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Loans and Allowance for Loan Losses
12 Months Ended
Dec. 31, 2012
Loans and Allowance for Loan Losses  
Loans and Allowance for Loan Losses

Note 4—Loans and Allowance for Loan Losses

        The following is a summary of non-acquired loans:

 
  December 31,  
(Dollars in thousands)
  2012   2011  

Non-acquired loans:

             

Commercial non-owner occupied real estate:

             

Construction and land development

  $ 273,420     310,845  

Commercial non-owner occupied

    290,071     299,698  
           

Total commercial non-owner occupied real estate

    563,491     610,543  

Consumer real estate:

             

Consumer owner occupied

    434,503     391,529  

Home equity loans

    255,284     264,986  
           

Total consumer real estate

    689,787     656,515  

Commercial owner occupied real estate

    784,152     742,890  

Commercial and industrial

    279,763     220,454  

Other income producing property

    133,713     140,693  

Consumer

    86,934     85,342  

Other loans

    33,163     14,128  
           

Total non-acquired loans

    2,571,003     2,470,565  

Less allowance for loan losses

    (44,378 )   (49,367 )
           

Non-acquired loans, net

  $ 2,526,625   $ 2,421,198  
           

        In accordance with FASB ASC Topic 310-30, the Company aggregated acquired loans that have common risk characteristics into pools of loan categories as described in the table below. The majority of the acquired loans are accounted for in accordance with FASB ASC Topic 310-30.

        The Company's acquired loan portfolio is comprised of the following balances net of related discount:

(Dollars in thousands)
  Loans
Impaired
at Acquisition
  Loans
Not Impaired
at Acquisition
  Total  

December 31, 2012:

                   

FASB ASC Topic 310-30 acquired loans:

                   

Covered loans:

                   

Commercial loans greater than or equal to $1 million—CBT

  $ 19,483   $ 30,201   $ 49,684  

Commercial real estate

    22,946     40,016     62,962  

Commercial real estate—construction and development           

    15,107     17,468     32,575  

Residential real estate

    39,050     65,761     104,811  

Consumer

    948     3,376     4,324  

Commercial and industrial

    8,281     15,319     23,600  

Single pay

    4,599     173     4,772  
               

Total covered loans

  $ 110,414   $ 172,314   $ 282,728  

Non-covered loans:

                   

Commercial real estate

    53,259     256,703     309,962  

Commercial real estate—construction and development           

    32,975     64,901     97,876  

Residential real estate

    40,585     209,731     250,316  

Consumer

    1,672     9,689     11,361  

Commercial and industrial

    3,064     46,220     49,284  
               

Total non-covered loans

    131,555     587,244     718,799  
               

Total FASB ASC Topic 310-30 acquired loans

    241,969     759,558     1,001,527  

Total FASB ASC Topic 310-20 acquired loans (non-covered)

        73,215     73,215  
               

Total acquired loans

    241,969     832,773     1,074,742  

Less allowance for loan losses

    (24,988 )   (7,144 )   (32,132 )
               

Acquired loans, net

  $ 216,981   $ 825,629   $ 1,042,610  
               

December 31, 2011:

                   

FASB ASC Topic 310-30 acquired loans:

                   

Covered loans:

                   

Commercial loans greater than or equal to $1 million—CBT

  $ 24,073   $ 36,756   $ 60,829  

Commercial real estate

    39,685     67,780     107,465  

Commercial real estate—construction and development           

    29,528     21,425     50,953  

Residential real estate

    52,727     74,926     127,653  

Consumer

    2,669     4,364     7,033  

Commercial and industrial

    14,800     21,702     36,502  

Single pay

    3,852     208     4,060  
               

Total covered loans

  $ 167,334   $ 227,161   $ 394,495  

Non-covered loans:

                   

Commercial real estate

    305     557     862  

Commercial real estate—construction and development           

    5     47     52  

Residential real estate

    244     753     997  

Consumer

    2,723     263     2,986  

Commercial and industrial

    219     2,590     2,809  
               

Total non-covered loans

    3,496     4,210     7,706  
               

Total FASB ASC Topic 310-30 acquired loans

    170,830     231,371     402,201  

Less allowance for loan losses

    (23,875 )   (7,745 )   (31,620 )
               

Acquired loans, net

  $ 146,955   $ 223,626   $ 370,581  
               

        Contractual loan payments receivable, estimates of amounts not expected to be collected, other fair value adjustments and the resulting fair values of FASB ASC Topic 310-30 acquired loans impaired and non-impaired at the acquisition date for Savannah (December 13, 2012) are as follows:

 
  December 13, 2012  
 
  FASB ASC Topic 310-30 Loans    
 
(Dollars in thousands)
  Loans
Impaired
at Acquisition
  Loans
Not Impaired
at Acquisition
  Total  

Contractual principal and interest

  $ 155,582   $ 483,293   $ 638,875  

Non-accretable difference

    (37,492 )   (9,460 )   (46,952 )
               

Cash flows expected to be collected

    118,090     473,833     591,923  

Accretable yield

    (8,615 )   (51,466 )   (60,081 )
               

Carrying value

  $ 109,475   $ 422,367   $ 531,842  
               

        The table above excludes $69.5 million ($74.9 million in contractual principal less a $5.4 million fair value adjustment) in acquired loans at fair value as of the acquisition date that will be accounted for under FASB ASC Topic 310-20. These loans are primarily commercial and consumer lines of credit for which the entire discount will be accreted into interest income.

