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

or

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

Commission File Number: 001-32550

 

WESTERN ALLIANCE BANCORPORATION

(Exact Name of Registrant as Specified in Its Charter)

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,” “large 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: 72,482,477 shares as of October 31, 2009.

 

 

Table of Contents

Index			Page
Part I. Financial Information
Item 1 — Financial Statements
Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008			3
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008			4
Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2009			5
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 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			31
Item 3 — Quantitative and Qualitative Disclosures about Market Risk			53
Item 4 — Controls and Procedures			53
Part II. Other Information
Item 1 — Legal Proceedings			53
Item 1A — Risk Factors			54
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds			54
Item 3 — Defaults Upon Senior Securities			54
Item 4 — Submission of Matters to a Vote of Security Holders			54
Item 5 — Other Information			54
Item 6 — Exhibits			55
Signatures			56
Exhibit Index			57
EX-31.1
EX-31.2
EX-32

Part I. Financial Information

ITEM I. FINANCIAL STATEMENTS

Western Alliance Bancorporation and Subsidiaries

Consolidated Balance Sheets
September 30, 2009 and December 31, 2008
(Unaudited)

		September 30,				December 31,
($ in thousands, except per share amounts)		2009				2008
Assets
Cash and due from banks		$	752,867			$	136,791
Federal funds sold and other			4,998				3,163
Cash and cash equivalents			757,865				139,954
Money market investments			55,051				—
Securities held to maturity (approximate fair value $7,483 and $8,382, respectively)			7,483				8,278
Securities available for sale			588,431				437,862
Securities measured at fair value			76,834				119,237
Gross loans, including net deferred loan fees			3,967,962				4,095,711
Less: Allowance for loan losses			(104,181	)			(74,827	)
Loans, net			3,863,781				4,020,884
Premises and equipment, net			128,647				140,910
Other real estate owned			72,795				14,545
Bank owned life insurance			91,841				90,700
Investment in restricted stock			41,061				41,047
Accrued interest receivable			19,090				19,719
Deferred tax assets, net			56,241				34,400
Goodwill			33,390				78,966
Other intangible assets, net of accumulated amortization of $10,159 and $7,324, respectively			18,199				21,034
Income tax receivable			2,236				48,367
Other assets			18,372				26,858
Total assets		$	5,831,317			$	5,242,761
Liabilities and Stockholders’ Equity
Liabilities
Noninterest-bearing demand deposits		$	1,154,770			$	1,010,625
Interest-bearing deposits:
Demand			339,431				253,529
Savings and money market			1,802,602				1,351,502
Time, $100 and over			874,969				638,806
Other time			580,463				397,804
			4,752,235				3,652,266
Customer repurchase agreements			264,143				321,004
Federal Home Loan Bank/Federal Reserve advances and other borrowings:
One year or less			70,000				586,120
Over one year ($0 and $31,515 measured at fair value, respectively)			9,386				50,998
Junior subordinated debt measured at fair value			41,859				43,038
Subordinated debt			60,000				60,000
Accrued interest payable and other liabilities			30,727				33,838
Total liabilities			5,228,350				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			127,248				125,203
Common stock, par value $.0001; shares authorized 100,000,000; shares issued and outstanding 2009: 72,489,100; 2008: 38,600,788			7				4
Additional paid-in capital			682,043				484,205
Retained earnings (deficit)			(212,365	)			(85,424	)
Accumulated other comprehensive loss — net unrealized loss on held-to-maturity securities			(1,318	)			—
Accumulated other comprehensive income (loss) — net unrealized gain (loss) on available-for-sale securities			7,352				(28,491	)
Total stockholders’ equity			602,967				495,497
Total liabilities and stockholders’ equity		$	5,831,317			$	5,242,761

See Notes to Unaudited Consolidated Financial Statements.

Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2009 and 2008
(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
($ in thousands, except per share amounts)		2009				2008				2009				2008
Interest income on:
Loans, including fees		$	61,380			$	64,977			$	187,901			$	193,498
Securities — taxable			5,730				7,239				17,939				24,883
Securities — nontaxable			55				311				350				996
Dividends — taxable			32				854				335				2,310
Dividends — nontaxable			74				564				796				1,541
Short term investments			334				—				519				—
Federal funds sold and other			141				80				370				275
Total interest income			67,746				74,025				208,210				223,503
Interest expense on:
Deposits			16,067				16,844				48,130				53,566
Customer repurchase agreements			867				1,233				3,163				4,263
Short-term borrowings			374				3,744				1,298				13,468
Long-term borrowings			211				700				1,399				2,110
Junior subordinated debt			735				1,004				2,377				3,171
Subordinated debt			522				638				1,342				2,199
Total interest expense			18,776				24,163				57,709				78,777
Net interest income			48,970				49,862				150,501				144,726
Provision for loan losses			50,750				14,716				108,307				35,927
Net interest income (loss) after provision for loan losses			(1,780	)			35,146				42,194				108,799
Noninterest income (loss):
Securities impairment charges			(1,044	)			(32,688	)			(44,083	)			(37,968	)
Portion of impairment charges recognized in other comprehensive loss (before taxes)			—				—				2,047				—
Net securities impairment charges recognized in earnings			(1,044	)			(32,688	)			(42,036	)			(37,968	)
Derivative gain (loss)			(70	)			176				(200	)			983
Unrealized gain (loss) on assets and liabilities measured at fair value, net			1,987				5,075				5,609				6,343
Net gain on sale of investment securities			4,146				87				15,933				304
Net gain (loss) on repossessed assets			(7,283	)			(32	)			(16,193	)			321
			(2,264	)			(27,382	)			(36,887	)			(30,017	)
Trust and investment advisory services			2,369				2,668				6,967				8,199
Service charges			2,212				1,586				5,874				4,424
Income from bank owned life insurance			574				593				1,523				1,966
Miscellaneous noninterest income			2,987				2,565				7,803				7,840
Total noninterest income (loss)			5,878				(19,970	)			(14,720	)			(7,588	)
Noninterest expense:
Salaries and employee benefits			24,488				21,812				73,839				65,263
Occupancy			5,428				5,280				15,953				15,487
Customer service			2,827				910				8,777				3,223
Insurance			2,328				1,006				9,039				2,851
Legal, professional and director fees			1,827				1,066				5,077				3,234
Data processing			951				1,695				3,303				3,901
Intangible amortization			945				920				2,835				2,624
Advertising, public relations and business development			936				3,123				4,185				7,596
Travel and automobile			549				604				1,391				1,306
Telephone			513				415				1,500				1,200
Audits and exams			397				278				1,368				1,563
Correspondent banking service charges and wire transfer costs			380				382				1,159				1,017
Supplies			330				374				1,220				1,156
Goodwill impairment charge			576				79,242				45,576				79,242
Other			2,953				2,817				7,318				7,456
Total noninterest expenses			45,428				119,924				182,540				197,119
Income (loss) before income taxes			(41,330	)			(104,748	)			(155,066	)			(95,908	)
Income tax expense (benefit)			(17,415	)			(10,040	)			(30,572	)			(7,757	)
Net income (loss)			(23,915	)			(94,708	)			(124,494	)			(88,151	)
Preferred stock dividends			1,750				—				5,250				—
Accretion on preferred stock discount			689				—				2,045				—
Net income (loss) available to common stockholders		$	(26,354	)		$	(94,708	)		$	(131,789	)		$	(88,151	)
Earnings (loss) per share:
Basic		$	(0.37	)		$	(2.84	)		$	(2.42	)		$	(2.86	)
Diluted		$	(0.37	)		$	(2.84	)		$	(2.42	)		$	(2.86	)

See Notes to Unaudited Consolidated Financial Statements.

