XNAS:FBNC First Bancorp Quarterly Report 10-Q Filing - 6/30/2012

 

 

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 June 30, 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)

 

o Large Accelerated Filer	ý Accelerated Filer	o Non-Accelerated Filer	o 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 July 31, 2012 was 16,975,481.

 

INDEX

FIRST BANCORP AND SUBSIDIARIES

 

 

	Page
Part I.  Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets - June 30, 2012 and June 30, 2011 (With Comparative Amounts at December 31, 2011)	4
Consolidated Statements of Income - For the Periods Ended June 30, 2012 and 2011	5
Consolidated Statements of Comprehensive Income -For the Periods Ended June 30, 2012 and 2011	6
Consolidated Statements of Shareholders’ Equity - For the Periods Ended June 30, 2012 and 2011	7
Consolidated Statements of Cash Flows - For the Periods Ended June 30, 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	41
Item 3 – Quantitative and Qualitative Disclosures About Market Risk	65
Item 4 – Controls and Procedures	67
Part II.  Other Information
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 6 – Exhibits	68
Signatures	70

 

 

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)		June 30, 2012				December 31, 2011(audited)				June 30, 2011
ASSETS
Cash and due from banks, noninterest-bearing		$	58,872				80,341				73,676
Due from banks, interest-bearing			203,313				135,218				163,414
Federal funds sold			—				608				1,157
Total cash and cash equivalents			262,185				216,167				238,247
Securities available for sale			171,907				182,626				171,844
Securities held to maturity (fair values of $61,676, $62,754, and $59,860)			56,182				57,988				57,593
Presold mortgages in process of settlement			4,053				6,090				2,466
Loans – non-covered			2,114,906				2,069,152				2,040,714
Loans – covered by FDIC loss share agreement			322,895				361,234				401,726
Total loans			2,437,801				2,430,386				2,442,440
Allowance for loan losses – non-covered			(47,523	)			(35,610	)			(34,465	)
Allowance for loan losses – covered			(5,931	)			(5,808	)			(5,540	)
Total allowance for loan losses			(53,454	)			(41,418	)			(40,005	)
Net loans			2,384,347				2,388,968				2,402,435
Premises and equipment			73,642				69,975				68,898
Accrued interest receivable			10,932				11,779				12,000
FDIC indemnification asset			116,902				121,677				142,894
Goodwill			65,835				65,835				65,835
Other intangible assets			3,452				3,897				4,349
Other real estate owned – non-covered			37,895				37,023				31,849
Other real estate owned – covered			70,850				85,272				102,883
Bank-owned life insurance			27,380				2,207				2,160
Other assets			43,193				40,970				30,296
Total assets		$	3,328,755				3,290,474				3,333,749
LIABILITIES
Deposits:   Noninterest bearing checking accounts		$	381,353				335,833				323,223
Interest bearing checking accounts			472,342				423,452				371,693
Money market accounts			545,356				513,832				499,286
Savings accounts			160,137				146,481				145,576
Time deposits of $100,000 or more			725,699				753,233				765,787
Other time deposits			553,411				582,206				641,853
Total deposits			2,838,298				2,755,037				2,747,418
Securities sold under agreements to repurchase			—				17,105				68,608
Borrowings			111,394				133,925				138,796
Accrued interest payable			1,549				1,872				2,208
Other liabilities			37,440				37,385				24,421
Total liabilities			2,988,681				2,945,324				2,981,451
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			—				—				(2,474	)
Common stock, no par value per share.  Authorized: 40,000,000 shares
Issued and outstanding:  16,973,008, 16,909,820 and 16,862,536 shares			105,437				104,841				105,141
Retained earnings			179,298				185,491				188,737
Accumulated other comprehensive income (loss)			(8,161	)			(8,682	)			(4,106	)
Total shareholders’ equity			340,074				345,150				352,298
Total liabilities and shareholders’ equity		$	3,328,755				3,290,474				3,333,749

See notes to consolidated financial statements.

