Edgar Filing: ViewPoint Financial Group

Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2010


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

For the transition period from to

Commission file number 001-32992

VIEWPOINT FINANCIAL GROUP

(Exact name of registrant as specified in its charter)


United States	6035	20-4484783
(State or other jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer Identification No.)
incorporation or organization)	Classification Code Number)

1309 W. 15^th Street, Plano, Texas 75075
(972) 578-5000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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 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 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,” “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		24,929,157
Class		Shares Outstanding as of May 7, 2010


	Page
	Number

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements:

Consolidated Balance Sheets at March 31, 2010, (unaudited) and December 31, 2009		3

Unaudited Consolidated Statements of Income for the Three Months Ended March 31, 2010 and 2009		4

Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2010 and 2009		5

Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2010 and 2009		6

Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009		7

Condensed Notes to Unaudited Consolidated Interim Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25

Item 3. Quantitative and Qualitative Disclosures about Market Risk		44

Item 4. Controls and Procedures		47

PART II—OTHER INFORMATION

Item 1. Legal Proceedings		48

Item 1.A. Risk Factors		48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		48

Item 3. Defaults Upon Senior Securities		48

Item 4. Reserved		48

Item 5. Other Information		48

Item 6. Exhibits		49

SIGNATURE PAGE		51

EXHIBIT INDEX		52

Exhibit 31.1
Exhibit 31.2
Exhibit 32

Page 2 of 52

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except share data)


	March 31,			December 31,
	2010			2009
	(unaudited)
ASSETS
Cash and due from financial institutions	$	14,420		$	17,507
Short-term interest bearing deposits in other financial institutions		60,644			37,963

Total cash and cash equivalents		75,064			55,470
Securities available for sale		545,325			484,058
Securities held to maturity (fair value: March 31, 2010 – $259,614, December 31, 2009 – $260,814)		251,931			254,724
Loans held for sale		358,818			341,431
Loans, net of allowance of $12,929 – March 31, 2010, $12,310 – December 31, 2009		1,107,900			1,108,159
Federal Home Loan Bank stock, at cost		13,814			14,147
Bank-owned life insurance		28,176			28,117
Mortgage servicing rights		897			872
Foreclosed assets, net		3,079			3,917
Premises and equipment, net		49,930			50,440
Goodwill		1,089			1,089
Accrued interest receivable		8,287			8,099
Prepaid FDIC assessment		8,513			9,134
Other assets		24,590			19,847

Total assets	$	2,477,413		$	2,379,504


LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Non-interest bearing demand		184,356			193,581
Interest bearing demand		321,380			268,063
Savings and money market		721,172			701,835
Time		673,370			633,186

Total deposits		1,900,278			1,796,665
Federal Home Loan Bank advances		304,174			312,504
Repurchase agreement		25,000			25,000
Other borrowings		10,000			10,000
Accrued interest payable		1,962			1,884
Other liabilities		27,458			27,769

Total liabilities		2,268,872			2,173,822

Commitments and contingent liabilities		—			—

Shareholders’ equity
Common stock, $.01 par value; 75,000,000 shares authorized; 26,208,958 shares issued – March 31, 2010 and December 31, 2009		262			262
Additional paid-in capital		118,851			118,297
Retained earnings		113,356			111,188
Accumulated other comprehensive income		3,705			3,802
Unearned Employee Stock Ownership Plan (ESOP) shares; 587,211 shares – March 31, 2010; 610,647 shares – December 31, 2009		(5,925	)		(6,159	)
Treasury stock, at cost; 1,279,801 shares – March 31, 2010 and December 31, 2009		(21,708	)		(21,708	)
Total shareholders’ equity		208,541			205,682

Total liabilities and shareholders’ equity	$	2,477,413		$	2,379,504

See accompanying notes to unaudited consolidated financial statements.

Page 3 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Dollar amounts in thousands, except per share data)


	Three Months Ended
	March 31,
	2010			2009
Interest and dividend income
Loans, including fees	$	20,373		$	20,738
Taxable securities		5,422			6,628
Nontaxable securities		296			86
Interest bearing deposits in other financial institutions		148			59
Federal Home Loan Bank stock		17			—

		26,256			27,511
Interest expense
Deposits		7,629			9,145
Federal Home Loan Bank advances		3,139			3,776
Federal Reserve Bank advances		—			29
Repurchase agreement		201			101
Other borrowings		148			—

		11,117			13,051

Net interest income		15,139			14,460
Provision for loan losses		1,146			1,442

Net interest income after provision for loan losses		13,993			13,018

Non-interest income
Service charges and fees		4,420			4,456
Brokerage fees		106			75
Net gain on sale of loans		2,655			3,706
Loan servicing fees		62			53
Bank-owned life insurance income		58			164
Fair value adjustment on mortgage servicing rights		90			(211	)
Impairment of collateralized debt obligations		—			(465	)
Loss on sale of foreclosed assets		(113	)		(165	)
Loss on disposition of assets		—			(416	)
Other		278			232

		7,556			7,429
Non-interest expense
Salaries and employee benefits		11,183			12,095
Advertising		277			255
Occupancy and equipment		1,489			1,602
Outside professional services		489			431
Regulatory assessments		795			645
Data processing		1,002			1,004
Office operations		1,446			1,506
Deposit processing charges		178			235
Lending and collection		221			288
Other		479			558

		17,559			18,619

Income before income tax expense		3,990			1,828
Income tax expense		1,285			584


Net income	$	2,705		$	1,244

Earnings per share:
Basic	$	0.11		$	0.05


Diluted	$	0.11		$	0.05

See accompanying notes to unaudited consolidated financial statements.

Page 4 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Dollar amounts in thousands)


	Three Months Ended
	March 31,
	2010			2009

Net income	$	2,705		$	1,244

Other comprehensive income (loss):

Change in unrealized gains (losses) on securities available for sale		(148	)		549
Reclassification of amount realized through impairment charges		—			465
Tax effect		51			(352	)

Other comprehensive income (loss), net of tax		(97	)		662


Comprehensive income (loss)	$	2,608		$	1,906

See accompanying notes to unaudited consolidated financial statements

Page 5 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(Dollar amounts in thousands, except per share data)


								Accumulated
			Additional					Other			Unearned						Total
	Common		Paid-In		Retained			Comprehensive			ESOP			Treasury			Shareholders’
	Stock		Capital		Earnings			Income (Loss)			Shares			Stock			Equity
For the three months ended March 31, 2009
Balance at January 1, 2009	$	262	$	115,963	$	108,332		$	(1,613	)	$	(7,097	)	$	(21,708	)	$	194,139
Cumulative effect of change in accounting principle, initial application of other-than-temporary impairment guidance, net of tax		—		—		2,843			(2,843	)		—			—			—
ESOP shares earned, 23,436 shares		—		84		—			—			235			—			319
Share-based compensation expense		—		434		—			—			—			—			434
Dividends declared ($0.08 per share)		—		—		(859	)		—			—			—			(859	)
Comprehensive income:
Net income		—		—		1,244			—			—			—			1,244
Change in unrealized gains (losses) on securities available for sale for which a portion of an other-than-temporary impairment has been recognized in earnings, net of reclassifications and taxes		—		—		—			(3,596	)		—			—			(3,596	)
Change in unrealized gains (losses) on securities available for sale, net of reclassifications and taxes		—		—		—			4,258			—			—			4,258

Total comprehensive income																		1,906

Balance at March 31, 2009	$	262	$	116,481	$	111,560		$	(3,794	)	$	(6,862	)	$	(21,708	)	$	195,939


For the three months ended March 31, 2010
Balance at January 1, 2010	$	262	$	118,297	$	111,188		$	3,802		$	(6,159	)	$	(21,708	)	$	205,682
ESOP shares earned, 23,436 shares		—		112		—			—			234			—			346
Share-based compensation expense		—		442		—			—			—			—			442
Dividends declared ($0.05 per share)		—		—		(537	)		—			—			—			(537	)
Comprehensive income:
Net income		—		—		2,705			—			—			—			2,705
Change in unrealized gains (losses) on securities available for sale, net of reclassifications and taxes		—		—		—			(97	)		—			—			(97	)

Total comprehensive income																		2,608

Balance at March 31, 2010	$	262	$	118,851	$	113,356		$	3,705		$	(5,925	)	$	(21,708	)	$	208,541

See accompanying notes to unaudited consolidated financial statements.

Page 6 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollar amounts in thousands)


	Three Months Ended
	March 31,
	2010			2009
Cash flows from operating activities
Net income	$	2,705		$	1,244
Adjustments to reconcile net income to net cash used in operating activities:
Provision for loan losses		1,146			1,442
Depreciation and amortization		900			1,027
Premium amortization and accretion of securities, net		763			(16	)
Impairment of collateralized debt obligations		—			465
ESOP compensation expense		346			319
Share-based compensation expense		442			434
Amortization of mortgage servicing rights		65			86
Net gain on loans held for sale		(2,655	)		(3,706	)
Loans originated or purchased for sale		(1,473,753	)		(960,535	)
Proceeds from sale of loans held for sale		1,459,021			903,332
FHLB stock dividends		(17	)		—
Increase in bank-owned life insurance		(58	)		(164	)
Loss on disposition of property and equipment		2			215
Net loss on sales of other real estate owned		113			156
Valuation adjustment on mortgage servicing rights		(90	)		211
Net change in deferred loan fees		(46	)		(105	)
Net change in accrued interest receivable		(188	)		214
Net change in other assets		(3,930	)		731
Net change in other liabilities		(233	)		(3,777	)

Net cash used in operating activities		(15,467	)		(58,427	)
Cash flows from investing activities
Available-for-sale securities:
Maturities, prepayments and calls		56,556			34,214
Purchases		(118,486	)		—
Held-to-maturity securities:
Maturities, prepayments and calls		12,984			7,844
Purchases		(10,440	)		—
Net change in loans		(1,558	)		6,236
Redemption of FHLB stock		347			2,769
Purchases of premises and equipment		(392	)		(4,343	)
Proceeds from sale of fixed assets		—			2
Proceeds on sale of other real estate owned		1,305			303

Net cash provided by / (used in) investing activities		(59,684	)		47,025
Cash flows from financing activities
Net change in deposits		103,613			87,113
Proceeds from Federal Home Loan Bank advances		4,000			—
Repayments on Federal Home Loan Bank advances		(12,331	)		(61,940	)
Payment of dividends		(537	)		(859	)

Net cash provided by financing activities		94,745			24,314

Net change in cash and cash equivalents		19,594			12,912
Beginning cash and cash equivalents		55,470			32,513

Ending cash and cash equivalents	$	75,064		$	45,425

Supplemental cash flow information:
Interest paid	$	11,040		$	12,695
Income taxes paid	$	—		$	800
Supplemental noncash disclosures:
Transfers from loans to other real estate owned	$	717		$	609

See accompanying notes to unaudited consolidated financial statements.

Page 7 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY

CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

1. Basis of Financial Statement Presentation

The accompanying consolidated financial statements of ViewPoint Financial Group (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles and with the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all normal and recurring adjustments which are considered necessary to fairly present the results for the interim periods presented have been included. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2009 Annual Report on Form 10-K. Interim results are not necessarily indicative of results for a full year.

In preparing the financial statements, management is required to make estimates and assumptions that affect the recorded amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the period. Actual results could differ from those estimates. For further information with respect to significant accounting policies followed by the Company in preparation of its consolidated financial statements, refer to the Company’s 2009 Annual Report on Form 10-K.

The accompanying Unaudited Consolidated Interim Financial Statements include the accounts of ViewPoint Financial Group, whose business currently consists of the operations of its wholly owned subsidiary, ViewPoint Bank (the “Bank”). The Bank’s operations include its wholly owned subsidiary, ViewPoint Bankers Mortgage, Inc. (“VPBM”). All significant intercompany transactions and balances are eliminated in consolidation. Some items in prior years have been reclassified to conform to current presentation.

As of March 31, 2010, ViewPoint MHC (the “MHC”) was the majority (57%) shareholder of the Company. The MHC is a mutual institution, whose members are the depositors of the Bank. The financial statements included in this Form 10-Q do not include the transactions and balances of the MHC.

2. Earnings per Common Share

Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding for the period, reduced for average unallocated ESOP shares and average unearned restricted stock awards. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock awards and options) were exercised or converted to common stock, or resulted in the issuance of common stock that then shared in the Company’s earnings. Diluted earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding for the period increased for the dilutive effect of unexercised stock options and unearned restricted stock awards. The dilutive effect of the unexercised stock options and unearned restricted stock awards is calculated under the treasury stock method utilizing the average market value of the Company’s stock for the period.

Page 8 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

Unvested share-based awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The two-class method of earnings per share calculation is described in Accounting Standards Codification (“ASC”) 260-10-45-60B. The two-class method calculation for the three months ended March 31, 2010, and March 31, 2009, had no impact on the earnings per common share for these periods. A reconciliation of the numerator and denominator of the basic and diluted earnings per common share computation for the three months ended March 31, 2010, and 2009 is as follows:


	Three Months Ended
	March 31,
	2010			2009
Basic
Net income (loss)	$	2,705		$	1,244

Weighted average common shares outstanding		24,929,157			24,929,157
Less: Average unallocated ESOP shares		(602,575	)		(696,319	)
Average unvested restricted stock awards		(258,118	)		(344,161	)

Average shares		24,068,464			23,888,677


Basic earnings (loss) per common share	$	0.11		$	0.05


Diluted
Net income (loss)	$	2,705		$	1,244

Weighted average common shares outstanding for basic earnings (loss) per common share		24,068,464			23,888,677
Add: Dilutive effects of assumed exercises of stock options		—			—
Dilutive effects of full vesting of stock awards		—			—

Average shares and dilutive potential common shares		24,068,464			23,888,677


Diluted earnings (loss) per common share	$	0.11		$	0.05

Stock options for 257,804 and 229,276 shares of common stock outstanding were not considered in computing diluted earnings per share for the three months ended March 31, 2010 and 2009, respectively, because the options’ exercise prices were greater than the average market price of the common stock and were, therefore, anti-dilutive.

