value	$	20,907	$	19,526
Contractual balance	20,581		19,100
Fair market value gain	326		426

There were no gains (losses) included in the fair value above that were associated with instrument specific credit risk. The aggregate fair value of loans held for investment measured and recorded at fair value that were on nonaccrual status as of June 30, 2015 and December 31, 2014 was $150 thousand and $155 thousand, respectively. There were no loans held for investment measured and recorded at fair value that were 90 days or more past due as of June 30, 2015.  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, 2014 was $155 thousand and $191 thousand, respectively. 

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 June 30, 2015 and 2014, there were $208 thousand and $168 thousand, respectively, and $413 thousand thousand and $259 thousand for the six months ended June 30, 2015 and 2014, respectively, of interest income earned on loans transferred from loans held for sale to loans held for investment.

The total amount of gains (losses) from changes in fair value of loans held for investment measured at fair value in the Consolidated Statements of Income were as follows:

	For the three months ended June 30,					For the six months ended June 30,
(Dollars in thousands)	2015			2014		2015			2014
Change in fair value:
Included in “Net gain on sales of loans”	$	12		$	15	$	139		$	8
Included in “Mortgage banking and other loan fees”	(347		)	386		(239		)	467

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 June 30, 2015 or December 31, 2014.

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

(Dollars in thousands)	June 30, 2015		December 31, 2014
Aggregate fair value	$	117,042	$	93,453
Contractual balance	113,851		89,138
Unrealized gain	3,191		4,315

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

	For the three months ended June 30,				For the six months ended June 30,
(Dollars in thousands)	2015		2014		2015			2014
Change in fair value	$	417	$	3,458	$	(1,124	)	$	4,834

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)
June 30, 2015
Impaired loans:(1)
Uncovered
Residential real estate	$	6,673	$	—	$	—	$	6,673
Commercial real estate	3,684		—		—		3,684
Commercial and industrial	370		—		—		370
Real estate construction	198		—		—		198
Consumer	29		—		—		29
Total uncovered impaired loans	10,954		—		—		10,954
Covered
Residential real estate	68		—		—		68
Commercial real estate	177		—		—		177
Commercial and industrial	155		—		—		155
Total covered impaired loans	400		—		—		400
Total impaired loans	11,354		—		—		11,354
Other real estate owned (uncovered)(2)	2,267		—		—		2,267
Other real estate owned (covered)(3)	1,811		—		—		1,811
Repossessed assets(4)	6,896		—		—		6,896
Premises and equipment(5)	1,575		—		—		1,575
Total	$	23,903	$	—	$	—	$	23,903
December 31, 2014
Impaired loans:(1)
Uncovered
Residential real estate	$	2,898	$	—	$	—	$	2,898
Commercial real estate	4,115		—		—		4,115
Commercial and industrial	579		—		—		579
Consumer	12		—		—		12
Total uncovered impaired loans	7,604		—		—		7,604
Covered
Residential real estate	152		—		—		152
Commercial and industrial	350		—		—		350
Total covered impaired loans	502		—		—		502
Total impaired loans	8,106		—		—		8,106
Other real estate owned (uncovered) (2)	9,670		—		—		9,670
Other real estate owned (covered) (3)	3,807		—		—		3,807
Repossessed assets(4)	9,654		—		—		9,654
Premises and equipment(5)	675		—		—		675
Total	$	31,912	$	—	$	—	$	31,912

(1) Specific reserves of $4.0 million and $2.9 million were provided to reduce the fair value of these loans at June 30, 2015 and December 31, 2014, respectively, based on the estimated fair value of the underlying collateral. In addition, charge-offs of $31 thousand and $1.9 million reduced the fair value of these loans for the three months ended June 30, 2015 and 2014, respectively, and $67 thousand and $2.0 million for the six months ended June 30, 2015 and 2014, respectively.

(2) The Company charged $487 thousand and $821 thousand through other noninterest expense during the three months ended June 30, 2015 and 2014, respectively, and $1.3 million and $1.5 million during the six months ended June 30, 2015 and 2014, respectively, to reduce the fair value of these properties.

(3) The Company charged $98 thousand and $537 thousand through other noninterest expense during the three months ended June 30, 2015 and 2014, respectively, and $636 thousand and $904 thousand during the six months ended June 30, 2015 and 2014, 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.

(4) The Company charged $274 thousand and $468 thousand through other noninterest expense during the three and six months ended June 30, 2015, respectively, to reduce the fair value of these assets.  As of June 30, 2014, there were no repossessed assets deemed impaired and there were no charges taken relating to these assets during the three and six months ended June 30, 2014. A valuation allowance of $3.1 million and $460 thousand was provided to reduce the fair value of these repossessed assets at June 30, 2015 and December 31, 2014, respectively, based on the estimated fair value as of each respective date.

(5) The company charged $1.1 million through other noninterest expenses during both the three and six months ended June 30, 2015 to reduce the value of premises and equipment deemed impaired during the period. As of June 30, 2014, there were no premises and equipment deemed impaired and there were no charges taken relating to these assets during the three and six months ended June 30, 2014.

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
June 30, 2015
Financial assets:
Cash and cash equivalents	$	410,558	$	410,558	$	79,357	$	331,201	$	—
Federal Home Loan Bank stock	25,418		N/A
Net loans, excluding covered loans(1)	4,207,560		4,281,316		—		—		4,281,316
Net covered loans(2)	264,507		349,004		—		—		349,004
Accrued interest receivable	14,409		14,409		—		14,409		—
FDIC indemnification asset	36,997		18,875		—		—		18,875
FDIC receivable	5,543		5,543		—		5,543		—
Company-owned life insurance	104,972		104,972		—		104,972		—
Securities held-to-maturity	1,692		1,692		—		—		1,692
Financial liabilities:
Deposits:
Savings and demand deposits	$	3,414,192	$	3,414,192	$	—	$	3,414,192	$	—
Time deposits(3)	1,493,881		1,493,607		—		1,493,607		—
Total deposits	4,908,073		4,907,799		—		4,907,799		—
FDIC clawback liability	28,588		28,588		—		—		28,588
Short-term borrowings	253,945		253,945		—		253,945		—
Long-term debt	414,947		409,580		—		409,580		—
FDIC warrants payable	4,441		4,441		—		—		4,441
Accrued interest payable	2,079		2,079		—		2,079		—
Deferred compensation plan liabilities	1,475		1,475		—		1,475		—

(1) Included $11.0 million of impaired loans recorded at fair value on a nonrecurring basis and $20.9 million of loans recorded at fair value on a recurring basis.

(2) Included $400 thousand of impaired loans recorded at fair value on a nonrecurring basis.

(3) Includes $66.8 million of other brokered funds.

			Estimated Fair Value
(Dollars in thousands)	Carrying Value		Total		Level 1		Level 2		Level 3
December 31, 2014
Financial assets:
Cash and cash equivalents	$	253,736	$	253,736	$	86,185	$	167,551	$	—
Federal Home Loan Bank stock	20,212		N/A
Net loans, excluding covered loans(1)	3,868,818		3,948,847		—		—		3,948,847
Net covered loans(2)	325,137		420,627		—		—		420,627
Accrued interest receivable	12,533		12,533		—		12,533		—
FDIC indemnification asset	67,026		34,572		—		—		34,572
FDIC receivable	6,062		6,062		—		6,062		—
Company-owned life insurance	97,782		97,782		—		97,782		—
Securities held-to-maturity	1,226		1,226		—		—		1,226
Financial liabilities:
Deposits:
Savings and demand deposits	$	3,288,414	$	3,288,414	$	—	$	3,288,414	$	—
Time deposits(3)	1,260,449		1,260,453		—		1,260,453		—
Total deposits	4,548,863		4,548,867		—		4,548,867		—
FDIC clawback liability	26,905		26,905		—		—		26,905
Short-term borrowings	135,743		135,743		—		135,743		—
Long-term debt	353,972		348,373		—		348,373		—
FDIC warrants payable	4,633		4,633		—		—		4,633
Accrued interest payable	1,476		1,476		—		1,476		—
Deferred compensation plan liabilities	587		587		—		587		—

(1) Included $7.6 million of impaired loans recorded at fair value on a nonrecurring basis and $19.5 million of loans recorded at fair value on a recurring basis.

(2) Included $502 thousand of impaired loans recorded at fair value on a nonrecurring basis.

(3) Includes $72.3 million of other brokered funds.

XML

BUSINESS COMBINATIONS

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS

The Company has determined that the acquisitions of First of Huron Corp. (“FHC”), and its subsidiary bank, Signature Bank, and Talmer West Bank (formerly known as Michigan Commerce Bank) constitute business combinations as defined by FASB 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 February 6, 2015, the Company acquired FHC for aggregate cash consideration of $13.4 million. In connection with the merger, FHC merged with Talmer Bancorp, Inc., with Talmer Bancorp, Inc. as the surviving company in the merger.  Immediately following the merger, Signature Bank, a Michigan state-chartered bank and wholly owned subsidiary of FHC, merged with and into Talmer Bank and Trust, with Talmer Bank and Trust as the surviving bank.  The Company assumed $3.5 million in subordinated notes issued to FHC and $1.4 million of related interest. The subordinated debt was immediately retired and the interest was paid in full in accordance with the provision of the purchase agreement. The Company also received FHC’s common securities issued by trust preferred issuers and assumed $876 thousand of outstanding interest. The outstanding interest on the trust preferred securities was immediately paid off in accordance with the provisions of the purchase agreement. The Company received certain tax assets and all cash and cash equivalents held by FHC. The Company incurred $144 thousand and $1.2 million of acquisition related expenses during the three and six months ended June 30, 2015, related to the acquisition of FHC, included within “Bank acquisition and diligence fees” in the Consolidated Statements of Income. All of the branches acquired fit squarely within the Company’s target market areas.

The acquisition resulted in a recorded $4.8 million in net deferred tax assets at acquisition.  Upon acquisition, FHC incurred an ownership change within the meaning of Section 382 of the Internal Revenue Code, but the acquisition did not result in built-in losses within the meaning of Section 382. At February 6, 2015, FHC had an estimated $1.7 million in gross federal net operating loss carry forwards expiring in 2030, 2032 and 2033 and $303 thousand in federal alternative minimum tax credits with an indefinite life.  As a result of the ownership change, the Company’s ability to benefit from the use of FHC’s pre-ownership change net operating loss and tax credit carry forwards will be limited to approximately $366 thousand per year.  No valuation allowance was established against the deferred tax assets associated with FHC’s pre-change net operating losses and tax credit carry forwards based on management’s estimate that none of the amounts will expire unused.

The assets and liabilities associated with the acquisition of FHC were recorded in the Consolidated Balance Sheets at estimated fair value as of the acquisition date. The following allocation is based on the information that was available to make preliminary estimates of the fair value and may change as additional information becomes available and additional analyses are completed. While the Company believes that information provided a reasonable basis for estimating the fair values, it expects that it could 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 date or the date we receive the information about the facts and circumstances that existed at the acquisition date. Subsequent adjustments are, and if necessary, will be retrospectively reflected in future filings. These refinements include: (1) changes in the estimated fair value of loans acquired; (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 and (4) a change in the goodwill caused by the net effect of these adjustments.

(Dollars in thousands)
Consideration paid:
Cash	$	13,395
Fair value of identifiable assets acquired:
Cash and cash equivalents	14,205
Investment securities	34,022
Federal Home Loan Bank stock	874
Loans	162,265
Premises and equipment	2,077
Company-owned life insurance	4,719
Other real estate owned and repossessed assets	1,260
Core deposit intangible	2,410
Other assets	6,462
Total identifiable assets acquired	228,294
Fair value of liabilities assumed:
Deposits	201,453
Long-term debt	13,086
Other liabilities	3,884
Total liabilities assumed	218,423
Fair value of net identifiable assets acquired	9,871
Goodwill recognized in the acquisition	$	3,524

The estimated fair values presented in the above table reflect additional information that the Company obtained following the acquisition, which resulted in changes to certain fair value estimates made as of the acquisition date within the measurement period. Material adjustments to the acquisition date estimated fair values are recorded in the period in which the acquisition occurred and, as a result, previously recorded results have changed. After considering this additional information, the estimated fair value of the deferred tax assets included within “other assets” increased $331 thousand, the estimated fair value of loans decreased $686 thousand and the estimated fair value of long-term debt increased $243 thousand. These revised fair value estimates resulted in a net increase to the recognition of goodwill resulting from acquisition of $598 thousand to $3.5 million, which is recognized in the Consolidated Balance Sheets as of June 30, 2015.

The FHC acquisition resulted in recognition of $3.5 million of goodwill which is the excess of the consideration paid over the fair value of net assets acquired, and is the result of expected operational synergies and other factors.

Loans acquired in the FHC 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 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.

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

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	$	53,807
Contractual cash flows not expected to be collected (nonaccretable difference)	8,084
Expected cash flows	45,723
Interest component of expected cash flows (accretable yield)	5,268
Fair value at acquisition	$	40,455
Excluded from ASC 310-30 accounting:
Unpaid principal balance	$	124,538
Fair value discount	(2,728		)
Fair value at acquisition	121,810
Total fair value at acquisition	$	162,265

FHC’s results of operations have been included in the Company’s financial results since the February 6, 2015 acquisition date. The acquisition was not considered material to the Company’s financial statements; therefore pro forma financial data and related disclosures are not included.

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.  Following the acquisition, the Company contributed $99.5 million of additional capital 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 of 2014.  The Company incurred $260 thousand and $191 thousand of acquisition related expenses related to the acquisition of Talmer West Bank during the three months ended June 30, 2015 and 2014, respectively, and $638 thousand and $1.8 million during the six months ended June 30, 2015 and 2014 respectively. These acquisition related expenses are included within “Bank acquisition and due diligence fees” in the Consolidated Statements of Income.  Twelve 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 as presented in the following table.

