UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

CVB FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

California		95-3629339
(State or other jurisdiction of incorporation		(I.R.S. Employer Identification No.)
or organization)
701 North Haven Ave, Suite 350, Ontario, California		91764
(Address of Principal Executive Offices)		(Zip Code)

(Registrant’s telephone number, including area code) (909) 980-4030

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, non-accelerated filer or smaller reporting company. See definition of “large accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Number of shares of common stock of the registrant: 106,298,217 outstanding as of May 4, 2010.

 

 

CVB FINANCIAL CORP.
2010 QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS			3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES			8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			24
GENERAL			24
OVERVIEW			24
CRITICAL ACCOUNTING POLICIES			25
ANALYSIS OF THE RESULTS OF OPERATIONS			27
RESULTS BY BUSINESS SEGMENTS			33
ANALYSIS OF FINANCIAL CONDITION			35
RISK MANAGEMENT			47
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			51
ITEM 4. CONTROLS AND PROCEDURES			55
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			56
ITEM 1A. RISK FACTORS			56
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			56
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			56
ITEM 4. OTHER INFORMATION			56
ITEM 5. EXHIBITS			57
SIGNATURES			58
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I — FINANCIAL INFORMATION (UNAUDITED)

ITEM 1. FINANCIAL STATEMENTS

CVB FINANCIAL CORP. AND SUBSIDIARIES

		March 31,				December 31,
		2010				2009
ASSETS
Cash and due from banks		$	281,275			$	103,254
Interest-bearing balances due from depository institutions			50,193				1,226
Total cash and cash equivalents			331,468				104,480
Investment in stock of Federal Home Loan Bank (FHLB)			97,582				97,582
Investment securities available-for-sale			2,073,975				2,108,463
Investment securities held-to-maturity			3,472				3,838
Loans held-for-sale			5,141				1,439
Loans and lease finance receivables			3,947,129				4,079,013
Allowance for credit losses			(112,321	)			(108,924	)
Net Loans and lease finance receivables			3,834,808				3,970,089
Premises and equipment, net			41,519				41,444
Bank owned life insurance			110,331				109,480
Accrued interest receivable			27,423				28,672
Intangibles			11,811				12,761
Goodwill			55,097				55,097
FDIC loss sharing asset			119,108				133,258
Other assets			76,917				73,166
TOTAL ASSETS		$	6,788,652			$	6,739,769
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing		$	1,598,022			$	1,561,981
Interest-bearing			2,920,577				2,876,673
Total deposits			4,518,599				4,438,654
Demand Note to U.S. Treasury			4,232				2,425
Repurchase agreements			785,214				735,132
Borrowings			653,186				753,118
Accrued interest payable			6,006				6,481
Deferred compensation			9,558				9,166
Junior subordinated debentures			115,055				115,055
Other liabilities			44,037				41,510
TOTAL LIABILITIES			6,135,887				6,101,541
COMMITMENTS AND CONTINGENCIES
Stockholders’ Equity:
Preferred stock, authorized, 20,000,000 shares without par; none issued or outstanding			—				—
Common stock, authorized, 122,070,312 shares without par; issued and outstanding 106,293,270 (2010) and 106,263,511 (2009)			491,945				491,226
Retained earnings			127,696				120,612
Accumulated other comprehensive income, net of tax			33,124				26,390
Total stockholders’ equity			652,765				638,228
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	6,788,652			$	6,739,769

See accompanying notes to the consolidated financial statements.

CVB FINANCIAL CORP. AND SUBSIDIARIES

		For the Three Months
		Ended March 31,
		2010				2009
Interest income:
Loans, including fees		$	67,768			$	49,526
Investment securities:
Taxable			16,084				22,436
Tax-preferred			6,532				6,996
Total investment income			22,616				29,432
Dividends from FHLB stock			66				—
Federal funds sold and Interest bearing deposits with other institutions			102				4
Total interest income			90,552				78,962
Interest expense:
Deposits			5,288				6,590
Borrowings			11,120				15,890
Junior subordinated debentures			805				1,190
Total interest expense			17,213				23,670
Net interest income before provision for credit losses			73,339				55,292
Provision for credit losses			12,200				22,000
Net interest income after provision for credit losses			61,139				33,292
Other operating income:
Impairment loss on investment securities			(98	)			—
Plus: Reclassification of credit-related impairment loss from other comprehensive income			(587	)			—
Net impairment loss on investment securities recognized in earnings			(685	)			—
Service charges on deposit accounts			4,264				3,717
Trust and Investment Services			2,118				1,661
Bankcard services			640				533
BOLI income			845				737
Reduction in FDIC loss sharing asset			(10,583	)			—
Other			1,190				780
Gain on sale of securities			—				8,929
Total other operating income (expense)			(2,211	)			16,357
Other operating expenses:
Salaries and employee benefits			18,073				15,819
Occupancy and Equipment			5,052				4,448
Professional services			2,807				1,695
Amortization of intangibles			950				789
Other			9,040				8,646
Total other operating expenses			35,922				31,397
Earnings before income taxes			23,006				18,252
Income taxes			6,887				5,084
Net earnings		$	16,119			$	13,168
Preferred stock dividend and other reductions			54				1,992
Net earnings allocated to common shareholders		$	16,065			$	11,176
Comprehensive income		$	22,853			$	19,443
Basic earnings per common share		$	0.15			$	0.13
Diluted earnings per common share		$	0.15			$	0.13
Cash dividends per common share		$	0.085			$	0.085

See accompanying notes to the consolidated financial statements.

