Loans and Other Repossessed Assets Acquired

3 Months Ended

Mar. 31, 2013

Loans And Other Repossessed Assets Acquired [Text Block]

NOTE 3. Loans and Other Repossessed Assets Acquired

     The following table presents the loan portfolio by major category. Loans are grouped by purpose versus underlying collateral.

(in thousands)	March 31, 2013		December 31, 2012
Residential loans
Residential 1-4 family	$	963,053	$	956,355
Residential construction		25,895		22,439
Residential land		48,911		52,739
Total residential loans		1,037,859		1,031,533
Commercial loans
Commercial business		130,169		118,379
Commercial real estate		467,890		491,567
Commercial construction		1,092		1,064
Commercial land		64,582		70,109
Total commercial loans		663,733		681,119
Consumer loans
Home equity		373,108		384,664
Manufactured housing		282,114		280,100
Marine		79,328		75,736
Other consumer		40,000		42,172
Total consumer loans		774,550		782,672
Total loans		2,476,142		2,495,324
Less: Allowance for loan losses		47,427		44,179
Net loans	$	2,428,715	$	2,451,145

     As of the balance sheet dates, loans to related parties did not exceed five percent of shareholders equity.

     In April 2009 and April 2012, First Federal entered into purchase and assumption agreements with the Federal Deposit Insurance Corporation (“FDIC”) to acquire certain assets and liabilities of the former Cape Fear Bank (“Cape Fear”) and Plantation Federal Bank (“Plantation”), respectively, under which Cape Fear loans and certain Plantation commercial loans and other real estate owned (“OREO”) were covered under loss share agreements with the FDIC (“acquired covered loans” or “acquired covered assets”). In addition, First Federal acquired five branches from Liberty Savings Bank (“Liberty”) in April 2012. The Plantation loans and OREO not covered under its loss share agreement and all of the Liberty loans are considered “acquired non-covered loans” or “acquired non-covered assets.” Loans that were originated through First Federal’s normal origination channels (i.e., not acquired in an acquisition) that are part of the loan portfolio or have subsequently migrated to OREO are considered “legacy loans” or “legacy assets.”

     The following is a summary of changes in the accretable yields of acquired loans during the respective periods.

	As of and for the Quarter Ended March 31, 2013									As of and for the Quarter Ended March 31, 2012
(in thousands)	Non-Impaired Loans			Impaired Loans			Total Acquired Loan Portfolios			Non-Impaired Loans			Impaired Loans			Total Acquired Loan Portfolios
Balance at beginning of period	$	5,474		$	20,933		$	26,407		$	2,811		$	14,154		$	16,965
Reclass of nonaccretable difference due to reduction of expected cash flows		---			(1,111	)		(1,111	)		---			---			---
Accretion		(393	)		(5,391	)		(5,784	)		(173	)		(1,010	)		(1,183	)
Balance at end of period	$	5,081		$	14,431		$	19,512		$	2,638			13,144		$	15,782

     First Federal monitors the expected cash flows for each ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, pool on a quarterly basis. During the quarter ended March 31, 2013, First Federal determined that certain Plantation loan pools are projected to have lower cash flows than originally estimated at acquisition. As a result, First Federal recorded an impairment and decreased the accretable yield related to these pools by $1.1 million. In addition, First Federal accelerated the accretion on a Cape Fear loan pool during the March 31, 2013 quarter to align with the projected cash flows of the underlying loans.

Delinquent Loans and Nonperforming Assets

     The following table presents the loan portfolio by age of delinquency.

