10-Q
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, 2015
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to
Commission File Number 001-35077
_____________________________________ 
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, 48,367,147 shares, as of October 31, 2015
 


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,
2015
 
December 31,
2014
 
September 30,
2014
Assets
 
 
 
 
 
Cash and due from banks
$
247,341

 
$
225,136

 
$
260,694

Federal funds sold and securities purchased under resale agreements
3,314

 
5,571

 
26,722

Interest bearing deposits with banks
701,106

 
998,437

 
620,370

Available-for-sale securities, at fair value
2,214,281

 
1,792,078

 
1,782,648

Trading account securities
3,312

 
1,206

 
6,015

Federal Home Loan Bank and Federal Reserve Bank stock
90,308

 
91,582

 
80,951

Brokerage customer receivables
28,293

 
24,221

 
26,624

Mortgage loans held-for-sale, at fair value
347,005

 
351,290

 
363,303

Loans, net of unearned income, excluding covered loans
16,316,211

 
14,409,398

 
14,052,059

Covered loans
168,609

 
226,709

 
254,605

Total loans
16,484,820

 
14,636,107

 
14,306,664

Less: Allowance for loan losses
102,996

 
91,705

 
91,019

Less: Allowance for covered loan losses
2,918

 
2,131

 
2,655

Net loans
16,378,906

 
14,542,271

 
14,212,990

Premises and equipment, net
587,348

 
555,228

 
555,241

FDIC indemnification asset

 
11,846

 
27,359

Accrued interest receivable and other assets
667,036

 
501,882

 
494,213

Trade date securities receivable
277,981

 
485,534

 
285,627

Goodwill
472,166

 
405,634

 
406,604

Other intangible assets
25,533

 
18,811

 
19,984

Total assets
$
22,043,930

 
$
20,010,727

 
$
19,169,345

Liabilities and Shareholders’ Equity
 
 
 
 
 
Deposits:
 
 
 
 
 
Non-interest bearing
$
4,705,994

 
$
3,518,685

 
$
3,253,477

Interest bearing
13,522,475

 
12,763,159

 
12,811,769

Total deposits
18,228,469

 
16,281,844

 
16,065,246

Federal Home Loan Bank advances
451,330

 
733,050

 
347,500

Other borrowings
259,978

 
196,465

 
51,483

Subordinated notes
140,000

 
140,000

 
140,000

Junior subordinated debentures
268,566

 
249,493

 
249,493

Trade date securities payable
617

 
3,828

 

Accrued interest payable and other liabilities
359,234

 
336,225

 
287,115

Total liabilities
19,708,194

 
17,940,905

 
17,140,837

Shareholders’ Equity:
 
 
 
 
 
Preferred stock, no par value; 20,000,000 shares authorized:
 
 
 
 
 
Series C - $1,000 liquidation value; 126,312 shares issued and outstanding at September 30, 2015 and 126,467 shares issued and outstanding at December 31, 2014, and September 30, 2014
126,312

 
126,467

 
126,467

Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at September 30, 2015 and no shares issued and outstanding at December 31, 2014 and September 30, 2014
125,000

 

 

Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at September 30, 2015, December 31, 2014, and September 30, 2014; 48,422,294 shares issued at September 30, 2015, 46,881,108 shares issued at December 31, 2014, and 46,766,420 shares issued at September 30, 2014
48,422

 
46,881

 
46,766

Surplus
1,187,407

 
1,133,955

 
1,129,975

Treasury stock, at cost, 85,424 shares at September 30, 2015, 76,053 shares at December 31, 2014, and 75,373 shares at September 30, 2014
(3,964
)
 
(3,549
)
 
(3,519
)
Retained earnings
901,652

 
803,400

 
771,519

Accumulated other comprehensive loss
(49,093
)
 
(37,332
)
 
(42,700
)
Total shareholders’ equity
2,335,736

 
2,069,822

 
2,028,508

Total liabilities and shareholders’ equity
$
22,043,930

 
$
20,010,727

 
$
19,169,345

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
(In thousands, except per share data)
September 30,
2015
 
September 30,
2014
 
September 30,
2015
 
September 30,
2014
Interest income
 
 
 
 
 
 
 
Interest and fees on loans
$
167,831

 
$
156,534

 
$
482,330

 
$
455,548

Interest bearing deposits with banks
372

 
409

 
993

 
977

Federal funds sold and securities purchased under resale agreements
1

 
12

 
4

 
22

Available-for-sale securities
16,130

 
12,767

 
44,601

 
39,190

Trading account securities
19

 
20

 
83

 
34

Federal Home Loan Bank and Federal Reserve Bank stock
821

 
733

 
2,375

 
2,171

Brokerage customer receivables
205

 
201

 
591

 
610

Total interest income
185,379

 
170,676

 
530,977

 
498,552

Interest expense
 
 
 
 
 
 
 