        Contractual loan payments receivable, estimates of amounts not expected to be collected, other fair value adjustments and the resulting fair values of acquired loans impaired and non-impaired at the acquisition date for Peoples (April 24, 2012) are as follows:

 
  April 24, 2012  
 
  FASB ASC Topic 310-30 Loans    
 
(Dollars in thousands)
  Loans
Impaired
at Acquisition
  Loans
Not Impaired
at Acquisition
  Total  

Contractual principal and interest

  $ 56,940   $ 250,023   $ 306,963  

Non-accretable difference

    (21,237 )   (16,560 )   (37,797 )
               

Cash flows expected to be collected

    35,703     233,463     269,166  

Accretable yield

    (4,968 )   (29,953 )   (34,921 )
               

Carrying value

  $ 30,735   $ 203,510   $ 234,245  
               

        Contractual loan payments receivable, estimates of amounts not expected to be collected, accretable yield and the resulting carrying values of FASB ASC Topic 310-30 acquired loans (impaired and non-impaired) are as follows:

 
  FASB ASC Topic 310-30 Loans    
 
(Dollars in thousands)
  Loans
Impaired
at Acquisition
  Loans
Not Impaired
at Acquisition
  Total  

December 31, 2012:

                   

Contractual principal and interest

  $ 376,894   $ 926,153   $ 1,303,047  

Non-accretable difference

    (86,514 )   (54,157 )   (140,671 )
               

Cash flows expected to be collected

    290,380     871,996     1,162,376  

Accretable yield

    (48,411 )   (112,438 )   (160,849 )
               

Carrying value

  $ 241,969   $ 759,558   $ 1,001,527  
               

Allowance for loan losses on acquired loans

  $ (24,988 ) $ (7,144 ) $ (32,132 )
               

December 31, 2011:

                   

Contractual principal and interest

  $ 382,760   $ 361,726   $ 744,486  

Non-accretable difference

    (176,601 )   (71,084 )   (247,685 )
               

Cash flows expected to be collected

    206,159     290,642     496,801  

Accretable yield

    (35,329 )   (59,271 )   (94,600 )
               

Carrying value

  $ 170,830   $ 231,371   $ 402,201  
               

Allowance for loan losses on acquired loans

  $ (23,875 ) $ (7,745 ) $ (31,620 )
               

        The table above excludes $73.2 million ($78.5 million in contractual principal less a $5.3 million discount) in acquired loans at carrying value as of December 31, 2012 that will be accounted for under FASB ASC Topic 310-20. There was no allowance for loan losses related to these loans as of December 31, 2012.

        Income on acquired loans that are not impaired at the acquisition date is recognized in the same manner as loans impaired at the acquisition date. A portion of the fair value discount on acquired non-impaired loans has been ascribed as an accretable yield that is accreted into interest income over the estimated remaining life of the loans. The remaining nonaccretable difference represents cash flows not expected to be collected.

        The unpaid contractual principal balance for acquired loans was $1.3 billion at December 31, 2012 and $597.7 million at December 31, 2011.

        The following are changes in the carrying value of acquired loans during the years ended December 31, 2012 and 2011:

 
  FASB ASC Topic 310-30    
 
(Dollars in thousands)
  Loans
Impaired
at Acquisition
  Loans
Not Impaired
at Acquisition
  Total  

Balance, December 31, 2011

  $ 146,955   $ 223,626   $ 370,581  

Fair value of acquired loans

    140,210     625,877     766,087  

Net increases (reductions) for payments, foreclosures, draws, and accretion

    (69,071 )   (97,690 )   (166,761 )

Change in the allowance for loan losses on acquired loans

    (1,113 )   601     (512 )
               

Balance, December 31, 2012, net of allowance for loan losses on acquired loans

  $ 216,981   $ 752,414   $ 969,395  
               

Balance, December 31, 2010

  $ 143,059   $ 177,979   $ 321,038  

Fair value of acquired loans

    92,278     130,156     222,434  

Net reductions for payments, foreclosures, and accretion

    (64,507 )   (76,764 )   (141,271 )

Change in the allowance for loan losses on acquired loans

    (23,875 )   (7,745 )   (31,620 )
               

Balance, December 31, 2011, net of allowance for loan losses on acquired loans

  $ 146,955   $ 223,626   $ 370,581  
               

        The table above excludes $73.2 million ($69.5 million in fair value of acquired loans and $3.7 million in net increases for payments, draws, and accretion) in acquired loans at carrying value as of December 31, 2012 that will be accounted for under FASB ASC Topic 310-20.

        The following are changes in the carrying amount of accretable yield for purchased impaired and non-impaired loans:

 
  Years Ended
December 31,
 
(Dollars in thousands)
  2012   2011  

Beginning at beginning of period

  $ 94,600   $ 44,684  

Addition from the Habersham acquisition

        28,115  

Addition from BankMeridian acquisition

        21,216  

Addition from the Peoples acquisition

    34,921      

Addition from the SAVB acquisition

    60,081      

Interest income

    (52,628 )   (40,710 )

Reclass of nonaccretable difference due to improvement in expected cash flows

    35,739     41,555  

Other changes, net

    (11,864 )   (260 )
           

Balance at end of period

  $ 160,849   $ 94,600  
           

        On December 13, 2006, the FDIC, Federal Reserve, OCC, and other regulatory agencies collectively revised the banking agencies' 1993 policy statement on the allowance for loan and lease losses to ensure consistency with generally accepted accounting principles in the United States and more recent supervisory guidance. Our loan loss policy adheres to the interagency guidance.

        The allowance for loan losses is based upon estimates made by management. We maintain an allowance for loan losses at a level that we believe is appropriate to cover estimated credit losses on individually evaluated loans that are determined to be impaired as well as estimated credit losses inherent in the remainder of our loan portfolio. Arriving at the allowance involves a high degree of management judgment and results in a range of estimated losses. We regularly evaluate the adequacy of the allowance through our internal risk rating system, outside credit review, and regulatory agency examinations to assess the quality of the loan portfolio and identify problem loans. The evaluation process also includes our analysis of current economic conditions, composition of the loan portfolio, past due and nonaccrual loans, concentrations of credit, lending policies and procedures, and historical loan loss experience. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on, among other factors, changes in economic conditions in our markets. In addition, regulatory agencies, as an integral part of their examination process, periodically review our allowances for losses on loans. These agencies may require management to recognize additions to the allowances based on their judgments about information available to them at the time of their examination. Because of these and other factors, it is possible that the allowances for losses on loans may change. The provision for loan losses is charged to expense in an amount necessary to maintain the allowance at an appropriate level.

