WTFC-2013.06.30-10Q
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _________________________________________
FORM 10-Q
_________________________________________
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
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 001-35077
_____________________________________ 
WINTRUST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter) 
Illinois
36-3873352
(State of incorporation or organization)
(I.R.S. Employer Identification No.)
9700 W. Higgins Road, Suite 800
Rosemont, Illinois 60018
(Address of principal executive offices)

(847) 939-9000
(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 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  þ    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  þ    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. (Check one):
 
Large accelerated filer

þ
 

Accelerated filer

¨
Non-accelerated filer

¨
(Do not check if a smaller reporting company)

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  þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock — no par value, 39,725,726 shares, as of July 31, 2013
 


Table of Contents

TABLE OF CONTENTS
 


Page
 
PART I. — FINANCIAL INFORMATION
 
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
 
PART II. — OTHER INFORMATION
 
ITEM 1.
Legal Proceedings
NA
ITEM 1A.
ITEM 2.
ITEM 3.
Defaults Upon Senior Securities
NA
ITEM 4.
Mine Safety Disclosures
NA
ITEM 5.
Other Information
NA
ITEM 6.
 


Table of Contents

PART I
ITEM 1. FINANCIAL STATEMENTS
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
 
(Unaudited)
 
 
 
(Unaudited)
(In thousands, except share data)
June 30, 2013
 
December 31, 2012
 
June 30, 2012
Assets
 
 
 
 
 
Cash and due from banks
$
224,286

 
$
284,731

 
$
176,529

Federal funds sold and securities purchased under resale agreements
9,013

 
30,297

 
15,227

Interest-bearing deposits with other banks (no balance restricted for securitization investors at June 30, 2013 and December 31, 2012, and a balance restricted for securitization investors of $658,983 at June 30, 2012)
440,656

 
1,035,743

 
1,117,888

Available-for-sale securities, at fair value
1,843,824

 
1,796,076

 
1,196,702

Trading account securities
659

 
583

 
608

Federal Home Loan Bank and Federal Reserve Bank stock
79,354

 
79,564

 
92,792

Brokerage customer receivables
26,214

 
24,864

 
31,448

Mortgage loans held-for-sale, at fair value
525,027

 
385,033

 
511,566

Mortgage loans held-for-sale, at lower of cost or market
12,964

 
27,167

 
14,538

Loans, net of unearned income, excluding covered loans
12,516,892

 
11,828,943

 
11,202,842

Covered loans
454,602

 
560,087

 
614,062

Total loans
12,971,494

 
12,389,030

 
11,816,904

Less: Allowance for loan losses
106,842

 
107,351

 
111,920

Less: Allowance for covered loan losses
14,429

 
13,454

 
20,560

Net loans (no balance restricted for securitization investors at June 30, 2013 and December 31, 2012, and a balance restricted for securitization investors of $29,840 at June 30, 2012)
12,850,223

 
12,268,225

 
11,684,424

Premises and equipment, net
512,928

 
501,205

 
449,608

FDIC indemnification asset
137,681

 
208,160

 
222,568

Accrued interest receivable and other assets
573,709

 
511,617

 
710,275

Goodwill
356,871

 
345,401

 
330,896

Other intangible assets
20,137

 
20,947

 
21,213

Total assets
$
17,613,546

 
$
17,519,613

 
$
16,576,282

Liabilities and Shareholders’ Equity
 
 
 
 
 
Deposits:
 
 
 
 
 
Non-interest bearing
$
2,450,659

 
$
2,396,264

 
$
2,047,715

Interest bearing
11,915,195

 
12,032,280

 
11,009,866

Total deposits
14,365,854

 
14,428,544

 
13,057,581

Notes payable
1,729

 
2,093

 
2,457

Federal Home Loan Bank advances
585,942

 
414,122

 
564,301

Other borrowings
252,776

 
274,411

 
375,523

Secured borrowings—owed to securitization investors

 

 
360,825

Subordinated notes
10,000

 
15,000

 
15,000

Junior subordinated debentures
249,493

 
249,493

 
249,493

Trade date securities payable
577

 

 
19,025

Accrued interest payable and other liabilities
310,515

 
331,245

 
210,003

Total liabilities
15,776,886

 
15,714,908

 
14,854,208

Shareholders’ Equity:
 
 
 
 
 
Preferred stock, no par value; 20,000,000 shares authorized:
 
 
 
 
 
Series A - $1,000 liquidation value; 50,000 shares issued and outstanding at June 30, 2013, December 31, 2012 and June 30, 2012
49,976

 
49,906

 
49,837

Series C - $1,000 liquidation value; 126,500 shares issued and outstanding at June 30, 2013, December 31, 2012 and June 30, 2012
126,500

 
126,500

 
126,500

Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at June 30, 2013, December 31, 2012, and June 30, 2012; 37,984,485 shares issued at June 30, 2013, 37,107,684 shares issued at December 31, 2012, and 36,573,468 shares issued at June 30, 2012
37,985

 
37,108

 
36,573

Surplus
1,066,796

 
1,036,295

 
1,013,428

Treasury stock, at cost, 259,342 shares at June 30, 2013, 249,329 shares at December 31, 2012, and 236,226 shares at June 30, 2012
(8,214
)
 
(7,838
)
 
(7,374
)
Retained earnings
612,821

 
555,023

 
501,139

Accumulated other comprehensive (loss) income
(49,204
)
 
7,711

 
1,971

Total shareholders’ equity
1,836,660

 
1,804,705

 
1,722,074

Total liabilities and shareholders’ equity
$
17,613,546

 
$
17,519,613

 
$
16,576,282

See accompanying notes to unaudited consolidated financial statements.

