UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-33803

WESTERN LIBERTY BANCORP

(Exact name of registrant as specified in its charter)

Delaware		26-0469120
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

     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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ 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 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 o		Smaller reporting company þ		Non-accelerated filer o

     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

     As of November 8, 2011, the registrant had 14,333,623 shares of its common stock, par value $0.0001 per share, outstanding.

 

 

WESTERN LIBERTY BANCORP
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			3
Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010 (unaudited)			3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010 (unaudited)			4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2010 (unaudited)			5
Notes to Condensed Consolidated Financial Statements (unaudited)			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Quantitative and Qualitative Disclosures About Market Risk			36
Item 4. Controls and Procedures			36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 3. Defaults Upon Senior Securities			38
Item 4. (Removed and Reserved)			38
Item 5. Other Information			38
Item 6. Exhibits			38
Signatures			39
Exhibit 31.1			40
Exhibit 31.2			41
Exhibit 32.1			42
Exhibit 32.2			43
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WESTERN LIBERTY BANCORP

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
($ in 000’s)

		September 30, 2011				December 31, 2010
ASSETS
Cash and due from banks		$	4,815			$	11,675
Money market funds			100				52,206
Interest-bearing deposits in banks			90,089				39,346
Cash and cash equivalents			95,004				103,227
Certificates of deposits			246				26,889
Securities, available for sale			773				1,819
Securities, held to maturity (fair value of $3,635 and $5,287, respectively)			3,631				5,314
Loans, net of allowance ($3,005 and $36, respectively)			98,771				106,223
Premises and equipment, net			927				1,228
Other real estate owned, net			4,119				3,406
Goodwill			—				5,633
Other intangibles, net			695				768
Accrued interest receivable and other assets			1,974				3,039
Total assets		$	206,140			$	257,546
LIABILITIES AND STOCKHOLDERS’ EQUITY
Non-interest bearing demand		$	52,770			$	67,087
Interest bearing			72,013				93,199
Total deposits			124,783				160,286
Contingent consideration			—				1,816
Accrued interest payable and other liabilities			684				1,615
Total liabilities			125,467				163,717
Stockholders’ Equity:
Preferred stock, $.0001 par value; 1,000,000 shares authorized; None issued or outstanding			—				—
Common stock, $.0001 par value; 100,000,000 shares authorized; 15,088,023 issued and 14,448,610, and 15,088,023, respectively outstanding			1				1
Additional paid-in capital			117,728				117,317
Accumulated deficit			(35,361	)			(23,489	)
Treasury stock, at cost, 639,413 and 0 shares, respectively			(1,696	)			—
Accumulated other comprehensive gain, net			1				—
Total stockholders’ equity			80,673				93,829
Total liabilities and stockholders’ equity		$	206,140			$	257,546

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

WESTERN LIBERTY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
($ in 000’s except per share data)

																		Service1st
																		Bank
																		Predecessor
																		For the
																		Nine
		For the Three Months																Months
		Ended								For the Nine Months Ended								Ended
		September 30,				September 30,				September 30,				September 30,				September 30,
		2011				2010				2011				2010				2010
Interest and dividend income:
Loans, including fees		$	1,587			$	—			$	7,387			$	—			$	5,371
Securities, taxable and other			60				1				194				5				745
Total interest and dividend income			1,647				1				7,581				5				6,116
Interest expense:
Deposits
Total interest expense			123				—				362				—				1,083
Net interest income			1,524				1				7,219				5				5,033
Provision for loan losses :			1,718				—				7,430				—				3,938
Net interest income / (loss) after provision for loan losses			(194	)			1				(211	)			5				1,095
Non-interest income:
Service charges			77				—				233				—				351
Gain on sale of OREO			—				—				34				—				—
Change in fair value of contingent consideration			1,816				—				1,816				—				—
Other			84				—				207				—				115
Total non-interest income			1,977				—				2,290				—				466
Non-interest expense:
Salaries and employee benefits			823				56				2,381				194				2,688
Occupancy, equipment and depreciation			365				—				1,113				—				1,232
Computer service charges			71				—				222				—				218
Federal deposit insurance			111				—				392				—				387
Legal and professional fees			341				948				1,796				2,673				1,528
Advertising and business development			17				—				85				—				74
Insurance			73				76				211				226				60
Telephone			19				—				62				—				79
Printing and supplies			30				142				259				273				39
Director fees			51				—				149				—				—
Stock-based compensation			131				(1,850	)			411				(588	)			607
Provision for unfunded commitments			48				—				(288	)			—				(442	)
Oreo property impairment			686				—				686				—				—
Goodwill impairment			5,633				—				5,633				—				—
Other			251				15				839				41				451
Total non-interest expense			8,650				(613	)			13,951				2,819				6,921
Net income/(loss)		$	(6,867	)		$	614			$	(11,872	)		$	(2,814	)		$	(5,360	)
Comprehensive income/(loss)		$	(6,861	)		$	614			$	(11,871	)		$	(2,814	)		$	(5,372	)
Basic earnings/(loss) per common share		$	(0.46	)		$	0.06			$	(0.79	)		$	(0.26	)		$	(107.59	)
Diluted earnings/(loss) per common share		$	(0.46	)		$	0.01			$	(0.79	)		$	(0.26	)		$	(107.59	)
Weighted average common shares outstanding — basic			15,058,383				10,959,169				15,078,143				10,959,169				49,811
Weighted average common shares outstanding — diluted			15,058,383				59,226,927				15,078,143				10,959,169				49,811

