10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the quarterly period ended September 30, 2013 Commission File Number 0-13823

COMMUNITYONE BANCORP

(Exact name of Registrant as specified in its Charter)

North Carolina	56-1456589
(State of Incorporation)	(I.R.S. Employer Identification No.)
1017 E. Morehead Street
Charlotte, North Carolina	28204
(Address of principal executive offices)	(Zip Code)

(336) 626-8300

(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer o	Accelerated filer x	Non-accelerated filer o	Smaller reporting Company  o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 1, 2013 (the most recent practicable date), the Registrant had outstanding approximately 21,739,646 shares of Common Stock.

CommunityOne Bancorp and Subsidiaries

Report on Form 10-Q

September 30, 2013

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012	1
	Consolidated Statements of Operations for Three Months and Nine Months Ended September 30, 2013 and 2012	2
	Consolidated Statements of Comprehensive Income (Loss) for Three Months and Nine Months Ended September 30, 2013 and 2012	3
	Consolidated Statements of Shareholders' Equity for Nine Months Ended September 30, 2013 and 2012	4
	Consolidated Statements of Cash Flows for Nine Months Ended September 30, 2013 and 2012	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3	Quantitative and Qualitative Disclosures about Market Risk	55
Item 4	Controls and Procedures	56
PART II. OTHER INFORMATION
Item 1	Legal Proceedings	57
Item 1A	Risk Factors	57
Item 2	Unregistered Sales of Equity Securities and Repurchases	57
Item 3	Defaults Upon Senior Securities	57
Item 4	Mine Safety Disclosures	57
Item 5	Other Information	57
Item 6	Exhibits	57
	Signatures	58

i

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

CommunityOne Bancorp and Subsidiaries

Consolidated Balance Sheets (unaudited)

(in thousands, except share and per share data)	September 30, 2013			December 31, 2012*
Assets
Cash and due from banks	$	29,506		$	38,552
Interest-bearing bank balances	73,568			201,058
Investment securities:
Available-for-sale, at estimated fair value (amortized cost of $456,310 in 2013 and $558,818 in 2012)	439,712			564,850
Held-to-maturity (estimated fair value of $146,474 in 2013)	153,684			—
Loans held for sale	2,734			6,974
Loans held for investment	1,195,142			1,177,035
Less: Allowance for loan losses	(25,387		)	(29,314		)
Net loans held for investment	1,169,755			1,147,721
Premises and equipment, net	51,409			52,725
Other real estate owned and property acquired in settlement of loans	33,179			63,131
Core deposit premiums and other intangibles	7,197			7,495
Goodwill	4,205			4,205
Bank-owned life insurance	39,646			38,792
Other assets	32,578			26,062
Total Assets	$	2,037,173		$	2,151,565
Liabilities
Deposits:
Noninterest-bearing demand deposits	$	308,178		$	251,235
Interest-bearing deposits:
Demand, savings and money market deposits	874,211			892,576
Time deposits of $100 or more	264,363			290,166
Other time deposits	343,856			473,011
Total deposits	1,790,608			1,906,988
Retail repurchase agreements	12,422			8,675
Federal Home Loan Bank advances	73,295			58,328
Long term notes payable	5,244			—
Junior subordinated debentures	56,702			56,702
Other liabilities	18,100			22,427
Total Liabilities	1,956,371			2,053,120
Shareholders' Equity
Preferred stock Series A, $10.00 par value; authorized 200,000 shares, no shares issued and outstanding in 2013 and 2012	—			—
Preferred stock, $1.00 par value, authorized 15,000,000 shares, no shares issued and outstanding in 2013 and 2012	—			—
Common stock, no par value; authorized 2,500,000,000 shares, issued 21,739,646 shares in 2013 and 21,698,115 in 2012	461,446			460,955
Accumulated deficit	(365,960		)	(362,187		)
Accumulated other comprehensive loss	(14,684		)	(323		)
Total Shareholders' Equity	80,802			98,445
Total Liabilities and Shareholders' Equity	$	2,037,173		$	2,151,565

See accompanying notes to consolidated financial statements.

* Derived from audited consolidated financial statements

1

CommunityOne Bancorp and Subsidiaries

Consolidated Statements of Operations (unaudited)

(in thousands, except share and per share data)	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Interest Income
Interest and fees on loans	$	15,993		$	16,264		$	45,451		$	50,458
Interest and dividends on investment securities:
Taxable income	3,788			2,667			10,366			8,238
Non-taxable income	(14		)	—			—			—
Other interest income	86			276			244			936
Total interest income	19,853			19,207			56,061			59,632
Interest Expense
Deposits	1,894			3,320			6,231			11,244
Retail repurchase agreements	6			6			15			23
Federal Home Loan Bank advances	289			391			1,037			1,057
Other borrowed funds	282			288			809			877
Total interest expense	2,471			4,005			8,092			13,201
Net Interest Income before Provision for Loan Losses	17,382			15,202			47,969			46,431
Provision for (recovery of) loan losses	(350		)	32			(1,297		)	10,877
Net Interest Income after Provision for Loan Losses	17,732			15,170			49,266			35,554
Noninterest Income
Service charges on deposit accounts	1,858			1,778			4,915			5,424
Mortgage loan income	420			728			2,085			1,051
Cardholder and merchant services income	1,161			1,119			3,403			3,436
Trust and investment services	329			234			964			692
Bank owned life insurance	267			290			805			910
Other service charges, commissions and fees	365			252			960			777
Securities gains (losses), net	50			(33		)	2,773			1,923
Other income	37			275			362			788
Total noninterest income	4,487			4,643			16,267			15,001
Noninterest Expense
Personnel expense	9,663			9,717			31,149			30,351
Net occupancy expense	1,558			1,710			5,060			4,885
Furniture, equipment and data processing expense	2,050			2,012			6,512			6,395
Professional fees	222			1,336			2,475			4,265
Stationery, printing and supplies	136			152			509			446
Advertising and marketing	150			166			994			420
Other real estate owned expense	(98		)	3,602			4,116			21,594
Credit/debit card expense	627			432			1,525			1,279
FDIC insurance	646			1,056			1,980			2,879
Loan collection expense	1,120			1,119			3,784			2,379
Merger-related expense	—			939			3,498			2,357
Core deposit intangible amortization	352			352			1,056			1,056
Other expense	1,501			2,009			4,273			6,059
Total noninterest expense	17,927			24,602			66,931			84,365
Income (Loss) from continuing operations, before income taxes	4,292			(4,789		)	(1,398		)	(33,810		)
Income tax expense (benefit) - continuing operations	286			(77		)	2,375			(128		)
Income (Loss) from continuing operations, net of tax	4,006			(4,712		)	(3,773		)	(33,682		)
Loss from discontinued operations, net of tax	—			—			—			(27		)
Net income (loss)	$	4,006		$	(4,712	)	$	(3,773	)	$	(33,709	)
Weighted average number of common shares outstanding - basic and diluted	21,738,770			21,588,027			21,722,536			21,294,727
Net income (loss) per common share from continuing operations - basic and diluted	$	0.18		$	(0.22	)	$	(0.17	)	$	(1.58	)
Net loss per common share from discontinued operations - basic and diluted	—			—			—			—
Net income (loss) per common share - basic and diluted	0.18			(0.22		)	(0.17		)	(1.58		)

See accompanying notes to consolidated financial statements.

2

CommunityOne Bancorp and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

(dollars in thousands)	Three Months Ended September 30,
	2013			2012
Net income (loss)	$	4,006		$	(4,712	)
Other comprehensive income (loss):
Unrealized gains arising from termination of supplemental executive retirement plans	—			371
Unrealized holdings gains (losses) arising during the period on available-for-sale securities	1,584			5,633
Tax effect	(829		)	(2,225		)
Unrealized holdings gains (losses) arising during the period on available-for-sale securities, net of tax	755			3,408
Reclassification adjustment for (gain) losses on available-for-sale securities included in net income	(50		)	33
Tax effect	19			(13		)
Reclassification adjustment for (gain) losses on available-for-sale securities included in net income, net of tax	(31		)	20
Change in defined benefit plans liability	(249		)	—
Tax effect	95			—
Change in defined benefit plans liability, net of tax	(154		)	—
Other comprehensive income (loss), net of tax:	570			3,799
Comprehensive income (loss)	$	4,576		$	(913	)

(dollars in thousands)	Nine Months Ended September 30,
	2013			2012
Net loss	$	(3,773	)	$	(33,709	)
Other comprehensive income (loss):
Unrealized gains arising from termination of supplemental executive retirement plans	—			371
Unrealized holdings gains (losses) arising during the period on available-for-sale securities	(19,857		)	10,817
Tax effect	7,636			(4,245		)
Unrealized holdings gains (losses) arising during the period on available-for-sale securities, net of tax	(12,221		)	6,572
Reclassification adjustment for (gain) losses on available-for-sale securities included in net income	(2,773		)	(1,923		)
Tax effect	1,094			760
Reclassification adjustment for (gain) losses on available-for-sale securities included in net income, net of tax	(1,679		)	(1,163		)
Change in defined benefit plans liability	(757		)	—
Tax effect	296			—
Change in defined benefit plans liability, net of tax	(461		)	—
Other comprehensive income (loss), net of tax:	(14,361		)	5,780
Comprehensive loss	$	(18,134	)	$	(27,929	)

See accompanying notes to consolidated financial statements.

3

CommunityOne Bancorp and Subsidiaries

Consolidated Statements of Shareholders’ Equity (unaudited)

For Nine Months Ended September 30, 2013 and 2012

												Accumulated
(dollars in thousands, except share and per share data)												Other
	Preferred Stock			Common Stock					Accumulated			Comprehensive
	Shares	Amount		Shares		Amount			Deficit			Income (Loss)			Total
Balance, December 31, 2011	—	$	—	21,102,668		$	455,166		$	(322,182	)	$	(3,969	)	$	129,015
Comprehensive loss:
Net loss	—	—		—		—			(33,709		)	—			(33,709		)
Other comprehensive income, net of tax	—	—		—		—			—			5,780			5,780
Total comprehensive loss															(27,929		)
Expense related to 2011 issuance of common stock	—	—		—		(913		)	—			—			(913		)
Return of common stock not received for fractional shares rounding purposes in the 1:100 reverse stock split	—	—		(586	)	—			—			—			—
Stock options:
Compensation expense recognized	—	—		—		1			—			—			1
Exercise of warrants related to stock offering				186		3									3
Stock offering, net of issuance costs of $158	—	—		485,788		6,696			—			—			6,696
Balance, September 30, 2012	—	$	—	21,588,056		$	460,953		$	(355,891	)	$	1,811		$	106,873
Balance, December 31, 2012	—	$	—	21,698,115		$	460,955		$	(362,187	)	$	(323	)	$	98,445
Comprehensive loss:
Net loss	—	—		—		—			(3,773		)	—			(3,773		)
Other comprehensive loss, net of tax	—	—		—		—			—			(14,361		)	(14,361		)
Total comprehensive loss															(18,134		)
Stock options:
Compensation expense recognized	—	—		—		462			—			—			462
Restricted stock:
Shares issued as compensation to directors	—	—		3,708		29			—			—			29
Issuance of restricted stock awards to employees	—	—		37,823		—			—			—			—
Balance, September 30, 2013	—	$	—	21,739,646		$	461,446		$	(365,960	)	$	(14,684	)	$	80,802

See accompanying notes to consolidated financial statements.    

4

CommunityOne Bancorp and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)	Nine Months Ended September 30,
	2013			2012
Operating Activities
Net loss	$	(3,773	)	$	(33,709	)
Net loss from discontinued operations	—			(27		)
Net loss from continuing operations	(3,773		)	(33,682		)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization of premises and equipment	2,715			2,906
Provision for (recovery of) loan losses	(1,297		)	10,877
Deferred income taxes (benefit)	2,375			(128		)
Deferred loan fees and costs, net	(279		)	(3,432		)
Premium amortization and discount accretion of investment securities, net	3,632			6,547
Net (gain) loss on sale of investment securities	(2,773		)	(1,923		)
Amortization of core deposit premiums	1,056			1,056
Net accretion of purchase accounting adjustments	(13,364		)	(19,661		)
Adjustment to goodwill	—			(300		)
Stock compensation expense	491			1
Increase in cash surrender value of bank-owned life insurance, net	(854		)	(967		)
Loans held for sale:
Origination of loans held for sale	(93,390		)	(40,078		)
Net proceeds from sale of loans held for sale	100,208			32,425
Net loss (gain) on sale of loans held for sale	(1,684		)	(559		)
Mortgage servicing rights capitalized	(959		)	—
Mortgage servicing rights amortization	203			—
Net (gain) loss on sale of premises and equipment	604			—
Net loss on sales and write-downs of other real estate owned	3,004			16,091
Changes in assets and liabilities:
Decrease (increase) in accrued interest receivable and other assets	(1,879		)	431
Increase in accrued interest payable and other liabilities	155			(2,742		)
Net cash used in operating activities of continuing operations	(5,809		)	(33,138		)
Net effect of discontinued operations	—			(874		)
Net cash used in operating activities	(5,809		)	(34,012		)
Investing Activities
Available-for-sale securities:
Proceeds from sales	175,046			133,241
Proceeds from maturities, calls and principal repayments	56,650			120,718
Purchases	(126,041		)	(309,221		)
Held-to-maturity securities:
Purchases	(155,394		)	—
Net (increase) decrease in loans held for investment	(13,608		)	(32,856		)
Proceeds from sales of other real estate owned	32,001			37,528
Purchases of premises and equipment	(2,455		)	(1,862		)
Proceeds from sales of premises and equipment	276			36
Expenses paid in 2012 related to 2011 capital raise	—			(913		)
Net cash (used in) provided by investing activities	(33,525		)	(53,329		)
Financing Activities
Net decrease in deposits	(115,916		)	(145,465		)
Increase in retail repurchase agreements	3,747			595
Decrease in Federal Home Loan Bank advances	14,967			(31		)
Issuance of common stock, net of expense	—			6,696
Net cash used in financing activities of continuing operations	(97,202		)	(138,205		)
Net effect of discontinued operations	—			—
Net cash used in financing activities	(97,202		)	(138,205		)
Net Decrease in Cash and Cash Equivalents	(136,536		)	(225,546		)
Cash and Cash Equivalents at Beginning of Period	239,610			553,416
Cash and Cash Equivalents at End of Period	$	103,074		$	327,870
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	7,793		$	13,982
Noncash transactions:
Foreclosed loans transferred to other real estate owned	10,403			23,647
Loans to facilitate the sale of other real estate owned	5,071			778
Transfer of loans from held for investment to held for sale	894			600
Transfer of loans from held for sale to held for investment	—			1,119
Unrealized securities gains/(losses), net of income taxes	(13,900		)	5,409
Transfer of investment from other assets to available for sale securities	2,640			—
Employee benefit plan costs, net of income taxes	(461		)	—

See accompanying notes to consolidated financial statements.

5

CommunityOne Bancorp and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

Nature of Operations

CommunityOne Bancorp, or "COB" or the "Company"(which also refers to us and our subsidiaries on a consolidated basis), is a bank holding company incorporated in 1984 under the laws of the State of North Carolina. Through our ownership of CommunityOne Bank, N.A., or the "Bank", a national banking association headquartered in Asheboro, North Carolina, we offer a complete line of consumer, wealth management, mortgage and business banking services, including loan, deposit, cash management, investment management and trust services, to individual and business customers through operations located throughout central, southern and western North Carolina. The Bank also holds the stock of Dover Mortgage Company (“Dover”) and First National Investor Services, Inc. Dover previously engaged in the business of originating, underwriting and closing mortgage loans for sale in the secondary market. Dover ceased operations in the first quarter of 2011 and filed for Chapter 11 bankruptcy on February 15, 2012. First National Investor Services, Inc. holds deeds of trust for the Bank.

COB also owns Granite Mortgage, Inc., which ceased mortgage operations in 2009 and filed for Chapter 11 bankruptcy on February 15, 2012, and FNB United Statutory Trust I, FNB United Statutory Trust II, and Catawba Valley Capital Trust II, which were formed to facilitate the issuance of trust preferred securities.

On October 21, 2011, as part of the recapitalization of COB, COB acquired Bank of Granite Corporation and its subsidiary bank, Bank of Granite, through the merger of a wholly owned subsidiary of ours into Granite Corp. (the “Merger”). Bank of Granite was merged into the Bank on June 8, 2013. Our shareholders approved an amendment in our articles of incorporation to change our name from FNB United Corp. to CommunityOne Bancorp on June 20, 2013. This change, along with a change in our stock symbol from FNBN to COB, was implemented on July 1, 2013.

We earn revenue primarily from interest on loans and securities investments, mortgage banking income and fees charged for financial services provided to our customers. Offsetting these revenues are the cost of deposits and other funding sources, provision for loan losses and write-downs in the value of, gains and losses on disposition of and holding costs associated with our OREO, and other operating costs such as: salaries and employee benefits, occupancy, data processing expenses, merger related expenses and tax expense.

General

The accompanying consolidated financial statements, prepared without audit, include the accounts of COB and its subsidiaries. All significant intercompany balances and transactions have been eliminated. Descriptions of the organization and business of COB, accounting policies followed by COB and other relevant information are contained in our Annual Report on Form 10-K for the year ended December 31, 2012 (the "Form 10-K"), including the notes to the consolidated financial statements filed as part of that report. This quarterly report should be read in conjunction with the Form 10-K.

In the opinion of management, the accompanying consolidated financial statements contain the adjustments, all of which are normal recurring adjustments, necessary to present fairly the financial position of COB as of September 30, 2013 and December 31, 2012, and the results of its operations and cash flows for the three and nine months ended September 30, 2013 and 2012, respectively.

All financial information is reported on a continuing operations basis, unless otherwise noted. See Note 2 to the consolidated financial statements for a discussion regarding discontinued operations and certain assets and liabilities at September 30, 2013 and December 31, 2012.

Use of Estimates

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States ("GAAP"). Actual results could differ from those estimates. Material estimates subject to change in the near term include, among other items, the allowances for loan losses (“ALL”), estimated cash flows of purchased impaired loans, the carrying value of other real estate owned (“OREO”), the carrying value of intangible assets and the realization of deferred tax assets.

6

Reclassification

Certain reclassifications have been made to the prior period consolidated financial statements to place them on a comparable basis with the current period consolidated financial statements. These reclassifications have no effect on net income or shareholders' equity as previously reported.

Recent Accounting Pronouncements

Comprehensive Income - In February 2013, the FASB issued ASU No. 2013-02 Comprehensive Income (Topic 220): "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" (“ASU No. 2013-02”). This pronouncement requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income for each applicable component of net income, as well as a roll forward of the components of accumulated other comprehensive income on a prospective basis. This pronouncement is effective beginning January 1, 2013. The provisions of ASU No. 2013-02 relate only to financial statement presentation of other comprehensive income and, accordingly, its adoption did not have a material effect on COB's financial statements. These new disclosures appear in Note 10.

FASB - From time to time, the Financial Accounting Standards Board (“FASB”) issues exposure drafts for proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards.

Management considers the effect of the proposed statements on the consolidated financial statements of COB and monitors the status of changes to and proposed effective dates of exposure drafts. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on our financial position, results of operations or cash flows.

2. Discontinued Operations

All operations of Dover, a subsidiary of the Bank, were discontinued as of March 17, 2011. Dover, acquired by us in 2003, originated, underwrote and closed mortgage loans for sale into the secondary market. It maintained a retail origination network based in Charlotte, North Carolina, which originated loans for properties located in North Carolina. Dover also engaged in the wholesale mortgage origination business and conducted retail mortgage origination business outside of North Carolina. Operations outside of the State of North Carolina and the wholesale mortgage origination business were discontinued in February 2011, and all remaining operations were discontinued on March 17, 2011. Dover filed for Chapter 11 bankruptcy on February 15, 2012 in the United States Bankruptcy Court for the Western District of North Carolina. All of the assets and liabilities of Dover were written off at that time.

The results of operations of a component of an entity that has been disposed of shall be reported in discontinued operations if both the operations and cash flows of the component have been, or will be, eliminated from ongoing operations of the entity as a result of the disposal transaction and the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. As a result, the Consolidated Balance Sheets, Statements of Operations and Statement of Cash Flows for all periods reflect retrospective application of Dover's classification as a discontinued operation.

There were no assets and liabilities of discontinued operations as of September 30, 2013 and December 31, 2012.

7

Net loss from discontinued operations, net of tax, at the dates indicated were as follows:

(dollars in thousands)	Nine Months Ended September 30,
	2013		2012
Interest Income
Total interest income	$	—	$	—
Interest Expense
Total interest expense	—		—
Net Interest Income before Provision for Loan Losses	—		—
Provision for loan losses	—		—
Net Interest Income after Provision for Loan Losses	—		—
Noninterest Income
Total noninterest income	—		—
Noninterest Expense
Personnel expense	—		1
Net occupancy expense	—		1
Professional fees	—		25
Total noninterest expense	—		27
Loss before income taxes	—		(27		)
Income tax (benefit)/expense	—		—
Net loss from discontinued operations, net of tax	$	—	$	(27	)

All financial information in the consolidated financial statements and notes to the consolidated financial statements reflects continuing operations, unless otherwise noted.

3. Goodwill and Other Intangible Assets

We accounted for the Merger as a business combination under the acquisition method of accounting. As a result, we have recognized in our financial statements the identifiable net assets acquired and an amount of goodwill (representing the difference between the purchase price and the identifiable net assets). During the measurement period following a business combination, the amount of identifiable net assets recognized is subject to further adjustment to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. GAAP requires that the measurement period cannot exceed one year from the acquisition date. During the first quarter of 2012, we recognized $0.3 million in additional goodwill from the Merger. This additional amount resulted from new valuations received on OREO acquired in the Merger, which were written down to our best estimate of fair value.

Goodwill and other intangible assets deemed to have indefinite lives generated from purchase business combinations are not subject to amortization and are instead tested for impairment no less than annually. Impairment exists when the carrying value of goodwill exceeds its implied fair value. An impairment loss would be recognized in an amount equal to that excess and would be included in noninterest expense in the Consolidated Statements of Operations. None of the goodwill recognized in the Merger is expected to be deductible for income tax purposes.

Our intangible assets with definite lives are core deposit premiums ("CDP") and mortgage servicing rights ("MSR"). CDPs are amortized over their useful lives to their estimated residual value and reviewed for impairment at least quarterly. The amortization expense represents the estimated decline in the value of the underlying deposits. MSRs are amortized over the expected lives of the underlying mortgages including prepayment estimates.

4. Investment Securities

Securities designated as available-for-sale are carried at fair value. However, the unrealized difference between amortized cost and fair value of securities available-for-sale is excluded from net income unless there is an other than temporary impairment and is reported, net of deferred taxes, as a component of shareholders' equity as accumulated other comprehensive income (loss). Securities held-to-maturity are carried at amortized cost, as the bank has the ability, and management has the positive intent, to hold these securities to maturity. Premiums and discounts on securities are amortized and accreted according to the interest method.

Our primary objective in managing the investment portfolio is to maintain a portfolio of high quality, highly liquid investments yielding competitive returns. We are required under federal regulations to maintain adequate liquidity to ensure safe and sound

8

operations. We maintain investment balances based on a continuing assessment of cash flows, the level of loan production, current interest rate risk strategies and an assessment of the potential future direction of market interest rate changes. Investment securities differ in terms of default, interest rate, liquidity and expected rate of return risks.

The following table summarizes the amortized cost and estimated fair value of investment securities and presents the related gross unrealized gains and losses:

September 30, 2013
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale:
Obligations of:
U.S. government sponsored enterprises	$	2,057	$	25	$	—	$	2,082
Residential mortgage-backed securities-GSE	373,860		945		17,358		357,447
Residential mortgage-backed securities-Private	20,484		784		10		21,258
Commercial mortgage backed securities-GSE	22,863		—		1,219		21,644
Commercial mortgage-backed securities-Private	10,419		—		786		9,633
Business Development Company investment	1,753		887		—		2,640
Corporate notes	24,874		134		—		25,008
Total available for sale	$	456,310	$	2,775	$	19,373	$	439,712
Held to Maturity:
Residential mortgage-backed securities-GSE	143,611		—		6,556		137,055
Commercial mortgage-backed securities-Private	10,073		—		654		9,419
Total held to maturity	$	153,684	$	—	$	7,210	$	146,474
Total investment securities	$	609,994	$	2,775	$	26,583	$	586,186
December 31, 2012
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale:
Obligations of:
U.S. Treasury and government agencies	$	6,646	$	335	$	—	$	6,981
U.S. government sponsored enterprises	22,118		55		—		22,173
States and political subdivisions	5,918		120		—		6,038
Residential mortgage-backed securities-GSE	436,344		5,678		948		441,074
Residential mortgage-backed securities-Private	22,649		750		454		22,945
Commercial mortgage backed securities-GSE	23,150		209		—		23,359
Commercial mortgage backed securities-Private	5,283		34		—		5,317
Corporate notes	36,710		270		17		36,963
Total	$	558,818	$	7,451	$	1,419	$	564,850

As a member of the Federal Home Loan Bank of Atlanta (“FHLB”), the Bank is required to own capital stock in the FHLB based generally upon the balances of total assets and FHLB advances. FHLB capital stock is pledged to secure FHLB advances. This investment is carried at cost since no ready market exists for FHLB stock and there is no quoted market value. However, redemption of this stock has historically been at par value. The Bank owned a total of $5.9 million of FHLB stock at September 30, 2013 and $6.3 million at December 31, 2012. Due to the redemption provisions of FHLB stock, we have estimated that fair value approximated cost and that this investment was not impaired at September 30, 2013. FHLB stock is included in other assets at its original cost basis.

As a member bank of the Federal Reserve Bank of Richmond (“FRBR”), the Bank also is required to own capital stock of the FRBR based upon a percentage of the bank's common stock and surplus. This investment is carried at cost since no ready market exists for FRBR stock and there is no quoted market value. At September 30, 2013 and December 31, 2012, the Bank owned a total of $4.1 million and $3.1 million of FRBR stock, respectively. Due to the nature of this investment in an entity of the U.S. government, we

9

have estimated that fair value approximated the cost and that this investment was not impaired at September 30, 2013. FRBR stock is included in other assets at its original cost basis.

At September 30, 2013, $94.1 million of the investment securities portfolio was pledged to secure public deposits, $18.4 million was pledged to retail repurchase agreements and $78.9 million was pledged to others, leaving $394.1 million available as lendable collateral.

During the three and nine months ended September 30, 2013, the Bank sold securities with a book value of $3.3 million and $175.1 million respectively, and recognized gains of $0.1 million and $2.8 million, respectively. During the three and nine months ended September 30, 2012, the Bank sold securities with a book value of $21.4 million and $134.1 million respectively, and recognized a loss of $(33) thousand, and a gain of $1.9 million, respectively. The Bank sold these securities in order to manage our interest rate sensitivity profile.

The following tables show our investments' estimated fair value and gross unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2013 and December 31, 2012. The change in unrealized losses during the three and nine month periods ending September 30, 2013 was attributed to changes in interest rates and not to changes in the credit quality of these securities. All unrealized losses on investment securities are considered by management to be temporary given the credit quality of these investment securities or the short duration of the unrealized loss, or both.

	Less than 12 Months				12 Months or More				Total
(dollars in thousands)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
September 30, 2013
Available for Sale:
Residential mortgage-backed securities-GSE	$	312,145	$	17,358	$	—	$	—	$	312,145	$	17,358
Residential mortgage-backed securities-Private	1,350		10		—		—		1,350		10
Commercial mortgage-backed securities-GSE	21,644		1,219		—		—		21,644		1,219
Commercial mortgage-backed securities-Private	9,633		786		—		—		9,633		786
Total available for sale	$	344,772	$	19,373	$	—	$	—	$	344,772	$	19,373
Held to Maturity:
Residential mortgage-backed securities-GSE	$	137,055	$	6,556	$	—	$	—	$	137,055	$	6,556
Commercial mortgage-backed securities-Private	9,419		654		—		—		9,419		654
Total held to maturity	$	146,474	$	7,210	$	—	$	—	$	146,474	$	7,210
Total	$	491,246	$	26,583	$	—	$	—	$	491,246	$	26,583
December 31, 2012
Obligations of:
Residential mortgage-backed securities-GSE	$	123,489	$	904	$	7,027	$	44	$	130,516	$	948
Residential mortgage-backed securities-Private	7,499		454		—		—		7,499		454
Corporate notes	3,249		17		—		—		3,249		17
Total	$	134,237	$	1,375	$	7,027	$	44	$	141,264	$	1,419

At September 30, 2013 and December 31, 2012, there were zero and four available-for-sale securities that were in an unrealized loss position for longer than 12 months, respectively.

If an entity has a debt security that has been in a loss position for over 12 months and it cannot assert it is more likely than not that it will not have to sell the security before recovery, then other than temporary impairment ("OTTI") must be taken. The amount of impairment is bifurcated between impairment due to credit (which is recorded through earnings) and noncredit impairment (which becomes a component of other comprehensive income (“OCI”) for both available-for-sale and held-to-maturity securities). For held-to-maturity securities, the amount in OCI will be amortized prospectively over the security's remaining life. After analyzing our

10

securities portfolio at September 30, 2013, and after considering ratings, fair value, cash flows and other factors, we did not have any OTTI during the three or nine months ended September 30, 2013 and September 30, 2012.

The aggregate amortized cost and fair value of securities at September 30, 2013, by remaining contractual maturity, are shown in the following table. Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.

	Available-for-Sale				Held-to-Maturity
(dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	16,486	$	16,539	$	—	$	—
Due after one year through five years	10,445		10,551		—		—
With no stated maturity	1,753		2,640		—		—
Total	28,684		29,730		—		—
Mortgage-backed securities	427,626		409,982		153,684		146,474
Total	$	456,310	$	439,712	$	153,684	$	146,474

5. Loans and Allowance for Loan Losses

General

Loans held for investment are stated at the principal amounts outstanding adjusted for purchase premiums/discounts, deferred net loan fees and costs, and unearned income.  We report our loan portfolio by segments and classes, which are disaggregations of portfolio segments.  Our portfolio segments are:  Commercial and agricultural, Real estate, and Consumer loans.  The Commercial and agricultural loan and Consumer loan portfolios are not further segregated into classes.  The classes within the Real estate portfolio segment include Real estate - construction and Real estate mortgage, which is further broken into 1-4 family residential mortgage and Commercial real estate mortgage loans.

Loan fees and the incremental direct costs associated with originating a loan are deferred and subsequently recognized over the life of the loan as an adjustment to interest income.

In addition to originating loans, we also purchase loans. At acquisition, purchased loans are designated as either purchased contractual loans ("PC loans") or purchased impaired loans ("PI loans"). PC loans are acquired loans where management believes it is probable that it will receive all principal as of the date of acquisition.  These loans are accounted for under the contractual cash flow method, under ASC 310-20. Any discount or premium paid on PC loans is recorded in interest income using the effective yield method over the expected life of the loans.

PI loans are acquired loans where management believes, at acquisition date, it is probable that all principal on the acquired loans will not be received.  PI loans are placed in homogeneous risk based pools where accounting for projected cash flows is performed, as allowed under ASC 310-30.  Once a pool is established the individual loans within each pool do not change.  As management obtains new information related to changes in expected principal loss and expected cash flows, by pool, we record either an increase in yield when new expected cash flows increase, an allowance for loan losses when new expected cash flows decline, or a decrease in yield when there is only a timing difference in expected cash flows.

Loans acquired in the Merger ("Granite Purchased Loans") included PI loans and PC loans. Loans designated as PC loans included performing revolving consumer and performing revolving commercial loans on acquisition date.

During the nine months ended September 30, 2013, we purchased $134.8 million of performing residential mortgage loans, including premiums of $1.0 million. During the nine months ended September 30, 2012, we purchased $173.2 million of performing residential mortgage loans, including premiums of $4.0 million. These loan purchases are accounted for as PC loans.

ALL Methodology

COB's ALL, which is utilized to absorb actual losses in the loan portfolio, is maintained at a level consistent with management's best estimate of probable loan losses to be incurred as of the balance sheet date. Management assesses COB's ALL quarterly. This assessment includes a methodology that separates the total loan portfolio into homogeneous loan classifications for purposes of evaluating risk. The required allowance is calculated by applying a risk adjusted reserve requirement to the dollar volume of

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loans within a homogenous group. For purposes of the ALL, we have grouped our loans into pools according to the loan segmentation regime employed on schedule RC-C of the FFIEC's Consolidated Report of Condition and Income. Major loan portfolio subgroups include: risk graded commercial loans, mortgage loans, home equity loans, retail loans and retail credit lines. Management also analyzes the loan portfolio on an ongoing basis to evaluate current risk levels, and risk grades are adjusted accordingly. While management uses the best information available to make evaluations, future adjustments may be necessary, if economic or other conditions differ substantially from the assumptions used.

Historical loss rates are calculated by associating losses to the risk-graded pool to which they relate for each of the previous eight quarters. Then, using a look back period consisting of the twenty most recent quarters, loss factors are calculated for each risk-graded pool using a simple average. This represents a change in methodology which began in the third quarter of 2013. Previously, we used a look back period beginning in the third quarter of 2006 and a weighted average of losses. The impact of this change was immaterial to the allowance calculation.

In addition to our ability to use our own historical loss data and migration between risk grades, we have a rigorous process for computing the qualitative factors that impact the ALL. A committee, independent of the historical loss migration team, reviews risk factors that may impact the ALL. Some factors are statistically quantifiable, such as concentration, growth, delinquency, and nonaccrual risk by loan type, while other factors are qualitative in nature, such as staff competency, competition within our markets and economic and regulatory changes impacting the loans held for investment.

We lend primarily in North Carolina. As of September 30, 2013, a majority of the principal amount of the loans held for investment in our portfolio was to businesses and individuals in North Carolina. This geographic concentration subjects the loan portfolio to the general economic conditions within this area. The risks created by this concentration have been considered by management in the determination of the adequacy of the ALL. Management believes the ALL is adequate to cover estimated losses on loans at each balance sheet date.

During the three month period ended September 30, 2013, we charged off $1.7 million in loans and realized $2.4 million in recoveries, for $0.7 million of net recoveries. During the nine month period ended September 30, 2013, we charged off $10.8 million in loans and realized $8.2 million in recoveries, for $2.6 million of net charge-offs. The majority of the loans charged off were loans that were previously impaired and had specific reserves assigned in prior periods.

The ALL, as a percentage of loans held for investment, was 2.12% at September 30, 2013, compared to 2.51% at September 30, 2012. At December 31, 2012, the ALL, as a percentage of loans held for investment, was 2.49%.

Risk Grades

The risk-grade categories presented in the following table, which are standard categories used by the bank regulators, are:

Pass - Loans categorized as Pass are higher quality loans that have adequate sources of repayment and little risk of collection.

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 asset or in the institution's credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

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 have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of Substandard loans, does not have to exist in individual assets classified Substandard.

Doubtful - A loan classified as Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors, which may work to the advantage of strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans.

Loans categorized as Special Mention or worse are considered Criticized. Loans categorized as Substandard or Doubtful are considered Classified. Purchased loans acquired in the Merger are recorded at estimated fair value on the date of acquisition without the carryover of related ALL. The table below includes $46.7 million and $60.6 million in Granite Purchased Loans categorized as Substandard or Doubtful at September 30, 2013 and December 31, 2012, respectively.

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The following table presents loans held for investment balances by risk grade as of September 30, 2013:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful
	(Ratings 1-5)		(Rating 6)		(Rating 7)		(Rating 8)		Total
Commercial and agricultural	$	65,556	$	640	$	3,421	$	—	$	69,617
Real estate - construction	48,665		3,310		15,567		—		67,542
Real estate - mortgage:
1-4 family residential	578,197		12,638		27,427		—		618,262
Commercial	300,609		26,918		67,559		—		395,086
Consumer	43,997		48		241		349		44,635
Total	$	1,037,024	$	43,554	$	114,215	$	349	$	1,195,142

The following table presents loans held for investment balances by risk grade as of December 31, 2012:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful
	(Ratings 1-5)		(Rating 6)		(Rating 7)		(Rating 8)		Total
Commercial and agricultural	$	69,003	$	3,447	$	6,953	$	301	$	79,704
Real estate - construction	40,117		2,031		16,266		—		58,414
Real estate - mortgage:
1-4 family residential	504,819		15,855		32,625		239		553,538
Commercial	296,271		50,275		95,126		164		441,836
Consumer	42,495		178		426		444		43,543
Total	$	952,705	$	71,786	$	151,396	$	1,148	$	1,177,035

Loans included in the preceding loan composition table are net of participations sold. Loans are increased by net loan premiums and deferred loan discounts or fees of $2.5 million at September 30, 2013. Loans are increased by net deferred loan discounts or fees of $3.6 million at December 31, 2012.