(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	571,666
Premises and equipment	6,540
Loan servicing rights	767
Other real estate owned	30,878
Core deposit intangible	3,633
Other assets	62,542
Total identifiable assets acquired	911,909
Fair value of liabilities assumed:
Deposits	857,769
Other liabilities	5,663
Total liabilities assumed	863,432
Fair value of net identifiable assets acquired	48,477
Bargain purchase gain resulting from acquisition	$	41,977

The Talmer West Bank acquisition resulted in a pre-tax bargain purchase gain of $42.0 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.  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	$	331,523
Contractual cash flows not expected to be collected (nonaccretable difference)	86,410
Expected cash flows	245,113
Interest component of expected cash flows (accretable yield)	32,764
Fair value at acquisition	$	212,349
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	$	571,666

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

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INCOME TAXES

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Provision for income taxes is computed by applying an estimated annual effective tax rate, based on our forecast of annual income from continuing operations, and then adjusting for any additional tax effects required to be recorded discreetly 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 June 30,										For the six months ended June 30,
	2015					2014					2015					2014
(Dollars in thousands)	Amount			Rate		Amount			Rate		Amount			Rate		Amount			Rate
Tax based on federal statutory rate	$	9,004		35.0	%	$	5,726		35.0	%	$	13,860		35.0	%	$	18,526		35.0	%
Effect of:
Tax exempt income	(644		)	(2.6	)	(475		)	(2.9	)	(1,275		)	(3.2	)	(1,202		)	(2.3	)
State taxes, net of federal benefit	194			0.8		201			1.2		460			1.2		469			0.9
Change in valuation allowance	—			—		(9,749		)	(59.6	)	—			—		(10,127		)	(19.1	)
Bargain purchase gain	—			—		—			—		—			—		(14,692		)	(27.9	)
Transaction costs	18			0.1		426			2.6		47			0.1		454			0.9
Other, net	(393		)	(1.5	)	(375		)	(2.3	)	(472		)	(1.2	)	670			1.3
Income tax expense (benefit)	$	8,179		31.8	%	$	(4,246	)	(26.0	)%	$	12,620		31.9	%	$	(5,902	)	(11.2	)%

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LOAN SERVICING RIGHTS

6 Months Ended

Jun. 30, 2015

LOAN SERVICING RIGHTS

LOAN SERVICING RIGHTS

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 commercial real estate servicing rights and the origination and purchase of agricultural servicing rights.  Loans serviced for others are not reported as assets in the Consolidated Balance Sheets.

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 June 30, 2015
Fair value, beginning of period	$	621		$	—		$	53,788		$	54,409
Additions from loans sold with servicing retained	—			—			2,933			2,933
Changes in fair value due to:
Reductions from loans paid off during the period	(24		)	—			(1,570		)	(1,594		)
Changes due to valuation inputs or assumptions (1)	(17		)	—			3,163			3,146
Fair value, end of period	$	580		$	—		$	58,314		$	58,894
For the six months ended June 30, 2015
Fair value, beginning of period	$	691		$	—		$	69,907		$	70,598
Additions from loans sold with servicing retained	—			—			5,848			5,848
Reduction from loans sold and servicing rights sold (2)	—			—			(12,702		)	(12,702		)
Changes in fair value due to:
Reductions from loans paid off during the period	(53		)	—			(3,859		)	(3,912		)
Changes due to valuation inputs or assumptions (1)	(58		)	—			(880		)	(938		)
Fair value, end of period	$	580		$	—		$	58,314		$	58,894
Principal balance of loans serviced	$	187,948		$	—		$	5,835,932		$	6,023,880
For the three months ended June 30, 2014
Fair value, beginning of period	$	1,079		$	894		$	75,919		$	77,892
Additions from loans sold with servicing retained	—			57			2,102			2,159
Changes in fair value due to:
Reductions from loans paid off during the period	(11		)	(68		)	(1,668		)	(1,747		)
Changes due to valuation inputs or assumptions (1)	(231		)	(7		)	(3,962		)	(4,200		)
Fair value, end of period	$	837		$	876		$	72,391		$	74,104
For the six months ended June 30, 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	—			123			3,625			3,748
Changes in fair value due to:
Reductions from loans paid off during the period	(68		)	(137		)	(2,404		)	(2,609		)
Changes due to valuation inputs or assumptions (1)	(230		)	(72		)	(6,103		)	(6,405		)
Fair value, end of period	$	837		$	876		$	72,391		$	74,104
Principal balance of loans serviced	$	234,921		$	41,518		$	7,109,497		$	7,385,936

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

(2) $12.7 million of servicing rights were sold during the six months ended June 30, 2015 in connection with the sale of $1.2 billion of principal balance of loans serviced.

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 June 30, 2015 and December 31, 2014.

	Commercial Real Estate			Mortgage
As of June 30, 2015
Prepayment speed	6.08 - 50.00%			3.68 - 36.97%
Weighted average (“WA”) discount rate	19.48		%	9.16		%
WA cost to service/per year	$	470		$	61
WA ancillary income/per year	N/A			35
WA float range	0.56		%	1.19-1.69%
As of December 31, 2014
Prepayment speed	6.41-50.00%			3.63-40.07%
WA discount rate	19.48		%	9.14		%
WA cost to service/per year	$	470		$	61
WA ancillary income/per year	N/A			35
WA float range	0.56		%	1.16-1.74%

The Company realized total loan servicing fee income of $2.5 million and $3.7 million for the three months ended June 30, 2015 and 2014, respectively, and $5.1 million and $7.3 million for the six months ended June 30, 2015 and 2014, 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	Jun. 30, 2015	Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]
Allowance for credit losses on lending-related commitments	$ 617	$ 539
Contingencies and Guarantees
Total commitments	1,331,649	1,039,626
Fixed Rate
Contingencies and Guarantees
Total commitments	704,362	572,067
Variable Rate
Contingencies and Guarantees
Total commitments	627,287	467,559
Commitments to extend credit
Contingencies and Guarantees
Total commitments	1,265,895	966,124
Commitments to extend credit | Fixed Rate
Contingencies and Guarantees
Total commitments	642,049	502,762
Commitments to extend credit | Variable Rate
Contingencies and Guarantees
Total commitments	623,846	463,362
Standby letters of credit
Contingencies and Guarantees
Total commitments standby letters of credit	65,754	73,502
Standby letters of credit | Fixed Rate
Contingencies and Guarantees
Total commitments standby letters of credit	62,313	69,305
Standby letters of credit | Variable Rate
Contingencies and Guarantees
Total commitments standby letters of credit	$ 3,441	$ 4,197

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ALLOWANCE FOR LOAN LOSSES

6 Months Ended

Jun. 30, 2015

Loans and Leases Receivable, Allowance [Abstract]

ALLOWANCE FOR LOAN LOSSES

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 nonaccrual loans and TDRs.

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
June 30, 2015
Uncovered individually evaluated impaired loans
Residential real estate	$	14,124	$	8,401	$	22,525	$	30,095	$	2,280
Commercial real estate	12,684		6,784		19,468		33,628		1,449
Commercial and industrial	3,647		2,069		5,716		12,386		497
Real estate construction	333		236		569		643		66
Consumer	292		249		541		786		144
Total uncovered individually evaluated impaired loans	$	31,080	$	17,739	$	48,819	$	77,538	$	4,436
Covered individually evaluated impaired loans
Residential real estate	$	2,903	$	2,752	$	5,655	$	7,424	$	407
Commercial real estate	4,594		13,429		18,023		24,656		1,950
Commercial and industrial	2,130		808		2,938		5,706		327
Real estate construction	619		46		665		989		—
Consumer	26		1		27		76		—
Total covered individually evaluated impaired loans	$	10,272	$	17,036	$	27,308	$	38,851	$	2,684
December 31, 2014
Uncovered individually evaluated impaired loans
Residential real estate	$	14,316	$	4,268	$	18,584	$	23,080	$	1,110
Commercial real estate	7,609		5,956		13,565		17,016		1,276
Commercial and industrial	915		1,884		2,799		2,807		982
Real estate construction	174		—		174		174		—
Consumer	296		176		472		610		82
Total uncovered individually evaluated impaired loans	$	23,310	$	12,284	$	35,594	$	43,687	$	3,450
Covered individually evaluated impaired loans
Residential real estate	$	2,155	$	2,583	$	4,738	$	6,388	$	417
Commercial real estate	10,400		11,985		22,385		28,755		1,277
Commercial and industrial	1,545		779		2,324		2,668		109
Real estate construction	670		—		670		994		—
Consumer	11		1		12		39		—
Total covered individually evaluated impaired loans	$	14,781	$	15,348	$	30,129	$	38,844	$	1,803

	For the three months ended June 30, 2015				For the six months ended June 30, 2015
(Dollars in thousands)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Uncovered individually evaluated impaired loans
Residential real estate	$	23,128	$	302	$	23,277	$	500
Commercial real estate	20,005		807		20,445		1,282
Commercial and industrial	5,942		93		6,784		282
Real estate construction	580		4		573		25
Consumer	570		10		589		20
Total uncovered individually evaluated impaired loans	$	50,225	$	1,216	$	51,668	$	2,109
Covered individually evaluated impaired loans
Residential real estate	$	5,775	$	98	$	5,803	$	174
Commercial real estate	18,203		260		18,329		497
Commercial and industrial	3,094		89		3,333		161
Real estate construction	842		72		901		79
Consumer	27		1		28		2
Total covered individually evaluated impaired loans	$	27,941	$	520	$	28,394	$	913

	For the three months ended June 30, 2014				For the six months ended June 30, 2014
(Dollars in thousands)	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
Uncovered individually evaluated impaired loans
Residential real estate	$	14,870	$	134	$	15,038	$	279
Commercial real estate	5,686		38		6,280		84
Commercial and industrial	1,668		15		1,676		39
Consumer	34		1		35		2
Total uncovered individually evaluated impaired loans	$	22,258	$	188	$	23,029	$	404
Covered individually evaluated impaired loans
Residential real estate	$	4,364	$	63	$	4,378	$	127
Commercial real estate	17,615		266		17,689		533
Commercial and industrial	2,299		21		2,399		44
Real estate construction	412		—		413		9
Consumer	21		1		22		2
Total covered individually evaluated impaired loans	$	24,711	$	351	$	24,901	$	715

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 June 30, 2015
Allowance for loan losses - uncovered:
Balance at beginning of period	$	10,879		$	11,161		$	9,475		$	1,685		$	1,277		$	34,477
Provision (benefit) for loan losses	282			154			679			(93		)	47			1,069
Gross charge-offs	(1,081		)	(2,929		)	(735		)	(272		)	(256		)	(5,273		)
Recoveries	1,008			3,796			1,326			128			35			6,293
Net (charge-offs) recoveries	(73		)	867			591			(144		)	(221		)	1,020
Ending allowance for loan losses	$	11,088		$	12,182		$	10,745		$	1,448		$	1,103		$	36,566
For the six months ended June 30, 2015
Allowance for loan losses - uncovered:
Balance at beginning of period	$	12,193		$	11,128		$	7,835		$	1,599		$	1,064		$	33,819
Provision (benefit) for loan losses	659			47			3,366			(129		)	538			4,481
Gross charge-offs	(3,218		)	(4,547		)	(2,002		)	(307		)	(579		)	(10,653		)
Recoveries	1,454			5,554			1,546			285			80			8,919
Net (charge-offs) recoveries	(1,764		)	1,007			(456		)	(22		)	(499		)	(1,734		)
Ending allowance for loan losses	$	11,088		$	12,182		$	10,745		$	1,448		$	1,103		$	36,566
As of June 30, 2015
Allowance for loan losses - uncovered:
Individually evaluated for impairment	$	2,280		$	1,449		$	497		$	66		$	144		$	4,436
Collectively evaluated for impairment	3,677			5,185			9,485			584			845			19,776
Accounted for under ASC 310-30	5,131			5,548			763			798			114			12,354
Allowance for loan losses - uncovered:	$	11,088		$	12,182		$	10,745		$	1,448		$	1,103		$	36,566
Balance of uncovered loans:
Individually evaluated for impairment	$	22,525		$	19,468		$	5,716		$	569		$	541		$	48,819
Collectively evaluated for impairment	1,185,771			1,191,695			1,043,907			167,325			169,422			3,758,120
Accounted for under ASC 310-30	226,382			184,620			16,730			7,298			2,157			437,187
Total uncovered loans	$	1,434,678		$	1,395,783		$	1,066,353		$	175,192		$	172,120		$	4,244,126
For the three months ended June 30, 2014
Allowance for loan losses - uncovered:
Balance at beginning of period	$	9,896		$	6,776		$	4,757		$	1,083		$	259		$	22,771
Provision (benefit) for loan losses	695			2,786			425			(618		)	(69		)	3,219
Gross charge-offs	(1,381		)	(3,586		)	(481		)	(28		)	(57		)	(5,533		)
Recoveries	540			1,870			439			961			93			3,903
Net (charge-offs) recoveries	(841		)	(1,716		)	(42		)	933			36			(1,630		)
Ending allowance for loan losses	$	9,750		$	7,846		$	5,140		$	1,398		$	226		$	24,360
For the six months ended June 30, 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	3,559			5,924			1,761			(1,483		)	(118		)	9,643
Gross charge-offs	(2,817		)	(4,831		)	(626		)	(109		)	(123		)	(8,506		)
Recoveries	1,300			2,486			601			963			127			5,477
Net (charge-offs) recoveries	(1,517		)	(2,345		)	(25		)	854			4			(3,029		)
Ending allowance for loan losses	$	9,750		$	7,846		$	5,140		$	1,398		$	226		$	24,360

(Dollars in thousands)	Residential real estate		Commercial real estate		Commercial and industrial		Real estate construction		Consumer		Total
As of December 31, 2014
Allowance for loan losses - uncovered:
Individually evaluated for impairment	$	1,110	$	1,276	$	982	$	—	$	82	$	3,450
Collectively evaluated for impairment	4,850		4,623		5,968		649		820		16,910
Accounted for under ASC 310-30	6,233		5,229		885		950		162		13,459
Allowance for loan losses - uncovered:	$	12,193	$	11,128	$	7,835	$	1,599	$	1,064	$	33,819
Balance of uncovered loans:
Individually evaluated for impairment	$	18,584	$	13,565	$	2,799	$	174	$	472	$	35,594
Collectively evaluated for impairment	1,167,905		1,107,225		851,179		123,203		161,663		3,411,175
Accounted for under ASC 310-30	239,523		190,148		15,499		8,309		2,389		455,868
Total uncovered loans	$	1,426,012	$	1,310,938	$	869,477	$	131,686	$	164,524	$	3,902,637

