WTFC-2013.09.30-10Q
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 September 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, 39,933,549 shares, as of October 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.
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)
September 30,
2013
 
December 31,
2012
 
September 30,
2012
Assets
 
 
 
 
 
Cash and due from banks
$
322,866

 
$
284,731

 
$
186,752

Federal funds sold and securities purchased under resale agreements
7,771

 
30,297

 
26,062

Interest-bearing deposits with other banks
681,834

 
1,035,743

 
934,430

Available-for-sale securities, at fair value
1,781,883

 
1,796,076

 
1,256,768

Trading account securities
259

 
583

 
635

Federal Home Loan Bank and Federal Reserve Bank stock
76,755

 
79,564

 
80,687

Brokerage customer receivables
29,253

 
24,864

 
30,633

Mortgage loans held-for-sale, at fair value
329,186

 
385,033

 
548,300

Mortgage loans held-for-sale, at lower of cost or market
5,159

 
27,167

 
21,685

Loans, net of unearned income, excluding covered loans
12,581,039

 
11,828,943

 
11,489,900

Covered loans
415,988

 
560,087

 
657,525

Total loans
12,997,027

 
12,389,030

 
12,147,425

Less: Allowance for loan losses
107,188

 
107,351

 
112,287

Less: Allowance for covered loan losses
12,924

 
13,454

 
21,926

Net loans
12,876,915

 
12,268,225

 
12,013,212

Premises and equipment, net
517,942

 
501,205

 
461,905

FDIC indemnification asset
100,313

 
208,160

 
238,305

Accrued interest receivable and other assets
576,121

 
511,617

 
557,884

Trade date securities receivable
—

 
—

 
307,295

Goodwill
357,309

 
345,401

 
331,634

Other intangible assets
18,982

 
20,947

 
22,405

Total assets
$
17,682,548

 
$
17,519,613

 
$
17,018,592

Liabilities and Shareholders’ Equity
 
 
 
 
 
Deposits:
 
 
 
 
 
Non-interest bearing
$
2,622,518

 
$
2,396,264

 
$
2,162,215

Interest bearing
12,024,928

 
12,032,280

 
11,685,750

Total deposits
14,647,446

 
14,428,544

 
13,847,965

Notes payable
1,546

 
2,093

 
2,275

Federal Home Loan Bank advances
387,852

 
414,122

 
414,211

Other borrowings
246,870

 
274,411

 
377,229

Secured borrowings—owed to securitization investors
—

 
—

 
—

Subordinated notes
10,000

 
15,000

 
15,000

Junior subordinated debentures
249,493

 
249,493

 
249,493

Trade date securities payable
—

 
—

 
412

Accrued interest payable and other liabilities
265,775

 
331,245

 
350,707

Total liabilities
15,808,982

 
15,714,908

 
15,257,292

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

 
49,906

 
49,871

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

 
126,500

 
126,500

Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at September 30, 2013, December 31, 2012, and September 30, 2012; 39,992,300 shares issued at September 30, 2013, 37,107,684 shares issued at December 31, 2012, and 36,647,154 shares issued at September 30, 2012
39,992

 
37,108

 
36,647

Surplus
1,118,550

 
1,036,295

 
1,018,417

Treasury stock, at cost, 261,257 shares at September 30, 2013, 249,329 shares at December 31, 2012, and 239,373 shares at September 30, 2012
(8,290
)
 
(7,838
)
 
(7,490
)
Retained earnings
643,228

 
555,023

 
527,550

Accumulated other comprehensive (loss) income
(46,414
)
 
7,711

 
9,805

Total shareholders’ equity
1,873,566

 
1,804,705

 
1,761,300

Total liabilities and shareholders’ equity
$
17,682,548

 
$
17,519,613

 
$
17,018,592

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
 
Nine Months Ended
 
September 30,
 
September 30,
(In thousands, except per share data)
2013
 
2012
 
2013
 
2012
Interest income
 
 
 
 
 
 
 