Consolidated Statement of Stockholders’ Equity
Nine Months Ended September 30, 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
Issuance of 33,441 shares of common stock, net of offering costs of $9,582							33,441				3				—				—				191,059				—				—				191,062
Stock options exercised							28				—				—				—				78				—				—				78
Stock-based compensation expense							171				—				—				—				2,352				—				—				2,352
Restricted stock granted, net of forfeitures							248				—				—				—				4,349				—				—				4,349
Accretion on preferred stock discount							—				—				—				2,045				—				(2,045	)			—				—
Dividends on preferred stock							—				—				—				—				—				(5,250	)			—				(5,250	)
Comprehensive income (loss):
Net loss		$	(124,494	)			—				—				—				—				—				(124,494	)			—				(124,494	)
Other comprehensive income (loss)
Unrealized holding gains on securities available for sale arising during the period, net of taxes of $5,323			9,886
Less reclassification adjustment for impairment losses included in net loss, net of taxes of $2,835			39,201
Plus reclassification adjustment for gains included in net loss, net of taxes of $6,219			(9,714	)
Net unrealized holding gains			39,373				—				—				—				—				—				—				39,373				39,373
		$	(85,121	)
Balance, September 30, 2009							72,489			$	7				140			$	127,248			$	682,043			$	(212,365	)		$	6,034			$	602,967

See Notes to Unaudited Consolidated Financial Statements.

Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2009 and 2008 (Unaudited)
($ in thousands)

		2009				2008
Cash Flows from Operating Activities:
Net income (loss)		$	(124,494	)		$	(88,151	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses			108,307				35,927
Goodwill impairment charge			45,576				79,242
Securities impairment charges			42,036				37,968
Change in fair value of assets and liabilities measured at fair value			(5,409	)			(7,326	)
Net gain on sale of investment securities			(15,933	)			(304	)
Net loss on repossessed assets			16,193				321
Depreciation and amortization			8,865				9,390
Deferred taxes and income taxes receivable			(40,173	)			(15,221	)
Decrease (increase) in other assets			54,617				(2,056	)
(Decrease) increase in other liabilities			(3,111	)			9,064
Other operating activities, net			4,866				3,926
Net cash provided by operating activities			91,340				62,780
Cash Flows from Investing Activities:
Proceeds from maturities of securities			106,649				86,052
Purchases of securities and short term investments			(375,128	)			(167,233	)
Proceeds from the sale of securities			146,787				114,409
Net increase in loans made to customers, net of charge-offs			(25,648	)			(342,337	)
Purchase of premises and equipment			2,054				(6,482	)
Proceeds from sale of premises and equipment			—				20
Purchases (liquidations) of restricted stock			2				(14,478	)
Other investing activities, net			383				—
Net cash (used in) investing activities			(144,901	)			(330,049	)
Cash Flows from Financing Activities:
Net proceeds from stock issued in offerings			191,268				80,156
Net increase (decrease) in deposits			1,099,969				(37,917	)
Net (repayments on) proceeds from borrowings			(614,593	)			280,723
Proceeds from exercise of stock options and stock warrants			78				1,930
Cash dividends paid			(5,250	)			—
Stock repurchases			—				(356	)
Net cash provided by financing activities			671,472				324,536
Increase in cash and cash equivalents			617,911				57,267
Cash and Cash Equivalents, beginning of period			139,954				115,629
Cash and Cash Equivalents, end of period		$	757,865			$	172,896
Supplemental Disclosure of Cash Flow Information
Cash payments for interest		$	56,731			$	88,261
Cash payments for income taxes		$	—			$	6,983
Supplemental Disclosure of Noncash Investing and Financing Activities
Transfers of loans to other real estate owned, net		$	73,457			$	19,528

See Notes to Unaudited Consolidated Financial Statements.

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

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); fair value of other real estate owned; 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 accounting criteria for consolidation, 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 September 30, 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

Generally accepted accounting standards require 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 September 30, 2009 or December 31, 2008.

The estimated fair value amounts for September 30, 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.

