Allowance for Loan and Lease Losses

12 Months Ended

Dec. 31, 2014

NOTE 6 – ALLOWANCE FOR LOAN AND LEASE LOSSES

The composition of the Company's allowance for loan and lease losses at December 31, 2014 and 2013 was as follows:

	December 31,		December 31,
	2014		2013
	(In thousands)
Allowance for loans and lease losses on non-covered loans:
Originated and other loans and leases held for investment:
Mortgage	$	19,679	$	19,937
Commercial		8,432		14,897
Consumer		9,072		6,006
Auto and leasing		14,255		7,866
Unallocated		1		375
		51,439		49,081
Acquired loans:
Accounted for under ASC 310-20 (Loans with revolving feature and/or
acquired at a premium)
Commercial		65		926
Consumer		1,211		-
Auto		3,321		1,428
		4,597		2,354
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Commercial		13,476		1,713
Consumer		5		418
Auto		-		732
		13,481		2,863
		69,517		54,298
Allowance for loans and lease losses on covered loans:
Loans secured by 1-4 family residential properties		15,522		12,495
Commercial and other construction		48,334		39,619
Consumer		389		615
		64,245		52,729
Total allowance for loan and lease losses	$	133,762	$	107,027

Non-Covered Loans

The Company maintains an allowance for loan and lease losses at a level that management considers adequate to provide for probable losses based upon an evaluation of known and inherent risks. The Company's allowance for loan and lease losses policy provides for a detailed quarterly analysis of probable losses. The analysis includes a review of historical loan loss experience, value of underlying collateral, current economic conditions, financial condition of borrowers and other pertinent factors. While management uses available information in estimating probable loan losses, future additions to the allowance may be required based on factors beyond the Company's control. We also maintain an allowance for loan losses on acquired loans when: (i) for loans accounted for under ASC 310-30, there is deterioration in credit quality subsequent to acquisition, and (ii) for loans accounted for under ASC 310-20, the inherent losses in the loans exceed the remaining credit discount recorded at the time of acquisition.

Originated and Other Loans and Leases Held for Investment

The following tables present the activity in our allowance for loan and lease losses and the related recorded investment of the associated loans for our originated and other loans held for investment portfolio by segment for the periods indicated:

	Year Ended December 31, 2014
							Auto and
	Mortgage		Commercial		Consumer		Leasing		Unallocated		Total
	(In thousands)
Allowance for loan and lease losses for non-covered originated and other loans:
Balance at beginning of year	$	19,937	$	14,897	$	6,006	$	7,866	$	375	$	49,081
Charge-offs		(5,011)		(2,424)		(5,782)		(26,041)		-		(39,258)
Recoveries		428		333		570		8,858		-		10,189
Provision (recapture) for non-covered originated and other loan and lease losses		4,325		(4,374)		8,278		23,572		(374)		31,427
Balance at end of year	$	19,679	$	8,432	$	9,072	$	14,255	$	1	$	51,439


	Year Ended December 31, 2013
							Auto and
	Mortgage		Commercial		Consumer		Leasing		Unallocated		Total
	(In thousands)
Allowance for loan and lease losses for non-covered originated and other loans:
Balance at beginning of year	$	21,092	$	17,072	$	856	$	533	$	368	$	39,921
Charge-offs		(36,566)		(5,889)		(1,485)		(4,601)		-		(48,541)
Recoveries		6		383		165		1,568		-		2,122
Provision (recapture) for non-covered originated and other loan and lease losses		35,405		3,331		6,470		10,366		7		55,579
Balance at end of year	$	19,937	$	14,897	$	6,006	$	7,866	$	375	$	49,081


	Year Ended December 31, 2012
							Auto and
	Mortgage		Commercial		Consumer		Leasing		Unallocated		Total
	(In thousands)
Allowance for loan and lease losses for non-covered originated and other loans:
Balance at beginning of year	$	21,652	$	12,548	$	1,423	$	845	$	542	$	37,010
Charge-offs		(6,492)		(4,081)		(739)		(139)		-		(11,451)
Recoveries		131		156		194		27		-		508
Provision (recapture) for non-covered originated and other loan and lease losses		5,801		8,449		(22)		(200)		(174)		13,854
Balance at end of year	$	21,092	$	17,072	$	856	$	533	$	368	$	39,921

	December 31, 2014
	Mortgage		Commercial		Consumer		Auto and Leasing		Unallocated		Total
	(In thousands)
Allowance for loan and lease losses on non-covered originated and other loans:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	8,968	$	841	$	-	$	-	$	-	$	9,809
Collectively evaluated for impairment		10,711		7,591		9,072		14,255		1		41,630
Total ending allowance balance	$	19,679	$	8,432	$	9,072	$	14,255	$	1	$	51,439
Loans:
Individually evaluated for impairment	$	94,185	$	236,270	$	-	$	-	$	-	$	330,455
Collectively evaluated for impairment		697,566		1,053,462		186,760		575,582		-		2,513,370
Total ending loan balance	$	791,751	$	1,289,732	$	186,760	$	575,582	$	-	$	2,843,825

	December 31, 2013
	Mortgage		Commercial		Consumer		Auto and Leasing		Unallocated		Total
	(In thousands)
Allowance for loan and lease losses for non-covered originated and other loans:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	8,708	$	1,431	$	-	$	-	$	-	$	10,139
Collectively evaluated for impairment		11,229		13,466		6,006		7,866		375		38,942
Total ending allowance balance	$	19,937	$	14,897	$	6,006	$	7,866	$	375	$	49,081
Loans:
Individually evaluated for impairment	$	84,494	$	28,145	$	-	$	-	$	-	$	112,639
Collectively evaluated for impairment		681,771		1,099,512		127,744		379,874		-		2,288,901
Total ending loans balance	$	766,265	$	1,127,657	$	127,744	$	379,874	$	-	$	2,401,540

