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Loans and Leases | 12 Months Ended
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Dec. 31, 2014
Loans and Leases Receivable Disclosure [Abstract] |
Loans and Leases | LOANS AND LEASES BancShares reports purchased credit-impaired ("PCI") and non-PCI loan portfolios separately, and each portfolio is further divided into commercial and non-commercial based on the type of borrower, purpose, collateral, and/or our underlying credit management processes. Additionally, loans are assigned to loan classes, which further disaggregate loans based upon common risk characteristics. Commercial – Commercial loans include construction and land development, mortgage, other commercial real estate, commercial and industrial, lease financing and other. Construction and land development – Construction and land development consists of loans to finance land for development, investment, and use in a commercial business enterprise; multifamily apartments; and other commercial buildings that may be owner-occupied or income generating investments for the owner. Commercial mortgage – Commercial mortgage consists of loans to purchase or refinance owner-occupied nonresidential and investment properties. Investment properties include office buildings and other facilities that are rented or leased to unrelated parties. Other commercial real estate – Other commercial real estate consists of loans secured by farmland (including residential farms and other improvements) and multifamily (5 or more) residential properties. Commercial and industrial – Commercial and industrial consists of loans or lines of credit to finance corporate credit cards, accounts receivable, inventory and other general business purposes. Lease financing – Lease financing consists solely of lease financing agreements. Other – Other consists of all other commercial loans not classified in one of the preceding classes. These typically include loans to non-profit organizations such as churches, hospitals, educational and charitable organizations. Noncommercial – Noncommercial consist of residential and revolving mortgage, construction and land development, and consumer loans. Residential mortgage – Residential real estate consists of loans to purchase, construct or refinance the borrower's primary dwelling, second residence or vacation home. Revolving mortgage – Revolving mortgage consists of home equity lines of credit that are secured by first or second liens on the borrower's primary residence. Construction and land development – Construction and land development consists of loans to construct the borrower's primary or secondary residence or vacant land upon which the owner intends to construct a dwelling at a future date. Consumer – Consumer loans consist of installment loans to finance purchases of vehicles, unsecured home improvements and revolving lines of credit that can be secured or unsecured, including personal credit cards. Loans and leases are evaluated at acquisition and where a discount is required at least in part due to credit quality, the non-revolving loans are accounted for under the guidance in ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Loans for which it is probable at acquisition that all required payments will not be collected in accordance with contractual terms are considered PCI loans. PCI loans and leases are recorded at fair value at the date of acquisition. No allowance for loan and lease losses is recorded on the acquisition date as the fair value of the acquired assets incorporates assumptions regarding credit risk. An allowance is recorded if there is additional credit deterioration after the acquisition date. Conversely, Non-PCI loans include originated commercial, originated noncommercial, purchased revolving, and purchased non-impaired loans, or loans that do not have a discount, due at least in part, to credit quality at the time of acquisition. Substantially all loans acquired in the Bancorporation acquisition are accounted for as non-PCI loans. Note A of BancShares' Notes to Consolidated Financial Statements provides additional information. Loans and leases outstanding include the following as of the dates indicated:
