PORTFOLIO LOANS NOT COVERED BY LOSS SHARE ("Non-covered")

Below is a summary of Non-covered loans by category at September 30, 2012, and December 31, 2011:



(in thousands)	September 30, 2012		December 31, 2011
Real Estate Loans:
Construction and Land Development	$	146,236	$	140,147
Commercial real estate - Investor Owned	476,501		477,154
Commercial real estate - Owner Occupied	325,379		334,416
Residential real estate	146,940		171,034
Total real estate loans	$	1,095,056	$	1,122,751
Commercial and industrial	880,394		763,202
Consumer & other	11,694		11,459
Portfolio Loans	$	1,987,144	$	1,897,412
Unearned loan costs, net	22		(338		)
Portfolio loans, including unearned loan costs	$	1,987,166	$	1,897,074

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 Non-covered loans by portfolio class and category based on impairment method through September 30, 2012, and at December 31, 2011, is as follows:



(in thousands)	Commercial & Industrial			Commercial Real Estate Owner Occupied			Commercial Real Estate Investor Owned			Construction and Land Development			Residential Real Estate			Consumer & Other		Qualitative Adjustment			Total
Allowance for Loan Losses:
Balance at December 31, 2011	$	11,945		$	6,297		$	6,751		$	5,847		$	3,931		$	14	$	3,204		$	37,989
Provision charged to expense	929			1,231			216			269			(555		)	—		(372		)	1,718
Losses charged off	(585		)	(746		)	(185		)	(856		)	(362		)	—		—			(2,734		)
Recoveries	96			2			15			152			356			2		—			623
Balance at March 31, 2012	$	12,385		$	6,784		$	6,797		$	5,412		$	3,370		$	16	$	2,832		$	37,596
Provision charged to expense	(3,201		)	(744		)	3,518			442			(189		)	3		246			75
Losses charged off	(406		)	(739		)	(108		)	(502		)	(216		)	—		—			(1,971		)
Recoveries	203			5			15			97			284			—		—			604
Balance at June 30, 2012	$	8,981		$	5,306		$	10,222		$	5,449		$	3,249		$	19	$	3,078		$	36,304
Provision charged to expense	(204		)	(738		)	604			2,551			(1,202		)	4		33			1,048
Losses charged off	(1,479		)	(625		)	(639		)	(949		)	(282		)	—		—			(3,974		)
Recoveries	142			1			14			15			672			—		—			844
Balance at September 30, 2012	$	7,440		$	3,944		$	10,201		$	7,066		$	2,437		$	23	$	3,111		$	34,222



(in thousands)	Commercial & Industrial		Commercial Real Estate Owner Occupied		Commercial Real Estate Investor Owned		Construction and Land Development		Residential Real Estate		Consumer & Other		Qualitative Adjustment		Total
Balance September 30, 2012
Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	1,165	$	379	$	2,199	$	2,538	$	506	$	—	$	—	$	6,787
Collectively evaluated for impairment	6,275		3,565		8,002		4,528		1,931		23		3,111		27,435
Total	$	7,440	$	3,944	$	10,201	$	7,066	$	2,437	$	23	$	3,111	$	34,222
Loans - Ending Balance:
Individually evaluated for impairment	$	2,849	$	5,584	$	9,647	$	10,095	$	3,883	$	—	$	—	$	32,058
Collectively evaluated for impairment	877,545		319,795		466,854		136,141		143,057		11,716		—		1,955,108
Total	$	880,394	$	325,379	$	476,501	$	146,236	$	146,940	$	11,716	$	—	$	1,987,166

Balance at December 31, 2011
Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	3,214	$	1,377	$	2,315	$	2,927	$	896	$	—	$	—	$	10,729
Collectively evaluated for impairment	8,731		4,920		4,436		2,920		3,035		14		3,204		27,260
Total	$	11,945	$	6,297	$	6,751	$	5,847	$	3,931	$	14	$	3,204	$	37,989
Loans - Ending Balance:
Individually evaluated for impairment	$	5,634	$	4,572	$	11,127	$	14,767	$	5,522	$	—	$	—	$	41,622
Collectively evaluated for impairment	757,568		329,844		466,027		125,380		165,512		11,121		—		1,855,452
Total	$	763,202	$	334,416	$	477,154	$	140,147	$	171,034	$	11,121	$	—	$	1,897,074

A summary of Non-covered loans individually evaluated for impairment by category at September 30, 2012, and December 31, 2011, is as follows:



	September 30, 2012
(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	$	4,081	$	291	$	2,558	$	2,849	$	1,165	$	6,322
Real Estate:
Commercial - Owner Occupied	6,154		2,875		2,709		5,584		379		8,653
Commercial - Investor Owned	14,053		1,865		7,782		9,647		2,199		9,793
Construction and Land Development	13,192		748		9,347		10,095		2,538		11,295
Residential	4,164		1,705		2,178		3,883		506		4,800
Consumer & Other	—		—		—		—		—		—
Total	$	41,644	$	7,484	$	24,574	$	32,058	$	6,787	$	40,863



	December 31, 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	$	7,517	$	128	$	5,506	$	5,634	$	3,214	$	6,571
Real Estate:
Commercial - Owner Occupied	5,099		—		4,572		4,572		1,377		2,711
Commercial - Investor Owned	15,676		914		10,213		11,127		2,315		10,562
Construction and Land Development	19,685		1,628		13,139		14,767		2,927		16,114
Residential	6,465		2,211		3,311		5,522		896		9,588
Consumer & Other	—		—		—		—		—		—
Total	$	54,442	$	4,881	$	36,741	$	41,622	$	10,729	$	45,546

There were no loans over 90 days past due and still accruing interest at September 30, 2012. If interest on impaired loans would have been accrued based upon the original contractual terms, such income would have been $708,000 and $2.2 million for the three and nine months ended September 30, 2012, respectively. The cash amount collected and recognized as interest income on impaired loans was $120,000 and $361,000 for the three and nine months ended September 30, 2012, respectively. The amount recognized as interest income on impaired loans continuing to accrue interest was $174,000 and $412,000 for the three and nine months ended September 30, 2012, respectively. At September 30, 2012, there were $543,000 of unadvanced commitments on impaired loans. Other Liabilities include approximately $98,000 for estimated losses attributable to the unadvanced commitments on impaired loans.