At September 30, 2013, loans held for sale consisted of originated residential mortgage loans held for sale at the lower of cost or fair market value, as well as nonperforming commercial loans which are under contract to sell. At December 31, 2012, loans held for sale consisted only of originated residential mortgage loans.

Loans serviced for others are not included in the consolidated balance sheet. The unpaid principal balance of loans serviced for others amounted to $172.7 million at September 30, 2013 and $65.1 million at December 31, 2012.

Loans Pledged

To borrow from the FHLB, members must pledge collateral to secure advances and letters of credit. Acceptable collateral includes, among other types of collateral, a variety of residential, multifamily, home equity lines and second mortgages, and commercial loans. Gross loans of $215.5 million and $25.1 million of investment securities, and gross loans of $270.2 million were pledged to collateralize FHLB advances and letters of credit at September 30, 2013 and December 31, 2012, respectively, of which there was $15.7 million and $19.1 million of credit availability for borrowing, respectively. At September 30, 2013, $10.0 million of loans and $51.7 million of securities were pledged to collateralize potential borrowings from the Federal Reserve Discount Window, of which $57.5 million was available as borrowing capacity. We could also access $314.2 million of additional borrowings from the FHLB under credit lines by pledging additional collateral.

Nonaccruing and Impaired Loans

Interest income on loans is calculated by using the interest method based on the daily outstanding balance. The recognition of interest income is discontinued when, in management's opinion, the collection of all or a portion of interest becomes doubtful. Loans are returned to accrual status when the factors indicating doubtful collectability cease to exist and the loan has performed in accordance with its terms for a demonstrated period of time. The past due status of loans is based on the contractual payment terms. Had nonaccruing loans been on accruing status, interest income would have been higher by $0.7 million and $1.5 million for the three months ended September 30, 2013 and September 30, 2012, respectively, and higher by $2.3 million and $2.9 million for the nine months ended September 30, 2013 and September 30, 2012, respectively. At September 30, 2013 and

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December 31, 2012, COB had certain impaired loans of $51.1 million and $79.2 million, respectively, which were on nonaccruing interest status.

All loan classes are considered past due when the contractual amounts due with respect to principal and interest are not received within 30 days of the contractual due date. When we cannot reasonably expect full and timely repayment of its loan, the loan is placed on nonaccrual.

All loan classes on which principal or interest is in default for 90 days or more are put on nonaccrual status, unless there is sufficient documentation to conclude that the loan is well secured and in the process of collection. A debt is "well-secured" if collateralized by liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt in full; or by the guarantee of a financially responsible party. A debt is "in process of collection" if collection is proceeding in due course either through legal action, including judgment enforcement procedures, or, in appropriate circumstances, through collection efforts not involving legal action that are reasonably expected to result in repayment of the debt or its restoration to a current status.

Loans that are less than 90 days delinquent may also be placed on nonaccrual if deterioration in the financial condition of the borrower has increased the probability of less than full repayment.

At the time a loan is placed on nonaccrual, all accrued, unpaid interest is charged off, unless it is documented that repayment of all principal and presently accrued but unpaid interest is probable. Charge-offs of accrued and unpaid interest are charged against the current year's interest income and not against the current ALL.

For all loan classes, a nonaccrual loan may be returned to accrual status when we can reasonably expect continued timely payments until payment in full. All prior arrearage does not have to be eliminated, nor do all previously charged-off amounts need to have been recovered, but the loan can still be returned to accrual status if the following conditions are met: (1) all principal and interest amounts contractually due (including arrearage) are reasonably assured of repayment within a reasonable period; and (2) there is a sustained period of repayment performance (generally a minimum of six months) by the borrower, in accordance with the contractual terms involving payments of cash or cash equivalents.

For all classes within all loan portfolios, cash receipts received on nonaccrual loans are applied entirely against principal until the loan or lease has been collected in full, after which time any additional cash receipts are recognized as interest income.

For all loan classes, as soon as any loan becomes uncollectible, the loan will be charged down or charged off as follows:

• If unsecured, the loan must be charged off in full.

• If secured, the outstanding principal balance of the loan should be charged down to the net liquidation value of the collateral.

Loans should be considered uncollectible when:

• No regularly scheduled payment has been made within four months and the determination is made that any further payment is unlikely, or

• The loan is unsecured, the borrower has filed for bankruptcy protection and there is no other (guarantor, etc.) support from an entity outside of the bankruptcy proceedings.

Based on a variety of credit, collateral and documentation issues, loans with lesser degrees of delinquency or obvious loss may also be deemed uncollectible.

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The following table presents an aging analysis of accruing and nonaccruing loans as of September 30, 2013:

(dollars in thousands)	Accruing
	30-59 days past due		60-89 days past due		More than 90 days past due		Nonaccrual		Total past due and nonaccrual		Current and accruing		Total Loans
PC and Originated Loans
Commercial and agricultural	$	52	$	—	$	—	$	590	$	642	$	57,558	$	58,200
Real estate - construction	47		—		76		10,190		10,313		47,034		57,347
Real estate - mortgage:
1-4 family residential	1,269		759		—		12,822		14,850		573,700		588,550
Commercial	220		153		—		27,425		27,798		243,108		270,906
Consumer	97		13		—		104		214		43,332		43,546
Total	$	1,685	$	925	$	76	$	51,131	$	53,817	$	964,732	$	1,018,549
PI loans
Commercial and agricultural	$	77	$	—	$	2,235	$	—	$	2,312	$	9,106	$	11,418
Real estate - construction	—		—		2,884		—		2,884		7,312		10,196
Real estate - mortgage:
1-4 family residential	10		—		5,242		—		5,252		24,460		29,712
Commercial	174		594		19,228		—		19,996		104,182		124,178
Consumer	7		—		15		—		22		1,067		1,089
Total	$	268	$	594	$	29,604	$	—	$	30,466	$	146,127	$	176,593
Total Loans	$	1,953	$	1,519	$	29,680	$	51,131	$	84,283	$	1,110,859	$	1,195,142

The following table presents an aging analysis of accruing and nonaccruing loans as of December 31, 2012:

(dollars in thousands)	Accruing
	30-59 days past due		60-89 days past due		More than 90 days past due		Nonaccrual		Total past due and nonaccrual		Current and accruing		Total Loans
PC and Originated Loans
Commercial and agricultural	$	515	$	—	$	50	$	2,746	$	3,311	$	61,727	$	65,038
Real estate - construction	26		119		—		14,297		14,442		41,290		55,732
Real estate - mortgage:
1-4 family residential	6,173		880		—		18,372		25,425		488,898		514,323
Commercial	617		—		177		43,621		44,415		226,948		271,363
Consumer	24		—		—		206		230		41,957		42,187
Total	$	7,355	$	999	$	227	$	79,242	$	87,823	$	860,820	$	948,643
PI loans
Commercial and agricultural	$	100	$	1	$	1,103	$	—	$	1,204	$	13,462	$	14,666
Real estate - construction	117		—		655		—		772		1,910		2,682
Real estate - mortgage:
1-4 family residential	1,308		495		4,678		—		6,481		32,734		39,215
Commercial	2,559		4,300		17,384		—		24,243		146,230		170,473
Consumer	4		—		13		—		17		1,339		1,356
Total	$	4,088	$	4,796	$	23,833	$	—	$	32,717	$	195,675	$	228,392
Total Loans	$	11,443	$	5,795	$	24,060	$	79,242	$	120,540	$	1,056,495	$	1,177,035

All PI loans are considered to be accruing for all periods presented, in accordance with ASC 310-30.

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A loan is considered impaired, based on current information and events, if it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. If the loan has been modified to provide relief to the borrower, the loan is deemed to be impaired if all principal and interest will not be repaid according to the original contract. All loans meeting the definition of Doubtful should be considered impaired.

When a loan has been determined to be impaired, the amount of the impairment is measured using the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, the observable market price of the loan, or the fair value of the collateral if the loan is collateral dependent. When the present value of expected future cash flows is used, the effective interest rate is the original contractual interest rate of the loan adjusted for any premium or discount. When the contractual interest rate is variable, the effective interest rate of the loan changes over time. A specific reserve is established as a component of the ALL when a loan has been determined to be impaired. Subsequent to the initial measurement of impairment, if there is a significant change to the impaired loan's expected future cash flows, or if actual cash flows are significantly different from the cash flows previously estimated, we recalculate the impairment and appropriately adjust the specific reserve. Similarly, if we measure impairment based on the observable market price of an impaired loan or the fair value of the collateral of an impaired collateral-dependent loan, we will adjust the specific reserve if there is a significant change in either of those bases.

When a loan is impaired and principal and interest is in doubt when contractually due, interest income is not recognized. Cash receipts received on nonaccruing impaired loans within any class are generally applied entirely against principal until the loan has been collected in full, after which time any additional cash receipts are recognized as interest income. Cash receipts received on accruing impaired loans within any class are applied in the same manner as accruing loans that are not considered impaired.

The following table summarizes information relative to impaired loans for the dates indicated:

	September 30, 2013				December 31, 2012
(dollars in thousands)	Balance		Associated Reserves		Balance		Associated Reserves
Impaired loans, not individually reviewed for impairment	$	4,550	$	—	$	6,017	$	—
Impaired loans, individually reviewed, with no impairment	49,356		—		62,282		—
Impaired loans, individually reviewed, with impairment	2,963		486		15,312		1,737
Total impaired loans, excluding purchased impaired *	$	56,869	$	486	$	83,611	$	1,737
Purchased impaired loans with subsequent deterioration	$	147,852	4,066		$	192,115	5,373
Purchased impaired loans with no subsequent deterioration	$	28,741	—		$	36,277	—
Total Reserves			$	4,552			$	7,110
Average impaired loans calculated using a simple average	$	61,837			$	94,754

* Included at September 30, 2013 and December 31, 2012 were $6.7 million and $4.5 million, respectively, in restructured and performing loans.

16

The following table presents loans held for investment on nonaccrual status by loan class for the dates indicated:

(dollars in thousands)
	September 30, 2013		December 31, 2012
Loans held for investment:
Commercial and agricultural	$	590	$	2,746
Real estate - construction	10,190		14,297
Real estate - mortgage:
1-4 family residential	12,822		18,372
Commercial	27,425		43,621
Consumer	104		206
Total nonaccrual loans	$	51,131	$	79,242
Loans more than 90 days delinquent, still on accrual	76		227
Total nonperforming loans	$	51,207	$	79,469

There were no loans held for sale on nonaccrual status as of September 30, 2013 or December 31, 2012.

17

The following table presents individually reviewed impaired loans and purchased impaired loans with subsequent credit deterioration, segregated by portfolio segment, and the corresponding reserve for impaired loan losses as of September 30, 2013:

			Unpaid
(dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and agricultural	$	416	$	776	$	—
Real estate - construction	9,900		14,246		—
Real estate - mortgage:
1-4 family residential	10,465		13,416		—
Commercial	28,576		34,748		—
Consumer	—		—		—
Total	$	49,357	$	63,186	$	—
With an allowance recorded:
Commercial and agricultural	$	—	$	—	$	—
Real estate - construction	97		112		1
Real estate - mortgage:
1-4 family residential	2,595		2,994		446
Commercial	271		397		39
Consumer	—		—		—
Total	$	2,963	$	3,503	$	486
Total individually evaluated impaired loans
Commercial and agricultural	$	416	$	776	$	—
Real estate - construction	9,997		14,358		1
Real estate - mortgage:
1-4 family residential	13,060		16,410		446
Commercial	28,847		35,145		39
Consumer	—		—		—
Total	$	52,320	$	66,689	$	486
PI loans with subsequent credit deterioration:
Commercial and agricultural	$	8,821	$	9,042	$	34
Real estate - construction	8,258		8,897		747
Real estate - mortgage:
1-4 family residential	26,661		27,130		527
Commercial	103,028		106,249		2,567
Consumer	1,084		848		191
Total	$	147,852	$	152,166	$	4,066

18

The following table presents individually reviewed impaired loans, and purchased impaired loans with subsequent credit deterioration, segregated by portfolio segment, and the corresponding reserve for impaired loan losses as of December 31, 2012:

			Unpaid
(dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and agricultural	$	1,755	$	2,608	$	—
Real estate - construction	11,875		18,553		—
Real estate - mortgage:
1-4 family residential	16,437		20,764		—
Commercial	32,215		38,585		—
Consumer	—		—		—
Total	$	62,282	$	80,510	$	—
With an allowance recorded:
Commercial and agricultural	$	579	$	602	$	282
Real estate - construction	1,658		1,843		82
Real estate - mortgage:
1-4 family residential	1,681		1,745		607
Commercial	11,394		14,714		766
Consumer	—		—		—
Total	$	15,312	$	18,904	$	1,737
Total individually evaluated impaired loans
Commercial and agricultural	$	2,334	$	3,210	$	282
Real estate - construction	13,533		20,396		82
Real estate - mortgage:
1-4 family residential	18,118		22,509		607
Commercial	43,609		53,299		766
Consumer	—		—		—
Total	$	77,594	$	99,414	$	1,737
PI loans with subsequent credit deterioration:
Commercial and agricultural	$	11,533	$	11,728	$	524
Real estate - construction	2,285		2,236		200
Real estate - mortgage:
1-4 family residential	34,961		35,802		711
Commercial	141,974		145,704		3,388
Consumer	1,362		1,147		550
Total	$	192,115	$	196,617	$	5,373

19

The following summary includes impaired loans individually reviewed as well as impaired loans held for sale. Average recorded investment and interest income recognized on impaired loans, segregated by portfolio segment, is shown in the following tables as of September 30, 2013 and September 30, 2012:

	For Three Months Ended				For Three Months Ended
	September 30, 2013				September 30, 2012
	Average		Interest		Average		Interest
(dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and agricultural	$	434	$	—	$	1,557	$	56
Real estate - construction	10,006		3		15,484		104
Real estate - mortgage:
1-4 family residential	10,516		—		14,265		81
Commercial	27,844		4		44,480		567
Consumer	—		—		162		4
Total	$	48,800	$	7	$	75,948	$	812
With an allowance recorded:
Commercial and agricultural	$	—	$	—	$	1,274	$	6
Real estate - construction	97		—		2,802		9
Real estate - mortgage:
1-4 family residential	2,605		—		6,436		41
Commercial	273		—		4,689		27
Consumer	—		—		100		1
Total	$	2,975	$	—	$	15,301	$	84
Total:
Commercial and agricultural	$	434	$	—	$	2,831	$	62
Real estate - construction	10,103		3		18,286		113
Real estate - mortgage:
1-4 family residential	13,121		—		20,701		122
Commercial	28,117		4		49,169		594
Consumer	—		—		262		5
Total	$	51,775	$	7	$	91,249	$	896

20

	For Nine Months Ended				For Nine Months Ended
	September 30, 2013				September 30, 2012
	Average		Interest		Average		Interest
(dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and agricultural	$	455	$	7	$	1,879	$	152
Real estate - construction	10,300		23		18,140		350
Real estate - mortgage:
1-4 family residential	10,442		14		15,096		292
Commercial	29,288		58		46,051		1,388
Consumer	—		—		279		6
Total	$	50,485	$	102	$	81,445	$	2,188
With an allowance recorded:
Commercial and agricultural	$	107	$	—	$	1,266	$	36
Real estate - construction	220		6		2,873		32
Real estate - mortgage:
1-4 family residential	1,682		4		6,869		163
Commercial	3,933		—		4,687		145
Consumer	167		1		95		2
Total	$	6,109	$	11	$	15,790	$	378
Total:
Commercial and agricultural	$	562	$	7	$	3,145	$	188
Real estate - construction	10,520		29		21,013		382
Real estate - mortgage:
1-4 family residential	12,124		18		21,965		455
Commercial	33,221		58		50,738		1,533
Consumer	167		1		374		8
Total	$	56,594	$	113	$	97,235	$	2,566

Impaired loans also include loans for which we may elect to grant a concession, providing terms more favorable than those prevalent in the market (e.g., rate, amortization term), and formally restructure due to the weakening credit status of a borrower. Restructuring is designed to facilitate a repayment plan that minimizes the potential losses that we otherwise may have to incur. If these impaired loans are on nonaccruing status as of the date of restructuring, the loans are included in nonperforming loans. Nonperforming restructured loans will remain as nonperforming until the borrower can demonstrate adherence to the restructured terms for a period of no less than six months and when it is otherwise determined that continued adherence is reasonably assured. Some restructured loans continue as accruing loans after restructuring if the borrower is not past due at the time of restructuring, adequate collateral valuations support the restructured loans, and the cash flows of the underlying business appear adequate to support the restructured debt service. Not included in nonperforming loans are loans that have been restructured that were performing as of the restructure date. At September 30, 2013, there was $14.3 million in restructured loans, of which $6.7 million were accruing and in a performing status. At December 31, 2012, there was $20.8 million in restructured loans, of which $4.5 million were accruing and in a performing status.

Sale of Problem Loans

During 2012, we sold loans to third party buyers in order to reduce our problem loan exposure. These loans were transferred to loans held for sale at the time we received a signed contract for the purchase of the loans. Prior to transferring these loans to loans held for sale, the loans were marked down to the contract price less associated selling costs. All transactions were conducted at arm's length and loans were sold without recourse.

21

The following table presents sold loans by portfolio segment for the periods indicated below:

	For Three Months Ended					For Three Months Ended
	September 30, 2013					September 30, 2012
(dollars in thousands)	Number	Recorded		Contract		Number	Recorded		Contract
	of Loans	Investment		Pricing		of Loans	Investment		Pricing
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		—	—		—
Real estate - mortgage:
1-4 family residential	—	—		—		1	602		540
Commercial	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	1	$	602	$	540

	For Nine Months Ended					For Nine Months Ended
	September 30, 2013					September 30, 2012
(dollars in thousands)	Number	Recorded		Contract		Number	Recorded		Contract
	of Loans	Investment		Pricing		of Loans	Investment		Pricing
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		—	—		—
Real estate - mortgage:
1-4 family residential	—	—		—		7	1,865		1,896
Commercial	—	—		—		2	4,402		4,590
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	9	$	6,267	$	6,486

Granite Purchased Loans

Granite Purchased Loans include PI loans and PC loans. PC loans include performing revolving consumer and commercial loans on October 21, 2011, the acquisition date.

PI loans are segregated into pools and recorded at estimated fair value on the date of acquisition without the carryover of the related ALL. PI loans are accounted for under ASC 310-30 when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition we will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the date of acquisition may include statistics such as past due status, nonaccrual status and risk grade. PI loans generally meet our definition for nonaccrual status; however, even if the borrower is not currently making payments, we will classify loans as accruing if we can reasonably estimate the amount and timing of future cash flows.All Granite Purchased PI loans are presented on an accruing basis. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference.

Periodically, we estimate the expected cash flows for each pool of the PI loans and evaluate whether the expected cash flows for each pool have changed from prior estimates. Decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or reclassification from nonaccretable difference to accretable yield with a positive impact on future interest income. Excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

We have elected to account for the Granite Purchased PI loans under ASC 310-30 and the Granite Purchased PC loans under ASC 310-20.

22

At September 30, 2013, and December 31, 2012, our financial statements reflected a PI loan ALL of $4.1 million and $5.4 million, respectively, and an ALL for PC loans of $0.7 million and $0.5 million, respectively.

The following table presents the balance of all Granite Purchased Loans:

	At September 30, 2013
(dollars in thousands)	Purchased Impaired		Purchased Contractual		Total Purchased Loans		Unpaid Principal Balance
Commercial and agricultural	$	11,418	$	4,874	$	16,292	$	15,597
Real estate - construction	10,196		—		10,196		9,902
Real estate - mortgage:
1-4 family residential	29,712		22,833		52,545		53,476
Commercial	124,178		381		124,559		125,395
Consumer	1,089		—		1,089		860
Total	$	176,593	$	28,088	$	204,681	$	205,230

	At December 31, 2012
(dollars in thousands)	Purchased Impaired		Purchased Contractual		Total Purchased Loans		Unpaid Principal Balance
Commercial and agricultural	$	14,666	$	7,311	$	21,977	$	21,692
Real estate - construction	2,682		—		2,682		2,677
Real estate - mortgage:
1-4 family residential	39,215		27,484		66,699		69,200
Commercial	170,467		49		170,516		176,347
Consumer	1,362		—		1,362		1,144
Total	$	228,392	$	34,844	$	263,236	$	271,060

The tables below include only those Granite Purchased Loans accounted for under the expected cash flow method (PI loans) for the periods indicated. These tables do not include PC loans, including Granite Purchased PC loans or purchased performing residential mortgage loans.

	For Three Months Ended						For Three Months Ended
	September 30, 2013						September 30, 2012
	Purchased Impaired						Purchased Impaired
(dollars in thousands)	Carrying Amount			Future Accretion			Carrying Amount			Future Accretion
Balance, beginning of period	$	189,159		$	28,706		$	287,092		$	41,133
Accretion	4,283			(4,283		)	4,568			(4,568		)
Increase in future accretion	—			—			—			—
Payments received	(16,225		)	—			(34,043		)	—
Foreclosed and transferred to OREO	(624		)	—			(5,412		)	—
Subtotal before allowance	176,593			24,423			252,205			36,565
Allowance for credit losses	(4,066		)	—			(3,296		)	—
Net carrying amount, end of period	$	172,527		$	24,423		$	248,909		$	36,565

23

	For Nine Months Ended						For Nine Months Ended
	September 30, 2013						September 30, 2012
	Purchased Impaired						Purchased Impaired
(dollars in thousands)	Carrying Amount			Future Accretion			Carrying Amount			Future Accretion
Balance, beginning of period	$	228,392		$	30,299		$	330,836		$	47,804
Accretion	12,677			(12,677		)	15,831			(15,831		)
Increase in future accretion	—			6,801			—			4,592
Payments received	(62,556		)	—			(84,944		)	—
Foreclosed and transferred to OREO	(1,920		)	—			(9,518		)	—
Subtotal before allowance	176,593			24,423			252,205			36,565
Allowance for credit losses	(4,066		)	—			(3,296		)	—
Net carrying amount, end of period	$	172,527		$	24,423		$	248,909		$	36,565

Allowance for Loan Losses

An analysis of the changes in the ALL is as follows:

	For Three Months Ended						For Nine Months Ended
(dollars in thousands)	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Balance, beginning of period	$	25,085		$	38,551		$	29,314		$	39,360
Provision for (recoveries of) losses charged to continuing operations	(350		)	32			(1,297		)	10,877
Net charge-offs:
Charge-offs	(1,724		)	(9,276		)	(10,836		)	(23,580		)
Recoveries	2,376			1,552			8,206			4,202
Net recoveries (charge-offs)	652			(7,724		)	(2,630		)	(19,378		)
Balance, end of period	$	25,387		$	30,859		$	25,387		$	30,859
Annualized net charge-offs (recoveries) during the period to average loans	(0.22		)%	2.46		%	0.31		%	2.06		%
Annualized net charge-offs (recoveries) during the period to ALL	(10.19		)%	100.12		%	13.85		%	83.73		%
Allowance for loan losses to loans held for investment (1)	2.12		%	2.51		%	2.12		%	2.51		%

(1) Excludes discontinued operations.

The following table presents ALL activity by portfolio segment for the three months ended September 30, 2013:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at July 1, 2013	$	2,192		$	5,652		$	7,400		$	7,387		$	2,454		$	25,085
Charge-offs	(2		)	(36		)	(394		)	(592		)	(700		)	(1,724		)
Recoveries	465			1,039			285			357			230			2,376
Provision	(45		)	(1,560		)	1,493			(677		)	439			(350		)
Ending balance at September 30, 2013	$	2,610		$	5,095		$	8,784		$	6,475		$	2,423		$	25,387

24

The following table presents ALL activity by portfolio segment for the three months ended September 30, 2012:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at July 1, 2012	$	7,151		$	11,320		$	8,784		$	9,218		$	2,078		$	38,551
Charge-offs	(1,156		)	(2,465		)	(1,646		)	(2,602		)	(1,407		)	(9,276		)
Recoveries	286			323			69			388			486			1,552
Provision	(1,128		)	(3,195		)	2,787			54			1,514			32
Ending balance at September 30, 2012	$	5,153		$	5,983		$	9,994		$	7,058		$	2,671		$	30,859

The following table presents ALL activity by portfolio segment for the nine months ended September 30, 2013:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at January 1, 2013	$	3,238		$	4,987		$	8,701		$	9,627		$	2,761		$	29,314
Charge-offs	(1,196		)	(964		)	(3,563		)	(2,853		)	(2,260		)	(10,836		)
Recoveries	1,376			2,106			962			2,363			1,399			8,206
Provision	(808		)	(1,034		)	2,684			(2,662		)	523			(1,297		)
Ending balance at September 30, 2013	$	2,610		$	5,095		$	8,784		$	6,475		$	2,423		$	25,387

The following table presents ALL activity by portfolio segment for the nine months ended September 30, 2012:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at January 1, 2012	$	5,776		$	11,995		$	8,885		$	11,063		$	1,641		$	39,360
Charge-offs	(2,774		)	(8,761		)	(4,805		)	(3,594		)	(3,646		)	(23,580		)
Recoveries	777			1,169			447			725			1,084			4,202
Provision	1,374			1,580			5,467			(1,136		)	3,592			10,877
Ending balance at September 30, 2012	$	5,153		$	5,983		$	9,994		$	7,058		$	2,671		$	30,859

The following table details the recorded investment in loans related to each segment in the allowance for loan losses by portfolio segment and disaggregated on the basis of impairment evaluation methodology at September 30, 2013:

25

					Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural		Real Estate - Construction		1-4 Family Residential		Commercial		Consumer		Total
ALL:
Individually evaluated for impairment	$	—	$	1	$	446	$	39	$	—	$	486
Collectively evaluated for impairment	2,576		4,347		7,811		3,869		2,232		20,835
PI loans evaluated for credit impairment	34		747		527		2,567		191		4,066
PI loans with no credit deterioration	—		—		—		—		—		—
Total ALL	$	2,610	$	5,095	$	8,784	$	6,475	$	2,423	$	25,387
Loans held for investment
Individually evaluated for impairment	$	416	$	9,998	$	13,060	$	28,846	$	—	$	52,320
Collectively evaluated for impairment	57,783		47,348		575,490		242,062		43,546		966,229
PI loans with subsequent credit deterioration	8,821		8,258		26,661		103,028		1,084		147,852
PI loans with no credit deterioration	2,597		1,938		3,051		21,150		5		28,741
Total loans	$	69,617	$	67,542	$	618,262	$	395,086	$	44,635	$	1,195,142

The following table details the recorded investment in loans related to each segment in the allowance for loan losses by portfolio segment and disaggregated on the basis of impairment evaluation methodology at December 31, 2012:

					Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural		Real Estate - Construction		1-4 Family Residential		Commercial		Consumer		Total
ALL:
Individually evaluated for impairment	$	282	$	82	$	607	$	766	$	—	$	1,737
Collectively evaluated for impairment	2,432		4,705		7,383		5,473		2,211		22,204
PI loans evaluated for credit impairment	524		200		711		3,388		550		5,373
PI loans with no credit deterioration	—		—		—		—		—		—
Total ALL	$	3,238	$	4,987	$	8,701	$	9,627	$	2,761	$	29,314
Loans held for investment
Individually evaluated for impairment	$	2,334	$	13,533	$	18,118	$	43,609	$	—	$	77,594
Collectively evaluated for impairment	62,704		42,199		496,205		227,760		42,181		871,049
PI loans with subsequent credit deterioration	11,533		2,285		34,961		141,974		1,362		192,115
PI loans with no credit deterioration	3,133		397		4,254		28,493		—		36,277
Total loans	$	79,704	$	58,414	$	553,538	$	441,836	$	43,543	$	1,177,035

26

Troubled Debt Restructuring

The following tables presents a breakdown of troubled debt restructurings that were restructured during the three months and nine months ended September 30, 2013 and September 30, 2012, segregated by portfolio segment:

	Three Months Ended September 30, 2013					For Three Months Ended September 30, 2012
		Pre-Modification		Post-Modification			Pre-Modification		Post-Modification
		Outstanding		Outstanding			Outstanding		Outstanding
(dollars in thousands)	Number	Recorded		Recorded		Number	Recorded		Recorded
	of Loans	Investment		Investment		of Loans	Investment		Investment
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		—	—		—
Real estate - mortgage:
1-4 family residential	—	—		—		1	202		202
Commercial	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	1	$	202	$	202

	For Nine Months Ended September 30, 2013					For Nine Months Ended September 30, 2012
		Pre-Modification		Post-Modification			Pre-Modification		Post-Modification
		Outstanding		Outstanding			Outstanding		Outstanding
(dollars in thousands)	Number	Recorded		Recorded		Number	Recorded		Recorded
	of Loans	Investment		Investment		of Loans	Investment		Investment
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		9	2,526		1,603
Real estate - mortgage:
1-4 family residential	9	2,733		2,630		3	260		260
Commercial	2	1,611		1,195		8	1,356		1,353
Consumer	—	—		—		—	—		—
Total	11	$	4,344	$	3,825	20	$	4,142	$	3,216

During the three months ended September 30, 2013, we did not modify any loans. During the three months ended September 30, 2012, we modified one loan that was considered to be a troubled debt restructuring. We extended the term for this loan but did not modify the interest rate.

During the nine months ended September 30, 2013, we modified eleven loans that were considered to be troubled debt restructurings. We extended the terms for two of these loans, modified the interest rate for one of these loans, and modified the remaining eight loans in both ways. During the nine months ended September 30, 2012, we modified 20 loans that were considered to be troubled debt restructurings. We extended the terms for 16 of these loans, the interest rate was lowered for two of these loans, and the remaining two loans were modified for multiple reasons.

There were no loans restructured in the twelve months prior to September 30, 2013 that went into default during the three months or nine months ended September 30, 2013. There were also no loans restructured in the twelve months prior to September 30, 2012 that went into default during the three months or nine months ended September 30, 2012.

In the determination of the ALL, management considers troubled debt restructurings and any subsequent defaults in these restructurings as impaired loans. The amount of the impairment is measured using the present value of expected future cash flows discounted at the loan's effective interest rate, the observable market price of the loan, or the fair value of the collateral if the loan is collateral dependent.

Unfunded Commitments

The reserve for unfunded commitments, which is included in other liabilities, is calculated by determining the type of commitment and the remaining unfunded commitment for each loan. Based on the type of commitment, an expected usage percentage to the remaining unfunded balance is applied. The expected usage percentage is multiplied by the historical losses and

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qualitative and environmental factors for each loans pool as defined in the regular ALL calculation to determine the appropriate level of reserve. The following describes our method for determining the unfunded commitment:

• Straight Lines of Credit - Unfunded balance of line of credit

• Revolving Lines of Credit - Average Utilization (for the last 12 months) less Current Utilization

• Letters of Credit - a 10% utilization is applied

The reserve for unfunded commitments was $0.5 million as of September 30, 2013 and $0.6 million at December 31, 2012.

6. Other Real Estate Owned and Personal Property Acquired in Settlement of Loans

OREO consists of real estate acquired through foreclosure or deed in lieu thereof. The property is classified as held for sale. The property is initially carried at fair value based on recent appraisals, less estimated costs to sell. Declines in the fair value of properties included in other real estate below carrying value are recognized by a charge to income.

Total OREO and personal property acquired in settlement of loans decreased $30.0 million during the first nine months of 2013 from $63.1 million at December 31, 2012, to $33.2 million at September 30, 2013. This represents 39% of total nonperforming assets. At December 31, 2012, OREO and personal property acquired in settlement of loans represented 44% of total nonperforming assets.

The following table summarizes OREO and personal property acquired in settlement of loans at the periods indicated:

(dollars in thousands)	September 30, 2013		December 31, 2012
Real estate acquired in settlement of loans	$	33,123	$	62,796
Personal property acquired in settlement of loans	56		335
Total property acquired in settlement of loans	$	33,179	$	63,131

The following tables summarize the changes in real estate acquired in settlement of loans at the periods indicated:

	For Three Months Ended
(dollars in thousands)	September 30, 2013			September 30, 2012
Real estate acquired in settlement of loans, beginning of period	$	35,662		$	86,183
Plus: New real estate acquired in settlement of loans	3,610			9,746
Less: Sales of real estate acquired in settlement of loans	(6,411		)	(13,826		)
Less: Write-downs and net gain (loss) on sales charged to expense	262			(1,621		)
Real estate acquired in settlement of loans, end of period	$	33,123		$	80,482

	For Nine Months Ended
(dollars in thousands)	September 30, 2013			September 30, 2012
Real estate acquired in settlement of loans, beginning of period	$	62,796		$	110,009
Plus: New real estate acquired in settlement of loans	10,403			24,766
Less: Sales of real estate acquired in settlement of loans	(37,072		)	(38,202		)
Less: Write-downs and net loss on sales charged to expense	(3,004		)	(16,091		)
Real estate acquired in settlement of loans, end of period	$	33,123		$	80,482

At September 30, 2013, 13 assets with a net carrying amount of $7.2 million were under contract for sale. Estimated losses on these sales have been recognized in the Consolidated Statements of Operations in the first nine months of 2013.

7. Earnings Per Share

Basic net loss per share, or basic earnings/(loss) per share (“EPS”), is computed by dividing net loss to common shareholders by the weighted average number of common shares outstanding for the period. We retired our preferred stock in 2011.

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Diluted EPS reflects the potential dilution that could occur if COB's potential common stock, which consists of dilutive stock options and a common stock warrant, were issued. As required for entities with complex capital structures, a dual presentation of basic and diluted EPS is included on the face of the income statement, and a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation is provided in this note.

(dollars in thousands, except per share data)	For Three Months Ended					For Nine Months Ended
	September 30, 2013		September 30, 2012			September 30, 2013			September 30, 2012
Income (Loss) from continuing operations, net of tax	$	4,006	$	(4,712	)	$	(3,773	)	$	(33,682	)
Loss from discontinued operations, net of tax	—		—			—			(27		)
Net income (loss) to common shareholders	$	4,006	$	(4,712	)	$	(3,773	)	$	(33,709	)
Weighted average number of common shares outstanding - basic and diluted	21,738,770		21,588,027			21,722,536			21,294,727
Net income (loss) per common share from continuing operations - basic and diluted	$	0.18	$	(0.22	)	$	(0.17	)	$	(1.58	)
Net loss per common share from discontinued operations - basic and diluted	—		—			—			—
Net income (loss) per common share - basic and diluted	$	0.18	$	(0.22	)	$	(0.17	)	$	(1.58	)

During the three months and nine months ended September 30, 2013 and 2012, the price of the Company's common stock (as quoted on the Nasdaq Capital Market) was below the exercise price of all vested stock options and the common stock warrant. As a result, the options and warrants were considered antidilutive and thus are not included in the diluted share calculation. For the three months and nine months ended September 30, 2013, there were 23,197 antidilutive shares. For the three and nine months ended September 30, 2012, there were 23,347 antidilutive shares. Of the antidilutive shares, the number of shares relating to stock options were 1,125 for the three months and nine months ended September 30, 2013, and 1,275 for both the three months and nine months ended September 30, 2012, while the number relating to the warrant was 22,072 for all periods presented.

8. Derivatives and Financial Instruments

A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate. These instruments include interest rate swaps, caps, floors, collars, options or other financial instruments designed to hedge exposures to interest rate risk or for speculative purposes.

Accounting guidance requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet, and measure those instruments at fair value. Changes in the fair value of those derivatives are reported in current earnings or other comprehensive income depending on the purpose for which the derivative is held and whether the derivative qualifies for hedge accounting.

Mortgage banking derivatives used in the ordinary course of business consist of mandatory forward sales contracts or forward contracts and rate lock loan commitments. The fair value of our derivative instruments is primarily measured by obtaining pricing from broker-dealers recognized to be market participants.