Interest on deposits
12,436

 
12,298

 
36,246

 
35,980

Interest on Federal Home Loan Bank advances
2,458

 
2,641

 
6,426

 
7,989

Interest on other borrowings
1,045

 
200

 
2,620

 
1,460

Interest on subordinated notes
1,776

 
1,776

 
5,328

 
2,130

Interest on junior subordinated debentures
2,124

 
2,091

 
6,034

 
6,137

Total interest expense
19,839

 
19,006

 
56,654

 
53,696

Net interest income
165,540

 
151,670

 
474,323

 
444,856

Provision for credit losses
8,322

 
5,864

 
23,883

 
14,404

Net interest income after provision for credit losses
157,218

 
145,806

 
450,440

 
430,452

Non-interest income
 
 
 
 
 
 
 
Wealth management
18,243

 
17,659

 
54,819

 
52,694

Mortgage banking
27,887

 
26,691

 
91,694

 
66,923

Service charges on deposit accounts
7,403

 
6,084

 
20,174

 
17,118

(Losses) gains on available-for-sale securities, net
(98
)
 
(153
)
 
402

 
(522
)
Fees from covered call options
2,810

 
2,107

 
11,735

 
4,893

Trading (losses) gains, net
(135
)
 
293

 
(452
)
 
(1,102
)
Other
8,843

 
5,271

 
28,135

 
17,579

Total non-interest income
64,953

 
57,952

 
206,507

 
157,583

Non-interest expense
 
 
 
 
 
 
 
Salaries and employee benefits
97,749

 
85,976

 
282,300

 
247,873

Equipment
8,887

 
7,570

 
24,637

 
22,196

Occupancy, net
12,066

 
10,446

 
35,818

 
31,289

Data processing
8,127

 
4,765

 
19,656

 
14,023

Advertising and marketing
6,237

 
3,528

 
16,550

 
9,902

Professional fees
4,100

 
4,035

 
13,838

 
11,535

Amortization of other intangible assets
1,350

 
1,202

 
3,297

 
3,521

FDIC insurance
3,035

 
3,211

 
9,069

 
9,358

OREO expense, net
(367
)
 
581

 
1,885

 
7,047

Other
18,790

 
17,186

 
54,539

 
46,662

Total non-interest expense
159,974

 
138,500

 
461,589

 
403,406

Income before taxes
62,197

 
65,258

 
195,358

 
184,629

Income tax expense
23,842

 
25,034

 
74,120

 
71,364

Net income
$
38,355

 
$
40,224

 
$
121,238

 
$
113,265

Preferred stock dividends and discount accretion
4,079

 
1,581

 
7,240

 
4,743

Net income applicable to common shares
$
34,276

 
$
38,643

 
$
113,998

 
$
108,522

Net income per common share—Basic
$
0.71

 
$
0.83

 
$
2.39

 
$
2.34

Net income per common share—Diluted
$
0.69

 
$
0.79

 
$
2.29

 
$
2.23

Cash dividends declared per common share
$
0.11

 
$
0.10

 
$
0.33

 
$
0.30

Weighted average common shares outstanding
48,158

 
46,639

 
47,658

 
46,453

Dilutive potential common shares
4,049

 
4,241

 
4,141

 
4,349

Average common shares and dilutive common shares
52,207

 
50,880

 
51,799

 
50,802

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
(In thousands)
September 30,
2015
 
September 30,
2014
 
September 30,
2015
 
September 30,
2014
Net income
$
38,355

 
$
40,224

 
$
121,238

 
$
113,265

Unrealized gains on securities
 
 
 
 
 
 
 
Before tax
31,268

 
1,345

 
4,144

 
49,920

Tax effect
(12,273
)
 
(533
)
 
(1,645
)
 
(19,669
)
Net of tax
18,995

 
812

 
2,499

 
30,251

Less: Reclassification of net (losses) gains included in net income
 
 
 
 
 
 
 
Before tax
(98
)
 
(153
)
 
402

 
(522
)
Tax effect
38

 
62

 
(158
)
 
208

Net of tax
(60
)
 
(91
)
 
244

 
(314
)
Net unrealized gains on securities
19,055

 
903

 
2,255

 
30,565

Unrealized gains (losses) on derivative instruments
 
 
 
 
 
 
 
Before tax
99

 
971

 
(247
)
 
247

Tax effect
(39
)
 
(386
)
 
97

 
(98
)
Net unrealized gains (losses) on derivative instruments
60

 
585

 
(150
)
 
149

Foreign currency translation adjustment
 
 
 
 
 
 
 
Before tax
(8,682
)
 
(13,062
)
 
(18,900
)
 
(13,976
)
Tax effect
2,345

 
3,377

 
5,034

 
3,598

Net foreign currency translation adjustment
(6,337
)
 
(9,685
)
 
(13,866
)
 
(10,378
)
Total other comprehensive income (loss)
12,778

 
(8,197
)
 
(11,761
)
 