1

Table of Contents

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
Three Months Ended
 
Six Months Ended

June 30,
 
June 30,
(In thousands, except per share data)
2013
 
2012
 
2013
 
2012
Interest income
 
 
 
 
 
 
 
Interest and fees on loans
$
145,983

 
$
144,100

 
$
288,097

 
$
287,655

Interest bearing deposits with banks
411

 
203

 
980

 
451

Federal funds sold and securities purchased under resale agreements
4

 
6

 
19

 
18

Securities
9,359

 
10,510

 
18,111

 
22,357

Trading account securities
8

 
10

 
13

 
19

Federal Home Loan Bank and Federal Reserve Bank stock
693

 
641

 
1,377

 
1,245

Brokerage customer receivables
188

 
221

 
362

 
432

Total interest income
156,646

 
155,691

 
308,959

 
312,177

Interest expense
 
 
 
 
 
 
 
Interest on deposits
13,675

 
17,273

 
28,179

 
35,303

Interest on Federal Home Loan Bank advances
2,821

 
2,867

 
5,585

 
6,451

Interest on notes payable and other borrowings
1,132

 
2,274

 
2,286

 
5,376

Interest on secured borrowings—owed to securitization investors

 
1,743

 

 
4,292

Interest on subordinated notes
52

 
126

 
111

 
295

Interest on junior subordinated debentures
3,142

 
3,138

 
6,261

 
6,295

Total interest expense
20,822

 
27,421

 
42,422

 
58,012

Net interest income
135,824

 
128,270

 
266,537

 
254,165

Provision for credit losses
15,382

 
20,691

 
31,069

 
38,091

Net interest income after provision for credit losses
120,442

 
107,579

 
235,468

 
216,074

Non-interest income
 
 
 
 
 
 
 
Wealth management
15,892

 
13,393

 
30,720

 
25,794

Mortgage banking
31,734

 
25,607

 
61,879

 
44,141

Service charges on deposit accounts
5,035

 
3,994

 
9,828

 
8,202

Gains on available-for-sale securities, net
2

 
1,109

 
253

 
1,925

Fees from covered call options
993

 
3,114

 
2,632

 
6,237

Gain on bargain purchases, net

 
(55
)
 

 
785

Trading gains (losses), net
3,260

 
(928
)
 
2,825

 
(782
)
Other
7,079

 
4,701

 
13,237

 
11,656

Total non-interest income
63,995

 
50,935

 
121,374

 
97,958

Non-interest expense
 
 
 
 
 
 
 
Salaries and employee benefits
79,225

 
68,139

 
156,738

 
137,169

Equipment
6,413

 
5,466

 
12,597

 
10,866

Occupancy, net
8,707

 
7,728

 
17,560

 
15,790

Data processing
4,358

 
3,840

 
8,957

 
7,458

Advertising and marketing
2,722

 
2,179

 
4,762

 
4,185

Professional fees
4,191

 
3,847

 
7,412

 
7,451

Amortization of other intangible assets
1,164

 
1,089

 
2,284

 
2,138

FDIC insurance
3,003

 
3,477

 
6,447

 
6,834

OREO expense, net
2,284

 
5,848

 
664

 
13,026

Other
16,120

 
15,572

 
30,885

 
30,027

Total non-interest expense
128,187

 
117,185

 
248,306

 
234,944

Income before taxes
56,250

 
41,329

 
108,536

 
79,088

Income tax expense
21,943

 
15,734

 
42,177

 
30,283

Net income
$
34,307

 
$
25,595

 
$
66,359

 
$
48,805

Preferred stock dividends and discount accretion
$
2,617

 
$
2,644

 
$
5,233

 
$
3,890

Net income applicable to common shares
$
31,690

 
$
22,951

 
$
61,126

 
$
44,915

Net income per common share—Basic
$
0.85

 
$
0.63

 
$
1.64

 
$
1.24

Net income per common share—Diluted
$
0.69

 
$
0.52

 
$
1.34

 
$
1.02

Cash dividends declared per common share
$

 
$

 
$
0.09

 
$
0.09

Weighted average common shares outstanding
37,486

 
36,329

 
37,231

 
36,266

Dilutive potential common shares
12,354

 
7,770

 
12,363

 
7,723

Average common shares and dilutive common shares
49,840

 
44,099

 
49,594

 
43,989

See accompanying notes to unaudited consolidated financial statements.

2

Table of Contents

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 
Three Months Ended
 
Six Months Ended

June 30,
 
June 30,
(In thousands)
2013
 
2012
 
2013
 
2012
Net income
$
34,307

 
$
25,595

 
$
66,359

 
$
48,805

Unrealized (losses) gains on securities
 
 
 
 
 
 
 
Before tax
(71,463
)
 
7,959

 
(78,918
)
 
4,740

Tax effect
28,341

 
(3,160
)
 
31,147

 
(1,884
)
Net of tax
(43,122
)
 
4,799

 
(47,771
)
 
2,856

Less: Reclassification of net gains included in net income
 
 
 
 
 
 
 
Before tax
2

 
1,109

 
253

 
1,925

Tax effect
(1
)
 
(445
)
 
(101
)
 
(772
)
Net of tax
1

 
664

 
152

 
1,153

Net unrealized (losses) gains on securities
(43,123
)
 
4,135

 
(47,923
)
 
1,703

Unrealized gains on derivative instruments
 
 
 
 
 
 
 
Before tax
2,169

 
936

 
3,643

 
1,732

Tax effect
(865
)
 
(371
)
 
(1,451
)
 
(687
)
Net unrealized gains on derivative instruments
1,304

 
565

 
2,192

 
1,045

Foreign currency translation adjustment
 
 
 
 
 
 
 
Before tax
(8,241
)
 
2,701

 
(14,545
)
 
2,701

Tax effect
1,923

 
(600
)
 
3,361

 
(600
)
Net foreign currency translation adjustment
(6,318
)
 
2,101

 
(11,184
)
 
2,101

Total other comprehensive (loss) income
(48,137
)
 
6,801

 
(56,915
)
 
4,849

Comprehensive (loss) income
$
(13,830
)
 
$
32,396

 
$
9,444

 
$
53,654

See accompanying notes to unaudited consolidated financial statements.

