Loans Receivable Not Covered by Loss Share and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2011

Loans Receivable Not Covered by Loss Share and Allowance for Loan Losses [Abstract]

Loans Receivable Not Covered by Loss Share and Allowance for Loan Losses

4: Loans Receivable Not Covered by Loss Share and Allowance for Loan Losses

     The various categories of loans not covered by loss share are summarized as follows:

	June 30,		December 31,
	2011		2010
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	754,251	$	805,635
Construction/land development		363,310		348,768
Agricultural		26,826		26,798
Residential real estate loans
Residential 1-4 family		348,402		371,381
Multifamily residential		48,803		59,319
Total real estate		1,541,592		1,611,901
Consumer		42,662		51,642
Commercial and industrial		173,285		184,014
Agricultural		25,929		16,549
Other		29,250		28,268
Loans receivable not covered by loss share	$	1,812,718	$	1,892,374

     The following tables present the balance in the allowance for loan losses for the three-month and six-month periods ended June 30, 2011, and the allowance for loan losses and recorded investment in loans based on portfolio segment by impairment method as of June 30, 2011. Allocation of a portion of the allowance to one type of loans does not preclude its availability to absorb losses in other categories.

	Three Months Ended June 30, 2011
				Other
	Construction			Commercial Real			Residential			Commercial			Consumer
	Land Development			Estate			Real Estate			& Industrial			& Other			Unallocated			Total
							(In thousands)
Allowance for loan losses:
Beginning balance	$	11,241		$	17,529		$	13,674		$	6,725		$	1,932		$	2,490		$	53,591
Loans charged off		(228	)		(4	)		(755	)		(58	)		(515	)		—			(1,560	)
Recoveries of loans previously charged off		4			73			18			4,459			199			—			4,753
Net loans recovered (charged off)		(224	)		69			(737	)		4,401			(316	)		—			3,193
Provision for loan losses		301			1,543			1,387			(4,007	)		834			(58	)		—
Balance, June 30	$	11,318		$	19,141		$	14,324		$	7,119		$	2,450		$	2,432		$	56,784

	Six Months Ended June 30, 2011
				Other
	Construction			Commercial Real			Residential			Commercial			Consumer
	Land Development			Estate			Real Estate			& Industrial			& Other			Unallocated		Total
										(In thousands)
Allowance for loan losses:
Beginning balance	$	12,002		$	17,247		$	14,297		$	6,357		$	1,022		$	2,423	$	53,348
Loans charged off		(231	)		(20	)		(784	)		(152	)		(1,995	)		—		(3,182	)
Recoveries of loans previously charged off		6			163			248			4,616			335			—		5,368
Net loans recovered (charged off)		(225	)		143			(536	)		4,464			(1,660	)		—		2,186
Provision for loan losses		(459	)		1,751			563			(3,702	)		3,088			9		1,250
Balance, June 30	$	11,318		$	19,141		$	14,324		$	7,119		$	2,450		$	2,432	$	56,784

	As of June 30, 2011
			Other
	Construction		Commercial Real		Residential		Commercial		Consumer
	Land Development		Estate		Real Estate		& Industrial		& Other		Unallocated		Total
Allowance for loan losses:
Period end amount allocated to:
Loans individually evaluated for impairment	$	7,441	$	13,160	$	10,404	$	4,011	$	1,484	$	—	$	36,500
Loans collectively evaluated for impairment		3,877		5,981		3,920		3,108		966		2,432		20,284
Balance, June 30	$	11,318	$	19,141	$	14,324	$	7,119	$	2,450	$	2,432	$	56,784
Loans receivable:
Period end amount allocated to:
Loans individually evaluated for impairment	$	21,692	$	78,291	$	28,921	$	14,303	$	2,836	$	—	$	146,043
Loans collectively evaluated for impairment		341,618		702,786		368,284		158,982		95,005		—		1,666,675
Balance, June 30	$	363,310	$	781,077	$	397,205	$	173,285	$	97,841	$	—	$	1,812,718

As of June 30, 2011, no loans acquired with deteriorated credit quality have required a provision for loan loss.

     The following tables present the balance in the allowance for loan losses for the year ended December 31, 2010, and the recorded investment in allowance for loan losses and loans based on portfolio segment by impairment method as of December 31, 2010. Allocation of a portion of the allowance to one type of loans does not preclude its availability to absorb losses in other categories.

