PORTFOLIO LOANS

Below is a summary of loans by category at June 30, 2011 and December 31, 2010:



	June 30, 2011
(in thousands)	Portfolio Loans not Covered under FDIC loss share		Portfolio Loans Covered under FDIC loss share		Total
Real Estate Loans:
Construction and land development	$	158,128	$	31,006	$	189,134
Commercial real estate - Investor Owned	455,438		46,251		501,689
Commercial real estate - Owner Occupied	334,118		44,398		378,516
Residential real estate	176,782		43,194		219,976
Total real estate loans	$	1,124,466	$	164,849	$	1,289,315
Commercial and industrial	688,354		14,934		703,288
Consumer & other	13,360		470		13,830
Portfolio Loans	$	1,826,180	$	180,253	$	2,006,433
Unearned loan costs, net	48		—		48
Portfolio loans, including unearned loan costs	$	1,826,228	$	180,253	$	2,006,481


	December 31, 2010
(in thousands)	Portfolio Loans not Covered under FDIC loss share		Portfolio Loans Covered under FDIC loss share		Total
Real Estate Loans:
Construction and land development	$	190,285	$	32,748	$	223,033
Commercial real estate - Investor Owned	444,724		42,136		486,860
Commercial real estate - Owner Occupied	331,544		31,084		362,628
Residential real estate	189,484		10,201		199,685
Other real estate loans	712,177		72,280		784,457
Total real estate loans	$	1,156,037	$	116,169	$	1,272,206
Commercial and industrial	593,938		10,036		603,974
Consumer & other	16,308		506		16,814
Portfolio Loans	$	1,766,283	$	126,711	$	1,892,994
Unearned loan costs, net	68		—		68
Portfolio loans, including unearned loan costs	$	1,766,351	$	126,711	$	1,893,062

The Company grants commercial, residential, and consumer loans primarily in the St. Louis, Kansas City and Phoenix metropolitan areas. The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a substantial portion of the portfolio is concentrated in and secured by real estate. The ability of the Company’s borrowers to honor their contractual obligations is partially dependent upon the local economy and its effect on the real estate market.

A summary of the year-to-date activity in the allowance for loan losses and the recorded investment in loans by portfolio class and category based on impairment method through June 30, 2011 and at December 31, 2010 is as follows:



(in thousands)	Commercial & Industrial			Commercial Real Estate Owner Occupied			Commercial Real Estate Investor Owned		Construction Real Estate		Residential Real Estate			Consumer & Other			Unallocated			Portfolio loans covered under FDIC loss share		Total
Allowance for Loan Losses:
Balance at December 31, 2010	$	12,727		$	5,060		$	5,629	$	8,407	$	5,485		$	93		$	5,358		$	—	$	42,759
Provision charged to expense	(62		)	691			1,524		2,964		(361		)	9			(1,165		)	—		3,600
Losses charged off	400			378			360		2,716		111			—			—			—		3,965
Recoveries	125			—			15		178		89			21			—			—		428
Balance at March 31, 2011	$	12,390		$	5,373		$	6,808	$	8,833	$	5,102		$	123		$	4,193		$	—	$	42,822
Provision charged to expense	421			(105		)	234		2,736		785			(81		)	309			276		4,575
Losses charged off	504			11			544		4,120		495			5			—			276		5,955
Recoveries	16			274			263		93		56			13			—			—		715
Balance at June 30, 2011	$	12,323		$	5,531		$	6,761	$	7,542	$	5,448		$	50		$	4,502		$	—	$	42,157

Balance June 30, 2011
Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	2,695		$	337		$	1,754	$	3,518	$	2,165		$	—		$	—		$	—	$	10,469
Collectively evaluated for impairment	9,628			5,194			5,007		4,024		3,283			50			4,502			—		31,688
Loans acquired with deteriorated credit quality	—			—			—		—		—			—			—			—		—
Total	$	12,323		$	5,531		$	6,761	$	7,542	$	5,448		$	50		$	4,502		$	—	$	42,157
Loans - Ending Balance:
Individually evaluated for impairment	$	5,082		$	1,917		$	8,998	$	17,845	$	9,276		$	—		$	—		$	—	$	43,118
Collectively evaluated for impairment	683,272			332,201			446,440		140,283		167,506			13,408			—			12,606		1,795,716
Loans acquired with deteriorated credit quality	—			—			—		—		—			—			—			167,647		167,647
Total	$	688,354		$	334,118		$	455,438	$	158,128	$	176,782		$	13,408		$	—		$	180,253	$	2,006,481