Money market investments

The carrying amounts reported in the consolidated balance sheets for money market investments 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 collateralized debt obligations (CDOs) 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 CDOs 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 Federal Home Loan Bank (FHLB) system and maintain an investment in capital stock of the FHLB. Alta Alliance Bank is a member of the Federal Reserve Board (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 with adjustments that the Company believes a market participant would consider in determining fair value. 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) which the Company believes a market participant would consider in determining fair value. 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.

Reclassifications

Certain amounts in the consolidated financial statements as of and for the nine months ended September 30, 2009 and 2008 have been reclassified to conform to the current presentation. The reclassifications have no effect on net income or stockholders’ equity as previously reported.

Recent Accounting Pronouncements

In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161). This amendment was subsequently incorporated in Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging (ASC 815). ASC 815 now requires enhanced disclosures about (a) how and why the Company uses derivative instruments, (b) how derivative instruments and related hedge items are accounted for 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. This amendment was effective January 1, 2009 on a prospective basis, with comparative disclosures of earlier periods encouraged upon initial

adoption. The implementation of this amendment 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). This FSP was subsequently incorporated in ASC Topic 260, Earnings Per Share (ASC 260). ASC 260 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. This guidance applies to the calculation of EPS under ASC 260 for share-based payment awards with rights to dividends or dividend equivalents. This incorporated portion of ASC 260 was 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 standard. 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. This FSP was subsequently incorporated in ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820). ASC 820 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. ASC 820 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. This guidance 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 guidance prospectively, beginning July 1, 2008. This standard was utilized by the Company in the fair value determination of our 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 Office of the Chief Accountant (OCA) of the Securities and Exchange Commission (SEC) 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. SFAS 115 was subsequently incorporated in ASC Topic 320, Investments — Debt and Equity Securities (ASC 320). 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. This guidance was utilized by the Company in its determination of other-than-temporary impairment on its ARPS securities portfolio.

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 a more consistent determination of whether an other-than-temporary impairment has occurred and make the guidance consistent between EITF No. 99-20 and SFAS 115. FSP EITF 99-20-1 was subsequently incorporated in ASC 320. This guidance 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 this guidance did not have a significant impact on the Company’s consolidated financial statements.

On April 9, 2009, the FASB issued the following guidance, which is effective for third quarter reporting.

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). This FSP was subsequently incorporated in ASC 820. This guidance 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. ASC 820 requires an entity to base its conclusion about whether a transaction was not orderly on the weight of the evidence. This guidance also expanded certain disclosure requirements. The Company adopted this guidance during the first quarter of 2009. Adoption of this guidance 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). These FSPs were subsequently incorporated in ASC 320. This guidance (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 ASC 320, 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 this guidance during the first quarter of 2009. For further details of the Company’s adoption of this guidance 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). This guidance was subsequently incorporated in ASC Topic 825, Financial Instruments (ASC 825). ASC 825 requires an entity to provide disclosures about fair value of financial instruments in interim financial information as well as require those disclosures in summarized financial information at interim reporting periods. Under ASC 825, a publicly-traded company is required to 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 ASC Subtopic 825-50. Refer to Note 11 of the Unaudited Consolidated Financial Statements for the interim disclosures required by ASC 825.

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). This FSP was subsequently incorporated in ASC 805, Business Combinations (ASC 805). ASC 805 requires 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 ASC Topic 450, Contingencies (ASC 450). ASC 805 removes subsequent accounting guidance for assets and liabilities arising from contingencies and requires entities to develop a systematic and rational basis for subsequently measuring and accounting for assets and liabilities arising from contingencies. ASC 805 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 ASC 450. ASC 805 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. This guidance contained in ASC 805 is effective for assets or liabilities arising from contingencies the Company acquires in business combinations occurring after January 1, 2009.