During 2012, we began originating residential mortgage loans for sale in the secondary market. We have established guidelines in originating, selling loans to Fannie Mae, and retaining or selling the loan servicing rights. The commitments to borrowers to originate residential mortgage loans and the forward sales commitments to investors are freestanding derivative instruments. As such, they do not qualify for hedge accounting treatment, and the fair value adjustments for these instruments is recorded through the Consolidated Statements of Operations in mortgage loan income. The fair market value of mortgage banking derivatives at September 30, 2013 was recorded in the consolidated balance sheet in Other Assets.

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	Gain (Loss) Recognized
(dollars in thousands)	For Three Months Ended					For Nine Months Ended
	September 30, 2013			September 30, 2012		September 30, 2013			September 30, 2012
Derivatives not designated as hedging instruments:
Mortgage loan rate lock commitments	$	20		$	13	$	8		$	13
Mortgage loan forward sales	(102		)	120		(196		)	298
Total	$	(82	)	$	133	$	(188	)	$	311

9. Fair Values of Assets and Liabilities

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale, derivative assets and liabilities, certain FHLB advances hedged by interest rate swaps designated as fair value hedges, performing mortgage loans held for sale, and mortgage servicing rights are recorded at fair value on a recurring basis. Additionally, from time-to-time, we may be required to record at fair value other assets and liabilities on a nonrecurring basis, such as non-performing loans held for sale, loans held for investment, impaired loans and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets or liabilities.

Fair Value Hierarchy

We group assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3: Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

Investments Securities Available-for-Sale

Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 may include asset-backed securities in less liquid markets.

Liquidity is a significant factor in the determination of the fair values of available-for-sale debt securities. Market price quotes may not be readily available for some positions, or positions within a market sector where trading activity has slowed significantly or ceased. Some of these instruments are valued using a discounted cash flow model, which estimates the fair value of the securities using internal credit risk, interest rate and prepayment risk models that incorporate management's best estimate of current key assumptions such as default rates, loss severity and prepayment rates. Principal and interest cash flows are discounted using an observable discount rate for similar instruments with adjustments that management believes a market participant would consider in determining fair value for the specific security. Underlying assets are valued using external pricing services, where available, or matrix pricing based on the vintages and ratings. Situations of illiquidity generally are triggered by the market's perception of credit uncertainty regarding a single company or a specific market sector. In these instances, fair value is determined based on limited available market information and other factors, principally from reviewing the issuer's financial statements and changes in credit ratings made by one or more ratings agencies.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or fair value less estimated costs to sell. Once sold, the loans are beyond the reach of COB in all respects and the purchasing investor has all rights of ownership, including the ability to pledge or exchange the loans.

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Most of the loans sold are without recourse. Gains or losses on loan sales are recognized at the time of sale, are determined by the difference between net sales proceeds and the carrying value of the loan sold, and are included in Consolidated Statements of Operations. Since loans held for sale are carried at the lower of cost or fair value, the fair value of loans held for sale is based on contractual agreements with independent third-party buyers. As such, we classify loans held for sale subjected to nonrecurring fair value adjustments as Level 2.

Loans Held for Investment

We do not record loans held for investment at fair value on a recurring basis. However, from time to time, a loan is considered impaired and the related impairment is charged against the allowance or a specific allowance is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as impaired, management determines the fair value of the loan to quantify impairment, should such exist. The fair value of impaired loans is estimated using one of several methods, including collateral net liquidation value, market value of similar debt, enterprise value, and discounted cash flows. Those impaired loans not requiring a specific allowance represent loans for which the fair value of the expected repayments or collateral meet or exceed the recorded investments in such loans. At September 30, 2013 and December 31, 2012, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. We record impaired loans as nonrecurring Level 3.

Other Real Estate Owned

OREO is adjusted to fair value upon transfer of the loans to OREO. Subsequently, OREO is carried at the lower of carrying value or fair value less estimated costs to sell. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral. Given the lack of observable market prices for identical properties, we record OREO as nonrecurring Level 3.

Interest Rate Locks and Forward Loan Sale Commitments

We enter into interest rate lock commitments and commitments to sell mortgages.  The fair value of interest rate lock commitments is based on servicing rate premium, origination income net of origination costs, fall out rates and changes in loan pricing between the commitment date and the balance sheet date. We record interest rate lock commitments as recurring level 3, and based on their immaterial value, has excluded them from the fair value table.

Mortgage Servicing Rights

The fair value of mortgage serving rights (MSR) is dependent upon a number of assumptions including the fee per loan, the cost to service, the expected loan prepayment rate, and the discount rate.  In determining the fair value of the existing MSR management reviews the key assumptions, analyzes pricing in the market for comparable MSR, and uses a third party provider to independently calculate the fair value of its MSR. We record mortgage servicing rights as recurring Level 3.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Assets and liabilities carried at fair value on a recurring basis at September 30, 2013 for continuing operations are summarized in the following table:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale debt securities:
U.S. government sponsored agencies	$	2,082	$	—	$	2,082	$	—
Residential mortgage-backed securities-GSE	357,447		—		357,447		—
Residential mortgage-backed securities-Private	21,258		—		21,258		—
Commercial mortgage-backed securities-GSE	21,644				21,644
Commercial mortgage-backed securities-Private	9,633		—		9,633		—
Business Development Company investment	2,640		2,640		—		—
Corporate notes	25,008		—		25,008		—
Total available-for-sale debt securities	439,712		2,640		437,072		—
Mortgage servicing rights	1,482		—		—		1,482
Total assets at fair value from continuing operations	$	441,194	$	2,640	$	437,072	$	1,482

Assets and liabilities carried at fair value on a recurring basis at December 31, 2012 for continuing operations are summarized in the following table:

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(dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale debt securities:
U.S. Treasury and government agencies	$	6,981	$	—	$	6,981	$	—
U.S. government sponsored agencies	22,173		—		22,173		—
States and political subdivisions	6,038		—		6,038		—
Residential mortgage-backed securities-GSE	441,074		—		441,074		—
Residential mortgage-backed securities-Private	22,945		—		22,945		—
Commercial mortgage-backed securities-GSE	23,359		—		23,359		—
Commercial mortgage-backed securities-Private	5,317		—		5,317		—
Corporate notes	36,963		—		36,963		—
Total available-for-sale debt securities	564,850		—		564,850		—
Mortgage servicing rights	726		—		—		726
Total assets at fair value from continuing operations	$	565,576	$	—	$	564,850	$	726

The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the periods indicated:

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Servicing Rights
(dollars in thousands)	Three Months Ended September 30,
	2013			2012
Balance, beginning of period	$	1,337		$	25
Total gains or losses (realized/unrealized):
Included in earnings, gross	235			225
Less amortization	(90		)	(2		)
Balance, end of period	$	1,482		$	248

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Servicing Rights
(dollars in thousands)	Nine Months Ended September 30,
	2013			2012
Beginning balance at January 1,	$	726		$	—
Total gains or losses (realized/unrealized):
Included in earnings, gross	959			250
Less amortization	(203		)	(2		)
Balance, end of period	$	1,482		$	248

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. This is due to further deterioration in the value of the assets.

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Assets measured at fair value on a nonrecurring basis are included in the following table at September 30, 2013 for continuing operations:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Impaired loans, net	$	2,477	$	—	$	—	$	2,477
Other real estate owned	25,271		—		—		25,271
Total assets at fair value from continuing operations	$	27,748	$	—	$	—	$	27,748

Assets measured at fair value on a nonrecurring basis are included in the following table at December 31, 2012 for continuing operations:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Impaired loans, net	$	13,575	$	—	$	—	$	13,575
Other real estate owned	48,480		—		—		48,480
Total assets at fair value from continuing operations	$	62,055	$	—	$	—	$	62,055

There are no assets or liabilities measured at fair value on a nonrecurring basis at September 30, 2013 or December 31, 2012 for discontinued operations.

Quantitative Information about Level 3 Fair Value Measurements

(dollars in thousands)	Fair Value at September 30, 2013		Valuation Techniques	Unobservable Input	Range
Impaired loans, net	$	2,477	Discounted appraisals	Collateral discounts	6.00% - 40.00%
Other real estate owned	25,271		Discounted appraisals	Collateral discounts	6.00% - 40.00%
Mortgage servicing rights	1,482		Discounted cash flows	Prepayment rate	10.00% - 25.00%
Mortgage servicing rights				Discount rate	6.00% - 10.00%

(dollars in thousands)	Fair Value at December 31, 2012		Valuation Techniques	Unobservable Input	Range
Impaired loans, net	$	13,575	Discounted appraisals	Collateral discounts	6.00%-40.00%
Other real estate owned	48,480		Discounted appraisals	Collateral discounts	6.00%-40.00%
Mortgage servicing rights	726		Discounted cash flows	Prepayment rate	10.00% - 30.00%
Mortgage servicing rights				Discount rate	6.00% - 12.00%

Level 3 Valuation Methodologies. Following is a description of the unobservable inputs used for Level 3 fair value measurements.

Disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value is required. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument.

Because no market exists for a portion of our financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value for each class of COB's financial instruments.

Cash and cash equivalents.Fair value equals the carrying value of such assets due to their nature and is classified as Level 1.

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Investment securities. The fair value of investment securities is based on quoted market prices, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. The fair value of equity investments in the restricted stock of the FRBR and FHLB approximates the carrying value. The fair value of investment securities is classified as Level 2.

Loans held for sale. Substantially all residential mortgage loans held for sale are pre-sold and their carrying value approximates fair value. We classified the fair value of loans held for sale as Level 2.

Loans held for investment. The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of variable rate loans with frequent repricing and negligible credit risk approximates book value. The fair value of loans is further discounted by credit and liquidity factors. We classified the fair value of loans as Level 3.

Accrued interest receivable and payable. The carrying amounts of accrued interest payable and receivable approximate fair value and are classified as Level 2 if the related asset or liability is classified as Level 2, or Level 3 if the related asset or liability is classified as Level 3.

Deposits. The fair value of noninterest-bearing and interest-bearing demand deposits and savings are the amounts payable on demand because these products have no stated maturity. The fair value of time deposits is estimated using the rates currently offered for deposits of similar remaining maturities and are classified as Level 2.

Borrowed funds. The carrying value of retail repurchase agreements is considered to be a reasonable estimate of fair value. The fair value of FHLB advances and other borrowed funds is estimated using the rates currently offered for advances of similar remaining maturities and is classified as Level 2. For the long term note payable, the current market rate for similar debt is substantially equal to the rate on this note, so its fair value approximates its carrying value.

Junior subordinated debentures. Included in junior subordinated debentures are variable rate trust preferred securities issued by COB. Fair values for the trust preferred securities were estimated by developing cash flow estimates for each of these debt instruments based on scheduled principal and interest payments and current interest rates. Once the cash flows were determined, a rate for comparable subordinated debt was used to discount the cash flows to the present value. The estimated fair value for our junior subordinated debentures have declined due to wider credit spreads (i.e., spread to LIBOR) on similar trust preferred issues. This is due, in part, to proposed bank regulatory changes in bank capital structure. We classified the fair value of junior subordinated debentures as Level 3.

Financial instruments with off-balance sheet risk. The fair value of financial instruments with off-balance sheet risk is considered to approximate carrying value, since the large majority of these future financing commitments would result in loans that have variable rates and/or relatively short terms to maturity. For other commitments, generally of a short-term nature, the carrying value is considered to be a reasonable estimate of fair value.

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The estimated fair values of financial instruments for continuing operations are as follows at the periods indicated:

	At September 30, 2013
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets of Continuing Operations:
Cash and cash equivalents	$	103,074	$	103,074	$	103,074	$	—	$	—
Investment securities: Available-for-sale	439,712		439,712		2,640		437,072		—
Investment securities: Held-to-maturity	153,684		146,474		—		146,474		—
Loans held for sale	2,734		2,734		—		2,734		—
Loans, net	1,169,755		1,137,425		—		—		1,137,425
Accrued interest receivable	6,527		6,527		—		1,735		4,792
Financial Liabilities of Continuing Operations:
Deposits	1,790,608		1,791,409		—		1,791,409		—
Retail repurchase agreements	12,422		12,422		—		12,422		—
Federal Home Loan Bank advances	73,295		77,010		—		77,010		—
Long term notes payable	5,244		5,244		—		—		5,244
Junior subordinated debentures	56,702		21,818		—		—		21,818
Accrued interest payable	2,410		2,410		—		439		1,971

	At December 31, 2012
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets of Continuing Operations:
Cash and cash equivalents	$	239,610	$	239,610	$	239,610	$	—	$	—
Investment securities: Available-for-sale	564,850		564,850		—		564,850		—
Loans held for sale	6,974		6,974		—		6,974		—
Loans, net	1,147,721		1,140,088		—		—		1,140,088
Accrued interest receivable	6,102		6,102		—		1,812		4,290
Financial Liabilities of Continuing Operations:
Deposits	1,906,988		1,910,927		—		1,910,927		—
Retail repurchase agreements	8,675		8,675		—		8,675		—
Federal Home Loan Bank advances	58,328		62,950		—		62,950		—
Junior subordinated debentures	56,702		18,760		—		—		18,760
Accrued interest payable	2,111		2,111		—		937		1,174

There were no transfers between valuation levels for any assets during the three and nine months ended September 30, 2013. If different valuation techniques are deemed necessary, we would consider those transfers to occur at the end of the period when the assets are valued.

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10. Accumulated Other Comprehensive Income

The following table presents the changes in our accumulated other comprehensive income (loss), net of tax, by component for the period indicated:

(Dollars in thousands)	Unrealized Gains (Losses) on Available For Sale Securities			Defined Benefit Plan Items			Total
Beginning balance January 1, 2013	$	3,650		$	(3,973	)	$	(323	)
Other comprehensive income (loss) before reclassifications	(12,221		)	—			(12,221		)
Amounts reclassified from accumulated other comprehensive income	(1,679		)	(461		)	(2,140		)
Net current period other comprehensive income	(13,900		)	(461		)	(14,361		)
Ending balance September 30, 2013	$	(10,250	)	$	(4,434	)	$	(14,684	)

The following table presents the reclassifications out of our accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2013:

(Dollars in thousands)	Amount Reclassified from AOCI
	Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013			Line Item in the Consolidated Statement of Operations
Available for sale securities:
Net realized gains on sale of securities	$	(50	)	$	(2,773	)	Securities gains (losses), net
Income tax benefit (expense)	19			1,095			Income tax benefit (expense)
Total, net of tax	(31		)	(1,678		)
Defined benefit plan items:
Net actuarial gains	(249		)	(762		)	Personnel expense
Income tax benefit (expense)	95			301			Income tax benefit (expense)
Total, net of tax	(154		)	(461		)
Total reclassifications for the period	$	(185	)	$	(2,139	)

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations

The following presents management's discussion and analysis of the financial condition and results of operations of COB. Certain reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation. This discussion should be read in conjunction with the financial statements and related notes included elsewhere in this quarterly Report on Form 10-Q. Results of operations for the periods included in this review are not necessarily indicative of results to be obtained during any future period.

Important Note Regarding Forward-Looking Statements

This quarterly Report on Form 10-Q contains statements that we believe are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. These statements generally relate to our financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking terminology, such as “believes,” “expects,” or “are expected to,” “plans,” “projects,” “goals,” “estimates,” “may,” “should,” “could,” “would,” “intends to,” “outlook” or “anticipates,” or variations of these and similar words, or by discussions of strategies that involve risks and uncertainties. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including but not limited to, those described in this quarterly Report on Form 10-Q. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information actually known to us at the time. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Forward-looking statements contained in this quarterly Report on Form 10-Q are based on current expectations, estimates and projections about our business, management's beliefs and assumptions made by management. These statements are not guarantees of our future performance and involve certain risks, uncertainties and assumptions (called Future Factors), which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements. Future factors include, without limitation:

• financial resources in the amount, at the times and on the terms required to support our future business;

• changes in interest rates, spreads on earning assets and interest-bearing liabilities, the shape of the yield curve and interest rate sensitivity;

• a prolonged period of low interest rates;

• continued and increased credit losses and material changes in the quality of our loan portfolio;

• continued decline in the value of our OREO;

• increased competitive pressures in the banking industry or in our markets;

• less favorable general economic conditions, either nationally or regionally, resulting in, among other things, a reduced demand for credit or other services;

• a slowdown in the housing markets, or an increase in interest rates, either of which may reduce demand for mortgages;

• changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board and Federal, State and local taxing authorities;

• the outcome of legislation and regulation affecting the financial services industry, including COB, including the effects resulting from the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III capital rules;

• changes in accounting principles and standards;

• adverse changes in financial performance or condition of our borrowers, which could affect repayment of such borrowers' outstanding loans;

• repurchase risk in connection with our mortgage line of business;

• reducing costs and expenses;

• increasing price and product/service competition by competitors;

• rapid technological development and changes;

• the effect of any mergers, acquisitions or other transactions to which we or our subsidiaries may from time to time be a party;

• the inaccuracy of assumptions underlying the establishment of our ALL;

• loss of one or more members of executive management;

• disruptions in or manipulations of our operating systems or the systems of our vendors due to, among other things, cybersecurity risks or otherwise; and

• our success at managing the risks involved in the foregoing.

All forward-looking statements speak only as of the date on which such statements are made, and COB undertakes no obligation to update any statement, to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

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Financial highlights are presented in the accompanying table.

Selected Financial Data

(dollars in thousands, except per share data)	As of and for Three Months Ended						As of and for Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Income Statement Data
Net interest income	$	17,382		$	15,202		$	47,969		$	46,431
Provision for (recovery of) loan losses	(350		)	32			(1,297		)	10,877
Noninterest income	4,487			4,643			16,267			15,001
Noninterest expense	17,927			24,602			66,931			84,365
Income (Loss) from continuing operations, before income taxes	4,292			(4,789		)	(1,398		)	(33,810		)
Income (Loss) from continuing operations, net of tax	4,006			(4,712		)	(3,773		)	(33,682		)
Loss from discontinued operations, net of tax	—			—			—			(27		)
Net income (loss)	4,006			(4,712		)	(3,773		)	(33,709		)
Net income (loss) to common shareholders	4,006			(4,712		)	(3,773		)	(33,709		)
Period End Balances
Assets	$	2,037,173		$	2,238,065		$	2,037,173		$	2,238,065
Loans held for sale (1)	2,734			8,212			2,734			8,212
Loans held for investment (2)	1,195,142			1,231,795			1,195,142			1,231,795
Allowance for loan losses (1)	25,387			30,859			25,387			30,859
Goodwill	4,205			4,205			4,205			4,205
Deposits	1,790,608			1,982,253			1,790,608			1,982,253
Borrowings	147,663			124,474			147,663			124,474
Shareholders' equity	80,802			106,873			80,802			106,873
Average Balances
Assets	$	2,002,237		$	2,247,437		$	2,057,905		$	2,322,484
Loans held for sale (1)	2,798			4,769			4,085			4,669
Loans held for investment (2)	1,185,559			1,257,460			1,146,248			1,253,252
Allowance for loan losses (1)	25,681			38,098			28,243			38,898
Goodwill	4,205			4,205			4,205			4,105
Deposits	1,775,529			1,989,669			1,822,906			2,054,628
Borrowings	131,033			125,621			126,650			124,221
Shareholders' equity	75,740			107,628			86,708			117,953
Per Common Share Data
Net income (loss) per common share from continuing operations - basic and diluted	$	0.18		$	(0.22	)	$	(0.17	)	$	(1.58	)
Net loss per common share from discontinued operations - basic and diluted	—			—			—			—
Net income (loss) per common share - basic and diluted	0.18			(0.22		)	(0.17		)	(1.58		)
Book value (3)	3.72			4.95			3.72			4.95
Tangible book value (3)	3.19			4.41			3.19			4.41
Performance Ratios
Return on average assets	0.79		%	(0.83		)%	(0.25		)%	(1.94		)%
Return on average tangible assets (3)	0.80			(0.84		)	(0.25		)	(1.95		)

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Return on average equity	20.98		(17.42	)	(5.82	)	(38.17	)
Return on average tangible equity (3)	24.71		(19.52	)	(6.71	)	(42.40	)
Net interest margin (tax equivalent)	3.76		2.95		3.41		2.94
Core noninterest expense as a percentage of average assets (3)	3.42		3.37		3.56		3.22
Asset Quality Ratios
Allowance for loan losses to period end loans held for investment (1)	2.12	%	2.51	%	2.12	%	2.51	%
Nonperforming loans to period end allowance for loan losses (1)	201.71		279.15		201.71		279.15
Net annualized charge-offs (recoveries) to average loans held for investment	(0.22	)	2.46		0.31		2.06
Nonperforming loans to loans held for investment (4)	4.28		6.99		4.28		6.99
Nonperforming assets to total assets (4)	4.14		7.46		4.14		7.46
Capital and Liquidity Ratios
Average equity to average assets	3.78	%	4.79	%	4.21	%	5.08	%
Leverage capital	5.83		5.68		5.83		5.68
Tier 1 risk-based capital	9.18		9.60		9.18		9.60
Total risk-based capital	12.38		12.47		12.38		12.47
Average loans held for investment to average deposits	66.77		63.20		62.88		61.00
Average loans held for investment to average deposits and borrowings	62.18		59.45		58.80		57.52

(1) Excludes discontinued operations.

(2) Loans held for investment, net of unearned income, before allowance for loan losses.

(3) Refer to the "Non-GAAP Measures" section in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

(4) Nonperforming loans and nonperforming assets include loans past due 90 days or more that are still accruing interest.

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Overview

CommunityOne Bancorp, or "COB" or the "Company" (which also refers to us and our subsidiaries on a consolidated basis), is a bank holding company incorporated in 1984 under the laws of the State of North Carolina. Through our ownership of CommunityOne Bank, N.A., or the "Bank", a national banking association headquartered in Asheboro, North Carolina, we offer a complete line of consumer, wealth management, mortgage and business banking services, including loan, deposit, cash management, investment management and trust services, to individual and business customers through operations located throughout central, southern and western North Carolina. The Bank also holds the stock of Dover Mortgage Company (“Dover”) and First National Investor Services, Inc. Dover previously engaged in the business of originating, underwriting and closing mortgage loans for sale in the secondary market. Dover ceased operations in the first quarter of 2011 and filed for Chapter 11 bankruptcy on February 15, 2012. First National Investor Services, Inc. holds deeds of trust for the Bank.

COB also owns Granite Mortgage, Inc., which ceased mortgage operations in 2009 and filed for Chapter 11 bankruptcy on February 15, 2012, and FNB United Statutory Trust I, FNB United Statutory Trust II, and Catawba Valley Capital Trust II, which were formed to facilitate the issuance of trust preferred securities.

On October 21, 2011, as part of the recapitalization of COB, COB acquired Bank of Granite Corporation and its subsidiary bank, Bank of Granite, through the merger of a wholly owned subsidiary of ours into Granite Corp. (the “Merger”). Bank of Granite was merged into the Bank on June 8, 2013. Our shareholders approved an amendment in our articles of incorporation to change our name from FNB United Corp. to CommunityOne Bancorp on June 20, 2013. This change, along with a change in our stock symbol from FNBN to COB, was implemented on July 1, 2013.

We earn revenue primarily from interest on loans and securities investments, mortgage banking income and fees charged for financial services provided to our customers. Offsetting these revenues are the cost of deposits and other funding sources, provision for loan losses and write-downs in the value of, gains and losses on disposition of and holding costs associated with our OREO, and other operating costs such as: salaries and employee benefits, occupancy, data processing expenses, merger related expenses and tax expense.

Progress on 2013 goals

As previously disclosed, we established four goals for 2013:

1. Complete the merger of Bank of Granite into the Bank during the second quarter of 2013,

2. Return the Company to profitability in the second half of 2013,

3. Continue to reduce problem asset levels and improve asset quality, and

4. Continue efforts to restore COB and the Bank to a satisfactory condition.

We completed our first goal during the second quarter when we successfully merged the Bank of Granite into the Bank. As a result of this merger, we consolidated six overlapping branches and our ATM network, completed our consolidation of operational functions, and completed our merger-related activities - all reducing the Bank's ongoing operating costs. Also at the end of the second quarter, we closed two additional branches to further reduce operating costs.

As a result of these efforts, we achieved the second goal by returning the Company to profitability in the third quarter, the first operating profit for the Company since the second quarter of 2008. In the third quarter, we had net income of $4.0 million, a $7.2 million improvement from the second quarter’s $(3.2) million net loss. Net of non-core items, our core earnings (see "Non-GAAP Measures" for further discussion) were $4.7 million in the third quarter. Net interest margin expanded to 3.76% in the second quarter from 3.27% in the second quarter of 2013, an increase of 49 basis points, as we received the full quarter of benefit of the deployment during the second quarter of lower yielding cash balances into the loan and securities portfolios, increasing the earning asset yield during the quarter by 44 basis points to 4.29%. The yield on the securities portfolio rose to 2.51%, from 2.44% in the second quarter of 2013, based on second quarter portfolio additions and yield increases in mortgage backed securities as a result of declines in expected prepayment speeds. The cost of interest-bearing deposits again fell 3 basis points during the quarter, the same as the second quarter, to 0.51%, from 0.54%, as a result of deposit mix and relationship focus strategies.

During the third quarter, we continued to make excellent progress in reducing the level of nonperforming assets. Asset quality improved again during the third quarter, with nonperforming loans declining 13%, or $7.8 million, to 4.28% of loans. OREO declined 7%, or $2.6 million, during the third quarter. In total, for the third quarter, nonperforming assets were reduced by $10.4 million, or 11%. We achieved very strong credit performance in the third quarter, with net recoveries on loans of $0.7 million, net recovery of loan losses of $0.4 million and net recovery on OREO, net of expenses, of $0.1 million. We do not expect significant additional OREO write-downs net of recoveries during the remainder of the year as we accelerated OREO appraisals for all OREO in the second quarter. Our year to date annualized loan charge-off rate was 0.31%, and at September 30, 2013 our allowance for loan losses was 2.12% of our loans held for investment.

40

Lastly, this quarter we also made important progress to restore our Company to a satisfactory condition. On September 27, 2013 the Department of Justice terminated the Deferred Prosecution Agreement relating to the Bank’s Bank Secrecy Act/Anti-Money Laundering program and the related case against the Bank that was pending in the U.S. District Court for the Western District of North Carolina dismissed. On November 5, 2013, the Federal Reserve Bank of Richmond (“FRBR”) terminated its Written Agreement with the Company which had been entered into on October 21, 2010. The Written Agreement had required, among other things, that the Company use its financial and managerial resources to serve as a source of strength to the Bank. With the termination of the Written Agreement the Company and the Bank are no longer subject to any formal supervisory orders.With the return of the Company to profitability this quarter, and the impact of other changes implemented since the recapitalization of the Company in 2011, we expect further progress in restoring the Company to a satisfactory condition in coming quarters.

Results of Operations

Net Interest Income

Our principal source of revenue is net interest income. Net interest income is the difference between interest income earned on interest-earning assets, primarily loans and investment securities, and interest expense paid on interest-bearing deposits and other interest-bearing liabilities. The net interest margin measures how effectively we manage the mix of interest-earning assets and interest-bearing liabilities and the difference between the interest income earned on interest-earning assets and the interest expense paid for funds to support those assets. Changes in the mix of interest-earning assets and interest-bearing liabilities, changes in the interest rates earned on interest-earning assets and interest rates paid on interest-bearing liabilities, the rate of growth of the interest-earning assets and interest-bearing liabilities base, the ratio of interest-earning assets to interest-bearing liabilities, and the management of interest rate sensitivity factor into fluctuations within net interest income. An analysis is presented in the Average Balances and Net Interest Income Analysis - Third Quarter for the three month periods ended September 30, 2013 and 2012, and in the Average Balances and Net Interest Income Analysis - Nine Months for the nine month periods ended September 30, 2013 and 2012.

Net interest margin (taxable equivalent) improved 81 basis points from 2.95% in the third quarter of 2012 to 3.76% in the third quarter of 2013. Net interest income on a taxable equivalent basis was $17.4 million for the three month period ended September 30, 2013, an increase of $2.1 million from $15.3 million for the same period in 2012. The increase in interest income is a result of higher yields on loans as a result of reduced levels of nonaccruing loans, the impact on accretion of income in the Purchased Impaired loan portfolio of improved cash flow forecasts for that portfolio, and the result of deploying cash invested at low short term rates into higher-yielding and longer term securities. During the third quarter of 2013, the accretion of purchase accounting marks totaled $2.1 million, compared to $1.4 million in the third quarter of 2012. The yield on investment securities continued to improve as a result of investments purchased in the second quarter of 2013 and the impact of prepayment expectations as a result of rising interest rates in the mortgage-backed security portfolio.

The yield on average earning assets increased by 56 basis points during the third quarter of 2013 to 4.29% from 3.73% in the third quarter of 2012. The cost of interest-bearing liabilities declined during the third quarter of 2013 by 25 basis points to 0.61% compared to 0.86% in the third quarter of 2012, primarily as a result of the deposit mix shift to lower rate demand, savings and money market deposits, declines in interest rates on all deposit products, and lower rates on FHLB borrowings as the Company converted $50 million of fixed rate FHLB advances to floating rate during the second quarter. The cost of interest-bearing deposits declined 25 basis points, or 33%, from 0.76% for the third quarter of 2012 to 0.51% for the third quarter of 2013 as the percentage of CDs in our deposit portfolio declined from 42.2% to 34.0% at September 30, 2012 and 2013, respectively.

The following table summarizes the average balance sheets and net interest income/margin analysis for the three months ended September 30, 2013 and 2012. The interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities shown in the table are derived by dividing interest income and expense by the average balances of interest-earning assets or interest-bearing liabilities, respectively.

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Average Balances and Net Interest Income Analysis - Third Quarter

	Three Months Ended September 30,
	2013						2012
					Average						Average
(dollars in thousands)	Average		Income /		Yield /		Average		Income /		Yield /
	Balance (3)		Expense		Rate		Balance (3)		Expense		Rate
Interest-earning assets:
Loans (1)(2)	$	1,188,357	$	16,012	5.35	%	$	1,262,229	$	16,312	5.14	%
Taxable investment securities	595,773		3,774		2.51		475,032		2,667		2.23
Other earning assets	55,229		115		0.83		317,932		276		0.35
Total earning assets	1,839,359		19,901		4.29		2,055,193		19,255		3.73
Noninterest-earning assets:
Cash and due from banks	27,401						31,202
Goodwill and other intangible assets	11,402						11,502
Other assets, net	124,075						149,540
Total assets	$	2,002,237					$	2,247,437
Interest-bearing liabilities:
Interest-bearing demand deposits	$	330,934	$	253	0.30	%	$	346,289	$	335	0.38	%
Savings deposits	80,412		21		0.10		73,274		28		0.15
Money market deposits	445,639		265		0.24		445,192		436		0.39
Time deposits	618,284		1,355		0.87		867,963		2,521		1.16
Total interest-bearing deposits	1,475,269		1,894		0.51		1,732,718		3,320		0.76
Retail repurchase agreements	10,871		6		0.22		10,574		6		0.23
Federal Home Loan Bank advances	59,932		289		1.91		58,345		391		2.67
Other borrowed funds	60,230		282		1.86		56,702		288		2.02
Total interest-bearing liabilities	1,606,302		2,471		0.61		1,858,339		4,005		0.86
Noninterest-bearing liabilities and shareholders' equity:
Noninterest-bearing demand deposits	300,260						256,951
Other liabilities	19,935						24,519
Shareholders' equity	75,740						107,628
Total liabilities and shareholders' equity	$	2,002,237					$	2,247,437
Net interest income and net yield on earning assets (4)			$	17,430	3.76	%			$	15,250	2.95	%
Interest rate spread (5)					3.68	%					2.87	%

(1) The fully tax equivalent basis is computed using a federal tax rate of 35%.

(2) Average loan balances include nonaccruing loans and loans held for sale.

(3) Average balances include market adjustments to fair value for securities and loans held for sale.

(4) Net yield on earning assets is computed by dividing net interest income by average earning assets.

(5) Earning asset yield minus interest bearing liabilities rate.

42

Net interest income on a taxable equivalent basis was $48.1 million for the nine month period ended September 30, 2013, an increase of $1.5 million from $46.6 million for the same period in 2012. The increase in net interest income was as a result of a shift in mix of the earning asset base to loans and securities away from cash invested at low interest rates, a decrease in interest-bearing liability levels of $252 million, an improvement in the level of low cost core deposits, and a decrease in the rates paid on those liabilities, offset by an overall reduction in the earning asset base of $216 million.

Net interest margin (taxable equivalent) improved 47 basis points from 2.94% in the first nine months of 2012 to 3.41% in the first nine months of 2013. As described above, the increase was attributable primarily to the deployment of cash from low yielding bank accounts to higher-yielding investment securities, as well as management's strategy to shift the mix of deposits to lower rate demand, savings and money market deposits. The yield on average earning assets increased by 20 basis points during the first nine months of 2013 to 3.98% from 3.78% in the comparable portion of 2012. The increase in average yield was the result of deploying cash invested at low short term rates into higher-yielding and longer term securities, partially offset by a decline in loan and investment securities portfolio yields. The cost of interest-bearing liabilities declined during the first nine months of 2013 by 26 basis points to 0.65% compared to 0.91% in the same period of 2012, primarily as a result of the deposit mix shift to low cost core deposits and, declines in interest rates on all deposit products. During the second quarter of 2013, we restructured $50 million of Federal Home Loan Bank advances from fixed rate to floating rate, which further reduced interest costs. The cost of interest-bearing deposits declined 29 basis points, or 35%, from 0.83% for the first nine months of 2012 to 0.54% for the comparable period of 2013.

The following table summarizes the average balance sheets and net interest income/margin analysis for the nine months ended September 30, 2013 and 2012. The interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities shown in the table are derived by dividing interest income and expense by the average balances of interest-earning assets or interest-bearing liabilities, respectively.

43

Average Balances and Net Interest Income Analysis - Nine Months

	Nine Months Ended September 30,
	2013						2012
					Average						Average
(dollars in thousands)	Average		Income /		Yield /		Average		Income /		Yield /
	Balance (3)		Expense		Rate		Balance (3)		Expense		Rate
Interest-earning assets:
Loans (1)(2)	$	1,150,333	$	45,315	5.27	%	$	1,257,921	$	50,601	5.37	%
Taxable investment securities	579,599		10,366		2.39		456,836		8,238		2.41
Other earning assets	158,210		524		0.44		398,463		937		0.31
Total earning assets	1,888,142		56,205		3.98		2,113,220		59,776		3.78
Noninterest-earning assets:
Cash and due from banks	30,566						31,668
Goodwill and other intangible assets	11,474						11,754
Other assets, net	127,723						165,731
Assets of discontinued operations	—						111
Total assets	$	2,057,905					$	2,322,484
Interest-bearing liabilities:
Interest-bearing demand deposits	$	346,730	$	784	0.30	%	$	348,145	$	1,099	0.42	%
Savings deposits	79,293		60		0.10		72,187		81		0.15
Money market deposits	450,197		759		0.23		439,296		1,418		0.43
Time deposits	669,197		4,628		0.92		943,897		8,646		1.22
Total interest-bearing deposits	1,545,417		6,231		0.54		1,803,525		11,244		0.83
Retail repurchase agreements	9,303		15		0.22		9,163		23		0.34
Federal Home Loan Bank advances	58,862		1,037		2.36		58,356		1,057		2.42
Other borrowed funds	58,485		809		1.85		56,702		877		2.07
Total interest-bearing liabilities	1,672,067		8,092		0.65		1,927,746		13,201		0.91
Noninterest-bearing liabilities and shareholders' equity:
Noninterest-bearing demand deposits	277,489						251,103
Other liabilities	21,641						25,682
Shareholders' equity	86,708						117,953
Total liabilities and shareholders' equity	$	2,057,905					$	2,322,484
Net interest income and net yield on earning assets (4)			$	48,113	3.41	%			$	46,575	2.94	%
Interest rate spread (5)					3.33	%					2.87	%

(1) The fully tax equivalent basis is computed using a federal tax rate of 35%.

(2) Average loan balances include nonaccruing loans and loans held for sale.

(3) Average balances include market adjustments to fair value for securities and loans held for sale.

(4) Net yield on earning assets is computed by dividing net interest income by average earning assets.

(5) Earning asset yield minus interest bearing liabilities rate.