(in thousands)	Commercial & Industrial		Commercial Real Estate Owner Occupied		Commercial Real Estate Investor Owned		Construction Real Estate		Residential Real Estate		Consumer & Other		Unallocated		Portfolio loans covered under FDIC loss share		Total
Balance at December 31, 2010
Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	4,434	$	219	$	1,457	$	650	$	2,368	$	—	$	—	$	—	$	9,128
Collectively evaluated for impairment	8,293		4,841		4,172		7,757		3,117		93		5,358		—		33,631
Loans acquired with deteriorated credit quality	—		—		—		—		—		—		—		—		—
Total	$	12,727	$	5,060	$	5,629	$	5,407	$	5,485	$	93	$	5,358	$	—	$	42,759
Loans - Ending Balance:
Individually evaluated for impairment	$	11,276	$	2,024	$	10,935	$	9,934	$	12,188	$	—	$	—	$	—	$	46,357
Collectively evaluated for impairment	582,662		329,520		433,789		180,351		177,296		16,376		—		3,837		1,723,831
Loans acquired with deteriorated credit quality	—		—		—		—		—		—		—		122,874		122,874
Total	$	593,938	$	331,544	$	444,724	$	190,285	$	189,484	$	16,376	$	—	$	126,711	$	1,893,062

A summary of loans individually evaluated for impairment by category at June 30, 2011 and December 31, 2010 is as follows:



	June 30, 2011
(in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial & Industrial	$	5,082	$	142	$	4,940	$	5,082	$	2,695	$	7,465
Real Estate:
Commercial - Owner Occupied	2,100		805		1,112		1,917		337		1,682
Commercial - Investor Owned	14,689		694		8,304		8,998		1,754		9,883
Construction	24,935		2,277		15,568		17,845		3,518		17,074
Residential	9,694		1,873		7,403		9,276		2,165		9,664
Consumer & Other	—		—		—		—		—		1
Total	$	56,500	$	5,791	$	37,327	$	43,118	$	10,469	$	45,769



	December 31, 2010
(in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial & Industrial	$	11,591	$	412	$	10,864	$	11,276	$	4,434	$	5,848
Real Estate:
Commercial - Owner Occupied	2,668		1,044		980		2,024		219		3,890
Commercial - Investor Owned	15,024		1,960		8,975		10,935		1,457		15,122
Construction	13,391		5,388		4,546		9,934		650		16,898
Residential	12,390		2,650		9,538		12,188		2,368		5,721
Consumer & Other	—		—		—		—		—		92
Total	$	55,064	$	11,454	$	34,903	$	46,357	$	9,128	$	47,571

There was one loan over 90 days past due and still accruing interest at June 30, 2011. If interest on impaired loans would have been accrued based upon the original contractual terms, such income would have been $891,000 and $1.5 million, for the three and six months ended June 30, 2011, respectively. The cash amount collected and recognized as interest income on impaired loans was $74,000 and $203,000 for the three and six months ended June 30, 2011, respectively. The amount recognized as interest income on impaired loans continuing to accrue interest was $62,000 and $213,000 for the three and six months ended June 30, 2011, respectively. At June 30, 2011, there were $1.6 million of unadvanced commitments on impaired loans. Other Liabilities include approximately $321,000 for estimated losses attributable to the unadvanced commitments on impaired loans.