On May 28, 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165). SFAS 165 was subsequently incorporated in ASC Topic 855, Subsequent Events (ASC 855). Under ASC 855, companies are required to evaluate events and transactions that occur after the balance sheet date but before the date the financial statements are issued, or available to be issued in the case of non-public entities. ASC 855 requires entities to recognize in the financial statements the effect of all events or transactions that provide additional evidence of conditions that existed at the balance sheet date, including the estimates inherent in the financial preparation process. Entities shall not recognize

the impact of events or transactions that provide evidence about conditions that did not exist at the balance sheet date but arose after that date. ASC 855 also requires entities to disclose the date through which subsequent events have been evaluated. ASC 855 was effective for interim and annual reporting periods ending after June 15, 2009. The Company adopted the provisions of ASC 855 for the quarter ended June 30, 2009.

On June 12, 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets (SFAS 166), and SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167), which change the way entities account for securitizations and special-purpose entities. SFAS 166 was subsequently incorporated in ASC Topic 860, Transfers and Servicing (ASC 860). ASC 860 requires more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. ASC 860 also eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional disclosures. ASC 860 changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. This guidance in ASC 860 will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The recognition and measurement provisions of ASC 860 shall be applied to transfers that occur on or after the effective date. The Company will adopt these provisions of ASC 860 on January 1, 2010, as required. Management does not believe there will be a material impact on the Company’s consolidated financial statements upon adoption of these statements.

On June 29, 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162 (SFAS 168). SFAS 168 establishes the ASC as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. SFAS 168 was subsequently incorporated in ASC Topic 105, Generally Accepted Accounting Principles (ASC 105). This guidance in ASC 105 will be effective for financial statements issued for interim and annual periods ending after September 15, 2009, for most entities. On the effective date, all non-SEC accounting and reporting standards will be superseded. The Company adopted the provisions of ASC 105 for the quarter ended September 30, 2009.

The FASB issued Accounting Standards Update (ASU) 2009-05, Fair Value Measurements and Disclosures (Topic 820) — Measuring Liabilities at Fair Value in August 2009 to provide guidance when estimating the fair value of a liability. When a quoted price in an active market for the identical liability is not available, fair value should be measured using (a) the quoted price of an identical liability when traded as an asset; (b) quoted prices for similar liabilities or similar liabilities when traded as assets; or (c) another valuation technique consistent with the principles of Topic 820, such as an income approach or a market approach. If a restriction exists that prevents the transfer of the liability, a separate adjustment related to the restriction is not required when estimating fair value. The ASU was effective October 1, 2009 and will not have a material impact on financial position or operations of the Company.

ASU 2009-12, Fair Value Measurements and Disclosures (Topic 820) — Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), issued in September 2009, allows a company to measure the fair value of an investment that has no readily determinable fair market value on the basis of the investee’s net asset value per share as provided by the investee. This allowance assumes that the investee has calculated net asset value in accordance with the GAAP measurement principles of ASC Topic 946, Financial Services-Investment Companies (ASC 946), as of the reporting entity’s measurement date. Examples of such investments include investments in hedge funds, private equity funds, real estate funds and venture capital funds. The update also provides guidance on how the investment should be classified within the fair value hierarchy based on the value for which the investment can be redeemed. The amendment is effective for interim and annual periods ending after December 15, 2009 with early adoption permitted. The Company does not have investments in such entities and, therefore, there will be no impact to the financial statements.

Issued October 2009, ASU 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing amends ASC Topic 470, Debt (ASC 470), and provides guidance for accounting and reporting for own-share lending arrangements issued in contemplation of a convertible debt

issuance. At the date of issuance, a share-lending arrangement entered into on an entity’s own shares should be measured at fair value in accordance with ASC 820 and recognized as an issuance cost, with an offset to additional paid-in capital. Loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs. The amendments also require several disclosures including a description and the terms of the arrangement and the reason for entering into the arrangement. The effective dates of the amendments are dependent upon the date the share-lending arrangement was entered into and include retrospective application for arrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009. The Company has no plans to issue convertible debt and, therefore, does not expect the update to have an impact on its financial statements.