	As of March 31, 2013
(in thousands)	30-59 Days Past Due			60-89 Days Past Due			90 Days and Greater Past Due			90 Days and Greater Accruing			Total Past Due			Current1			Total Loans
Residential loans
Residential 1-4 family		$	821		$	612		$	7,693		$	---		$	9,126		$	953,927		$	963,053
Residential construction			284			---			---			---			284			25,611			25,895
Residential land			585			140			576			---			1,301			47,610			48,911
Total residential loans			1,690			752			8,269			---			10,711			1,027,148			1,037,859
Commercial loans
Commercial business			1,199			56			1,813			---			3,068			127,101			130,169
Commercial real estate			3,091			1,161			18,213			---			22,465			445,425			467,890
Commercial construction			---			---			---			---			---			1,092			1,092
Commercial land			1,321			219			3,845			---			5,385			59,197			64,582
Total commercial loans			5,611			1,436			23,871			---			30,918			632,815			663,733
Consumer loans
Home equity			2,430			328			9,295			---			12,053			361,055			373,108
Manufactured housing			973			189			3,085			---			4,247			277,867			282,114
Marine			112			42			125			---			279			79,049			79,328
Other consumer			140			37			265			6			448			39,552			40,000
Total consumer loans			3,655			596			12,770			6			17,027			757,523			774,550
Total loans		$	10,956		$	2,784		$	44,910		$	6		$	58,656		$	2,417,486		$	2,476,142
Acquired non-covered loans			28			---			235			---			263			111,837			112,100
Acquired covered loans			2,951			414			8,769			---			12,134			189,052			201,186
Legacy loans			7,977			2,370			35,906			6			46,259			2,116,597			2,162,856
Total loans		$	10,956		$	2,784		$	44,910		$	6		$	58,656		$	2,417,486		$	2,476,142

¹ Included in current loans are $3.8 million of accruing performing TDRs. Accruing TDRs include $257 thousand in residential land, $683 thousand in commercial business, $1.7 million in commercial real estate, $499 thousand in commercial land, $500 thousand in home equity and $134 thousand in manufactured housing.

	As of December 31, 2012
(in thousands)	30-59 Days Past Due			60-89 Days Past Due			90 Days and Greater Past Due			90 Days and Greater Accruing			Total Past Due			Current1			Total Loans
Residential loans
Residential 1-4 family		$	1,943		$	857		$	7,137		$	---		$	9,937		$	946,418		$	956,355
Residential construction			---			---			---			---			---			22,439			22,439
Residential land			8			39			785			---			832			51,907			52,739
Total residential loans			1,951			896			7,922			---			10,769			1,020,764			1,031,533
Commercial loans
Commercial business			761			86			1,460			---			2,307			116,072			118,379
Commercial real estate			2,380			1,112			18,386			---			21,878			469,689			491,567
Commercial construction			---			---			247			---			247			817			1,064
Commercial land			966			607			4,058			---			5,631			64,478			70,109
Total commercial loans			4,107			1,805			24,151			---			30,063			651,056			681,119
Consumer loans
Home equity			2,328			2,086			10,049			---			14,463			370,201			384,664
Manufactured housing			2,479			762			3,355			---			6,596			273,504			280,100
Marine			216			68			139			---			423			75,313			75,736
Other consumer			261			123			275			43			702			41,470			42,172
Total consumer loans			5,284			3,039			13,818			43			22,184			760,488			782,672
Total loans		$	11,342		$	5,740		$	45,891		$	43		$	63,016		$	2,432,308			2,495,324
Acquired non-covered loans			153			329			328			---			810			117,321			118,131
Acquired covered loans			1,472			173			8,649			---			10,294			206,395			216,689
Legacy loans			9,717			5,238			36,914			43			51,912			2,108,592			2,160,504
Total loans		$	11,342		$	5,740		$	45,891		$	43		$	63,016		$	2,432,308		$	2,495,324

¹ Included in current loans are $3.5 million of accruing performing TDRs. Accruing TDRs include $687 thousand in commercial business, $1.7 million in commercial real estate, $502 thousand in home equity, $499 thousand in commercial land and $135 thousand in manufactured housing.

     Nonperforming assets include nonaccrual loans, loans delinquent 90 days or more and still accruing, restructured loans still accruing, and other repossessed assets acquired through foreclosure. With the exception of the credit card portfolio, loans are placed on nonaccrual status when they become 90 days delinquent. In addition, loans that were not delinquent in excess of 90 days but exhibited doubt as to First Federal’s ability to collect all contractual principal and interest have been classified as impaired under ASC 310-10, and placed on nonaccrual status. The following table presents the composition of nonperforming assets.

