XNAS:FBNC First Bancorp Quarterly Report 10-Q Filing - 3/31/2012

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2012

 

 

 

Commission File Number 0-15572

 

                            FIRST BANCORP                            

(Exact Name of Registrant as Specified in its Charter)

 

North Carolina		56-1421916
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)
341 North Main Street, Troy, North Carolina		27371-0508
(Address of Principal Executive Offices)		(Zip Code)
(Registrant's telephone number, including area code)		(910)   576-6171

 

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 twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      ý YES      o NO

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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).     ý YES     o NO

 

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	S Accelerated Filer	£ Non-Accelerated Filer	£ Smaller Reporting Company
		(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).     o YES     ý NO

 

The number of shares of the registrant's Common Stock outstanding on April 30, 2012 was 16,949,941.

 

 

INDEX

FIRST BANCORP AND SUBSIDIARIES

 

 

	Page
Part I.  Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets -
March 31, 2012 and March 31, 2011
(With Comparative Amounts at December 31, 2011)	4
Consolidated Statements of Income -
For the Periods Ended March 31, 2012 and 2011	5
Consolidated Statements of Comprehensive Income -
For the Periods Ended March 31, 2012 and 2011	6
Consolidated Statements of Shareholders’ Equity -
For the Periods Ended March 31, 2012 and 2011	7
Consolidated Statements of Cash Flows -
For the Periods Ended March 31, 2012 and 2011	8
Notes to Consolidated Financial Statements	9
Item 2 – Management’s Discussion and Analysis of Consolidated
Results of Operations and Financial Condition	38
Item 3 – Quantitative and Qualitative Disclosures About Market Risk	61
Item 4 – Controls and Procedures	63
Part II.  Other Information
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 6 – Exhibits	64
Signatures	66

 

 

FORWARD-LOOKING STATEMENTS

 

Part I of this report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, which statements are inherently subject to risks and uncertainties. Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often characterized by the use of qualifying words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” or other statements concerning our opinions or judgment about future events. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. Factors that could influence the accuracy of such forward-looking statements include, but are not limited to, the financial success or changing strategies of our customers, our level of success in integrating acquisitions, actions of government regulators, the level of market interest rates, and general economic conditions. For additional information about factors that could affect the matters discussed in this paragraph, see the “Risk Factors” section of our 2011 Annual Report on Form 10-K.

 

 

 

 

 

 

Part I. Financial Information

Item 1 - Financial Statements

First Bancorp and Subsidiaries

Consolidated Balance Sheets

 

($ in thousands-unaudited)		March 31, 2012				December 31, 2011(audited)				March 31, 2011
ASSETS
Cash and due from banks, noninterest-bearing		$	58,001				80,341				59,985
Due from banks, interest-bearing			234,137				135,218				182,445
Federal funds sold			1,203				608				14,590
Total cash and cash equivalents			293,341				216,167				257,020
Securities available for sale			159,182				182,626				192,382
Securities held to maturity (fair values of $61,226, $62,754, and $58,526)			57,066				57,988				57,433
Presold mortgages in process of settlement			7,003				6,090				2,696
Loans – non-covered			2,094,524				2,069,152				2,045,998
Loans – covered by FDIC loss share agreement			342,100				361,234				440,212
Total loans			2,436,624				2,430,386				2,486,210
Allowance for loan losses – non-covered			(46,455	)			(35,610	)			(35,773	)
Allowance for loan losses – covered			(6,372	)			(5,808	)			(7,002	)
Total allowance for loan losses			(52,827	)			(41,418	)			(42,775	)
Net loans			2,383,797				2,388,968				2,443,435
Premises and equipment			72,343				69,975				67,879
Accrued interest receivable			10,969				11,779				12,958
FDIC indemnification asset			113,405				121,677				140,937
Goodwill			65,835				65,835				65,835
Other intangible assets			3,675				3,897				4,575
Other real estate owned – non-covered			36,838				37,023				26,961
Other real estate owned – covered			79,535				85,272				95,868
Other assets			54,017				43,177				34,484
Total assets		$	3,337,006				3,290,474				3,402,463
LIABILITIES
Deposits:   Noninterest bearing checking accounts		$	371,293				335,833				332,168
Interest bearing checking accounts			468,691				423,452				349,677
Money market accounts			526,684				513,832				516,045
Savings accounts			157,619				146,481				161,869
Time deposits of $100,000 or more			738,839				753,233				806,735
Other time deposits			567,933				582,206				677,947
Total deposits			2,831,059				2,755,037				2,844,441
Securities sold under agreements to repurchase			—				17,105				72,951
Borrowings			133,894				133,925				108,833
Accrued interest payable			1,659				1,872				2,328
Other liabilities			31,963				37,385				24,520
Total liabilities			2,998,575				2,945,324				3,053,073
Commitments and contingencies
SHAREHOLDERS’ EQUITY
Preferred stock, no par value per share.  Authorized: 5,000,000 shares
Issued and outstanding:  63,500, 63,500, and 65,000 shares			63,500				63,500				65,000
Discount on preferred stock			—				—				(2,703	)
Common stock, no par value per share.  Authorized: 40,000,000 shares
Issued and outstanding:  16,937,641, 16,909,820 and 16,824,489 shares			105,068				104,841				104,581
Retained earnings			178,195				185,491				187,401
Accumulated other comprehensive income (loss)			(8,332	)			(8,682	)			(4,889	)
Total shareholders’ equity			338,431				345,150				349,390
Total liabilities and shareholders’ equity		$	3,337,006				3,290,474				3,402,463

 

See notes to consolidated financial statements.