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

Accounting standards establish 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 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 and nine months ended September 30, 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 and Nine Month
		Periods Ended September 30, 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
(Three months ended September 30, 2009)
Securities measured at fair value		$	1,498			$	403			$	—			$	1,901
Junior subordinated debt			489				—				234				723
		$	1,987			$	403			$	234			$	2,624
(Nine Months Ended September 30, 2009)
Securities measured at fair value		$	4,893			$	641			$	—			$	5,534
Junior subordinated debt			716				—				697				1,413
		$	5,609			$	641			$	697			$	6,947

The difference between the aggregate fair value and the aggregate unpaid principal balance of junior subordinated debt was $24.6 million at September 30, 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 September 30, 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		September 30, 2009				(Level 1)				(Level 2)				(Level 3)
Assets:
Securities available for sale		$	588,431			$	73,876			$	514,555			$	—
Securities measured at fair value			76,834				—				76,834				—
Interest rate swaps			1,432				—				1,432				—
Total		$	666,697			$	73,876			$	592,821			$	—
Liabilities:
Junior subordinated debt		$	41,859			$	—			$	—			$	41,859
Interest rate swaps			1,432				—				1,432				—
Total		$	43,291			$	—			$	1,432			$	41,859

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			—				—				1,179				1,515
Included in other comprehensive income			—				—				—				—
Purchases, issuances, and settlements, net			—				—				—				30,000
Transfers in and/or out of Level 3			—				—				—				—
Ending balance September 30, 2009		$	—			$	—			$	(41,859	)		$	—
The amount of total gains for the period included in earnings attributable to the change in unrealized gains relating to assets and liabilities still held at the reporting date		$	—			$	—			$	1,179			$	1,515

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 fair value hierarchy as of September 30, 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 a specific valuation allowance		$	40,803			$	—			$	—			$	40,803
Goodwill valuation of reporting units			33,390				—				—				33,390
Other real estate owned			16,867				—				—				16,867
Collateralized debt obligations			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 $61.5 million and specific reserves in the allowance for loan losses of $20.7 million as of September 30, 2009.

Goodwill. In accordance with applicable accounting guidance, 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. For the quarter ended September 30, 2009 goodwill was further impaired by $0.6 million. 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 $45.6 million year-to-date was primarily based on the Company’s assumptions, and 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 $72.8 million of such assets at September 30, 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.

Collateralized debt obligations. 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.

Credit vs. non-credit losses

The Company has elected to apply provisions of ASC 320 as of January 1, 2009 to its available-for-sale and held-to-maturity investment portfolios. 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 ASC 320 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.

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 ASC 320 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 ASC 320 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 nine months ended September 30, 2009, the Company determined that certain collateralized mortgage debt securities met the applicable criteria bifurcation of the credit losses and other market losses. The impairment credit loss related to these debt securities for the nine months ended September 30, 2009 was $3.2 million. The remaining loss due to other market factors was $2.1 million.

The following table presents a rollforward of the amount related to impairment credit losses recognized in earnings for the nine months ended September 30, 2009:

		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 through earnings			2,643				988
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			—				(1,379	)
Ending balance of net unrealized gains and (losses) held in other comprehensive income		$	(2,062	)		$	(3,222	)

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								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
		(in thousands, except per share amounts)
Basic:
Net loss available to common stockholders		$	(26,354	)		$	(94,708	)		$	(131,789	)		$	(88,151	)
Average common shares outstanding			71,697				33,299				54,471				30,867
Loss per share		$	(0.37	)		$	(2.84	)		$	(2.42	)		$	(2.86	)
Diluted:
Net loss available to common stockholders		$	(26,354	)		$	(94,708	)		$	(131,789	)		$	(88,151	)
Average common equivalent shares outstanding			71,697				33,299				54,471				30,867
Loss per share		$	(0.37	)		$	(2.84	)		$	(2.42	)		$	(2.86	)