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

WESTERN LIBERTY BANCORP CONDENSED

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
($ in 000’s)

										Service1st Bank
										Predecessor For
										the Nine Months
		For the Nine Months Ended								Ended
		September 30,				September 30,				September 30,
		2011				2010				2010
Cash flow from operating activities:
Net loss		$	(11,872	)		$	(2,814	)		$	(5,360	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation			411				(588	)			607
Accretion of loan discount, net			(3,131	)			—				—
Amortization of core deposit intangible			73				—				—
OREO property impairment			686				—				—
Goodwill impairment			5,633				—				—
Contingent liability impairment			(1,816	)			—				—
Provision for loan losses			7,430				—				3,938
Depreciation of premises and equipment			325				—				385
Amortization of securities premiums/discounts, net			159				—				46
Gain on sale of securities			—				—				(13	)
Gain on disposition of other real estate owned			(34	)			—				—
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses and other assets			1,086				—				(470	)
(Decrease) increase in accrued interest payable and other liabilities			(931	)			(249	)			(383	)
Net cash used in operating activities			(1,981	)			(3,651	)			(1,250	)
Cash flow from investing activities:
Purchases of certificates of deposit			—				—				(39,921	)
Proceeds from maturities of certificates of deposit			26,643				—				17,061
Purchases of securities available for sale			(250	)			—				(6,000	)
Proceeds from sale of securities available for sale			—				—				4,000
Proceeds from principal paydowns of securities available for sale			1,265				—				5,489
Proceeds from maturities of securities held to maturity			1,500				—				2,497
Proceeds from principal payouts of securities held to maturity			36				—				63
Proceeds from disposition of other real estate owned			1,074				—				—
Purchase of premises and equipment			(24	)			—				(72	)
Net decrease in loans			713				—				9,771
Net cash provided by (used in) investing activities			30,957				—				(7,112	)
Cash flow from financing activities:
Net increase (decrease) in deposits			(35,503	)			—				(13,445	)
Payments to repurchase common stock			(1,696	)			—				—
Net cash provided by (used in) financing activities			(37,199	)			—				(13,445	)
Net (decrease) in cash and cash equivalents			(8,223	)			(3,651	)			(21,807	)
Cash and cash equivalents, beginning of period			103,227				87,969				49,633
Cash and cash equivalents, end of period		$	95,004			$	84,318			$	27,826
Supplemental disclosures of cash flow information:
Interest paid on deposits and other borrowed funds		$	356			$	—			$	1,172
Supplemental disclosure of noncash investing and financing activities:
Transfers of loans to other real estate owned		$	2,440			$	—			$	3,019
Principal paydowns on SBA loan pool securities reclassified to other assets		$	21			$	—			$	82

The accompany notes are an integral part of these unaudited condensed consolidated financial statements.

Western Liberty Bancorp

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of business

     Western Liberty Bancorp (WLBC) became a bank holding company on October 28, 2010 with consummation of the acquisition of Service1st Bank of Nevada. We were formerly known as “Global Consumer Acquisition Corp.”, a special purpose acquisition company formed under the laws of Delaware on June 28, 2007, to consummate an acquisition, capital stock exchange, acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Our stockholders approved certain amendments to our Amended and Restated Certificate of Incorporation removing certain provisions specific to special purpose acquisition companies, changing our name to “Western Liberty Bancorp” and authorizing the distribution and termination of our trust account. Effective October 7, 2009, the Company began its business operations and exited its development stage. Our sole subsidiary is Service1st Bank of Nevada. We currently conduct no business activities other than acting as the holding company of Service1st Bank.

     Service1st Bank of Nevada (Service1st) is a community bank which commenced operations as a financial institution on January 16, 2007. Service1st provides a full range of banking and related services to locally owned businesses, professional firms, real estate developers and investors, local non-profit organizations, high net worth individuals, and other customers in and around the greater Las Vegas area. Banking services provided include basic commercial and consumer depository services, commercial working capital and equipment loans, commercial real estate (both owner occupied and non-owner occupied) loans, construction loans, and unsecured personal and business loans. Service1st relies primarily on locally generated deposits to fund its lending activities. Service1st has two branches located in Las Vegas, Nevada, which accept deposits and grant loans to customers. Substantially all of our business is generated in the Nevada market. Service1st is under the supervision of and subject to regulation and examination by the Nevada FID and the FDIC.

Basis of presentation

     The accounting and reporting policies of the Company conform to generally accepted accounting principles in the United States of America. All significant intercompany balances and transactions have been eliminated in consolidation. Our financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. We have evaluated all subsequent events through the date the financial statements were issued.

     Certain information and note disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The interim operating results are not necessarily indicative, of operating results for the year. For further information, refer to the consolidated financial statements and notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2010.

