(4) Loans

Loans are either secured or unsecured based on the type of loan and the financial condition of the borrower. Repayment is generally expected from cash flow or proceeds from the sale of selected assets of the borrower. BOK Financial is exposed to risk of loss on loans due to the borrower's difficulties, which may arise from any number of factors, including problems within the respective industry or local economic conditions. Access to collateral, in the event of borrower default, is reasonably assured through adherence to applicable lending laws and through sound lending standards and credit review procedures.

Performing loans may be renewed under then current collateral value, debt service ratio and other underwriting standards. Nonperforming loans may be renewed and will remain on nonaccrual status. Nonperforming loans renewed will be evaluated and may be charged off if the loan balance is no longer covered by the paying capacity of the borrower based on an evaluation of available cash resources and collateral value.

Interest is accrued at the applicable interest rate on the principal amount outstanding. Loans are placed on nonaccrual status when, in the opinion of management, full collection of principal or interest is uncertain. Interest previously accrued but not collected is charged against interest income when the loan is placed on nonaccrual status. Payments on nonaccrual loans are applied to principal or reported as interest income, according to management's judgment as to the collectability of principal. Loans may be returned to accruing status when, in the opinion of management, full collection of principal and interest, including principal previously charged off, is probable based on improvements in the borrower's financial condition or a sustained period of performance.

Loan origination and commitment fees and direct loan acquisition and origination costs are deferred and amortized as an adjustment to yield over the life of the loan or over the commitment period, as applicable.

Certain residential mortgage loans originated by the Company are held for sale. All residential mortgage loans originated for sale are carried at fair value based on sales commitments or market quotes. Changes in fair value are recorded in other operating revenue – mortgage banking revenue.

Significant components of the loan portfolio are as follows (in thousands):

	June 30, 2011								December 31, 2010
	Fixed		Variable						Fixed		Variable
	Rate		Rate		Nonaccrual		Total		Rate		Rate		Nonaccrual		Total

Commercial	$	2,830,388	$	3,294,843	$	53,365	$	6,178,596	$	2,883,905	$	3,011,636	$	38,455	$	5,933,996
Commercial real estate		872,696		1,200,656		110,363		2,183,715		829,836		1,297,148		150,366		2,277,350
Residential mortgage		920,063		916,241		31,693		1,867,997		851,048		939,774		37,426		1,828,248
Consumer		292,385		210,102		4,749		507,236		369,364		229,511		4,567		603,442
Total	$	4,915,532	$	5,621,842	$	200,170	$	10,737,544	$	4,934,153	$	5,478,069	$	230,814	$	10,643,036
Accruing loans past due (90 days)1							$	2,341							$	7,966

1	Excludes residential mortgage loans guaranteed by agencies of the U.S. government

At June 30, 2011, approximately $4.8 billion or 45% of the total loan portfolio is to businesses and individuals in Oklahoma and $3.1 billion or 29% of our total loan portfolio is to businesses and individuals in Texas. This geographic concentration subjects the loan portfolio to the general economic conditions within this area.

Commercial loans represent loans for working capital, facilities acquisition or expansion, purchases of equipment and other needs of commercial customers primarily located within our geographical footprint. Commercial loans are underwritten individually and represent on-going relationships based on a thorough knowledge of the customer, the customer's industry and market. While commercial loans are generally secured by the customer's assets including real property, inventory, accounts receivable, operating equipment, interest in mineral rights and other property and may also include personal guarantees of the owners and related parties, the primary source of repayment of the loans is the on-going cash flow from operations of the customer's business. Inherent lending risk is centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with commercial lending policies.

At June 30, 2011, loans to service-related businesses totaled $1.7 billion or 16% of total loans. Approximately $1.0 billion of loans in the services category consists of loans with individual balances of less than $10 million. Loans to energy-related businesses within the commercial loan classification totaled $1.7 billion or 16% of total loans. Other loan classes include wholesale / retail, $1.1 billion; healthcare, $869 million; manufacturing, $367 million; other commercial and industrial, $282 million and integrated food services, $196 million. Approximately $2.6 billion or 42% of the commercial portfolio are to businesses in Oklahoma and $2.0 billion or 32% of our commercial loan portfolio are to businesses in Texas.