	As of December 31, 2010
				Other
	Construction			Commercial Real			Residential			Commercial			Consumer
	Land Development			Estate			Real Estate			& Industrial			& Other			Unallocated			Total
										(In thousands)
Allowance for loan losses:
Beginning balance	$	9,624		$	13,568		$	11,348		$	6,067		$	1,984		$	377		$	42,968
Loans charged off		(951	)		(856	)		(2,749	)		1,636			(1,580	)		—			(7,772	)
Recoveries of loans previously charged off		54			784			383			26			321			—			1,568
Net loans recovered (charged off)		(897	)		(72	)		(2,366	)		(1,610	)		(1,259	)		—			(6,204	)
Provision for loan losses		1,479			(395	)		5,262			325			486			(307	)		6,850
Balance, June 30		10,206			13,101			14,244			4,782			1,211			70			43,614
Loans charged off		(9,323	)		(15,849	)		(7,982	)		(22,591	)		(936	)		—			(56,681	)
Recoveries of loans previously charged off		1			84			109			24			197			—			415
Net loans recovered (charged off)		(9,322	)		(15,765	)		(7,873	)		(22,567	)		(739	)		—			(56,266	)
Provision for loan losses		11,118			19,911			7,926			24,142			550			2,353			66,000
Balance, end of year	$	12,002		$	17,247		$	14,297		$	6,357		$	1,022		$	2,423		$	53,348
Period end amount allocated to:
Loans individually evaluated for impairment	$	7,602		$	9,912		$	9,843		$	2,625		$	438		$	—		$	30,420
Loans collectively evaluated for impairment		4,400			7,335			4,454			3,732			584			2,423			22,928
Balance, end of year	$	12,002		$	17,247		$	14,297		$	6,357		$	1,022		$	2,423		$	53,348
Loans receivable:
Period end amount allocated to:
Loans individually evaluated for impairment	$	25,556		$	69,010		$	35,077		$	16,939		$	1,136		$	—		$	147,718
Loans collectively evaluated for impairment		323,212			763,423			395,623			167,075			95,323			—			1,744,656
Balance, end of year	$	348,768		$	832,433		$	430,700		$	184,014		$	96,459		$	—		$	1,892,374

As of December 31, 2010, no loans acquired with deteriorated credit quality have required a provision for loan loss.

     The following is an aging analysis for the non-covered loan portfolio as of June 30, 2011 and December 31, 2010:

	June 30, 2011
													Accruing
					Loans								Loans
	Loans		Loans		Past Due								Past Due
	Past Due		Past Due		90 Days		Total		Current		Total Loans		90 Days
	30-59 Days		60-89 Days		or More		Past Due		Loans		Receivable		or More
					(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	1,059	$	240	$	7,375	$	8,674	$	745,577	$	754,251	$	494
Construction/land development		5,253		3,277		4,509		13,039		350,271		363,310		832
Agricultural		—		—		948		948		25,878		26,826		—
Residential real estate loans
Residential 1-4 family		1,915		1,860		14,345		18,120		330,282		348,402		25
Multifamily residential		—		2,912		—		2,912		45,891		48,803		—
Total real estate		8,227		8,289		27,177		43,693		1,497,899		1,541,592		1,351
Consumer		1,247		345		2,177		3,769		38,893		42,662		105
Commercial and industrial		87		147		1,824		2,058		171,227		173,285		—
Agricultural and other		253		—		51		304		54,875		55,179		—
Total	$	9,814	$	8,781	$	31,229	$	49,824	$	1,762,894	$	1,812,718	$	1,456

