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

Effective Date 6/30/2012

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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 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

 

 

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)

  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.

Page 4

 

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.

Page 5

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.

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                       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.

 

 

 

Page 7

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.

 

Page 8

 

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.

 

Page 9

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.

 

Page 10

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.

 

 

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 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 

 

Page 12

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 
                               

 

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 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.

 

Page 14

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.

 

Page 15

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 

 

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   (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.

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   (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.

 

Page 18

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 
                

 

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 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.

 

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 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  $                             

 

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 

 

 

 

Page 23

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