(in thousands)	March 31, 2013			December 31, 2012
Nonaccrual loans		$	44,910		$	45,891
Loans 90+ days, still accruing			6			43
Restructured loans, still accruing			3,768			3,536
Total nonperforming loans			48,684			49,470
Other repossessed assets acquired			16,310			18,338
Total nonperforming assets		$	64,994		$	67,808
Acquired non-covered nonperforming loans		$	235		$	328
Acquired covered nonperforming loans			8,769			8,649
Legacy nonperforming loans			39,680			40,493
Total nonperforming loans		$	48,684		$	49,470
Acquired non-covered nonperforming assets		$	1,226		$	2,023
Acquired covered nonperforming assets			18,446			18,256
Legacy nonperforming assets			45,322			47,529
Total nonperforming assets		$	64,994		$	67,808

     Loans acquired from Cape Fear and Plantation that were performing at the time of acquisition, but have subsequently become nonaccrual are included in the tables above. Nonperforming loans acquired at acquisition are not included since these loans were adjusted to fair value at the acquisition date and accounted for under ASC 310-30.

Impaired Loans

     In accordance with ASC 310-10, a loan is considered impaired when First Federal determines it is probable that the principal and interest due under the contractual terms of the loan will not be collected. Criticized and classified commercial loans (as defined in the “Criticized Loans, Classified Loans and Other Risk Characteristics” section of this Note) greater than $500,000 are reviewed for potential impairment as part of a monthly problem loan review process. In addition, homogeneous loans which have been modified are reviewed for potential impairment.

     In assessing the impairment of a loan and the related reserve required for that loan, various methodologies are employed. Impairment measurement on loans that are not collateral dependent is determined primarily using the present value of expected future cash flows discounted at the loan’s effective interest rate. With respect to most real estate loans, and specifically if the loan is considered to be collected through a probable foreclosure, an approach that estimates the fair value of the underlying collateral is used. The collateral is appraised to reflect estimated realizable value (usually “as is” or liquidation value), with the value being adjusted for estimated selling costs. First Federal’s policy is to update collateral appraisals on impaired loans at least annually, and more frequently if deemed necessary based on market conditions or specific circumstances. Significant downward trends in the real estate market can adversely affect First Federal’s collateral position. For larger credits or loans that are classified “substandard” or worse that rely primarily on real estate collateral for repayment, re-appraisal would occur earlier than the stated policy if management believes the market conditions have changed such that the existing appraisal may no longer reflect the current market value of the property. At a minimum, at the time a loan with a principal balance of over $500,000 is downgraded to “substandard” or worse, or if the loan is determined to be impaired, the property securing the loan is re-appraised to update the value. In addition to updated appraisals, market bids or current offers may be utilized to estimate current value.

     First Federal maintains a valuation reserve for impaired loans as part of the allowance for loan losses. Cash collected on impaired nonaccrual loans is applied to outstanding principal. A summary of impaired loans, related valuation reserves and their effect on interest income follows.