(Dollars in thousands) | December 31, 2014 |  | December 31, 2013
Loans and leases (non-PCI)(1): |  |  |
Commercial: |  |  |
Construction and land development | 550,568 |  |  | 319,847 |
Commercial mortgage | 7,552,948 |  |  | 6,362,490 |
Other commercial real estate | 244,875 |  |  | 178,754 |
Commercial and industrial | 1,988,934 |  |  | 1,081,158 |
Lease financing | 571,916 |  |  | 381,763 |
Other | 353,833 |  |  | 175,336 |
Total commercial loans | 11,263,074 |  |  | 8,499,348 |
Noncommercial: |  |  |
Residential mortgage | 2,520,542 |  |  | 982,421 |
Revolving mortgage | 2,561,800 |  |  | 2,113,285 |
Construction and land development | 120,097 |  |  | 122,792 |
Consumer | 1,117,454 |  |  | 386,452 |
Total noncommercial loans | 6,319,893 |  |  | 3,604,950 |
Total non-PCI loans and leases | 17,582,967 |  |  | 12,104,298 |
Purchased credit-impaired (PCI) loans: |  |  |
Commercial: |  |  |
Construction and land development | $ | 78,079 |  |  | $ | 78,915 |
Commercial mortgage | 577,518 |  |  | 642,891 |
Other commercial real estate | 40,193 |  |  | 41,381 |
Commercial and industrial | 27,254 |  |  | 17,254 |
Other | 3,079 |  |  | 866 |
Total commercial loans | 726,123 |  |  | 781,307 |
Noncommercial: |  |  |
Residential mortgage | 382,340 |  |  | 213,851 |
Revolving mortgage | 74,109 |  |  | 30,834 |
Construction and land development | 912 |  |  | 2,583 |
Consumer | 3,014 |  |  | 851 |
Total noncommercial loans | 460,375 |  |  | 248,119 |
Total PCI loans | 1,186,498 |  |  | 1,029,426 |
Total loans and leases | $ | 18,769,465 |  |  | $ | 13,133,724 |
(1) Non-PCI loans include originated and purchased non-impaired loans, including non-accrual and TDR loans. At December 31, 2014, $3.16 billion in noncovered loans with a lendable collateral value of $2.20 billion were used to secure $240.3 million in FHLB of Atlanta advances, resulting in additional borrowing capacity of $1.96 billion, compared to $2.56 billion in noncovered loans with a lendable collateral value of $1.38 billion used to secure $240.3 million in FHLB of Atlanta advances, resulting additional borrowing capacity of $1.14 billion at December 31, 2013. At December 31, 2014, $485.3 million in total loans were covered under loss share agreements, compared to $1.03 billion at December 31, 2013. The loss share protection expired for non-single family residential loans acquired from Temecula Valley Bank ("TVB") and Venture Bank ("VB") during the third quarter of 2014. Also, the loss share protection expired for non-single family residential loans from Georgian Bank ("GB"), a portfolio of loans acquired through the Bancorporation merger. The loan balances at December 31, 2014 for the expired agreements from TVB, VB, and GB are $177.3 million, $61.4 million, and $40.9 million respectively. The remaining decrease in covered loans is due to pay downs and payoffs. During the first quarter of 2015, the loss share protection will expire for non-single family residential loans acquired from Sun American Bank ("SAB") and all loans acquired from First Regional Bank ("First Regional"). The loan balances at December 31, 2014 for the expiring agreements from SAB and First Regional are $41.1 million and $73.2 million, respectively. During the third quarter of 2015, the loss share protection will expire for non-single family residential loans from Williamsburg First National Bank ("WFNB"), a portfolio of loans acquired through the Bancorporation merger. Loan balances at December 31, 2014 for the expiring agreements from WFNB are $9.1 million. Credit quality indicators Loans and leases are monitored for credit quality on a recurring basis. The credit quality indicators used are dependent on the portfolio segment to which the loan relates. Commercial and noncommercial loans and leases have different credit quality indicators as a result of the unique characteristics of the loan segment being evaluated. The credit quality indicators for non-PCI and PCI commercial loans and leases are developed through