Predecessors

     Since the Company’s operations prior to the acquisition of Service1st were insignificant relative to that of Service1st, management believes that Service1st is the Company’s predecessor. Management has determined this based on an evaluation of the various facts and circumstances, including, but not limited to the life of Service1st, the operations of Service1st, the purchase price paid, and the fact that the operations on a prospective basis will be most similar to Service1st. Accordingly, the historical statement of operations for the nine months ended September 30, 2010 and statement of cash flows for the nine months ended September 30, 2010 of Service1st Bank have been presented.

Use of estimates in the preparation of financial statements

     To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial

statements and the disclosures provided, and actual results could differ. The purchase accounting adjustments, allowance for loan loss, fair value of financial instruments, and deferred tax assets are particularly subject to change.

Reclassifications

     Certain amounts in the financial statements and related disclosures as of December 31, 2010 have been reclassified to conform to the current condensed presentation. These reclassification adjustments have no effect on net loss or stockholders’ equity as previously reported.

Loans

     Loans are stated at the amount of unpaid principal, reduced or increased by unearned net loan fees or deferred costs, a credit and yield mark, and allowance for loan losses. The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

     The allowance is an amount that management believes will be adequate to absorb probable incurred losses on existing loans that may become uncollectible, based on evaluation of the collectability of loans and prior credit loss experience of the Company and peer bank historical loss experience. This evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, specific problem credits, peer bank information, and current economic conditions that may affect the borrower’s ability to pay. Due to the credit concentration of the Company’s loan portfolio in real estate-secured loans, the value of collateral is heavily dependent on real estate values in Southern Nevada. This evaluation is inherently subjective and future adjustments to the allowance may be necessary if there are significant changes in economic or other conditions. In addition, the FDIC and state banking regulatory agencies, as an integral part of their examination processes, periodically review the Company’s allowance for loan losses, and may require the Company to make additions to the allowance based on their judgment about information available to them at the time of their examinations.

     During 2011, Service1st implemented a new program to assist in determining estimated credit losses. During the latter part of 2010, management began researching for ALLL models that would provide a better estimate for the ALLL but was consistent with all accounting and regulatory guidance. By the end of 2010 a new ALLL model was purchased, data was loaded and initial tests were made comparing the results to the existing methodology. The old and new models were run in parallel for a period of time. The new model has been used since the June 30, 2011 reporting period. The new program utilizes a dual factor approach. The ALLL methodology incorporates both a payment default rate (“PD”) and a loss given default (“LGD”) rate in lieu of evaluating loss primarily based on charge-offs to total loans. Service1st uses a historical look-back period of three years to compute the payment default rate and loss given default rate. When not statistically meaningful, Service1st will utilize peer institution data to determine an appropriate PD and LGD by that specific loan type. Pursuant to the Joint Policy Statement issued in 2006, the model provides for a variety of qualitative factors to adjust for specific conditions associated with the institution and local market conditions. This method does not produce materially different results from the previously used ALLL model.

     The allowance consists of general and specific components. The general component covers non-impaired loans and is based on the methodology described above. The specific component relates to loans that are classified as impaired. For such loans, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan are lower than the carrying value of that loan.

     A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

     Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

     Commercial and commercial real estate loans that are graded substandard are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

     Risk factors impacting loans in each of the portfolio segments include broad deterioration of property values, reduced consumer and business spending as a result of continued high unemployment in our market and a lack of confidence in a sustainable recovery. The Las Vegas market has begun to see an increase in visitor traffic and slight upticks in gaming revenue year over year. However, the oversupply of real estate will continue to suppress values for the foreseeable future. Consequently we believe real estate appraisals will continue to reduce asset valuations and further stress individuals and businesses that rely on real estate to generate cash flows. The general component covers non-impaired loans and is based on the methodology described above. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent three years. The dual factors of payment default rate and a loss given default rate are supplemented with other economic factors based on the risks present for each portfolio segment. These factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. The following portfolio segments have been identified:

	•		Loans secured by real estate construction, land development and other land loans
	•		Commercial real estate
	•		Residential real estate
	•		Commercial and industrial
	•		Consumer

     These are generally the segments identified in regulatory reporting. Service1st Bank primarily focuses on the small business market and, therefore, generates most of its loans in the area of commercial real estate and commercial and industrial loans. By segmenting into these categories, the bank is able to monitor the exposure to the related risks and observe compliance with regulatory guidance and limitations.

     The Company, as a result of its purchase of Service1st Bank of Nevada on October 28, 2010, acquired a portfolio of loans, some of which have shown evidence of credit deterioration since origination. These purchased loans were recorded at fair value and there was no carryover of the seller’s allowance for loan losses. After acquisition, losses are recognized by an increase in the allowance for loan losses. It is important that consideration to loss experience be blended with the significant discounts to properly reflect the carrying value of the legacy loan portfolio. In the current process, a general component of the allowance for loan losses is being recorded for new loan originations that were determined based on historical experience and management’s judgment.

     Purchased loans with credit impairment are accounted for individually. The Company estimates the amount and timing of expected cash flows for each purchased loan, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

     Over the life of the loan, expected future cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized respectively as interest income.