	December 31, 2010
													Accruing
					Loans								Loans
	Loans		Loans		Past Due								Past Due
	Past Due		Past Due		90 Days		Total		Current		Total Loans		90 Days
	30-59 Days		60-89 Days		or More		Past Due		Loans		Receivable		or More
					(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	1,903	$	4,833	$	16,535	$	23,271	$	782,338	$	805,635	$	—
Construction/land development		5,055		—		6,809		11,864		336,904		348,768		1
Agricultural		—		—		220		220		26,578		26,798		—
Residential real estate loans
Residential 1-4 family		1,513		2,354		16,530		20,397		350,984		371,381		535
Multifamily residential		—		2,887		5,122		8,009		51,310		59,319		—
Total real estate		8,471		10,074		45,216		63,787		1,548,114		1,611,901		536
Consumer		154		60		1,342		1,556		50,086		51,642		34
Commercial and industrial		283		395		2,943		3,621		180,393		184,014		8
Agricultural and other		156		20		1		177		44,666		44,817		—
Total	$	9,064	$	10,549	$	49,502	$	69,115	$	1,823,259	$	1,892,374	$	578

     Non-accruing loans not covered by loss share at June 30, 2011 and December 31, 2010 were $29.8 million and $48.9 million, respectively.

     The Company did not sell any of the guaranteed portions of SBA loans during the three-month month period ended June 30, 2011. During the six-month period ended June 30, 2011, the Company sold $4.2 million of the guaranteed portion of certain SBA loans, which resulted in a gain of approximately $259,000. The Company sold $250,000 of the guaranteed portions of SBA loans during the three-month and six-month periods ended June 30, 2010, resulting in a gain of $18,000.

     Mortgage loans held for sale of approximately $4.0 million and $14.0 million at June 30, 2011 and December 31, 2010, respectively, are included in residential 1-4 family loans. Mortgage loans held for sale are carried at the lower of cost or fair value, determined using an aggregate basis. Gains and losses resulting from sales of mortgage loans are recognized when the respective loans are sold to investors. Gains and losses are determined by the difference between the selling price and the carrying amount of the loans sold, net of discounts collected or paid. The Company obtains forward commitments to sell mortgage loans to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. The forward commitments acquired by the Company for mortgage loans in process of origination are not mandatory forward commitments. These commitments are structured on a best efforts basis; therefore the Company is not required to substitute another loan or to buy back the commitment if the original loan does not fund. Typically, the Company delivers the mortgage loans within a few days after the loans are funded. These commitments are derivative instruments and their fair values at June 30, 2011 and December 31, 2010 were not material.

     The following is a summary of the non-covered impaired loans as of June 30, 2011 and December 31, 2010:

	June 30, 2011
							Three Months Ended				Six Months Ended
					Allocation
	Unpaid Contractual		Total Recorded		of Allowance for		Average Recorded		Interest		Average Recorded		Interest
	Principal Balance		Investment		Loan Losses		Investment		Recognized		Investment		Recognized
							(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	77,692	$	45,900	$	12,761	$	43,787	$	611	$	41,486	$	1,173
Construction/land development		21,692		18,397		7,441		18,779		253		18,280		511
Agricultural		598		598		399		598		—		598		10
Residential real estate loans
Residential 1-4 family		21,416		20,980		7,100		20,272		175		19,653		327
Multifamily residential		7,505		7,505		3,304		7,390		101		7,344		282
Total real estate		128,903		93,380		31,005		90,826		1,140		87,361		2,203
Consumer		2,546		2,067		1,484		1,653		17		1,321		27
Commercial and industrial		14,303		12,645		4,011		12,760		197		12,243		388
Agricultural and other		—		—		—		—		—		—		—
Total	$	145,752	$	108,092	$	36,500	$	105,239	$	1,354	$	100,925	$	2,618

	December 31, 2010
					Allocation
	Unpaid Contractual		Total Recorded		of Allowance for		Average Recorded		Interest
	Principal Balance		Investment		Loan Losses		Investment		Recognized
					(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	40,078	$	36,884	$	9,697	$	18,366	$	1,922
Construction/land development		19,617		17,282		7,602		14,272		823
Agricultural		598		598		215		120		40
Residential real estate loans
Residential 1-4 family		20,894		18,416		6,884		17,137		602
Multifamily residential		7,251		7,251		2,959		5,149		325
Total real estate		88,438		80,431		27,357		55,044		3,712
Consumer		658		658		438		799		—
Commercial and industrial		11,284		11,208		2,625		6,218		749
Agricultural and other		—		—		—		—		—
Total	$	100,380	$	92,297	$	30,420	$	62,061	$	4,461

     All of the Company’s non-covered impaired loans have a specific allocation of the allowance for loan losses. Interest recognized on non-covered impaired loans during the six months ended June 30, 2011 and 2010 was approximately $2.6 million and $1.2 million, respectively. The amount of interest recognized on non-covered impaired loans on the cash basis is not materially different than the accrual basis.