44

Provision for Loan Losses

The provision for loan loss provides a level of allowance considered appropriate to absorb management's estimate of losses inherent in the loan portfolio. The amount of this charge is affected by several considerations, including management's evaluation of various risk factors in determining the adequacy of the allowance (see additional discussion under “Asset Quality”), actual loan loss experience and changes in the composition of the loan portfolio.

During the three month and nine months periods ended September 30, 2013, the provision for (recovery of) loan losses, excluding discontinued operations, was $(0.4) million and $(1.3) million, respectively, compared to $32 thousand and $10.9 million, respectively, in the same periods of 2012, as a result of reductions in nonperforming loans, the impact of declining loss rates net of recoveries in recent periods, and an increase in forecasted cash flows for Granite PI loans that resulted in the reversal of previously recorded impairment on pools of loans within this portfolio.

We have also experienced lower net charge-offs, reduced levels of classified assets and lower levels of past dues compared to 2012, primarily as a result of reductions in the overall size of the loan portfolio and lower levels of nonperforming loans. During the three and nine month periods ended September 30, 2013, net charge-offs (recoveries) totaled $(0.7) million and $2.6 million, respectively, or (0.22)% and 0.31% of annualized average loans, respectively. These charge-off levels are improved from net charge-offs of $7.7 million and $19.4 million, respectively, or 2.46% and 2.06% of annualized average loans, respectively, for the three and nine month periods ended September 30, 2012.

Noninterest Income

Noninterest income includes mortgage banking income, fees and service charges on deposit accounts, fees from cardholder and merchant services, fees and commissions related to trust and investment services, gains and losses on the sales of securities, and all other types of noninterest revenue.

For the three months ended September 30, 2013, noninterest income was $4.5 million compared to $4.6 million for the same period in 2012, a decrease of $156 thousand, or 3%, primarily the result of a $308 thousand decline in mortgage loan income compared to the same period of 2012, partially offset by smaller increases in cardholder and merchant services income and trust income. Core noninterest income, which excludes securities gains and losses, was $4.4 million, a decrease of $239 thousand from the third quarter of 2012. See "Non-GAAP Measures" for further discussion. Service charge income was $80 thousand higher as compared to the third quarter of 2012, or 4.5%.

For the nine months ended September 30, 2013, noninterest income was $16.3 million compared to $15.0 million for the same period in 2012, an increase of $1.3 million, or 8%, primarily the result of a $0.8 million increase in net gains on sales of investment securities in the first nine months of 2013, compared to the same period in 2012. Core noninterest income was $13.5 million, compared to $13.1 million in the first nine months of 2012. Mortgage loan income increased $1.0 million as we had a full nine months of loan sales to Fannie Mae in 2013. Service charge income was $0.5 million lower as compared to the first nine months of 2012 primarily as a result of a one-time 60 day fee waiver given to customers at the Bank as part of the product conversion completed in February of 2013, and the impact of changes to NSF policies and overdraft protection products beginning in the second half of 2012.

45

	Three Months Ended					Nine Months Ended
(dollars in thousands)	September 30, 2013		September 30, 2012			September 30, 2013		September 30, 2012
Noninterest Income
Service charges on deposit accounts	$	1,858	$	1,778		$	4,915	$	5,424
Mortgage loan income	420		728			2,085		1,051
Cardholder and merchant services income	1,161		1,119			3,403		3,436
Trust and investment services	329		234			964		692
Bank owned life insurance	267		290			805		910
Other service charges, commissions and fees	365		252			960		777
Securities (loss)/gains, net	50		(33		)	2,773		1,923
Other income	37		275			362		788
Total noninterest income	4,487		4,643			16,267		15,001
Less:
Securities (loss) gains, net	50		(33		)	2,773		1,923
Core noninterest income (1)	$	4,437	$	4,676		$	13,494	$	13,078

(1) See "Non-GAAP Measures"

Noninterest Expense

Noninterest expense includes salary and employee benefits, occupancy and equipment, and other expenses associated with our operations, in addition to credit related expenses related to OREO and loan collections, and one-time merger-related expenses incurred to acquire and integrate Granite.

Noninterest expenses were $17.9 million in the third quarter of 2013 compared to $24.6 million in the same period of 2012, a decrease of $6.7 million, or 27%. The decrease in noninterest expense was primarily attributable to a $3.7 million decrease in OREO expense, as a result of our substantial reduction in OREO assets from the prior year and stabilizing real estate prices during 2013. Professional fees declined by $1.1 million from 2012 on lower legal and consulting fees. There were no merger related expenses in the third quarter of 2013 compared to $0.9 million in 2012, while FDIC insurance premiums declined by $0.4 million as a result of our improved risk profile and lower asset balances.

For the nine months ended September 30, 2013, noninterest expenses declined $17.4 million, or 21%, from the same period of 2012, to $66.9 million. OREO expense declined $17.5 million from the first nine months of 2012, as a result of the decline in the OREO portfolio and stabilizing real estate prices during 2013 described above. Professional fees declined by $1.8 million on lower legal and consulting fees, while FDIC insurance premiums declined $0.9 million on improved credit. These declines were partially offset by loan collection expenses, which rose $1.4 million, and merger-related expense rose $1.1 million, from the prior year comparable period as a result of the completion of the bank merger in 2013. Personnel expenses rose $0.8 million from the first nine months of 2012, as we have added credit staff to manage the problem asset portfolio, and added mortgage staff and incurred mortgage commission expenses in connection with rebuilding our mortgage activities.

As a result of the level of problem assets, actions taken to dispose of assets, actions taken to restructure the balance sheet, and the expenses to acquire and integrate Granite, there are a significant number of non-core items within our noninterest expense. Excluding the items that we identify as non-core, other real estate expenses, loan collection expenses, merger-related expense, branch closure and restructuring expenses, mortgage and litigation accruals and rebranding expenses, the core noninterest expense ("Core NIE"), was $17.1 million in the third quarter of 2013. See "Non-GAAP Measures" for further discussion. This Core NIE was $1.8 million lower than Core NIE of $18.9 million in the same quarter in 2012. On a comparative basis, Core NIE as a percent of average assets was 3.42% in the third quarter of 2013, up slightly from 3.37% in the same quarter of 2012, but improved from 3.59% in the second quarter of this year. For the nine months ended September 30, 2013, Core NIE was $54.9 million, or $2.0 million lower than Core NIE of $56.9 million in the same period of 2012. Despite the reduction in Core NIE year over year, Core NIE as a percent of average assets was 3.56% in the first nine months of 2013, 34 basis points higher than 3.22% in the same period of 2012, primarily as a result of the declining asset base. As a result of the completion of the merger and the non-merger related closure of two branches in the second quarter of 2013, as well as other ongoing cost reduction efforts, we expect that cost synergies related to branch, back office and vendor consolidation will result in a lower Core NIE and Core NIE to average assets ratio in future periods.

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Full-time equivalent employees averaged 610 employees for the third quarter of 2013 versus 637 employees for the third quarter of 2012. At September 30, 2013, there were 600 full-time equivalent employees.

	Three Months Ended					Nine Months Ended
(dollars in thousands)	September 30, 2013			September 30, 2012		September 30, 2013			September 30, 2012
Noninterest Expense
Personnel expense	$	9,663		$	9,717	$	31,149		$	30,351
Net occupancy expense	1,558			1,710		5,060			4,885
Furniture, equipment and data processing expense	2,050			2,012		6,512			6,395
Professional fees	222			1,336		2,475			4,265
Stationery, printing and supplies	136			152		509			446
Advertising and marketing	150			166		994			420
Other real estate owned expense	(98		)	3,602		4,116			21,594
Credit/debit card expense	627			432		1,525			1,279
FDIC insurance	646			1,056		1,980			2,879
Loan collection expense	1,120			1,119		3,784			2,379
Merger-related expense	—			939		3,498			2,357
Core deposit intangible amortization	352			352		1,056			1,056
Other expense	1,501			2,009		4,273			6,059
Total noninterest expense	17,927			24,602		66,931			84,365
Less:
Other real estate owned expense	(98		)	3,602		4,116			21,594
Merger-related expense	—			939		3,498			2,357
Loan collection expense	1,120			1,119		3,784			2,379
Rebranding expenses	6			—		616			—
Granite mortgage and litigation accrual	(117		)	—		(487		)	1,100
Branch closure and restructuring expense	(105		)	—		497			—
Core noninterest expense (1)	$	17,121		$	18,942	$	54,907		$	56,935

(1) See "Non-GAAP Measures"

Provision for Income Taxes

Excluding discontinued operations, we had income tax expense (benefit) totaling $0.3 million for the third quarter of 2013 and $(77) thousand for the third quarter of 2012. For the first nine months of 2013, we recorded income tax expense of $2.4 million, compared to income tax benefit of $128 thousand during the first nine months of 2012. Our provision for income taxes, as a percentage of loss before income taxes, excluding discontinued operations, was 6.7% and 1.6% for the three months ended September 30, 2013 and September 30, 2012, respectively, and was (169.9)% and 0.1% for the nine months ended September 30, 2013 and September 30, 2012, respectively. Income tax expense in the first nine months of 2013 is primarily the result of the reduction of deferred tax liabilities during the period, offset by an increase in the deferred tax assets arising from losses in the investment securities portfolio for which no valuation allowance is required.

Balance Sheet Review

Total assets at September 30, 2013 were $2,037.2 million, a decrease of $114.4 million, or 5.3%, compared to total assets of $2,151.6 million at December 31, 2012.

Cash and interest-bearing balances were $103.1 million at September 30, 2013, a decrease of $136.5 million, or 57%, compared to $239.6 million at December 31, 2012, primarily attributable to the use of cash to purchase investment securities, purchase of residential loan pools and to fund reductions in the deposit portfolio.

Total investment securities increased $28.5 million during the first nine months of 2013, from $564.9 million at December 31, 2012 to $593.4 million at September 30, 2013, an increase of 5%. The portfolio is comprised of U.S. federal agency securities and federal

47

agency MBSs (GSE), private residential MBSs, commercial MBSs (GSE), private commercial MBSs, Business Development Company investments and corporate debt securities. During the first quarter of 2013, we began to purchase investment securities to be held to maturity. At September 30, 2013 there were $153.7 million of investment securities so designated.

Gross loans held for investment increased $18.1 million, or 2%, during the first nine months of 2013, from $1,177.0 million at December 31, 2012 to $1,195.1 million at September 30, 2013. During the nine month period, we purchased $134.1 million of residential mortgage pools, reduced criticized loans by $66.2 million, and received principal payments of $55.4 million on the residential mortgage pools purchased in 2012. The pass rated loan portfolio has grown $84.3 million, or 9%, in 2013.

Other real estate owned ("OREO") and other foreclosed property decreased $30.0 million during the first nine months of 2013, from $63.1 million at December 31, 2012 to $33.2 million at September 30, 2013, as a result of $37.1 million of OREO sales and $3.0 million of write-downs and losses, partially offset by the addition of $10.4 million of OREO properties. At September 30, 2013, 13 assets with a net carrying amount of $7.2 million were under contract for sale. Estimated losses, if any, with these sales have been recognized in the Consolidated Statements of Operations in the first nine months of 2013. Actual gains, if any, will be recorded at the time of sale.

Total deposits were $1,790.6 million at September 30, 2013, a decline of $116.4 million, or 6% from $1,907.0 million at December 31, 2012. We continued to shift the mix of deposits from higher cost time deposits, including higher rate CD's and brokered CD's, towards lower rate demand, savings and money market deposits. At September 30, 2013, CD's comprised 34.0% of total deposits compared to 40.0% at December 31, 2012. Noninterest-bearing deposits increased $56.9 million, or 23%, from $251.2 million at December 31, 2012 to $308.2 million at September 30, 2013. This was primarily the result of certain accounts being mapped from interest bearing to noninterest bearing during the bank merger in June 2013. Total cost of interest-bearing deposits declined by 29 basis points from 0.83% in the first nine months of 2012 to 0.54% in the first nine months of 2013. The cost of all deposits, including noninterest-bearing deposits, fell to 0.46% for the first nine months of 2013, a decline of 27 basis points from 0.73% for the first nine months of 2012.

Shareholders' equity at September 30, 2013 was $80.8 million as compared to $98.4 million at December 31, 2012. The book value per share was $3.72 at September 30, 2013 and average equity to average assets was 4.21% for the nine months ended September 30, 2013 as compared to a book value per share of $4.54 and average equity to average assets of 5.00% for the year ended December 31, 2012. The change in shareholders' equity reflects a net loss to common shareholders for the nine months ended September 30, 2013 of $3.8 million as well as $14.4 million other comprehensive loss, net of tax, including unrealized loss on available-for-sale securities described below. We did not declare common dividends during the nine months ended September 30, 2013, and will not be able to pay any dividends until such time as we either receive or are not required to receive regulatory approval for the payment of dividends. We do not expect to pay dividends to shareholders for the foreseeable future.

Investment Securities

We evaluate all securities on a quarterly basis, and more frequently as economic conditions warrant, to determine if an other-than-temporary impairment (“OTTI”) exists. In evaluating the possible impairment of securities, consideration is given to the length of time and the extent to which the fair value has been less than book value, the financial conditions and near-term prospects of the issuer, and the ability and intent of COB to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer's financial condition, we may consider whether the securities are issued by the federal government or its agencies or government sponsored agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer's financial condition. If management determines that an investment experienced an OTTI, the loss is recognized in the income statement as a realized loss. Any recoveries related to the value of these securities are recorded as an unrealized gain (as other comprehensive income (loss) in shareholders' equity) and not recognized in income until the security is ultimately sold. As of September 30, 2013, there were no securities considered by COB to have OTTI.

During the first nine months of 2013, changes in the overall level of interest rates resulted in net unrealized losses of $22.6 million in our available-for-sale portfolio. As a result, an unrealized loss of $13.9 million in the first nine months of 2013, net of deferred taxes of $8.7 million, has been recorded in Other Comprehensive Income. We do not expect to sell these securities and realize these losses.

Asset Quality

Management considers asset quality to be of primary importance. A formal loan review function, independent of loan origination, is used to identify and monitor problem loans. This function reports directly to the Risk Management Committee of the Board of Directors, and is independent of loan origination.

During 2013, our asset quality has continued to improve. Since December 31, 2012, nonperforming loans have declined 36% and OREO has declined 47%. We recorded net loan charge-offs of $2.6 million in the first nine months of 2013, and OREO write-downs, net of gain on sale of OREO, were $3.0 million.

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Acquired Loans

Loans acquired in the Merger ("Granite Purchased Loans") include purchased impaired loans ("PI loans") and purchased contractual loans ("PC loans"). At September 30, 2013 there were $204.7 million of Granite Purchased Loans, of which $28.1 million were PC loans, $28.7 million were PI loans with no subsequent credit deterioration and $147.9 million were PI loans with subsequent credit deterioration.

PI loans are segregated into pools and recorded at estimated fair value on the date of acquisition without the carryover of the related ALL. PI loans are accounted for under ASC 310-30 when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition we will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the date of acquisition may include statistics such as past due status, nonaccrual status and risk grade. PI loans generally meet our definition for nonaccrual status, however, even if the borrower is not currently making payments, we will classify loans as accruing if we can reasonably estimate the amount and timing of future cash flows.The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference.

Periodically, we estimate the expected cash flows for each pool of the PI loans and evaluate whether the expected cash flows for each pool have changed from prior estimates. Decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or reclassification from nonaccretable difference to accretable yield with a positive impact on future interest income. Excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

We have elected to treat the Granite portfolio under ASC 310-30, with the exception of performing revolving consumer and commercial loans, which are being accounted for under ASC 310-20.

At September 30, 2013, an ALL of $4.1 million was required for the PI loans, and these loans are presented on an accruing basis.

Nonperforming Assets

Nonperforming assets are comprised of nonaccrual loans, accruing loans past due 90 days or more, other repossessed assets and OREO. Nonperforming loans are loans placed in nonaccrual status when, in management's opinion, the collection of all or a portion of interest becomes doubtful. Loans are returned to accrual status when the factors indicating doubtful collectability cease to exist and the loan has performed in accordance with its terms for a demonstrated period of time. OREO represents real estate acquired through foreclosure or deed in lieu of foreclosure and is generally carried at fair value, less estimated costs to sell.

The level of nonperforming loans continued to decline, from $79.5 million or 6.75% of loans held for investment at December 31, 2012, to $51.2 million, or 4.28% of loans held for investment at September 30, 2013. OREO and repossessed assets were $33.2 million at September 30, 2013, compared to $63.1 million at December 31, 2012, a decline of $30.0 million. During the second quarter of 2013, we accelerated the periodic reappraisal of our OREO portfolio and received third party appraisals on our entire OREO portfolio. During the first nine months of 2013, we recorded net write-downs (net of gains on sales) of OREO of $3.0 million as compared to $16.1 million during the first nine months of 2012. We have experienced stabilizing real estate prices in 2013, and OREO sales in excess of additions to the portfolio. Total nonperforming assets declined 41% from $142.6 million at December 31, 2012 to $84.4 million at September 30, 2013, and represented 4.14% of total assets, an improvement from 6.63% at December 31, 2012.

Commercial real estate secured lending (including commercial, construction and land development) is a significant but decreasing portion of our commercial loan portfolio. These categories constitute $462.6 million, or approximately 39%, of our total loans held for investment portfolio at September 30, 2013, down from 43% at December 31, 2012. These categories are generally affected by changes in economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax and other laws and acts of nature.

Allowance for Loan Losses

In determining the ALL and any resulting provision to be charged against earnings, particular emphasis is placed on the results of the loan review process. Consideration is also given to a review of individual loans, historical loan loss experience, the value and adequacy of collateral, as well as the economic conditions in our market area. For loans determined to be impaired, the allowance is based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans. This evaluation is inherently subjective as it requires material estimates, including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. In addition, as an integral part of its examination process, the OCC periodically reviews the Bank's ALL and may require the Bank to recognize changes to the allowance based on its judgments about information available to it at the time of its examinations. Loans are charged off when, in the opinion of management, they are deemed to be uncollectible. Recognized losses are charged against the allowance, and subsequent recoveries are added to the allowance.

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Estimated credit losses should meet the criteria for accrual of a loss contingency, i.e., a provision to the ALL, set forth in GAAP. Our methodology for determining the ALL is based on the requirements of GAAP, the Interagency Policy Statement on the Allowance for Loan and Lease Losses and other regulatory and accounting pronouncements. The ALL is determined by the sum of three separate components:  (i) the impaired loan component, which addresses specific reserves for impaired loans; (ii) the general reserve component, which addresses reserves for pools of homogeneous loans; and (iii) an unallocated reserve component (if any) based on management's judgment and experience. The loan pools and impaired loans are mutually exclusive; any loan that is impaired should be excluded from its homogenous pool for purposes of that pool's reserve calculation, regardless of the level of impairment. However, we have established a de minimis threshold for loan exposures that, if found to be impaired, will have impairment determined by applying the same general reserve rate as nonimpaired loans within the same pool.

The allowance for loan losses of $29.3 million at December 31, 2012 decreased by 13% to $25.4 million at September 30, 2013. The ALL, as a percentage of loans held for investment, amounted to 2.12% at September 30, 2013 compared to 2.49% at December 31, 2012. Net charge-offs were $2.6 million in the first nine months of 2013 compared to net charge-offs of $19.4 million in the first nine months of 2012. Annualized net charge-offs in the first nine months of 2013 were 0.31% of average loans, compared to annualized net charge-offs of 2.06% in the same period of 2012. A substantial portion of 2013 charge-offs were related to impaired loans, with specific reserves established in prior periods.

Actual past due loans and loan charge-offs have declined and management continues to diligently work to improve asset quality. Management believes the ALL of $25.4 million at September 30, 2013 is adequate to cover probable losses inherent in the loan portfolio; however, assessing the adequacy of the allowance is a process that requires considerable judgment. Management's judgments are based on numerous assumptions about current events that it believes to be reasonable, but which may or may not be valid. Thus, there can be no assurance that loan losses in future periods will not exceed the current allowance or that future increases in the allowance will not be required. No assurance can be given that management's ongoing evaluation of the loan portfolio in light of changing economic conditions and other relevant circumstances will not require significant future additions to the allowance, thus adversely affecting the operating results of COB. Additional information on the ALL is presented in Note 5 to the consolidated financial statements.

Historical loss rates are calculated by associating losses to the risk-graded pool to which they relate for each of the previous eight quarters. Then, using a look back period consisting of the twenty most recent quarters, loss factors are calculated for each risk-graded pool using a simple average. This represents a change in methodology which began in the third quarter of 2013. Previously, we used a look back period beginning in the third quarter of 2006 and a weighted average of losses. The impact of this change was immaterial to the allowance calculation.

In addition to the Bank's ability to use its own historical loss data and migration between risk grades, it has a rigorous process for computing the qualitative factors that impact the ALL. A committee, independent of the historical loss migration team, reviews risk factors that may impact the ALL. Some factors are statistically quantifiable, such as concentration, growth, delinquency, and nonaccrual risk by loan type, while other factors are qualitative in nature, such as staff competency, competition within our markets, economic and regulatory changes impacting the loans held for investment.

The following table presents COB's investment in loans considered to be impaired and related information on those impaired loans as of September 30, 2013 and December 31, 2012:

	September 30, 2013				December 31, 2012
(dollars in thousands)	Balance		Associated Reserves		Balance		Associated Reserves
Impaired loans, not individually reviewed for impairment	$	4,550	$	—	$	6,017	$	—
Impaired loans, individually reviewed, with no impairment	49,356		—		62,282		—
Impaired loans, individually reviewed, with impairment	2,963		486		15,312		1,737
Total impaired loans *	$	56,869	$	486	$	83,611	$	1,737
Purchased impaired loans with subsequent deterioration	147,852		4,066		192,115		5,373
Purchased impaired loans with no subsequent deterioration	28,741		—		36,277		—
Total Reserves			4,552				7,110
Average impaired loans calculated using a simple average	$	61,837			$	94,754
* Included at September 30, 2013 and December 31, 2012 were $6.7 million and $4.5 million, respectively, in restructured and performing loans.

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Liquidity Management

Liquidity management refers to the ability to meet day-to-day cash flow requirements based primarily on activity in loan and deposit accounts of COB's customers. Deposit withdrawals, loan funding and general corporate activity create a need for liquidity. Liquidity is derived from sources such as deposit growth, maturity, calls, or sales of investment securities, principal and interest payments on loans and access to borrowed funds or lines of credit.

Consistent with the general approach to liquidity, loans and other assets of COB are funded primarily by local core deposits. To date, a stable retail deposit base and a modest amount of brokered deposits have been adequate to meet our loan obligations, while maintaining the desired level of immediate liquidity. Additionally, an investment securities portfolio is available for both immediate and secondary liquidity purposes.

During the first quarter of 2012, we resumed deferring the payment of cash dividends on its outstanding junior subordinated debentures.

As of September 30, 2013, available borrowing under credit lines totaled $73.2 million, compared to $41.4 million at December 31, 2012. The Company can also access $314.2 million of additional borrowings from the FHLB under credit lines by pledging additional collateral.

At September 30, 2013, $94.1 million of the investment securities portfolio was pledged to secure public deposits, $18.4 million was pledged to retail repurchase agreements and $78.9 million was pledged to others, leaving $394.1 million available as lendable collateral.

Asset/Liability Management and Interest Rate Sensitivity

One of the primary objectives of asset/liability management is to maximize the net interest margin while minimizing the earnings risk associated with changes in interest rates. One method used to manage interest rate sensitivity is to measure, over various time periods, the interest rate sensitivity positions, or gaps. This method, however, addresses only the magnitude of timing differences and does not address earnings or market value. Therefore, management uses an earnings simulation model to prepare, on a regular basis, earnings projections based on a range of interest rate scenarios to more accurately measure interest rate risk.

COB's balance sheet continued to be asset-sensitive at September 30, 2013. During the year, increases in long-term interest rates that extended the duration of our fixed-rate mortgage backed investment securities portfolio, purchases of $134 million of fixed-rate residential mortgage pools and the conversion of $50 million of fixed rate FHLB advances to floating rate have reduced our overall level of asset sensitivity. An asset-sensitive position means that net interest income will generally move in the same direction as interest rates. For instance, if interest rates increase, net interest income can be expected to increase, and if interest rates decrease, net interest income can be expected to decrease. COB's asset sensitivity is primarily derived from cash and due from banks position, prime-based commercial loans that adjust as the prime interest rate changes and the long duration of its indeterminate term deposits. These prime-based loans are primarily funded by deposits that are not expected to reprice as quickly as the loans. Since the prime rate is not expected to decline below current levels, management believes COB's risk to lower interest rates is low.

Capital Adequacy and Resources

Under guidelines established by the Federal Reserve Board and the OCC, capital adequacy is currently measured for regulatory purposes by certain risk-based capital ratios, supplemented by a leverage capital ratio. The guidelines define an institution's total qualifying capital as having two components: Tier 1 capital, which must be at least 50% of total qualifying capital and is mainly comprised of common equity, retained earnings and qualifying preferred stock, less certain intangibles; and Tier 2 capital, which may include the ALL up to a maximum of 1.25% of risk weighted assets, qualifying subordinated debt, qualifying preferred stock and hybrid capital instruments. The requirements also define the weights assigned to assets and off-balance sheet items to determine the risk weighted asset components of the risk-based capital rules.

Under the requirements, the minimum capital standards that must be met by any bank holding company or bank include a Tier 1 capital ratio of at least 4%, a total risk based capital ratio of at least 8% and a leverage capital ratio of at least 4% (except for those institutions with the highest regulatory ratings and not experiencing significant growth or expansion). The leverage capital ratio, which serves as a minimum capital standard, considers Tier 1 capital only and is expressed as a percentage of average total assets for the most recent quarter, after reduction of those assets for goodwill and other disallowed intangible assets at the measurement date. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution's exposure to a decline in the economic value of its capital due to changes in interest rates, and an institutions ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution's overall capital adequacy.

The prompt corrective action provisions of federal law require the federal bank agencies to take prompt corrective action to resolve problems of insured depository institutions such as the Bank. The extent of these powers depends upon whether the institution is designated as well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized or critically undercapitalized, as

51

defined by the law. The minimum capital requirements to be characterized as “well-capitalized” and “adequately capitalized,” as defined by the applicable provisions of federal law, and COB and the Bank's capital ratios as of September 30, 2013 were as follows:

			Minimum Regulatory Requirement
	CommunityOne Bancorp	CommunityOne Bank	Adequately Capitalized	Well- Capitalized
Leverage capital ratio	5.83%	7.39%	4.00%	5.00%
Tier 1 risk-based capital ratio	9.18%	11.62%	4.00%	6.00%
Total risk-based capital ratio	12.38%	12.88%	8.00%	10.00%

On June 10, 2013, the OCC terminated the Bank Consent Order; however, the Bank has continuing obligations to, among other things, adhere to its 2013 Business Plan, including maintaining the capital ratios in the Plan, and will continue to have restrictions on its ability to pay dividends. With the lifting of the Consent Order, the Bank is considered “well-capitalized” under the applicable provisions of the Federal Deposit Insurance Act. On November 5, 2013, the FRBR terminated its Written Agreement with the Company which had been entered into on October 21, 2010. The Written Agreement had required, among other things, that the Company use its financial and managerial resources to serve as a source of strength to the Bank. The Company also agreed not to declare or pay any dividends, take any dividends or other form of payment representing a reduction in capital from the Bank, make any distributions of interest, principal or other amounts on subordinated debentures or trust preferred securities or incur, increase or guarantee any debt, or repurchase or redeem shares of stock without the prior written approval of the FRBR and the Director of the Division of Banking Supervision and Regulation of the Federal Reserve. With the termination of the Written Agreement the Company and the Bank are no longer subject to any formal supervisory orders. However the Company continues to have restrictions on its ability to declare or pay dividends, distribute interest, principal or other amounts on its trust preferred securities, incurring, increasing or guaranteeing any debt, or repurchasing or redeeming any shares of stock.

The federal banking agencies have issued revised capital rules that would change the leverage and risk-based capital requirements (including the prompt corrective action framework), which will become effective for community banks as of January 1, 2015. Under these final rules, the definition of the regulatory capital components and minimum capital requirements will materially change. Among the most important of these changes is that a new common equity Tier 1 risk based capital ratio of 4.5% has been added, and the overall Tier 1 risk-based capital ratio has been raised to 6%. Certain deductions from common equity will be expanded and others, including mortgage servicing assets and deferred tax assets subject to temporary timing differences, will be subject to threshold deductions. In addition, the agencies are requiring a capital conservation buffer of up to 2.5% above each of the capital ratio requirements (common equity tier 1, tier 1, and total risk-based capital) which must be met for a bank to be able to pay dividends, engage in share buybacks or make discretionary bonus payments to executive management without restriction. This capital conservation buffer will be phased in over a four year period starting on January 1, 2016. The rulemakings also change the risk-weighting of certain assets, including “high volatility” commercial real estate, past due assets, structured securities and equity holdings. We are still evaluating the changes, but believe that they will not have a material effect on COB or the Bank at this time.

Application of Critical Accounting Policies

Our accounting policies are in accordance with GAAP and with general practice within the banking industry and are fundamental to understanding management's discussion and analysis of results of operations and financial condition. Our significant accounting policies are discussed in detail in Note 1 of the consolidated financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2012, as amended ("Form 10-K"), and are described below.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, valuation of OREO, carrying value of investment securities, estimated cash flows for purchased impaired loans and treatment of deferred tax assets.

Allowance for Loan Losses

The ALL, which is utilized to absorb actual losses in the loan portfolio, is maintained at a level consistent with management's best estimate of probable loan losses incurred as of the balance sheet date. Our ALL is assessed quarterly by management. This assessment includes a methodology that separates the total loan portfolio into homogeneous loan classifications for purposes of evaluating risk. The required allowance is calculated by applying a risk adjusted reserve requirement to the dollar volume of loans within a homogenous group. We have grouped our loans into pools according to the loan segmentation regime employed on schedule RC-C of the FFIEC's Consolidated Report of Condition and Income. Management analyzes the loan portfolio on an ongoing basis to evaluate current risk levels, and risk grades are adjusted accordingly. While management uses the best information available to make evaluations, future adjustments may be necessary, if economic or other conditions differ substantially from the assumptions used. See additional discussion under "Asset Quality".

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During the third quarter of 2013, we changed a component of the calculation of our allowance for loan losses. We began using a look back period consisting of the twenty most recent quarters to calculate loss factors for each risk-graded pool. Previously, we used a look back period beginning in the third quarter of 2006.

Valuation of Other Real Estate Owned

Other real estate owned represents properties acquired through foreclosure or deed in lieu thereof. The property is classified as held for sale and is carried at fair value based on recent appraisals, less estimated costs to sell. Declines in the fair value of properties included in other real estate below carrying value are recognized by a charge to income. An increase in fair value is not recognized until the property is sold.

Carrying Value of Securities

Securities designated as available-for-sale are carried at fair value. However, the unrealized difference between amortized cost and fair value of securities available-for-sale is excluded from net income unless there is an other than temporary impairment and is reported, net of deferred taxes, as a component of shareholders' equity as accumulated other comprehensive income (loss). Securities held-to-maturity are carried at amortized cost, as the Bank has the ability, and management has the positive intent, to hold these securities to maturity. Premiums and discounts on securities are amortized and accreted according to the interest method.

Purchased Loans Accounting

Purchased impaired ("PI") loans are recorded at fair value at acquisition date. Therefore, amounts deemed uncollectible at acquisition date become part of the fair value determination and are excluded from the allowance for loan and lease losses. Following acquisition, we periodically review PI loans to determine if changes in estimated cash flows have occurred. Subsequent decreases in the amount expected to be collected result in a provision for loan losses with a corresponding increase in the allowance for loan losses. Subsequent increases in the amount expected to be collected result in a reversal of any previously recorded provision for loan losses and related allowance for loan losses, if any, or prospective adjustment to the accretable yield if no provision for loan losses had been recorded. Results of operations of an acquired business are included in the statement of earnings from the date of acquisition. Acquisition-related costs, including conversion and restructuring charges, are expensed as incurred.

Treatment of Deferred Tax Assets

Management's determination of the realization of deferred tax assets is based upon its judgment of various future events and uncertainties, including the timing and amount of future income earned by certain subsidiaries and the implementation of various tax plans to maximize realization of the deferred tax assets. In evaluating the positive and negative evidence to support the realization of the asset under current guidance, there is insufficient positive evidence to support a conclusion that it is more likely than not this asset will be realized in the foreseeable future. Examinations of the income tax returns or changes in tax law may impact our tax liabilities and resulting provisions for income taxes.

A valuation allowance is recognized for a deferred tax asset if, based on the weight of available evidence, it is more-likely-than-not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In making such judgments, significant weight is given to evidence that can be objectively verified. As a result of the increased credit losses, COB continues to be in a three-year cumulative pre-tax loss position as of September 30, 2013. A cumulative loss position is considered significant negative evidence in assessing the realizability of a deferred tax asset, which is difficult to overcome. Our estimate of the realization of its deferred tax assets was based on the scheduled reversal of deferred tax liabilities and taxable income available in prior carry back years and estimated unrealized losses in the available-for-sale investment portfolio. In total, we have a net deferred tax asset of $159.3 million which is offset by a valuation allowance of $151.8 million. We did not consider future taxable income in determining the realizability of its deferred tax assets. We expect our income tax expense (benefit) will be negligible except for expense and benefit related to the change in the deferred tax liability related to available for sale securities until profitability has been restored for a reasonable time and such profitability is considered sustainable. At that time, the valuation allowance would be reversed. Reversal of the valuation allowance requires a great deal of judgment and will be based on the circumstances that exist as of that future date. If future events differ significantly from our current forecasts, we may need to increase this valuation allowance, which could have a material adverse effect on the results of operations and financial condition.

The Merger was considered a change in control for Granite Corp. under Internal Revenue Code Section 382 and the Regulations, thereunder. Accordingly, we are required to evaluate potential limitation or deferral of its ability to carryforward pre-acquisition net operating losses and to determine the amount of net unrealized built-in losses (“NUBIL”), which may be subject to similar limitation or deferral. Under the Internal Revenue Code and Regulations, NUBIL realized within 5 years of the change in control are subject to potential limitation, which for us is October 20, 2016. Through that date, we will continue to analyze our ability to utilize such losses to offset anticipated future taxable income, however, this estimate will not be known until the five-year recognition period expires. Losses limited under these provisions are generally limited to a carryforward period of 20 years, subject to the annual limitation and expire if not used by the end of that period. During the third quarter of 2013, the Company reduced its deferred tax asset by $28.3 million based on its inability to use the Granite Corp. net operating losses and built in losses that are limited due to the change in

53

ownership that occurred at acquisition.  The net reduction in DTA is offset by a corresponding reduction in the valuation allowance. The Company believes the remaining DTA of $2.9 million related to NOL carryforwards from the Merger will be realized on a go forward basis.

The State of North Carolina passed legislation to reduce the income tax rates from 6.90% to 6.0% in 2014 and to 5.0% in 2015.  The DTA has been reduced by $5.3 million to account for the reduction in income tax rates to 5%.  The net reduction in DTA is offset by a corresponding reduction in the valuation allowance.  Beginning in the third quarter, the Company will use an effective tax rate of 38.25%, from 39.485%, based on the reduction in the North Carolina income tax rate.

Summary

Management believes the accounting estimates related to the ALL, the valuation of OREO, the carrying value of securities, purchased loan accounting, and the valuation allowance for deferred tax assets are “critical accounting estimates” because: (1) the estimates are highly susceptible to change from period to period as they require management to make assumptions concerning the changes in the types and volumes of the portfolios and anticipated economic conditions, and (2) the impact of recognizing an impairment or loan loss could have a material effect on the COB's assets reported on the balance sheet as well as its net earnings.

Non-GAAP Measures

This quarterly Report on Form 10-Q contains financial information determined by methods other than in accordance with GAAP. We use these non-GAAP measures in our analysis of COB's performance. Some of these non-GAAP measures exclude goodwill, core deposit premiums and other intangibles from the calculations of return on average assets and return on average equity. We believe presentations of financial measures excluding the impact of goodwill, core deposit premiums and other intangible assets provide useful supplemental information that is essential to a proper understanding of the operating results of our core businesses. In addition, certain designated net interest income amounts are presented on a taxable equivalent basis. We believe that the presentation of net interest income on a taxable equivalent basis aids in the comparability of net interest income arising from taxable and tax-exempt sources. We believe that other non-GAAP measures that exclude credit and non-recurring income and expenses provide useful supplemental information that enhances the understanding of our core operating results.

