UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ______________________________________________

FORM 10-Q

______________________________________________ 

(Mark One)

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

For the quarterly period ended March 31, 2015

OR

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

For the transition period from                    to                    .

Commission File Number 001-34066

______________________________________________ 

PRIVATEBANCORP, INC.

(Exact name of Registrant as specified in its charter)

______________________________________________ 

Delaware	36-3681151
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
120 South LaSalle Street, Chicago, Illinois	60603
(Address of principal executive offices)	(zip code)

(312) 564-2000

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  ý    No  ¨

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  ý    No  ¨

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	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

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

As of May 7, 2015, there were 78,612,280 shares of the issuer’s voting common stock, no par value, outstanding.

PRIVATEBANCORP, INC.

FORM 10-Q

TABLE OF CONTENTS

	Page
Part I.     FINANCIAL INFORMATION
Item 1.     Financial Statements (Unaudited)
Consolidated Statements of Financial Condition	3
Consolidated Statements of Income	4
Consolidated Statements of Comprehensive Income	5
Consolidated Statements of Changes in Equity	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	9
Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.     Quantitative and Qualitative Disclosures About Market Risk	83
Item 4.     Controls and Procedures	85
Part II.    OTHER INFORMATION
Item 1.     Legal Proceedings	85
Item 1A.  Risk Factors	86
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds	86
Item 3.     Defaults Upon Senior Securities	86
Item 4.     Mine Safety Disclosures	86
Item 5.     Other Information	86
Item 6.     Exhibits	87
Signatures	88

2

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PRIVATEBANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Amounts in thousands, except shares and per share data)

	March 31, 2015			December 31, 2014
	(Unaudited)			(Audited)
Assets
Cash and due from banks	$	158,431		$	132,211
Federal funds sold and interest-bearing deposits in banks	799,953			292,341
Loans held-for-sale	89,461			115,161
Securities available-for-sale, at fair value (pledged as collateral to creditors: $86.1 million - 2015; $86.5 million - 2014)	1,631,237			1,645,344
Securities held-to-maturity, at amortized cost (fair value: $1.2 billion - 2015; $1.1 billion - 2014)	1,159,853			1,129,285
Federal Home Loan Bank ("FHLB") stock	28,556			28,666
Loans – excluding covered assets, net of unearned fees	12,170,484			11,892,219
Allowance for loan losses	(156,610		)	(152,498		)
Loans, net of allowance for loan losses and unearned fees	12,013,874			11,739,721
Covered assets	32,191			34,132
Allowance for covered loan losses	(6,021		)	(5,191		)
Covered assets, net of allowance for covered loan losses	26,170			28,941
Other real estate owned, excluding covered assets	15,625			17,416
Premises, furniture, and equipment, net	38,544			39,143
Accrued interest receivable	41,202			40,531
Investment in bank owned life insurance	55,561			55,207
Goodwill	94,041			94,041
Other intangible assets	5,230			5,885
Derivative assets	56,607			43,062
Other assets	147,003			196,427
Total assets	$	16,361,348		$	15,603,382
Liabilities
Demand deposits:
Noninterest-bearing	$	3,936,181		$	3,516,695
Interest-bearing	1,498,810			1,907,320
Savings deposits and money market accounts	6,156,331			5,171,025
Time deposits	2,510,406			2,494,928
Total deposits	14,101,728			13,089,968
Deposits held-for-sale	—			122,216
Short-term and secured borrowings	258,788			432,385
Long-term debt	344,788			344,788
Accrued interest payable	7,004			6,948
Derivative liabilities	26,967			26,767
Other liabilities	82,644			98,631
Total liabilities	14,821,919			14,121,703
Equity
Common stock (no par value, $1 stated value; authorized shares: 174 million; issued shares: 78,654,425 - 2015 and 78,179,542 - 2014)	77,968			77,211
Treasury stock, at cost (160,193 - 2015 and 1,704 - 2014)	(5,560		)	(53		)
Additional paid-in capital	1,047,227			1,034,048
Retained earnings	390,247			349,556
Accumulated other comprehensive income, net of tax	29,547			20,917
Total equity	1,539,429			1,481,679
Total liabilities and equity	$	16,361,348		$	15,603,382

Note: Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

See accompanying notes to consolidated financial statements.

3

PRIVATEBANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(Unaudited)

	Quarter Ended March 31,
	2015		2014
Interest Income
Loans, including fees	$	122,702	$	110,199
Federal funds sold and interest-bearing deposits in banks	261		142
Securities:
Taxable	13,556		13,255
Exempt from Federal income taxes	1,806		1,529
Other interest income	48		33
Total interest income	138,373		125,158
Interest Expense
Interest-bearing demand deposits	1,006		942
Savings deposits and money market accounts	4,610		3,974
Time deposits	5,639		4,806
Short-term and secured borrowings	197		196
Long-term debt	4,928		6,488
Total interest expense	16,380		16,406
Net interest income	121,993		108,752
Provision for loan and covered loan losses	5,646		3,707
Net interest income after provision for loan and covered loan losses	116,347		105,045
Non-interest Income
Asset management	4,363		4,347
Mortgage banking	3,775		1,632
Capital markets products	4,172		4,083
Treasury management	7,327		6,599
Loan, letter of credit and commitment fees	5,106		4,634
Syndication fees	2,622		3,313
Deposit service charges and fees and other income	5,617		1,297
Net securities gains	534		331
Total non-interest income	33,516		26,236
Non-interest Expense
Salaries and employee benefits	52,361		44,620
Net occupancy and equipment expense	7,864		7,776
Technology and related costs	3,421		3,283
Marketing	3,578		2,413
Professional services	2,310		2,759
Outsourced servicing costs	1,680		1,464
Net foreclosed property expenses	1,328		2,823
Postage, telephone, and delivery	862		825
Insurance	3,211		2,903
Loan and collection expense	2,268		1,056
Other expenses	4,262		5,828
Total non-interest expense	83,145		75,750
Income before income taxes	66,718		55,531
Income tax provision	25,234		21,026
Net income available to common stockholders	$	41,484	$	34,505
Per Common Share Data
Basic earnings per share	$	0.53	$	0.44
Diluted earnings per share	$	0.52	$	0.44
Cash dividends declared	$	0.01	$	0.01
Weighted-average common shares outstanding	77,407		76,675
Weighted-average diluted common shares outstanding	78,512		77,417

See accompanying notes to consolidated financial statements.

4

PRIVATEBANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

	Quarter Ended March 31,
	2015			2014
Net income	$	41,484		$	34,505
Other comprehensive income:
Available-for-sale securities:
Net unrealized gains	8,590			3,677
Reclassification of net gains included in net income	(534		)	(331		)
Income tax expense	(3,148		)	(1,320		)
Net unrealized gains on available-for-sale securities	4,908			2,026
Cash flow hedges:
Net unrealized gains	8,630			4,137
Reclassification of net gains included in net income	(2,538		)	(2,043		)
Income tax expense	(2,370		)	(817		)
Net unrealized gains on cash flow hedges	3,722			1,277
Other comprehensive income	8,630			3,303
Comprehensive income	$	50,114		$	37,808

See accompanying notes to consolidated financial statements.

5

PRIVATEBANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands, except per share data)

(Unaudited)

	Common Shares Out- standing		Common Stock			Treasury Stock			Additional Paid-in Capital			Retained Earnings			Accumu- lated Other Compre- hensive Income		Total
Balance at January 1, 2014	77,707		$	76,825		$	(6,415	)	$	1,022,023		$	199,627		$	9,844	$	1,301,904
Comprehensive income (1)	—		—			—			—			34,505			3,303		37,808
Cash dividends declared ($0.01 per common share)	—		—			—			—			(785		)	—		(785		)
Common stock issued for:
Nonvested (restricted) stock grants	369		(237		)	5,385			(5,148		)	—			—		—
Exercise of stock options	109		—			3,100			(855		)	—			—		2,245
Restricted stock activity	5		425			296			(721		)	—			—		—
Deferred compensation plan	1		—			30			247			—			—		277
Excess tax benefit from share-based compensation plans	—		—			—			2,205			—			—		2,205
Stock repurchased in connection with benefit plans	(142	)	—			(4,093		)	—			—			—		(4,093		)
Share-based compensation expense	—		—			—			3,685			—			—		3,685
Balance at March 31, 2014	78,049		$	77,013		$	(1,697	)	$	1,021,436		$	233,347		$	13,147	$	1,343,246
Balance at January 1, 2015	78,178		$	77,211		$	(53	)	$	1,034,048		$	349,556		$	20,917	$	1,481,679
Comprehensive income (1)	—		—			—			—			41,484			8,630		50,114
Cash dividends declared ($0.01 per common share)	—		—			—			—			(793		)	—		(793		)
Common stock issued for:
Nonvested (restricted) stock grants	248		—			—			—			—			—		—
Exercise of stock options	235		227			316			5,015			—			—		5,558
Restricted stock activity	—		530			—			(530		)	—			—		—
Deferred compensation plan	1		—			22			124			—			—		146
Excess tax benefit from share-based compensation	—		—			—			3,427			—			—		3,427
Stock repurchased in connection with benefit plans	(168	)	—			(5,845		)	—			—			—		(5,845		)
Share-based compensation expense	—		—			—			5,143			—			—		5,143
Balance at March 31, 2015	78,494		$	77,968		$	(5,560	)	$	1,047,227		$	390,247		$	29,547	$	1,539,429

⁽¹⁾  Net of taxes and reclassification adjustments.

See accompanying notes to consolidated financial statements.

6

PRIVATEBANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Quarter Ended March 31,
	2015			2014
Operating Activities
Net income	$	41,484		$	34,505
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and covered loan losses	5,646			3,707
Provision for unfunded commitments	376			496
Depreciation of premises, furniture, and equipment	2,163			2,052
Net amortization of premium on securities	4,044			3,503
Net gains on sale of securities	(534		)	(331		)
Valuation adjustments on other real estate owned	935			1,463
Net losses on sale of other real estate owned	227			317
Net amortization of discount on covered assets	141			259
Bank owned life insurance income	(354		)	(319		)
Net decrease in deferred loan fees	(155		)	(1,024		)
Share-based compensation expense	5,143			3,685
Excess tax benefit from exercise of stock options and vesting of restricted shares	(3,772		)	(2,340		)
Provision for deferred income tax expense	3,694			1,159
Amortization of other intangibles	655			756
Originations and purchases of loans held-for-sale	(166,370		)	(64,246		)
Proceeds from sales of loans held-for-sale	195,378			66,241
Net gains from sales of loans held-for-sale	(3,268		)	(1,259		)
Net increase in derivative assets and liabilities	(13,345		)	(4,474		)
Net increase in accrued interest receivable	(671		)	(2,269		)
Net increase (decrease) in accrued interest payable	56			(75		)
Net decrease in other assets	49,691			20,663
Net decrease in other liabilities	(12,285		)	(11,886		)
Net cash provided by operating activities	108,879			50,583
Investing Activities
Available-for-sale securities:
Proceeds from maturities, prepayments, and calls	48,884			65,007
Proceeds from sales	28,931			47,477
Purchases	(57,733		)	(86,206		)
Held-to-maturity securities:
Proceeds from maturities, prepayments, and calls	34,460			24,204
Purchases	(66,457		)	(127,016		)
Gain on sale of branch	(4,092		)	—
Net redemption of FHLB stock	110			—
Net increase in loans	(281,641		)	(280,419		)
Net decrease in covered assets	2,475			17,940
Proceeds from sale of other real estate owned	2,781			3,892
Net purchases of premises, furniture, and equipment	(1,564		)	(1,904		)
Net cash used in investing activities	(293,846		)	(337,025		)
Financing Activities
Net increase (decrease) in deposit accounts, including deposits held-for-sale	889,544			(127,480		)
Increase in secured borrowings	1,403			—
Net (decrease) increase in FHLB advances	(175,000		)	325,000
Stock repurchased in connection with benefit plans	(5,845		)	(4,093		)
Cash dividends paid	(779		)	(778		)
Proceeds from exercise of stock options and issuance of common stock under benefit plans	5,704			2,522
Excess tax benefit from exercise of stock options and vesting of restricted shares	3,772			2,340
Net cash provided by financing activities	718,799			197,511
Net increase (decrease) in cash and cash equivalents	533,832			(88,931		)
Cash and cash equivalents at beginning of year	424,552			440,062
Cash and cash equivalents at end of period	$	958,384		$	351,131

See accompanying notes to consolidated financial statements.

7

PRIVATEBANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)

(Amounts in thousands)

(Unaudited)

	Quarter Ended March 31,
	2015		2014
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	16,324	$	16,482
Cash paid for income taxes	1,863		5,290
Non-cash transfers of loans to other real estate	2,152		689
Non-cash transfers of loans to loans held-for-sale	50,630		10,105

See accompanying notes to consolidated financial statements.

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated interim financial statements of PrivateBancorp, Inc. ("PrivateBancorp" or the "Company"), a Delaware corporation, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include certain information and footnote disclosures required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete annual financial statements. Accordingly, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for our fiscal year ended December 31, 2014.

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with U.S. GAAP and reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position and results of operations for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the year or any other period.

The accompanying consolidated financial statements include the accounts and results of operations of the Company and its subsidiary, The PrivateBank and Trust Company (the "Bank"), after elimination of all significant intercompany accounts and transactions. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

In preparing the consolidated financial statements, we have considered the impact of events occurring subsequent to March 31, 2015 for potential recognition or disclosure.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure - On January 1, 2015, we adopted new accounting guidance issued by the Financial Accounting Standards Board ("FASB") that requires a creditor to derecognize a mortgage loan upon foreclosure and recognize a separate other receivable if the following conditions are met: (1) the loan has a government guarantee that is not separable from the loan before foreclosure, (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim, and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable is measured based on the amount of the loan balance expected to be recovered from the guarantor.The adoption of this guidance did not impact our financial position or consolidated results of operations.

Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans - On January 1, 2015, we adopted new accounting guidance issued by the FASB that clarifies when an entity is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The guidance indicates that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or similar legal agreement. Additionally, the guidance requires disclosure of (1) the amount of foreclosed residential real estate property held by the Company and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. The adoption of this guidance did not impact our financial position or consolidated results of operations.

Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures - On January 1, 2015, we adopted new accounting guidance issued by the FASB that amends the accounting for repurchase-to-maturity transactions and repurchase financings, except for the disclosures related to transactions accounted for as secured borrowings, which will be effective for the Company’s financial statements that include periods beginning on April 1, 2015. Under the new guidance, repurchase-to-maturity transactions will be accounted for as secured borrowings. Additionally, the initial transfer and related repurchase agreement in a repurchase financing will need to be considered separately, rather than as a linked transaction. In addition, new disclosures will

9

be required for (1) repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions that are accounted for as secured borrowings, and (2) transfers accounted for as sales when the transferor also retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. The adoption of this guidance did not impact our financial position or consolidated results of operations.

Accounting Pronouncements Pending Adoption

Revenue from Contracts with Customers - In May 2014, the FASB issued a comprehensive new revenue recognition standard that will replace most of the existing revenue recognition guidance in U.S. GAAP. All arrangements involving the transfer of goods or services to customers are within the scope of the guidance, except for certain contracts subject to other U.S. GAAP guidance, such as, including lease contracts and rights and obligations related to financial instruments. The standard’s core principle is that an entity should recognize revenue when it transfers 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 guidance also includes new disclosure requirements related to the nature, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The guidance will be effective for the Company’s financial statements beginning January 1, 2017. The Company may choose to apply the new standard either retrospectively or through a cumulative effect adjustment as of January 1, 2017. The Company is in the process of determining the effect of the new guidance on our financial position and consolidated results of operations, as well as which transition method to use.

Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period-In June 2014, the FASB issued guidance that clarifies the accounting for a performance target that affects vesting of a share-based payment award and that could be achieved after the requisite service period. The guidance indicates that such a performance target would not be reflected in the estimation of the award’s grant date fair value. Rather, compensation cost for such an award would be recognized over the requisite service period, if it is probable that the performance target will be achieved. The total amount of compensation cost recognized during and after the requisite service period would reflect the number of awards that are expected to vest and would be adjusted to reflect those awards that ultimately vest. The guidance will be effective for the Company’s financial statements that include periods beginning January 1, 2016 and applied prospectively to awards that are granted or modified after the effective date. The adoption of this guidance is not expected to have a material impact on our financial position or consolidated results of operations.

Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern - In August 2014, the FASB issued guidance that requires management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern. The guidance requires new disclosures to the extent management concludes there is substantial doubt about an entity’s ability to continue as a going concern. The guidance will be effective for the Company’s annual financial statements dated December 31, 2016, as well as interim periods thereafter. The adoption of this guidance is not expected to have a material impact on our financial position or consolidated results of operations.

Amendments to the Consolidation Analysis- In February 2015, the FASB issued guidance that changes certain aspects of the variable interest and voting interest consolidation models. The amendments modify existing guidance on (1) the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities, (2) when fee arrangements represent variable interests in a VIE, and (3) the primary beneficiary determination for VIEs. Additionally, the guidance eliminates the presumption that a general partner controls a limited partnership under the voting interest model and exempts reporting entities from consolidating money market funds that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940. The guidance will be effective for the Company’s financial statements that include periods beginning on January 1, 2016. The Company may choose to apply the guidance either retrospectively or through a cumulative effect adjustment as of January 1, 2016. The Company is in the process of determining the effect of the new guidance on our financial position and consolidated results of operations, as well as which transition method to use.

10

3. SECURITIES

Securities Portfolio

(Amounts in thousands)

	March 31, 2015									December 31, 2014
	Amortized Cost		Gross Unrealized					Fair Value		Amortized Cost		Gross Unrealized					Fair Value
			Gains		Losses							Gains		Losses
Securities Available-for-Sale
U.S. Treasury	$	243,608	$	1,186	$	(238	)	$	244,556	$	269,697	$	120	$	(1,552	)	$	268,265
U.S. Agency	46,847		20		(61		)	46,806		46,959		—		(701		)	46,258
Collateralized mortgage obligations	123,181		4,647		—			127,828		132,633		4,334		(34		)	136,933
Residential mortgage-backed securities	802,921		27,797		(1,305		)	829,413		822,746		25,058		(1,726		)	846,078
State and municipal securities	374,125		8,521		(512		)	382,134		340,810		7,222		(722		)	347,310
Foreign sovereign debt	500		—		—			500		500		—		—			500
Total	$	1,591,182	$	42,171	$	(2,116	)	$	1,631,237	$	1,613,345	$	36,734	$	(4,735	)	$	1,645,344
Securities Held-to-Maturity
Collateralized mortgage obligations	$	58,209	$	—	$	(1,273	)	$	56,936	$	59,960	$	—	$	(2,017	)	$	57,943
Residential mortgage-backed securities	909,643		15,195		(1,470		)	923,368		885,235		9,410		(2,483		)	892,162
Commercial mortgage-backed securities	190,932		1,710		(618		)	192,024		183,021		592		(2,176		)	181,437
State and municipal securities	1,069		5		—			1,074		1,069		4		—			1,073
Total	$	1,159,853	$	16,910	$	(3,361	)	$	1,173,402	$	1,129,285	$	10,006	$	(6,676	)	$	1,132,615

The carrying value of securities pledged to secure public deposits, FHLB advances, trust deposits, Federal Reserve Bank ("FRB") discount window borrowing availability, derivative transactions, standby letters of credit with counterparty banks and for other purposes as permitted or required by law, totaled $383.5 million and $353.1 million at March 31, 2015 and December 31, 2014, respectively. Of total pledged securities, securities pledged to creditors under agreements pursuant to which the collateral may be sold or re-pledged by the secured parties totaled $86.1 million and $86.5 million at March 31, 2015 and December 31, 2014, respectively.

Excluding securities issued or backed by the U.S. Government and its agencies and U.S. Government-sponsored enterprises, there were no investments in securities from one issuer that exceeded 10% of consolidated equity at March 31, 2015 or December 31, 2014.

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The following table presents the fair values of securities with unrealized losses as of March 31, 2015 and December 31, 2014. The securities presented are grouped according to the time periods during which the securities have been in a continuous unrealized loss position.

Securities in Unrealized Loss Position

(Amounts in thousands)

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
As of March 31, 2015
Securities Available-for-Sale
U.S. Treasury	$	25,187	$	(46	)	$	52,348	$	(192	)	$	77,535	$	(238	)
U.S. Agency	14,875		(61		)	—		—			14,875		(61		)
Residential mortgage-backed securities	2,577		(6		)	86,266		(1,299		)	88,843		(1,305		)
State and municipal securities	63,470		(441		)	4,623		(71		)	68,093		(512		)
Total	$	106,109	$	(554	)	$	143,237	$	(1,562	)	$	249,346	$	(2,116	)
Securities Held-to-Maturity
Collateralized mortgage obligations	$	—	$	—		$	56,936	$	(1,273	)	$	56,936	$	(1,273	)
Residential mortgage-backed securities	118,201		(643		)	64,950		(827		)	183,151		(1,470		)
Commercial mortgage-backed securities	24,076		(124		)	50,056		(494		)	74,132		(618		)
Total	$	142,277	$	(767	)	$	171,942	$	(2,594	)	$	314,219	$	(3,361	)
As of December 31, 2014
Securities Available-for-Sale
U.S. Treasury	$	119,233	$	(159	)	$	123,117	$	(1,393	)	$	242,350	$	(1,552	)
U.S. Agency	—		—			46,258		(701		)	46,258		(701		)
Collateralized mortgage obligations	4,565		(34		)	—		—			4,565		(34		)
Residential mortgage-backed securities	—		—			89,085		(1,726		)	89,085		(1,726		)
State and municipal securities	53,092		(249		)	32,152		(473		)	85,244		(722		)
Total	$	176,890	$	(442	)	$	290,612	$	(4,293	)	$	467,502	$	(4,735	)
Securities Held-to-Maturity
Collateralized mortgage obligations	$	—	$	—		$	57,943	$	(2,017	)	$	57,943	$	(2,017	)
Residential mortgage-backed securities	45,867		(38		)	162,564		(2,445		)	208,431		(2,483		)
Commercial mortgage-backed securities	10,021		(28		)	105,709		(2,148		)	115,730		(2,176		)
Total	$	55,888	$	(66	)	$	326,216	$	(6,610	)	$	382,104	$	(6,676	)

There were $315.2 million of securities with $4.2 million in an unrealized loss position for greater than 12 months at March 31, 2015. At December 31, 2014, there were $616.8 million of securities with $10.9 million in an unrealized loss position for greater than 12 months. The Company does not consider these unrealized losses to be credit-related. These unrealized losses relate to changes in interest rates and market spreads. We do not intend to sell the securities nor do we believe it is more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity. Accordingly, no other-than-temporary impairments have been recorded on these securities during the quarter ended March 31, 2015 or during 2014.

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The following table presents the remaining contractual maturity of securities as of March 31, 2015 by amortized cost and fair value.

Remaining Contractual Maturity of Securities

(Amounts in thousands)

	March 31, 2015
	Available-For-Sale Securities				Held-To-Maturity Securities
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. Treasury, U.S. Agency, state and municipal and foreign sovereign debt securities:
One year or less	$	7,839	$	7,985	$	816	$	817
One year to five years	447,192		452,133		253		257
Five years to ten years	195,714		199,318		—		—
After ten years	14,335		14,560		—		—
All other securities:
Collateralized mortgage obligations	123,181		127,828		58,209		56,936
Residential mortgage-backed securities	802,921		829,413		909,643		923,368
Commercial mortgage-backed securities	—		—		190,932		192,024
Total	$	1,591,182	$	1,631,237	$	1,159,853	$	1,173,402

The following table presents gains (losses) on securities for the quarters ended March 31, 2015 and 2014.

Securities Gains (Losses)

(Amounts in thousands)

	Quarter Ended March 31,
	2015			2014
Proceeds from sales	$	28,931		$	47,477
Gross realized gains	$	538		$	397
Gross realized losses	(4		)	(66		)
Net realized gains	$	534		$	331
Income tax provision on net realized gains	$	210		$	131

Refer to Note 10 for additional details of the securities available-for-sale portfolio and the related impact of unrealized gains (losses) on other comprehensive income.

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4. LOANS AND CREDIT QUALITY

The following loan portfolio and credit quality disclosures exclude covered loans. Covered loans represent loans acquired through a Federal Deposit Insurance Corporation ("FDIC") assisted transaction that are subject to a loss share agreement and are presented separately in the Consolidated Statements of Financial Condition. Refer to the "Covered Assets" section in this footnote for a detailed discussion regarding covered loans.

Loan Portfolio

(Amounts in thousands)

	March 31, 2015		December 31, 2014
Commercial and industrial	$	6,213,029	$	5,996,070
Commercial - owner-occupied CRE	1,977,601		1,892,564
Total commercial	8,190,630		7,888,634
Commercial real estate	2,411,359		2,323,616
Commercial real estate - multi-family	492,695		593,103
Total commercial real estate	2,904,054		2,916,719
Construction	357,258		381,102
Residential real estate	376,741		361,565
Home equity	138,734		142,177
Personal	203,067		202,022
Total loans	$	12,170,484	$	11,892,219
Net deferred loan fees and unamortized discount and premium on loans, included as a reduction in total loans	$	46,862	$	47,017
Overdrawn demand deposits included in total loans	$	1,540	$	1,963

We primarily lend to businesses and consumers in the market areas in which we have physical locations. We seek to diversify our loan portfolio by loan type, industry, and borrower.

Loans Held-For-Sale

(Amounts in thousands)

	March 31, 2015		December 31, 2014
Mortgage loans held-for-sale (1)	$	21,866	$	42,215
Other loans held-for-sale (2)	67,595		72,946
Total loans held-for-sale	$	89,461	$	115,161

⁽¹⁾  Comprised of residential mortgage loan originations intended to be sold in the secondary market. The Company accounts for these loans under the fair value option. Refer to Note 16 for additional information regarding mortgage loans held-for-sale.

⁽²⁾  Amounts at March 31, 2015 represent commercial, commercial real estate, and construction loans carried at the lower of aggregate cost or fair value. Generally, the Company intends to sell these loans within 30-60 days from the date the intent to sell was established. Amounts at December 31, 2014 consists of $36.6 million of commercial, commercial real estate and construction loans carried at the lower of aggregate cost or fair value and $36.3 million of commercial, commercial real estate, construction, home equity and personal loans held-for-sale in connection with the sale of the Company's banking office located in Norcross, Georgia, which closed in January 2015.

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Carrying Value of Loans Pledged

(Amounts in thousands)

	March 31, 2015		December 31, 2014
Loans pledged to secure outstanding borrowings or availability:
FRB discount window borrowings (1)	$	458,615	$	478,692
FHLB advances (2)	1,851,727		1,576,168
Total	$	2,310,342	$	2,054,860

⁽¹⁾  No borrowings were outstanding at March 31, 2015 or December 31, 2014.

⁽²⁾  Refer to Notes 7 and 8 for additional information regarding FHLB advances.

Loan Portfolio Aging

(Amounts in thousands)

			Delinquent
	Current		30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days Past Due and Accruing		Total Accruing Loans		Nonaccrual		Total Loans
As of March 31, 2015
Commercial	$	8,147,503	$	1,862	$	2,292	$	—	$	8,151,657	$	38,973	$	8,190,630
Commercial real estate	2,888,347		88		—		—		2,888,435		15,619		2,904,054
Construction	356,308		950		—		—		357,258		—		357,258
Residential real estate	368,824		2,912		242		—		371,978		4,763		376,741
Home equity	126,575		814		—		—		127,389		11,345		138,734
Personal	202,692		47		10		—		202,749		318		203,067
Total loans	$	12,090,249	$	6,673	$	2,544	$	—	$	12,099,466	$	71,018	$	12,170,484
As of December 31, 2014
Commercial	$	7,855,833	$	762	$	992	$	—	$	7,857,587	$	31,047	$	7,888,634
Commercial real estate	2,891,301		5,408		261		—		2,896,970		19,749		2,916,719
Construction	380,939		163		—		—		381,102		—		381,102
Residential real estate	354,717		943		631		—		356,291		5,274		361,565
Home equity	128,500		397		2,236		—		131,133		11,044		142,177
Personal	201,569		23		—		—		201,592		430		202,022
Total loans	$	11,812,859	$	7,696	$	4,120	$	—	$	11,824,675	$	67,544	$	11,892,219

Impaired Loans

Impaired loans consist of nonaccrual loans (which include nonaccrual troubled debt restructurings ("TDRs")) and loans classified as accruing TDRs. A loan is considered impaired when, based on current information and events, either (i) management believes that it is probable that we will be unable to collect all amounts due (both principal and interest) according to the original contractual terms of the loan agreement, or (ii) it has been classified as a TDR.

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The following two tables present our recorded investment in impaired loans outstanding by product segment, including our recorded investment in impaired loans, which represents the principal amount outstanding, net of unearned income, deferred loan fees and costs, and any direct principal charge-offs.

Impaired Loans

(Amounts in thousands)

	Unpaid Contractual Principal Balance		Recorded Investment With No Specific Reserve		Recorded Investment With Specific Reserve		Total Recorded Investment		Specific Reserve
As of March 31, 2015
Commercial	$	70,501	$	31,582	$	28,166	$	59,748	$	10,643
Commercial real estate	22,385		6,020		9,776		15,796		2,201
Residential real estate	5,344		—		4,763		4,763		430
Home equity	13,425		3,651		9,110		12,761		2,292
Personal	318		—		318		318		70
Total impaired loans	$	111,973	$	41,253	$	52,133	$	93,386	$	15,636
As of December 31, 2014
Commercial	$	60,174	$	25,739	$	26,432	$	52,171	$	11,487
Commercial real estate	26,738		9,755		10,193		19,948		2,441
Residential real estate	5,849		349		4,925		5,274		735
Home equity	12,904		3,627		8,839		12,466		1,855
Personal	430		—		430		430		109
Total impaired loans	$	106,095	$	39,470	$	50,819	$	90,289	$	16,627

Average Recorded Investment and Interest Income Recognized on Impaired Loans ⁽¹⁾ 

(Amounts in thousands)

	Quarter Ended March 31,
	2015				2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial	$	53,048	$	184	$	43,777	$	382
Commercial real estate	17,897		3		46,415		24
Residential real estate	4,979		—		9,833		—
Home equity	13,332		22		13,526		24
Personal	356		—		663		—
Total	$	89,612	$	209	$	114,214	$	430

⁽¹⁾  Represents amounts while classified as impaired for the periods presented.