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 June 30, 2015
Allowance for loan losses - covered:
Balance at beginning of period	$	4,159		$	9,904		$	2,812		$	1,075		$	38		$	17,988
Provision (benefit) for loan losses	(162		)	(6,267		)	(2,083		)	207			(77		)	(8,382		)
Gross charge-offs	(152		)	(777		)	(1,274		)	(454		)	(7		)	(2,664		)
Recoveries	251			6,306			2,638			126			77			9,398
Net (charge-offs) recoveries	99			5,529			1,364			(328		)	70			6,734
Ending allowance for loan losses	$	4,096		$	9,166		$	2,093		$	954		$	31		$	16,340
For the six months ended June 30, 2015
Allowance for loan losses - covered:
Balance at beginning of period	$	3,981		$	13,663		$	2,577		$	1,086		$	46		$	21,353
Provision (benefit) for loan losses	151			(8,700		)	(1,558		)	326			(20		)	(9,801		)
Gross charge-offs	(476		)	(4,588		)	(2,091		)	(962		)	(165		)	(8,282		)
Recoveries	440			8,791			3,165			504			170			13,070
Net (charge-offs) recoveries	(36		)	4,203			1,074			(458		)	5			4,788
Ending allowance for loan losses	$	4,096		$	9,166		$	2,093		$	954		$	31		$	16,340
As of June 30, 2015
Allowance for loan losses - covered:
Individually evaluated for impairment	$	407		$	1,950		$	327		$	—		$	—		$	2,684
Collectively evaluated for impairment	222			4			29			—			1			256
Accounted for under ASC 310-30	3,467			7,212			1,737			954			30			13,400
Allowance for loan losses - covered:	$	4,096		$	9,166		$	2,093		$	954		$	31		$	16,340
Balance of covered loans:
Individually evaluated for impairment	$	5,655		$	18,023		$	2,938		$	665		$	27		$	27,308
Collectively evaluated for impairment	15,061			1,153			3,636			—			57			19,907
Accounted for under ASC 310-30	75,655			124,722			18,220			6,761			8,274			233,632
Total covered loans	$	96,371		$	143,898		$	24,794		$	7,426		$	8,358		$	280,847
For the three months ended June 30, 2014
Allowance for loan losses - covered:
Balance at beginning of period	$	5,077		$	24,062		$	6,759		$	2,003		$	99		$	38,000
Provision (benefit) for loan losses	91			(5,848		)	(1,411		)	(95		)	(58		)	(7,321		)
Gross charge-offs	(412		)	(1,209		)	(1,500		)	(979		)	(30		)	(4,130		)
Recoveries	556			4,270			692			590			86			6,194
Net (charge-offs) recoveries	144			3,061			(808		)	(389		)	56			2,064
Ending allowance for loan losses	$	5,312		$	21,275		$	4,540		$	1,519		$	97		$	32,743
For the six months ended June 30, 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	783			(7,839		)	(2,501		)	(178		)	(84		)	(9,819		)
Gross charge-offs	(1,275		)	(3,195		)	(2,527		)	(1,004		)	(77		)	(8,078		)
Recoveries	1,108			5,915			2,341			717			178			10,259
Net (charge-offs) recoveries	(167		)	2,720			(186		)	(287		)	101			2,181
Ending allowance for loan losses	$	5,312		$	21,275		$	4,540		$	1,519		$	97		$	32,743

(Dollars in thousands)	Residential real estate		Commercial real estate		Commercial and industrial		Real estate construction		Consumer		Total
As of December 31, 2014
Allowance for loan losses - covered:
Individually evaluated for impairment	$	417	$	1,277	$	109	$	—	$	—	$	1,803
Collectively evaluated for impairment	123		57		89		7		1		277
Accounted for under ASC 310-30	3,441		12,329		2,379		1,079		45		19,273
Allowance for loan losses - covered:	$	3,981	$	13,663	$	2,577	$	1,086	$	46	$	21,353
Balance of covered loans:
Individually evaluated for impairment	$	4,738	$	22,385	$	2,324	$	670	$	12	$	30,129
Collectively evaluated for impairment	16,973		3,391		6,572		304		84		27,324
Accounted for under ASC 310-30	86,515		160,886		23,752		8,415		9,469		289,037
Total covered loans	$	108,226	$	186,662	$	32,648	$	9,389	$	9,565	$	346,490

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SECURITIES (Details 3) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Securities with contractual maturities:
Within one year	$ 5,921
After one year through five years	142,325
After five years through ten years	185,443
After ten years	508,392
Total available-for-sale securities, amortized cost	842,081	$ 734,674
Securities with contractual maturities:
Within one year	5,954
After one year through five years	143,842
After five years through ten years	185,589
After ten years	509,934
Total securities available-for-sale	845,319	740,819
Amortized Cost - Held To Maturity
After one year through five years	1,692
Total securities held-to-maturity, amortized cost	1,692	1,226
Fair Value - Held To Maturity
After one year through five years	1,692
Total securities held-to-maturity	1,692	1,226
Available-for-sale securities pledged as collateral
Securities with amortized cost pledged to secure borrowings and deposits	$ 453,200	$ 337,800

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SECURITIES

6 Months Ended

Jun. 30, 2015

Investments, Debt and Equity Securities [Abstract]

SECURITIES

SECURITIES

The following summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses.

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2015
Securities available-for-sale:
U.S. government sponsored agency obligations	$	97,860	$	819	$	(396	)	$	98,283
Obligations of state and political subdivisions:
Taxable	4,361		7		(7		)	4,361
Tax-exempt	271,102		2,601		(1,949		)	271,754
SBA Pools	31,960		389		—			32,349
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	332,457		2,766		(1,189		)	334,034
Privately issued	26,604		1		(145		)	26,460
Privately issued commercial mortgage-backed securities	19,547		12		(50		)	19,509
Corporate debt securities	58,190		445		(66		)	58,569
Total securities available-for-sale	$	842,081	$	7,040	$	(3,802	)	$	845,319

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Securities held-to-maturity	$	1,692	$	—	$	—	$	1,692

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2014
Securities available-for-sale:
U.S. government sponsored agency obligations	$	97,746	$	791	$	(179	)	$	98,358
Obligations of state and political subdivisions:
Taxable	397		—		—			397
Tax-exempt	229,404		3,578		(723		)	232,259
SBA Pools	33,824		209		(100		)	33,933
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	289,156		2,886		(283		)	291,759
Privately issued	18,814		27		(41		)	18,800
Privately issued commercial mortgage-backed securities	5,127		3		—			5,130
Corporate debt securities	60,206		209		(232		)	60,183
Total securities available-for-sale	$	734,674	$	7,703	$	(1,558	)	$	740,819

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Securities held-to-maturity	$	1,226	$	—	$	—	$	1,226

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

	For the three months ended June 30,				For the six months ended June 30,
(Dollars in thousands)	2015		2014		2015			2014
Proceeds	$	135	$	—	$	24,750		$	54,211
Gross gains	6		—		9			—
Gross losses	—		—		(110		)	(2,310		)

The amortized cost and fair value of debt securities by contractual maturity at June 30, 2015 are shown below. Contractual maturity is utilized for 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.

	June 30, 2015
(Dollars in thousands)	Amortized Cost		Fair Value
Securities with contractual maturities:
Within one year	$	5,921	$	5,954
After one year through five years	142,325		143,842
After five years through ten years	185,443		185,589
After ten years	508,392		509,934
Total securities available-for-sale	$	842,081	$	845,319
Securities held-to-maturity:
After one year through five years	$	1,692	$	1,692
Total securities held-to-maturity	$	1,692	$	1,692

Securities with a carrying value of $453.2 million and $337.8 million were pledged at June 30, 2015 and December 31, 2014, respectively, to secure borrowings and deposits.

At June 30, 2015 and December 31, 2014, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

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
June 30, 2015
U.S. government sponsored agency obligations	$	54,604	$	(396	)	$	—	$	—		$	54,604	$	(396	)
Obligations of state and political subdivisions:
Taxable	953		(7		)	—		—			953		(7		)
Tax-exempt	137,675		(1,730		)	8,026		(219		)	145,701		(1,949		)
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	112,083		(1,164		)	907		(25		)	112,990		(1,189		)
Privately issued	25,984		(145		)	—		—			25,984		(145		)
Privately issued commercial mortgage-backed securities	14,398		(50		)	—		—			14,398		(50		)
Corporate debt securities	21,237		(64		)	448		(2		)	21,685		(66		)
Total securities available-for-sale	$	366,934	$	(3,556	)	$	9,381	$	(246	)	$	376,315	$	(3,802	)
December 31, 2014
U.S. government sponsored agency obligations	$	—	$	—		$	14,821	$	(179	)	$	14,821	$	(179	)
Obligations of state and political subdivisions:
Tax-exempt	31,054		(260		)	33,650		(463		)	64,704		(723		)
SBA Pools	1,844		(4		)	17,682		(96		)	19,526		(100		)
Residential mortgage-backed securities:
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises	36,261		(85		)	27,361		(198		)	63,622		(283		)
Privately issued	7,801		(41		)	8		—			7,809		(41		)
Corporate debt securities	22,520		(162		)	8,912		(70		)	31,432		(232		)
Total securities available-for-sale	$	99,480	$	(552	)	$	102,434	$	(1,006	)	$	201,914	$	(1,558	)

As of June 30, 2015, the Company’s security portfolio consisted of 375 securities, 151 of which were in an unrealized loss position. The unrealized losses for these securities resulted primarily from changes in benchmark U.S. Treasury 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 June 30, 2015.

The unrealized losses are spread across asset classes, primarily in those securities carrying fixed interest rates. At June 30, 2015, the combination of these security asset class holdings in an unrealized loss position had an estimated fair value of $376.3 million with gross unrealized losses of $3.8 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 in select assets classes since their respective acquisition dates.

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LOANS

6 Months Ended

Jun. 30, 2015

Loans and Leases Receivable Disclosure [Abstract]

LOANS

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 lines 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, service industry, professional service areas and agricultural.  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 June 30, 2015 and December 31, 2014 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
June 30, 2015
Residential real estate	$	75,655	$	20,716	$	96,371	$	226,382	$	1,208,296	$	1,434,678	$	1,531,049
Commercial real estate	124,722		19,176		143,898		184,620		1,211,163		1,395,783		1,539,681
Commercial and industrial	18,220		6,574		24,794		16,730		1,049,623		1,066,353		1,091,147
Real estate construction	6,761		665		7,426		7,298		167,894		175,192		182,618
Consumer	8,274		84		8,358		2,157		169,963		172,120		180,478
Total	$	233,632	$	47,215	$	280,847	$	437,187	$	3,806,939	$	4,244,126	$	4,524,973	(1)
December 31, 2014
Residential real estate	$	86,515	$	21,711	$	108,226	$	239,523	$	1,186,489	$	1,426,012	$	1,534,238
Commercial real estate	160,886		25,776		186,662		190,148		1,120,790		1,310,938		1,497,600
Commercial and industrial	23,752		8,896		32,648		15,499		853,978		869,477		902,125
Real estate construction	8,415		974		9,389		8,309		123,377		131,686		141,075
Consumer	9,469		96		9,565		2,389		162,135		164,524		174,089
Total	$	289,037	$	57,453	$	346,490	$	455,868	$	3,446,769	$	3,902,637	$	4,249,127	(1)

(1) Reported net of deferred fees totaling $2.7 million and $4.6 million at June 30, 2015 and December 31, 2014, 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 acquisitions, other real estate owned obtained through foreclosure and other repossessed assets.

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:

(Dollars in thousands)	June 30, 2015		December 31, 2014
Uncovered nonperforming assets
Nonaccrual loans
Residential real estate	$	20,133	$	17,374
Commercial real estate	15,727		13,756
Commercial and industrial	3,119		3,550
Real estate construction	438		174
Consumer	308		257
Total nonaccrual loans	39,725		35,111
Other real estate owned and repossessed assets (1)	37,612		36,872
Total uncovered nonperforming assets	77,337		71,983
Covered nonperforming assets
Nonaccrual loans
Residential real estate	2,071		1,848
Commercial real estate	14,968		15,723
Commercial and industrial	2,369		3,560
Real estate construction	365		713
Consumer	20		13
Total nonaccrual loans	19,793		21,857
Other real estate owned and repossessed assets	8,261		10,719
Total covered nonperforming assets	28,054		32,576
Total nonperforming assets	$	105,391	$	104,559
Uncovered loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30
Residential real estate	$	120	$	12
Commercial and industrial	4		—
Real estate construction	5		—
Consumer	211		41
Total loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30	$	340	$	53

(1) Excludes closed branches and operating facilities.

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

	June 30, 2015
(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	$	3,973	$	3,005	$	8,739	$	15,717	$	1,192,579	$	1,208,296	$	120
Commercial real estate	3,589		1,764		10,985		16,338		1,194,825		1,211,163		—
Commercial and industrial	6,184		42		2,465		8,691		1,040,932		1,049,623		4
Real estate construction	151		243		173		567		167,327		167,894		5
Consumer	1,203		517		329		2,049		167,914		169,963		211
Total	$	15,100	$	5,571	$	22,691	$	43,362	$	3,763,577	$	3,806,939	$	340
Covered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	537	$	140	$	1,307	$	1,984	$	18,732	$	20,716	$	—
Commercial real estate	101		—		2,350		2,451		16,725		19,176		—
Commercial and industrial	29		67		2,308		2,404		4,170		6,574		—
Real estate construction	—		—		288		288		377		665		—
Consumer	—		—		2		2		82		84		—
Total	$	667	$	207	$	6,255	$	7,129	$	40,086	$	47,215	$	—

	December 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	$	11,709	$	2,044	$	9,593	$	23,346	$	1,163,143	$	1,186,489	$	12
Commercial real estate	4,870		1,083		11,333		17,286		1,103,504		1,120,790		—
Commercial and industrial	4,679		184		2,960		7,823		846,155		853,978		—
Real estate construction	1,004		136		174		1,314		122,063		123,377		—
Consumer	964		152		150		1,266		160,869		162,135		41
Total	$	23,226	$	3,599	$	24,210	$	51,035	$	3,395,734	$	3,446,769	$	53
Covered loans, excluding loans accounted for under ASC 310-30
Residential real estate	$	238	$	35	$	1,179	$	1,452	$	20,259	$	21,711	$	—
Commercial real estate	—		—		4,569		4,569		21,207		25,776		—
Commercial and industrial	373		7		2,923		3,303		5,593		8,896		—
Real estate construction	—		—		710		710		264		974		—
Consumer	—		—		2		2		94		96		—
Total	$	611	$	42	$	9,383	$	10,036	$	47,417	$	57,453	$	—

Impaired Loans

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

(Dollars in thousands)	June 30, 2015		December 31, 2014
Uncovered
Nonaccrual loans	$	39,725	$	35,111
Performing troubled debt restructurings:
Residential real estate	2,392		1,368
Commercial real estate	3,741		3,785
Commercial and industrial	2,597		840
Real estate construction	131		90
Consumer	233		234
Total uncovered performing troubled debt restructurings	9,094		6,317
Total uncovered impaired loans	$	48,819	$	41,428
Covered
Nonaccrual loans	$	19,793	$	21,857
Performing troubled debt restructurings:
Residential real estate	3,584		3,046
Commercial real estate	3,055		9,017
Commercial and industrial	569		1,137
Real estate construction	300		264
Consumer	7		—
Total covered performing troubled debt restructurings	7,515		13,464
Total covered impaired loans	$	27,308	$	35,321

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 effective yield after the modification is less than the effective yield at the time the loan was acquired in association with consideration of qualitative factors included within ASC 310-40, “Receivables — Troubled Debt Restructurings by Creditors” (“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 June 30, 2015, there were $28.1 million of nonperforming TDRs and $16.6 million of performing TDRs included in impaired loans.  As of December 31, 2014, there were $25.0 million of nonperforming TDRs and $19.8 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. If a TDR is subsequently restructured under current market terms, no cumulative concession has been granted to the borrower and the borrower is not experiencing financial difficulties, which is documented by a current credit evaluation, the loan is no longer required to be reported as a TDR.

