ACQUIRED LOANS

Since 2009, the Company acquired the majority of the assets and assumed the deposits of four financial institutions in FDIC-assisted transactions. In three of those transactions, most loans and OREO acquired are covered by the FDIC Agreements. The significant accounting policies related to purchased impaired loans and the related FDIC indemnification asset are presented in Note 1, “Summary of Significant Accounting Policies.”

Acquired Loans

(Dollar amounts in thousands)



	September 30, 2013							December 31, 2012
	Covered			Non-Covered		Total		Covered			Non-Covered		Total
Purchased impaired loans	$	119,602	⁽¹⁾	$	15,964	$	135,566	$	154,762	⁽¹⁾	$	18,198	$	172,960
Other loans ⁽²⁾	33,703			19,542		53,245		43,132			22,480		65,612
Total acquired loans	$	153,305		$	35,506	$	188,811	$	197,894		$	40,678	$	238,572


⁽¹⁾	At acquisition, the Company made an election to account for certain covered loans as purchased impaired loans. These loans totaled $25.5 million at September 30, 2013 and $28.1 million at December 31, 2012.


⁽²⁾	These loans did not meet the criteria to be accounted for as purchased impaired loans at acquisition.

Except for leases and revolving loans, management determined that a significant portion of the acquired loans had evidence of credit deterioration since origination (“purchased impaired loans”), and it was probable at the date of acquisition that the Company would not collect all contractually required principal and interest payments. Evidence of credit quality deterioration was evaluated using various indicators, such as past due and non-accrual status. Other key considerations and indicators included the past performance of the troubled institutions’ credit underwriting standards, completeness and accuracy of credit files, maintenance of risk ratings, and age of appraisals.

In connection with the FDIC Agreements, the Company recorded an indemnification asset. To maintain eligibility for the loss share reimbursement, the Company is required to follow certain servicing procedures as specified in the FDIC Agreements. The Company is in compliance with those requirements as of September 30, 2013 and December 31, 2012.

Changes in the FDIC Indemnification Asset

(Dollar amounts in thousands)



	Quarters Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Beginning balance	$	23,158		$	58,302		$	37,051		$	65,609
Amortization	(116		)	(6,146		)	(2,348		)	(10,642		)
Expected reimbursements from the FDIC for changes in expected credit losses	(999		)	250			(3,453		)	10,022
Payments received from the FDIC	(3,965		)	(5,215		)	(13,172		)	(17,798		)
Ending balance	$	18,078		$	47,191		$	18,078		$	47,191

Changes in the accretable yield for purchased impaired loans were as follows.

Changes in Accretable Yield

(Dollar amounts in thousands)



	Quarters Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Beginning balance	$	47,104		$	48,980		$	51,498		$	52,147
Accretion	(3,410		)	(4,689		)	(11,752		)	(15,870		)
Other ⁽¹⁾	(3,128		)	(6,348		)	820			1,666
Ending balance	$	40,566		$	37,943		$	40,566		$	37,943


⁽¹⁾	Decreases result from the resolution of certain loans occurring earlier than anticipated while increases represent an increase in the estimated cash flows to be collected over the remaining estimated life of the underlying portfolio.