(in thousands)	Unpaid Contractual Principal Balance			Recorded Investment With No Specific Allowance			Recorded Investment With Specific Allowance			Total Recorded Investment			Specific Allowance			Average Balance			Interest Income Recognized Period to Date
March 31, 2013
Residential loans
Residential 1-4 family		$	7,734		$	5,705		$	462		$	6,167		$	93		$	4,078		$	---
Residential land			675			314			16			330			5			196			4
Total residential loans			8,409			6,019			478			6,497			98			4,274			4
Commercial loans
Commercial business			2,025			1,180			829			2,009			829			1,743			9
Commercial real estate			16,883			12,024			1,726			13,750			109			12,835			28
Commercial construction			---			---			---			---			---			124			---
Commercial land			5,361			2,426			1,040			3,466			230			3,415			---
Total commercial loans			24,269			15,630			3,595			19,225			1,168			18,116			37
Consumer loans
Home equity			11,013			8,281			447			8,728			43			7,545			6
Manufactured housing			605			273			99			372			16			275			---
Marine			12			5			---			5			---			3			---
Total consumer loans			11,630			8,559			546			9,105			59			7,822			6
Total impaired loans		$	44,308		$	30,208		$	4,619		$	34,827		$	1,325		$	30,212		$	47
Acquired non-covered loans			299			154			---			154			---			77			---
Acquired covered loans			6,379			4,181			719			4,900			42			4,209			---
Legacy loans			37,630			25,873			3,900			29,773			1,283			25,926			47
Total Loans		$	44,308		$	30,208		$	4,619		$	34,827		$	1,325		$	30,212		$	47
December 31, 2012
Residential loans
Residential 1-4 family		$	2,123		$	1,988		$	---		$	1,988		$	---		$	2,117		$	---
Residential land			341			62			---			62			---			31			---
Total residential loans			2,464			2,050			---			2,050			---			2,148			---
Commercial loans
Commercial business			1,676			1,368			108			1,476			---			2,565			33
Commercial real estate			13,510			8,595			3,324			11,919			624			12,096			---
Commercial construction			311			247			---			247			---			254			125
Commercial land			5,000			2,121			1,243			3,364			271			3,546			---
Total commercial loans			20,497			12,331			4,675			17,006			895			18,461			158
Consumer loans
Home equity			8,070			6,262			99			6,361			67			5,068			28
Manufactured housing			195			177			---			177			---			155			---
Marine			---			---			---			---			---			---			---
Total consumer loans			8,265			6,439			99			6,538			67			5,223			28
Total impaired loans		$	31,226		$	20,820		$	4,774		$	25,594		$	962		$	25,832		$	186
Acquired non-covered loans			---			---			---			---			---			---			---
Acquired covered loans			4,228			3,217			300			3,517			12			8,082			---
Legacy Loans			26,998			17,603			4,474			22,077			950			17,750			186
Total Loans		$	31,226		$	20,820		$	4,774		$	25,594		$	962		$	25,832		$	186

     The increase in total impaired loans from December 31, 2012 to March 31, 2013 was primarily due to $7.1 million of homogenous loans that are in the process of foreclosure and were individually evaluated for impairment, which resulted in an increase in the specific allowance of $181 thousand.

Troubled Debt Restructuring

     First Federal accounts for certain loan modifications or restructurings as a Troubled Debt Restructuring (“TDR”). In general, a loan is considered a TDR if, for economic or legal reasons related to a borrower’s financial difficulties, a concession is granted to the borrower that First Federal would not otherwise consider. While commercial loan modifications vary depending on circumstances, the most common types of modifications for residential and consumer loans include below market rate reductions and/or maturity extensions, and generally do not include forgiveness of principal balances. Modified terms are dependent on the financial position and needs of the individual borrower.

     First Federal classifies TDRs as nonaccruing loans unless the loan qualified for accruing status at the time of the restructure, or the loan has performed according to the new contractual terms for at least six months. To qualify for accruing status at the time of the restructure, the original loan must have been less than 90 days past due at the time of the restructure and the modification must not have resulted in an impairment loss.

     The following table provides a summary of TDRs that continue to accrue interest under restructured terms and TDRs that have been placed in nonaccrual status.

	As of March 31, 2013								As of December 31, 2012
(dollars in thousands)	#		Accruing		Non-accruing		Total1		#		Accruing		Non-accruing		Total1
Residential loans
Residential 1-4 family		5	$	---	$	1,816	$	1,816		4	$	---	$	1,745	$	1,745
Residential land		2		257		57		314		1		---		61		61
Residential Loans		7		257		1,873		2,130		5		---		1,806		1,806
Commercial loans
Commercial business		2		683		252		935		3		687		609		1,296
Commercial real estate		21		1,695		4,030		5,725		18		1,713		4,543		6,256
Commercial land		5		499		1,820		2,319		5		499		1,852		2,351
Total commercial loans		28		2,877		6,102		8,979		26		2,899		7,004		9,903
Consumer loans
Home equity		22		500		4,254		4,754		22		502		4,359		4,861
Manufactured housing		5		134		94		228		1		135		---		135
Marine		1		---		5		5		---		---		---		---
Total consumer loans		28		634		4,353		4,987		23		637		4,359		4,996
Total loans		63	$	3,768	$	12,328	$	16,096		54	$	3,536	$	13,169	$	16,705
Acquired covered loans included above		9	$	---	$	2,410	$	2,410		8	$	---	$	2,612	$	2,612
1 There were no acquired non-covered TDRs in the above noted periods.

