Covered Assets

Covered assets represent loans and real estate held for sale acquired from the FDIC that are subject to loss sharing agreements and were $485,789,000 as of June 30, 2011, versus $578,629,000 as of September 30, 2010.

Changes in the carrying amount and accretable yield for acquired impaired and non-impaired loans were as follows for the quarter ended June 30, 2011:



	Acquired Impaired						Acquired Non-impaired
	Accretable Yield			Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans
	(In thousands)
Balance at beginning of period	$	27,019		$	190,530		$	39,813		$	343,944
Accretion	(8,337		)	8,337			(7,058		)	7,058
Transfers to REO				(46,008		)	—
Payments received, net				(24,152		)	—			(61,828		)
Balance at end of period	$	18,682		$	128,707		$	32,755		$	289,174

At June 30, 2011, none of the acquired impaired or non-impaired loans were classified as non-performing assets. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, was recognized on all acquired loans. There was no allowance for loan losses related to the covered loans at June 30, 2011, as these loans are performing as anticipated in the projections used in the purchase accounting fair value calculations.

The outstanding principal balance of acquired loans was $540,133,000 and $685,384,000 as of June 30, 2011 and September 30, 2010, respectively. The discount balance related to the acquired loans was $122,252,000 and $150,910,000 as of June 30, 2011 and September 30, 2010, respectively.

The following table shows the year to date activity for the FDIC indemnification asset:



	June 30, 2011			September 30, 2010
	(In thousands)
Balance at beginning of period	$	131,128		$	—
Additions	—			227,500
Payments received	(20,978		)	(92,551		)
Amortization	(5,645		)	(8,150		)
Accretion	2,447			4,329
Balance at end of period	$	106,952		$	131,128

The following tables provide information on covered loans based on credit quality indicators (defined in Note A) as of June 30, 2011:

Credit Risk Profile by Internally Assigned Grade:



	Internally Assigned Grade															Total Net Loans
	Pass			Special mention			Substandard			Doubtful			Loss
	(In thousands)
Purchased non-credit impaired loans:
Single-family residential	$	47,898		$	—		$	626		$	—		$	—		$	48,524
Construction - speculative	2,253			—			—			—			—			2,253
Construction - custom	—			—			—			—			—			—
Land - acquisition & development	8,878			7,277			324			—			—			16,479
Land - consumer lot loans	562			—			111			—			—			673
Multi-family	32,827			—			2,462			—			—			35,289
Commercial real estate	126,838			530			29,784			—			—			157,152
Commercial & industrial	20,489			4,886			5,821			—			—			31,196
HELOC	22,161			—			—			—			—			22,161
Consumer	1,311			—			—			—			—			1,311
	263,217			12,693			39,128			—			—			315,038
Total grade as a % of total net loans	83.6		%	4.0		%	12.4		%	—		%	—		%

Purchased credit impaired loans:
Pool 1 - Construction and land A&D	9,062			3,975			63,912			—			—			76,949
Pool 2 - Single-family residential	3,911			—			9,030			—			—			12,941
Pool 3 - Multi-family	—			—			3,342			—			—			3,342
Pool 4 - HELOC & other consumer	3,888			—			5,504			—			—			9,392
Pool 5 - Commercial real estate	1,553			29,985			49,824			—			—			81,362
Pool 6 - Commercial & industrial	515			5,327			35,267			—			—			41,109
	$	18,929		$	39,287		$	166,879		$	—		$	—		225,095
													Total covered loans			540,133
													Discount			(122,252		)
													Covered loans, net			$	417,881

The following table provides an analysis of the age of purchased non-credit impaired loans in past due status for the period ended June 30, 2011.



	Amount of Loans Net of LIP & Chg.-Offs		Days Delinquent Based on $ Amount of Loans										% based on $
Type of Loans	Amount of Loans Net of LIP & Chg.-Offs		Current		30		60		90		Total		% based on $
Single-Family Residential	$	48,524	$	43,880	$	2,527	$	16	$	2,101	$	4,644	9.57	%
Construction - Speculative	2,253		2,253		—		—		—		—		—	%
Construction - Custom	—		—		—		—		—		—		—	%
Land - Acquisition & Development	16,479		15,658		590		—		231		821		4.98	%
Land - Consumer Lot Loans	673		546		16		—		111		127		18.87	%
Multi-Family	35,289		33,577		204		—		1,508		1,712		4.85	%
Commercial Real Estate	157,152		152,999		2,756		152		1,245		4,153		2.64	%
Commercial & Industrial	31,196		28,913		203		776		1,304		2,283		7.32	%
HELOC	22,161		19,647		1,753		389		372		2,514		11.34	%
Consumer	1,311		1,093		150		9		59		218		16.63	%
	$	315,038	$	298,566	$	8,199	$	1,342	$	6,931	$	16,472	7.97	%