Interest and fees on loans
$
150,810

 
$
149,271

 
$
438,907

 
$
436,926

Interest bearing deposits with banks
229

 
362

 
1,209

 
813

Federal funds sold and securities purchased under resale agreements
4

 
7

 
23

 
25

Securities
9,224

 
7,691

 
27,335

 
30,048

Trading account securities
14

 
3

 
27

 
22

Federal Home Loan Bank and Federal Reserve Bank stock
687

 
649

 
2,064

 
1,894

Brokerage customer receivables
200

 
218

 
562

 
650

Total interest income
161,168

 
158,201

 
470,127

 
470,378

Interest expense
 
 
 
 
 
 
 
Interest on deposits
12,524

 
16,794

 
40,703

 
52,097

Interest on Federal Home Loan Bank advances
2,729

 
2,817

 
8,314

 
9,268

Interest on notes payable and other borrowings
910

 
2,024

 
3,196

 
7,400

Interest on secured borrowings—owed to securitization investors
—

 
795

 
—

 
5,087

Interest on subordinated notes
40

 
67

 
151

 
362

Interest on junior subordinated debentures
3,183

 
3,129

 
9,444

 
9,424

Total interest expense
19,386

 
25,626

 
61,808

 
83,638

Net interest income
141,782

 
132,575

 
408,319

 
386,740

Provision for credit losses
11,114

 
18,799

 
42,183

 
56,890

Net interest income after provision for credit losses
130,668

 
113,776

 
366,136

 
329,850

Non-interest income
 
 
 
 
 
 
 
Wealth management
16,057

 
13,252

 
46,777

 
39,046

Mortgage banking
25,682

 
31,127

 
87,561

 
75,268

Service charges on deposit accounts
5,308

 
4,235

 
15,136

 
12,437

Gains on available-for-sale securities, net
75

 
409

 
328

 
2,334

Fees from covered call options
285

 
2,083

 
2,917

 
8,320

Gain on bargain purchases, net
—

 
6,633

 
—

 
7,418

Trading (losses) gains, net
(1,655
)
 
(998
)
 
1,170

 
(1,780
)
Other
8,910

 
6,204

 
22,147

 
17,860

Total non-interest income
54,662

 
62,945

 
176,036

 
160,903

Non-interest expense
 
 
 
 
 
 
 
Salaries and employee benefits
78,007

 
75,280

 
234,745

 
212,449

Equipment
6,593

 
5,888

 
19,190

 
16,754

Occupancy, net
9,079

 
8,024

 
26,639

 
23,814

Data processing
4,884

 
4,103

 
13,841

 
11,561

Advertising and marketing
2,772

 
2,528

 
7,534

 
6,713

Professional fees
3,378

 
4,653

 
10,790

 
12,104

Amortization of other intangible assets
1,154

 
1,078

 
3,438

 
3,216

FDIC insurance
3,245

 
3,549

 
9,692

 
10,383

OREO expense, net
2,499

 
3,808

 
3,163

 
16,834

Other
15,637

 
15,637

 
46,522

 
45,664

Total non-interest expense
127,248

 
124,548

 
375,554

 
359,492

Income before taxes
58,082

 
52,173

 
166,618

 
131,261

Income tax expense
22,519

 
19,871

 
64,696

 
50,154

Net income
$
35,563

 
$
32,302

 
$
101,922

 
$
81,107

Preferred stock dividends and discount accretion
$
1,581

 
$
2,616

 
$
6,814

 
$
6,477

Net income applicable to common shares
$
33,982

 
$
29,686

 
$
95,108

 
$
74,630

Net income per common share—Basic
$
0.86

 
$
0.82

 
$
2.51

 
$
2.06

Net income per common share—Diluted
$
0.71

 
$
0.66

 
$
2.05

 
$
1.70

Cash dividends declared per common share
$
0.09

 
$
0.09

 
$
0.18

 
$
0.18

Weighted average common shares outstanding
39,331

 
36,381

 
37,939

 
36,305

Dilutive potential common shares
10,823

 
12,295

 
11,763

 
11,292

Average common shares and dilutive common shares
50,154

 
48,676

 
49,702

 
47,597

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
 
Nine Months Ended
 
September 30,
 
September 30,
(In thousands)
2013
 
2012
 
2013
 
2012
Net income
$
35,563

 
$
32,302

 
$
101,922

 
$
81,107

Unrealized (losses) gains on securities
 
 
 
