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 $357,443,000 as of March 31, 2012, versus $438,566,000 as of September 30, 2011.

Changes in the carrying amount and accretable yield for acquired impaired and non-impaired loans were as follows:



March 31, 2012	Acquired Impaired						Acquired Non-impaired
	Accretable Yield			Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans
	(In thousands)
Balance at beginning of period	$	37,072		$	116,061		$	30,370		$	269,888
Accretion	(10,404		)	10,404			(3,965		)	3,965
Transfers to REO	—			(11,775		)	—			—
Payments received, net	—			(29,141		)	—			(37,768		)
Balance at end of period	$	26,668		$	85,549		$	26,405		$	236,085



September 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
Reclassification from nonaccretable balance, net	24,025			—			—			—
Accretion	(13,972		)	13,972			(9,443		)	9,443
Transfers to REO	—			(54,638		)	—			—
Payments received, net	—			(33,803		)	—			(83,499		)
Balance at end of period	$	37,072		$	116,061		$	30,370		$	269,888

At March 31, 2012, 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. The allowance for credit losses related to the acquired loans resulted from decreased expectations of future cash flows due to increased credit losses for certain acquired loan pools.

The outstanding principal balance of acquired loans was $422,647,000 and $495,358,000 as of March 31, 2012 and September 30, 2011, respectively. The discount balance related to the acquired loans was $97,247,000 and $109,409,000 as of March 31, 2012 and September 30, 2011, respectively.

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



	March 31, 2012			September 30, 2011
	(In thousands)
Balance at beginning of period	$	101,634		$	131,128
Additions	2,052			10,470
Payments made (received)	4,068			(32,828		)
Amortization	(7,869		)	(10,239		)
Accretion	990			3,103
Balance at end of period	$	100,875		$	101,634

The following tables provide information on covered loans based on credit quality indicators (defined in Note A) as of March 31, 2012 and September 30, 2011:

Credit Risk Profile by Internally Assigned Grade:



March 31, 2012	Internally Assigned Grade															Total Net Loans
	Pass			Special mention			Substandard			Doubtful			Loss
	(In thousands)
Purchased non credit-impaired loans:
Single-family residential	$	37,588		$	—		$	3,196		$	—		$	—		$	40,784
Construction - speculative	734			—			—			—			—			734
Construction - custom	—			—			—			—			—			—
Land - acquisition & development	7,632			5,398			1,031			—			—			14,061
Land - consumer lot loans	507			—			—			—			—			507
Multi-family	29,828			—			2,760			—			—			32,588
Commercial real estate	99,296			1,115			28,787			—			—			129,198
Commercial & industrial	7,462			1,156			6,923			—			—			15,541
HELOC	19,705			—			—			—			—			19,705
Consumer	1,019			—			—			—			—			1,019
	203,771			7,669			42,697			—			—			254,137
Total grade as a % of total net loans	80.2		%	3.0		%	16.8		%	—		%	—		%

Purchased credit-impaired loans:
Pool 1 - Construction and land A&D	10,415			5,872			42,297			—			—			58,584
Pool 2 - Single-family residential	2,038			—			4,044			—			—			6,082
Pool 3 - Multi-family	—			3,043			—			—			—			3,043
Pool 4 - HELOC & other consumer	1,997			—			4,574			—			—			6,571
Pool 5 - Commercial real estate	411			30,259			41,912			—			—			72,582
Pool 6 - Commercial & industrial	4,983			1,556			15,109			—			—			21,648
	$	19,844		$	40,730		$	107,936		$	—		$	—		168,510
													Total covered loans			422,647
													Discount			(97,247		)
													Allowance			(3,766		)
													Covered loans, net			$	321,634



September 30, 2011	Internally Assigned Grade															Total Net Loans
	Pass			Special mention			Substandard			Doubtful			Loss
	(In thousands)
Purchased non credit-impaired loans:
Single-family residential	$	45,619		$	—		$	595		$	—		$	—		$	46,214
Construction - speculative	1,315			—			—			—			—			1,315
Construction - custom	—			—			—			—			—			—
Land - acquisition & development	8,383			6,315			360			—			—			15,058
Land - consumer lot loans	543			—			111			—			—			654
Multi-family	32,448			—			2,458			—			—			34,906
Commercial real estate	118,124			1,361			28,979			—			—			148,464
Commercial & industrial	13,717			4,481			4,239			444			—			22,881
HELOC	21,730			—			—			—			—			21,730
Consumer	1,199			—			—			—			—			1,199
	243,078			12,157			36,742			444			—			292,421
Total grade as a % of total net loans	83.1		%	4.2		%	12.6		%	0.2		%	—		%

Purchased credit-impaired loans:
Pool 1 - Construction and land A&D	9,982			2,980			54,682			—			—			67,644
Pool 2 - Single-family residential	3,667			—			8,263			—			—			11,930
Pool 3 - Multi-family	—			—			3,324			—			—			3,324
Pool 4 - HELOC & other consumer	3,544			—			5,411			—			—			8,955
Pool 5 - Commercial real estate	418			30,579			48,069			—			—			79,066
Pool 6 - Commercial & industrial	2,859			2,725			25,662			772			—			32,018
	$	20,470		$	36,284		$	145,411		$	772		$	—		202,937
													Total covered loans			495,358
													Discount			(109,409		)
													Allowance			(3,766		)
													Covered loans, net			$	382,183

The following tables provide an analysis of the age of purchased non credit-impaired loans in past due status for the periods ended March 31, 2012 and September 30, 2011:



March 31, 2012	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	$	40,784	$	38,794	$	—	$	—	$	1,990	$	1,990	4.88	%
Construction - Speculative	734		734		—		—		—		—		NM
Construction - Custom	—		—		—		—		—		—		NM
Land - Acquisition & Development	14,061		13,077		—		—		984		984		7.00
Land - Consumer Lot Loans	507		276		133		—		98		231		45.56
Multi-Family	32,588		31,080		—		—		1,508		1,508		4.63
Commercial Real Estate	129,198		124,777		1,742		79		2,600		4,421		3.42
Commercial & Industrial	15,541		15,016		—		434		91		525		3.38
HELOC	19,705		18,456		906		5		338		1,249		6.34
Consumer	1,019		1,018		1		—		—		1		0.10
	$	254,137	$	243,228	$	2,782	$	518	$	7,609	$	10,909	4.29	%



September 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	$	46,214	$	43,445	$	1,034	$	30	$	1,705	$	2,769	5.99	%
Construction - Speculative	1,315		1,315		—		—		—		—		NM
Construction - Custom	—		—		—		—		—		—		NM
Land - Acquisition & Development	15,058		13,344		487		—		1,227		1,714		11.38
Land - Consumer Lot Loans	654		527		16		—		111		127		19.42
Multi-Family	34,906		33,398		—		—		1,508		1,508		4.32
Commercial Real Estate	148,464		142,060		1,527		—		4,877		6,404		4.31
Commercial & Industrial	22,881		18,049		3,606		703		523		4,832		21.12
HELOC	21,730		20,339		731		391		269		1,391		6.40
Consumer	1,199		1,123		31		8		37		76		6.34
	$	292,421	$	273,600	$	7,432	$	1,132	$	10,257	$	18,821	6.44	%

NM - not meaningful