Quarterly report pursuant to Section 13 or 15(d)

Loans and Allowance for Loan Losses

v2.4.0.6
Loans and Allowance for Loan Losses
9 Months Ended
Sep. 30, 2012
Loans and Allowance for Loan Losses [Abstract]  
LOANS AND ALLOWANCE FOR LOAN LOSSES
4. LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are stated at their face amount, net of unearned income, and consist of the following at September 30, 2012 and December 31, 2011 (dollars in thousands):

 

                 
    September 30,
2012
    December 31,
2011
 

Commercial:

               

Commercial Construction

  $ 200,032     $ 185,359  

Commercial Real Estate - Owner Occupied

    492,715       452,407  

Commercial Real Estate - Non-Owner Occupied

    693,679       655,083  

Raw Land and Lots

    212,316       214,284  

Single Family Investment Real Estate

    206,090       192,437  

Commercial and Industrial

    209,401       212,268  

Other Commercial

    40,307       44,403  

Consumer:

               

Mortgage

    221,474       219,646  

Consumer Construction

    27,488       20,757  

Indirect Auto

    159,495       162,708  

Indirect Marine

    31,314       39,819  

HELOCs

    286,348       277,101  

Credit Card

    20,332       19,006  

Other Consumer

    107,519       123,305  
   

 

 

   

 

 

 

Total

  $ 2,908,510     $ 2,818,583  
   

 

 

   

 

 

 

The following table shows the aging of the Company’s loan portfolio, by class, at September 30, 2012 (dollars in thousands):

 

                                                         
    30-59 Days
Past Due
    60-89 Days
Past Due
    Greater Than
90 Days and
still Accruing
    Purchased
Impaired (net of
credit mark)
    Nonaccrual     Current     Total Loans  

Commercial:

                                                       

Commercial Construction

  $ 6,148     $ —       $ —       $ —       $ 7,846     $ 186,038     $ 200,032  

Commercial Real Estate - Owner Occupied

    2,865       88       822       1,228       2,212       485,500       492,715  

Commercial Real Estate - Non-Owner Occupied

    5,116       —         635       —         540       687,388       693,679  

Raw Land and Lots

    138       —         153       3,743       10,995       197,287       212,316  

Single Family Investment Real Estate

    686       102       201       371       4,081       200,649       206,090  

Commercial and Industrial

    230       191       120       89       2,678       206,093       209,401  

Other Commercial

    238       1       —         —         195       39,873       40,307  

Consumer:

                                                       

Mortgage

    3,899       3,003       3,991       —         693       209,888       221,474  

Consumer Construction

    —         —         —         —         210       27,278       27,488  

Indirect Auto

    1,998       234       289       24       2       156,948       159,495  

Indirect Marine

    68       —         114       —         876       30,256       31,314  

HELOCs

    2,481       536       1,707       851       797       279,976       286,348  

Credit Card

    147       223       268       —         —         19,694       20,332  

Other Consumer

    893       629       796       131       1,034       104,036       107,519  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 24,907     $ 5,007     $ 9,096     $ 6,437     $ 32,159     $ 2,830,904     $ 2,908,510  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following table shows the aging of the Company’s loan portfolio, by class, at December 31, 2011 (dollars in thousands):

 

                                                         
    30-59 Days
Past Due
    60-89 Days
Past Due
    Greater Than
90 Days and
still Accruing
    Purchased
Impaired (net of
credit mark)
    Nonaccrual     Current     Total Loans  

Commercial:

                                                       

Commercial Construction

  $ —       $ —       $ 490     $ —       $ 10,276     $ 174,593     $ 185,359  

Commercial Real Estate - Owner Occupied

    520       —         2,482       1,292       5,962       442,151       452,407  

Commercial Real Estate - Non-Owner Occupied

    190       64       2,887       1,133       2,031       648,778       655,083  

Raw Land and Lots

    94       1,124       —         5,623       13,322       194,121       214,284  

Single Family Investment Real Estate

    779       70       3,637       388       5,048       182,515       192,437  

Commercial and Industrial

    601       185       3,369       392       5,297       202,424       212,268  

Other Commercial

    —         25       —         —         238       44,140       44,403  

Consumer:

                                                       

Mortgage

    6,748       412       3,804       —         240       208,442       219,646  

Consumer Construction

    —         —         —         —         207       20,550       20,757  

Indirect Auto

    2,653       416       443       40       7       159,149       162,708  

Indirect Marine

    189       795       —         —         544       38,291       39,819  

HELOCs

    1,678       547       820       865       885       272,306       277,101  

Credit Card

    245       184       323       —         —         18,254       19,006  

Other Consumer

    1,421       443       1,657       164       777       118,843       123,305  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 15,118     $ 4,265     $ 19,912     $ 9,897     $ 44,834     $ 2,724,557     $ 2,818,583  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nonaccrual loans totaled $32.2 million and $51.9 million at September 30, 2012 and 2011, respectively. There were no nonaccrual loans excluded from impaired loan disclosure in 2012 or 2011. Loans past due 90 days or more and accruing interest totaled $9.1 million and $12.1 million at September 30, 2012 and 2011, respectively.

The following table shows purchased impaired commercial and consumer loan portfolios, by class and their delinquency status through September 30, 2012 (dollars in thousands):

 

                                 
    30-89 Days
Past Due
    Greater than
90 Days
    Current     Total  

Commercial:

                               

Commercial Real Estate - Owner Occupied

  $ —       $ 1,164     $ 64     $ 1,228  

Raw Land and Lots

    —         91       3,652       3,743  

Single Family Investment Real Estate

    16       —         355       371  

Commercial and Industrial

    —         89       —         89  

Consumer:

                               

Indirect Auto

    7       —         17       24  

HELOCs

    —         50       801       851  

Other Consumer

    —         26       105       131  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 23     $ 1,420     $ 4,994     $ 6,437  
   

 

 

   

 

 

   

 

 

   

 

 

 

The following table shows purchased impaired commercial and consumer loan portfolios, by class and their delinquency status through December 31, 2011 (dollars in thousands):

 

                                 
    30-89 Days
Past Due
    Greater than
90 Days
    Current     Total  

Commercial:

                               

Commercial Real Estate - Owner Occupied

  $ 206     $ 50     $ 1,036     $ 1,292  

Commercial Real Estate - Non-Owner Occupied

    —         1,133       —         1,133  

Raw Land and Lots

    —         —         5,623       5,623  

Single Family Investment Real Estate

    —         —         388       388  

Commercial and Industrial

    —         302       90       392  

Consumer:

                               

Indirect Auto

    6       11       23       40  

HELOCs

    19       32       814       865  

Other Consumer

    —         77       87       164  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 231     $ 1,605     $ 8,061     $ 9,897  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

The Company measures the amount of impairment by evaluating loans either in their collective homogeneous pools or individually. At September 30, 2012, the Company had $177.9 million in loans considered to be impaired of which $16.7 million were collectively evaluated for impairment and $161.2 million were individually evaluated for impairment. The following table shows the Company’s impaired loans individually evaluated for impairment, by class, at September 30, 2012 (dollars in thousands):

 

                                         
    Recorded
Investment
    Unpaid
Principal
Balance
    Related
Allowance
    YTD
Average
Investment
    Interest
Income
Recognized
 

Loans without a specific allowance

                                       

Commercial:

                                       

Commercial Construction

  $ 30,864     $ 31,347     $ —       $ 31,913     $ 1,073  

Commercial Real Estate - Owner Occupied

    10,774       11,246       —         11,517       423  

Commercial Real Estate - Non-Owner Occupied

    21,230       21,305       —         22,644       867  

Raw Land and Lots

    35,067       35,141       —         36,376       941  

Single Family Investment Real Estate

    5,860       6,180       —         6,440       216  

Commercial and Industrial

    3,361       3,394       —         3,837       135  

Other Commercial

    906       906       —         1,009       46  

Consumer:

                                       

Mortgage

    2,592       2,645       —         2,983       80  

Indirect Auto

    6       6       —         9       —    

HELOCs

    1,672       1,771       —         1,843       10  

Other Consumer

    871       910       —         937       21  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans without a specific allowance