     Credit Quality Indicators. As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk rating of loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) non-performing loans and (v) the general economic conditions in Florida and Arkansas.

     The Company utilizes a risk rating matrix to assign a risk rating to each of its loans. Loans are rated on a scale from 1 to 8. A description of the general characteristics of the 8 risk ratings are as follows:

• Risk rating 1 — Excellent. Loans in this category are to persons or entities of unquestionable financial strength, a highly liquid financial position, with collateral that is liquid and well margined. These borrowers have performed without question on past obligations, and the Bank expects their performance to continue. Internally generated cash flow covers current maturities of long-term debt by a substantial margin. Loans secured by bank certificates of deposit and savings accounts, with appropriate holds placed on the accounts, are to be rated in this category.

• Risk rating 2 — Good. These are loans to persons or entities with strong financial condition and above-average liquidity that have previously satisfactorily handled their obligations with the Bank. Collateral securing the Bank’s debt is margined in accordance with policy guidelines. Internally generated cash flow covers current maturities of long-term debt more than adequately. Unsecured loans to individuals supported by strong financial statements and on which repayment is satisfactory may be included in this classification.

• Risk rating 3 — Satisfactory. Loans to persons or entities with an average financial condition, adequate collateral margins, adequate cash flow to service long-term debt, and net worth comprised mainly of fixed assets are included in this category. These entities are minimally profitable now, with projections indicating continued profitability into the foreseeable future. Closely held corporations or businesses where a majority of the profits are withdrawn by the owners or paid in dividends are included in this rating category. Overall, these loans are basically sound.

• Risk rating 4 — Watch. Borrowers who have marginal cash flow, marginal profitability or have experienced an unprofitable year and a declining financial condition characterize these loans. The borrower has in the past satisfactorily handled debts with the Bank, but in recent months has either been late, delinquent in making payments, or made sporadic payments. While the Bank continues to be adequately secured, margins have decreased or are decreasing, despite the borrower’s continued satisfactory condition. Other characteristics of borrowers in this class include inadequate credit information, weakness of financial statement and repayment capacity, but with collateral that appears to limit exposure. Included in this category are loans to borrowers in industries that are experiencing elevated risk.

• Risk rating 5 — Other Loans Especially Mentioned (“OLEM”). A loan criticized as OLEM has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. OLEM assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification.

• Risk rating 6 — Substandard. A loan classified as substandard is inadequately protected by the sound worth and paying capacity of the borrower or the collateral pledged. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual assets.

• Risk rating 7 — Doubtful. A loan classified as doubtful has all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collectability in full in a reasonable period of time; in fact, there is permanent impairment in the collateral securing the loan.

• Risk rating 8 — Loss. Assets classified as loss are considered uncollectible and of such little value that the continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather, it is not practical or desirable to defer writing off this basically worthless asset, even though partial recovery may occur in the future. This classification is based upon current facts, not probabilities. Assets classified as loss should be charged-off in the period in which they became uncollectible.

     The Company’s classified loans include loans in risk ratings 6, 7 and 8. The following is a presentation of classified non-covered loans by class as of June 30, 2011 and December 31, 2010:

	June 30, 2011
	Risk Rated 6		Risk Rated 7		Risk Rated 8		Classified Total
			(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	31,460	$	2	$	—	$	31,462
Construction/land development		8,377		—		—		8,377
Agricultural		948		—		—		948
Residential real estate loans
Residential 1-4 family		22,342		179		—		22,521
Multifamily residential		6,058		—		—		6,058
Total real estate		69,185		181		—		69,366
Consumer		2,594		—		—		2,594
Commercial and industrial		3,359		56		—		3,415
Agricultural and other		107		—		—		107
Total	$	75,245	$	237	$	—	$	75,482