CVB FINANCIAL CORP. AND SUBSIDIARIES

														Accumulated
		Common												Other
		Shares				Common				Retained				Comprehensive				Comprehensive
		Outstanding				Stock				Earnings				Income				Income				Total
Balance January 1, 2010			106,263			$	491,226			$	120,612			$	26,390							$	638,228
Proceeds from exercise of stock options			30				152																152
Tax benefit from exercise of stock options							35																35
Stock-based Compensation Expense							532																532
Cash dividends declared
Common ($0.085 per share)											(9,035	)											(9,035	)
Comprehensive income:
Net earnings											16,119							$	16,119				16,119
Other comprehensive gain:
Unrealized gain on securities available-for-sale, net															6,394				6,394				6,394
Portion of impairment loss on investment securities reclassified in the current year, net															340				340				340
Comprehensive income																		$	22,853
Balance March 31, 2010			106,293			$	491,945			$	127,696			$	33,124							$	652,765

																		Accumulated
		Common																Other
		Shares				Preferred				Common				Retained				Comprehensive				Comprehensive
		Outstanding				Stock				Stock				Earnings				Loss				Income				Total
Balance January 1, 2009			83,270			$	121,508			$	364,469			$	100,184			$	28,731							$	614,892
Issuance of common stock			56								280																280
Tax benefit from exercise of stock options											62																62
Stock-based Compensation Expense											393																393
Amortization of preferred stock discount							352								(352	)											—
Cash dividends ($0.085 per share)
Preferred															(1,626	)											(1,626	)
Common															(7,083	)											(7,083	)
Comprehensive income:
Net earnings															13,168							$	13,168				13,168
Other comprehensive loss:
Unrealized loss on securities available-for-sale, net																			6,275				6,275				6,275
Comprehensive income																						$	19,443
Balance March 31, 2009			83,326			$	121,860			$	365,204			$	104,291			$	35,006							$	626,361

		At March 31,
		2010				2009
Disclosure of reclassification amount
Unrealized gain on securities arising during the period		$	11,610			$	10,819
Tax benefit			(4,876	)			(4,544	)
Net unrealized gain on securities		$	6,734			$	6,275

See accompanying notes to the consolidated financial statements.

CVB FINANCIAL CORP. AND SUBSIDIARIES

		For the Three Months
		Ended March 31,
		2010				2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and dividends received		$	78,809			$	78,131
Service charges and other fees received			8,177				7,421
Interest paid			(17,736	)			(24,965	)
Cash paid to vendors and employees			(27,384	)			(25,026	)
Income taxes paid			—				(1,200	)
Net cash provided by operating activities			41,866				34,361
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities			—				165,935
Proceeds from repayment of investment securities			72,514				101,344
Proceeds from maturity of investment securities			30,845				16,937
Purchases of investment securities			(57,854	)			(113,618	)
Net decrease in loans and lease finance receivables			116,375				62,932
Proceeds from sales of premises and equipment			12				119
Proceeds from sales of other real estate owned			1,874				3,428
Purchase of premises and equipment			(1,734	)			(1,553	)
Other, net			(10	)			(120	)
Net cash provided by investing activities			162,022				235,404
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in transaction deposits			50,129				152,819
Net increase in time deposits			29,930				124,291
Advances from Federal Home Loan Bank			—				203,500
Repayment of advances from Federal Home Loan Bank			(100,000	)			(782,660	)
Net increase in other borrowings			1,807				365
Net increase in repurchase agreements			50,082				46,204
Cash dividends on preferred stock			—				(1,626	)
Cash dividends on common stock			(9,035	)			(7,083	)
Proceeds from exercise of stock options			152				280
Tax benefit related to exercise of stock options			35				62
Net cash (used in)/provided by financing activities			23,100				(263,848	)
NET INCREASE IN CASH AND CASH EQUIVALENTS			226,988				5,917
CASH AND CASH EQUIVALENTS, beginning of period			104,480				95,297
CASH AND CASH EQUIVALENTS, end of period		$	331,468			$	101,214

See accompanying notes to the consolidated financial statements.

CVB FINANCIAL CORP. AND SUBSIDIARIES

		For the Three Months
		Ended March 31,
		2010				2009
RECONCILIATION OF NET EARNINGS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net earnings		$	16,119			$	13,168
Adjustments to reconcile net earnings to net cash provided by operating activities:
Gain on sale of investment securities			—				(8,929	)
(Gain)/Loss on sale of premises and equipment			9				(8	)
Gain on sale of other real estate owned			(185	)			—
Increase from bank owned life insurance			(845	)			(737	)
Net amortization of premiums on investment securities			998				36
Accretion of SJB Discount			(13,378	)			—
Provisions for credit losses			12,200				22,000
Reduction in FDIC Loss Sharing Asset			10,583				—
Stock-based compensation			532				393
Depreciation and amortization			2,588				2,635
Change in accrued interest receivable			1,250				105
Change in accrued interest payable			(475	)			(1,294	)
Change in other assets and liabilities			12,470				6,992
Total adjustments			25,747				21,193
NET CASH PROVIDED BY OPERATING ACTIVITIES		$	41,866			$	34,361
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Transfer from loans to Other Real Estate Owned		$	17,397			$	6,291

See accompanying notes to the consolidated financial statements.

CVB FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For the three months ended March 31, 2010 and 2009

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying condensed consolidated unaudited financial statements and notes thereto have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for Form 10-Q and conform to practices within the banking industry and include all of the information and disclosures required by accounting principles generally accepted in the United States of America for interim financial reporting. The results of operations for the three months ended March 31, 2010 are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the financial statements, accounting policies and financial notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the Securities and Exchange Commission. In the opinion of management, the accompanying condensed consolidated unaudited financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair presentation of financial results for the interim periods presented. A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows.

