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

Effective Date 3/31/2012

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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

 

 

Page 2

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.

 

 

 

 

 

Page 3

 

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.

Page 4

 

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.

Page 5

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.

Page 6

 

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.

 

 

 

Page 7

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.

 

Page 8

 

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

Page 9

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.

 

Page 10

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.

 

 

Page 11

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.

Page 12

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 
                               

 

Page 13

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

Page 14

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.

 

Page 15

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 

 

Page 16

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.

 

Page 17

 

($ 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.

 

Page 18

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 
                

 

Page 19

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.

 

Page 20

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.

 

Page 21

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  $                             

 

 

Page 22

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 

 

Page 23

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