20,336

Comprehensive income
$
51,133

 
$
32,027

 
$
109,477

 
$
133,601

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
loss
 
Total
shareholders’
equity
Balance at January 1, 2014
$
126,477

 
$
46,181

 
$
1,117,032

 
$
(3,000
)
 
$
676,935

 
$
(63,036
)
 
$
1,900,589

Net income

 

 

 

 
113,265

 

 
113,265

Other comprehensive income, net of tax

 

 

 

 

 
20,336

 
20,336

Cash dividends declared on common stock

 

 

 

 
(13,938
)
 

 
(13,938
)
Dividends on preferred stock

 

 

 

 
(4,743
)
 

 
(4,743
)
Stock-based compensation

 

 
5,754

 

 

 

 
5,754

Conversion of Series C preferred stock to common stock
(10
)
 
1

 
9

 

 

 

 

Common stock issued for:
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options and warrants

 
450

 
3,797

 
(313
)
 

 

 
3,934

Restricted stock awards

 
67

 
151

 
(206
)
 

 

 
12

Employee stock purchase plan

 
47

 
2,086

 

 

 

 
2,133

Director compensation plan

 
20

 
1,146

 

 

 

 
1,166

Balance at September 30, 2014
$
126,467

 
$
46,766

 
$
1,129,975

 
$
(3,519
)
 
$
771,519

 
$
(42,700
)
 
$
2,028,508

Balance at January 1, 2015
$
126,467

 
$
46,881

 
$
1,133,955

 
$
(3,549
)
 
$
803,400

 
$
(37,332
)
 
$
2,069,822

Net income

 

 

 

 
121,238

 

 
121,238

Other comprehensive loss, net of tax

 

 

 

 

 
(11,761
)
 
(11,761
)
Cash dividends declared on common stock

 

 

 

 
(15,746
)
 

 
(15,746
)
Dividends on preferred stock

 

 

 

 
(7,240
)
 

 
(7,240
)
Stock-based compensation

 

 
7,817

 

 

 

 
7,817

Issuance of Series D preferred stock
125,000

 

 
(4,158
)
 

 

 

 
120,842

Conversion of Series C preferred stock to common stock
(155
)
 
4

 
151

 

 

 

 

Common stock issued for:
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions

 
811

 
37,912

 

 

 

 
38,723

Exercise of stock options and warrants

 
564

 
8,141

 
(130
)
 

 

 
8,575

Restricted stock awards

 
99

 
382

 
(285
)
 

 

 
196

Employee stock purchase plan

 
43

 
1,997

 

 

 

 
2,040

Director compensation plan

 
20

 
1,210

 

 

 

 
1,230

Balance at September 30, 2015
$
251,312

 
$
48,422

 
$
1,187,407

 
$
(3,964
)
 
$
901,652

 
$
(49,093
)
 
$
2,335,736

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
(In thousands)
September 30,
2015
 
September 30,
2014
Operating Activities:
 
 
 
Net income
$
121,238

 
$
113,265

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Provision for credit losses
23,883

 
14,404

Depreciation and amortization
24,975

 
23,952

Stock-based compensation expense
7,817

 
5,754

Excess tax benefits from stock-based compensation arrangements
(660
)
 
(339
)
Net amortization of premium on securities
2,576

 
4,733

Mortgage servicing rights fair value change, net
641

 
706

Originations and purchases of mortgage loans held-for-sale
(3,094,901
)
 
(2,272,919
)
Proceeds from sales of mortgage loans held-for-sale
3,182,623

 
2,299,103

Bank owned life insurance, net of claims
(1,683
)
 
(2,039
)
Increase in trading securities, net
(2,106
)
 
(5,518
)
Net (increase) decrease in brokerage customer receivables
(4,072
)
 
4,329

Gains on mortgage loans sold
(83,437
)
 
(55,160
)
(Gains) losses on available-for-sale securities, net
(402
)
 
522

Losses on sales of premises and equipment, net
512

 
664

Net (gains) losses on sales and fair value adjustments of other real estate owned
(585
)
 
2,628

(Increase) decrease in accrued interest receivable and other assets, net
(110,632
)
 
82,159

Decrease in accrued interest payable and other liabilities, net
(28,717
)
 
(55,874
)
Net Cash Provided by Operating Activities
37,070

 
160,370

Investing Activities:
 
 
 
Proceeds from maturities of available-for-sale securities
397,832

 
222,434

Proceeds from sales of available-for-sale securities
1,216,860

 
578,594

Purchases of available-for-sale securities
(1,584,282
)
 
(944,281
)
Redemption (purchase) of Federal Home Loan Bank and Federal Reserve Bank stock, net
1,274

 
(1,690
)
Net cash (paid) received for acquisitions
(15,428
)
 
228,946

Proceeds from sales of other real estate owned
34,936

 
73,940

Proceeds received from the FDIC related to reimbursements on covered assets
1,697