Principles of Consolidation — The consolidated financial statements include the accounts of CVB Financial Corp. (the “Company”) and its wholly owned subsidiary: Citizens Business Bank (the “Bank”) after elimination of all intercompany transactions and balances. The Company also has three inactive subsidiaries: CVB Ventures, Inc.; Chino Valley Bancorp; and Orange National Bancorp. The Company is also the common stockholder of CVB Statutory Trust I, CVB Statutory Trust II, CVB Statutory Trust III and FCB Trust II. CVB Statutory Trusts I and II were created in December 2003 and CVB Statutory Trust III was created in January 2006 to issue trust preferred securities in order to raise capital for the Company. The Company acquired FCB Trust II through the acquisition of First Coastal Bancshares (“FCB”). These trusts do not meet the criteria for consolidation.

Nature of Operations — The Company’s primary operations are related to traditional banking activities, including the acceptance of deposits and the lending and investing of money through the operations of the Bank. The Bank also provides automobile and equipment leasing to customers through its Citizens Financial Services Division and trust services to customers through its CitizensTrust Division. The Bank’s customers consist primarily of small to mid-sized businesses and individuals located in San Bernardino County, Riverside County, Orange County, Los Angeles County, Madera County, Fresno County, Tulare County, Kern County and San Joaquin County. The Bank operates 44 Business Financial Centers and 6 Commercial Banking Centers with its headquarters located in the city of Ontario.

The Company’s operating business units have been divided into two main segments: (i) Business Financial and Commercial Banking Centers and (ii) Treasury. Business Financial and Commercial Banking Centers (branches) are comprised of loans, deposits, and products and services the Bank offers to the majority of its customers. The other segment is Treasury, which manages the investment portfolio of the Company. The Company’s remaining centralized functions and eliminations of inter-segment amounts have been aggregated and included in “Other.”

The internal reporting of the Company considers all business units. Funds are allocated to each business unit based on its need to fund assets (use of funds) or its need to invest funds (source of funds). Net income is determined based on the actual net income of the business unit plus the allocated income or expense based on the sources and uses of funds for each business unit. Non-interest income and non-interest expense are those items directly attributable to a business unit.

Cash and due from banks — Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Bank are included in Cash and due from banks.

Investment Securities — The Company classifies as held-to-maturity those debt securities that the Company has the positive intent and ability to hold to maturity. Securities classified as trading are those securities that are bought and held principally for the purpose of selling them in the near term. All other debt and equity securities are classified as available-for-sale. Securities held-to-maturity are accounted for at cost and adjusted for amortization of premiums and accretion of discounts. Trading securities are accounted for at fair value with the unrealized gains and losses being included in current earnings. Available-for-sale securities are accounted for at fair value, with the net unrealized gains and losses, net of income tax effects, presented as a separate component of stockholders’ equity. Realized gains and losses on sales of securities are recognized in earnings at the time of sale and are determined on a specific-identification basis. Purchase premiums and discounts are recognized in interest income using the effective-yield method over the terms of the securities. For mortgage-backed securities (“MBS”), the amortization or accretion is based on estimated average lives of the securities. The lives of these securities can fluctuate based on the amount of prepayments received on the underlying collateral of the securities. The Company’s investment in Federal Home Loan Bank (“FHLB”) stock is carried at cost.

At each reporting date, securities are assessed to determine whether there is an other-than-temporary impairment. Other-than-temporary impairment on investment securities is recognized in earnings when there are credit losses on a debt security for which management does not intend to sell and for which it is more-likely-than-not that the Company will not have to sell prior to recovery of the noncredit impairment. In those situations, the portion of the total impairment that is attributable to the credit loss would be recognized in earnings, and the remaining difference between the debt security’s amortized cost and its fair value would be included in other comprehensive income.

Loans and Lease Finance Receivables — Loans and lease finance receivables are reported at the principal amount outstanding, less deferred net loan origination fees. Interest on loans and lease finance receivables is credited to income based on the principal amount outstanding. Interest income is not recognized on loans and lease finance receivables when collection of interest is deemed by management to be doubtful. In the ordinary course of business, the Company enters into commitments to extend credit to its customers. These commitments are not reflected in the accompanying consolidated financial statements. As of March 31, 2010, the Company had entered into commitments with certain customers amounting to $653.5 million compared to $596.6 million at December 31, 2009. Letters of credit at March 31, 2010 and December 31, 2009, were $68.5 million and $69.5 million, respectively.

The Bank receives collateral to support loans, lease finance receivables, and commitments to extend credit for which collateral is deemed necessary. The most significant categories of collateral are real estate, principally commercial and industrial income-producing properties, real estate mortgages, and assets utilized in agribusiness.

Nonrefundable fees and direct costs associated with the origination or purchase of loans are deferred and netted against outstanding loan balances. The deferred net loan fees and costs are recognized in interest income over the loan term using the effective-yield method.

Acquired loans for which there is deterioration in credit quality between origination and acquisition of the loans and the bank does not expect to collect all amounts due according to the loan’s contractual terms are accounted for individually or in pools of loans based on common risk characteristics. These loans are within the scope of accounting guidance for loans acquired with deteriorated credit quality. The excess of the loan’s or pool’s scheduled contractual principal and interest payments over all cash flows expected at acquisition is the nonaccretable difference. The remaining amount, representing the excess of the loan’s cash flows expected to be collected over the fair value is the accretable yield (accreted into interest income over the remaining life of the loan or pool). The Bank has also elected to account for acquired loans not within the scope of accounting guidance using this same methodology.