a review of individual borrowers on an ongoing basis. Each commercial loan is evaluated annually with more frequent evaluation of more severely criticized loans or leases. The credit quality indicators for PCI and non-PCI noncommercial loans are based on the delinquency status of the borrower. As the borrower becomes more delinquent, the likelihood of loss increases. The indicators represent the rating for loans or leases as of the date presented based on the most recent assessment performed. These credit quality indicators are defined as follows: Pass – A pass rated asset is not adversely classified because it does not display any of the characteristics for adverse classification. Special mention – A special mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification. Substandard – A substandard asset is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected. Doubtful – An asset classified as doubtful has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions and values. Loss – Assets classified as loss are considered uncollectible and of such little value that it is inappropriate to be carried as an asset. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full charge-off even though partial recovery may be effected in the future. Ungraded – Ungraded loans represent loans that are not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of ungraded loans at December 31, 2014 and December 31, 2013 relate to business credit cards. Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit. The remaining balance is comprised of a small amount of commercial mortgage and other commercial real estate loans. As of December 31, 2013, ungraded loans also included tobacco buyout loans classified as commercial and industrial loans. Final payment from the Commodity Credit Corporation was received during January 2014 for tobacco buyout loans held by FCB. The composition of the loans and leases outstanding at December 31, 2014, and December 31, 2013, by credit quality indicator is provided below:
| Non-PCI commercial loans and leases
(Dollars in thousands) | Construction and land development |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Lease financing |  | Other |  | Total non-PCI commercial loans and leases
Grade: |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 525,711 |  |  | $ | 7,284,714 |  |  | $ | 242,053 |  |  | $ | 1,859,415 |  |  | $ | 564,319 |  |  | $ | 349,111 |  |  | $ | 10,825,323 |
Special mention | 20,025 |  |  | 129,247 |  |  | 909 |  |  | 27,683 |  |  | 3,205 |  |  | 1,384 |  |  | 182,453 |
Substandard | 4,720 |  |  | 134,677 |  |  | 1,765 |  |  | 8,878 |  |  | 3,955 |  |  | 3,338 |  |  | 157,333 |
Doubtful | — |  |  | 2,366 |  |  | — |  |  | 164 |  |  | 365 |  |  | — |  |  | 2,895 |
Ungraded | 112 |  |  | 1,944 |  |  | 148 |  |  | 92,794 |  |  | 72 |  |  | — |  |  | 95,070 |
Total | $ | 550,568 |  |  | $ | 7,552,948 |  |  | $ | 244,875 |  |  | $ | 1,988,934 |  |  | $ | 571,916 |  |  | $ | 353,833 |  |  | $ | 11,263,074 |
December 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 308,231 |  |  | $ | 6,094,505 |  |  | $ | 174,913 |  |  | $ | 964,840 |  |  | $ | 375,371 |  |  | $ | 174,314 |  |  | $ | 8,092,174 |
Special mention | 8,620 |  |  | 119,515 |  |  | 1,362 |  |  | 14,686 |  |  | 2,160 |  |  | 982 |  |  | 147,325 |
Substandard | 2,944 |  |  | 141,913 |  |  | 2,216 |  |  | 6,352 |  |  | 3,491 |  |  | 40 |  |  | 156,956 |
Doubtful | 52 |  |  | 5,159 |  |  | 75 |  |  | 144 |  |  | 592 |  |  | — |  |  | 6,022 |
Ungraded | — |  |  | 1,398 |  |  | 188 |  |  | 95,136 |  |  | 149 |  |  | — |  |  | 96,871 |
Total | $ | 319,847 |  |  | $ | 6,362,490 |  |  | $ | 178,754 |  |  | $ | 1,081,158 |  |  | $ | 381,763 |  |  | $ | 175,336 |  |  | $ | 8,499,348 |
| Non-PCI noncommercial loans and leases
(Dollars in thousands) | Residential mortgage |  | Revolving mortgage |  | Construction and land development |  | Consumer |  | Total non-PCI noncommercial loans and leases
December 31, 2014 |  |  |  |  |  |  |  |  |
Current | $ | 2,482,281 |  |  | $ | 2,542,807 |  |  | $ | 119,094 |  |  | $ | 1,110,153 |  |  | $ | 6,254,335 |