 
17,652

Net decrease (increase) in interest bearing deposits with banks
438,072

 
(124,796
)
Net increase in loans
(1,311,797
)
 
(1,011,889
)
Redemption of bank owned life insurance
2,701

 

Purchases of premises and equipment, net
(29,375
)
 
(30,982
)
Net Cash Used for Investing Activities
(847,510
)
 
(992,072
)
Financing Activities:
 
 
 
Increase in deposit accounts
970,090

 
1,000,603

Increase (decrease) in other borrowings, net
38,644

 
(203,621
)
Decrease in Federal Home Loan Bank advances, net
(293,360
)
 
(70,000
)
Proceeds from the issuance of preferred stock, net
120,842

 

Proceeds from the issuance of subordinated notes, net

 
139,090

Excess tax benefits from stock-based compensation arrangements
660

 
339

Issuance of common shares resulting from the exercise of stock options and the employee stock purchase plan
14,413

 
8,043

Common stock repurchases
(415
)
 
(519
)
Dividends paid
(20,486
)
 
(18,681
)
Net Cash Provided by Financing Activities
830,388

 
855,254

Net Increase in Cash and Cash Equivalents
19,948

 
23,552

Cash and Cash Equivalents at Beginning of Period
230,707

 
263,864

Cash and Cash Equivalents at End of Period
$
250,655

 
$
287,416

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, 2014 (“2014 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 2014 Form 10-K.
(2) Recent Accounting Developments

Accounting for Investments in Qualified Affordable Housing Projects

In January 2014, the FASB issued ASU No. 2014-01, “Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” to provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that invest in affordable housing projects that qualify for the low-income housing tax credit. This ASU permits a new accounting treatment, if certain conditions are met, which allows the Company to amortize the initial cost of an investment in proportion to the amount of tax credits and other tax benefits received with recognition of the investment performance in income tax expense. The Company adopted this new guidance beginning January 1, 2015. The guidance did not have a material impact on the Company's consolidated financial statements.

Repossession of Residential Real Estate Collateral

In January 2014, the FASB issued ASU No. 2014-04, “Receivables - Troubled Debt Restructurings by Creditors (Topic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” to address diversity in practice and clarify guidance regarding the accounting for an in-substance repossession or foreclosure of residential real estate collateral. This ASU clarifies that an in-substance repossession or foreclosure occurs upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or the borrower conveying all interest in the residential real estate property to the creditor. Additionally, this ASU requires disclosure of both the amount of foreclosed residential real estate property held by the Company and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. The Company adopted this new guidance beginning January 1, 2015. The guidance did not have a material impact on the Company's consolidated financial statements.

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, which created "Revenue from Contracts with Customers (Topic 606), to clarify the principles for recognizing revenue and develop a common revenue standard for customer contracts. This ASU provides guidance regarding how an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount

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that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also added a new subtopic to the codification, ASC 340-40, "Other Assets and Deferred Costs: Contracts with Customers" to provide guidance on costs related to obtaining and fulfilling a customer contract. Furthermore, the new standard requires disclosure of sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. At the time ASU No. 2014-09 was issued, the guidance was effective for fiscal years beginning after December 15, 2016. In July 2015, the FASB approved a deferral of the effective date by one year, which would result in the guidance becoming effective for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.

Extraordinary and Unusual Items

In January 2015, the FASB issued ASU No. 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” to eliminate the concept of extraordinary items related to separately classifying, presenting and disclosing certain events and transactions that meet the criteria for that concept. This guidance is effective for fiscal years beginning after December 15, 2015 and is to be applied either prospectively or retrospectively. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

Consolidation

In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” which changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance is effective for fiscal years beginning after December 15, 2015 and is to be applied retrospectively. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.

Debt Issuance Costs

In April 2015, the FASB issued ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs," to clarify the presentation of debt issuance costs within the balance sheet. This ASU requires that an entity present debt issuance costs related to a recognized debt liability on the balance sheet as a direct deduction from the carrying amount of that debt liability, not as a separate asset. The ASU does not affect the current guidance for the recognition and measurement for these debt issuance costs. Additionally, in August 2015, the FASB issued ASU No. 2015-15, "Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting," to further clarify the the presentation of debt issuance costs related to line-of-credit agreements. This ASU states the SEC would not object to an entity deferring and presenting debt issuance costs related to line-of-credit agreements as an asset on the balance sheet and subsequently amortizing these costs ratably over the term of the agreement, regardless of any outstanding borrowing under the line-of-credit agreement. This guidance is effective for fiscal years beginning after December 15, 2015 and is to be applied retrospectively. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

Business Combinations

In September 2015, the FASB issued ASU No. 2015-16, "Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments," to simplify the accounting for subsequent adjustments made to provisional amounts recognized at the acquisition date of a business combination. This ASU eliminates the requirement to retrospectively account for these adjustment for all prior periods impacted. The acquirer is required to recognize these adjustments identified during the measurement period in the reporting period in which the adjustment amount is determined. Additionally, the ASU requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the adjustment had been recognized at the acquisition date. This guidance is effective for fiscal years beginning after December 15, 2015 and is to be applied prospectively. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