Credit Quality Indicators

We have adopted an internal risk rating policy in which each loan is rated for credit quality with a numerical rating of 1 through 8. Loans rated 5 and better (1-5 ratings, inclusive) are credits that we believe exhibit acceptable financial performance, cash flow, and leverage. We attempt to mitigate risk through loan structure, collateral, monitoring, and other credit risk management controls. Credits rated 6 are performing in accordance with contractual terms but are considered "special mention" as these credits demonstrate potential weakness that if left unresolved, may result in deterioration in our credit position and/or the repayment prospects for the credit. Borrowers rated special mention may exhibit adverse operating trends, high leverage, tight liquidity or other credit concerns. Loans rated 7 may be classified as either accruing ("potential problem") or nonaccrual ("nonperforming"). Potential problem loans, like special mention, are loans that are performing in accordance with contractual terms, but for which

16

management has some level of concern (greater than that of special mention loans) about the ability of the borrowers to meet existing repayment terms in future periods. These loans continue to accrue interest but the ultimate collection of these loans in full is questionable due to the same conditions that characterize a 6-rated credit. These credits may also have somewhat increased risk profiles as a result of the current net worth and/or paying capacity of the obligor or guarantors or the value of the collateral pledged. These loans generally have a well-defined weakness that may jeopardize collection of the debt and are characterized by the distinct possibility that we may sustain some loss if the deficiencies are not resolved. Although these loans are generally identified as potential problem loans and require additional attention by management, they may never become nonperforming. Nonperforming loans include nonaccrual loans risk rated 7 or 8 and have all the weaknesses inherent in a 7-rated potential problem loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently-existing facts, conditions and values, highly questionable and improbable. Special mention, potential problem and nonperforming loans are reviewed at a minimum on a quarterly basis, while all other rated credits over a certain dollar threshold, depending on loan type, are reviewed annually or more frequently as the circumstances warrant.

Credit Quality Indicators

(Dollars in thousands)

	Special Mention		% of Portfolio Loan Type	Potential Problem Loans		% of Portfolio Loan Type	Non- Performing Loans		% of Portfolio Loan Type	Total Loans
As of March 31, 2015
Commercial	$	97,851	1.2	$	95,448	1.2	$	38,973	0.5	$	8,190,630
Commercial real estate	130		*	2,925		0.1	15,619		0.5	2,904,054
Construction	—		—	—		—	—		—	357,258
Residential real estate	3,323		0.9	6,045		1.6	4,763		1.3	376,741
Home equity	502		0.4	2,599		1.9	11,345		8.2	138,734
Personal	845		0.4	21		*	318		0.2	203,067
Total	$	102,651	0.8	$	107,038	0.9	$	71,018	0.6	$	12,170,484
As of December 31, 2014
Commercial	$	93,130	1.2	$	78,562	1.0	$	31,047	0.4	$	7,888,634
Commercial real estate	3,552		0.1	746		*	19,749		0.7	2,916,719
Construction	—		—	—		—	—		—	381,102
Residential real estate	2,964		0.8	5,981		1.7	5,274		1.5	361,565
Home equity	1,170		0.8	2,108		1.5	11,044		7.8	142,177
Personal	173		0.1	45		*	430		0.2	202,022
Total	$	100,989	0.8	$	87,442	0.7	$	67,544	0.6	$	11,892,219

* Less than 0.1%

Troubled Debt Restructured Loans

Troubled Debt Restructured Loans Outstanding

(Amounts in thousands)

	March 31, 2015				December 31, 2014
	Accruing		Nonaccrual (1)		Accruing		Nonaccrual (1)
Commercial	$	20,775	$	17,333	$	21,124	$	20,113
Commercial real estate	177		12,335		199		8,005
Residential real estate	—		1,737		—		1,881
Home equity	1,416		5,701		1,422		5,886
Personal	—		284		—		413
Total	$	22,368	$	37,390	$	22,745	$	36,298

⁽¹⁾  Included in nonperforming loans.

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At March 31, 2015 and December 31, 2014, credit commitments to lend additional funds to debtors whose loan terms have been modified in a TDR (both accruing and nonaccruing) totaled $5.5 million and $8.5 million, respectively.

Additions to Troubled Debt Restructurings During the Period

(Dollars in thousands)

	Quarter Ended March 31,
	2015					2014
	Number of Borrowers	Recorded Investment (1)				Number of Borrowers	Recorded Investment (1)
		Pre- Modification		Post- Modification			Pre- Modification		Post- Modification
Accruing TDRs
Commercial
Extension of maturity date (2)	1	$	2,394	$	2,394	1	$	200	$	200
Other concession (3)	—	—		—		1	12,941		12,941
Total commercial	1	2,394		2,394		2	13,141		13,141
Commercial real estate
Other concession (3)	—	—		—		1	426		426
Total accruing	1	$	2,394	$	2,394	3	$	13,567	$	13,567

Nonaccrual TDRs
Commercial
Other concession (3)	1	$	673	$	666	2	$	456	$	406
Commercial real estate
Extension of maturity date (2)	2	1,747		1,660		—	—		—
Other concession (3)	1	3,773		3,773		—	—		—
Total commercial real estate	3	5,520		5,433		—	—		—
Residential real estate
Other concession (3)	—	—		—		2	495		495
Home equity
Extension of maturity date (2)	—	—		—		1	114		114
Other concession (3)	2	77		77		1	250		250
Total home equity	2	77		77		2	364		364
Total nonaccrual	6	$	6,270	$	6,176	6	$	1,315	$	1,265
Change in recorded investment due to principal paydown at time of modification				$	94				$	50

⁽¹⁾  Represents amounts as of the date immediately prior to and immediately after the modification is effective.

⁽²⁾  Extension of maturity date also includes loans renewed at existing rate of interest which is considered a below market rate for that particular loan’s risk profile.

⁽³⁾  Other concessions primarily include interest rate reductions, loan increases or deferrals of principal.

At the time an accruing loan becomes modified and meets the definition of a TDR, it is considered impaired and no longer included as part of the general loan loss reserve calculation. However, our general reserve methodology considers the amount and product type of the TDRs removed as a proxy for potentially heightened risk in the portfolio when establishing final reserve requirements.

As impaired loans, TDRs (both accruing and nonaccruing) are evaluated for impairment at the end of each quarter with a specific valuation reserve created, or adjusted (either individually or as part of a pool), if necessary, as a component of the allowance for loan losses. Refer to the "Impaired Loan" and "Allowance for Loan Loss" sections of Note 1, "Summary of Significant Accounting Policies," to the Notes to Consolidated Financial Statements of our 2014 Annual Report on Form 10-K regarding our policy for assessing potential impairment on such loans. Our allowance for loan losses included $9.9 million and $10.6 million in specific

18

reserves for nonaccrual TDRs at March 31, 2015 and December 31, 2014, respectively. For accruing TDRs, there were no specific reserves at March 31, 2015 and December 31, 2014, respectively, as the present value of cash flows for the restructured loan were greater than the recorded investment in the loan.

During the three months ended March 31, 2014, a single commercial real estate loan totaling $699,000 became nonperforming within 12 months of being modified as an accruing TDR. There were no such transactions for the three months ended March 31, 2015. A loan becomes nonperforming and placed on nonaccrual status typically when the principal or interest payments are 90 days past due based on contractual terms or when an individual analysis of a borrower’s creditworthiness indicates a loan should be placed on nonaccrual status earlier than when the loan becomes 90 days past due.

Other Real Estate Owned

The following table presents the composition of property by type acquired as a result of borrower defaults on loans secured by real property.

OREO Composition

(Amounts in thousands)

	March 31, 2015		December 31, 2014
Single-family homes	$	7,698	$	7,902
Land parcels	3,971		4,237
Multi-family	465		488
Office/industrial	2,663		3,832
Retail	828		957
Total OREO properties	$	15,625	$	17,416

The recorded investment of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $4.8 million at March 31, 2015 and $5.5 million December 31, 2014, respectively.

Covered Assets

Covered assets represent acquired residential mortgage loans and foreclosed loan collateral covered under a loss sharing agreement with the FDIC and include an indemnification receivable representing the present value of the expected reimbursement from the FDIC related to expected losses on the acquired loans and foreclosed real estate under such agreement. The loss share agreement will expire on September 30, 2019.

The carrying amount of covered assets is presented in the following table.

Covered Assets

(Amounts in thousands)

	March 31, 2015			December 31, 2014
Residential mortgage loans (1)	$	29,963		$	32,182
Foreclosed real estate - single family homes	203			187
Estimated loss reimbursement by the FDIC	2,025			1,763
Total covered assets	32,191			34,132
Allowance for covered loan losses	(6,021		)	(5,191		)
Net covered assets	$	26,170		$	28,941

⁽¹⁾  Includes $266,000 and $420,000 of purchased impaired loans as of March 31, 2015 and December 31, 2014, respectively.

The recorded investment of residential real estate properties for which foreclosure proceedings are in process totaled $635,000 and $856,000 at March 31, 2015 and December 31, 2014, respectively.

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5. ALLOWANCE FOR LOAN LOSSES AND RESERVE FOR UNFUNDED COMMITMENTS

The following allowance and credit quality disclosures exclude covered loans. Refer to Note 4 for a discussion regarding covered loans.

Allowance for Loan Losses and Recorded Investment in Loans

(Amounts in thousands)

	Quarter Ended March 31, 2015
	Commercial			Commercial Real Estate			Construction			Residential Real Estate			Home Equity			Personal			Total
Allowance for Loan Losses:
Balance at beginning of period	$	103,462		$	31,838		$	4,290		$	5,316		$	4,924		$	2,668		$	152,498
Loans charged-off	(2,202		)	(887		)	—			(37		)	(371		)	(10		)	(3,507		)
Recoveries on loans previously charged-off	511			598			19			57			70			873			2,128
Net (charge-offs) recoveries	(1,691		)	(289		)	19			20			(301		)	863			(1,379		)
Provision (release) for loan losses	7,102			57			(283		)	(113		)	(35		)	(1,237		)	5,491
Balance at end of period	$	108,873		$	31,606		$	4,026		$	5,223		$	4,588		$	2,294		$	156,610
Ending balance, loans individually evaluated for impairment (1)	$	10,643		$	2,201		$	—		$	430		$	2,292		$	70		$	15,636
Ending balance, loans collectively evaluated for impairment	$	98,230		$	29,405		$	4,026		$	4,793		$	2,296		$	2,224		$	140,974
Recorded Investment in Loans:
Ending balance, loans individually evaluated for impairment (1)	$	59,748		$	15,796		$	—		$	4,763		$	12,761		$	318		$	93,386
Ending balance, loans collectively evaluated for impairment	8,130,882			2,888,258			357,258			371,978			125,973			202,749			12,077,098
Total recorded investment in loans	$	8,190,630		$	2,904,054		$	357,258		$	376,741		$	138,734		$	203,067		$	12,170,484

⁽¹⁾  Refer to Note 4 for additional information regarding impaired loans.

20

Allowance for Loan Losses and Recorded Investment in Loans (Continued) (Amounts in thousands)
	Quarter Ended March 31, 2014
	Commercial			Commercial Real Estate			Construction		Residential Real Estate			Home Equity			Personal			Total
Allowance for Loan Losses:
Balance at beginning of period	$	80,768		$	42,362		$	3,338	$	7,555		$	5,648		$	3,438		$	143,109
Loans charged-off	(1,487		)	(2,582		)	—		(235		)	(447		)	(130		)	(4,881		)
Recoveries on loans previously charged-off	3,662			688			7		300			28			406			5,091
Net recoveries (charge-offs)	2,175			(1,894		)	7		65			(419		)	276			210
Provision (release) for loan losses	7,137			(2,893		)	202		(642		)	271			(626		)	3,449
Balance at end of period	$	90,080		$	37,575		$	3,547	$	6,978		$	5,500		$	3,088		$	146,768
Ending balance, loans individually evaluated for impairment (1)	$	8,678		$	9,479		$	—	$	2,198		$	2,274		$	138		$	22,767
Ending balance, loans collectively evaluated for impairment	$	81,402		$	28,096		$	3,547	$	4,780		$	3,226		$	2,950		$	124,001
Recorded Investment in Loans:
Ending balance, loans individually evaluated for impairment (1)	$	54,700		$	42,180		$	—	$	9,354		$	13,430		$	625		$	120,289
Ending balance, loans collectively evaluated for impairment	7,342,248			2,457,226			335,476		328,478			134,144			207,124			10,804,696
Total recorded investment in loans	$	7,396,948		$	2,499,406		$	335,476	$	337,832		$	147,574		$	207,749		$	10,924,985

⁽¹⁾  Refer to Note 4 for additional information regarding impaired loans.

Reserve for Unfunded Commitments ⁽¹⁾ 

(Amounts in thousands)

	Quarter Ended March 31,
	2015		2014
Balance at beginning of period	$	12,274	$	9,206
Provision for unfunded commitments	376		496
Balance at end of period	$	12,650	$	9,702
Unfunded commitments, excluding covered assets, at period end	$	6,229,242	$	4,814,346

⁽¹⁾  Unfunded commitments include commitments to extend credit, standby letters of credit and commercial letters of credit. Unfunded commitments related to covered assets are excluded as they are covered under a loss sharing agreement with the FDIC.

Refer to Note 14 for additional details of commitments to extend credit, standby letters of credit and commercial letters of credit.

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6. GOODWILL AND OTHER INTANGIBLE ASSETS

Carrying Amount of Goodwill by Operating Segment

(Amounts in thousands)

	March 31, 2015		December 31, 2014
Banking	$	81,755	$	81,755
Asset management	12,286		12,286
Total goodwill	$	94,041	$	94,041

Goodwill is not amortized but, instead, is subject to impairment tests at least on an annual basis or more often if events or circumstances occur that would indicate it is more likely than not that the fair value of a reporting unit is below its carrying value. Our annual goodwill impairment test was performed as of October 31, 2014, and it was determined no impairment existed as of that date nor are we aware of any events or circumstances subsequent to October 31, 2014 that would indicate impairment of goodwill at March 31, 2015. There were no impairment charges for goodwill recorded in 2014. Our annual goodwill test will be completed during the fourth quarter 2015.

We have other intangible assets capitalized on the Consolidated Statements of Financial Condition in the form of core deposit premiums and client relationships. These intangible assets are being amortized over their estimated useful lives, which range from 8 to 12 years.

We review intangible assets for possible impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. During the first quarter 2015, there were no events or circumstances that we believe indicate there may be impairment of intangible assets, and no impairment charges for other intangible assets were recorded for the quarter ended March 31, 2015.

Other Intangible Assets

(Dollars in thousands)

	Quarter Ended March 31, 2015		Year Ended December 31, 2014
Core deposit intangibles:
Gross carrying amount	$	18,093	$	18,093
Accumulated amortization	13,473		12,870
Net carrying amount	$	4,620	$	5,223
Amortization during the period	$	603	$	2,799
Weighted average remaining life (in years)	2		2
Client relationships:
Gross carrying amount	$	2,002	$	2,002
Accumulated amortization	1,392		1,340
Net carrying amount	$	610	$	662
Amortization during the period	$	52	$	208
Weighted average remaining life (in years)	6		6

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Scheduled Amortization of Other Intangible Assets

(Amounts in thousands)

	Total
Year ending December 31,
2015 - remaining nine months	$	1,800
2016	2,161
2017	1,125
2018	98
2019	28
2020 and thereafter	18
Total	$	5,230

7. SHORT-TERM AND SECURED BORROWINGS

Summary of Short-Term Borrowings

(Dollars in thousands)

	March 31, 2015				December 31, 2014
	Amount		Rate		Amount		Rate
Outstanding:
FHLB advances	$	253,000	0.14	%	$	428,000	0.13	%
Other borrowings	33		0.06	%	—		—	%
Total short-term borrowings	$	253,033			$	428,000
Other Information:
Weighted average remaining maturity of FHLB advances at period end	9 months				7 months
Unused FHLB advances availability	$	552,721			$	265,529
Unused overnight Federal funds availability (1)	$	630,500			$	630,500
Borrowing capacity through the FRB discount window primary credit program (2)	$	392,842			$	403,752

⁽¹⁾  Our total availability of overnight Federal fund borrowings is not a committed line of credit and is dependent upon lender availability.

⁽²⁾  Our borrowing capacity changes each quarter subject to available collateral and FRB discount factors.

Borrowings with maturities of one year or less are classified as short-term and include FHLB advances and other borrowings.

FHLB Advances - At March 31, 2015, FHLB advances consisted of $8.0 million from the FHLB Atlanta, of which $3.0 million is included in short-term borrowings, and $295.0 million from FHLB Chicago, of which $250.0 million is included in short-term borrowings. As a member of the FHLB Chicago, the Bank has access to borrowing capacity which is subject to change based on the availability of acceptable collateral to pledge and the level of our investment in FHLB Chicago stock. At March 31, 2015 our borrowing capacity was $848.1 million of which $552.7 million is available, subject to making the required additional investment in FHLB Chicago stock. Qualifying residential, multi-family and commercial real estate loans, home equity lines of credit, and residential mortgage-backed securities are pledged as collateral to secure current outstanding balances and additional borrowing availability.

Other Borrowings - Other borrowings represents cash received by counterparty in excess of derivative liability at March 31, 2015.

Revolving Line of Credit - The Company has a 364-day revolving line of credit (the "Facility") with a group of commercial banks allowing borrowing of up to $60.0 million, and maturing on September 25, 2015. The interest rate applied on the Facility will be at the Company's election either 30-day or 90-day LIBOR plus 1.95% or Prime minus 0.50% at the time the advance is made. Any amounts outstanding under the Facility upon or before maturity may be converted, at the Company's option, to an amortizing term loan, with the balance of such loan due September 26, 2017. At March 31, 2015, no amounts have been drawn on the Facility.

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Secured Borrowings - Also included in short-term and secured borrowings on the Consolidated Statements of Financial Condition are amounts related to certain loan participation agreements on loans we originated that were classified as secured borrowings because they did not qualify for sale accounting treatment. As of March 31, 2015 and December 31, 2014, these loan participation agreements totaled $5.8 million and $4.4 million, respectively. A corresponding amount was recorded within loans on the Consolidated Statements of Financial Condition at each of these dates.

8. LONG-TERM DEBT

Long-Term Debt

(Dollars in thousands)

				March 31, 2015		December 31, 2014
Parent Company:
2.92% junior subordinated debentures due 2034		(1)(a)		$	8,248	$	8,248
1.98% junior subordinated debentures due 2035		(2)(a)		51,547		51,547
1.77% junior subordinated debentures due 2035		(3)(a)		41,238		41,238
10.00% junior subordinated debentures due 2068			(a)	68,755		68,755
7.125% subordinated debentures due 2042	(b)			125,000		125,000
Subtotal				294,788		294,788
Subsidiaries:
FHLB advances				50,000		50,000
Total long-term debt				$	344,788	$	344,788

⁽¹⁾  Variable rate in effect at March 31, 2015 based on three-month LIBOR +2.65%.

⁽²⁾  Variable rate in effect at March 31, 2015, based on three-month LIBOR +1.71%.

⁽³⁾  Variable rate in effect at March 31, 2015, based on three-month LIBOR +1.50%.

^(a)  Under the final regulatory capital rules issued in July 2013, these instruments are grandfathered for inclusion as a component of Tier 1 capital, although the Tier 1 capital treatment for these instruments will be subject to phase-out due to certain acquisitions.

^(b)  Qualifies as Tier 2 capital for regulatory capital purposes.

The $169.8 million in junior subordinated debentures presented in the table above were issued to four separate wholly-owned trusts for the purpose of issuing Company-obligated mandatorily redeemable trust preferred securities. Refer to Note 9 for further information on the nature and terms of these and previously issued debentures.

At March 31, 2015, outstanding long-term FHLB advances were secured by qualifying residential, multi-family, commercial real estate, and home equity lines of credit. From time to time we may pledge eligible real estate backed securities to support additional borrowings.

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Maturity and Rate Schedule for FHLB Long-Term Advances

(Dollars in thousands)

	March 31, 2015
	Amount		Rate
Maturity Date:
March 25, 2019	$	2,000	4.26	%
May 22, 2019	3,000		4.68	%
September 12, 2019 (1)	15,000		3.72	%
September 26, 2019 (1)	15,000		3.69	%
December 9, 2019 (2)	15,000		3.58	%
Total	$	50,000	3.75	%

⁽¹⁾  Provides for a one-time option to increase the advances in September 2016, up to $150.0 million each at the same fixed rate as the original advance. The advances include prepayment features and are subject to a prepayment fee.

⁽²⁾  Provides for a one-time option to increase the advances in December 2016, up to $150.0 million each at the same fixed rate as the original advance. The advances include prepayment features and are subject to a prepayment fee.

We reclassify long-term debt to short-term borrowings when the remaining maturity becomes less than one year.

Scheduled Maturities of Long-Term Debt

(Amounts in thousands)

	Total
Year ending December 31,
2019	$	50,000
2020 and thereafter	294,788
Total	$	344,788

9. JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES HELD BY TRUSTS THAT ISSUED GUARANTEED CAPITAL DEBT SECURITIES

As of March 31, 2015, we sponsored and wholly owned 100% of the common equity of four trusts that were formed for the purpose of issuing Company obligated mandatorily redeemable trust preferred securities ("Trust Preferred Securities") to third-party investors and investing the proceeds from the sale of the Trust Preferred Securities solely in a series of junior subordinated debentures of the Company ("Debentures"). The Debentures held by the trusts, which in aggregate totaled $169.8 million at March 31, 2015, are the sole assets of each respective trust. Our obligations under the Debentures and related documents, including the indentures, the declarations of trust and related Company guarantees, taken together, constitute a full and unconditional guarantee by the Company on a subordinated basis of distributions and redemption payments and liquidation payments on the Trust Preferred Securities. We currently have the right to redeem, in whole or in part, subject to any required regulatory approval, all or any series of the Debentures, in each case, at a redemption price of 100% of the principal amount of the Debentures being redeemed plus any accrued but unpaid interest to the redemption date. The repayment, redemption or repurchase of any of the Debentures would be subject to the terms of the applicable indenture and would result in a corresponding repayment, redemption or repurchase of an equivalent amount of the related series of Trust Preferred Securities. Any redemption of the 10% Debentures held by the PrivateBancorp Capital Trust IV ("Capital Trust IV") would be subject to the terms of the replacement capital covenant described below and any required regulatory approval.

In connection with the issuance in 2008 of the 10% Debentures, which rank junior to the other Debentures, we entered into a replacement capital covenant that relates to redemption of the 10% Debentures and the related Trust Preferred Securities. Under the replacement capital covenant, as amended in October 2012, we committed, for the benefit of certain debt holders, that we would not repay, redeem or repurchase the 10% Debentures or the related Trust Preferred Securities prior to June 2048 unless we have (1) obtained any required regulatory approval, and (2) raised certain amounts of qualifying equity or equity-like replacement capital at any time after October 10, 2012. The replacement capital covenant benefits holders of our "covered debt" as specified under the terms of the replacement capital covenant. Currently, under the replacement capital covenant, the "covered debt" is the

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Debentures held by PrivateBancorp Statutory Trust II. In the event that the Company's 7.125% subordinated debentures due 2042 are designated as or become the covered debt under the replacement capital covenant, the terms of such debentures provide that the Company is authorized to terminate the replacement capital covenant without any further action or payment. We may amend or terminate the replacement capital covenant in certain circumstances without the consent of the holders of the covered debt.

Under current accounting rules, the trusts qualify as variable interest entities for which we are not the primary beneficiary and therefore are ineligible for consolidation in our financial statements. The Debentures issued by us to the trusts are included in our Consolidated Statements of Financial Condition as "long-term debt" with the corresponding interest distributions recorded as interest expense. The common shares issued by the trusts are included in other assets in our Consolidated Statements of Financial Condition with the related dividend distributions recorded in other non-interest income.

Common Securities, Preferred Securities, and Related Debentures

(Dollars in thousands)

		Common Securities Issued		Trust Preferred Securities Issued (1)				Earliest Redemption Date (on or after) (3)		Principal Amount of Debentures (3)
	Issuance Date					Coupon Rate (2)			Maturity	March 31, 2015		December 31, 2014
Bloomfield Hills Statutory Trust I	May 2004	$	248	$	8,000	2.92	%	June 17, 2009	June 2034	$	8,248	$	8,248
PrivateBancorp Statutory Trust II	Jun. 2005	1,547		50,000		1.98	%	Sep 15, 2010	Sept. 2035	51,547		51,547
PrivateBancorp Statutory Trust III	Dec. 2005	1,238		40,000		1.77	%	Dec 15, 2010	Dec. 2035	41,238		41,238
PrivateBancorp Capital Trust IV	May 2008	5		68,750		10.00	%	June 15, 2013	June 2068	68,755		68,755
Total		$	3,038	$	166,750					$	169,788	$	169,788

⁽¹⁾  The trust preferred securities accrue distributions at a rate equal to the interest rate on and have a maturity identical to that of the related Debentures. The trust preferred securities will be redeemed upon maturity or earlier redemption of the related Debentures.

⁽²⁾  Reflects the coupon rate in effect at March 31, 2015. The coupon rate for the Bloomfield Hills Statutory Trust I is a variable rate and is based on three-month LIBOR plus 2.65%. The coupon rates for the PrivateBancorp Statutory Trusts II and III are at a variable rate based on three-month LIBOR plus 1.71% for Trust II and three-month LIBOR plus 1.50% for Trust III. The coupon rate for the PrivateBancorp Capital Trust IV is fixed. Distributions for all of the Trusts are payable quarterly. We have the right to defer payment of interest on the Debentures at any time or from time to time for a period not exceeding ten years in the case of the Debentures held by Trust IV, and five years in the case of all other Debentures, without causing an event of default under the related indenture, provided no extension period may extend beyond the stated maturity of the Debentures. During such extension period, distributions on the trust preferred securities would also be deferred, and our ability to pay dividends on our common stock would generally be prohibited. The Federal Reserve has the ability to prevent interest payments on the Debentures.

⁽³⁾  The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the Debentures at maturity or upon their earlier redemption in whole or in part. The Debentures are redeemable in whole or in part prior to maturity at any time after the dates shown in the table and only after we have obtained Federal Reserve approval, if then required under applicable guidelines or regulations.

10. EQUITY

Preferred Stock

At March 31, 2015 and December 31, 2014, there were 1 million shares of preferred stock authorized and none issued or outstanding.

Nonvoting Common Stock

At March 31, 2015 and December 31, 2014, there were 5 million shares of nonvoting common stock authorized and none issued or outstanding.

Treasury Stock

The Company reissues treasury stock, when available, or new shares to fulfill its obligation to issue shares granted pursuant to the share-based compensation plans. Treasury shares are reissued at average cost. The Company held 160,193 shares and 1,704 shares in treasury at March 31, 2015 and December 31, 2014, respectively.

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Comprehensive Income

Change in Accumulated Other Comprehensive Income ("AOCI") by Component

(Amounts in thousands)

	Quarter Ended March 31,
	2015									2014
	Unrealized Gain on Available-for-Sale Securities			Accumulated (Loss) Gain on Effective Cash Flow Hedges			Total			Unrealized Gain on Available-for-Sale Securities			Accumulated (Loss) Gain on Effective Cash Flow Hedges			Total
Balance at beginning of period	$	19,448		$	1,469		$	20,917		$	12,960		$	(3,116	)	$	9,844
Increase in unrealized gains on securities	8,590			—			8,590			3,677			—			3,677
Increase in unrealized gains on cash flow hedges	—			8,630			8,630			—			4,137			4,137
Tax expense on increase in unrealized gains	(3,358		)	(3,369		)	(6,727		)	(1,451		)	(1,623		)	(3,074		)
Other comprehensive income before reclassifications	5,232			5,261			10,493			2,226			2,514			4,740
Reclassification adjustment of net gains included in net income (1)	(534		)	(2,538		)	(3,072		)	(331		)	(2,043		)	(2,374		)
Reclassification adjustment for tax expense on realized net gains (2)	210			999			1,209			131			806			937
Amounts reclassified from AOCI	(324		)	(1,539		)	(1,863		)	(200		)	(1,237		)	(1,437		)
Net current period other comprehensive income	4,908			3,722			8,630			2,026			1,277			3,303
Balance at end of period	$	24,356		$	5,191		$	29,547		$	14,986		$	(1,839	)	$	13,147

⁽¹⁾  The amounts reclassified from AOCI for the available-for-sale securities are included in net securities gains on the Consolidated Statements of Income, while the amounts reclassified from AOCI for cash flow hedges are included in interest income on loans on the Consolidated Statements of Income.

⁽²⁾  The tax expense amounts reclassified from AOCI in connection with the available-for-sale securities reclassification and cash flow hedges reclassification are included in income tax provision on the Consolidated Statements of Income.

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11. EARNINGS PER COMMON SHARE

Basic and Diluted Earnings per Common Share

(Amounts in thousands, except per share data)

	Quarter Ended March 31,
	2015			2014
Basic earnings per common share
Net income	$	41,484		$	34,505
Net income allocated to participating stockholders (1)	(463		)	(613		)
Net income allocated to common stockholders	$	41,021		$	33,892
Weighted-average common shares outstanding	77,407			76,675
Basic earnings per common share	$	0.53		$	0.44
Diluted earnings per common share
Diluted earnings applicable to common stockholders (2)	$	41,028		$	33,897
Weighted-average diluted common shares outstanding:
Weighted-average common shares outstanding	77,407			76,675
Dilutive effect of stock awards (3)	1,105			742
Weighted-average diluted common shares outstanding	78,512			77,417
Diluted earnings per common share	$	0.52		$	0.44

⁽¹⁾  Participating stockholders are those that hold certain share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents. Such shares or units are considered participating securities (i.e., certain of the Company’s deferred and restricted stock units and nonvested restricted stock awards).

⁽²⁾  Net income allocated to common stockholders for basic and diluted earnings per share may differ under the two-class method as a result of adding common stock equivalents for options to dilutive shares outstanding, which alters the ratio used to allocate earnings to common stockholders and participating securities for the purposes of calculating diluted earnings per share.

⁽³⁾  For the quarters ended March 31, 2015 and 2014, the weighted-average outstanding non-participating securities of 730,000 and 1.2 million shares, respectively, were not included in the computation of diluted earnings per common share because their inclusion would have been antidilutive for the periods presented.