The following tables present the recorded investment of loans modified in TDRs during the three and six months ended June 30, 2015 and 2014 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 June 30, 2015		Net charge-offs (recoveries)			Provision (benefit) for loan losses (2)
For the three months ended June 30, 2015
Uncovered
Residential real estate	$	403	$	114	$	224	$	—	17	$	741	$	—		$	162
Commercial real estate	93		—		1,304		532		9	1,929		—			—
Commercial and industrial	231		—		542		152		14	925		192			232
Real estate construction	44		—		72		—		2	116		—			—
Consumer	17		—		—		—		1	17		—			—
Total uncovered	$	788	$	114	$	2,142	$	684	43	$	3,728	$	192		$	394
Covered
Residential real estate	$	747	$	—	$	112	$	—	6	$	859	$	—		$	5
Commercial real estate	—		—		2,442		—		8	2,442		—			2
Real estate construction	46		—		76		—		2	122		30			30
Total covered	$	793	$	—	$	2,630	$	—	16	$	3,423	$	30		$	37
Total loans	$	1,581	$	114	$	4,772	$	684	59	$	7,151	$	222		$	431
For the six months ended June 30, 2015
Uncovered
Residential real estate	$	1,286	$	114	$	785	$	—	26	$	2,185	$	1		$	192
Commercial real estate	93		—		1,402		1,639		12	3,134		37			129
Commercial and industrial	567		—		1,254		178		22	1,999		192			280
Real estate construction	44		—		72		130		3	246		—			—
Consumer	17		—		—		—		1	17		—			—
Total uncovered	$	2,007	$	114	$	3,513	$	1,947	64	$	7,581	$	230		$	601
Covered
Residential real estate	$	812	$	—	$	187	$	—	9	$	999	$	5		$	77
Commercial real estate	—		—		2,694		—		10	2,694		—			81
Commercial and industrial	—		—		95		—		1	95		—			92
Real estate construction	46		—		76		—		2	122		(8		)	(8		)
Consumer	15		—		—		—		1	15		—			—
Total covered	$	873	$	—	$	3,052	$	—	23	$	3,925	$	(3	)	$	242
Total loans	$	2,880	$	114	$	6,565	$	1,947	87	$	11,506	$	227		$	843

(1) Loan forgiveness related to loans modified in TDRs for both the three and six months ended June 30, 2015 totaled $187 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											Financial effects of modification
(Dollars in thousands)	Principal deferral		Principal Reduction (1)		Interest rate		Forbearance agreement		Total number of loans	Total recorded investment at June 30, 2014		Net  charge-offs (recoveries)			Provision for loan losses (2)
For the three months ended June 30, 2014
Uncovered
Residential real estate	$	144	$	159	$	—	$	147	9	$	450	$	—		$	22
Commercial real estate	—		—		180		99		3	279		—			—
Commercial and industrial	7		—		61		—		6	68		—			(3		)
Consumer	—		88		—		—		2	88		—			—
Total uncovered	$	151	$	247	$	241	$	246	20	$	885	$	—		$	19
Covered
Residential real estate	$	—	$	14	$	345	$	—	9	$	359	$	—		$	22
Commercial real estate	—		—		652		—		2	652		—			6
Commercial and industrial	—		—		177		100		5	277		—			11
Total covered	$	—	$	14	$	1,174	$	100	16	$	1,288	$	—		$	39
Total loans	$	151	$	261	$	1,415	$	346	36	$	2,173	$	—		$	58
For the six months ended June 30, 2014
Uncovered
Residential real estate	$	144	$	227	$	230	$	147	15	$	748	$	—		$	127
Commercial real estate	—		—		894		1,026		8	$	1,920	(9		)	197
Commercial and industrial	50		—		61		117		11	$	228	—			31
Consumer	—		88		—		—		2	88		—			26
Total uncovered	$	194	$	315	$	1,185	$	1,290	36	$	2,984	$	(9	)	$	381
Covered
Residential real estate	$	113	$	14	$	345	$	—	14	$	472	$	6		$	29
Commercial real estate	—		—		652		446		3	$	1,098	—			66
Commercial and industrial	—		—		203		100		8	303		—			14
Total covered	$	113	$	14	$	1,200	$	546	25	$	1,873	$	6		$	109
Total loans	$	307	$	329	$	2,385	$	1,836	61	$	4,857	$	(3	)	$	490

(1) Loan forgiveness related to loans modified in TDRs for the three and six months ended June 30, 2014 totaled $51 thousand and $178 thousand, respectively.

(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 quarterly 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 and six months ended June 30, 2015 and 2014, including the recorded investment as of June 30, 2015 and 2014.  A payment on a TDR is considered to be in default once it is greater than 30 days past due.

	For the three months ended June 30, 2015					For the six months ended June 30, 2015
(Dollars in thousands)	Total number of loans	Total recorded investment at June 30, 2015		Charged off following a subsequent default		Total number of loans	Total recorded investment at June 30, 2015		Charged off following a subsequent default
Uncovered
Residential real estate	14	$	1,701	$	—	18	$	1,875	$	29
Commercial real estate	11	2,812		144		11	2,812		218
Commercial and industrial	3	30		—		3	30		—
Total uncovered	28	4,543		144		32	4,717		247
Covered
Residential real estate	3	111		—		3	111		—
Commercial real estate	1	130		—		1	130		—
Commercial and industrial	1	95		—		1	95		—
Total covered	5	336		—		5	336		—
Total loans	33	$	4,879	$	144	37	$	5,053	$	247

	For the three months ended June 30, 2014					For the six months ended June 30, 2014
(Dollars in thousands)	Total number of loans	Total recorded investment at June 30, 2014		Charged off following a subsequent default		Total number of loans	Total recorded investment at June 30, 2014		Charged off following a subsequent default
Uncovered
Residential real estate	14	$	951	$	13	20	$	1,245	$	95
Commercial real estate	1	546		—		3	1,797		176
Commercial and industrial	2	135		—		2	135		—
Consumer	1	—		—		3	—		—
Total uncovered	18	1,632		13		28	3,177		271
Covered
Residential real estate	5	175		—		7	219		12
Commercial real estate	2	546		—		6	669		—
Commercial and industrial	2	53		—		9	188		2
Real estate construction	—	—		—		1	346		483
Consumer	1	—		—		2	—		—
Total covered	10	774		—		25	1,422		497
Total loans	28	$	2,406	$	13	53	$	4,599	$	768

At June 30, 2015, commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled $352 thousand.

The terms of certain other loans that were modified during the years ended June 30, 2015 and 2014 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 a lower effective yield 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 (1)		Total
June 30, 2015
Uncovered loans
Commercial real estate	$	1,250,671	$	47,245	$	97,867	$	—	$	1,395,783
Commercial and industrial	1,008,042		35,986		22,325		—		1,066,353
Real estate construction	169,484		71		5,637		—		175,192
Total	$	2,428,197	$	83,302	$	125,829	$	—	$	2,637,328
Covered loans
Commercial real estate	$	88,649	$	6,565	$	48,684	$	—	$	143,898
Commercial and industrial	13,396		932		10,466		—		24,794
Real estate construction	4,144		67		3,215		—		7,426
Total	$	106,189	$	7,564	$	62,365	$	—	$	176,118
December 31, 2014
Uncovered loans
Commercial real estate	$	1,153,132	$	63,567	$	94,239	$	—	$	1,310,938
Commercial and industrial	824,239		29,511		15,727		—		869,477
Real estate construction	123,822		1,981		5,883		—		131,686
Total	$	2,101,193	$	95,059	$	115,849	$	—	$	2,312,101
Covered loans
Commercial real estate	$	102,952	$	16,073	$	67,637	$	—	$	186,662
Commercial and industrial	16,718		1,875		14,055		—		32,648
Real estate construction	3,817		792		4,780		—		9,389
Total	$	123,487	$	18,740	$	86,472	$	—	$	228,699

(1)Prior to January 1, 2015, all nonaccrual loans were included in the “Doubtful” risk category. After further review of regulatory guidance, we have reclassified nonaccrual loans with a determinable value to the “Substandard” risk category; therefore, “Substandard” now includes accrual and nonaccrual loans. This change in classification has been made retrospectively and the reclassification is presented within the December 31, 2014 disclosure.

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
June 30, 2015
Uncovered loans
Residential real estate	$	1,414,545	$	20,133	$	1,434,678
Consumer	171,812		308		172,120
Total	$	1,586,357	$	20,441	$	1,606,798
Covered loans
Residential real estate	$	94,300	$	2,071	$	96,371
Consumer	8,338		20		8,358
Total	$	102,638	$	2,091	$	104,729
December 31, 2014
Uncovered
Residential real estate	$	1,408,638	$	17,374	$	1,426,012
Consumer	164,267		257		164,524
Total	$	1,572,905	$	17,631	$	1,590,536
Covered loans
Residential real estate	$	106,378	$	1,848	$	108,226
Consumer	9,552		13		9,565
Total	$	115,930	$	1,861	$	117,791

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ACQUIRED LOANS AND LOSS SHARE ACCOUNTING

6 Months Ended

Jun. 30, 2015

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities [Abstract]

ACQUIRED LOANS AND LOSS SHARE ACCOUNTING

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 $28.6 million ($24.0 million related to the CF Bancorp acquisition, $4.5 million related to the First Banking Center acquisition and $119 thousand related to the Peoples State Bank acquisition) at June 30, 2015 compared to $26.9 million ($22.6 million related to the CF Bancorp acquisition, $4.3 million related to the First Banking Center acquisition and $4 thousand related to the Peoples State Bank acquisition) at December 31, 2014.

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, Talmer West Bank and First of Huron, Corp. 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 June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Balance at beginning of period	$	278,825		$	311,171		$	277,058		$	302,287
Additions due to acquisitions	—			—			5,268			32,764
Discount accretion	(19,242		)	(24,342		)	(40,206		)	(47,007		)
Reclassifications from nonaccretable discount and other additions to accretable discount due to results of cash flow re-estimations	21,642			24,543			51,073			40,907
Other activity, net (1)	(21,161		)	(13,952		)	(33,129		)	(31,531		)
Balance at end of period	$	260,064		$	297,420		$	260,064		$	297,420

(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.  To the extent impairment is recorded on covered loans, 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.  To the extent improvement relates to covered loans, 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 resulting in yield adjustments on a prospective basis during the three months ended June 30, 2015 and 2014 for both covered and uncovered purchased credit impaired loans was $21.6 million and $24.5 million, respectively.  During the six months ended June 30, 2015 and 2014, the total identified improvement in the cash flow expectations was $51.1 million and $40.9 million respectively. 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 June 30, 2015 and December 31, 2014.

(Dollars in thousands)	June 30, 2015			December 31, 2014
Contractual cash flows	$	1,163,849		$	1,281,482
Non-accretable difference	(232,966		)	(259,519		)
Accretable yield	(260,064		)	(277,058		)
Loans accounted for under ASC 310-30	$	670,819		$	744,905

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 June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Benefit for loan losses - covered:
Net impairment recorded as a result of re-estimation of cash flows on loans accounted for under ASC 310-30 (1)	$	1,223		$	1,066		$	2,938		$	2,365
Additional benefit recorded, net of charge-offs, for covered loans	(9,605		)	(8,387		)	(12,739		)	(12,184		)
Total benefit for loan losses-covered	$	(8,382	)	$	(7,321	)	$	(9,801	)	$	(9,819	)
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)	765			1,923			1,042			3,504
Expense recorded, to offset benefit, for covered loans	(6,534		)	(5,942		)	(8,324		)	(7,459		)
Total loss sharing expense due to provision for loan losses-covered	(5,769		)	(4,019		)	(7,282		)	(3,955		)
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)	458			(857		)	1,896			(1,139		)
Net income recorded, for covered loans including those accounted for under ASC 310-20 and ASC 310-40	(3,071		)	(2,445		)	(4,415		)	(4,725		)
Net (increase) decrease to income before taxes	$	(2,613	)	$	(3,302	)	$	(2,519	)	$	(5,864	)

(1) The results of re-estimations also included cash flow improvements to be recognized prospectively as an adjustment to the accretable yield on the related covered loans of $8.6 million and $8.0 million for the three months ended June 30, 2015 and 2014, respectively, and $16.7 million and $16.4 million for the six months ended June 30, 2015 and 2014, respectively.

The following table summarizes the activity related to the FDIC indemnification asset and the FDIC receivable for the three and six months ended June 30, 2015 and 2014.  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  June 30, 2015						For the six months ended June 30, 2015
(Dollars in thousands)	FDIC Indemnification Asset			FDIC Receivable			FDIC Indemnification Asset			FDIC Receivable
Balance at beginning of period	$	50,702		$	7,839		$	67,026		$	6,062
Accretion	(8,548		)	—			(17,798		)	—
Sales and write-downs of other real estate owned (covered)	(475		)	150			(828		)	16
Net effect of change in allowance on covered assets (1)	490			—			(1,200		)	—
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(5,172		)	5,172			(10,203		)	10,203
Decreases due to recoveries net of additional claimable expenses incurred (2)	—			(6,261		)	—			(7,618		)
Claim payments received from the FDIC	—			(1,357		)	—			(3,120		)
Balance at end of period	$	36,997		$	5,543		$	36,997		$	5,543

(1) Primarily includes adjustments for fully claimed and exited loans and the results of remeasurement of expected cash flows under ASC 310-30 accounting.

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

	For the three months ended  June 30, 2014						For the six months ended June 30, 2014
(Dollars in thousands)	FDIC Indemnification Asset			FDIC Receivable			FDIC Indemnification Asset			FDIC Receivable
Balance at beginning of period	$	119,045		$	8,130		$	131,861		$	7,783
Accretion	(5,506		)	—			(12,224		)	—
Sales and write-downs of other real estate owned (covered)	(281		)	(55		)	(753		)	(247		)
Net effect of change in allowance on covered assets (1)	(6,130		)	—			(8,155		)	—
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(4,434		)	4,434			(8,035		)	8,035
Decreases due to recoveries net of additional claimable expenses incurred (2)	—			(3,433		)	—			(4,319		)
Claim payments received from the FDIC	—			(1,878		)	—			(4,054		)
Balance at end of period	$	102,694		$	7,198		$	102,694		$	7,198

(1) Primarily includes adjustments for fully claimed and exited loans and the results of remeasurement of expected cash flows under ASC 310-30 accounting.