As of September 30, 2009 and 2008, 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 September 30, 2009 and December 31, 2008 are summarized as follows (in thousands):

		September 30, 2009
						OTTI
						Recognized
						in Other				Net				Gross				Gross
		Amortized				Comprehensive				Carrying				Unrealized				Unrealized				Fair
($ in thousands)		Cost				Loss				Amount				Gains				(Losses)				Value
Securities held to maturity
Collateralized debt obligations		$	2,980			$	(2,061	)		$	919			$	262			$	(262	)		$	919
Municipal obligations			5,064				—				5,064				—				—				5,064
Other			1,500				—				1,500				—				—				1,500
		$	9,544			$	(2,061	)		$	7,483			$	262			$	(262	)		$	7,483

						OTTI
						Recognized
						in Other				Gross				Gross
		Amortized				Comprehensive				Unrealized				Unrealized				Fair
		Cost				Loss				Gains				(Losses)				Value
Securities available for sale
Municipal obligations		$	344			$	—			$	20			$	—			$	364
Adjustable-rate preferred stock			7,825				—				9,063				—				16,888
Direct obligation and GSE residential mortgage-backed securities			490,048				—				12,269				(2,096	)			500,221
Private label residential mortgage-backed securities			16,566				(3,222	)			1,584				(956	)			13,972
Trust preferred securities			32,109				—				—				(10,998	)			21,111
Corporate bonds			19,972				—				129				—				20,101
Other			15,585				—				189				—				15,774
		$	582,449			$	(3,222	)		$	23,254			$	(14,050	)		$	588,431
Securities measured at fair value
U.S. Government-sponsored agencies																		$	2,548
Direct obligation and GSE residential mortgage-backed securities																			66,082
Private label mortgage-backed securities																			8,204
																		$	76,834

		December 31, 2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				(Losses)				Value
Securities held to maturity
Collateralized debt obligations		$	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 residential mortgage-backed securities			338,697				5,124				(935	)			342,886
Private label residential mortgage-backed securities			21,197				—				(5,474	)			15,723
Adjustable-rate preferred stock			52,001				850				(25,129	)			27,722
Trust preferred 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 residential mortgage-backed securities															93,918
Private label residential mortgage-backed securities															22,705
														$	119,237

Gross unrealized gains on the ARPS securities are considered after-tax amounts as the previous impairment losses on these securities were also not tax-effected. This was due to a deferred tax valuation allowance that was originally

booked on the ARPS impairment losses. Sales of these ARPS at current values would generate after-tax gains to the Company.

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.

Gross unrealized losses at September 30, 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 $42.0 million for the nine months ended September 30, 2009. This includes $36.4 million related to impairment losses in the Company’s ARPS, $1.8 million related to impairment losses to the Company’s CDO portfolio and $3.8 million related to the Company’s collateralized mortgage obligation (CMO) portfolio.

The Company does not consider any other securities to be other-than-temporarily impaired as of September 30, 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.

Information pertaining to securities with gross unrealized losses at September 30, 2009 and December 31, 2008, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

		September 30, 2009
		Less Than Twelve Months								Over Twelve Months
		Gross								Gross
		Unrealized				Fair				Unrealized				Fair
($ in thousands)		Losses				Value				Losses				Value
Securities held to maturity
Collateralized debt obligations		$	2,323			$	824			$	—			$	—
Other			—				—				—				—
		$	2,323			$	824			$	—			$	—

		September 30, 2009
		Less Than Twelve Months								Over Twelve Months
		Gross								Gross
		Unrealized				Fair				Unrealized				Fair
		Losses				Value				Losses				Value
Securities available for sale
Direct obligation and GSE residential mortgage-backed securities		$	1,711			$	143,614			$	385			$	25,854
Private label residential mortgage-backed securities			—				—				4,178				13,972
Trust preferred securities			—				—				10,998				21,111
		$	1,711			$	143,614			$	15,561			$	60,937