Loans and Allowance For Loan Losses

3 Months Ended

Jun. 30, 2012

Loans and Allowance For Loan Losses:

Loans and Allowance For Loan Losses

NOTE 7: LOANS AND ALLOWANCE FOR LOAN LOSSES

	June 30,	December 31,
	2012	2011
One- to four-family residential construction	$27,183	$23,976
Subdivision construction	40,555	61,140
Land development	68,533	68,771
Commercial construction	102,640	119,589
Owner occupied one- to four-family residential	89,881	91,994
Non-owner occupied one- to four-family residential	148,024	145,781
Commercial real estate	620,023	639,857
Other residential	286,076	243,742
Commercial business	232,650	236,384
Industrial revenue bonds	45,337	59,750
Consumer auto	65,812	59,368
Consumer other	81,210	77,540
Home equity lines of credit	49,205	47,114
FDIC-supported loans, net of discounts (TeamBank)	91,407	128,875
FDIC-supported loans, net of discounts (Vantus Bank)	107,485	123,036
FDIC-supported loans, net of discounts (Sun Security Bank)	110,478	144,626
FDIC-supported loans, net of discounts (InterBank)	276,976	--
Total gross loans receivable	2,443,475	2,271,543
Undisbursed portion of loans in process	(91,639)	(103,424)
Allowance for loan losses	(40,722)	(41,232)
Deferred loan fees and gains, net	(2,438)	(2,726)
Total net loans	$2,308,676	$2,124,161
Weighted average interest rate	5.60%	5.86%

Classes of loans by aging were as follows:

	June 30, 2012
							Total Loans
	30-59 Days	60-89 Days	Over 90	Total Past		Total Loans	> 90 Days and
	Past Due	Past Due	Days	Due	Current	Receivable	Still Accruing
One- to four-family
residential construction	$--	$--	$--	$--	$27,183	$27,183	$--
Subdivision construction	79	--	1,501	1,580	38,975	40,555	--
Land development	12	--	2,514	2,526	66,007	68,533	--
Commercial construction	--	--	1,691	1,691	100,949	102,640	--
Owner occupied one- to four-
family residential	509	716	2,080	3,305	86,576	89,881	139
Non-owner occupied one- to
four-family residential	1,946	--	4,600	6,546	141,478	148,024	--
Commercial real estate	11,576	323	1,640	13,539	606,484	620,023	--
Other residential	--	--	2,950	2,950	283,126	286,076	--
Commercial business	316	379	2,913	3,608	229,042	232,650	--
Industrial revenue bonds	--	--	2,110	2,110	43,227	45,337	--
Consumer auto	499	23	106	628	65,184	65,812	4
Consumer other	1,122	380	455	1,957	79,253	81,210	161
Home equity lines of credit	59	--	79	138	49,067	49,205	--
FDIC-supported loans, net of
discounts (TeamBank)	373	83	20,026	20,482	70,925	91,407	8
FDIC-supported loans, net of
discounts (Vantus Bank)	495	214	9,224	9,933	97,552	107,485	1
FDIC-supported loans,
net of discounts (Sun Security Bank)	5,508	2,717	30,360	38,585	71,893	110,478	671
FDIC-supported loans,
net of discounts (InterBank)	2,365	2,952	16,705	22,022	254,954	276,976	--
Total before FDIC-supported loans, net of discount	24,859	7,787	98,954	131,600	2,311,875	2,443,475	984
Less FDIC-supported loans,
net of discounts	8,741	5,966	76,315	91,022	495,324	586,346	680
Total	$16,118	$1,821	$22,639	$40,578	$1,816,551	$1,857,129	$304