Commercial real estate loans are for the construction of buildings or other improvements to real estate and property held by borrowers for investment purposes primarily within our geographical footprint. We require collateral values in excess of the loan amounts, demonstrated cash flows in excess of expected debt service requirements, equity investment in the project and a portion of the project already sold, leased or permanent financing already secured. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. As with commercial loans, inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with applicable lending policies.

Approximately 28% of commercial real estate loans are secured by properties located in Oklahoma, primarily in the Tulsa and Oklahoma City metropolitan areas. An additional 33% of commercial real estate loans are secured by property located in Texas, primarily in the Dallas and Houston areas. The major components of commercial real estate loans are office buildings, $482 million; retail facilities, $439 million; other real estate loans, $398 million; construction and land development, $367 million; multifamily residences, $336 million and industrial, $162 million.

Residential mortgage loans provide funds for our customers to purchase or refinance their primary residence or to borrow against the equity in their home. Residential mortgage loans are secured by a first or second-mortgage on the customer's primary residence. Consumer loans include direct loans secured by and for the purchase of automobiles, recreational and marine equipment as well as other unsecured loans. Consumer loans also include indirect automobile loans made through primary dealers. Residential mortgage and consumer loans are made in accordance with underwriting policies we believe to be conservative and are fully documented. Credit scoring is assessed based on significant credit characteristics including credit history, residential and employment stability. Residential mortgage loans retained in the Company's portfolio are primarily composed of various mortgage programs to support customer relationships including jumbo mortgage loans, non-builder construction loans and special loan programs for high net worth individuals and certain professionals. Jumbo loans may be fixed or variable rate and are fully amortizing. Jumbo loans generally conform to government sponsored entity standards, with exception that the loan size exceeds maximums required under these standards. These loans generally require a minimum FICO score of 720 and a maximum debt-to-income ratio (“DTI”) of 38%. Loan-to-value (“LTV”) ratios are tiered from 60% to 100%, depending on the market. Special mortgage programs include fixed and variable fully amortizing loans tailored to the needs of certain healthcare professionals. Variable rate loans are fully indexed at origination and may have fixed rates for three to ten years, then adjust annually thereafter.

At both June 30, 2011 and December 31, 2010, residential mortgage loans included $22 million, respectively, of loans with repayment terms that have been modified from the original contracts. Interest accrues based on the modified terms of the loan. If it becomes probable that we will not be able to collect all amounts due according to the modified loan terms, the loan is placed on nonaccrual status and included in nonaccrual loans. At both June 30, 2011, and December 31, 2010, restructured residential mortgage included $19 million of loans guaranteed by agencies of the U.S. government. At June 30, 2010, $10 million of renegotiated loans were 90 days or more past due and still accruing interest because they are guaranteed by U.S. government agencies. Renegotiated loans guaranteed by U.S. government agencies may be sold once they become eligible according to U.S. agency guidelines.

At June 30, 2011 and December 31, 2010, residential mortgage loans included $109 million and $48 million, respectively, of loans guaranteed by U.S. government agencies previously sold into GNMA mortgage pools. The Company may repurchase these loans when certain defined delinquency criteria are met. Because of this repurchase right, the Company is deemed to have regained effective control over these loans and must include them on the Consolidated Balance Sheet.

Credit Commitments

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At June 30, 2011, outstanding commitments totaled $5.5 billion. Because some commitments are expected to expire before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. BOK Financial uses the same credit policies in making commitments as it does loans.