        The allowance for loan losses on non-acquired loans consists of general and specific reserves. The general reserves are determined by applying loss percentages to the portfolio that are based on historical loss experience for each class of loans and management's evaluation and "risk grading" of the loan portfolio. Additionally, the general economic and business conditions affecting key lending areas, credit quality trends, collateral values, loan volumes and concentrations, seasoning of the loan portfolio, the findings of internal and external credit reviews and results from external bank regulatory examinations are included in this evaluation. Currently, these adjustments are applied to the non-acquired loan portfolio when estimating the level of reserve required. The specific reserves are determined on a loan-by-loan basis based on management's evaluation of our exposure for each credit, given the current payment status of the loan and the value of any underlying collateral. These are loans classified by management as doubtful or substandard. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. Generally, the need for specific reserve is evaluated on impaired loans greater than $250,000, and once a specific reserve is established for a loan, a charge off of that amount occurs in the quarter subsequent to the establishment of the specific reserve. Loans that are determined to be impaired are provided a specific reserve, if necessary, and are excluded from the calculation of the general reserves.

        In determining the acquisition date fair value of purchased loans, and in subsequent accounting, SCBT generally aggregates purchased loans into pools of loans with common risk characteristics. Expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows of the pool is reasonably estimable. Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are reclassified from the non-accretable difference to accretable yield and recognized as interest income prospectively. Decreases in expected cash flows after the acquisition date are recognized by recording an allowance for loan losses. Management analyzes the acquired loan pools using various assessments of risk to determine an expected loss. The expected loss is derived based upon a loss given default based upon the collateral type and/or detailed review by loan officers of loans greater than $500,000 and the probability of default that is determined based upon historical data at the loan level. Trends are reviewed in terms of accrual status, past due status, and weighted-average grade of the loans within each of the accounting pools. In addition, the relationship between the change in the unpaid principal balance and change in the mark is assessed to correlate the directional consistency of the expected loss for each pool. Offsetting the impact of the provision established for acquired loans covered under FDIC loss share agreements, the receivable from the FDIC is adjusted to reflect the indemnified portion of the post-acquisition exposure with a corresponding credit to the provision for loan losses. (For further discussion of the Company's allowance for loan losses on acquired loans, see Note 1—Summary of Significant Accounting Policies and Note 2—Mergers and Acquisitions.)

        An aggregated analysis of the changes in allowance for loan losses is as follows:

(Dollars in thousands)
  Non-acquired
Loans
  Acquired Loans   Total  

Year ended December 31, 2012:

                   

Balance at beginning of period

  $ 49,367   $ 31,620   $ 80,987  

Loans charged-off

    (21,930 )       (21,930 )

Recoveries of loans previously charged off

    3,756         3,756  
               

Net charge-offs

    (18,174 )       (18,174 )

Provision for loan losses

    13,185     512     13,697  

Benefit attributable to FDIC loss share agreements

        (78 )   (78 )
               

Total provision for loan losses charged to operations

    13,185     434     13,619  

Provision for loan losses recorded through the FDIC
loss share receivable

        78     78  
               

Balance at end of period

  $ 44,378   $ 32,132   $ 76,510  
               

Year ended December 31, 2011:

                   

Balance at beginning of period

  $ 47,512   $   $ 47,512  

Loans charged-off

    (29,209 )       (29,209 )

Recoveries of loans previously charged off

    2,409         2,409  
               

Net charge-offs

    (26,800 )       (26,800 )

Provision for loan losses

    28,655     31,620     60,275  

Benefit attributable to FDIC loss share agreements

        (30,039 )   (30,039 )
               

Total provision for loan losses charged to operations

    28,655     1,581     30,236  

Provision for loan losses recorded through the FDIC
loss share receivable

        30,039     30,039  
               

Balance at end of period

  $ 49,367   $ 31,620   $ 80,987  
               

Year ended December 31, 2010:

                   

Balance at beginning of period

  $ 37,488   $   $ 37,488  

Loans charged-off

    (46,817 )       (46,817 )

Recoveries of loans previously charged off

    2,559         2,559  
               

Net charge-offs

    (44,258 )       (44,258 )

Provision for loan losses

    54,282         54,282  
               

Balance at end of period

  $ 47,512   $   $ 47,512  
               

        The following tables present a disaggregated analysis of activity in the allowance for loan losses and loan balances for non-acquired loans:

(Dollars in thousands)
  Construction &
Land
Development
  Commercial
Non-owner
Occupied
  Commercial
Owner
Occupied
  Consumer
Owner
Occupied
  Home
Equity
  Commercial &
Industrial
  Other
Income
Producing
Property
  Consumer   Other
Loans
  Total  

Year ended December 31, 2012:

                                                             

Allowance for loan losses:

                                                             

Balance, December 31, 2011

  $ 12,373   $ 6,109   $ 10,356   $ 7,453   $ 4,269   $ 3,901   $ 3,636   $ 1,145   $ 125   $ 49,367  

Charge-offs

    (8,454 )   (2,348 )   (2,781 )   (1,850 )   (1,394 )   (2,033 )   (924 )   (2,146 )       (21,930 )

Recoveries

    1,428     282     5     124     600     228     361     728         3,756  

Provision

    5,489     878     1,163     841     151     2,843     674     1,054     92     13,185  
                                           