Provision and Allowance for Credit Losses — The determination of the balance in the allowance for credit losses is based on an analysis of the loan and lease finance receivables portfolio using a systematic methodology and reflects an amount that, in management’s judgment, is adequate to provide for probable credit losses inherent in the portfolio, after giving consideration to the character of the loan portfolio, current economic conditions, past credit loss experience, and such other factors that would deserve current recognition in estimating inherent credit losses. The estimate is reviewed quarterly by the Board of Directors and management and periodically by various regulatory entities and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. The provision for credit losses is charged to expense. During the first three months of 2010, we recorded a provision for credit losses of $12.2 million. The allowance for credit losses was $112.3 million as of March 31, 2010, or 3.20% of total non-covered loans and leases.

In addition to the allowance for credit losses, the Company also has a reserve for undisbursed commitments for loans and letters of credit. This reserve is carried in the liabilities section of the balance sheet in other liabilities. Provisions to this reserve are included in other expense. For the first three months of 2010, the Company recorded an increase of $1,250,000 in the reserve for undisbursed commitments. As of March 31, 2010, the balance in this reserve was $9.2 million.

A loan for which collection of principal and interest according to its original terms is not probable is considered to be impaired. The Company’s policy is to record a specific valuation allowance, which is included in the allowance for credit losses, or charge off that portion of an impaired loan that exceeds its fair value less selling costs. Fair value is usually based on the value of underlying collateral.

At March 31, 2010, the Company had impaired loans of $86.3 million. Of this amount, $2.9 million consisted of non-accrual residential construction and land loans, $31.2 million in non-accrual commercial construction loans, $13.7 million of non-accrual single family mortgage loans, $22.0 million of non-accrual commercial real estate loans, $6.9 million of non-accrual commercial and industrial loans, and $123,000 of non-accrual consumer loans. Impaired loans also include $23.9 million of loans whose terms were modified in a troubled debt restructure, of which $14.4 million are classified as non-accrual. The remaining balance of $9.5 million consists of two loans performing according to the restructured terms. The impaired loans of $86.3 million, net of $8.7 million in charge-offs, are supported by collateral with a stated fair value less selling costs and net of prior liens. For the collateral-deficient loans, the amount of specific reserve was $1.7 million at March 31, 2010. At December 31, 2009, the Bank had classified as impaired, loans with a balance of $72.3 million.

Premises and Equipment — Premises and equipment are stated at cost, less accumulated depreciation, which is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using the straight-line method. Properties under capital lease and leasehold improvements are amortized over the shorter of estimated economic lives of 15 years or the initial terms of the leases. Estimated lives are 3 to 5 years for computer and equipment, 5 to 7 years for furniture, fixtures and equipment, and 15 to 40 years for buildings and improvements. Long-lived assets are reviewed periodically for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The existence of impairment is based on undiscounted cash flows. To the extent impairment exists, the impairment is calculated as the difference in fair value of assets and their carrying value. The impairment loss, if any, would be recorded in noninterest expense.

FDIC Loss Sharing Asset — The FDIC loss sharing asset is initially recorded at fair value which represents the present value of the estimated cash payments from the FDIC for future losses on covered loans. The ultimate collectability of this asset is dependent upon the performance of the underlying covered loans, the passage of time and claims paid by the FDIC.

Other Real Estate Owned — Other real estate owned (“OREO”) represents real estate acquired through foreclosure in satisfaction of commercial and real estate loans and is stated at fair value, minus estimated costs to sell (fair value at time of foreclosure). Loan balances in excess of fair value of the real estate acquired at the date of acquisition are charged against the allowance for credit losses. Any subsequent operating expenses or income, reduction in estimated values, and gains or losses on disposition of such properties are charged to current operations. OREO is recorded in other assets on the consolidated balance sheets.

Business Combinations and Intangible Assets — The Company has engaged in the acquisition of financial institutions and the assumption of deposits and purchase of assets from other financial institutions in its market area. The Company has paid premiums on certain transactions, and such premiums are recorded as intangible assets, in the form of goodwill or other intangible assets. Goodwill is not being amortized whereas identifiable intangible assets with finite lives are amortized over their useful lives. On an annual basis, the Company tests goodwill and intangible assets for impairment. The Company completed its annual impairment test as of July 1, 2009; there was no impairment of goodwill.

At March 31, 2010 goodwill was $55.1 million. As of March 31, 2010, intangible assets that continue to be subject to amortization include core deposit premiums of $11.8 million (net of $20.2 million of accumulated amortization). Amortization expense for such intangible assets was $950,000 for the three months ended March 31, 2010. Estimated amortization expense, for the remainder of 2010 is expected to be $2.8 million. Estimated amortization expense, for the succeeding five fiscal years is $3.5 million for year one, $2.2 million for year two, $1.1 million for year three, $475,000 for year four and $1.8 million thereafter. The weighted average remaining life of intangible assets is approximately 3.9 years.

Bank Owned Life Insurance — The Bank invests in Bank-Owned Life Insurance (“BOLI”). BOLI involves the purchasing of life insurance by the Bank on a select group of employees. The Bank is the owner and beneficiary of these policies. BOLI is recorded as an asset at cash surrender value. Increases in the cash value of these policies, as well as insurance proceeds received, are recorded in other non-interest income and are not subject to income tax.

Income Taxes — Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryback or carryforward periods available under the tax law. Based on historical and future expected taxable earnings and available strategies, the Company considers the future realization of these deferred tax assets more likely than not.

The tax effects from an uncertain tax position are recognized in the financial statements only if, based on its merits, the position is more likely than not to be sustained on audit by the taxing authorities. Interest and penalties related to uncertain tax positions are recorded as part of other operating expense.

Earnings per Common Share — The Company calculates earnings per common share (“EPS”) using the two-class method. The two-class method requires the Company to present EPS as if all of the earnings for the period are distributed to common shareholders and any participating securities, regardless of whether any actual dividends or distributions are made. All outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends are considered participating securities. The Company grants restricted shares under the 2008 Equity Incentive Plan that qualify as participating securities. Restricted shares issued under this plan are entitled to dividends at the same rate as common stock.