 

First Bancorp and Subsidiaries

Consolidated Statements of Income

  

		Three Months Ended June 30,								Six Months Ended June 30,
($ in thousands, except share data-unaudited)		2012				2011				2012				2011
INTEREST INCOME
Interest and fees on loans		$	35,636				38,464				70,678				75,271
Interest on investment securities:
Taxable interest income			1,149				1,463				2,407				2,895
Tax-exempt interest income			491				499				984				999
Other, principally overnight investments			178				103				317				193
Total interest income			37,454				40,529				74,386				79,358
INTEREST EXPENSE
Savings, checking and money market			759				1,103				1,608				2,333
Time deposits of $100,000 or more			2,085				2,661				4,260				5,265
Other time deposits			1,169				1,767				2,438				3,936
Securities sold under agreements to repurchase			—				48				4				98
Borrowings			490				470				1,034				932
Total interest expense			4,503				6,049				9,344				12,564
Net interest income			32,951				34,480				65,042				66,794
Provision for loan losses – non-covered			5,194				7,607				23,751				15,177
Provision for loan losses – covered			1,273				3,327				4,271				7,100
Total provision for loan losses			6,467				10,934				28,022				22,277
Net interest income after provision for loan losses			26,484				23,546				37,020				44,517
NONINTEREST INCOME
Service charges on deposit accounts			2,967				3,294				5,814				5,939
Other service charges, commissions and fees			2,340				2,070				4,532				3,985
Fees from presold mortgage loans			489				346				900				641
Commissions from sales of insurance and financial products			432				409				815				764
Gain from acquisition			─				─				—				10,196
Foreclosed property losses and write-downs – non-covered			(1,318	)			(271	)			(2,006	)			(1,624	)
Foreclosed property losses and write-downs – covered			(6,554	)			(2,583	)			(11,101	)			(7,517	)
FDIC indemnification asset income, net			3,558				1,826				7,663				6,866
Securities gains (losses)			(3	)			60				449				74
Other gains (losses)			(141	)			(37	)			53				(17	)
Total noninterest income			1,770				5,114				7,119				19,307
NONINTEREST EXPENSES
Salaries			10,173				9,694				20,347				19,405
Employee benefits			2,777				2,954				6,691				6,156
Total personnel expense			12,950				12,648				27,038				25,561
Net occupancy expense			1,615				1,598				3,296				3,270
Equipment related expenses			1,164				1,110				2,334				2,172
Intangibles amortization			223				226				446				450
Acquisition expenses			—				243				—				594
Other operating expenses			7,496				7,088				14,709				15,909
Total noninterest expenses			23,448				22,913				47,823				47,956
Income (loss) before income taxes			4,806				5,747				(3,684	)			15,868
Income taxes (benefit)			1,516				2,021				(1,792	)			5,767
Net income (loss)			3,290				3,726				(1,892	)			10,101
Preferred stock dividends			(829	)			(812	)			(1,589	)			(1,625	)
Accretion of preferred stock discount			—				(229	)			—				(458	)
Net income (loss) available to common shareholders		$	2,461				2,685				(3,481	)			8,018
Earnings (loss) per common share:
Basic		$	0.15				0.16				(0.21	)			0.48
Diluted			0.15				0.16				(0.21	)			0.48
Dividends declared per common share		$	0.08				0.08				0.16				0.16
Weighted average common shares outstanding:
Basic			16,952,624				16,841,289				16,938,620				16,827,615
Diluted			16,952,624				16,868,571				16,938,620				16,855,027

See notes to consolidated financial statements.