3

Table of Contents

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(In thousands)
Preferred
stock
 
Common
stock
 
Surplus
 
Treasury
stock
 
Retained
earnings
 
Accumulated
other
comprehensive
income (loss)
 
Total
shareholders’
equity
Balance at December 31, 2011
$
49,768

 
$
35,982

 
$
1,001,316

 
$
(112
)
 
$
459,457

 
$
(2,878
)
 
$
1,543,533

Net income

 

 

 

 
48,805

 

 
48,805

Other comprehensive income, net of tax

 

 

 

 

 
4,849

 
4,849

Cash dividends declared on common stock

 

 

 

 
(3,261
)
 

 
(3,261
)
Dividends on preferred stock

 

 

 

 
(3,793
)
 

 
(3,793
)
Accretion on preferred stock
69

 

 

 

 
(69
)
 

 

Stock-based compensation

 

 
4,639

 

 

 

 
4,639

Issuance of Series C preferred stock
126,500

 

 
(3,810
)
 

 

 

 
122,690

Common stock issued for:
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options and warrants

 
420

 
7,676

 
(6,391
)
 

 

 
1,705

Restricted stock awards

 
110

 
1,692

 
(871
)
 

 

 
931

Employee stock purchase plan

 
39

 
1,223

 

 

 

 
1,262

Director compensation plan

 
22

 
692

 

 

 

 
714

Balance at June 30, 2012
$
176,337

 
$
36,573

 
$
1,013,428

 
$
(7,374
)
 
$
501,139

 
$
1,971

 
$
1,722,074

Balance at December 31, 2012
$
176,406

 
$
37,108

 
$
1,036,295

 
$
(7,838
)
 
$
555,023

 
$
7,711

 
$
1,804,705

Net income

 

 

 

 
66,359

 

 
66,359

Other comprehensive loss, net of tax

 

 

 

 

 
(56,915
)
 
(56,915
)
Cash dividends declared on common stock

 

 

 

 
(3,328
)
 

 
(3,328
)
Dividends on preferred stock

 

 

 

 
(5,163
)
 

 
(5,163
)
Accretion on preferred stock
70

 

 

 

 
(70
)
 

 

Stock-based compensation

 

 
4,628

 

 

 

 
4,628

Common stock issued for:
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions

 
648

 
22,422

 

 

 

 
23,070

Exercise of stock options and warrants

 
46

 
1,301

 
(214
)
 

 

 
1,133

Restricted stock awards

 
121

 
140

 
(162
)
 

 

 
99

Employee stock purchase plan

 
31

 
1,287

 

 

 

 
1,318

Director compensation plan

 
31

 
723

 

 

 

 
754

Balance at June 30, 2013
$
176,476

 
$
37,985

 
$
1,066,796

 
$
(8,214
)
 
$
612,821

 
$
(49,204
)
 
$
1,836,660

See accompanying notes to unaudited consolidated financial statements.

4

Table of Contents


WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
Six Months Ended

June 30,
(In thousands)
2013
 
2012
Operating Activities:
 
 
 
Net income
$
66,359

 
$
48,805

Adjustments to reconcile net income to net cash provided by (used for) operating activities
 
 
 
Provision for credit losses
31,069

 
38,091

Depreciation and amortization
13,874

 
11,442

Stock-based compensation expense
4,628

 
4,639

Tax benefit from stock-based compensation arrangements
223

 
1,228

Excess tax benefits from stock-based compensation arrangements
(326
)
 
(800
)
Net amortization of premium on securities
155

 
4,830

Mortgage servicing rights fair value change and amortization, net
(1,456
)
 
(1,920
)
Originations and purchases of mortgage loans held-for-sale
(2,025,231
)
 
(1,568,240
)
Proceeds from sales of mortgage loans held-for-sale
1,954,766

 
1,392,580

Bank owned life insurance income, net of claims
(1,748
)
 
(1,424
)
(Increase) decrease in trading securities, net
(76
)
 
1,882

Net increase in brokerage customer receivables
(1,350
)
 
(3,523
)
Gains on mortgage loans sold
(55,326
)
 
(29,920
)
Gains on available-for-sale securities, net
(253
)
 
(1,925
)
Gain on bargain purchases, net

 
(785
)
Loss on sales of premises and equipment, net

 
471

Net (gain) loss on sales and fair value adjustments of other real estate owned
(1,926
)
 
10,302

Decrease (increase) in accrued interest receivable and other assets, net
35,279

 
(245,123
)
(Decrease) increase in accrued interest payable and other liabilities, net
(12,930
)
 
10,600

Net Cash Provided by (Used for) Operating Activities
5,731

 
(328,790
)
Investing Activities:
 
 
 
Proceeds from maturities of available-for-sale securities
120,803

 
410,640

Proceeds from sales of available-for-sale securities
84,459

 
1,364,546

Purchases of available-for-sale securities
(205,372
)
 
(1,036,877
)
Net cash paid for acquisitions
(9,350
)
 
(129,742
)
Divestiture of operations
(149,100
)
 

Proceeds from sales of other real estate owned
40,127

 
49,773

Proceeds received from the FDIC related to reimbursements on covered assets
21,483

 
115,280

Net decrease (increase) in interest-bearing deposits with banks
653,816

 
(368,166
)
Net increase in loans
(530,412
)
 
(487,135
)
Purchases of premises and equipment, net
(13,097
)
 
(27,296
)
Net Cash Provided by (Used for) Investing Activities
13,357

 
(108,977
)
Financing Activities:
 
 
 
(Decrease) increase in deposit accounts
(242,433
)
 
609,317

Decrease in other borrowings, net
(22,881
)
 
(341,111
)
Increase in Federal Home Loan Bank advances, net
172,000

 
90,000

Repayment of subordinated notes
(5,000
)
 
(20,000
)
Excess tax benefits from stock-based compensation arrangements
326

 
800

Net proceeds from issuance of Series C preferred stock

 
122,690

Issuance of common shares resulting from exercise of stock options, employee stock purchase plan and conversion of common stock warrants
3,457

 
10,646

Common stock repurchases
(376
)
 
(7,262
)
Dividends paid
(5,910
)
 
(5,261
)
Net Cash (Used for) Provided by Financing Activities
(100,817
)
 
459,819

Net (Decrease) Increase in Cash and Cash Equivalents
(81,729
)
 
22,052

Cash and Cash Equivalents at Beginning of Period
315,028

 
169,704

Cash and Cash Equivalents at End of Period
$
233,299

 
$
191,756

See accompanying notes to unaudited consolidated financial statements.