12. INCOME TAXES

Income Tax Provision Analysis

(Dollars in thousands)

	Quarter Ended  March 31,
	2015			2014
Income before income taxes	$	66,718		$	55,531
Income tax provision:
Current income tax provision	$	21,540		$	19,867
Deferred income tax provision	3,694			1,159
Total income tax provision	$	25,234		$	21,026
Effective tax rate	37.8		%	37.9		%

Deferred Tax Assets

Net deferred tax assets totaled $88.9 million at March 31, 2015 and $98.2 million at December 31, 2014. Net deferred tax assets are included in other assets in the accompanying Consolidated Statements of Financial Condition.

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At March 31, 2015, we have concluded that it is more likely than not that the deferred tax assets will be realized and no valuation allowance was recorded. This conclusion was based in part on our recent earnings history, on both a book and tax basis, and our outlook for earnings and taxable income in future periods.

At both March 31, 2015 and December 31, 2014, we had $212,000, respectively, of unrecognized tax benefits relating to uncertain tax positions that, if recognized, would impact the effective tax rate.

13. DERIVATIVE INSTRUMENTS

We utilize an overall risk management strategy that incorporates the use of derivative instruments to reduce both interest rate risk (relating to mortgage loan commitments and planned sales of loans) and foreign currency volatility (relating to certain loans denominated in currencies other than the U.S. dollar). We also use these instruments to accommodate our clients as we provide them with risk management solutions. None of the client-related and other end-user derivatives, noted in the table below, were designated as hedging instruments for accounting purposes at March 31, 2015 and December 31, 2014.

We also use interest rate derivatives to hedge variability in forecasted interest cash flows in our loan portfolio which is comprised primarily of floating-rate loans. These derivatives are designated as cash flow hedges.

Derivatives expose us to counterparty credit risk. Credit risk is managed through our standard underwriting process. Actual exposures are monitored against various types of credit limits established to contain risk within parameters. Additionally, credit risk is managed through the use of collateral, netting agreements, and the establishment of internal concentration limits by financial institution.

Notional Amounts and Fair Value of Derivative Instruments

(Amounts in thousands)

	Asset Derivatives										Liability Derivatives
	March 31, 2015					December 31, 2014					March 31, 2015					December 31, 2014
	Notional (1)		Fair Value			Notional (1)		Fair Value			Notional (1)		Fair Value			Notional (1)		Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	$	725,000	$	8,491		$	550,000	$	4,542		$	75,000	$	441		$	250,000	$	2,715
Derivatives not designated as hedging instruments:
Client-related derivatives:
Interest rate contracts	$	3,982,438	$	54,821		$	3,881,202	$	42,879		$	3,982,438	$	56,520		$	3,743,827	$	43,792
Foreign exchange contracts	173,672		9,056			98,285		5,183			149,430		8,433			86,582		4,659
Credit contracts (1)	94,241		20			98,478		19			110,426		26			100,941		24
Total client-related derivatives			$	63,897				$	48,081				$	64,979				$	48,475
Other end-user derivatives:
Foreign exchange contracts	$	10,937	$	115		$	18,551	$	241		$	4,566	$	18		$	2,892	$	45
Mortgage banking derivatives			479					786					534					801
Total other end-user derivatives			$	594				$	1,027				$	552				$	846
Total derivatives not designated as hedging instruments			$	64,491				$	49,108				$	65,531				$	49,321
Netting adjustments (2)			(16,375		)			(10,588		)			(39,005		)			(25,269		)
Total derivatives			$	56,607				$	43,062				$	26,967				$	26,767

⁽¹⁾  The remaining average notional amounts are shown for credit contracts.

⁽²⁾  Represents netting of derivative asset and liability balances, and related cash collateral, with the same counterparty subject to master netting agreements.

Master Netting Agreements

Certain of our derivative contracts are subject to enforceable master netting agreements with derivative counterparties. Authoritative accounting guidance permits the netting of derivative assets and liabilities when a legally enforceable master netting agreement

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exists between us and a derivative counterparty. A master netting agreement is an agreement between two counterparties who have multiple derivative contracts with each other that provide for the net settlement of contracts through a single payment, in a single currency, in the event of default on or termination of any one contract. For those derivative contracts subject to enforceable master netting agreements, derivative assets and liabilities, and related cash collateral, with the same counterparty are reported on a net basis within derivative assets and derivative liabilities on the Consolidated Statements of Financial Condition.

Derivative contracts may require us to provide or receive cash or financial instrument collateral. Collateral associated with derivative assets and liabilities subject to enforceable master netting agreements with the same counterparty is posted on a net basis. We have pledged cash or financial collateral in accordance with each counterparty's collateral posting requirements for all of the Company's derivative assets and liabilities in a net liability position as of March 31, 2015. Certain collateral posting requirements are subject to posting thresholds and minimum transfer amounts, such that we are only required to post collateral once the posting threshold is met, and any adjustments to the amount of collateral posted must meet minimum transfer amounts.

As of March 31, 2015, $22.7 million of cash collateral pledged was netted with the related derivative liabilities and $57,000 of the $90,000 cash collateral received was netted with the related derivative assets on the Consolidated Statement of Financial Condition. To the extent not netted against derivative fair values under a master netting agreement, the excess collateral received or pledged is included in other short-term borrowings or other investments, respectively. There was no excess cash collateral pledged at March 31, 2015. Any securities pledged to counterparties as financial instrument collateral remain on the Consolidated Statements of Financial Condition as long as we do not default.

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The following table presents information about our derivative assets and liabilities and the related collateral by derivative type (e.g., interest rate contracts). As we post collateral with counterparties on the basis of our net position in all derivative contracts with a given counterparty, the information presented below aggregates the derivative contracts entered into with the same counterparty.

Offsetting of Derivative Assets and Liabilities

(Amounts in thousands)

	Gross Amounts of Recognized Assets / Liabilities (1)		Gross Amounts Offset (2)			Net Amount Presented on the Statement of Financial Condition		Gross Amounts Not Offset on the Statement of Financial Condition (3)					Net Amount
								Financial Instruments (4)			Cash Collateral
As of March 31, 2015
Derivative assets:
Interest rate contracts	$	63,312	$	(10,462	)	$	52,850	$	(721	)	$	—	$	52,129
Foreign exchange contracts	6,508		(5,912		)	596		—			—		596
Credit contracts	20		(1		)	19		—			—		19
Total derivatives subject to a master netting agreement	69,840		(16,375		)	53,465		(721		)	—		52,744
Total derivatives not subject to a master netting agreement	3,142		—			3,142		—			—		3,142
Total derivatives	$	72,982	$	(16,375	)	$	56,607	$	(721	)	$	—	$	55,886
Derivative liabilities:
Interest rate contracts	$	56,961	$	(36,426	)	$	20,535	$	(15,482	)	$	—	$	5,053
Foreign exchange contracts	5,041		(2,570		)	2,471		(1,863		)	—		608
Credit contracts	26		(9		)	17		(13		)	—		4
Total derivatives subject to a master netting agreement	62,028		(39,005		)	23,023		(17,358		)	—		5,665
Total derivatives not subject to a master netting agreement	3,944		—			3,944		—			—		3,944
Total derivatives	$	65,972	$	(39,005	)	$	26,967	$	(17,358	)	$	—	$	9,609

⁽¹⁾  All derivative contracts are over-the-counter contracts.

⁽²⁾  Represents end-user, client-related and cash flow hedging derivative contracts and related cash collateral entered into with the same counterparty and subject to a master netting agreement.

⁽³⁾  Collateralization is determined at the counterparty level. If overcollateralization exists, the amount shown is limited to the fair value of the derivative.

⁽⁴⁾  Financial instruments are disclosed at fair value. Financial instrument collateral is allocated pro-rata amongst the derivative liabilities to which it relates.

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Offsetting of Derivative Assets and Liabilities (Continued) (Amounts in thousands)
	Gross Amounts of Recognized Assets / Liabilities (1)		Gross Amounts Offset (2)			Net Amount Presented on the Statement of Financial Condition		Gross Amounts Not Offset on the Statement of Financial Condition (3)					Net Amount
								Financial Instruments (4)			Cash Collateral
As of December 31, 2014
Derivative assets:
Interest rate contracts	$	47,421	$	(7,433	)	$	39,988	$	—		$	—	$	39,988
Foreign exchange contracts	3,664		(3,154		)	510		—			—		510
Credit contracts	19		(1		)	18		—			—		18
Total derivatives subject to a master netting agreement	51,104		(10,588		)	40,516		—			—		40,516
Total derivatives not subject to a master netting agreement	2,546		—			2,546		—			—		2,546
Total derivatives	$	53,650	$	(10,588	)	$	43,062	$	—		$	—	$	43,062
Derivative liabilities:
Interest rate contracts	$	46,507	$	(24,067	)	$	22,440	$	(17,755	)	$	—	$	4,685
Foreign exchange contracts	2,421		(1,202		)	1,219		(965		)	—		254
Credit contracts	24		—			24		(19		)	—		5
Total derivatives subject to a master netting agreement	48,952		(25,269		)	23,683		(18,739		)	—		4,944
Total derivatives not subject to a master netting agreement	3,084		—			3,084		—			—		3,084
Total derivatives	$	52,036	$	(25,269	)	$	26,767	$	(18,739	)	$	—	$	8,028

⁽¹⁾  All derivative contracts are over-the-counter contracts.

⁽²⁾  Represents end-user, client-related and cash flow hedging derivative contracts entered into with the same counterparty and subject to a master netting agreement.

⁽³⁾  Collateralization is determined at the counterparty level. If overcollateralization exists, the amount shown is limited to the fair value of the derivative.

⁽⁴⁾  Financial instruments are disclosed at fair value. Financial instrument collateral is allocated pro-rata amongst the derivative liabilities to which it relates.

Certain of our derivative contracts contain embedded credit risk contingent features that if triggered either allow the derivative counterparty to terminate the derivative or require additional collateral. These contingent features are triggered if we do not meet specified financial performance indicators such as minimum capital ratios under the Federal banking agencies’ guidelines. All such requirements were met at March 31, 2015 and December 31, 2014. Details on these derivative contracts are set forth in the following table.

Derivatives Subject to Credit Risk Contingency Features

(Amounts in thousands)

	March 31, 2015		December 31, 2014
Fair value of derivatives with credit contingency features in a net liability position	$	13,291	$	14,596
Collateral posted for those transactions in a net liability position	$	15,226	$	16,865
If credit risk contingency features were triggered:
Additional collateral required to be posted to derivative counterparties	$	—	$	—
Outstanding derivative instruments that would be immediately settled	$	13,291	$	14,596

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Derivatives Designated in Hedge Relationships

The objective of our hedging program is to use interest rate derivatives to manage our exposure to interest rate movements.

Cash Flow Hedges – Under our cash flow hedging program we enter into receive fixed/pay variable interest rate swaps to convert certain floating-rate commercial loan cash flows to fixed-rate to reduce the variability in forecasted interest cash flows due to market interest rate changes. We use regression analysis to assess the effectiveness of cash flow hedges at both the inception of the hedge relationship and on an ongoing basis. Ineffectiveness is generally measured as the amount by which the cumulative change in fair value of the hedging instrument exceeds the present value of the cumulative change in the expected cash flows of the hedged item. Measured ineffectiveness is recognized directly in other non-interest income in the Consolidated Statements of Income. During the quarter ended March 31, 2015, there were no gains or losses from cash flow hedge derivatives related to ineffectiveness that were reclassified to current earnings. The effective portion of the gains or losses on cash flow hedges are recorded, net of tax, in accumulated other comprehensive income ("AOCI") and are subsequently reclassified to interest income on loans in the period that the hedged interest cash flows affect earnings. As of March 31, 2015, the maximum length of time over which forecasted interest cash flows are hedged is five years. There are no components of derivative gains or losses excluded from the assessment of hedge effectiveness related to our cash flow hedge strategy.

Change in Accumulated Other Comprehensive Income

Related to Interest Rate Swaps Designated as Cash Flow Hedge

(Amounts in thousands)

	Quarter Ended March 31,
	2015						2014
	Pre-tax			After-tax			Pre-tax			After-tax
Accumulated unrealized gain (loss) at beginning of period	$	2,405		$	1,469		$	(5,110	)	$	(3,116	)
Amount of gain recognized in AOCI (effective portion)	8,630			5,261			4,137			2,514
Amount reclassified from AOCI to interest income on loans	(2,538		)	(1,539		)	(2,043		)	(1,237		)
Accumulated unrealized gain (loss) at end of period	$	8,497		$	5,191		$	(3,016	)	$	(1,839	)

As of March 31, 2015, $5.2 million in net deferred gains, net of tax, recorded in AOCI are expected to be reclassified into earnings during the next twelve months. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to March 31, 2015. During the quarter ended March 31, 2015, there were no gains or losses from cash flow hedge derivatives reclassified to current earnings because it became probable that the original forecasted transaction would not occur.

Derivatives Not Designated in Hedge Relationships

Other End-User Derivatives – We enter into derivatives that include commitments to fund residential mortgage loans to be sold into the secondary market and forward commitments for the future delivery of residential mortgage loans. It is our practice to enter into forward commitments for the future delivery of residential mortgage loans when we enter into customer interest rate lock commitments. This practice allows us to economically hedge the effect of changes in interest rates on our commitments to fund the loans as well as on our portfolio of mortgage loans held-for-sale. At March 31, 2015, the par value of our mortgage loans held-for-sale totaled $21.8 million, the notional value of our interest rate lock commitments totaled $83.2 million, and the notional value of our forward commitments for the future delivery of residential mortgage loans totaled $105.0 million.

We are also exposed at times to foreign exchange risk as a result of originating loans in which the principal and interest are settled in a currency other than U.S. dollars. As of March 31, 2015, our exposure was to the Euro, Canadian dollar, British pound and Danish Kroner on $14.7 million of loans. We manage this risk using forward currency derivatives.

Client-Related Derivatives – We offer, through our capital markets group, over-the-counter interest rate and foreign exchange derivatives to our clients, including but not limited to, interest rate swaps, interest rate options (also referred to as caps, floors, collars, etc.), foreign exchange forwards and options, as well as cash products such as foreign exchange spot transactions. When our clients enter into an interest rate or foreign exchange derivative transaction with us, we mitigate our exposure to market risk through the execution of off-setting positions with inter-bank dealer counterparties. Although the off-setting nature of transactions originated by our capital markets group limits our market risk exposure, they do expose us to other risks including counterparty credit, settlement, and operational risk.

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To accommodate our loan clients, we occasionally enter into risk participation agreements ("RPA") with counterparty banks to either accept or transfer a portion of the credit risk related to their interest rate derivatives or transfer a portion of the credit risk related to our interest rate derivatives. This allows clients to execute an interest rate derivative with one bank while allowing for distribution of the credit risk among participating members. We have entered into written RPAs in which we accept a portion of the credit risk associated with an interest rate derivative of another bank's loan client in exchange for a fee. We manage this credit risk through our loan underwriting process, and when appropriate, the RPA is backed by collateral provided by the clients under their loan agreement.

The current payment/performance risk of written RPAs is assessed using internal risk ratings which range from 1 to 8 with the latter representing the highest credit risk. The risk rating is based on several factors including the financial condition of the RPA’s underlying derivative counterparty, present economic conditions, performance trends, leverage, and liquidity.

The maximum potential amount of future undiscounted payments that we could be required to make under our written RPAs assumes that the underlying derivative counterparty defaults and that the floating interest rate index of the underlying derivative remains at zero percent. In the event that we would have to pay out any amounts under our RPAs, we will seek to maximize the recovery of these amounts from assets that our clients pledged as collateral for the derivative and the related loan.

Risk Participation Agreements

(Dollars in thousands)

	March 31, 2015			December 31, 2014
Fair value of written RPAs	$	26		$	24
Range of remaining terms to maturity (in years)	Less than 1 to 4			Less than 1 to 4
Range of assigned internal risk ratings	2 to 7			2 to 7
Maximum potential amount of future undiscounted payments	$	3,821		$	3,927
Percent of maximum potential amount of future undiscounted payments covered by proceeds from liquidation of pledged collateral	24		%	25		%

Gain (Loss) Recognized on Derivative Instruments

Not Designated in Hedging Relationship

(Amounts in thousands)

	Quarter Ended March 31,
	2015			2014
Gain on client-related derivatives recognized in capital markets products income:
Interest rate contracts	$	2,363		$	2,510
Foreign exchange contracts	1,753			1,415
Credit contracts	56			158
Total client-related derivatives	4,172			4,083
Gain (loss) on end-user derivatives recognized in other income:
Foreign exchange derivatives	1,050			6
Mortgage banking derivatives	(40		)	(182		)
Total end-user derivatives	1,010			(176		)
Total derivatives not designated in hedging relationship	$	5,182		$	3,907

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14. COMMITMENTS, GUARANTEES, AND CONTINGENT LIABILITIES

Credit Extension Commitments and Guarantees

In the normal course of business, we enter into a variety of financial instruments with off-balance sheet risk to meet the financing needs of our clients and to conduct lending activities. These instruments principally include commitments to extend credit, standby letters of credit, and commercial letters of credit. These instruments involve, to varying degrees, elements of credit and liquidity risk in excess of the amounts reflected in the Consolidated Statements of Financial Condition.

Contractual or Notional Amounts of Financial Instruments ⁽¹⁾ 

(Amounts in thousands)

	March 31, 2015		December 31, 2014
Commitments to extend credit:
Home equity lines	$	133,911	$	129,943
Residential 1-4 family construction	51,776		53,847
Commercial real estate, other construction, and land development	1,205,048		1,123,123
Commercial and industrial	4,101,972		4,031,217
All other commitments	345,133		336,623
Total commitments to extend credit	$	5,837,840	$	5,674,753
Letters of credit:
Financial standby	$	359,716	$	334,175
Performance standby	37,667		38,167
Commercial letters of credit	4,765		5,224
Total letters of credit	$	402,148	$	377,566

⁽¹⁾  Includes covered loan commitments of $10.7 million and $11.0 million as of March 31, 2015 and December 31, 2014, respectively.

Commitments to extend credit are agreements to lend funds to or issue letters of credit for the account of, a client as long as there is no violation of any condition established in the credit agreement. Commitments generally have fixed expiration dates or other termination clauses and variable interest rates tied to the prime rate or LIBOR and may require payment of a fee for the unused portion of the commitment or for the amounts issued but not drawn on letters of credit. All or a portion of unfunded commitments require regulatory capital support, except for unfunded commitments of less than one year that are unconditionally cancellable. Since many of our commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements of the borrowers. As of March 31, 2015, we had a reserve for unfunded commitments of $12.7 million, which reflects our estimate of inherent losses associated with these commitment obligations. The balance of this reserve changes based on a number of factors including: the balance of outstanding commitments and our assessment of the likelihood of borrowers to utilize these commitments. The reserve is recorded in other liabilities in the Consolidated Statements of Financial Condition.

Standby and commercial letters of credit are conditional commitments issued by us to guarantee the performance of a client to a third party. Standby letters of credit include performance and financial guarantees for clients in connection with contracts between our clients and third parties. Standby letters of credit are agreements where we are obligated to make payment to a third party on behalf of a client in the event the client fails to meet their contractual obligations. Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the client and the third party. In most cases, the Company receives a fee for the amount of a letter of credit issued but not drawn upon.

In the event of a client’s nonperformance, our credit loss exposure is equal to the contractual amount of those commitments. We manage this credit risk in a similar manner to evaluating credit risk in extending loans to clients under our credit policies. We use the same credit policies in making credit commitments as for on-balance sheet instruments, mitigating exposure to credit loss through various collateral requirements, if deemed necessary. In the event of nonperformance by the clients, we have rights to the underlying collateral, which could include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities.

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The maximum potential future payments guaranteed by us under standby letters of credit arrangements are equal to the contractual amount of the commitment. The unamortized fees associated with standby letters of credit, which are included in other liabilities in the Consolidated Statements of Financial Condition, totaled $2.6 million as of March 31, 2015. We amortize these amounts into income over the commitment period. As of March 31, 2015, standby letters of credit had a remaining weighted-average term of approximately 14 months, with remaining actual lives ranging from less than 1 year to 6 years.

Other Commitments

The Company has unfunded commitments to Community Reinvestment Act ("CRA") investments and other investment partnerships totaling $20.2 million at March 31, 2015. Of these commitments, $8.3 million related to legally-binding unfunded commitments for tax-credit investments and was included within other assets and other liabilities on the Consolidated Statements of Financial Condition.

Credit Card Settlement Guarantees

Our third-party corporate credit card provider issues corporate purchase credit cards on behalf of our commercial clients. The corporate purchase credit cards are issued to employees of certain of our commercial clients at the client’s direction and used for payment of business-related expenses. In most circumstances, these cards will be underwritten by our third-party provider. However, in certain circumstances, we may enter into a recourse agreement, which transfers the credit risk from the third-party provider to us in the event that the client fails to meet its financial payment obligation. In these circumstances, a total maximum exposure amount is established for our corporate client. In addition to the obligations presented in the prior table, the maximum potential future payments guaranteed by us under this third-party settlement guarantee were $13.5 million at March 31, 2015.

We believe that the estimated amounts of maximum potential future payments are not representative of our actual potential loss given our insignificant historical losses from this third-party settlement guarantee program. As of March 31, 2015, we have no recorded contingent liability in the consolidated financial statements for this settlement guarantee program, and management believes that the probability of any loss under this arrangement is remote.

Mortgage Loans Sold with Recourse

Certain mortgage loans sold into the secondary market have limited recourse provisions. The losses for the three months ended March 31, 2015 and 2014 arising from limited recourse provisions were not material. Based on this experience, the Company has not established any liability for potential future losses relating to mortgage loans sold in prior periods.

Legal Proceedings

In June 2013, we were served with a complaint naming the Bank as an additional defendant in a lawsuit pending in the Circuit Court of the 21st Judicial Circuit, Kankakee County, Illinois known as Maas vs. Marek et. al. The lawsuit, brought by the beneficiaries of two trusts for which the Bank is serving as the successor trustee, seeks reimbursement of penalties and interest assessed by the IRS due to the late payment of certain generation skipping taxes by the trusts, as well as certain related attorney fees and other damages. The other named defendants include legal and accounting professionals that provided services related to the matters involved. In January 2014, the Circuit Court denied the Bank’s motion to dismiss, and the matter is now in the discovery process. Although we are not able to predict the likelihood of an adverse outcome, we currently anticipate that ultimate resolution of this matter will not have a material adverse impact on our financial condition or results of operations.

As of March 31, 2015, there were various other legal proceedings pending against the Company and its subsidiaries in the ordinary course of business. Management does not believe that the outcome of these proceedings will have, individually or in the aggregate, a material adverse effect on the Company’s results of operations, financial condition or cash flows.

15. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

We measure, monitor, and disclose certain of our assets and liabilities on a fair value basis. Fair value is used on a recurring basis to account for securities available-for-sale, mortgage loans held-for-sale, derivative assets, derivative liabilities, and certain other assets and other liabilities. In addition, fair value is used on a nonrecurring basis to apply lower-of-cost-or-market accounting to foreclosed real estate and certain other loans held-for-sale, evaluate assets or liabilities for impairment, including collateral-dependent impaired loans, and for disclosure purposes. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, we use various valuation techniques and input assumptions when estimating fair value.

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U.S. GAAP requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and establishes a fair value hierarchy that prioritizes the inputs used to measure fair value into three broad levels based on the reliability of the input assumptions. The hierarchy gives the highest priority to level 1 measurements and the lowest priority to level 3 measurements. The three levels of the fair value hierarchy are defined as follows:

• Level 1 – Unadjusted quoted prices for identical assets or liabilities traded in active markets.

• Level 2 – Observable inputs other than level 1 prices, such as quoted prices for similar instruments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of where an asset or liability falls within the hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Valuation Methodology

We believe our valuation methods are appropriate and consistent with other market participants. However, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value. Additionally, the methods used may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.

The following describes the valuation methodologies we use for assets and liabilities measured at fair value, including the general classification of the assets and liabilities pursuant to the valuation hierarchy.

Securities Available-for-Sale – Securities available-for-sale include U.S. Treasury, U.S. Agency, collateralized mortgage obligations, residential mortgage-backed securities, state and municipal securities, and foreign sovereign debt. Substantially all available-for-sale securities are fixed-income instruments that are not quoted on an exchange, but may be traded in active markets. The fair value of these securities is based on quoted market prices obtained from external pricing services. The principal markets for our securities portfolio are the secondary institutional markets, with an exit price that is predominantly reflective of bid level pricing in those markets. U.S. Treasury securities have been classified in level 1 of the valuation hierarchy. All other remaining securities are classified in level 2 of the valuation hierarchy. On a quarterly basis, the Company uses a variety of methods to validate the overall reasonableness of the fair values obtained from external pricing services, including evaluating pricing service inputs and methodologies, using exception reports based on analytical criteria, comparing prices obtained to prices received from other pricing sources, and reviewing the reasonableness of prices based on the Company’s knowledge of market liquidity and other market-related conditions. While we may challenge valuation inputs used in determining prices obtained from external pricing services based on our validation procedures, we have not altered the fair values ultimately provided by the external pricing services during the periods presented.

Mortgage Loans Held-for-Sale – Mortgage loans held-for-sale represent residential mortgage loan originations intended to be sold in the secondary market. We have elected the fair value option for residential mortgage loans originated with the intention of selling to a third party. The election of the fair value option aligns the accounting for these loans with the related mortgage banking derivatives used to economically hedge them. These mortgage loans are measured at fair value as of each reporting date, with changes in fair value recognized through mortgage banking non-interest income. The fair value of mortgage loans held-for-sale is determined based on prices obtained for loans with similar characteristics from third party sources. On a quarterly basis, the Company validates the overall reasonableness of the fair values obtained from third party sources by comparing prices obtained to prices received from various other pricing sources, and reviewing the reasonableness of prices based on Company knowledge of market liquidity and other market-related conditions. Mortgage loans held-for-sale are classified in level 2 of the valuation hierarchy.

Collateral-Dependent Impaired Loans – We do not record loans held for investment at fair value on a recurring basis. However, periodically, we record nonrecurring adjustments to reduce the carrying value of certain impaired loans based on fair value measurement. This population of impaired loans includes those for which repayment of the loan is expected to be provided solely by the underlying collateral. We measure the fair value of collateral-dependent impaired loans based on the fair value of the collateral securing these loans less estimated selling costs. A majority of collateral-dependent impaired loans are secured by real estate with the fair value generally determined based upon appraisals performed by a certified or licensed appraiser using a combination of valuation techniques such as sales comparison, income capitalization and cost approach and include inputs such as absorption rates, capitalization rates and comparables. We also consider other factors or recent developments that could result in adjustments to the collateral value estimates indicated in the appraisals. When a collateral-dependent loan is secured by non-

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real estate collateral such as receivables, inventory, or equipment, the fair value is generally determined based upon appraisals, field exams, or receivable reports. The valuation techniques and inputs are reviewed internally by an asset-based specialist for reasonableness of estimated liquidation costs, collectability probabilities, and other market data. Accordingly, fair value estimates for collateral-dependent impaired loans are classified in level 3 of the valuation hierarchy. The carrying value of all impaired loans and the related specific reserves are disclosed in Note 4.

At the time a collateral-dependent loan is initially determined to be impaired, we review the existing appraisal. If the most recent appraisal is greater than one-year old, a new appraisal of the underlying collateral is obtained. For collateral-dependent impaired loans that are secured by real estate, we generally obtain "as is" appraisal values in order to evaluate impairment. When a collateral-dependent loan is secured by non-real estate collateral such as receivables, inventory, or equipment, the fair value is generally determined based upon appraisals, field exams, or receivable reports. The valuation techniques and inputs are reviewed internally by workout and/or asset-based specialists for reasonableness of estimated liquidation costs, collectability probabilities, and other market data. Appraisals for real estate collateral-dependent impaired loans in excess of $500,000 are updated with new independent appraisals at least annually and are formally reviewed by our internal appraisal department. Additional diligence is performed at the six-month interval between annual appraisals. If during the course of the six-month review process there is evidence supporting a meaningful decline in the value of collateral, the appraised value is either adjusted downward or a new appraisal is required to support the value of the impaired loan. As part of our internal review process, we consider other factors or recent developments that could adjust the valuations indicated in the appraisals or internal reviews. The Company’s internal appraisal review process validates the reasonableness of appraisals in conjunction with analyzing sales and market data from an array of market sources.

Covered Asset OREO and OREO – Covered asset OREO and OREO generated from our originated book of business are valued on a nonrecurring basis using third-party appraisals of each property and our judgment of other relevant market conditions and are classified in level 3 of the valuation hierarchy. As part of our internal review process, we consider other factors or recent developments that could adjust the valuations indicated in the appraisals or internal reviews. Updated appraisals on both OREO portfolios are typically obtained every twelve months and evaluated internally at least every six months. In addition, both property-specific and market-specific factors as well as collateral type factors are taken into consideration, which may result in obtaining more frequent appraisal updates or internal assessments. Appraisals are conducted by third-party independent appraisers under internal direction and engagement using a combination of valuation techniques such as sales comparison, income capitalization and cost approach and include inputs such as absorption rates, capitalization rate and comparables. Any appraisal with a value in excess of $250,000 is subject to a compliance review. Appraisals received with a value in excess of $1.0 million are subject to a technical review. Appraisals are either reviewed internally by our appraisal department or sent to an outside technical firm if appropriate. Both levels of review involve a scope appropriate for the complexity and risk associated with the OREO. To validate the reasonableness of the appraisals obtained, the Company compares the appraised value to the actual sales price of properties sold and analyzes the reasons why a property may be sold for less than its appraised value.

Derivative Assets and Derivative Liabilities – Derivative instruments with positive fair values are reported as an asset and derivative instruments with negative fair value are reported as liabilities, in both cases after taking into account the effects of master netting agreements. For derivative counterparties with which we have a master netting agreement, we measure nonperformance risk on the basis of our net exposure to the counterparty. The fair value of derivative assets and liabilities is determined based on prices obtained from third party advisors using standardized industry models. Many factors affect derivative values, including the level of interest rates, the market’s perception of our nonperformance risk as reflected in our credit spread, and our assessment of counterparty nonperformance risk. The nonperformance risk assessment is based on our evaluation of credit risk, or if available, on observable external assessments of credit risk. Values of derivative assets and liabilities are primarily based on observable inputs and are classified in level 2 of the valuation hierarchy, with the exception of certain client-related derivatives and risk participation agreements, as discussed below. On a quarterly basis, the Company uses a variety of methods to validate the overall reasonableness of the fair values obtained from third party advisors, including evaluating inputs and methodologies used by the third party advisors, comparing prices obtained to prices received from other pricing sources, and reviewing the reasonableness of prices based on the Company's knowledge of market liquidity and other market-related conditions. While we may challenge valuation inputs used in determining prices obtained from third party advisors based on our validation procedures, during the quarters ended March 31, 2015 and 2014, we did not alter the fair values ultimately provided by the third party advisors.

