UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2009 or

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition period from                     to                     

Nevada		88-0365922
(State or Other Jurisdiction		(I.R.S. Employer I.D. Number)
of Incorporation or Organization)
2700 W. Sahara Avenue, Las Vegas, NV		89102
(Address of Principal Executive Offices)		(Zip Code)
(702) 248-4200
(Registrant’s telephone number,
including area code)

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 (§232.405 of this chapter) 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, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions 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
				(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock issued and outstanding: 38,988,316 shares as of April 30, 2009.

 

 

Table of Contents

Index

		Page
Part I. Financial Information
Item 1 — Financial Statements Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008			3
Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008			4
Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2009			5
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008			6
Notes to Unaudited Consolidated Financial Statements			7
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3 — Quantitative and Qualitative Disclosures about Market Risk			46
Item 4 — Controls and Procedures			46
Part II. Other Information
Item 1 — Legal Proceedings			46
Item 1A — Risk Factors			46
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds			47
Item 3 — Defaults Upon Senior Securities			47
Item 4 — Submission of Matters to a Vote of Security Holders			47
Item 5 — Other Information			47
Item 6 — Exhibits			48
Signatures			49
Exhibit Index			50
EX-31.1
EX-31.2
EX-32

Part I. Financial Information

ITEM I. FINANCIAL STATEMENTS
Western Alliance Bancorporation and Subsidiaries

		March 31,				December 31,
($ in thousands, except per share amounts)		2009				2008
Assets
Cash and due from banks		$	224,315			$	136,791
Federal funds sold and other			3,301				3,163
Cash and cash equivalents			227,616				139,954
Securities held to maturity (approximate fair value $8,097 and $8,382, respectively)			7,978				8,278
Securities available for sale			458,101				437,862
Securities measured at fair value			117,482				119,237
Gross loans, including net deferred loan fees			4,075,741				4,095,711
Less: Allowance for loan losses			(77,184	)			(74,827	)
Loans, net			3,998,557				4,020,884
Premises and equipment, net			138,079				140,910
Other real estate owned			15,455				14,545
Bank owned life insurance			90,832				90,700
Investment in restricted stock			40,975				41,047
Accrued interest receivable			21,138				19,719
Deferred tax assets, net			31,626				34,400
Goodwill			33,966				78,966
Other intangible assets, net of accumulated amortization of $8,269 and $7,324, respectively			20,089				21,034
Income tax receivable			42,276				48,367
Other assets			23,116				26,858
Total assets		$	5,267,286			$	5,242,761
Liabilities and Stockholders’ Equity
Liabilities
Noninterest-bearing demand deposits		$	1,039,233			$	1,010,625
Interest-bearing deposits:
Demand			260,636				253,529
Savings and money market			1,578,958				1,351,502
Time, $100 and over			642,014				638,806
Other time			540,658				397,804
			4,061,499				3,652,266
Customer repurchase agreements			272,258				321,004
Federal Home Loan Bank/Federal Reserve advances and other borrowings:
One year or less			320,000				586,120
Over one year ($31,303 and $31,515 measured at fair value, respectively)			50,751				50,998
Junior subordinated debt measured at fair value			42,837				43,038
Subordinated debt			60,000				60,000
Accrued interest payable and other liabilities			33,003				33,838
Total liabilities			4,840,348				4,747,264
Commitments and Contingencies (Note 9)
Stockholders’ Equity
Preferred stock, par value $.0001; shares authorized 20,000,000; shares issued and outstanding 2009: 140,000; 2008: 140,000. Total liquidation preference of outstanding shares of $140,000			125,885				125,203
Common stock, par value $.0001; shares authorized 100,000,000; shares issued and outstanding 2009: 38,956,027; 2008: 38,600,788			4				4
Additional paid-in capital			486,189				484,205
Retained earnings (deficit)			(169,450	)			(85,424	)
Accumulated other comprehensive loss — net unrealized loss on held-to-maturity securities			(3,008	)			—
Accumulated other comprehensive loss — net unrealized loss on available-for-sale securities			(12,682	)			(28,491	)
Total stockholders’ equity			426,938				495,497
Total liabilities and stockholders’ equity		$	5,267,286			$	5,242,761

Western Alliance Bancorporation and Subsidiaries

($ in thousands, except per share amounts)		2009				2008
Interest income on:
Loans, including fees		$	63,253			$	65,704
Securities — taxable			6,048				9,570
Securities — nontaxable			179				357
Dividends — taxable			195				627
Dividends — nontaxable			470				419
Federal funds sold and other			23				115
Total interest income			70,168				76,792
Interest expense on:
Deposits			15,650				19,514
Customer repurchase agreements			1,250				1,903
Short-term borrowings			550				5,677
Long-term borrowings			725				715
Junior subordinated debt			837				1,181
Subordinated debt			426				940
Total interest expense			19,438				29,930
Net interest income			50,730				46,862
Provision for loan losses			19,984				8,059
Net interest income after provision for loan losses			30,746				38,803
Noninterest income (loss):
Trust and investment advisory services			2,237				2,796
Service charges			1,682				1,427
Income from bank owned life insurance			514				800
Other			2,424				3,015
Noninterest income, excluding securities and fair value gains (losses)			6,857				8,038
Securities impairment charges			(40,452	)			(5,280	)
Portion of impairment charges recognized in other comprehensive loss (before taxes)			2,047				—
Net securities impairment charges recognized in earnings			(38,405	)			(5,280	)
Derivative gains (losses)			(63	)			43
Unrealized gain on assets and liabilities measured at fair value, net			4,071				1,381
Gains, net on sales of investment securities			7				161
Net gain (loss) on sale of other real estate owned			(4,936	)			380
Total noninterest income (loss)			(32,469	)			4,723
Noninterest expense:
Salaries and employee benefits			24,824				21,934
Occupancy			5,271				5,028
Customer service			2,485				1,200
Insurance			1,648				972
Advertising, public relations and business development			1,597				2,100
Legal, professional and director fees			1,373				931
Data processing			1,137				769
Intangible amortization			945				789
Telephone			496				401
Audits and exams			466				648
Supplies			460				371
Travel and automobile			410				338
Correspondent banking service charges and wire transfer costs			400				301
Goodwill impairment charge			45,000				—
Other			1,984				2,221
Total noninterest expenses			88,496				38,003
Income (loss) before income taxes			(90,219	)			5,523
Income tax expense (benefit)			(3,777	)			1,381
Net income (loss)			(86,442	)			4,142
Preferred stock dividends			1,750				—
Accretion on preferred stock discount			682				—
Net income (loss) available to common stockholders		$	(88,874	)		$	4,142
Earnings (loss) per share:
Basic		$	(2.33	)		$	0.14
Diluted		$	(2.33	)		$	0.14

See Notes to Unaudited Consolidated Financial Statements.