 
 
 
 
Before tax
(2,419
)
 
3,921

 
(81,337
)
 
8,661

Tax effect
959

 
(1,563
)
 
32,106

 
(3,447
)
Net of tax
(1,460
)
 
2,358

 
(49,231
)
 
5,214

Less: Reclassification of net gains included in net income
 
 
 
 
 
 
 
Before tax
75

 
409

 
328

 
2,334

Tax effect
(30
)
 
(162
)
 
(131
)
 
(934
)
Net of tax
45

 
247

 
197

 
1,400

Net unrealized (losses) gains on securities
(1,505
)
 
2,111

 
(49,428
)
 
3,814

Unrealized gains (losses) on derivative instruments
 
 
 
 
 
 
 
Before tax
647

 
(293
)
 
4,290

 
1,439

Tax effect
(257
)
 
119

 
(1,708
)
 
(568
)
Net unrealized gains (losses) on derivative instruments
390

 
(174
)
 
2,582

 
871

Foreign currency translation adjustment
 
 
 
 
 
 
 
Before tax
4,970

 
8,438

 
(9,575
)
 
11,139

Tax effect
(1,065
)
 
(2,541
)
 
2,296

 
(3,141
)
Net foreign currency translation adjustment
3,905

 
5,897

 
(7,279
)
 
7,998

Total other comprehensive income (loss)
2,790

 
7,834

 
(54,125
)
 
12,683

Comprehensive income
$
38,353

 
$
40,136

 
$
47,797

 
$
93,790

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
—

 
—

 
—

 
—

 
81,107

 
—

 
81,107

Other comprehensive income, net of tax
—

 
—

 
—

 
—

 
—

 
12,683

 
12,683

Cash dividends declared on common stock
—

 
—

 
—

 
—

 
(6,537
)
 
—

 
(6,537
)
Dividends on preferred stock
—

 
—

 
—

 
—

 
(6,374
)
 
—

 
(6,374
)
Accretion on preferred stock
103

 
—

 
—

 
—

 
(103
)
 
—

 
—

Stock-based compensation
—

 
—

 
7,260

 
—

 
—

 
—

 
7,260

Issuance of Series C preferred stock
126,500

 
—

 
(3,810
)
 
—

 
—

 
—

 
122,690

Common stock issued for:
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions
—

 
26

 
868

 
—

 
—

 
—

 
894

Exercise of stock options and warrants
—

 
439

 
10,050

 
(6,391
)
 
—

 
—

 
4,098

Restricted stock awards
—

 
123

 
(152
)
 
(987
)
 
—

 
—

 
(1,016
)
Employee stock purchase plan
—

 
55

 
1,777

 
—

 
—

 
—

 
1,832

Director compensation plan
—

 
22

 
1,108

 
—

 
—

 
—

 
1,130

Balance at September 30, 2012
$
176,371

 
$
36,647

 
$
1,018,417

 
$
(7,490
)
 
$
527,550

 
$
9,805

 
$
1,761,300

Balance at December 31, 2012
$
176,406

 
$
37,108

 
$
1,036,295

 
$
(7,838
)
 
$
555,023

 
$
7,711

 
$
1,804,705

Net income
—

 
—

 
—

 
—

 
101,922

 
—

 
101,922

Other comprehensive loss, net of tax
—

 
—

 
—

 
—

 
—

 
(54,125
)
 
(54,125
)
Cash dividends declared on common stock
—

 
—

 
—

 
—

 
(6,903
)
 
—

 
(6,903
)
Dividends on preferred stock
—

 
—

 
—

 
—

 
(6,744
)
 