  $ 113,203     $ 114,851     $ —       $ 119,508     $ 3,812  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans with a specific allowance

                                       

Commercial:

                                       

Commercial Construction

  $ 4,290     $ 4,338     $ 1,368     $ 4,360     $ 20  

Commercial Real Estate - Owner Occupied

    2,718       2,853       665       2,888       22  

Commercial Real Estate - Non-Owner Occupied

    13,546       13,580       426       13,777       568  

Raw Land and Lots

    12,472       12,669       3,052       13,168       118  

Single Family Investment Real Estate

    2,503       2,573       962       2,736       44  

Commercial and Industrial

    9,929       10,069       3,581       10,059       304  

Other Commercial

    134       134       108       134       —    

Consumer:

                                       

Consumer Construction

    210       236       76       226       —    

Indirect Marine

    876       876       404       879       3  

HELOCs

    752       811       550       1,017       —    

Other Consumer

    563       563       246       563       —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans with a specific allowance

  $ 47,993     $ 48,702     $ 11,438     $ 49,807     $ 1,079  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans individually evaluated for impairment

  $ 161,196     $ 163,553     $ 11,438     $ 169,315     $ 4,891  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

At December 31, 2011, the Company had $255.1 million in loans considered to be impaired of which $12.3 million were collectively evaluated for impairment and $242.8 million were individually evaluated for impairment. The following table shows the Company’s impaired loans individually evaluated for impairment, by class, at December 31, 2011 (dollars in thousands):

 

                                         
    Recorded
Investment
    Unpaid
Principal
Balance
    Related
Allowance
    YTD
Average
Investment
    Interest
Income
Recognized
 

Loans without a specific allowance

                                       

Commercial:

                                       

Commercial Construction

  $ 40,475     $ 40,524     $ —       $ 37,835     $ 1,690  

Commercial Real Estate - Owner Occupied

    20,487       21,010       —         23,364       1,183  

Commercial Real Estate - Non-Owner Occupied

    37,799       37,855       —         38,084       2,002  

Raw Land and Lots

    46,791       46,890       —         47,808       1,306  

Single Family Investment Real Estate

    11,285       11,349       —         11,684       637  

Commercial and Industrial

    9,467       9,959       —         10,216       423  

Other Commercial

    1,257       1,257       —         1,269       75  

Consumer:

                                       

Mortgage

    1,202       1,202       —         1,225       70  

HELOCs

    349       349       —         350       11  

Other Consumer

    —         —         —         1       —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans without a specific allowance

  $ 169,112     $ 170,395     $ —       $ 171,836     $ 7,397  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans with a specific allowance

                                       

Commercial:

                                       

Commercial Construction

  $ 12,927     $ 13,297     $ 583     $ 13,811     $ 343  

Commercial Real Estate - Owner Occupied

    8,679       8,788       1,961       8,681       267  

Commercial Real Estate - Non-Owner Occupied

    8,858       8,879       1,069       9,010       322  

Raw Land and Lots

    22,188       22,429       991       24,553       973  

Single Family Investment Real Estate

    9,020       9,312       1,140       9,571       321  

Commercial and Industrial

    8,980       9,133       3,320       10,448       369  

Other Commercial

    150       150       3       153       10  

Consumer:

                                       

Mortgage

    535       535       11       536       32  

Consumer Construction

    207       226       86       228       —    

Indirect Auto

    71       71       —         93       5  

Indirect Marine

    544       547       263       548       9  

HELOCs

    785       825       587       1,034       —    

Other Consumer

    777       804       284       815       5  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans with a specific allowance

  $ 73,721     $ 74,996     $ 10,298     $ 79,481     $ 2,656  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans individually evaluated for impairment

  $ 242,833     $ 245,391     $ 10,298     $ 251,317     $ 10,053  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The Company considers troubled debt restructurings (“TDRs”) to be impaired loans. A modification of a loan’s terms constitutes a TDR if the creditor grants a concession to the borrower for economic or legal reasons related to the borrower’s financial difficulties that it would not otherwise consider. Included in the impaired loan disclosures above are $63.8 million and $112.6 million of loans considered to be troubled debt restructurings as of September 30, 2012 and December 31, 2011, respectively. All loans that are considered to be TDRs are specifically evaluated for impairment in accordance with the Company’s allowance for loan loss methodology.