Level 3 derivatives include risk participation agreements and derivatives associated with clients whose loans are risk rated 6 or higher ("watch list derivative"). Refer to "Credit Quality Indicators" in Note 4 for further discussion on risk ratings. For these level 3 derivatives, the Company obtains prices from third party advisors, consistent with the valuation processes employed for the Company’s derivatives classified in level 2 of the fair value hierarchy, and then applies loss factors to adjust the prices obtained from third party advisors. The significant unobservable inputs that are employed in the valuation process for the risk participation agreements and watch list derivatives that cause these derivatives to be classified in level 3 of the fair value hierarchy are the historic loss factors specific to the particular industry segment and risk rating category. The loss factors are updated quarterly and are derived and aligned with the loss factors utilized in the calculation of the Company’s general reserve component of the allowance

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for loan losses. Changes in the fair value measurement of risk participation agreements and watch list derivatives are largely due to changes in the fair value of the derivative, risk rating adjustments and fluctuations in the pertinent historic average loss rate.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the hierarchy level and fair value for each major category of assets and liabilities measured at fair value at March 31, 2015 and December 31, 2014 on a recurring basis.

Fair Value Measurements on a Recurring Basis

(Amounts in thousands)

	March 31, 2015											December 31, 2014
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
Assets:
Securities available-for sale:
U.S. Treasury	$	244,556	$	—		$	—		$	244,556		$	268,265	$	—		$	—		$	268,265
U.S. Agency	—		46,806			—			46,806			—		46,258			—			46,258
Collateralized mortgage obligations	—		127,828			—			127,828			—		136,933			—			136,933
Residential mortgage-backed securities	—		829,413			—			829,413			—		846,078			—			846,078
State and municipal securities	—		382,134			—			382,134			—		347,310			—			347,310
Foreign sovereign debt	—		500			—			500			—		500			—			500
Total securities available-for-sale	244,556		1,386,681			—			1,631,237			268,265		1,377,079			—			1,645,344
Mortgage loans held-for-sale	—		21,866			—			21,866			—		42,215			—			42,215
Derivative assets:
Interest rate contract derivatives designated as hedging instruments	—		8,491			—			8,491			—		4,542			—			4,542
Client-related derivatives	—		62,143			1,754			63,897			—		46,669			1,412			48,081
Other end-user derivatives	—		594			—			594			—		1,027			—			1,027
Netting adjustments	—		(15,686		)	(689		)	(16,375		)	—		(9,952		)	(636		)	(10,588		)
Total derivative assets	—		55,542			1,065			56,607			—		42,286			776			43,062
Total assets	$	244,556	$	1,464,089		$	1,065		$	1,709,710		$	268,265	$	1,461,580		$	776		$	1,730,621
Liabilities:
Derivative liabilities:
Interest rate contract derivatives designated as hedging instruments	$	—	$	441		$	—		$	441		$	—	$	2,715		$	—		$	2,715
Client-related derivatives	—		64,273			706			64,979			—		47,799			676			48,475
Other end-user derivatives	—		552			—			552			—		846			—			846
Netting adjustments	—		(38,316		)	(689		)	(39,005		)	—		(24,633		)	(636		)	(25,269		)
Total derivative liabilities	$	—	$	26,950		$	17		$	26,967		$	—	$	26,727		$	40		$	26,767

If a change in valuation techniques or input assumptions for an asset or liability occurred between periods, we would consider whether this would result in a transfer between the three levels of the fair value hierarchy. There have been no transfers of assets or liabilities between level 1 and level 2 of the valuation hierarchy between December 31, 2014 and March 31, 2015.

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There have been no other changes in the valuation techniques we used for assets and liabilities measured at fair value on a recurring basis from December 31, 2014 to March 31, 2015.

Reconciliation of Beginning and Ending Fair Value for Those

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) ⁽¹⁾ 

(Amounts in thousands)

	Quarter Ended March 31,
	2015						2014
	Derivative Assets			Derivative (Liabilities)			Derivative Assets			Derivative (Liabilities)
Balance at beginning of period	$	1,412		$	(676	)	$	448		$	(98	)
Total gains:
Included in earnings (2)	312			(24		)	79			180
Purchases, issuances, sales and settlements:
Settlements	(500		)	147			(385		)	(245		)
Transfers into Level 3 (out of Level 2) (3)	884			(160		)	827			(446		)
Transfers out of Level 3 (into Level 2) (3)	(354		)	8			(112		)	—
Balance at end of period	$	1,754		$	(705	)	$	857		$	(609	)
Change in unrealized gains in earnings relating to assets and liabilities still held at end of period	$	241		$	24		$	7		$	166

⁽¹⁾  Fair value is presented prior to giving effect to netting adjustments.

⁽²⁾  Amounts disclosed in this line are included in the Consolidated Statements of Income as capital markets products income for derivatives.

⁽³⁾  Transfers in and transfers out are recognized at the end of each quarterly reporting period. In general, derivative assets and liabilities are transferred into Level 3 from Level 2 due to a lack of observable market data, as there was deterioration in the credit risk of the derivative counterparty. Conversely, derivative assets and liabilities are transferred out of Level 3 into Level 2 due to an improvement in the credit risk of the derivative counterparty.

Financial Instruments Recorded Using the Fair Value Option

Difference Between Aggregate Fair Value and Aggregate Remaining Principal Balance

for Mortgage Loans Held-For-Sale Elected to be Carried at Fair Value

(Amounts in thousands)

	March 31, 2015			December 31, 2014
Aggregate fair value	$	21,866		$	42,215
Difference (1)	(55		)	(16		)
Aggregate unpaid principal balance	$	21,811		$	42,199

⁽¹⁾  The change in fair value is reflected in mortgage banking non-interest income.

As of March 31, 2015, none of the mortgage loans held-for-sale were on nonaccrual or 90 days or more past due and still accruing interest. Changes in fair value due to instrument-specific credit risk for the quarter ended March 31, 2015 were not material.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

From time to time, we may be required to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the application of lower-of-cost-or-fair-value accounting or write-downs of individual assets when there is evidence of impairment.

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The following table provides the fair value of those assets that were subject to fair value adjustments during the first quarter 2015 and 2014, and still held at March 31, 2015 and 2014, respectively. All fair value measurements on a nonrecurring basis were measured using level 3 of the valuation hierarchy.

Fair Value Measurements on a Nonrecurring Basis

(Amounts in thousands)

	Fair Value				Net (Gains) Losses
	March 31,				For the Quarter Ended March 31,
	2015		2014		2015			2014
Collateral-dependent impaired loans (1)	$	27,234	$	40,716	$	(1,653	)	$	5,612
OREO (2)	5,128		6,858		935			1,463
Total	$	32,362	$	47,574	$	(718	)	$	7,075

⁽¹⁾  Represents the fair value of loans adjusted to the appraised value of the collateral with a write-down in fair value or change in specific reserves during the respective period. These fair value adjustments are recorded against the allowance for loan losses.

⁽²⁾  Represents the fair value of foreclosed properties that were adjusted subsequent to their initial classification as foreclosed assets. Write-downs are recognized as a component of net foreclosed real estate expense in the Consolidated Statements of Income.

There have been no changes in the valuation techniques we used for assets and liabilities measured at fair value on a nonrecurring basis from December 31, 2014 to March 31, 2015.

Additional Information Regarding Level 3 Fair Value Measurements

The following table presents information regarding the unobservable inputs developed by the Company for its level 3 fair value measurements.

Quantitative Information Regarding Level 3 Fair Value Measurements

(Dollars in thousands)

Financial Instrument:	Fair Value of Assets / (Liabilities) at March 31, 2015				Valuation Technique(s)	Unobservable Input	Range	Weighted Average
Watch list derivatives	$	1,054			Discounted cash flow	Loss factors	4.5% to 16.5%	13.9	%
Risk participation agreements	$	(6	)	(1)	Discounted cash flow	Loss factors	0.6% to 16.5%	4.0	%
Collateral-dependent impaired loans	$	27,234			Sales comparison, income capitalization and/or cost approach	Property specific adjustment	-2.0% to -15.9%	-8.1	%	(2)
OREO	$	5,128			Sales comparison, income capitalization and/or cost approach	Property specific adjustment	-2.4% to -18.8%	-14.8	%	(2)

⁽¹⁾  Represents fair value of underlying swap.

⁽²⁾  Weighted average is calculated based on assets with a property specific adjustment.

The significant unobservable inputs used in the fair value measurement of the risk participation agreements and watch list derivatives are the historic loss factors. A significant increase (decrease) in the pertinent loss factor would result in a significantly lower (higher) fair value measurement.

Estimated Fair Value of Certain Financial Instruments

U.S. GAAP requires disclosure of the estimated fair values of certain financial instruments, both assets and liabilities, on and off-balance sheet, for which it is practical to estimate the fair value. Because the disclosure of estimated fair values provided herein excludes the fair value of certain other financial instruments and all non-financial instruments, any aggregation of the estimated

41

fair value amounts presented would not represent total underlying value. Examples of non-financial instruments having value not disclosed herein include the future earnings potential of significant customer relationships and the value of our asset management operations and other fee-generating businesses. In addition, other significant assets including property, plant, and equipment and goodwill are not considered financial instruments and, therefore, have not been included in the disclosure.

Various methodologies and assumptions have been utilized in management’s determination of the estimated fair value of our financial instruments, which are detailed below. The fair value estimates are made at a discrete point in time based on relevant market information. Because no market exists for a significant portion of these financial instruments, fair value estimates are based on judgments regarding future expected economic conditions, loss experience, and risk characteristics of the financial instruments. These estimates are subjective, involve uncertainties, and cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

In addition to the valuation methodology explained above for financial instruments recorded at fair value, the following methods and assumptions were used in estimating the fair value of financial instruments that are carried at cost in the Consolidated Statements of Financial Condition and includes the general classification of the assets and liabilities pursuant to the valuation hierarchy.

Short-term financial assets and liabilities – For financial instruments with a shorter-term or with no stated maturity, prevailing market rates, and limited credit risk, the carrying amounts approximate fair value. Those financial instruments include cash and due from banks, Federal funds sold and interest-bearing deposits in banks (including the receivable for cash collateral pledged), accrued interest receivable, and accrued interest payable. Accrued interest receivable and accrued interest payable are classified consistent with the hierarchy of their corresponding assets and liabilities.

Other loans held-for-sale - Included in loans held-for sale at March 31, 2015 and December 31, 2014 are $67.6 million and $36.6 million, respectively, of loans carried at the lower of aggregate cost or fair value. Also included in loans held-for-sale at December 31, 2014 are $36.3 million of loans held-for-sale in connection with the sale of the Company's banking office located in Norcross, Georgia, which closed in January 2015. Fair value estimates are based on the actual agreed upon price in the agreement.

Securities held-to-maturity – Securities held-to-maturity include collateralized mortgage obligations, residential mortgage-backed securities, agency commercial mortgage-backed securities and state and municipal securities. Substantially all held-to-maturity securities are fixed income instruments that are not quoted on an exchange, but may be traded in active markets. The fair value of these securities is based on quoted market prices obtained from external pricing services. The principal markets for our securities portfolio are the secondary institutional markets, with an exit price that is predominantly reflective of bid level pricing in those markets.

FHLB stock – The carrying value of FHLB stock approximates fair value as the stock is non-marketable, but can only be sold to the FHLB or another member institution at par.

Loans – The fair value of loans is calculated by discounting estimated cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. Cash flows are estimated by applying contractual payment terms to assumed interest rates. The estimate of maturity is based on contractual terms and includes assumptions that reflect our and the industry’s historical experience with repayments for each loan classification. The estimation is modified, as required, by the effect of current economic and lending conditions, collateral, and other factors.

Covered assets – Covered assets include acquired loans and foreclosed loan collateral covered under a loss sharing agreement with the FDIC (including the fair value of expected reimbursements from the FDIC). The fair value of covered assets is calculated by discounting contractual cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the asset. The estimate of maturity is based on contractual terms and includes assumptions that reflect our and the industry’s historical experience with repayments for each asset classification. The estimate is modified, as required, by the effect of current economic and lending conditions, collateral, and other factors.

Investment in BOLI – The cash surrender value of our investment in bank owned life insurance approximates the fair value.

Deposit liabilities – The fair values disclosed for noninterest-bearing deposits, savings deposits, interest-bearing demand deposits, and money market deposits are approximately equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The fair values for certificate of deposits and time deposits were estimated using present value techniques by discounting the future cash flows at rates based on internal models and broker quotes.

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Deposits held-for-sale – Deposits held-for-sale are recorded at the lower of cost or fair value. Amounts held at December 31, 2014 are deposits held-for-sale in connection with the sale of the Company's banking office located in Norcross, Georgia, which closed in January 2015. Fair value estimates are based upon the price and premium per the agreement.

Short-term and other borrowings – The fair value of FHLB advances with remaining maturities of one year or less is estimated by discounting the obligations using the rates currently offered for borrowings of similar remaining maturities. The fair value of secured borrowings is equal to the value of the loans they are collateralizing. See "Loans" above for further information. The carrying amount of the obligation for cash collateral held is considered to be its fair value because of its short-term nature.

Long-term debt – The fair value of the Company's fixed-rate long-term debt was estimated using the unadjusted publicly-available market price as of period end.

FHLB advances with remaining maturities greater than one year and the Company's variable-rate junior subordinated debentures are estimated by discounting future cash flows. For the FHLB advances with remaining maturities greater than one year, the Company discounts cash flows using quoted interest rates for similar financial instruments. For the Company's variable-rate junior subordinated debentures, we interpolate a discount rate we believe is appropriate based on quoted interest rates and entity specific adjustments.

Commitments – Given the limited interest rate risk posed by the commitments outstanding at period end due to their variable rate structure, termination clauses provided in the agreements, and the market rate of fees charged, we have deemed the fair value of commitments outstanding to be immaterial.

Financial Instruments

(Amounts in thousands)

	As of March 31, 2015
	Carrying Amount				Fair Value Measurements Using
			Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	158,431	$	158,431	$	158,431	$	—	$	—
Federal funds sold and interest-bearing deposits in banks	799,953		799,953		—		799,953		—
Loans held-for-sale	89,461		89,461		—		89,461		—
Securities available-for-sale	1,631,237		1,631,237		244,556		1,386,681		—
Securities held-to-maturity	1,159,853		1,173,402		—		1,173,402		—
FHLB stock	28,556		28,556		—		28,556		—
Loans, net of allowance for loan losses and unearned fees	12,013,874		11,951,864		—		—		11,951,864
Covered assets, net of allowance for covered loan losses	26,170		32,030		—		—		32,030
Accrued interest receivable	41,202		41,202		—		—		41,202
Investment in BOLI	55,561		55,561		—		—		55,561
Derivative assets	56,607		56,607		—		55,542		1,065
Financial Liabilities:
Deposits	$	14,101,728	$	14,110,642	$	—	$	11,591,322	$	2,519,320
Short-term and secured borrowings	258,788		257,809		—		252,675		5,134
Long-term debt	344,788		338,520		206,537		54,942		77,041
Accrued interest payable	7,004		7,004		—		—		7,004
Derivative liabilities	26,967		26,967		—		26,950		17

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Financial Instruments (Continued)

(Amounts in thousands)

	As of December 31, 2014
	Carrying Amount				Fair Value Measurements Using
			Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	132,211	$	132,211	$	132,211	$	—	$	—
Federal funds sold and interest-bearing deposits in banks	292,341		292,341		—		292,341		—
Loans held-for-sale	115,161		115,161		—		115,161		—
Securities available-for-sale	1,645,344		1,645,344		268,265		1,377,079		—
Securities held-to-maturity	1,129,285		1,132,615		—		1,132,615		—
FHLB stock	28,666		28,666		—		28,666		—
Loans, net of allowance for loan losses and unearned fees	11,739,721		11,736,461		—		—		11,736,461
Covered assets, net of allowance for covered loan losses	28,941		33,988		—		—		33,988
Accrued interest receivable	40,531		40,531		—		—		40,531
Investment in BOLI	55,207		55,207		—		—		55,207
Derivative assets	43,062		43,062		—		42,286		776
Financial Liabilities:
Deposits	$	13,089,968	$	13,095,657	$	—	$	10,595,040	$	2,500,617
Deposits held-for-sale	122,216		117,572		—		117,572		—
Short-term and secured borrowings	432,385		430,944		—		427,150		3,794
Long-term debt	344,788		332,374		204,320		54,092		73,962
Accrued interest payable	6,948		6,948		—		—		6,948
Derivative liabilities	26,767		26,767		—		26,727		40

16. OPERATING SEGMENTS

We have three primary operating segments: Banking, Asset Management and the Holding Company. With respect to the Banking and Asset Management segments, each is delineated by the products and services that each segment offers. The Banking operating segment is comprised of commercial and personal banking services, including mortgage originations. Commercial banking services are primarily provided to corporations and other business clients and include a wide array of lending and cash management products. Personal banking services offered to individuals, professionals, and entrepreneurs include direct lending and depository services. The Asset Management segment includes certain activities of our PrivateWealth group, including investment management, personal trust and estate administration, custodial and escrow, retirement plans and brokerage services. The activities of the third operating segment, the Holding Company, include the direct and indirect ownership of our banking subsidiary, the issuance of debt and intersegment eliminations.

The accounting policies of the individual operating segments are the same as those of the Company as described in Note 1, "Summary of Significant Accounting Policies," to the Notes to Consolidated Financial Statements of our 2014 Annual Report on Form 10-K. Transactions between operating segments are primarily conducted at fair value, resulting in profits that are eliminated from consolidated results of operations.

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Financial results for each segment are presented below. For segment reporting purposes, the statement of financial condition of Asset Management is included with the Banking segment.

Operating Segments Performance

(Amounts in thousands)

	Quarter Ended March 31,
	Banking				Asset Management				Holding Company and Other Adjustments						Consolidated
	2015		2014		2015		2014		2015			2014			2015		2014
Net interest income (loss)	$	126,498	$	115,152	$	899	$	787	$	(5,404	)	$	(7,187	)	$	121,993	$	108,752
Provision for loan and covered loan losses	5,646		3,707		—		—		—			—			5,646		3,707
Non-interest income	29,138		21,872		4,363		4,349		15			15			33,516		26,236
Non-interest expense	75,935		68,660		4,312		4,076		2,898			3,014			83,145		75,750
Income (loss) before taxes	74,055		64,657		950		1,060		(8,287		)	(10,186		)	66,718		55,531
Income tax provision (benefit)	27,937		24,653		374		418		(3,077		)	(4,045		)	25,234		21,026
Net income (loss)	$	46,118	$	40,004	$	576	$	642	$	(5,210	)	$	(6,141	)	$	41,484	$	34,505

	Banking				Holding Company and Other Adjustments(1)						Consolidated
Selected Balances	3/31/2015		12/31/2014		3/31/2015			12/31/2014			3/31/2015		12/31/2014
Assets	$	14,583,189	$	13,882,805	$	1,778,159		$	1,720,577		$	16,361,348	$	15,603,382
Total loans	12,170,484		11,892,219		—			—			12,170,484		11,892,219
Deposits, excluding deposits held-for-sale	14,156,257		13,150,600		(54,529		)	(60,632		)	14,101,728		13,089,968

⁽¹⁾  Deposit amounts represent the elimination of Holding Company cash accounts included in total deposits of the Banking segment.

17. VARIABLE INTEREST ENTITIES

At March 31, 2015 and December 31, 2014, the Company had no variable interest entity ("VIE") consolidated in its financial statements. The table below presents our interests in VIEs that are not consolidated in our financial statements.

Nonconsolidated VIEs

(Amounts in thousands)

	March 31, 2015				December 31, 2014
	Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss
Trust preferred capital securities issuances	$	169,788	$	—	$	169,788	$	—
Community reinvestment investments	11,431		13,125		14,360		16,054
Restructured loans to commercial clients (1):
Outstanding loan balance	50,425		55,886		49,376		57,782
Related derivative asset	2,961		2,961		6,533		6,533
Total	$	234,605	$	71,972	$	240,057	$	80,369

⁽¹⁾  Excludes personal loans and loans to non-for-profit entities.

Trust preferred capital securities issuances – As discussed in Note 9, we sponsor and wholly own 100% of the common equity of four trusts that were formed for the purpose of issuing trust preferred securities to third-party investors and investing the proceeds from the sale of the trust preferred securities solely in debentures issued by the Company. The trusts’ only assets are the principal

45

balance of the Debentures and the related interest receivable, which are included within long-term debt in our Consolidated Statements of Financial Condition. The Company is not the primary beneficiary of the trusts and accordingly, the trusts are not consolidated in our financial statements.

Community reinvestment investments – We hold certain investments in funds that make investments to further our community reinvestment initiatives. Such investments are included within other assets in our Consolidated Statements of Financial Condition. Certain of these investments meet the definition of a VIE, but the Company is not the primary beneficiary as we are a limited investor in those investment funds and do not have the power to direct their investment activities. Accordingly, we will continue to account for our interests in these investments on an unconsolidated basis. Our maximum exposure to loss is limited to the carrying amount plus additional required future capital contributions.

A portion of our community reinvestment investments are investments in limited liability entities that invest in affordable housing projects that qualify for low-income housing tax credits. These investments entitle the Company to tax credits through 2031. Any new investments in qualified affordable housing projects entered into on or after January 1, 2014 that meet certain conditions will be accounted for using the proportional amortization method. Prior to January 1, 2014, the Company accounted for all of its investments in qualified affordable housing projects using the effective yield method and has elected to continue accounting for preexisting tax credit investments using the effective yield method as permitted under the accounting standards.

The carrying value of the Company’s tax credit investments totaled $9.9 million and $10.0 million as of March 31, 2015 and December 31, 2014, respectively. The Company recognizes tax credits related to these investments, tax benefits from the operating losses generated by these investments, and amortization of the principal investment balances, all of which were immaterial during each of the three months ended March 31, 2015 and 2014. Commitments to provide future capital contributions totaling $8.3 million as of March 31, 2015, are expected to be paid through 2029. These investments are reviewed periodically for impairment. No impairment losses have been recorded for the three months ended March 31, 2015 and 2014.

Restructured loans – For certain troubled commercial loans, we restructure the terms of the borrower’s debt in an effort to increase the probability of collecting amounts contractually due. Following a restructuring, the borrower entity typically meets the definition of a VIE, and economic events have proven that the entity’s equity is not sufficient to permit it to finance its activities without additional subordinated financial support or a restructuring of the terms of its financing. As we do not have the power to direct the activities that most significantly impact such troubled commercial borrowers’ operations, we are not considered the primary beneficiary even in situations where, based on the size of the financing provided, we are exposed to potentially significant benefits and losses of the borrowing entity. We have no contractual requirements to provide financial support to the borrowing entities beyond certain funding commitments established upon restructuring of the terms of the debt. Our interests in the troubled commercial borrowers include outstanding loans and related derivative assets. Our maximum exposure to loss is limited to these interests plus any additional future funding commitments.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

PrivateBancorp, Inc. ("PrivateBancorp," we or the "Company"), is a Delaware corporation and bank holding company headquartered in Chicago, Illinois. The PrivateBank and Trust Company (the "Bank" or the "PrivateBank"), our bank subsidiary, provides customized financial services to middle market companies, as well as business owners, executives, entrepreneurs and families in all the markets and communities we serve. As of March 31, 2015, we had 34 offices located in 11 states, primarily in the Midwest, with a majority of our business conducted in the greater Chicago market.

We deliver a full spectrum of commercial and personal banking products and services to our clients through our commercial banking, community banking and private wealth businesses. We offer clients a full range of lending, treasury management, capital markets and other banking products to meet their commercial needs, and residential mortgage banking, private banking and asset management services to meet their personal needs.

The following discussion and analysis should be read in conjunction with the unaudited interim consolidated financial statements and accompanying notes presented elsewhere in this report, as well as our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for our fiscal year ended December 31, 2014. Results of operations for the quarter ended March 31, 2015 are not necessarily indicative of results to be expected for the year ending December 31, 2015. Unless otherwise stated, all earnings per share data included in this section and through the remainder of this discussion are presented on a diluted basis.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this report that are not historical facts may constitute forward-looking statements within the meaning of Federal securities laws. Forward-looking statements represent management's beliefs and expectations regarding future events, such as our anticipated future financial results, credit quality, revenues, expenses, or other financial items, and the impact of business plans and strategies or legislative or regulatory actions. Forward-looking statements are typically identified by words such as "may," "might," "will," "should," "could," "would," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "project," "potential," or "continue" or other comparable terminology.

Our ability to predict results or the actual effects of future plans, strategies or events is inherently uncertain. Factors which could cause actual results to differ from those reflected in forward-looking statements include:

• continued uncertainty regarding U.S. and global economic outlook that may impact market conditions or affect demand for certain banking products and services;

• unanticipated developments in pending or prospective loan transactions or greater-than-expected paydowns or payoffs of existing loans;

• unanticipated changes in interest rates;

• competitive pressures in the financial services industry that may affect the pricing of the Company’s loan and deposit products as well as its services;

• unforeseen credit quality problems or changing economic conditions that could result in charge-offs greater than we have anticipated in our allowance for loan losses or changes in value of our investments;

• lack of sufficient or cost-effective sources of liquidity or funding as and when needed;

• loss of key personnel or our ability to recruit and retain appropriate talent;

• greater-than-anticipated costs to support the growth of our business, including investments in technology, process improvements or other infrastructure enhancements, or greater-than-anticipated compliance costs or regulatory burdens; or

• failures or disruptions to, or compromises of, our data processing or other information or operational systems, including the potential impact of disruptions or security breaches at our third-party service providers.

These factors should be considered in evaluating forward-looking statements and undue reliance should not be placed on our forward-looking statements. Readers should also consider the risks, assumptions and uncertainties set forth in the "Risk Factors" section of our Annual Report on Form 10-K for our fiscal year ended December 31, 2014 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this Form 10-Q, as well as those set forth in our subsequent periodic and current reports filed with the SEC. Forward-looking statements speak only as of the date they are made and we assume no obligation to update any of these statements in light of new information, future events or otherwise unless required under the Federal securities laws.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), and our accounting policies are consistent with predominant practices in the financial services industry. Critical accounting policies are those policies that require management to make the most significant estimates, assumptions, and judgments based on information available at the date of the financial statements that affect the amounts reported in the financial statements and accompanying notes. Future changes in information may affect these estimates, assumptions, and judgments, which, in turn, may affect amounts reported in the consolidated financial statements. Management has determined that our accounting policies with respect to the allowance for loan losses, goodwill and intangible assets, income taxes and fair value measurements are the accounting areas requiring subjective or complex judgments that are most important to our financial position and results of operations, and, as such, are considered to be critical accounting policies. For additional information regarding critical accounting policies, refer to “Summary of Significant Accounting Policies,” presented in Note 1 to the Condensed Consolidated Financial Statements and the section titled “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s 2014 Annual Report on Form 10-K. There have been no significant changes in the Company’s application of critical accounting policies since December 31, 2014.

USE OF NON-U.S. GAAP FINANCIAL MEASURES

This report contains both U.S. GAAP and non-U.S. GAAP financial measures. These non-U.S. GAAP financial measures include (i) net interest income, net interest margin, net revenue, operating profit, and efficiency ratio which are presented on a fully taxable-equivalent basis and (ii) return on average tangible common equity, tangible common equity to risk-weighted assets, tangible common equity to tangible assets, and tangible book value. We believe that presenting these non-U.S. GAAP financial measures

47

provides information useful to investors in understanding our underlying operational performance, business and performance trends, and facilitates comparisons with the performance of other similar companies in the banking industry. Where non-U.S. GAAP financial measures are used, the comparable U.S. GAAP financial measure, as well as a reconciliation to the comparable U.S. GAAP financial measure, can be found in Table 23. These disclosures should not be viewed as a substitute for operating results determined in accordance with U.S. GAAP, nor are they necessarily comparable to non-U.S. GAAP performance measures that may be presented by other companies.

FIRST QUARTER 2015 OVERVIEW

For the quarter ended March 31, 2015, we reported net income available to common stockholders of $41.5 million, an increase of $7.0 million, or 20%, compared to $34.5 million for first quarter 2014, and an increase of $4.3 million, or 11% compared to $37.2 million for fourth quarter 2014. Diluted earnings per share was $0.52, an increase of 18% compared to $0.44 per diluted share in the first quarter 2014, and 11% compared to $0.47 per share in fourth quarter 2014. For the quarter ended March 31, 2015, our annualized return on average assets grew to 1.07% and our annualized return on average common equity grew to 11.05%, both improving from the year ago quarter when these performance ratios were 1.00% and 10.48%, respectively. Our efficiency ratio improved to 53.1% for the quarter ended March 31, 2015, compared to 55.8% in the first quarter 2014 due to growth in net revenue outpacing increases in non-interest expense and benefited from the $4.1 million gain on sale of our Norcross, Georgia branch during the first quarter 2015.

Compared to the first quarter 2014, the increase in earnings for the current quarter was mainly attributable to an increase in net interest income as a result of significant loan growth over the past year, a full quarter's benefit of lower junior subordinated debenture interest expense due to the $75 million partial redemption in October 2014, and the gain on sale of the Georgia branch. These same factors contributed to an increase in operating profit of $13.3 million to $73.3 million for first quarter 2015 compared to $60.0 million for first quarter 2014. Net revenue was $156.5 million, up$20.7 million from the first quarter 2014, due to $1.2 billion in loan growth from March 31, 2014. Net interest income for first quarter 2015increased$13.2 million compared to the first quarter 2014, driven by higher interest income on $1.7 billion growth in average interest-earning assets compared to the prior year quarter and reduced cost of funds. Net interest margin remained relatively stable at 3.21% for first quarter 2015 compared to 3.23% for first quarter 2014. Non-interest income for the current quarter increased $7.3 million to $33.5 million compared to the first quarter 2014 and benefited from the gain on sale of the Georgia branch, along with an increase in mortgage banking income and treasury management fees. Non-interest expenses increased 10% from the prior year quarter, primarily due to higher salary and employee benefit costs.