—

 
(6,744
)
Accretion on preferred stock
70

 
—

 
—

 
—

 
(70
)
 
—

 
—

Conversion of Series A preferred stock to common stock
(49,976
)
 
1,944

 
48,032

 
—

 
—

 
—

 
—

Stock-based compensation
—

 
—

 
6,598

 
—

 
—

 
—

 
6,598

Common stock issued for:
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions
—

 
648

 
22,422

 
—

 
—

 
—

 
23,070

Exercise of stock options and warrants
—

 
79

 
2,161

 
(214
)
 
—

 
—

 
2,026

Restricted stock awards
—

 
135

 
140

 
(238
)
 
—

 
—

 
37

Employee stock purchase plan
—

 
47

 
1,801

 
—

 
—

 
—

 
1,848

Director compensation plan
—

 
31

 
1,101

 
—

 
—

 
—

 
1,132

Balance at September 30, 2013
$
126,500

 
$
39,992

 
$
1,118,550

 
$
(8,290
)
 
$
643,228

 
$
(46,414
)
 
$
1,873,566

See accompanying notes to unaudited consolidated financial statements.

4
Table of Contents


WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
Nine Months Ended
 
September 30,
(In thousands)
2013
 
2012
Operating Activities:
 
 
 
Net income
$
101,922

 
$
81,107

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Provision for credit losses
42,183

 
56,890

Depreciation and amortization
21,061

 
17,624

Stock-based compensation expense
6,598

 
7,260

Tax benefit from stock-based compensation arrangements
188

 
1,279

Excess tax benefits from stock-based compensation arrangements
(349
)
 
(868
)
Net amortization of premium on securities
1,534

 
4,745

Mortgage servicing rights fair value change and amortization, net
(1,373
)
 
(3,469
)
Originations and purchases of mortgage loans held-for-sale
(2,966,058
)
 
(2,688,002
)
Proceeds from sales of mortgage loans held-for-sale
3,108,405

 
2,498,525

Bank owned life insurance income, net of claims
(2,372
)
 
(2,234
)
Decrease in trading securities, net
324

 
1,855

Net increase in brokerage customer receivables
(4,389
)
 
(2,708
)
Gains on mortgage loans sold
(64,492
)
 
(59,984
)
Gains on available-for-sale securities, net
(328
)
 
(2,334
)
Gain on bargain purchases, net
—

 
(7,418
)
(Gain) loss on sales of premises and equipment, net
(375
)
 
702

Net (gain) loss on sales and fair value adjustments of other real estate owned
(1,323
)
 
12,306

Decrease (increase) in accrued interest receivable and other assets, net
29,542

 
(13,335
)
(Decrease) increase in accrued interest payable and other liabilities, net
(50,290
)
 
140,857

Net Cash Provided by Operating Activities
220,408

 
42,798

Investing Activities:
 
 
 
Proceeds from maturities of available-for-sale securities
169,139

 
473,331

Proceeds from sales of available-for-sale securities
129,537

 
2,059,154

Purchases of available-for-sale securities
(240,640
)
 
(2,079,665
)
Net cash (paid) received for acquisitions
(9,350
)
 
30,220

Divestiture of operations
(149,100
)
 
—

Proceeds from sales of other real estate owned
76,506

 
65,902

Proceeds received from the FDIC related to reimbursements on covered assets
47,408

 
152,594

Net decrease (increase) in interest-bearing deposits with banks
412,638

 
(113,963
)
Net increase in loans
(589,402
)
 
(774,437
)
Purchases of premises and equipment, net
(24,239
)
 
(45,533
)
Net Cash Used for Investing Activities
(177,503
)
 
(232,397
)
Financing Activities:
 
 
 
Increase in deposit accounts
39,575

 
914,513

Decrease in other borrowings, net
(29,009
)
 
(118,552
)
Decrease in Federal Home Loan Bank advances, net
(26,000
)
 
(60,000
)
Repayment of subordinated notes
(5,000
)
 
(20,000
)
Payoff of secured borrowing
—

 
(600,000
)
Excess tax benefits from stock-based compensation arrangements
349

 
868

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
5,307

 
12,143

Common stock repurchases
(452
)
 
(7,378
)
Dividends paid
(12,066
)
 
(11,575
)
Net Cash (Used for) Provided by Financing Activities
(27,296
)
 
232,709

Net Increase in Cash and Cash Equivalents
15,609

 
43,110

Cash and Cash Equivalents at Beginning of Period
315,028

 
169,704

Cash and Cash Equivalents at End of Period
$
330,637

 
$
212,814

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 nine-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 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.