Interest and fees on loans

     Interest on loans is recognized over the terms of the loans and is calculated using the effective interest method. The accrual of interest on impaired loans is discontinued when, in management’s opinion, the borrower may be unable to make payments as they become due.

     The Company determines a loan to be delinquent when payments have not been made according to contractual terms, typically evidenced by nonpayment of a monthly installment by the due date. The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in the process of collection.

     All interest accrued but not collected for loans that are placed on nonaccrual status or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

     Loan origination fees, fair value adjustments on purchased non-impaired loans, commitment fees and certain direct loan origination costs are deferred and the net amount amortized as an adjustment to the related loan’s yield. The Company is generally amortizing these amounts over the contractual life of the loan. Commitment fees, based upon a percentage of a customer’s unused line of credit, and fees related to standby letters of credit are recognized over the commitment period.

Other real estate acquired through foreclosure

     Assets acquired through or in-lieu-of foreclosures are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Goodwill and other intangible assets

     Goodwill resulting from a business combination after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any non-controlling interests in the acquired company, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected October 31st as the date to perform the annual impairment test, or such time as an event occurs or circumstances change that would likely reduce the fair value of the reporting unit, as was the case during this quarter. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance sheet. WLBC acquired Service1st Bank of Nevada on October 28, 2010 which resulted in goodwill of $5.6 million being recorded. See Note 6, Goodwill and Intangibles, of Part I, Item I of this Form 10-Q for further discussion of the goodwill impairment charge taken during the quarter.

     Other intangible assets consist of a core deposit intangible which is amortized on an accelerated method over the estimated useful life of 10 years.

Stock compensation plans

     The Company has the Service1st Bank of Nevada 2007 Stock Option Plan. Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The Company records the fair value of stock compensation granted to employees and directors as expense over the vesting period. The cost of the award is based on the grant-date fair value.

Treasury stock

     On August 18, 2011, the Company announced that its board of directors authorized the repurchase of 5% of the Company’s outstanding common stock, or approximately 750,000 shares. The Company appointed an agent to purchase the common shares on behalf of the Company in the open market. It is the Company’s intent that such purchases benefit from the safe harbor provided by Rule 10b-18, promulgated by the Securities and Exchange Commission under the Securities exchange Act of 1934, as amended. As of September 30, 2011, using the trade date, the Company purchased 639,413 shares of its common stock. The volume weighted average cost of the acquired shares was $2.65, with an aggregate cost of $1,696,112.

The Company records the repurchase of shares of common stock at cost based on the trade date of the transaction. These shares are classified as treasury stock, which is a reduction to stockholders’ equity. Treasury stock is included in authorized and issued shares but excluded from outstanding shares.

Fair value measurement

     For assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. Fair value measurements for assets and liabilities, where there exists limited or no observable market data and, therefore, are based primarily upon estimates, are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. The Company utilizes fair value measurements to determine fair value disclosures and certain assets recorded at fair value on a recurring and nonrecurring basis. See note 3.

     Fair values of financial instruments

     The Company discloses 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 as of September 30, 2011. The estimated fair value amounts as of September 30, 2011 have been measured as of that date and have been updated for purposes of these financial statements. As such, the estimated fair values of these financial statements subsequent to the reporting date may be different than the amounts reported as of September 30, 2011.

     Certificates of deposit

     The carrying amounts reported in the balance sheet for certificates of deposit approximate their fair value as the terms on the certificates of deposits do not exceed one year.

     Securities

     Fair values for securities are based on quoted market prices where available or on quoted market prices for similar securities in the absence of quoted prices on the specific security.

     Loans

     For variable rate loans that re-price frequently and that have experienced no significant change in credit risk, fair values are based on carrying values. Variable rate loans comprise approximately 57% of the loan portfolio as of September 30, 2011. 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. Prepayments prior to the re-pricing date are not expected to be significant. Loans are expected to be held to maturity and any unrealized gains or losses are not expected to be realized.

     Impaired loans

     The fair value of an impaired loan is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value, and discounted cash flows. Those impaired loans not requiring an allowance for probable losses represent loans for which the fair value of the expected repayments or collateral exceeds the recorded investment in such loans.

     Accrued interest receivable and payable

     The carrying amounts reported in the balance sheet for accrued interest receivable and payable approximate their fair value.

     Restricted stock

     The Company is a member of the FHLB system and maintains an investment in capital stock of the FHLB of San Francisco in an amount pursuant to the agreement with the FHLB. This investment is carried at cost since no ready market exists, and there is no quoted market value.

     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 (carrying amount). The carrying amount for variable-rate deposit accounts approximates their fair value. Due to the short-term maturities of fixed-rate certificates of deposit, their carrying amount approximates their fair value. Early withdrawals of fixed-rate certificates of deposit are not expected to be significant.

     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.

Contingent Consideration

     Contingent consideration is measured at its estimated fair value on a quarterly basis by management and material fair value adjustments are recorded in the period they occur. The fair value of the contingent consideration is determined based on various models, which take into account the expected value of the Company’s stock, taking into account current and projected values, volatility, and other factors. During the third quarter of 2011 it was determined based on the continued decline in stock price, the volatility of the stock and current market conditions, the performance of the company, the goodwill impairment and the remaining time that the contingency is in place, that the probability of reaching the prescribed targets was nominal. As a result, management reversed all of the contingent consideration liability. The Company will continue to reevaluate this determination on a quarterly basis.

Loss per share

     Diluted earnings per share are based on the weighted average outstanding common shares (excluding treasury shares, if any) during each period, including common stock equivalents. Basic earnings per share are based on the weighted average outstanding common shares during the period.

     Due to the Company’s historical net losses, all of the Company’s stock-based awards are considered anti-dilutive, and accordingly, basic and diluted loss per share is the same. As of September 30, 2011, approximately 447,000 stock-based instruments were issued and outstanding. For further information, refer to the consolidated financial statements and notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2010.

Recent accounting pronouncements

     In January 2010, the FASB issued ASU 2010-06, Improving Disclosure about Fair Value Measurements. This standard requires new disclosures on the amount and reason for transfers in and out of Level 1 and Level 2 recurring fair value measurements. The standard also requires disclosure of activities (i.e., on a gross basis), including purchases, sales, issuances, and settlements, in the reconciliation of Level 3 fair value recurring measurements. The standard regarding Level 1 and Level 2 fair value measurements and clarification of existing disclosures are effective for periods beginning after December 15, 2009. The disclosures about the reconciliation of information in Level 3 recurring fair value measurements are required for periods beginning after December 15, 2010. Adoption of the applicable portions of this standard on January 1, 2011 did not have a significant impact on our quarterly disclosures.

     In April 2011, the FASB issued an accounting standard updated to amend previous guidance with respect to troubled debt restructurings. This updated guidance is designed to assist creditors with determining whether or not a restructuring constitutes a troubled debt restructuring. In particular, additional guidance has been added to help creditors determine whether a concession has been granted and whether a debtor is experiencing financial difficulties. Both of these conditions are required to be met for a restructuring to constitute a troubled debt restructuring. The amendments in the update are effective for the first interim period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. Also of

note is that the update deferred the additional required disclosures surrounding trouble debt restructurings to interim and annual periods beginning after June 15, 2011. The additional trouble debt restructuring disclosures which are required in the third quarter 2011 include the amount and type of trouble debt restructurings which occurred during the period in addition to the amount and type of defaults of troubled debt restructurings that had been restructured in the preceding 12 months. The provisions of this update do not have a material impact on the Company’s financial position, results or operations or cash flows.

Newly issued but not yet effective accounting standards

     In May 2011, the FASB issued an accounting standards update to improve the comparability between US GAAP fair value accounting and reporting requirements and International Financial Reporting Standards (IFRS) fair value accounting and reporting requirements. Additional disclosures required by the update include: (i) Disclosure of quantitative information regarding the unobservable inputs used in any fair value measurement classified as Level 3 in the fair value hierarchy in addition to an explanation of the valuation techniques used in valuing Level 3 items and information regarding the sensitivity in the valuation of Level 3 items to changes in the values assigned to unobservable inputs. (ii) Categorization by level within the fair value hierarchy of items not recognized on the Statement of Financial Position at fair value but for which fair values are required to be disclosed. (iii) Instances where the fair values disclosed for non-financial assets were based on a highest and best use assumption when in fact the assets are not being utilized in that capacity. The amendments in the update are effective for interim and annual periods beginning on or after December 15, 2011. The provisions of this update are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

     In June 2011, the FASB issued an accounting standards update to increase the prominence of items included in Other Comprehensive Income and facilitate the convergence of US GAAP with IFRS. The update prohibits continued presentation of Other Comprehensive Income in the statement of Shareholder’s Equity. The update requires that all non-owner changes in shareholder’s equity be presented in either a single continuous statement of comprehensive income or in two separate but continuous statements. The amendments in the update are effective for interim and annual periods beginning on or after December 15, 2011. The provisions of this update are only expected to change the manner in which our other comprehensive income is disclosed. On October 21, 2011, the FASB announced these requirements will be deferred. No implementation date was given.

Note 2. BUSINESS COMBINATION

     On October 28, 2010, the Company acquired 100% of the outstanding common shares of Service1st Bank of Nevada in exchange for approximately 2.4 million shares of common stock. Under the terms of the acquisition, Service1st Bank common shareholders received 47.5975 shares of the Company’s common stock in exchange for each share of Service1st Bank common stock. In addition, the Service1st Bank shareholders are eligible to receive additional common shares equal to twenty percent of Service1st Bank’s tangible capital at August 31, 2010, if the price of the Company’s common stock exceeds $12.75 per share for 30 days during the subsequent two year period. The Company also injected $25 million of cash into its subsidiary bank. With the acquisition, the Company became a bank holding company with its sole operating bank located in Southern Nevada.

     The transaction was recorded as an acquisition under the current accounting rules and as a result the balance sheet of Service1st was revalued to fair value as of the acquisition date. Any purchase price in excess of net assets acquired is recorded as goodwill. Based on a purchase price of $17.1 million and the $16.4 million fair value of net assets acquired, the transaction resulted in $5.6 million of goodwill.

