Classified assets to Tier I capital plus allowance for credit losses, a common regulatory measure of asset quality, improved to 34 percent at December 31, 2012 from 39 percent at December 31, 2011. 1

Net loss on sales and valuation of repossessed assets (primarily other real estate) was $0.5 million for the fourth quarter of 2012 compared to $0.1 million for the third quarter 2012 and $7.7 million in the fourth quarter 2011. At December 31, 2012, other repossessed assets were valued at $77 million compared to $78 million at September 30, 2012 and $89 million one year ago.

During the quarter, the Company completed its acquisition of Western Liberty Bancorp, which increased assets, loans and deposits by $195 million, $91 million, and $117 million, respectively, and recorded a gain on bargain purchase of $17.6 million. The Company issued 3.0 million shares in conjunction with closing this transaction.

The Company transferred its remaining $34 million in affinity credit card receivables to loans held for sale during the quarter and recognized a loan charge-off of $2.6 million in a markdown to fair value. Disposition costs of $1.6 million (net of tax) were also recognized in discontinued operations.

Balance Sheet

Gross loans totaled $5.71 billion at December 31, 2012, an increase of $376 million from September 30, 2012 and an increase of $929 million from $4.78 billion at December 31, 2011. At December 31, 2012, the allowance for credit losses was 1.67 percent of total loans down from 1.83 percent at September 30, 2012 and 2.07 percent at December 31, 2011.

Deposits totaled $6.46 billion at December 31, 2012, an increase of $293 million from $6.16 billion at September 30, 2012 and an increase of $797 million from $5.66 billion at December 31, 2011.

Non-interest bearing deposits increased $92 million to $1.93 billion at December 31, 2012 from September 30, 2012 and increased $375 million from $1.56 billion at December 31, 2011. Non-interest bearing deposits comprised 29.9 percent of total deposits at December 31, 2012, compared to 27.5 percent a year ago. At December 31, 2012, the Company’s loans were 88.5 percent of deposits compared to 86.5 percent at September 30, 2012 and 84.5 percent at December 31, 2011.

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