The amount of collateral obtained, if deemed necessary, is based upon management's credit evaluation of the borrower.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Because the credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan commitments, BOK Financial uses the same credit policies in evaluating the creditworthiness of the customer. Additionally, BOK Financial uses the same evaluation process in obtaining collateral on standby letters of credit as it does for loan commitments. The term of these standby letters of credit is defined in each commitment and typically corresponds with the underlying loan commitment. At June 30, 2011, outstanding standby letters of credit totaled $510 million. Commercial letters of credit are used to facilitate customer trade transactions with the drafts being drawn when the underlying transaction is consummated. At June 30, 2011, outstanding commercial letters of credit totaled $7 million.

Allowances for Credit Losses

BOK Financial maintains separate allowances for loan losses and for off-balance sheet credit risk related to commitments to extend credit and standby letters of credit. As discussed in greater detail in Note 5, the Company also has separate allowances related to off-balance sheet credit risk related to residential mortgage loans sold with full or partial recourse and for residential mortgage loans sold to government sponsored agencies under standard representation and warranties.

The allowance for loan losses is assessed by management on a quarterly basis and consists of specific amounts attributed to certain impaired loans, general allowances based on migration factors for unimpaired loans and non-specific allowances based on general economic conditions, risk concentration and related factors. Impairment is individually measured for certain impaired loans and collectively measured for all other loans. There have been no material changes in the approach or techniques utilized in developing the allowances for loan losses and off-balance sheet credit losses.

Internally risk graded loans are evaluated individually for impairment. Non-risk graded loans are collectively evaluated for impairment through past-due status and other relevant factors. Substantially all commercial and commercial real estate loans are risk graded. Certain residential mortgage and consumer loans are also risk graded. Certain commercial loans and most residential mortgage and consumer loans are small balance, homogeneous pools of loans that are not risk graded. Loans are considered to be impaired when it becomes probable that BOK Financial will be unable to collect all amounts due according to the contractual terms of the loan agreements. This is substantially the same criteria used to determine when a loan should be placed on nonaccrual status. Specific allowances for impaired loans are measured by an evaluation of estimated future cash flows discounted at the loans' initial effective interest rate or the fair value of collateral for certain collateral dependent loans. Historical statistics may be used in limited situation to assist in estimating future cash flows or collateral values, such as when an impaired collateral dependent loan is identified at the end of a reporting period. Historical statistics are a practical way to estimate impairment until an updated appraisal of collateral value is received or a full assessment of future cash flows is completed. Estimates of future cash flows and collateral value require significant judgments and are subject to volatility.

General allowances for unimpaired loans are based on migration models. Separate migration models are used to determine general allowances for commercial and commercial real estate loans, residential mortgage loans and consumer loans. All commercial and commercial real estate loans are risk-graded based on an evaluation of the borrowers' ability to repay. Risk grades are updated quarterly. Migration factors are determined for each risk grade to determine the inherent loss based on historical trends. An eight-quarter aggregate accumulation of net losses is used as a basis for the migration factors. Losses incurred in more recent periods are more heavily weighted by a sum-of-periods-digits formula. The higher of the current loss factors based on migration trends or a minimum migration factor based upon long-term history is assigned to each risk grade. The resulting general allowances may be adjusted upward or downward by management to account for the limitations in migration models which are based entirely on historical data, such as their limited accuracy at the beginning and ending of credit cycles.

The general allowance for residential mortgage loans is based on an eight-quarter average percent of loss. The general allowance for consumer loans is based on an eight-quarter average percent loss with separate migration factors determined by major product line, such as indirect automobile loans and direct consumer loans.

Nonspecific allowances are maintained for risks beyond factors specific to a particular loan or identified by the migration models. These factors include trends in the economy in our primary lending areas, conditions in certain industries where we have a concentration and overall growth in the loan portfolio. Evaluation of nonspecific factors considers the effect of the duration of the business cycle on migration factors and also considers current economic conditions and other factors.

A provision for credit losses is charged against earnings in amounts necessary to maintain appropriate allowances for loan and off-balance sheet credit losses. Loans are charged off when the loan balance or a portion of the loan balance is no longer covered by the paying capacity of the borrower based on an evaluation of available cash resources and collateral value. Loans are evaluated quarterly and charge-offs are taken in the quarter in which the loss is identified. Additionally, all unsecured or under-secured residential mortgage and consumer loans that are past due 180 days are charged off. Recoveries of loans previously charged off are added to the allowance.