     The most significant fair value adjustment resulting from the application of purchase accounting adjustment for this acquisition was made to loans. As of the acquisition date, the gross loan portfolio at Service1st Bank was approximately $125.4 million with a related Allowance for Loan and Lease Losses (“ALLL”) of approximately $9.4 million. The valuation of the loan portfolio resulted in a discount of approximately $15.8 million at October 28, 2010 which was subsequently adjusted to approximately $15.1 million based on additional information after the measurement date, but before the adjustments were considered final. This discount consists of two components; credit discount and yield discount. Loans purchased with credit impairments are loans with credit deterioration since origination and it is probable that not all contractually required principal and interest payments would be collected. The performing loan portfolio was approximately $89.9 million and was discounted by $49,000 for yield and $3.6 million for credit discounts. The remaining $35.6 million of loans were identified as loans with purchased credit impairment (PCI) and those loans had a discount of $576,000 for yield and $10.9 million for credit discounts. The discounts on performing loans are recognized by a “level yield” method over the remaining life of the loans or loan pools. The loans identified as containing purchase credit impairment are treated somewhat differently. The discount associated with yield is accreted as yield discount and the credit discount is not accreted but is left on the books to reduce the current carrying value of the applicable loans.

     In order to assist WLBC in gaining the requisite approval of certain bank regulatory authorities in connection with the Acquisition, each of the 48,067,758 warrants outstanding when the Acquisition occurred was exchanged for one thirty-second (1/32) of one share of WLBC common stock. Warrant holders also received $0.06 per warrant as a consent fee, or $2.9 million in total. Accordingly, we issued 1,502,088 shares on October 28, 2010 in the exchange of outstanding warrants for common stock.

     On October 28, 2010, the 900 Bank Stock Warrants were converted to 42,834 WLBC stock warrants with an exercise price of $21.01 per stock warrant and all were exercisable at that time. The exercise price was determined in accordance with the Merger Agreement, dated November 6, 2009. The exercise price is calculated by the common stock exchange ratio of 47.5975. Each Service1st stock warrant had an exercise price of $1,000.00. The $1,000.00 is divided by the exchange ratio to create the equivalent exercise price for the Company’s stock warrant ($1,000.00 divided by 47.5975 equals $21.01). As of September 30, 2011, the aggregate intrinsic value of outstanding and vested stock warrants is $0.

Note 3. FAIR VALUE

     Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses a fair value hierarchy that prioritizes 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.

Fair value on a recurring basis

     Financial assets measured at fair value on a recurring basis include the following:

Securities available for sale

     Securities reported as available for sale are reported at fair value utilizing Level 2 inputs. For these securities the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond’s terms and conditions, among other things.

		Fair Value Measurements at September 30, 2011
						Quoted Prices in
						Active Markets for				Significant Other				Significant
($ in 000’s)						Identical Assets				Observable Inputs				Unobservable Inputs
Description		Total				(Level 1)				(Level 2)				(Level 3)
Securities Available for Sale
Collateralized Mortgage Obligation Securities-commercial		$	520			$	—			$	520			$	—
U.S. Agencies			253				—				253				—
		$	773			$	—			$	773			$	—

     There were no transfers between Levels during 2011.

Fair Value Measurements at December 31, 2010

Quoted Prices in

Active Markets for

Significant Other

Significant

($ in 000’s)

Identical Assets

Observable Inputs

Unobservable Inputs

Description

Total

(Level 1)

(Level 2)

(Level 3)

Securities Available for Sale

Collateralized Mortgage Obligation Securities-commercial

$

1,819

$

—

$

1,819

$

—

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.

		Fair Value Measurements at September 30, 2011
						Quoted Prices in
						Active Markets for				Significant Other				Significant
						Identical Assets				Observable Inputs				Unobservable Input
($ in 000’s) Description		Total				(Level 1)				(Level 2)				(Level 3)
Impaired loans
Commercial real estate		$	2,631			$	—			$	—			$	2,631
Other real estate owned
Construction, land development and other land			1,939				—				—				1,939
Commercial real estate			2,180				—				—				2,180
		$	6,750			$	—			$	—			$	6,750

		Fair Value Measurements at December 31, 2010
						Quoted Prices in
						Active Markets for				Significant Other				Significant
($ in 000’s)						Identical Assets				Observable Inputs				Unobservable Inputs
Description		Total				(Level 1)				(Level 2)				(Level 3)
Impaired loans
Construction, land development and other land		$	3,220				—				—			$	3,220
Commercial real estate			1,648				—				—				1,648
Residential real estate			2,900				—				—				2,900
Commercial and Industrial			3,670				—				—				3,670
Other real estate owned
Construction, land development and other land			625				—				—				625
Commercial real estate			2,781				—				—				2,781
		$	14,844			$				$				$	14,844

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. Accordingly, the resulting fair value measurement has been categorized as a Level 3 measurement. Impaired loans measured for impairment using the fair value of collateral, had a carrying amount of $2.6 million at September 30, 2011 (after netting $791,000 specific valuation allowance included in the allowance for loan losses). The $2.6 million of impaired loans carried at fair value were the result of certain credit and yield discounts and the aforementioned specific valuation allowance. There have been discounts applied in the amount of $9,000 on these impaired loans carried at fair value.

