NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES

We extend commercial and consumer credit primarily to customers in the states of Oklahoma, Texas, and Kansas. Our commercial lending operations are concentrated in Oklahoma City, Tulsa, Dallas, Wichita, and other metropolitan markets in Oklahoma, Texas, and Kansas. As a result, the collectability of our loan portfolio can be affected by changes in the economic conditions in those states and markets. Please see Note 8: Operating Segments for more detail regarding loans by market. At September 30, 2013 and December 31, 2012, substantially all of our loans were collateralized with real estate, inventory, accounts receivable, and/or other assets or were guaranteed by agencies of the United States government.

Our loan classifications were as follows:



	At September 30, 2013				At December 31, 2012
(Dollars in thousands)	Noncovered		Covered		Noncovered		Covered
Real estate mortgage:
Commercial	$	743,858	$	13,578	$	870,975	$	18,298
One-to-four family residential		80,561		4,084		70,954		4,881
Real estate construction:
Commercial		162,995		311		130,753		382
One-to-four family residential		4,464		-		3,656		-
Commercial		263,598		967		240,498		2,037
Installment and consumer:
Guaranteed student loans		4,471		-		4,680		-
Other		27,698		40		31,512		109
		1,287,645		18,980		1,353,028		25,707
Less: Allowance for loan losses		(40,013)		(68)		(46,494)		(224)
Total loans, net	$	1,247,632	$	18,912	$	1,306,534	$	25,483

Concentrations of Credit. At September 30, 2013, $456.5 million, or 35%, of our noncovered loans consisted of loans to individuals and businesses in the healthcare industry. We do not have any other concentrations of loans to individuals or businesses involved in a single industry totaling 10% or more of total loans.

Loans Held for Sale. We had loans which were held for sale of $3.6 million and $31.7 million at September 30, 2013 and December 31, 2012, respectively. The decline from year-end is due to the first quarter reclassification of the guaranteed student loans and the United States Department of Agriculture government guaranteed commercial real estate loans back into the loan portfolio because we are not actively looking to sell these loans. These loans were reclassified at their respective book value which approximated fair value. The loans currently classified as held for sale, primarily residential mortgage loans, are carried at the lower of cost or market value. A substantial portion of the one-to-four family residential loans and loan servicing rights are primarily sold to one buyer. These mortgage loans are generally sold within a one-month period from loan closing at amounts determined by the investor commitment based upon the pricing of the loan. These loans are available for sale in the secondary market.

Loan Servicing. We earn fees for servicing real estate mortgages and other loans owned by others. The fees are generally calculated on the outstanding principal balance of the loans serviced and are recorded as noninterest income when earned. The unpaid principal balance of real estate mortgage loans serviced for others totaled $383.4 million and $329.2 million at September 30, 2013 and 2012, respectively. Loan servicing rights are capitalized based on estimated fair value at the point of origination. The servicing rights are amortized over the period of estimated net servicing income.

Acquired Loans. On June 19, 2009, Bank of Kansas entered into a purchase and assumption agreement with the Federal Deposit Insurance Corporation (“FDIC”) to acquire substantially all loans as well as certain other related assets of First National Bank of Anthony, Anthony, Kansas in an FDIC-assisted transaction. Bank of Kansas and the FDIC entered into loss sharing agreements that provide Bank of Kansas with significant protection against credit losses from loans and related assets acquired in the transaction. Under these agreements, the FDIC will reimburse Bank of Kansas for 80% of net losses up to $35.0 million on covered assets, primarily acquired loans and other real estate, and for 95% of any net losses above $35.0 million. Bank of Kansas services the covered assets.

Loans covered under the loss sharing agreements with the FDIC, including the amounts of expected reimbursements from the FDIC under these agreements, are reported in loans and are referred to as “covered” loans. Covered loans were initially recorded at fair value (as determined by the present value of expected future cash flows) with no allowance for loan losses. Subsequent decreases in expected cash flows are recognized as impairments. Valuation allowances on these covered loans reflect only losses incurred after the acquisition.

The expected payments from the FDIC under the loss sharing agreements are recorded as part of the covered loans in the Unaudited Consolidated Statement of Financial Condition.