These disclosures should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The non-GAAP financial measures used in this Report are “tangible equity,” “tangible assets”, “tangible book value”, "core earnings", "core and non-core noninterest expense" and "core and non-core noninterest income." Our management, financial services companies, bank stock analysts, and bank regulators use these non-GAAP measures in their analysis of our performance.

• “Tangible shareholders' equity” is shareholders' equity reduced by recorded goodwill and other intangible assets.

• “Tangible assets” are total assets reduced by recorded goodwill and other intangible assets.

• “Tangible book value” is defined as total equity reduced by recorded goodwill and other intangible assets divided by total common shares outstanding. This measure discloses changes from period-to-period in book value per share exclusive of changes in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing total book value while not increasing the tangible assets of a company. Companies utilizing purchase accounting in a business combination, as required by GAAP, must record goodwill related to such transactions.

• “Non-core Noninterest Expense ” is defined as OREO expenses, loan collection expenses, nonrecurring items such as merger-related expense, mortgage servicing rights impairment, prepayment penalty on borrowings, goodwill impairment and loss on loans held for sale. This measure identifies items which are elevated during periods of elevated problem asset activity and items which are nonrecurring in nature.

• "Core Noninterest Expense (NIE)" is defined as total noninterest expense reduced by Non-core Noninterest expense. This measure reduces noninterest expense by items which are elevated during periods of elevated problem asset activity and items which are nonrecurring in nature.

• "Non-core Noninterest Income" is defined as gains and losses on securities and any other nonrecurring noninterest income items. This measure identifies noninterest income items which are nonrecurring in nature.

• “Core Noninterest Income (NII)” is defined as total noninterest income reduced by Non-core Noninterest Income. This measure reduces noninterest income by items which are nonrecurring in nature.

• "Core Earnings" is defined as income (loss) from continuing operations, before income taxes, increased by Non-core Noninterest Expense, decreased by Non-core Noninterest Income, and increased by provision for loan losses or decreased by recovery of loan losses. This measure identifies the Company's pre-tax earnings excluding items which are elevated during periods of elevated problem asset activity and items which are nonrecurring in nature.

54

The following tables provide a more detailed analysis of these non-GAAP measures:

(dollars in thousands, except per share data)	September 30, 2013			December 31, 2012			September 30, 2012
Total shareholders' equity	$	80,802		$	98,445		$	106,873
Less:
Goodwill	4,205			4,205			4,205
Core deposit and other intangibles	7,197			7,495			7,369
Tangible shareholders' equity	$	69,400		$	86,745		$	95,299
Total assets	$	2,037,173		$	2,151,565		$	2,238,065
Less:
Goodwill	4,205			4,205			4,205
Core deposit and other intangibles	7,197			7,495			7,369
Tangible assets	$	2,025,771		$	2,139,865		$	2,226,491
Book value per common share	$	3.72		$	4.54		$	4.95
Effect of intangible assets	(0.53		)	(0.54		)	(0.54		)
Tangible book value per common share	3.19			4.00			4.41

(dollars in thousands)	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Total noninterest expense	$	17,927		$	24,602		$	66,931		$	84,365
Less:
Other real estate owned expense	(98		)	3,602			4,116			21,594
Loan collection expense	1,120			1,119			3,784			2,379
Merger-related expense	—			939			3,498			2,357
Rebranding expenses	6			—			616			—
Granite mortgage and litigation accrual	(117		)	—			(487		)	1,100
Branch closure and restructuring expense	(105		)	—			497			—
Total non-core noninterest expense	806			5,660			12,024			27,430
Core noninterest expense	$	17,121		$	18,942		$	54,907		$	56,935
Total noninterest income	$	4,487		$	4,643		$	16,267		$	15,001
Less:
Securities gains (losses), net	50			(33		)	2,773			1,923
Total non-core noninterest income	50			(33		)	2,773			1,923
Core noninterest income	$	4,437		$	4,676		$	13,494		$	13,078
Income loss from continuing operations, before income taxes	$	4,292		$	(4,789	)	$	(1,398	)	$	(33,810	)
Non-core noninterest expense	806			5,660			12,024			27,430
Less: Non-core noninterest income	(50		)	33			(2,773		)	(1,923		)
Provision for (recovery of) loan losses	(350		)	32			(1,297		)	10,877
Core earnings	$	4,698		$	936		$	6,556		$	2,574

55

Item 3.Quantitative and Qualitative Disclosures About Market Risk

The objective of our asset/liability management function is long term maximization of net interest income within our risk guidelines. This objective is accomplished through management of our balance sheet composition, liquidity, and interest rate risk exposures arising from changing economic conditions, interest rates and customer preferences.

Management considers interest rate risk our most significant market risk. Interest rate risk is the exposure to adverse changes in net interest income due to changes in interest rates. Consistency of our net interest income is largely dependent upon the effective management of interest rate risk.

To identify and manage its interest rate risk, we employ an earnings simulation model to analyze net interest income sensitivity to changing interest rates. The model is based on contractual cash flows and repricing characteristics and incorporates market-based assumptions regarding the effect of changing interest rates on the prepayment rates of certain assets and liabilities. The model also includes management projections for activity levels in each of the product lines offered by the Bank. Assumptions are inherently uncertain and the measurement of net interest income or the impact of rate fluctuations on net interest income cannot be precisely predicted. Actual results may differ from simulated results due to timing, magnitude, and frequency of interest changes as well as changes in market conditions and management strategies.

COB's Asset/Liability Management Committee (“ALCO”), which includes senior management representatives and reports to the Board of Directors, monitors and manages interest rate risk. See "Asset/Liability Management and Interest Rate Sensitivity" in Item 2 of this Form 10-Q for further discussion.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation of our disclosure controls and procedures (as defined in Sections 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934), was carried out under the supervision and with the participation of COB's Chief Executive Officer and Chief Financial Officer and several other members of senior management as of September 30, 2013, the last day of the period covered by this Quarterly Report. COB's Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2013 in ensuring that the information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 is (i) accumulated and communicated to management (including COB's Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.

Internal Control Changes

We assess the adequacy of our internal control over financial reporting quarterly and enhance our internal controls in response to internal control assessments and internal and external audit and regulatory recommendations. No control enhancements during the quarter ended September 30, 2013 have materially affected, or are reasonably likely to materially affect, COB’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

In the ordinary course of operations, COB is party to various legal proceedings. Other than noted below, COB is not involved in, nor has it terminated during the nine months ended September 30, 2013, any pending legal proceedings other than routine, nonmaterial proceedings occurring in the ordinary course of business.

As described in Item 3., Legal Proceedings, of the Form 10-K, Howe Barnes Hoefer & Arnett, Inc., an affiliate of Raymond James Financial, Inc., filed a complaint in Wake County Superior Court in North Carolina seeking monetary damages against COB and the Bank. The parties have executed a formal settlement agreement, which received regulatory non-objection and was effective as of July 25, 2013. The settlement involves a note secured by Bank stock. As a result of the settlement, the parties filed a stipulation of dismissal of the complaint as of July 31, 2013.

On September 27, 2013, the U.S. District Court for the Western District of North Carolina dismissed the United States’ case against CommunityOne Bancorp’s bank subsidiary, CommunityOne Bank, N.A. (“Bank”), styled U.S. v. CommunityOne Bank, N.A., Case No. 3:11-CR-00122-RJC-DSC.The case related to the Bank’s Bank Secrecy Act/anti-money laundering program in connection with a Bank customer in a suspected Ponzi scheme who was convicted of securities fraud, wire fraud and money laundering. This dismissal was pursuant to the Deferred Prosecution Agreement (“DPA”) the Bank had entered into with the U.S. Government as part of its recapitalization on October 21, 2011 and which was described in the Company’s Proxy Statement/Prospectus, dated September 15, 2011. At the time the DPA became effective in October 2011, the Bank had made a cash payment of $400,000 to the District Court for restitution to the victims of the scheme. With the dismissal of the complaint, the DPA also was terminated.

Item 1A.     Risk Factors

There have been no material changes to the risk factors that we have previously disclosed in Item 1A - “Risk Factors” in our Form 10-K.

Item 2.Unregistered Sales of Equity Securities and Repurchases

Not Applicable

Item 3.Defaults Upon Senior Securities

Not Applicable

Item 4.Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

Item 6.Exhibits

Exhibits to this report are listed in the Index to Exhibits section of this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CommunityOne Bancorp

(Registrant)

Date: November 12, 2013                    By:    /s/DAVID L. NIELSEN

David L. Nielsen

Executive Vice President and Chief

Financial Officer

(Principal Financial and Accounting Officer)

58

INDEX TO EXHIBITS

Exhibit No.	Description of Exhibit
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Financial Statements submitted in XBRL format

59

EX-31.01

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Brian E. Simpson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CommunityOne Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:    November 12, 2013/s/ BRIAN E. SIMPSON

Brian E. Simpson

Chief Executive Officer

EX-31.02

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David L. Nielsen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CommunityOne Bancorp;

1. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

2. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

3. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

4. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:    November 12, 2013/s/DAVID L. NIELSEN

David L. Nielsen

Chief Financial Officer

EX-32.01

Exhibit 32

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of CommunityOne Bancorp, a North Carolina corporation (the “Corporation”), does hereby certify that:

The Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 (the “Form 10-Q”) of the Corporation fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all materials respects, the financial condition and results of operations of the Corporation.

Date:    November 12, 2013/s/ BRIAN E. SIMPSON

Brian E. Simpson        

Chief Executive Officer

Date:    November 12, 2013/s/DAVID L. NIELSEN

David L. Nielsen

Chief Financial Officer

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

XML

Fair Values of Assets and Liabilities

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Values of Assets and Liabilities

Fair Values of Assets and Liabilities

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale, derivative assets and liabilities, certain FHLB advances hedged by interest rate swaps designated as fair value hedges, performing mortgage loans held for sale, and mortgage servicing rights are recorded at fair value on a recurring basis. Additionally, from time-to-time, we may be required to record at fair value other assets and liabilities on a nonrecurring basis, such as non-performing loans held for sale, loans held for investment, impaired loans and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets or liabilities.

Fair Value Hierarchy

We group assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3: Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

Investments Securities Available-for-Sale

Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 may include asset-backed securities in less liquid markets.

Liquidity is a significant factor in the determination of the fair values of available-for-sale debt securities. Market price quotes may not be readily available for some positions, or positions within a market sector where trading activity has slowed significantly or ceased. Some of these instruments are valued using a discounted cash flow model, which estimates the fair value of the securities using internal credit risk, interest rate and prepayment risk models that incorporate management's best estimate of current key assumptions such as default rates, loss severity and prepayment rates. Principal and interest cash flows are discounted using an observable discount rate for similar instruments with adjustments that management believes a market participant would consider in determining fair value for the specific security. Underlying assets are valued using external pricing services, where available, or matrix pricing based on the vintages and ratings. Situations of illiquidity generally are triggered by the market's perception of credit uncertainty regarding a single company or a specific market sector. In these instances, fair value is determined based on limited available market information and other factors, principally from reviewing the issuer's financial statements and changes in credit ratings made by one or more ratings agencies.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or fair value less estimated costs to sell. Once sold, the loans are beyond the reach of COB in all respects and the purchasing investor has all rights of ownership, including the ability to pledge or exchange the loans. Most of the loans sold are without recourse. Gains or losses on loan sales are recognized at the time of sale, are determined by the difference between net sales proceeds and the carrying value of the loan sold, and are included in Consolidated Statements of Operations. Since loans held for sale are carried at the lower of cost or fair value, the fair value of loans held for sale is based on contractual agreements with independent third-party buyers. As such, we classify loans held for sale subjected to nonrecurring fair value adjustments as Level 2.

Loans Held for Investment

We do not record loans held for investment at fair value on a recurring basis. However, from time to time, a loan is considered impaired and the related impairment is charged against the allowance or a specific allowance is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as impaired, management determines the fair value of the loan to quantify impairment, should such exist. The fair value of impaired loans is estimated using one of several methods, including collateral net liquidation value, market value of similar debt, enterprise value, and discounted cash flows. Those impaired loans not requiring a specific allowance represent loans for which the fair value of the expected repayments or collateral meet or exceed the recorded investments in such loans. At September 30, 2013 and December 31, 2012, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. We record impaired loans as nonrecurring Level 3.

Other Real Estate Owned

OREO is adjusted to fair value upon transfer of the loans to OREO. Subsequently, OREO is carried at the lower of carrying value or fair value less estimated costs to sell. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral. Given the lack of observable market prices for identical properties, we record OREO as nonrecurring Level 3.

Interest Rate Locks and Forward Loan Sale Commitments

We enter into interest rate lock commitments and commitments to sell mortgages.  The fair value of interest rate lock commitments is based on servicing rate premium, origination income net of origination costs, fall out rates and changes in loan pricing between the commitment date and the balance sheet date. We record interest rate lock commitments as recurring level 3, and based on their immaterial value, has excluded them from the fair value table.

Mortgage Servicing Rights

The fair value of mortgage serving rights (MSR) is dependent upon a number of assumptions including the fee per loan, the cost to service, the expected loan prepayment rate, and the discount rate.  In determining the fair value of the existing MSR management reviews the key assumptions, analyzes pricing in the market for comparable MSR, and uses a third party provider to independently calculate the fair value of its MSR. We record mortgage servicing rights as recurring Level 3.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Assets and liabilities carried at fair value on a recurring basis at September 30, 2013 for continuing operations are summarized in the following table:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale debt securities:
U.S. government sponsored agencies	$	2,082	$	—	$	2,082	$	—
Residential mortgage-backed securities-GSE	357,447		—		357,447		—
Residential mortgage-backed securities-Private	21,258		—		21,258		—
Commercial mortgage-backed securities-GSE	21,644				21,644
Commercial mortgage-backed securities-Private	9,633		—		9,633		—
Business Development Company investment	2,640		2,640		—		—
Corporate notes	25,008		—		25,008		—
Total available-for-sale debt securities	439,712		2,640		437,072		—
Mortgage servicing rights	1,482		—		—		1,482
Total assets at fair value from continuing operations	$	441,194	$	2,640	$	437,072	$	1,482

Assets and liabilities carried at fair value on a recurring basis at December 31, 2012 for continuing operations are summarized in the following table:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale debt securities:
U.S. Treasury and government agencies	$	6,981	$	—	$	6,981	$	—
U.S. government sponsored agencies	22,173		—		22,173		—
States and political subdivisions	6,038		—		6,038		—
Residential mortgage-backed securities-GSE	441,074		—		441,074		—
Residential mortgage-backed securities-Private	22,945		—		22,945		—
Commercial mortgage-backed securities-GSE	23,359		—		23,359		—
Commercial mortgage-backed securities-Private	5,317		—		5,317		—
Corporate notes	36,963		—		36,963		—
Total available-for-sale debt securities	564,850		—		564,850		—
Mortgage servicing rights	726		—		—		726
Total assets at fair value from continuing operations	$	565,576	$	—	$	564,850	$	726

The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the periods indicated:

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Servicing Rights
(dollars in thousands)	Three Months Ended September 30,
	2013			2012
Balance, beginning of period	$	1,337		$	25
Total gains or losses (realized/unrealized):
Included in earnings, gross	235			225
Less amortization	(90		)	(2		)
Balance, end of period	$	1,482		$	248

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Servicing Rights
(dollars in thousands)	Nine Months Ended September 30,
	2013			2012
Beginning balance at January 1,	$	726		$	—
Total gains or losses (realized/unrealized):
Included in earnings, gross	959			250
Less amortization	(203		)	(2		)
Balance, end of period	$	1,482		$	248

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. This is due to further deterioration in the value of the assets.

Assets measured at fair value on a nonrecurring basis are included in the following table at September 30, 2013 for continuing operations:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Impaired loans, net	$	2,477	$	—	$	—	$	2,477
Other real estate owned	25,271		—		—		25,271
Total assets at fair value from continuing operations	$	27,748	$	—	$	—	$	27,748

Assets measured at fair value on a nonrecurring basis are included in the following table at December 31, 2012 for continuing operations:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Impaired loans, net	$	13,575	$	—	$	—	$	13,575
Other real estate owned	48,480		—		—		48,480
Total assets at fair value from continuing operations	$	62,055	$	—	$	—	$	62,055

There are no assets or liabilities measured at fair value on a nonrecurring basis at September 30, 2013 or December 31, 2012 for discontinued operations.

Quantitative Information about Level 3 Fair Value Measurements

(dollars in thousands)	Fair Value at September 30, 2013		Valuation Techniques	Unobservable Input	Range
Impaired loans, net	$	2,477	Discounted appraisals	Collateral discounts	6.00% - 40.00%
Other real estate owned	25,271		Discounted appraisals	Collateral discounts	6.00% - 40.00%
Mortgage servicing rights	1,482		Discounted cash flows	Prepayment rate	10.00% - 25.00%
Mortgage servicing rights				Discount rate	6.00% - 10.00%

(dollars in thousands)	Fair Value at December 31, 2012		Valuation Techniques	Unobservable Input	Range
Impaired loans, net	$	13,575	Discounted appraisals	Collateral discounts	6.00%-40.00%
Other real estate owned	48,480		Discounted appraisals	Collateral discounts	6.00%-40.00%
Mortgage servicing rights	726		Discounted cash flows	Prepayment rate	10.00% - 30.00%
Mortgage servicing rights				Discount rate	6.00% - 12.00%

Level 3 Valuation Methodologies. Following is a description of the unobservable inputs used for Level 3 fair value measurements.

Disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value is required. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument.

Because no market exists for a portion of our financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value for each class of COB's financial instruments.

Cash and cash equivalents.Fair value equals the carrying value of such assets due to their nature and is classified as Level 1.

Investment securities. The fair value of investment securities is based on quoted market prices, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. The fair value of equity investments in the restricted stock of the FRBR and FHLB approximates the carrying value. The fair value of investment securities is classified as Level 2.

Loans held for sale. Substantially all residential mortgage loans held for sale are pre-sold and their carrying value approximates fair value. We classified the fair value of loans held for sale as Level 2.

Loans held for investment. The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of variable rate loans with frequent repricing and negligible credit risk approximates book value. The fair value of loans is further discounted by credit and liquidity factors. We classified the fair value of loans as Level 3.

Accrued interest receivable and payable. The carrying amounts of accrued interest payable and receivable approximate fair value and are classified as Level 2 if the related asset or liability is classified as Level 2, or Level 3 if the related asset or liability is classified as Level 3.

Deposits. The fair value of noninterest-bearing and interest-bearing demand deposits and savings are the amounts payable on demand because these products have no stated maturity. The fair value of time deposits is estimated using the rates currently offered for deposits of similar remaining maturities and are classified as Level 2.

Borrowed funds. The carrying value of retail repurchase agreements is considered to be a reasonable estimate of fair value. The fair value of FHLB advances and other borrowed funds is estimated using the rates currently offered for advances of similar remaining maturities and is classified as Level 2. For the long term note payable, the current market rate for similar debt is substantially equal to the rate on this note, so its fair value approximates its carrying value.

Junior subordinated debentures. Included in junior subordinated debentures are variable rate trust preferred securities issued by COB. Fair values for the trust preferred securities were estimated by developing cash flow estimates for each of these debt instruments based on scheduled principal and interest payments and current interest rates. Once the cash flows were determined, a rate for comparable subordinated debt was used to discount the cash flows to the present value. The estimated fair value for our junior subordinated debentures have declined due to wider credit spreads (i.e., spread to LIBOR) on similar trust preferred issues. This is due, in part, to proposed bank regulatory changes in bank capital structure. We classified the fair value of junior subordinated debentures as Level 3.

Financial instruments with off-balance sheet risk. The fair value of financial instruments with off-balance sheet risk is considered to approximate carrying value, since the large majority of these future financing commitments would result in loans that have variable rates and/or relatively short terms to maturity. For other commitments, generally of a short-term nature, the carrying value is considered to be a reasonable estimate of fair value.

The estimated fair values of financial instruments for continuing operations are as follows at the periods indicated:

	At September 30, 2013
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets of Continuing Operations:
Cash and cash equivalents	$	103,074	$	103,074	$	103,074	$	—	$	—
Investment securities: Available-for-sale	439,712		439,712		2,640		437,072		—
Investment securities: Held-to-maturity	153,684		146,474		—		146,474		—
Loans held for sale	2,734		2,734		—		2,734		—
Loans, net	1,169,755		1,137,425		—		—		1,137,425
Accrued interest receivable	6,527		6,527		—		1,735		4,792
Financial Liabilities of Continuing Operations:
Deposits	1,790,608		1,791,409		—		1,791,409		—
Retail repurchase agreements	12,422		12,422		—		12,422		—
Federal Home Loan Bank advances	73,295		77,010		—		77,010		—
Long term notes payable	5,244		5,244		—		—		5,244
Junior subordinated debentures	56,702		21,818		—		—		21,818
Accrued interest payable	2,410		2,410		—		439		1,971

	At December 31, 2012
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets of Continuing Operations:
Cash and cash equivalents	$	239,610	$	239,610	$	239,610	$	—	$	—
Investment securities: Available-for-sale	564,850		564,850		—		564,850		—
Loans held for sale	6,974		6,974		—		6,974		—
Loans, net	1,147,721		1,140,088		—		—		1,140,088
Accrued interest receivable	6,102		6,102		—		1,812		4,290
Financial Liabilities of Continuing Operations:
Deposits	1,906,988		1,910,927		—		1,910,927		—
Retail repurchase agreements	8,675		8,675		—		8,675		—
Federal Home Loan Bank advances	58,328		62,950		—		62,950		—
Junior subordinated debentures	56,702		18,760		—		—		18,760
Accrued interest payable	2,111		2,111		—		937		1,174

There were no transfers between valuation levels for any assets during the three and nine months ended September 30, 2013. If different valuation techniques are deemed necessary, we would consider those transfers to occur at the end of the period when the assets are valued.

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Earnings Per Share (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Earnings Per Share Disclosure [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	23,197	23,347	23,197	23,347
Stock Options [Member]
Earnings Per Share Disclosure [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,125	1,275	1,125	1,275
Warrant [Member]
Earnings Per Share Disclosure [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	22,072	22,072	22,072	22,072

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Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Interest Income
Interest and fees on loans	$ 15,993	$ 16,264	$ 45,451	$ 50,458
Taxable income	3,788	2,667	10,366	8,238
Non-taxable income	(14)	0	0	0
Other interest income	86	276	244	936
Total interest income	19,853	19,207	56,061	59,632
Interest Expense
Deposits	1,894	3,320	6,231	11,244
Retail repurchase agreements	6	6	15	23
Federal Home Loan Bank advances	289	391	1,037	1,057
Other borrowed funds	282	288	809	877
Total interest expense	2,471	4,005	8,092	13,201
Net Interest Income before Provision for Loan Losses	17,382	15,202	47,969	46,431
Provision for (recovery of) loan losses	(350)	32	(1,297)	10,877
Net Interest Income after Provision for Loan Losses	17,732	15,170	49,266	35,554
Noninterest Income
Service charges on deposit accounts	1,858	1,778	4,915	5,424
Mortgage loan income	420	728	2,085	1,051
Cardholder and merchant services income	1,161	1,119	3,403	3,436
Trust and investment services	329	234	964	692
Bank owned life insurance	267	290	805	910
Other service charges, commissions and fees	365	252	960	777
Securities gains (losses), net	50	(33)	2,773	1,923
Other income	37	275	362	788
Total noninterest income	4,487	4,643	16,267	15,001
Noninterest Expense
Personnel expense	9,663	9,717	31,149	30,351
Net occupancy expense	1,558	1,710	5,060	4,885
Furniture, equipment and data processing expense	2,050	2,012	6,512	6,395
Professional fees	222	1,336	2,475	4,265
Stationery, printing and supplies	136	152	509	446
Advertising and marketing	150	166	994	420
Other real estate owned expense	(98)	3,602	4,116	21,594
Credit/debit card expense	627	432	1,525	1,279
FDIC insurance	646	1,056	1,980	2,879
Loan collection expense	1,120	1,119	3,784	2,379
Merger-related expense	0	939	3,498	2,357
Core deposit intangible amortization	352	352	1,056	1,056
Other expense	1,501	2,009	4,273	6,059
Total noninterest expense	17,927	24,602	66,931	84,365
Income (Loss) from continuing operations, before income taxes	4,292	(4,789)	(1,398)	(33,810)
Income tax expense (benefit) - continuing operations	286	(77)	2,375	(128)
Income (Loss) from continuing operations, net of tax	4,006	(4,712)	(3,773)	(33,682)
Loss from discontinued operations, net of tax	0	0	0	(27)
Net income (loss)	$ 4,006	$ (4,712)	$ (3,773)	$ (33,709)
Weighted average number of common shares outstanding - basic and diluted	21,738,770	21,588,027	21,722,536	21,294,727
Net income (loss) per common share from continuing operations - basic and diluted	$ 0.18	$ (0.22)	$ (0.17)	$ (1.58)
Net loss per common share from discontinued operations - basic and diluted	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Net income (loss) per common share - basic and diluted	$ 0.18	$ (0.22)	$ (0.17)	$ (1.58)

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Discontinued Operations

9 Months Ended

Sep. 30, 2013

Discontinued Operation, Additional Disclosures [Abstract]

Discontinued Operations

Discontinued Operations

All operations of Dover, a subsidiary of the Bank, were discontinued as of March 17, 2011. Dover, acquired by us in 2003, originated, underwrote and closed mortgage loans for sale into the secondary market. It maintained a retail origination network based in Charlotte, North Carolina, which originated loans for properties located in North Carolina. Dover also engaged in the wholesale mortgage origination business and conducted retail mortgage origination business outside of North Carolina. Operations outside of the State of North Carolina and the wholesale mortgage origination business were discontinued in February 2011, and all remaining operations were discontinued on March 17, 2011. Dover filed for Chapter 11 bankruptcy on February 15, 2012 in the United States Bankruptcy Court for the Western District of North Carolina. All of the assets and liabilities of Dover were written off at that time.

The results of operations of a component of an entity that has been disposed of shall be reported in discontinued operations if both the operations and cash flows of the component have been, or will be, eliminated from ongoing operations of the entity as a result of the disposal transaction and the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. As a result, the Consolidated Balance Sheets, Statements of Operations and Statement of Cash Flows for all periods reflect retrospective application of Dover's classification as a discontinued operation.

There were no assets and liabilities of discontinued operations as of September 30, 2013 and December 31, 2012.

Net loss from discontinued operations, net of tax, at the dates indicated were as follows:

(dollars in thousands)	Nine Months Ended September 30,
	2013		2012
Interest Income
Total interest income	$	—	$	—
Interest Expense
Total interest expense	—		—
Net Interest Income before Provision for Loan Losses	—		—
Provision for loan losses	—		—
Net Interest Income after Provision for Loan Losses	—		—
Noninterest Income
Total noninterest income	—		—
Noninterest Expense
Personnel expense	—		1
Net occupancy expense	—		1
Professional fees	—		25
Total noninterest expense	—		27
Loss before income taxes	—		(27		)
Income tax (benefit)/expense	—		—
Net loss from discontinued operations, net of tax	$	—	$	(27	)

All financial information in the consolidated financial statements and notes to the consolidated financial statements reflects continuing operations, unless otherwise noted.

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Schedule of Calculation of Numerator and Denominator in Earnings Per Share

As required for entities with complex capital structures, a dual presentation of basic and diluted EPS is included on the face of the income statement, and a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation is provided in this note.

(dollars in thousands, except per share data)	For Three Months Ended					For Nine Months Ended
	September 30, 2013		September 30, 2012			September 30, 2013			September 30, 2012
Income (Loss) from continuing operations, net of tax	$	4,006	$	(4,712	)	$	(3,773	)	$	(33,682	)
Loss from discontinued operations, net of tax	—		—			—			(27		)
Net income (loss) to common shareholders	$	4,006	$	(4,712	)	$	(3,773	)	$	(33,709	)
Weighted average number of common shares outstanding - basic and diluted	21,738,770		21,588,027			21,722,536			21,294,727
Net income (loss) per common share from continuing operations - basic and diluted	$	0.18	$	(0.22	)	$	(0.17	)	$	(1.58	)
Net loss per common share from discontinued operations - basic and diluted	—		—			—			—
Net income (loss) per common share - basic and diluted	$	0.18	$	(0.22	)	$	(0.17	)	$	(1.58	)

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Fair Values of Assets and Liabilities (Measured on Recurring Basis) (Details) (Continuing operations [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	$ 2,640
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	437,072	564,850
Recurring [Member] | Total [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	439,712	564,850
Mortgage servicing rights	1,482	726
Total assets at fair value	441,194	565,576
Recurring [Member] | Total [Member] | U.S, Treasury and government agencies debt securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities		6,981
Recurring [Member] | Total [Member] | U.S. government sponsored agencies debt securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	2,082	22,173
Recurring [Member] | Total [Member] | States and political subdivisions debt securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities		6,038
Recurring [Member] | Total [Member] | Residential mortgage-backed securities - GSE [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	357,447	441,074
Recurring [Member] | Total [Member] | Residential mortgage-backed securities - Private [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	21,258	22,945
Recurring [Member] | Total [Member] | Commercial mortgage-backed securities - GSE [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	21,644	23,359
Recurring [Member] | Total [Member] | Commercial mortgage-backed securities - Private [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	9,633	5,317
Recurring [Member] | Total [Member] | Business Development Company investment [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	2,640
Recurring [Member] | Total [Member] | Corporate notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	25,008	36,963
Recurring [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	2,640
Total assets at fair value	2,640
Recurring [Member] | Level 1 [Member] | Business Development Company investment [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	2,640
Recurring [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	437,072	564,850
Total assets at fair value	437,072	564,850
Recurring [Member] | Level 2 [Member] | U.S, Treasury and government agencies debt securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities		6,981
Recurring [Member] | Level 2 [Member] | U.S. government sponsored agencies debt securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	2,082	22,173
Recurring [Member] | Level 2 [Member] | States and political subdivisions debt securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities		6,038
Recurring [Member] | Level 2 [Member] | Residential mortgage-backed securities - GSE [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	357,447	441,074
Recurring [Member] | Level 2 [Member] | Residential mortgage-backed securities - Private [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	21,258	22,945
Recurring [Member] | Level 2 [Member] | Commercial mortgage-backed securities - GSE [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	21,644	23,359
Recurring [Member] | Level 2 [Member] | Commercial mortgage-backed securities - Private [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	9,633	5,317
Recurring [Member] | Level 2 [Member] | Business Development Company investment [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	0
Recurring [Member] | Level 2 [Member] | Corporate notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Available-for-sale investment securities	25,008	36,963
Recurring [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Mortgage servicing rights	1,482	726
Total assets at fair value	$ 1,482	$ 726

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Accumulated Other Comprehensive Income

9 Months Ended

Sep. 30, 2013

Statement of Other Comprehensive Income [Abstract]

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

The following table presents the changes in our accumulated other comprehensive income (loss), net of tax, by component for the period indicated:

(Dollars in thousands)	Unrealized Gains (Losses) on Available For Sale Securities			Defined Benefit Plan Items			Total
Beginning balance January 1, 2013	$	3,650		$	(3,973	)	$	(323	)
Other comprehensive income (loss) before reclassifications	(12,221		)	—			(12,221		)
Amounts reclassified from accumulated other comprehensive income	(1,679		)	(461		)	(2,140		)
Net current period other comprehensive income	(13,900		)	(461		)	(14,361		)
Ending balance September 30, 2013	$	(10,250	)	$	(4,434	)	$	(14,684	)

The following table presents the reclassifications out of our accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2013:

(Dollars in thousands)	Amount Reclassified from AOCI
	Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013			Line Item in the Consolidated Statement of Operations
Available for sale securities:
Net realized gains on sale of securities	$	(50	)	$	(2,773	)	Securities gains (losses), net
Income tax benefit (expense)	19			1,095			Income tax benefit (expense)
Total, net of tax	(31		)	(1,678		)
Defined benefit plan items:
Net actuarial gains	(249		)	(762		)	Personnel expense
Income tax benefit (expense)	95			301			Income tax benefit (expense)
Total, net of tax	(154		)	(461		)
Total reclassifications for the period	$	(185	)	$	(2,139	)

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Loans and Allowance for Loan Losses (Evaluation for Impairment) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Mar. 31, 2013	Dec. 31, 2012		Sep. 30, 2012	Mar. 31, 2012	Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL, individually evaluated for impairment	$ 486		$ 1,737
ALL, collectively evaluated for impairment	20,835		22,204
ALL, PI loans evluated for credit impairment	4,066		5,373
ALL, PI loans with no credit deterioration	0		0
Total ALL evaluated for impairment	25,387	25,085	29,314		30,859	38,551	39,360
Loans held for investment, individually evaluated for impairment	52,320		77,594
Loans held for investment, collectively evaluated for impairment	966,229		871,049
Loans held for investment, PI loans with subsequent credit deterioration	147,852		192,115
Loans held for investment, PI loans with no credit deterioration	28,741		36,277
Loans held for investment	1,195,142		1,177,035	[1]
Commercial and agricultural [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL, individually evaluated for impairment	0		282
ALL, collectively evaluated for impairment	2,576		2,432
ALL, PI loans evluated for credit impairment	34		524
ALL, PI loans with no credit deterioration	0		0
Total ALL evaluated for impairment	2,610	2,192	3,238		5,153	7,151	5,776
Loans held for investment, individually evaluated for impairment	416		2,334
Loans held for investment, collectively evaluated for impairment	57,783		62,704
Loans held for investment, PI loans with subsequent credit deterioration	8,821		11,533
Loans held for investment, PI loans with no credit deterioration	2,597		3,133
Loans held for investment	69,617		79,704
Real estate - construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL, individually evaluated for impairment	1		82
ALL, collectively evaluated for impairment	4,347		4,705
ALL, PI loans evluated for credit impairment	747		200
ALL, PI loans with no credit deterioration	0		0
Total ALL evaluated for impairment	5,095	5,652	4,987		5,983	11,320	11,995
Loans held for investment, individually evaluated for impairment	9,998		13,533
Loans held for investment, collectively evaluated for impairment	47,348		42,199
Loans held for investment, PI loans with subsequent credit deterioration	8,258		2,285
Loans held for investment, PI loans with no credit deterioration	1,938		397
Loans held for investment	67,542		58,414
Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL, individually evaluated for impairment	446		607
ALL, collectively evaluated for impairment	7,811		7,383
ALL, PI loans evluated for credit impairment	527		711
ALL, PI loans with no credit deterioration	0		0
Total ALL evaluated for impairment	8,784	7,400	8,701		9,994	8,784	8,885
Loans held for investment, individually evaluated for impairment	13,060		18,118
Loans held for investment, collectively evaluated for impairment	575,490		496,205
Loans held for investment, PI loans with subsequent credit deterioration	26,661		34,961
Loans held for investment, PI loans with no credit deterioration	3,051		4,254
Loans held for investment	618,262		553,538
Real estate - mortgage, commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL, individually evaluated for impairment	39		766
ALL, collectively evaluated for impairment	3,869		5,473
ALL, PI loans evluated for credit impairment	2,567		3,388
ALL, PI loans with no credit deterioration	0		0
Total ALL evaluated for impairment	6,475	7,387	9,627		7,058	9,218	11,063
Loans held for investment, individually evaluated for impairment	28,846		43,609
Loans held for investment, collectively evaluated for impairment	242,062		227,760
Loans held for investment, PI loans with subsequent credit deterioration	103,028		141,974
Loans held for investment, PI loans with no credit deterioration	21,150		28,493
Loans held for investment	395,086		441,836
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
ALL, individually evaluated for impairment	0		0
ALL, collectively evaluated for impairment	2,232		2,211
ALL, PI loans evluated for credit impairment	191		550
ALL, PI loans with no credit deterioration	0		0
Total ALL evaluated for impairment	2,423	2,454	2,761		2,671	2,078	1,641
Loans held for investment, individually evaluated for impairment	0		0
Loans held for investment, collectively evaluated for impairment	43,546		42,181
Loans held for investment, PI loans with subsequent credit deterioration	1,084		1,362
Loans held for investment, PI loans with no credit deterioration	5		0
Loans held for investment	$ 44,635		$ 43,543