Western Alliance Bancorporation and Subsidiaries

Consolidated Statement of Stockholders’ Equity
Three Months Ended March 31, 2009 (Unaudited)
(in thousands)

																														Accumulated
																						Additional								Other
		Comprehensive				Common Stock								Preferred Stock								Paid-in				Retained				Comprehensive
Description		Income (loss)				Shares Issued				Amount				Shares Issued				Amount				Capital				Earnings				Income (Loss)				Total
Balance, December 31, 2008							38,601			$	4				140			$	125,203			$	484,205			$	(85,424	)		$	(28,491	)		$	495,497
Cumulative effect from adoption of FSP FAS 115-2 and FAS 124-2, net of taxes of $2,688							—				—				—				—				—				4,848				(4,848	)			—
Balance, January 1, 2009							38,601				4				140				125,203				484,205				(80,576	)			(33,339	)			495,497
Stock options exercised							16				—				—				—				78				—				—				78
Stock-based compensation expense							67				—				—				—				504				—				—				504
Restricted stock granted, net of forfeitures							272				—				—				—				1,402				—				—				1,402
Accretion on preferred stock discount							—				—				—				682				—				(682	)			—				—
Dividends on preferred stock							—				—				—				—				—				(1,750	)			—				(1,750	)
Comprehensive income (loss):
Net loss		$	(86,442	)			—				—				—				—				—				(86,442	)			—				(86,442	)
Other comprehensive income (loss)
Unrealized holding losses on securities available for sale arising during the period, net of taxes of $10,677			(19,829	)
Less reclassification adjustment for impairment losses included in net loss, net of taxes of $922			37,483
Plus reclassification adjustment for gains included in net loss, net of taxes of $2			(5	)
Net unrealized holding gains			17,649				—				—				—				—				—				—				17,649				17,649
		$	(106,276	)
Balance, March 31, 2009							38,956			$	4				140			$	125,885			$	486,189			$	(169,450	)		$	(15,690	)		$	426,938

See Notes to Unaudited Consolidated Financial Statements.

Western Alliance Bancorporation and Subsidiaries

Consolidated Statements of Cash Flows
Three Months Ended March 31, 2009 and 2008 (Unaudited)
($ in thousands)

		2009				2008
Cash Flows from Operating Activities:
Net income (loss)		$	(86,442	)		$	4,142
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses			19,984				8,059
Goodwill impairment charge			45,000				—
Securities impairment charges			38,405				5,280
Change in fair value of assets and liabilities measured at fair value			(4,008	)			(1,788	)
Losses (gains) on sale of other real estate owned			4,936				(380	)
Depreciation and amortization			6,362				3,167
Deferred taxes			(8,001	)			(2,323	)
Decrease in other assets			9,833				7,976
Increase (decrease) in other liabilities			(835	)			7,872
Other operating activities, net			(1,273	)			3,740
Net cash provided by operating activities			23,961				35,745
Cash Flows from Investing Activities:
Proceeds from maturities of securities			26,329				34,006
Purchases of securities			(48,384	)			(82,434	)
Proceeds from the sale of securities			7				22,011
Net decrease (increase) in loans made to customers			2,343				(96,148	)
Purchase of premises and equipment			(2,586	)			(2,893	)
Other real estate owned acquisitions, net			(5,846	)			—
(Liquidations) purchases of restricted stock			72				(18,901	)
Net cash (used in) investing activities			(28,065	)			(144,359	)
Cash Flows from Financing Activities:
Net increase in deposits			409,233				84,016
Net proceeds from (repayments on) borrowings			(315,113	)			100,633
Proceeds from exercise of stock options and stock warrants			78				553
Cash dividends paid			(1,750	)			—
Preferred stock discount accretion			(682	)			—
Stock repurchases			—				(356	)
Net cash provided by financing activities			91,766				184,846
Increase in cash and cash equivalents			87,662				76,232
Cash and Cash Equivalents, beginning of period			139,954				115,629
Cash and Cash Equivalents, end of period		$	227,616			$	191,861
Supplemental Disclosure of Cash Flow Information
Cash payments for interest		$	19,043			$	40,595
Supplemental Disclosure of Noncash Investing and Financing Activities
Trading securities in the process of settlement		$	—			$	12,878
Transfers of loans to other real estate owned		$	5,022			$	6,901

See Notes to Unaudited Consolidated Financial Statements.

Note 1. Nature of Business and Summary of Significant Accounting Policies

(Dollars in thousands, except per share amounts)

Nature of business

Western Alliance Bancorporation is a bank holding company providing a full range of banking services to commercial and consumer clientele through its wholly-owned subsidiaries: Bank of Nevada and First Independent Bank of Nevada, operating in Nevada; Alliance Bank of Arizona, operating in Arizona; Torrey Pines Bank and Alta Alliance Bank, operating in California; Miller/Russell & Associates, Inc., operating in Nevada, Arizona and Southern California; Premier Trust, Inc., operating in Nevada and Arizona and Shine Investment Advisory Services, Inc., operating in Colorado. These entities are collectively referred to herein as the Company. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America and general industry practices.

Use of estimates in the preparation of financial statements

The preparation of financial statements 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. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan losses; fair value of collateralized debt obligations (CDOs); classification of impaired securities as other than temporary; determination of valuation allowance related to deferred tax assets; and impairment of goodwill and other intangible assets.