The recorded investment in impaired Non-covered loans by category at September 30, 2012, and December 31, 2011, is as follows:



	September 30, 2012
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial & Industrial	$	2,849	$	—	$	—	$	2,849
Real Estate:
Commercial - Investor Owned	9,647		—		—		9,647
Commercial - Owner Occupied	5,377		207		—		5,584
Construction and Land Development	7,286		2,809		—		10,095
Residential	2,187		1,696		—		3,883
Consumer & Other	—		—		—		—
Total	$	27,346	$	4,712	$	—	$	32,058



	December 31, 2011
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial & Industrial	$	4,475	$	1,159	$	—	$	5,634
Real Estate:
Commercial - Investor Owned	6,647		4,480		—		11,127
Commercial - Owner Occupied	4,129		443		—		4,572
Construction and Land Development	10,335		3,677		755		14,767
Residential	5,299		223		—		5,522
Consumer & Other	—		—		—		—
Total	$	30,885	$	9,982	$	755	$	41,622

The recorded investment by category for the Non-covered loans that have been restructured for the three and nine months ended September 30, 2012, is as follows:



	Three months ended September 30, 2012					Nine months ended September 30, 2012
(in thousands, except for number of loans)	Number of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance		Number of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Commercial & Industrial	1	$	150	$	—	—	$	—	$	—
Real Estate:
Commercial - Owner Occupied	1	207		207		1	207		207
Commercial - Investor Owned	—	—		—		—	—		—
Construction and Land Development	—	—		—		2	4,341		2,809
Residential	—	—		—		1	1,696		1,696
Consumer & Other	—	—		—		—	—		—
Total	2	$	357	$	207	4	$	6,244	$	4,712

The restructured Non-covered loans primarily resulted from interest rate concessions. As of September 30, 2012, the Company has allocated $791,000 of specific reserves to the loans that have been restructured.

The recorded investment by category for the Non-covered loans that have been restructured and subsequently defaulted for the three and nine months ended September 30, 2012, is as follows:



	Three months ended September 30, 2012			Nine months ended September 30, 2012
(in thousands, except for number of loans)	Number of Loans	Recorded Balance		Number of Loans	Recorded Balance
Commercial & Industrial	1	$	150	2	$	166
Real Estate:
Commercial - Owner Occupied	—	—		—	—
Commercial - Investor Owned	—	—		—	—
Construction and Land Development	—	—		—	—
Residential	—	—		—	—
Consumer & Other	—	—		—	—
Total	1	$	150	2	$	166

The aging of the recorded investment in past due Non-covered loans by portfolio class and category at September 30, 2012, and December 31, 2011, is shown below.



	September 30, 2012
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial & Industrial	$	704	$	862	$	1,566	$	878,828	$	880,394
Real Estate:
Commercial - Owner Occupied	—		344		344		325,035		325,379
Commercial - Investor Owned	15		4,509		4,524		471,977		476,501
Construction and Land Development	596		5,306		5,902		140,334		146,236
Residential	703		890		1,593		145,347		146,940
Consumer & Other	5		—		5		11,711		11,716
Total	$	2,023	$	11,911	$	13,934	$	1,973,232	$	1,987,166



	December 31, 2011
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial & Industrial	$	4,521	$	792	$	5,313	$	757,889	$	763,202
Real Estate:
Commercial - Owner Occupied	1,945		1,522		3,467		330,949		334,416
Commercial - Investor Owned	2,308		4,209		6,517		470,637		477,154
Construction and Land Development	1,356		9,786		11,142		129,005		140,147
Residential	299		4,137		4,436		166,598		171,034
Consumer & Other	—		—		—		11,121		11,121
Total	$	10,429	$	20,446	$	30,875	$	1,866,199	$	1,897,074

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 Non-covered loans by portfolio class and category at September 30, 2012, which is based upon the most recent analysis performed, and December 31, 2011 is as follows:



	September 30, 2012
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial & Industrial	$	824,351	$	37,878	$	18,165	$	—	$	880,394
Real Estate:
Commercial - Owner Occupied	279,806		30,850		14,379		344		325,379
Commercial - Investor Owned	387,509		54,161		34,831		—		476,501
Construction and Land Development	101,683		15,101		28,944		508		146,236
Residential	130,212		4,967		11,761		—		146,940
Consumer & Other	11,660		6		50		—		11,716
Total	$	1,735,221	$	142,963	$	108,130	$	852	$	1,987,166



	December 31, 2011
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial & Industrial	$	683,239	$	50,197	$	27,229	$	2,537	$	763,202
Real Estate:
Commercial - Owner Occupied	276,802		40,207		16,225		1,182		334,416
Commercial - Investor Owned	405,686		56,370		14,894		204		477,154
Construction and Land Development	91,286		27,056		21,461		344		140,147
Residential	148,309		4,814		16,419		1,492		171,034
Consumer & Other	11,112		9		—		—		11,121
Total	$	1,616,434	$	178,653	$	96,228	$	5,759	$	1,897,074