[1] Derived from audited consolidated financial statements

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Fair Values of Assets and Liabilities (Unobservable Inputs Reconciliations) (Details) (Recurring [Member], Level 3 [Member], Mortgage servicing rights [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Mar. 31, 2013
Recurring [Member] | Level 3 [Member] | Mortgage servicing rights [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Beginning balance		$ 25	$ 726	$ 0	$ 1,337
Total gains or losses (realized/unrealized) included in earnings	235	225	959	250
Less amortization	(90)	(2)	(203)	(2)
Ending balance	$ 1,482	$ 248	$ 1,482	$ 248	$ 1,337

XML

Loans and Allowance for Loan Losses (Past Due Status) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	$ 1,953	$ 11,443
60 - 89 days past due	1,519	5,795
More than 90 days past due	29,680	24,060
Nonaccrual	51,131	79,242
Total past due and nonaccrual	84,283	120,540
Current and accruing	1,110,859	1,056,495
Loans held for investment	1,195,142	1,177,035	[1]
Commercial and agricultural [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans held for investment	69,617	79,704
Real estate - construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans held for investment	67,542	58,414
Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans held for investment	618,262	553,538
Real estate - mortgage, commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans held for investment	395,086	441,836
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans held for investment	44,635	43,543
PC [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	1,685	7,355
60 - 89 days past due	925	999
More than 90 days past due	76	227
Nonaccrual	51,131	79,242
Total past due and nonaccrual	53,817	87,823
Current and accruing	964,732	860,820
Loans held for investment	1,018,549	948,643
PC [Member] | Commercial and agricultural [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	52	515
60 - 89 days past due	0	0
More than 90 days past due	0	50
Nonaccrual	590	2,746
Total past due and nonaccrual	642	3,311
Current and accruing	57,558	61,727
Loans held for investment	58,200	65,038
PC [Member] | Real estate - construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	47	26
60 - 89 days past due	0	119
More than 90 days past due	76	0
Nonaccrual	10,190	14,297
Total past due and nonaccrual	10,313	14,442
Current and accruing	47,034	41,290
Loans held for investment	57,347	55,732
PC [Member] | Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	1,269	6,173
60 - 89 days past due	759	880
More than 90 days past due	0	0
Nonaccrual	12,822	18,372
Total past due and nonaccrual	14,850	25,425
Current and accruing	573,700	488,898
Loans held for investment	588,550	514,323
PC [Member] | Real estate - mortgage, commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	220	617
60 - 89 days past due	153	0
More than 90 days past due	0	177
Nonaccrual	27,425	43,621
Total past due and nonaccrual	27,798	44,415
Current and accruing	243,108	226,948
Loans held for investment	270,906	271,363
PC [Member] | Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	97	24
60 - 89 days past due	13	0
More than 90 days past due	0	0
Nonaccrual	104	206
Total past due and nonaccrual	214	230
Current and accruing	43,332	41,957
Loans held for investment	43,546	42,187
PI [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	268	4,088
60 - 89 days past due	594	4,796
More than 90 days past due	29,604	23,833
Nonaccrual	0	0
Total past due and nonaccrual	30,466	32,717
Current and accruing	146,127	195,675
Loans held for investment	176,593	228,392
PI [Member] | Commercial and agricultural [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	77	100
60 - 89 days past due	0	1
More than 90 days past due	2,235	1,103
Nonaccrual	0	0
Total past due and nonaccrual	2,312	1,204
Current and accruing	9,106	13,462
Loans held for investment	11,418	14,666
PI [Member] | Real estate - construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	0	117
60 - 89 days past due	0	0
More than 90 days past due	2,884	655
Nonaccrual	0	0
Total past due and nonaccrual	2,884	772
Current and accruing	7,312	1,910
Loans held for investment	10,196	2,682
PI [Member] | Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	10	1,308
60 - 89 days past due	0	495
More than 90 days past due	5,242	4,678
Nonaccrual	0	0
Total past due and nonaccrual	5,252	6,481
Current and accruing	24,460	32,734
Loans held for investment	29,712	39,215
PI [Member] | Real estate - mortgage, commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	174	2,559
60 - 89 days past due	594	4,300
More than 90 days past due	19,228	17,384
Nonaccrual	0	0
Total past due and nonaccrual	19,996	24,243
Current and accruing	104,182	146,230
Loans held for investment	124,178	170,473
PI [Member] | Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	7	4
60 - 89 days past due	0	0
More than 90 days past due	15	13
Nonaccrual	0	0
Total past due and nonaccrual	22	17
Current and accruing	1,067	1,339
Loans held for investment	$ 1,089	$ 1,356

[1] Derived from audited consolidated financial statements

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Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2013

Statement of Other Comprehensive Income [Abstract]

Changes in Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The following table presents the changes in our accumulated other comprehensive income (loss), net of tax, by component for the period indicated:

(Dollars in thousands)	Unrealized Gains (Losses) on Available For Sale Securities			Defined Benefit Plan Items			Total
Beginning balance January 1, 2013	$	3,650		$	(3,973	)	$	(323	)
Other comprehensive income (loss) before reclassifications	(12,221		)	—			(12,221		)
Amounts reclassified from accumulated other comprehensive income	(1,679		)	(461		)	(2,140		)
Net current period other comprehensive income	(13,900		)	(461		)	(14,361		)
Ending balance September 30, 2013	$	(10,250	)	$	(4,434	)	$	(14,684	)

Reclassifications out of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The following table presents the reclassifications out of our accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2013:

(Dollars in thousands)	Amount Reclassified from AOCI
	Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013			Line Item in the Consolidated Statement of Operations
Available for sale securities:
Net realized gains on sale of securities	$	(50	)	$	(2,773	)	Securities gains (losses), net
Income tax benefit (expense)	19			1,095			Income tax benefit (expense)
Total, net of tax	(31		)	(1,678		)
Defined benefit plan items:
Net actuarial gains	(249		)	(762		)	Personnel expense
Income tax benefit (expense)	95			301			Income tax benefit (expense)
Total, net of tax	(154		)	(461		)
Total reclassifications for the period	$	(185	)	$	(2,139	)

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Fair Values of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the periods indicated:

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Servicing Rights
(dollars in thousands)	Three Months Ended September 30,
	2013			2012
Balance, beginning of period	$	1,337		$	25
Total gains or losses (realized/unrealized):
Included in earnings, gross	235			225
Less amortization	(90		)	(2		)
Balance, end of period	$	1,482		$	248

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Servicing Rights
(dollars in thousands)	Nine Months Ended September 30,
	2013			2012
Beginning balance at January 1,	$	726		$	—
Total gains or losses (realized/unrealized):
Included in earnings, gross	959			250
Less amortization	(203		)	(2		)
Balance, end of period	$	1,482		$	248

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques

(dollars in thousands)	Fair Value at September 30, 2013		Valuation Techniques	Unobservable Input	Range
Impaired loans, net	$	2,477	Discounted appraisals	Collateral discounts	6.00% - 40.00%
Other real estate owned	25,271		Discounted appraisals	Collateral discounts	6.00% - 40.00%
Mortgage servicing rights	1,482		Discounted cash flows	Prepayment rate	10.00% - 25.00%
Mortgage servicing rights				Discount rate	6.00% - 10.00%

(dollars in thousands)	Fair Value at December 31, 2012		Valuation Techniques	Unobservable Input	Range
Impaired loans, net	$	13,575	Discounted appraisals	Collateral discounts	6.00%-40.00%
Other real estate owned	48,480		Discounted appraisals	Collateral discounts	6.00%-40.00%
Mortgage servicing rights	726		Discounted cash flows	Prepayment rate	10.00% - 30.00%
Mortgage servicing rights				Discount rate	6.00% - 12.00%

Continuing operations [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Assets and liabilities carried at fair value on a recurring basis at September 30, 2013 for continuing operations are summarized in the following table:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale debt securities:
U.S. government sponsored agencies	$	2,082	$	—	$	2,082	$	—
Residential mortgage-backed securities-GSE	357,447		—		357,447		—
Residential mortgage-backed securities-Private	21,258		—		21,258		—
Commercial mortgage-backed securities-GSE	21,644				21,644
Commercial mortgage-backed securities-Private	9,633		—		9,633		—
Business Development Company investment	2,640		2,640		—		—
Corporate notes	25,008		—		25,008		—
Total available-for-sale debt securities	439,712		2,640		437,072		—
Mortgage servicing rights	1,482		—		—		1,482
Total assets at fair value from continuing operations	$	441,194	$	2,640	$	437,072	$	1,482

Assets and liabilities carried at fair value on a recurring basis at December 31, 2012 for continuing operations are summarized in the following table:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale debt securities:
U.S. Treasury and government agencies	$	6,981	$	—	$	6,981	$	—
U.S. government sponsored agencies	22,173		—		22,173		—
States and political subdivisions	6,038		—		6,038		—
Residential mortgage-backed securities-GSE	441,074		—		441,074		—
Residential mortgage-backed securities-Private	22,945		—		22,945		—
Commercial mortgage-backed securities-GSE	23,359		—		23,359		—
Commercial mortgage-backed securities-Private	5,317		—		5,317		—
Corporate notes	36,963		—		36,963		—
Total available-for-sale debt securities	564,850		—		564,850		—
Mortgage servicing rights	726		—		—		726
Total assets at fair value from continuing operations	$	565,576	$	—	$	564,850	$	726

Fair Value Measurements, Nonrecurring

Assets measured at fair value on a nonrecurring basis are included in the following table at September 30, 2013 for continuing operations:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Impaired loans, net	$	2,477	$	—	$	—	$	2,477
Other real estate owned	25,271		—		—		25,271
Total assets at fair value from continuing operations	$	27,748	$	—	$	—	$	27,748

Assets measured at fair value on a nonrecurring basis are included in the following table at December 31, 2012 for continuing operations:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Impaired loans, net	$	13,575	$	—	$	—	$	13,575
Other real estate owned	48,480		—		—		48,480
Total assets at fair value from continuing operations	$	62,055	$	—	$	—	$	62,055

Fair Value, by Balance Sheet Grouping

The estimated fair values of financial instruments for continuing operations are as follows at the periods indicated:

	At September 30, 2013
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets of Continuing Operations:
Cash and cash equivalents	$	103,074	$	103,074	$	103,074	$	—	$	—
Investment securities: Available-for-sale	439,712		439,712		2,640		437,072		—
Investment securities: Held-to-maturity	153,684		146,474		—		146,474		—
Loans held for sale	2,734		2,734		—		2,734		—
Loans, net	1,169,755		1,137,425		—		—		1,137,425
Accrued interest receivable	6,527		6,527		—		1,735		4,792
Financial Liabilities of Continuing Operations:
Deposits	1,790,608		1,791,409		—		1,791,409		—
Retail repurchase agreements	12,422		12,422		—		12,422		—
Federal Home Loan Bank advances	73,295		77,010		—		77,010		—
Long term notes payable	5,244		5,244		—		—		5,244
Junior subordinated debentures	56,702		21,818		—		—		21,818
Accrued interest payable	2,410		2,410		—		439		1,971

	At December 31, 2012
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets of Continuing Operations:
Cash and cash equivalents	$	239,610	$	239,610	$	239,610	$	—	$	—
Investment securities: Available-for-sale	564,850		564,850		—		564,850		—
Loans held for sale	6,974		6,974		—		6,974		—
Loans, net	1,147,721		1,140,088		—		—		1,140,088
Accrued interest receivable	6,102		6,102		—		1,812		4,290
Financial Liabilities of Continuing Operations:
Deposits	1,906,988		1,910,927		—		1,910,927		—
Retail repurchase agreements	8,675		8,675		—		8,675		—
Federal Home Loan Bank advances	58,328		62,950		—		62,950		—
Junior subordinated debentures	56,702		18,760		—		—		18,760
Accrued interest payable	2,111		2,111		—		937		1,174

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Loans and Allowance for Loan Losses (Allowance for Loan Losses) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012		Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012
Allowance for Loan and Lease Losses [Roll Forward]
Balance, beginning of period					$ 29,314	[1]	$ 39,360		$ 25,085		$ 38,551
Charge-offs	(1,724)		(9,276)		(10,836)		(23,580)
Recoveries	2,376		1,552		8,206		4,202
Net charge-offs	652		(7,724)		(2,630)		(19,378)
Balance, end of period	25,387		30,859		25,387		30,859		25,085		38,551
Annualized net charge-offs during the period to average loans	(0.22%)		2.46%		0.31%		2.06%
Annualized net charge-offs during the period to ALL	(10.19%)		100.12%		13.85%		83.73%
Allowance for loan losses to loans held for investment	2.12%	[2]	2.51%	[2]	2.12%	[2]	2.51%	[2]		2.49%
Continuing operations [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Provision for losses	$ (350)		$ 32		$ (1,297)		$ 10,877

[1] Derived from audited consolidated financial statements

[2] Excludes discontinued operations.

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Investment Securities (Maturity Schedule) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Available-for-sale Securities, Debt Maturities [Abstract]
Due in one year or less, amortized cost	$ 16,486
Due in one year or less, estimated fair value	16,539
Due after one year through five years, amortized cost	10,445
Due after one year through five years, estimated fair value	10,551
Due after ten years, amortized cost	1,753
Due after ten years, estimated fair value	2,640
Total, amortized cost	28,684
Total, estimated fair value	29,730
Mortgage-backed securities, amortized cost	427,626
Mortgage-backed securities, estimated fair value	409,982
Total, amortized cost	456,310
Estimated fair value	439,712	564,850	[1]
Held-to-maturity Securities, Debt Maturities [Abstract]
Mortgage-backed securities, amortized cost	153,684
Mortgage-backed securities, estimated fair value	146,474
Total, amortized cost	153,684
Estimated fair value	$ 146,474

[1] Derived from audited consolidated financial statements

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Loans and Allowance for Loan Losses (Nonaccrual Status) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
Interest lost on nonaccrual loans	$ 700,000	$ 1,500,000	$ 2,300,000	$ 2,900,000
Loans on nonaccrual status	51,100,000		51,100,000		79,200,000
Loans held for investment on nonaccrual status	51,131,000		51,131,000		79,242,000
Net loans held for investment	1,169,755,000		1,169,755,000		1,147,721,000	[1]
Nonperforming [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans held for investment on nonaccrual status	51,131,000		51,131,000		79,242,000
90 or more days past due and accruing	76,000		76,000		227,000
Net loans held for investment	51,207,000		51,207,000		79,469,000
Nonperforming [Member] | Commercial and agricultural [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans held for investment on nonaccrual status	590,000		590,000		2,746,000
Nonperforming [Member] | Real estate - construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans held for investment on nonaccrual status	10,190,000		10,190,000		14,297,000
Nonperforming [Member] | Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans held for investment on nonaccrual status	12,822,000		12,822,000		18,372,000
Nonperforming [Member] | Real estate - mortgage, commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans held for investment on nonaccrual status	27,425,000		27,425,000		43,621,000
Nonperforming [Member] | Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans held for investment on nonaccrual status	$ 104,000		$ 104,000		$ 206,000

[1] Derived from audited consolidated financial statements

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Loans and Allowance for Loan Losses (Troubled Debt Restructuring) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013 loans	Sep. 30, 2012 loans	Sep. 30, 2013 loans	Sep. 30, 2012 loans
Financing Receivable, Modifications [Line Items]
Number of loans	0	1	11	20
Pre-modification outstanding recorded investment	$ 0	$ 202	$ 4,344	$ 4,142
Post-modification outstanding recorded investment	0	202	3,825	3,216
Commercial and agricultural [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	0	0	0
Pre-modification outstanding recorded investment	0	0	0
Post-modification outstanding recorded investment	0	0	0
Real estate - construction [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	0	0	0	9
Pre-modification outstanding recorded investment	0	0	0	2,526
Post-modification outstanding recorded investment	0	0	0	1,603
Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	0	1	9	3
Pre-modification outstanding recorded investment	0	202	2,733	260
Post-modification outstanding recorded investment	0	202	2,630	260
Real estate - mortgage, commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	0	0	2	8
Pre-modification outstanding recorded investment	0	0	1,611	1,356
Post-modification outstanding recorded investment	0	0	1,195	1,353
Consumer [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	0	0	0
Pre-modification outstanding recorded investment	0	0	0
Post-modification outstanding recorded investment	$ 0	$ 0	$ 0

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Investment Securities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Available-for-sale Securities [Abstract]
Amortized cost	$ 456,310	$ 558,818	[1]
Gross unrealized gains	2,775	7,451
Gross unrealized losses	19,373	1,419
Estimated fair value	439,712	564,850	[1]
Held-to-maturity Securities [Abstract]
Amortized cost	153,684
Gross unrealized gains	0
Gross unrealized losses	7,210
Estimated fair value	146,474
Amortized cost, Total	609,994
Gross unrealized gains, Total	2,775
Gross unrealized losses, Total	26,583
Estimated fair value, Total	586,186
Obligations of U.S. Treasury and government agencies [Member]
Available-for-sale Securities [Abstract]
Amortized cost		6,646
Gross unrealized gains		335
Gross unrealized losses		0
Estimated fair value		6,981
Obligations of U.S. government sponsored enterprises [Member]
Available-for-sale Securities [Abstract]
Amortized cost	2,057	22,118
Gross unrealized gains	25	55
Gross unrealized losses	0	0
Estimated fair value	2,082	22,173
Obligations of states and political subdivisions [Member]
Available-for-sale Securities [Abstract]
Amortized cost		5,918
Gross unrealized gains		120
Gross unrealized losses		0
Estimated fair value		6,038
Residential mortgage-backed securities - GSE [Member]
Available-for-sale Securities [Abstract]
Amortized cost	373,860	436,344
Gross unrealized gains	945	5,678
Gross unrealized losses	17,358	948
Estimated fair value	357,447	441,074
Held-to-maturity Securities [Abstract]
Amortized cost	143,611
Gross unrealized gains	0
Gross unrealized losses	6,556
Estimated fair value	137,055
Residential mortgage-backed securities - Private [Member]
Available-for-sale Securities [Abstract]
Amortized cost	20,484	22,649
Gross unrealized gains	784	750
Gross unrealized losses	10	454
Estimated fair value	21,258	22,945
Commercial mortgage-backed securities - GSE [Member]
Available-for-sale Securities [Abstract]
Amortized cost	22,863	23,150
Gross unrealized gains	0	209
Gross unrealized losses	1,219	0
Estimated fair value	21,644	23,359
Commercial mortgage-backed securities - Private [Member]
Available-for-sale Securities [Abstract]
Amortized cost	10,419	5,283
Gross unrealized gains	0	34
Gross unrealized losses	786	0
Estimated fair value	9,633	5,317
Held-to-maturity Securities [Abstract]
Amortized cost	10,073
Gross unrealized gains	0
Gross unrealized losses	654
Estimated fair value	9,419
Business Development Company investment [Member]
Available-for-sale Securities [Abstract]
Amortized cost	1,753
Gross unrealized gains	887
Gross unrealized losses	0
Estimated fair value	2,640
Corporate notes [Member]
Available-for-sale Securities [Abstract]
Amortized cost	24,874	36,710
Gross unrealized gains	134	270
Gross unrealized losses	0	17
Estimated fair value	$ 25,008	$ 36,963

[1] Derived from audited consolidated financial statements

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Loans and Allowance for Loan Losses (Loans Sold) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013 loans	Sep. 30, 2012 loans	Sep. 30, 2013 loans	Sep. 30, 2012 loans
Financing Receivable [Line Items]
Number of loans sold	0	1	0	9
Recorded investment of loans sold	$ 0	$ 602	$ 0	$ 6,267
Contract pricing of loans sold	0	540	0	6,486
Commercial and agricultural [Member]
Financing Receivable [Line Items]
Recorded investment of loans sold				0
Contract pricing of loans sold				0
Real estate - construction [Member]
Financing Receivable [Line Items]
Recorded investment of loans sold				0
Contract pricing of loans sold				0
Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable [Line Items]
Number of loans sold		1		7
Recorded investment of loans sold		602		1,865
Contract pricing of loans sold		540		1,896
Real estate - mortgage, commercial [Member]
Financing Receivable [Line Items]
Number of loans sold				2
Recorded investment of loans sold		0		4,402
Contract pricing of loans sold		0		4,590
Consumer [Member]
Financing Receivable [Line Items]
Recorded investment of loans sold				0
Contract pricing of loans sold				$ 0

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments, Gain (Loss)

	Gain (Loss) Recognized
(dollars in thousands)	For Three Months Ended					For Nine Months Ended
	September 30, 2013			September 30, 2012		September 30, 2013			September 30, 2012
Derivatives not designated as hedging instruments:
Mortgage loan rate lock commitments	$	20		$	13	$	8		$	13
Mortgage loan forward sales	(102		)	120		(196		)	298
Total	$	(82	)	$	133	$	(188	)	$	311

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Consolidated Statements of Shareholders' Equity (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Total		Preferred stock [Member]	Common Stock [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss [Member]	2011 Issuance [Member]	2011 Issuance [Member] Common Stock [Member]
Beginning balance at Dec. 31, 2011	$ 129,015		$ 0	$ 455,166	$ (322,182)	$ (3,969)
Beginning balance, shares at Dec. 31, 2011			0	21,102,668
Comprehensive loss:
Net loss	(33,709)				(33,709)
Other comprehensive income, net of tax	5,780					5,780
Total comprehensive loss	(27,929)
Expense related to 2011 issuance of common stock							(913)	(913)
Return of common stock not received for fractional shares rounding purposes in the 1:100 reverse stock split				(586)
Compensation expense recognized	1			1
Exercise of warrants related to stock offering				186
Adjustments to Additional Paid in Capital, Warrant Issued	3			3
Stock offering, net of issuance costs (shares)				485,788
Stock offering, net of issuance costs of $158	6,696			6,696
Ending balance at Sep. 30, 2012	106,873		0	460,953	(355,891)	1,811
Ending balance, shares at Sep. 30, 2012			0	21,588,056
Beginning balance at Dec. 31, 2012	98,445	[1]	0	460,955	(362,187)	(323)
Beginning balance, shares at Dec. 31, 2012			0	21,698,115
Comprehensive loss:
Net loss	(3,773)				(3,773)
Other comprehensive income, net of tax	(14,361)					(14,361)
Total comprehensive loss	(18,134)
Compensation expense recognized	462			462
Shares issued as compensation to directors (shares)				3,708
Shares issued as compensation to directors	29			29
Issuance of restricted stock awards to employees				37,823
Ending balance at Sep. 30, 2013	$ 80,802		$ 0	$ 461,446	$ (365,960)	$ (14,684)
Ending balance, shares at Sep. 30, 2013			0	21,739,646

[1] Derived from audited consolidated financial statements

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Operating Activities
Net loss	$ (3,773)	$ (33,709)
Net loss from discontinued operations	0	(27)
Net loss from continuing operations	(3,773)	(33,682)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization of premises and equipment	2,715	2,906
Provision for (recovery of) loan losses	(1,297)	10,877
Deferred income taxes (benefit)	2,375	(128)
Deferred loan fees and costs, net	(279)	(3,432)
Premium amortization and discount accretion of investment securities, net	3,632	6,547
Net (gain) loss on sale of investment securities	(2,773)	(1,923)
Amortization of core deposit premiums	1,056	1,056
Net accretion of purchase accounting adjustments	(13,364)	(19,661)
Adjustment to goodwill	0	(300)
Stock compensation expense	491	1
Increase in cash surrender value of bank-owned life insurance, net	(854)	(967)
Origination of loans held for sale	(93,390)	(40,078)
Net proceeds from sale of loans held for sale	100,208	32,425
Net loss (gain) on sale of loans held for sale	(1,684)	(559)
Mortgage servicing rights capitalized	(959)	0
Mortgage servicing rights amortization	203	0
Net (gain) loss on sale of premises and equipment	604	0
Net loss on sales and write-downs of other real estate owned	3,004	16,091
Changes in assets and liabilities:
Decrease (increase) in accrued interest receivable and other assets	(1,879)	431
Increase in accrued interest payable and other liabilities	155	(2,742)
Net cash used in operating activities of continuing operations	(5,809)	(33,138)
Net effect of discontinued operations	0	(874)
Net cash used in operating activities	(5,809)	(34,012)
Investing Activities
Proceeds from sales	175,046	133,241
Proceeds from maturities, calls and principal repayments	56,650	120,718
Purchases	(126,041)	(309,221)
Purchases	(155,394)	0
Net (increase) decrease in loans held for investment	(13,608)	(32,856)
Proceeds from sales of other real estate owned	32,001	37,528
Purchases of premises and equipment	(2,455)	(1,862)
Proceeds from sales of premises and equipment	276	36
Expenses paid in 2012 related to 2011 capital raise	0	(913)
Net cash (used in) provided by investing activities	(33,525)	(53,329)
Financing Activities
Net decrease in deposits	(115,916)	(145,465)
Increase in retail repurchase agreements	3,747	595
Decrease in Federal Home Loan Bank advances	14,967	(31)
Issuance of common stock, net of expense	0	6,696
Net cash used in financing activities of continuing operations	(97,202)	(138,205)
Net effect of discontinued operations	0	0
Net cash used in financing activities	(97,202)	(138,205)
Net Decrease in Cash and Cash Equivalents	(136,536)	(225,546)
Cash and Cash Equivalents at Beginning of Period	239,610	553,416
Cash and Cash Equivalents at End of Period	103,074	327,870
Cash paid during the period for:
Interest	7,793	13,982
Noncash transactions:
Foreclosed loans transferred to other real estate owned	10,403	23,647
Loans to facilitate the sale of other real estate owned	5,071	778
Transfer of loans from held for investment to held for sale	894	600
Transfer of loans from held for sale to held for investment	0	1,119
Unrealized securities gains/(losses), net of income taxes	(13,900)	5,409
Transfer of investment from other assets to available for sale securities	2,640	0
Employee benefit plan costs, net of income taxes	$ (461)	$ 0

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Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

We accounted for the Merger as a business combination under the acquisition method of accounting. As a result, we have recognized in our financial statements the identifiable net assets acquired and an amount of goodwill (representing the difference between the purchase price and the identifiable net assets). During the measurement period following a business combination, the amount of identifiable net assets recognized is subject to further adjustment to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. GAAP requires that the measurement period cannot exceed one year from the acquisition date. During the first quarter of 2012, we recognized $0.3 million in additional goodwill from the Merger. This additional amount resulted from new valuations received on OREO acquired in the Merger, which were written down to our best estimate of fair value.

Goodwill and other intangible assets deemed to have indefinite lives generated from purchase business combinations are not subject to amortization and are instead tested for impairment no less than annually. Impairment exists when the carrying value of goodwill exceeds its implied fair value. An impairment loss would be recognized in an amount equal to that excess and would be included in noninterest expense in the Consolidated Statements of Operations. None of the goodwill recognized in the Merger is expected to be deductible for income tax purposes.

Our intangible assets with definite lives are core deposit premiums ("CDP") and mortgage servicing rights ("MSR"). CDPs are amortized over their useful lives to their estimated residual value and reviewed for impairment at least quarterly. The amortization expense represents the estimated decline in the value of the underlying deposits. MSRs are amortized over the expected lives of the underlying mortgages including prepayment estimates.

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Basis of Presentation

9 Months Ended

Sep. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

Nature of Operations

CommunityOne Bancorp, or "COB" or the "Company"(which also refers to us and our subsidiaries on a consolidated basis), is a bank holding company incorporated in 1984 under the laws of the State of North Carolina. Through our ownership of CommunityOne Bank, N.A., or the "Bank", a national banking association headquartered in Asheboro, North Carolina, we offer a complete line of consumer, wealth management, mortgage and business banking services, including loan, deposit, cash management, investment management and trust services, to individual and business customers through operations located throughout central, southern and western North Carolina. The Bank also holds the stock of Dover Mortgage Company (“Dover”) and First National Investor Services, Inc. Dover previously engaged in the business of originating, underwriting and closing mortgage loans for sale in the secondary market. Dover ceased operations in the first quarter of 2011 and filed for Chapter 11 bankruptcy on February 15, 2012. First National Investor Services, Inc. holds deeds of trust for the Bank.

COB also owns Granite Mortgage, Inc., which ceased mortgage operations in 2009 and filed for Chapter 11 bankruptcy on February 15, 2012, and FNB United Statutory Trust I, FNB United Statutory Trust II, and Catawba Valley Capital Trust II, which were formed to facilitate the issuance of trust preferred securities.

On October 21, 2011, as part of the recapitalization of COB, COB acquired Bank of Granite Corporation and its subsidiary bank, Bank of Granite, through the merger of a wholly owned subsidiary of ours into Granite Corp. (the “Merger”). Bank of Granite was merged into the Bank on June 8, 2013. Our shareholders approved an amendment in our articles of incorporation to change our name from FNB United Corp. to CommunityOne Bancorp on June 20, 2013. This change, along with a change in our stock symbol from FNBN to COB, was implemented on July 1, 2013.

We earn revenue primarily from interest on loans and securities investments, mortgage banking income and fees charged for financial services provided to our customers. Offsetting these revenues are the cost of deposits and other funding sources, provision for loan losses and write-downs in the value of, gains and losses on disposition of and holding costs associated with our OREO, and other operating costs such as: salaries and employee benefits, occupancy, data processing expenses, merger related expenses and tax expense.

General

The accompanying consolidated financial statements, prepared without audit, include the accounts of COB and its subsidiaries. All significant intercompany balances and transactions have been eliminated. Descriptions of the organization and business of COB, accounting policies followed by COB and other relevant information are contained in our Annual Report on Form 10-K for the year ended December 31, 2012 (the "Form 10-K"), including the notes to the consolidated financial statements filed as part of that report. This quarterly report should be read in conjunction with the Form 10-K.

In the opinion of management, the accompanying consolidated financial statements contain the adjustments, all of which are normal recurring adjustments, necessary to present fairly the financial position of COB as of September 30, 2013 and December 31, 2012, and the results of its operations and cash flows for the three and nine months ended September 30, 2013 and 2012, respectively.

All financial information is reported on a continuing operations basis, unless otherwise noted. See Note 2 to the consolidated financial statements for a discussion regarding discontinued operations and certain assets and liabilities at September 30, 2013 and December 31, 2012.

Use of Estimates

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States ("GAAP"). Actual results could differ from those estimates. Material estimates subject to change in the near term include, among other items, the allowances for loan losses (“ALL”), estimated cash flows of purchased impaired loans, the carrying value of other real estate owned (“OREO”), the carrying value of intangible assets and the realization of deferred tax assets.

Reclassification

Certain reclassifications have been made to the prior period consolidated financial statements to place them on a comparable basis with the current period consolidated financial statements. These reclassifications have no effect on net income or shareholders' equity as previously reported.

Recent Accounting Pronouncements

Comprehensive Income - In February 2013, the FASB issued ASU No. 2013-02 Comprehensive Income (Topic 220): "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" (“ASU No. 2013-02”). This pronouncement requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income for each applicable component of net income, as well as a roll forward of the components of accumulated other comprehensive income on a prospective basis. This pronouncement is effective beginning January 1, 2013. The provisions of ASU No. 2013-02 relate only to financial statement presentation of other comprehensive income and, accordingly, its adoption did not have a material effect on COB's financial statements. These new disclosures appear in Note 10.

FASB - From time to time, the Financial Accounting Standards Board (“FASB”) issues exposure drafts for proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards.

Management considers the effect of the proposed statements on the consolidated financial statements of COB and monitors the status of changes to and proposed effective dates of exposure drafts. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on our financial position, results of operations or cash flows.

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Loans and Allowance for Loan Losses (Impaired Loans Disclosure) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, recorded investment	$ 49,357	$ 62,282
With an allowance recorded, recorded investment	2,963	15,312
Impaired Financing Receivable, Recorded Investment	52,320	77,594
With no related allowance recorded, unpaid principal balance	63,186	80,510
With an allowance recorded, unpaid principal balance	3,503	18,904
Impaired Financing Receivable, Unpaid Principal Balance	66,689	99,414
Related allowance	486	1,737
Purchased impaired loans with subsequent deterioration	147,852	192,115
Purchased impaired loans with subsequent credit deterioration, unpaid principal balance	152,166	196,617
Purchased impaired loans with subsequent deterioration, related allowance	4,066	5,373
Commercial and agricultural [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, recorded investment	416	1,755
With an allowance recorded, recorded investment	0	579
Impaired Financing Receivable, Recorded Investment	416	2,334
With no related allowance recorded, unpaid principal balance	776	2,608
With an allowance recorded, unpaid principal balance	0	602
Impaired Financing Receivable, Unpaid Principal Balance	776	3,210
Related allowance	0	282
Purchased impaired loans with subsequent deterioration	8,821	11,533
Purchased impaired loans with subsequent credit deterioration, unpaid principal balance	9,042	11,728
Purchased impaired loans with subsequent deterioration, related allowance	34	524
Real estate - construction [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, recorded investment	9,900	11,875
With an allowance recorded, recorded investment	97	1,658
Impaired Financing Receivable, Recorded Investment	9,997	13,533
With no related allowance recorded, unpaid principal balance	14,246	18,553
With an allowance recorded, unpaid principal balance	112	1,843
Impaired Financing Receivable, Unpaid Principal Balance	14,358	20,396
Related allowance	1	82
Purchased impaired loans with subsequent deterioration	8,258	2,285
Purchased impaired loans with subsequent credit deterioration, unpaid principal balance	8,897	2,236
Purchased impaired loans with subsequent deterioration, related allowance	747	200
Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, recorded investment	10,465	16,437
With an allowance recorded, recorded investment	2,595	1,681
Impaired Financing Receivable, Recorded Investment	13,060	18,118
With no related allowance recorded, unpaid principal balance	13,416	20,764
With an allowance recorded, unpaid principal balance	2,994	1,745
Impaired Financing Receivable, Unpaid Principal Balance	16,410	22,509
Related allowance	446	607
Purchased impaired loans with subsequent deterioration	26,661	34,961
Purchased impaired loans with subsequent credit deterioration, unpaid principal balance	27,130	35,802
Purchased impaired loans with subsequent deterioration, related allowance	527	711
Real estate - mortgage, commercial [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, recorded investment	28,576	32,215
With an allowance recorded, recorded investment	271	11,394
Impaired Financing Receivable, Recorded Investment	28,847	43,609
With no related allowance recorded, unpaid principal balance	34,748	38,585
With an allowance recorded, unpaid principal balance	397	14,714
Impaired Financing Receivable, Unpaid Principal Balance	35,145	53,299
Related allowance	39	766
Purchased impaired loans with subsequent deterioration	103,028	141,974
Purchased impaired loans with subsequent credit deterioration, unpaid principal balance	106,249	145,704
Purchased impaired loans with subsequent deterioration, related allowance	2,567	3,388
Consumer [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, recorded investment	0	0
With an allowance recorded, recorded investment	0	0
Impaired Financing Receivable, Recorded Investment	0	0
With no related allowance recorded, unpaid principal balance	0	0
With an allowance recorded, unpaid principal balance	0	0
Impaired Financing Receivable, Unpaid Principal Balance	0	0
Related allowance	0	0
Purchased impaired loans with subsequent deterioration	1,084	1,362
Purchased impaired loans with subsequent credit deterioration, unpaid principal balance	848	1,147
Purchased impaired loans with subsequent deterioration, related allowance	$ 191	$ 550

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Discontinued Operations (Balance Sheet) (Details) (Dover [Member], USD $)	Sep. 30, 2013	Dec. 31, 2012
Dover [Member]
Discontinued Operations, Balance Sheet Disclosure [Line Items]
Assets from discontinued operations	$ 0	$ 0
Liabilities from discontinued operations	$ 0	$ 0

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Investment Securities (Other Disclosures) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
FHLB stock	$ 5,900,000		$ 5,900,000		$ 6,300,000
FRBR stock	4,100,000		4,100,000		3,100,000
Investment securities portfolio available as lendable collateral	394,100,000		394,100,000
Book value of securities sold	3,300,000	21,400,000	175,100,000	134,100,000
Gain on securities sold	50,000	(33,000)	2,773,000	1,923,000
Deposits [Member]
Schedule of Available-for-sale Securities [Line Items]
Investment securities portfolio pledged as collateral	94,100,000		94,100,000
Retail repurchase agreements [Member]
Schedule of Available-for-sale Securities [Line Items]
Investment securities portfolio pledged as collateral	18,400,000		18,400,000
Others [Member]
Schedule of Available-for-sale Securities [Line Items]
Investment securities portfolio pledged as collateral	$ 78,900,000		$ 78,900,000

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Loans and Allowance for Loan Losses (Loans Pledged) (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Loans Receivable, Net [Abstract]
Loans pledged to collateralize FHLB advances and letters of credit	$ 215.5	$ 270.2
Pledged financial instruments, Not separately reported, securities, for Federal Home Loan Bank debt	25.1
Credit availability for borrowing under FHLB advances and letters of credit	15.7	19.1
Loans pledged to collateralize potential borrowings from Federal Reserve Discount Window	10.0
Pledged Financial Instruments, Not Separately Reported, investment securities, for Federal Reserve Bank	51.7
Borrowing capacity under Federal Reserve Discount Window	57.5
Federal Home Loan Bank Advances and Line of Credit, Amount of Available Borrowing	$ 314.2

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Derivative Financial Instruments (Details) (Not designated as hedges [Member], Continuing operations [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Derivative [Line Items]
Gain (loss) recognized in income	$ (82)	$ 133	$ (188)	$ 311
Mortgage loan rate lock commitments [Member]
Derivative [Line Items]
Gain (loss) recognized in income	20	13	8	13
Mortgage loan forward sales and MBS [Member]
Derivative [Line Items]
Gain (loss) recognized in income	$ (102)	$ 120	$ (196)	$ 298

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Loans and Allowance for Loan Losses (Unfunded Commitment) (Details) (USD $) In Millions, unless otherwise specified			3 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013 Letters of credit [Member]
Unfunded Commitments [Line Items]
Expected usage percentage of remaining unfunded commitments			10.00%
Reserve for unfunded commitments	$ 0.5	$ 0.6

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Loans and Allowance for Loan Losses (Purchased Loans with Deteriorated Credity Quality) (Details) (Granite Corp [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012
Granite Corp [Member]
Deterioarted Loans Acquired Movement Schedule [Roll Forward]
Balance, beginning of period			$ 228,392	$ 330,836	$ 189,159		$ 287,092
Accretion	4,283	4,568	12,677	15,831
Increase in future accretion	0	0	6,801	4,592
Payment received	(16,225)	(34,043)	(62,556)	(84,944)
Foreclosed and transferred to OREO	(624)	(5,412)	(1,920)	(9,518)
Subtotal before allowance	176,593	252,205	176,593	252,205		228,392
Subtotal before provision	(4,066)	(3,296)	(4,066)	(3,296)
Balance, end of period	172,527	248,909	172,527	248,909	189,159		287,092
Deteriorated Loans Acquired, Accretable Yield Movement Schedule [Roll Forward]
Future accretion balance, beginning of period			30,299	47,804	28,706		41,133
Accretion	(4,283)	(4,568)	(12,677)	(15,831)
Future accretion balance, end of period	$ 24,423	$ 36,565	$ 24,423	$ 36,565	$ 28,706		$ 41,133

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Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Amortized cost of available-for-sale securities	$ 456,310	$ 558,818	[1]
Fair value of held-to-maturity securities	$ 146,474
Common stock, no par value			[1]
Common stock, shares authorized	2,500,000,000	2,500,000,000	[1]
Common stock, shares issued	21,739,646	21,698,115	[1]
Preferred stock Series A [Member]
Preferred stock, par value	$ 10.00	$ 10.00	[1]
Preferred stock, shares authorized	200,000	200,000	[1]
Preferred stock, shares issued	0	0	[1]
Preferred stock, shares outstanding	0	0	[1]
Preferred stock [Member]
Preferred stock, par value	$ 1.00	$ 1.00	[1]
Preferred stock, shares authorized	15,000,000	15,000,000	[1]
Preferred stock, shares issued	0	0	[1]
Preferred stock, shares outstanding	0	0	[1]

[1] Derived from audited consolidated financial statements

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Other Real Estate Owned and Property Acquired in Settlement of Loans

9 Months Ended

Sep. 30, 2013

Repossessed Assets [Abstract]

Other Real Estate Owned and Property Acquired in Settlement of Loans

Other Real Estate Owned and Personal Property Acquired in Settlement of Loans

OREO consists of real estate acquired through foreclosure or deed in lieu thereof. The property is classified as held for sale. The property is initially carried at fair value based on recent appraisals, less estimated costs to sell. Declines in the fair value of properties included in other real estate below carrying value are recognized by a charge to income.