Collateral value of real property is generally based on third party appraisals that conform to Uniform Standards of Professional Appraisal Practice, less estimated selling costs. Appraised values are on an “as-is” basis and are not adjusted by the Company. Collateral value of mineral rights is generally determined by our internal staff of engineers based on projected cash flows from proven oil and gas reserves under existing economic and operating conditions. The value of other collateral is generally determined by our special assets staff based on projected liquidation cash flows under current market conditions. Collateral values and available cash resources that support impaired loans are evaluated quarterly. Updated appraisals are obtained at least annually or more frequently if market conditions indicate collateral values have declined.

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at June 30, 2011 is as follows (in thousands):

	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance

Commercial	$	6,125,434	$	111,131	$	53,162	$	2,440	$	6,178,596	$	113,571
Commercial real estate		2,073,352		88,611		110,363		3,139		2,183,715		91,750
Residential mortgage		1,857,112		44,254		10,885		989		1,867,997		45,243
Consumer		505,315		8,807		1,921		115		507,236		8,922
Total		10,561,213		252,803		176,331		6,683		10,737,544	$	259,486

Nonspecific allowance		–		–		–		–		–		27,125

Total	$	10,561,213	$	252,803	$	176,331	$	6,683	$	10,737,544	$	286,611

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at December 31, 2010 is as follows (in thousands):

	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance

Commercial	$	5,895,674	$	102,565	$	38,322	$	2,066	$	5,933,996	$	104,631
Commercial real estate		2,126,984		94,502		150,366		4,207		2,277,350		98,709
Residential mortgage		1,816,184		49,500		12,064		781		1,828,248		50,281
Consumer		601,691		12,536		1,751		78		603,442		12,614
Total		10,440,533		259,103		202,503		7,132		10,643,036		266,235

Nonspecific allowance		–		–		–		–		–		26,736

Total	$	10,440,533	$	259,103	$	202,503	$	7,132	$	10,643,036	$	292,971

The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments and standby letters of credit for the three months ended June 30, 2011 is summarized as follows (in thousands):

	Commercial			Commercial Real Estate			Residential Mortgage			Consumer			Nonspecific allowance		Total

Allowance for loans losses:
Beginning balance	$	113,706		$	94,535		$	45,649		$	10,410		$	25,249	$	289,549
Provision for loan losses		980			289			2,721			(286	)		1,876		5,580
Loans charged off		(3,302	)		(3,380	)		(3.381	)		(2,711	)		–		(12,774	)
Recoveries		2,187			306			254			1,509			–		4,256
Ending balance	$	113,571		$	91,750		$	45,243		$	8,922		$	27,125	$	286,611
Allowance for off-balance sheet credit losses:
Beginning balance	$	12,256		$	875		$	155		$	339		$	–	$	13,625
Provision for off-balance sheet credit losses		(3,020	)		145			25			(30	)		–		(2,880	)
Ending balance	$	9,236		$	1,020		$	180		$	309		$	–	$	10,745

Total provision for credit losses	$	(2,040	)	$	434		$	2,746		$	(316	)	$	1,876	$	2,700

The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments and standby letters of credit for the six months ended June 30, 2011 is summarized as follows (in thousands):

	Commercial			Commercial Real Estate			Residential Mortgage			Consumer			Nonspecific allowance		Total

Allowance for loans losses:
Beginning balance	$	104,631		$	98,709		$	50,281		$	12,614		$	26,736	$	292,971
Provision for loan losses		10,836			2,665			(45	)		(1,369	)		389		12,476
Loans charged off		(5,654	)		(10,273	)		(6,329	)		(5,750	)		–		(28,006	)
Recoveries		3,758			649			1,336			3,427			–		9,170
Ending balance	$	113,571		$	91,750		$	45,243		$	8,922		$	27,125	$	286,611
Allowance for off-balance sheet credit losses:
Beginning balance	$	13,456		$	443		$	131		$	241		$	–	$	14,271
Provision for off-balance sheet credit losses		(4,220	)		577			49			68			–		(3,526	)
Ending balance	$	9,236		$	1,020		$	180		$	309		$	–	$	10,745