5

Table of Contents

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The consolidated financial statements of Wintrust Financial Corporation and Subsidiaries (“Wintrust” or “the Company”) presented herein are unaudited, but in the opinion of management reflect all necessary adjustments of a normal or recurring nature for a fair presentation of results as of the dates and for the periods covered by the consolidated financial statements.
The accompanying consolidated financial statements are unaudited and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations or cash flows in accordance with U.S. generally accepted accounting principles ("GAAP"). The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 (“2012 Form 10-K”). Operating results reported for the three-month and six-month periods are not necessarily indicative of the results which may be expected for the entire year. Reclassifications of certain prior period amounts have been made to conform to the current period presentation.
The preparation of the financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities. Management believes that the estimates made are reasonable, however, changes in estimates may be required if economic or other conditions develop differently from management’s expectations. Certain policies and accounting principles inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the financial statements. Management currently views the determination of the allowance for loan losses, allowance for covered loan losses and the allowance for losses on lending-related commitments, loans acquired with evidence of credit quality deterioration since origination, estimations of fair value, the valuations required for impairment testing of goodwill, the valuation and accounting for derivative instruments and income taxes as the accounting areas that require the most subjective and complex judgments, and as such could be the most subject to revision as new information becomes available. Descriptions of our significant accounting policies are included in Note 1 - “Summary of Significant Accounting Policies” of the Company’s 2012 Form 10-K.
(2) Recent Accounting Developments
Accumulated Other Comprehensive Income Reporting by Component
In February 2013, the FASB issued ASU No. 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” which adds disclosures to make reporting of accumulated other comprehensive income more informative. Specifically, the new guidance requires a Company to identify amounts reclassified out of other comprehensive income by component. The guidance is effective for fiscal years beginning after December 15, 2012. The Company has included the required disclosures in this Form 10-Q by disclosing the reclassification amounts related to its securities, derivatives and foreign currency translation components. Other than requiring additional disclosures, adoption of this guidance did not have a material impact on our consolidated financial statements. See Note 17 - Shareholders' Equity and Earnings Per Share, for further information.
Balance Sheet Offsetting
In January 2013, the FASB issued ASU No. 2013-01, "Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” to address the disclosure requirements within ASU No. 2011-11, "Disclosures about Offsetting Assets and Liabilities". ASU 2011-11 requires disclosure showing the Company's gross and net positions for derivatives and financial transactions that are either offset in accordance with GAAP or are subject to a master netting or similar agreement. The guidance is effective for fiscal years beginning on or after January 1, 2013. The Company has included required disclosures for the current and comparative periods as required by the new guidance. Other than requiring additional disclosures, adoption of this guidance did not have a material impact on our consolidated financial statements. See Note 14 - Derivative Financial Instruments, for further information.
Subsequent Accounting for Indemnification Assets
In October 2012, the FASB issued ASU No. 2012-06, “Business Combinations (Topic 805): Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution,” to address the diversity in practice and interpret guidance related to the subsequent measurement of an indemnification asset recognized in a government-assisted acquisition. These indemnification assets are recorded by the Company as FDIC indemnification assets on the Consolidated Statements of Condition. This ASU clarifies existing guidance by asserting that subsequent changes in expected cash flows related to an indemnification asset should be amortized over the shorter of the life of the indemnification agreement or the life of the underlying loan. This guidance is to be applied with respect to changes in cash flows on existing indemnification agreements as well as prospectively to new indemnification agreements. The guidance is effective for fiscal years beginning after December 15, 2012. As of January 1, 2013, the Company is accounting for its FDIC

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indemnification assets in accordance with ASU No. 2012-06. Adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

(3) Business Combinations
FDIC-Assisted Transactions
In 2010 and 2011, the Company acquired the banking operations, including the acquisition of certain assets and the assumption of liabilities, of six financial institutions in FDIC-assisted transactions.
Since January 1, 2012, the Company has acquired the banking operations, including the acquisition of certain assets and the assumption of liabilities, of three financial institutions in FDIC-assisted transactions. The following table presents details related to the three recent transactions:
(Dollars in thousands)
Charter
National
 
Second Federal
 
First United Bank
Date of acquisition
February 10, 2012
 
July 20, 2012
 
September 28, 2012
Fair value of assets acquired, at the acquisition date
$
92,355

 
$
171,625

 
$
328,408

Fair value of loans acquired, at the acquisition date
45,555

 

 
77,964

Fair value of liabilities assumed, at the acquisition date
91,570

 
171,582

 
321,734

Fair value of reimbursable losses, at the acquisition date(1)
13,164

 