Balance, December 31, 2012

  $ 10,836   $ 4,921   $ 8,743   $ 6,568   $ 3,626   $ 4,939   $ 3,747   $ 781   $ 217   $ 44,378  
                                           

Loans individually evaluated for impairment

  $ 1,573   $ 411   $ 648   $ 213   $   $ 1,030   $ 1,004   $   $   $ 4,879  
                                           

Loans collectively evaluated for impairment

  $ 9,263   $ 4,510   $ 8,095   $ 6,355   $ 3,626   $ 3,909   $ 2,743   $ 781   $ 217   $ 39,499  
                                           

Loans:

                                                             

Loans individually evaluated for impairment

  $ 13,549   $ 5,344   $ 20,212   $ 1,954   $   $ 1,783   $ 4,393   $   $   $ 47,235  

Loans collectively evaluated for impairment

    259,871     284,727     763,940     432,549     255,284     277,980     129,320     86,934     33,163     2,523,768  
                                           

Total non-acquired loans

  $ 273,420   $ 290,071   $ 784,152   $ 434,503   $ 255,284   $ 279,763   $ 133,713   $ 86,934   $ 33,163   $ 2,571,003  
                                           

Year ended December 31, 2011:

                                                             

Allowance for loan losses:

                                                             

Balance, December 31, 2010

  $ 14,242   $ 6,428   $ 7,814   $ 6,060   $ 4,424   $ 4,313   $ 2,834   $ 1,191   $ 206   $ 47,512  

Charge-offs

    (11,848 )   (3,805 )   (2,346 )   (3,365 )   (2,159 )   (1,872 )   (2,366 )   (1,337 )   (111 )   (29,209 )

Recoveries

    518     144     158     224     132     295     293     645         2,409  

Provision

    9,461     3,342     4,730     4,534     1,872     1,165     2,875     646     30     28,655  
                                           

Balance, December 31, 2011

  $ 12,373   $ 6,109   $ 10,356   $ 7,453   $ 4,269   $ 3,901   $ 3,636   $ 1,145   $ 125   $ 49,367  
                                           

Loans individually evaluated for impairment

  $ 1,646   $ 706   $ 1,510   $ 262   $   $   $ 289   $   $   $ 4,413  
                                           

Loans collectively evaluated for impairment

  $ 10,727   $ 5,403   $ 8,846   $ 7,191   $ 4,269   $ 3,901   $ 3,347   $ 1,145   $ 125   $ 44,954  
                                           

Loans:

                                                             

Loans individually evaluated for impairment

  $ 24,749   $ 12,040   $ 17,717   $ 2,594   $   $ 1,576   $ 3,375   $   $   $ 62,051  

Loans collectively evaluated for impairment

    286,096     287,658     725,173     388,935     264,986     218,878     137,318     85,342     14,128     2,408,514  
                                           

Total non-acquired loans

  $ 310,845   $ 299,698   $ 742,890   $ 391,529   $ 264,986   $ 220,454   $ 140,693   $ 85,342   $ 14,128   $ 2,470,565  
                                           

Year ended December 31, 2010:

                                                             

Allowance for loan losses:

                                                             

Balance, December 31, 2009

  $ 9,169   $ 5,792   $ 5,978   $ 4,635   $ 3,751   $ 4,330   $ 2,375   $ 1,258   $ 200   $ 37,488  

Charge-offs

    (19,150 )   (3,011 )   (2,625 )   (7,285 )   (2,490 )   (9,138 )   (338 )   (2,780 )       (46,817 )

Recoveries

    785     29     126     149     45     713     6     706         2,559  

Provision

    23,438     3,618     4,335     8,561     3,118     8,408     791     2,007     6     54,282  
                                           

Balance, December 31, 2010

  $ 14,242   $ 6,428   $ 7,814   $ 6,060   $ 4,424   $ 4,313   $ 2,834   $ 1,191   $ 206   $ 47,512  
                                           

Loans individually evaluated for impairment

  $ 1,718   $ 1,444   $ 830   $ 80   $   $ 36   $ 28   $   $   $ 4,136  
                                           

Loans collectively evaluated for impairment

  $ 12,524   $ 4,984   $ 6,984   $ 5,980   $ 4,424   $ 4,277   $ 2,806   $ 1,191   $ 206   $ 43,376  
                                           

Loans:

                                                             

Loans individually evaluated for impairment

  $ 23,081   $ 10,948   $ 10,747   $ 1,540   $   $ 1,144   $ 3,153   $   $   $ 50,613  

Loans collectively evaluated for impairment

    368,906     309,255     567,840     323,930     263,961     201,843     121,278     67,768     20,806     2,245,587  
                                           

Total non-acquired loans

  $ 391,987   $ 320,203   $ 578,587   $ 325,470   $ 263,961   $ 202,987   $ 124,431   $ 67,768   $ 20,806   $ 2,296,200  
                                           

        The following tables present a disaggregated analysis of activity in the allowance for loan losses and loan balances for acquired loans. There was no acquired allowance for loan losses for the year ended December 31, 2010.