     The following table provides a summary of the primary reason loan modifications were classified as TDRs and their estimated impact on the allowance for loan losses.

	As of March 31, 2013								As of December 31, 2012
			Types of Modifications1								Types of Modifications1
(dollars in thousands)	#		Rate		Structure		Increase to Allowance		#		Rate		Structure		Increase to Allowance
Residential loans
Residential 1-4		5	$	539	$	1,277	$	---		4	$	543	$	1,202	$	---
Residential Land		2		57		257		---		1		61		---		---
Total residential loans		7		596		1,534		---		5		604		1,202		---
Commercial loans
Commercial business		2		---		935		---		3		---		1,296		---
Commercial real estate		21		359		5,366		---		18		---		6,256		12
Commercial land		5		---		2,319		230		5		---		2,351		257
Total commercial loans		28		359		8,620		230		26		---		9,903		269
Consumer loans
Home equity		22		3,597		1,157		---		22		3,686		1,175		---
Manufactured housing		5		134		94		7		1		135		---		---
Marine		1		---		5		---		---		---		---		---
Total consumer loans		28		3,731		1,256		7		23		3,821		1,175		---
Total loans		63	$	4,686	$	11,410	$	237		54	$	4,425	$	12,280	$	269
Acquired covered loans included above		9	$	39	$	2,371	$	---		8	$	---	$	2,612	$	---
1 There were no acquired non-covered TDRs in the above noted periods.

     The following table provides a summary of the pre-default balance for TDRs that experienced a payment default during the respective period, that were classified as TDRs during the previous twelve months.

	As of March 31, 2013							As of December 31, 2012
(dollars in thousands)	#	Performing Restructurings		Nonperforming Restructurings		Total1		#	Performing Restructurings		Nonperforming Restructurings		Total1
Residential 1-4 family	1	$	---	$	392	$	392	---	$	---	$	---	$	---
Commercial real estate	3		---		897		897	5		662		1,289		1,951
Home equity	2		---		601		601	3		---		1,387		1,387
Total loans	6	$	---	$	1,890	$	1,890	8		662	$	2,676	$	3,338
Acquired covered loans included above	1	$	---	$	523	$	523	2	$	---	$	300	$	300
1 There were no acquired non-covered TDRs in the above noted periods.

Criticized Loans, Classified Loans and Other Risk Characteristics

     Federal regulations provide for the designation of lower quality loans as special mention, substandard, doubtful or loss. Loans designated as special mention are considered “criticized” by regulatory definitions and possess characteristics of weakness which may not necessarily manifest into future loss. Loans designated as substandard, doubtful or loss are considered “classified” by regulatory definitions. Substandard loans have a well-defined weakness and are inadequately protected by the current net worth, liquidity and paying capacity of the borrower or any collateral pledged, and include loans characterized by the distinct possibility that some loss will occur if the deficiencies are not corrected. Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions and values. Loans classified as loss are those considered uncollectible and of such little value that their continuance without the establishment of a specific loss reserve is not warranted. When First Federal classifies problem loans as a loss, they are charged-off in the period in which they are deemed uncollectible. First Federal evaluates its commercial loans regularly to determine whether they are appropriately risk rated in accordance with applicable regulations and internal policies.

     The following tables present the risk profiles for the commercial loan portfolio by the primary categories monitored.