The recorded investment in impaired loans by category at June 30, 2011 and December 31, 2010 is as follows:



	June 30, 2011
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial & Industrial	$	4,333	$	—	$	749	$	5,082
Real Estate:
Commercial - Investor Owned	4,629		4,369		—		8,998
Commercial - Owner Occupied	1,917		—		—		1,917
Construction	15,850		1,995		—		17,845
Residential	4,275		5,001		—		9,276
Consumer & Other	—		—		—		—
Total	$	31,004	$	11,365	$	749	$	43,118



	December 31, 2010
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial & Industrial	$	11,276	$	—	$	—	$	11,276
Real Estate:
Commercial - Investor Owned	10,516		419		—		10,935
Commercial - Owner Occupied	2,024		—		—		2,024
Construction	9,352		582		—		9,934
Residential	5,309		6,879		—		12,188
Consumer & Other	—		—		—		—
Total	$	38,477	$	7,880	$	—	$	46,357

The aging of the recorded investment in past due loans by portfolio class and category at June 30, 2011 and December 31, 2010 is shown below.



	June 30, 2011
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Portfolio loans not covered under FDIC loss share
Commercial & Industrial	$	531	$	2,665	$	3,196	$	685,158	$	688,354
Real Estate:
Commercial - Owner Occupied	2,263		420		2,683		331,435		334,118
Commercial - Investor Owned	36		4,374		4,410		451,028		455,438
Construction	2,916		11,250		14,166		143,962		158,128
Residential	811		3,547		4,358		172,424		176,782
Consumer & Other	—		—		—		13,408		13,408
Total	$	6,557	$	22,256	$	28,813	$	1,797,415	$	1,826,228

Portfolio loans covered under FDIC loss share
Commercial & Industrial	$	3,940	$	596	$	4,536	$	10,398	$	14,934
Real Estate:
Commercial - Owner Occupied	1,203		4,372		5,575		38,823		44,398
Commercial - Investor Owned	2,709		690		3,399		42,852		46,251
Construction	1,448		7,687		9,135		21,871		31,006
Residential	566		2,973		3,539		39,655		43,194
Consumer & Other	—		91		91		379		470
Total	$	9,866	$	16,409	$	26,275	$	153,978	$	180,253

Portfolio loans, total
Commercial & Industrial	$	4,471	$	3,261	$	7,732	$	695,556	$	703,288
Real Estate:
Commercial - Owner Occupied	3,466		4,792		8,258		370,258		378,516
Commercial - Investor Owned	2,745		5,064		7,809		493,880		501,689
Construction	4,364		18,937		23,301		165,833		189,134
Residential	1,377		6,520		7,897		212,079		219,976
Consumer & Other	—		91		91		13,787		13,878
Total	$	16,423	$	38,665	$	55,088	$	1,951,393	$	2,006,481



	December 31, 2010
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Portfolio loans not covered under FDIC loss share
Commercial & Industrial	$	5,938	$	3,557	$	9,495	$	584,443	$	593,938
Real Estate:
Commercial - Owner Occupied	914		1,583		2,497		329,047		331,544
Commercial - Investor Owned	2,692		4,348		7,040		437,684		444,724
Construction	802		6,876		7,678		182,607		190,285
Residential	2,496		2,518		5,014		184,470		189,484
Consumer & Other	3		—		3		16,373		16,376
Total	$	12,845	$	18,882	$	31,727	$	1,734,624	$	1,766,351

Portfolio loans covered under FDIC loss share
Commercial & Industrial	$	674	$	264	$	938	$	9,098	$	10,036
Real Estate:
Commercial - Owner Occupied	62		5,591		5,653		25,431		31,084
Commercial - Investor Owned	3,687		1,956		5,643		36,493		42,136
Construction	—		25,943		25,943		6,804		32,747
Residential	726		737		1,463		8,737		10,200
Consumer & Other	196		—		196		312		508
Total	$	5,345	$	34,491	$	39,836	$	86,875	$	126,711

Portfolio loans, total
Commercial & Industrial	$	6,612	$	3,821	$	10,433	$	593,541	$	603,974
Real Estate:
Commercial - Owner Occupied	976		7,174		8,150		354,478		362,628
Commercial - Investor Owned	6,379		6,304		12,683		474,177		486,860
Construction	802		32,819		33,621		189,411		223,032
Residential	3,222		3,255		6,477		193,207		199,684
Consumer & Other	199		—		199		16,685		16,884
Total	$	18,190	$	53,373	$	71,563	$	1,821,499	$	1,893,062

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, and current economic factors among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:


•	Grades 1, 2, and 3 - These grades include loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow and whose management team has experience and depth within their industry.


