Note 5 - Covered Loans

6 Months Ended

Jun. 30, 2011

Loans Receivable Covered ByFdic Loss Share [Text Block]

NOTE 5:                      COVERED LOANS

The Company evaluated loans purchased in conjunction with the acquisition of SWCB and SSB described in Note 2, Acquisitions, for impairment in accordance with the provisions of ASC Topic 310-30.  Purchased covered loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected.

The following table reflects the carrying value of all purchased covered impaired loans as of June 30, 2011 and December 31, 2010, for the SWCB and SSB FDIC-assisted transactions:

	Loans Covered
	by FDIC Loss Share
	June 30,		December 31,
(in thousands)	2011		2010
Consumer:
Other consumer	$	19	$	105
Total consumer		19		105
Real estate:
Construction		34,559		73,527
Single family residential		34,280		50,182
Other commercial		117,147		89,495
Total real estate		185,986		213,204
Commercial:
Commercial		6,894		17,975
Agricultural		--		316
Total commercial		6,894		18,291
Total covered loans (1)	$	192,899	$	231,600

(1) These loans were not classified as non-performing assets at June 30, 2011 or December 31, 2010, as the loans are accounted for on a pooled basis and the pools are considered to be performing.  Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all purchased impaired loans.  The loans are grouped in pools sharing common risk characteristics and were treated in the aggregate when applying various valuation techniques.

The acquired loans were grouped into pools based on common risk characteristics and were recorded at their estimated fair values, which incorporated estimated credit losses at the acquisition date.  These loan pools are systematically reviewed by the Company to determine the risk of losses that may exceed those identified at the time of the acquisition.  Techniques used in determining risk of loss are similar to the Company’s non-covered loan portfolio, with most focus being placed on those loan pools which include the larger loan relationships and those loan pools which exhibit higher risk characteristics.

The following is a summary of the covered impaired loans acquired in the acquisitions during 2010, as of the dates of acquisition.

(in thousands)	SWCB			SSB
Contractually required principal and interest at acquisition	$	58,739		$	334,582
Non-accretable difference (expected losses and foregone interest)		(15,396	)		(78,139	)
Cash flows expected to be collected at acquisition		43,343			256,443
Accretable yield		(3,166	)		(37,285	)
Basis in acquired loans at acquisition	$	40,177		$	219,158

As of the respective acquisition dates, the estimates of contractually required payments receivable, including interest, for all covered impaired loans acquired in the SWCB and SSB transactions were $393.3 million.  The cash flows expected to be collected as of the acquisition dates for these loans were $299.8 million, including interest.  These amounts were determined based upon the estimated remaining life of the underlying loans, which includes the effects of estimated prepayments.

Changes in the carrying amount of the accretable yield for purchased impaired and non-impaired loans were as follows for the three and six months ended June 30, 2011, for SWCB and SSB, combined.

	Three Months Ended						Six Months Ended
	June 30, 2011						June 30, 2011
				Carrying						Carrying
	Accretable			Amount of			Accretable			Amount of
(In thousands)	Yield			Loans			Yield			Loans
Beginning balance	$	31,906		$	208,774		$	36,247		$	231,600
Additions		--			--			--			--
Accretion		(4,347	)		4,347			(8,688	)		8,688
Payments received, net		--			(20,222	)		--			(47,389	)
Balance, ending	$	27,559		$	192,899		$	27,559		$	192,899

No pools evaluated by the Company were determined to have experienced impairment in the estimated credit quality or cash flows.  There were no allowances for loan losses related to the purchased impaired loans at June 30, 2011 or December 31, 2010.