Changes in the carrying amounts and accretable yields for ASC 310.30, Receivables: Loans and Debt Securities Acquired with Deteriorated Credit Quality, loans were as follows for the three and nine months ended September 30, 2013 and September 30, 2012.



	For the three months ended September 30,
	2013					2012
			Carrying				Carrying
	Accretable		amount		Accretable		amount
(Dollars in thousands)	Yield		of loans		Yield		of loans
Balance at beginning of period	$	1,580	$	21,646	$	1,758	$	30,712
Payments received		-		(2,697)		-		(1,409)
Transfers to other real estate / repossessed assets		-		-		21		(1,202)
Net charge-offs		-		-		-		-
Accretion		(137)		31		(102)		96
Balance at end of period	$	1,443	$	18,980	$	1,677	$	28,197



	For the nine months ended September 30,
	2013				2012
			Carrying				Carrying
	Accretable		amount		Accretable		amount
(Dollars in thousands)	Yield		of loans		Yield		of loans
Balance at beginning of period	$	1,904	$	25,707	$	2,402	$	37,615
Payments received		-		(6,527)		-		(7,269)
Transfers to other real estate / repossessed assets		(33)		(375)		27		(2,365)
Net charge-offs		(1)		(70)		(5)		(112)
Net reclassifications to / from nonaccretable amount		-		-		(271)		-
Accretion		(427)		245		(476)		328
Balance at end of period	$	1,443	$	18,980	$	1,677	$	28,197

Nonperforming / Past Due Loans. We identify past due loans based on contractual terms on a loan by loan basis and generally place loans, except for consumer loans, on nonaccrual when any portion of the principal or interest is ninety days past due and collateral is insufficient to discharge the debt in full. Interest accrual may also be discontinued earlier if, in management’s opinion, collection is unlikely. Generally, consumer installment loans are not placed on nonaccrual but are charged-off when they are four months past due. Accrued interest is written off when a loan is placed on nonaccrual status. Subsequent interest income is recorded when cash receipts are received from the borrower and collectability of the principal amount is reasonably assured.

Under generally accepted accounting principles and instructions to reports of condition and income of federal banking regulators, a nonaccrual loan may be returned to accrual status: (i) when none of its principal and interest is due and unpaid, repayment is expected, and there has been a sustained period (at least six months) of repayment performance; (ii) when the loan is not brought current, but there is a sustained period of performance and repayment within a reasonable period is reasonably assured; or (iii) when the loan otherwise becomes well-secured and in the process of collection. Purchased nonperforming loans also may be returned to accrual status without becoming fully current. Loans that have been restructured because of weakened financial positions of the borrowers also may be returned to accrual status if repayment is reasonably assured under the revised terms and there has been a sustained period of repayment performance.

Management strives to carefully monitor credit quality and to identify loans that may become nonperforming. At any time, however, there are loans included in the portfolio that will result in losses to us that have not been identified as nonperforming or potential problem loans. Because the loan portfolio contains a significant number of commercial and commercial real estate loans with relatively large balances, the unexpected deterioration of one or a few such loans may cause a significant increase in nonperforming assets and may lead to a material increase in charge-offs and the provision for loan losses in future periods.

The following table shows the recorded investment in loans on nonaccrual status.



	At September 30, 2013				At December 31, 2012
(Dollars in thousands)	Noncovered		Covered		Noncovered		Covered
Real estate mortgage:
Commercial	$	12,203	$	3,175	$	18,337	$	3,087
One-to-four family residential		396		71		563		52
Real estate construction:
Commercial		5,659		130		3,355		130
Commercial		10,886		104		12,761		324
Other consumer		54		-		88		2
Total nonaccrual loans	$	29,198	$	3,480	$	35,104	$	3,595

During the first nine months of 2013, an immaterial amount of interest income was received on nonaccruing loans. If interest on all nonaccrual loans had been accrued for the nine months ended September 30, 2013, additional interest income of $1.5 million would have been recorded.

Net cumulative charge-offs against noncovered nonaccrual loans at September 30, 2013 and December 31, 2012 were $12.0 million and $8.3 million, respectively.