 
67,190

Gain on bargain purchase recognized
785

 
43

 
6,675

(1) As no assets subject to loss sharing agreements were acquired in the acquisition of Second Federal, there was no fair value of reimbursable losses.
Loans comprise the majority of the assets acquired in nearly all of these FDIC-assisted transactions since 2010, most of which are subject to loss sharing agreements with the FDIC whereby the FDIC has agreed to reimburse the Company for 80% of losses incurred on the purchased loans, other real estate owned (“OREO”), and certain other assets. Additionally, the loss share agreements with the FDIC require the Company to reimburse the FDIC in the event that actual losses on covered assets are lower than the original loss estimates agreed upon with the FDIC with respect of such assets in the loss share agreements. The Company refers to the loans subject to these loss-sharing agreements as “covered loans” and uses the term “covered assets” to refer to covered loans, covered OREO and certain other covered assets. The agreements with the FDIC require that the Company follow certain servicing procedures or risk losing the FDIC reimbursement of covered asset losses.
On their respective acquisition dates in 2012, the Company announced that its wholly-owned subsidiary banks, Old Plank Trail Community Bank, N.A. ("Old Plank Trail Bank"), Hinsdale Bank and Trust Company ("Hinsdale Bank") and Barrington Bank and Trust Company, N.A. ("Barrington"), acquired certain assets and liabilities and the banking operations of First United Bank of Crete, Illinois ("First United Bank"), Second Federal Savings and Loan Association of Chicago ("Second Federal") and Charter National Bank and Trust (“Charter National”), respectively, in FDIC-assisted transactions. The loans covered by the loss sharing agreements are classified and presented as covered loans and the estimated reimbursable losses are recorded as an FDIC indemnification asset in the Consolidated Statements of Condition. The Company recorded the acquired assets and liabilities at their estimated fair values at the acquisition date. The fair value for loans reflected expected credit losses at the acquisition date. Therefore, the Company will only recognize a provision for credit losses and charge-offs on the acquired loans for any further credit deterioration subsequent to the acquisition date. See Note 7 — Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans for further discussion of the allowance on covered loans.
The loss share agreements with the FDIC cover realized losses on loans, foreclosed real estate and certain other assets. These loss share assets are measured separately from the loan portfolios because they are not contractually embedded in the loans and are not transferable with the loans should the Company choose to dispose of them. Fair values at the acquisition dates were estimated based on projected cash flows available for loss-share based on the credit adjustments estimated for each loan pool and the loss share percentages. The loss share assets are also separately measured from the related loans and foreclosed real estate and recorded as FDIC indemnification assets on the Consolidated Statements of Condition. Subsequent to the acquisition date, reimbursements received from the FDIC for actual incurred losses will reduce the FDIC indemnification assets. Reductions to expected losses, to the extent such reductions to expected losses are the result of an improvement to the actual or expected cash flows from the covered assets, will also reduce the FDIC indemnification assets. Although these assets are contractual receivables from the FDIC, there are no contractual interest rates. Additions to expected losses will require an increase to the allowance for loan losses and a corresponding increase to the FDIC indemnification assets. The corresponding accretion is recorded as a component of non-interest income on the Consolidated Statements of Income.

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The following table summarizes the activity in the Company’s FDIC indemnification asset during the periods indicated:

Three Months Ended
 
Six Months Ended
(Dollars in thousands)
June 30, 2013
 
June 30, 2012
 
June 30, 2013
 
June 30, 2012
Balance at beginning of period
$
170,696

 
$
263,212

 
$
208,160

 
$
344,251

Additions from acquisitions

 

 

 
13,164

Additions from reimbursable expenses
2,827

 
6,113

 
7,860

 
12,977

Amortization
(1,653
)
 
(1,204
)
 
(4,121
)
 
(2,780
)
Changes in expected reimbursements from the FDIC for changes in expected credit losses
(26,638
)
 
(12,551
)
 
(52,735
)
 
(29,764
)
Payments received from the FDIC
(7,551
)
 
(33,002
)
 
(21,483
)
 
(115,280
)
Balance at end of period
$
137,681

 
$
222,568

 
$
137,681

 
$
222,568

Divestiture of Previous FDIC-Assisted Acquisition
On February 1, 2013, the Company completed the divestiture of the deposits and current banking operations of Second Federal to an unaffiliated financial institution. Through this transaction, the Company divested approximately $149 million of related deposits.
Other Recent Bank Acquisitions
On May 1, 2013, the Company completed its acquisition of First Lansing Bancorp, Inc. ("FLB"). FLB was the parent company of First National Bank of Illinois ("FNBI"), which operated seven banking locations in the south and southwest suburbs of Chicago, as well as one location in northwest Indiana. As part of this transaction, FNBI was merged into Old Plank Trail Bank. The Company acquired assets with a fair value of approximately $373.4 million, including approximately $123.0 million of loans, and assumed liabilities with a fair value of approximately $334.7 million, including approximately $331.4 million of deposits. Additionally, the Company recorded goodwill of $14.0 million on the acquisition.
On December 12, 2012, the Company acquired HPK Financial Corporation ("HPK"). HPK was the parent company of Hyde Park Bank & Trust Company ("Hyde Park Bank"), which operated two banking locations in the Hyde Park neighborhood of Chicago, Illinois. As part of this transaction, Hyde Park Bank was merged into the Company's wholly-owned subsidiary bank, Beverly Bank & Trust Company, N.A. ("Beverly Bank"). The Company acquired assets with a fair value of approximately $371.6 million, including approximately $118.5 million of loans, and assumed liabilities with a fair value of approximately $344.1 million, including approximately $243.8 million of deposits. Additionally, the Company recorded goodwill of $12.6 million on the acquisition.
On April 13, 2012, the Company acquired a branch of Suburban Bank & Trust Company (“Suburban”) located in Orland Park, Illinois. Through this transaction, the Company acquired approximately $52 million of deposits and $3 million of loans. The Company recorded goodwill of $1.5 million on the branch acquisition.
See Note 18—Subsequent Events for discussion regarding the Company's announcement in July 2013 of the signing of a definitive agreement to acquire Diamond Bancorp, Inc. ("Diamond").
Specialty Finance Acquisition
On June 8, 2012, the Company completed its acquisition of Macquarie Premium Funding Inc., the Canadian insurance premium funding business of Macquarie Group. Through this transaction, the Company acquired approximately $213 million of gross premium finance receivables. The Company recorded goodwill of approximately $21.9 million at the time of the acquisition.
Wealth Management Acquisitions
On March 30, 2012, the Company’s wholly-owned subsidiary, The Chicago Trust Company, N.A. (“CTC”), acquired the trust operations of Suburban. Through this transaction, CTC acquired trust accounts having assets under administration of approximately $160 million, in addition to land trust accounts. The Company recorded goodwill of $1.8 million on the trust operations acquisition.