Principles of consolidation

With the exception of certain trust subsidiaries which do not meet the criteria for consolidation pursuant to Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities,” the consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Bank of Nevada and its subsidiary BW Real Estate, Inc., Alliance Bank of Arizona, Torrey Pines Bank, Alta Alliance Bank, First Independent Bank of Nevada (collectively referred to herein as the Banks), Miller/Russell & Associates, Inc., Premier Trust, Inc., and Shine Investment Advisory Services, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Interim financial information

The accompanying unaudited consolidated financial statements as of March 31, 2009 and 2008 have been prepared in condensed format, and therefore do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These statements have been prepared on a basis that is substantially consistent with the accounting principles applied to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008.

The information furnished in these interim statements reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for each respective period presented. Such adjustments are of a normal recurring nature. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter or for the full year. The interim financial information should be read in conjunction with the Company’s audited financial statements.

Fair values of financial instruments

Statement of Financial Accounting Standards (SFAS) No. 107, “Disclosures about Fair Value of Financial Instruments” (SFAS 107), requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the

fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction at March 31, 2009 or December 31, 2008.

The estimated fair value amounts for March 31, 2009 and December 31, 2008 have been measured as of their period end, and have not been reevaluated or updated for purposes of these consolidated financial statements subsequent to those dates. As such, the estimated fair values of these financial instruments subsequent to the reporting date may be different than the amounts reported at each period end.

The information in Note 11 should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only required for a limited portion of the Company’s assets and liabilities.

Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimate, comparisons between the Company’s disclosures and those of other companies or banks may not be meaningful.

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Cash and cash equivalents

The carrying amounts reported in the consolidated balance sheets for cash and due from banks and federal funds sold and other approximate their fair value.

Securities

The fair values of U.S. Treasuries and exchange-listed preferred stock are based on quoted market prices and are categorized as Level 1 of the fair value hierarchy.

With the exception of CDO and structured notes, the fair value of most other investment securities are determined based on matrix pricing. Matrix pricing is a mathematical technique that utilizes observable market inputs including, for example, yield curves, credit ratings and prepayment speeds. Fair values determined using matrix pricing are generally categorized as Level 2 in the fair value hierarchy.

The Company owns certain CDO and structured notes for which quoted prices are not available. Quoted prices for similar assets are also not available for these investment securities. In order to determine the fair value of these securities, the Company has estimated the future cash flows and discount rate using observable market inputs when readily available. However, these observable market inputs were adjusted based on the Company’s assumptions regarding the adjustments a market participant would assume necessary for each specific security. As a result, the resulting fair values have been categorized as Level 3 in the fair value hierarchy.

Restricted stock

The Company’s subsidiary banks are members of the FHLB system and maintain an investment in capital stock of the FHLB. Alta Alliance Bank is a member of the FRB system and maintains an investment in capital stock of the FRB. The Company’s subsidiary banks also maintain an investment in their primary correspondent bank. These investments are carried at cost since no ready market exists for them, and they have no quoted market value.

Loans

For variable rate loans that reprice frequently and that have experienced no significant change in credit risk, fair values are based on carrying values. Fair value for all other loans is estimated based on discounted cash flows using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. As a result, the fair value for loans disclosed in Note 11 is categorized as Level 3 in the fair value hierarchy.

Accrued interest receivable and payable

The carrying amounts reported in the consolidated balance sheets for accrued interest receivable and payable approximate their fair value. Accrued interest receivable and payable fair value measurements disclosed in Note 11 are classified as Level 3 in the fair value hierarchy.

Derivative financial instruments

All derivatives are recognized on the balance sheet at their fair value. The fair value for derivatives is determined based on market prices, broker-dealer quotations on similar product or other related input parameters. As a result, the fair values have been categorized as Level 2 in the fair value hierarchy.

Deposit liabilities

The fair value disclosed for demand and savings deposits is by definition equal to the amount payable on demand at their reporting date (that is, their carrying amount). The carrying amount for variable-rate deposit accounts approximates their fair value. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on these deposits. The fair value measurement of the deposit liabilities disclosed in Note 11 is categorized as Level 3 in the fair value hierarchy.

Federal Home Loan Bank and Federal Reserve advances and other borrowings

The fair values of the Company’s borrowings are estimated using discounted cash flow analyses, based on the market rates for similar types of borrowing arrangements. The FHLB and FRB advances and other borrowings have been categorized as Level 3 in the fair value hierarchy.

Junior subordinated and subordinated debt

Junior subordinated debt and subordinated debt are valued by comparing interest rates and spreads to benchmark indices offered to institutions with similar credit profiles to our own and discounting the contractual cash flows on our debt using these market rates. The junior subordinated debt and subordinated debt have been categorized as Level 3 in the fair value hierarchy.

Off-balance sheet instruments

Fair values for the Company’s off-balance sheet instruments (lending commitments and standby letters of credit) are based on quoted fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.

Recent Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). SFAS 161 amends and expands the disclosure requirements of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (FAS 133) requiring enhanced disclosures about (a) how and why the Company uses derivative instruments, (b) how derivative instruments and related hedge items are accounted for under FAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect the Company’s financial position, results of operations, and cash flows. SFAS 161 is effective January 1, 2009 on a prospective basis, with comparative disclosures of earlier periods encouraged upon initial adoption. The implementation of this standard did not have a material impact on our consolidated financial position or results of operations.

In June 2008, the FASB issued FASB Staff Position (FSP) No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (FSP EITF 03-6-1). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share, or EPS, under the two-class method described in paragraphs 60 and 61 of FASB Statement No. 128, “Earnings per Share” (SFAS

128). The guidance in this FSP applies to the calculation of EPS under SFAS 128 for share-based payment awards with rights to dividends or dividend equivalents. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented should be adjusted retrospectively to conform with the provisions of this FSP. The implementation of this standard did not have a material impact on our consolidated financial position or results of operations.