	December 31, 2011
							Total Loans
	30-59 Days	60-89 Days	Over 90	Total Past		Total Loans	> 90 Days and
	Past Due	Past Due	Days	Due	Current	Receivable	Still Accruing
One- to four-family
residential construction	$2,082	$342	$186	$2,610	$21,366	$23,976	$--
Subdivision construction	4,014	388	6,661	11,063	50,077	61,140	--
Land development	--	4	2,655	2,659	66,112	68,771	--
Commercial construction	--	--	--	--	119,589	119,589	--
Owner occupied one- to four-
family residential	833	--	3,888	4,721	87,273	91,994	40
Non-owner occupied one- to
four-family residential	117	--	3,425	3,542	142,239	145,781	--
Commercial real estate	6,323	535	6,204	13,062	626,795	639,857	--
Other residential	--	--	--	--	243,742	243,742	--
Commercial business	426	10	1,362	1,798	234,586	236,384	--
Industrial revenue bonds	--	--	2,110	2,110	57,640	59,750	--
Consumer auto	455	56	117	628	58,740	59,368	10
Consumer other	1,508	641	715	2,864	74,676	77,540	356
Home equity lines of credit	45	29	174	248	46,866	47,114	--
FDIC-supported loans, net of
discounts (TeamBank)	2,422	862	19,215	22,499	106,376	128,875	--
FDIC-supported loans, net of
discounts (Vantus Bank)	562	57	5,999	6,618	116,418	123,036	5
FDIC-supported loans,
net of discounts (Sun Security Bank)	5,628	6,851	40,299	52,778	91,848	144,626	150
Total before FDIC-supported loans, net of discount	24,415	9,775	93,010	127,200	2,144,343	2,271,543	561
Less FDIC-supported loans,
net of discounts	8,612	7,770	65,513	81,895	314,642	396,537	155
Total	$15,803	$2,005	$27,497	$45,305	$1,829,701	$1,875,006	$406

Nonaccruing loans (excluding FDIC-supported loans, net of discount) are summarized as follows:

	June 30,	December 31,
	2012	2011
One- to four-family residential construction	$--	$186
Subdivision construction	1,500	6,661
Land development	4,205	2,655
Commercial construction	--	--
Owner occupied one- to four-family residential	1,928	3,848
Non-owner occupied one- to four-family residential	4,084	3,425
Commercial real estate	1,642	6,204
Other residential	2,950	--
Commercial business	2,912	1,362
Industrial revenue bonds	2,110	2,110
Consumer auto	101	107
Consumer other	849	359
Home equity lines of credit	54	174
Total	$22,335	27,091

The following table presents the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2012 and 2011.  Also presented are the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2012:

	One- to Four-
	Family
	Residential and	Other	Commercial	Commercial	Commercial
	Construction	Residential	Real Estate	Construction	Business	Consumer	Total
Allowance for loan losses
Balance April 1, 2012	$9,413	$4,023	$20,109	$3,155	$3,059	$1,773	$41,532
Provision charged to expense	598	2,924	3,191	8,689	680	1,518	17,600
Losses charged off	(2,135)	(3,252)	(7,795)	(5,132)	(512)	(727)	(19,553)
Recoveries	23	317	87	217	114	385	1,143
Balance June 30, 2012	$7,899	$4,012	$15,592	$6,929	$3,341	$2,949	$40,722
Balance January 1, 2012	$11,424	$3,088	$18,390	$2,982	$2,974	$2,374	$41,232
Provision charged to expense	(1,106)	3,857	9,316	13,298	1,246	1,066	27,677
Losses charged off	(2,494)	(3,252)	(12,205)	(9,592)	(1,053)	(962)	(29,558)
Recoveries	75	319	91	241	174	471	1,371
Balance June 30, 2012	$7,899	$4,012	$15,592	$6,929	$3,341	$2,949	$40,722
Allowance for loan losses
Balance April 1, 2011	$11,546	$3,798	$15,807	$5,235	$3,010	$2,438	$41,834
Provision charged to expense	772	1,756	2,673	2,348	38	844	8,431
Losses charged off	(758)	(1,926)	(3,526)	(2,433)	(924)	(917)	(10,484)
Recoveries	2	1	49	5	200	449	706
Balance June 30, 2011	$11,562	$3,629	$15,003	$5,155	$%2,324	$2,814	$40,487
Balance January 1, 2011	11,483	$3,866	$14,336	$5,852	$3,281	$2,669	$41,487
Provision charged to expense	4,010	2,649	5,885	3,145	8	934	16,631
Losses charged off	(3,959)	(2,888)	(5,269)	(3,851)	(1,716)	(1,807)	(19,490)
Recoveries	28	2	51	9	751	1,018	1,859
Balance June 30, 2011	$11,562	$3,629	$15,003	$5,155	$2,324	$2,814	$40,487
Ending balance:
Individually evaluated for
impairment	$2,029	$246	$1,143	$3,976	$517	$147	$8,058
Collectively evaluated for
impairment	$5,870	$3,766	$14,449	$2,942	$2,825	$2,802	$32,654
Loans acquired and
accounted for under ASC 310-30	$--	$--	$--	$10	$--	$--	$10
Loans
Individually evaluated for
impairment	$20,318	$17,335	$39,634	$20,763	$6,955	$917	$105,922
Collectively evaluated for
impairment	$285,325	$268,741	$625,726	$150,410	$225,695	$195,310	$1,751,207
Loans acquired and
accounted for under ASC 310-30	$300,122	$60,216	$164,276	$1,787	$19,559	$40,386	$586,346

The following table presents the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2011:

	One- to Four-
	Family
	Residential and	Other	Commercial	Commercial	Commercial
	Construction	Residential	Real Estate	Construction	Business	Consumer	Total
Allowance for loan losses
Individually evaluated for
impairment	$4,989	$89	$3,584	$594	$736	$38	$10,030
Collectively evaluated for
impairment	$6,435	$2,999	$14,806	$2,358	$2,238	$2,336	$31,172
Loans acquired and
accounted for under ASC 310-30	$--	$--	$--	$30	$--	$--	$30
Loans
Individually evaluated for
impairment	$39,519	$20,802	$99,254	$27,592	$10,720	$839	$198,726
Collectively evaluated for
impairment	$283,371	$222,940	$600,353	$160,768	$225,665	$183,183	$1,676,280
Loans acquired and
accounted for under ASC 310-30	$109,909	$25,877	$157,805	$40,215	$28,784	$33,947	$396,537

The portfolio segments used in the preceding two tables correspond to the loan classes used in all other tables in Note 7 as follows:

·         The one-to four-family residential and construction segment includes the one- to four-family residential construction, subdivision construction, owner occupied one- to four-family residential and non-owner occupied one- to four-family residential classes

·         The other residential and construction segment corresponds to the other residential class

·         The commercial real estate segment includes the commercial real estate and industrial revenue bonds classes

·         The commercial construction segment includes the land development and commercial construction classes

·         The commercial business segment corresponds to the commercial business class

·         The consumer segment includes the consumer auto, consumer other and home equity lines of credit classes

Impaired loans are summarized as follows:

	June 30, 2012
		Unpaid
	Recorded	Principal	Specific
	Balance	Balance	Allowance
One- to four-family residential construction	$687	$687	$251
Subdivision construction	3,810	5,486	262
Land development	19,233	20,710	3,842
Commercial construction	1,530	1,530	134
Owner occupied one- to four-family residential	4,856	5,309	488
Non-owner occupied one- to four-family residential	10,965	11,402	1,028
Commercial real estate	39,634	41,887	1,045
Other residential	17,335	18,600	246
Commercial business	3,447	4,365	517
Industrial revenue bonds	3,508	3,588	98
Consumer auto	158	180	25
Consumer other	669	774	99
Home equity lines of credit	90	98	23
Total	$105,922	$114,616	$8,058

	June 30, 2011
		Unpaid
	Recorded	Principal	Specific
	Balance	Balance	Allowance
One- to four-family residential construction	$2,106	$2,197	$121
Subdivision construction	8,543	9,467	1,498
Land development	7,330	7,995	1,288
Commercial construction	--	--	--
Owner occupied one- to four-family residential	3,960	4,529	601
Non-owner occupied one- to four-family residential	9,126	9,323	1,074
Commercial real estate	22,038	24,641	1,795
Other residential	8,330	9,266	369
Commercial business	2,366	3,212	502
Industrial revenue bonds	2,110	2,190	105
Consumer auto	121	141	6
Consumer other	550	615	63
Home equity lines of credit	120	129	17
Total	$66,700	$73,705	$7,439

	December 31, 2011
		Unpaid
	Recorded	Principal	Specific
	Balance	Balance	Allowance
One- to four-family residential construction	$873	$917	$12
Subdivision construction	12,999	14,730	2,953
Land development	7,150	7,317	594
Commercial construction	--	--	--
Owner occupied one- to four-family residential	5,481	6,105	776
Non-owner occupied one- to four-family residential	11,259	11,768	1,249
Commercial real estate	49,961	55,233	3,562
Other residential	12,102	12,102	89
Commercial business	4,679	5,483	736
Industrial revenue bonds	2,110	2,190	22
Consumer auto	147	168	3
Consumer other	579	680	22
Home equity lines of credit	174	184	12
Total	$107,514	$116,877	$10,030

At June 30, 2012 and December 31, 2011, all impaired loans had specific valuation allowances.

	Six Months Ended June 30, 2012
	Average
	Investment	Interest
	in Impaired	Income
	Loans	Recognized
One- to four-family residential construction	$801	$22
Subdivision construction	13,743	287
Land development	10,516	481
Commercial construction	255	35
Owner occupied one- to four-family residential	5,156	162
Non-owner occupied one- to four-family residential	11,087	454
Commercial real estate	45,031	1,524
Other residential	17,252	581
Commercial business	4,245	160
Industrial revenue bonds	3,042	--
Consumer auto	167	12
Consumer other	655	62
Home equity lines of credit	137	6
Total	$112,087	$3,786

	Six Months Ended June 30, 2011
	Average
	Investment	Interest
	in Impaired	Income
	Loans	Recognized
One- to four-family residential construction	$1,882	$18
Subdivision construction	8,909	115
Land development	12,751	233
Commercial construction	617	--
Owner occupied one- to four-family residential	4,568	34
Non-owner occupied one- to four-family residential	9,944	201
Commercial real estate	26,282	461
Other residential	11,032	191
Commercial business	5,264	62
Industrial revenue bonds	2,163	--
Consumer auto	262	4
Consumer other	579	7
Home equity lines of credit	267	1
Total	$84,520	$1,327

	Year Ended December 31, 2011
	Average
	Investment	Interest
	in Impaired	Income
	Loans	Recognized
One- to four-family residential construction	$1,939	$39
Subdivision construction	10,154	282
Land development	9,983	379
Commercial construction	308	--
Owner occupied one- to four-family residential	4,748	76
Non-owner occupied one- to four-family residential	9,658	425
Commercial real estate	34,403	1,616
Other residential	9,475	454
Commercial business	4,173	125
Industrial revenue bonds	2,137	--
Consumer auto	192	6
Consumer other	544	10
Home equity lines of credit	227	1
Total	$87,941	$3,413

Included in certain loan categories in the impaired loans are troubled debt restructurings that were classified as impaired. Troubled debt restructurings are loans that are modified by granting concessions to borrowers experiencing financial difficulties.  These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.  The types of concessions made are factored into the estimation of the allowance for loan losses for troubled debt restructurings primarily using a discounted cash flows or collateral adequacy approach.

At June 30, 2012, the Company had $5.9 million of construction loans, $18.3 million of single family and multi-family residential mortgage loans, $31.3 million of commercial real estate loans, $2.8 million of commercial business loans and $133,000 of consumer loans that were modified in troubled debt restructurings and impaired.  Of the total troubled debt restructurings, $47.9 million were accruing interest at June 30, 2012.  At December 31, 2011, the Company had $9.0 million of construction loans, $17.0 million of residential mortgage loans, $31.3 million of commercial real estate loans, $671,000 of commercial business loans and $156,000 of consumer loans that were modified in troubled debt restructurings and impaired.  Of the total troubled debt restructurings, $50.8 million were accruing interest at December 31, 2011.