3. Dividends

On January 21, 2010, the Company’s Board of Directors declared a quarterly cash dividend of $0.05 per share. The dividend was paid on February 18, 2010, to shareholders of record as of February 4, 2010. ViewPoint MHC, which owns 57% of the common stock of ViewPoint Financial Group, elected to waive these dividends after filing a notice with and receiving no objection from the Office of Thrift Supervision.

4. Share-Based Compensation

At its annual meeting held May 22, 2007, the Company’s shareholders approved the ViewPoint Financial Group 2007 Equity Incentive Plan. The Company is accounting for this plan under ASC 718, Compensation – Stock Compensation, which requires companies to record compensation cost for share-based payment transactions with employees in return for employment service. Under this plan, 1,160,493 options to purchase shares of common stock and 464,198 restricted shares of common stock were made available.

The compensation cost that has been charged against income for the restricted stock portion of the Equity Incentive Plan was $391 for the three months ended March 31, 2010 and 2009, respectively. The compensation cost that has been charged against income for the stock option portion of the Equity Incentive Plan was $51 and $43 for the three months ended March 31, 2010 and 2009, respectively. The total income tax benefit recognized in the income statement for share-based compensation was $150 and $148 for the three months ended March 31, 2010 and 2009, respectively.

Page 9 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

A summary of the status of the non-vested shares of the restricted stock portion of the Equity Incentive Plan at March 31, 2010, is presented below:


				Weighted-
				Average
				Grant Date
	Shares			Fair Value
Non-vested at January 1, 2010		260,118		$	18.41
Granted		—			—
Vested		(2,000	)		16.53
Forfeited		—			—


Non-vested at March 31, 2010		258,118		$	18.42

The grant date fair value is based on the last sale price as quoted on the NASDAQ Stock Market on the grant date. As of March 31, 2010, there was $3,417 of total unrecognized compensation expense related to non-vested shares awarded under the restricted stock portion of the Equity Incentive Plan. That expense is expected to be recognized over a weighted-average period of 2.2 years.

A summary of the activity under the stock option portion of the Equity Incentive Plan as of March 31, 2010, and changes for the three months then ended is presented below.


						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
Options	Shares			Price		Term		Value
Outstanding at January 1, 2010		261,704		$	17.16		8.1	$	101
Granted		—			—		—		—
Exercised		—			—		—		—
Forfeited		(3,900	)		15.54		—		(3	)

Outstanding at March 31, 2010		257,804		$	17.18		7.8	$	98

Fully vested and expected to vest		232,647		$	17.33		7.8	$	86

Exercisable at March 31, 2010		29,103		$	18.36		7.2	$	—

As of March 31, 2010, there was $461 of total unrecognized compensation expense related to non-exercisable shares awarded under the stock option portion of the Equity Incentive Plan. That expense is expected to be recognized over a weighted-average period of 2.5 years. At March 31, 2010, the Company used a forfeiture rate of 11% that is based on historical activity.

The Compensation Committee may grant stock appreciation rights, which give the recipient of the award the right to receive the excess of the market value of the shares represented by the stock appreciation rights on the date exercised over the exercise price. As of March 31, 2010, the Company has not granted any stock appreciation rights.

Page 10 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

5. Loans

Loans consist of the following:


	March 31,			December 31,
	2010			2009
Mortgage loans:
One- to four-family	$	408,505		$	420,934
Commercial real estate		461,207			453,604
One- to four-family construction		7,378			6,195
Commercial construction		880			879
Home equity		113,573			117,139

Total mortgage loans		991,543			998,751

Automobile indirect loans		7,134			10,711
Automobile direct loans		52,877			57,186
Government-guaranteed student loans		6,215			5,818
Commercial non-mortgage loans		43,453			27,983
Consumer lines of credit and unsecured loans		14,499			14,781
Other consumer loans, secured		6,222			6,399

Total non-mortgage loans		130,400			122,878

Gross loans		1,121,943			1,121,629
Deferred net loan origination fees		(1,114	)		(1,160	)
Allowance for loan losses		(12,929	)		(12,310	)

Net loans	$	1,107,900		$	1,108,159

Activity in the allowance for loan losses was as follows:


	Three Months Ended
	March 31,
	2010		2009
Beginning balance	$	12,310	$	9,068
Charge-offs:
One- to four-family real estate		76		138
Commercial real estate		—		—
Home equity		28		9

Total real estate loans		104		147
Consumer		467		868
Commercial non-mortgage		44		191

Total charge-offs		615		1,206

Recoveries:
One- to four-family real estate		3		4
Commercial real estate		—		—
Home equity		—		—

Total real estate loans		3		4
Consumer		85		190
Commercial non-mortgage		—		—

Total recoveries		88		194

Net charge-offs		527		1,012
Provision for loan losses		1,146		1,442

Ending balance	$	12,929	$	9,498

Page 11 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

6. Securities

The amortized cost and fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized
March 31, 2010	Cost		Gains		Losses			Fair Value
U.S. government and federal agency	$	33,000	$	82	$	—		$	33,082
Agency residential mortgage-backed securities		286,677		4,162		(1,227	)		289,612
Agency residential collateralized mortgage obligations		213,987		3,432		(728	)		216,691
SBA pools		5,990		—		(50	)		5,940

Total securities	$	539,654	$	7,676	$	(2,005	)	$	545,325


			Gross		Gross
	Amortized		Unrealized		Unrealized
December 31, 2009	Cost		Gains		Losses			Fair Value
U.S. government and federal agency	$	47,994	$	—	$	(556	)	$	47,438
Agency residential mortgage-backed securities		197,437		4,377		(187	)		201,627
Agency residential collateralized mortgage obligations		226,242		3,588		(1,329	)		228,501
SBA pools		6,565		—		(73	)		6,492

Total securities	$	478,238	$	7,965	$	(2,145	)	$	484,058

The amortized cost, unrecognized gains and losses, and fair value of securities held to maturity were as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized
March 31, 2010	Cost		Gains		Losses			Fair Value
U.S. government and federal agency	$	14,993	$	162	$	—		$	15,155
Agency residential mortgage-backed securities		143,442		5,616		—			149,058
Agency residential collateralized mortgage obligations		59,083		1,410		—			60,493
Municipal bonds		34,413		638		(143	)		34,908

Total securities	$	251,931	$	7,826	$	(143	)	$	259,614


			Gross		Gross
	Amortized		Unrealized		Unrealized
December 31, 2009	Cost		Gains		Losses			Fair Value
U.S. government and federal agency	$	14,991	$	140	$	—		$	15,131
Agency residential mortgage-backed securities		154,013		4,555		(175	)		158,393
Agency residential collateralized mortgage obligations		56,414		978		(2	)		57,390
Municipal bonds		29,306		698		(104	)		29,900

Total securities	$	254,724	$	6,371	$	(281	)	$	260,814

Page 12 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

The Company evaluates securities for other-than-temporary impairment on at least a quarterly basis and more frequently when economic, market, or security specific concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer(s), and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The Company conducts regular reviews of the bond agency ratings of securities and considers whether the securities were issued by or have principal and interest payments guaranteed by the federal government or its agencies. These reviews focus on the underlying rating of the issuer and also include the insurance rating of securities that have an insurance component. The ratings and financial condition of the issuers are monitored as well.

In determining other-than-temporary impairment for debt securities, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time. In analyzing an issuer’s financial condition, the Company will consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.

When other-than-temporary impairment occurs, the amount of the other-than-temporary impairment recognized in earnings depends on whether the Company intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current period credit loss. If the Company intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current period credit loss, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current period loss, the other-than-temporary impairment shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the other-than-temporary impairment recognized in earnings becomes the new amortized cost basis of the investment.

During the first quarter of 2009, the Company recognized through operating results a $465 non-cash impairment charge to write off one of our collateralized debt obligations due to other-than-temporary impairment, which was credit-related. The securities were sold in late June 2009.

The table below presents a reconciliation of the credit portion of other-than-temporary impairment charges relating to the collateralized debt obligations.


	March 31, 2010
Beginning balance, January 1, 2010	$	—
Additional credit losses not recorded previously		—

Ending balance, March 31, 2010	$	—


	March 31, 2009
Beginning balance, January 1, 2009	$	9,408	⁽¹⁾
Additional credit losses not recorded previously		465

Ending balance, March 31, 2009	$	9,873


⁽¹⁾		Reduced by $4.4 million fue to adoption of new accounting guidance for other-than-temporary impairment as discussed above

Page 13 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

The fair value of debt securities and carrying amount, if different, at March 31, 2010, by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities and collateralized mortgage obligations, are shown separately.


					Available
	Held to maturity				for sale
	Carrying
	Amount		Fair Value		Fair Value
Due in one year or less	$	—	$	—	$	—
Due from one to five years		16,610		16,856		—
Due from five to ten years		8,621		8,950		34,017
Due after ten years		24,175		24,257		5,005

Securities due at a single maturity date		49,406		50,063		39,022
Agency residential mortgage-backed securities		143,442		149,058		289,612
Agency residential collateralized mortgage obligations		59,083		60,493		216,691

Total	$	251,931	$	259,614	$	545,325

Page 14 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

Securities with unrealized losses at March 31, 2010, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:


HTM	Less than 12 Months							12 Months or More						Total
Description of Securities			Unrealized							Unrealized						Unrealized
March 31, 2010	Fair Value		Loss			Number		Fair Value		Loss		Number		Fair Value		Loss			Number


SBA pools	$	—	$	—				$	—	$	—			$	—	$	—			—
Municipal bonds		8,503		(143	)		21		—		—				8,503		(143	)		21
Agency residential mortgage-backed securities		—		—					—		—				—		—			—
Agency residential collateralized mortgage obligations		—		—					418		—		2		418		—			2
U.S. Government and federal agency		—		—					—		—				—		—			—

Total temporarily impaired	$	8,503	$	(143	)		21	$	418	$	—		2	$	8,921	$	(143	)		23


AFS	Less than 12 Months							12 Months or More							Total
Description of Securities			Unrealized							Unrealized							Unrealized
March 31, 2010	Fair Value		Loss			Number		Fair Value		Loss			Number		Fair Value		Loss			Number

SBA pools	$	—	$	—				$	5,940	$	(50	)		2	$	5,940	$	(50	)		2
Municipal bonds		—		—					—		—					—		—			—
Agency residential mortgage-backed securities		115,750		(1,227	)		20		—		—					115,750		(1,227	)		20
Agency residential collateralized mortgage obligations		10,904		(276	)		3		63,343		(452	)		17		74,247		(728	)		20
U.S. Government and federal agency		—		—					—		—					—		—			—

Total temporarily impaired	$	126,654	$	(1,503	)		23	$	69,283	$	(502	)		19	$	195,937	$	(2,005	)		42

Page 15 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)


HTM	Less than 12 Months					12 Months or More					Total
Description of Securities			Unrealized					Unrealized					Unrealized
December 31, 2009	Fair Value		Loss			Fair Value		Loss			Fair Value		Loss

SBA pools	$	—	$	—		$	—	$	—		$	—	$	—
Municipal bonds		4,333		(104	)		—		—		$	4,333	$	(104	)
Agency residential mortgage-backed securities		30,231		(175	)		—		—		$	30,231	$	(175	)
Agency residential collateralized mortgage obligations		4		—			687		(2	)	$	691	$	(2	)
U.S. Government and federal agency		—		—			—		—		$	—	$	—

Total temporarily impaired	$	34,568	$	(279	)	$	687	$	(2	)	$	35,255	$	(281	)


AFS	Less than 12 Months					12 Months or More					Total
Description of Securities			Unrealized					Unrealized					Unrealized
December 31, 2009	Fair Value		Loss			Fair Value		Loss			Fair Value		Loss

SBA pools	$	—	$	—		$	6,492	$	(73	)	$	6,492	$	(73	)
Municipal bonds		—		—			—		—		$	—	$	—
Agency residential mortgage-backed securities		40,651		(187	)		—		—		$	40,651	$	(187	)
Agency residential collateralized mortgage obligations		3,793		(32	)		89,956		(1,297	)	$	93,749	$	(1,329	)
U.S. Government and federal agency		47,438		(556	)		—		—		$	47,438	$	(556	)

Total temporarily impaired	$	91,882	$	(775	)	$	96,448	$	(1,370	)	$	188,330	$	(2,145	)

Page 16 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

The Company’s SBA pools are guaranteed as to principal and interest by the U.S. government. The agency residential mortgage-backed securities and agency collateralized mortgage obligations were issued and are backed by the Government National Mortgage Association (GNMA), a U.S. government agency, or by FNMA or the FHLMC, both U.S. government sponsored agencies. They carry the explicit or implicit guarantee of the U.S. government. The Company does not own any non-agency mortgage-backed securities or collateralized mortgage obligations.

The Company conducts regular reviews of the municipal bond agency ratings of securities. These reviews focus on the underlying rating of the issuer and also include the insurance rating of securities that have an insurance component. The ratings and financial condition of the issuers are monitored as well, including reviews of official statements and other available municipal reports. The Company’s municipal bonds, which include both the ratings of the underlying issuers and the ratings with credit support, are all rated at least A by Standard and Poor’s or A3 by Moody’s.

7. Fair Value Disclosures

ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Prices or valuation techniques that require inputs that are both significant and unobservable in the market. These instruments are valued using the best information available, some of which is internally developed, and reflects a reporting entity’s own assumptions about the risk premiums that market participants would generally require and the assumptions they would use.

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

Page 17 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:


			Fair Value Measurements at March 31, 2010, Using
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable
	March 31, 2010		(Level 1)		(Level 2)		Inputs (Level 3)
Assets:
U.S. government and federal agency	$	33,082	$	—	$	33,082	$	—
Agency residential mortgage-backed securities		289,612		—		289,612		—
Agency residential collateralized mortgage obligations		216,691		—		216,691		—
SBA pools		5,940		—		5,940		—

Total securities available for sale	$	545,325	$	—	$	545,325	$	—


			Fair Value Measurements at December 31, 2009, Using
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable
	December 31, 2009		(Level 1)		(Level 2)		Inputs (Level 3)
Assets:
U.S. government and federal agency	$	47,438	$	—	$	47,438	$	—
Agency residential mortgage-backed securities		201,627		—		201,627		—
Agency residential collateralized mortgage obligations		228,501		—		228,501		—
SBA pools		6,492		—		6,492		—

Total securities available for sale	$	484,058	$	—	$	484,058	$	—

The table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2009, and 2010:


	Securities
	available
	for sale
Beginning balance, January 1, 2010	$	—
Total gains or losses (realized /unrealized)
Included in earnings
Included in other comprehensive income		—

Ending balance, March 31, 2010	$	—


Beginning balance, January 1, 2009	$	7,940
Adjustment due to adoption of ASC 320-10-65, non-credit portion of impairment previously recorded		4,351
Total gains or losses (realized /unrealized)
Included in earnings
Interest income on securities		135
Impairment of collateralized debt obligations (all credit)		(465	)
Included in other comprehensive income		(9,855	)

Ending balance, March 31, 2009	$	2,106

Page 18 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:


			Fair Value Measurements at March 31, 2010, Using
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable
	March 31, 2010		(Level 1)		(Level 2)		Inputs (Level 3)
Assets:
Impaired loans	$	2,924	$	—	$	2,924	$	—
Mortgage servicing rights		897		—		897		—
Other real estate owned		3,073		—		3,073		—


			Fair Value Measurements at December 31, 2009, Using
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable
	December 31, 2009		(Level 1)		(Level 2)		Inputs (Level 3)
Assets:
Impaired loans	$	3,614	$	—	$	3,614	$	—
Mortgage servicing rights		872		—		872		—
Other real estate owned		3,917		—		3,917		—

Impaired loans, which primarily consist of one- to four-family residential, home equity, commercial real estate and commercial non-mortgage loans, are measured for impairment using the fair value of the collateral (as determined by third party appraisals using recent comparative sales data) for collateral dependent loans. Impaired loans with allocated allowance for loan losses at March 31, 2010, had a carrying amount of $2,924, which is made up of the outstanding balance of $3,667, net of a valuation allowance of $743. This resulted in an additional provision for loan losses of $561 that is included in the amount reported on the income statement. Impaired loans with allocated allowance for loan losses at December 31, 2009, had a carrying amount of $3,614, which is made up of the outstanding balance of $4,352, net of a valuation allowance of $738. This resulted in an additional provision for loan losses of $667.

Other real estate owned, which is measured at the lower of book or fair value less costs to sell, had a net book value of $3,073, which is made up of the outstanding balance of $3,167, net of a valuation allowance of $94 at March 31, 2010, resulting in net write-downs of $68 for the three months ended March 31, 2010. Other real estate owned had a net book value of $3,917, which is made up of the outstanding balance of $3,954, net of a valuation allowance of $37 at December 31, 2009, resulting in net write-downs of $188 for the year ended December 31, 2009.

Page 19 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

Activity for other real estate owned for the three months ended March 31, 2010, and the related valuation allowance follows:


Other real estate owned:
Balance at January 1, 2010	$	3,917
Transfers in at fair value		641
Change in valuation allowance		(57	)
Sale of property (gross)		(1,428	)

Balance at March 31, 2010	$	3,073


Valuation allowance:
Balance at January 1, 2010	$	37
Sale of property		(11	)
Valuation adjustment		68

Balance at March 31, 2010	$	94

Mortgage servicing rights, which are carried at amortized cost, were carried at an amortized cost of $897 at March 31, 2010, which is made up of the outstanding balance of $998, net of a valuation allowance of $101 at March 31, 2010. Mortgage servicing rights were carried at an amortized cost of $872 at December 31, 2009, which is made up of the outstanding balance of $1,063, net of a valuation allowance of $191 at December 31, 2009.

Activity for capitalized mortgage servicing rights for the three months ended March 31, 2010, and the related valuation allowance follows:


Mortgage servicing rights:
Balance at January 1, 2010	$	872
Amortized to expense		(65	)
Change in valuation allowance		90

Balance at March 31, 2010	$	897


Valuation allowance:
Balance at January 1, 2010	$	191
Additions expensed		—
Valuation adjustment		(90	)

Balance at March 31, 2010	$	101

Page 20 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

Carrying amount and estimated fair values of financial instruments were as follows:


	March 31, 2010						December 31, 2009
	Carrying						Carrying
	Amount			Fair Value			Amount			Fair Value

Financial assets
Cash and cash equivalents	$	75,064		$	75,064		$	55,470		$	55,470
Securities available for sale		545,325			545,325			484,058			484,058
Securities held to maturity		251,931			259,614			254,724			260,814
Loans held for sale		358,818			360,081			341,431			342,663
Loans, net		1,107,900			1,103,915			1,108,159			1,105,979
Federal Home Loan Bank stock		13,814			N/A			14,147			N/A
Bank-owned life insurance		28,176			28,176			28,117			28,117
Accrued interest receivable		8,287			8,287			8,099			8,099

Financial liabilities
Deposits	$	(1,900,278	)	$	(1,885,403	)	$	(1,796,665	)	$	(1,771,080	)
Federal Home Loan Bank advances		(304,174	)		(316,096	)		(312,504	)		(319,052	)
Repurchase agreement		(25,000	)		(26,726	)		(25,000	)		(25,277	)
Other borrowings		(10,000	)		(10,000	)		(10,000	)		(10,000	)
Accrued interest payable		(1,962	)		(1,962	)		(1,884	)		(1,884	)

The methods and assumptions used to estimate fair value are described as follows:

Estimated fair value is the carrying amount for cash and cash equivalents, bank-owned life insurance and accrued interest receivable and payable. For loans, fair value is based on discounted cash flows using current market offering rates, estimated life, and applicable credit risk. For deposits and borrowings, fair value is based on discounted cash flows using the FHLB advance curve to the estimated life. Fair value of debt is based on discounting the estimated cash flows using the current rate at which similar borrowings would be made with similar rates and maturities. It was not practicable to determine the fair value of FHLB stock due to restrictions on its transferability. The fair value of off-balance sheet items is based on the current fees or cost that would be charged to enter into or terminate such arrangements and are not considered significant to this presentation.

Page 21 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

8. Income Taxes


	Three Months Ended			Three Months Ended
	March 31,			March 31,
	2010			2009
Current expense (benefit)	$	1,232		$	(598	)
Deferred expense		53			1,182

Total income tax expense	$	1,285		$	584


Effective Tax Rate		32.21	%		31.95	%

The net deferred tax assets totaled $5.1 million at March 31, 2010 and December 31, 2009. No valuation allowance was provided on deferred tax assets as of March 31, 2010 or December 31, 2009, as the Company expects to realize the future tax benefits.

9. Repurchase Agreement

In April 2008, the Company entered into a ten-year term structured repurchase callable agreement with Credit Suisse Securities (U.S.A.) LLC for $25.0 million to leverage the balance sheet and reduce cost of funds. The interest rate was fixed at 1.62% for the first year of the agreement. After the first year, the interest rate adjusts quarterly to 6.25% less the three month Libor rate, subject to a lifetime cap of 3.22%. The rate was 3.22% at March 31, 2010. The securities sold under agreements to repurchase had an average balance of $32.0 million and an average interest rate of 1.66% during the three months ended March 31, 2010. The maximum month-end balance during the three months ended March 31, 2010 was $32.2 million. At maturity, the securities underlying the agreement are returned to the Company. The fair value of these securities sold under agreements to repurchase was $31.6 million at March 31, 2010. The Company retains the right to substitute securities under the terms of the agreements.

Page 22 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

10. Segment Information

The reportable segments are determined by the products and services offered, primarily distinguished between banking and VPBM, our mortgage banking subsidiary. Loans, investments and deposits generate the revenues in the banking segment; secondary marketing sales generate the revenue in the VPBM segment. Segment performance is evaluated using segment profit (loss). Information reported internally for performance assessment for the three months ended March 31, 2010 and 2009 follows:


	Three Months Ended
	March 31, 2010
										Total
							Eliminations			Segments
							and			(Consolidated
	Banking			VPBM			Adjustments¹			Total)
Results of Operations:
Total interest income	$	25,770		$	413		$	73		$	26,256
Total interest expense		11,056			309			(248	)		11,117
Provision for loan losses		1,105			41			—			1,146

Net interest income after provision for loan losses		13,609			63			321			13,993
Other revenue		4,917			(1	)		(15	)		4,901
Net gain (loss) on sale of loans		(156	)		2,811			—			2,655
Total non-interest expense		13,997			3,450			112			17,559

Income (loss) before income tax expense (benefit)		4,373			(577	)		194			3,990
Income tax expense (benefit)		1,543			(194	)		(64	)		1,285

Net income (loss)	$	2,830		$	(383	)	$	258		$	2,705

Segment assets	$	2,477,209		$	39,541		$	(39,337	)	$	2,477,413
Noncash items:
Net gain (loss) on sale of loans		(156	)		2,811			—			2,655
Depreciation		833			67			—			900
Provision for loan losses		1,105			41			—			1,146


	Three Months Ended
	March 31, 2009
									Total
						Eliminations			Segments
						and			(Consolidated
	Banking			VPBM		Adjustments¹			Total)
Results of Operations:
Total interest income	$	27,634		$	506	$	(629	)	$	27,511
Total interest expense		13,149			369		(467	)		13,051
Provision for loan losses		1,442			—		—			1,442

Net interest income after provision for loan losses		13,043			137		(162	)		13,018
Other revenue		4,215			—		(27	)		4,188
Net gain on sale of loans		—			4,245		(539	)		3,706
Impairment of collateralized debt obligations		(465	)		—		—			(465	)
Total non-interest expense		15,143			3,976		(500	)		18,619

Income before income tax expense		1,650			406		(228	)		1,828
Income tax expense		427			146		11			584

Net income	$	1,223		$	260	$	(239	)	$	1,244

Segment assets	$	2,238,015		$	53,593	$	(54,988	)	$	2,236,620
Noncash items:
Net gain on sale of loans		—			4,245		(539	)		3,706
Depreciation		947			60		—			1,007
Provision for loan losses		1,442			—		—			1,442


¹		Includes eliminating entries for intercompany transactions and stand-alone expenses of ViewPoint Financial Group.

Page 23 of 52

VIEWPOINT FINANCIAL GROUP AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

11. Recent Accounting Developments

In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-02, Consolidation (Topic 810) – Accounting and Reporting for Decreases in Ownership of a Subsidiary – A Scope Clarification. This ASU provides amendments to Subtopic 810-10 and related guidance within U.S. GAAP to clarify that the scope of the decrease in ownership provisions of the Subtopic and related guidance applied to the following: a subsidiary or group of assets that is a business or nonprofit activity; a subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture; and an exchange of a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in an entity (including an equity method investee or joint venture.) The amendments in this ASU also clarify that the decrease in ownership guidance in Subtopic 810-10 does not apply to sales of in substance real estate or conveyances of oil and gas mineral rights, even if they involve businesses. Also, the amendments in this ASU expand the disclosures about the deconsolidation of a subsidiary or derecognition of a group of assets within the scope of Subtopic 810-10. The amendments in this ASU are effective beginning in the period that an entity adopts the provisions of Subtopic 810-10. If an entity has previously adopted Subtopic 810-10 as of the date the amendments in this ASU are included in the ASC, the amendments in this ASU are effective beginning in the first interim or annual reporting period ending on or after December 15, 2009. The adoption of this ASU did not have a significant impact to the Company’s financial statements.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements. This ASU provides amendments to Subtopic 820-10 that require new disclosures as follows: a reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers, and in the reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present separately information about purchases, sales, issuances and settlements (that is, on a gross basis rather than as one net number.) This ASU provides amendments to Subtopic 820-10 that clarify existing disclosures regarding the level of disaggregation, input and valuation techniques. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2009, and for interim periods within those fiscal years. The adoption of this ASU did not have a significant impact to the Company’s financial statements.

In February 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855) – Amendments to Certain Recognition and Disclosure Requirements. This ASU amends Subtopic 855-10 to state that an entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC’s requirements. The amendments in this ASU were effective upon issuance. The adoption of this ASU did not have a significant impact to the Company’s financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Private Securities Litigation Reform Act Safe Harbor Statement

When used in filings by the Company with the Securities and Exchange Commission (the “SEC”) in the Company’s press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “intends” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions, legislative changes, changes in policies by regulatory agencies, fluctuations in interest rates, the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, the Company’s ability to access cost-effective funding, fluctuations in real estate values and both residential and commercial real estate market conditions, demand for loans and deposits in the Company’s market area, competition, changes in management’s business strategies and other factors set forth under Risk Factors in the Company’s Annual Report on Form 10-K, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to advise readers that the factors listed above could materially affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake — and specifically declines any obligation — to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Overview

The Company is a federally chartered stock holding company and is subject to regulation by the Office of Thrift Supervision (“OTS”). The Company was organized on September 29, 2006, as part of ViewPoint Bank’s reorganization into the mutual holding company form of organization. As part of the reorganization, ViewPoint Bank (i) converted to a stock savings bank as the successor to the Bank in its mutual form (which was originally chartered as a credit union in 1952); (ii) organized ViewPoint Financial Group, which owns 100% of the common stock of ViewPoint Bank; and (iii) organized ViewPoint MHC, which currently owns 57% of the common stock of ViewPoint Financial Group. ViewPoint MHC has no other activities or operations other than its ownership of ViewPoint Financial Group. ViewPoint Bank succeeded to the business and operations of the Bank in its mutual form and ViewPoint Financial Group sold a minority interest in its common stock in a public stock offering. ViewPoint Financial Group has no significant assets or liabilities other than all of the outstanding shares of common stock of ViewPoint Bank, its loan to the ViewPoint Bank Employee Stock Ownership Plan, liquid assets and certain borrowings.

On January 21, 2010, the boards of the Company, ViewPoint Bank and ViewPoint MHC adopted a plan to reorganize into a full stock company and undertake a “second step” offering of new shares of common stock. The reorganization and offering, which is subject to regulatory, shareholder and depositor approval, is expected to be completed during the summer of 2010. As part of the reorganization, ViewPoint Bank will become a wholly owned subsidiary of a newly formed stock corporation, ViewPoint Financial Group, Inc. Shares of common stock of the Company, other than those held by ViewPoint MHC, will be converted into shares of common stock of ViewPoint Financial Group, Inc. using an exchange ratio designed to preserve current percentage ownership interests. Shares owned by ViewPoint MHC will be retired, and new shares representing that ownership will be offered and sold to the Bank’s eligible depositors, the Bank’s tax-qualified employee benefit plans and members of the general public as set forth in the Plan of Conversion and Reorganization of ViewPoint MHC.

Our principal business consists of attracting retail deposits from the general public and the business community and investing those funds, along with borrowed funds, in permanent loans secured by first and second mortgages on owner-occupied, one- to four-family residences and commercial real estate, as well as in secured and unsecured commercial non-mortgage and consumer loans. Additionally, we have an active program with mortgage banking companies that allows them to close one- to four-family real estate loans in their own name and temporarily finance their inventory of these closed loans until the loans are sold to investors approved by the Company (the “Purchase Program”). We also offer brokerage services for the purchase and sale of non-deposit investment and insurance products through a third party brokerage arrangement.

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Our operating revenues are derived principally from earnings on interest earning assets, service charges and fees, and gains on the sale of loans. Our primary sources of funds are deposits, FHLB advances and other borrowings, and payments received on loans and securities. We offer a variety of deposit accounts that provide a wide range of interest rates and terms, generally including savings, money market, term certificate and demand accounts.

At March 31, 2010, the Company operated 23 community bank offices in the Dallas/Fort Worth Metroplex and 15 loan production offices. In 2009, we opened three new full-service community bank offices in Grapevine, Frisco and Wylie. On January 2, 2009, the Company announced plans to expand its community banking network by opening more free-standing, full-service community bank offices and transitioning away from limited grocery store banking centers. As a result, the Company closed ten in-store banking centers located in Carrollton, Dallas, Garland, Plano, McKinney, Frisco and Wylie in 2009. These cities continue to be served by full-service ViewPoint Bank offices. Two additional loan production offices are scheduled to open in the second quarter of 2010.

First Quarter Highlights

•

Quarterly EPS more than doubled from this time last year: Basic and diluted earnings per share of $0.11, up $0.06 from the same period last year.

•

Quarterly net income increased by 117.4%: Net income for the quarter ended March 31, 2010 was $2.7 million, an increase of $1.5 million from the quarter ended March 31, 2009.

•

Non-performing loans declined: Non-performing loans improved by $678,000 to 1.07% of Gross Loans, compared to 1.13% at December 31, 2009.

•

Continued loan growth: Purchase Program and commercial non-mortgage loans helped gross loans (including loans held for sale) increase by $17.7 million, or 1.2%, from December 31, 2009.

•

Deposit growth of $103.6 million: Deposits increased, primarily in checking, by $103.6 million, or 5.8%, from December 31, 2009.

•

Continued capital strength: The Company’s equity to total assets ratio was 8.42 %, and the Bank’s tier one capital ratio was 7.81%, exceeding the regulatory minimum of 5.00% for a well-capitalized institution.

Critical Accounting Policies

Certain of our accounting policies are important to the portrayal of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for loan losses and other-than-temporary impairments in our securities portfolio.

Allowance for Loan Loss. The allowance for loan losses and related provision expense are susceptible to change if the credit quality of our loan portfolio changes, which is evidenced by many factors including charge-offs and non-performing loan trends. Generally, one- to four-family residential real estate lending has a lower credit risk profile compared to consumer lending (such as automobile or personal line of credit loans). Commercial real estate and non-mortgage lending, however, have higher credit risk profiles than consumer and one- to four- family residential real estate loans due to these loans being larger in amount and non-homogenous in structure and term. Changes in economic conditions, the mix and size of the loan portfolio and individual borrower conditions can dramatically impact our level of allowance for loan losses in relatively short periods of time. Management believes that the allowance for loan losses is maintained at a level that represents our best estimate of credit losses in the loan portfolio. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions. In addition, our banking regulators and external auditor periodically review our allowance for loan losses. These entities may require us to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their review.

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Management evaluates current information and events regarding a borrower’s ability to repay its obligations and considers a loan to be impaired when the ultimate collectability of amounts due, according the contractual terms of the loan agreement, is in doubt. If an impaired loan is collateral-dependent, the fair value of the collateral, less the cost to acquire and sell, is used to determine the amount of impairment. The amount of the impairment can be adjusted, based on current data, until such time as the actual basis is established by acquisition of the collateral. Impairment losses are reflected in the allowance for loan losses through a charge to the provision for loan losses. Subsequent recoveries are credited to the allowance for loan losses. Cash receipts for accruing loans are applied to principal and interest under the contractual terms of the loan agreement. Cash receipts on impaired loans for which the accrual of interest has been discontinued are applied first to principal and then to interest income.

Other-than-Temporary Impairments. The Company evaluates securities for other-than-temporary impairment on at least a quarterly basis and more frequently when economic, market, or security specific concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer(s), and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The Company conducts regular reviews of the bond agency ratings of securities and considers whether the securities were issued by or have principal and interest payments guaranteed by the federal government or its agencies. These reviews focus on the underlying rating of the issuer and also include the insurance rating of securities that have an insurance component. The ratings and financial condition of the issuers are monitored as well.

For periods in which other-than-temporary impairment of a debt security is recognized, the credit portion of the amount is determined by subtracting the present value of the stream of estimated cash flows as calculated in the discounted cash flow model and discounted at book yield from the prior period’s ending carrying value. The non-credit portion of the amount is determined by subtracting the credit portion of the impairment from the difference between the book value and fair value of the security. The credit related portion of the impairments is charged against income and the non-credit related portion is charged to equity as a component of other comprehensive income.

Business Strategy

Our principal objective is to remain an independent, community-oriented financial institution serving customers in our primary market area. Our Board of Directors has sought to accomplish this objective through the adoption of a strategy designed to maintain profitability, a strong capital position and high asset quality. This strategy primarily involves:

•

Continuing the growth and diversification of our loan portfolio.

During the past five years, we have successfully transitioned our lending activities from a predominantly consumer-driven model to a more diversified consumer and business lender by emphasizing three key lending initiatives: our Purchase Program, through which we fund third party mortgage bankers; residential mortgage lending through our own mortgage banking company; and commercial real estate lending. Additionally, we will seek to diversify our loan portfolio by increasing secured commercial and industrial lending to small to mid-size businesses in our market area. Loan diversification improves our earnings because commercial real estate and commercial and industrial loans generally have higher interest rates than residential mortgage loans. Another benefit of commercial lending is that it improves the sensitivity of our interest-earning assets because commercial loans typically have shorter terms than residential mortgage loans and frequently have variable interest rates.

•

Maintaining our historically high level of asset quality.

We believe that strong asset quality is a key to long-term financial success. We have sought to maintain a high level of asset quality and moderate credit risk by strictly adhering to our strong lending policies, as evidenced by historical low charge-off ratios and non-performing assets. Although we intend to continue our efforts to grow our loan portfolio, including through commercial real estate and business lending, we intend to continue our philosophy of managing credit exposures through our conservative approach to lending.

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•

Capturing our customers’ full relationship.

We offer a wide range of products and services that provide diversification of revenue sources and solidify our relationship with our customers. We focus on core retail and business deposits, including savings and checking accounts, that lead to long-term customer retention. Our Absolute Checking account product, which offers a higher rate of interest when required electronic transaction amounts and other requirements are satisfied, provides cost savings and drives fee revenue while providing what we believe to be a stable customer relationship. As part of our commercial lending process we cross-sell the entire business banking relationship, including non-interest bearing deposits and business banking products, such as online cash management, treasury management, wires, and direct deposit /payment processing.

•

Expanding our reach.

In addition to deepening our relationships with existing customers, we intend to expand our business to new customers by leveraging our well-established involvement in the community and by selectively emphasizing products and services designed to meet their banking needs. We also intend to continue to pursue expansion in our market area through growth of our branch network. We may also consider the acquisition of other financial institutions or branches of other banks in or contiguous to our market area, although currently no specific transactions are planned.

As a community bank, we strive to make banking feel more like a partnership with our customers than simply providing an account or loan. We offer the wide variety of resources that customers typically expect from a large bank while giving the personal attention found at a community bank. We support the communities we serve by donating thousands of volunteer hours to a multitude of worthy causes; in fact, our community reinvestment activities received the highest rating of “Outstanding” from the OTS.

Comparison of Financial Condition at March 31, 2010, and December 31, 2009

General. Total assets increased by $97.9 million, or 4.1%, to $2.48 billion at March 31, 2010, from $2.38 billion at December 31, 2009. The rise in total assets was primarily due to a $61.3 million, or 12.7%, increase in securities available for sale, $19.6 million in cash and cash equivalents, and a $17.7 million increase in gross loans (including an increase in loans held for sale of $17.4 million.) Asset growth was funded by an increase in deposits of $103.6 million, or 5.8%.

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Loans. Gross loans (including $358.8 million in mortgage loans held for sale) increased by $17.7 million, or 1.2%, from $1.46 billion at December 31, 2009 to $1.48 billion at March 31, 2010.


	March 31,		December 31,		Dollar			Percent
	2010		2009		Change			Change
	(Dollars in thousands)
Real estate loans:
One- to four- family	$	408,505	$	420,934	$	(12,429	)		(3.0	%)
Commercial		461,207		453,604		7,603			1.7
Home equity		113,573		117,139		(3,566	)		(3.0	)
Construction		8,258		7,074		1,184			16.7
Loans held for sale		358,818		341,431		17,387			5.1

Total real estate loans		1,350,361		1,340,182		10,179			0.8


Other loans:
Consumer loans:
Automobile indirect		7,134		10,711		(3,577	)		(33.4	)
Automobile direct		52,877		57,186		(4,309	)		(7.5	)
Other secured		12,437		12,217		220			1.8
Lines of credit/unsecured		14,499		14,781		(282	)		(1.9	)

Total consumer loans		86,947		94,895		(7,948	)		(8.4	)


Commercial non-mortgage		43,453		27,983		15,470			55.3

Total loans	$	1,480,761	$	1,463,060	$	17,701			1.2	%

Mortgage loans held for sale increased $17.4 million, or 5.1% from December 31, 2009, and consisted of $331.1 million of Purchase Program loans purchased for sale under our standard loan participation agreement and $27.7 million of loans originated for sale by our mortgage banking subsidiary, VPBM. Our Purchase Program enables our mortgage banking company customers to close conforming one- to four-family real estate loans in their own name and temporarily finance their inventory of these closed loans until the loans are sold to investors approved by the Company. The Purchase Program had 22 clients with approved maximum borrowing amounts ranging from $15.0 million to $30.0 million at March 31, 2010. During the first quarter of 2010, the average outstanding balance per client was $11.2 million. The Purchase Program generated $566 thousand in fee income for the quarter ended March 31, 2010, and also produced interest income of $3.0 million, which was an increase of $1.4 million from the quarter ended March 31, 2009. VPBM originated $96.1 million in one-to-four family mortgage loans in the three months ended March 31, 2010, and sold $88.2 million to investors, generating a net gain on sale of loans of $2.7 million. Also, $7.0 million in VPBM originated loans were retained in our portfolio. One- to four- family mortgage loans held in portfolio declined by $12.4 million, or 3.0%, from December 31, 2009. Since we added fewer loans to our portfolio, paydowns exceeded new loans added to the portfolio. For asset/liability and interest rate risk management, the Company follows guidelines set forth by the Company’s Asset/Liability Management Committee to determine whether to keep loans in portfolio or sell with a servicing release premium. The Company evaluates price, yield and duration, and credit when determining the amount of loans sold or retained.