First Bancorp and Subsidiaries

Consolidated Statements of Comprehensive Income

 

		Three Months Ended June 30,								Six Months Ended June 30,
($ in thousands-unaudited)		2012				2011				2012				2011
Net income (loss)		$	3,290				3,726				(1,892	)			10,101
Other comprehensive income (loss):
Unrealized gains on securities available for sale:
Unrealized holding gains arising during the period, pretax			186				1,198				901				1,387
Tax benefit			(72	)			(467	)			(350	)			(541	)
Reclassification to realized losses (gains)			3				(60	)			(449	)			(74	)
Tax expense (benefit)			(1	)			23				175				29
Postretirement Plans:
Amortization of unrecognized net actuarial loss			82				140				383				280
Tax expense			(32	)			(56	)			(149	)			(112	)
Amortization of prior service cost and transition obligation			8				9				17				18
Tax expense			(3	)			(4	)			(7	)			(8	)
Other comprehensive income			171				783				521				979
Comprehensive income (loss)		$	3,461				4,509				(1,371	)			11,080

 

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																			10,101								10,101
Common stock issued under stock option plans											2				30												30
Common stock issued into dividend reinvestment plan											30				421												421
Cash dividends declared ($0.16 per common share)																			(2,694	)							(2,694	)
Preferred dividends																			(1,625	)							(1,625	)
Accretion of preferred stock discount							458												(458	)							—
Stock-based compensation											29				483												483
Other comprehensive income																							979				979
Balances, June 30, 2011		$	65,000				(2,474	)			16,862			$	105,141				188,737				(4,106	)			352,298
Balances, January 1, 2012		$	63,500				—				16,910			$	104,841				185,491				(8,682	)			345,150
Net income (loss)																			(1,892	)							(1,892	)
Common stock issued into dividend reinvestment plan											31				335												335
Repurchases of common stock											—				(2	)											(2	)
Cash dividends declared ($0.16 per common share)																			(2,712	)							(2,712	)
Preferred dividends																			(1,589	)							(1,589	)
Stock-based compensation											32				263												263
Other comprehensive income																							521				521
Balances, June 30, 2012		$	63,500				—				16,973			$	105,437				179,298				(8,161	)			340,074

 

See notes to consolidated financial statements.

 

 

 

First Bancorp and Subsidiaries

Consolidated Statements of Cash Flows

 

		Six Months Ended June 30,
($ in thousands-unaudited)		2012				2011
Cash Flows From Operating Activities
Net income (loss)		$	(1,892	)			10,101
Reconciliation of net income to net cash provided by operating activities:
Provision for loan losses			28,022				22,277
Net security premium amortization			907				748
Purchase accounting accretion and amortization, net			(5,721	)			(6,565	)
Gain from acquisition			—				(10,196	)
Foreclosed property losses and write-downs			13,107				9,141
Gain on securities available for sale			(449	)			(74	)
Other losses (gains)			(53	)			17
Increase in net deferred loan costs			(96	)			(323	)
Depreciation of premises and equipment			2,278				2,182
Stock-based compensation expense			263				483
Amortization of intangible assets			446				450
Origination of presold mortgages in process of settlement			(41,858	)			(35,532	)
Proceeds from sales of presold mortgages in process of settlement			43,895				37,028
Decrease in accrued interest receivable			847				1,579
Increase in other assets			(13,188	)			(6,866	)
Increase (decrease) in accrued interest payable			(323	)			126
Increase (decrease) in other liabilities			415				(5,238	)
Net cash provided by operating activities			26,600				19,338
Cash Flows From Investing Activities
Purchases of securities available for sale			(47,395	)			(23,721	)
Purchases of securities held to maturity			—				(3,816	)
Proceeds from sales of securities available for sale			9,641				2,518
Proceeds from maturities/issuer calls of securities available for sale			48,590				34,829
Proceeds from maturities/issuer calls of securities held to maturity			1,685				1,053
Purchase of bank-owned life insurance			(25,000	)			—
Net decrease (increase) in loans			(42,993	)			45,905
Proceeds from FDIC loss share agreements			15,286				32,468
Proceeds from sales of foreclosed real estate			25,767				16,425
Purchases of premises and equipment			(5,945	)			(3,323	)
Net cash received in acquisition			—				54,037
Net cash provided (used) by investing activities			(20,364	)			156,375
Cash Flows From Financing Activities
Net increase (decrease) in deposits and repurchase agreements			66,211				(83,523	)
Repayments of borrowings, net			(22,500	)			(62,081	)
Cash dividends paid – common stock			(2,708	)			(2,690	)
Cash dividends paid – preferred stock			(1,554	)			(1,625	)
Proceeds from issuance of common stock			335				451
Repurchase of common stock			(2	)			—
Net cash provided (used) by financing activities			39,782				(149,468	)
Increase in cash and cash equivalents			46,018				26,245
Cash and cash equivalents, beginning of period			216,167				212,002
Cash and cash equivalents, end of period		$	262,185				238,247
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest		$	9,667				12,438
Income taxes			5,275				11,710
Non-cash transactions:
Unrealized gain on securities available for sale, net of taxes			277				801
Foreclosed loans transferred to other real estate			25,324				42,984