30-59 days past due | 23,288 |  |  | 11,097 |  |  | 370 |  |  | 4,577 |  |  | 39,332 |
60-89 days past due | 6,018 |  |  | 2,433 |  |  | 486 |  |  | 1,619 |  |  | 10,556 |
90 days or greater past due | 8,955 |  |  | 5,463 |  |  | 147 |  |  | 1,105 |  |  | 15,670 |
Total | $ | 2,520,542 |  |  | $ | 2,561,800 |  |  | $ | 120,097 |  |  | $ | 1,117,454 |  |  | $ | 6,319,893 |
December 31, 2013 |  |  |  |  |  |  |  |  |
Current | $ | 955,300 |  |  | $ | 2,095,480 |  |  | $ | 121,026 |  |  | $ | 382,710 |  |  | $ | 3,554,516 |
30-59 days past due | 12,885 |  |  | 10,977 |  |  | 1,193 |  |  | 2,114 |  |  | 27,169 |
60-89 days past due | 4,658 |  |  | 2,378 |  |  | 317 |  |  | 955 |  |  | 8,308 |
90 days or greater past due | 9,578 |  |  | 4,450 |  |  | 256 |  |  | 673 |  |  | 14,957 |
Total | $ | 982,421 |  |  | $ | 2,113,285 |  |  | $ | 122,792 |  |  | $ | 386,452 |  |  | $ | 3,604,950 |
| December 31, 2014
(Dollars in thousands) | PCI commercial loans
Grade: | Construction and land development |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Other |  | Total PCI commercial loans
Pass | $ | 13,514 |  |  | $ | 300,187 |  |  | $ | 11,033 |  |  | $ | 16,637 |  |  | $ | 801 |  |  | $ | 342,172 |
Special mention | 6,063 |  |  | 98,724 |  |  | 16,271 |  |  | 4,137 |  |  | — |  |  | 125,195 |
Substandard | 53,739 |  |  | 171,920 |  |  | 12,889 |  |  | 6,312 |  |  | 2,278 |  |  | 247,138 |
Doubtful | 2,809 |  |  | 6,302 |  |  | — |  |  | 130 |  |  | — |  |  | 9,241 |
Ungraded | 1,954 |  |  | 385 |  |  | — |  |  | 38 |  |  | — |  |  | 2,377 |
Total | $ | 78,079 |  |  | $ | 577,518 |  |  | $ | 40,193 |  |  | $ | 27,254 |  |  | $ | 3,079 |  |  | $ | 726,123 |
| December 31, 2013
| PCI commercial loans
| Construction and land development |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Other |  | Total PCI commercial loans
Pass | $ | 2,619 |  |  | $ | 296,824 |  |  | $ | 22,225 |  |  | $ | 8,021 |  |  | $ | 866 |  |  | $ | 330,555 |
Special mention | 15,530 |  |  | 125,295 |  |  | 3,431 |  |  | 2,585 |  |  | — |  |  | 146,841 |
Substandard | 52,228 |  |  | 179,657 |  |  | 7,012 |  |  | 5,225 |  |  | — |  |  | 244,122 |
Doubtful | 7,436 |  |  | 40,471 |  |  | 8,713 |  |  | 1,257 |  |  | — |  |  | 57,877 |
Ungraded | 1,102 |  |  | 644 |  |  | — |  |  | 166 |  |  | — |  |  | 1,912 |
Total | $ | 78,915 |  |  | $ | 642,891 |  |  | $ | 41,381 |  |  | $ | 17,254 |  |  | $ | 866 |  |  | $ | 781,307 |
| PCI noncommercial loans and leases
(Dollars in thousands) | Residential mortgage |  | Revolving mortgage |  | Construction and land development |  | Consumer |  | Total non-PCI noncommercial loans
December 31, 2014 |  |  |  |  |  |  |  |  |
Current | $ | 326,589 |  |  | $ | 68,548 |  |  | $ | 506 |  |  | $ | 2,582 |  |  | $ | 398,225 |
30-59 days past due | 11,432 |  |  | 1,405 |  |  | — |  |  | 147 |  |  | 12,984 |
60-89 days past due | 10,073 |  |  | 345 |  |  | — |  |  | 25 |  |  | 10,443 |
90 days or greater past due | 34,246 |  |  | 3,811 |  |  | 406 |  |  | 260 |  |  | 38,723 |
Total | $ | 382,340 |  |  | $ | 74,109 |  |  | $ | 912 |  |  | $ | 3,014 |  |  | $ | 460,375 |
December 31, 2013 |  |  |  |  |  |  |  |  |
Current | $ | 162,771 |  |  | $ | 26,642 |  |  | $ | 1,925 |  |  | 841 |  |  | $ | 192,179 |
30-59 days past due | 15,261 |  |  | 2,138 |  |  | — |  |  | 3 |  |  | 17,402 |
60-89 days past due | 6,544 |  |  | — |  |  | — |  |  | — |  |  | 6,544 |
90 days or greater past due | 29,275 |  |  | 2,054 |  |  | 658 |  |  | 7 |  |  | 31,994 |
Total | $ | 213,851 |  |  | $ | 30,834 |  |  | $ | 2,583 |  |  | $ | 851 |  |  | $ | 248,119 |
The aging of the outstanding non-PCI loans and leases, by class, at December 31, 2014, and December 31, 2013 is provided in the table below. The calculation of days past due begins on the day after payment is due and includes all days through which all required interest or principal has not been paid. Loans and leases 30 days or less past due are considered current due to various grace periods that allow borrowers to make payments within a stated period after the due date and still remain in compliance with the loan agreement.