Basic earnings per common share are computed by dividing income allocated to common stockholders by the weighted-average number of common shares outstanding during each period. The computation of diluted earnings per common share considers the number of tax-effected shares issuable upon the assumed exercise of outstanding common stock options. Share and per share amounts have been retroactively restated to give effect to all stock dividends and splits. The number of shares outstanding at March 31, 2010 was 106,293,270. The tables below presents the reconciliation of earnings per share for the periods indicated.

Earnings Per Share Reconciliation
(Dollars and shares in thousands, except per share amounts)

		For the three months ended
		March 31
		2010				2009
Earnings per common share
Net earnings		$	16,119			$	13,168
Less: Dividends on preferred stock and discount amortization			—				1,978
Net earnings available to common shareholders		$	16,119			$	11,190
Less: Net earnings allocated to restricted stock			54				14
Net earnings allocated to common shareholders (numerator)		$	16,065			$	11,176
Weighted Average Shares Outstanding (denominator)			105,929				83,174
Earnings per common share		$	0.15			$	0.13
Diluted earnings per common share
Net income allocated to common shareholders (numerator)		$	16,065			$	11,176
Weighted Average Shares Outstanding			105,929				83,174
Incremental shares from assumed exercise of outstanding options			192				129
Diluted Weighted Average Shares Outstanding (denominator)			106,121				83,303
Diluted earnings per common share		$	0.15			$	0.13

Stock-Based Compensation — At March 31, 2010, the Company has three stock-based employee compensation plans, which are described more fully in Note 16 in the Company’s Annual Report on Form 10-K. The Company accounts for stock compensation using the “modified prospective” method. Under this method, awards that are granted, modified, or settled after December 31, 2005, are fair valued as of grant date and compensation costs recognized over the vesting period on a straight-lined basis. Also under this method, unvested stock awards as of January 1, 2006 are recognized over the remaining service period with no change in historical reported earnings.

Derivative Financial Instruments — All derivative instruments, including certain derivative instruments embedded in other contracts, are recognized on the consolidated balance sheet at fair value. For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. Changes in fair value of derivatives designated and accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in “Other Comprehensive Income,” net of deferred taxes and are subsequently reclassified to earnings when the hedged transaction affects earnings. Any hedge ineffectiveness would be recognized in the income statement line item pertaining to the hedged item.

Statement of Cash Flows — Cash and cash equivalents as reported in the statements of cash flows include cash and due from banks. Cash flows from loans and deposits are reported net.

CitizensTrust — This division provides trust, investment and brokerage related services, as well as financial, estate and business succession planning services. The Company maintains funds in trust for customers. CitizensTrust has approximately $2.0 billion in assets under administration, including $1.0 billion in assets under management. The amount of these funds and the related liability have not been recorded in the accompanying consolidated balance sheets because they are not assets or liabilities of the Bank or Company, with the exception of any funds held on deposit with the Bank.

Use of Estimates in the Preparation of Financial Statements — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for credit losses. Other significant estimates which may be subject to change include fair value disclosures, impairment of investments and goodwill, and valuation of deferred tax assets, other intangibles and OREO.

Recent Accounting Pronouncements — In January 2010, the FASB issued an accounting standards update (ASU) 2010-06, which amends FASB ASC Topic 820, Fair Value Measurements and Disclosures. The update requires new disclosures about recurring or nonrecurring fair value measurements including significant transfers into and out of Level 1 and Level 2 fair value measurements and information about purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. The ASU also clarifies existing fair-value measurement disclosure guidance about the level of disaggregation, inputs, and valuation techniques. Except for the detailed Level 3 roll forward disclosures, the guidance in the ASU is effective for interim and annual reporting periods beginning after December 31, 2009. The adoption of ASU 2010-06 did not have a material effect on the Company’s consolidated financial position or results of operations.

Shareholder Rights Plan — The Company has a shareholder rights plan designed to maximize long-term value and to protect shareholders from improper takeover tactics and takeover bids which are not fair to all shareholders. In accordance with the plan, preferred share purchase rights were distributed as a dividend at the rate of one right to purchase one one-thousandth of a share of the Company’s Series A Participating Preferred Stock at an initial exercise price of $50.00 (subject to adjustment as described in the terms of the plan) upon the occurrence of certain triggering events. For additional information concerning this plan, see Note 12 to Consolidated Financial Statements, “Commitments and Contingencies” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Other Contingencies — In the ordinary course of business, the Company becomes involved in litigation. Based upon the Company’s internal records and discussions with legal counsel, the Company records reserves for estimates of the probable outcome of all cases brought against them. At March 31, 2010, the Company does not have any litigation reserves and is not aware of any material pending legal action or complaints asserted against the Company.

2. INVESTMENTS

The amortized cost and estimated fair value of investment securities are shown below. The majority of securities held are publicly traded, and the estimated fair values were obtained from an independent pricing service based upon market quotes.