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

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LOANS (Details 3) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Loans and Allowance for Loan Losses
90 days or more past due		$ 191
Covered loans
Loans and Allowance for Loan Losses
Total covered loans	$ 280,847	346,490
Covered loans | Residential real estate
Loans and Allowance for Loan Losses
Total covered loans	96,371	108,226
Covered loans | Commercial real estate
Loans and Allowance for Loan Losses
Total covered loans	143,898	186,662
Covered loans | Commercial and industrial
Loans and Allowance for Loan Losses
Total covered loans	24,794	32,648
Covered loans | Real estate construction
Loans and Allowance for Loan Losses
Total covered loans	7,426	9,389
Covered loans | Consumer
Loans and Allowance for Loan Losses
Total covered loans	8,358	9,565
Excluded from ASC 310-30 accounting | Uncovered
Loans and Allowance for Loan Losses
30-59 days past due	15,100	23,226
60-89 days past due	5,571	3,599
90 days or more past due	22,691	24,210
Total past due	43,362	51,035
Current	3,763,577	3,395,734
Total uncovered loans, excluding ASC 310-30	3,806,939	3,446,769
90 days or more past due and still accruing	340	53
Excluded from ASC 310-30 accounting | Uncovered | Residential real estate
Loans and Allowance for Loan Losses
30-59 days past due	3,973	11,709
60-89 days past due	3,005	2,044
90 days or more past due	8,739	9,593
Total past due	15,717	23,346
Current	1,192,579	1,163,143
Total uncovered loans, excluding ASC 310-30	1,208,296	1,186,489
90 days or more past due and still accruing	120	12
Excluded from ASC 310-30 accounting | Uncovered | Commercial real estate
Loans and Allowance for Loan Losses
30-59 days past due	3,589	4,870
60-89 days past due	1,764	1,083
90 days or more past due	10,985	11,333
Total past due	16,338	17,286
Current	1,194,825	1,103,504
Total uncovered loans, excluding ASC 310-30	1,211,163	1,120,790
90 days or more past due and still accruing	0	0
Excluded from ASC 310-30 accounting | Uncovered | Commercial and industrial
Loans and Allowance for Loan Losses
30-59 days past due	6,184	4,679
60-89 days past due	42	184
90 days or more past due	2,465	2,960
Total past due	8,691	7,823
Current	1,040,932	846,155
Total uncovered loans, excluding ASC 310-30	1,049,623	853,978
90 days or more past due and still accruing	4	0
Excluded from ASC 310-30 accounting | Uncovered | Real estate construction
Loans and Allowance for Loan Losses
30-59 days past due	151	1,004
60-89 days past due	243	136
90 days or more past due	173	174
Total past due	567	1,314
Current	167,327	122,063
Total uncovered loans, excluding ASC 310-30	167,894	123,377
90 days or more past due and still accruing	5	0
Excluded from ASC 310-30 accounting | Uncovered | Consumer
Loans and Allowance for Loan Losses
30-59 days past due	1,203	964
60-89 days past due	517	152
90 days or more past due	329	150
Total past due	2,049	1,266
Current	167,914	160,869
Total uncovered loans, excluding ASC 310-30	169,963	162,135
90 days or more past due and still accruing	211	41
Excluded from ASC 310-30 accounting | Covered loans
Loans and Allowance for Loan Losses
30-59 days past due	667	611
60-89 days past due	207	42
90 days or more past due	6,255	9,383
Total past due	7,129	10,036
Current	40,086	47,417
Total covered loans	47,215	57,453
90 days or more past due and still accruing	0	0
Excluded from ASC 310-30 accounting | Covered loans | Residential real estate
Loans and Allowance for Loan Losses
30-59 days past due	537	238
60-89 days past due	140	35
90 days or more past due	1,307	1,179
Total past due	1,984	1,452
Current	18,732	20,259
Total covered loans	20,716	21,711
90 days or more past due and still accruing	0	0
Excluded from ASC 310-30 accounting | Covered loans | Commercial real estate
Loans and Allowance for Loan Losses
30-59 days past due	101	0
60-89 days past due	0	0
90 days or more past due	2,350	4,569
Total past due	2,451	4,569
Current	16,725	21,207
Total covered loans	19,176	25,776
90 days or more past due and still accruing	0	0
Excluded from ASC 310-30 accounting | Covered loans | Commercial and industrial
Loans and Allowance for Loan Losses
30-59 days past due	29	373
60-89 days past due	67	7
90 days or more past due	2,308	2,923
Total past due	2,404	3,303
Current	4,170	5,593
Total covered loans	6,574	8,896
90 days or more past due and still accruing	0	0
Excluded from ASC 310-30 accounting | Covered loans | Real estate construction
Loans and Allowance for Loan Losses
30-59 days past due	0	0
60-89 days past due	0	0
90 days or more past due	288	710
Total past due	288	710
Current	377	264
Total covered loans	665	974
90 days or more past due and still accruing	0	0
Excluded from ASC 310-30 accounting | Covered loans | Consumer
Loans and Allowance for Loan Losses
30-59 days past due	0	0
60-89 days past due	0	0
90 days or more past due	2	2
Total past due	2	2
Current	82	94
Total covered loans	84	96
90 days or more past due and still accruing	$ 0	$ 0

XML

COMMITMENTS, CONTINGENCIES AND GUARANTEES (Details 2) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Contingencies and Guarantees
Warranty liabilities	$ 2,000	$ 4,000
Performance guarantee
Contingencies and Guarantees
Outstanding balance of loans	26,800	39,800
Maximum potential amount of undiscounted future payments	20,200	31,600
Recourse liability	170	355
Standby letters of credit
Contingencies and Guarantees
Standby letters of credit outstanding	$ 65,800	$ 73,500

XML

LOANS (Details 5) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Information as to total impaired loans
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
Nonperforming assets
Information as to total impaired loans
Troubled debt restructurings	$ 28.1	$ 25.0
Performing assets
Information as to total impaired loans
Troubled debt restructurings	$ 16.6	$ 19.8

XML

LOANS (Details 2) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Uncovered
Information on nonperforming assets
Nonaccrual loans	$ 39,725	$ 35,111
Uncovered | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	340	53
Covered loans
Information on nonperforming assets
Nonaccrual loans	19,793	21,857
Covered loans | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	0	0
Nonperforming assets
Information on nonperforming assets
Total assets	105,391	104,559
Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	39,725	35,111
Other real estate owned and repossessed assets	37,612	36,872
Total assets	77,337	71,983
Nonperforming assets | Covered loans
Information on nonperforming assets
Nonaccrual loans	19,793	21,857
Other real estate owned and repossessed assets	8,261	10,719
Total assets	28,054	32,576
Residential real estate | Uncovered | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	120	12
Residential real estate | Covered loans | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	0	0
Residential real estate | Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	20,133	17,374
Residential real estate | Nonperforming assets | Covered loans
Information on nonperforming assets
Nonaccrual loans	2,071	1,848
Commercial real estate | Uncovered | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	0	0
Commercial real estate | Covered loans | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	0	0
Commercial real estate | Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	15,727	13,756
Commercial real estate | Nonperforming assets | Covered loans
Information on nonperforming assets
Nonaccrual loans	14,968	15,723
Commercial and industrial | Uncovered | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	4	0
Commercial and industrial | Covered loans | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	0	0
Commercial and industrial | Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	3,119	3,550
Commercial and industrial | Nonperforming assets | Covered loans
Information on nonperforming assets
Nonaccrual loans	2,369	3,560
Real estate construction | Uncovered | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	5	0
Real estate construction | Covered loans | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	0	0
Real estate construction | Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	438	174
Real estate construction | Nonperforming assets | Covered loans
Information on nonperforming assets
Nonaccrual loans	365	713
Consumer | Uncovered | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	211	41
Consumer | Covered loans | Excluded from ASC 310-30 accounting
Information on nonperforming assets
90 days or more past due and still accruing	0	0
Consumer | Nonperforming assets | Uncovered
Information on nonperforming assets
Nonaccrual loans	308	257
Consumer | Nonperforming assets | Covered loans
Information on nonperforming assets
Nonaccrual loans	$ 20	$ 13

XML

REGULATORY CAPITAL MATTERS (Details) - USD ($)		3 Months Ended		6 Months Ended
	Jul. 29, 2015	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
REGULATORY CAPITAL MATTERS
Capital conservation buffer		2.50%		2.50%
Capital conservation buffer, period				4 years
Total capital to risk-weighted assets
Actual Amount		$ 772,889,000		$ 772,889,000		$ 720,552,000
Actual Ratio		15.00%		15.00%		16.40%
For Capital Adequacy Purposes Amount		$ 412,749,000		$ 412,749,000		$ 350,645,000
For Capital Adequacy Purposes Ratio		8.00%		8.00%		8.00%
Common equity tier 1 capital
Actual Amount		$ 717,196,000		$ 717,196,000
Actual Ratio		13.90%		13.90%
For Capital Adequacy Purposes Amount		$ 232,171,000		$ 232,171,000
For Capital Adequacy Purposes Ratio		4.50%		4.50%
Tier 1 capital to risk-weighted assets
Actual Amount		$ 717,196,000		$ 717,196,000		$ 666,035,000
Actual Ratio		13.90%		13.90%		15.20%
For Capital Adequacy Purposes Amount		$ 309,561,000		$ 309,561,000		$ 175,323,000
For Capital Adequacy Purposes Ratio		6.00%		6.00%		4.00%
Tier 1 leverage ratio
Actual Amount		$ 717,196,000		$ 717,196,000		$ 666,035,000
Actual Ratio		11.50%		11.50%		11.60%
For Capital Adequacy Purposes Amount		$ 249,398,000		$ 249,398,000		$ 230,546,000
For Capital Adequacy Purposes Ratio		4.00%		4.00%		4.00%
Dividend income from subsidiary		$ 0	$ 0	$ 15,000,000	$ 25,000,000
Subsequent Event
Tier 1 leverage ratio
Dividend declared (in dollars per share)	$ 0.01
Talmer Bank and Trust
Total capital to risk-weighted assets
Actual Amount		$ 653,191,000		$ 653,191,000		$ 627,851,000
Actual Ratio		14.20%		14.20%		16.30%
For Capital Adequacy Purposes Amount		$ 368,064,000		$ 368,064,000		$ 308,374,000
For Capital Adequacy Purposes Ratio		8.00%		8.00%		8.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount		$ 460,080,000		$ 460,080,000		$ 385,468,000
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio		10.00%		10.00%		10.00%
Common equity tier 1 capital
Actual Amount		$ 606,576,000		$ 606,576,000
Actual Ratio		13.20%		13.20%
For Capital Adequacy Purposes Amount		$ 207,036,000		$ 207,036,000
For Capital Adequacy Purposes Ratio		4.50%		4.50%
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount		$ 299,052,000		$ 299,052,000
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio		6.50%		6.50%
Tier 1 capital to risk-weighted assets
Actual Amount		$ 606,576,000		$ 606,576,000		$ 579,604,000
Actual Ratio		13.20%		13.20%		15.00%
For Capital Adequacy Purposes Amount		$ 276,048,000		$ 276,048,000		$ 154,187,000
For Capital Adequacy Purposes Ratio		6.00%		6.00%		4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount		$ 368,064,000		$ 368,064,000		$ 231,281,000
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio		8.00%		8.00%		6.00%
Tier 1 leverage ratio
Actual Amount		$ 606,576,000		$ 606,576,000		$ 579,604,000
Actual Ratio		11.10%		11.10%		11.60%
For Capital Adequacy Purposes Amount		$ 217,889,000		$ 217,889,000		$ 200,128,000
For Capital Adequacy Purposes Ratio		4.00%		4.00%		4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount		$ 272,361,000		$ 272,361,000		$ 250,160,000
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio		5.00%		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%		20.00%
Talmer West Bank
Total capital to risk-weighted assets
Actual Amount		$ 136,659,000		$ 136,659,000		$ 101,926,000
Actual Ratio		24.80%		24.80%		19.60%
For Capital Adequacy Purposes Amount		$ 44,168,000		$ 44,168,000		$ 41,628,000
For Capital Adequacy Purposes Ratio		8.00%		8.00%		8.00%
Common equity tier 1 capital
Actual Amount		$ 129,474,000		$ 129,474,000
Actual Ratio		23.50%		23.50%
For Capital Adequacy Purposes Amount		$ 24,844,000		$ 24,844,000
For Capital Adequacy Purposes Ratio		4.50%		4.50%
Tier 1 capital to risk-weighted assets
Actual Amount		$ 129,474,000		$ 129,474,000		$ 95,656,000
Actual Ratio		23.50%		23.50%		18.40%
For Capital Adequacy Purposes Amount		$ 33,126,000		$ 33,126,000		$ 20,814,000
For Capital Adequacy Purposes Ratio		6.00%		6.00%		4.00%
Tier 1 leverage ratio
Actual Amount		$ 129,474,000		$ 129,474,000		$ 95,656,000
Actual Ratio		16.60%		16.60%		12.40%
For Capital Adequacy Purposes Amount		$ 31,213,000		$ 31,213,000		$ 30,786,000
For Capital Adequacy Purposes Ratio		4.00%		4.00%		4.00%
Talmer West Bank | Minimum
REGULATORY CAPITAL MATTERS
Total capital (to risk-weighted assets) ratio prescribed in the Consent Order		12.00%		12.00%
Tier 1 capital (to adjusted total assets) ratio prescribed in the Consent Order		9.00%		9.00%

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ACQUIRED LOANS AND LOSS SHARE ACCOUNTING (Tables)

6 Months Ended

Jun. 30, 2015

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities [Abstract]

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

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 June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Balance at beginning of period	$	278,825		$	311,171		$	277,058		$	302,287
Additions due to acquisitions	—			—			5,268			32,764
Discount accretion	(19,242		)	(24,342		)	(40,206		)	(47,007		)
Reclassifications from nonaccretable discount and other additions to accretable discount due to results of cash flow re-estimations	21,642			24,543			51,073			40,907
Other activity, net (1)	(21,161		)	(13,952		)	(33,129		)	(31,531		)
Balance at end of period	$	260,064		$	297,420		$	260,064		$	297,420

(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

Below is the composition of the recorded investment for loans accounted for under ASC 310-30 at June 30, 2015 and December 31, 2014.