Acquired Loans accounted for under ASC 310-20 (Loans with revolving feature and/or acquired at a premium)

The following tables present the activity in our allowance for loan losses and related recorded investment of the associated loans in our non-covered acquired loan portfolio, excluding loans accounted for under ASC 310-30, for the periods indicated:

	Year Ended December 31, 2014
	Commercial			Consumer		Auto		Unallocated		Total
	(In thousands)
Allowance for loan losses for non-covered acquired loans accounted for under ASC 310-20:
Balance at beginning of year	$	926		$	-	$	1,428	$	-	$	2,354
Charge-offs		(532)			(6,902)		(6,011)		-		(13,445)
Recoveries		73			531		2,169		-		2,773
Provision (recapture) for non-covered acquired loan and lease losses accounted for under ASC 310-20		(402)			7,582		5,735		-		12,915
Balance at end of year	$	65		$	1,211	$	3,321	$	-	$	4,597



	Year Ended December 31, 2013
	Commercial			Consumer		Auto		Unallocated		Total
	(In thousands)
Allowance for loan losses for non-covered acquired loans accounted for under ASC 310-20:
Balance at beginning of year	$	-	0	$	-	$	-	$	-	$	-
Charge-offs		(25)			(5,530)		(5,650)		-		(11,205)
Recoveries		9			1,035		3,398		-		4,442
Provision for non-covered acquired loan and lease losses accounted for under ASC 310-20		942			4,495		3,680		-		9,117
Balance at end of year	$	926		$	-	$	1,428	$	-	$	2,354

	December 31, 2014
	Commercial		Consumer		Auto		Unallocated		Total
	(In thousands)
Allowance for loan and lease losses on non-covered acquired loans accounted for under ASC 310-20:
Ending allowance balance attributable to loans:
Collectively evaluated for impairment		65		1,211		3,321		-		4,597
Total ending allowance balance	$	65	$	1,211	$	3,321	$	-	$	4,597
Loans:
Collectively evaluated for impairment		12,675		45,344		184,782		-		242,801
Total ending loan balance	$	12,675	$	45,344	$	184,782	$	-	$	242,801


	December 31, 2013
	Commercial		Consumer		Auto		Unallocated		Total
	(In thousands)
Allowance for loan and lease losses on non-covered acquired loans accounted for under ASC 310-20:
Ending allowance balance attributable to loans:
Collectively evaluated for impairment		926		-		1,428		-		2,354
Total ending allowance balance	$	926	$	-	$	1,428	$	-	$	2,354
Loans:
Collectively evaluated for impairment		77,681		56,174		301,584		-		435,439
Total ending loan balance	$	77,681	$	56,174	$	301,584	$	-	$	435,439

Acquired Loans Accounted for under ASC 310-30 (including those accounted for under ASC 310-30 by analogy)

The following tables present the activity in our allowance for loan losses and related recorded investment of the associated loans in our non-covered acquired loan portfolio accounted for under ASC 310-30, for the periods indicated:

	Year Ended December 31, 2014
	Mortgage			Commercial		Construction		Consumer		Auto		Total
	(In thousands)
Allowance for loan and lease losses for non-covered loans accounted for under ASC 310-30:
Balance at beginning of year	$	-		$	1,713	$	-	$	418	$	732	$	2,863
Provision (recapture) for non-covered acquired loan and lease losses accounted for under ASC 310-30		-			11,763		-		(413)		(732)		10,618
Balance at end of year	$	-		$	13,476	$	-	$	5	$	-	$	13,481



	Year Ended December 31, 2013
	Mortgage			Commercial		Construction		Consumer		Auto		Total
	(In thousands)
Allowance for loan and lease losses for non-covered loans accounted for under ASC 310-30:
Balance at beginning of year	$	-	0	$	-	$	-	$	-	$	-	$	-
Provision for non-covered acquired loan and lease losses accounted for under ASC 310-30		-			1,713		-		418		732		2,863
Balance at end of year	$	-		$	1,713	$	-	$	418	$	732	$	2,863

Non-covered acquired loans accounted for under ASC 310-30 were recognized at fair value as of December 18, 2012, which included the impact of expected credit losses, and therefore, no allowance for credit losses was recorded during year ended December 31, 2012.

Covered Loans

For covered loans, as part of the evaluation of actual versus expected cash flows, the Company assesses on a quarterly basis the credit quality of these loans based on delinquency, severity factors and risk ratings, among other assumptions. Migration and credit quality trends are assessed at the pool level, by comparing information from the latest evaluation period through the end of the reporting period.

The changes in the allowance for loan and lease losses on covered loans for the years ended December 31, 2014 and 2013 were as follows:

	Year Ended December 31,
	2014		2013
	(In thousands)
Balance at beginning of the year	$	52,729	$	54,124
Provision for covered loan and lease losses, net		5,680		5,335
FDIC shared-loss portion of provision for (recapture of)
covered loan and lease losses, net		5,836		(6,730)
Balance at end of the year	$	64,245	$	52,729

FDIC shared-loss portion of provision for (recapture of) covered loans and lease losses net, represents the credit impairment losses to be covered under the FDIC loss-share agreement which is increasing (decreasing) the FDIC loss-share indemnification asset.

Net provision for covered loans includes both additional reserves and reserve releases for different pools. The pools for which there were releases are also subject to a reduction to the FDIC shared-loss indemnification asset because of lower expected losses which are recognized as recaptures.