(Dollars in thousands)
  Commercial
Loans Greater
Than or Equal
to $1 Million
  Commercial
Real Estate
  Commercial
Real Estate—
Construction
and
Development
  Residential
Real Estate
  Consumer   Commercial
and
Industrial
  Single
Pay
  FASB ASC
Topic 310-20
Loans
  Total  

Year ended December 31, 2012:

                                                       

Allowance for loan losses:

                                                       

Balance, December 31, 2011

  $ 16,706   $ 1,318   $   $ 5,471   $   $ 4,564   $ 3,561   $   $ 31,620  

Charge-offs

                                     

Recoveries

                                     

Provision for loan losses before benefit attributable to FDIC loss share agreements

    (1,298 )   199     1,628     (855 )   96     (259 )   1,001         512  

Benefit attributable to FDIC loss share agreements

    1,233     (30 )   (1,319 )   813     (88 )   264     (951 )       (78 )
                                       

Total provision for loan losses charged to operations

    (65 )   169     309     (42 )   8     5     50         434  

Provision for loan losses recorded through the FDIC loss share receivable              

    (1,233 )   30     1,319     (813 )   88     (264 )   951         78  
                                       

Balance, December 31, 2012

  $ 15,408   $ 1,517   $ 1,628   $ 4,616   $ 96   $ 4,305   $ 4,562   $   $ 32,132  
                                       

Loans individually evaluated for impairment

  $   $   $   $   $   $   $   $   $  
                                       

Loans collectively evaluated for impairment

  $ 15,408   $ 1,517   $ 1,628   $ 4,616   $ 96   $ 4,305   $ 4,562   $   $ 32,132  
                                       

Loans:*

                                                       

Loans individually evaluated for impairment

  $   $   $   $   $   $   $   $   $  

Loans collectively evaluated for impairment

    49,684     372,924     130,451     355,127     15,685     72,884     4,772     73,215     1,074,742  
                                       

Total acquired loans

  $ 49,684   $ 372,924   $ 130,451   $ 355,127   $ 15,685   $ 72,884   $ 4,772   $ 73,215   $ 1,074,742  
                                       

Year ended December 31, 2011:

                                                       

Allowance for loan losses:

                                                       

Balance, December 31, 2010

  $   $   $   $   $   $   $   $   $  

Charge-offs

                                     

Recoveries

                                     

Provision for loan losses before benefit attributable to FDIC loss share agreements

    16,706     1,318         5,471         4,564     3,561         31,620  

Benefit attributable to FDIC loss share agreements

    (15,871 )   (1,252 )       (5,197 )       (4,336 )   (3,383 )       (30,039 )
                                       

Total provision for loan losses charged to operations

    835     66         274         228     178         1,581  

Provision for loan losses recorded through the FDIC loss share receivable              

    15,871     1,252         5,197         4,336     3,383         30,039  
                                       

Balance, December 31, 2011

  $ 16,706   $ 1,318   $   $ 5,471   $   $ 4,564   $ 3,561   $   $ 31,620  
                                       

Loans individually evaluated for impairment

  $   $   $   $   $   $   $   $   $  
                                       

Loans collectively evaluated for impairment

  $ 16,706   $ 1,318   $   $ 5,471   $   $ 4,564   $ 3,561   $   $ 31,620  
                                       

Loans:*

                                                       

Loans individually evaluated for impairment

  $   $   $   $   $   $   $   $   $  

Loans collectively evaluated for impairment

    60,829     108,327     51,005     128,650     10,019     39,311     4,060         402,201  
                                       

Total acquired loans

  $ 60,829   $ 108,327   $ 51,005   $ 128,650   $ 10,019   $ 39,311   $ 4,060   $   $ 402,201  
                                       

*
—The carrying value of FASB ASC Topic 310-30 acquired loans includes a non-accretable difference which is primarily associated with the assessment of credit quality of acquired loans.

        As part of the on-going monitoring of the credit quality of the Company's loan portfolio, management tracks certain credit quality indicators including trends related to (i) the level of classified loans, (ii) net charge-offs, (iii) non-performing loans (see details below) and (iv) the general economic conditions of the markets that we serve.

        The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. A description of the general characteristics of the risk grades is as follows:

  • Pass—These loans range from minimal credit risk to average however still acceptable credit risk.

    Special mention—A special mention loan has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution's credit position at some future date.

    Substandard—A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
  • Doubtful—A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.

        The following table presents the credit risk profile by risk grade of commercial loans for non-acquired loans:

 
  Construction &
Development
  Commercial Non-owner
Occupied
  Commercial Owner
Occupied
 
(Dollars in thousands)
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
 

Pass

  $ 215,793   $ 232,131   $ 232,714   $ 231,954   $ 716,578   $ 656,914  

Special mention

    31,670     33,254     38,473     43,733     31,800     38,511  

Substandard

    25,957     45,460     18,884     24,011     35,774     47,465  

Doubtful

                         
                           

 

  $ 273,420   $ 310,845   $ 290,071   $ 299,698   $ 784,152   $ 742,890  
                           

 

 
  Commercial &
Industrial
  Other Income
Producing Property
  Commercial Total  
 
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
 

Pass

  $ 265,148   $ 207,063   $ 114,809   $ 117,237   $ 1,545,042   $ 1,445,299  

Special mention

    8,626     6,949     9,324     11,885     119,893     134,332  

Substandard

    5,989     6,442     9,580     11,571     96,184     134,949  

Doubtful

                         
                           

 

  $ 279,763   $ 220,454   $ 133,713   $ 140,693   $ 1,761,119   $ 1,714,580  
                           

        The following table presents the credit risk profile by risk grade of consumer loans for non-acquired loans:

 
  Consumer Owner
Occupied
  Home Equity   Consumer  
(Dollars in thousands)
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
 

Pass

  $ 388,822   $ 342,307   $ 241,184   $ 247,929   $ 85,517   $ 84,189  

Special mention

    24,515     25,298     7,837     10,018     897     682  

Substandard

    21,166     23,924     6,239     7,039     519     471  

Doubtful

            24         1      
                           

 

  $ 434,503   $ 391,529   $ 255,284   $ 264,986   $ 86,934   $ 85,342  
                           

 

 
  Other   Consumer Total  
 
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
 

Pass

  $ 33,163   $ 14,128   $ 748,686   $ 688,553  

Special mention

            33,249     35,998  

Substandard

            27,924     31,434  

Doubtful

            25      
                   

 

  $ 33,163   $ 14,128   $ 809,884   $ 755,985  
                   

        The following table presents the credit risk profile by risk grade of total non-acquired loans:

 
  Total Non-acquired Loans  
(Dollars in thousands)
  December 31,
2012
  December 31,
2011
 

Pass

  $ 2,293,728   $ 2,133,852  

Special mention

    153,142     170,330  

Substandard

    124,108     166,383  

Doubtful

    25      
           

 

  $ 2,571,003   $ 2,470,565  
           

        At December 31, 2012, the aggregate amount of non-acquired substandard and doubtful loans totaled $124.1 million. When these loans are combined with non-acquired OREO of $19.1 million, our non-acquired classified assets (as defined by the state of South Carolina and the FDIC, our primary federal regulators) were $143.2 million. At December 31, 2011, the amounts were $166.4 million, $18.0 million, and $184.4 million, respectively.