| December 31, 2014
(Dollars in thousands) | 30-59 days past due |  | 60-89 days past due |  | 90 days or greater |  | Total past due |  | Current |  | Total loans and leases
Non-PCI loans and leases: |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | $ | 1,796 |  |  | $ | 621 |  |  | $ | 385 |  |  | $ | 2,802 |  |  | $ | 547,766 |  |  | $ | 550,568 |
Commercial mortgage | 11,367 |  |  | 4,782 |  |  | 8,061 |  |  | 24,210 |  |  | 7,528,738 |  |  | 7,552,948 |
Other commercial real estate | 206 |  |  | 70 |  |  | 102 |  |  | 378 |  |  | 244,497 |  |  | 244,875 |
Commercial and industrial | 2,843 |  |  | 1,545 |  |  | 378 |  |  | 4,766 |  |  | 1,984,168 |  |  | 1,988,934 |
Lease financing | 1,631 |  |  | 8 |  |  | 2 |  |  | 1,641 |  |  | 570,275 |  |  | 571,916 |
Residential mortgage | 23,288 |  |  | 6,018 |  |  | 8,955 |  |  | 38,261 |  |  | 2,482,281 |  |  | 2,520,542 |
Revolving mortgage | 11,097 |  |  | 2,433 |  |  | 5,463 |  |  | 18,993 |  |  | 2,542,807 |  |  | 2,561,800 |
Construction and land development - noncommercial | 370 |  |  | 486 |  |  | 147 |  |  | 1,003 |  |  | 119,094 |  |  | 120,097 |
Consumer | 4,577 |  |  | 1,619 |  |  | 1,105 |  |  | 7,301 |  |  | 1,110,153 |  |  | 1,117,454 |
Other | 146 |  |  | 1,966 |  |  | — |  |  | 2,112 |  |  | 351,721 |  |  | 353,833 |
Total non-PCI loans and leases | $ | 57,321 |  |  | $ | 19,548 |  |  | $ | 24,598 |  |  | $ | 101,467 |  |  | $ | 17,481,500 |  |  | $ | 17,582,967 |
| December 31, 2013
| 30-59 days past due |  | 60-89 days past due |  | 90 days or greater |  | Total past due |  | Current |  | Total loans and leases
Non-PCI loans and leases: |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | $ | 1,603 |  |  | $ | 9 |  |  | $ | 457 |  |  | $ | 2,069 |  |  | $ | 317,778 |  |  | $ | 319,847 |
Commercial mortgage | 11,131 |  |  | 3,601 |  |  | 14,407 |  |  | 29,139 |  |  | 6,333,351 |  |  | 6,362,490 |
Other commercial real estate | 139 |  |  | 210 |  |  | 470 |  |  | 819 |  |  | 177,935 |  |  | 178,754 |
Commercial and industrial | 3,336 |  |  | 682 |  |  | 436 |  |  | 4,454 |  |  | 1,076,704 |  |  | 1,081,158 |
Lease financing | 789 |  |  | 1,341 |  |  | 101 |  |  | 2,231 |  |  | 379,532 |  |  | 381,763 |
Residential mortgage | 12,885 |  |  | 4,658 |  |  | 9,578 |  |  | 27,121 |  |  | 955,300 |  |  | 982,421 |
Revolving mortgage | 10,977 |  |  | 2,378 |  |  | 4,450 |  |  | 17,805 |  |  | 2,095,480 |  |  | 2,113,285 |
Construction and land development - noncommercial | 1,193 |  |  | 317 |  |  | 256 |  |  | 1,766 |  |  | 121,026 |  |  | 122,792 |
Consumer | 2,114 |  |  | 955 |  |  | 673 |  |  | 3,742 |  |  | 382,710 |  |  | 386,452 |
Other | — |  |  | 85 |  |  | — |  |  | 85 |  |  | 175,251 |  |  | 175,336 |
Total non-PCI loans and leases | $ | 44,167 |  |  | $ | 14,236 |  |  | $ | 30,828 |  |  | $ | 89,231 |  |  | $ | 12,015,067 |  |  | $ | 12,104,298 |
The recorded investment, by class, in loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at December 31, 2014 and December 31, 2013 for non-PCI loans, were as follows:
| December 31, 2014 |  | December 31, 2013
(Dollars in thousands) | Nonaccrual loans and leases |  | Loans and leases > 90 days and accruing |  | Nonaccrual loans and leases |  | Loans and leases > 90 days and accruing
Non-PCI loans and leases: |  |  |  |  |  |  |
Construction and land development - commercial | $ | 343 |  |  | $ | 111 |  |  | $ | 544 |  |  | $ | — |
Commercial mortgage | 24,720 |  |  | 1,003 |  |  | 33,529 |  |  | 1,113 |
Commercial and industrial | 1,741 |  |  | 239 |  |  | 1,428 |  |  | 294 |
Lease financing | 374 |  |  | 2 |  |  | 832 |  |  | — |
Other commercial real estate | 619 |  |  | 35 |  |  | 1,610 |  |  | — |
Construction and land development - noncommercial | — |  |  | 147 |  |  | 457 |  |  | 256 |
Residential mortgage | 14,242 |  |  | 3,191 |  |  | 14,701 |  |  | 1,998 |
Revolving mortgage | — |  |  | 5,463 |  |  | — |  |  | 4,450 |
Consumer | — |  |  | 1,059 |  |  | 69 |  |  | 673 |
Other | 1,966 |  |  | — |  |  | — |  |  | — |
Total non-PCI loans and leases | $ | 44,005 |  |  | $ | 11,250 |  |  | $ | 53,170 |  |  | $ | 8,784 |
Purchased credit-impaired (PCI) loans The following table relates to PCI loans acquired in the Bancorporation and 1st Financial mergers, and summarizes the contractually required payments, which include principal and interest, expected cash flows to be collected, and the fair value of PCI loans and leases at the respective merger date.