Other real estate owned

     Other real estate owned consists of properties acquired as a result of foreclosure, a deed-in-lieu-of foreclosure, or an in-substance foreclosure. Properties classified as other real estate owned are initially reported at the fair value determined by independent appraisals using appraised value, less cost to sell. Such properties are generally re-appraised every six months. There is risk for subsequent volatility. Costs relating to the development or improvement of the assets are capitalized and costs relating to holding the assets are charged to expense. 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. In August 2011, there

was a $686,000 valuation allowance charged against one of the above listed properties which resulted in a total of $686,000 expensed for both the third quarter and year-to-date 2011.

Fair value of financial instruments

     The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

     The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows:

		September 30, 2011								December 31, 2010
($ in 000’s)		Carrying Amount				Fair Value				Carrying Amount				Fair Value
Financial Assets:
Cash and cash equivalents		$	95,004			$	95,004			$	103,227			$	103,227
Certificates of deposits			246				246				26,889				26,889
Securities available for sale			773				773				1,819				1,819
Securities held to maturity			3,631				3,635				5,314				5,287
Loans, net			98,771				98,077				106,223				106,223
Accrued interest receivable			283				283				447				447
Financial Liabilities:
Deposits		$	124,783			$	124,783			$	160,286			$	160,286
Accrued interest payable			41				41				35				35

Loan commitments

     The estimated fair value of the standby letters of credit at September 30, 2011 and December 31, 2010 is insignificant. Loan commitments on which the committed interest rate is less than the current market rate are also insignificant at September 30, 2011 and December 31, 2010.

Note 4. SECURITIES

     Carrying amounts and fair values of investment securities at September 30, 2011 and December 31, 2010 are summarized as follows:

		September 30, 2011
						Gross				Gross
($ in 000’s)		Amortized				Unrealized				Unrealized				Fair
Securities Available for Sale		Cost				Gains				Losses				Value
US Agencies		$	250			$	3			$	—			$	253
Collateralized Mortgage Obligation Securities-commercial			522				—				(2	)			520
		$	772			$	3			$	(2	)		$	773

						Gross				Gross
($ in 000’s)		Amortized				Unrecognized				Unrecognized				Fair
Securities Held to Maturity		Cost				Gains				Losses				Value
Corporate Debt Securities		$	3,041			$	1			$	(4	)		$	3,038
Small Business Administration Loan Pools			590				7				—				597
		$	3,631			$	8			$	(4	)		$	3,635

December 31, 2010

Gross

Gross

($ in 000’s)

Amortized

Unrealized

Unrealized

Fair

Securities Available for Sale

Cost

Gains

Losses

Value

Collateralized Mortgage Obligation Securities-commercial

$

1,819

$

—

$

—

$

1,819

						Gross				Gross
($ in 000’s)		Amortized				Unrecognized				Unrecognized				Fair
Securities Held to Maturity		Cost				Gains				Losses				Value
Corporate Debt Securities		$	4,663			$	—			$	(27	)		$	4,636
Small Business Administration Loan Pools			651				—				—				651
		$	5,314			$	—			$	(27	)		$	5,287

     There have been no sales of securities or gross realized gains or losses in any of the periods presented.

     As of September 30, 2011 and December 31, 2010, securities of $3.0 and $4.7 million, respectively were pledged for various purposes as required or permitted by law.

     Information pertaining to securities with gross losses at September 30, 2011 and December 31, 2010, aggregated by investment category and length of time that individual securities have been in continuous loss position follows:

		September 30, 2011
		Less Than Twelve Months								Over Twelve Months
		Gross								Gross
		Unrealized				Fair				Unrealized				Fair
($ in 000’s)		(Losses)				Value				(Losses)				Value
Securities Available for Sale
Collateralized Mortgage Obligation Securities — commercial		$	(2	)		$	520			$	—			$	—
($ in 000’s)
Securities Held to Maturity
Corporate Debt Securities		$	(4	)		$	1,527			$	—			$	—
Small Business Administration Loan Pools			—				—				—				—
		$	(4	)		$	1,527			$	—			$	—

		December 31, 2010
		Less Than Twelve Months								Over Twelve Months
		Gross								Gross
		Unrealized				Fair				Unrealized				Fair
($ in 000’s)		(Losses)				Value				(Losses)				Value
Securities Available for Sale
Collateralized Mortgage Obligation
Securities — commercial		$	—			$	—			$	—			$	—
		$	—			$	—			$	—			$	—
($ in 000’s)
Securities Held to Maturity
Corporate Debt Securities		$	(27	)		$	4,636			$	—			$	—
Small Business Administration Loan Pools			—				—				—				—
		$	(27	)		$	4,636			$	—			$	—

     As of September 30, 2011 and December 31, 2010, three debt securities, respectively, have unrealized losses with aggregate degradation of $6,000 and $27,000, respectively, relating primarily to fluctuations in the current interest rate environment and other factors, but do not presently represent realized losses. As of September 30, 2011 and December 31, 2010 there are no securities that have been determined to be other-than-temporarily-impaired (OTTI).