        The following table presents the credit risk profile by risk grade of covered acquired loans, net of the related discount (this table should be read in conjunction with the allowance for acquired loan losses table found on page F-44):

 
  Commercial Loans
Greater Than or Equal to
$1 million—CBT
  Commercial Real Estate   Commercial Real Estate—
Construction and
Development
 
(Dollars in thousands)
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
 

Pass

  $ 14,355   $ 17,257   $ 22,687   $ 33,770   $ 7,134   $ 11,791  

Special mention

    3,470     5,164     10,609     22,089     3,474     5,947  

Substandard

    31,859     38,408     29,501     51,108     21,154     30,566  

Doubtful

            165     498     813     2,649  
                           

 

  $ 49,684   $ 60,829   $ 62,962   $ 107,465   $ 32,575   $ 50,953  
                           

 

 
  Residential Real Estate   Consumer   Commercial & Industrial  
 
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
 

Pass

  $ 41,907   $ 50,971   $ 2,215   $ 3,375   $ 8,073   $ 9,007  

Special mention

    20,915     19,550     574     722     3,744     6,963  

Substandard

    41,963     54,281     1,534     2,446     11,753     19,476  

Doubtful

    26     2,851     1     490     30     1,056  
                           

 

  $ 104,811   $ 127,653   $ 4,324   $ 7,033   $ 23,600   $ 36,502  
                           

 

 
  Single Pay  
 
  December 31,
2012
  December 31,
2011
 

Pass

  $ 57   $ 465  

Special mention

    52     62  

Substandard

    4,633     3,533  

Doubtful

         
           

 

  $ 4,772   $ 4,060  
           

        The following table presents the credit risk profile by risk grade of non-covered acquired loans, net of the related discount (this table should be read in conjunction with the allowance for acquired loan losses table found on page F-44):

 
  Commercial Real Estate   Commercial Real Estate—
Construction and
Development
  Residential Real Estate  
(Dollars in thousands)
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
 

Pass

  $ 274,721   $ 799   $ 80,008   $ 47   $ 213,069   $ 777  

Special mention

    11,670     38     4,268         17,324      

Substandard

    23,571     25     13,600     5     19,923     220  

Doubtful

                         
                           

 

  $ 309,962   $ 862   $ 97,876   $ 52   $ 250,316   $ 997  
                           

 

 
  Consumer   Commercial & Industrial   FASB ASC Topic 310-20 Loans  
 
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
  December 31,
2012
  December 31,
2011
 

Pass

  $ 10,712   $ 2,394   $ 45,973   $ 2,201   $ 71,174   $  

Special mention

    209     168     1,549     332     574      

Substandard

    440     424     1,762     276     1,467      

Doubtful

                         
                           

 

  $ 11,361   $ 2,986   $ 49,284   $ 2,809   $ 73,215   $  
                           

        The risk grading of acquired loans is determined utilizing a loan's contractual balance, while the amount recorded in the financial statements and reflected above is the carrying value. In an FDIC-assisted acquisition, covered acquired loans are initially recorded at their fair value, including a credit discount due to the high concentration of substandard and doubtful loans. In addition to the credit discount and the allowance for loan losses on covered acquired loans, the Company's risk of loss is mitigated by the FDIC loss share arrangement.

        An aging analysis of past due loans, segregated by class for non-acquired loans, was as follows:

(Dollars in thousands)
  30 - 59 Days
Past Due
  60 - 89 Days
Past Due
  90+ Days
Past Due
  Total
Past Due
  Current   Total Loans  

December 31, 2012:

                                     

Commercial real estate:

                                     

Construction and land development

  $ 812   $ 701   $ 10,435   $ 11,948   $ 261,472   $ 273,420  

Commercial non-owner occupied

    1,013     572     3,605     5,190     284,881     290,071  

Commercial owner occupied

    1,141     40     9,827     11,008     773,144     784,152  

Consumer real estate:

                                     

Consumer owner occupied

    1,433     241     4,045     5,719     428,784     434,503  

Home equity loans

    735     170     395     1,300     253,984     255,284  

Commercial and industrial

    1,187     513     549     2,249     277,514     279,763  

Other income producing property

    322     278     3,253     3,853     129,860     133,713  

Consumer

    364     151     112     627     86,307     86,934  

Other loans

    49     41     36     126     33,037     33,163  
                           

 

  $ 7,056   $ 2,707   $ 32,257   $ 42,020   $ 2,528,983   $ 2,571,003  
                           

December 31, 2011:

                                     

Commercial real estate:

                                     

Construction and land development

  $ 1,056   $ 2,793   $ 13,176   $ 17,025   $ 293,820   $ 310,845  

Commercial non-owner occupied

    998     539     10,088     11,625     288,073     299,698  

Commercial owner occupied

    2,731     902     12,936     16,569     726,321     742,890  

Consumer real estate:

                                     

Consumer owner occupied

    3,288     762     5,819     9,869     381,660     391,529  

Home equity loans

    889     360     647     1,896     263,090     264,986  

Commercial and industrial

    389     142     1,218     1,749     218,705     220,454  

Other income producing property

    192     29     4,185     4,406     136,287     140,693  

Consumer

    302     130     33     465     84,877     85,342  

Other loans

    97     74     46     217     13,911     14,128  
                           

 