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Table of Contents

(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 these three 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 Bank"), 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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Table of Contents

The following table summarizes the activity in the Company’s FDIC indemnification asset during the periods indicated:
 
Three Months Ended
 
Nine Months Ended
(Dollars in thousands)
September 30, 2013
 
September 30, 2012
 
September 30, 2013
 
September 30, 2012
Balance at beginning of period
$
137,681

 
$
222,568

 
$
208,160

 
$
344,251

Additions from acquisitions
—

 
65,100

 
—

 
78,264

Additions from reimbursable expenses
3,062

 
5,669

 
10,922

 
18,646

Amortization
(1,763
)
 
(1,139
)
 
(5,884
)
 
(3,919
)
Changes in expected reimbursements from the FDIC for changes in expected credit losses
(12,742
)
 
(16,579
)
 
(65,477
)
 
(46,343
)
Payments received from the FDIC
(25,925
)
 
(37,314
)
 
(47,408
)
 
(152,594
)
Balance at end of period
$
100,313

 
$
238,305

 
$
100,313

 
$
238,305

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 announcements in October 2013 of the acquisition of certain assets and assumption of certain liabilities of Surety Financial Services ("Surety") and the completion of its previously announced acquisition of 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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Table of Contents

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:
 
 
September 30, 2013
(Dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
U.S. Treasury
$
225,190

 
$
150

 
$
(14,438
)
 
$
210,902

U.S. Government agencies
954,050

 
2,213

 
(43,574
)
 
912,689

Municipal
152,010

 
1,983

 
(3,346
)
 
150,647

Corporate notes and other:
 
 
 
 
 
 
 
Financial issuers
132,320

 
2,252

 
(2,513
)
 
132,059

Other
7,011

 
126

 
(15
)
 
7,122

Mortgage-backed: (1)
 
 
 
 
 
 
 
Mortgage-backed securities
268,166

 
4,157

 
(12,861
)
 
259,462

Collateralized mortgage obligations
60,001

 
458

 
(728
)
 
59,731

Other equity securities
53,837

 
1,097

 
(5,663
)
 
49,271

Total available-for-sale securities
$
1,852,585

 
$
12,436

 
$
(83,138
)
 
$
1,781,883

 
 
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

 
 
September 30, 2012
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in thousands)
 
 
 
U.S. Treasury
$
25,045

 
$
211

 
$
—

 
$
25,256

U.S. Government agencies
626,725

 
3,833

 
(2,374
)
 
628,184

Municipal
96,696

 
2,711

 
(23
)
 
99,384

Corporate notes and other:
 
 
 
 
 
 
 
Financial issuers
142,158

 
2,550

 
(5,170
)
 
139,538

Other
17,200

 
251

 
—

 
17,451

Mortgage-backed: (1)
 
 
 
 
 
 
 
Mortgage-backed securities
225,393

 
13,733

 
—

 
239,126

Collateralized mortgage obligations
66,422

 
690

 
—

 
67,112

Other equity securities
43,737

 
216

 
(3,236
)
 
40,717

Total available-for-sale securities
$
1,243,376

 
$
24,195

 
$
(10,803
)
 
$
1,256,768


(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 September 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
$
185,734

 
$
(14,438
)
 
$
—

 
$
—

 
$
185,734

 
$
(14,438
)
U.S. Government agencies
413,113

 
(37,142
)
 
60,240

 
(6,432
)
 