		March 31, 2010
						Gross				Gross
						Unrealized				Unrealized
		Amortized				Holding				Holding								Total
		Cost				Gain				Loss				Fair Value				Percent
		(Amounts in thousands)
Investment Securities Available-for-Sale:
U.S. Treasury securities		$	503			$	—			$	—			$	503				0.02	%
Government agency & government-sponsored enterprises			55,604				83				(94	)			55,593				2.68	%
Mortgage-backed securities			588,108				20,912				(125	)			608,895				29.37	%
CMO’s / REMIC’s			727,782				22,878				(240	)			750,420				36.18	%
Municipal bonds			641,268				17,446				(2,671	)			656,043				31.63	%
Other securities			2,521				—				—				2,521				0.12	%
Total Investment Securities		$	2,015,786			$	61,319			$	(3,130	)		$	2,073,975				100.00	%

		December 31, 2009
						Gross				Gross
						Unrealized				Unrealized
		Amortized				Holding				Holding								Total
		Cost				Gain				Loss				Fair Value				Percent
		(Amounts in thousands)
Investment Securities Available-for-Sale:
U.S. Treasury securities		$	507			$	—			$	—			$	507				0.02	%
Government agency & government-sponsored enterprises			21,574				140				(1	)			21,713				1.03	%
Mortgage-backed securities			629,998				18,138				(968	)			647,168				30.70	%
CMO’s / REMIC’s			759,179				17,297				(3,311	)			773,165				36.67	%
Municipal bonds			647,556				18,290				(2,420	)			663,426				31.46	%
Other securities			2,484				—				—				2,484				0.12	%
Total Investment Securities		$	2,061,298			$	53,865			$	(6,700	)		$	2,108,463				100.00	%

Approximately 67% of the available-for-sale portfolio represents securities issued by the U.S government or U.S. government-sponsored enterprises, which guarantee payment of principal and interest.

The remaining CMO/REMICs are backed by agency-pooled collateral or whole loan collateral. All non-agency available-for-sale CMO/REMIC issues held are rated investment grade or better by either Standard & Poor’s or Moody’s, as of March 31, 2010 and December 31, 2009.

There were no realized gains or losses in our available-for-sale portfolio for the three months ended March 31, 2010. Gross realized gains were $8.9 million for the same period in 2009 and no realized losses.

Composition of the Fair Value and Gross Unrealized Losses of Securities:

		March 31, 2010
		Less than 12 months								12 months or longer								Total
						Gross								Gross								Gross
						Unrealized								Unrealized								Unrealized
						Holding								Holding								Holding
Description of Securities		Fair Value				Losses				Fair Value				Losses				Fair Value				Losses
		(amounts in thousands)
Held-To-Maturity
CMO		$	—			$	—			$	3,472			$	1,068			$	3,472			$	1,068
Available-for-Sale
Government agency		$	19,963			$	94			$	—			$	—			$	19,963			$	94
Mortgage-backed securities			57,242				125				—				—				57,242				125
CMO/REMICs			23,738				62				8,432				178				32,170				240
Municipal bonds			98,811				2,359				1,771				312				100,582				2,671
		$	199,754			$	2,640			$	10,203			$	490			$	209,957			$	3,130

		December 31, 2009
		Less than 12 months								12 months or longer								Total
						Gross								Gross								Gross
						Unrealized								Unrealized								Unrealized
						Holding								Holding								Holding
Description of Securities		Fair Value				Losses				Fair Value				Losses				Fair Value				Losses
		(amounts in thousands)
Held-To-Maturity
CMO (1)		$	—			$	—			$	3,838			$	1,671			$	3,838			$	1,671
Available-for-Sale
Government agency		$	5,022			$	1			$	—			$	—			$	5,022			$	1
Mortgage-backed securities			73,086				968				—				—				73,086				968
CMO/REMICs			179,391				3,025				9,640				286				189,031				3,311
Municipal bonds			80,403				2,122				1,785				298				82,188				2,420
		$	337,902			$	6,116			$	11,425			$	584			$	349,327			$	6,700

The tables above show the Company’s investment securities’ gross unrealized losses and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2010 and December 31, 2009. The Company has reviewed individual securities to determine whether a decline in fair value below the amortized cost is other-than-temporary.

The following summarizes our analysis of these securities and the unrealized losses. This assessment was based on the following factors: i) the length of the time and the extent to which the fair value has been less than amortized cost; ii) adverse condition specifically related to the security, an industry, or a geographic area and whether or not the Company expects to recover the entire amortized cost, iii) historical and implied volatility of the fair value of the security; iv) the payment structure of the security and the likelihood of the issuer being able to make payments in the future; v.) failure of the issuer of the security to make scheduled interest or principal payments, vi) any changes to the rating of the security by a rating agency, and vii) recoveries or additional declines in fair value subsequent to the balance sheet date.

CMO Held-to-Maturity — We have one investment security classified as held-to-maturity. This security was issued by Countrywide Financial and is collateralized by Alt-A mortgages. The mortgages are primarily fixed-rate, 30-year loans, originated in early 2006 with average FICO scores of 715 and an average LTV of 71% at origination. The security was a senior security in the securitization, was rated AAA at origination and was supported by subordinate securities. This security is classified as held-to-maturity as we have both the intent and ability to hold this debt security to maturity as the amount of the security, $3.5 million, is not significant to our liquidity needs. We acquired this security in February 2008 at a price of 98.25%. The significant decline in the fair value of the security first appeared in August 2008 as the current financial crisis in the markets occurred and the market for securities collateralized by Alt-A mortgages diminished.

As of March 31, 2010, the unrealized loss on this security was $1.1 million and the fair value on the security was 62% of the current par value. The security is rated non-investment grade. We evaluated the security for an other than temporary decline in fair value as of March 31, 2010. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. This security was determined to have additional credit impairment during the first quarter of 2010 due to continued degradation in expected cash flows primarily due to higher loss forecasts. We determined the amount of the credit impairment by discounting the expected future cash flows of the underlying collateral. We recognized an other-than-temporary impairment loss of $685,000 in first quarter earnings.

The following table provides a roll-forward of credit-related other-than-temporary impairment recognized in earnings for the three months ended March 31, 2010.