  $ 9,942   $ 5,731   $ 48,148   $ 63,821   $ 2,406,744   $ 2,470,565  
                           

        An aging analysis of past due loans, segregated by class for acquired loans, was as follows:

(Dollars in thousands)
  30 - 59 Days
Past Due
  60 - 89 Days
Past Due
  90+ Days
Past Due
  Total
Past Due
  Current   Total Loans  

December 31, 2012:

                                     

Covered loans:

                                     

Commercial loans greater than or equal to $1 million—CBT

  $ 922   $ 993   $ 22,471   $ 24,386   $ 25,298   $ 49,684  

Commercial real estate

    3,154     1,536     12,162     16,852     46,110     62,962  

Commercial real estate—construction and development          

    1,381     220     11,615     13,216     19,359     32,575  

Residential real estate

    2,502     2,636     12,328     17,466     87,345     104,811  

Consumer

    67     19     687     773     3,551     4,324  

Commercial and industrial

    739     190     4,870     5,799     17,801     23,600  

Single pay

    1     3,256     62     3,319     1,453     4,772  
                           

 

    8,766     8,850     64,195     81,811     200,917     282,728  

Non-covered loans:

                                     

Commercial real estate

    2,712     770     5,326     8,808     301,154     309,962  

Commercial real estate—construction and development          

    1,595     1,353     7,103     10,051     87,825     97,876  

Residential real estate

    5,109     2,193     5,987     13,289     237,027     250,316  

Consumer

    114     57     49     220     11,141     11,361  

Commercial and industrial

    529     97     277     903     48,381     49,284  

FASB ASC Topic 310-20 loans

    388     111     148     647     72,568     73,215  
                           

 

    10,447     4,581     18,890     33,918     758,096     792,014  
                           

 

  $ 19,213   $ 13,431   $ 83,085   $ 115,729   $ 959,013   $ 1,074,742  
                           

December 31, 2011:

                                     

Covered loans:

                                     

Commercial loans greater than or equal to $1 million—CBT

  $   $ 990   $ 27,582   $ 28,572   $ 32,257   $ 60,829  

Commercial real estate

    3,720     2,422     21,361     27,503     79,962     107,465  

Commercial real estate—construction and development          

    2,907     1,121     20,704     24,732     26,221     50,953  

Residential real estate

    3,214     2,225     14,243     19,682     107,971     127,653  

Consumer

    183     125     1,151     1,459     5,574     7,033  

Commercial and industrial

    1,360     473     9,422     11,255     25,247     36,502  

Single pay

    79     5     2,866     2,950     1,110     4,060  
                           

 

    11,463     7,361     97,329     116,153     278,342     394,495  

Non-covered loans:

                                     

Commercial real estate

                    862     862  

Commercial real estate—construction and development          

                    52     52  

Residential real estate

    50             50     947     997  

Consumer

    79     39     129     247     2,739     2,986  

Commercial and industrial

    50     39     115     204     2,605     2,809  
                           

 

    179     78     244     501     7,205     7,706  
                           

 

  $ 11,642   $ 7,439   $ 97,573   $ 116,654   $ 285,547   $ 402,201  
                           

        The following is a summary of information pertaining to impaired non-acquired loans:

(Dollars in thousands)
  Unpaid
Contractual
Principal
Balance
  Recorded
Investment
With No
Allowance
  Gross
Recorded
Investment
With
Allowance
  Total
Recorded
Investment
  Related
Allowance
 

December 31, 2012:

                               

Commercial real estate:

                               

Construction and land development

  $ 21,350   $ 8,659   $ 4,890   $ 13,549   $ 1,573  

Commercial non-owner occupied

    7,564     3,148     2,196     5,344     411  

Commercial owner occupied

    23,566     15,698     4,514     20,212     648  

Consumer real estate:

                               

Consumer owner occupied

    2,040         1,954     1,954     213  

Home equity loans

                     

Commercial and industrial

   
2,595
   
464
   
1,319
   
1,783
   
1,030
 

Other income producing property

    4,656     1,382     3,011     4,393     1,004  

Consumer

                       

Other loans

                       
                       

Total impaired loans

  $ 61,771   $ 29,351   $ 17,884   $ 47,235   $ 4,879  
                       

December 31, 2011:

                               

Commercial real estate:

                               

Construction and land development

  $ 34,076   $ 19,521   $ 5,228   $ 24,749   $ 1,646  

Commercial non-owner occupied

    14,269     9,704     2,336     12,040     706  

Commercial owner occupied

    21,072     10,692     7,025     17,717     1,510  

Consumer real estate:

                               

Consumer owner occupied

    2,815     607     1,987     2,594     262  

Home equity loans

                     

Commercial and industrial

   
1,788
   
1,576
   
   
1,576
   
 

Other income producing property

    4,393     2,132     1,243     3,375     289  

Consumer

                       

Other loans

                       
                       

Total impaired loans

  $ 78,413   $ 44,232   $ 17,819   $ 62,051   $ 4,413  
                       

        Acquired loans are accounted for in pools as shown on page F-36 rather than being individually evaluated for impairment; therefore, the table above only pertains to non-acquired loans.