Commercial Credit Quality1	As of March 31, 2013
(in thousands)	Commercial Business		Commercial Real Estate		Commercial Construction		Commercial Land		Total Commercial Loans
Pass	$	92,495	$	337,052	$	1,092	$	18,520	$	449,159
Special mention		2,991		26,665		---		15,693		45,349
Substandard		9,714		57,024		---		8,596		75,334
Doubtful		---		---		---		---		---
Total		105,200		420,741		1,092		42,809		569,842
ASC 310-30 loans		24,969		47,149		---		21,773		93,891
Total	$	130,169	$	467,890	$	1,092	$	64,582	$	663,733

	As of December 31, 2012
(in thousands)	Commercial Business		Commercial Real Estate		Commercial Construction		Commercial Land		Total Commercial Loans
Pass	$	77,326	$	349,981	$	817	$	20,732	$	448,856
Special mention		2,608		27,523		---		16,423		46,554
Substandard		10,988		64,610		247		9,131		84,976
Doubtful		---		---		---		---		---
Total		90,922		442,114		1,064		46,286		580,386
ASC 310-30 loans		27,457		49,453		---		23,823		100,733
Total	$	118,379	$	491,567	$	1,064	$	70,109	$	681,119
1Credit quality indicators are reviewed and updated as applicable on an ongoing basis in accordance with credit policies.

     For residential and consumer loans, First Federal evaluates credit quality based on payment activity, accrual status, if a loan was modified from its original contractual terms, and if a loan is part of a commercial relationship.

     The following tables present the risk indicators for the residential and consumer loan portfolios.

Residential Credit Quality1	As of March 31, 2013
(in thousands)	Residential 1-4 Family		Residential Construction		Residential Land		Total Residential Loans
Performing	$	934,014	$	25,895	$	43,230	$	1,003,139
Performing classified		10,261		---		1,111		11,372
Nonperforming		7,693		---		833		8,526
Total		951,968		25,895		45,174		1,023,037
ASC 310-30 loans		11,085		---		3,737		14,822
Total	$	963,053	$	25,895	$	48,911	$	1,037,859

	As of December 31, 2012
(in thousands)	Residential 1-4 Family		Residential Construction		Residential Land		Total Residential Loans
Performing	$	928,298	$	22,439	$	48,165	$	998,902
Performing classified		9,598		---		532		10,130
Nonperforming		7,137		---		785		7,922
Total		945,033		22,439		49,482		1,016,954
ASC 310-30 loans		11,322		---		3,257		14,579
Total	$	956,355	$	22,439	$	52,739	$	1,031,533
1Credit quality indicators are reviewed and updated as applicable on an ongoing basis in accordance with credit policies.

Consumer Credit Quality1	As of March 31, 2013
(in thousands)	Home Equity		Manufactured Housing		Marine		Other Consumer		Total Consumer Loans
Performing	$	342,164	$	278,329	$	79,153	$	39,512	$	739,158
Performing classified		10,226		566		50		93		10,935
Nonperforming		9,795		3,219		125		271		13,410
Total		362,185		282,114		79,328		39,876		763,503
ASC 310-30 loans		10,923		---		---		124		11,047
Total	$	373,108	$	282,114	$	79,328	$	40,000	$	774,550

	As of December 31, 2012
(in thousands)	Home Equity		Manufactured Housing		Marine		Other Consumer		Total Consumer Loans
Performing	$	355,983	$	276,522	$	75,544	$	41,644	$	749,693
Performing classified		6,858		87		53		59		7,057
Nonperforming		10,551		3,491		139		318		14,499
Total		373,392		280,100		75,736		42,021		771,249
ASC 310-30 loans		11,272		---		---		151		11,423
Total	$	384,664	$	280,100	$	75,736	$	42,172	$	782,672
1Credit quality indicators are reviewed and updated as applicable on an ongoing basis in accordance with credit policies.

     An analysis of changes in the allowance for loan losses follows.