 

See notes to consolidated financial statements.

 

 

First Bancorp and Subsidiaries

Notes to Consolidated Financial Statements

 

 

(unaudited)

For the Periods Ended June 30, 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 June 30, 2012 and 2011 and the consolidated results of operations and consolidated cash flows for the periods ended June 30, 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 June 30, 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 six months 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 June 30, 2011 have been reclassified to conform to the presentation for June 30, 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 – Equity-Based Compensation Plans

 

At June 30, 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 June 30, 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 $226,000 in the aggregate on the date of the grant, to non-employee directors 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 $22,000 in stock option expense in the first six months of 2012 and will record $9,700 in each subsequent quarter of 2012 related to this grant. 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 $14,900 in the first six months of 2012 and will record $11,200 in each subsequent quarter of 2012 related to this grant.

 

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 June 30, 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 June 30, 2012, there were 871,257 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 June 30, 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 six months ended June 30, 2012 were the issuance of 1) 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, and 2) 25,452 shares of common stock to non-employee directors on June 1, 2012 (1,818 shares per director), at a fair market value of $8.86 per share, which was the closing price of the Company’s common stock on that date.

 

The Company’s equity grants for the six months ended June 30, 2011 were the issuance of 1) 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, and 2) 21,210 shares of common stock to non-employee directors on June 1, 2011 (1,414 shares per director), at a fair market value of $11.39 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 $263,000 and $483,000 for the six month periods ended June 30, 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 $103,000 and $188,000 of income tax benefits related to stock based compensation expense in the income statement for the six months ended June 30, 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 six 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 June 30, 2012			481,412			$	18.92				3.2			$	—
Exercisable at June 30, 2012			480,412			$	18.92				3.2			$	—

 

The Company did not have any stock option exercises during the six months ended June 30, 2012 and received $30,000 as a result of stock option exercises during the six months ended June 30, 2011. The Company recorded no tax benefits from the exercise of nonqualified stock options during the six months ended June 30, 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 June 30, 2012			14,344			$	12.50

 

Note 5 – 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 June 30,
		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 available to common shareholders		$	2,461				16,952,624			$	0.15			$	2,685				16,841,289			$	0.16
Effect of Dilutive Securities			—				—								—				27,282
Diluted EPS per common share		$	2,461				16,952,624			$	0.15			$	2,685				16,868,571			$	0.16

 

 

		For the Six Months Ended June 30,
		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		$	(3,481	)			16,938,620			$	(0.21	)		$	8,018				16,827,615			$	0.48
Effect of Dilutive Securities			—				—								—				27,412
Diluted EPS per common share		$	(3,481	)			16,938,620			$	(0.21	)		$	8,018				16,855,027			$	0.48

 

For both the three and six months ended June 30, 2012, there were 386,662 options, respectively, that were antidilutive because the exercise price exceeded the average market price for the period. For both the three and six month periods ended June 30, 2011, there were 542,916 options 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 6 – Securities

 

