Note 4 – Loans

As discussed in Note 2, due to the deconsolidation of the Bank during the second quarter of 2011, no loans are reported on the Company’s consolidated balance sheet as of June 30, 2011. Major classifications of loans as of December 31, 2010 are as follows:

(Successor Company)	December 31, 2010
Real estate mortgage loans:
Commercial	$	612,455
Residential		225,850
Construction and vacant land		38,956
Commercial and agricultural loans		60,642
Indirect auto loans		28,038
Home equity loans		29,658
Other consumer loans		8,730
Total loans		1,004,329

Net deferred loan costs		301
Loans, net of deferred loan costs	$	1,004,630

Accretable yield, or income expected to be collected, related to purchased credit-impaired loans is as follows:

(Successor Company)	Three Months Ended June 30, 2011			Six Months Ended June 30, 2011
Balance, beginning of period	$	250,840		$	263,381
New loans purchased		-			-
Accretion of income		(4,518	)		(17,059	)
Reclassifications from nonaccretable difference		-			-
Reduction due to deconsolidation of the Bank		(246,322	)		(246,322	)
Balance, end of period	$	-		$	-

The contractually required payments represent the total undiscounted amount of all uncollected contractual principal and contractual interest payments both past due and scheduled for the future, adjusted for the timing of estimated prepayments and any full or partial charge-offs prior to the NAFH Investment. Nonaccretable difference represents contractually required payments in excess of the amount of estimated cash flows expected to be collected. The accretable yield represents the excess of estimated cash flows expected to be collected over the initial fair value of the PCI loans, which is their fair value at the time of the NAFH Investment. The accretable yield is accreted into interest income over the estimated life of the PCI loans using the level yield method. The accretable yield will change due to changes in:

●

the estimate of the remaining life of PCI loans which may change the amount of future interest income, and possibly principal, expected to be collected;

●

the estimate of the amount of contractually required principal and interest payments over the estimated life that will not be collected (the nonaccretable difference); and

●

indices for PCI loans with variable rates of interest.

For PCI loans, the impact of loan modifications is included in the evaluation of expected cash flows for subsequent decreases or increases of cash flows. For variable rate PCI loans, expected future cash flows will be recalculated as the rates adjust over the lives of the loans. At acquisition, the expected future cash flows were based on the variable rates that were in effect at that time.