On October 10, 2008, the FASB issued FSP No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for that Asset is not Active” (FSP FAS 157-3), which clarifies the application of SFAS No. 157, "Fair Value Measurements” (SFAS 157), in an inactive market and illustrates how an entity would determine fair value when the market for a financial asset is not active. The FSP states that an entity should not automatically conclude that a particular transaction price is determinative of fair value. In a dislocated market, judgment is required to evaluate whether individual transactions are forced liquidations or distressed sales. When relevant observable market information is not available, a valuation approach that incorporates management’s judgments about the assumptions that market participants would use in pricing the asset in a current sale transaction would be acceptable. The FSP also indicates that quotes from brokers or pricing services may be relevant inputs when measuring fair value, but are not necessarily determinative in the absence of an active market for the asset. In weighing a broker quote as an input to a fair value measurement, an entity should place less reliance on quotes that do not reflect the result of market transactions. Further, the nature of the quote (for example, whether the quote is an indicative price or a binding offer) should be considered when weighing the available evidence. The FSP is effective immediately and applies to prior periods for which financial statements have not been issued, including interim or annual periods ending on or before September 30, 2008. Accordingly, the Company adopted the FSP prospectively, beginning July 1, 2008. FSP FAS 157-3 was utilized by the Company in the fair value determination of our collateralized debt obligations (“CDOs”) and adjustable rate preferred stock (“ARPS”) investment portfolios where quotes were not available, as discussed in Note 4 of the Unaudited Consolidated Financial Statements.

On October 14, 2008, the SEC’s Office of the Chief Accountant (OCA), clarified its views on the application of other-than-temporary impairment guidance in SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (SFAS 115), to certain perpetual preferred securities. The OCA stated that it would not object to a registrant applying an other-than-temporary impairment model to investments in perpetual preferred securities, (such as ARPS), that possess significant debt-like characteristics that is similar to the impairment model applied to debt securities, provided there has been no evidence of deterioration in credit of the issuer. An entity is permitted to apply the OCA’s views in its financial statements included in filings subsequent to the date of the letter. For the period ended March 31, 2009, based on the OCA guidance, the Company recorded no other-than-temporary impairment for investments in investment-grade perpetual preferred securities that had no evidence of credit deterioration and that the Company has the intent and ability to hold to recovery.

In January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment of Guidance of EITF Issue No. 99-20” (FSP EITF 99-20-1). FSP EITF No. 99-20-1 amends the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets” (EITF No. 99-20), to achieve more consistent determination of whether an other-than-temporary impairment has occurred and making the guidance consistent between EITF No. 99-20 and SFAS 115. FSP EITF 99-20-1 is effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual reporting period is not permitted. The adoption of FSP EITF 99-20-1 did not have a significant impact on the Company’s consolidated financial statements.

On April 9, 2009, the FASB issued the following FSPs, which become effective for second quarter reporting, with earlier implementation permitted for the first calendar quarter of 2009.

FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (FSP FAS 157-4). FSP FAS 157-4 affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction, and clarifies and includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active. FSP FAS 157-4 requires an entity to base its conclusion about whether a transaction was not orderly on the weight of the evidence. FSP FAS 157-4 also amended FAS 157, “Fair Value Measurements” (FAS 157), to expand certain disclosure requirements. The Company adopted the provisions of FSP FAS 157-4 during the first quarter of 2009. Adoption of FSP FAS 157-4 did not significantly impact the Company’s consolidated financial statements.

FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (FSP FAS 115-2 and FAS 124-2). FSP FAS 115-2 and FAS 124-2 (i) changes existing guidance for determining whether an

impairment is other than temporary to debt securities and (ii) replaces the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to sell the security; and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis. Under FSP FAS 115-2 and FAS 124-2, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. The Company adopted the provisions of FSP FAS 115-2 and FAS 124-2 during the first quarter of 2009. For further details of the Company’s adoption of FSP FAS 115-2 and FAS 124-2 refer to Note 2 to the Unaudited Consolidated Financial Statements.

FSP SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (FSP SFAS 107-1 and APB 28-1). FSP SFAS 107-1 and APB 28-1 amends SFAS 107, “Disclosures about Fair Value of Financial Instruments,” to require an entity to provide disclosures about fair value of financial instruments in interim financial information and amends Accounting Principles Board (APB) Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in summarized financial information at interim reporting periods. Under FSP SFAS 107-1 and APB 28-1, a publicly-traded company shall include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. In addition, entities must disclose, in the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods, the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position, as required by SFAS 107. Refer to Note 11 of the Unaudited Consolidated Financial Statements for the interim disclosures required by FSP SFAS 107-1 and APB 28-1.

In April 2009, the FASB issued FSP FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (FSP FAS 141(R)-1). FSP FAS 141(R)-1 amends the guidance in SFAS 141R “Business Combinations” to require that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value of such an asset or liability cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with SFAS No. 5, “Accounting for Contingencies” (SFAS 5), and FASB Interpretation (FIN) No. 14, "Reasonable Estimation of the Amount of a Loss” (FIN 14). FSP FAS 141(R)-1 removes subsequent accounting guidance for assets and liabilities arising from contingencies from SFAS 141R and requires entities to develop a systematic and rational basis for subsequently measuring and accounting for assets and liabilities arising from contingencies. FSP FAS 141(R)-1 eliminates the requirement to disclose an estimate of the range of outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, entities are required to include only the disclosures required by SFAS 5. FSP FAS 141(R)-1 also requires that contingent consideration arrangements of an acquiree assumed by the acquirer in a business combination be treated as contingent consideration of the acquirer and should be initially and subsequently measured at fair value in accordance with SFAS 141R. FSP FAS 141(R)-1 is effective for assets or liabilities arising from contingencies the Company acquires in business combinations occurring after January 1, 2009.

Derivative financial instruments

All derivatives are recognized on the balance sheet at their fair value, with changes in fair value reported in current-period earnings. These instruments consist primarily of interest rate swaps.

The Company occasionally purchases a financial instrument or originates a loan that contains an embedded derivative instrument. Upon purchasing the instrument or originating the loan, the Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the financial instrument (i.e., the host contract) and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that (1) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and (2) a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract and carried at fair value. However, in cases where (1) the host contract is measured at fair value, with changes in fair value reported in current earnings or (2) the Company is unable to reliably identify and measure an embedded derivative for

separation from its host contract, the entire contract is carried on the balance sheet at fair value and is not designated as a hedging instrument.

Note 2. Fair Value Accounting

SFAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under SFAS 157 are described below:

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-based valuation techniques where all significant assumptions are observable, either directly or indirectly, in the market;

Level 3 — Valuation is generated from model-based techniques where all significant assumptions are not observable, either directly or indirectly, in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques may include use of matrix pricing, discounted cash flow models and similar techniques.

For the three months ended March 31, 2009, gains and losses from fair value changes included in the Consolidated Statement of Operations were as follows (in thousands):

		Changes in Fair Values for the Three-Month Period
		Ended March 31, 2009 for Items Measured at Fair
		Value Pursuant to Election of the Fair Value Option
														Total
		Unrealized												Changes in
		Gain (Loss) on								Interest				Fair Values
		Assets and								Expense on				Included in
		Liabilities				Interest				Junior				Current-
		Measured at				Income on				Subordinated				Period
Description		Fair Value, Net				Securities				Debt				Earnings
Securities measured at fair value		$	3,888			$	248			$	—			$	4,136
Junior subordinated debt			(29	)			—				230				201
Fixed-rate term borrowings			212				—				—				212
		$	4,071			$	248			$	230			$	4,549

The difference between the aggregate fair value and the aggregate unpaid principal balance of junior subordinated debt was $23.7 million at March 31, 2009.

The difference between the aggregate fair value and the aggregate unpaid principal balance of fixed-rate term borrowings measured at fair value was $1.3 million at March 31, 2009.

Interest income on securities measured at fair value is accounted for similarly to those classified as available-for-sale and held-to-maturity. As of January 1, 2007, a discount or premium was calculated for each security based upon the difference between the par value and the fair value at that date. These premiums and discounts are recognized in interest income over the term of the securities. For mortgage-backed securities, estimates of prepayments are considered in the constant yield calculations. Interest expense on junior subordinated debt is also determined under a constant yield calculation.

Fair value on a recurring basis

The Company measures certain assets and liabilities at fair value on a recurring basis, including securities available for sale, securities measured at market value and junior subordinated debt. The fair value of these assets and liabilities were determined using the following inputs at March 31, 2009 (in thousands):

						Fair Value Measurements at Reporting Date Using:
						Quoted Prices
						in Active				Significant
						Markets for				Other				Significant
						Identical				Observable				Unobservable
						Assets				Inputs				Inputs
Description		March 31, 2009				(Level 1)				(Level 2)				(Level 3)
Assets:
Securities available for sale		$	458,101			$	39,167			$	418,934			$	—
Securities measured at fair value			117,482				—				117,482				—
Interest rate swaps			2,888				—				2,888				—
Total		$	578,471			$	39,167			$	539,304			$	—
Liabilities:
Fixed-rate term borrowings		$	31,303			$	—			$	—			$	31,303
Junior subordinated debt			42,837				—				—				42,837
Interest rate swaps			2,888				—				2,888				—
Total		$	77,028			$	—			$	2,888			$	74,140

Fair Value Measurements Using
Significant Unobservable Inputs
(Level 3)

		Securities Available				Securities Measured				Junior Subordinated				Fixed-Rate
		For Sale				at Fair Value				Debt				Term Borrowings
Beginning balance January 1, 2009		$	—			$	—			$	(43,038	)		$	(31,515	)
Total gains (losses) (realized/unrealized)
Included in earnings			—				—				201				212
Included in other comprehensive income			—				—				—				—
Purchases, issuances, and settlements, net			—				—				—				—
Transfers in and/or out of Level 3			—				—				—				—
Ending balance March 31, 2009		$	—			$	—			$	(42,837	)		$	(31,303	)
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date		$	—			$	—			$	201			$	212

The value of the Company’s fixed-rate term borrowings and junior subordinated debt (Level 3) are estimated by projecting the expected cash flows and discounting those cash flows at a rate reflective of the current market environment. For the junior subordinated debt, the Company factored in adjustments to the discount rate used in the cash flow projection for nonperformance risk and uncertainty in the model. The factors used in the estimation of value incorporate the Company’s own best estimates of assumptions that market participants would use in pricing the instruments or valuations that require significant judgment or estimation.

Fair value on a nonrecurring basis

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following table presents such assets carried on the balance sheet by caption and by level within the SFAS 157 hierarchy as of March 31, 2009 (in thousands):

		Fair Value Measurements Using
						Quoted Prices
						in Active				Significant Other				Significant
						Markets for				Observable				Unobservable
						Identical Assets				Inputs				Inputs
		Total				(Level 1)				(Level 2)				(Level 3)
Impaired loans with specific valuation allowance under SFAS 114		$	47,793			$	—			$	—			$	47,793
Goodwill valuation of reporting units			33,966				—				—				33,966
Other real estate owned			15,455				—				—				15,455
Debt obligations and structured securities held-to-maturity			919				—				—				919

Impaired loans. The specific reserves for collateral dependent impaired loans are based on the fair value of the collateral less estimated costs to sell. The fair value of collateral is determined based on third-party appraisals. In some cases, adjustments are made to the appraised values due to various factors, including age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in the collateral. When significant adjustments are based on unobservable inputs, such as when a current appraised value is not available or management determines the fair value of the collateral is further impaired below appraised value and there is no observable market price, the resulting fair value measurement has been categorized as a Level 3 measurement. These Level 3 impaired loans had an aggregate carrying amount of $69.0 million and specific reserves in the allowance for loan losses of $21.2 million as of March 31, 2009.

Goodwill. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill was written down to its implied fair value of $34.0 million by a charge to earnings of $45.0 million at March 31, 2009. Some of the inputs used to determine the implied fair value of the Company and the corresponding amount of the impairment included the quoted market price of our common stock, market prices of common stocks of other banking organizations, common stock trading multiples, discounted cash flows, and inputs from comparable transactions. The Company’s adjustment for $45.0 million, was primarily based on the Company’s assumptions, therefore the resulting fair value measurement was determined to be Level 3.