Total OREO and personal property acquired in settlement of loans decreased $30.0 million during the first nine months of 2013 from $63.1 million at December 31, 2012, to $33.2 million at September 30, 2013. This represents 39% of total nonperforming assets. At December 31, 2012, OREO and personal property acquired in settlement of loans represented 44% of total nonperforming assets.

The following table summarizes OREO and personal property acquired in settlement of loans at the periods indicated:

(dollars in thousands)	September 30, 2013		December 31, 2012
Real estate acquired in settlement of loans	$	33,123	$	62,796
Personal property acquired in settlement of loans	56		335
Total property acquired in settlement of loans	$	33,179	$	63,131

The following tables summarize the changes in real estate acquired in settlement of loans at the periods indicated:

	For Three Months Ended
(dollars in thousands)	September 30, 2013			September 30, 2012
Real estate acquired in settlement of loans, beginning of period	$	35,662		$	86,183
Plus: New real estate acquired in settlement of loans	3,610			9,746
Less: Sales of real estate acquired in settlement of loans	(6,411		)	(13,826		)
Less: Write-downs and net gain (loss) on sales charged to expense	262			(1,621		)
Real estate acquired in settlement of loans, end of period	$	33,123		$	80,482

	For Nine Months Ended
(dollars in thousands)	September 30, 2013			September 30, 2012
Real estate acquired in settlement of loans, beginning of period	$	62,796		$	110,009
Plus: New real estate acquired in settlement of loans	10,403			24,766
Less: Sales of real estate acquired in settlement of loans	(37,072		)	(38,202		)
Less: Write-downs and net loss on sales charged to expense	(3,004		)	(16,091		)
Real estate acquired in settlement of loans, end of period	$	33,123		$	80,482

At September 30, 2013, 13 assets with a net carrying amount of $7.2 million were under contract for sale. Estimated losses on these sales have been recognized in the Consolidated Statements of Operations in the first nine months of 2013.

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Consolidated Statements of Comprehensive Loss (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Statement of Other Comprehensive Income [Abstract]
Net loss	$ 4,006	$ (4,712)	$ (3,773)	$ (33,709)
Other comprehensive income (loss):
Unrealized gains arising from termination of supplemental executive retirement plans	0	371	0	371
Unrealized holdings gains (losses) arising during the period on available-for-sale securities	1,584	5,633	(19,857)	10,817
Tax effect	(829)	(2,225)	7,636	(4,245)
Unrealized holdings gains (losses) arising during the period on available-for-sale securities, net of tax	755	3,408	(12,221)	6,572
Reclassification adjustment for (gain) losses on available-for-sale securities included in net income	(50)	33	(2,773)	(1,923)
Tax effect	19	(13)	1,094	760
Reclassification adjustment for (gain) losses on available-for-sale securities included in net income, net of tax	(31)	20	(1,679)	(1,163)
Change in defined benefit plans liability	(249)	0	(757)	0
Tax effect	95	0	296	0
Change in defined benefit plans liability, net of tax	(154)	0	(461)	0
Other comprehensive income (loss), net of tax:	570	3,799	(14,361)	5,780
Comprehensive income (loss)	$ 4,576	$ (913)	$ (18,134)	$ (27,929)

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Fair Values of Assets and Liabilities (Measured on Nonrecurring Basis) (Details) (Continuing operations [Member], Nonrecurring [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Total [Member]
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items]
Impaired loans, net	$ 2,477	$ 13,575
Other real estate owned	25,271	48,480
Total assets at fair value	27,748	62,055
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items]
Total assets at fair value		0
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items]
Impaired loans, net	2,477	13,575
Other real estate owned	25,271	48,480
Total assets at fair value	$ 27,748	$ 62,055

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Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Assets
Cash and due from banks	$ 29,506	$ 38,552	[1]
Interest-bearing bank balances	73,568	201,058	[1]
Investment securities:
Available-for-sale, at estimated fair value (amortized cost of $456,310 in 2013 and $558,818 in 2012)	439,712	564,850	[1]
Held-to-maturity (estimated fair value of $146,474 in 2013)	153,684	0	[1]
Loans held for sale	2,734	6,974	[1]
Loans held for investment	1,195,142	1,177,035	[1]
Less: Allowance for loan losses	(25,387)	(29,314)	[1]
Net loans held for investment	1,169,755	1,147,721	[1]
Premises and equipment, net	51,409	52,725	[1]
Other real estate owned and property acquired in settlement of loans	33,179	63,131	[1]
Core deposit premiums and other intangibles	7,197	7,495	[1]
Goodwill	4,205	4,205	[1]
Bank-owned life insurance	39,646	38,792	[1]
Other assets	32,578	26,062	[1]
Total Assets	2,037,173	2,151,565	[1]
Liabilities
Noninterest-bearing demand deposits	308,178	251,235	[1]
Interest-bearing deposits:
Demand, savings and money market deposits	874,211	892,576	[1]
Time deposits of $100 or more	264,363	290,166	[1]
Other time deposits	343,856	473,011	[1]
Total deposits	1,790,608	1,906,988	[1]
Retail repurchase agreements	12,422	8,675	[1]
Federal Home Loan Bank advances	73,295	58,328	[1]
Long term notes payable	5,244	0
Junior subordinated debentures	56,702	56,702	[1]
Other liabilities	18,100	22,427	[1]
Total Liabilities	1,956,371	2,053,120	[1]
Shareholders' Equity
Common stock, no par value; authorized 2,500,000,000 shares, issued 21,739,646 shares in 2013 and 21,698,115 in 2012	461,446	460,955	[1]
Accumulated deficit	(365,960)	(362,187)	[1]
Accumulated other comprehensive loss	(14,684)	(323)	[1]
Total Shareholders' Equity	80,802	98,445	[1]
Total Liabilities and Shareholders' Equity	2,037,173	2,151,565	[1]
Preferred stock Series A [Member]
Shareholders' Equity
Preferred stock	0	0	[1]
Preferred stock [Member]
Shareholders' Equity
Preferred stock	$ 0	$ 0	[1]

[1] Derived from audited consolidated financial statements

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Other Real Estate Owned and Property Acquired in Settlement of Loans (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Mar. 31, 2013	Dec. 31, 2012		Sep. 30, 2012	Mar. 31, 2012	Dec. 31, 2011
Repossessed Assets [Abstract]
Decrease in total OREO and foreclosed assets	$ 30,000,000
Total OREO and foreclosed assets as a percentage of total nonperforming assets	39.00%		44.00%
Real estate acquired in settlement of loans	33,123,000	35,662,000	62,796,000		80,482,000	86,183,000	110,009,000
Personal property acquired in settlement of loans	56,000		335,000
Total property acquired in settlement of loans	$ 33,179,000		$ 63,131,000	[1]

[1] Derived from audited consolidated financial statements

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Discontinued Operations (Income Statement) (Details) (Dover [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Dover [Member]
Discontinued Operations, Income Statement Disclosure [Line Items]
Total interest income	$ 0	$ 0
Total interest expense	0	0
Net Interest Income before Provision for Loan Losses	0	0
Provision for loan losses	0	0
Net Interest Income after Provision for Loan Losses	0	0
Total noninterest loss	0	0
Personnel expense	0	1
Net occupancy expense	0	1
Professional fees	0	25
Total noninterest expense	0	27
Loss before income taxes	0	(27)
Income tax (benefit)/expense	0	0
Net loss from discontinued operations, net of tax	$ 0	$ (27)

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Other Real Estate Owned and Property Acquired in Settlement of Loans (Tables)

9 Months Ended

Sep. 30, 2013

Repossessed Assets [Abstract]

Schedule of Repossessed Assets

The following table summarizes OREO and personal property acquired in settlement of loans at the periods indicated:

(dollars in thousands)	September 30, 2013		December 31, 2012
Real estate acquired in settlement of loans	$	33,123	$	62,796
Personal property acquired in settlement of loans	56		335
Total property acquired in settlement of loans	$	33,179	$	63,131

Activities of Real Estate Acquired through Foreclosure

The following tables summarize the changes in real estate acquired in settlement of loans at the periods indicated:

	For Three Months Ended
(dollars in thousands)	September 30, 2013			September 30, 2012
Real estate acquired in settlement of loans, beginning of period	$	35,662		$	86,183
Plus: New real estate acquired in settlement of loans	3,610			9,746
Less: Sales of real estate acquired in settlement of loans	(6,411		)	(13,826		)
Less: Write-downs and net gain (loss) on sales charged to expense	262			(1,621		)
Real estate acquired in settlement of loans, end of period	$	33,123		$	80,482

	For Nine Months Ended
(dollars in thousands)	September 30, 2013			September 30, 2012
Real estate acquired in settlement of loans, beginning of period	$	62,796		$	110,009
Plus: New real estate acquired in settlement of loans	10,403			24,766
Less: Sales of real estate acquired in settlement of loans	(37,072		)	(38,202		)
Less: Write-downs and net loss on sales charged to expense	(3,004		)	(16,091		)
Real estate acquired in settlement of loans, end of period	$	33,123		$	80,482

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Loans and Allowance for Loan Losses (Granite Purchased Loans) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Mar. 31, 2013	Dec. 31, 2012		Sep. 30, 2012	Mar. 31, 2012	Dec. 31, 2011
Financing Receivable [Line Items]
Allowance of loan losses	$ 25,387	$ 25,085	$ 29,314	[1]	$ 30,859	$ 38,551	$ 39,360
Loans held for investment	1,195,142		1,177,035	[1]
PI [Member]
Financing Receivable [Line Items]
Loans held for investment	176,593		228,392
PC [Member]
Financing Receivable [Line Items]
Loans held for investment	1,018,549		948,643
Granite Corp [Member]
Financing Receivable [Line Items]
Purchased impaired	176,593		228,392		252,205
Purchased contractual	28,088		34,844
Loans held for investment	204,681		263,236
Unpaid principal balance	205,230		271,060
Granite Corp [Member] | Commercial and agricultural [Member]
Financing Receivable [Line Items]
Purchased impaired	11,418		14,666
Purchased contractual	4,874		7,311
Loans held for investment	16,292		21,977
Unpaid principal balance	15,597		21,692
Granite Corp [Member] | Real estate - construction [Member]
Financing Receivable [Line Items]
Purchased impaired	10,196		2,682
Purchased contractual	0		0
Loans held for investment	10,196		2,682
Unpaid principal balance	9,902		2,677
Granite Corp [Member] | Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable [Line Items]
Purchased impaired	29,712		39,215
Purchased contractual	22,833		27,484
Loans held for investment	52,545		66,699
Unpaid principal balance	53,476		69,200
Granite Corp [Member] | Real estate - mortgage, commercial [Member]
Financing Receivable [Line Items]
Purchased impaired	124,178		170,467
Purchased contractual	381		49
Loans held for investment	124,559		170,516
Unpaid principal balance	125,395		176,347
Granite Corp [Member] | Consumer [Member]
Financing Receivable [Line Items]
Purchased impaired	1,089		1,362
Purchased contractual	0		0
Loans held for investment	1,089		1,362
Unpaid principal balance	860		1,144
Granite Corp [Member] | PI [Member]
Financing Receivable [Line Items]
Allowance of loan losses	4,100		5,400
Granite Corp [Member] | PC [Member]
Financing Receivable [Line Items]
Allowance of loan losses	$ 700		$ 500

[1] Derived from audited consolidated financial statements

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Earnings Per Share (EPS Calculation) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Earnings Per Share [Abstract]
Net loss from continuing operations before cumulative dividends on preferred stock	$ 4,006	$ (4,712)	$ (3,773)	$ (33,682)
Loss from continuting operations, net of tax	4,006	(4,712)	(3,773)	(33,682)
Loss from discontinued operations, net of tax	0	0	0	(27)
Net loss to common shareholders	$ 4,006	$ (4,712)	$ (3,773)	$ (33,709)
Weighted average number of common shares outstanding - basic and diluted	21,738,770	21,588,027	21,722,536	21,294,727
Net income (loss) per common share from continuing operations - basic and diluted	$ 0.18	$ (0.22)	$ (0.17)	$ (1.58)
Net loss per common share from discontinued operations - basic and diluted	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Net loss per common share - basic and diluted	$ 0.18	$ (0.22)	$ (0.17)	$ (1.58)

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Loans and Allowance for Loan Losses (Impaired Loans) (Details) (USD $)	3 Months Ended		12 Months Ended
	Sep. 30, 2013		Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Impaired loans, no individually reviewed for impairment	$ 4,550,000		$ 6,017,000
Impaired loans, individually reviewed, with no impairment	49,356,000		62,282,000
Impaired loans, individually reviewed, with impairment	2,963,000		15,312,000
Total impaired loans, excluding purchased impaired	56,869,000	[1]	83,611,000	[1]
Purchased impaired loans with subsequent deterioration	147,852,000		192,115,000
Purchased impaired loans with no subsequent deterioration	28,741,000		36,277,000
Impaired loan, individually reviewed, with impairment, associated reserves	486,000	[1]	1,737,000	[1]
Purchased impaired loans with subsequent deterioration, associated reserves	4,066,000		5,373,000
Impaired financing receivable, including deteriorated loans purchased, related allowance	4,552,000		7,110,000
Imparied financing receivable, simple average balance	61,837,000		94,754,000
Restructured loans	14,300,000		20,800,000
Performing [Member]
Financing Receivable, Impaired [Line Items]
Restructured loans	$ 6,700,000		$ 4,500,000

[1] * Included at September 30, 2013 and December 31, 2012 were $6.7 million and $4.5 million, respectively, in restructured and performing loans.

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Loans and Allowance for Loan Losses (Details) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012		Dec. 31, 2012
Financing Receivable [Line Items]
Allowance for Loan and Lease Losses, Write-offs	$ 1,724,000		$ 9,276,000		$ 10,836,000		$ 23,580,000
Allowance for Loan Losses, Recovery	2,376,000		1,552,000		8,206,000		4,202,000
Allowance for Loan and Lease Losses, Net Write-downs	(652,000)		7,724,000		2,630,000		19,378,000
Loans and Leases Receivable, Ratio, Allowance for Loan and Lease Losses to Loans and Leases Receivables	2.12%	[1]	2.51%	[1]	2.12%	[1]	2.51%	[1]	2.49%
Real estate - mortgage, 1-4 family residential [Member] | PC [Member] | Granite Corp [Member]
Financing Receivable [Line Items]
Loans purchases					134,800,000		173,200,000
Loans purchases premium					$ 1,000,000		$ 4,000,000

[1] Excludes discontinued operations.

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Loans and Allowance for Loan Losses (Credit Quality Indicator) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Deferred Income	$ (2,500,000)	$ 3,600,000
Loans held for investment	1,195,142,000	1,177,035,000	[1]
Servicing Assets, Unconsolidated Loans Serviced, Unpaid Principal Balance	172,700,000	65,100,000
Substandard or Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans purchased in the Merger	46,700,000	60,600,000
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	1,037,024,000	952,705,000
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	43,554,000	71,786,000
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	114,215,000	151,396,000
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	349,000	1,148,000
Commercial and agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	69,617,000	79,704,000
Commercial and agricultural [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	65,556,000	69,003,000
Commercial and agricultural [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	640,000	3,447,000
Commercial and agricultural [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	3,421,000	6,953,000
Commercial and agricultural [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	0	301,000
Real estate - construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	67,542,000	58,414,000
Real estate - construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	48,665,000	40,117,000
Real estate - construction [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	3,310,000	2,031,000
Real estate - construction [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	15,567,000	16,266,000
Real estate - construction [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	0	0
Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	618,262,000	553,538,000
Real estate - mortgage, 1-4 family residential [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	578,197,000	504,819,000
Real estate - mortgage, 1-4 family residential [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	12,638,000	15,855,000
Real estate - mortgage, 1-4 family residential [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	27,427,000	32,625,000
Real estate - mortgage, 1-4 family residential [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	0	239,000
Real estate - mortgage, commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	395,086,000	441,836,000
Real estate - mortgage, commercial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	300,609,000	296,271,000
Real estate - mortgage, commercial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	26,918,000	50,275,000
Real estate - mortgage, commercial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	67,559,000	95,126,000
Real estate - mortgage, commercial [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	0	164,000
Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	44,635,000	43,543,000
Consumer [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	43,997,000	42,495,000
Consumer [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	48,000	178,000
Consumer [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	241,000	426,000
Consumer [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment	$ 349,000	$ 444,000

[1] Derived from audited consolidated financial statements

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Loans and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2013

Loans Receivable, Net [Abstract]

Loans

Loans and Allowance for Loan Losses

General

Loans held for investment are stated at the principal amounts outstanding adjusted for purchase premiums/discounts, deferred net loan fees and costs, and unearned income.  We report our loan portfolio by segments and classes, which are disaggregations of portfolio segments.  Our portfolio segments are:  Commercial and agricultural, Real estate, and Consumer loans.  The Commercial and agricultural loan and Consumer loan portfolios are not further segregated into classes.  The classes within the Real estate portfolio segment include Real estate - construction and Real estate mortgage, which is further broken into 1-4 family residential mortgage and Commercial real estate mortgage loans.

Loan fees and the incremental direct costs associated with originating a loan are deferred and subsequently recognized over the life of the loan as an adjustment to interest income.

In addition to originating loans, we also purchase loans. At acquisition, purchased loans are designated as either purchased contractual loans ("PC loans") or purchased impaired loans ("PI loans"). PC loans are acquired loans where management believes it is probable that it will receive all principal as of the date of acquisition.  These loans are accounted for under the contractual cash flow method, under ASC 310-20. Any discount or premium paid on PC loans is recorded in interest income using the effective yield method over the expected life of the loans.

PI loans are acquired loans where management believes, at acquisition date, it is probable that all principal on the acquired loans will not be received.  PI loans are placed in homogeneous risk based pools where accounting for projected cash flows is performed, as allowed under ASC 310-30.  Once a pool is established the individual loans within each pool do not change.  As management obtains new information related to changes in expected principal loss and expected cash flows, by pool, we record either an increase in yield when new expected cash flows increase, an allowance for loan losses when new expected cash flows decline, or a decrease in yield when there is only a timing difference in expected cash flows.

Loans acquired in the Merger ("Granite Purchased Loans") included PI loans and PC loans. Loans designated as PC loans included performing revolving consumer and performing revolving commercial loans on acquisition date.

During the nine months ended September 30, 2013, we purchased $134.8 million of performing residential mortgage loans, including premiums of $1.0 million. During the nine months ended September 30, 2012, we purchased $173.2 million of performing residential mortgage loans, including premiums of $4.0 million. These loan purchases are accounted for as PC loans.

ALL Methodology

COB's ALL, which is utilized to absorb actual losses in the loan portfolio, is maintained at a level consistent with management's best estimate of probable loan losses to be incurred as of the balance sheet date. Management assesses COB's ALL quarterly. This assessment includes a methodology that separates the total loan portfolio into homogeneous loan classifications for purposes of evaluating risk. The required allowance is calculated by applying a risk adjusted reserve requirement to the dollar volume of loans within a homogenous group. For purposes of the ALL, we have grouped our loans into pools according to the loan segmentation regime employed on schedule RC-C of the FFIEC's Consolidated Report of Condition and Income. Major loan portfolio subgroups include: risk graded commercial loans, mortgage loans, home equity loans, retail loans and retail credit lines. Management also analyzes the loan portfolio on an ongoing basis to evaluate current risk levels, and risk grades are adjusted accordingly. While management uses the best information available to make evaluations, future adjustments may be necessary, if economic or other conditions differ substantially from the assumptions used.

Historical loss rates are calculated by associating losses to the risk-graded pool to which they relate for each of the previous eight quarters. Then, using a look back period consisting of the twenty most recent quarters, loss factors are calculated for each risk-graded pool using a simple average. This represents a change in methodology which began in the third quarter of 2013. Previously, we used a look back period beginning in the third quarter of 2006 and a weighted average of losses. The impact of this change was immaterial to the allowance calculation.

In addition to our ability to use our own historical loss data and migration between risk grades, we have a rigorous process for computing the qualitative factors that impact the ALL. A committee, independent of the historical loss migration team, reviews risk factors that may impact the ALL. Some factors are statistically quantifiable, such as concentration, growth, delinquency, and nonaccrual risk by loan type, while other factors are qualitative in nature, such as staff competency, competition within our markets and economic and regulatory changes impacting the loans held for investment.

We lend primarily in North Carolina. As of September 30, 2013, a majority of the principal amount of the loans held for investment in our portfolio was to businesses and individuals in North Carolina. This geographic concentration subjects the loan portfolio to the general economic conditions within this area. The risks created by this concentration have been considered by management in the determination of the adequacy of the ALL. Management believes the ALL is adequate to cover estimated losses on loans at each balance sheet date.

During the three month period ended September 30, 2013, we charged off $1.7 million in loans and realized $2.4 million in recoveries, for $0.7 million of net recoveries. During the nine month period ended September 30, 2013, we charged off $10.8 million in loans and realized $8.2 million in recoveries, for $2.6 million of net charge-offs. The majority of the loans charged off were loans that were previously impaired and had specific reserves assigned in prior periods.

The ALL, as a percentage of loans held for investment, was 2.12% at September 30, 2013, compared to 2.51% at September 30, 2012. At December 31, 2012, the ALL, as a percentage of loans held for investment, was 2.49%.

Risk Grades

The risk-grade categories presented in the following table, which are standard categories used by the bank regulators, are:

Pass - Loans categorized as Pass are higher quality loans that have adequate sources of repayment and little risk of collection.

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 asset or in the institution's credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

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 have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of Substandard loans, does not have to exist in individual assets classified Substandard.

Doubtful - A loan classified as Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors, which may work to the advantage of strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans.

Loans categorized as Special Mention or worse are considered Criticized. Loans categorized as Substandard or Doubtful are considered Classified. Purchased loans acquired in the Merger are recorded at estimated fair value on the date of acquisition without the carryover of related ALL. The table below includes $46.7 million and $60.6 million in Granite Purchased Loans categorized as Substandard or Doubtful at September 30, 2013 and December 31, 2012, respectively.

The following table presents loans held for investment balances by risk grade as of September 30, 2013:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful
	(Ratings 1-5)		(Rating 6)		(Rating 7)		(Rating 8)		Total
Commercial and agricultural	$	65,556	$	640	$	3,421	$	—	$	69,617
Real estate - construction	48,665		3,310		15,567		—		67,542
Real estate - mortgage:
1-4 family residential	578,197		12,638		27,427		—		618,262
Commercial	300,609		26,918		67,559		—		395,086
Consumer	43,997		48		241		349		44,635
Total	$	1,037,024	$	43,554	$	114,215	$	349	$	1,195,142

The following table presents loans held for investment balances by risk grade as of December 31, 2012:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful
	(Ratings 1-5)		(Rating 6)		(Rating 7)		(Rating 8)		Total
Commercial and agricultural	$	69,003	$	3,447	$	6,953	$	301	$	79,704
Real estate - construction	40,117		2,031		16,266		—		58,414
Real estate - mortgage:
1-4 family residential	504,819		15,855		32,625		239		553,538
Commercial	296,271		50,275		95,126		164		441,836
Consumer	42,495		178		426		444		43,543
Total	$	952,705	$	71,786	$	151,396	$	1,148	$	1,177,035

Loans included in the preceding loan composition table are net of participations sold. Loans are increased by net loan premiums and deferred loan discounts or fees of $2.5 million at September 30, 2013. Loans are increased by net deferred loan discounts or fees of $3.6 million at December 31, 2012.

At September 30, 2013, loans held for sale consisted of originated residential mortgage loans held for sale at the lower of cost or fair market value, as well as nonperforming commercial loans which are under contract to sell. At December 31, 2012, loans held for sale consisted only of originated residential mortgage loans.

Loans serviced for others are not included in the consolidated balance sheet. The unpaid principal balance of loans serviced for others amounted to $172.7 million at September 30, 2013 and $65.1 million at December 31, 2012.

Loans Pledged

To borrow from the FHLB, members must pledge collateral to secure advances and letters of credit. Acceptable collateral includes, among other types of collateral, a variety of residential, multifamily, home equity lines and second mortgages, and commercial loans. Gross loans of $215.5 million and $25.1 million of investment securities, and gross loans of $270.2 million were pledged to collateralize FHLB advances and letters of credit at September 30, 2013 and December 31, 2012, respectively, of which there was $15.7 million and $19.1 million of credit availability for borrowing, respectively. At September 30, 2013, $10.0 million of loans and $51.7 million of securities were pledged to collateralize potential borrowings from the Federal Reserve Discount Window, of which $57.5 million was available as borrowing capacity. We could also access $314.2 million of additional borrowings from the FHLB under credit lines by pledging additional collateral.

Nonaccruing and Impaired Loans

Interest income on loans is calculated by using the interest method based on the daily outstanding balance. The recognition of interest income is discontinued when, in management's opinion, the collection of all or a portion of interest becomes doubtful. Loans are returned to accrual status when the factors indicating doubtful collectability cease to exist and the loan has performed in accordance with its terms for a demonstrated period of time. The past due status of loans is based on the contractual payment terms. Had nonaccruing loans been on accruing status, interest income would have been higher by $0.7 million and $1.5 million for the three months ended September 30, 2013 and September 30, 2012, respectively, and higher by $2.3 million and $2.9 million for the nine months ended September 30, 2013 and September 30, 2012, respectively. At September 30, 2013 and December 31, 2012, COB had certain impaired loans of $51.1 million and $79.2 million, respectively, which were on nonaccruing interest status.

All loan classes are considered past due when the contractual amounts due with respect to principal and interest are not received within 30 days of the contractual due date. When we cannot reasonably expect full and timely repayment of its loan, the loan is placed on nonaccrual.

All loan classes on which principal or interest is in default for 90 days or more are put on nonaccrual status, unless there is sufficient documentation to conclude that the loan is well secured and in the process of collection. A debt is "well-secured" if collateralized by liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt in full; or by the guarantee of a financially responsible party. A debt is "in process of collection" if collection is proceeding in due course either through legal action, including judgment enforcement procedures, or, in appropriate circumstances, through collection efforts not involving legal action that are reasonably expected to result in repayment of the debt or its restoration to a current status.

Loans that are less than 90 days delinquent may also be placed on nonaccrual if deterioration in the financial condition of the borrower has increased the probability of less than full repayment.

At the time a loan is placed on nonaccrual, all accrued, unpaid interest is charged off, unless it is documented that repayment of all principal and presently accrued but unpaid interest is probable. Charge-offs of accrued and unpaid interest are charged against the current year's interest income and not against the current ALL.

For all loan classes, a nonaccrual loan may be returned to accrual status when we can reasonably expect continued timely payments until payment in full. All prior arrearage does not have to be eliminated, nor do all previously charged-off amounts need to have been recovered, but the loan can still be returned to accrual status if the following conditions are met: (1) all principal and interest amounts contractually due (including arrearage) are reasonably assured of repayment within a reasonable period; and (2) there is a sustained period of repayment performance (generally a minimum of six months) by the borrower, in accordance with the contractual terms involving payments of cash or cash equivalents.

For all classes within all loan portfolios, cash receipts received on nonaccrual loans are applied entirely against principal until the loan or lease has been collected in full, after which time any additional cash receipts are recognized as interest income.

For all loan classes, as soon as any loan becomes uncollectible, the loan will be charged down or charged off as follows:

• If unsecured, the loan must be charged off in full.

• If secured, the outstanding principal balance of the loan should be charged down to the net liquidation value of the collateral.

Loans should be considered uncollectible when:

• No regularly scheduled payment has been made within four months and the determination is made that any further payment is unlikely, or

• The loan is unsecured, the borrower has filed for bankruptcy protection and there is no other (guarantor, etc.) support from an entity outside of the bankruptcy proceedings.

Based on a variety of credit, collateral and documentation issues, loans with lesser degrees of delinquency or obvious loss may also be deemed uncollectible.

The following table presents an aging analysis of accruing and nonaccruing loans as of September 30, 2013:

(dollars in thousands)	Accruing
	30-59 days past due		60-89 days past due		More than 90 days past due		Nonaccrual		Total past due and nonaccrual		Current and accruing		Total Loans
PC and Originated Loans
Commercial and agricultural	$	52	$	—	$	—	$	590	$	642	$	57,558	$	58,200
Real estate - construction	47		—		76		10,190		10,313		47,034		57,347
Real estate - mortgage:
1-4 family residential	1,269		759		—		12,822		14,850		573,700		588,550
Commercial	220		153		—		27,425		27,798		243,108		270,906
Consumer	97		13		—		104		214		43,332		43,546
Total	$	1,685	$	925	$	76	$	51,131	$	53,817	$	964,732	$	1,018,549
PI loans
Commercial and agricultural	$	77	$	—	$	2,235	$	—	$	2,312	$	9,106	$	11,418
Real estate - construction	—		—		2,884		—		2,884		7,312		10,196
Real estate - mortgage:
1-4 family residential	10		—		5,242		—		5,252		24,460		29,712
Commercial	174		594		19,228		—		19,996		104,182		124,178
Consumer	7		—		15		—		22		1,067		1,089
Total	$	268	$	594	$	29,604	$	—	$	30,466	$	146,127	$	176,593
Total Loans	$	1,953	$	1,519	$	29,680	$	51,131	$	84,283	$	1,110,859	$	1,195,142

The following table presents an aging analysis of accruing and nonaccruing loans as of December 31, 2012:

(dollars in thousands)	Accruing
	30-59 days past due		60-89 days past due		More than 90 days past due		Nonaccrual		Total past due and nonaccrual		Current and accruing		Total Loans
PC and Originated Loans
Commercial and agricultural	$	515	$	—	$	50	$	2,746	$	3,311	$	61,727	$	65,038
Real estate - construction	26		119		—		14,297		14,442		41,290		55,732
Real estate - mortgage:
1-4 family residential	6,173		880		—		18,372		25,425		488,898		514,323
Commercial	617		—		177		43,621		44,415		226,948		271,363
Consumer	24		—		—		206		230		41,957		42,187
Total	$	7,355	$	999	$	227	$	79,242	$	87,823	$	860,820	$	948,643
PI loans
Commercial and agricultural	$	100	$	1	$	1,103	$	—	$	1,204	$	13,462	$	14,666
Real estate - construction	117		—		655		—		772		1,910		2,682
Real estate - mortgage:
1-4 family residential	1,308		495		4,678		—		6,481		32,734		39,215
Commercial	2,559		4,300		17,384		—		24,243		146,230		170,473
Consumer	4		—		13		—		17		1,339		1,356
Total	$	4,088	$	4,796	$	23,833	$	—	$	32,717	$	195,675	$	228,392
Total Loans	$	11,443	$	5,795	$	24,060	$	79,242	$	120,540	$	1,056,495	$	1,177,035

All PI loans are considered to be accruing for all periods presented, in accordance with ASC 310-30.

A loan is considered impaired, based on current information and events, if it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. If the loan has been modified to provide relief to the borrower, the loan is deemed to be impaired if all principal and interest will not be repaid according to the original contract. All loans meeting the definition of Doubtful should be considered impaired.

When a loan has been determined to be impaired, the amount of the impairment is measured using the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, the observable market price of the loan, or the fair value of the collateral if the loan is collateral dependent. When the present value of expected future cash flows is used, the effective interest rate is the original contractual interest rate of the loan adjusted for any premium or discount. When the contractual interest rate is variable, the effective interest rate of the loan changes over time. A specific reserve is established as a component of the ALL when a loan has been determined to be impaired. Subsequent to the initial measurement of impairment, if there is a significant change to the impaired loan's expected future cash flows, or if actual cash flows are significantly different from the cash flows previously estimated, we recalculate the impairment and appropriately adjust the specific reserve. Similarly, if we measure impairment based on the observable market price of an impaired loan or the fair value of the collateral of an impaired collateral-dependent loan, we will adjust the specific reserve if there is a significant change in either of those bases.