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Purchased loans with evidence of credit quality deterioration since origination
Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. Expected future cash flows at the purchase date in excess of the fair value of loans are recorded as interest income over the life of the loans if the timing and amount of the future cash flows is reasonably estimable (“accretable yield”). The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference and represents probable losses in the portfolio.
In determining the acquisition date fair value of purchased impaired loans, and in subsequent accounting, the Company aggregates these purchased loans into pools of loans by common risk characteristics, such as credit risk rating and loan type. Subsequent to the purchase date, increases in cash flows over those expected at the purchase date are recognized as interest income prospectively. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses.
The Company purchased a portfolio of life insurance premium finance receivables in 2009. These purchased life insurance premium finance receivables are valued on an individual basis with the accretable component being recognized into interest income using the effective yield method over the estimated remaining life of the loans. The non-accretable portion is evaluated each quarter and if the loans’ credit related conditions improve, a portion is transferred to the accretable component and accreted over future periods. In the event a specific loan prepays in whole, any remaining accretable and non-accretable discount is recognized in income immediately. If credit related conditions deteriorate, an allowance related to these loans will be established as part of the provision for credit losses.
See Note 6—Loans, for more information on loans acquired with evidence of credit quality deterioration since origination.
(4) Cash and Cash Equivalents
For purposes of the Consolidated Statements of Cash Flows, the Company considers cash and cash equivalents to include cash on hand, cash items in the process of collection, non-interest bearing amounts due from correspondent banks, federal funds sold and securities purchased under resale agreements with original maturities of three months or less.


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Table of Contents

(5) Available-For-Sale Securities
The following tables are a summary of the available-for-sale securities portfolio as of the dates shown:
 

June 30, 2013
(Dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
U.S. Treasury
$
225,200

 
$
134

 
$
(14,359
)
 
$
210,975

U.S. Government agencies
996,137

 
1,976

 
(39,655
)
 
958,458

Municipal
152,208

 
1,281

 
(3,362
)
 
150,127

Corporate notes and other:
 
 
 
 
 
 
 
Financial issuers
133,453

 
2,290

 
(2,783
)
 
132,960

Other
8,838

 
135

 

 
8,973

Mortgage-backed: (1)
 
 
 
 
 
 
 
Mortgage-backed securities
279,925

 
3,971

 
(14,866
)
 
269,030

Collateralized mortgage obligations
63,833

 
434

 
(530
)
 
63,737

Other equity securities
52,437

 
746

 
(3,619
)
 
49,564

Total available-for-sale securities
$
1,912,031

 
$
10,967

 
$
(79,174
)
 
$
1,843,824

 

December 31, 2012
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in thousands)
 
 
 
U.S. Treasury
$
220,226

 
$
198

 
$
(937
)
 
$
219,487

U.S. Government agencies
986,186

 
4,839

 
(986
)
 
990,039

Municipal
107,868

 
2,899

 
(296
)
 
110,471

Corporate notes and other:
 
 
 
 
 
 
 
Financial issuers
142,205

 
2,452

 
(3,982
)
 
140,675

Other
13,911

 
220

 

 
14,131

Mortgage-backed: (1)
 
 
 
 
 
 
 
Mortgage-backed securities
188,485

 
8,805

 
(30
)
 
197,260

Collateralized mortgage obligations
73,386

 
928

 

 
74,314

Other equity securities
52,846

 
215

 
(3,362
)
 
49,699

Total available-for-sale securities
$
1,785,113

 
$
20,556

 
$
(9,593
)
 
$
1,796,076

 
 
June 30, 2012
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in thousands)
 
 
 
U.S. Treasury
$
25,054

 
$
191

 
$
(2
)
 
$
25,243

U.S. Government agencies
636,117

 
4,262

 
(167
)
 
640,212

Municipal
77,397

 
2,414

 
(83
)
 
79,728

Corporate notes and other:
 
 
 
 
 
 
 
Financial issuers
143,892

 
2,434

 
(7,663
)
 
138,663

Other
19,311

 
253

 

 
19,564

Mortgage-backed: (1)
 
 
 
 
 
 
 
Mortgage-backed securities
205,689

 
12,889

 

 
218,578

Collateralized mortgage obligations
36,636

 
528

 

 
37,164

Other equity securities
42,726

 
122

 
(5,298
)
 
37,550

Total available-for-sale securities
$
1,186,822

 
$
23,093

 
$
(13,213
)
 
$
1,196,702


(1)
Consisting entirely of residential mortgage-backed securities, none of which are subprime.

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Table of Contents

The following table presents the portion of the Company’s available-for-sale securities portfolio which has gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position at June 30, 2013:
 
 
Continuous unrealized
losses existing for
less than 12 months
 
Continuous unrealized
losses existing for
greater than 12 months
 
Total
(Dollars in thousands)
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
U.S. Treasury
$
190,813

 
$
(14,359
)
 
$

 
$

 
$
190,813

 
$
(14,359
)
U.S. Government agencies
625,955

 
(39,654
)
 
6,024

 
(1
)
 
631,979

 
(39,655
)
Municipal
85,166

 
(3,360
)
 
618

 
(2
)
 
85,784

 
(3,362
)
Corporate notes and other:
 
 
 
 
 
 
 
 
 
 
 
Financial issuers
16,491

 
(301
)
 
63,459

 
(2,482
)
 
79,950

 
(2,783
)
Other

 

 

 

 

 

Mortgage-backed:
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
179,965

 
(14,866
)
 

 

 
179,965

 
(14,866
)
Collateralized mortgage obligations
32,504

 
(530
)
 

 

 
32,504

 
(530
)
Other equity securities
13,171

 
(555
)
 
22,337

 
(3,064
)
 
35,508

 
(3,619
)
Total
$
1,144,065

 
$
(73,625
)
 
$
92,438

 
$
(5,549
)
 
$
1,236,503

 
$
(79,174
)