	As of and for the Quarter Ended March 31, 2013
(in thousands)	Residential			Commercial Business			Commercial Real Estate			Commercial Construction			Commercial Land			Consumer			Total
Balance at beginning of period	$	7,790		$	3,066		$	10,099		$	16		$	2,805		$	20,403		$	44,179
Provision for loan losses before benefit from FDIC loss share agreements		1,669			1,833			3,068			19			574			2,148		$	9,311
Benefit from FDIC loss share agreements		(250	)		(145	)		(1,621	)		---			(1,318	)		(5	)		(3,339	)
Provision for loan losses		1,419			1,688			1,447			19			(744	)		2,143			5,972
Increase in FDIC indemnification asset		250			145			1,621			---			1,318			5			3,339
Loan charge-offs		(1,120	)		(352	)		(2,401	)		(36	)		(130	)		(3,237	)		(7,276	)
Recoveries		49			83			312			32			109			628			1,213
Net charge-offs		(1,071	)		(269	)		(2,089	)		(4	)		(21	)		(2,609	)		(6,063	)
Balance at end of period	$	8,388		$	4,630		$	11,078		$	31		$	3,358		$	19,942		$	47,427
Loans as of March 31, 2013
Individually evaluated for impairment	$	6,497		$	2,009		$	13,750		$	---		$	3,466		$	9,105		$	34,827
Collectively evaluated for impairment		1,016,540			103,191			406,991			1,092			39,343			754,398			2,321,555
ASC 310-30 loans		14,822			24,969			47,149			---			21,773			11,047			119,760
Total loans	$	1,037,859		$	130,169		$	467,890		$	1,092		$	64,582		$	774,550		$	2,476,142

	As of and for the Quarter Ended March 31, 2012
(in thousands)	Residential			Commercial Business			Commercial Real Estate			Commercial Construction		Commercial Land			Consumer			Total
Balance at beginning of period	$	8,748		$	4,106		$	11,711		$	397	$	5,981		$	22,581		$	53,524
Provision for loan losses		41			719			567			2		1,046			4,370			6,745
Loan charge-offs		(1,253	)		(887	)		(1,624	)		---		(1,505	)		(4,802	)		(10,071	)
Recoveries		45			62			162			2		66			241			578
Net charge-offs		(1,208	)		(825	)		(1,462	)		2		(1,439	)		(4,561	)		(9,493	)
Balance at end of period	$	7,581		$	4,000		$	10,816		$	401	$	5,588		$	22,390		$	50,776
Loans as of March 31, 2012
Individually evaluated for impairment	$	2,698		$	2,181		$	11,111		$	261	$	2,541		$	5,683		$	24,475
Collectively evaluated for impairment		1,026,214			85,138			430,553			16,028		50,506			713,870			2,322,309
ASC 310-30 loans		264			735			5,675			---		1,739			370			8,783
Total loans	$	1,029,176		$	88,054		$	447,339		$	16,289	$	54,786		$	719,923		$	2,355,567

     In accordance with ASC 310-30, First Financial evaluates the projected cash flows of its acquired loans that were identified as nonperforming at the time of acquisition on a quarterly basis. The ASC 310-30 evaluation is made on all acquired loans, including acquired covered loans. As of March 31, 2013, a net impairment of $4.6 million was projected on certain loan pools, primarily due to several large losses which occurred during the current quarter, and was recorded as an increase to the allowance for loan losses. A portion of the higher loss estimate was related to acquired covered loans and was recorded as an adjustment to the FDIC indemnification asset, which reduced the provision for loan losses.

Other Repossessed Assets Acquired

     The following table presents the components of other repossessed assets acquired, which is comprised of OREO and other consumer-related repossessed items, such as manufactured houses and boats, and is included in other assets on the Consolidated Balance Sheets.

	As of
(in thousands)	March 31, 2013		December 31, 2012
Residential real estate	$	4,146	$	4,660
Commercial real estate		5,165		5,588
Land		5,422		6,350
Consumer-related assets		1,577		1,740
Total other repossessed assets acquired	$	16,310	$	18,338

     The following table presents the components of OREO expenses, net.

	Quarters Ended March 31,
(in thousands)	2013			2012
Gain on sale of other real estate, net	$	(214	)	$	(643	)
Fair value writedown		805			989
Expenses, net		674			527
Rental income		(75	)		(59	)
Covered OREO expense reimbursement		(266	)		(284	)
Total other real estate expenses, net	$	924		$	530