 

First Bancorp and Subsidiaries

Consolidated Statements of Income

($ in thousands, except share data-unaudited)		Three Months Ended March 31,
		2012				2011
INTEREST INCOME
Interest and fees on loans		$	35,042				36,807
Interest on investment securities:
Taxable interest income			1,258				1,432
Tax-exempt interest income			493				500
Other, principally overnight investments			139				90
Total interest income			36,932				38,829
INTEREST EXPENSE
Savings, checking and money market			849				1,230
Time deposits of $100,000 or more			2,175				2,604
Other time deposits			1,269				2,169
Securities sold under agreements to repurchase			4				50
Borrowings			544				462
Total interest expense			4,841				6,515
Net interest income			32,091				32,314
Provision for loan losses – non-covered			18,557				7,570
Provision for loan losses – covered			2,998				3,773
Total provision for loan losses			21,555				11,343
Net interest income after provision for loan losses			10,536				20,971
NONINTEREST INCOME
Service charges on deposit accounts			2,847				2,645
Other service charges, commissions and fees			2,192				1,915
Fees from presold mortgage loans			411				295
Commissions from sales of insurance and financial products			383				355
Gain from acquisition			—				10,196
Foreclosed property losses and write-downs – non-covered			(688	)			(1,353	)
Foreclosed property losses and write-downs – covered			(4,547	)			(4,934	)
FDIC indemnification asset income, net			4,105				5,040
Securities gains			452				14
Other gains			194				20
Total noninterest income			5,349				14,193
NONINTEREST EXPENSES
Salaries			10,174				9,711
Employee benefits			3,914				3,202
Total personnel expense			14,088				12,913
Net occupancy expense			1,681				1,672
Equipment related expenses			1,170				1,062
Intangibles amortization			223				224
Acquisition expenses			—				351
Other operating expenses			7,213				8,821
Total noninterest expenses			24,375				25,043
Income (loss) before income taxes			(8,490	)			10,121
Income taxes (benefit)			(3,308	)			3,746
Net income (loss)			(5,182	)			6,375
Preferred stock dividends			(760	)			(813	)
Accretion of preferred stock discount			—				(229	)
Net income (loss) available to common shareholders		$	(5,942	)			5,333
Earnings (loss) per common share:
Basic		$	(0.35	)			0.32
Diluted			(0.35	)			0.32
Dividends declared per common share		$	0.08				0.08
Weighted average common shares outstanding:
Basic			16,924,616				16,813,941
Diluted			16,924,650				16,841,787

See notes to consolidated financial statements.

First Bancorp and Subsidiaries

Consolidated Statements of Comprehensive Income

 

 

		Three Months Ended March 31,
($ in thousands-unaudited)		2012				2011
Net income (loss)		$	(5,182	)			6,375
Other comprehensive income (loss):
Unrealized gains on securities available for sale:
Unrealized holding gains arising during the period, pretax			717				190
Tax benefit			(280	)			(74	)
Reclassification to realized gains			(452	)			(14	)
Tax expense			176				5
Postretirement Plans:
Amortization of unrecognized net actuarial loss			301				140
Tax expense			(117	)			(56	)
Amortization of prior service cost and transition obligation			9				9
Tax expense			(4	)			(4	)
Other comprehensive income			350				196
Comprehensive income (loss)		$	(4,832	)			6,571

 

See notes to consolidated financial statements.

 

First Bancorp and Subsidiaries

Consolidated Statements of Shareholders’ Equity

 

 

(In thousands, except per share - unaudited)		Preferred				Preferred Stock				Common Stock								Retained				Accumulated Other Comprehensive				Total Share- holders’
		Stock				Discount				Shares				Amount				Earnings				Income (Loss)				Equity
Balances, January 1, 2011		$	65,000				(2,932	)			16,801			$	104,207				183,413				(5,085	)			344,603
Net income																			6,375								6,375
Common stock issued under stock option plans											2				31												31
Common stock issued into dividend reinvestment plan											14				210												210
Cash dividends declared ($0.08 per common share)																			(1,345	)							(1,345	)
Preferred dividends																			(813	)							(813	)
Accretion of preferred stock discount							229												(229	)							—
Stock-based compensation											7				133												133
Other comprehensive income																							196				196
Balances, March 31, 2011		$	65,000				(2,703	)			16,824			$	104,581				187,401				(4,889	)			349,390
Balances, January 1, 2012		$	63,500				—				16,910			$	104,841				185,491				(8,682	)			345,150
Net income (loss)																			(5,182	)							(5,182	)
Common stock issued into dividend reinvestment plan											18				209												209
Repurchases of common stock											—				(2	)											(2	)
Cash dividends declared ($0.08 per common share)																			(1,354	)							(1,354	)
Preferred dividends																			(760	)							(760	)
Stock-based compensation											10				20												20
Other comprehensive income																							350				350
Balances, March 31, 2012		$	63,500				—				16,938			$	105,068				178,195				(8,332	)			338,431

See notes to consolidated financial statements.

 

 

 

First Bancorp and Subsidiaries

Consolidated Statements of Cash Flows

 

		Three Months Ended March 31,
($ in thousands-unaudited)		2012				2011
Cash Flows From Operating Activities
Net income (loss)		$	(5,182	)			6,375
Reconciliation of net income to net cash provided by operating activities:
Provision for loan losses			21,555				11,343
Net security premium amortization			456				412
Purchase accounting accretion and amortization, net			(2,525	)			(2,500	)
Gain from acquisition			—				(10,196	)
Foreclosed property losses and write-downs			5,235				6,287
Gain on securities available for sale			(452	)			(14	)
Other gains			(194	)			(20	)
Increase in net deferred loan costs			(60	)			(207	)
Depreciation of premises and equipment			1,133				1,092
Stock-based compensation expense			20				133
Amortization of intangible assets			223				224
Origination of presold mortgages in process of settlement			(19,422	)			(20,082	)
Proceeds from sales of presold mortgages in process of settlement			18,509				21,348
Decrease in accrued interest receivable			810				621
Increase in other assets			(15,846	)			(4,281	)
Increase (decrease) in accrued interest payable			(213	)			246
Decrease in other liabilities			(5,080	)			(5,280	)
Net cash provided (used) by operating activities			(1,033	)			5,501
Cash Flows From Investing Activities
Purchases of securities available for sale			(9,000	)			(21,817	)
Purchases of securities held to maturity			—				(3,232	)
Proceeds from sales of securities available for sale			9,641				2,518
Proceeds from maturities/issuer calls of securities available for sale			23,125				11,469
Proceeds from maturities/issuer calls of securities held to maturity			860				686
Net decrease (increase) in loans			(23,828	)			35,368
Proceeds from FDIC loss share agreements			13,247				31,214
Proceeds from sales of foreclosed real estate			10,653				6,772
Purchases of premises and equipment			(3,501	)			(1,214	)
Net cash received in acquisition			—				54,037
Net cash provided by investing activities			21,197				115,801
Cash Flows From Financing Activities
Net increase in deposits and repurchase agreements			58,950				17,713
Repayments of borrowings, net			—				(92,081	)
Cash dividends paid – common stock			(1,353	)			(1,344	)
Cash dividends paid – preferred stock			(794	)			(813	)
Proceeds from issuance of common stock			209				241
Repurchase of common stock			(2	)			—
Net cash provided (used) by financing activities			57,010				(76,284	)
Increase in cash and cash equivalents			77,174				45,018
Cash and cash equivalents, beginning of period			216,167				212,002
Cash and cash equivalents, end of period		$	293,341				257,020
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest		$	5,054				6,269
Income taxes			5,275				8,200
Non-cash transactions:
Unrealized gain on securities available for sale, net of taxes			161				107
Foreclosed loans transferred to other real estate			9,966				19,441

 

See notes to consolidated financial statements.

 

 

First Bancorp and Subsidiaries

Notes to Consolidated Financial Statements

 

 

(unaudited)

For the Periods Ended March 31, 2012 and 2011

 

Note 1 - Basis of Presentation

 

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of March 31, 2012 and 2011 and the consolidated results of operations and consolidated cash flows for the periods ended March 31, 2012 and 2011. All such adjustments were of a normal, recurring nature. Reference is made to the 2011 Annual Report on Form 10-K filed with the SEC for a discussion of accounting policies and other relevant information with respect to the financial statements. The results of operations for the periods ended March 31, 2012 and 2011 are not necessarily indicative of the results to be expected for the full year. The Company has evaluated all subsequent events through the date the financial statements were issued.

 

Note 2 – Accounting Policies

 

Note 1 to the 2011 Annual Report on Form 10-K filed with the SEC contains a description of the accounting policies followed by the Company and discussion of recent accounting pronouncements. During the first quarter of 2012, there were no new standards or guidance issued by the regulatory authorities relevant to the Company.

 

Note 3 – Reclassifications

 

Certain amounts reported in the period ended March 31, 2011 have been reclassified to conform to the presentation for March 31, 2012. These reclassifications had no effect on net income or shareholders’ equity for the periods presented, nor did they materially impact trends in financial information.

 

Note 4 – Acquisition - Pending

 

On October 21, 2011, the Company entered into a Branch Purchase and Assumption Agreement (“The Agreement”) with Waccamaw Bankshares, Inc., and its subsidiary, Waccamaw Bank. The Agreement provides for First Bank to acquire eleven branches from Waccamaw Bank, which includes assuming all deposits, selected performing loans, and all premises and equipment. Deposits total approximately $180 million and loans total approximately $98 million.

 

The Agreement provides for the deposits to be purchased at a premium that varies by account type. The estimated blended premium is approximately 1.5% of total deposits.

 

The Agreement provides for loans to be purchased at par (the amount of principal outstanding and interest receivable) and for premises and equipment to be purchased at net book value. Approximately $31 million of the $98 million in loans being acquired are subject to a provision in the Agreement allowing First Bank to put the loans back to Waccamaw Bank at par value for any reason within 20 months following the closing date of the transaction. The Agreement is subject to regulatory approval and other customary conditions. No assurance can be provided that this Agreement will be approved.

 

Note 5 – Equity-Based Compensation Plans

 

At March 31, 2012, the Company had the following equity-based compensation plans: the First Bancorp 2007 Equity Plan, the First Bancorp 2004 Stock Option Plan, the First Bancorp 1994 Stock Option Plan, and one plan that was assumed from an acquired entity. The Company’s shareholders approved all equity-based compensation plans, except for those assumed from acquired companies. The First Bancorp 2007 Equity Plan became effective

upon the approval of shareholders on May 2, 2007. As of March 31, 2012, the First Bancorp 2007 Equity Plan was the only plan that had shares available for future grants.

 

The First Bancorp 2007 Equity Plan is intended to serve as a means to attract, retain and motivate key employees and directors and to associate the interests of the plans’ participants with those of the Company and its shareholders. The First Bancorp 2007 Equity Plan allows for both grants of stock options and other types of equity-based compensation, including stock appreciation rights, restricted stock, restricted performance stock, unrestricted stock, and performance units.

 

Recent equity grants to employees have either had performance vesting conditions, service vesting conditions, or both. Compensation expense for these grants is recorded over the various service periods based on the estimated number of equity grants that are probable to vest. No compensation cost is recognized for grants that do not vest and any previously recognized compensation cost will be reversed. As it relates to director equity grants, the Company grants common shares, valued at approximately $242,000 on the date of the grant, to each non-employee director in June of each year. Compensation expense associated with these director grants is recognized on the date of grant since there are no vesting conditions.

 

The Company granted long-term restricted shares of common stock to certain senior executives on February 24, 2011 and February 23, 2012 with a two year minimum vesting period. The total compensation expense associated with the February 24, 2011 grant was $105,500 and the grant will fully vest on February 24, 2013. The Company recorded $12,400 in the first quarter of 2012 and will record $9,700 in each subsequent quarter of 2012. The total compensation expense associated with the February 23, 2012 grant was $89,700 and the grant will fully vest on February 23, 2014. The Company recorded $3,700 in the first quarter of 2012 and will record $11,200 in each subsequent quarter of 2012.

 

Under the terms of the Predecessor Plans and the First Bancorp 2007 Equity Plan, options can have a term of no longer than ten years, and all options granted thus far under these plans have had a term of ten years. The Company’s options provide for immediate vesting if there is a change in control (as defined in the plans).

 

At March 31, 2012, there were 476,624 options outstanding related to the three First Bancorp plans, with exercise prices ranging from $14.35 to $22.12. At March 31, 2012, there were 896,709 shares remaining available for grant under the First Bancorp 2007 Equity Plan. The Company also has a stock option plan as a result of a corporate acquisition. At March 31, 2012, there were 4,788 stock options outstanding in connection with the acquired plan, with option prices ranging from $10.66 to $15.22.

 

The Company issues new shares of common stock when options are exercised.

 

The Company measures the fair value of each option award on the date of grant using the Black-Scholes option-pricing model. The Company determines the assumptions used in the Black-Scholes option pricing model as follows: the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant; the dividend yield is based on the Company’s dividend yield at the time of the grant (subject to adjustment if the dividend yield on the grant date is not expected to approximate the dividend yield over the expected life of the option); the volatility factor is based on the historical volatility of the Company’s stock (subject to adjustment if future volatility is reasonably expected to differ from the past); and the weighted-average expected life is based on the historical behavior of employees related to exercises, forfeitures and cancellations.

 

The Company’s equity grants for the three months ended March 31, 2012 were the issuance of 9,559 shares of long-term restricted stock to certain senior executives on February 23, 2012, at a fair market value of $10.96 per share, which was the closing price of the Company’s common stock on that date.

 

The Company’s equity grants for the three months ended March 31, 2011 were the issuance of 7,259 shares of long-term restricted stock to certain senior executives on February 24, 2011, at a fair market value of $14.54 per share, which was the closing price of the Company’s common stock on that date.

 

The Company recorded total stock-based compensation expense of $20,000 and $133,000 for the three-month periods ended March 31, 2012 and 2011, respectively, which relates to the employee grants discussed above and is recorded as “salaries expense.” Stock based compensation is reflected as an adjustment to cash flows from operating activities on the Company’s Consolidated Statement of Cash Flows. The Company recognized $8,000 and $48,000 of income tax benefits related to stock based compensation expense in the income statement for the three months ended March 31, 2012 and 2011, respectively.

 

As noted above, certain of the Company’s stock option grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. The Company has elected to recognize compensation expense for awards with graded vesting schedules on a straight-line basis over the requisite service period for the entire award. Compensation expense is based on the estimated number of stock options and awards that will ultimately vest. Over the past five years, there have only been minimal amounts of forfeitures, and therefore the Company assumes that all options granted without performance conditions will become vested.

 

The following table presents information regarding the activity for the first three months of 2012 related to all of the Company’s stock options outstanding:

 

				Options Outstanding
				Number of Shares				Weighted- Average Exercise Price				Weighted- Average Contractual Term (years)				Aggregate Intrinsic Value
	Balance at December 31, 2011				493,850			$	18.92
	Granted				—				—
	Exercised				—				—
	Forfeited				—				—
	Expired				(12,438	)			18.71
	Outstanding at March 31, 2012				481,412			$	18.92				3.4			$	656
	Exercisable at March 31, 2012				479,412			$	18.92				3.4			$	656

 

The Company did not have any stock option exercises during the three months ended March 31, 2012 and received $31,000 as a result of stock option exercises during the three months ended March 31, 2011. The Company recorded no tax benefits from the exercise of nonqualified stock options during the three months ended March 31, 2012 or 2011.

 

As discussed above, the Company granted 7,259 and 9,559 long-term restricted shares of common stock to certain senior executives on February 24, 2011 and February 23, 2012, respectively.

 

 

The following table presents information regarding the activity during 2012 related to the Company’s outstanding restricted stock:

 

		Long-Term Restricted Stock
		Number of Units				Weighted- Average Grant-Date Fair Value
Nonvested at December 31, 2011			7,259			$	14.54
Granted during the period			9,559			$	10.96
Vested during the period			—				—
Forfeited or expired during the period			(2,474	)			12.55
Nonvested at March 31, 2012			14,344			$	12.50

Note 6 – Earnings Per Common Share

 

Basic earnings per common share were computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed by assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period. Currently, the Company’s potentially dilutive common stock issuances relate to grants under the Company’s equity-based compensation plans, including stock options and restricted stock. The following is a reconciliation of the numerators and denominators used in computing basic and diluted earnings per common share:

 

		For the Three Months Ended March 31,
		2012												2011
($ in thousands except per share amounts)		Income (Numer- ator)				Shares (Denom- inator)				Per Share Amount				Income (Numer- ator)				Shares (Denom- inator)				Per Share Amount
Basic EPS
Net income (loss) available to common shareholders		$	(5,942	)			16,924,616			$	(0.35	)		$	5,333				16,813,941			$	0.32
Effect of Dilutive Securities			—				34								—				27,846
Diluted EPS per common share		$	(5,942	)			16,924,650			$	(0.35	)		$	5,333				16,841,787			$	0.32

 

For the three months ended March 31, 2012 and 2011, there were 384,231 and 515,916 options, respectively, that were antidilutive because the exercise price exceeded the average market price for the period. Antidilutive options have been omitted from the calculation of diluted earnings per share for the respective periods.

Note 7 – Securities

 

The book values and approximate fair values of investment securities at March 31, 2012 and December 31, 2011 are summarized as follows:

 

		March 31, 2012																December 31, 2011
		Amortized				Fair				Unrealized								Amortized				Fair				Unrealized
($ in thousands)		Cost				Value				Gains				(Losses)				Cost				Value				Gains				(Losses)
Securities available for sale:
Government-sponsored enterprise securities		$	23,507				23,591				104				(20	)			34,511				34,665				170				(13	)
Mortgage-backed securities			107,330				111,069				3,831				(92	)			120,032				124,105				4,164				(91	)
Corporate bonds			13,186				13,137				284				(333	)			13,189				12,488				279				(980	)
Equity securities			10,998				11,385				419				(32	)			10,998				11,368				409				(39	)
Total available for sale		$	155,021				159,182				4,638				(477	)			178,730				182,626				5,022				(1,126	)
Securities held to maturity:
State and local governments		$	57,066				61,226				4,162				(2	)			57,988				62,754				4,766				—
Total held to maturity		$	57,066				61,226				4,162				(2	)			57,988				62,754				4,766				—

 

Included in mortgage-backed securities at March 31, 2012 were collateralized mortgage obligations with an amortized cost of $805,000 and a fair value of $829,000. Included in mortgage-backed securities at December 31, 2011 were collateralized mortgage obligations with an amortized cost of $1,462,000 and a fair value of $1,515,000. All of the Company’s mortgage-backed securities, including collateralized mortgage obligations, were issued by government-sponsored corporations.

 

The Company owned Federal Home Loan Bank (FHLB) stock with a cost and fair value of $10,904,000 at both March 31, 2012 and December 31, 2011, which is included in equity securities above and serves as part of the collateral for the Company’s line of credit with the FHLB. The investment in this stock is a requirement for membership in the FHLB system.

 

The following table presents information regarding securities with unrealized losses at March 31, 2012:

 

($ in thousands)		Securities in an Unrealized Loss Position for Less than 12 Months								Securities in an Unrealized Loss Position for More than 12 Months								Total
		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Government-sponsored enterprise securities		$	2,980				20				—				—				2,980				20
Mortgage-backed securities			13,628				91				3,300				1				16,928				92
Corporate bonds			2,020				18				2,978				315				4,998				333
Equity securities			—				—				28				32				28				32
State and local governments			510				2				—				—				510				2
Total temporarily impaired securities		$	19,138				131				6,306				348				25,444				479

 

The following table presents information regarding securities with unrealized losses at December 31, 2011:

 

($ in thousands)		Securities in an Unrealized Loss Position for Less than 12 Months								Securities in an Unrealized Loss Position for More than 12 Months								Total
		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Government-sponsored enterprise securities		$	8,984				16				—				—				8,984				16
Mortgage-backed securities			14,902				61				9,302				30				24,204				91
Corporate bonds			4,588				458				2,773				522				7,361				980
Equity securities			4				2				22				37				26				39
State and local governments			—				—				—				—				—				—
Total temporarily impaired securities		$	28,478				537				12,097				589				40,575				1,126

In the above tables, all of the non-equity securities that were in an unrealized loss position at March 31, 2012 and December 31, 2011 are bonds that the Company has determined are in a loss position due to interest rate factors, the overall economic downturn in the financial sector, and the broader economy in general. The Company has evaluated the collectability of each of these bonds and has concluded that there is no other-than-temporary impairment. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost. The Company has also concluded that each of the equity securities in an unrealized loss position at March 31, 2012 and December 31, 2011 was in such a position due to temporary fluctuations in the market prices of the securities. The Company’s policy is to record an impairment charge for any of these equity securities that remains in an unrealized loss position for twelve consecutive months unless the amount is insignificant.

 

The aggregate carrying amount of cost-method investments was $10,904,000 at March 31, 2012 and December 31, 2011, respectively, which was the FHLB stock discussed above. The Company determined that none of its cost-method investments were impaired at either period end.

 

The book values and approximate fair values of investment securities at March 31, 2012, by contractual maturity, are summarized in the table below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

		Securities Available for Sale								Securities Held to Maturity
		Amortized				Fair				Amortized				Fair
($ in thousands)		Cost				Value				Cost				Value
Debt securities
Due within one year		$	3,007				3,073				675				686
Due after one year but within five years			23,497				23,602				2,549				2,768
Due after five years but within ten years			—				—				27,296				31,611
Due after ten years			10,189				10,053				26,546				26,161
Mortgage-backed securities			107,330				111,069				—				—
Total debt securities			144,023				147,797				57,066				61,226
Equity securities			10,998				11,385				—				—
Total securities		$	155,021				159,182				57,066				61,226

 

At March 31, 2012 investment securities with a book value of $27,626,000 were pledged as collateral for public deposits. At December 31, 2011, investment securities with a book value of $47,418,000 were pledged as collateral for public and private deposits and securities sold under agreements to repurchase.

 

There were $9,641,000 in sales of securities during the three months ended March 31, 2012, which resulted in a net gain of $446,000. There were $2,518,000 in sales during the three months ended March 31, 2011, which resulted in a net gain of $8,000. During the three months ended March 31, 2012 and 2011, the Company recorded a net gain of $6,000 and $11,000, respectively, related to the call of municipal securities. Also, during the three

months ended March 31, 2011, the Company recorded a net loss of $5,000 related to write-downs of the Company’s equity portfolio.

 

Note 8 – Loans and Asset Quality Information

 

The loans and foreclosed real estate that were acquired in FDIC-assisted transactions are covered by loss share agreements between the FDIC and the Company’s banking subsidiary, First Bank, which afford First Bank significant loss protection. (See the Company’s 2011 Annual Report on Form 10-K for more information regarding these transactions.) Because of the loss protection provided by the FDIC, the risk of the Cooperative Bank and The Bank of Asheville loans and foreclosed real estate are significantly different from those assets not covered under the loss share agreements. Accordingly, the Company presents separately loans subject to the loss share agreements as “covered loans” in the information below and loans that are not subject to the loss share agreements as “non-covered loans.”

 

The following is a summary of the major categories of total loans outstanding:

 

($ in thousands)		March 31, 2012								December 31, 2011								March 31, 2011
		Amount				Percentage				Amount				Percentage				Amount				Percentage
All  loans (non-covered and covered):
Commercial, financial, and agricultural		$	159,496				7	%			162,099				7	%			162,868				7	%
Real estate – construction, land development & other land loans			355,709				15	%			363,079				15	%			434,566				18	%
Real estate – mortgage – residential (1-4 family) first mortgages			812,878				33	%			805,542				33	%			804,278				32	%
Real estate – mortgage – home equity loans / lines of credit			255,955				10	%			256,509				11	%			267,515				11	%
Real estate – mortgage – commercial and other			775,610				32	%			762,895				31	%			733,087				29	%
Installment loans to individuals			75,636				3	%			78,982				3	%			82,716				3	%
Subtotal			2,435,284				100	%			2,429,106				100	%			2,485,030				100	%
Unamortized net deferred loan costs			1,340								1,280								1,180
Total loans		$	2,436,624								2,430,386								2,486,210

 

As of March 31, 2012, December 31, 2011 and March 31, 2011, net loans include unamortized premiums of $833,000, $949,000, and $1,298,000, respectively, related to acquired loans.

 

The following is a summary of the major categories of non-covered loans outstanding:

 

($ in thousands)		March 31, 2012								December 31, 2011								March 31, 2011
		Amount				Percentage				Amount				Percentage				Amount				Percentage
Non-covered loans:
Commercial, financial, and agricultural		$	151,148				7	%			152,627				8	%			146,838				7	%
Real estate – construction, land development & other land loans			287,833				14	%			290,983				14	%			330,389				16	%
Real estate – mortgage – residential (1-4 family) first mortgages			659,946				31	%			646,616				31	%			622,108				30	%
Real estate – mortgage – home equity loans / lines of credit			233,915				11	%			233,171				11	%			241,443				12	%
Real estate – mortgage – commercial and other			685,734				33	%			666,882				32	%			624,699				31	%
Installment loans to individuals			74,608				4	%			77,593				4	%			79,341				4	%
Subtotal			2,093,184				100	%			2,067,872				100	%			2,044,818				100	%
Unamortized net deferred loan costs			1,340								1,280								1,180
Total non-covered loans		$	2,094,524								2,069,152								2,045,998

 

The carrying amount of the covered loans at March 31, 2012 consisted of impaired and nonimpaired purchased loans, as follows:

 

($ in thousands)		Impaired Purchased Loans – Carrying Value				Impaired Purchased Loans – Unpaid Principal Balance				Nonimpaired Purchased Loans – Carrying Value				Nonimpaired Purchased Loans - Unpaid Principal Balance				Total Covered Loans – Carrying Value				Total Covered Loans – Unpaid Principal Balance
Covered loans:
Commercial, financial, and agricultural		$	69				150				8,279				10,513				8,348				10,663
Real estate – construction, land development & other land loans			1,881				3,985				65,995				114,241				67,876				118,226
Real estate – mortgage – residential (1-4 family) first mortgages			841				1,926				152,091				182,035				152,932				183,961
Real estate – mortgage – home equity loans / lines of credit			16				311				22,024				27,724				22,040				28,035
Real estate – mortgage – commercial and other			2,392				4,167				87,484				118,559				89,876				122,726
Installment loans to individuals			3				5				1,025				1,121				1,028				1,126
Total		$	5,202				10,544				336,898				454,193				342,100				464,737

 

The carrying amount of the covered loans at December 31, 2011 consisted of impaired and nonimpaired purchased loans, as follows:

 

($ in thousands)		Impaired Purchased Loans – Carrying Value				Impaired Purchased Loans – Unpaid Principal Balance				Nonimpaired Purchased Loans – Carrying Value				Nonimpaired Purchased Loans - Unpaid Principal Balance				Total Covered Loans – Carrying Value				Total Covered Loans – Unpaid Principal Balance
Covered loans:
Commercial, financial, and agricultural		$	69				319				9,403				11,736				9,472				12,055
Real estate – construction, land development & other land loans			3,865				8,505				68,231				115,489				72,096				123,994
Real estate – mortgage – residential (1-4 family) first mortgages			1,214				2,639				157,712				189,436				158,926				192,075
Real estate – mortgage – home equity loans / lines of credit			127				577				23,211				29,249				23,338				29,826
Real estate – mortgage – commercial and other			2,585				4,986				93,428				125,450				96,013				130,436
Installment loans to individuals			4				6				1,385				1,583				1,389				1,589
Total		$	7,864				17,032				353,370				472,943				361,234				489,975

 

The following table presents information regarding covered purchased nonimpaired loans since December 31, 2010. The amounts include principal only and do not reflect accrued interest as of the date of the acquisition or beyond.

 

($ in thousands)
Carrying amount of nonimpaired covered loans at December 31, 2010			366,521
Additions due to acquisition of The Bank of Asheville (at fair value)			84,623
Principal repayments			(40,576	)
Transfers to foreclosed real estate			(53,999	)
Loan charge-offs			(14,797	)
Accretion of loan discount			11,598
Carrying amount of nonimpaired covered loans at December 31, 2011		$	353,370
Principal repayments			(12,082	)
Transfers to foreclosed real estate			(4,535	)
Loan charge-offs			(2,433	)
Accretion of loan discount			2,578
Carrying amount of nonimpaired covered loans at March 31, 2012		$	336,898

 

As reflected in the table above, the Company accreted $2,578,000 of the loan discount on purchased nonimpaired loans into interest income during the first quarter of 2012. As of March 31, 2012, there was remaining loan discount of $86,093,000 related to purchased nonimpaired loans. If these loans continue to be repaid by the borrowers, the Company will accrete the remaining loan discount into interest income over the lives of the respective loans. In such circumstances, a corresponding entry to reduce the indemnification asset will be recorded amounting to 80% of the loan discount accretion, which reduces noninterest income.

 

The following table presents information regarding all purchased impaired loans since December 31, 2010, substantially all of which are covered loans. The Company has applied the cost recovery method to all purchased impaired loans at their respective acquisition dates due to the uncertainty as to the timing of expected cash flows, as reflected in the following table.

 

($ in thousands)       Purchased Impaired Loans		Contractual Principal Receivable				Fair Market Value Adjustment – Write Down (Nonaccretable Difference)				Carrying Amount
Balance at December 31, 2010		$	8,080				2,329				5,751
Additions due to acquisition of The Bank of Asheville			38,452				20,807				17,645
Change due to payments received			(1,620	)			(327	)			(1,293	)
Transfer to foreclosed real estate			(19,881	)			(9,308	)			(10,573	)
Change due to loan charge-off			(7,522	)			(4,193	)			(3,329	)
Other			807				224				583
Balance at December 31, 2011		$	18,316				9,532				8,784
Change due to payments received			(238	)			(96	)			(142	)
Transfer to foreclosed real estate			(7,334	)			(3,477	)			(3,857	)
Change due to loan charge-off			(109	)			(109	)			—
Other			(1,391	)			(1,808	)			417
Balance at March 31, 2012		$	9,244				4,042				5,202

 

Each of the purchased impaired loans is on nonaccrual status and considered to be impaired. Because of the uncertainty of the expected cash flows, the Company is accounting for each purchased impaired loan under the cost recovery method, in which all cash payments are applied to principal. Thus, there is no accretable yield associated with the above loans. During the first quarter of 2012 and 2011, the Company received no payments that exceeded the initial carrying amount of the purchased impaired loans.

 

Nonperforming assets are defined as nonaccrual loans, restructured loans, loans past due 90 or more days and still accruing interest, and other real estate. Nonperforming assets are summarized as follows:

 

ASSET QUALITY DATA ($ in thousands)		March 31, 2012				December 31, 2011				March 31, 2011
Non-covered nonperforming assets
Nonaccrual loans		$	69,665				73,566				69,250
Restructured loans - accruing			10,619				11,720				19,843
Accruing loans > 90 days past due			—				—				—
Total non-covered nonperforming loans			80,284				85,286				89,093
Other real estate			36,838				37,023				26,961
Total non-covered nonperforming assets		$	117,122				122,309				116,054
Covered nonperforming assets
Nonaccrual loans (1)		$	42,369				41,472				56,862
Restructured loans - accruing			13,158				14,218				16,238
Accruing loans > 90 days past due			—				—				—
Total covered nonperforming loans			55,527				55,690				73,100
Other real estate			79,535				85,272				95,868
Total covered nonperforming assets		$	135,062				140,962				168,968
Total nonperforming assets		$	252,184				263,271				285,022

 

(1) At March 31, 2012, December 31, 2011, and March 31, 2011, the contractual balance of the nonaccrual loans covered by FDIC loss share agreements was $68.3 million, $69.0 million, and $106.5 million, respectively.

 

The following table presents information related to the Company’s impaired loans.

 

($ in thousands)		As of /for the three months ended March 31, 2012				As of /for the year ended December 31, 2011				As of /for the three months ended March 31, 2011
Impaired loans at period end
Non-covered		$	80,284				85,286				89,093
Covered			55,527				55,690				73,100
Total impaired loans at period end		$	135,811				140,976				162,193
Average amount of impaired loans for period
Non-covered		$	82,788				89,023				92,548
Covered			55,609				63,289				72,962
Average amount of impaired loans for period – total		$	138,397				152,312				165,510
Allowance for loan losses related to impaired loans at period end
Non-covered		$	11,662				5,804				6,289
Covered			5,308				5,106				6,206
Allowance for loan losses related to impaired loans - total		$	16,970				10,910				12,495
Amount of impaired loans with no related allowance at period end
Non-covered		$	16,717				35,721				40,169
Covered			36,756				43,702				57,785
Total impaired loans with no related allowance at period end		$	53,473				79,423				97,954

 

All of the impaired loans noted in the table above were on nonaccrual status at each respective period end except for those classified as restructured loans (see table on previous page for balances).

 

The remaining tables in this note present information derived from the Company’s allowance for loan loss model. Relevant accounting guidance requires certain disclosures to be disaggregated based on how the Company develops its allowance for loan losses and manages its credit exposure. This model combines loan types in a different manner than the tables previously presented.

 

The following table presents the Company’s nonaccrual loans as of March 31, 2012.

 

($ in thousands)		Non-covered				Covered				Total
Commercial, financial, and agricultural:
Commercial – unsecured		$	30				—				30
Commercial – secured			1,751				24				1,775
Secured by inventory and accounts receivable			822				—				822
Real estate – construction, land development & other land loans			20,469				19,002				39,471
Real estate – residential, farmland and multi-family			25,819				10,898				36,717
Real estate – home equity lines of credit			2,909				938				3,847
Real estate – commercial			15,017				11,497				26,514
Consumer			2,848				10				2,858
Total		$	69,665				42,369				112,034

 

The following table presents the Company’s nonaccrual loans as of December 31, 2011.

 

($ in thousands)		Non-covered				Covered				Total
Commercial, financial, and agricultural:
Commercial - unsecured		$	452				—				452
Commercial - secured			2,190				358				2,548
Secured by inventory and accounts receivable			588				102				690
Real estate – construction, land development & other land loans			22,772				21,204				43,976
Real estate – residential, farmland and multi-family			25,430				11,050				36,480
Real estate – home equity lines of credit			3,161				1,068				4,229
Real estate - commercial			16,203				7,459				23,662
Consumer			2,770				231				3,001
Total		$	73,566				41,472				115,038

 

The following table presents an analysis of the payment status of the Company’s loans as of March 31, 2012.

 

($ in thousands)		30-59 Days Past Due				60-89 Days Past Due				Nonaccrual Loans				Current				Total Loans Receivable
Non-covered loans
Commercial, financial, and agricultural:
Commercial - unsecured		$	178				82				30				37,459				37,749
Commercial - secured			1,222				130				1,751				107,088				110,191
Secured by inventory and accounts receivable			33				—				822				21,415				22,270
Real estate – construction, land development & other land loans			923				219				20,469				222,150				243,761
Real estate – residential, farmland, and multi-family			7,886				2,439				25,819				773,061				809,205
Real estate – home equity lines of credit			314				210				2,909				204,897				208,330
Real estate - commercial			948				545				15,017				588,775				605,285
Consumer			433				181				2,848				52,931				56,393
Total non-covered		$	11,937				3,806				69,665				2,007,776				2,093,184
Unamortized net deferred loan costs																			1,340
Total non-covered loans																		$	2,094,524
Covered loans		$	7,014				2,274				42,369				290,443				342,100
Total loans		$	18,951				6,080				112,034				2,298,219				2,436,624

 

The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at March 31, 2012.

 

The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2011.

 

($ in thousands)		30-59 Days Past Due				60-89 Days Past Due				Nonaccrual Loans				Current				Total Loans Receivable
Non-covered loans
Commercial, financial, and agricultural:
Commercial - unsecured		$	67				591				452				37,668				38,778
Commercial - secured			672				207				2,190				108,682				111,751
Secured by inventory and accounts receivable			247				—				588				20,993				21,828
Real estate – construction, land development & other land loans			1,250				1,411				22,772				221,372				246,805
Real estate – residential, farmland, and multi-family			9,751				4,259				25,430				756,215				795,655
Real estate – home equity lines of credit			1,126				237				3,161				202,912				207,436
Real estate - commercial			2,620				1,006				16,203				567,354				587,183
Consumer			657				286				2,770				54,723				58,436
Total non-covered		$	16,390				7,997				73,566				1,969,919				2,067,872
Unamortized net deferred loan costs																			1,280
Total non-covered loans																		$	2,069,152
Covered loans		$	6,511				3,388				41,472				309,863				361,234
Total loans		$	22,901				11,385				115,038				2,279,782				2,430,386

 

The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at December 31, 2011.