Total provision for credit losses	$	6,616		$	3,242		$	4		$	(1,301	)	$	389	$	8,950

Credit Quality Indicators

The Company utilizes risk grading as a primary credit quality indicator. Substantially all commercial and commercial real estate loans and certain residential mortgage and consumer loans are risk graded based on a quarterly evaluation of the borrowers' ability to repay the loans. Certain commercial loans and most residential mortgage and consumer loans are small, homogeneous pools that are not risk graded. These loans are collectively evaluated for impairment primarily through past due status.

The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at June 30, 2011 is as follows (in thousands):

	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance

Commercial	$	6,159,735	$	111,392	$	18,861	$	2,179	$	6,178,596	$	113,571
Commercial real estate		2,183,715		91,750		–		–		2,183,715		91,750
Residential mortgage		350,986		7,911		1,517,011		37,332		1,867,997		45,243
Consumer		220,222		1,877		287,014		7,045		507,236		8,922
Total		8,914,658		212,930		1,822,886		46,556		10,737,544		259,486

Nonspecific allowance		–		–		–		–		–		27,125

Total	$	8,914,658	$	212,930	$	1,822,886	$	46,556	$	10,737,544	$	286,611

The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at December 31, 2010 is as follows (in thousands):

	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance

Commercial	$	5,914,178	$	102,259	$	19,818	$	2,372	$	5,933,996	$	104,631
Commercial real estate		2,277,350		98,709		–		–		2,277,350		98,709
Residential mortgage		451,874		8,356		1,376,374		41,925		1,828,248		50,281
Consumer		246,350		1,881		357,092		10,733		603,442		12,614
Total		8,889,752		211,205		1,753,284		55,030		10,643,036		266,235

Nonspecific allowance		–		–		–		–		–		26,736

Total	$	8,889,752	$	211,205	$	1,753,284	$	55,030	$	10,643,036	$	292,971

Loans are considered to be performing if they are in compliance with the original terms of the agreement which is consistent with the regulatory guideline of “pass.” Performing also includes loans considered to be “other loans especially mentioned” by regulatory guideline. Other loans especially mentioned are in compliance with the original terms of the agreement but may have a weakness that deserves management's close attention. Performing loans also include past due residential mortgages that are guaranteed by agencies of the U.S. government.

The risk grading process identified certain criticized loans as potential problem loans. These loans have a well-defined weakness (e.g. inadequate debt service coverage or liquidity or marginal capitalization; repayment may depend on collateral or other risk mitigation) that may jeopardize liquidation of the debt and represent a greater risk due to deterioration in the financial condition of the borrower. This is consistent with the regulatory guideline for “substandard.” Because the borrowers are still performing in accordance with the original terms of the loan agreements, these loans were not placed in nonaccrual status. Known information does, however, cause concern as to the borrowers' continued compliance with current repayment terms. Nonaccrual loans represent loans for which full collection of principal and interest is uncertain. This is substantially the same criteria used to determine whether a loan is impaired and includes certain loans considered “substandard” and all loans considered “doubtful” by regulatory guidelines.