Credit quality metrics as of March 31, 2015 were generally similar to year end 2014, with a 2%increase in nonperforming assets. At March 31, 2015, other real estate owned was $15.6 million, a reduction of $1.8 million from December 31, 2014. Nonperforming assets to total assets were 0.53% at March 31, 2015, compared to 0.54% at December 31, 2014. Nonperforming loans to total loans were 0.58% at March 31, 2015, compared to 0.57% at December 31, 2014. At March 31, 2015, our allowance for loan losses as a percentage of total loans was 1.29%, compared to 1.28% at December 31, 2014. Net charge-offs totaled $1.4 million in first quarter 2015 as compared to net recoveries of $210,000 in the first quarter 2014, while the provision for loan losses increased by $2.0 million to $5.5 million in the first quarter 2015, compared to $3.4 million for first quarter 2014 largely due to loan growth.

Total loans grew $278.3 million to $12.2 billion at March 31, 2015, from $11.9 billion at year end 2014, and increased $1.2 billion from March 31, 2014, primarily driven by commercial and industrial loans to new clients. Total commercial and industrial loans comprised two-thirds of total loans at March 31, 2015 consistent with year end 2014 and at March 31, 2014.

Total deposits at March 31, 2015increased$1.0 billion to $14.1 billion from year end 2014, while average deposits increased $210.0 million from year end 2014. Growth in total deposits was largely attributable to inflows from several commercial clients in connection with client-specific corporate events such as acquisitions and divestitures. As anticipated, as of the date of this report, a meaningful portion has been subsequently redeployed by clients during the second quarter 2015. Given the commercial focus of our core business strategy, a majority of our deposits are interest-bearing accounts of commercial clients, which are typically larger than retail accounts and have balances that will fluctuate based on the business needs of our clients.

Please refer to the remaining sections of "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for greater discussion of the various components of our first quarter 2015 performance, statement of financial condition and liquidity.

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The following table presents selected quarterly financial data highlighting operating performance trends over the past year.

Table 1

Consolidated Financial Highlights

(Dollars in thousands, except per share data)

	As of and for the Quarter Ended
	2015			2014
	March 31			December 31			September 30			June 30			March 31
Selected Operating Statistics
Net income	$	41,484		$	37,223		$	40,527		$	40,824		$	34,505
Effective tax rate	37.8		%	38.1		%	38.3		%	38.9		%	37.9		%
Net interest income	$	121,993		$	116,876		$	116,758		$	112,351		$	108,752
Fee revenue (1)	32,982			30,426			30,666			30,063			25,905
Net revenue (2)	156,453			148,180			148,238			143,354			135,788
Operating profit (2)	73,308			65,155			70,402			67,889			60,038
Provision for loan losses (3)	5,491			3,977			3,732			2,011			3,449
Per Share Data
Basic earnings per share	$	0.53		$	0.48		$	0.52		$	0.52		$	0.44
Diluted earnings per share	0.52			0.47			0.51			0.52			0.44
Tangible book value at period end (2)(4)	$	18.35		$	17.67		$	17.08		$	16.61		$	15.90
Dividend payout ratio	1.89		%	2.08		%	1.92		%	1.92		%	2.27		%
Performance Ratios
Return on average common equity	11.05		%	10.03		%	11.27		%	11.88		%	10.48		%
Return on average assets	1.07		%	0.95		%	1.09		%	1.14		%	1.00		%
Return on average tangible common equity (2)	11.94		%	10.89		%	12.27		%	12.97		%	11.50		%
Net interest margin (2)	3.21		%	3.07		%	3.23		%	3.21		%	3.23		%
Efficiency ratio (2)(5)	53.14		%	56.03		%	52.51		%	52.64		%	55.79		%
Credit Quality (3)
Total nonperforming loans to total loans	0.58		%	0.57		%	0.64		%	0.69		%	0.86		%
Total nonperforming assets to total assets	0.53		%	0.54		%	0.60		%	0.66		%	0.82		%
Allowance for loan losses to total loans	1.29		%	1.28		%	1.30		%	1.32		%	1.34		%
Balance Sheet Highlights
Total assets	$	16,361,348		$	15,603,382		$	15,190,468		$	14,602,404		$	14,304,782
Average interest-earning assets	15,293,533			15,022,425			14,283,920			13,936,754			13,564,530
Loans (3)	12,170,484			11,892,219			11,547,587			11,136,942			10,924,985
Allowance for loan losses (3)	(156,610		)	(152,498		)	(150,135		)	(146,491		)	(146,768		)
Deposits, excluding deposits held-for-sale	14,101,728			13,089,968			12,849,204			12,236,201			11,886,161
Noninterest-bearing demand deposits	$	3,936,181		$	3,516,695		$	3,342,862		$	3,387,424		$	3,103,736
Loans to deposits (3)	86.30		%	90.85		%	89.87		%	91.02		%	91.91		%

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	As of
	2015		2014
	March 31		December 31		September 30		June 30		March 31
Capital Ratios
Total risk-based capital	12.29	%	12.51	%	13.18	%	13.41	%	13.39	%
Tier 1 risk-based capital	10.34	%	10.49	%	11.12	%	11.24	%	11.19	%
Tier 1 leverage ratio	10.16	%	9.96	%	10.70	%	10.63	%	10.60	%
Common equity Tier 1 ratio (6)	9.23	%	9.33	%	9.38	%	9.42	%	9.33	%
Tangible common equity to tangible assets (2)(7)	8.86	%	8.91	%	8.84	%	8.94	%	8.74	%

⁽¹⁾  Computed as total non-interest income less net securities gains (losses).

⁽²⁾  This is a non-U.S. GAAP financial measure. Refer to Table 23 for a reconciliation of non-U.S. GAAP to U.S. GAAP measures.

⁽³⁾  Excludes covered assets.

⁽⁴⁾  Computed as total equity less preferred stock, goodwill and other intangibles divided by outstanding shares of common stock at end of period.

⁽⁵⁾  Computed as non-interest expense divided by the sum of net interest income on a tax equivalent basis (assuming a federal income tax rate of 35%) and non-interest income.

⁽⁶⁾  Effective January 1, 2015, the common equity Tier 1 ratio is a required regulatory capital measure and as presented for the 2015 period is calculated in accordance with the new Basel III capital rules. For periods prior to January 1, 2015, this ratio was considered a non-U.S. GAAP financial measure and was calculated without giving effect to the final Basel III capital rules. Refer to Table 23, "Non-U.S. GAAP Financial Measures" for a reconciliation from non-U.S. GAAP to U.S. GAAP for periods prior to 2015.

⁽⁷⁾  Computed as tangible common equity divided by tangible assets, where tangible common equity equals total equity less preferred stock, goodwill and other intangible assets and tangible assets equals total assets less goodwill and other intangible assets.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income is the primary source of the Company's revenue. Net interest income is the difference between interest income and fees earned on interest-earning assets, such as loans and investments, and interest expense incurred on interest-bearing liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is affected by the volume, pricing, mix and maturity of earning assets and interest-bearing liabilities; the volume and value of noninterest-bearing sources of funds, such as noninterest-bearing demand deposits and equity; the use of derivative instruments to manage interest rate risk; the sensitivity of the balance sheet to fluctuations in interest rates, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities, repricing frequencies, and loan repayment behavior; and asset quality.

Interest rate spread and net interest margin are utilized to measure and explain changes in net interest income. Interest rate spread is the difference between the yield on interest-earning assets and the rate paid for interest-bearing liabilities that fund those assets. Net interest margin is expressed as the percentage of net interest income to average interest-earning assets. The net interest margin exceeds the interest rate spread because noninterest-bearing sources of funds, principally noninterest-bearing demand deposits and equity, also support interest-earning assets.

The accounting policies underlying the recognition of interest income on loans, securities, and other interest-earning assets are included in Note 1 of "Notes to Consolidated Financial Statements" contained in our 2014 Annual Report on Form 10-K.

For purposes of this discussion, net interest income and any ratios or metrics that include net interest income as a component, such as net interest margin, have been adjusted to a fully tax-equivalent basis to more appropriately compare the returns on certain tax-exempt securities to those on taxable securities, assuming a federal income tax rate of 35%. The effect of the tax-equivalent adjustment is presented at the bottom of the following table.

Quarter ended March 31, 2015 compared to quarter ended March 31, 2014

Table 2 summarizes the changes in our average interest-earning assets and interest-bearing liabilities as well as the average interest rates earned and paid on these assets and liabilities, respectively, for the quarters ended March 31, 2015 and 2014. The table also presents the trend in net interest margin on a quarterly basis for 2015 and 2014, including the tax-equivalent yields on interest-earning assets and rates paid on interest-bearing liabilities. In addition, Table 2 details variances in income and expense for each

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of the major categories of interest-earning assets and interest-bearing liabilities and indicates the extent to which such variances are attributable to volume and rate changes.

Table 2

Net Interest Income and Margin Analysis

(Dollars in thousands)

	Quarter Ended March 31,														Attribution of Change in Net Interest Income (1)
	2015							2014
	Average Balance			Interest (2)		Yield/ Rate (%)		Average Balance			Interest (2)		Yield/ Rate (%)		Volume			Yield/ Rate			Total
Assets:
Federal funds sold and interest-bearing deposits in banks	$	420,844		$	261	0.25	%	$	233,311		$	142	0.24	%	$	116		$	3		$	119
Securities:
Taxable	2,362,725			13,556		2.30	%	2,237,628			13,255		2.37	%	726			(425		)	301
Tax-exempt (3)	347,856			2,750		3.16	%	265,551			2,329		3.51	%	668			(247		)	421
Total securities	2,710,581			16,306		2.41	%	2,503,179			15,584		2.49	%	1,394			(672		)	722
FHLB stock	28,664			48		0.67	%	30,005			33		0.44	%	(1		)	16			15
Loans, excluding covered assets:
Commercial	8,096,853			84,992		4.20	%	7,186,657			78,215		4.35	%	9,631			(2,854		)	6,777
Commercial real estate	2,887,159			27,586		3.82	%	2,487,677			22,009		3.54	%	3,723			1,854			5,577
Construction	388,437			3,798		3.91	%	315,136			3,077		3.91	%	717			4			721
Residential	386,106			3,488		3.61	%	350,388			3,357		3.83	%	330			(199		)	131
Personal and home equity	342,088			2,481		2.94	%	362,335			2,753		3.08	%	(150		)	(122		)	(272		)
Total loans, excluding covered assets(4)	12,100,643			122,345		4.05	%	10,702,193			109,411		4.09	%	14,251			(1,317		)	12,934
Covered assets (5)	32,801			357		4.41	%	95,842			788		3.30	%	(631		)	200			(431		)
Total interest-earning assets (3)	15,293,533			$	139,317	3.65	%	13,564,530			$	125,958	3.72	%	$	15,129		$	(1,770	)	$	13,359
Cash and due from banks	171,330							146,746
Allowance for loan and covered loan losses	(160,550		)					(164,933		)
Other assets	486,600							483,870
Total assets	$	15,790,913						$	14,030,213
Liabilities and Equity (6):
Interest-bearing demand deposits	$	1,524,124		$	1,006	0.27	%	$	1,293,652		$	942	0.30	%	$	158		$	(94	)	$	64
Savings deposits	325,615			312		0.39	%	284,703			196		0.28	%	31			85			116
Money market accounts	5,538,192			4,298		0.31	%	4,660,158			3,778		0.33	%	687			(167		)	520
Time deposits	2,560,036			5,639		0.89	%	2,547,508			4,806		0.77	%	(139		)	972			833
Total interest-bearing deposits	9,947,967			11,255		0.46	%	8,786,021			9,722		0.45	%	737			796			1,533
Short-term and secured borrowings	276,841			197		0.28	%	43,289			196		1.81	%	286			(285		)	1
Long-term debt	344,788			4,928		5.72	%	627,793			6,488		4.13	%	(3,531		)	1,971			(1,560		)
Total interest-bearing liabilities	10,569,596			16,380		0.63	%	9,457,103			16,406		0.70	%	(2,508		)	2,482			(26		)
Noninterest-bearing demand deposits	3,552,717							3,101,219
Other liabilities	146,199							136,478
Equity	1,522,401							1,335,413
Total liabilities and equity	$	15,790,913						$	14,030,213
Net interest spread (3)(6)						3.02	%						3.02	%
Contribution of noninterest-bearing sources of funds						0.19	%						0.21	%
Net interest income/margin (3)(6)				122,937		3.21	%				109,552		3.23	%	$	17,637		$	(4,252	)	$	13,385
Less: tax equivalent adjustment				944							800
Net interest income, as reported				$	121,993						$	108,752

(footnotes on following page)

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Table 2

Net Interest Income and Margin Analysis (Continued)

(Dollars in thousands)

	Quarterly Net Interest Margin Trend
	2015		2014
	First		Fourth		Third		Second		First
Yield on interest-earning assets (3)	3.65	%	3.57	%	3.72	%	3.69	%	3.72	%
Cost of interest-bearing liabilities (6)	0.63	%	0.73	%	0.71	%	0.69	%	0.70	%
Net interest spread (3)(6)	3.02	%	2.84	%	3.01	%	3.00	%	3.02	%
Contribution of noninterest-bearing sources of funds	0.19	%	0.23	%	0.22	%	0.21	%	0.21	%
Net interest margin (3)(6)	3.21	%	3.07	%	3.23	%	3.21	%	3.23	%

⁽¹⁾  For purposes of this table, changes which are not due solely to volume changes or rate changes are allocated to such categories in proportion to the absolute amounts of the change in each.

⁽²⁾  Interest income included $7.5 million and $6.2 million in net loan fees for the quarters ended March 31, 2015 and 2014, respectively.

⁽³⁾  Interest income and yields are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%. This is a non-U.S. GAAP measure. Refer to Table 23, "Non-U.S. GAAP Financial Measures," for a reconciliation of the effect of the tax-equivalent adjustment.

⁽⁴⁾  Includes loans held-for-sale and nonaccrual loans. Average loans on a nonaccrual basis for the recognition of interest income totaled $69.3 million and $93.0 million for the quarters ended March 31, 2015 and 2014, respectively. Interest foregone on impaired loans was estimated to be approximately $671,000 and $870,000 for the quarters ended March 31, 2015 and 2014, respectively, calculated based on the average loan portfolio yield for the respective period.

⁽⁵⁾  Covered interest-earning assets consist of loans acquired through a Federal Deposit Insurance Corporation ("FDIC") assisted transaction that are subject to a loss share agreement and the related indemnification asset. Refer to the section entitled "Covered Assets" for a detailed discussion.

⁽⁶⁾  Includes deposits held-for-sale.

Net interest income on a tax-equivalent basis increased$13.4 million, or 12%, to $122.9 million for first quarter 2015, compared to $109.6 million for the first quarter 2014. The growth in interest income for the first quarter 2015 was largely due to $12.9 million in higher interest income on loans generated from a $1.4 billionincrease in average loan balances during the period. The increase in net interest income also benefited from a decrease in interest expense driven primarily by a $1.6 millionreduction in long-term debt interest expense attributable to the interest savings on the $75.0 million partial redemption of our 10% junior subordinated debentures ("10% Debentures") in fourth quarter 2014, offset by $1.5 million in higher deposit costs due to higher average interest-bearing deposit balances and higher rates paid on brokered time deposits.

Average interest-earning assets grew$1.7 billion from the prior year period primarily driven by $1.4 billion of growth in average loan balances, with $910.2 million of the growth in the commercial and industrial portfolio and $399.5 million in the commercial real estate portfolio. Average interest-bearing deposits grew$1.2 billion from the prior year period, with growth in all categories of deposits. In the first quarter 2015, average short-term debt increased$233.6 million while average long-term debt decreased$283.0 million, primarily as a result of FHLB long-term advances replaced by short-term advances in the current period, as well as the $75.0 million partial redemption of the 10% Debentures mentioned above.

Net interest margin was 3.21% for the first quarter 2015, compared to 3.23% for first quarter 2014. For the comparative period, cost of funds improved 7 basis points, offset by a 2 basis point reduction in the value of noninterest-bearing liabilities. Interest-earning asset yields also declined 7 basis points, with the decline diluted by 4 basis points due to higher average cash balances in the first quarter 2015. Although loan yields declined by 4 basis points from first quarter 2014, they continue to benefit from our hedging program, increases in our specialty lending activity and non-recurring loan fees. Our commercial loan hedging program contributed 8 basis points to our loan yields for both first quarter 2015 and 2014.Approximately two-thirds of our loan portfolio is comprised of commercial loans, which include specialty lines such as healthcare and security industry group that can command pricing premiums due to elevated complexity, risk and the industry expertise required. Non-recurring fee income of $875,000 contributed 3 basis points to our loan yields in first quarter 2015, compared to non-recurring fee income and interest recoveries of $989,000 which contributed 4 basis points to our loan yields in the prior year period. The 7 basis points reduction on cost of funds for the quarter was driven by reduced borrowing costs from the partial redemption of the $75.0 million of our 10% Debentures in fourth quarter 2014 as discussed above. Average noninterest-bearing demand deposits and average equity, our principal sources of noninterest-bearing funds, increased in aggregate by $638.5 million from first quarter 2014, but the lower interest rate environment continues to reduce their value within net interest margin.

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In the continued low interest rate environment, competition remains strong, which has influenced pricing. Future loan yields may be impacted by fluctuations in loan fees and interest income recognized as a result of recovery of interest on nonaccrual loans, acceleration of unamortized origination fees upon payoff or refinancing, prepayment and other fees received on certain event driven actions in accordance with the loan agreement. In the prolonged low interest rate environment, we have experienced a general decline in our loan core coupon yields (which excluded the effect of loan fees and our hedging program), primarily due to pricing compression on loan renewals and change in the composition of the portfolio. With over two-thirds of our loan portfolio indexed to one-month LIBOR, we would expect this trend to continue until there is a meaningful increase in interest rates. Despite the highly competitive environment, we maintain a selective and disciplined approach to structure, pricing and overall returns as we selectively add and develop client relationships. As discussed above, we continue to see some downward pressure on loan renewals, which remain very competitive, and have resulted in a compression on overall loan yields. Although we expect our net interest margin to benefit from a rise in short-term interest rates, it is more difficult to predict the impact on deposit costs as it depends on the mix of our funding sources, with wholesale and brokered time deposits commanding higher rates.

Provision for loan and covered loan losses

The provision for loan losses, excluding the provision for covered loans, totaled $5.5 million for the quarter ended March 31, 2015, up from $3.4 million for the same period in 2014. The provision for loan losses is a function of our allowance for loan loss methodology used to determine the allowance deemed adequate to cover inherent loan losses after net charge-offs have been deducted. The current quarter provision compared to the prior year quarter increased largely due to loan growth, offset by the benefit from portfolio improvement in most credit metrics and a reduced requirement for specific reserves on a smaller population of impaired loans. Impaired loans were $93.4 million at March 31, 2015, down 22% from $120.3 million at March 31, 2014. Net charge-offs for the quarter ended March 31, 2015 totaled $1.4 million and benefited from recoveries of $2.1 million compared to net recoveries of $210,000 for the same period in 2014. For further analysis and information on how we determine the appropriate level for the allowance for loan losses and analysis of credit quality, see "Critical Accounting Policies" and "Credit Quality Management and Allowance for Loan Losses."

For the quarter ended March 31, 2015, we recorded a provision in the allowance for covered loan losses related to the loans purchased under the FDIC-assisted transaction loss share agreement of $155,000, compared to $258,000 for the quarter ended March 31, 2014. For further information regarding the FDIC-assisted transaction, see "Covered Assets."

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Non-interest Income

Non-interest income is derived from a number of sources including fees from our asset management business, mortgage banking business and deposit services to our retail clients as well as fees from our various commercial products and services such as the sale of derivative products through our capital markets group, treasury management services, lending and servicing and syndication activities. The following table presents a composition of these multiple sources of revenue for the periods presented.

Table 3

Non-interest Income Analysis

(Dollars in thousands)

	Quarter Ended March 31,
	2015		2014		% Change
Asset management income:
Managed fee income	$	3,829	$	3,767	2
Custodian fee income	534		580		-8
Total asset management income	4,363		4,347		*
Mortgage banking	3,775		1,632		131
Capital markets products	4,172		4,083		2
Treasury management	7,327		6,599		11
Loan, letter of credit and commitment fees	5,106		4,634		10
Syndication fees	2,622		3,313		-21
Deposit service charges and fees and other income (1)	5,617		1,297		333
Subtotal fee revenue	32,982		25,905		27
Net securities gains	534		331		61
Total non-interest income	$	33,516	$	26,236	28

Note: Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

⁽¹⁾  First quarter 2015 includes the $4.1 million gain on sale of our Georgia branch.

* Less than 1%.

First quarter 2015 compared to first quarter 2014

Non-interest income for first quarter 2015 totaled $33.5 million, increasing$7.3 million, or 28% compared to $26.2 million for the first quarter 2014, and included a $4.1 million gain on sale of our Georgia branch that was completed during first quarter 2015. Certain revenue sources such as mortgage banking, capital markets and syndications fees are transactional in nature, and accordingly, tend to fluctuate, creating unevenness period to period.

For the first quarter 2015, asset management fee income was flat compared to first quarter 2014, as fees from new business added over the past year were largely offset by several large one-time estate fees included in the prior year period results. The majority of the growth in assets under management and administration ("AUMA") from a year ago occurred in the first quarter 2015 and will benefit fee income in future periods albeit at a lower level because much of the growth was in corporate and institutional products which typically have lower margins than personal AUMA products.

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The following table presents the composition of AUMA, as of the dates shown.

	As of						% Change
	3/31/2015		12/31/2014		3/31/2014		3/31-12/31	3/31-3/31
AUMA:
Personal managed	$	1,897,644	$	1,786,633	$	1,746,809	6	9
Corporate and institutional managed	1,826,215		1,347,299		1,386,215		36	32
Total managed assets	3,723,859		3,133,932		3,133,024		19	19
Custody assets	3,604,333		3,511,996		2,910,234		3	24
Total AUMA	$	7,328,192	$	6,645,928	$	6,043,258	10	21

Note: Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

AUMA grew to $7.3 billion during the quarter compared to $6.6 billion at December 31, 2014 and $6.0 billion at March 31, 2014 with growth occurring in both managed and custody assets. Growth for both comparative periods is primarily attributable to continued client acquisition and cross-selling asset management services to new clients. The pricing on asset management accounts varies depending on the type of services provided. Managed fee income includes fees earned on investment management, personal trust and estate administration, and retirement plan and brokerage services. Custodian fee income includes fees earned on "qualified custodian," escrow accounts, and standard custody, all of which have significantly lower fees recognized than on managed assets. Fees earned on "qualified custodian" and escrow assets are typically a flat fee structure while standard custody and managed assets are generally based on the market value of the assets on the last day of the prior quarter or month and therefore subject to market volatility.

Revenue from our mortgage banking business, which includes gains on loans sold and certain mortgage related loan fees, increased $2.1 million, or 131% to $3.8 million in first quarter 2015 compared to first quarter 2014, due to a higher volume of loans sold and increased gain on sale despite tighter spreads for the current quarter compared to the prior year quarter. We sold $137.1 million of mortgage loans in the secondary market, generating gains of $2.9 million, in first quarter 2015 compared to $57.7 million of mortgage loans sold, generating gains of $1.3 million, in the prior year period. Both refinance and purchase activity increased compared to the first quarter 2014, with refinance activity representing the majority of loans sold attributable to a continued improvement in the purchase market related to the strengthening U.S. economy, combined with an increase in refinancing activity due to declining interest rates in first quarter 2015.

Capital markets revenue increased $89,000 from first quarter 2014 to $4.2 million for first quarter 2015 and included a negative$805,000 CVA in the current quarter compared to a negative CVA of $66,000 for the first quarter 2014. The CVA represents the credit component of fair value with regard to both client-based derivatives and the related matched derivatives with interbank dealer counterparties. Exclusive of CVA, capital markets products income increased$828,000, or 20%, compared to first quarter 2014. The increase was attributable to higher notional volume as clients anticipate higher rates in 2015 and beyond. Our capital markets business opportunities are sensitive to the level of loan originations and our clients' outlook on interest rates.

Treasury management income increased $728,000, or 11%, from first quarter 2014 due to higher volume. The current year increase reflects the ongoing success in cross-selling treasury management services to new commercial clients as we continue to build client relationships, with approximately 75% of our commercial clients using treasury management services. Successful cross-sell and implementation of treasury management services may lag the closing of a credit facility by on average three to six months. Similar to loan originations, we continue to experience increased competition for treasury management services.

Loan, letter of credit, and commitment fees increased$472,000, or 10%, from first quarter 2014, primarily due to an $186,000, or 9%, increase in standby letter of credit fees and a $176,000, or 8%, increase in unused commitment fees. The majority of our unused commitment fees related to revolving facilities which at March 31, 2015 totaled $9.1 billion, of which $4.9 billion were unused. In comparison, at March 31, 2014, commitments related to revolving facilities totaled $7.7 billion, of which $4.1 billion were unused. The change from the prior year period reflects new client relationships since first quarter 2014.

Syndication fees declined$691,000, or 21%, to $2.6 million from first quarter 2014. During the first quarter 2015, we participated in 15 syndicated transactions (all of which we led or co-led), totaling $467.1 million in commitments, of which we retained $208.7 million in commitments. In the prior year period, we participated in 14 syndicated loan transactions (5 of which we led or co-led), totaling $701.3 million in commitments, while retaining $304.6 million in commitments. We expect syndication opportunities to continue as we grow our loan portfolio, specifically commercial and commercial real estate. Syndication fees tend to fluctuate

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period to period depending on market conditions, loan origination trends, portfolio management decisions (including structure of the transactions), and timing of deal closings.

Deposit service charges and fees and other income increased$4.3 million from first quarter 2014 to $5.6 million largely due to the $4.1 million gain on sale of our Georgia branch in first quarter 2015.

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Non-interest Expense

Table 4

Non-interest Expense Analysis

(Dollars in thousands)

	Quarter Ended March 31,
	2015			2014			% Change
Compensation expense:
Salaries and wages	$	27,002		$	24,973		8
Share-based costs	5,143			3,685			40
Incentive compensation and commissions	11,062			8,244			34
Payroll taxes, insurance and retirement costs	9,154			7,718			19
Total compensation expense	52,361			44,620			17
Net occupancy and equipment expense	7,864			7,776			1
Technology and related costs	3,421			3,283			4
Marketing	3,578			2,413			48
Professional services	2,310			2,759			-16
Outsourced servicing costs	1,680			1,464			15
Net foreclosed property expense	1,328			2,823			-53
Postage, telephone, and delivery	862			825			4
Insurance	3,211			2,903			11
Loan and collection:
Loan origination and servicing expense	1,626			799			104
Loan remediation expense	642			257			150
Total loan and collection expense	2,268			1,056			115
Other operating expense:
Supplies and printing	165			160			3
Subscriptions and dues	319			298			7
Education and training	284			214			33
Internal travel and entertainment	323			346			-7
Investment manager expense	645			706			-9
Bank charges	296			215			38
Intangibles amortization	655			756			-13
Provision for unfunded commitments	376			496			-24
Other expenses	1,199			2,637			-55
Total other operating expenses	4,262			5,828			-27
Total non-interest expense	$	83,145		$	75,750		10
Full-time equivalent ("FTE") employees at period end	1,165			1,130			3
Operating efficiency ratios:
Non-interest expense to average assets	2.14		%	2.19		%
Net overhead ratio (1)	1.27		%	1.43		%
Efficiency ratio (2)	53.14		%	55.79		%

⁽¹⁾  Computed as non-interest expense, less non-interest income, annualized, divided by average total assets.

⁽²⁾  Computed as non-interest expense divided by the sum of net interest income on a tax equivalent basis and non-interest income. The efficiency ratio is presented on a tax-equivalent basis, assuming a federal income tax rate of 35%. See Table 23, "Non-U.S. GAAP Financial Measures," for a reconciliation of the effect of the tax-equivalent adjustment.

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First quarter 2015 compared to first quarter 2014

Non-interest expense increased by $7.4 million, or 10%, for first quarter 2015 compared to first quarter2014. The increase primarily reflects higher compensation expense, loan and collection expense and marketing costs. This was partially offset by a decrease in net foreclosed property expense and other expenses in first quarter 2015 compared to first quarter 2014.

Compensation expense increased$7.7 million, or 17%, over first quarter 2014, due to additional staffing to support our growing business, annual salary adjustments, and increased incentive compensation accruals. Salary and wages were up $2.0 million, or 8%, primarily due to a higher FTE base, as well as annual compensation adjustments. Share-based costs increased $1.5 million, or 40%, and is largely attributable to the structure of certain awards granted in the first quarter 2015, triggering a shorter service period of expense recognition. Incentive compensation was up by $2.8 million, or 34%, compared to first quarter 2014, due to higher mortgage banking commissions and incentive compensation plan accruals. New incentive compensation programs in development could contribute additional expense during the year.

Marketing expense increased$1.2 million, or 48%, from first quarter 2014, as a result of our continuing client development activities.

Professional services expense, which includes fees paid for legal services in connection with corporate activities, accounting, and consulting services, declined$449,000, or 16%, from first quarter 2014, primarily due to reduced consulting services for risk management.

Net foreclosed property expense, which includes write-downs on foreclosed properties, gains and losses on sales of foreclosed properties, and property ownership costs associated with the maintenance of OREO, declined$1.5 million, or 53%, compared to first quarter 2014. The decline is primarily due to a $528,000reduction in lower OREO valuation write-downs compared to the prior year period. In addition, property ownership costs, such as property management and real estate taxes, were down $526,000 from the prior year quarter as the population of OREO had declined from $23.6 million at March 31, 2014 to $15.6 million at March 31, 2015.

Insurance expense increased$308,000, or 11%, from first quarter 2014 and was primarily due to higher FDIC deposit insurance in 2015 due to overall asset growth, increase in loan balances, and certain loan classifications, along with a shift in our deposit mix.

Loan and collection expense, which consists of certain non-reimbursable costs associated with loan origination and servicing and loan remediation costs for problem and nonperforming loans, increased$1.2 million, or 115%, from first quarter 2014 largely due to increased mortgage activity. Loan origination and servicing which comprises over 70% of loan and collection expense, was higher due to a significant increase in mortgage origination activity compared to first quarter 2014 as the purchase market returned to a more normalized level compared to a low point experienced in first quarter 2014 and increased refinance activity due to lower rate movements earlier in the quarter. Loan remediation related costs increased largely due to one-time credit on forced-placed insurance and certain covered asset expenses recorded in the first quarter of 2014.