The Company conducts a regular assessment of its investment securities to determine whether securities are other-than-temporarily impaired considering, among other factors, the nature of the securities, credit ratings or financial condition of the issuer, the extent and duration of the unrealized loss, expected cash flows, market conditions and the Company’s ability to hold the securities through the anticipated recovery period.
The Company does not consider securities with unrealized losses at June 30, 2013 to be other-than-temporarily impaired. The Company does not intend to sell these investments and it is more likely than not that the Company will not be required to sell these investments before recovery of the amortized cost bases, which may be the maturity dates of the securities. The unrealized losses within each category have occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase. Securities with continuous unrealized losses existing for more than twelve months were primarily corporate securities of financial issuers and auction rate securities included in other equity securities. The corporate securities of financial issuers in this category were comprised of six fixed-to-floating rate bonds and three trust-preferred securities, all of which continue to be considered investment grade. Additionally, a review of the issuers indicated that they all have strong capital ratios.
The following table provides information as to the amount of gross gains and gross losses realized and proceeds received through the sales of available-for-sale investment securities:
 

Three months ended June 30,
 
Six months ended June 30,
(Dollars in thousands)
2013
 
2012
 
2013
 
2012
Realized gains
$
3

 
$
1,109

 
$
316

 
$
1,937

Realized losses
(1
)
 

 
(63
)
 
(12
)
Net realized gains
$
2

 
$
1,109

 
$
253

 
$
1,925

Other than temporary impairment charges

 

 

 

Gains on available-for-sale securities, net
$
2

 
$
1,109

 
$
253

 
$
1,925

Proceeds from sales of available-for-sale securities
$
43,403

 
$
627,177

 
$
84,459

 
$
1,364,546


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The amortized cost and fair value of securities as of June 30, 2013, December 31, 2012 and June 30, 2012, by contractual maturity, are shown in the following table. Contractual maturities may differ from actual maturities as borrowers may have the right to call or repay obligations with or without call or prepayment penalties. Mortgage-backed securities are not included in the maturity categories in the following maturity summary as actual maturities may differ from contractual maturities because the underlying mortgages may be called or prepaid without penalties:
 

June 30, 2013
 
December 31, 2012
 
June 30, 2012
(Dollars in thousands)
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Due in one year or less
$
284,334

 
$
284,734

 
$
188,594

 
$
189,015

 
$
67,163

 
$
67,488

Due in one to five years
320,175

 
320,189

 
419,588

 
419,654

 
467,468

 
466,553

Due in five to ten years
382,837

 
366,341

 
361,037

 
362,135

 
110,465

 
109,780

Due after ten years
528,490

 
490,229

 
501,177

 
503,999

 
256,675

 
259,589

Mortgage-backed
343,758

 
332,767

 
261,871

 
271,574

 
242,325

 
255,742

Other equity securities
52,437

 
49,564

 
52,846

 
49,699

 
42,726

 
37,550

Total available-for-sale securities
$
1,912,031

 
$
1,843,824

 
$
1,785,113

 
$
1,796,076

 
$
1,186,822

 
$
1,196,702

Securities having a carrying value of $1.1 billion at June 30, 2013 and December 31, 2012 and $782.8 million at June 30, 2012, were pledged as collateral for public deposits, trust deposits, FHLB advances, securities sold under repurchase agreements and derivatives. At June 30, 2013, there were no securities of a single issuer, other than U.S. Government-sponsored agency securities, which exceeded 10% of shareholders’ equity.
(6) Loans
The following table shows the Company’s loan portfolio by category as of the dates shown:
 
June 30,
 
December 31,
 
June 30,
(Dollars in thousands)
2013
 
2012
 
2012
Balance:
 
 
 
 
 
Commercial
$
3,120,576

 
$
2,914,798

 
$
2,673,181

Commercial real-estate
4,093,983

 
3,864,118

 
3,666,519

Home equity
758,260

 
788,474

 
820,991

Residential real-estate
384,961

 
367,213

 
375,494

Premium finance receivables—commercial
2,165,734

 
1,987,856

 
1,830,044

Premium finance receivables—life insurance
1,821,147

 
1,725,166

 
1,656,200

Indirect consumer
64,521

 
77,333

 
72,482

Consumer and other
107,710

 
103,985

 
107,931

Total loans, net of unearned income, excluding covered loans
$
12,516,892

 
$
11,828,943

 
$
11,202,842

Covered loans
454,602

 
560,087

 
614,062

Total loans
$
12,971,494

 
$
12,389,030

 
$
11,816,904

Mix:
 
 
 
 
 
Commercial
24
%
 
24
%
 
23
%
Commercial real-estate
31

 
31

 
31

Home equity
6

 
6

 
7

Residential real-estate
3

 
3

 
3

Premium finance receivables—commercial
16

 
16

 
15

Premium finance receivables—life insurance
14

 
14

 
14

Indirect consumer
1

 
1

 
1

Consumer and other
1

 
1

 
1

Total loans, net of unearned income, excluding covered loans
96
%
 
96
%
 
95
%
Covered loans
4

 
4

 
5

Total loans
100
%
 
100
%
 
100
%
Certain premium finance receivables are recorded net of unearned income. The unearned income portions of such premium finance receivables were $41.5 million at June 30, 2013, $41.1 million at December 31, 2012 and $41.9 million at June 30, 2012,

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respectively. Certain life insurance premium finance receivables attributable to the life insurance premium finance loan acquisition in 2009 as well as the covered loans acquired in the FDIC-assisted acquisitions are recorded net of credit discounts. See “Acquired Loan Information at Acquisition” below.
Indirect consumer loans include auto, boat and other indirect consumer loans. Total loans, excluding loans acquired with evidence of credit quality deterioration since origination, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $(3.6) million at June 30, 2013, $13.2 million at December 31, 2012 and $13.8 million at June 30, 2012. The net credit balance at June 30, 2013 is primarily the result of purchase accounting adjustments related to the acquisition of FNBI during the second quarter of 2013.
The Company’s loan portfolio is generally comprised of loans to consumers and small to medium-sized businesses located within the geographic market areas that the banks serve. The premium finance receivables portfolios are made to customers on a national basis and the majority of the indirect consumer loans were generated through a network of local automobile dealers. The Company strives to maintain a loan portfolio that is diverse in terms of loan type, industry, borrower and geographic concentrations. Such diversification reduces the exposure to economic downturns that may occur in different segments of the economy or in different industries.
It is the policy of the Company to review each prospective credit in order to determine the appropriateness and, when required, the adequacy of security or collateral necessary to obtain when making a loan. The type of collateral, when required, will vary from liquid assets to real estate. The Company seeks to ensure access to collateral, in the event of default, through adherence to state lending laws and the Company’s credit monitoring procedures.
Acquired Loan Information at Acquisition—Loans with evidence of credit quality deterioration since origination
As part of our previous acquisitions, we acquired loans for which there was evidence of credit quality deterioration since origination and we determined that it was probable that the Company would be unable to collect all contractually required principal and interest payments.