The following table summarizes the Company's loan portfolio at June 30, 2011 by the risk grade categories (in thousands):

	Internally Risk Graded						Non-Graded
	Performing		Potential Problem		Nonaccrual		Performing		Nonaccrual		Total

Commercial:
Energy	$	1,677,809	$	4,688	$	345	$	–	$	–	$	1,682,842
Services		1,663,313		33,490		16,254		–		–		1,713,057
Wholesale/retail		1,002,113		40,935		25,138		–		–		1,068,186
Manufacturing		359,958		2,827		4,366		–		–		367,151
Healthcare		860,354		2,992		5,962		–		–		869,308
Integrated food services		194,514		1,260		–		–		–		195,774
Other commercial and industrial		258,910		3,410		1,097		18,658		203		282,278
Total commercial		6,016,971		89,602		53,162		18,658		203		6,178,596

Commercial real estate:
Construction and land development		275,077		15,750		76,265		–		–		367,092
Retail		426,839		7,013		4,642		–		–		438,494
Office		456,281		14,751		11,473		–		–		482,505
Multifamily		325,085		5,860		4,717		–		–		335,662
Industrial		161,879		288		–		–		–		162,167
Other commercial real estate		363,491		21,038		13,266		–		–		397,795
Total commercial real estate		2,008,652		64,700		110,363		–		–		2,183,715

Residential mortgage:
Permanent mortgage		326,349		13,752		10,885		783,084		17,106		1,151,176
Permanent mortgages guaranteed by U.S. government agencies		–		–		–		134,458		–		134,458
Home equity		–		–		–		578,661		3,702		582,363
Total residential mortgage		326,349		13,752		10,885		1,496,203		20,808		1,867,997

Consumer:
Indirect automobile		–		–		–		159,771		2,729		162,500
Other consumer		215,056		3,245		1,921		124,415		99		344,736
Total consumer		215,056		3,245		1,921		284,186		2,828		507,236

Total	$	8,567,028	$	171,299	$	176,331	$	1,799,047	$	23,839	$	10,737,544

The following table summarizes the Company's loan portfolio at December 31, 2010 by the risk grade categories (in thousands):

	Internally Risk Graded						Non-Graded
	Performing		Potential Problem		Nonaccrual		Performing		Nonaccrual		Total

Commercial:
Energy	$	1,704,401	$	6,543	$	465	$	–	$	–	$	1,711,409
Services		1,531,239		30,420		19,262		–		–		1,580,921
Wholesale/retail		956,397		45,363		8,486		–		–		1,010,246
Manufacturing		319,075		4,000		2,116		–		–		325,191
Healthcare		801,525		4,566		3,534		–		–		809,625
Integrated food services		202,885		1,385		13		–		–		204,283
Other commercial and industrial		267,949		108		4,446		19,685		133		292,321
Total commercial		5,783,471		92,385		38,322		19,685		133		5,933,996

Commercial real estate:
Construction and land development		326,769		21,516		99,579		–		–		447,864
Retail		395,094		5,468		4,978		–		–		405,540
Office		420,899		16,897		19,654		–		–		457,450
Multifamily		355,733		6,784		6,725		–		–		369,242
Industrial		177,712		294		4,087		–		–		182,093
Other commercial real estate		390,969		8,849		15,343		–		–		415,161
Total commercial real estate		2,067,176		59,808		150,366		–		–		2,277,350

Residential mortgage:
Permanent mortgage		420,407		19,403		12,064		730,638		20,047		1,202,559
Permanent mortgages guaranteed by U.S. government agencies		–		–		–		72,385		–		72,385
Home equity		–		–		–		547,989		5,315		553,304
Total residential mortgage		420,407		19,403		12,064		1,351,012		25,362		1,828,248

Consumer:
Indirect automobile		–		–		–		237,050		2,526		239,576
Other consumer		240,243		4,356		1,751		117,226		290		363,866
Total consumer		240,243		4,356		1,751		354,276		2,816		603,442

Total	$	8,511,297	$	175,952	$	202,503	$	1,724,973	$	28,311	$	10,643,036

Impaired Loans

Loans are considered to be impaired when it is probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement.

A summary of risk-graded impaired loans follows (in thousands):

	As of June 30, 2011										For the three months				For the six months
			Recorded Investment								ended June 30, 2011				ended June 30, 2011
	Unpaid Principal Balance		Total		With No Allowance		With Allowance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized

Commercial:
Energy	$	345	$	345	$	345	$	–	$	–	$	380	$	–	$	405	$	–
Services		26,441		16,254		15,525		729		273		15,987		–		17,758		–
Wholesale/retail		31,770		25,138		22,751		2,387		1,742		27,775		–		16,812		–
Manufacturing		9,259		4,366		2,012		2,354		259		4,456		–		3,241		–
Healthcare		7,659		5,962		5,103		859		166		4,268		–		4,748		–
Integrated food services		–		–		–		–		–		3		–		7		–
Other commercial and industrial		8,596		1,097		1,097		–		–		2,363		–		2,772		–
Total commercial		84,070		53,162		46,833		6,329		2,440		55,232		–		45,743		–

Commercial real estate:
Construction and land development		115,337		76,265		65,094		11,171		1,966		83,486		–		87,922		–
Retail		5,652		4,642		1,855		2,787		612		4,959		–		4,810		–
Office		14,749		11,473		9,713		1,760		207		13,051		–		15,564		–
Multifamily		5,381		4,717		4,717		–		–		3,309		–		5,721		–
Industrial		–		–		–		–		–		–		–		2,044		–
Other real estate loans		15,203		13,266		11,755		1,511		354		13,130		–		14,305		–
Total commercial real estate		156,322		110,363		93,134		17,229		3,139		117,935		–		130,366		–

Residential mortgage:
Permanent mortgage		12,122		10,885		5,016		5,869		989		11,479		–		11,475		–
Home equity		–		–		–		–		–		–		–		–		–
Total residential mortgage		12,122		10,885		5,016		5,869		989		11,479		–		11,475		–

Consumer:
Indirect automobile		–		–		–		–		–		–		–		–		–
Other consumer		2,449		1,921		1,348		573		115		2,244		–		1,836		–
Total consumer		2,449		1,921		1,348		573		115		2,244		–		1,836		–

Total	$	254,963	$	176,331	$	146,331	$	30,000	$	6,683	$	186,890	$	–	$	189,420	$	–

Generally, no interest income is recognized on impaired loans until all principal balances, including amounts charged-off, have been recovered.

A summary of risk-graded impaired loans at December 31, 2010 follows (in thousands):

			Recorded Investment
	Unpaid Principal Balance		Total		With No Allowance		With Allowance		Related Allowance

Commercial:
Energy	$	559	$	465	$	404	$	61	$	60
Services		28,579		19,262		15,985		3,277		1,227
Wholesale/retail		14,717		8,486		7,562		924		684
Manufacturing		5,811		2,116		2,116		–		–
Healthcare		4,701		3,534		2,743		791		95
Integrated food services		172		13		13		–		–
Other commercial and industrial		13,007		4,446		4,446		–		–
Total commercial		67,546		38,322		33,269		5,053		2,066

Commercial real estate:
Construction and land development		138,922		99,579		84,959		14,620		2,428
Retail		6,111		4,978		1,968		3,010		514
Office		25,702		19,654		18,798		856		106
Multifamily		24,368		6,725		6,129		596		115
Industrial		4,087		4,087		–		4,087		723
Other real estate loans		17,129		15,343		13,802		1,541		321
Total commercial real estate		216,319		150,366		125,656		24,710		4,207

Residential mortgage:
Permanent mortgage		15,258		12,064		8,574		3,490		781
Home equity		–		–		–		–		–
Total residential mortgage		15,258		12,064		8,574		3,490		781

Consumer:
Indirect automobile		–		–		–		–		–
Other consumer		1,909		1,751		1,506		245		78
Total consumer		1,909		1,751		1,506		245		78

Total	$	301,032	$	202,503	$	169,005	$	33,498	$	7,132

Investments in impaired loans were as follows (in thousands):

	June 30, 2011		Dec. 31, 2010		June 30, 2010

Investment in impaired loans	$	176,331	$	202,503	$	292,679
Impaired loans with specific allowance for loss		30,000		33,498		97,897
Specific allowance balance		6,683		7,132		19,578
Impaired loans with no specific allowance for loss		146,331		169,005		194,782
Average recorded investment in impaired loans		186,890		262,368		319,655

Nonaccrual & Past Due Loans

Past due status for all loan classes is based on the actual number of days since the last payment was due according to the contractual terms of the loans.

A summary of loans currently performing, loans 30 to 89 days past due and accruing, loans 90 days or more past due and accruing and nonaccrual loans as of June 30, 2011 is as follows (in thousands):

			Past Due
	Current		30 to 89 Days		90 Days or More		Nonaccrual		Total

Commercial:
Energy	$	1,682,344	$	153	$	–	$	345	$	1,682,842
Services		1,691,451		3,759		1,593		16,254		1,713,057
Wholesale/retail		1,041,864		697		487		25,138		1,068,186
Manufacturing		362,785		–		–		4,366		367,151
Healthcare		863,169		177		–		5,962		869,308
Integrated food services		195,774		–		–		–		195,774
Other commercial and industrial		280,729		192		57		1,300		282,278
Total commercial		6,118,116		4,978		2,137		53,365		6,178,596

Commercial real estate:
Construction and land development		288,494		2,333		–		76,265		367,092
Retail		430,941		2,911		–		4,642		438,494
Office		468,712		2,320		–		11,473		482,505
Multifamily		330,945		–		–		4,717		335,662
Industrial		161,783		384		–		–		162,167
Other real estate loans		381,961		2,393		175		13,266		397,795
Total commercial real estate		2,062,836		10,341		175		110,363		2,183,715

Residential mortgage:
Permanent mortgage		1,104,450		18,735		–		27,991		1,151,176
Permanent mortgages guaranteed by U.S. government agencies		8,426		3,728		122,304		–		134,458
Home equity		576,203		2,450		8		3,702		582,363
Total residential mortgage		1,689,079		24,913		122,312		31,693		1,867,997

Consumer:
Indirect automobile		152,496		7,256		19		2,729		162,500
Other consumer		341,683		1,031		2		2,020		344,736
Total consumer		494,179		8,287		21		4,749		507,236

Total	$	10,364,210	$	48,519	$	124,645	$	200,170	$	10,737,544

A summary of loans currently performing, loans 30 to 89 days past due and accruing, loans 90 days or more past due and accruing and nonaccrual loans as of December 31, 2010 is as follows (in thousands):

			Past Due
	Current		30 to 89 Days		90 Days or More		Nonaccrual		Total

Commercial:
Energy	$	1,707,466	$	507	$	2,971	$	465	$	1,711,409
Services		1,558,120		3,196		343		19,262		1,580,921
Wholesale/retail		1,001,422		315		23		8,486		1,010,246
Manufacturing		321,102		168		1,805		2,116		325,191
Healthcare		805,124		75		892		3,534		809,625
Integrated food services		204,199		71		–		13		204,283
Other commercial and industrial		287,357		111		274		4,579		292,321
Total commercial		5,884,790		4,443		6,308		38,455		5,933,996

Commercial real estate:
Construction and land development		344,016		3,170		1,099		99,579		447,864
Retail		394,445		6,117		–		4,978		405,540
Office		437,496		300		–		19,654		457,450
Multifamily		362,517		–		–		6,725		369,242
Industrial		177,660		346		–		4,087		182,093
Other real estate loans		395,320		4,301		197		15,343		415,161
Total commercial real estate		2,111,454		14,234		1,296		150,366		2,277,350

Residential mortgage:
Permanent mortgage		1,148,271		22,177		–		32,111		1,202,559
Permanent mortgages guaranteed by U.S. government agencies		10,451		4,342		57,592		–		72,385
Home equity		546,384		1,605		–		5,315		553,304
Total residential mortgage		1,705,106		28,124		57,592		37,426		1,828,248

Consumer:
Indirect automobile		225,601		11,382		67		2,526		239,576
Other consumer		360,603		927		295		2,041		363,866
Total consumer		586,204		12,309		362		4,567		603,442

Total	$	10,287,554	$	59,110	$	65,558	$	230,814	$	10,643,036