     The amortized cost and fair value of securities as of September 30, 2011 by contractual maturities are shown below. The maturities of small business administration loan pools differ from their contractual maturities because the loans underlying the securities may be repaid without penalties; therefore, these securities are listed separately in the maturity summary.

($ in 000’s)		Amortized Cost				Fair Value
Securities available for sale
Due in one year or less		$	522			$	520
Due in one to five years			250				253
		$	772			$	773

($ in 000’s)		Amortized Cost				Fair Value
Securities held to maturity
Due in one year or less		$	3,041			$	3,038
Small Business Administration loan pools			590				597
		$	3,631			$	3,635

Note 5. LOANS

     Loans at September 30, 2011 and December 31, 2010 were as follows:

		September 30,				December 31,
($ in 000’s)		2011				2010
Construction, land development and other land		$	3,582			$	5,923
Commercial real estate			52,058				54,975
Residential real estate			4,674				9,247
Commercial and industrial			41,373				35,946
Consumer			69				131
Plus: net deferred loan costs			20				37
			101,776				106,259
Less: allowance for loan losses			(3,005	)			(36	)
		$	98,771			$	106,223

Activity in the allowance for loan losses was as follows:

																		Construction, Land
						Commercial Real				Residential Real								Development, Other
($ in 000’s)		Commercial				Estate				Estate				Consumer				Land				Total
Three months ended
Beginning balance, June 30, 2011		$	1,417			$	2,504			$	7			$	1			$	475			$	4,404
Provision for loan losses			540				1,147				2				(1	)			30				1,718
Recoveries			225				—				—				—				—				225
Loan charge-offs			(575	)			(2,412	)			—				—				(355	)			(3,342	)
Balance, September 30, 2011		$	1,607			$	1,239			$	9			$	—			$	150			$	3,005

																		Construction, Land
						Commercial Real				Residential Real								Development, Other
($ in 000’s)		Commercial				Estate				Estate				Consumer				Land				Total
Nine months ended
Beginning balance, December 31, 2010		$	36			$	—			$	—			$	—			$	—			$	36
Provision for loan losses			3,155				3,651				5				—				619				7,430
Recoveries			225				—				4				—				—				229
Loan charge-offs			(1,809	)			(2,412	)			—				—				(469	)			(4,690	)
Balance, September 30, 2011		$	1,607			$	1,239			$	9			$	—			$	150			$	3,005

     The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2011 and December 31, 2010:

																		Construction,
																		Land
						Commercial				Residential								Development,
($ in 000’s)		Commercial				Real Estate				Real Estate				Consumer				Other Land				Total
September 30, 2011
Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment		$	604			$	791			$	—			$	—			$	—			$	1,395
Collectively evaluated for impairment			985				448				9				—				150				1,592
Acquired with deteriorated credit quality			18				—				—				—				—				18
Total ending allowance balance		$	1,607			$	1,239			$	9			$	—			$	150			$	3,005
Loans:
Loans individually evaluated for impairment		$	4,290			$	7,840			$	2,943			$	—			$	714			$	15,787
Loans collectively evaluated for impairment			34,322				40,083				1,740				71				1,314				77,530
Loans acquired with deteriorated credit quality			2,797				4,096				—				—				1,566				8,459
Total ending loans balance		$	41,409			$	52,019			$	4,683			$	71			$	3,594			$	101,776
December 31, 2010
Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment		$	—			$	—			$	—			$	—			$	—			$	—
Collectively evaluated for impairment			36				—				—				—				—				36
Acquired with deteriorated credit quality			—				—				—				—				—				—
Total ending allowance balance		$	36			$	—			$	—			$	—			$	—			$	36
Loans:
Loans individually evaluated for impairment		$	—			$	—			$	—			$	—			$	—			$	—
Loans collectively evaluated for impairment			30,917				50,449				3,988				133				1,006				86,493
Loans acquired with deteriorated credit quality			5,421				4,458				5,257				—				4,630				19,766
Total ending loans balance		$	36,338			$	54,907			$	9,245			$	133			$	5,636			$	106,259

     The impaired balance is the recorded investment, which represents customer balances net of any partial charge-offs recognized on the loans, net of any deferred fees and costs. As nearly all of our impaired loans at September 30, 2011 and December 31, 2010 are on nonaccrual status, recorded investment excludes any insignificant amount of accrued interest receivable on loans 90 days or more past due and still accruing.

     Impaired loan details as of September 30, 2011 and December 31, 2010 are as follows:

Impaired loans with related allowance:		September 30, 2011
						Percent of								Percent of
		Impaired				Total				Reserve				Total
($ in 000’s)		Balance				Loans				Balance				Allowance
Construction , land development and other land loans		$	—				—			$	—				—
Commercial real estate			3,422				3.36	%			791				26.32	%
Residential real estate (1-4 family)			—				—				—				—
Commercial and industrial			4,332				4.25	%			622				20.7	%
Consumer			—				—				—				—
Total		$	7,754				7.61	%		$	1,413				47.02	%