•	Grade 4 – This grade includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.


•	Grade 5 – This grade includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.


•	Grade 6 – This grade includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may also include circumstances where the company is starting to reverse a negative trend or condition, or have recently been upgraded from a 7, 8, or 9 rating.


•	Grade 7 – Watch credits are companies that have experienced financial setback of a nature that are not determined to be severe or influence ‘ongoing concern’ expectations. Borrowers within this category are expected to turnaround within a 12-month period of time. Although possible, no loss is anticipated, due to strong collateral and/or guarantor support.


•	Grade 8 – Substandard credits will include those companies that are characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.


•	Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. Borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on non-accrual.

The recorded investment by risk category of the loans by portfolio class and category at June 30, 2011, which is based upon the most recent analysis performed, and December 31, 2010 is as follows:



	June 30, 2011
(in thousands)	Commercial & Industrial		Commercial Real Estate Owner Occupied		Commercial Real Estate Investor Owned		Construction Real Estate		Residential Real Estate		Consumer & Other		Total
Portfolio loans not covered under FDIC loss share
Outstanding (1-3)	$	98,409	$	9,646	$	6,742	$	1,141	$	1,069	$	2,258	$	119,265
Above Average (4)	79,184		65,638		34,571		8,535		14,766		1,793		204,487
Average (5)	325,935		162,998		264,358		52,947		122,928		9,004		938,170
Below Average (6)	98,511		46,567		76,287		35,581		9,798		217		266,961
Watch (7)	53,189		32,822		58,642		30,582		5,819		6		181,060
Substandard (8)	29,281		16,447		14,620		28,836		20,368		130		109,682
Doubtful (9)	3,845		—		218		506		2,034		—		6,603
Total	$	688,354	$	334,118	$	455,438	$	158,128	$	176,782	$	13,408	$	1,826,228

Portfolio loans covered under FDIC loss share
Outstanding (1-3)	$	—	$	—	$	—	$	—	$	—	$	73	$	73
Above Average (4)	1,310		2,369		—		219		14,037		59		17,994
Average (5)	10,213		18,336		18,024		12,556		19,506		278		78,913
Below Average (6)	1,939		3,134		6,747		1,844		1,221		43		14,928
Watch (7)	221		3,874		5,153		215		3,190		—		12,653
Substandard (8)	1,251		16,685		13,797		14,865		4,752		17		51,367
Doubtful (9)	—		—		2,530		1,307		488		—		4,325
Total	$	14,934	$	44,398	$	46,251	$	31,006	$	43,194	$	470	$	180,253

Portfolio loans, total
Outstanding (1-3)	$	98,409	$	9,646	$	6,742	$	1,141	$	1,069	$	2,331	$	119,338
Above Average (4)	80,494		68,007		34,571		8,754		28,803		1,852		222,481
Average (5)	336,148		181,334		282,382		65,503		142,434		9,282		1,017,083
Below Average (6)	100,450		49,701		83,034		37,425		11,019		260		281,889
Watch (7)	53,410		36,696		63,795		30,797		9,009		6		193,713
Substandard (8)	30,532		33,132		28,417		43,701		25,120		147		161,049
Doubtful (9)	3,845		—		2,748		1,813		2,522		—		10,928
Total	$	703,288	$	378,516	$	501,689	$	189,134	$	219,976	$	13,878	$	2,006,481



	December 31, 2010
(in thousands)	Commercial & Industrial		Commercial Real Estate Owner Occupied		Commercial Real Estate Investor Owned		Construction Real Estate		Residential Real Estate		Consumer & Other		Total
Portfolio loans not covered under FDIC loss share
Outstanding (1-3)	$	92,940	$	19,139	$	6,846	$	1,142	$	1,522	$	5,930	$	127,519
Above Average (4)	48,745		68,443		31,826		8,549		17,400		2,264		177,227
Average (5)	252,938		149,773		259,937		80,400		127,587		7,722		878,357
Below Average (6)	135,174		46,080		91,385		27,931		10,900		117		311,587
Watch (7)	26,549		33,374		38,680		32,519		8,272		9		139,403
Substandard (8)	34,512		14,634		15,812		39,744		23,759		334		128,795
Doubtful (9)	3,080		101		238		—		44		—		3,463
Total	$	593,938	$	331,544	$	444,724	$	190,285	$	189,484	$	16,376	$	1,766,351