Other expenses declined$1.6 million, or 27%, from first quarter 2014. Other expenses include bank charges, costs associated with the CDARS^® product offering, intangible asset amortization, education-related costs, subscriptions, provision for unfunded commitments, and miscellaneous losses and expenses. The decrease was largely due to expense reductions across various categories, including a lower provision for unfunded commitments, a reduced charge on our CRA investments, lower intangible asset amortization, and reduction in other miscellaneous operating losses.

Our efficiency ratio was 53.1% for first quarter 2015, improving from 55.8% for first quarter 2014, reflecting revenue increasing at a higher percentage than our expenses, largely aided by the gain on sale of the Georgia branch in first quarter 2015. Further meaningful improvement in the efficiency ratio will likely depend on a rise in interest rates.

Income Taxes

Our provision for income taxes includes both federal and state income tax expense. For the quarter ended March 31, 2015, we recorded an income tax provision of $25.2 million on pre-tax income of $66.7 million (equal to a 37.8% effective tax rate) compared to an income tax provision of $21.0 million on pre-tax income of $55.5 million for the quarter ended March 31, 2015 (equal to a 37.9% effective tax rate).

Net deferred tax assets totaled $88.9 million at March 31, 2015. We have concluded that it is more likely than not that the deferred tax assets will be realized and, accordingly, no valuation allowance was recorded during the quarter. This conclusion was based

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in part on the fact that the Company has cumulative book income for financial statement purposes at March 31, 2015, measured on a trailing three-year basis. In addition, we considered the Company's recent earnings history, on both a book and tax basis, and our outlook for earnings and taxable income in future periods.

For calendar year 2015, we currently expect the effective tax rate to be in the range of 37.5-38.5%, although a number of factors will continue to influence that estimate.

Operating Segments Results

We have three primary business segments: Banking, Asset Management, and Holding Company Activities.

Banking

Our Banking segment is the Company's most significant segment, representing 89% of consolidated total assets and generating nearly all of our net income. The profitability of our Banking segment is dependent on net interest income, provision for loan and covered loan losses, non-interest income, and non-interest expense. The net income for the Banking segment for the quarter ended March 31, 2015 was $46.1 million, an increase of $6.1 million from net income of $40.0 million for the prior year period. The increase in net income for the Banking segment was primarily due to $11.3 millionincrease in net interest income due to 11% loan growth since the prior year period. In addition, non-interest expenses increased$7.3 million, as compared to the prior year period, due to an increase in salaries and incentive compensation primarily driven by new hires, salary increases and higher incentive compensation accruals tied to improved performance.

Total loans for the Banking segment increased $278.3 million to $12.2 billion at March 31, 2015 from $11.9 billion at December 31, 2014. Total deposits, excluding deposits held-for-sale, were $14.2 billion and $13.2 billion at March 31, 2015 and December 31, 2014, respectively.

Asset Management

The Asset Management segment includes investment management, personal trust and estate administration, custodial and escrow, retirement plans and brokerage services.

Net income from Asset Management declined to $576,000 for first quarter 2015 from $642,000 for the prior year period. The decline was attributable to a higher level of compensation and benefit costs. AUMA grew to $7.3 billion at March 31, 2015 from $6.6 billion at December 31, 2014 and from $6.0 billion at March 31, 2014 benefiting from growth in both managed and custody assets due to new client balances and improved market performance.

Holding Company Activities

The Holding Company Activities segment consists of parent company-only activity and intersegment eliminations. The Holding Company’s most significant asset is its investment in the Bank. Undistributed earnings relating to this investment is not included in the Holding Company financial results. Holding Company financial results are represented primarily by interest expense on borrowings and operating expenses. Recurring operating expenses consist primarily of compensation expense allocated to the Holding Company and professional fees. The Holding Company Activities segment reported a net loss of $5.2 million for the quarter ended March 31, 2015, compared to a net loss of $6.1 million for the prior year period. The Holding Company had $54.5 million in cash at quarter ended March 31, 2015, compared to $60.6 million at December 31, 2014.

Additional information about our operating segments are also discussed in Note 16 of "Notes to Consolidated Financial Statements" in Item 1 of this Form 10-Q.

FINANCIAL CONDITION

Investment Securities Portfolio Management

We manage our investment securities portfolio to maximize the return on invested funds within acceptable risk guidelines, to meet pledging and liquidity requirements, and to adjust balance sheet interest rate sensitivity to attempt to serve as some protection of net interest income levels against the impact of changes in interest rates. Investments in the portfolio are comprised of debt securities, primarily residential mortgage-backed pools and state and municipal bonds.

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We may adjust the size and composition of our securities portfolio according to a number of factors, including expected liquidity needs, the current and forecasted interest rate environment, our actual and anticipated balance sheet growth rate, the relative value of various segments of the securities markets, and the broader economic and regulatory environment.

Debt securities that are classified as available-for-sale are carried at fair value and may be sold as part of our asset/liability management strategy in response to changes in interest rates, liquidity needs or significant prepayment risk. Unrealized gains and losses on available-for-sale securities represent the difference between the aggregated cost and fair value of the portfolio and are reported, on an after-tax basis, as a separate component of equity in accumulated other comprehensive income ("AOCI"). This balance sheet component will fluctuate as current market interest rates and conditions change, with such changes affecting the aggregate fair value of the portfolio. In periods of significant market volatility we may experience significant changes in AOCI.

Debt securities that are classified as held-to-maturity are securities that we have the ability and intent to hold until maturity and are accounted for using historical cost, adjusted for amortization of premiums and accretion of discounts.

Table 5

Investment Securities Portfolio Valuation Summary

(Dollars in thousands)

	As of March 31, 2015					As of December 31, 2014
	Fair Value		Amortized Cost		% of Total	Fair Value		Amortized Cost		% of Total
Available-for-Sale
U.S. Treasury securities	$	244,556	$	243,608	9	$	268,265	$	269,697	10
U.S. Agency securities	46,806		46,847		2	46,258		46,959		2
Collateralized mortgage obligations	127,828		123,181		4	136,933		132,633		5
Residential mortgage-backed securities	829,413		802,921		29	846,078		822,746		29
State and municipal securities	382,134		374,125		14	347,310		340,810		13
Foreign sovereign debt	500		500		*	500		500		*
Total available-for-sale	1,631,237		1,591,182		58	1,645,344		1,613,345		59
Held-to-Maturity
Collateralized mortgage obligations	56,936		58,209		2	57,943		59,960		2
Residential mortgage-backed securities	923,368		909,643		33	892,162		885,235		32
Commercial mortgage-backed securities	192,024		190,932		7	181,437		183,021		7
State and municipal securities	1,074		1,069		*	1,073		1,069		*
Total held-to-maturity	1,173,402		1,159,853		42	1,132,615		1,129,285		41
Total securities	$	2,804,639	$	2,751,035	100	$	2,777,959	$	2,742,630	100

* Less than 1%

As of March 31, 2015, our securities portfolio totaled $2.8 billion, up slightly compared to December 31, 2014. During the quarter ended March 31, 2015, purchases of securities totaled $124.2 million, with $57.7 million in the available-for-sale portfolio and $66.5 million in the held-to-maturity portfolio. The current year purchases in the investment portfolio primarily represented the reinvestment of proceeds from sales, maturities and paydowns in largely similar agency guaranteed residential mortgage-backed securities, as well as purchases of residential and commercial mortgage-backed securities and state and municipal securities.

In conjunction with ongoing portfolio management and rebalancing activities, during the quarter ended March 31, 2015, we sold $28.9 million in state and municipal securities and U.S. Treasury securities, resulting in a net securities gain of $534,000.

Investments in collateralized mortgage obligations and residential and commercial mortgage-backed securities comprised 76% of the total portfolio at March 31, 2015. All of the mortgage-backed securities are backed by U.S. Government agencies or issued by U.S. Government-sponsored enterprises. All residential mortgage-backed securities are composed of fixed-rate, fully-amortizing collateral with final maturities of 30 years or less.

Investments in debt instruments of state and local municipalities comprised 14% of the total portfolio at March 31, 2015. This type of security has historically experienced very low default rates and provided a predictable cash flow since it generally is not

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subject to significant prepayment. Insurance companies regularly provide credit enhancement to improve the credit rating and liquidity of a municipal bond issuance. Management considers the credit enhancement and underlying municipality credit strength when evaluating a purchase or sale decision.

At March 31, 2015, our reported equity reflected unrealized net securities gains on available-for-sale securities, net of tax, of $24.4 million, an increase of $4.9 million from December 31, 2014 due to decreases in interest rates and the corresponding increase in the value of the security as a result. We continue to add, as needed, to the held-to-maturity portfolio to mitigate the potential future market volatility of adding bonds to the available-for-sale portfolio in a low interest rate environment.

The following table summarizes activity in the Company's investment securities portfolio during 2015. There were no transfers of securities between investment categories during the year.

Table 6

Investment Portfolio Activity

(Dollars in thousands)

	Quarter Ended March 31, 2015
	Available-for-Sale			Held-to-Maturity
Balance at beginning of period	$	1,645,344		$	1,129,285
Additions:
Purchases	57,733			66,457
Reductions:
Sales proceeds	(28,931		)	—
Net gains on sale	534			—
Principal maturities, prepayments and calls, net of gains	(48,884		)	(34,460		)
Amortization of premiums and accretion of discounts	(2,615		)	(1,429		)
Total reductions	(79,896		)	(35,889		)
Increase in market value	8,056			—			(1)
Balance at end of period	$	1,631,237		$	1,159,853

⁽¹⁾  The held-to-maturity portfolio is recorded at cost, with no adjustment for the $3.3 million unrealized loss in the portfolio at the beginning of 2015 or the increase in market value of $10.2 million for the quarter ended March 31, 2015.

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The following table presents the maturities of the different types of investments that we owned at March 31, 2015, and the corresponding interest rates.

Table 7

Maturity Distribution and Portfolio Yields

(Dollars in thousands)

	As of March 31, 2015
	One Year or Less				One Year to Five Years				Five Years to Ten Years				After 10 years
	Amortized Cost		Yield to Maturity		Amortized Cost		Yield to Maturity		Amortized Cost		Yield to Maturity		Amortized Cost		Yield to Maturity
Available-for-Sale
U.S. Treasury securities	$	—	—	%	$	243,608	1.07	%	$	—	—	%	$	—	—	%
U.S. Agency securities	—		—	%	46,847		1.30	%	—		—	%	—		—	%
Collateralized mortgage obligations (1)	4,513		4.69	%	118,668		3.19	%	—		—	%	—		—	%
Residential mortgage-backed securities (1)	5		5.05	%	577,378		3.25	%	225,016		2.17	%	522		7.45	%
State and municipal securities (2)	10,271		3.55	%	163,878		2.04	%	192,230		2.03	%	7,746		2.26	%
Foreign sovereign debt	500		1.51	%	—		—	%	—		—	%	—		—	%
Total available-for-sale	15,289		3.82	%	1,150,379		2.53	%	417,246		2.11	%	8,268		2.59	%
Held-to-Maturity
Collateralized mortgage obligations (1)	—		—	%	58,209		1.41	%	—		—	%	—		—	%
Residential mortgage-backed securities (1)	—		—	%	439,764		2.47	%	257,806		2.43	%	212,073		2.95	%
Commercial mortgage-backed securities (1)	—		—	%	120,617		1.67	%	70,315		2.21	%	—		—	%
State and municipal securities (2)	815		2.98	%	254		2.80	%	—		—	%	—		—	%
Total held-to-maturity	815		2.98	%	618,844		2.21	%	328,121		2.38	%	212,073		2.95	%
Total securities	$	16,104	3.78	%	$	1,769,223	2.42	%	$	745,367	2.23	%	$	220,341	2.94	%

⁽¹⁾  The repricing distributions and yields to maturity of collateralized mortgage obligations and mortgage-backed securities are based on average life of expected cash flows. Actual repricings and yields of the securities may differ from those reflected in the table depending upon actual interest rates and prepayment speeds.

⁽²⁾  The maturity date of state and municipal bonds is based on contractual maturity, unless the bond, based on current market prices, is deemed to have a high probability that a call right will be exercised, in which case the call date is used as the maturity date.

LOAN PORTFOLIO AND CREDIT QUALITY (excluding covered assets)

The following discussion of our loan portfolio and credit quality excludes covered assets. Covered assets represent assets acquired through an FDIC-assisted transaction that are subject to a loss share agreement and are presented separately on the Consolidated Statements of Financial Condition. For additional discussion of covered assets, refer to "Covered Assets" further in "Management’s Discussion and Analysis".

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Portfolio Composition

Table 8

Loan Portfolio

(Dollars in thousands)

	March 31, 2015		% of Total	December 31, 2014		% of Total	% Change in Balances
Commercial and industrial	$	6,213,029	51	$	5,996,070	50	4
Commercial – owner-occupied real estate	1,977,601		16	1,892,564		16	4
Total commercial	8,190,630		67	7,888,634		66	4
Commercial real estate	2,411,359		20	2,323,616		20	4
Commercial real estate – multi-family	492,695		4	593,103		5	-17
Total commercial real estate	2,904,054		24	2,916,719		25	*
Construction	357,258		3	381,102		3	-6
Total commercial real estate and construction	3,261,312		27	3,297,821		28	-1
Residential real estate	376,741		3	361,565		3	4
Home equity	138,734		1	142,177		1	-2
Personal	203,067		2	202,022		2	1
Total loans	$	12,170,484	100	$	11,892,219	100	2

* Less than 1%

Total loans were $12.2 billion at March 31, 2015, compared to $11.9 billion at December 31, 2014. Loans grew by $278.3 million during the quarter ended March 31, 2015, with the growth primarily in commercial and industrial loans, which increased $302.0 million from year end 2014. New client activity of $385.8 million was offset by a net decrease in borrowings from existing clients largely due to above average payoffs. Our five-quarter trailing average loan growth is approximately $305.3 million at March 31, 2015, increasing $148.3 million compared to $157.0 million a year ago. The growth rate is driven by quarterly relationship growth, both for new and existing clients. Commercial real estate loans decreased $12.7 million from year end 2014, due to increased payoffs in the portfolio, with average payoff activity in first quarter 2015 $63.0 million higher than the five quarter average. Payoffs during the quarter included property sales, clients obtaining permanent financing, project completion, and decreased line usage. This is indicative of the uneven commercial real estate loan life cycle as we are a short and intermediate term commercial real estate lender. Revolving line usage on the overall loan portfolio increased slightly to 46% at March 31, 2015, from 45% at December 31, 2014.

Overall loan growth continues to be impacted by heightened competition from bank and nonbank competitors which is affecting borrowers' expectations regarding both pricing and structure. Our strategy is to maintain a disciplined approach to pricing and structuring new credit opportunities and continue to develop comprehensive client relationships. Given the competitive environment, we may experience uneven loan growth from quarter-to-quarter.

Much of our recent loan growth has been focused in commercial and industrial, which represents 67% of our portfolio at March 31, 2015. Within the commercial and industrial portfolio, the healthcare portfolio increased $105.9 million and the finance and insurance portfolio increased $102.2 million from December 31, 2014. The commercial and industrial portfolio generally provides us higher yields, principally in specialty lines such as healthcare and security industry group, than other segments of our loan portfolio and provides greater potential for us to cross-sell other products and services.

In the normal course of our business, we participate in loan transactions that involve a number of banks, primarily to maintain and build client relationships with a view to cross-selling products and originating loans for the borrowers in the future. Although we may strive to lead or co-lead the arrangement, we will also participate with other banks when we have a relationship with the borrower. Loan syndications assist us with decreasing credit exposure linked to individual client relationships or loan concentrations by industry, type or size. Of our $12.2 billion in total loans at March 31, 2015, we were party to $4.1 billion of loans with other financial institutions, which included $2.6 billion in shared national credits ("SNCs") and $1.5 billion in retained balances in syndicated loans that were led or co-led by us. SNC transactions are typically led by larger institutions.

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The following table summarizes the composition of our commercial loan portfolio at March 31, 2015 and December 31, 2014. Our commercial loan portfolio is categorized in the table based on our most significant industry segments, as classified pursuant to the North American Industrial Classification System standard industry description. These categories are based on the nature of the client's ongoing business activity as opposed to the collateral underlying an individual loan. To the extent that a client's underlying business activity changes, classification differences between periods will arise.

Table 9

Commercial Loan Portfolio Composition by Industry Segment

(Dollars in thousands)

	March 31, 2015			December 31, 2014
	Amount		% of Total	Amount		% of Total
Healthcare	$	1,892,977	23	$	1,787,092	23
Manufacturing	1,743,868		21	1,746,328		22
Finance and insurance	881,395		11	779,146		10
Wholesale trade	690,463		8	685,247		9
Real estate, rental and leasing	552,710		7	549,467		7
Administrative, support, waste management and remediation services	542,537		7	505,939		6
Professional, scientific and technical services	491,047		6	447,483		6
Architecture, engineering and construction	302,033		4	288,527		4
Retail	277,997		3	277,393		3
All other (1)	815,603		10	822,012		10
Total commercial (2)	$	8,190,630	100	$	7,888,634	100

⁽¹⁾  All other consists of numerous smaller balances across a variety of industries with no category greater than 3%.

⁽²⁾  Includes owner-occupied commercial real estate of $2.0 billion and $1.9 billion at March 31, 2015 and December 31, 2014, respectively.

One of the largest segments within our commercial lending business is the healthcare industry. We have a specialized niche in the skilled nursing, assisted living, and residential care segment of the healthcare industry. Loan relationships to these providers tend to be larger extensions of credit with borrowers primarily represented by for-profit businesses. At March 31, 2015, 23% of the commercial loan portfolio and 16% of the total loan portfolio was composed of loans extended primarily to operators in this segment to finance the working capital needs and cost of facilities providing such services. The facilities securing the loans are dependent, in part, on the receipt of payments and reimbursements under government contracts for services provided. Accordingly, our clients and their ability to service this debt may be adversely impacted by the financial health of state or federal payors. In recent years, there have been reductions in the reimbursement rates in certain states and government entities are taking longer to reimburse. Despite some impact on client cash flows as a result, to date the healthcare loan portfolio segment has experienced minimal defaults and losses.

Our manufacturing portfolio, representing 21% of our commercial lending business at March 31, 2015, is well diversified among sub-industry and product types with particular focus on serving clients in the key geographic markets in which we operate. The manufacturing industry segment is a key component of our core business. As the general market environment for manufacturing in our markets has improved over the past several years, the manufacturing segment of the portfolio has had a significant effect on the improvement in the credit performance in the commercial portfolio.

At March 31, 2015, approximately 11%, or $1.3 billion of our total loan portfolio was characterized as higher-risk commercial and industrial loans, as defined for regulatory purposes, compared to 10% or $1.2 billion as of December 31, 2014. Of the $141.0 million increase since year-end 2014, $77.6 million is due to new commitments. Higher-risk commercial and industrial loans are a portion of our total leveraged loans and are primarily underwritten on the recurring earnings of the borrower, where the ratio of debt to earnings is elevated compared to other commercial loans that are not characterized as higher-risk. These metrics were defined by the FDIC in late 2012. Our higher-risk commercial and industrial loans are spread across multiple industries, generally command higher loan yields as a premium for underwriting the additional risk due to their leveraged position, and typically have lower collateral coverage than similar commercial and industrial loans that are not classified as higher-risk. Based on our historical experience, the probability of default and loss given default have been higher than our commercial and industrial loans as a whole and we take this into account in establishing our allowance for loan losses.

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The following table summarizes our commercial real estate and construction loan portfolios by collateral type at March 31, 2015 and December 31, 2014.

Table 10

Commercial Real Estate and Construction Loan Portfolios by Collateral Type

(Dollars in thousands)

	March 31, 2015			December 31, 2014
	Amount		% of Total	Amount		% of Total
Commercial Real Estate
Retail	$	681,323	23	$	608,102	21
Multi-family	492,695		17	593,103		20
Office	528,869		18	543,657		19
Healthcare	365,480		13	361,476		12
Industrial/warehouse	279,389		10	264,976		9
Land	210,550		7	199,497		7
Residential 1-4 family	86,173		3	76,995		3
Mixed use/other	259,575		9	268,913		9
Total commercial real estate	$	2,904,054	100	$	2,916,719	100
Construction
Multi-family	$	109,327	30	$	113,206	30
Retail	98,121		27	100,086		26
Industrial/warehouse	55,696		16	43,779		11
Residential 1-4 family	33,104		9	32,419		9
Healthcare	16,171		5	22,382		6
Office	16,185		5	14,447		4
Mixed use/other	28,654		8	54,783		14
Total construction	$	357,258	100	$	381,102	100

Of the combined commercial real estate and construction portfolios, the three largest categories at March 31, 2015 were retail, multi-family, and office real estate, which represent 24%, 18% and 17%, respectively of the combined portfolios. Our commercial real estate and construction portfolio strategy is focused on achieving market share in core real estate classes in the key geographic markets in which we operate. Despite higher than average payoffs during the first quarter 2015, we continue to grow our commercial real estate and construction portfolio opportunities with real estate developers we have relationships with, and, in many cases, have done business with in the past. From an overall portfolio performance perspective, management believes the business execution plans of these borrowers continue to perform at satisfactory levels.

Within the commercial real estate portfolio, our exposure to land loans totaled $210.6 million at March 31, 2015, increasing $11.1 million, or 6%, from $199.5 million at December 31, 2014. Land remains a less liquid asset class as buyers and sellers may hold divergent future development outlooks for the land, therefore affecting saleability and market prices. As a percentage of the commercial real estate portfolio, land loans were 7% at both March 31, 2015 and December 31, 2014, respectively.

The construction portfolio totaled $357.3 million at March 31, 2015, a decrease of $23.8 million, compared to $381.1 million at December 31, 2014, as $84.5 million of construction loans were reclassified to commercial or commercial real estate at the completion of the construction phase.

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Maturity and Interest Rate Sensitivity of Loan Portfolio

The following table summarizes the maturity distribution of our loan portfolio as of March 31, 2015, by category, as well as the interest rate sensitivity of loans in these categories that have maturities in excess of one year.

Table 11

Maturities and Sensitivities of Loans to Changes in Interest Rates⁽¹⁾ 

(Amounts in thousands)

	As of March 31, 2015
	Due in 1 year or less		Due after 1 year through 5 years		Due after 5 years		Total
Commercial	$	1,983,859	$	6,070,619	$	136,152	$	8,190,630
Commercial real estate	926,848		1,742,096		235,110		2,904,054
Construction	109,684		244,317		3,257		357,258
Residential real estate	9,156		3,731		363,854		376,741
Home equity	22,401		62,740		53,593		138,734
Personal	122,242		80,815		10		203,067
Total	$	3,174,190	$	8,204,318	$	791,976	$	12,170,484
Loans maturing after one year:
Predetermined (fixed) interest rates			$	193,782	$	222,696
Floating interest rates			8,010,536		569,280
Total			$	8,204,318	$	791,976

⁽¹⁾  Maturities are based on contractual maturity date. Actual timing of repayment may differ from those reflected in the table as clients may choose to pre-pay their outstanding balance prior to the contractual maturity date.

Of the $8.6 billion in loans maturing after one year with a floating interest rate, $1.2 billion are subject to interest rate floors, of which $1.1 billion have such floors in effect at March 31, 2015. In recent quarters, it has been difficult to retain the interest rate floor feature as loans renew, which has contributed to loan yield compression. For further analysis and information related to interest sensitivity, see Item 3 "Quantitative and Qualitative Disclosures about Market Risk" of this Form 10-Q.

In conjunction with our commercial middle market focus, our lending activities sometimes involve larger credit relationships. Depending on collateral values, success of a workout strategy or the ability of a borrower to return to performing status, the unexpected occurrence of an event or development adversely impacting one or more of our large clients could materially affect our results of operation and financial condition.

Table 12

Client Relationships with Commitments > $25 Million

(Dollars in thousands)

	March 31, 2015			December 31, 2014
Commitments > $25 million
Number of client relationships > $25 million	140			136
Percentage that are commercial and industrial businesses	91		%	88		%
Total commitments > $25 million	$	4,557,422		$	4,339,470
Funded loan balances	$	2,429,545		$	2,301,805
Funded loan balances as a percent of total loan portfolio	20		%	19		%

Delinquent Loans, Special Mention and Potential Problem Loans, Restructured Loans and Nonperforming Assets

Loans are reported delinquent if the required principal and interest payments have not been received within 30 days of the date such payments are due. Delinquency can be driven by either failure of the borrower to make payments within the term of the loan or failure to make the final payment at maturity. The majority of our loans are not fully amortizing over the term. As a result, a

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sizeable final repayment is often required at maturity. If a borrower lacks refinancing options or the ability to pay, the loan may become delinquent in connection with its maturity.

Loans considered special mention are performing in accordance with the contractual terms but demonstrate potential weakness that if left unresolved, may result in deterioration in the Company’s credit position and/or the repayment prospects for the credit. Borrowers rated special mention may exhibit adverse operating trends, high leverage, tight liquidity, or other credit concerns. These loans continue to accrue interest.

Potential problem loans, like special mention, are loans that are performing in accordance with contractual terms, but for which management has some level of concern (greater than that of special mention loans) about the ability of the borrowers to meet existing repayment terms in future periods. These loans continue to accrue interest but the ultimate collection of these loans in full is questionable due to the same conditions that characterize a special mention credit. These credits may also have somewhat increased risk profiles as a result of the current net worth and/or paying capacity of the obligor or guarantors or the collateral pledged. These loans generally have a well-defined weakness that may jeopardize collection of the debt and are characterized by the distinct possibility that the Company may sustain some loss if the deficiencies are not resolved. Although potential problem loans require additional attention by management, they may never become nonperforming.

Nonperforming assets include nonperforming loans and real estate that has been acquired primarily through foreclosure proceedings and are awaiting disposition. Nonperforming loans consist of nonaccrual loans, including restructured loans that remain on nonaccrual. We specifically exclude restructured loans that accrue interest from our definition of nonperforming loans.

All loans are placed on nonaccrual status when principal or interest payments become 90 days past due or earlier if management deems the collectability of the principal or interest to be in question prior to the loans becoming 90 days past due. When interest accruals are discontinued, accrued but uncollected interest is reversed, reducing interest income. Subsequent receipts on nonaccrual loans are recorded in the financial statements as a reduction of principal, and interest income is only recorded on a cash basis if the remaining recorded investment after charge-offs is deemed fully collectible. Classification of a loan as nonaccrual does not necessarily preclude the ultimate collection of loan principal and/or interest.

As part of our ongoing risk management practices and in certain circumstances, we may extend or modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties. The modification may consist of reduction in interest rate, extension of the maturity date, reduction in the principal balance, or other action intended to minimize potential losses and maximize our chances of a more successful recovery on a troubled loan. When we make such concessions as part of a modification, we report the loan as a TDR and account for the interest due in accordance with our TDR policy. Restructured loans can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. The TDR is classified as an accruing TDR if the borrower has demonstrated the ability to meet the new terms of the restructuring as evidenced by a minimum of six months of performance in compliance with the restructured terms or if the borrower's performance prior to the restructuring or other significant events at the time of the restructuring supports returning or maintaining the loan on accrual status. TDRs accrue interest as long as the borrower complies with the revised terms and conditions and management is reasonably assured as to the collectability of principal and interest; otherwise, the restructured loan will be classified as nonaccrual. The TDR classification is removed when the loan is either fully repaid or is re-underwritten at market terms and an evaluation of the loan determines that it does not meet the definition of a TDR under current accounting guidance (i.e., the new terms do not represent a concession, the borrower is no longer experiencing financial difficulty, and the re-underwriting is executed at current market terms for new debt with similar risk).

Foreclosed real estate ("OREO") represents properties acquired as the result of borrower defaults on loans secured by a mortgage on real property.

Nonperforming loans totaled $71.0 million at March 31, 2015, up 5% from $67.5 million at December 31, 2014 and down 24% from March 31, 2014. Because our loan portfolio contains loans that may be larger in size in order to accommodate the financing needs of some of our borrowers, changes in the performance of larger credits could create fluctuations in our credit quality metrics, including nonperforming, special mention and potential problem loans. At March 31, 2015, two nonperforming loans in excess of $9.0 million comprised 31% of our total nonperforming loans. Nonperforming loan inflows which are primarily comprised of potential problem loans moving through the workout process (i.e., moving from potential problem to nonperforming status) have steadily declined nearly every quarter since second quarter 2010, troughed in fourth quarter 2014 at $6.1 million and increased by $10.2 million to $16.3 million in first quarter 2015 from the fourth quarter 2014. Of the total $16.3 million in nonperforming loan inflows, 73%, or $12.4 million was from two commercial credits. As shown in Table 14, first quarter 2015 nonperforming loan inflows were partially offset by paydowns, payoffs, dispositions, and charge-offs. Nonperforming loans as a percent of total loans was 0.58% at March 31, 2015, relatively flat from 0.57% at December 31, 2014 and down from 0.86% at March 31, 2014.

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Nonperforming assets declined 2% from the prior year end to $86.6 million at March 31, 2015 and declined 26% from March 31, 2014. The improvement in nonperforming assets was largely attributable to paydowns, payoffs and sales. Nonperforming assets as a percentage of total assets were 0.53% at March 31, 2015, comparative to 0.54% at December 31, 2014.

OREO declined$1.8 million, or 10%, to $15.6 million from $17.4 million at December 31, 2014, as inflows to OREO were more than offset by sales of OREO and valuation adjustments as we continue to dispose and settle these properties.

The following table provides a comparison of our nonperforming assets, restructured loans accruing interest, special mention, potential problem and past due loans for the past five periods.