Included in noncovered nonaccrual loans are five and six collateral dependent lending relationships with aggregate principal balances of approximately $24.5 million and $31.2 million as of September 30, 2013 and December 31, 2012, respectively. Related impairment reserves as of September 30, 2013 and December 31, 2012 were $3.0 million and $6.8 million, respectively. These impairment reserves were established either based on recent appraisal values obtained for the respective properties or the discounted present value of expected cash flows using the loan’s initial effective interest rate. At September 30, 2013, three of the five lending relationships were secured by commercial real estate.

The following table shows an age analysis of past due loans at September 30, 2013 and December 31, 2012.



			90 days and								Recorded loans
	30-89 days		greater		Total past				Total		> 90 days and
(Dollars in thousands)	past due		past due		due		Current		loans		accruing
At September 30, 2013
Noncovered:
Real estate mortgage:
Commercial	$	24,105	$	12,203	$	36,308	$	707,550	$	743,858	$	-
One-to-four family residential		105		396		501		80,060		80,561		-
Real estate construction:
Commercial		-		5,659		5,659		157,336		162,995		-
One-to-four family residential		-		-		-		4,464		4,464		-
Commercial		1,009		10,887		11,896		251,702		263,598		1
Other		148		55		203		31,966		32,169		1
Total - noncovered		25,367		29,200		54,567		1,233,078		1,287,645		2

Covered:
Real estate mortgage:
Commercial		1,189		3,175		4,364		9,214		13,578		-
One-to-four family residential		-		71		71		4,013		4,084		-
Real estate construction:
Commercial		-		130		130		181		311		-
Commercial		-		104		104		863		967		-
Other		-		-		-		40		40		-
Total - covered		1,189		3,480		4,669		14,311		18,980		-
Total	$	26,556	$	32,680	$	59,236	$	1,247,389	$	1,306,625	$	2

At December 31, 2012
Noncovered:
Real estate mortgage:
Commercial	$	23,348	$	18,337	$	41,685	$	829,290	$	870,975	$	-
One-to-four family residential		1,479		1,310		2,789		68,165		70,954		747
Real estate construction:
Commercial		3,501		3,355		6,856		123,897		130,753		-
One-to-four family residential		-		-		-		3,656		3,656		-
Commercial		7,358		15,232		22,590		217,908		240,498		2,471
Other		538		160		698		35,494		36,192		72
Total - noncovered		36,224		38,394		74,618		1,278,410		1,353,028		3,290

Covered:
Real estate mortgage:
Commercial real estate		1,090		3,087		4,177		14,121		18,298		-
One-to-four family residential		-		52		52		4,829		4,881		-
Real estate construction:
Commercial		-		130		130		252		382		-
Commercial		-		324		324		1,713		2,037		-
Other		-		2		2		107		109		-
Total - covered		1,090		3,595		4,685		21,022		25,707		-
Total	$	37,314	$	41,989	$	79,303	$	1,299,432	$	1,378,735	$	3,290

Impaired Loans. A loan is considered to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Each loan deemed to be impaired (loans on nonaccrual status and greater than one-hundred thousand, and all troubled debt restructurings) is evaluated on an individual basis using the discounted present value of expected cash flows based on the loan’s initial effective interest rate, the fair value of collateral, or the market value of the loan. Smaller balance, homogeneous loans, including mortgage, student, and consumer, are collectively evaluated for impairment.

Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans or portions thereof, are charged-off when deemed uncollectible.

Impaired loans are shown in the following table:



	With No Specific Allowance				With A Specific Allowance
			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Investment		Balance		Allowance
At September 30, 2013
Noncovered:
Commercial real estate	$	30,334	$	30,761	$	15,586	$	15,836	$	4,343
One-to-four family residential		396		507		-		-		-
Real estate construction		5,659		9,920		-		-		-
Commercial		5,861		8,561		6,802		8,594		4,295
Other		5		7		49		75		49
Total noncovered	$	42,255	$	49,756	$	22,437	$	24,505	$	8,687

Covered:
Commercial real estate	$	7,280	$	8,343	$	776	$	828	$	19
One-to-four family residential		55		55		45		96		4
Real estate construction		130		308		-		-		-
Commercial		127		215		-		-		-
Total covered	$	7,592	$	8,921	$	821	$	924	$	23