(3) Business Combinations

Non-FDIC Assisted Bank Acquisitions
On July 24, 2015, the Company acquired Community Financial Shares, Inc ("CFIS"). CFIS was the parent company of Community Bank - Wheaton/Glen Ellyn ("CBWGE"), which had four banking locations. CBWGE was merged into the Company's wholly-

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owned subsidiary Wheaton Bank & Trust Company ("Wheaton Bank"). The Company acquired assets with a fair value of approximately $350.5 million, including approximately $159.5 million of loans, and assumed deposits with a fair value of approximately $290.0 million. Additionally, the Company recorded goodwill of $27.5 million on the acquisition.
    
On July 17, 2015, the Company acquired Suburban Illinois Bancorp, Inc. ("Suburban"). Suburban was the parent company of Suburban Bank & Trust Company ("SBT"), which operated ten banking locations. SBT was merged into the Company's wholly-owned subsidiary Hinsdale Bank & Trust Company ("Hinsdale Bank"). The Company acquired assets with a fair value of approximately $494.7 million, including approximately $257.8 million of loans, and assumed deposits with a fair value of approximately $416.7 million. Additionally, the Company recorded goodwill of $18.8 million on the acquisition.

On July 1, 2015, the Company, through its wholly-owned subsidiary Wintrust Bank, acquired North Bank, which had two banking locations. The Company acquired assets with a fair value of $101.0 million, including approximately $51.6 million of loans, and assumed deposits with a fair value of approximately $100.3 million. Additionally, the Company recorded goodwill of $6.7 million on the acquisition.

On January 16, 2015, the Company acquired Delavan Bancshares, Inc. ("Delavan"). Delavan was the parent company of Community Bank CBD, which had four banking locations. Community Bank CBD was merged into the Company's wholly-owned subsidiary Town Bank. The Company acquired assets with a fair value of approximately $224.1 million, including approximately $128.0 million of loans, and assumed liabilities with a fair value of approximately $186.4 million, including approximately $170.2 million of deposits. Additionally the Company recorded goodwill of $16.3 million on the acquisition.

On August 8, 2014, the Company, through its wholly-owned subsidiary Town Bank, acquired eleven branch offices and deposits of Talmer Bank & Trust. Subsequent to this date, the Company acquired loans from these branches as well. In total, the Company acquired assets with a fair value of approximately $361.3 million, including approximately $41.5 million of loans, and assumed liabilities with a fair value of approximately $361.3 million, including approximately $354.9 million of deposits. Additionally, the Company recorded goodwill of $9.7 million on the acquisition.

On July 11, 2014 the Company, through its wholly-owned subsidiary Town Bank, acquired the Pewaukee, Wisconsin branch of THE National Bank. The Company acquired assets with a fair value of approximately $94.1 million, including approximately $75.0 million of loans, and assumed deposits with a fair value of approximately $36.2 million. Additionally, the Company recorded goodwill of $16.3 million on the acquisition.

On May 16, 2014, the Company, through its wholly-owned subsidiary Hinsdale Bank acquired the Stone Park branch office and certain related deposits of Urban Partnership Bank ("UPB"). The Company assumed liabilities with a fair value of approximately $5.5 million, including approximately $5.4 million of deposits. Additionally, the Company recorded goodwill of $678,000 on the acquisition.

FDIC-Assisted Transactions
Since 2010, the Company acquired the banking operations, including the acquisition of certain assets and the assumption of liabilities, of nine financial institutions in FDIC-assisted transactions. Loans comprise the majority of the assets acquired in nearly all of these FDIC-assisted transactions, 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, clawback provisions within these 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.
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.

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The loss share agreements with the FDIC cover realized losses on loans, foreclosed real estate and certain other assets and require the Company to record loss share assets and liabilities that 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 and liabilities are recorded as FDIC indemnification assets and other liabilities, respectively, 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 and, if necessary, increase any loss share liability when necessary reductions exceed the current value of the FDIC indemnification assets. In accordance with the clawback provision noted above, the Company may be required to reimburse the FDIC when actual losses are less than certain thresholds established for each lose share agreement. The balance of these estimated reimbursements in accordance with clawback provisions and any related amortization are adjusted periodically for changes in the expected losses on covered assets. On the Consolidated Statements of Condition, estimated reimbursements from clawback provisions are recorded as a reduction to the FDIC indemnification asset or, if necessary, an increase to the loss share liability, which is included within accrued interest payable and other liabilities. Although these assets are contractual receivables from the FDIC, there are no contractual interest rates. Additional expected losses, to the extent such expected losses result in recognition of an allowance for covered loan losses, will increase the FDIC indemnification asset. The corresponding amortization is recorded as a component of non-interest income on the Consolidated Statements of Income.
The following table summarizes the activity in the Company’s FDIC indemnification (liability) asset during the periods indicated:
 