		For the three
		months ended
		March 31, 2010
		(in thousands)
Balance, beginning of the period		$	323
Addition of OTTI that was not previously recognized			685
Reduction for securities sold during the period			—
Reduction for securities with OTTI recognized in earnings because the security might be sold before recovery of its amortized cost basis			—
Addition of OTTI that was previously recognized because the security might not be sold before recovery of its amortized cost basis			—
Reduction for increases in cash flows expected to be collected that are recognized over the remaining life of the security			—
Balance, end of the period		$	1,008

Government Agency — The government agency bonds are backed by the full faith and credit of Agencies of the U.S. Government. These securities are bullet securities, that is, they have a defined maturity date on which the principal is paid. The contractual term of these investments provides that the Bank will receive the face value of the bond at maturity which will equal the amortized cost of the bond. Interest is received throughout the life of the security. There was no loss greater than 12 months on these securities at March 31, 2010.

Mortgaged-Backed Securities and CMO/REMICs — Almost all of the mortgage-backed and CMO/REMICs securities are issued by the government-sponsored enterprises such as Ginnie Mae, Fannie Mae and Freddie Mac. These securities are collateralized or backed by the underlying residential mortgages. All mortgage-backed securities are rated investment grade with an average life of approximately 3.1 years. The contractual cash flows of 98.0% of these investments are guaranteed by U.S. government-sponsored agencies. The remaining 2.0% are issued by banks. Accordingly, it is expected the securities would not be settled at a price less than the amortized cost of the bonds. The unrealized loss greater than 12 months on these securities at March 31, 2010 is $178,000. This loss is primarily comprised of two bonds issued by non-government sponsored enterprises such as financial institutions. Because we believe the decline in fair value is attributable to the changes in interest rates and not credit quality and because the Company does not intend to sell the investments and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized costs, which may be at maturity, management does not consider these investments to be other than temporarily impaired at March 31, 2010.

Municipal Bonds — Ninety-five percent of our $656.0 million municipal bond portfolio contains securities which have an underlying rating of investment grade. The majority of our municipal bonds are insured by the largest bond insurance companies with maturities of approximately 5.8 years. The unrealized loss greater than 12 months on these securities at March 31, 2010 was $312,000. The Bank diversifies its holdings by owning selections of securities from different issuers and by holding securities from geographically diversified municipal issuers, thus reducing the Bank’s exposure to any single adverse event. Because we believe the decline in fair value is attributable to the changes in interest rates and not credit quality and because the Company does not intend to sell the investments and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized costs, which may be at maturity, management does not consider these investments to be other than temporarily impaired at March 31, 2010.

We are continually monitoring the quality of our municipal bond portfolio in light of the current financial problems exhibited by certain monoline insurance companies. While most of our securities are insured by these companies, we feel that there is minimal risk of loss due to the problems these insurers are having. Many of the securities that would not be rated without insurance are pre-refunded and/or are general obligation bonds. Based on our monitoring of the municipal marketplace, to our knowledge, none of the municipalities are exhibiting financial problems that would lead us to believe there is a loss in any given security.

At March 31, 2010 and December 31, 2009, investment securities having an amortized cost of approximately $1.86 billion and $2.02 billion respectively, were pledged to secure public deposits, short and long-term borrowings, and for other purposes as required or permitted by law.

The amortized cost and fair value of debt securities at March 31, 2010, by contractual maturity, are shown below. Although mortgage-backed securities and CMO/REMICs have contractual maturities through 2029, expected maturities will differ from contractual maturities because borrowers may have the right to prepay such obligations without penalty. Mortgage-backed securities and CMO/REMICs are included in maturity categories based upon estimated prepayment speeds.

		Available-for-sale
										Weighted-
		Amortized				Fair				Average
		Cost				Value				Yield
		(amounts in thousands)
Due in one year or less		$	164,274			$	166,678				4.52	%
Due after one year through five years			1,012,059				1,047,842				4.36	%
Due after five years through ten years			705,379				726,686				4.36	%
Due after ten years			134,074				132,769				4.05	%
		$	2,015,786			$	2,073,975				4.35	%

The investment in FHLB stock is periodically evaluated for impairment based on, among other things, the capital adequacy of the FHLB and its overall financial condition. No impairment losses have been recorded through March 31, 2010.

3. FAIR VALUE INFORMATION

The following disclosure provides fair value information for financial assets and liabilities as of March 31, 2010 and December 31, 2009. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels (Level 1, Level 2, and Level 3).

•

Level 1 — Valuation is based upon quoted prices for identical instruments traded in active markets.

•

Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•

Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flows and similar techniques.

Determination of Fair Value

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not recorded at fair value.

Cash — The carrying amount of cash and cash equivalents is considered to be a reasonable estimate of fair value.

Investment securities available-for-sale — Investment securities available-for-sale are valued based upon quotes obtained from a reputable third-party pricing service. The service uses evaluated pricing applications and model processes. Market inputs, such as, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data are considered as part of the evaluation. The inputs are related directly to the security being evaluated, or indirectly to a similarly situated security. Market assumptions and market data are utilized in the valuation models. Accordingly, the Company categorized its investment portfolio as a Level 2 valuation.

Investment security held-to-maturity — Investment security held-to-maturity is carried at amortized cost-basis on the balance sheet. The fair value is determined using the same process described above for available-for-sale securities. During the first quarter ended, an other-than-temporary impairment loss was recognized and the carrying balance was reduced to fair value.

Non-covered Loans — The carrying amount of loans and lease finance receivables is their contractual amounts outstanding, reduced by deferred net loan origination fees and the allocable portion of the allowance for credit losses.