The following table presents the unpaid principal balance and carrying value for these acquired loans:
 

June 30, 2013
 
December 31, 2012
 
Unpaid
Principal
 
Carrying
 
Unpaid
Principal
 
Carrying
(Dollars in thousands)
Balance
 
Value
 
Balance
 
Value
Bank acquisitions
$
549,781

 
$
416,733

 
$
674,868

 
$
503,837

Life insurance premium finance loans acquisition
492,221

 
474,450

 
536,503

 
514,459

For loans acquired with evidence of credit quality deterioration since origination as a result of acquisitions during the six months ended June 30, 2013, the following table provides estimated details on these loans at the date of acquisition:

(Dollars in thousands)
FNBI
Contractually required payments including interest
$
32,022

Less: Nonaccretable difference
8,890

Cash flows expected to be collected (1)
23,132

Less: Accretable yield
2,055

Fair value of loans acquired with evidence of credit quality deterioration since origination
$
21,077

(1)
Represents undiscounted expected principal and interest cash flows at acquisition.

See Note 7—Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans for further discussion regarding the allowance for loan losses associated with loans acquired with evidence of credit quality deterioration since origination at June 30, 2013.

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Table of Contents

Accretable Yield Activity
Changes in expected cash flows may vary from period to period as the Company periodically updates its cash flow model assumptions for loans acquired with evidence of credit quality deterioration since origination. The factors that most significantly affect the estimates of gross cash flows expected to be collected, and accordingly the accretable yield, include changes in the benchmark interest rate indices for variable-rate products and changes in prepayment assumptions and loss estimates. The following table provides activity for the accretable yield of loans acquired with evidence of credit quality deterioration since origination:
 
 
Three Months Ended
June 30, 2013
 
Three Months Ended
June 30, 2012
(Dollars in thousands)
Bank Acquisitions
 
Life Insurance
Premium Finance Loans
 
Bank
Acquisitions
 
Life Insurance
Premium
Finance Loans
Accretable yield, beginning balance
$
121,725

 
$
11,218

 
$
182,222

 
$
15,848

Acquisitions
2,055

 

 

 

Accretable yield amortized to interest income
(9,347
)
 
(2,254
)
 
(13,387
)
 
(2,749
)
Accretable yield amortized to indemnification asset (1)
(11,906
)
 

 
(18,063
)
 

Reclassification from non-accretable difference (2)
30,792

 
1,007

 
7,590

 
1,145

(Decreases) increases in interest cash flows due to payments and changes in interest rates
(2,463
)
 
316

 
13,439

 
382

Accretable yield, ending balance (3)
$
130,856

 
$
10,287

 
$
171,801

 
$
14,626

 
 
Six Months Ended
June 30, 2013
 
Six Months Ended
June 30, 2012
(Dollars in thousands)
Bank Acquisitions
 
Life Insurance
Premium Finance Loans
 
Bank
Acquisitions
 
Life Insurance
Premium
Finance Loans
Accretable yield, beginning balance
$
143,224

 
$
13,055

 
$
173,120

 
$
18,861

Acquisitions
1,977

 

 
2,288

 

Accretable yield amortized to interest income
(18,924
)
 
(4,273
)
 
(28,279
)
 
(6,486
)
Accretable yield amortized to indemnification asset (1)
(20,612
)
 

 
(39,440
)
 

Reclassification from non-accretable difference (2)
36,204

 
1,007

 
49,191

 
1,145

(Decreases) increases in interest cash flows due to payments and changes in interest rates
(11,013
)
 
498

 
14,921

 
1,106

Accretable yield, ending balance (3)
$
130,856

 
$
10,287

 
$
171,801

 
$
14,626


(1)
Represents the portion of the current period accreted yield, resulting from lower expected losses, applied to reduce the loss share indemnification asset.
(2)
Reclassification is the result of subsequent increases in expected principal cash flows.
(3)
As of June 30, 2013, the Company estimates that the remaining accretable yield balance to be amortized to the indemnification asset for the bank acquisitions is $52.2 million. The remainder of the accretable yield related to bank acquisitions is expected to be amortized to interest income.


14

Table of Contents

(7) Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans
The tables below show the aging of the Company’s loan portfolio at June 30, 2013December 31, 2012 and June 30, 2012:
As of June 30, 2013

 
90+ days and still accruing
 
60-89 days past due
 
30-59 days past due
 

 

(Dollars in thousands)
Nonaccrual
 
 
 
 
Current
 
Total Loans
Loan Balances:
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
15,432

 
$

 
$
2,940

 
$
9,933

 
$
1,423,823

 
$
1,452,128

Franchise

 

 

 
450

 
201,790

 
202,240

Mortgage warehouse lines of credit

 

 

 

 
174,422

 
174,422

Community Advantage—homeowners association

 

 

 

 
83,003

 
83,003

Aircraft

 

 

 

 
13,174

 
13,174

Asset-based lending
1,816

 
100

 
2,305

 
7,127

 
919,106

 
930,454

Tax exempt

 

 

 

 
151,492

 
151,492

Leases

 

 

 

 
102,409

 
102,409

Other

 

 

 

 
98

 
98

Purchased non-covered commercial (1)

 
190

 

 
1,632

 
9,334

 
11,156

Total commercial
17,248

 
290

 
5,245

 
19,142

 
3,078,651

 
3,120,576

Commercial real-estate: