1.	We note your purchase of certain assets and liabilities of Heritage Community Bank from the FDIC on February 27, 2009.  Please tell us the following information:

a.

Please tell us and revise your future filings to more clearly disclose how you recorded the purchase of these loans in your financial statements.  Please tell us and disclose how you determined the fair value of the loans purchased and whether the FDIC agreement was contemplated in this determination.

b.	From your disclosure on page 10, you appear to have purchased loans with a total contractual balance of $138.8 million.  However, on page 8 you state that you purchased $159.2 million in loans.  Please reconcile this apparent inconsistency.

c.	Please tell us how you determined the value of the FDIC reimbursement agreement.  In this regard, you disclose on page 10 that you have recorded the value of this agreement at $65.5 million, however, your estimate of uncollectible cash flows on SOP 03-3 loans is only $47 million.

d.	Please tell us and disclose in future filings how you intend to account for this agreement going forward (i.e. indemnification or derivative accounting).

a.

In future filings, to the extent our purchase of loans originated by Heritage Community Bank is discussed, we will include the following disclosure, “On the acquisition date, the preliminary fair value of SOP 03-3 loans was determined based on assigned risk ratings, expected cash flows and the fair value of the collateral.  The fair value of non SOP 03-3 loans was determined based on preliminary estimates of default probabilities.”

As it relates to the FDIC agreement, we will include the following disclosure, “Due to the loss sharing agreement with the Federal Deposit Insurance Corporation (“FDIC”), the Bank recorded a receivable from the FDIC equal to the corresponding reimbursement percentages on the estimated losses embedded in the fair values of the loans.”

 

We will also include the following disclosure in “Accounting Policies” footnote, “Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date and prohibit the carryover of the related allowance for loan losses, which include loans purchased in the Heritage Community Bank acquisition. Purchased loans are accounted for under American Institute of Certified Public Accountants (AICPA) Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3), when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status. Generally, acquired loans that meet the Company’s definition for nonaccrual status fall within the scope of SOP 03-3. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference which is included in the carrying amount of the loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or a reversal of the nonaccretable difference with a positive impact on interest income.”

b.

We believe you are adding the contractually required payments receivable for SOP 03-3 loans ($93.2 million) and the March 31, 2009 carrying amount of the non SOP 03-3 loans ($45.6 million).  We did not disclose the contractually required payments receivable for all non SOP 03-3 loans acquired, as this is not required.  The $159.2 million in loans purchased at the acquisition date represents our preliminary estimate of the fair value of all covered assets.  The reduction of the carrying amount of purchased loans from $159.2 million to $158.3 million resulted primarily from loan payments from customers.

c.

In addition to the estimated reimbursements from SOP 03-3 loans, we also estimated reimbursements from non SOP 03-3 loans that were considered in calculating the $65.5 million FDIC reimbursement.  The reimbursements from non SOP 03-3 loans was determined based on our preliminary estimate of default probabilities of these loans.

d.	In future filings, to the extent our FDIC reimbursement agreement is discussed, we will include the following disclosure, “The Company accounts for its loss sharing agreement with the FDIC as an indemnification asset.”

2.

We note that you recorded an intangible asset in connection with your purchase of certain assets and liabilities of Heritage Community Bank.  Please tell us how you concluded that this purchase constituted the acquisition of a business as that term is defined by paragraph 3(d) of SFAS 141(R).  Please revise to include a description of the nature of the intangible asset recorded in connection with this transaction.

 

 

 

The Company acknowledges that:

·	the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·	staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·	the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

/s/ Jill. E. York