The fair value of loans, other than loans on non-accrual status, was estimated by discounting the remaining contractual cash flows using the estimated current rate at which similar loans would be made to borrowers with similar credit risk characteristics and for the same remaining maturities, reduced by deferred net loan origination fees and the allocable portion of the allowance for credit losses. Accordingly, in determining the estimated current rate for discounting purposes, no adjustment has been made for any change in borrowers’ credit risks since the origination of such loans. Rather, the allocable portion of the allowance for credit losses is considered to provide for such changes in estimating fair value. As a result, this fair value is not necessarily the value which would be derived using an exit price.

Non-covered Impaired loans and OREO are generally measured using the fair value of the underlying collateral, which is determined based on the most recent appraisal information received, less costs to sell. Appraised values may be adjusted based on factors such as the changes in market conditions from the time of valuation or discounted cash flows of the property. As such, these loans fall within Level 3 of the fair value hierarchy.

The fair value of commitments to extend credit and standby letters of credit were not significant at either March 31, 2010 or December 31, 2009, as these instruments predominantly have adjustable terms and are of a short-term nature.

Covered Loans — Covered loans were measured at fair value on the date of acquisition. Thereafter, covered loans are not measured at fair value on a recurring basis. The above valuation discussion for non-covered loans is applicable to covered loans following their acquisition date.

Swaps — The fair value of the interest rate swap contracts are provided by our counterparty using a system that constructs a yield curve based on cash LIBOR rates, Eurodollar futures contracts, and 3-year through 30-year swap rates. The yield curve determines the valuations of the interest rate swaps. Accordingly, the swap is categorized as a Level 2 valuation.

Deposits & Borrowings — The amounts payable to depositors for demand, savings, and money market accounts, and the demand note to the U.S. Treasury, and short-term borrowings are considered to be stated at fair value. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. The fair value of long-term borrowings and junior subordinated debentures is estimated using the rates currently offered for borrowings of similar remaining maturities.

Accrued Interest Receivable/Payable — The amounts of accrued interest receivable on loans and lease finance receivables and investments and accrued interest payable on deposits and borrowings are considered to be stated at fair value.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis as of March 31, 2010 and December 31, 2009.

Assets & Liabilities Measured at Fair Value on a Recurring Basis

						Quoted Prices in				Significant
						Active Markets				Other				Significant
						for Identical				Observable				Unobservable
		Carrying Value at				Assets				Inputs				Inputs
(in thousands)		March 31, 2010				(Level 1)				(Level 2)				(Level 3)
Description of Assets
U.S. Treasury securities		$	503			$	—			$	503			$	—
Mortgage-backed securities			608,895				—				608,895				—
CMO’s / REMIC’s			750,420				—				750,420				—
Government agency			55,593				—				55,593				—
Municipal bonds			656,043				—				656,043				—
Other securities			2,521								2,521
Investment Securities-AFS		$	2,073,975			$	—			$	2,073,975			$	—
Interest Rate Swaps			5,034				—				5,034				—
Total Assets		$	2,079,009			$	—			$	2,079,009			$	—
Description of Liability
Interest Rate Swaps		$	5,034			$	—			$	5,034			$	—

Assets & Liabilities Measured at Fair Value on a Recurring Basis

						Quoted Prices in				Significant
						Active Markets				Other				Significant
						for Identical				Observable				Unobservable
		Carrying Value at				Assets				Inputs				Inputs
(in thousands)		December 31, 2009				(Level 1)				(Level 2)				(Level 3)
Description of Assets
U.S. Treasury securities		$	507			$	—			$	507			$	—
Mortgage-backed securities			647,168				—				647,168				—
CMO’s / REMIC’s			773,165				—				773,165				—
Government agency			21,713				—				21,713				—
Municipal bonds			663,426				—				663,426				—
Other securities			2,484								2,484
Investment Securities-AFS		$	2,108,463			$	—			$	2,108,463			$	—
Interest Rate Swaps			4,334				—				4,334				—
Total Assets		$	2,112,797			$	—			$	2,112,797			$	—
Description of Liability
Interest Rate Swaps		$	4,334			$	—			$	4,334			$	—

We may be required to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis that were still held in the balance sheet at March 31, 2010 and December 31, 2009, the following table provides the level of valuation assumptions used to determine each adjustment and the carrying value of the related assets.

Assets & Liabilities Measured at Fair Value on a Non-Recurring Basis

						Quoted Prices in				Significant								For the three
						Active Markets				Other				Significant				months ended
						for Identical				Observable				Unobservable				March 31,
		Carrying Value at				Assets				Inputs				Inputs				2010
(in thousands)		March 31, 2010				(Level 1)				(Level 2)				(Level 3)				Total Losses
Description of Assets
Investment Security-HTM		$	3,472			$	—			$	3,472			$	—			$	(685	)
Impaired Loans-Noncovered		$	15,744			$	—			$	2,500			$	13,244			$	(8,745	)
OREO-Noncovered		$	15,178			$	—			$	—			$	15,178			$	(13	)
OREO-Covered		$	10,031			$	—			$	—			$	10,031			$	—

Assets & Liabilities Measured at Fair Value on a Non-Recurring Basis

						Quoted Prices in				Significant								For the year
						Active Markets				Other				Significant				ended
						for Identical				Observable				Unobservable				December 31,
		Carrying Value at				Assets				Inputs				Inputs				2009
(in thousands)		December 31, 2009				(Level 1)				(Level 2)				(Level 3)				Total Losses
Description of Assets
Investment Security-HTM		$	3,838			$	—			$	3,838			$	—			$	(323	)
Impaired Loans-Noncovered		$	29,982			$	—			$	2,500			$	27,482			$	(18,450	)
OREO-Noncovered		$	3,936			$	—			$	—			$	3,936			$	(848	)
OREO-Covered		$	5,565			$	—			$	—			$	5,565			$	—