(Dollars in thousands)	June 30, 2015			December 31, 2014
Contractual cash flows	$	1,163,849		$	1,281,482
Non-accretable difference	(232,966		)	(259,519		)
Accretable yield	(260,064		)	(277,058		)
Loans accounted for under ASC 310-30	$	670,819		$	744,905

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

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 June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Benefit for loan losses - covered:
Net impairment recorded as a result of re-estimation of cash flows on loans accounted for under ASC 310-30 (1)	$	1,223		$	1,066		$	2,938		$	2,365
Additional benefit recorded, net of charge-offs, for covered loans	(9,605		)	(8,387		)	(12,739		)	(12,184		)
Total benefit for loan losses-covered	$	(8,382	)	$	(7,321	)	$	(9,801	)	$	(9,819	)
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)	765			1,923			1,042			3,504
Expense recorded, to offset benefit, for covered loans	(6,534		)	(5,942		)	(8,324		)	(7,459		)
Total loss sharing expense due to provision for loan losses-covered	(5,769		)	(4,019		)	(7,282		)	(3,955		)
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)	458			(857		)	1,896			(1,139		)
Net income recorded, for covered loans including those accounted for under ASC 310-20 and ASC 310-40	(3,071		)	(2,445		)	(4,415		)	(4,725		)
Net (increase) decrease to income before taxes	$	(2,613	)	$	(3,302	)	$	(2,519	)	$	(5,864	)

(1) The results of re-estimations also included cash flow improvements to be recognized prospectively as an adjustment to the accretable yield on the related covered loans of $8.6 million and $8.0 million for the three months ended June 30, 2015 and 2014, respectively, and $16.7 million and $16.4 million for the six months ended June 30, 2015 and 2014, respectively.

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

The following table summarizes the activity related to the FDIC indemnification asset and the FDIC receivable for the three and six months ended June 30, 2015 and 2014.  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  June 30, 2015						For the six months ended June 30, 2015
(Dollars in thousands)	FDIC Indemnification Asset			FDIC Receivable			FDIC Indemnification Asset			FDIC Receivable
Balance at beginning of period	$	50,702		$	7,839		$	67,026		$	6,062
Accretion	(8,548		)	—			(17,798		)	—
Sales and write-downs of other real estate owned (covered)	(475		)	150			(828		)	16
Net effect of change in allowance on covered assets (1)	490			—			(1,200		)	—
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(5,172		)	5,172			(10,203		)	10,203
Decreases due to recoveries net of additional claimable expenses incurred (2)	—			(6,261		)	—			(7,618		)
Claim payments received from the FDIC	—			(1,357		)	—			(3,120		)
Balance at end of period	$	36,997		$	5,543		$	36,997		$	5,543

(1) Primarily includes adjustments for fully claimed and exited loans and the results of remeasurement of expected cash flows under ASC 310-30 accounting.

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

	For the three months ended  June 30, 2014						For the six months ended June 30, 2014
(Dollars in thousands)	FDIC Indemnification Asset			FDIC Receivable			FDIC Indemnification Asset			FDIC Receivable
Balance at beginning of period	$	119,045		$	8,130		$	131,861		$	7,783
Accretion	(5,506		)	—			(12,224		)	—
Sales and write-downs of other real estate owned (covered)	(281		)	(55		)	(753		)	(247		)
Net effect of change in allowance on covered assets (1)	(6,130		)	—			(8,155		)	—
Reimbursements requested from FDIC (reclassification to FDIC receivable)	(4,434		)	4,434			(8,035		)	8,035
Decreases due to recoveries net of additional claimable expenses incurred (2)	—			(3,433		)	—			(4,319		)
Claim payments received from the FDIC	—			(1,878		)	—			(4,054		)
Balance at end of period	$	102,694		$	7,198		$	102,694		$	7,198

(1) Primarily includes adjustments for fully claimed and exited loans and the results of remeasurement of expected cash flows under ASC 310-30 accounting.

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

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FAIR VALUE (Details 3) - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Fair Value
Securities available-for-sale	$ 845,319		$ 740,819
Loans held for sale	117,042		93,453
Loan servicing rights	58,894	$ 54,409	70,598	$ 74,104	$ 77,892	$ 78,603
U.S. government sponsored agency obligations
Fair Value
Securities available-for-sale	98,283		98,358
Taxable
Fair Value
Securities available-for-sale	4,361		397
Tax exempt
Fair Value
Securities available-for-sale	271,754		232,259
SBA Pools
Fair Value
Securities available-for-sale	32,349		33,933
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Fair Value
Securities available-for-sale	334,034		291,759
Privately issued
Fair Value
Securities available-for-sale	26,460		18,800
Privately issued commercial mortgage-backed securities
Fair Value
Securities available-for-sale	19,509		5,130
Corporate debt securities
Fair Value
Securities available-for-sale	58,569		60,183
Recurring basis | Tax exempt
Fair Value
Securities available-for-sale			0
Recurring basis | Level 1
Fair Value
Securities available-for-sale	0		0
Loans held for sale	0		0
Loan servicing rights	0		0
Derivative assets	0		0
Total assets at fair value	0		0
Derivative liabilities	0		0
Total liabilities at fair value	0		0
Recurring basis | Level 1 | Forward contracts related to mortgage loans to be delivered for sale
Fair Value
Derivative assets	0
Derivative liabilities			0
Recurring basis | Level 1 | Interest rate lock commitments
Fair Value
Derivative assets	0		0
Recurring basis | Level 1 | Customer-initiated derivatives
Fair Value
Derivative assets	0		0
Derivative liabilities	0		0
Recurring basis | Level 1 | Risk management derivatives
Fair Value
Derivative assets	0
Derivative liabilities	0		0
Recurring basis | Level 1 | Residential real estate
Fair Value
Loans held for investment, recorded at fair value	0		0
Recurring basis | Level 1 | Real estate construction
Fair Value
Loans held for investment, recorded at fair value			0
Recurring basis | Level 1 | U.S. government sponsored agency obligations
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 1 | Taxable
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 1 | Tax exempt
Fair Value
Securities available-for-sale	0
Recurring basis | Level 1 | SBA Pools
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 1 | Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 1 | Privately issued
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 1 | Privately issued commercial mortgage-backed securities
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 1 | Corporate debt securities
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 2
Fair Value
Securities available-for-sale	844,553		736,997
Loans held for sale	117,042		93,453
Loan servicing rights	0		0
Derivative assets	5,240		3,077
Total assets at fair value	966,835		833,527
Derivative liabilities	2,004		2,502
Total liabilities at fair value	2,004		2,502
Recurring basis | Level 2 | Forward contracts related to mortgage loans to be delivered for sale
Fair Value
Derivative assets	863
Derivative liabilities			803
Recurring basis | Level 2 | Interest rate lock commitments
Fair Value
Derivative assets	2,029		1,489
Recurring basis | Level 2 | Customer-initiated derivatives
Fair Value
Derivative assets	2,011		1,588
Derivative liabilities	1,870		1,477
Recurring basis | Level 2 | Risk management derivatives
Fair Value
Derivative assets	337
Derivative liabilities	134		222
Recurring basis | Level 2 | Residential real estate
Fair Value
Loans held for investment, recorded at fair value	0		0
Recurring basis | Level 2 | Real estate construction
Fair Value
Loans held for investment, recorded at fair value			0
Recurring basis | Level 2 | U.S. government sponsored agency obligations
Fair Value
Securities available-for-sale	98,283		98,358
Recurring basis | Level 2 | Taxable
Fair Value
Securities available-for-sale	4,043		0
Recurring basis | Level 2 | Tax exempt
Fair Value
Securities available-for-sale	271,754		232,259
Recurring basis | Level 2 | SBA Pools
Fair Value
Securities available-for-sale	32,349		33,933
Recurring basis | Level 2 | Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Fair Value
Securities available-for-sale	334,034		291,759
Recurring basis | Level 2 | Privately issued
Fair Value
Securities available-for-sale	26,460		18,800
Recurring basis | Level 2 | Privately issued commercial mortgage-backed securities
Fair Value
Securities available-for-sale	19,509		5,130
Recurring basis | Level 2 | Corporate debt securities
Fair Value
Securities available-for-sale	58,121		56,758
Recurring basis | Level 3
Fair Value
Securities available-for-sale	766		3,822
Loans held for sale	0		0
Loan servicing rights	58,894		70,598
Derivative assets	0		0
Total assets at fair value	80,567		93,946
Derivative liabilities	0		0
Total liabilities at fair value	0		0
Recurring basis | Level 3 | Forward contracts related to mortgage loans to be delivered for sale
Fair Value
Derivative assets	0
Derivative liabilities			0
Recurring basis | Level 3 | Interest rate lock commitments
Fair Value
Derivative assets	0		0
Recurring basis | Level 3 | Customer-initiated derivatives
Fair Value
Derivative assets	0		0
Derivative liabilities	0		0
Recurring basis | Level 3 | Risk management derivatives
Fair Value
Derivative assets	0
Derivative liabilities	0		0
Recurring basis | Level 3 | Residential real estate
Fair Value
Loans held for investment, recorded at fair value	20,907		18,311
Recurring basis | Level 3 | Real estate construction
Fair Value
Loans held for investment, recorded at fair value			1,215
Recurring basis | Level 3 | U.S. government sponsored agency obligations
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 3 | Taxable
Fair Value
Securities available-for-sale	318		397
Recurring basis | Level 3 | Tax exempt
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 3 | SBA Pools
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 3 | Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 3 | Privately issued
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 3 | Privately issued commercial mortgage-backed securities
Fair Value
Securities available-for-sale	0		0
Recurring basis | Level 3 | Corporate debt securities
Fair Value
Securities available-for-sale	448		3,425
Recurring basis | Total Fair Value
Fair Value
Securities available-for-sale	845,319		740,819
Loans held for sale	117,042		93,453
Loan servicing rights	58,894		70,598
Derivative assets	5,240		3,077
Total assets at fair value	1,047,402		927,473
Derivative liabilities	2,004		2,502
Total liabilities at fair value	2,004		2,502
Recurring basis | Total Fair Value | Forward contracts related to mortgage loans to be delivered for sale
Fair Value
Derivative assets	863
Derivative liabilities			803
Recurring basis | Total Fair Value | Interest rate lock commitments
Fair Value
Derivative assets	2,029		1,489
Recurring basis | Total Fair Value | Customer-initiated derivatives
Fair Value
Derivative assets	2,011		1,588
Derivative liabilities	1,870		1,477
Recurring basis | Total Fair Value | Risk management derivatives
Fair Value
Derivative assets	337
Derivative liabilities	134		222
Recurring basis | Total Fair Value | Residential real estate
Fair Value
Loans held for investment, recorded at fair value	20,907		18,311
Recurring basis | Total Fair Value | Real estate construction
Fair Value
Loans held for investment, recorded at fair value			1,215
Recurring basis | Total Fair Value | U.S. government sponsored agency obligations
Fair Value
Securities available-for-sale	98,283		98,358
Recurring basis | Total Fair Value | Taxable
Fair Value
Securities available-for-sale	4,361		397
Recurring basis | Total Fair Value | Tax exempt
Fair Value
Securities available-for-sale	271,754		232,259
Recurring basis | Total Fair Value | SBA Pools
Fair Value
Securities available-for-sale	32,349		33,933
Recurring basis | Total Fair Value | Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Fair Value
Securities available-for-sale	334,034		291,759
Recurring basis | Total Fair Value | Privately issued
Fair Value
Securities available-for-sale	26,460		18,800
Recurring basis | Total Fair Value | Privately issued commercial mortgage-backed securities
Fair Value
Securities available-for-sale	19,509		5,130
Recurring basis | Total Fair Value | Corporate debt securities
Fair Value
Securities available-for-sale	$ 58,569		$ 60,183

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COMMITMENTS, CONTINGENCIES AND GUARANTEES

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS, CONTINGENCIES AND GUARANTEES

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, accounts receivable, 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 $617 thousand and $539 thousand at June 30, 2015 and December 31, 2014, 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:

	June 30, 2015						December 31, 2014
(Dollars in thousands)	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Commitments to extend credit	$	642,049	$	623,846	$	1,265,895	$	502,762	$	463,362	$	966,124
Standby letters of credit	62,313		3,441		65,754		69,305		4,197		73,502
Total commitments	$	704,362	$	627,287	$	1,331,649	$	572,067	$	467,559	$	1,039,626

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 $26.8 million and $39.8 million at June 30, 2015 and December 31, 2014, 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 $20.2 million and $31.6 million at June 30, 2015 and December 31, 2014, respectively.  In the event of nonperformance, we have rights to the underlying collateral securing the loans.  As of June 30, 2015 and December 31, 2014, we had recorded a liability of $170 thousand and $355 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 June 30, 2015 and December 31, 2014, our standby letters of credit totaled $65.8 million and $73.5 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 June 30, 2015 and December 31, 2014, our liability recorded in connection with these representations and warranties totaled $2.0 million and $4.0 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.

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PARENT COMPANY FINANCIAL STATEMENTS

6 Months Ended

Jun. 30, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

PARENT COMPANY FINANCIAL STATEMENTS

PARENT COMPANY FINANCIAL STATEMENTS

Balance Sheets - Parent Company

(Dollars in thousands)	June 30, 2015		December 31, 2014
Assets
Cash and cash equivalents	$	10,628	$	9,497
Investment in banking subsidiaries	792,467		756,452
Income tax benefit	8,429		7,975
Other assets	681		655
Total assets	$	812,205	$	774,579
Liabilities
Short-term borrowings	$	30,000	$	—
Long-term debt	15,322		10,724
Accrued expenses and other liabilities	477		2,248
Total liabilities	45,799		12,972
Shareholders’ equity	766,406		761,607
Total liabilities and shareholders’ equity	$	812,205	$	774,579

Statements of Income and Comprehensive Income - Parent Company

	For the three months ended June 30,						For the six months ended June 30,
(Dollars in thousands)	2015			2014			2015		2014
Income
Dividend income from subsidiary	$	—		$	—		$	15,000	$	25,000
Bargain purchase gain	—			—			—		41,977
Other noninterest income	4			3			9		5
Total income	4			3			15,009		66,982
Expenses
Salaries and employee benefits	1,671			2,042			2,892		5,955
Bank acquisition and due diligence fees	159			266			1,155		1,974
Professional service fees	491			492			868		1,086
Insurance expense	33			213			113		367
Marketing expense	35			26			49		191
Interest on short-term borrowings	187			—			261		151
Interest on long-term debt	182			125			344		252
Other	59			80			173		147
Total expenses	2,817			3,244			5,855		10,123
Income (loss) before income taxes and equity in undistributed net earnings of subsidiaries	(2,813		)	(3,241		)	9,154		56,859
Income tax benefit	1,082			420			1,735		2,457
Equity in (over)/under distributed earnings of subsidiaries	19,279			23,427			16,092		(483		)
Net income	$	17,548		$	20,606		$	26,981	$	58,833
Total comprehensive income, net of tax	$	17,548		$	20,606		$	26,981	$	58,833

Statements of Cash Flows - Parent Company

	For the six months ended June 30,
(Dollars in thousands)	2015			2014
Cash flows from operating activities
Net income	$	26,981		$	58,833
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in over (under) distributed earnings of subsidiaries	(16,092		)	483
Gain on acquisition	—			(41,977		)
Stock-based compensation expense	371			248
(Increase) decrease in income tax benefit	(71		)	139
Decrease in other assets, net	168			629
Increase (decrease) in accrued expenses and other liabilities, net	(4,194		)	317
Net cash from operating activities	7,163			18,672
Cash flows from investing activities
Cash (used in) proceeds from acquisitions	(13,323		)	(6,500		)
Capital contributions to subsidiaries	—			(99,500		)
Refund of investment	2,225			—
Net cash used in investing activities	(11,098		)	(106,000		)
Cash flows from financing activities
Issuance of common stock	—			42,075
Restricted stock awards tax benefits	16			—
Exercise of stock options, including tax benefit	(143		)	(661		)
Repurchase of warrants to repurchase 2.5 million shares, at fair value	(19,892		)	—
Cash dividends paid on common stock (1)	(1,415		)	—
Draw on senior unsecured line of credit	30,000			—
Repayment of senior unsecured line of credit	—			(35,000		)
Repayment of long-term debt	(3,500		)	—
Net cash from financing activities	5,066			6,414
Net increase (decrease) in cash and cash equivalents	1,131			(80,914		)
Beginning cash and cash equivalents	9,497			98,411
Ending cash and cash equivalents	$	10,628		$	17,497

(1) $0.02 per share for the six months ended June 30, 2015.

