Note 5. Allowance for Loan Losses

The following tables provide additional information regarding the Company’s allowance for loan losses, based upon the method of evaluating loan impairment:


(in thousands)	Mortgage		Other		Total
Allowance for Loan Losses at September 30, 2012:
Individually evaluated for impairment		$ 1,677		$ --		$ 1,677
Collectively evaluated for impairment		124,017		13,321		137,338
Acquired loans with deteriorated credit quality		35,085		19,506		54,591

Total		$160,779		$32,827		$193,606


(in thousands)	Mortgage		Other		Total
Allowance for Loan Losses at December 31, 2011:
Individually evaluated for impairment		$ 490		$ --		$ 490
Collectively evaluated for impairment		121,505		15,295		136,800
Acquired loans with deteriorated credit quality		14,227		19,096		33,323

Total		$136,222		$34,391		$170,613

The following tables provide additional information regarding the methods used to evaluate the Company’s loan portfolio for impairment:


(in thousands)	Mortgage		Other		Total
Loans Receivable at September 30, 2012:
Individually evaluated for impairment		$ 302,571		$ 17,770		$ 320,341
Collectively evaluated for impairment		25,873,662		619,058		26,492,720
Acquired loans with deteriorated credit quality		3,069,827		330,797		3,400,624

Total		$29,246,060		$ 967,625		$30,213,685


(in thousands)	Mortgage		Other		Total
Loans Receivable at December 31, 2011:
Individually evaluated for impairment		$ 324,427		$ 5,995		$ 330,422
Collectively evaluated for impairment		24,534,477		663,898		25,198,375
Acquired loans with deteriorated credit quality		3,366,456		386,575		3,753,031

Total		$28,225,360		$1,056,468		$29,281,828

Non-Covered Loans

The following table summarizes activity in the allowance for losses on non-covered loans for the nine months ended September 30, 2012 and 2011:


	September 30,
	2012						2011
(in thousands)	Mortgage		Other		Total		Mortgage		Other		Total
Balance, beginning of period	$	121,995	$	15,295	$	137,290	$	140,834	$	18,108	$	158,942
Charge-offs		(35,542)		(6,217)		(41,759)		(73,994)		(9,485)		(83,479)
Recoveries		735		2,749		3,484		2,189		2,727		4,916
Provision for loan losses		38,506		1,494		40,000		53,287		5,713		59,000

Balance, end of period	$	125,694	$	13,321	$	139,015	$	122,316	$	17,063	$	139,379

Non-accrual loans amounted to $246.6 million and $325.8 million, respectively, at September 30, 2012 and December 31, 2011. There were no loans over 90 days past due and still accruing interest at either of these dates.

The following table presents additional information regarding the Company’s impaired loans at or for the nine months ended September 30, 2012:


(in thousands)	Recorded Investment			Unpaid Principal Balance			Related Allowance			Average Recorded Investment			Interest Income Recognized
Impaired loans with no related allowance:
Multi-family		$	158,750		$	176,801		$	--		$	188,180		$	2,642
Commercial real estate			79,744			81,237			--			69,544			1,030
Acquisition, development, and construction			22,643			27,015			--			24,538			636
One-to-four family			1,102			1,147			--			1,118			--
Commercial and industrial			17,769			24,999			--			9,840			1,749

Total impaired loans with no related allowance		$	280,008		$	311,199		$	--		$	293,220		$	6,057


Impaired loans with an allowance recorded:
Multi-family		$	38,488		$	39,368		$	1,628		$	30,423		$	655
Commercial real estate			1,845			1,845			49			3,953			79
Acquisition, development, and construction			--			--			--			2,098			--
One-to-four family			--			--			--			--			--
Commercial and industrial			--			--			--			--			--

Total impaired loans with an allowance recorded		$	40,333		$	41,213		$	1,677		$	36,474		$	734


Total impaired loans:
Multi-family		$	197,238		$	216,169		$	1,628		$	218,603		$	3,297
Commercial real estate			81,589			83,082			49			73,497			1,109
Acquisition, development, and construction			22,643			27,015			--			26,636			636
One-to-four family			1,102			1,147			--			1,118			--
Commercial and industrial			17,769			24,999			--			9,840			1,749

Total impaired loans		$	320,341		$	352,412		$	1,677		$	329,694		$	6,791

The following table presents additional information regarding the Company’s impaired loans at or for the year ended December 31, 2011:


(in thousands)	Recorded Investment			Unpaid Principal Balance			Related Allowance			Average Recorded Investment			Interest Income Recognized
Impaired loans with no related allowance:
Multi-family		$	235,100		$	244,684		$	--		$	321,994		$	3,435
Commercial real estate			49,258			52,152			--			63,032			1,397
Acquisition, development, and construction			26,680			27,143			--			42,600			1,141
One-to-four family			1,127			1,520			--			2,649			10
Commercial and industrial			5,995			10,240			--			6,442			60

Total impaired loans with no related allowance		$	318,160		$	335,739		$	--		$	436,717		$	6,043


Impaired loans with an allowance recorded:
Multi-family		$	6,329		$	6,899		$	408		$	10,893		$	187
Commercial real estate			5,648			5,857			53			10,297			--
Acquisition, development, and construction			--			--			--			14,495			--
One-to-four family			285			373			29			71			--
Commercial and industrial			--			--			--			1,837			--

Total impaired loans with an allowance recorded		$	12,262		$	13,129		$	490		$	37,593		$	187


Total impaired loans:
Multi-family		$	241,429		$	251,583		$	408		$	332,887		$	3,622
Commercial real estate			54,906			58,009			53			73,329			1,397
Acquisition, development, and construction			26,680			27,143			--			57,095			1,141
One-to-four family			1,412			1,893			29			2,720			10
Commercial and industrial			5,995			10,240			--			8,279			60

Total impaired loans		$	330,422		$	348,868		$	490		$	474,310		$	6,230

The interest income recorded on these loans was not materially different from cash-basis interest income.

Covered Loans

Under the loss sharing agreements with the FDIC, covered loans are reported exclusive of the FDIC loss share receivable. The covered loans acquired in the AmTrust and Desert Hills acquisitions are, and will continue to be, reviewed for collectability based on the expectations of cash flows from these loans. Covered loans have been aggregated into pools of loans with common characteristics. In determining the allowance for losses on covered loans, the Company periodically performs an analysis to estimate the expected cash flows for each of the loan pools. The Company records a provision for loan losses on covered loans to the extent that the expected cash flows from a loan pool have decreased since the acquisition date. Accordingly, if there is a decrease in expected cash flows due to an increase in estimated credit losses, as compared to the estimates made at the respective acquisition dates, the decrease in the present value of expected cash flows is recorded as a provision for covered loan losses charged to earnings, and an allowance for covered loan losses is established. A related credit to non-interest income and an increase in the FDIC loss share receivable is recognized at the same time, and measured based on the loss sharing agreement percentages.

The following table summarizes activity in the allowance for losses on covered loans for the nine months ended September 30, 2012 and 2011:


	September 30,
(in thousands)	2012		2011
Balance, beginning of period	$	51,771	$	11,903
Provision for loan losses		2,820		8,708

Balance, end of period	$	54,591	$	20,611