The book values and approximate fair values of investment securities at June 30, 2012 and December 31, 2011 are summarized as follows:

 

		June 30, 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		$	29,504				29,626				122				—				34,511				34,665				170				(16	)
Mortgage-backed securities			115,674				119,536				3,862				—				120,032				124,105				4,164				(91	)
Corporate bonds			13,186				13,139				253				(300	)			13,189				12,488				279				(980	)
Equity securities			9,195				9,606				438				(27	)			10,998				11,368				409				(39	)
Total available for sale		$	167,559				171,907				4,675				(327	)			178,730				182,626				5,022				(1,126	)
Securities held to maturity:
State and local governments		$	56,182				61,676				5,494				—				57,988				62,754				4,766				—
Total held to maturity		$	56,182				61,676				5,494				—				57,988				62,754				4,766				—

 

Included in mortgage-backed securities at June 30, 2012 were collateralized mortgage obligations with an amortized cost of $663,000 and a fair value of $684,000. 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 $9,102,000 at June 30, 2012 and $10,904,000 at 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 June 30, 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		$	—				—				—				—				—				—
Mortgage-backed securities			—				—				—				—				—				—
Corporate bonds			—				—				5,029				300				5,029				300
Equity securities			—				—				31				27				31				27
State and local governments			—				—				—				—				—				—
Total temporarily impaired securities		$	—				—				5,060				327				5,060				327

 

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 June 30, 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 June 30, 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 $9,102,000 at June 30, 2012 and $10,904,000 at 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 June 30, 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		$	3,004				3,040				350				358
Due after one year but within five years			26,497				26,679				2,958				3,210
Due after five years but within ten years			3,000				3,000				29,731				32,673
Due after ten years			10,189				10,046				23,143				25,435
Mortgage-backed securities			115,674				119,536				—				—
Total debt securities			158,364				162,301				56,182				61,676
Equity securities			9,195				9,606				—				—
Total securities		$	167,559				171,907				56,182				61,676

 

At June 30, 2012 investment securities with a book value of $86,865,000 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 six months ended June 30, 2012, which resulted in a net gain of $439,000. There were $2,518,000 in sales during the six months ended June 30, 2011, which resulted in a net gain of $8,000. During the six months ended June 30, 2012 and 2011, the Company recorded a net gain of $11,000 and $71,000, respectively, related to the call of several municipal and bond securities. Also, during the six months ended June 30, 2012 and 2011, the Company recorded a net loss of $1,000 and $5,000, respectively, related to write-downs of the Company’s equity portfolio.

 

Note 7 – 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)		June 30, 2012								December 31, 2011								June 30, 2011
		Amount				Percentage				Amount				Percentage				Amount				Percentage
All  loans (non-covered and covered):
Commercial, financial, and agricultural		$	163,761				7%				162,099				7%				158,303				6%
Real estate – construction, land development & other land loans			343,620				14%				363,079				15%				386,354				16%
Real estate – mortgage – residential (1-4 family) first mortgages			815,605				34%				805,542				33%				803,209				33%
Real estate – mortgage – home equity loans / lines of credit			250,627				10%				256,509				11%				266,995				11%
Real estate – mortgage – commercial and other			789,290				32%				762,895				31%				745,858				31%
Installment loans to individuals			73,522				3%				78,982				3%				80,423				3%
Subtotal			2,436,425				100%				2,429,106				100%				2,441,142				100%
Unamortized net deferred loan costs			1,376								1,280								1,298
Total loans		$	2,437,801								2,430,386								2,442,440

 

As of June 30, 2012, December 31, 2011 and June 30, 2011, net loans include unamortized premiums of $717,000, $949,000, and $1,182,000, respectively, related to acquired loans.