Three Months Ended
 
Nine Months Ended
(Dollars in thousands)
September 30,
2015
 
September 30,
2014
 
September 30,
2015
 
September 30,
2014
Balance at beginning of period
$
3,429

 
$
46,115

 
$
11,846

 
$
85,672

Additions from acquisitions

 

 

 

Additions from reimbursable expenses
1,039

 
1,584

 
3,548

 
4,933

Amortization
(718
)
 
(1,382
)
 
(3,184
)
 
(4,441
)
Changes in expected reimbursements from the FDIC for changes in expected credit losses
(5,236
)
 
(12,124
)
 
(13,546
)
 
(41,153
)
Payments received from the FDIC
(1,547
)
 
(6,834
)
 
(1,697
)
 
(17,652
)
Balance at end of period
$
(3,033
)
 
$
27,359

 
$
(3,033
)
 
$
27,359

Specialty Finance Acquisition
On April 28, 2014, the Company, through its wholly-owned subsidiary, First Insurance Funding of Canada, Inc., acquired Policy Billing Services Inc. and Equity Premium Finance Inc., two affiliated Canadian insurance premium funding and payment services companies. Through this transaction, the Company acquired approximately $7.4 million of premium finance receivables. The Company recorded goodwill of approximately $6.5 million on the acquisition.
Purchased Credit Impaired ("PCI") Loans
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 PCI 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

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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 PCI loans.
(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.

(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, 2015
(Dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
U.S. Treasury
$
288,185

 
$
101

 
$
(2,364
)
 
$
285,922

U.S. Government agencies
657,297

 
2,726

 
(15,000
)
 
645,023

Municipal
294,073

 
5,354

 
(2,085
)
 
297,342

Corporate notes:
 
 
 
 
 
 
 
Financial issuers
114,976

 
1,656

 
(1,216
)
 
115,416

Other
1,525

 
6

 
(2
)
 
1,529

Mortgage-backed: (1)
 
 
 
 
 
 
 
Mortgage-backed securities
778,240

 
4,974

 
(10,913
)
 
772,301

Collateralized mortgage obligations
42,724

 
343

 
(323
)
 
42,744

Equity securities
49,356

 
4,993

 
(345
)
 
54,004

Total available-for-sale securities
$
2,226,376

 
$
20,153

 
$
(32,248
)
 
$
2,214,281

 
 
December 31, 2014
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in thousands)
 
 
 
U.S. Treasury
$
388,713

 
$
84

 
$
(6,992
)
 
$
381,805

U.S. Government agencies
686,106

 
4,113

 
(21,903
)
 
668,316

Municipal
234,951

 
5,318

 
(1,740
)
 
238,529

Corporate notes:
 
 
 
 
 
 
 
Financial issuers
129,309

 
2,006

 
(1,557
)
 
129,758

Other
3,766

 
55

 

 
3,821

Mortgage-backed: (1)
 
 
 
 
 
 
 
Mortgage-backed securities
271,129

 
5,448

 
(4,928
)
 
271,649

Collateralized mortgage obligations
47,347

 
249

 
(535
)
 
47,061

Equity securities
46,592

 
4,872

 
(325
)
 
51,139

Total available-for-sale securities
$
1,807,913

 
$
22,145

 
$
(37,980
)
 
$
1,792,078

 

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September 30, 2014
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in thousands)
 
 
 
U.S. Treasury
$
388,873

 
$
372

 
$
(10,984
)
 
$
378,261

U.S. Government agencies
771,255

 
3,866

 
(35,369
)
 
739,752

Municipal
184,015

 
4,969

 
(1,881
)
 
187,103

Corporate notes:
 
 
 
 
 
 
 
Financial issuers
129,259

 
2,252

 
(1,208
)
 
130,303

Other
3,773

 
79

 

 
3,852

Mortgage-backed: (1)
 
 
 
 
 
 
 
Mortgage-backed securities
246,354

 
4,303

 
(8,938
)
 
241,719

Collateralized mortgage obligations
49,909

 
357

 
(763
)
 
49,503

Equity securities
47,595

 
4,958

 
(398
)
 
52,155

Total available-for-sale securities
$
1,821,033

 
$
21,156

 
$
(59,541
)
 
$
1,782,648


(1)
Consisting entirely of residential mortgage-backed securities, none of which are subprime.
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, 2015:
 
 
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
$
202,795

 
$
(2,364
)
 
$

 
$

 
$
202,795

 
$
(2,364
)
U.S. Government agencies
218,297

 
(4,932
)
 
251,654

 
(10,068
)
 
469,951

 
(15,000
)
Municipal
68,140

 
(964
)
 
37,002

 
(1,121
)
 
105,142

 
(2,085
)
Corporate notes:
 