Our commercial non-mortgage loans increased $15.5 million, or 55.3%, from December 31, 2009 to March 31, 2010. $12.0 million of the growth this quarter is attributed to two loans made to purchasers of discounted, performing, commercial real estate notes, with the notes, deeds of trust and other loan-related documents serving as collateral for our loan. In both cases, the structure of the loan required the borrowers to have a significant new cash equity position in the discounted notes which resulted in a loan to discounted purchase price percentage of between 57% and 64% and a loan to value ratio of between 35% and 37% of the current appraised as-is value of the underlying real estate securing the notes.

Commercial real estate, which increased by $7.6 million, or 1.7%, from December 31, 2009, consists almost exclusively of loans secured by existing, multi-tenanted commercial buildings with positive cash flows. 89% of our commercial real estate properties are located in Texas, a market that has outperformed many areas of the country.

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Consumer loans, including direct and indirect automobile, other secured installment loans, and unsecured lines of credit, decreased by $7.9 million, or 8.37%, from December 31, 2009. We have continued to reduce our emphasis on consumer lending and are focused on originating residential and commercial loans. Nevertheless, we remain committed to meeting all of the banking needs of our customers, which includes offering them competitive consumer lending products.

At March 31, 2010, the majority of our loan portfolio, or 67.5%, excluding loans held for sale, were fixed rate loans.

ViewPoint Bankers Mortgage. At March 31, 2010, VPBM had total assets of $39.5 million, which primarily consisted of $27.7 million in one- to four- family mortgage loans held for sale. VPBM operated at a net loss for the three months ended March 31, 2010 of $383,000 compared to net income of $260,000 for the three months ended March 31, 2009, as production declined from $191.7 million in the first quarter 2009 to $96.4 million in the first quarter 2010. Refinance originations were down 68% compared to the same time period in 2009. VPBM operates 14 loan production offices in Texas and has 130 employees.

Allowance for Loan Losses. The allowance for loan losses is maintained to cover losses that can be estimated on the date of the evaluation in accordance with U.S. generally accepted accounting principles. It is our estimate of credit losses in our loan portfolio. Our methodology for analyzing the allowance for loan losses consists of specific and general components.

For the general component, we stratify the loan portfolio into homogeneous groups of loans that possess similar loss potential characteristics and apply an appropriate loss ratio to these groups of loans to estimate the credit losses in the loan portfolio. We use both historical loss ratios and qualitative loss factors assigned to major loan collateral types to establish loss allocations. The historical loss ratio is generally defined as an average percentage of net annual loan losses to loans outstanding. Qualitative loss factors are based on management’s judgment of company-specific data and external economic indicators and how this information could impact the Company’s specific loan portfolios. The Allowance for Loan Loss Committee sets and adjusts qualitative loss factors by reviewing changes in loan composition and the seasonality of specific portfolios. The Committee also considers credit quality and trends relating to delinquency, non-performing and/or classified loans and bankruptcy within the Company’s loan portfolio when evaluating qualitative loss factors. Additionally, the Committee adjusts qualitative factors to account for the potential impact of external economic factors, including the unemployment rate and housing price and inventory levels specific to our market area.

For the specific component, the allowance for loan losses on individually analyzed loans includes commercial non-mortgage and one- to four-family and commercial real estate loans where management has concerns about the borrower’s ability to repay. Loss estimates include the negative difference, if any, between the current fair value of the collateral and the loan amount due.

We are focused on maintaining our asset quality by applying strong underwriting guidelines to all loans we originate. Substantially all of our residential real estate loans are full-documentation, standard “A” type products. We do not offer any sub-prime loan products.

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Delinquent Loans. The following table sets forth our loan delinquencies at March 31, 2010.


	Loans Delinquent For:
	60-89 Days							90 Days and Over							Total Loans Delinquent 60 Days or More
					Percent of							Percent of							Percent of
					Loan							Loan							Loan
	Number		Amount		Category			Number		Amount		Category			Number		Amount		Category
	(Dollars in thousands)
Real estate loans:
One- to four- family		7	$	673		0.16	%		19	$	4,672		1.14	%		26	$	5,345		1.31	%
Commercial		—		—		—	%		1		901		—	%		1		901		0.20	%
Home equity		1		15		—	%		4		246		—	%		5		261		0.23	%

Total real estate loans		8		688		0.07	%		24		5,819		0.59	%		32		6,507		0.66	%


Other loans:
Consumer loans:
Automobile indirect		7		26		0.36	%		14		101		1.42	%		21		127		1.78	%
Automobile direct		4		30		0.06	%		10		52		0.10	%		14		82		0.16	%
Other secured		—		—		0.00	%		1		3		0.02	%		1		3		0.02	%
Lines of credit/unsecured		6		19		0.13	%		12		57		0.39	%		18		76		0.52	%

Total consumer loans		17		75		0.09	%		37		213		0.24	%		54		288		0.32	%


Commercial non-mortgage		3		107		0.25	%		3		297		0.68	%		6		404		0.93	%

Total loans		28	$	870		0.08	%		64	$	6,329		0.56	%		92	$	7,199		0.64	%

Impaired loans as defined in ASC 310-10 were as follows:


	March 31, 2010		December 31, 2009
	(Dollars in Thousands)
Period-end loans with no allocated allowance for loan losses	$	8,308	$	8,240
Period-end loans with allocated allowance for loan losses		3,667		4,352

Total	$	11,975	$	12,592


Amount of the allowance for loan losses allocated to impaired loans at period-end	$	743	$	738


	Three Months Ended
	March 31,
	2010		2009
	(Dollars in Thousands)
Average balance of impaired loans during the period	$	12,914	$	5,580

Non-performing loans were as follows:


	March 31, 2010		December 31, 2009
	(Dollars in Thousands)
Loans past due over 90 days still on accrual	$	—	$	—
Nonaccrual loans		8,186		11,675
Troubled debt restructurings		3,789		978

Total	$	11,975	$	12,653

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At March 31, 2010, nonaccrual loans consisted of the following loan types:


	(Dollars in Thousands)
	Amount		Percent of Total
Mortgage loans:
One- to four-family	$	4,839		59.11	%
Commercial real estate		2,538		31.00	%
Home equity		246		3.01	%

Total mortgage loans		7,623		93.12	%

Indirect automobile loans		102		1.25	%
Direct automobile loans		73		0.89	%
Commercial non-mortgage loans		328		4.01	%
Consumer secured loans		3		0.04	%
Consumer lines of credit and unsecured loans		57		0.70	%

Total non-mortgage loans		563		6.88	%


Total nonaccrual loans	$	8,186		100.00	%

At March 31, 2010, troubled debt restructurings consisted of the following loan types:


	(Dollars in Thousands)
	Amount		Percent of Total
Mortgage loans:
One- to four-family	$	470		12.40	%
Commercial real estate		2,874		75.85	%
Home equity		47		1.24	%

Total mortgage loans		3,391		89.49	%

Indirect automobile loans		121		3.19	%
Direct automobile loans		144		3.80	%
Commercial non-mortgage loans		42		1.11	%
Consumer secured loans		—		0.00	%
Consumer lines of credit and unsecured loans		91		2.40	%

Total non-mortgage loans		398		10.51	%


Total troubled debt restructurings	$	3,789		100.00	%

At March 31, 2010, $2.1 million of troubled debt restructurings were classified as nonaccrual, including $1.8 million in commercial real estate loans.

At March 31, 2010, foreclosed assets consisted of the following collateral types:


	(Dollars in Thousands)
	Amount		Percent of Total
One- to four- family real estate	$	523		16.99	%
Commercial real estate		2,550		82.82	%
Automobile indirect		4		0.13	%
Automobile direct		2		0.06	%

Total foreclosed assets	$	3,079		100.00	%

Our non-performing loans, which consist of nonaccrual loans and troubled debt restructurings, include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. Troubled debt restructurings, which are accounted for under ASC 310-40, are loans that have renegotiated loan terms to assist borrowers who are unable to meet the original terms of their loans. These modifications to loan terms may include a lower interest rate, a reduction in principal, or an extended term to maturity.

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Our percentage of non-performing loans to total loans ratio at March 31, 2010, was 1.07%, compared to 1.13% at December 31, 2009. Non-performing loans decreased by $678,000, from $12.7 million at December 31, 2009, to $12.0 million at March 31, 2010. The decrease in non-performing loans was primarily due to $1.1 million in one-to-four family loans becoming current or paying off. The commercial real estate nonaccrual loans consist of three loans, two have been restructured and one represents a refinance of a former other real estate owned property. The first loan is a $907,000 loan participation that is collateralized by a hotel property experiencing financial difficulties. This loan is a troubled debt restructuring and is rated “substandard.” This loan matured in 2009 and has since been modified or extended several times in 2009 on a short-term basis to provide time to negotiate a long-term modification that is currently pending. This loan has matured and pays interest only. A $156,000 specific valuation allowance has been reserved for this loan based on a current appraisal. At March 31, 2010, this loan was 59 days delinquent under the restructured terms with a final short term modification pending. The second loan, a participation with an outstanding balance of $901,000, was reported as a troubled debt restructuring at December 31, 2008, and was moved into nonaccrual status in 2009. The loan defaulted at maturity in November 2008 and is currently in the process of foreclosure, which has been slowed due to the borrower’s filing of Chapter 13 bankruptcy. A $238,000 specific valuation allowance has been set aside for this loan, which is secured by two office buildings located in Oregon and is rated “doubtful.” At March 31, 2010, this loan was over 90 days delinquent under the restructured terms. The third loan is a $730,000 participation collateralized by an outlet mall located in Texas that was previously other real estate owned. The property was sold in January with the seller financing through the lender group. The loan is considered substandard initially due to its 90% loan to value. The sale of this property contributed to the decrease in the percentage of non-performing assets to total assets from .70% at December 31, 2009 to .61% at March 31, 2010. Commercial real estate loans on nonaccrual status decreased by $2.1 million as a troubled debt restructured loan moved out of nonaccrual status after performing in accordance with its restructured terms for more than six months. It is still classified “substandard” and now included in the above troubled debt restructurings table. The loan, with a net outstanding balance of $2.9 million, has paid as agreed and remains current under the restructured terms. It is collateralized by three office buildings located in Texas. The loan was initially extended for a period of three months to allow for the structure of a long term modification. The loan was extended an additional 33 months in August 2009. This loan represents an interest-only note with a cash flow recapture feature that is measured annually. Based on a current analysis, there is no anticipated loss for this loan and no specific reserve required.

Commercial real estate had three loans totaling $4.7 million in troubled debt restructurings which contained term extensions as well as interest concessions in the form of interest only instead of amortizing. $3.7 million of these loans are performing, while $901,000 is not performing and currently in the process of foreclosure.

One-to-four family real estate had four loans totaling $585,000 in troubled debt restructurings. Three loans had their payments capitalized, two loans for $346,000 that received a rate concession, while one loan for $124,000 had a due date extension, all three are performing. The remaining loan for $115,000 is not performing and is currently in the process of foreclosure. This loan is reported in the nonaccrual table.

Commercial non-mortgage had two loans totaling $72,000 in troubled debt restructurings. $42,000 was granted a payment forbearance of three months per SBA guidelines and is performing. The remaining loan for $30,000 was granted a rate reduction and is also performing. This loan is reported in the nonaccrual table.

Other Loans of Concern. The Company has other potential problem loans that are currently performing and do not meet the criteria for impairment, but where some concern exists. Excluding the non-performing assets set forth in the table above, as of March 31, 2010, there was an aggregate of $19.5 million of these potential problem loans compared to $19.7 million as of December 31, 2009. Of the $19.5 million, nine commercial real estate loans totaling $17.8 million were not delinquent at March 31, 2010, but are being monitored due to circumstances such as low occupancy rate, low debt service coverage or prior payment history problems. These possible credit problems may result in the future inclusion of these items in the non-performing asset categories. These loans consist of residential and commercial real estate and commercial non-mortgage loans that are classified as “watch” or “special mention”, meaning that these loans have potential weaknesses that deserve management’s close attention. These loans are not adversely classified according to regulatory classifications and do not expose the Company to sufficient risk to warrant adverse classification. These loans have been considered in management’s determination of our allowance for loan losses.

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Classified Assets. Federal regulations provide for the classification of loans and other assets, such as debt and equity securities, considered by the OTS to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses of those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the OTS and the FDIC, which may order the establishment of additional general or specific loss allowances. The Company’s classified assets and loss allowances reflect reviews by the OTS in 2009.

We regularly review the problem assets in our portfolio to determine whether any assets require classification in accordance with applicable regulations. The total amount classified represented 7.2% of our equity capital and 0.61% of our assets at March 31, 2010 compared to 7.9% of our equity capital and 0.68% of our assets at December 31, 2009. The aggregate amount of classified assets at the dates indicated was as follows:


	March 31, 2010		December 31, 2009
	(Dollars in Thousands)
Loss	$	—	$	—
Doubtful		4,783		4,153
Substandard		10,227		12,049

Total	$	15,010	$	16,202

Our allowance for loan losses at March 31, 2010, was $12.9 million, or 1.15% of gross loans, compared to $12.3 million, or 1.10% of gross loans, at December 31, 2009. The $619,000, or 5.0%, increase in our allowance for loan loss was primarily due to qualitative factors applied to two commercial real estate loans that moved from Watch to Special Mention during the period. One of these two loans is current while the other loan is thirty days delinquent. Allowance for loan loss to non-performing loans was 107.97% at March 31, 2010 compared to 97.29% as of December 31, 2009.

Securities. Our securities portfolio increased by $58.5 million, or 7.91%, to $797.3 million at March 31, 2010, from $738.8 million at December 31, 2009. The increase in our securities portfolio was primarily caused by deposit growth outpacing loan demand. There were $128.9 million of securities purchased and $69.5 million in maturities and paydowns. The purchases consisted of $118.5 million of securities deemed available for sale and $10.4 million of securities that were recorded as held to maturity. The classification of these purchased securities was determined in accordance with ASC 320-10. The available for sale securities purchased consisted of adjustable rate government and agency mortgage-backed securities, floating rate agency collateralized mortgage obligations, and agency step-up bonds. The held to maturity securities purchased consisted of fixed rate agency collateralized mortgage obligations and municipal bonds. This mix was determined due to its strong cash flow characteristics in various interest rate environments.

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Deposits. Total deposits increased by $103.6 million, or 5.8%, to $1.90 billion at March 31, 2010, from $1.80 billion at December 31, 2009.


	March 31,		December 31,		Dollar			Percent
	2010		2009		Change			Change
	(Dollars in thousands)
Non-interest bearing demand	$	184,356	$	193,581	$	(9,225	)		(4.8	%)
Interest bearing demand		321,380		268,063		53,317			19.9
Savings		151,876		143,506		8,370			5.8
Money Market		560,518		549,619		10,899			2.0
IRA savings		8,778		8,710		68			0.8
Time		673,370		633,186		40,184			6.3

Total deposits	$	1,900,278	$	1,796,665	$	103,613			5.8	%

The increase in deposits was primarily caused by a $53.3 million, or 19.9%, increase in interest bearing demand deposits, which was principally attributable to our Absolute Checking product, which currently provides a 4.0% annual percentage yield on account balances up to $50,000 if certain conditions are met. These conditions include using direct deposit or online bill pay, receiving statements online and having at least 15 Visa Check Card transactions per month for purchases. Absolute Checking encourages relationship accounts with required electronic transactions that are intended to reduce the expense of maintaining this product. If the conditions described above are not met, the rate paid decreases to 0.04%. The actual average rate paid on Absolute Checking accounts at March 31, 2010 was 2.76%. At March 31, 2010, 66% of Absolute Checking customers received online statements, compared to the average of 38% in other consumer checking accounts. Additionally, at March 31, 2010, Absolute Checking customers that represented new households generated 215 new loans totaling more than $7.4 million and 832 new deposit accounts for more than $30.4 million.

Time Deposits increased $40.2 million, or 6.3% due to an increase of $45.9 million in deposits from public funds. Public funds totaled $365.3 million as of March 31, 2010, and were pledged by securities with a market value of $400.9 million as of March 31, 2010. Money market deposits increased by $10.9 million, or 2.0%, due to a $7.9 million, or 1.6%, increase in consumer money market accounts, while non-interest bearing demand deposits decreased by $9.2 million, or 4.8%, as more consumers are choosing interest bearing accounts.

Borrowings. Federal Home Loan Bank advances decreased by $8.3 million, or 2.7%, from $312.5 million at December 31, 2009, to $304.2 million at March 31, 2010. The outstanding balance of Federal Home Loan Bank advances decreased due to monthly principal paydowns. During the three months ended March 31, 2010, the Company used deposit growth to fund loans and purchase investment securities. At March 31, 2010, the Company was eligible to borrow an additional $451.2 million from the Federal Home Loan Bank. Additionally, the Company is eligible to borrow from the Federal Reserve Bank discount window and has two available federal funds lines of credit with other financial institutions totaling $66.0 million.

In addition to Federal Home Loan Bank advances, the Company has a $25.0 million repurchase agreement with Credit Suisse and four promissory notes for unsecured loans totaling $10.0 million obtained from local private investors. The Company has used the proceeds from these loans for general working capital and to support the growth of the Bank.

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Shareholders’ Equity. Total shareholders’ equity increased by $2.9 million, or 1.4%, from $205.7 million at December 31, 2009, to $208.5 million at March 31, 2010.


	March 31,			December 31,			Dollar			Percent
	2010			2009			Change			Change
	(Dollars in Thousands)
Common stock	$	262		$	262		$	—			—	%
Additional paid-in capital		118,851			118,297			554			0.5
Retained Earnings		113,356			111,188			2,168			1.9
Accumulated other comprehensive income		3,705			3,802			(97	)		(2.6	)
Unearned ESOP shares		(5,925	)		(6,159	)		234			3.8
Treasury stock		(21,708	)		(21,708	)		—			—

Total shareholders’ equity	$	208,541		$	205,682		$	2,859			1.4	%

This increase was primarily caused by net income of $2.7 million, which was partially offset by the payment of dividends totaling $.05 per share during the three months ended March 31, 2010, which resulted in a $537,000 reduction to retained earnings.

Comparison of Results of Operations for the Three Months Ended March 31, 2010 and 2009

General. Net income for the three months ended March 31, 2010 was $2.7 million, an increase of $1.5 million, or 117.4%, from $1.2 million for the three months ended March 31, 2009. This increase in net income was driven by an increase in net interest income, lower provision for loan losses, and lower non-interest expense. Our basic and diluted earnings per share for the three months ended March 31, 2010 increased to $0.11 from $.05 for the three months ended March 31, 2009.

Interest Income. Interest income decreased by $1.3 million, or 4.6%, from $27.5 million for the three months ended March 31, 2009, to $26.3 million for the three months ended March 31, 2010.


	Three Months Ended
	March 31,				Dollar			Percent
	2010		2009		Change			Change
	(Dollars in Thousands)
Interest and dividend income
Loans, including fees	$	20,373	$	20,738	$	(365	)		(1.8	%)
Securities		5,718		6,714		(996	)		(14.8	)
Interest bearing deposits in other financial institutions		148		59		89			150.8
Federal Home Loan Bank stock		17		—		17			N/M

	$	26,256	$	27,511	$	(1,255	)		(4.6	%)

This decrease in interest income was primarily driven by the decrease in interest earned on securities of $996,000, or 14.8%, primarily relating to decreases in the weighted average yields on agency mortgage-backed securities, agency collateralized mortgage obligations and investment securities, as adjustable rate securities within the portfolios and purchases of new securities reflected lower interest rates, particularly the LIBOR rate, in the current quarter as compared to the prior period. Overall, the yield on agency collateralized mortgage obligations has decreased from 3.90% for the three months ended March 31, 2009 to 2.50% for the three months ended March 31, 2010. Partially offsetting the impact of this decrease in yield was an increase in the average balance of securities of $126.7 million, or 19.3% over the prior year period, principally in agency mortgage-backed securities. Interest income on loans also decreased $365,000, or 1.8%, as the average balance of loans (including loans held for sale) decreased by $95.2 million, or 6.52%, from the three months ended March 31, 2009. This decrease was driven by lower average balances in consumer and commercial non-mortgage loans and, to a lesser extent, commercial real estate loans. The decrease in the average balance of loans was partially offset by an increase in overall yield on the loan portfolio, driven by increases in yields on the commercial real estate and commercial non-mortgage portfolios. Overall, the yield on interest-earning assets for the three months ended March 31, 2010 decreased by 48 basis points, from 5.13% for the three months ended March 31, 2009, to 4.65%; this decrease was due to the lower yields earned on securities and the lower average balances of loans.

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Interest Expense. Interest expense decreased by $1.9 million, or 14.8%, from $13.1 million for the three months ended March 31, 2009, to $11.1 million for the three months ended March 31, 2010.


	Three Months Ended
	March 31,				Dollar			Percent
	2010		2009		Change			Change
	(Dollars in Thousands)
Interest expense
Deposits	$	7,629	$	9,145	$	(1,516	)		(16.6	%)
Federal Home Loan Bank advances		3,139		3,776		(637	)		(16.9	)
Federal Reserve Bank advances		—		29		(29	)		(100.0	)
Repurchase agreement		201		101		100			99.0
Other borrowings		148		—		148			N/M

	$	11,117	$	13,051	$	(1,934	)		(14.8	%)

This decrease was primarily caused by a $1.5 million, or 16.6%, decline in interest expense on deposits. While volume increased in all of our deposit categories raising average balances by $230.1 million, lower rates paid on our savings, money market, and time accounts resulted in lower overall interest expense on deposits. Interest expense on Federal Home Loan Bank advances also experienced a decline of $637,000, or 16.9%, which was partially offset by the increase of $100,000 in interest expense on our $25.0 million repurchase agreement with Credit Suisse after the agreement repriced to 3.22% from 1.62% in April 2009 in accordance with its terms. The $148,000 of interest expense reflected as other borrowings is attributable to four promissory notes that were executed in October 2009 for unsecured loans totaling $10.0 million obtained from local private investors. The lenders are all members of the same family and long-time customers of ViewPoint Bank. Each of the four promissory notes initially bears interest at 6% per annum, thereafter being adjusted quarterly to a rate equal to the national average 2-year jumbo CD rate plus 2%, with a floor of 6% and a ceiling of 9%. The average balance of borrowings decreased by $75.8 million, or 18.1%, from the three months ended March 31, 2009, while the average rate paid on borrowings increased by 34 basis points. Overall, the cost of interest-bearing liabilities decreased 61 basis points, from 2.85% for the three months ended March 31, 2009, to 2.24% at March 31, 2010.

Net Interest Income. Net interest income increased by $679,000, or 4.7%, to $15.1 million for the three months ended March 31, 2010, from $14.5 million for the three months ended March 31, 2009. The net interest rate spread increased 13 basis points to 2.41% for the three months ended March 31, 2010, from 2.28% for the same period last year. The net interest margin decreased 2 basis points to 2.68% for the three months ended March 31, 2010, from 2.70% for the three months ended March 31, 2009. The decrease in the net interest margin was primarily attributable to Purchase Program loans with an average balance of $240.6 million that were added to our loan portfolio at an average rate of 4.91%. Also, our average balance maintained in interest-earning deposit accounts increased by $230.1 million from the three months ended March 31, 2010, compared to the same period this year. Additionally, we have purchased an increased amount of variable-rate securities over the past year, which we expect will better position us for a rising rate environment.

Analysis of Net Interest Income — Three Months Ended March 31, 2010 and 2009

Net interest income, the primary contributor to earnings, represents the difference between income on interest-earning assets and expenses on interest-bearing liabilities. Net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, expressed both in dollars and rates. Also presented is the weighted average yield on interest earning assets, rates paid on interest bearing liabilities and the resultant spread. All average balances are daily average balances. Non-accruing loans have been included in the table as loans carrying a zero yield.


	Three Months Ended March 31,
	2010								2009
	Average								Average
	Outstanding			Interest					Outstanding			Interest
	Balance			Earned/Paid		Yield/Rate			Balance			Earned/Paid		Yield/Rate
	(Dollars in thousands)
Interest earning assets:
One- to four- family real estate	$	686,786		$	9,268		5.40	%	$	669,297		$	9,168		5.48	%
Commercial real estate		462,554			7,685		6.65	%		475,399			6,967		5.86	%
Home equity		107,573			1,573		5.85	%		100,705			1,518		6.03	%
Consumer		91,667			1,418		6.19	%		134,023			2,047		6.11	%
Commercial non-mortgage		29,063			429		5.90	%		90,651			1,038		4.58	%
Less: deferred fees and allowance for loan loss		(13,141	)		—		—	%		(10,359	)		—		—	%

Loans receivable ¹		1,364,502			20,373		5.97	%		1,459,716			20,738		5.68	%
Agency mortgage-backed securities		382,497			3,110		3.25	%		275,387			3,172		4.61	%
Agency collateralized mortgage obligations		285,584			1,784		2.50	%		318,363			3,104		3.90	%
Investment securities		99,342			824		3.32	%		44,991			438		3.89	%
FHLB stock		14,670			17		0.46	%		16,632			—		—	%
Interest earning deposit accounts		113,512			148		0.52	%		27,994			59		0.84	%

Total interest earning assets		2,260,107			26,256		4.65	%		2,143,083			27,511		5.13	%


Non-interest earning assets		142,588								93,330


Total assets	$	2,402,695							$	2,236,413


Interest bearing liabilities:
Interest bearing demand		284,063			1,611		2.27	%		104,381			407		1.56	%
Savings and money market		700,001			2,596		1.48	%		644,216			3,376		2.10	%
Time		657,089			3,422		2.08	%		662,419			5,362		3.24	%
Borrowings		342,336			3,488		4.08	%		418,152			3,906		3.74	%

Total interest bearing liabilities		1,983,489			11,117		2.24	%		1,829,168			13,051		2.85	%


Non-interest bearing liabilities		212,212								211,767


Total liabilities		2,195,701								2,040,935


Total capital		206,994								195,478


Total liabilities and capital	$	2,402,695							$	2,236,413


Net interest income				$	15,139							$	14,460

Net interest rate spread							2.41	%							2.28	%

Net earning assets	$	276,618							$	313,915

Net interest margin							2.68	%							2.70	%

Average interest earning assets to average interest bearing liabilities		113.95	%							117.16	%


¹		Calculated net of deferred fees, loan discounts, loans in process and allowance for loan losses. Includes loans held for sale. Construction loans have been included in the one- to four- family and commercial real estate line items, as appropriate.