	December 31, 2010
	Risk Rated 6		Risk Rated 7		Risk Rated 8		Total
			(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	31,806	$	5,483	$	—	$	37,289
Construction/land development		11,665		934		—		12,599
Agricultural		994		—		—		994
Residential real estate loans
Residential 1-4 family		23,801		740		—		24,541
Multifamily residential		11,170		—		—		11,170
Total real estate		79,436		7,157		—		86,593
Consumer		1,350		—		—		1,350
Commercial and industrial		3,588		55		—		3,643
Agricultural		1		2		—		3
Other		143		—		—		143
Total	$	84,518	$	7,214	$	—	$	91,732

     Loans may be classified, but not considered impaired, due to one of the following reasons: (1) The Company has established minimum dollar amount thresholds for loan impairment testing. All loans over $250,000 that are rated 5 or worse are individually assessed for impairment on a quarterly basis. Loans rated 6 — 8 that fall under the threshold amount are not individually tested for impairment and therefore are not included in impaired loans; (2) Of the loans that are above the threshold amount and tested for impairment, after testing, some are considered to not be impaired and are not included in impaired loans.

     The following is a presentation of non-covered loans by class and risk rating as of June 30, 2011 and December 31, 2010:

	June 30, 2011
	Risk		Risk		Risk		Risk		Risk		Classified
	Rated 1		Rated 2		Rated 3		Rated 4		Rated 5		Total		Total
							(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	399	$	18	$	388,438	$	283,794	$	50,140	$	31,462	$	754,251
Construction/land development		58		—		81,365		256,816		16,694		8,377		363,310
Agricultural		—		—		7,323		18,555		—		948		26,826
Residential real estate loans
Residential 1-4 family		289		—		215,191		99,894		10,507		22,521		348,402
Multifamily residential		—		—		24,734		16,318		1,693		6,058		48,803
Total real estate		746		18		717,051		675,377		79,034		69,366		1,541,592
Consumer		8,808		883		20,763		8,124		1,490		2,594		42,662
Commercial and industrial		7,749		389		76,606		71,817		13,309		3,415		173,285
Agricultural and other		170		1,518		33,271		19,787		326		107		55,179
Total	$	17,473	$	2,808	$	847,691	$	775,105	$	94,159	$	75,482	$	1,812,718

							December 31, 2010
	Risk		Risk		Risk		Risk		Risk		Classified
	Rated 1		Rated 2		Rated 3		Rated 4		Rated 5		Total		Total
							(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	398	$	22	$	440,989	$	292,391	$	34,545	$	37,289	$	805,635
Construction/land development		16		—		74,887		244,133		17,133		12,599		348,768
Agricultural		—		—		19,315		6,196		293		994		26,798
Residential real estate loans
Residential 1-4 family		245		12		242,036		92,998		11,549		24,541		371,381
Multifamily residential		—		—		28,539		17,915		1,695		11,170		59,319
Total real estate		660		34		805,767		653,633		65,215		86,593		1,611,901
Consumer		14,355		3,093		15,233		17,360		252		1,350		51,642
Commercial and industrial		7,967		668		81,012		75,138		15,586		3,643		184,014
Agricultural and other		144		1,270		36,028		7,223		5		146		44,817
Total	$	23,125	$	5,065	$	938,040	$	753,354	$	81,058	$	91,732	$	1,892,374

     The following is a presentation of non-covered TDR’s by class as of June 30, 2011:

	June 30, 2011
									Rate
	Number		Pre-Modification		Rate		Term		& Term		Post-Modification
	of Loans		Outstanding Balance		Modification		Modification		Modification		Outstanding Balance
					(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential		28	$	40,408	$	26,465	$	4,083	$	5,767	$	36,315
Construction/land development		14		25,573		12,354		1,343		3,712		17,409
Residential real estate loans
Residential 1-4 family		14		7,138		3,502		125		773		4,400
Multifamily residential		2		4,586		4,605		—		—		4,605
Total real estate		58		77,705		46,926		5,551		10,252		62,729
Commercial and industrial		4		517		158		—		178		336
Total		62	$	78,222	$	47,084	$	5,551	$	10,430	$	63,065

     The following is a presentation of non-covered TDR’s not in compliance with the modified terms:

	June 30, 2011
	Number of Loans		Recorded Balance
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential		4	$	2,703
Construction/land development		5		3,426
Residential real estate loans
Residential 1-4 family		5		1,817
Multifamily residential		—		—
Total real estate		14		7,946
Commercial and industrial		1		53
Total		15	$	7,999