(Dollars in thousands) |
Contractually required payments | $ | 828,156 |
Cash flows expected to be collected | $ | 735,381 |
Fair value of loans at acquisition | $ | 623,408 |
The recorded fair values of PCI loans acquired in the Bancorporation and 1st Financial transaction as of their respective merger dates are as follows:
(Dollars in thousands) |
Commercial: |
Construction and land development | $ | 69,789 |
Commercial mortgage | 176,841 |
Other commercial real estate | 15,425 |
Commercial and industrial | 37,583 |
Other | 2,219 |
Total commercial loans | 301,857 |
Noncommercial: |
Residential mortgage | 287,675 |
Revolving mortgage | 29,777 |
Construction and land development | 199 |
Consumer | 3,900 |
Total noncommercial loans | 321,551 |
Total PCI loans | $ | 623,408 |
The following table provides changes in the carrying value of purchased credit-impaired loans during the years ended December 31, 2014 and 2013:
(Dollars in thousands) | 2014 |  | 2013
Balance at January 1 | $ | 1,029,426 |  |  | $ | 1,809,235 |
Fair value of PCI loans acquired during the year | 623,408 |  |  | — |
Accretion | 112,368 |  |  | 224,672 |
Payments received and other changes, net | (578,704 | ) |  | (1,004,481 | )
Balance at December 31 | $ | 1,186,498 |  |  | $ | 1,029,426 |
Unpaid principal balance at December 31 | $ | 2,057,691 |  |  | $ | 1,833,955 |
The carrying value of loans on the cost recovery method was $33.4 million at December 31, 2014, and $28.5 million at December 31, 2013. The cost recovery method is applied to loans when the timing of future cash flows is not reasonably estimable due to borrower nonperformance or uncertainty in the ultimate disposition of the asset. For PCI loans, improved cash flow estimates and receipt of unscheduled loan payments result in the reclassification of nonaccretable difference to accretable yield. Accretable yield resulting from the improved ability to estimate future cash flows generally does not represent amounts previously identified as nonaccretable difference. The following table documents changes to the amount of accretable yield for 2014 and 2013.
(Dollars in thousands) | 2014 |  | 2013
Balance at January 1 | $ | 439,990 |  |  | $ | 539,564 |
Additions from acquisitions | 111,973 |  |  | — |
Accretion | (112,368 | ) |  | (224,672 | )
Reclassifications from nonaccretable difference | 7,865 |  |  | 92,349 |
Changes in expected cash flows that do not affect nonaccretable difference | (29,300 | ) |  | 32,749 |
Balance at December 31 | $ | 418,160 |  |  | $ | 439,990 |
Purchased non-impaired loans and leases The following table relates to purchased non-impaired loans and leases and provides the contractually required payments, estimate of contractual cash flows not expected to be collected and fair value of the acquired loans at the merger date.
(Dollars in thousands) |
Contractually required payments | $ | 4,708,681 |
Contractual cash flows not expected to be collected | $ | 59,187 |
Fair value at acquisition date | $ | 4,175,586 |
The recorded fair values of purchased non-impaired loans and leases acquired in the Bancorporation transaction as of the merger date is as follows:
(Dollars in thousands) |
Commercial: |
Construction and land development | $ | 134,941 |
Commercial mortgage | 951,794 |
Other commercial real estate | 61,856 |
Commercial and industrial | 431,367 |
Lease financing | 72,563 |
Other | 95,379 |
Total commercial loans and leases | 1,747,900 |
Noncommercial: |
Residential mortgage | 1,305,140 |
Revolving mortgage | 419,106 |
Construction and land development | 7,165 |
Consumer | 696,275 |
Total noncommercial loans and leases | 2,427,686 |
Total non-PCI loans and leases | $ | 4,175,586 |
The unamortized discount related to the purchased non-impaired loans and leases acquired in the Bancorporation merger totaled $61.2 million at December 31, 2014.

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