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Rate/Volume Analysis

The following schedule presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to outstanding balances and those due to changes in interest rates. The change in interest attributable to rate has been determined by applying the change in rate between periods to average balances outstanding in the later period. The change in interest due to volume has been determined by applying the rate from the earlier period to the change in average balances outstanding between periods. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume.


	Three Months Ended March 31,
	2010 versus 2009
	Increase (Decrease) Due to
							Total
							Increase
	Volume			Rate			(Decrease)
	(Dollars in thousands)
Interest earning assets:
One- to four- family real estate	$	237		$	(137	)	$	100
Commercial real estate		(192	)		910			718
Home equity		101			(46	)		55
Consumer		(655	)		26			(629	)
Commercial non-mortgage		(848	)		239			(609	)

Loans receivable		(1,357	)		992			(365	)
Agency mortgage-backed securities		1,027			(1,089	)		(62	)
Agency collateralized mortgage obligations		(294	)		(1,026	)		(1,320	)
Investment securities		459			(73	)		386
FHLB stock		17			—			17
Interest earning deposit accounts		119			(30	)		89

Total interest earning assets		(29	)		(1,226	)		(1,255	)


Interest bearing liabilities:
Interest bearing demand		953			251			1,204
Savings and money market		273			(1,053	)		(780	)
Time		(43	)		(1,897	)		(1,940	)
Borrowings		(751	)		333			(418	)

Total interest bearing liabilities		432			(2,366	)		(1,934	)


Net interest income	$	(461	)	$	1,140		$	679

Provision for Loan Losses. We establish provisions for loan losses, which are charged to earnings, at a level required to reflect estimated credit losses in the loan portfolio. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect borrowers’ ability to repay, estimated value of any underlying collateral, prevailing economic conditions, and current factors.

The provision for loan losses was $1.1 million for the three months ended March 31, 2010, a decrease of $296,000, or 20.5%, from $1.4 million for same time last year. This decrease was primarily due to a decrease in net charge-offs of $485,000 over the same period last year, minimal loan growth, excluding loans held for sale of $314,000, and an improvement of $678,000 in nonperforming loans over the balance at December 31, 2009. Net charge-offs for the three months ended March 31, 2010, totaled $527,000, a decrease of 47.9% from $1.0 million for the three months ended March 31, 2009.

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Noninterest Income. Noninterest income increased by $127,000, or 1.7%, from $7.4 million for the three months ended March 31, 2009, to $7.6 million for the three months ended March 31, 2010.


	Three Months Ended
	March 31,						Dollar			Percent
	2010			2009			Change			Change
	(Dollars in Thousands)
Non-interest income
Service charges and fees	$	4,420		$	4,456		$	(36	)		(0.8	%)
Brokerage fees		106			75			31			41.3
Net gain on sale of loans		2,655			3,706			(1,051	)		(28.4	)
Loan servicing fees		62			53			9			17.0
Bank-owned life insurance income		58			164			(106	)		(64.6	)
Valuation adjustment on mortgage servicing rights		90			(211	)		301			N/M
Impairment of collateralized debt obligation (all credit)		—			(465	)		465			N/M
Gain (loss) on sale of foreclosed assets		(113	)		(165	)		52			(31.5	)
Gain (loss) on disposition of assets		—			(416	)		416			N/M
Other		278			232			46			19.8

	$	7,556		$	7,429		$	127			1.7	%

Net gain on sale of loans decreased by $1.1 million, or 28.4%, as VPBM sold $88.2 million in loans to outside investors during the three months ended March 31, 2010, compared to $140.2 million for the same period in 2009. The decrease in sales can be attributed to the lower volume of one- to four-family loan originations so far in 2010 compared to the refinance volume experienced during the same prior year period. Non-interest income for the three months ended March 31, 2009, included a $465,000 impairment on collateralized debt obligations, which were marked down to their fair value and sold in June 2009. Also, in March 2009, we realized losses of $400,000 on disposition of assets relating to the closure of most of our in-store banking centers as we transitioned away from limited service grocery store banking centers. An increase in fees of $321,000 generated by our Purchase Program partially offset a $286,000 decrease in non-sufficient funds fees. The decrease in non-sufficient funds fees is primarily due to a trend of lower volume in these types of transactions.

Noninterest Expense. Noninterest expense decreased by $1.1 million, or 5.7%, from $18.6 million for the three months ended March 31, 2009, to $17.6 million for the three months ended March 31, 2010.


	Three Months Ended
	March 31,				Dollar			Percent
	2010		2009		Change			Change
	(Dollars in Thousands)
Non-interest expense
Salaries and employee benefits	$	11,183	$	12,095	$	(912	)		(7.5	%)
Advertising		277		255		22			8.6
Occupancy and equipment		1,489		1,602		(113	)		(7.1	)
Outside professional services		489		431		58			13.5
Regulatory assessments		795		645		150			23.3
Data processing		1,002		1,004		(2	)		(0.2	)
Office operations		1,446		1,506		(60	)		(4.0	)
Deposit processing charges		178		235		(57	)		(24.3	)
Lending and collection		221		288		(67	)		(23.3	)
Other		479		558		(79	)		(14.2	)

	$	17,559	$	18,619	$	(1,060	)		(5.7	%)

The decrease in noninterest expense was primarily attributable to a $912,000 decline in salaries and employee benefits for the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The decrease in salaries and employee benefits was attributed to $612,000 in lower variable incentives paid to VPBM staff as they closed $96.1 million of loans in the first three months of 2010 compared to $189.5 million for the comparable period last year. This $93.4 million, or 49.3%, decline in production is a result of the heavy refinance volume experienced in 2009. Lower costs the quarter helped to offset the $1.1 million decline in net gain on sale of loans. Salary expense also decreased by $365,000 after closing the in-store banking centers in 2009. The opening of three new full-service community bank offices in 2009 offset $271,000 of this decrease due to the resulting additional salaries and employee benefits. Lower health care claims led to a $267,000 reduction in healthcare costs as of March 31, 2010.

Page 40 of 52

The decline of $113,000, or 7.1%, in occupancy and equipment was also attributed to the closing of most of our in-store banking centers in 2009, which was partially offset by $64,000 in additional expense related to the three new full-service community bank offices. Regulatory assessments expense increased by $150,000, or 23.3%, due to increased regulatory fees as FDIC deposit insurance assessment rates have increased along with an increase in assessable deposits.

Income Tax Expense. During the three months ended March 31, 2010, we recognized income tax expense of $1.3 million on our pre-tax income compared to income tax expense of $584,000 for the three months ended March 31, 2009. Our effective tax rate for the three months ended March 31, 2010 was 32.2% compared to 32.0% for the same time period in 2009 due to our increased earnings.

Liquidity

Management maintains a liquidity position that it believes will adequately provide funding for loan demand and deposit run-off that may occur in the normal course of business. The Company relies on a number of different sources in order to meet its potential liquidity demands. The primary sources are increases in deposit accounts and cash flows from loan payments and the securities portfolio. Planning for the Bank’s normal business liquidity needs, both expected and unexpected, is done on a daily and short-term basis through the cash management function. On a longer-term basis it is accomplished through the budget and strategic planning functions, with support from internal asset/liability management software model projections.

The Liquidity Committee adds liquidity contingency planning to the process by focusing on possible scenarios that would stress liquidity beyond the Bank’s normal business liquidity needs. These scenarios may include local/regional adversity and national adversity situations. Management recognizes that the events and their severity of liquidity stress leading up to and occurring during a liquidity stress event cannot be precisely defined or listed. Nevertheless, management believes that liquidity stress events can be categorized into sources and levels of severity, with responses that apply to various situations.

In addition to the primary sources of funds, management has several secondary sources available to meet potential funding requirements. As of March 31, 2010, the Company had an additional borrowing capacity of $451.2 million with the FHLB. The Company may also use the discount window at the Federal Reserve Bank as a source of short-term funding. Federal Reserve Bank borrowing capacity varies based upon collateral pledged to the discount window line. As of March 31, 2010, collateral pledged had a market value of $77.2 million. Also, at March 31, 2010, the Company had $66.0 million in federal funds lines of credit available with other financial institutions.

As of March 31, 2010, the Company has classified 68.4% of its securities portfolio as available for sale, providing an additional source of liquidity. Management believes that because active markets exist and our securities portfolio is of high quality, our available for sale securities are marketable. In addition, we have historically sold mortgage loans in the secondary market to reduce interest rate risk and to create still another source of liquidity.

Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments, such as overnight deposits and federal funds. On a longer term basis, we maintain a strategy of investing in various lending products and investment securities, including mortgage-backed securities. Participations in loans we originate, including portions of commercial real estate loans, are sold to manage borrower concentration risk as well as interest rate risk.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its shareholders, and interest and principal on outstanding debt. The Company has also repurchased shares of its common stock. The Company’s primary source of funds consists of the net proceeds retained by the Company from our initial public offering in 2006. We also have the ability to receive dividends or capital distributions from the Bank. There are regulatory restrictions on the ability of the Bank to pay dividends. At March 31, 2010, the Company (on an unconsolidated basis) had liquid assets of $12.0 million.

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The Company uses its sources of funds primarily to meet its ongoing commitments, pay maturing deposits and fund withdrawals, and to fund loan commitments. At March 31, 2010, the total approved loan commitments (including Purchase Program commitments) and unused lines of credit outstanding amounted to $287.2 million and $78.0 million, respectively, as compared to $283.3 million and $79.8 million, respectively, as of December 31, 2009. Certificates of deposit scheduled to mature in one year or less at March 31, 2010 totaled $400.9 million.

It is management’s policy to offer deposit rates that are competitive with other local financial institutions. Based on this management strategy, we believe that a majority of maturing deposits will remain with the Company.

For the three months ended March 31, 2010, cash and cash equivalents increased by $19.6 million, or 35.3%, from $55.5 million as of December 31, 2009, to $75.1 million as of March 31, 2010. Cash provided by financing activities of $94.7 million more than offset cash used in investing activities of $59.7 million and cash used in operating activities of $15.5 million. Primary sources of cash for the three months ended March 31, 2010 included increased deposits of $103.6 million, and maturities, prepayments and calls of securities of $69.5 million. Primary uses of cash for the three months ended March 31, 2010, included a net increase to gross loans, including loans held for sale, of $17.7 million, net repayment of FHLB advances of $8.3 million and purchases of securities totaling $128.9 million.

Please see Item 1A (Risk Factors) under Part 1 of the Company’s 2009 Annual Report on Form 10-K for information regarding liquidity risk.

Off-Balance Sheet Arrangements, Contractual Obligations and Commitments

The following table presents our longer term, non-deposit related contractual obligations and commitments to extend credit to our borrowers, in the aggregate and by payment due dates.


	March 31, 2010
			One
			through		Four
	Less than		Three		through		After Five
	One Year		Years		Five Years		Years		Total
	(Dollars in thousands)
Contractual obligations: ⁽¹⁾
Federal Home Loan Bank advances	$	52,094	$	114,429	$	54,467	$	83,184	$	304,174
Repurchase agreement		—		—		—		25,000		25,000
Other borrowings		—		—		10,000		—		10,000
Operating leases (premises)		1,253		1,747		784		3,121		6,905

Total advances and operating leases		53,347		116,176		65,251		111,305		346,079


Off-balance sheet loan commitments:
Undisbursed portions of loans closed		—		—		—		—		27,456
Commitments to originate loans		—		—		—		—		70,839
Unused commitment on Purchase Program loans		—		—		—		—		188,904
Unused lines of credit		—		—		—		—		77,961

Total loan commitments		—		—		—		—		365,160

Total contractual obligations and loan commitments									$	711,239


⁽¹⁾		Amounts do not include interest

In addition, the Company has overdraft protection available in the amounts of $71,597 and $73,017 for March 31, 2010 and December 31, 2009.

Page 42 of 52

Capital Resources

ViewPoint Bank is subject to minimum capital requirements imposed by the OTS. Consistent with our goal to operate a sound and profitable organization, our policy is for ViewPoint Bank to maintain a “well-capitalized” status under the capital categories of the OTS. Based on capital levels at March 31, 2010, and December 31, 2009, ViewPoint Bank was considered to be well-capitalized.

At March 31, 2010, ViewPoint Bank’s equity totaled $197.6 million. Management monitors the capital levels of ViewPoint Bank to provide for current and future business opportunities and to meet regulatory guidelines for “well-capitalized” institutions.

The Company’s equity totaled $208.5 million, or 8.42% of total assets, at March 31, 2010. The Company is not subject to any specific capital requirements; however, the OTS expects the Company to support the Bank, including providing additional capital to the Bank when appropriate.