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PARENT COMPANY FINANCIAL STATEMENTS (Details 3) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities
Net income	$ 17,548	$ 20,606	$ 26,981	$ 58,833
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on acquisition	0	0	0	(41,977)
Stock-based compensation expense			866	454
Decrease in other assets, net			2,399	(21,146)
Decrease in other assets, net			(1,286)	17,037
Net cash from operating activities			22,628	31,928
Cash flows from investing activities
Net cash used in investing activities			(168,220)	(118,299)
Cash flows from financing activities
Issuance of common stock			(127)	41,414
Repurchase of warrants to repurchase 2.5 million shares, at fair value			(19,892)	0
Cash dividends paid on common stock			(1,415)	0
Repayment of senior unsecured line of credit			0	(35,000)
Repayment of long-term debt			(3,500)	0
Net cash from financing activities			302,414	113,616
Net increase (decrease) in cash and cash equivalents			156,822	27,245
Beginning cash and cash equivalents			253,736	375,356
Ending cash and cash equivalents	410,558	402,601	$ 410,558	402,601
Number of shares repurchased			2.5
Cash dividends declared on common stock (in dollars per share)			$ 0.02
Holding Company
Cash flows from operating activities
Net income	17,548	20,606	$ 26,981	58,833
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in over (under) distributed earnings of subsidiaries			(16,092)	483
Gain on acquisition	0	0	0	(41,977)
Stock-based compensation expense			371	248
(Increase) decrease in income tax benefit			(71)	139
Decrease in other assets, net			168	629
Decrease in other assets, net			(4,194)	317
Net cash from operating activities			7,163	18,672
Cash flows from investing activities
Cash (used in) proceeds from acquisitions			(13,323)	(6,500)
Capital contributions to subsidiaries			0	(99,500)
Refund of investment			2,225	0
Net cash used in investing activities			(11,098)	(106,000)
Cash flows from financing activities
Issuance of common stock			0	42,075
Excess Tax Benefit from Share-based Compensation, Financing Activities			16	0
Exercise of stock options, including tax benefit			(143)	(661)
Repurchase of warrants to repurchase 2.5 million shares, at fair value			(19,892)	0
Cash dividends paid on common stock			(1,415)	0
Draw on senior unsecured line of credit			30,000	0
Repayment of senior unsecured line of credit			0	(35,000)
Repayment of long-term debt			(3,500)	0
Net cash from financing activities			5,066	6,414
Net increase (decrease) in cash and cash equivalents			1,131	(80,914)
Beginning cash and cash equivalents			9,497	98,411
Ending cash and cash equivalents	$ 10,628	$ 17,497	$ 10,628	$ 17,497
Number of shares repurchased			2.5
Cash dividends declared on common stock (in dollars per share)			$ 0.02

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FAIR VALUE (Details)	6 Months Ended
	Jun. 30, 2015
General disclosure on fair value
Percentage of available for sale securities that are categorized as Level 3	1.00%
Minimum
General disclosure on fair value
Adjustments to loan values during the appraisal process (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 to other real estate owned values during the appraisal process (as a percent)	40.00%

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INCOME TAXES (Tables)

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

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

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 June 30,										For the six months ended June 30,
	2015					2014					2015					2014
(Dollars in thousands)	Amount			Rate		Amount			Rate		Amount			Rate		Amount			Rate
Tax based on federal statutory rate	$	9,004		35.0	%	$	5,726		35.0	%	$	13,860		35.0	%	$	18,526		35.0	%
Effect of:
Tax exempt income	(644		)	(2.6	)	(475		)	(2.9	)	(1,275		)	(3.2	)	(1,202		)	(2.3	)
State taxes, net of federal benefit	194			0.8		201			1.2		460			1.2		469			0.9
Change in valuation allowance	—			—		(9,749		)	(59.6	)	—			—		(10,127		)	(19.1	)
Bargain purchase gain	—			—		—			—		—			—		(14,692		)	(27.9	)
Transaction costs	18			0.1		426			2.6		47			0.1		454			0.9
Other, net	(393		)	(1.5	)	(375		)	(2.3	)	(472		)	(1.2	)	670			1.3
Income tax expense (benefit)	$	8,179		31.8	%	$	(4,246	)	(26.0	)%	$	12,620		31.9	%	$	(5,902	)	(11.2	)%

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 17,548	$ 20,606	$ 26,981	$ 58,833
Other comprehensive income:
Unrealized holding gains (losses) on securities available-for-sale arising during the period	(7,431)	7,151	(3,008)	13,427
Reclassification adjustment for (gains) losses on realized income	(6)	0	101	2,310
Tax effect	2,603	(2,503)	1,017	(5,508)
Net unrealized gains (losses) on securities available-for-sale, net of tax	(4,834)	4,648	(1,890)	10,229
Unrealized gains on interest rate swaps designated as cash flow hedges	558	0	233	0
Reclassification adjustment for losses included in net income	104	0	192	0
Tax effect	(232)	0	(149)	0
Net unrealized gains on interest rate swaps designated as cash flow hedges, net of tax	430	0	276	0
Other comprehensive income (loss), net of tax	(4,404)	4,648	(1,614)	10,229
Total comprehensive income, net of tax	$ 13,144	$ 25,254	$ 25,367	$ 69,062

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STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock issued or issuable	9,800,000		9,800,000
Option shares available for grant	1,200,000		1,200,000
Granted (in shares)			0	35,000
Expected life (in years)			6 years
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period			10 years
Weighted average fair value (in dollars per share)			$ 15.74
Total intrinsic value of stock options exercised			$ 5,400,000
Cash received from exercise of options			$ 210,000
Shares issued on stock option exercises upon receipt of cash			35,000
Number of shares issued under the net-settlement option			210,000
Tax benefit realized from option exercises			$ 1,400,000
Total unrecognized compensation cost related to stock options	$ 0		0
Total compensation expense		$ 207,000		$ 387,000
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total compensation expense	$ 515,000	67,000	$ 866,000	67,000
Awards outstanding (in shares)	711,000		711,000		378,000
Total unrecognized compensation cost	$ 9,200,000		$ 9,200,000
Weighted-average period over which unrecognized compensation cost is expected to be recognized			4 years 2 months 2 days
Employees | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			5 years
Director | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Salary and Employee Benefits | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total compensation expense	441,000	50,000	$ 739,000	50,000
Professional Fee | Director | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total compensation expense	$ 74,000	$ 17,000	$ 127,000	$ 17,000

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BASIS OF PRESENTATION AND RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION AND RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS

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, 2014.

On February 6, 2015, the Company acquired First of Huron Corp. which resulted in the recognition of goodwill on the Consolidated Balance Sheets. For further information, refer to Note 2, “Business Combinations”.  Goodwill is initially recorded as the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination.  Goodwill is required to be tested annually for impairment or whenever events occur that may indicate that the recoverability of the carrying amount is not probable.  In the event of impairment, the amount by which the carrying amount exceeds the fair value is charged to earnings.

On February 17, 2015, the Company repurchased an aggregate of 2,529,416 warrants to repurchase shares of Class A common stock including 1,623,162 of warrants issued on April 30, 2010, 109,122 of warrants issued on February 21, 2012 and 797,132 of warrants issued on December 27, 2012.  The purchase price was based upon the fair value of the warrants on February 17, 2015, determined utilizing the closing price of our stock on the date of repurchase, and resulted in an aggregate purchase price of $19.9 million.

Recently Adopted and Issued Accounting Standards:  The following provides a description of recently adopted or newly issued not yet effective accounting standards that had or could have a material effect on our financial statements.

In May of 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including revenue recognition guidance.  The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU is intended to clarify and converge the revenue recognition principles under U.S. GAAP and International Financial Reporting Standards and to streamline revenue recognition requirements in addition to expanding required revenue recognition disclosures.  The FASB recently approved a one year deferral of the effective date, therefore, ASU 2014-09 is effective for public companies for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2017.  As such, the Company will adopt ASU 2014-09 as of January 1, 2018.  Under the provision, the Company will have the option to adopt the guidance using either a full retrospective method or a modified transition approach.  The Company is currently evaluating the provisions of ASU 2014-09.

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SECURITIES (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Investment securities available-for-sale
Total available-for-sale securities, amortized cost	$ 842,081	$ 734,674
Gross Unrealized Gains	7,040	7,703
Gross Unrealized Losses	(3,802)	(1,558)
Fair Value	845,319	740,819
Held-to-maturity:
Total securities held-to-maturity, amortized cost	1,692	1,226
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	1,692	1,226
U.S. government sponsored agency obligations
Investment securities available-for-sale
Total available-for-sale securities, amortized cost	97,860	97,746
Gross Unrealized Gains	819	791
Gross Unrealized Losses	(396)	(179)
Fair Value	98,283	98,358
Taxable
Investment securities available-for-sale
Total available-for-sale securities, amortized cost	4,361	397
Gross Unrealized Gains	7	0
Gross Unrealized Losses	(7)	0
Fair Value	4,361	397
Tax exempt
Investment securities available-for-sale
Total available-for-sale securities, amortized cost	271,102	229,404
Gross Unrealized Gains	2,601	3,578
Gross Unrealized Losses	(1,949)	(723)
Fair Value	271,754	232,259
SBA Pools
Investment securities available-for-sale
Total available-for-sale securities, amortized cost	31,960	33,824
Gross Unrealized Gains	389	209
Gross Unrealized Losses	0	(100)
Fair Value	32,349	33,933
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises
Investment securities available-for-sale
Total available-for-sale securities, amortized cost	332,457	289,156
Gross Unrealized Gains	2,766	2,886
Gross Unrealized Losses	(1,189)	(283)
Fair Value	334,034	291,759
Privately issued
Investment securities available-for-sale
Total available-for-sale securities, amortized cost	26,604	18,814
Gross Unrealized Gains	1	27
Gross Unrealized Losses	(145)	(41)
Fair Value	26,460	18,800
Privately issued commercial mortgage-backed securities
Investment securities available-for-sale
Total available-for-sale securities, amortized cost	19,547	5,127
Gross Unrealized Gains	12	3
Gross Unrealized Losses	(50)	0
Fair Value	19,509	5,130
Corporate debt securities
Investment securities available-for-sale
Total available-for-sale securities, amortized cost	58,190	60,206
Gross Unrealized Gains	445	209
Gross Unrealized Losses	(66)	(232)
Fair Value	$ 58,569	$ 60,183

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DERIVATIVE INSTRUMENTS AND BALANCE SHEET OFFSETTING (Details 3) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Derivative instruments
Amount of gain (loss) recognized in other non interest income (Ineffective portion)			$ 0
Interest rate swaps | Designated as hedges | Cash flow hedges
Derivative instruments
Amount of gain (loss) recognized in other comprehensive income (Effective portion)	$ 558,000	$ 0	233,000	$ 0
Amount of gain (loss) reclassified from other comprehensive income to interest income or expense (Effective portion)	(104,000)	0	(192,000)	0
Amount of gain (loss) recognized in other non interest income (Ineffective portion)	0	$ 0	0	$ 0
Amount of gain (loss) expected to be reclassified in the next twelve months	$ 363,000		$ 363,000

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LOANS (Details 8) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	$ 4,244,126	$ 3,902,637
Covered loans	280,847	346,490
Commercial real estate
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	1,395,783	1,310,938
Covered loans	143,898	186,662
Commercial and industrial
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	1,066,353	869,477
Covered loans	24,794	32,648
Real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	175,192	131,686
Covered loans	7,426	9,389
Commercial and industrial, commercial real estate and real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	2,637,328	2,312,101
Covered loans	176,118	228,699
Pass | Commercial real estate
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	1,250,671	1,153,132
Covered loans	88,649	102,952
Pass | Commercial and industrial
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	1,008,042	824,239
Covered loans	13,396	16,718
Pass | Real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	169,484	123,822
Covered loans	4,144	3,817
Pass | Commercial and industrial, commercial real estate and real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	2,428,197	2,101,193
Covered loans	106,189	123,487
Special Mention | Commercial real estate
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	47,245	63,567
Covered loans	6,565	16,073
Special Mention | Commercial and industrial
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	35,986	29,511
Covered loans	932	1,875
Special Mention | Real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	71	1,981
Covered loans	67	792
Special Mention | Commercial and industrial, commercial real estate and real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	83,302	95,059
Covered loans	7,564	18,740
Substandard | Commercial real estate
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	97,867	94,239
Covered loans	48,684	67,637
Substandard | Commercial and industrial
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	22,325	15,727
Covered loans	10,466	14,055
Substandard | Real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	5,637	5,883
Covered loans	3,215	4,780
Substandard | Commercial and industrial, commercial real estate and real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	125,829	115,849
Covered loans	62,365	86,472
Doubtful | Commercial real estate
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	0	0
Covered loans	0	0
Doubtful | Commercial and industrial
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	0	0
Covered loans	0	0
Doubtful | Real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	0	0
Covered loans	0	0
Doubtful | Commercial and industrial, commercial real estate and real estate construction
Commercial and industrial, commercial real estate and real estate construction credit quality
Uncovered loans	0	0
Covered loans	$ 0	$ 0

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EARNINGS PER COMMON SHARE

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

EARNINGS PER COMMON SHARE

EARNINGS PER COMMON SHARE

The two-class method is used in the calculation of basic and diluted earnings per share.  Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participating rights in undistributed earnings.  Common shares outstanding include common stock and vested restricted stock awards, when applicable. The factors used in the earnings per share computation follow:

	For the three months ended June 30,						For the six months ended June 30,
(In thousands, except per share data)	2015			2014			2015			2014
Net income	$	17,548		$	20,606		$	26,981		$	58,833
Net income allocated to participating securities	174			26			211			37
Net income allocated to common shareholders (1)	$	17,374		$	20,580		$	26,770		$	58,796
Weighted average common shares - issued	71,006			70,107			70,814			69,115
Average unvested restricted share awards	(705		)	(86		)	(555		)	(44		)
Weighted average common shares outstanding - basic	70,301			70,021			70,259			69,071
Effect of dilutive securities -
Employee and director stock options	4,339			4,112			4,174			3,991
Warrants	260			1,526			613			1,469
Weighted average common shares outstanding - diluted	74,900			75,659			75,046			74,531
EPS available to common shareholders
Basic	$	0.25		$	0.29		$	0.38		$	0.85
Diluted	$	0.23		$	0.27		$	0.36		$	0.79

(1) Net income allocated to common shareholders for basic and diluted earnings per share may differ under the two-class method as a result of adding common share equivalents for options and warrants to dilutive shares outstanding, which alters the ratio used to allocate net income to common shareholders and participating securities for the purposes of calculating diluted earnings per share.