 

The following table provides a summary, by class, of modified loans that continue to accrue interest under the terms of the restructuring agreement, which are considered to be performing, and modified loans that have been placed in nonaccrual status, which are considered to be nonperforming, as of September 30, 2012 and December 31, 2011 (dollars in thousands):

 

                                                 
    September 30, 2012     December 31, 2011  
    No. of
Loans
    Recorded
Investment
    Outstanding
Commitment
    No. of
Loans
    Recorded
Investment
    Outstanding
Commitment
 

Performing

                                               

Commercial:

                                               

Commercial Construction

    6     $ 6,559     $ 169       14     $ 21,461     $ 3,185  

Commercial Real Estate - Owner Occupied

    8       3,056       —         11       7,996       180  

Commercial Real Estate - Non-Owner Occupied

    10       13,082       29       16       21,777       13  

Raw Land and Lots

    14       25,274       1       15       32,450       1  

Single Family Investment Real Estate

    5       848       —         12       8,525       —    

Commercial and Industrial

    6       1,103       —         12       4,991       204  

Other Commercial

    1       236       —         4       864       —    

Consumer:

                                               

Mortgage

    7       1,690       —         1       507       —    

Other Consumer

    2       85       —         2       263       —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total performing

    59     $ 51,933     $ 199       87     $ 98,834     $ 3,583  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nonperforming

                                               

Commercial:

                                               

Commercial Construction

    4     $ 4,260     $ —         5     $ 5,353     $ —    

Commercial Real Estate - Owner Occupied

    3       1,084       —         —         —         —    

Commercial Real Estate - Non-Owner Occupied

    1       208       —         2       292       —    

Raw Land and Lots

    3       3,860       —         6       4,342       —    

Single Family Investment Real Estate

    2       433       —         4       1,342       —    

Commercial and Industrial

    7       1,284       —         3       1,134       —    

Consumer:

                                               

Mortgage

    1       202       —         5       1,076       —    

Indirect Marine

    1       283       —         —         —         —    

Other Consumer

    2       266       —         1       265       —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming

    24     $ 11,880     $ —         26     $ 13,804     $ —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total performing and nonperforming

    83     $ 63,813     $ 199       113     $ 112,638     $ 3,583  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The Company considers a default of a restructured loan to occur when subsequent to the restructure, the borrower is 90 days past due or results in foreclosure and repossession of the applicable collateral; the Company did not identify any restructured loans that went into default in the third quarter that had been restructured during the previous twelve months. During the nine months ended September 30, 2012, the Company identified three restructured loans, totaling approximately $1.4 million, that went into default that had been restructured in the twelve-month period prior to the time of default. All three loans had a term extension at a market rate.

 

The following table shows, by class and modification type, TDRs that occurred during the three month and nine month periods ended September 30, 2012 (dollars in thousands):

 

                                 
    Three months ended
September 30, 2012
    Nine months ended
September 30, 2012
 
    No. of
Loans
    Recorded
investment at
period end
    No. of
Loans
    Recorded
investment at
period end
 

Modified to interest only

                               

Commercial:

                               

Commercial Real Estate - Non-Owner Occupied

    —       $ —         1     $ 309  

Raw Land and Lots

    —         —         3       260  

Single Family Investment Real Estate

    —         —         2       176  

Consumer:

                               

Indirect Marine

    —         —         1       283  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest only at market rate of interest

    —       $ —         7     $ 1,028  
   

 

 

   

 

 

   

 

 

   

 

 

 

Term modification, at a market rate

                               

Commercial:

                               

Commercial Real Estate - Owner Occupied

    —       $ —         3     $ 1,809  

Commercial Real Estate - Non-Owner Occupied

    2       720       2       720  

Raw Land and Lots

    —         —         1       603  

Commercial and Industrial

    1       115       6       432  

Consumer:

                               