Portfolio loans covered under FDIC loss share
Outstanding (1-3)	$	—	$	—	$	—	$	—	$	—	$	83	$	83
Above Average (4)	—		—		—		—		110		—		110
Average (5)	4,195		8,774		14,744		1,343		4,400		378		33,834
Below Average (6)	4,902		7,952		7,938		1,557		2,717		47		25,113
Watch (7)	75		3,414		7,331		353		1,443		—		12,616
Substandard (8)	864		10,944		9,861		22,272		1,170		—		45,111
Doubtful (9)	—		—		2,262		7,222		360		—		9,844
Total	$	10,036	$	31,084	$	42,136	$	32,747	$	10,200	$	508	$	126,711

Portfolio loans, total
Outstanding (1-3)	$	92,940	$	19,139	$	6,846	$	1,142	$	1,522	$	6,013	$	127,602
Above Average (4)	48,745		68,443		31,826		8,549		17,510		2,264		177,337
Average (5)	257,133		158,547		274,681		81,743		131,987		8,100		912,191
Below Average (6)	140,076		54,032		99,323		29,488		13,617		164		336,700
Watch (7)	26,624		36,788		46,011		32,872		9,715		9		152,019
Substandard (8)	35,376		25,578		25,673		62,016		24,929		334		173,906
Doubtful (9)	3,080		101		2,500		7,222		404		—		13,307
Total	$	603,974	$	362,628	$	486,860	$	223,032	$	199,684	$	16,884	$	1,893,062

Portfolio loans covered under FDIC loss share

Purchased loans acquired in a business combination, including loans purchased in our FDIC-assisted transactions, are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan losses. Purchased credit-impaired loans are loans that have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the purchase date may include factors such as past due and non-accrual status. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the non-accretable yield. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges or a reclassification of the difference from non-accretable to accretable with a positive impact on interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

Changes in the accretable yield for purchased loans were as follows for the six months ended June 30, 2011 and 2010:



(in thousands)	June 30, 2011			June 30, 2010
Balance at beginning of period	$	46,460		$	3,708
Additions	10,757			—
Accretion	(12,380		)	(494		)
Balance at end of period	$	44,837		$	3,214

Outstanding balances on purchased loans from the FDIC were $260.8 million as of June 30, 2011 and $219.5 million at December 31, 2010, respectively. In the second quarter of 2011, the Bank received payments of $10.9 million for loss share claims under the terms of the FDIC loss share agreements.

Legacy acquisition

The following table presents information regarding the contractually required payments receivable, the cash flows expected to be collected, and the estimated fair value of the loans acquired in the Legacy acquisition, at the closing date of the transaction:



(In thousands)	January 7, 2011 Purchased Credit-Impaired Loans
Contractually required payments (principal and interest):	$	106,286
Cash flows expected to be collected (principal and interest):	84,089
Fair value of loans acquired:	73,214

These amounts were determined based upon the estimated remaining life of the underlying loans, which includes the effects of estimated prepayments. The majority of the purchased credit-impaired loans were valued based on the liquidation value of the underlying collateral. There was no allowance for credit losses on purchased loans related to FDIC-assisted transactions at June 30, 2011.

The determination of the initial fair value of loans and other real estate acquired in the transaction and the initial fair value of the related FDIC loss share receivable involve a high degree of judgment and complexity. The carrying value of the acquired loans and other real estate and the FDIC indemnification asset reflect management’s best estimate of the fair value of each of these assets as of the date of acquisition. However, the amount that the Bank realizes on these assets could differ materially from the carrying value reflected in these financial statements, based upon the timing and amount of collections on the acquired loans in future periods. To the extent the actual values realized for the acquired loans are different from the estimate, the FDIC loss share receivable will generally be affected in an offsetting manner due to the indemnification obligations of the FDIC, thus limiting the Bank’s loss exposure.