During the previous 12 months, three non-owner occupied residential mortgage loans totaling $164,000, three commercial real estate loans totaling $1.4 million and one consumer loan totaling $20,000, were modified as troubled debt restructurings and had payment defaults subsequent to the modifications.  When loans modified as troubled debt restructuring have subsequent payment defaults, the defaults are factored into the determination of the allowance for loan losses to ensure specific valuation allowances reflect amounts considered uncollectible.

The Company reviews the credit quality of its loan portfolio using an internal grading system that classifies loans as “Satisfactory,” “Watch,” “Special Mention” and “Substandard.”  Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if certain deficiencies are not corrected.  Special mention loans possess potential weaknesses that deserve management’s close attention but do not expose the Bank to a degree of risk that warrants substandard classification.  Loans classified as watch are being monitored because of indications of potential weaknesses or deficiencies that may require future classification as special mention or substandard.  Loans not meeting any of the criteria previously described are considered satisfactory.  The FDIC-covered loans are evaluated using this internal grading system.  However, since these loans are accounted for in pools and are currently substantially covered through loss sharing agreements with the FDIC, all of the loan pools were considered satisfactory at June 30, 2012 and December 31, 2011, respectively.  See Note 8 for further discussion of the acquired loan pools and loss sharing agreements.  The loan grading system is presented by loan class below:

	March 31, 2012
			Special
	Satisfactory	Watch	Mention	Substandard	Total
One- to four-family residential
construction	$26,168	$328	$--	$687	$27,183
Subdivision construction	34,114	2,631	--	3,810	40,555
Land development	48,263	1,764	--	18,506	68,533
Commercial construction	101,110	--	--	1,530	102,640
Owner occupied one- to four-family
residential	85,660	619	--	3,602	89,881
Non-owner occupied one- to four-family
residential	132,352	5,139	--	10,533	148,024
Commercial real estate	542,370	57,351	--	20,302	620,023
Other residential	257,514	16,454	--	12,108	286,076
Commercial business	220,576	8,627	--	3,447	232,650
Industrial revenue bonds	41,829	--	--	3,508	45,337
Consumer auto	65,656	--	--	156	65,812
Consumer other	80,580	--	--	630	81,210
Home equity lines of credit	49,115	--	--	90	49,205
FDIC-supported loans, net of discounts
(TeamBank)	91,407	--	--	--	91,407
FDIC-supported loans, net of discounts
(Vantus Bank)	107,485	--	--	--	107,485
FDIC-supported loans, net of discounts
(Sun Security Bank)	110,478	--	--	--	110,478
FDIC-supported loans, net of discounts
(InterBank)	276,976	--	--	--	276,976
Total	$2,271,653	$92,913	$--	$78,909	$2,443,475

	December 31, 2011
			Special
	Satisfactory	Watch	Mention	Substandard	Total
One- to four-family residential
construction	$21,436	$2,354	$--	$186	$23,976
Subdivision construction	45,754	2,701	--	12,685	61,140
Land development	41,179	20,902	245	6,445	68,771
Commercial construction	119,589	--	--	--	119,589
Owner occupied one- to four-family
residential	86,725	1,018	--	4,251	91,994
Non-owner occupied one- to four-family
residential	129,458	5,232	249	10,842	145,781
Commercial real estate	542,712	51,757	13,384	32,004	639,857
Other residential	222,940	13,262	--	7,540	243,742
Commercial business	225,664	5,403	638	4,679	236,384
Industrial revenue bonds	57,640	--	--	2,110	59,750
Consumer auto	59,237	--	--	131	59,368
Consumer other	77,006	--	--	534	77,540
Home equity lines of credit	46,940	--	--	174	47,114
FDIC-supported loans, net of discounts
(TeamBank)	128,875	--	--	--	128,875
FDIC-supported loans, net of discounts
(Vantus Bank)	123,036	--	--	--	123,036
FDIC-supported loans, net of discounts
(Sun Security Bank)	144,626	--	--	--	144,626
Total	$2,072,817	$102,629	$14,516	$81,581	$2,271,543