Mortgage

    —         —         2       472  

Other Consumer

    —         —         3       282  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total loan term extended at a market rate

    3     $ 835       17     $ 4,318  
   

 

 

   

 

 

   

 

 

   

 

 

 

Term modification, below market rate

                               

Commercial:

                               

Commercial Real Estate - Owner Occupied

    —       $ —         4     $ 654  

Raw Land and Lots

    1       60       1       60  

Consumer:

                               

Other Consumer

    1       69       1       69  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total loan term extended at a below market rate

    2     $ 129       6     $ 783  
   

 

 

   

 

 

   

 

 

   

 

 

 

Interest rate modification, below market rate

                               

Commercial:

                               

Commercial Real Estate - Non-Owner Occupied

    —       $ —         2     $ 2,390  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest only at below market rate of interest

    —       $ —         2     $ 2,390  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    5     $ 964       32     $ 8,519  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following table shows, by class and modification type, TDRs that occurred during the three month and nine month periods ended September 30, 2011 (dollars in thousands):

 

                                 
    Three months ended
September 30, 2011
    Nine months ended
September 30, 2011
 
    No. of
Loans
    Recorded
investment at
period end
    No. of
Loans
    Recorded
investment at
period end
 

Modified to interest only

                               

Commercial:

                               

Commercial Real Estate - Non-Owner Occupied

    —       $ —         1     $ 223  

Raw Land and Lots

    —         —         1       341  

Single Family Investment Real Estate

    1       95       1       95  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest only at market rate of interest

    1     $ 95       3     $ 659  
   

 

 

   

 

 

   

 

 

   

 

 

 

Term modification, at a market rate

                               

Commercial:

                               

Commercial Construction

    5     $ 7,072       15     $ 22,940  

Commercial Real Estate - Owner Occupied

    3       3,869       5       5,035  

Commercial Real Estate - Non-Owner Occupied

    2       2,572       16       21,655  

Raw Land and Lots

    4       18,625       14       27,596  

Single Family Investment Real Estate

    1       2,616       10       7,286  

Commercial and Industrial

    5       2,729       12       5,623  

Other Commercial

    2       457       5       911  

Consumer:

                               

Mortgage

    1       56       4       538  

Other Consumer

    1       270       3       533  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total loan term extended at a market rate

    24     $ 38,266       84     $ 92,117  
   

 

 

   

 

 

   

 

 

   

 

 

 

Term modification, below market rate

                               

Commercial:

                               

Commercial Construction

    —       $ —         3     $ 3,451  

Commercial Real Estate - Owner Occupied

    2       546       2       546  

Raw Land and Lots

    —         —         6       6,391  

Single Family Investment Real Estate

    —         —         4       2,506  

Commercial and Industrial

    —         —         2       368  

Consumer:

                               

Mortgage

    —         —         1       507  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total loan term extended at a below market rate

    2     $ 546       18     $ 13,769  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    27     $ 38,907       105     $ 106,545  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following table shows the allowance for loan loss activity, by portfolio segment, balances for allowance for credit losses, and loans based on impairment methodology for the nine months ended September 30, 2012. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands):

 

                                 
    Commercial     Consumer     Unallocated     Total  

Allowance for loan losses:

                               

Balance, beginning of the year

  $ 27,891     $ 11,498     $ 81     $ 39,470  

Recoveries credited to allowance

    490       881       —         1,371  

Loans charged off

    (5,956     (3,891     —         (9,847

Provision charged to operations

    7,301       1,626       (27     8,900  
   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

  $ 29,726     $ 10,114     $ 54     $ 39,894  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

    10,033       1,276       —         11,309  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

    19,564       8,838       54       28,456  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: loans acquired with deteriorated credit quality

    129       —         —         129  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 29,726     $ 10,114     $ 54     $ 39,894  
   

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

                               

Ending balance

  $ 2,054,540     $ 853,970     $ —       $ 2,908,510  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

    148,223       6,536       —         154,759  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

    1,900,886       846,428       —         2,747,314  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: loans acquired with deteriorated credit quality