Table 13

Nonperforming Assets and Restructured and Past Due Loans

(Dollars in thousands)

	2015			2014
	March 31			December 31			September 30			June 30			March 31
Nonaccrual loans:
Commercial	$	38,973		$	31,047		$	33,348		$	34,522		$	31,074
Commercial real estate	15,619			19,749			19,079			21,953			40,928
Residential real estate	4,763			5,274			9,723			9,337			9,354
Personal and home equity	11,663			11,474			11,279			10,777			12,471
Total nonaccrual loans	71,018			67,544			73,429			76,589			93,827
90 days past due loans (still accruing interest)	—			—			—			—			—
Total nonperforming loans	71,018			67,544			73,429			76,589			93,827
OREO	15,625			17,416			17,293			19,823			23,565
Total nonperforming assets	$	86,643		$	84,960		$	90,722		$	96,412		$	117,392
Nonaccrual troubled debt restructured loans (included in nonaccrual loans):
Commercial	$	17,333		$	20,113		$	17,746		$	6,046		$	6,346
Commercial real estate	12,335			8,005			8,103			8,403			15,452
Residential real estate	1,737			1,881			1,512			1,534			2,671
Personal and home equity	5,985			6,299			5,467			5,033			4,433
Total nonaccrual troubled debt restructured loans	$	37,390		$	36,298		$	32,828		$	21,016		$	28,902
Restructured loans accruing interest:
Commercial	$	20,775		$	21,124		$	19,901		$	30,329		$	23,626
Commercial real estate	177			199			807			1,220			1,252
Personal and home equity	1,416			1,422			1,428			1,433			1,584
Total restructured loans accruing interest	$	22,368		$	22,745		$	22,136		$	32,982		$	26,462
Special mention loans	$	102,651		$	100,989		$	76,611		$	119,878		$	87,329
Potential problem loans	$	107,038		$	87,442		$	119,770		$	125,033		$	106,474
30-89 days past due loans	$	9,217		$	11,816		$	3,457		$	3,683		$	13,088
Nonperforming loans to total loans	0.58		%	0.57		%	0.64		%	0.69		%	0.86		%
Nonperforming loans to total assets	0.43		%	0.43		%	0.48		%	0.52		%	0.66		%
Nonperforming assets to total assets	0.53		%	0.54		%	0.60		%	0.66		%	0.82		%
Allowance for loan losses as a percent of nonperforming loans	221		%	226		%	204		%	191		%	156		%

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The following table presents changes in our nonperforming loans for the past five periods.

Table 14

Nonperforming Loans Rollforward

(Amounts in thousands)

	Quarter Ended
	2015			2014
	March 31			December 31			September 30			June 30			March 31
Nonperforming loans:
Balance at beginning of period	$	67,544		$	73,429		$	76,589		$	93,827		$	94,238
Additions:
New nonaccrual loans (1)	16,279			6,052			16,767			16,327			14,882
Reductions:
Return to performing status	(97		)	(439		)	—			—			(119		)
Paydowns and payoffs, net of advances	(4,841		)	(457		)	(16,371		)	(19,936		)	(3,326		)
Net sales	(2,407		)	(1,800		)	(1,053		)	(7,875		)	(6,327		)
Transfer to OREO	(2,152		)	(6,177		)	(776		)	(1,111		)	(689		)
Charge-offs	(3,308		)	(3,064		)	(1,727		)	(4,643		)	(4,832		)
Total reductions	(12,805		)	(11,937		)	(19,927		)	(33,565		)	(15,293		)
Balance at end of period	$	71,018		$	67,544		$	73,429		$	76,589		$	93,827
Nonaccruing troubled debt restructured loans (included in nonperforming loans):
Balance at beginning of period	$	36,298		$	32,828		$	21,016		$	28,902		$	32,182
Additions:
New nonaccrual troubled debt restructured loans (1)	6,666			3,487			17,662			2,098			1,820
Reductions:
Return to performing status	(78		)	—			—			—			—
Paydowns and payoffs, net of advances	(2,336		)	234			(5,721		)	(8,211		)	(1,483		)
Net sales	(140		)	—			—			(1,100		)	(3,356		)
Transfer to OREO	(874		)	(133		)	—			(552		)	—
Charge-offs	(2,146		)	(118		)	(129		)	(121		)	(261		)
Total reductions	(5,574		)	(17		)	(5,850		)	(9,984		)	(5,100		)
Balance at end of period	$	37,390		$	36,298		$	32,828		$	21,016		$	28,902

⁽¹⁾  Amounts represent loan balances as of the end of the month in which loans were classified as new nonaccrual loans.

Credit Quality Management and Allowance for Loan Losses

We maintain an allowance for loan losses at a level management believes is sufficient to absorb credit losses inherent in the loan portfolio. The allowance for loan losses is assessed quarterly and represents an accounting estimate of probable losses in the portfolio at each balance sheet date based on a review of available and relevant information at that time. The allowance contains provisions for probable losses that have been identified relating to specific borrowing relationships that are considered to be impaired (the "specific component" of the allowance), as well as probable losses inherent in the loan portfolio that are not specifically identified (the "general allocated component" of the allowance), which is determined using a methodology that is a function of quantitative and qualitative factors and management judgment applied to defined segments of our loan portfolio.

The specific component of the allowance relates to impaired loans. Impaired loans consist of nonaccrual loans (which include nonaccrual troubled debt restructurings ("TDRs")) and loans classified as accruing TDRs. A loan is considered impaired when, based on current information and events, either (i) management believes that it is probable that we will be unable to collect all amounts due (both principal and interest) according to the original contractual terms of the loan agreement, or (ii) it has been

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classified as a TDR. Once a loan is determined to be impaired, the amount of impairment is measured based on the loan’s observable fair value; fair value of the underlying collateral less estimated selling costs, if the loan is collateral-dependent; or the present value of expected future cash flows discounted at the loan’s effective interest rate. Impaired loans exceeding $500,000 are evaluated individually while smaller loans are evaluated as pools using historical loss experience as well as management’s loss expectations for the respective asset class and product type. If the estimated fair value of the impaired loan is less than the recorded investment in the loan (including accrued interest, net of deferred loan fees and costs and unamortized premium or discount), impairment is recognized by creating a specific reserve as a component of the allowance for loan losses. The recognition of any reserve required on new impaired loans is recorded in the same quarter in which the transfer of the loan to nonaccrual status occurred. All loans that are over 90 days past due in principal or interest are placed on nonaccrual status. Management may also place some loans on nonaccrual status before they are 90 days past due if they meet the above definition of "nonaccrual." All impaired loans are reviewed quarterly for any changes that would affect the specific reserve. Any impaired loan in which a determination has been made that the economic value is permanently reduced is charged-off against the allowance for loan losses to reflect its current economic value in the period in which the determination has been made.

At the time a collateral-dependent loan is initially determined to be impaired, we review the existing appraisal. If the most recent appraisal is greater than one-year old, a new appraisal of the underlying collateral is obtained. For collateral-dependent impaired loans that are secured by real estate, we generally obtain "as is" appraisal values in order to evaluate impairment. When a collateral-dependent loan is secured by non-real estate collateral such as receivables, inventory, or equipment, the fair value is generally determined based upon appraisals, field exams, or receivable reports. The valuation techniques and inputs are reviewed internally by workout and/or asset-based specialists for reasonableness of estimated liquidation costs, collectability probabilities, and other market data. Appraisals for real estate collateral-dependent impaired loans in excess of $500,000 are updated with new independent appraisals at least annually and are formally reviewed by our internal appraisal department. Additional diligence is performed at the six-month interval between annual appraisals. If during the course of the six-month review process there is evidence supporting a meaningful decline in the value of collateral, the appraised value is either adjusted downward or a new appraisal is required to support the value of the impaired loan.

In addition to the appraisal, both borrower and market-specific factors are taken into consideration, which may result in obtaining more frequent appraisal updates or internal assessments. Appraisals are conducted by third-party independent appraisers under internal direction and engagement. Appraisals are either reviewed internally by our appraisal department or are sent to an outside firm if appropriate. Both levels of review involve a scope appropriate for the complexity and risk associated with the loan and its collateral. As part of our internal review process, we consider other factors or recent developments that could adjust the valuations indicated in the appraisals or internal reviews. To validate the reasonableness of the appraisals obtained, we may consider many factors, including a comparison of the appraised value to the actual sales price of similar properties, relevant comparable sale price listings, broker opinions, and local or regional real estate valuation and sales data.

As of March 31, 2015, the average appraisal age used in the impaired loan valuation process was approximately 145 days. The amount of impaired assets which, by policy, requires an independent appraisal, but does not have a current external appraisal at March 31, 2015 due to the timing of the receipt of the appraisal is not material. In situations such as this, we perform an internal assessment to determine if a probable impairment reserve is required for the account based on our experience in the related asset class and type.

The general allocated component of the allowance is determined using a methodology that is a function of quantitative and qualitative factors applied to segments of our loan portfolio. The methodology takes into account at a product level originating line of business (transformational or legacy), year of origination, the risk-rating migration of the loans, and historical default and loss history of similar products. Using this information, the methodology produces loss estimates which provide a range of possible reserve amounts by product type. Use of the loss emergence period information by product type provides an important reference point for determining the appropriate level within a range of reserves for a specific product category. We consider the appropriate balance of the general allocated component of the reserve within these ranges based on a variety of internal and external quantitative and qualitative factors to reflect data or timeframes not captured by the model as well as market and economic data, estimate of the loss emergence period and management judgment. We consider relevant factors related to individual product types and will also consider, when appropriate, changes in lending practices, changes in business or economic conditions, changes in the nature and volume of loans, changes in staffing or management, changes in the quality of our results from loan reviews (which includes credit quality trends and risk rating accuracy), changes in collateral values, concentration risks, and other external factors such as legal or regulatory matters relevant to management’s assessment of required reserve levels. In certain instances, these additional factors and judgments may lead to management’s conclusion that the appropriate level of the reserve is outside the range determined through the quantitative framework with respect to a given product type.

The Bank has limited exposure to junior collateral position in any product type with the exception of home equity lines of credit ("HELOCs"). This product is by definition usually secured in the junior position to the first mortgage on the related property. The

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Bank evaluates the allowance for loan losses for HELOCs as one of our six primary, segregated product types and considers the potential impact of the junior security position (as opposed to our generally senior position in all other product types) in setting final allocated reserve amounts for this product. Our allowance reflects the performance and loss history of our portfolio.

In our evaluation of the quantitatively-determined range and the adequacy of the allowance at March 31, 2015, we considered a number of factors for each product that included, but were not limited to, the following:

• for the commercial portfolio product type, the pace of growth in the commercial loan sector, portfolio credit performance, impact of competition on loan structures, the existence of larger individual credits and specialized industry concentrations, sensitivity of leveraged lending on our overall portfolio performance, comparison of our default rates to overall U.S. industry averages at industry subsets, default emergence in recent years compared to historical stressed periods, the loss emergence period, results of "back testing" of model results versus actual recent charge-off history, recent rating migrations into problem loan categories and other portfolio trends, as well as general macroeconomic indicators, such as GDP, employment trends and manufacturing activity;

• for the commercial real estate portfolio product type, the potential impact of general commercial real estate trends, particularly occupancy and leasing rate trends, charge-off severity, nonperforming loan inflows, default likelihood in our book versus the general U.S. averages, loss emergence period, default emergence from recent years compared to historical stressed periods, results of "back testing" of model results versus recent charge-off history, collateral value changes in commercial real estate, less stringent underwriting standards in the marketplace leading to more competitive credit structures, and the impact that a negative general macroeconomic condition could have on this sector;

• for the construction portfolio product type, construction employment, industry experience on construction loan losses, loss emergence period, construction spending rates, less stringent underwriting standards in the marketplace leading to more competitive credit structures, and improved valuation basis of the recent growth in the portfolio; and

• for the residential, home equity, and personal portfolio product types, home price indices and delinquency rates, portfolio trends and borrowers' credit strength, loss emergence period, and general economic conditions and interest rate trends which impact these products.

In determining our reserve levels at March 31, 2015, we established a general reserve that includes management's qualitative assessment, which increased the reserve to a slightly higher output than our model's quantitative output range, in total. This judgment was influenced primarily by recent indicators in our transformational commercial portfolio which have not yet been fully incorporated into the model output, specifically, (i) volatility of risk rating migration levels into special mention and potential problem loan categories not fully reflected in the model, (ii) the impact of competition on loan structures, and (iii) performance of, and growth in leveraged lending transactions. In our transformational commercial real estate portfolio, this judgment was influenced by (i) competition in the marketplace leading to competitive credit structures for certain transactions and (ii) a modest increase in property types with a historically higher risk profile. A reduction in the management qualitative reserve in our transformational home equity portfolio was driven by (i) stronger underlying borrower performance within the portfolio, (ii) a relatively mixed collateral distribution of senior and junior lien debt, (iii) the portfolio’s relative concentration in more recent loan vintages at lower valuation basis and (iv) stronger underwriting standards.

Management also considers the amount and characteristics of the accruing TDRs removed from the general reserve formulas as a proxy for potentially heightened risk in the portfolio when establishing final reserve requirements.

The establishment of the allowance for loan losses involves a high degree of judgment and includes an inherent level of imprecision given the difficulty of identifying all the factors impacting loan repayment and the timing of when losses will actually occur. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond our control, including, but not limited to, client performance, the economy, changes in interest rates and property values, and the interpretation by regulatory authorities of loan classifications.

Although we determine the amount of each element of the allowance separately and consider this process to be an important credit management tool, the entire allowance for loan losses is available for the entire loan portfolio.

Management evaluates the adequacy of the allowance for loan losses and reviews the underlying methodology with the Audit Committee of the Board of Directors quarterly. As of March 31, 2015, management concluded the allowance for loan losses was adequate (i.e., sufficient to absorb losses that are inherent in the portfolio at that date, including for those loans where the loss is not yet identifiable).

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As an integral part of their examination process, various federal and state regulatory agencies also review the allowance for loan losses. These agencies may require that certain loan balances be classified differently or charged off when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination.

The accounting policies underlying the establishment and maintenance of the allowance for loan losses through provisions charged to operating expense are discussed more fully in Note 1 of "Notes to Consolidated Financial Statements" of our Annual Report on Form 10-K for our fiscal year ended December 31, 2014.

The following table presents changes in the allowance for loan losses, excluding covered assets, for the periods presented.

Table 15

Allowance for Loan Losses and Summary of Loan Loss Experience

(Dollars in thousands)

	Quarter Ended
	2015			2014
	March 31			December 31			September 30			June 30			March 31
Change in allowance for loan losses:
Balance at beginning of period	$	152,498		$	150,135		$	146,491		$	146,768		$	143,109
Loans charged-off:
Commercial	(2,202		)	(1,732		)	(227		)	(2,142		)	(1,487		)
Commercial real estate	(887		)	(417		)	(1,133		)	(2,082		)	(2,582		)
Construction	—			1			(7		)	—			—
Residential real estate	(37		)	(847		)	(252		)	(180		)	(235		)
Home equity	(371		)	(130		)	(172		)	(268		)	(447		)
Personal	(10		)	(7		)	(8		)	(13		)	(130		)
Total charge-offs	(3,507		)	(3,132		)	(1,799		)	(4,685		)	(4,881		)
Recoveries on loans previously charged-off:
Commercial	511			720			1,145			813			3,662
Commercial real estate	598			270			356			1,360			688
Construction	19			57			6			9			7
Residential real estate	57			231			9			135			300
Home equity	70			73			67			60			28
Personal	873			167			128			20			406
Total recoveries	2,128			1,518			1,711			2,397			5,091
Net (charge-offs) recoveries	(1,379		)	(1,614		)	(88		)	(2,288		)	210
Provisions charged to operating expense	5,491			3,977			3,732			2,011			3,449
Balance at end of period	$	156,610		$	152,498		$	150,135		$	146,491		$	146,768
Allowance as a percent of loans at period end	1.29		%	1.28		%	1.30		%	1.32		%	1.34		%
Average loans, excluding covered assets	$	12,049,687		$	11,750,702		$	11,329,823		$	11,019,782		$	10,686,513
Ratio of net charge-offs (recoveries) (annualized) to average loans outstanding for the period	0.05		%	0.05		%	*			0.08		%	-0.01		%
Allowance for loan losses as a percent of nonperforming loans	221		%	226		%	204		%	191		%	156		%

*    Less than 0.01%

Gross charge-offs declined28% to $3.5 million for the first quarter 2015 from $4.9 million for the year ago period and increased 12% from $3.1 million for fourth quarter 2014. Commercial loans comprised 63% of total charge-offs, while commercial real estate loans comprised 25% of total charge-offs in the first quarter 2015.

The allowance for loan losses increased $4.1 million to $156.6 million at March 31, 2015 from $152.5 million at December 31, 2014. The change in allowance levels was largely impacted by $278.3 million in loan growth, changes in the composition of the

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loan portfolio, changes in the quantitative component of the allowance factors and a $24.7 million increase in problem loan categories. The provision for loan losses for the quarter was $5.5 million, compared to $4.0 million for the prior quarter and $3.4 million for first quarter 2014. The prior year first quarter provision was aided by larger than average recoveries totaling $5.1 million, compared to $2.1 million in the current quarter. The provision for loan losses may fluctuate quarter to quarter depending on the level of loan growth and unevenness in credit quality due to size of individual credits. The allowance for loan losses to total loans ratio was 1.29% at March 31, 2015 and 1.28% at December 31, 2014.

The following table presents our allocation of the allowance for loan losses by loan category at the dates shown.

Table 16

Allocation of Allowance for Loan Losses

(Dollars in thousands)

	March 31, 2015		% of Total		December 31, 2014		% of Total
Commercial	$	108,873	70		$	103,462	68
Commercial real estate	31,606		20		31,838		21
Construction	4,026		3		4,290		3
Residential real estate	5,223		3		5,316		3
Home equity	4,588		3		4,924		3
Personal	2,294		1		2,668		2
Total	$	156,610	100	%	$	152,498	100	%
Specific reserve	$	15,636	10	%	$	16,627	11	%
General allocated reserve	$	140,974	90	%	$	135,871	89	%
Recorded Investment in Loans:
Ending balance, specific reserve	$	93,386			$	90,289
Ending balance, general allocated reserve	12,077,098				11,801,930
Total loans at period end	$	12,170,484			$	11,892,219

Under our methodology, the allowance for loan losses is comprised of the following components:

General Allocated Component of the Allowance

The general allocated component of the allowance increased by $5.1 million, or 4%, from $135.9 million at December 31, 2014 to $141.0 million at March 31, 2015. The increase in the general allocated reserve was primarily influenced by the increased reserve needs to reflect the growing loan portfolio and changes in the credit quality of the existing portfolio for certain segments. In addition, we had a slight increase in the quantitative model factors that were driven by lengthening of the loss emergence period in the commercial real estate portfolio, an increase in the model loss rate in the commercial and industrial portfolio, offset by a reduction in the qualitative reserve in the home equity portfolio and decrease in loss emergence period in the commercial loan portfolio.

Specific Component of the Allowance

The specific reserve requirements are the summation of individual reserves related to impaired loans that are analyzed on an account by account basis at the balance sheet date. Once a loan is determined to be impaired, the amount of impairment is measured based on the loan's observable fair value; fair value of the underlying collateral less estimated selling costs, if the loan is collateral-dependent; or the present value of expected cash flows discounted at the loan's effective interest rate. At March 31, 2015, the specific component of the allowance totaled $15.6 million, down from $16.6 million at December 31, 2014 with the decrease being largely driven by a release of specific reserve established for an individual problem credit resolved in the first quarter of 2015. At March 31, 2015, impaired loans totaled $93.4 million, of which 91% are collateral-dependent. Of the $93.4 million in impaired loans at March 31, 2015 and $90.3 million in impaired loans at December 31, 2014, 56% required a specific reserve at both March 31, 2015 and December 31, 2014.

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Reserve for Unfunded Commitments

In addition to the allowance for loan losses, we maintain a reserve for unfunded commitments at a level we believe to be sufficient to absorb estimated probable losses related to unfunded credit facilities. During the quarter ended March 31, 2015, our reserve for unfunded commitments increased $376,000 from $12.3 million at December 31, 2014 to $12.7 million and consisted of $12.6 million in general reserve and $79,000 in specific reserves at March 31, 2015. For the quarter ended March 31, 2015, general reserves increased $1.2 million driven by higher unfunded commitment levels and an increase in the likelihood of certain product categories to draw on unused lines and loss factors. This was partially offset by a release in the specific reserve of $815,000, mainly attributable to an individual credit. Net adjustments to the reserve for unfunded commitments are included in other non-interest expense in the Consolidated Statements of Income. Unfunded commitments, excluding covered assets, totaled $6.2 billion and $6.0 billion at March 31, 2015 and December 31, 2014, respectively. At March 31, 2015, unfunded commitments with maturities of less than one year approximated $2.1 billion. For further information on our unfunded commitments, refer to Note 14 of "Notes to Consolidated Financial Statements" in Item 1 of this Form 10-Q.

COVERED ASSETS

At March 31, 2015 and December 31, 2014, covered assets represent acquired residential mortgage loans and foreclosed loan collateral covered under a loss sharing agreement with the FDIC and include an indemnification receivable representing the present value of the expected reimbursement from the FDIC related to expected losses on the acquired loans and foreclosed real estate under such agreement. The loss share agreement will expire on September 30, 2019.

Total covered assets, net of allowance for covered loan losses, declined by $2.8 million, or 10%, from $28.9 million at December 31, 2014 to $26.2 million at March 31, 2015. The reduction was primarily attributable to $2.7 million in principal paydowns, net of advances, as well as the impact of such on the evaluation of expected cash flows and discount accretion levels. In addition, the estimated loss reimbursements by the FDIC further contributed to the reduction as a result of loss claims paid by the FDIC and amortization of the receivable. At March 31, 2015, the indemnification receivable totaled $2.0 million, compared to $1.8 million at December 31, 2014. Because the remaining covered assets largely represent single-family mortgages, we do not expect a significant change in balances from period to period. Total delinquent and nonperforming covered loans totals $7.5 million at March 31, 2015 and $7.0 million at December 31, 2014.

FUNDING AND LIQUIDITY MANAGEMENT

We manage our liquidity position in order to meet our cash flow requirements and maintain sufficient capacity to meet our clients’ needs and accommodate fluctuations in asset and liability levels due to changes in our business operations. We also have contingency funding plans designed to allow us to operate through a period of stress when access to normal sources of funding may be constrained. As part of our asset/liability management strategy, we utilize a variety of funding sources in an effort to optimize the balance of duration risk, cost, liquidity risk and contingency planning.

We maintain liquidity at levels we believe sufficient to meet anticipated client liquidity needs, fund anticipated loan growth, and selectively purchase securities and investments. Liquid assets refer to cash on hand, Federal funds sold and securities. Net liquid assets represent the sum of the liquid asset categories less the amount of such assets pledged to secure deposits that require collateral and to satisfy contractual obligations. In managing our levels of cash on-hand, we take into consideration our deposit concentration risk, client deposit movements, the level of unfunded commitments and additional factors. These factors and other considerations impact our deployment and level of liquidity. Net liquid assets at the Bank were $3.3 billion and $2.7 billion at March 31, 2015 and December 31, 2014, respectively.

The Bank’s principal sources of funds are commercial and retail deposits, including large institutional deposits and brokered deposits. We first look toward internally generated deposits as our funding source for loan and asset growth. We also utilize FHLB borrowings and other wholesale funding, including traditional brokered time deposits, as needed to enhance liquidity and to fund asset growth. Cash from operations is also a source of funds. The Bank’s principal uses of funds include funding growth in the core asset portfolios, including loans, and to a lesser extent, our investment portfolio, which is used primarily to manage liquidity risk and interest rate risk.

The primary sources of funding for the Holding Company include dividends when received from the Bank, intercompany tax reimbursements from the Bank, and proceeds from the issuance of senior and subordinated debt, as well as equity. As an additional source of working capital, the Holding Company has a 364-day revolving line of credit with a group of commercial banks allowing borrowings of up to $60.0 million in total. As of March 31, 2015, no amounts have been drawn on the facility. Net liquid assets at the Holding Company totaled $54.5 million at March 31, 2015, and $60.6 million at December 31, 2014.

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Our cash flows are comprised of three classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Cash flows from operating activities primarily include results of operations for the period, adjusted for items in net income that did not impact cash. Net cash provided by operating activities increased by $58.3 million from the prior year period to $108.9 million for the quarter ended March 31, 2015. Cash flows from investing activities reflect the impact of loans and investments acquired for our interest-earning asset portfolios and asset maturities and sales. For the quarter ended March 31, 2015, net cash used in investing activities was $293.8 million, compared to $337.0 million for the prior year period. Cash flows from financing activities include transactions and events whereby cash is obtained from and/or paid to depositors, creditors or investors. Net cash provided by financing activities for the quarter ended March 31, 2015 was $718.8 million, compared to $197.5 million for the prior year period. The current period financing cash flows primarily represents a net increase of $889.5 million in deposits driven by large quarter-end inflows.

Deposits

Our deposit base is predominately comprised of middle market commercial client relationships from a diversified industry base. Through our community banking and private wealth groups, we offer a variety of small business and personal banking products, including checking, savings and money market accounts and CDs, which are a source of stable core deposits. Approximately 26% of our deposits at March 31, 2015 were accounts served in our community banking and private wealth groups.

The following table provides a comparison of deposits by category for the periods presented.

Table 17

Deposits⁽¹⁾ 

(Dollars in thousands)

	March 31, 2015		% of Total	December 31, 2014		% of Total	% Change in Balances
Noninterest-bearing demand deposits	$	3,936,181	28	$	3,516,695	27	12
Interest-bearing demand deposits	1,498,810		11	1,907,320		15	-21
Savings deposits	331,796		2	319,100		2	4
Money market accounts	5,824,535		41	4,851,925		37	20
Time deposits	2,510,406		18	2,494,928		19	1
Total deposits	$	14,101,728	100	$	13,089,968	100	8

⁽¹⁾  Excludes deposits held-for-sale of $122.2 million as of December 31, 2014.

Deposit balances fluctuate as a result of client business and liquidity needs (which are in part cyclical), market and economic conditions, and the pricing and types of deposit products offered by the Bank. We have experienced significant deposit volatility from time to time due to large deposit movements in certain client accounts, such as in connection with client-specific corporate acquisitions and divestitures. Total deposits at March 31, 2015increased$1.0 billion to $14.1 billion from year end 2014. As anticipated, as of the date of this report, a meaningful portion has been subsequently redeployed by clients during the second quarter of 2015. Although we expect overall liquidity in the banking system to remain high while the economy continues to recover and market factors continue to improve, if commercial deposit balances decline, we would expect to increase reliance on other sources of liquidity, including wholesale funding such as FHLB borrowings, securities sold under agreements to repurchase and traditional brokered time deposits. Based on March 31, 2015 balances, the loan to deposit ratio was 86% at March 31, 2015 compared to 91% at December 31, 2014, with the first quarter 2015 deposit activity impacting the ratio. The Bank continues to rely on alternative funding sources to supplement deposit funding as our five-quarter trailing average loan growth continues to outpace average deposit growth for the same period. Total average deposit growth for the current quarter was $210.0 million.

Public fund balances, denoting the funds held on account for municipalities and other public entities, are included as a part of our total deposits. We enter into specific agreements with certain public clients to pledge collateral, primarily securities, in support of their balances on deposit. At March 31, 2015, we had public funds on deposit totaling $872.5 million. Changes in balances are influenced by the tax collection activities of the various municipalities as well as the general level of interest rates.

Given the commercial focus of our business, we offer a suite of deposit and cash management products and services that support our efforts to attract and retain commercial clients. These deposits are generated principally through the development of long-term relationships with clients. As a result, a significant portion of our funding base is comprised of large, noninterest-bearing and

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interest-bearing demand deposits. The following table presents a comparison of our large deposit relationships as of the dates shown. Of our large deposit relationships shown in the table below, approximately half of the deposits are financial-services related businesses.

Table 18

Large Deposit Relationships

(Dollars in thousands)

	2015			2014
	March 31			December 31			March 31
Ten largest depositors:
Deposit amounts	$	2,143,127		$	2,225,641		$	2,044,767
Percentage of total deposits	15		%	17		%	17		%
Classified as brokered deposits	$	1,397,689		$	1,442,195		$	1,319,328
$75 Million or More:
Deposit amounts	$	3,574,028		$	3,285,598		$	2,543,347
Percentage of total deposits	25		%	25		%	21		%
Number of deposit relationships	25			22			16
Classified as brokered deposits	$	2,011,517		$	1,936,653		$	1,571,184
Financial services-related business greater than $75 million to total deposits	13		%	14		%	16		%

Brokered Deposits

Table 19

Brokered Deposit Composition

(Dollars in thousands)

	2015			2014
	March 31			December 31			March 31
Noninterest-bearing demand deposits	$	264,493		$	107,564		$	87,388
Interest-bearing demand deposits	323,094			641,466			426,125
Money market accounts	1,891,590			1,448,663			1,391,114
Time deposits:
Traditional	673,944			564,116			458,344
CDARS (1)	458,192			521,995			639,521
Other	87,732			82,714			112,668
Total time deposits	1,219,868			1,168,825			1,210,533
Total brokered deposits	$	3,699,045		$	3,366,518		$	3,115,160
Brokered deposits as a % of total deposits	26		%	26		%	26		%

Note: Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

⁽¹⁾  The CDARS^® deposit program is a deposit services arrangement that effectively achieves FDIC deposit insurance for jumbo deposit relationships.

The regulatory definition of brokered deposits is very broad and generally includes any non-proprietary funds deposited, or referred for deposit, by a third party. Our brokered deposits are maintained across various account types including demand deposit, money market and time. Certain deposits generated through the efforts of our commercial banking relationship managers, which we believe to be a stable cost-effective source of funding, consist of funds of the depositors' clients, and as such, are classified for regulatory reporting purposes as brokered. From a liquidity risk management perspective, however, we view these brokered deposits as different from traditional brokered time deposits which are generated when we pay fees to a third party in return for

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sourcing time deposits for us. We have used traditional brokered time deposits as a source of longer-term funding in our funding mix and to complement our internally generated deposits.

Total brokered deposits, as defined for regulatory reporting purposes, represented 26% of total deposits at both March 31, 2015 and December 31, 2014. Traditional brokered time deposits represented 5% of total deposits at March 31, 2015 and 4% at December 31, 2014.

In connection with our liquidity risk management program, we consider characteristics other than regulatory classification when assessing the stability and overall value of deposits to the Bank. Those other characteristics may include pricing, duration, and relationship with the depositor.