473,353

 
(43,574
)
Municipal
78,209

 
(3,342
)
 
696

 
(4
)
 
78,905

 
(3,346
)
Corporate notes and other:
 
 
 
 
 
 
 
 
 
 
 
Financial issuers
16,530

 
(232
)
 
63,661

 
(2,281
)
 
80,191

 
(2,513
)
Other
985

 
(15
)
 
—

 
—

 
985

 
(15
)
Mortgage-backed:
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
175,261

 
(12,861
)
 
—

 
—

 
175,261

 
(12,861
)
Collateralized mortgage obligations
33,511

 
(728
)
 
—

 
—

 
33,511

 
(728
)
Other equity securities
14,507

 
(614
)
 
20,350

 
(5,049
)
 
34,857

 
(5,663
)
Total
$
917,850

 
$
(69,372
)
 
$
144,947

 
$
(13,766
)
 
$
1,062,797

 
$
(83,138
)

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 September 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, agency bonds and auction rate securities included in other equity securities. The corporate securities of financial issuers in this category were comprised primarily of investment grade securities including six fixed-to-floating rate bonds and three trust-preferred securities. 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 September 30,
 
Nine months ended September 30,
(Dollars in thousands)
2013
 
2012
 
2013
 
2012
Realized gains
$
118

 
$
413

 
$
434

 
$
2,350

Realized losses
(43
)
 
(4
)
 
(106
)
 
(16
)
Net realized gains
$
75

 
$
409

 
$
328

 
$
2,334

Other than temporary impairment charges
—

 
—

 
—

 
—

Gains on available-for-sale securities, net
$
75

 
$
409

 
$
328

 
$
2,334

Proceeds from sales of available-for-sale securities
$
45,078

 
$
694,608

 
$
129,537

 
$
2,059,154


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The amortized cost and fair value of securities as of September 30, 2013, December 31, 2012 and September 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:
 
 
September 30, 2013
 
December 31, 2012
 
September 30, 2012
(Dollars in thousands)
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Due in one year or less
$
285,746

 
$
286,066

 
$
188,594

 
$
189,015

 
$
83,658

 
$
83,863

Due in one to five years
316,076

 
316,474

 
419,588

 
419,654

 
471,863

 
471,747

Due in five to ten years
344,742

 
328,895

 
361,037

 
362,135

 
135,580

 
137,116

Due after ten years
524,017

 
481,984

 
501,177

 
503,999

 
216,723

 
217,087

Mortgage-backed
328,167

 
319,193

 
261,871

 
271,574

 
291,815

 
306,238

Other equity securities
53,837

 
49,271

 
52,846

 
49,699

 
43,737

 
40,717

Total available-for-sale securities
$
1,852,585

 
$
1,781,883

 
$
1,785,113

 
$
1,796,076

 
$
1,243,376

 
$
1,256,768

Securities having a carrying value of $1.2 billion at September 30, 2013 and $1.1 billion at both December 31, 2012 and September 30, 2012, were pledged as collateral for public deposits, trust deposits, FHLB advances, securities sold under repurchase agreements and derivatives. At September 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:
 
September 30,
 
December 31,
 
September 30,
(Dollars in thousands)
2013
 
2012
 
2012
Balance:
 
 
 
 
 
Commercial
$
3,109,121

 
$
2,914,798

 
$
2,771,053

Commercial real-estate
4,146,110

 
3,864,118

 
3,699,712

Home equity
736,620

 
788,474

 
807,592

Residential real-estate
397,707

 
367,213

 
376,678

Premium finance receivables—commercial
2,150,481

 
1,987,856

 
1,982,945

Premium finance receivables—life insurance
1,869,739

 
1,725,166

 
1,665,620

Indirect consumer
57,236

 
77,333

 
77,378

Consumer and other
114,025

 
103,985

 
108,922

Total loans, net of unearned income, excluding covered loans
$
12,581,039

 
$
11,828,943

 
$
11,489,900

Covered loans
415,988

 
560,087

 
657,525

Total loans
$
12,997,027

 
$
12,389,030

 
$
12,147,425

Mix:
 