At December 31, 2012
Noncovered:
Commercial real estate	$	29,425	$	30,340	$	24,630		27,397	$	5,094
One-to-four family residential		563		653		7		7		7
Real estate construction		3,970		7,841		232		256		50
Commercial		3,337		6,975		13,422		13,448		6,492
Other		7		8		81		100		81
Total noncovered	$	37,302	$	45,817	$	38,372		41,208	$	11,724

Covered:
Commercial real estate	$	4,325	$	5,347	$	2,214		3,979	$	22
One-to-four family residential		20		25		52		98		2
Real estate construction		130		308		-		-		-
Commercial		322		1,884		2		3		1
Other		2		4		-		-		-
Total covered	$	4,799	$	7,568	$	2,268	$	4,080	$	25

The average recorded investment and interest income recognized on impaired loans as of September 30, 2013 and September 30, 2012 is shown in the following table:



	As of and for the nine months ended September 30,
	2013				2012
	Average				Average
	Recorded		Interest		Recorded		Interest
(Dollars in thousands)	Investment		Income		Investment		Income
Noncovered:
Commercial real estate	$	46,403	$	1,315	$	32,735	$	-
One-to-four family residential		338		-		736		28
Real estate construction		5,362		-		4,596		9
Commercial		12,312		74		4,398		7
Other		67		-		110		-
Total noncovered	$	64,482	$	1,389	$	42,575	$	44

Covered:
Commercial real estate	$	16,004	$	213	$	22,017	$	21
One-to-four family residential		4,419		1		5,854		-
Real estate construction		344		-		2,168		38
Commercial		1,627		-		2,244		-
Other		75		-		173		-
Total covered	$	22,469	$	214	$	32,456	$	59

Troubled Debt Restructurings. Our loan portfolio also includes certain loans that have been modified in a troubled debt restructuring, where economic concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from loss mitigation activities and can include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Troubled debt restructurings are classified as impaired at the time of restructuring and classified as nonperforming, potential problem, or performing restructured, as applicable. Loans modified in troubled debt restructurings may be returned to performing status after considering the borrowers’ sustained repayment for a reasonable period of at least six months.

When we modify loans in a troubled debt restructuring, an evaluation of any possible impairment is performed similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, or use of the current fair value of the collateral, less selling costs for collateral dependent loans. If it is determined that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs, and unamortized premium or discount), an impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, all loans modified in troubled debt restructurings are evaluated, including those that have payment defaults, for possible impairment.

Troubled debt restructured loans outstanding as of September 30, 2013 and December 31, 2012 were as follows:



	At September 30, 2013				At December 31, 2012
(Dollars in thousands)	Accruing		Nonaccrual		Accruing		Nonaccrual
Commercial real estate	$	37,452	$	11,324	$	39,170	$	2,953
One-to-four family residential		17		110		27		134
Real estate construction		-		130		847		130
Commercial		1,777		1,586		3,998		351
Consumer		-		49		-		81
Total	$	39,246	$	13,199	$	44,042	$	3,649

At September 30, 2013 and December 31, 2012, we had no significant commitments to lend additional funds to debtors whose loan terms have been modified in a troubled debt restructuring.

Loans modified as troubled debt restructurings that occurred during the three and nine months ended September 30, 2013 and September 30, 2012 are shown in the following table:



	For the three months ended September 30,
	2013				2012
	Number of		Recorded		Number of		Recorded
(Dollars in thousands)	Modifications		Investment		Modifications		Investment
Commercial real estate		-	$	-		1	$	249
Commercial		-		-		1		782
Total		-	$	-		2	$	1,031


	For the nine months ended September 30,
	2013				2012
	Number of		Recorded		Number of		Recorded
(Dollars in thousands)	Modifications		Investment		Modifications		Investment
Commercial real estate		7	$	2,881		6	$	13,952
One-to-four family residential		-		-		2		110
Real estate construction		-		-		1		864
Commercial		5		1,820		4		2,519
Total		12	$	4,701		13	$	17,445

The modifications of loans identified as troubled debt restructurings primarily related to payment extensions and/or reductions in the interest rate. The financial impact of troubled debt restructurings is not significant.

The following table presents the recorded investment and the number of loans modified as a troubled debt restructuring that subsequently defaulted during the three and nine months ended September 30, 2013 and September 30, 2012. Default, for this purpose, is deemed to occur when a loan is 90 days or more past due or transferred to nonaccrual and is within twelve months of restructuring.