Other real estate. Other real estate owned (“OREO”) consists of properties acquired as a result of, or in-lieu-of, foreclosure. Properties or other assets (primarily repossessed assets formerly leased) are classified as OREO and other repossessed property and are reported at the lower of carrying value or fair value, less estimated costs to sell the property. Costs relating to the development or improvement of the assets are capitalized and costs relating to holding the assets are charged to expense. The Company had $15.5 million of such assets at March 31, 2009. When significant adjustments were based on unobservable inputs, such as when a current appraised value is not available or management determines the fair value of the collateral is further impaired below appraised value and there is no observable market price, the resulting fair value measurement has been categorized as a Level 3 measurement.

Debt obligations and structured securities. The Company previously wrote down its trust-preferred CDO portfolio to $0.9 million when it determined these CDOs were other-than-temporarily impaired under generally accepted accounting principles due to the continued expected weakness of the U.S. economy, the decline in the market value of these CDOs, credit rating downgrades and the increase in deferrals and defaults by the issuers of the underlying CDOs. These CDOs represent interests in various trusts, each of which is collateralized with trust preferred debt issued by other financial institutions. The $0.9 million CDO carrying value approximates market value.

FSP FAS 115-2

The Company has elected to apply the provisions of FSP FAS 115-2 as of January 1, 2009 to its available-for-sale and held-to-maturity investment portfolios. Under FSP FAS 115-2, the other-than-temporary impairment is separated into (a) the amount of total impairment related to the credit loss and (b) the amount of the total impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total impairment related to all other factors is recognized in other comprehensive income. The other-than-temporary impairment is presented in the statement of operations with an offset for the amount of the total other-than-temporary impairment that is recognized in other comprehensive income.

As part of this adoption, the Company applied the criteria of FSP FAS 115-2 in the determination of the amount of credit and other losses applicable to debt instruments held in its available-for-sale and held-to-maturity investment portfolios. The Company utilized a valuation specialist to evaluate and assist the Company in the determination of the amount and class of losses in its collateralized mortgage and collateralized debt obligation portfolios. In connection with this valuation, the Company evaluated significant inputs such as default rates, delinquency rates, collateral value ratios, subordination levels, vintage, geographic concentration and credit ratings of the securities in question.

Under the provisions of FSP FAS 115-2, if the Company does not intend to sell and it is not more likely than not that the company will be required to sell the impaired securities before recovery of the amortized cost basis, the Company recognizes the cumulative effect of initially applying this FSP as an adjustment to the opening balance of retained earnings with a corresponding adjustment to accumulated other comprehensive income, including related tax effects. The Company elected to early adopt FSP FAS 115-2 on its impaired securities portfolio since it provides more transparency in the consolidated financial statements related to the bifurcation of the credit and non-credit losses.

The following table provides the impact of adoption of FSP FAS 115-2 on the Company’s balance sheet as of January 1, 2009:

		Unrealized								Unrealized
		Non-Credit				Cumulative				Non-Credit
		Losses Prior to				Effect				Losses After
($ in thousands)		Adoption				Adjustment				Adoption
Unrealized non-credit impairment losses on held-to-maturity securities		$	—			$	4,705			$	4,705
Unrealized non-credit impairment losses on available-for-sale securities			—				2,831				2,831
Pre-tax cumulative effect adjustment							7,536
Reversal of tax effect							(2,688	)
Cumulative effect adjustment, net						$	4,848

For the period ended March 31, 2009, the Company determined that certain collateralized mortgage debt securities met the criteria of FSP FAS 115-2 for bifurcation of the credit losses and other market losses. The impairment credit loss related to these debt securities for the period ended March 31, 2009 was $2.0 million. The remaining loss due to other market factors was $2.0 million.

The following table presents a rollforward of the amount related to impairment credit losses recognized in earnings:

		Debt Obligations and				Private Label Mortgage-
(in thousands)		Structured Securities				Backed Securities
Beginning balance of impairment losses held in other comprehensive income		$	4,705			$	2,831
Current period other-then temporary impairment credit losses recognized though earnings			—				2,022
Reductions for securities sold during the period			—				—
Additions or reductions in credit losses due to change of intent to sell			—				—
Reductions for increases in cash flows to be collected on impaired securities			—				—
Ending balance of net unrealized gains and (losses) held in other comprehensive income		$	4,705			$	4,853

Note 3. Earnings Per Share

Diluted earnings (loss) per share is based on the weighted average outstanding common shares during each period, including common stock equivalents. Basic earnings (loss) per share is based on the weighted average outstanding common shares during the period.

Basic and diluted earnings (loss) per share, based on the weighted average outstanding shares, are summarized as follows:

		Three Months Ended
		March 31,
		2009				2008
		(in thousands, except per share
		amounts)
Basic:
Net income (loss) available to common stockholders		$	(88,874	)		$	4,142
Average common shares outstanding			38,096				29,544
Earnings (loss) per share		$	(2.33	)		$	0.14
Diluted:
Net income (loss) available to common stockholders		$	(88,874	)		$	4,142
Average common shares outstanding			38,096				29,544
Stock option adjustment			—				435
Stock warrant adjustment			—				568
Average common equivalent shares outstanding			38,096				30,547
Earnings (loss) per share		$	(2.33	)		$	0.14

As of March 31, 2009, all stock options, stock warrants and restricted stock awards were considered anti-dilutive and excluded for purposes of calculating diluted earnings per share.