At March 31, 2015, approximately 44% of our total brokered deposits were from cash sweep programs, which have historically been a stable source of liquidity for us. Cash sweep program deposits come from the Bank’s relationships with securities broker dealers (“BDs”). From time to time, the BDs’ clients may have cash in their accounts with the BDs pending re-investment in other securities or for liquidity needs. Pursuant to the cash sweep programs, the BDs allow their clients to elect to sweep cash into an omnibus bank deposit account established by the BD as agent or custodian for the benefit of its clients. Unlike traditional brokered time deposits, the cash sweep program deposits are generally maintained in money market accounts and may be eligible for FDIC pass-through insurance. The cash sweep program deposits are subject to contracts between the Bank and the BDs that establish terms of the deposits such as price and duration. These deposits have historically been a stable source of liquidity and totaled $1.6 billion at March 31, 2015 and $1.7 billion at December 31, 2014. Approximately 58% of the cash sweep program deposit balances at March 31, 2015 is from BDs who have had a deposit relationship with the Bank for more than 4 years, and $1.6 billion of the total cash sweeps at March 31, 2015 are included in the greater than or equal to $75.0 million large depositor balance presented in Table 18, Large Deposit Relationships, above.

The following table presents our time and brokered time deposits as of March 31, 2015, with scheduled maturity dates during the period specified.

Table 20

Scheduled Maturities of Time Deposits

(Amounts in thousands)

	Total
Year Ended December 31, 2015:
Second quarter	$	516,608
Third quarter	613,060
Fourth quarter	403,351
2016	445,753
2017	168,320
2018	146,588
2019	89,996
2020 and thereafter	126,730
Total	$	2,510,406

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The following table presents our time and brokered time deposits of $100,000 or more as of March 31, 2015, which are expected to mature during the period specified.

Table 21

Maturities of Time Deposits of $100,000 or More

(Amounts in thousands)

	March 31, 2015
Maturing within 3 months	$	458,110
After 3 but within 6 months	532,775
After 6 but within 12 months	508,032
After 12 months	722,392
Total	$	2,221,309

Over the past several years in the generally low interest rate environment, our clients have tended to keep the maturities of their deposits short, and short-term certificates of deposit have generally been renewed on terms and with maturities of similar duration. In the event that time deposits are not renewed, we expect to replace those deposits with brokered time deposits or borrowed money sufficient to meet our funding needs.

Short-term and Secured Borrowings and Long-term Debt

Short-term borrowings at March 31, 2015 totaled $253.0 million, down$175.0 million from the $428.0 million at December 31, 2014. Short-term borrowings represent borrowings that mature in one year or less and consisted primarily of FHLB advances at March 31, 2015 and December 31, 2014. We may use FHLB advances to meet our funding needs, although we may choose to use brokered time deposits as an alternative depending on cost and certain other factors. The current period decrease reflected the maturity of a single FHLB advance and growth in deposits.

Also included in short-term and secured borrowings on the Consolidated Statements of Financial Condition are amounts related to certain loan participation agreements on loans we originated that were classified as secured borrowings because they did not qualify for sale accounting treatment. As of March 31, 2015 and December 31, 2014, these loan participation agreements totaled $5.8 million and $4.4 million, respectively. A corresponding amount was recorded within loans on the Consolidated Statements of Financial Condition at each of these dates.

Long-term debt, which is comprised of junior subordinated debentures, subordinated debt, and the long-term portion of FHLB advances, totaled $344.8 million at March 31, 2015 and December 31, 2014. The earliest scheduled maturity of long-term debt is $2 million of FHLB advances due in March 2019.

In addition to on-balance sheet funding and other liquid assets, such as cash and investment securities, we maintain access to various external sources of funding, which assist in the prudent management of funding costs, interest rate risk, and anticipated funding needs or other considerations. Some sources of funding are accessible same-day, while others require advance notice. Funds that are immediately accessible include Federal fund counterparty lines, which are uncommitted lines of credit from other financial institutions, and the borrowing term is typically overnight. Availability of Federal fund lines fluctuates based on market conditions and counterparty relationship strength. Unused overnight Federal funds available totaled $630.5 million at March 31, 2015 and December 31, 2014.

We had borrowing capacity of $848.1 million with the FHLB Chicago at March 31, 2015, of which $552.7 million was available, subject to making the required additional investment in FHLB Chicago stock. The borrowing capacity is subject to change based on the availability of acceptable collateral to pledge (such as loans and securities) and the level of our investment in FHLB Chicago stock. This borrowing source may be utilized by the Bank for short-term funding needs, including overnight advances, as well as long-term funding needs.

Repurchase agreements ("Repos") are also an immediate source of funding in which we pledge assets to a counterparty against which we can borrow with the agreement to repurchase at a specified date in the future. Repos can vary in term, from overnight to longer, but are regarded as short-term in nature.

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The discount window at the Federal Reserve Bank ("FRB") is an additional source of overnight funding. We maintain access to the discount window by pledging loans as collateral to the FRB. Funding availability is primarily dictated by the amount of loans pledged, but also impacted by the advance rate applied to the loans by the FRB. The amount of loans pledged to the FRB can fluctuate due to the availability of loans eligible under the FRB’s criteria which include stipulations of documentation requirements, credit quality, payment status and other criteria. We also pledge securities to the FRB supplement discount window capacity. At March 31, 2015, we had $392.8 million in borrowing capacity through the FRB discount window’s primary credit program compared to $403.8 million at December 31, 2014. We had no borrowings outstanding as of March 31, 2015.

CAPITAL

Equity totaled $1.5 billion at March 31, 2015, increasing by $57.8 million compared to December 31, 2014, and is primarily due to net income for the quarter ended March 31, 2015 of $41.5 million, along with a $8.6 millionincrease in accumulated other comprehensive income, net of tax, which is mainly associated with an increase in market values on our available-for-sale investment portfolio.

Stock Repurchases and Shares Issued in Connection with Share-Based Compensation Plans

We currently do not have a stock repurchase program in place; however, we have repurchased shares in connection with the administration of our employee benefit plans. Under the terms of these plans, we accept shares of common stock from plan participants if they elect to surrender previously-owned shares upon exercise of options to cover the exercise price or, in the case of both restricted shares of common stock or stock options, the withholding of shares to satisfy tax withholding obligations associated with the vesting of restricted shares or exercise of stock options. During the first quarter 2015, we repurchased 168,310 shares with an average value of $34.73 per share.

We reissue treasury stock, when available, or new shares to fulfill its obligation to issue shares granted pursuant to the share-based compensation plans. Treasury shares are reissued at average cost. We held 160,193 shares of voting common stock as treasury stock at March 31, 2015 and 1,704 shares at December 31, 2014.

Dividends

We declared dividends of $0.01 per common share during the first quarter 2015, unchanged from first quarter 2014. Based on our closing stock price on March 31, 2015 of $35.17 per share, the annualized dividend yield on our common stock was 0.11%. The dividend payout ratio, which represents the percentage of common dividends declared to stockholders to basic earnings per share, was 1.89% for the first quarter 2015 compared to 2.27% for the first quarter 2014. While we have no current plans to raise the amount of the dividends currently paid on our common stock, our Board of Directors periodically evaluates our dividend payout ratio, taking into consideration internal capital guidelines, and our strategic objectives and business plans.

For additional information regarding limitations and restrictions on our ability to pay dividends, refer to the "Supervision and Regulation" and "Risk Factors" sections of our 2014 Annual Report on Form 10-K.

Capital Management

Under applicable regulatory capital adequacy guidelines, the Company and the Bank are subject to various capital requirements adopted and administered by the federal banking agencies. These guidelines specify minimum capital ratios calculated in accordance with the definitions in the guidelines, including the leverage ratio which is Tier 1 capital as a percentage of adjusted average assets, and the Tier 1 capital ratio, common equity Tier 1 ratio and the total capital ratio each as a percentage of risk-weighted assets and off-balance sheet items that have been weighted according to broad risk categories. These minimum ratios are shown in the table below.

To satisfy safety and soundness standards, banking institutions are expected to maintain capital levels in excess of the regulatory minimums depending on the risk inherent in the balance sheet, regulatory expectations and the changing risk profile of business activities. Under our capital management policy, we conduct periodic stress testing of our capital adequacy and target capital ratios at levels above regulatory minimums that we believe are appropriate based on various other risk considerations, including the current operating and economic environment and outlook, internal risk guidelines, and our strategic objectives as well as regulatory expectations.

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Table 22

Capital Measurements

(Dollars in thousands)

	Actual (1)				FRB Guidelines For Minimum Regulatory Capital				Regulatory Minimum For "Well-Capitalized" under FDICIA
	March 31, 2015		December 31, 2014		Ratio		Excess Over Regulatory Minimum at 3/31/15		Ratio		Excess Over "Well Capitalized" under FDICIA at 3/31/15
Regulatory capital ratios:
Total risk-based capital:
Consolidated	12.29	%	12.51	%	8.00	%	$	659,786	n/a		n/a
The PrivateBank	11.79		11.95		n/a		n/a		10.00	%	$	274,640
Tier 1 risk-based capital:
Consolidated	10.34		10.49		6.00	%	667,406		n/a		n/a
The PrivateBank	10.65		10.79		n/a		n/a		8.00	%	406,788
Tier 1 leverage:
Consolidated	10.16		9.96		4.00	%	964,586		n/a		n/a
The PrivateBank	10.47		10.24		n/a		n/a		5.00	%	854,815
Common equity Tier 1 (2):
Consolidated	9.23		9.33		4.50	%	728,544		n/a		n/a
The PrivateBank	10.65		10.79		n/a		n/a		6.50	%	637,359
Other capital ratios (consolidated)(3):
Tangible common equity to tangible assets	8.86		8.91

⁽¹⁾  Computed in accordance with the applicable regulations of the FRB in effect as of the respective reporting periods.

⁽²⁾  Effective January 1, 2015, the common equity Tier 1 ratio is a required regulatory capital measure and as presented for the 2015 period is calculated in accordance with the new Basel III capital rules. For periods prior to January 1, 2015, this ratio was considered a non-U.S. GAAP financial measure and was calculated without giving effect to the final Basel III capital rules. Refer to Table 23, "Non-U.S. GAAP Financial Measures" for a reconciliation from non-U.S. GAAP to U.S. GAAP for periods prior to 2015.

⁽³⁾  Ratio is not subject to formal FRB regulatory guidance and is a non-U.S. GAAP financial measure. Refer to Table 23, "Non-U.S. GAAP Financial Measures" for a reconciliation from non-U.S. GAAP to U.S. GAAP presentation.

n/a    Not applicable.

As disclosed in our 2014 Annual Report on Form 10-K, in July 2013, the FRB and the FDIC issued final rules implementing the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act changes. The rules revise minimum capital requirements and adjust prompt corrective action thresholds. The final rules revise the regulatory capital elements, add a new common equity Tier 1 ratio, increase the minimum Tier 1 capital ratio requirements and implement a new capital conservation buffer. The rules also permit certain banking organizations to retain, through a one-time election, the existing treatment of excluding accumulated other comprehensive income. The Company and the Bank have made the election to retain the existing treatment for accumulated other comprehensive income. The final rules took effect for the Company and the Bank on January 1, 2015, subject to a transition period for certain parts of the rules.

The table above includes the new regulatory capital ratio requirements that became effective on January 1, 2015. Beginning in 2016, an additional capital conservation buffer will be added to the minimum requirements for capital adequacy purposes, subject to a three year phase-in period. The capital conservation buffer will be fully phased-in on January 1, 2019 at 2.5 percent. A banking organization with a conservation buffer of less than 2.5 percent (or the required phase-in amount in years prior to 2019) will be subject to limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. At the present time, the ratios for the Company and the Bank are sufficient to meet the fully phased-in conservation buffer.

As of March 31, 2015, all of our $169.8 million of outstanding junior subordinated debentures held by trusts that issued trust preferred securities, which as a percentage of Tier 1 capital was 11%, are included in Tier 1 capital. The Tier 1 qualifying amount is limited to 25% of Tier 1 capital as defined under FRB regulations. Under the final regulatory capital rules issued in 2013, the

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Tier 1 capital treatment of our trust preferred securities will be grandfathered, subject to the 25% limitation of Tier 1 capital. In the event we make certain acquisitions, the Tier 1 capital treatment for these instruments will be subject to the phase-out schedule for bank holding companies with greater than $15 billion in total assets. All of our outstanding trust preferred securities are callable by us and we will continue to evaluate market conditions and other factors in making a redemption determination on the remaining outstanding instruments. Any such redemption would require regulatory approval.

For a full description of our junior subordinated debentures and subordinated debt, refer to Notes 8 and 9 of "Notes to Consolidated Financial Statements" in Item 1 of this Form 10-Q.

NON-U.S. GAAP FINANCIAL MEASURES

This report contains both U.S. GAAP and non-U.S. GAAP based financial measures. These non-U.S. GAAP financial measures include net interest income, net interest margin, net revenue, operating profit, and efficiency ratio all on a fully taxable-equivalent basis, return on average tangible common equity, tangible common equity to risk-weighted assets, tangible common equity to tangible assets, and tangible book value. We believe that presenting these non-U.S. GAAP financial measures will provide information useful to investors in understanding our underlying operational performance, our business, and performance trends and facilitates comparisons with the performance of others in the banking industry.

We use net interest income on a taxable-equivalent basis in calculating various performance measures by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments assuming a 35% tax rate. Management believes this measure to be the preferred industry measurement of net interest income as it enhances comparability to net interest income arising from taxable and tax-exempt sources, and accordingly believes that providing this measure may be useful for peer comparison purposes.

In addition to capital ratios defined by banking regulators, we also consider various measures when evaluating capital utilization and adequacy, including return on average tangible common equity, tangible common equity to risk-weighted assets, tangible common equity to tangible assets, and tangible book value. These calculations are intended to complement the capital ratios defined by banking regulators for both absolute and comparative purposes. All of these measures exclude the ending balances of goodwill and other intangibles while certain of these ratios exclude preferred capital components. Because U.S. GAAP does not include capital ratio measures, we believe there are no comparable U.S. GAAP financial measures to these ratios. We believe these non-U.S. GAAP financial measures are relevant because they provide information that is helpful in assessing the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of our capitalization to other similar companies. However, because there are no standardized definitions for these ratios, our calculations may not be comparable with other companies. For the periods prior to January 1, 2015, the common equity Tier 1 ratio contained herein is calculated without giving effect to the final Basel III capital rules.

Non-U.S. GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-U.S. GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation or as a substitute for analyses of results as reported under U.S. GAAP. As a result, we encourage readers to consider our Consolidated Financial Statements in their entirety and not to rely on any single financial measure.

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The following table reconciles non-U.S. GAAP financial measures to U.S. GAAP.

Table 23

Non-U.S. GAAP Financial Measures

(Dollars in thousands)

(Unaudited)

	Quarter Ended
	2015			2014
	March 31			December 31			September 30			June 30			March 31
Taxable-equivalent net interest income
U.S. GAAP net interest income	$	121,993		$	116,876		$	116,758		$	112,351		$	108,752
Taxable-equivalent adjustment	944			878			811			744			800
Taxable-equivalent net interest income (a)	$	122,937		$	117,754		$	117,569		$	113,095		$	109,552
Average Earning Assets(b)	$	15,293,533		$	15,022,425		$	14,283,920		$	13,936,754		$	13,564,530
Net Interest Margin((a)annualized) / (b)	3.21		%	3.07		%	3.23		%	3.21		%	3.23		%
Net Revenue
Taxable-equivalent net interest income	$	122,937		$	117,754		$	117,569		$	113,095		$	109,552
U.S. GAAP non-interest income	33,516			30,426			30,669			30,259			26,236
Net revenue (c)	$	156,453		$	148,180		$	148,238		$	143,354		$	135,788
Operating Profit
U.S. GAAP income before income taxes	$	66,718		$	60,157		$	65,701		$	66,818		$	55,531
Provision for loan and covered loan losses	5,646			4,120			3,890			327			3,707
Taxable-equivalent adjustment	944			878			811			744			800
Operating profit	$	73,308		$	65,155		$	70,402		$	67,889		$	60,038
Efficiency Ratio
U.S. GAAP non-interest expense (d)	$	83,145		$	83,025		$	77,836		$	75,465		$	75,750
Net revenue	$	156,453		$	148,180		$	148,238		$	143,354		$	135,788
Efficiency ratio (d) / (c)	53.14		%	56.03		%	52.51		%	52.64		%	55.79		%
Adjusted Net Income
U.S. GAAP net income available to common stockholders	$	41,484		$	37,223		$	40,527		$	40,824		$	34,505
Amortization of intangibles, net of tax	397			449			458			458			458
Adjusted net income (e)	$	41,881		$	37,672		$	40,985		$	41,282		$	34,963
Average Tangible Common Equity
U.S. GAAP average total equity	$	1,522,401		$	1,472,111		$	1,426,273		$	1,378,581		$	1,335,413
Less: average goodwill	94,041			94,041			94,041			94,041			94,041
Less: average other intangibles	5,551			6,243			6,996			7,749			8,506
Average tangible common equity (f)	$	1,422,809		$	1,371,827		$	1,325,236		$	1,276,791		$	1,232,866
Return on average tangible common equity((e) annualized) / (f)	11.94		%	10.89		%	12.27		%	12.97		%	11.50		%

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Non-U.S. GAAP Financial Measures (Continued)

(Dollars in thousands)

(Unaudited)

				Quarter Ended
				2014
				December 31			September 30			June 30			March 31
Common Equity Tier 1
U.S. GAAP total equity				$	1,481,679		$	1,435,309		$	1,397,821		$	1,343,246
Trust preferred securities				169,788			244,793			244,793			244,793
Less: accumulated other comprehensive income, net of tax				20,917			16,236			23,406			13,147
Less: goodwill				94,041			94,041			94,041			94,041
Less: other intangibles				5,885			6,627			7,381			8,136
Less: disallowed servicing rights				44			42			32			32
Tier 1 risk-based capital				1,530,580			1,563,156			1,517,754			1,472,683
Less: trust preferred securities				169,788			244,793			244,793			244,793
Common equity Tier 1 (g)				$	1,360,792		$	1,318,363		$	1,272,961		$	1,227,890
	Quarter Ended
	2015			2014
	March 31			December 31			September 30			June 30			March 31
Tangible Common Equity
U.S. GAAP total equity	$	1,539,429		$	1,481,679		$	1,435,309		$	1,397,821		$	1,343,246
Less: goodwill	94,041			94,041			94,041			94,041			94,041
Less: other intangibles	5,230			5,885			6,627			7,381			8,136
Tangible common equity (h)	$	1,440,158		$	1,381,753		$	1,334,641		$	1,296,399		$	1,241,069
Tangible Assets
U.S. GAAP total assets	$	16,361,348		$	15,603,382		$	15,190,468		$	14,602,404		$	14,304,782
Less: goodwill	94,041			94,041			94,041			94,041			94,041
Less: other intangibles	5,230			5,885			6,627			7,381			8,136
Tangible assets (i)	$	16,262,077		$	15,503,456		$	15,089,800		$	14,500,982		$	14,202,605
Risk-weighted Assets(j)	$	15,395,081		$	14,592,655		$	14,053,735		$	13,506,797		$	13,160,955
Period-end Common Shares Outstanding (k)	78,494			78,178			78,121			78,069			78,049
Ratios:
Common equity Tier 1 ratio (g) / (j) (1)	—			9.33		%	9.38		%	9.42		%	9.33		%
Tangible common equity to risk-weighted assets (h) / (j)	9.35		%	9.47		%	9.50		%	9.60		%	9.43		%
Tangible common equity to tangible assets (h) / (i)	8.86		%	8.91		%	8.84		%	8.94		%	8.74		%
Tangible book value (h) / (k)	$	18.35		$	17.67		$	17.08		$	16.61		$	15.90

⁽¹⁾Effective January 1, 2015, the common equity Tier 1 ratio became a required regulatory capital measure and is calculated in accordance with the new capital rules. For the periods prior to January 1, 2015, this ratio is considered a Non-GAAP measure and was calculated without giving effect to the final Basel III capital rules.

ITEM 3. QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

As a continuing part of our asset/liability management, we attempt to manage the impact of fluctuations in market interest rates on our net interest income. This effort entails providing a reasonable balance between interest rate risk, credit risk, liquidity risk and maintenance of yield. We may manage interest rate risk by structuring the asset and liability characteristics of our balance

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sheet and/or by executing derivatives designated as cash flow hedges. We initiated the use of interest rate derivatives as part of our asset liability management strategy in July 2011 to hedge interest rate risk in our primarily floating-rate loan portfolio and, depending on market conditions, we may expand this program and enter into additional interest rate swaps.

Interest rate changes do not affect all categories of assets and liabilities equally or simultaneously. There are other factors that are difficult to measure and predict that would influence the effect of interest rate fluctuations on our Consolidated Statements of Income.

The majority of our interest-earning assets are floating-rate instruments. At March 31, 2015, approximately 79% of the total loan portfolio is indexed to LIBOR, 16% of the total loan portfolio is indexed to the prime rate, and another 1% of the total loan portfolio otherwise adjusts with other reference interest rates. Of the $8.6 billion in loans maturing after one year with a floating interest rate, $1.2 billion are subject to interest rate floors, of which 90% are in effect at March 31, 2015 and are reflected in the interest sensitivity analysis below. It is anticipated that as loans renew at maturity, it will be difficult to maintain existing floors given the competitive environment. To manage the interest rate risk of our balance sheet, we have the ability to use a combination of financial instruments, including medium-term and short-term financings, variable-rate debt instruments, fixed-rate loans and securities and interest rate swaps.

We use a simulation model to estimate the potential impact of various interest rate changes on our income statement and our interest-earning asset and interest-bearing liability portfolios. The starting point of the analysis is the current size and nature of these portfolios at the beginning of the measurement period as well as the then-current applicable pricing structures. During the twelve-month measurement period, the model will re-price assets and liabilities based on the contractual terms and market rates in effect at the beginning of the measurement period and assuming instantaneous parallel shifts in the applicable yield curves and instruments remain at that new interest rate through the end of the twelve-month measurement period. The model only analyzes changes in the portfolios based on assets and liabilities at the beginning of the measurement period and does not assume any growth over the following twelve months.

The sensitivity analysis is based on numerous assumptions including: the nature and timing of interest rate levels, the shape of the yield curve, prepayments on loans and securities, levels of excess deposits, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows and others. While our assumptions are developed based upon current economic and local market conditions, we cannot make any assurances as to the predictive nature of these assumptions including how client preferences or competitor influences might change. In addition, the simulation model assumes certain one-time instantaneous interest rate shifts that are consistent across all yield curves and do not continue to increase over the measurement period. As such, these assumptions and modeling reflect an estimation of the sensitivity to interest rates or market risk and do not predict the timing and direction of interest rates or the shape and steepness of the yield curves. Therefore, the actual results may differ materially from these simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies.

Modeling the sensitivity of net interest income to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process. These assumptions are periodically reviewed and updated in the context of various internal and external factors including balance sheet changes, product offerings, product mix, external micro- and macro-economic factors, anticipated client behavior and anticipated Company and market pricing behavior, all of which may occur in dynamic and non-linear fashion. During 2014 and 2015, we conducted historical deposit re-pricing and deposit lifespan/retention analyses and adjusted our forward-looking assumptions related to client and market behavior. Based on our analyses and judgments, we modified the core deposit product repricing characteristics and retention periods, as well as average life estimates, used in our interest rate risk modeling which reflects higher interest rate sensitivity of our deposits.

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Based on our current simulation modeling assumptions, the following table shows the estimated impact of an immediate change in interest rates as of March 31, 2015 and December 31, 2014.

Analysis of Net Interest Income Sensitivity

(Dollars in thousands)

	Immediate Change in Rates
	-50			+50			+100			+200			+300
March 31, 2015
Dollar change	$	(6,958	)	$	18,142		$	33,169		$	63,667		$	92,226
Percent change	-1.5		%	4.0		%	7.2		%	13.9		%	20.1		%
December 31, 2014
Dollar change	$	(6,216	)	$	16,199		$	30,586		$	60,158		$	88,083
Percent change	-1.4		%	3.6		%	6.7		%	13.2		%	19.4		%

The table above illustrates the estimated impact to our net interest income over a one-year period reflected in dollar terms and percentage change. As an example, if there had been an instantaneous parallel shift in the yield curve of +100 basis points on March 31, 2015, net interest income would increase by $33.2 million or 7.2% over a twelve-month period, as compared to a net interest income increase of $30.6 million, or 6.7%, if there had been an instantaneous parallel shift of +100 basis points at December 31, 2014. The increase in the overall interest rate asset sensitivity at March 31, 2015 compared to December 31, 2014, is primarily due to an increase in the interest rate sensitivity of our assets since year end. Rate sensitive assets, particularly loans indexed to short term rates, increased during the quarter ended March 31, 2015. The increase was funded by less rate sensitive liabilities, primarily deposits. Though modification of assumptions partially offset increases in sensitivity, overall asset sensitivity still increased during 2015 due to asset and liability compositional changes. Based on the modeling, the Company remains in an asset sensitive position and would benefit from a rise in interest rates. We will continue to periodically review and refine, as appropriate, the assumptions used in our interest rate risk modeling.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report (the "Evaluation Date"), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the "Exchange Act"). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. There were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2015, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In June 2013, we were served with a complaint naming the Bank as an additional defendant in a lawsuit pending in the Circuit Court of the 21st Judicial Circuit, Kankakee County, Illinois known as Maas vs. Marek et. al. The lawsuit, brought by the beneficiaries of two trusts for which the Bank is serving as the successor trustee, seeks reimbursement of penalties and interest assessed by the IRS due to the late payment of certain generation skipping taxes by the trusts, as well as certain related attorney fees and other damages. The other named defendants include legal and accounting professionals that provided services related to the matters involved. In January 2014, the Circuit Court denied the Bank’s motion to dismiss, and the matter is now in the discovery process. Although we are not able to predict the likelihood of an adverse outcome, we currently anticipate that ultimate resolution of this matter will not have a material adverse impact on our financial condition or results of operations.

As of March 31, 2015, there were various other legal proceedings pending against the Company and its subsidiaries in the ordinary course of business. Management does not believe that the outcome of these proceedings will have, individually or in the aggregate, a material adverse effect on the Company’s results of operations, financial condition or cash flows.

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ITEM 1A. RISK FACTORS

Before making a decision to invest in our securities, you should carefully consider the information discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for our fiscal year ended December 31, 2014, regarding our business, financial condition or future results. You should also consider information included in this report, including the information set forth in Part I, Item 2, "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Statement Regarding Forward-Looking Statements."

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table summarizes the Company's monthly common stock purchases during the quarter ended March 31, 2015, which are solely in connection with the administration of our employee share-based compensation plans. Under the terms of these plans, we accept shares of common stock from plan participants if they elect to surrender previously-owned shares upon exercise of options to cover the exercise price or, in the case of both restricted shares of common stock and stock options, the withholding of shares to satisfy tax withholding obligations associated with the vesting of restricted shares or exercise of stock options.

Issuer Purchases of Equity Securities

	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plan or Programs
January 1 - January 31, 2015	99	$	32.54	—	—
February 1 - February 28, 2015	176	31.93		—	—
March 1 - March 31, 2015	168,035	34.73		—	—
Total	168,310	$	34.73	—	—

Unregistered Sale of Equity Securities

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit Number	Description of Documents
3.1	Restated Certificate of Incorporation of PrivateBancorp, Inc., dated August 6, 2013 is incorporated herein by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q (File No. 001-34006) filed on August 7, 2013.
3.2	Amended and Restated By-laws of PrivateBancorp, Inc. are incorporated herein by reference to Exhibit 3.5 to the Annual Report on Form 10-K (File No. 001-34066) filed on March 1, 2010.
3.3	Amendment to Amended and Restated By-laws of PrivateBancorp, Inc., is incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-34066) filed on May 24, 2013.
4.1	Certain instruments defining the rights of the holders of certain securities of PrivateBancorp, Inc. and certain of its subsidiaries, none of which authorize a total amount of securities in excess of 10% of the total assets of PrivateBancorp, Inc. and its subsidiaries on a consolidated basis, have not been filed as exhibits. PrivateBancorp, Inc. hereby agrees to furnish a copy of any of these agreements to the Securities and Exchange Commission upon request.
4.2	Form of Preemptive and Registration Rights Agreement dated as of November 26, 2007 is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-34066) filed on November 27, 2007.
4.3	Amendment No. 1 to Preemptive and Registration Rights Agreement dated as of June 17, 2009 by and among PrivateBancorp, Inc., GTCR Fund IX/A, L.P., GTCR Fund IX/B, L.P., and GTCR Co-Invest III, L.P., is incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-34066) filed on June 19, 2009.
10.1 (a)	Form of Executive Officer Option Award Agreement for option awards made beginning February 2015 pursuant to the PrivateBancorp, Inc. Amended and Restated 2011 Incentive Compensation Plan.
10.2 (a)	Form of Restricted Stock Unit Award Agreement for all Executive Officers' annual incentive deferral awards beginning February 2015 made pursuant to the PrivateBancorp, Inc. Amended and Restated 2011 Incentive Compensation Plan.
10.3 (a)	Form of Restricted Stock Unit Award Agreement for Executive Officers' (other than the CEO) long-term incentive awards beginning February 2015 made pursuant to the PrivateBancorp, Inc. Amended and Restated 2011 Incentive Compensation Plan.
10.4 (a)	Form of Restricted Stock Unit Award Agreement for the Chief Executive Officer's long-term incentive award beginning February 2015 made pursuant to the PrivateBancorp, Inc. Amended and Restated 2011 Incentive Compensation Plan.
10.5 (a)	Form of Performance Share Unit Award Agreement for Executive Officers' awards beginning March 2015 pursuant to the PrivateBancorp, Inc. Amended and Restated 2011 Incentive Compensation Plan.
11	Statement re: Computation of Per Share Earnings - The computation of basic and diluted earnings per share is included in Note 12 of the Company’s Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" of this report on Form 10-Q.
12 (a)	Statement re: Computation of Ratio of Earnings to Fixed Charges.
15 (a)	Acknowledgment of Independent Registered Public Accounting Firm.
31.1 (a)	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 (a)	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 (a) (b)	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99 (a) (b)	Report of Independent Registered Public Accounting Firm.
101 (a)	The following financial statements from the PrivateBancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed on May 8, 2015, formatted in Extensive Business Reporting Language (XBRL): (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

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(a)	Filed herewith.
(b)	This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

PrivateBancorp, Inc.

/s/ Larry D. Richman

Larry D. Richman

President and Chief Executive Officer

/s/ Kevin M. Killips

Kevin M. Killips

Chief Financial Officer and Principal Financial Officer

Date: May 8, 2015

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