	For the three months ended September 30,
	2013				2012
	Number of		Recorded		Number of		Recorded
(Dollars in thousands)	Contracts		Investment		Contracts		Investment
Commercial		-	$	-		2	$	48
Real estate construction		-		-		1		130
Total		-	$	-		3	$	178


	For the nine months ended September 30,
	2013				2012
	Number of		Recorded		Number of		Recorded
(Dollars in thousands)	Contracts		Investment		Contracts		Investment
Commercial real estate		1	$	535		-	$	-
Real estate construction		-		-		1		130
Commercial		1		1,033		4		160
Total		2	$	1,568		5	$	290

Credit Quality Indicators. To assess the credit quality of loans, we categorize loans into risk categories based on relevant information about the ability of the borrowers to service their debts such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. This analysis is performed on a quarterly basis. We use the following definitions for risk ratings:

Special mention – Loans classified as special mention have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for these loans or of the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligors or of the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. These loans are considered potential problem or nonperforming loans depending on the accrual status of the loans.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These loans are considered nonperforming.

Loans not meeting the criteria above that are analyzed as part of the above described process are considered to be pass rated loans. As of September 30, 2013 and December 31, 2012, based on the most recent analysis performed as of those dates, the risk category of loans by class was as follows:



	Commercial		1-4 Family		Real Estate
(Dollars in thousands)	Real Estate		Residential		Construction		Commercial		Other		Total
At September 30, 2013
Grade:
Pass	$	594,625	$	81,632	$	117,078	$	239,870	$	32,032	$	1,065,237
Special Mention		82,955		2,129		22,727		3,761		123		111,695
Substandard		77,430		853		27,965		14,880		54		121,182
Doubtful		2,426		31		-		6,054		-		8,511
Total	$	757,436	$	84,645	$	167,770	$	264,565	$	32,209	$	1,306,625

At December 31, 2012
Grade:
Pass	$	718,054	$	71,975	$	83,350	$	208,019	$	35,897	$	1,117,295
Special Mention		88,167		1,901		25,964		7,047		181		123,260
Substandard		80,104		1,923		25,477		26,887		223		134,614
Doubtful		2,948		36		-		582		-		3,566
Total	$	889,273	$	75,835	$	134,791	$	242,535	$	36,301	$	1,378,735

Allowance for Loan Losses. The allowance for loan losses is a reserve established through the provision for loan losses charged to operations. Loan amounts which are determined to be uncollectible are charged against this allowance, and recoveries, if any, are added to the allowance. The appropriate amount of the allowance is based on periodic review and evaluation of the loan portfolio and quarterly assessments of the probable losses inherent in the loan portfolio. The amount of the loan loss provision for a period is based solely upon the amount needed to cause the allowance to reach the level deemed appropriate after the effects of net charge-offs for the period.

Management believes the level of the allowance is appropriate to absorb probable losses inherent in the loan portfolio. The allowance for loan losses is determined in accordance with regulatory guidelines and generally accepted accounting principles and is comprised of two primary components, specific and general. There is no one factor, or group of factors, that produces the amount of an appropriate allowance for loan losses, as the methodology for assessing the allowance for loan losses makes use of evaluations of individual impaired loans along with other factors and analysis of loan categories. This assessment is highly qualitative and relies upon judgments and estimates by management.

The specific allowance is recorded based on the result of an evaluation consistent with ASC 310.10.35, Receivables: Subsequent Measurement, for each impaired loan. Collateral dependent loans are evaluated for impairment based upon the fair value of the collateral. The amount and level of the impairment allowance is ultimately determined by management’s estimate of the amount of expected future cash flows or, if the loan is collateral dependent, on the value of collateral, which may vary from period to period depending on changes in the financial condition of the borrower or changes in the estimated value of the collateral. Charge-offs against the allowance for impaired loans are made when and to the extent loans are deemed uncollectible. Any portion of a collateral dependent impaired loan in excess of the fair value of the collateral that is determined to be uncollectible is charged off.