 

The following table presents the activity in the allowance for loan losses for non-covered loans for the three months ended March 31, 2012.

 

($ in thousands)		Commercial, Financial, and Agricultural				Real Estate – Construction, Land Development, & Other Land Loans				Real Estate – Residential, Farmland, and Multi- family				Real Estate – Home Equity Lines of Credit				Real Estate – Commercial and Other				Consumer				Unallo- cated				Total
Beginning balance		$	3,780				11,306				13,532				1,690				3,414				1,872				16				35,610
Charge-offs			(1,318	)			(2,678	)			(2,091	)			(451	)			(1,365	)			(352	)			—				(8,255	)
Recoveries			16				188				194				34				41				70				—				543
Provisions			2,476				7,603				3,734				859				3,647				236				2				18,557
Ending balance		$	4,954				16,419				15,369				2,132				5,737				1,826				18				46,455
Ending balances:  Allowance for loan losses
Individually evaluated for impairment		$	869				3,473				1,926				406				1,885				—				—				8,559
Collectively evaluated for impairment		$	4,085				12,946				13,443				1,726				3,852				1,826				18				37,896
Loans acquired with deteriorated credit quality		$	—				—				—				—				—				—				—				—
Loans receivable:
Ending balance – total		$	170,210				243,761				809,205				208,330				605,285				56,393				—				2,093,184
Ending balances: Loans
Individually evaluated for impairment		$	1,011				24,746				14,366				1,331				25,263				—				—				66,717
Collectively evaluated for impairment		$	169,199				219,015				794,839				206,999				580,022				56,393				—				2,026,467
Loans acquired with deteriorated credit quality		$	—				—				—				—				—				—				—				—

 

 

The following table presents the activity in the allowance for loan losses for non-covered loans for the year ended December 31, 2011.

 

($ in thousands)		Commercial, Financial, and Agricultural				Real Estate – Construction, Land Development, & Other Land Loans				Real Estate – Residential, Farmland, and Multi- family				Real Estate – Home Equity Lines of Credit				Real Estate – Commercial and Other				Consumer				Unallo- cated				Total
Beginning balance		$	4,731				12,520				11,283				3,634				3,972				1,961				174				38,275
Charge-offs			(2,703	)			(16,240	)			(9,045	)			(1,147	)			(3,355	)			(845	)			(524	)			(33,859	)
Recoveries			389				1,142				719				107				37				182				93				2,669
Provisions			1,363				13,884				10,575				(904	)			2,760				574				273				28,525
Ending balance		$	3,780				11,306				13,532				1,690				3,414				1,872				16				35,610
Ending balances:  Allowance for loan losses
Individually evaluated for impairment		$	60				607				150				—				200				—				—				1,017
Collectively evaluated for impairment		$	3,720				10,699				13,382				1,690				3,214				1,872				16				34,593
Loans acquired with deteriorated credit quality		$	—				—				—				—				—				—				—				—
Loans receivable:
Ending balance – total		$	172,357				246,805				795,655				207,436				587,183				58,436				—				2,067,872
Ending balances: Loans
Individually evaluated for impairment		$	2,526				34,750				11,880				527				30,846				12				—				80,541
Collectively evaluated for impairment		$	169,831				212,055				783,775				206,909				556,337				58,424				—				1,987,331
Loans acquired with deteriorated credit quality		$	—				920				—				—				—				—				—				920

 

The following table presents the activity in the allowance for loan losses for non-covered loans for the three months ended March 31, 2011.

 

($ in thousands)		Commercial, Financial, and Agricultural				Real Estate – Construction, Land Development, & Other Land Loans				Real Estate – Residential, Farmland, and Multi- family				Real Estate – Home Equity Lines of Credit				Real Estate – Commercial and Other				Consumer				Unallo- cated				Total
Beginning balance		$	4,731				12,520				11,283				3,634				3,972				1,961				174				38,275
Charge-offs			(1,156	)			(3,993	)			(3,348	)			(623	)			(1,067	)			(203	)			(115	)			(10,505	)
Recoveries			8				32				232				6				28				83				44				433
Provisions			559				1,644				4,296				342				426				382				(79	)			7,570
Ending balance		$	4,142				10,203				12,463				3,359				3,359				2,223				24				35,773
Ending balances:  Allowance for loan losses
Individually evaluated for impairment		$	200				1,688				1,065				—				250				—				—				3,203
Collectively evaluated for impairment		$	3,942				8,515				11,398				3,359				3,109				2,223				24				32,570
Loans acquired with deteriorated credit quality		$	—				—				—				—				—				—				—				—
Loans receivable:
Ending balance – total		$	165,250				290,468				762,235				212,084				554,360				60,421				—				2,044,818
Ending balances: Loans
Individually evaluated for impairment		$	2,212				48,484				11,057				531				32,899				18				—				95,201
Collectively evaluated for impairment		$	163,038				241,984				751,178				211,553				521,461				60,403				—				1,949,617
Loans acquired with deteriorated credit quality		$	—				1,173				—				—				—				—				—				1,173

 

The following table presents the activity in the allowance for loan losses for covered loans for the three months ended March 31, 2012.

 

($ in thousands)		Covered Loans
As of and for the three months ended March, 31 2012
Beginning balance		$	5,808
Charge-offs			(2,434	)
Recoveries			—
Provisions			2,998
Ending balance		$	6,372
Ending balances as of March 31, 2012:  Allowance for loan losses
Individually evaluated for impairment		$	6,274
Collectively evaluated for impairment			—
Loans acquired with deteriorated credit quality			98
Loans receivable as of March 31, 2012:
Ending balance – total		$	342,100
Ending balances as of March 31, 2012: Loans
Individually evaluated for impairment		$	49,244
Collectively evaluated for impairment			292,856
Loans acquired with deteriorated credit quality			5,202

 

The following table presents the activity in the allowance for loan losses for covered loans for the year ended December 31, 2011.

 

($ in thousands)		Covered Loans
As of and for the year ended December 31, 2011
Beginning balance		$	11,155
Charge-offs			(18,123	)
Recoveries			—
Provisions			12,776
Ending balance		$	5,808