 

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

 

($ in thousands)		June 30, 2012								December 31, 2011								June 30, 2011
		Amount				Percentage				Amount				Percentage				Amount				Percentage
Non-covered loans:
Commercial, financial, and agricultural		$	155,879				7%				152,627				8%				145,811				7%
Real estate – construction, land development & other land loans			283,818				13%				290,983				14%				306,140				15%
Real estate – mortgage – residential (1-4 family) first mortgages			669,088				32%				646,616				31%				631,640				31%
Real estate – mortgage – home equity loans / lines of credit			229,415				11%				233,171				11%				241,973				12%
Real estate – mortgage – commercial and other			702,717				33%				666,882				32%				635,103				31%
Installment loans to individuals			72,613				4%				77,593				4%				78,749				4%
Subtotal			2,113,530				100%				2,067,872				100%				2,039,416				100%
Unamortized net deferred loan costs			1,376								1,280								1,298
Total non-covered loans		$	2,114,906								2,069,152								2,040,714

 

The carrying amount of the covered loans at June 30, 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		$	68				146				7,814				9,885				7,882				10,031
Real estate – construction, land development & other land loans			1,577				2,606				58,225				99,332				59,802				101,938
Real estate – mortgage – residential (1-4 family) first mortgages			827				1,915				145,690				173,707				146,517				175,622
Real estate – mortgage – home equity loans / lines of credit			12				309				21,200				26,400				21,212				26,709
Real estate – mortgage – commercial and other			2,332				4,153				84,241				113,936				86,573				118,089
Installment loans to individuals			3				4				906				990				909				994
Total		$	4,819				9,133				318,076				424,250				322,895				433,383

 

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			(25,012	)
Transfers to foreclosed real estate			(11,974	)
Loan charge-offs			(4,176	)
Accretion of loan discount			5,868
Carrying amount of nonimpaired covered loans at June 30, 2012		$	318,076

 

As reflected in the table above, the Company accreted $5,868,000 of the loan discount on purchased nonimpaired loans into interest income during the first six months of 2012. As of June 30, 2012, there was remaining loan discount of $73,519,000 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			(287	)			(54	)			(233	)
Transfer to foreclosed real estate			(7,636	)			(3,487	)			(4,149	)
Change due to loan charge-off			(109	)			(109	)			—
Other			(1,151	)			(1,568	)			417
Balance at June 30, 2012		$	9,133				4,314				4,819

 

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 six months 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)		June 30, 2012				December 31, 2011				June 30, 2011
Non-covered nonperforming assets
Nonaccrual loans		$	73,918				73,566				71,570
Restructured loans - accruing			20,684				11,720				16,893
Accruing loans > 90 days past due			—				—				—
Total non-covered nonperforming loans			94,602				85,286				88,463
Other real estate			37,895				37,023				31,849
Total non-covered nonperforming assets		$	132,497				122,309				120,312
Covered nonperforming assets
Nonaccrual loans (1)		$	39,075				41,472				37,057
Restructured loans - accruing			19,054				14,218				24,325
Accruing loans > 90 days past due			—				—				—
Total covered nonperforming loans			58,129				55,690				61,382
Other real estate			70,850				85,272				102,883
Total covered nonperforming assets		$	128,979				140,962				164,265
Total nonperforming assets		$	261,476				263,271				284,577

 

(1) At June 30, 2012, December 31, 2011, and June 30, 2011, the contractual balance of the nonaccrual loans covered by FDIC loss share agreements was $60.4 million, $69.0 million, and $69.4 million, respectively.

 

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

 

($ in thousands)		As of /for the six months ended June 30, 2012				As of /for the year ended December 31, 2011				As of /for the six months ended June 30, 2011
Impaired loans at period end
Non-covered		$	94,602				85,286				88,463
Covered			58,129				55,690				61,382
Total impaired loans at period end		$	152,731				140,976				149,845
Average amount of impaired loans for period
Non-covered		$	86,723				89,023				91,187
Covered			56,449				63,289				69,102
Average amount of impaired loans for period – total		$	143,172				152,312				160,289
Allowance for loan losses related to impaired loans at period end
Non-covered		$	11,051				5,804				6,019
Covered			5,158				5,106				4,727
Allowance for loan losses related to impaired loans - total		$	16,209				10,910				10,746
Amount of impaired loans with no related allowance at period end
Non-covered		$	22,235				35,721				31,514
Covered			40,613				43,702				49,755
Total impaired loans with no related allowance at period end		$	62,848				79,423				81,269

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 June 30, 2012.