Note 4. Securities

Carrying amounts and fair values of investment securities at March 31, 2009 and December 31, 2008 are summarized as follows (in thousands):

		March 31, 2009
						OTTI
						Recognized
						in Other				Net				Gross				Gross
		Amortized				Comprehensive				Carrying				Unrealized				Unrealized				Fair
Securities held to maturity		Cost				Loss				Amount				Gains				(Losses)				Value
Debt obligations and structured securities		$	5,624			$	(4,705	)		$	919			$	—			$	—			$	919
Municipal obligations			5,559				—				5,559				119				—				5,678
Other			1,500				—				1,500				—				—				1,500
		$	12,683			$	(4,705	)		$	7,978			$	119			$	—			$	8,097

						OTTI
						Recognized
						in Other				Gross				Gross
		Amortized				Comprehensive				Unrealized				Unrealized				Fair
Securities available for sale		Cost				Loss				Gains				(Losses)				Value
U.S. Treasury securities		$	8,050			$	—			$	33			$	—			$	8,083
Municipal obligations			13,009				—				267				(55	)			13,221
Adjustable-rate preferred stock			18,081				—				51				(1,042	)			17,090
Direct obligation and GSE mortgage-backed securities			369,445				—				9,391				(778	)			378,058
Private label mortgage-backed securities			21,104				(4,878	)			87				(2,707	)			13,606
Debt obligations and structured securities			32,239				—				—				(19,508	)			12,731
Other			15,312				—				26				(26	)			15,312
		$	477,240			$	(4,878	)		$	9,855			$	(24,116	)		$	458,101
Securities measured at fair value
U.S. Government-sponsored agencies																		$	2,550
Municipal obligations																			103
Direct obligation and GSE mortgage-backed securities																			91,183
Private label mortgage-backed securities																			23,646
																		$	117,482

		December 31, 2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
Securities held to maturity		Cost				Gains				(Losses)				Value
Debt obligations and structured securities		$	1,219			$	—			$	—			$	1,219
Municipal obligations			5,559				104				—				5,663
Other			1,500				—				—				1,500
		$	8,278			$	104			$	—			$	8,382
Securities available for sale
U.S. Treasury securities		$	8,102			$	68			$	—			$	8,170
Municipal obligations			13,183				167				(56	)			13,294
Direct obligation and GSE mortgage-backed securities			338,697				5,124				(935	)			342,886
Private label mortgage-backed securities			21,197				—				(5,474	)			15,723
Adjustable-rate preferred stock			52,001				850				(25,129	)			27,722
Debt obligations and structured securities			32,250				2				(15,951	)			16,301
Other			13,924				1				(159	)			13,766
		$	479,354			$	6,212			$	(47,704	)		$	437,862
Securities measured at fair value
U.S. Government-sponsored agency securities														$	2,511
Municipal obligations															103
Direct obligation and GSE mortgage-backed securities															93,918
Private label mortgage-backed securities															22,705
														$	119,237

The Company conducts an other-than-temporary impairment analysis of its securities portfolio on a quarterly basis. The initial indication of other-than-temporary impairment for both debt and equity securities is a decline in the market value below the amount recorded for an investment, and the severity and duration of the decline. In determining whether an impairment is other-than-temporary, the Company considers the length of time and the extent to which the market value has been below cost, recent events specific to the issuer, including investment downgrades by rating agencies and economic conditions of its industry, and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. For marketable equity securities, the Company also considers the issuer’s financial condition, capital strength, and near-term prospects.

For debt securities and for our ARPS portfolio that are treated as debt securities for the purpose of other-than-temporary analysis, the Company also considers the cause of the price decline (general level of interest rates and industry-and issuer-specific factors), the issuer’s financial condition, near-term prospects and current ability to make future payments in a timely manner, the issuer’s ability to service debt, and any change in agencies’ ratings at evaluation date from acquisition date and any likely imminent action. For ARPS securities with a fair value below cost that is not attributable to the credit deterioration of the issuer, such as a decline in cash flows from the security or a downgrade in the security’s rating below investment grade, the Company may avoid recognizing an other-than-temporary impairment charge by asserting that it has the intent and ability to continue holding the securities for a sufficient period to allow for an anticipated recovery in market value. This assessment may include the intent and ability to hold the securities indefinitely.

At March 31, 2009, the Company was holding ARPS of six issuers with an aggregate fair value of $17.1 million and an aggregate unrealized loss of $1.0 million. The majority of these securities were below investment grade (i.e. are rated BBB- or lower) and continue to pay dividends. Since the Company no longer has the intent and ability to hold these securities indefinitely until they recover, and the ratings on these securities are below investment grade, the declines in fair value have been deemed to be other-than-temporary.

Gross unrealized losses at March 31, 2009 are primarily caused by interest rate changes, credit spread widening and reduced liquidity in applicable markets. The Company has reviewed securities on which there is an unrealized loss in accordance with its accounting policy for other-than-temporary impairment described above and recorded impairment charges totaling $38.4 million for the three months ended March 31, 2009. This includes $36.4 million related to impairment losses in the Company’s ARPS and $2.0 million related to a collateralized mortgage obligation (“CMO”).

The Company does not consider any other securities to be other-than-temporarily impaired as of March 31, 2009. However, without recovery in the near term such that liquidity returns to the applicable markets and spreads return to levels that reflect underlying credit characteristics, additional other-than-temporary impairments may occur in future periods. At March 31, 2009, the Company had the ability and intent to hold all securities with significant unrealized losses in the available-for-sale portfolio.

Information pertaining to securities with gross unrealized losses at March 31, 2009 and December 31, 2008, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

		March 31, 2009
		Less Than Twelve Months								Over Twelve Months
		Gross								Gross
		Unrealized				Fair				Unrealized				Fair
($ in thousands)		Losses				Value				Losses				Value
Securities held to maturity
Debt obligations and structured securities		$	—			$	—			$	4,705			$	919
Municipal Obligations			—				—				—				—
Other			—				—				—				—
		$	—			$	—			$	4,705			$	919

		March 31, 2009
		Less Than Twelve Months								Over Twelve Months
		Gross								Gross
		Unrealized				Fair				Unrealized				Fair
($ in thousands)		Losses				Value				Losses				Value
Securities available for sale
U.S. Treasury securities		$	—			$	—			$	—			$	—
Municipal obligations			55				1,922				—				—
Direct obligation and GSE mortgage-backed securities			237				34,843				541				22,045
Private label mortgage-backed securities			—				—				7,585				13,606
Adjustable-rate preferred stock			1,042				17,038				—				—
Debt obligations and structured securities			1,398				724				18,110				12,007
Other			—				—				26				12,849
		$	2,732			$	54,527			$	26,262			$	60,507