    5,431       1,006       —         6,437  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 2,054,540     $ 853,970     $ —       $ 2,908,510  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following table shows the allowance for loan loss activity, portfolio segment types, balances for allowance for loan losses, and loans based on impairment methodology for the year ended December 31, 2011. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands):

 

                                 
    Commercial     Consumer     Unallocated     Total  

Allowance for loan losses:

                               

Balance, beginning of the year

  $ 28,255     $ 10,189     $ (38   $ 38,406  

Recoveries credited to allowance

    924       1,206       —         2,130  

Loans charged off

    (10,891     (6,975     —         (17,866

Provision charged to operations

    9,603       7,078       119       16,800  
   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of year

  $ 27,891     $ 11,498     $ 81     $ 39,470  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

    8,982       1,231       —         10,213  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

    18,824       10,267       81       29,172  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: loans acquired with deteriorated credit quality

    85       —         —         85  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 27,891     $ 11,498     $ 81     $ 39,470  
   

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

                               

Ending balance

  $ 1,956,241     $ 862,342     $ —       $ 2,818,583  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

    229,535       3,401       —         232,936  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

    1,717,878       857,872       —         2,575,750  
   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: loans acquired with deteriorated credit quality

    8,828       1,069       —         9,897  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,956,241     $ 862,342     $ —       $ 2,818,583  
   

 

 

   

 

 

   

 

 

   

 

 

 

The Company uses the past due status and trends as the primary credit quality indicator for the consumer loan portfolio segment while a risk rating system is utilized for commercial loans. Commercial loans are graded on a scale of 1 through 9. A general description of the characteristics of the risk grades follows:

 

   

Risk rated 1 loans have little or no risk and are generally secured by cash or cash equivalents;

 

   

Risk rated 2 loans have minimal risk to well qualified borrowers and no significant questions as to safety;

 

   

Risk rated 3 loans are satisfactory loans with strong borrowers and secondary sources of repayment;

 

   

Risk rated 4 loans are satisfactory loans with borrowers not as strong as risk rated 3 loans and may exhibit a greater degree of financial risk based on the type of business supporting the loan;

 

   

Risk rated 5 loans are watch loans that warrant more than the normal level of supervision and have the possibility of an event occurring that may weaken the borrower’s ability to repay;

 

   

Risk rated 6 loans have increasing potential weaknesses beyond those at which the loan originally was granted and if not addressed could lead to inadequately protecting the Company’s credit position;

 

   

Risk rated 7 loans are substandard loans and are inadequately protected by the current sound worth or paying capacity of the obligor or the collateral pledged; these have well defined weaknesses that jeopardize the liquidation of the debt with the distinct possibility the Company will sustain some loss if the deficiencies are not corrected;

 

   

Risk rated 8 loans are doubtful of collection and the possibility of loss is high but pending specific borrower plans for recovery, its classification as a loss is deferred until its more exact status is determined; and

 

   

Risk rated 9 loans are loss loans which are considered uncollectable and of such little value that their continuance as bankable assets is not warranted.

The following table shows all loans, excluding purchased impaired loans, in the commercial portfolios by class with their related risk rating as of September 30, 2012. The risk rating information has been updated through September 30, 2012 (dollars in thousands):

 

                                                         
    1-3     4     5     6     7     8     Total  

Commercial Construction

  $ 11,409     $ 105,226     $ 11,150     $ 39,371     $ 32,766     $ 110     $ 200,032  

Commercial Real Estate - Owner Occupied

    125,840       314,456       22,406       17,671       11,114       —         491,487  

Commercial Real Estate - Non-Owner Occupied

    164,530       416,312       51,597       31,961       29,279       —         693,679  

Raw Land and Lots

    3,378       112,439       14,807       33,719       43,724       506       208,573  

Single Family Investment Real Estate

    24,329       145,213       14,109       12,898       8,431       739       205,719  

Commercial and Industrial

    44,831       122,572       13,779       13,284       14,671       175       209,312  

Other Commercial

    5,307       16,489       12,133       4,803       1,515       60       40,307  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 379,624     $ 1,232,707     $ 139,981     $ 153,707     $ 141,500     $ 1,590     $ 2,049,109  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table shows all loans, excluding purchased impaired loans, in the commercial portfolios by class with their related risk rating as of December 31, 2011. The risk rating information has been updated through December 31, 2011 (dollars in thousands):