											To Be Well-Capitalized
						Required for Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in Thousands)
As of March 31, 2010:

Total capital (to risk-weighted assets)	$	205,057		15.28	%	$	107,392		8.00	%	$	134,240		10.00	%
Tier 1 (core) capital (to risk-weighted assets)		192,871		14.37	%		53,696		4.00	%		80,544		6.00	%
Tier 1 (core) capital (to adjusted total assets)		192,871		7.81	%		98,801		4.00	%		123,501		5.00	%

As of December 31, 2009:

Total capital (to risk-weighted assets)	$	201,250		15.27	%	$	105,450		8.00	%	$	131,812		10.00	%
Tier 1 (core) capital (to risk-weighted assets)		189,678		14.39	%		52,725		4.00	%		79,087		6.00	%
Tier 1 (core) capital (to adjusted total assets)		189,678		7.99	%		94,900		4.00	%		118,626		5.00	%

Impact of Inflation

The effects of price changes and inflation can vary substantially for most financial institutions. While management believes that inflation affects the economic value of total assets, it believes that it is difficult to assess the overall impact. Management believes this to be the case due to the fact that generally neither the timing nor the magnitude of changes in the consumer price index (“CPI”) coincides with changes in interest rates or asset values. For example, the price of one or more of the components of the CPI may fluctuate considerably, influencing composite CPI, without having a corresponding affect on interest rates, asset values, or the cost of those goods and services normally purchased by the Bank. In years of high inflation and high interest rates, intermediate and long-term interest rates tend to increase, adversely impacting the market values of investment securities, mortgage loans and other long-term fixed rate loans. In addition, higher short-term interest rates tend to increase the cost of funds. In other years, the opposite may occur.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Asset/Liability Management

Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market rates change over time. Like other financial institutions, our results of operations are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we monitor our interest rate risk. In doing so, we analyze and manage assets and liabilities based on their interest rates and contractual cash flows, timing of maturities, prepayment potential, repricing opportunities, and sensitivity to actual or potential changes in market interest rates.

The Company is subject to interest rate risk to the extent that its interest bearing liabilities, primarily deposits and Federal Home Loan Bank advances and other borrowings, reprice more rapidly or slowly, or at different rates than its interest earning assets, primarily loans and investment securities. The Bank calculates interest rate risk by entering relevant contractual and projected information into the asset/liability management software model. Data required by the model includes balance, rate, pay down, and maturity. For items that contractually reprice, the repricing index, spread, and frequency are entered, including any initial, periodic, and lifetime interest rate caps and floors.

In order to manage and monitor the potential for adverse effects of material prolonged increases or decreases in interest rates on our results of operations, the Bank has adopted an asset and liability management policy. The Board of Directors sets the asset and liability policy for the Bank, which is implemented by the Asset/Liability Management Committee.

The purpose of the Asset/Liability Management Committee is to communicate, coordinate, monitor, and control asset/liability management consistent with our business plan and board-approved policies. The committee establishes and monitors the volume and mix of assets and funding sources, taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk, and profitability goals.

The Committee generally meets on a bimonthly basis to, among other things, protect capital through earnings stability over the interest rate cycle; maintain our well-capitalized status; and provide a reasonable return on investment. The Committee recommends appropriate strategy changes based on this review. The Committee is responsible for reviewing and reporting the effects of the policy implementations and strategies to the Board of Directors at least quarterly. In addition, two outside members of the Board of Directors are on the Asset/Liability Management Committee. Senior managers oversee the process on a daily basis.

A key element of the Bank’s asset/liability management plan is to protect net earnings by managing the inherent maturity and repricing mismatches between its interest earning assets and interest bearing liabilities. The Bank manages earnings exposure through the addition of adjustable rate loans and investment securities, through the sale of certain fixed rate loans in the secondary market, and by entering into appropriate term Federal Home Loan Bank advance agreements.

As part of its efforts to monitor and manage interest rate risk, the Bank uses the net portfolio value (“NPV”) methodology adopted by the OTS as part of its capital regulations. In essence, this approach calculates the difference between the present value of expected cash flows from assets and liabilities. Management and the Board of Directors review NPV measurements on a quarterly basis to determine whether the Bank’s interest rate exposure is within the limits established by the Board of Directors.

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The Bank’s asset/liability management strategy sets acceptable limits to the percentage change in NPV given changes in interest rates. For instantaneous, parallel, and sustained interest rate increases and decreases of 100 and 200 basis points, the Bank’s policy indicates that the NPV ratio should not fall below 7.00% and 6.00%, respectively, and for an increase of 300 basis points the NPV ratio should not fall below 5.00%. As illustrated in the tables below, the Bank was within policy limits for all scenarios tested. The tables presented below, as of March 31, 2010 and December 31, 2009, are internal analyses of our interest rate risk as measured by changes in NPV for instantaneous, parallel, and sustained shifts in the yield curve, in 100 basis point increments, up 300 basis points and down 200 basis points.

As illustrated in the tables below, our NPV would be negatively impacted by a parallel, instantaneous, and sustained increase in market rates. Such an increase in rates would negatively impact NPV as a result of the duration of assets, including fixed rate residential mortgage loans, extending longer than the duration of liabilities, primarily deposit accounts and Federal Home Loan Bank borrowings. As interest rates rise, the market value of fixed rate loans declines due to both higher discount rates and anticipated slowing loan prepayments.

We have implemented a strategic plan to mitigate interest rate risk. This plan includes the ongoing review of our mix of fixed rate versus variable rate loans, investments, deposits, and borrowings. When available, high quality adjustable rate assets are purchased. These assets reduce our sensitivity to upward interest rate shocks. On the liability side of the balance sheet, term borrowings are added as appropriate. These borrowings will be of a size and term so as to impact and mitigate duration mismatches, reducing our sensitivity to upward interest rate shocks. These strategies are implemented as needed and as opportunities arise to mitigate interest rate risk without materially sacrificing earnings.


March 31, 2010
Change in
Interest
Rates in
Basis
Points		Net Portfolio Value								NPV
		$ Amount		$ Change			% Change			Ratio %
		(Dollars in Thousands)
300			167,632		(37,012	)		(18.09	)		7.17
200			183,567		(21,077	)		(10.30	)		7.69
100			197,776		(6,868	)		(3.36	)		8.11
—			204,644		—			—			8.24
(100	)		206,079		1,435			0.70			8.17
(200	)		216,523		11,879			5.80			8.44


December 31, 2009
Change in
Interest
Rates in
Basis
Points		Net Portfolio Value								NPV
		$ Amount		$ Change			% Change			Ratio %
		(Dollars in Thousands)
300			174,615		(42,468	)		(19.56	)		7.82
200			192,168		(24,915	)		(11.48	)		8.41
100			207,861		(9,222	)		(4.25	)		8.90
—			217,083		—			—			9.11
(100	)		218,003		920			0.42			9.00
(200	)		221,750		4,667			2.15			9.01

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The Bank’s NPV was $204.6 million, or 8.24%, of the market value of portfolio assets as of March 31, 2010, a $12.5 million decrease from $217.1 million, or 9.11%, of the market value of portfolio assets as of December 31, 2009. Based upon the assumptions utilized, an immediate 200 basis point increase in market interest rates would result in a $21.1 million decrease in our NPV at March 31, 2010, a decrease from $24.9 million at December 31, 2009, and would result in a 55 basis point decrease in our NPV ratio to 7.69% at March 31, 2010, as compared to a 70 basis point decrease to 8.41% at December 31, 2009. An immediate 200 basis point decrease in market interest rates would result in an $11.9 million increase in our NPV at March 31, 2010, compared to $4.7 million increase at December 31, 2009, and would result in a 20 basis point increase in our NPV ratio to 8.44% at March 31, 2010, as compared to a 10 basis point decrease in our NPV ratio to 9.01% at December 31, 2009.

In addition to monitoring selected measures of NPV, management also calculates and monitors potential effects on net interest income resulting from increases or decreases in rates. This process is used in conjunction with NPV measures to identify interest rate risk on both a global and account level basis. In managing our mix of assets and liabilities, while considering the relationship between long and short term interest rates, market conditions, and consumer preferences, we may place somewhat greater emphasis on maintaining or increasing the Bank’s net interest margin than on strictly matching the interest rate sensitivity of its assets and liabilities.

Management also believes that at times the increased net income which may result from an acceptable mismatch in the actual maturity or repricing of its asset and liability portfolios can provide sufficient returns to justify the increased exposure to sudden and unexpected increases in interest rates which may result from such a mismatch. Management believes that the Bank’s level of interest rate risk is acceptable under this approach.

In evaluating the Bank’s exposure to interest rate movements, certain shortcomings inherent in the method of analysis presented in the foregoing table must be considered. For example, although certain assets and liabilities may have similar maturities or repricing characteristics, their interest rate drivers may react in different degrees to changes in market interest rates (basis risk). Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in interest rates. Additionally, certain assets, such as adjustable rate mortgages, have features which restrict changes in interest rates on a short-term basis and over the life of the asset (initial, periodic, and lifetime caps and floors). Further, in the event of a significant change in interest rates, prepayment and early withdrawal levels may deviate significantly from those assumed above. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. The Bank considers all of these factors in monitoring its exposure to interest rate risk. Also of note, the current historically low interest rate environment has resulted in asymmetrical interest rate risk. Certain repricing liabilities cannot be fully shocked downward. Assets with prepayment options are being monitored. Current market rates and customer behavior are being considered in the management of interest rate risk.

The Board of Directors and management believe that the Bank’s ability to successfully manage and mitigate its exposure to interest rate risk is strengthened by several key factors. For example, the Bank manages its balance sheet duration and overall interest rate risk by placing a preference on originating and retaining adjustable rate loans and selling originated fixed rate residential mortgage loans. In addition, the Bank borrows at various maturities from the Federal Home Loan Bank to mitigate mismatches between the asset and liability portfolios. Furthermore, the investment securities portfolio is used as a primary interest rate risk management tool through the duration and repricing targeting of purchases and sales.

Page 46 of 52

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2010. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report. There has been no change in the Company’s internal controls over financial reporting during the quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goals, future events affecting its business may cause the Company to modify its disclosure controls and procedures. The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all error and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual actions of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

Page 47 of 52

PART 2 – OTHER INFORMATION


Item 1.		Legal Proceedings

In the normal course of business the Company may be involved in various legal proceedings from time to time. The Company does not believe it is currently involved in any claim or action the ultimate disposition of which would have a material adverse effect on the Company’s financial statements.


Item 1.A.		Risk Factors

There have been no material changes from risk factors as previously disclosed in the Company’s 2009 Annual Report on Form 10-K.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.


Item 3.		Defaults upon Senior Securities

Not applicable.


Item 4.		Reserved


Item 5.		Other Information

Not applicable.

Page 48 of 52


Item 6.		Exhibits


Exhibit
Number		Description

	2.1	Amended and Restated Plan of Conversion and Reorganization of ViewPoint MHC (incorporated herein by reference to Exhibit 2.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 4, 2010 (File No. 001-32992))

	3.1	Charter of the Registrant (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 0-24566-01))

	3.2	Bylaws of the Registrant (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 24, 2008 (File No. 001-32992))

	4.1	Certificate of Registrant’s Common Stock (incorporated herein by reference to Exhibit 4.0 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 0-24566-01))

	10.1	Employment Agreement by and between the Registrant and Garold R. Base (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 4, 2006 (File No. 001-32992))

	10.2	Amendment to Employment Agreement by and between the Registrant and Garold R. Base (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 10, 2008 (File No. 001-32992))

	10.3	Employment Agreement by and between ViewPoint Bank, the Registrant’s wholly owned operating subsidiary, and Garold R. Base (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 4, 2006 (File No. 001-32992))

	10.4	Amendment to Employment Agreement by and between ViewPoint Bank, the Registrant’s wholly owned operating subsidiary, and Garold R. Base (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 10, 2008 (File No. 001-32992))

	10.5	Amendment to Employment Agreement by and between ViewPoint Bank, the Registrant’s wholly owned operating subsidiary, and Garold R. Base (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 6, 2008 (File No. 001-32992))

	10.6	Form of Severance Agreement between ViewPoint Bank and the following executive officers: Pathie E. McKee, Mark E. Hord, James C. Parks and Rick M. Robertson (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 1, 2010 (File No. 001-32992))

	10.7	Summary of Director Board Fee Arrangements (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2007 (File No. 001-32992))

	10.8	ViewPoint Bank Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 0-24566-01))

	10.9	Amended and Restated ViewPoint Bank Supplemental Executive Retirement Plan (incorporated herein by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 0-24566-01))

	10.10	ViewPoint Bank 2007 Executive Officer Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 31, 2007 (File No. 001-32992))

Page 49 of 52


Exhibit
Number		Description

	10.11	Amendment to ViewPoint Bank 2007 Executive Officer Incentive Plan (incorporated herein by reference to the Registrant’s Current Report on Form 8-K filed with the SEC on March 6, 2008 (File No. 001-32992))

	10.12	Form of promissory note between ViewPoint Financial Group and four lenders, totaling $10 million (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 22, 2009 (File No. 001-32992))

	11	Statement regarding computation of per share earnings (See Note 2 of the Condensed Notes to Unaudited Consolidated Interim Financial Statements included in this Form 10-Q).

	31.1	Rule 13a – 14(a)/15d – 14(a) Certification (Chief Executive Officer)

	31.2	Rule 13a – 14(a)/15d – 14(a) Certification (Chief Financial Officer)

	32	Section 1350 Certifications

Page 50 of 52

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ViewPoint Financial Group
(Registrant)


Date: May 7, 2010		/s/ Garold R. Base
		Garold R. Base
		President and Chief Executive Officer
		(Duly Authorized Officer)

Date: May 7, 2010		/s/ Pathie E. McKee
		Pathie E. McKee
		Executive Vice President, Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

Page 51 of 52

EXHIBIT INDEX


Exhibits:

	31.1	Certification of the Chief Executive Officer

	31.2	Certification of the Chief Financial Officer

	32.0	Section 1350 Certifications

Page 52 of 52