		December 31, 2008
		Less Than Twelve Months								Over Twelve Months
		Gross								Gross
		Unrealized				Fair				Unrealized				Fair
		Losses				Value				Losses				Value
Securities available for sale
U.S. Treasury securities		$	—			$	—			$	—			$	—
Municipal obligations			55				2,151				1				292
Direct obligation and GSE mortgage-backed securities			515				36,302				420				33,889
Private label mortgage-backed securities			2,695				3,047				2,779				10,404
Adjustable-rate preferred stock			5,255				6,770				19,874				10,023
Debt obligations and structured securities			1,125				888				14,826				15,300
Other			—				—				159				12,591
		$	9,645			$	49,158			$	38,059			$	82,499

At March 31, 2009 and December 31, 2008, 29 and 36 debt securities (excluding ARPS, debt obligations and other structured securities), respectively, have unrealized losses with aggregate depreciation of approximately 11.5% and 7.5%, respectively, from the Company’s amortized cost basis. These unrealized losses relate primarily to fluctuations in the current interest rate environment. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysis reports. Since material downgrades have not occurred and management has the ability and intent to hold debt securities for the foreseeable future, none of the securities described in the above table or in this paragraph were deemed to be other than temporarily impaired.

At March 31, 2009 and December 31, 2008, 3 and 2 debt obligations and structured securities, respectively, have unrealized losses with aggregate depreciation of approximately 60.5% and 49.6%, respectively, from the Company’s amortized cost basis. These unrealized losses relate primarily to fluctuations in the current interest rate environment, and specifically to the widening of credit spreads on virtually all corporate and structured debt which began in 2007. All of these securities remained investment grade. Because the Company has the ability and intent to hold the investments until a recovery of fair value, which may be maturity, it does not consider these investments to be other than temporarily impaired.

At March 31, 2009 and December 31, 2008, 3 and 5 investments in ARPS, respectively, have unrealized losses with aggregate depreciation of 5.8% and 58.4%, respectively, from the Company’s amortized cost basis. This depreciation began in the third quarter of 2007. The decrease in unrealized losses on the ARPS portfolio is due to the other-than-temporary impairment charges mentioned previously as of March 31, 2009. The entire ARPS portfolio has now been other than temporarily impaired as of March 31, 2008.

At March 31, 2009, the combined net unrealized loss on our debt and other structured securities portfolios classified as available-for-sale was $19.5 million, compared with $16.0 million at December 31, 2008. The increase in unrealized losses is primarily due to additional losses from the impairment of the ARPS portfolio caused by continuing deterioration of the financial markets, which is the basis for the underlying debt in substantially all of the debt and other structured securities the Company holds. The Company is actively monitoring its debt and other structured securities portfolios classified as available-for-sale for declines in fair value that are considered other-than-temporary. These combined unrealized losses were not considered as other-than temporary as of March 31, 2009.

The following table summarizes the Company’s investment ratings position as March 31, 2009:

		Securities ratings profile
		As of March 31, 2009
						Investment- grade												Noninvestment-grade
(in thousands)		AAA				AA+ to AA-				A+ to A-				BBB+ to BBB-				BB+ and below				Totals
Municipal obligations		$	7,585			$	3,302			$	6,900			$	1,096			$	—			$	18,883
Direct & GSE mortgage-backed securities			469,241				—				—				—				—				469,241
Private label mortgage-backed securities			27,641				—				5,636				—				3,975				37,252
Adjustable-rate preferred stock			—				—				—				4,685				12,405				17,090
Debt obligations and structured securities			—				—				12,672				919				59				13,650
Total		$	504,467			$	3,302			$	25,208			$	6,700			$	16,439			$	556,116

The amortized cost and fair value of securities as of March 31, 2009, by contractual maturities, are shown below. The actual maturities of the mortgage-backed securities may differ from their contractual maturities because the loans underlying the securities may be repaid without any penalties. Therefore, these securities are listed separately in the maturity summary. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

		Amortized				Fair
(in thousands)		Cost				Value
Securities held to maturity
Due in one year or less		$	—			$	—
Due after one year through five years			2,025				2,064
Due after five years through ten years			2,534				2,601
Due after ten years			6,624				1,932
Other			1,500				1,500
		$	12,683			$	8,097
Securities available for sale
Due in one year or less		$	9,837			$	9,832
Due after one year through five years			16,589				15,820
Due after five years through ten years			5,902				6,041
Due after ten years			39,051				19,432
Mortgage backed securities			390,549				391,664
Other			15,312				15,312
		$	477,240			$	458,101

Note 5. Loans

The components of the Company’s loan portfolio as of March 31, 2009 and December 31, 2008 are as follows (in thousands):

		March 31,				December 31,
		2009				2008
Construction and land development		$	793,545			$	820,874
Commercial real estate			1,827,223				1,763,392
Residential real estate			586,509				589,196
Commercial and industrial			806,818				860,280
Consumer			71,150				71,148
Less: net deferred loan fees			(9,504	)			(9,179	)
			4,075,741				4,095,711
Less:
Allowance for loan losses			(77,184	)			(74,827	)
		$	3,998,557			$	4,020,884

Information about impaired and nonaccrual loans as of March 31, 2009 and December 31, 2008 is as follows (in thousands):

		March 31,				December 31,
		2009				2008
Impaired loans with a specific valuation allowance under SFAS No. 114		$	68,993			$	71,540
Impaired loans without a specific valuation allowance under SFAS No. 114			127,624				106,863
Total impaired loans		$	196,617			$	178,403
Related allowance for loan losses on impaired loans		$	21,200			$	14,072
Total nonaccrual loans		$	98,653			$	58,302
Loans past due 90 days or more and still accruing		$	53,239			$	11,515
Average balance of impaired loans during the period		$	187,510			$	192,561