 

                                                         
    1-3     4     5     6     7     8     Total  

Commercial Construction

  $ 10,099     $ 84,299     $ 6,079     $ 36,650     $ 48,232     $ —       $ 185,359  

Commercial Real Estate - Owner Occupied

    88,430       296,825       17,604       21,158       26,389       709       451,115  

Commercial Real Estate - Non-Owner Occupied

    149,346       367,244       58,844       38,662       39,854       —         653,950  

Raw Land and Lots

    4,368       99,374       18,767       33,673       52,204       275       208,661  

Single Family Investment Real Estate

    32,741       116,570       11,928       14,358       16,452       —         192,049  

Commercial and Industrial

    35,120       123,872       22,079       11,559       19,066       180       211,876  

Other Commercial

    6,364       15,918       16,739       3,807       1,512       63       44,403  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 326,468     $ 1,104,102     $ 152,040     $ 159,867     $ 203,709     $ 1,227     $ 1,947,413  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table shows only purchased impaired loans in the commercial portfolios by class with their related risk rating as of September 30, 2012. The credit quality indicator information has been updated through September 30, 2012 (dollars in thousands):

 

                                         
    5     6     7     8     Total  

Commercial Real Estate - Owner Occupied

  $  —       $  —       $ 1,228     $ —       $ 1,228  

Raw Land and Lots

    —         —         3,743       —         3,743  

Single Family Investment Real Estate

    355       —         16       —         371  

Commercial and Industrial

    —         —         89       —         89  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 355     $ —       $ 5,076     $ —       $ 5,431  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table shows only purchased impaired loans in the commercial portfolios by class with their related risk rating as of December 31, 2011. The credit quality indicator information has been updated through December 31, 2011 (dollars in thousands):

 

                                 
    6     7     8     Total  

Commercial Real Estate - Owner Occupied

  $ —       $ 1,292     $ —       $ 1,292  

Commercial Real Estate - Non-Owner Occupied

    —         1,133       —         1,133  

Raw Land and Lots

    —         5,623       —         5,623  

Single Family Investment Real Estate

    369       19       —         388  

Commercial and Industrial

    —         91       301       392  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 369     $ 8,158     $ 301     $ 8,828  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

Loans acquired are originally recorded at fair value, with certain loans being identified as impaired at the date of purchase. The fair values were determined based on the credit quality of the portfolio, expected future cash flows, and timing of those expected future cash flows. The contractually required payments, cash flows expected to be collected, and fair value as of the date of acquisition were $1,080,780, $1,072,726, and $1,052,358, respectively (dollars in thousands).

The following shows changes in the Company’s acquired loan portfolio and accretable yield for the following periods (dollars in thousands):

 

                                                                 
    For the Nine Months Ended     For the Twelve Months Ended  
    September 30, 2012     December 31, 2011  
    Purchased Impaired     Purchased Nonimpaired     Purchased Impaired     Purchased Nonimpaired  
    Accretable
Yield
    Carrying
Amount of
Loans
    Accretable
Yield
    Carrying
Amount of
Loans
    Accretable
Yield
    Carrying
Amount of
Loans
    Accretable
Yield
    Carrying
Amount of
Loans
 

Balance at beginning of period

  $ 5,140     $ 9,897     $ 9,010     $ 663,510     $ 8,169     $ 13,999     $ 13,589     $ 799,898  

Additions

    —         —         —         —         122       276       1,593       70,524  

Accretion

    (55     —         (2,960     —         (66     —         (6,172     —    

Charged off

    (1,602     (397     —         (1,551     (3,073     (1,329     —         (5,988

Transfers to OREO

    —         (2,371     —         (2,766     (12     (174     —         (2,341

Payments received, net

    —         (692     —         (155,947     —         (2,875     —         (198,583
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

  $ 3,483     $ 6,437     $ 6,050     $ 503,246     $ 5,140     $ 9,897     $ 9,010     $ 663,510