 
 
 
 
 
 
 
 
 
 
Financial issuers
23,052

 
(152
)
 
44,894

 
(1,064
)
 
67,946

 
(1,216
)
Other
999

 
(2
)
 

 

 
999

 
(2
)
Mortgage-backed:
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
519,631

 
(7,011
)
 
120,261

 
(3,902
)
 
639,892

 
(10,913
)
Collateralized mortgage obligations
7,167

 
(63
)
 
9,620

 
(260
)
 
16,787

 
(323
)
Equity securities
2,957

 
(12
)
 
8,557

 
(333
)
 
11,514

 
(345
)
Total
$
1,043,038

 
$
(15,500
)
 
$
471,988

 
$
(16,748
)
 
$
1,515,026

 
$
(32,248
)

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, 2015 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 agency bonds and mortgage-backed securities. Unrealized losses recognized on agency bonds and mortgage-backed securities are the result of increases in yields for similar types of securities which also have a longer duration and maturity.





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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)
2015
 
2014
 
2015
 
2014
Realized gains
$
87

 
$
179

 
$
654

 
$
333

Realized losses
(185
)
 
(332
)
 
(252
)
 
(855
)
Net realized (losses) gains
$
(98
)
 
$
(153
)
 
$
402

 
$
(522
)
Other than temporary impairment charges

 

 

 

(Losses) gains on available-for-sale securities, net
$
(98
)
 
$
(153
)
 
$
402

 
$
(522
)
Proceeds from sales of available-for-sale securities
$
82,827

 
$
382,552

 
$
1,216,860

 
$
578,594

The amortized cost and fair value of securities as of September 30, 2015, December 31, 2014 and September 30, 2014, 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, 2015
 
December 31, 2014
 
September 30, 2014
(Dollars in thousands)
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Due in one year or less
$
164,374

 
$
164,429

 
$
285,596

 
$
285,889

 
$
216,244

 
$
216,582

Due in one to five years
186,199

 
186,592

 
172,647

 
172,885

 
309,914

 
310,917

Due in five to ten years
343,468

 
342,271

 
331,389

 
325,644

 
327,505

 
317,654

Due after ten years
662,015

 
651,940

 
653,213

 
637,811

 
623,512

 
594,118

Mortgage-backed
820,964

 
815,045

 
318,476

 
318,710

 
296,263

 
291,222

Equity securities
49,356

 
54,004

 
46,592

 
51,139

 
47,595

 
52,155

Total available-for-sale securities
$
2,226,376

 
$
2,214,281

 
$
1,807,913

 
$
1,792,078

 
$
1,821,033

 
$
1,782,648

Securities having a carrying value of $1.3 billion at September 30, 2015 as well as securities having a carrying value of $1.1 billion at December 31, 2014 and September 30, 2014, were pledged as collateral for public deposits, trust deposits, FHLB advances, securities sold under repurchase agreements and derivatives. At September 30, 2015, there were no securities of a single issuer, other than U.S. Government-sponsored agency securities, which exceeded 10% of shareholders’ equity.

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(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)
2015
 
2014
 
2014
Balance:
 
 
 
 
 
Commercial
$
4,400,185

 
$
3,924,394

 
$
3,689,671

Commercial real estate
5,307,566

 
4,505,753

 
4,510,375

Home equity
797,465

 
716,293

 
720,058

Residential real estate
571,743

 
483,542

 
470,319

Premium finance receivables—commercial
2,407,075

 
2,350,833

 
2,377,892

Premium finance receivables—life insurance
2,700,275

 
2,277,571

 
2,134,405

Consumer and other
131,902

 
151,012

 
149,339

Total loans, net of unearned income, excluding covered loans
$
16,316,211

 
$
14,409,398

 
$
14,052,059

Covered loans
168,609

 
226,709

 
254,605

Total loans
$
16,484,820

 
$
14,636,107

 
$
14,306,664

Mix:
 
 
 
 
 
Commercial
27
%
 
26
%
 
26
%
Commercial real estate
32

 
31

 
31

Home equity
5

 
5

 
5

Residential real estate
3

 
3

 
3

Premium finance receivables—commercial
15

 
16

 
17

Premium finance receivables—life insurance
16

 
16

 
15

Consumer and other
1

 
1

 
1

Total loans, net of unearned income, excluding covered loans
99
%
 
98
%
 
98
%
Covered loans
1

 
2

 
2

Total loans
100
%
 
100
%
 
100
%
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. 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.
Certain premium finance receivables are recorded net of unearned income. The unearned income portions of such premium finance receivables were $53.4 million at September 30, 2015, $46.9 million at December 31, 2014 and $44.8 million at September 30, 2014, respectively. Certain life insurance premium finance receivables attributable to the life insurance premium finance loan acquisition in 2009 as well as PCI loans are recorded net of credit discounts. See “Acquired Loan Information at Acquisition” below.
Total loans, excluding PCI loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $(18.8) million at September 30, 2015, $330,000 at December 31, 2014 and $(6.3) million at September 30, 2014. The net credit balance at September 30, 2015 and September 30, 2014, is primarily the result of purchase accounting adjustments related to acquisitions in 2015 and 2014, respectively.
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.

