The covered FDIC-acquired loan discounts affecting the loss-share receivable was $56.8 million, or 94.5% of the loss-share receivable, for the second quarter 2013 compared with $63.6 million, or 97.8% of the loss-share receivable, for the linked quarter. The gross balance of covered FDIC-acquired assets decreased to $125.6 million for the second quarter of 2013 compared with $142.9 million for the linked quarter. The FDIC loss-share receivable as a percent of the covered FDIC-acquired assets increased to 38.3% compared with 36.4% for the linked quarter.

Asset Quality

Total non-performing assets, excluding FDIC-acquired assets, decreased to $15.3 million, or 1.14% of total assets, compared with $15.8 million, or 1.15% of total assets, for the linked quarter, but it increased from $11.5 million, or 1.08% of total assets, from the year-earlier quarter. Annualized net charge-offs to average outstanding loans, excluding FDIC-acquired loans, were 0.45% for the second quarter of 2013 compared with 0.27% for the linked quarter and 0.23% for the year-earlier quarter. Non-performing loans totaled $12.2 million, down from $12.7 million for the linked quarter, but up from $10.0 million for the year-earlier quarter. Other real estate owned and repossessed assets, excluding FDIC-acquired assets, totaled $3.0 million for the second quarter of 2013, in line with the $3.0 million for the linked quarter and up from the $1.5 million for the year-earlier quarter.

The provision for loan losses on non-FDIC-acquired loans decreased to $640,000 for the second quarter of 2013 from $750,000 for the year-earlier quarter, primarily driven by improving trends in total criticized and classified assets. For the second quarter in 2013, the allowance for loan losses represented 1.42% of total loans outstanding, excluding FDIC-acquired loans, versus 1.51% for the linked quarter and 1.61% for the year-earlier quarter. The improving loan loss allowance is primarily the result of declining criticized and classified assets as a percentage of total loans.

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