The general component of the allowance is calculated based on ASC 450, Contingencies. Loans not evaluated for specific allowance are segmented into loan pools by type of loan. The commercial real estate and real estate construction pools are further segmented by the market in which the loan collateral is located. Our primary markets are Oklahoma, Texas, and Kansas, and loans secured by real estate in those states are included in the “in-market” pool, with the remaining loans defaulting to the “out-of-market” pool. Estimated allowances are based on historical loss trends with adjustments factored in based on qualitative risk factors both internal and external to us. The historical loss trend is determined by loan pool and segmentation and is based on the actual loss history experienced by us over the most recent three years. The qualitative risk factors include, but are not limited to, economic and business conditions, changes in lending staff, lending policies and procedures, quality of loan review, changes in the nature and volume of the portfolios, loss and recovery trends, asset quality trends, and legal and regulatory considerations.

Independent appraisals on real estate collateral securing loans are obtained at origination. New appraisals are obtained periodically and following discovery of factors that may significantly affect the value of the collateral. Appraisals typically are received within 30 days of request. Results of appraisals on nonperforming and potential problem loans are reviewed promptly upon receipt and considered in the determination of the allowance for loan losses. We are not aware of any significant time lapses in the process that have resulted, or would result in, a significant delay in determination of a credit weakness, the identification of a loan as nonperforming, or the measurement of an impairment.

The following tables show the balance in the allowance for loan losses and the recorded investment in covered and noncovered loans for the dates indicated by portfolio classification disaggregated on the basis of impairment evaluation method.



	Commercial		1-4 Family		Real Estate
(Dollars in thousands)	Real Estate		Residential		Construction		Commercial		Other		Total
At September 30, 2013
Balance at beginning of period	$	27,223	$	861	$	5,271	$	12,604	$	759	$	46,718
Loans charged-off		(806)		(577)		(131)		(5,583)		(226)		(7,323)
Recoveries		109		212		59		916		97		1,393
Provision for loan losses		(6,770)		411		2,236		3,536		(120)		(707)
Balance at end of period	$	19,756	$	907	$	7,435	$	11,473	$	510	$	40,081

Allowance for loan losses ending balance:
Individually evaluated for impairment	$	4,343	$	-	$	-	$	4,295	$	49	$	8,687
Collectively evaluated for impairment		15,403		849		7,435		7,178		461		31,326
Acquired with deteriorated credit quality		10		58		-		-		-		68
Total ending allowance balance	$	19,756	$	907	$	7,435	$	11,473	$	510	$	40,081

Loans receivable ending balance:
Individually evaluated for impairment	$	45,920	$	396	$	5,659	$	12,663	$	54	$	64,692
Collectively evaluated for impairment		697,938		80,165		161,800		250,935		32,115		1,222,953
Acquired with deteriorated credit quality		13,578		4,084		311		967		40		18,980
Total ending loans balance	$	757,436	$	84,645	$	167,770	$	264,565	$	32,209	$	1,306,625



	Commercial		1-4 Family		Real Estate
(Dollars in thousands)	Real Estate		Residential		Construction		Commercial		Other		Total
At September 30, 2012
Balance at beginning of period	$	21,749	$	1,016	$	11,177	$	9,827	$	915	$	44,684
Loans charged-off		(2,167)		(269)		-		(3,805)		(577)		(6,818)
Recoveries		40		231		1,950		3,260		376		5,857
Provision for loan losses		6,703		(231)		(3,640)		(2,907)		97		22
Balance at end of period	$	26,325	$	747	$	9,487	$	6,375	$	811	$	43,745

Allowance for loan losses ending balances:
Individually evaluated for impairment	$	5,114	$	-	$	46	$	792	$	82	$	6,034
Collectively evaluated for impairment		21,086		734		9,441		5,583		729		37,573
Acquired with deteriorated credit quality		125		13		-		-		-		138
Total ending allowance balance	$	26,325	$	747	$	9,487	$	6,375	$	811	$	43,745

Loans receivable ending balance:
Individually evaluated for impairment	$	48,368	$	949	$	4,300	$	4,785	$	90	$	58,492
Collectively evaluated for impairment		850,085		73,132		205,480		239,233		37,492		1,405,422
Acquired with deteriorated credit quality		20,664		5,059		419		1,937		118		28,197
Total ending loans balance	$	919,117	$	79,140	$	210,199	$	245,955	$	37,700	$	1,492,111