 

($ in thousands)		Non-covered				Covered				Total
Commercial, financial, and agricultural:
Commercial – unsecured		$	211				188				399
Commercial – secured			2,227				—				2,227
Secured by inventory and accounts receivable			637				—				637
Real estate – construction, land development & other land loans			19,781				16,963				36,744
Real estate – residential, farmland and multi-family			24,146				10,084				34,230
Real estate – home equity lines of credit			3,878				758				4,636
Real estate – commercial			20,277				11,009				31,286
Consumer			2,761				73				2,834
Total		$	73,918				39,075				112,993

 

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 June 30, 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		$	83				58				211				37,991				38,343
Commercial - secured			446				443				2,227				110,248				113,364
Secured by inventory and accounts receivable			55				—				637				21,277				21,969
Real estate – construction, land development & other land loans			1,544				425				19,781				222,973				244,723
Real estate – residential, farmland, and multi-family			6,648				2,109				24,146				777,203				810,106
Real estate – home equity lines of credit			1,759				460				3,878				201,589				207,686
Real estate - commercial			4,715				381				20,277				597,135				622,508
Consumer			690				181				2,761				51,199				54,831
Total non-covered		$	15,940				4,057				73,918				2,019,615				2,113,530
Unamortized net deferred loan costs																			1,376
Total non-covered loans																		$	2,114,906
Covered loans		$	5,253				2,147				39,075				276,420				322,895
Total loans		$	21,193				6,204				112,993				2,296,035				2,437,801

 

The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at June 30, 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 and six months ended June 30, 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
As of and for the three months ended June 30, 2012
Beginning balance		$	4,954				16,419				15,369				2,132				5,737				1,826				18				46,455
Charge-offs			(744	)			(174	)			(2,145	)			(281	)			(805	)			(334	)			—				(4,483	)
Recoveries			18				126				60				85				6				62				—				357
Provisions			833				1,448				1,675				210				781				237				10				5,194
Ending balance		$	5,061				17,819				14,959				2,146				5,719				1,791				28				47,523
As of and for the six months ended June 30, 2012
Beginning balance		$	3,780				11,306				13,532				1,690				3,414				1,872				16				35,610
Charge-offs			(2,062	)			(2,852	)			(4,236	)			(732	)			(2,170	)			(686	)			—				(12,738	)
Recoveries			34				314				254				119				47				132				—				900
Provisions			3,309				9,051				5,409				1,069				4,428				473				12				23,751
Ending balance		$	5,061				17,819				14,959				2,146				5,719				1,791				28				47,523
Ending balances as of June 30, 2012:  Allowance for loan losses
Individually evaluated for impairment		$	869				4,819				635				439				1,480				—				—				8,242
Collectively evaluated for impairment		$	4,192				13,000				14,324				1,707				4,239				1,791				28				39,281
Loans acquired with deteriorated credit quality		$	—				—				—				—				—				—				—				—
Loans receivable as of June 30, 2012:
Ending balance – total		$	173,676				244,723				810,106				207,686				622,508				54,831				—				2,113,530
Ending balances as of June 30, 2012: Loans
Individually evaluated for impairment		$	1,009				23,860				9,508				1,331				21,918				—				—				57,626
Collectively evaluated for impairment		$	172,667				220,863				800,598				206,355				600,590				54,831				—				2,055,904
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 and six months ended June 30, 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
As of and for the three months ended June 30, 2011
Beginning balance		$	4,142				10,203				12,463				3,359				3,359				2,223				24				35,773
Charge-offs