 
 
 
 
Commercial
24
%
 
24
%
 
23
%
Commercial real-estate
32

 
31

 
30

Home equity
6

 
6

 
7

Residential real-estate
3

 
3

 
3

Premium finance receivables—commercial
16

 
16

 
16

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
97
%
 
96
%
 
95
%
Covered loans
3

 
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 $40.6 million at September 30, 2013, $41.1 million at December 31, 2012 and $39.5 million at September 30,

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Table of Contents

2012, 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.
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 $(1.5) million at September 30, 2013, $13.2 million at December 31, 2012 and $14.3 million at September 30, 2012. The net credit balance at September 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 throughout the United States and Canada 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:
 
 
September 30, 2013
 
December 31, 2012
 
Unpaid
Principal
 
Carrying
 
Unpaid
Principal
 
Carrying
(Dollars in thousands)
Balance
 
Value
 
Balance
 
Value
Bank acquisitions
$
496,355

 
$
380,733

 
$
674,868

 
$
503,837

Life insurance premium finance loans acquisition
475,711

 
459,883

 
536,503

 
514,459

For loans acquired with evidence of credit quality deterioration since origination as a result of acquisitions during the nine months ended September 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 September 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
September 30, 2013
 
Three Months Ended
September 30, 2012
(Dollars in thousands)
Bank Acquisitions
 
Life Insurance
Premium Finance Loans
 
Bank
Acquisitions
 
Life Insurance
Premium
Finance Loans
Accretable yield, beginning balance
$
130,856

 
$
10,287

 
$
171,801

 
$
14,626

Acquisitions
—

 
—

 
6,052

 
—

Accretable yield amortized to interest income
(9,056
)
 
(1,943
)
 
(12,266
)
 
(2,309
)
Accretable yield amortized to indemnification asset (1)
(8,279
)
 
—

 
(16,472
)
 
—

Reclassification from non-accretable difference (2)
8,703

 
234

 
4,636

 
2,951

(Decreases) increases in interest cash flows due to payments and changes in interest rates
(5,194
)
 
235

 
(1,951
)
 
158

Accretable yield, ending balance (3)
$
117,030

 
$
8,813

 
$
151,800

 
$
15,426

 
 
Nine Months Ended
September 30, 2013
 
Nine Months Ended
September 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

 
—

 
8,340

 
—

Accretable yield amortized to interest income
(27,980
)
 
(6,216
)
 
(40,545
)
 
(8,795
)
Accretable yield amortized to indemnification asset (1)
(28,891
)
 
—

 
(55,912
)
 
—

Reclassification from non-accretable difference (2)
44,907

 
1,241

 
53,827

 
4,096

(Decreases) increases in interest cash flows due to payments and changes in interest rates
(16,207
)
 
733

 
12,970

 
1,264

Accretable yield, ending balance (3)
$
117,030

 
$
8,813

 
$
151,800

 
$
15,426


(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 September 30, 2013, the Company estimates that the remaining accretable yield balance to be amortized to the indemnification asset for the bank acquisitions is $40.5 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 September 30, 2013, December 31, 2012 and September 30, 2012:
As of September 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
$
15,283

 
$
190

 
$
3,585

 
$
15,261

 
$
1,688,232

 
$
1,722,551

Franchise
—

 
—

 
113

 
—

 
213,215

 
213,328

Mortgage warehouse lines of credit
—

 
—

 
—

 
—

 
71,383

 
71,383

Community Advantage—homeowners association
—

 
—

 
—

 
—

 
90,504

 
90,504

Aircraft
—

 
—

 
—

 
—

 
12,601

 
12,601

Asset-based lending
2,364

 
—

 
693

 
3,926

 
732,585

 
739,568

Tax exempt
—

 
—

 
—

 
—

 
148,103

 
148,103

Leases
—

 
—

 
—

 
—

 
101,654

 
101,654

Other
—

 
—

 
—

 
—

 
90