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Acquired Loan Information at Acquisition—PCI Loans
As part of our previous acquisitions, we acquired loans for which there was evidence of credit quality deterioration since origination (PCI loans) 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, 2015
 
December 31, 2014
 
Unpaid
Principal
 
Carrying
 
Unpaid
Principal
 
Carrying
(Dollars in thousands)
Balance
 
Value
 
Balance
 
Value
Bank acquisitions
$
356,615

 
$
295,801

 
$
285,809

 
$
227,229

Life insurance premium finance loans acquisition
378,040

 
373,586

 
399,665

 
393,479


The following table provides estimated details as of the date of acquisition on loans acquired in 2015 with evidence of credit quality deterioration since origination:
(Dollars in thousands)
North Bank
 
CBWGE
 
Suburban
 
Delavan
Contractually required payments including interest
$
8,563

 
$
38,656

 
$
95,804

 
$
15,791

Less: Nonaccretable difference
1,027

 
4,437

 
13,888

 
1,442

   Cash flows expected to be collected (1)  
7,536

 
34,219

 
81,916

 
14,349

Less: Accretable yield
866

 
2,895

 
5,334

 
898

    Fair value of PCI loans acquired
6,670

 
31,324

 
76,582

 
13,451


(1) Represents undiscounted expected principal and interest cash 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 PCI loans at September 30, 2015.
Accretable Yield Activity - PCI Loans
Changes in expected cash flows may vary from period to period as the Company periodically updates its cash flow model assumptions for PCI loans. 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 PCI loans:

Three Months Ended
 
Nine Months Ended
(Dollars in thousands)
September 30,
2015

September 30,
2014

September 30,
2015

September 30,
2014
Accretable yield, beginning balance
$
63,643

 
$
97,281

 
$
79,102

 
$
115,909

Acquisitions
9,095

 

 
9,993

 

Accretable yield amortized to interest income
(5,939
)
 
(7,847
)
 
(18,359
)
 
(28,438
)
Accretable yield amortized to indemnification asset (1)
(3,280
)
 
(8,784
)
 
(10,945
)
 
(25,593
)
Reclassification from non-accretable difference (2)
2,298

 
2,584

 
5,154

 
29,092

Increases (decreases) in interest cash flows due to payments and changes in interest rates
(610
)
 
4,675

 
262

 
(3,061
)
Accretable yield, ending balance (3)
$
65,207

 
$
87,909

 
$
65,207

 
$
87,909

(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, 2015, the Company estimates that the remaining accretable yield balance to be amortized to the indemnification asset for the bank acquisitions is $10.0 million. The remainder of the accretable yield related to bank acquisitions is expected to be amortized to interest income.

Accretion to interest income from acquired loans totaled $5.9 million and $7.8 million in the third quarter of 2015 and 2014, respectively. For the nine months ended September 30, 2015 and 2014, the Company recorded accretion to interest income of $18.4 million and $28.4 million, respectively. These amounts include accretion from both covered and non-covered loans, and are included together within interest and fees on loans in the Consolidated Statements of 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, 2015December 31, 2014 and September 30, 2014:
As of September 30, 2015
 
 
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
$
12,006

 
$

 
$
2,731

 
$
9,331

 
$
2,622,207

 
$
2,646,275

Franchise

 

 
80

 
376

 
221,545

 
222,001

Mortgage warehouse lines of credit

 

 

 

 
136,614

 
136,614

Community Advantage—homeowners association

 

 
44

 

 
123,165

 
123,209

Aircraft

 

 

 
378

 
5,993

 
6,371

Asset-based lending
12

 

 
1,313

 
247

 
800,798

 
802,370

Tax exempt

 

 

 

 
232,667

 
232,667

Leases

 

 

 
89

 
205,697

 
205,786

Other

 

 

 

 
1,953

 
1,953

PCI - commercial (1)

 
217

 

 
39

 
22,683

 
22,939

Total commercial
12,018

 
217

 
4,168

 
10,460

 
4,373,322

 
4,400,185

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
Residential construction

 

 

 
1,141

 
60,130

 
61,271

Commercial construction
31

 

 

 
2,394

 
283,538

 
285,963

Land
1,756

 

 

 
2,207

 
75,113

 
79,076

Office
4,045

 

 
10,861

 
2,362

 
773,043

 
790,311

Industrial
11,637

 

 
786

 
897

 
622,804

 
636,124

Retail
2,022

 

 
1,536

 
821

 
781,463

 
785,842

Multi-family
1,525

 

 
512

 
744

 
684,878

 
687,659

Mixed use and other
7,601

 

 
2,340

 
12,871