        The following summarizes the average investment in non-acquired impaired loans and interest income recognized on impaired loans:

 
  Years Ended December 31,  
 
  2012   2011  
(Dollars in thousands)
  Average
Investment in
Impaired Loans
  Interest Income
Recognized
  Average
Investment in
Impaired Loans
  Interest Income
Recognized
 

Commercial real estate:

                         

Construction and land development

  $ 18,048   $ 114   $ 22,365   $ 429  

Commercial non-owner occupied

    7,503     85     11,522     138  

Commercial owner occupied

    17,460     347     12,664     484  

Consumer real estate:

                         

Consumer owner occupied

    2,223     65     2,180     40  

Home equity loans

                 

Commercial and industrial

   
921
   
23
   
1,215
   
104
 

Other income producing property

    3,171     117     1,679     105  

Consumer

                 

Other loans

                 
                   

Total Impaired Loans

  $ 49,326   $ 751   $ 51,625   $ 1,300  
                   

        The following is a summary of information pertaining to non-acquired nonaccrual loans by class, including restructured loans:

 
  December 31,  
(Dollars in thousands)
  2012   2011  

Commercial non-owner occupied real estate:

             

Construction and land development

  $ 11,961   $ 21,347  

Commercial non-owner occupied

    4,780     10,931  
           

Total commercial non-owner occupied real estate

    16,741     32,278  

Consumer real estate:

             

Consumer owner occupied

    8,025     8,017  

Home equity loans

    1,835     1,005  
           

Total consumer real estate

    9,860     9,022  

Commercial owner occupied real estate

    14,146     15,405  

Commercial and industrial

    2,152     1,913  

Other income producing property

    5,405     5,329  

Consumer

    83     223  

Other loans

         

Restructured loans

    13,151     11,807  
           

Total loans on nonaccrual status

  $ 61,538   $ 75,977  
           

        In the course of resolving delinquent loans, the Bank may choose to restructure the contractual terms of certain loans. Any loans that are modified are reviewed by the Bank to determine if a troubled debt restructuring ("TDR" or "restructured loan") has occurred. A TDR is a modification in which the Bank grants a concession to a borrower that it would not otherwise consider due to economic or legal reasons related to a borrower's financial difficulties. The concessions granted on TDRs generally include terms to reduce the interest rate, extend the term of the debt obligation, or modify the payment structure on the debt obligation.

        The Bank designates loan modifications as TDRs when it grants a concession to the borrower that it would not otherwise consider due to the borrower experiencing financial difficulty (FASB ASC Topic 310-40). Loans on nonaccrual status at the date of modification are initially classified as nonaccrual TDRs. Loans on accruing status at the date of concession are initially classified as accruing TDRs if the note is reasonably assured of repayment and performance is expected in accordance with its modified terms. Such loans may be designated as nonaccrual loans subsequent to the concession date if reasonable doubt exists as to the collection of interest or principal under the restructuring agreement. Nonaccrual TDRs are returned to accruing status when there is economic substance to the restructuring, there is documented credit evaluation of the borrower's financial condition, the remaining balance is reasonably assured of repayment in accordance with its modified terms, and the borrower has demonstrated sustained repayment performance in accordance with the modified terms for a reasonable period of time (generally a minimum of six months).

        The following table presents non-acquired loans designated as TDRs segregated by class and type of concession that was granted during the years ended December 31, 2012 and 2011:

 
  Years Ended December 31,  
 
  2012   2011  
(Dollars in thousands)
  Number
of loans
  Pre-
Modification
Outstanding
Recorded
Investment
  Post-
Modification
Outstanding
Recorded
Investment
  Number
of loans
  Pre-
Modification
Outstanding
Recorded
Investment
  Post-
Modification
Outstanding
Recorded
Investment
 

Interest rate modification

                                     

Construction and land development

    1   $ 165   $ 156     15   $ 3,595   $ 3,194  

Commercial owner occupied

    4     5,355     5,215     2     1,334     1,286  

Consumer owner occupied

                2     759     737  

Commercial and industrial

    1     474     464              

Other income producing property

                2     409     404  
                           

Total interest rate modifications

    6   $ 5,994   $ 5,835     21   $ 6,097   $ 5,621  
                           

Term modification

                                     

Construction and land development

    2     835     824     2     2,938     2,929  

Commercial non-owner occupied

    1     700     700              

Commercial owner occupied

                2     928     864  

Consumer owner occupied

                1     605     591  
                           

Total term modifications

    3   $ 1,535   $ 1,524     5   $ 4,471   $ 4,384  
                           

Forgiveness of principal

                                     

Commercial non-owner occupied

                         

Commercial owner occupied

                         
                           

Total forgiveness of principal

      $   $       $   $  
                           

Total restructured loans

    9   $ 7,529   $ 7,359     26   $ 10,568   $ 10,005  
                           

        At December 31, 2012 and 2011, the balance of accruing TDRs was $6.3 million and $5.8 million, respectively.

        For the years ended December 31, 2012 and 2011, there had been no modifications of acquired loans which the Bank designated as TDRs.

        The following table presents the changes in status of non-acquired loans restructured within the previous 12 months by type of concession:

 
  Paying Under
Restructured Terms
  Converted to
Non-accrual
  Foreclosure/Default  
(Dollars in thousands)
  Number of
loans
  Recorded
Investment
  Number of
loans
  Recorded
Investment
  Number of
loans
  Recorded
Investment
 

Year ended December 31, 2012:

                                     

Interest rate modification

    6   $ 5,836       $       $  

Term modification

    3     1,524                  

Forgiveness of principal

                         
                           

 

    9   $ 7,360       $       $  
                           

Year ended December 31, 2011:

                                     

Interest rate modification

    21   $ 5,621       $       $  

Term modification

    4     4,090     1     294          

Forgiveness of principal

                         
                           

 

    25   $ 9,711     1   $ 294       $  
                           

        The amount of specific reserve associated with non-acquired restructured loans was $1.1 million at December 31, 2012, none of which were related to the restructured loans that had subsequently defaulted. The Company had $161,000 in remaining availability under commitments to lend additional funds on these restructured loans at December 31, 2012.

        There were no loans modified as troubled debt restructurings within the previous 12 months for which there was a subsequent payment default during the year ended December 31, 2012.