For the effect of dilutive securities, the average stock valuation is $16.14 per share and $13.77 per share for the three months ended June 30, 2015 and 2014, respectively and the average stock valuation is $15.12 per share and assumed to be $13.24 per share for the six months ended June 30, 2015 and 2014, respectively.

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 because they were antidilutive.  There were no outstanding antidilutive warrants or options during the three and six months ended June 30, 2015 and no outstanding antidilutive warrants or options for the three and six months ended June 30, 2014.

(Shares in thousands)	For the three months ended June 30, 2014		For the six months ended June 30, 2014
Average outstanding options	8		4
Outstanding exercise prices:
Low end	$	14.44	$	14.44
High end	$	14.44	$	14.44

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ACQUIRED LOANS AND LOSS SHARE ACCOUNTING (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
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	$ 28,588		$ 28,588		$ 26,905
Change in carrying amount of accretable discount
Balance at beginning of period	278,825	$ 311,171	277,058	$ 302,287
Additions due to acquisitions	0	0	5,268	32,764
Discount accretion	(19,242)	(24,342)	(40,206)	(47,007)
Reclassifications from nonaccretable discount and other additions to accretable discount due to results of cash flow re-estimations	21,642	24,543	51,073	40,907
Other activity, net	(21,161)	(13,952)	(33,129)	(31,531)
Balance at end of period	260,064	297,420	260,064	297,420
Expected cash flows for loans
Identified improvement in the cash flow expectations	21,600	24,500	51,100	40,900
Benefit for loan losses - covered:
Total benefit for loan losses-covered	(8,382)	(7,321)	(9,801)	(9,819)
Less: FDIC loss share income:
Total loss sharing income (expense) due to provision for loan losses-covered	(5,769)	(4,019)	(7,282)	(3,955)
Net (increase) decrease to income before taxes:
Net (increase) decrease to income before taxes	(2,613)	(3,302)	(2,519)	(5,864)
Accounted for under ASC 310-30
Expected cash flows for loans
Contractual cash flows	1,163,849		1,163,849		1,281,482
Non-accretable difference	(232,966)		(232,966)		(259,519)
Accretable yield	(260,064)		(260,064)		(277,058)
Loans accounted	670,819		670,819		744,905
Benefit for loan losses - covered:
Net impairment recorded as a result of re-estimation of cash flows on loans	1,223	1,066	2,938	2,365
Less: FDIC loss share income:
Income recorded as a result of re-estimation of cash flows on loans	765	1,923	1,042	3,504
Net (increase) decrease to income before taxes:
Net income recorded as a result of re-estimation of cash flows on loans	458	(857)	1,896	(1,139)
Cash flow improvements related to covered loans	8,600	8,000	16,700	16,400
Accounted for under ASC 310-20 and ASC 310-40
Benefit for loan losses - covered:
Additional benefit recorded, net of charge-offs, for covered loans	(9,605)	(8,387)	(12,739)	(12,184)
Less: FDIC loss share income:
Income (expense) recorded, to offset benefit, for covered loans	(6,534)	(5,942)	(8,324)	(7,459)
Net (increase) decrease to income before taxes:
Net (income) expense recorded, for covered loans	(3,071)	$ (2,445)	(4,415)	$ (4,725)
CF Bancorp
ACQUIRED LOANS AND LOSS SHARE ACCOUNTING
Estimated FDIC clawback liability	24,000		24,000		22,600
First Banking Center
ACQUIRED LOANS AND LOSS SHARE ACCOUNTING
Estimated FDIC clawback liability	4,500		4,500		4,300
Peoples State Bank
ACQUIRED LOANS AND LOSS SHARE ACCOUNTING
Estimated FDIC clawback liability	$ 119		$ 119		$ 4

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DERIVATIVE INSTRUMENTS AND BALANCE SHEET OFFSETTING (Tables)

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule reflecting the amount and fair value of risk management derivatives and mortgage banking and customer initiated derivatives

The following table presents the notional amount and fair value of the Company’s derivative instruments held or issued for risk management purposes or in connection with customer-initiated and mortgage banking activities.

	June 30, 2015						December 31, 2014
			Fair Value						Fair Value
(Dollars in thousands)	Notional Amount (1)		Gross Derivative Assets (2)		Gross Derivative Liabilities (2)		Notional Amount (1)		Gross Derivative Assets (2)		Gross Derivative Liabilities (2)
Risk management purposes:
Derivatives designated as hedging instruments:
Interest rate swaps	$	22,000	$	337	$	134	$	12,000	$	—	$	222
Total risk management purposes	22,000		337		134		12,000		—		222
Customer-initiated and mortgage banking activities:
Forward contracts related to mortgage loans to be delivered for sale	196,416		863		—		114,828		—		803
Interest rate lock commitments	122,622		2,029		—		67,817		1,489		—
Customer-initiated derivatives	226,551		2,011		1,870		125,356		1,588		1,477
Total customer-initiated and mortgage banking activities	545,589		4,903		1,870		308,001		3,077		2,280
Total gross derivatives	$	567,589	$	5,240	$	2,004	$	320,001	$	3,077	$	2,502

(1) Notional or contract amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordance with the terms of the agreement.  These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in the Consolidated Balance Sheets.

(2) Derivative assets are included within “Other assets”  and derivative liabilities are included within “Other liabilities” on the Consolidated Balance Sheets.  Included in the fair value of the derivative assets are credit valuation adjustments for counterparty credit risk totaling $66 thousand at June 30, 2015 and $103 thousand at December 31, 2014.

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

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

		For the three months ended June 30,						For the the six months ended June 30,
(Dollars in thousands)	Location of Gain (Loss)	2015			2014			2015			2014
Forward contracts related to mortgage loans to be delivered for sale	Net gain on sale of loans	$	2,355		$	(6,915	)	$	1,211		$	(9,909	)
Interest rate lock commitments	Net gain on sale of loans	(1,620		)	1,274			542			1,136
Customer-initiated derivatives	Other noninterest income	(122		)	6			(38		)	19
Total gain (loss) recognized in income		$	613		$	(5,635	)	$	1,715		$	(8,754	)

Schedule of net gains (losses) recorded in other comprehensive income and consolidated statements of income related to the interest rate swaps

The following table presents the net gains (losses) recorded in accumulated other comprehensive income and the Consolidated Statements of Income relating to interest rate swaps designated as cash flow hedges for the three and six months ended June 30, 2015.  We had no interest rate swaps designated as cash flow hedges in the three and six months ended June 30, 2014.

(Dollars in thousands)	Amount of gain (loss) recognized in other comprehensive income (Effective portion)		Amount of gain (loss) reclassified from other comprehensive income to interest income or expense (Effective portion)			Amount of gain (loss) recognized in other non interest income (Ineffective portion)
For the three months ended June 30, 2015
Interest rate swaps designated as cash flow hedges	$	558	$	(104	)	$	—
For the six months ended June 30, 2015
Interest rate swaps designated as cash flow hedges	$	233	$	(192	)	$	—

Schedule of the Company's financial instruments eligible for offset, offsetting assets

The tables below present information about the Company’s financial instruments that are eligible for offset.

							Gross amounts not offset in the statement of financial position
(Dollars in thousands)	Gross amounts recognized		Gross amounts offset in the statement of financial condition		Net amounts presented in the statement of financial position		Financial instruments			Collateral (received)/posted		Net Amount
June 30, 2015
Offsetting derivative assets
Derivative assets	$	2,348	$	—	$	2,348	$	(2,004	)	$	1,570	$	1,914
Offsetting derivative liabilities
Derivative liabilities	2,004		—		2,004		(2,004		)	—		—
December 31, 2014
Offsetting derivative assets
Derivative assets	$	1,588	$	—	$	1,588	$	(1,588	)	$	1,689	$	1,689
Offsetting derivative liabilities
Derivative liabilities	1,699		—		1,699		(1,588		)	111		—

Schedule of the Company's financial instruments eligible for offset, offsetting liabilities

The tables below present information about the Company’s financial instruments that are eligible for offset.

							Gross amounts not offset in the statement of financial position
(Dollars in thousands)	Gross amounts recognized		Gross amounts offset in the statement of financial condition		Net amounts presented in the statement of financial position		Financial instruments			Collateral (received)/posted		Net Amount
June 30, 2015
Offsetting derivative assets
Derivative assets	$	2,348	$	—	$	2,348	$	(2,004	)	$	1,570	$	1,914
Offsetting derivative liabilities
Derivative liabilities	2,004		—		2,004		(2,004		)	—		—
December 31, 2014
Offsetting derivative assets
Derivative assets	$	1,588	$	—	$	1,588	$	(1,588	)	$	1,689	$	1,689
Offsetting derivative liabilities
Derivative liabilities	1,699		—		1,699		(1,588		)	111		—

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DERIVATIVE INSTRUMENTS AND BALANCE SHEET OFFSETTING

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND BALANCE SHEET OFFSETTING

DERIVATIVE INSTRUMENTS AND BALANCE SHEET OFFSETTING

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 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 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 for interest rate risk management purposes. 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 additionally utilizes interest rate swaps designated as cash flow hedges for risk management purposes to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  These interest rate swaps designated as cash flow hedges are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings and/or deposits.  The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative instrument with the changes in cash flows of the designated hedged transactions.  The interest rate swaps designated as cash flow hedges were determined to be fully effective during all periods presented.  As such, no amount of ineffectiveness has been included in net income.  Therefore, the aggregate fair value of the swaps is recorded in other assets (liabilities) with changes in fair value recorded in other comprehensive income (loss).  The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedge no longer be considered effective.  The Company expects the hedges to remain fully effective and does not expect any amounts to be reclassified from accumulated other comprehensive income due to ineffectiveness during the remaining terms of the swaps.

The following table presents the notional amount and fair value of the Company’s derivative instruments held or issued for risk management purposes or in connection with customer-initiated and mortgage banking activities.

	June 30, 2015						December 31, 2014
			Fair Value						Fair Value
(Dollars in thousands)	Notional Amount (1)		Gross Derivative Assets (2)		Gross Derivative Liabilities (2)		Notional Amount (1)		Gross Derivative Assets (2)		Gross Derivative Liabilities (2)
Risk management purposes:
Derivatives designated as hedging instruments:
Interest rate swaps	$	22,000	$	337	$	134	$	12,000	$	—	$	222
Total risk management purposes	22,000		337		134		12,000		—		222
Customer-initiated and mortgage banking activities:
Forward contracts related to mortgage loans to be delivered for sale	196,416		863		—		114,828		—		803
Interest rate lock commitments	122,622		2,029		—		67,817		1,489		—
Customer-initiated derivatives	226,551		2,011		1,870		125,356		1,588		1,477
Total customer-initiated and mortgage banking activities	545,589		4,903		1,870		308,001		3,077		2,280
Total gross derivatives	$	567,589	$	5,240	$	2,004	$	320,001	$	3,077	$	2,502

(1) Notional or contract amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordance with the terms of the agreement.  These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in the Consolidated Balance Sheets.

(2) Derivative assets are included within “Other assets”  and derivative liabilities are included within “Other liabilities” on the Consolidated Balance Sheets.  Included in the fair value of the derivative assets are credit valuation adjustments for counterparty credit risk totaling $66 thousand at June 30, 2015 and $103 thousand at December 31, 2014.

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” in the Consolidated Statements of Income and is considered a cost of executing a forward contract.

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

		For the three months ended June 30,						For the the six months ended June 30,
(Dollars in thousands)	Location of Gain (Loss)	2015			2014			2015			2014
Forward contracts related to mortgage loans to be delivered for sale	Net gain on sale of loans	$	2,355		$	(6,915	)	$	1,211		$	(9,909	)
Interest rate lock commitments	Net gain on sale of loans	(1,620		)	1,274			542			1,136
Customer-initiated derivatives	Other noninterest income	(122		)	6			(38		)	19
Total gain (loss) recognized in income		$	613		$	(5,635	)	$	1,715		$	(8,754	)

The following table presents the net gains (losses) recorded in accumulated other comprehensive income and the Consolidated Statements of Income relating to interest rate swaps designated as cash flow hedges for the three and six months ended June 30, 2015.  We had no interest rate swaps designated as cash flow hedges in the three and six months ended June 30, 2014.

(Dollars in thousands)	Amount of gain (loss) recognized in other comprehensive income (Effective portion)		Amount of gain (loss) reclassified from other comprehensive income to interest income or expense (Effective portion)			Amount of gain (loss) recognized in other non interest income (Ineffective portion)
For the three months ended June 30, 2015
Interest rate swaps designated as cash flow hedges	$	558	$	(104	)	$	—
For the six months ended June 30, 2015
Interest rate swaps designated as cash flow hedges	$	233	$	(192	)	$	—

At June 30, 2015, the Company expected $363 thousand of unrealized losses to be reclassified as an increase to interest expense during the following 12 months.

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

Balance Sheet Offsetting

Certain financial instruments, including derivatives (interest rate swaps designated as cash flow hedges and customer-initiated derivatives), may be eligible for offset in the Consolidated Balance Sheet and/or subject to master netting arrangements or similar agreements.  The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes.  The tables below present information about the Company’s financial instruments that are eligible for offset.

							Gross amounts not offset in the statement of financial position
(Dollars in thousands)	Gross amounts recognized		Gross amounts offset in the statement of financial condition		Net amounts presented in the statement of financial position		Financial instruments			Collateral (received)/posted		Net Amount
June 30, 2015
Offsetting derivative assets
Derivative assets	$	2,348	$	—	$	2,348	$	(2,004	)	$	1,570	$	1,914
Offsetting derivative liabilities
Derivative liabilities	2,004		—		2,004		(2,004		)	—		—
December 31, 2014
Offsetting derivative assets
Derivative assets	$	1,588	$	—	$	1,588	$	(1,588	)	$	1,689	$	1,689
Offsetting derivative liabilities
Derivative liabilities	1,699		—		1,699		(1,588		)	111		—