When a loan is impaired and principal and interest is in doubt when contractually due, interest income is not recognized. Cash receipts received on nonaccruing impaired loans within any class are generally applied entirely against principal until the loan has been collected in full, after which time any additional cash receipts are recognized as interest income. Cash receipts received on accruing impaired loans within any class are applied in the same manner as accruing loans that are not considered impaired.

The following table summarizes information relative to impaired loans for the dates indicated:

	September 30, 2013				December 31, 2012
(dollars in thousands)	Balance		Associated Reserves		Balance		Associated Reserves
Impaired loans, not individually reviewed for impairment	$	4,550	$	—	$	6,017	$	—
Impaired loans, individually reviewed, with no impairment	49,356		—		62,282		—
Impaired loans, individually reviewed, with impairment	2,963		486		15,312		1,737
Total impaired loans, excluding purchased impaired *	$	56,869	$	486	$	83,611	$	1,737
Purchased impaired loans with subsequent deterioration	$	147,852	4,066		$	192,115	5,373
Purchased impaired loans with no subsequent deterioration	$	28,741	—		$	36,277	—
Total Reserves			$	4,552			$	7,110
Average impaired loans calculated using a simple average	$	61,837			$	94,754

* Included at September 30, 2013 and December 31, 2012 were $6.7 million and $4.5 million, respectively, in restructured and performing loans.

The following table presents loans held for investment on nonaccrual status by loan class for the dates indicated:

(dollars in thousands)
	September 30, 2013		December 31, 2012
Loans held for investment:
Commercial and agricultural	$	590	$	2,746
Real estate - construction	10,190		14,297
Real estate - mortgage:
1-4 family residential	12,822		18,372
Commercial	27,425		43,621
Consumer	104		206
Total nonaccrual loans	$	51,131	$	79,242
Loans more than 90 days delinquent, still on accrual	76		227
Total nonperforming loans	$	51,207	$	79,469

There were no loans held for sale on nonaccrual status as of September 30, 2013 or December 31, 2012.

The following table presents individually reviewed impaired loans and purchased impaired loans with subsequent credit deterioration, segregated by portfolio segment, and the corresponding reserve for impaired loan losses as of September 30, 2013:

			Unpaid
(dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and agricultural	$	416	$	776	$	—
Real estate - construction	9,900		14,246		—
Real estate - mortgage:
1-4 family residential	10,465		13,416		—
Commercial	28,576		34,748		—
Consumer	—		—		—
Total	$	49,357	$	63,186	$	—
With an allowance recorded:
Commercial and agricultural	$	—	$	—	$	—
Real estate - construction	97		112		1
Real estate - mortgage:
1-4 family residential	2,595		2,994		446
Commercial	271		397		39
Consumer	—		—		—
Total	$	2,963	$	3,503	$	486
Total individually evaluated impaired loans
Commercial and agricultural	$	416	$	776	$	—
Real estate - construction	9,997		14,358		1
Real estate - mortgage:
1-4 family residential	13,060		16,410		446
Commercial	28,847		35,145		39
Consumer	—		—		—
Total	$	52,320	$	66,689	$	486
PI loans with subsequent credit deterioration:
Commercial and agricultural	$	8,821	$	9,042	$	34
Real estate - construction	8,258		8,897		747
Real estate - mortgage:
1-4 family residential	26,661		27,130		527
Commercial	103,028		106,249		2,567
Consumer	1,084		848		191
Total	$	147,852	$	152,166	$	4,066

The following table presents individually reviewed impaired loans, and purchased impaired loans with subsequent credit deterioration, segregated by portfolio segment, and the corresponding reserve for impaired loan losses as of December 31, 2012:

			Unpaid
(dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and agricultural	$	1,755	$	2,608	$	—
Real estate - construction	11,875		18,553		—
Real estate - mortgage:
1-4 family residential	16,437		20,764		—
Commercial	32,215		38,585		—
Consumer	—		—		—
Total	$	62,282	$	80,510	$	—
With an allowance recorded:
Commercial and agricultural	$	579	$	602	$	282
Real estate - construction	1,658		1,843		82
Real estate - mortgage:
1-4 family residential	1,681		1,745		607
Commercial	11,394		14,714		766
Consumer	—		—		—
Total	$	15,312	$	18,904	$	1,737
Total individually evaluated impaired loans
Commercial and agricultural	$	2,334	$	3,210	$	282
Real estate - construction	13,533		20,396		82
Real estate - mortgage:
1-4 family residential	18,118		22,509		607
Commercial	43,609		53,299		766
Consumer	—		—		—
Total	$	77,594	$	99,414	$	1,737
PI loans with subsequent credit deterioration:
Commercial and agricultural	$	11,533	$	11,728	$	524
Real estate - construction	2,285		2,236		200
Real estate - mortgage:
1-4 family residential	34,961		35,802		711
Commercial	141,974		145,704		3,388
Consumer	1,362		1,147		550
Total	$	192,115	$	196,617	$	5,373

The following summary includes impaired loans individually reviewed as well as impaired loans held for sale. Average recorded investment and interest income recognized on impaired loans, segregated by portfolio segment, is shown in the following tables as of September 30, 2013 and September 30, 2012:

	For Three Months Ended				For Three Months Ended
	September 30, 2013				September 30, 2012
	Average		Interest		Average		Interest
(dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and agricultural	$	434	$	—	$	1,557	$	56
Real estate - construction	10,006		3		15,484		104
Real estate - mortgage:
1-4 family residential	10,516		—		14,265		81
Commercial	27,844		4		44,480		567
Consumer	—		—		162		4
Total	$	48,800	$	7	$	75,948	$	812
With an allowance recorded:
Commercial and agricultural	$	—	$	—	$	1,274	$	6
Real estate - construction	97		—		2,802		9
Real estate - mortgage:
1-4 family residential	2,605		—		6,436		41
Commercial	273		—		4,689		27
Consumer	—		—		100		1
Total	$	2,975	$	—	$	15,301	$	84
Total:
Commercial and agricultural	$	434	$	—	$	2,831	$	62
Real estate - construction	10,103		3		18,286		113
Real estate - mortgage:
1-4 family residential	13,121		—		20,701		122
Commercial	28,117		4		49,169		594
Consumer	—		—		262		5
Total	$	51,775	$	7	$	91,249	$	896

	For Nine Months Ended				For Nine Months Ended
	September 30, 2013				September 30, 2012
	Average		Interest		Average		Interest
(dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and agricultural	$	455	$	7	$	1,879	$	152
Real estate - construction	10,300		23		18,140		350
Real estate - mortgage:
1-4 family residential	10,442		14		15,096		292
Commercial	29,288		58		46,051		1,388
Consumer	—		—		279		6
Total	$	50,485	$	102	$	81,445	$	2,188
With an allowance recorded:
Commercial and agricultural	$	107	$	—	$	1,266	$	36
Real estate - construction	220		6		2,873		32
Real estate - mortgage:
1-4 family residential	1,682		4		6,869		163
Commercial	3,933		—		4,687		145
Consumer	167		1		95		2
Total	$	6,109	$	11	$	15,790	$	378
Total:
Commercial and agricultural	$	562	$	7	$	3,145	$	188
Real estate - construction	10,520		29		21,013		382
Real estate - mortgage:
1-4 family residential	12,124		18		21,965		455
Commercial	33,221		58		50,738		1,533
Consumer	167		1		374		8
Total	$	56,594	$	113	$	97,235	$	2,566

Impaired loans also include loans for which we may elect to grant a concession, providing terms more favorable than those prevalent in the market (e.g., rate, amortization term), and formally restructure due to the weakening credit status of a borrower. Restructuring is designed to facilitate a repayment plan that minimizes the potential losses that we otherwise may have to incur. If these impaired loans are on nonaccruing status as of the date of restructuring, the loans are included in nonperforming loans. Nonperforming restructured loans will remain as nonperforming until the borrower can demonstrate adherence to the restructured terms for a period of no less than six months and when it is otherwise determined that continued adherence is reasonably assured. Some restructured loans continue as accruing loans after restructuring if the borrower is not past due at the time of restructuring, adequate collateral valuations support the restructured loans, and the cash flows of the underlying business appear adequate to support the restructured debt service. Not included in nonperforming loans are loans that have been restructured that were performing as of the restructure date. At September 30, 2013, there was $14.3 million in restructured loans, of which $6.7 million were accruing and in a performing status. At December 31, 2012, there was $20.8 million in restructured loans, of which $4.5 million were accruing and in a performing status.

Sale of Problem Loans

During 2012, we sold loans to third party buyers in order to reduce our problem loan exposure. These loans were transferred to loans held for sale at the time we received a signed contract for the purchase of the loans. Prior to transferring these loans to loans held for sale, the loans were marked down to the contract price less associated selling costs. All transactions were conducted at arm's length and loans were sold without recourse.

The following table presents sold loans by portfolio segment for the periods indicated below:

	For Three Months Ended					For Three Months Ended
	September 30, 2013					September 30, 2012
(dollars in thousands)	Number	Recorded		Contract		Number	Recorded		Contract
	of Loans	Investment		Pricing		of Loans	Investment		Pricing
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		—	—		—
Real estate - mortgage:
1-4 family residential	—	—		—		1	602		540
Commercial	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	1	$	602	$	540

	For Nine Months Ended					For Nine Months Ended
	September 30, 2013					September 30, 2012
(dollars in thousands)	Number	Recorded		Contract		Number	Recorded		Contract
	of Loans	Investment		Pricing		of Loans	Investment		Pricing
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		—	—		—
Real estate - mortgage:
1-4 family residential	—	—		—		7	1,865		1,896
Commercial	—	—		—		2	4,402		4,590
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	9	$	6,267	$	6,486

Granite Purchased Loans

Granite Purchased Loans include PI loans and PC loans. PC loans include performing revolving consumer and commercial loans on October 21, 2011, the acquisition date.

PI loans are segregated into pools and recorded at estimated fair value on the date of acquisition without the carryover of the related ALL. PI loans are accounted for under ASC 310-30 when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition we will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the date of acquisition may include statistics such as past due status, nonaccrual status and risk grade. PI loans generally meet our definition for nonaccrual status; however, even if the borrower is not currently making payments, we will classify loans as accruing if we can reasonably estimate the amount and timing of future cash flows.All Granite Purchased PI loans are presented on an accruing basis. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference.

Periodically, we estimate the expected cash flows for each pool of the PI loans and evaluate whether the expected cash flows for each pool have changed from prior estimates. Decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or reclassification from nonaccretable difference to accretable yield with a positive impact on future interest income. Excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

We have elected to account for the Granite Purchased PI loans under ASC 310-30 and the Granite Purchased PC loans under ASC 310-20.

At September 30, 2013, and December 31, 2012, our financial statements reflected a PI loan ALL of $4.1 million and $5.4 million, respectively, and an ALL for PC loans of $0.7 million and $0.5 million, respectively.

The following table presents the balance of all Granite Purchased Loans:

	At September 30, 2013
(dollars in thousands)	Purchased Impaired		Purchased Contractual		Total Purchased Loans		Unpaid Principal Balance
Commercial and agricultural	$	11,418	$	4,874	$	16,292	$	15,597
Real estate - construction	10,196		—		10,196		9,902
Real estate - mortgage:
1-4 family residential	29,712		22,833		52,545		53,476
Commercial	124,178		381		124,559		125,395
Consumer	1,089		—		1,089		860
Total	$	176,593	$	28,088	$	204,681	$	205,230

	At December 31, 2012
(dollars in thousands)	Purchased Impaired		Purchased Contractual		Total Purchased Loans		Unpaid Principal Balance
Commercial and agricultural	$	14,666	$	7,311	$	21,977	$	21,692
Real estate - construction	2,682		—		2,682		2,677
Real estate - mortgage:
1-4 family residential	39,215		27,484		66,699		69,200
Commercial	170,467		49		170,516		176,347
Consumer	1,362		—		1,362		1,144
Total	$	228,392	$	34,844	$	263,236	$	271,060

The tables below include only those Granite Purchased Loans accounted for under the expected cash flow method (PI loans) for the periods indicated. These tables do not include PC loans, including Granite Purchased PC loans or purchased performing residential mortgage loans.

	For Three Months Ended						For Three Months Ended
	September 30, 2013						September 30, 2012
	Purchased Impaired						Purchased Impaired
(dollars in thousands)	Carrying Amount			Future Accretion			Carrying Amount			Future Accretion
Balance, beginning of period	$	189,159		$	28,706		$	287,092		$	41,133
Accretion	4,283			(4,283		)	4,568			(4,568		)
Increase in future accretion	—			—			—			—
Payments received	(16,225		)	—			(34,043		)	—
Foreclosed and transferred to OREO	(624		)	—			(5,412		)	—
Subtotal before allowance	176,593			24,423			252,205			36,565
Allowance for credit losses	(4,066		)	—			(3,296		)	—
Net carrying amount, end of period	$	172,527		$	24,423		$	248,909		$	36,565

	For Nine Months Ended						For Nine Months Ended
	September 30, 2013						September 30, 2012
	Purchased Impaired						Purchased Impaired
(dollars in thousands)	Carrying Amount			Future Accretion			Carrying Amount			Future Accretion
Balance, beginning of period	$	228,392		$	30,299		$	330,836		$	47,804
Accretion	12,677			(12,677		)	15,831			(15,831		)
Increase in future accretion	—			6,801			—			4,592
Payments received	(62,556		)	—			(84,944		)	—
Foreclosed and transferred to OREO	(1,920		)	—			(9,518		)	—
Subtotal before allowance	176,593			24,423			252,205			36,565
Allowance for credit losses	(4,066		)	—			(3,296		)	—
Net carrying amount, end of period	$	172,527		$	24,423		$	248,909		$	36,565

Allowance for Loan Losses

An analysis of the changes in the ALL is as follows:

	For Three Months Ended						For Nine Months Ended
(dollars in thousands)	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Balance, beginning of period	$	25,085		$	38,551		$	29,314		$	39,360
Provision for (recoveries of) losses charged to continuing operations	(350		)	32			(1,297		)	10,877
Net charge-offs:
Charge-offs	(1,724		)	(9,276		)	(10,836		)	(23,580		)
Recoveries	2,376			1,552			8,206			4,202
Net recoveries (charge-offs)	652			(7,724		)	(2,630		)	(19,378		)
Balance, end of period	$	25,387		$	30,859		$	25,387		$	30,859
Annualized net charge-offs (recoveries) during the period to average loans	(0.22		)%	2.46		%	0.31		%	2.06		%
Annualized net charge-offs (recoveries) during the period to ALL	(10.19		)%	100.12		%	13.85		%	83.73		%
Allowance for loan losses to loans held for investment (1)	2.12		%	2.51		%	2.12		%	2.51		%

(1) Excludes discontinued operations.

The following table presents ALL activity by portfolio segment for the three months ended September 30, 2013:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at July 1, 2013	$	2,192		$	5,652		$	7,400		$	7,387		$	2,454		$	25,085
Charge-offs	(2		)	(36		)	(394		)	(592		)	(700		)	(1,724		)
Recoveries	465			1,039			285			357			230			2,376
Provision	(45		)	(1,560		)	1,493			(677		)	439			(350		)
Ending balance at September 30, 2013	$	2,610		$	5,095		$	8,784		$	6,475		$	2,423		$	25,387

The following table presents ALL activity by portfolio segment for the three months ended September 30, 2012:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at July 1, 2012	$	7,151		$	11,320		$	8,784		$	9,218		$	2,078		$	38,551
Charge-offs	(1,156		)	(2,465		)	(1,646		)	(2,602		)	(1,407		)	(9,276		)
Recoveries	286			323			69			388			486			1,552
Provision	(1,128		)	(3,195		)	2,787			54			1,514			32
Ending balance at September 30, 2012	$	5,153		$	5,983		$	9,994		$	7,058		$	2,671		$	30,859

The following table presents ALL activity by portfolio segment for the nine months ended September 30, 2013:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at January 1, 2013	$	3,238		$	4,987		$	8,701		$	9,627		$	2,761		$	29,314
Charge-offs	(1,196		)	(964		)	(3,563		)	(2,853		)	(2,260		)	(10,836		)
Recoveries	1,376			2,106			962			2,363			1,399			8,206
Provision	(808		)	(1,034		)	2,684			(2,662		)	523			(1,297		)
Ending balance at September 30, 2013	$	2,610		$	5,095		$	8,784		$	6,475		$	2,423		$	25,387

The following table presents ALL activity by portfolio segment for the nine months ended September 30, 2012:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at January 1, 2012	$	5,776		$	11,995		$	8,885		$	11,063		$	1,641		$	39,360
Charge-offs	(2,774		)	(8,761		)	(4,805		)	(3,594		)	(3,646		)	(23,580		)
Recoveries	777			1,169			447			725			1,084			4,202
Provision	1,374			1,580			5,467			(1,136		)	3,592			10,877
Ending balance at September 30, 2012	$	5,153		$	5,983		$	9,994		$	7,058		$	2,671		$	30,859

The following table details the recorded investment in loans related to each segment in the allowance for loan losses by portfolio segment and disaggregated on the basis of impairment evaluation methodology at September 30, 2013:

					Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural		Real Estate - Construction		1-4 Family Residential		Commercial		Consumer		Total
ALL:
Individually evaluated for impairment	$	—	$	1	$	446	$	39	$	—	$	486
Collectively evaluated for impairment	2,576		4,347		7,811		3,869		2,232		20,835
PI loans evaluated for credit impairment	34		747		527		2,567		191		4,066
PI loans with no credit deterioration	—		—		—		—		—		—
Total ALL	$	2,610	$	5,095	$	8,784	$	6,475	$	2,423	$	25,387
Loans held for investment
Individually evaluated for impairment	$	416	$	9,998	$	13,060	$	28,846	$	—	$	52,320
Collectively evaluated for impairment	57,783		47,348		575,490		242,062		43,546		966,229
PI loans with subsequent credit deterioration	8,821		8,258		26,661		103,028		1,084		147,852
PI loans with no credit deterioration	2,597		1,938		3,051		21,150		5		28,741
Total loans	$	69,617	$	67,542	$	618,262	$	395,086	$	44,635	$	1,195,142

The following table details the recorded investment in loans related to each segment in the allowance for loan losses by portfolio segment and disaggregated on the basis of impairment evaluation methodology at December 31, 2012:

					Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural		Real Estate - Construction		1-4 Family Residential		Commercial		Consumer		Total
ALL:
Individually evaluated for impairment	$	282	$	82	$	607	$	766	$	—	$	1,737
Collectively evaluated for impairment	2,432		4,705		7,383		5,473		2,211		22,204
PI loans evaluated for credit impairment	524		200		711		3,388		550		5,373
PI loans with no credit deterioration	—		—		—		—		—		—
Total ALL	$	3,238	$	4,987	$	8,701	$	9,627	$	2,761	$	29,314
Loans held for investment
Individually evaluated for impairment	$	2,334	$	13,533	$	18,118	$	43,609	$	—	$	77,594
Collectively evaluated for impairment	62,704		42,199		496,205		227,760		42,181		871,049
PI loans with subsequent credit deterioration	11,533		2,285		34,961		141,974		1,362		192,115
PI loans with no credit deterioration	3,133		397		4,254		28,493		—		36,277
Total loans	$	79,704	$	58,414	$	553,538	$	441,836	$	43,543	$	1,177,035

Troubled Debt Restructuring

The following tables presents a breakdown of troubled debt restructurings that were restructured during the three months and nine months ended September 30, 2013 and September 30, 2012, segregated by portfolio segment:

	Three Months Ended September 30, 2013					For Three Months Ended September 30, 2012
		Pre-Modification		Post-Modification			Pre-Modification		Post-Modification
		Outstanding		Outstanding			Outstanding		Outstanding
(dollars in thousands)	Number	Recorded		Recorded		Number	Recorded		Recorded
	of Loans	Investment		Investment		of Loans	Investment		Investment
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		—	—		—
Real estate - mortgage:
1-4 family residential	—	—		—		1	202		202
Commercial	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	1	$	202	$	202

	For Nine Months Ended September 30, 2013					For Nine Months Ended September 30, 2012
		Pre-Modification		Post-Modification			Pre-Modification		Post-Modification
		Outstanding		Outstanding			Outstanding		Outstanding
(dollars in thousands)	Number	Recorded		Recorded		Number	Recorded		Recorded
	of Loans	Investment		Investment		of Loans	Investment		Investment
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		9	2,526		1,603
Real estate - mortgage:
1-4 family residential	9	2,733		2,630		3	260		260
Commercial	2	1,611		1,195		8	1,356		1,353
Consumer	—	—		—		—	—		—
Total	11	$	4,344	$	3,825	20	$	4,142	$	3,216

During the three months ended September 30, 2013, we did not modify any loans. During the three months ended September 30, 2012, we modified one loan that was considered to be a troubled debt restructuring. We extended the term for this loan but did not modify the interest rate.

During the nine months ended September 30, 2013, we modified eleven loans that were considered to be troubled debt restructurings. We extended the terms for two of these loans, modified the interest rate for one of these loans, and modified the remaining eight loans in both ways. During the nine months ended September 30, 2012, we modified 20 loans that were considered to be troubled debt restructurings. We extended the terms for 16 of these loans, the interest rate was lowered for two of these loans, and the remaining two loans were modified for multiple reasons.

There were no loans restructured in the twelve months prior to September 30, 2013 that went into default during the three months or nine months ended September 30, 2013. There were also no loans restructured in the twelve months prior to September 30, 2012 that went into default during the three months or nine months ended September 30, 2012.

In the determination of the ALL, management considers troubled debt restructurings and any subsequent defaults in these restructurings as impaired loans. The amount of the impairment is measured using the present value of expected future cash flows discounted at the loan's effective interest rate, the observable market price of the loan, or the fair value of the collateral if the loan is collateral dependent.

Unfunded Commitments

The reserve for unfunded commitments, which is included in other liabilities, is calculated by determining the type of commitment and the remaining unfunded commitment for each loan. Based on the type of commitment, an expected usage percentage to the remaining unfunded balance is applied. The expected usage percentage is multiplied by the historical losses and qualitative and environmental factors for each loans pool as defined in the regular ALL calculation to determine the appropriate level of reserve. The following describes our method for determining the unfunded commitment:

• Straight Lines of Credit - Unfunded balance of line of credit

• Revolving Lines of Credit - Average Utilization (for the last 12 months) less Current Utilization

• Letters of Credit - a 10% utilization is applied

The reserve for unfunded commitments was $0.5 million as of September 30, 2013 and $0.6 million at December 31, 2012.

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Accumulated Other Comprehensive Income Reclassifications out of Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax benefit (expense)	$ (286)	$ 77	$ (2,375)	$ 128
Total, net of tax	4,006	(4,712)	(3,773)	(33,709)
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total, net of tax	(185)		(2,139)
Unrealized gains (losses) on available for sale securities [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sale of securities	(50)		(2,773)
Income tax benefit (expense)	19		1,095
Total, net of tax	(31)		(1,678)
Defined benefit plan items [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Personnel expense	(249)		(762)
Income tax benefit (expense)	95		301
Total, net of tax	$ (154)		$ (461)

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Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
Additional goodwill	$ 0.3

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Loans and Allowance for Loan Losses (Impaired Loans, Average Recorded Investment and Interest Income Recognized) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Financing Receivable, Impaired [Line Items]
With no related alowance recorded, average recorded investment	$ 48,800	$ 75,948	$ 50,485	$ 81,445
With no related allowance recorded, interest income recognized	7	812	102	2,188
With an allowance recorded, average recorded investment	2,975	15,301	6,109	15,790
With an allowance recorded, interest income recognized	0	84	11	378
Impaired Financing Receivable, Average Recorded Investment	51,775	91,249	56,594	97,235
Impaired Financing Receivable, Interest Income, Cash Basis Method	7	896	113	2,566
Commercial and agricultural [Member]
Financing Receivable, Impaired [Line Items]
With no related alowance recorded, average recorded investment	434	1,557	455	1,879
With no related allowance recorded, interest income recognized	0	56	7	152
With an allowance recorded, average recorded investment	0	1,274	107	1,266
With an allowance recorded, interest income recognized	0	6	0	36
Impaired Financing Receivable, Average Recorded Investment	434	2,831	562	3,145
Impaired Financing Receivable, Interest Income, Cash Basis Method	0	62	7	188
Real estate - construction [Member]
Financing Receivable, Impaired [Line Items]
With no related alowance recorded, average recorded investment	10,006	15,484	10,300	18,140
With no related allowance recorded, interest income recognized	3	104	23	350
With an allowance recorded, average recorded investment	97	2,802	220	2,873
With an allowance recorded, interest income recognized	0	9	6	32
Impaired Financing Receivable, Average Recorded Investment	10,103	18,286	10,520	21,013
Impaired Financing Receivable, Interest Income, Cash Basis Method	3	113	29	382
Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable, Impaired [Line Items]
With no related alowance recorded, average recorded investment	10,516	14,265	10,442	15,096
With no related allowance recorded, interest income recognized	0	81	14	292
With an allowance recorded, average recorded investment	2,605	6,436	1,682	6,869
With an allowance recorded, interest income recognized	0	41	4	163
Impaired Financing Receivable, Average Recorded Investment	13,121	20,701	12,124	21,965
Impaired Financing Receivable, Interest Income, Cash Basis Method	0	122	18	455
Real estate - mortgage, commercial [Member]
Financing Receivable, Impaired [Line Items]
With no related alowance recorded, average recorded investment	27,844	44,480	29,288	46,051
With no related allowance recorded, interest income recognized	4	567	58	1,388
With an allowance recorded, average recorded investment	273	4,689	3,933	4,687
With an allowance recorded, interest income recognized	0	27	0	145
Impaired Financing Receivable, Average Recorded Investment	28,117	49,169	33,221	50,738
Impaired Financing Receivable, Interest Income, Cash Basis Method	4	594	58	1,533
Consumer [Member]
Financing Receivable, Impaired [Line Items]
With no related alowance recorded, average recorded investment	0	162	0	279
With no related allowance recorded, interest income recognized	0	4	0	6
With an allowance recorded, average recorded investment	0	100	167	95
With an allowance recorded, interest income recognized	0	1	1	2
Impaired Financing Receivable, Average Recorded Investment	0	262	167	374
Impaired Financing Receivable, Interest Income, Cash Basis Method	$ 0	$ 5	$ 1	$ 8

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative and Financial Instruments

Derivatives and Financial Instruments

A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate. These instruments include interest rate swaps, caps, floors, collars, options or other financial instruments designed to hedge exposures to interest rate risk or for speculative purposes.

Accounting guidance requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet, and measure those instruments at fair value. Changes in the fair value of those derivatives are reported in current earnings or other comprehensive income depending on the purpose for which the derivative is held and whether the derivative qualifies for hedge accounting.

Mortgage banking derivatives used in the ordinary course of business consist of mandatory forward sales contracts or forward contracts and rate lock loan commitments. The fair value of our derivative instruments is primarily measured by obtaining pricing from broker-dealers recognized to be market participants.

During 2012, we began originating residential mortgage loans for sale in the secondary market. We have established guidelines in originating, selling loans to Fannie Mae, and retaining or selling the loan servicing rights. The commitments to borrowers to originate residential mortgage loans and the forward sales commitments to investors are freestanding derivative instruments. As such, they do not qualify for hedge accounting treatment, and the fair value adjustments for these instruments is recorded through the Consolidated Statements of Operations in mortgage loan income. The fair market value of mortgage banking derivatives at September 30, 2013 was recorded in the consolidated balance sheet in Other Assets.

	Gain (Loss) Recognized
(dollars in thousands)	For Three Months Ended					For Nine Months Ended
	September 30, 2013			September 30, 2012		September 30, 2013			September 30, 2012
Derivatives not designated as hedging instruments:
Mortgage loan rate lock commitments	$	20		$	13	$	8		$	13
Mortgage loan forward sales	(102		)	120		(196		)	298
Total	$	(82	)	$	133	$	(188	)	$	311

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Investment Securities

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment Securities

Securities designated as available-for-sale are carried at fair value. However, the unrealized difference between amortized cost and fair value of securities available-for-sale is excluded from net income unless there is an other than temporary impairment and is reported, net of deferred taxes, as a component of shareholders' equity as accumulated other comprehensive income (loss). Securities held-to-maturity are carried at amortized cost, as the bank has the ability, and management has the positive intent, to hold these securities to maturity. Premiums and discounts on securities are amortized and accreted according to the interest method.

Our primary objective in managing the investment portfolio is to maintain a portfolio of high quality, highly liquid investments yielding competitive returns. We are required under federal regulations to maintain adequate liquidity to ensure safe and sound operations. We maintain investment balances based on a continuing assessment of cash flows, the level of loan production, current interest rate risk strategies and an assessment of the potential future direction of market interest rate changes. Investment securities differ in terms of default, interest rate, liquidity and expected rate of return risks.

The following table summarizes the amortized cost and estimated fair value of investment securities and presents the related gross unrealized gains and losses:

September 30, 2013
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale:
Obligations of:
U.S. government sponsored enterprises	$	2,057	$	25	$	—	$	2,082
Residential mortgage-backed securities-GSE	373,860		945		17,358		357,447
Residential mortgage-backed securities-Private	20,484		784		10		21,258
Commercial mortgage backed securities-GSE	22,863		—		1,219		21,644
Commercial mortgage-backed securities-Private	10,419		—		786		9,633
Business Development Company investment	1,753		887		—		2,640
Corporate notes	24,874		134		—		25,008
Total available for sale	$	456,310	$	2,775	$	19,373	$	439,712
Held to Maturity:
Residential mortgage-backed securities-GSE	143,611		—		6,556		137,055
Commercial mortgage-backed securities-Private	10,073		—		654		9,419
Total held to maturity	$	153,684	$	—	$	7,210	$	146,474
Total investment securities	$	609,994	$	2,775	$	26,583	$	586,186
December 31, 2012
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale:
Obligations of:
U.S. Treasury and government agencies	$	6,646	$	335	$	—	$	6,981
U.S. government sponsored enterprises	22,118		55		—		22,173
States and political subdivisions	5,918		120		—		6,038
Residential mortgage-backed securities-GSE	436,344		5,678		948		441,074
Residential mortgage-backed securities-Private	22,649		750		454		22,945
Commercial mortgage backed securities-GSE	23,150		209		—		23,359
Commercial mortgage backed securities-Private	5,283		34		—		5,317
Corporate notes	36,710		270		17		36,963
Total	$	558,818	$	7,451	$	1,419	$	564,850

As a member of the Federal Home Loan Bank of Atlanta (“FHLB”), the Bank is required to own capital stock in the FHLB based generally upon the balances of total assets and FHLB advances. FHLB capital stock is pledged to secure FHLB advances. This investment is carried at cost since no ready market exists for FHLB stock and there is no quoted market value. However, redemption of this stock has historically been at par value. The Bank owned a total of $5.9 million of FHLB stock at September 30, 2013 and $6.3 million at December 31, 2012. Due to the redemption provisions of FHLB stock, we have estimated that fair value approximated cost and that this investment was not impaired at September 30, 2013. FHLB stock is included in other assets at its original cost basis.

As a member bank of the Federal Reserve Bank of Richmond (“FRBR”), the Bank also is required to own capital stock of the FRBR based upon a percentage of the bank's common stock and surplus. This investment is carried at cost since no ready market exists for FRBR stock and there is no quoted market value. At September 30, 2013 and December 31, 2012, the Bank owned a total of $4.1 million and $3.1 million of FRBR stock, respectively. Due to the nature of this investment in an entity of the U.S. government, we have estimated that fair value approximated the cost and that this investment was not impaired at September 30, 2013. FRBR stock is included in other assets at its original cost basis.

At September 30, 2013, $94.1 million of the investment securities portfolio was pledged to secure public deposits, $18.4 million was pledged to retail repurchase agreements and $78.9 million was pledged to others, leaving $394.1 million available as lendable collateral.

During the three and nine months ended September 30, 2013, the Bank sold securities with a book value of $3.3 million and $175.1 million respectively, and recognized gains of $0.1 million and $2.8 million, respectively. During the three and nine months ended September 30, 2012, the Bank sold securities with a book value of $21.4 million and $134.1 million respectively, and recognized a loss of $(33) thousand, and a gain of $1.9 million, respectively. The Bank sold these securities in order to manage our interest rate sensitivity profile.

The following tables show our investments' estimated fair value and gross unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2013 and December 31, 2012. The change in unrealized losses during the three and nine month periods ending September 30, 2013 was attributed to changes in interest rates and not to changes in the credit quality of these securities. All unrealized losses on investment securities are considered by management to be temporary given the credit quality of these investment securities or the short duration of the unrealized loss, or both.

	Less than 12 Months				12 Months or More				Total
(dollars in thousands)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
September 30, 2013
Available for Sale:
Residential mortgage-backed securities-GSE	$	312,145	$	17,358	$	—	$	—	$	312,145	$	17,358
Residential mortgage-backed securities-Private	1,350		10		—		—		1,350		10
Commercial mortgage-backed securities-GSE	21,644		1,219		—		—		21,644		1,219
Commercial mortgage-backed securities-Private	9,633		786		—		—		9,633		786
Total available for sale	$	344,772	$	19,373	$	—	$	—	$	344,772	$	19,373
Held to Maturity:
Residential mortgage-backed securities-GSE	$	137,055	$	6,556	$	—	$	—	$	137,055	$	6,556
Commercial mortgage-backed securities-Private	9,419		654		—		—		9,419		654
Total held to maturity	$	146,474	$	7,210	$	—	$	—	$	146,474	$	7,210
Total	$	491,246	$	26,583	$	—	$	—	$	491,246	$	26,583
December 31, 2012
Obligations of:
Residential mortgage-backed securities-GSE	$	123,489	$	904	$	7,027	$	44	$	130,516	$	948
Residential mortgage-backed securities-Private	7,499		454		—		—		7,499		454
Corporate notes	3,249		17		—		—		3,249		17
Total	$	134,237	$	1,375	$	7,027	$	44	$	141,264	$	1,419

At September 30, 2013 and December 31, 2012, there were zero and four available-for-sale securities that were in an unrealized loss position for longer than 12 months, respectively.

If an entity has a debt security that has been in a loss position for over 12 months and it cannot assert it is more likely than not that it will not have to sell the security before recovery, then other than temporary impairment ("OTTI") must be taken. The amount of impairment is bifurcated between impairment due to credit (which is recorded through earnings) and noncredit impairment (which becomes a component of other comprehensive income (“OCI”) for both available-for-sale and held-to-maturity securities). For held-to-maturity securities, the amount in OCI will be amortized prospectively over the security's remaining life. After analyzing our securities portfolio at September 30, 2013, and after considering ratings, fair value, cash flows and other factors, we did not have any OTTI during the three or nine months ended September 30, 2013 and September 30, 2012.

The aggregate amortized cost and fair value of securities at September 30, 2013, by remaining contractual maturity, are shown in the following table. Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.

	Available-for-Sale				Held-to-Maturity
(dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	16,486	$	16,539	$	—	$	—
Due after one year through five years	10,445		10,551		—		—
With no stated maturity	1,753		2,640		—		—
Total	28,684		29,730		—		—
Mortgage-backed securities	427,626		409,982		153,684		146,474
Total	$	456,310	$	439,712	$	153,684	$	146,474

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Consolidated Statements of Shareholders' Equity (Parenthetical) (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
2011 Issuance [Member]
Reverse stock split, conversion ratio	0.01
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs	$ 913
2012 Issuance [Member]
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs	$ 158

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Other Real Estate Owned and Property Acquired in Settlement of Loans (Real Estate Owned) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013 assets	Sep. 30, 2012	Sep. 30, 2013 assets	Sep. 30, 2012	Mar. 31, 2013	Mar. 31, 2012
Real Estate Acquired Through Foreclosure [Roll Forward]
Real estate acquired in settlement of loans, beginning of period			$ 62,796,000	$ 110,009,000	$ 35,662,000	$ 86,183,000
Plus: New real estate acquired in settlement of loans	3,610,000	9,746,000	10,403,000	24,766,000
Less: Sales of real estate acquired in settlement of loans	(6,411,000)	(13,826,000)	(37,072,000)	(38,202,000)
Less: Write-downs and net loss on sales charged to expense	262,000	(1,621,000)	(3,004,000)	(16,091,000)
Real estate acquired in settlement of loans, end of period	33,123,000	80,482,000	33,123,000	80,482,000	35,662,000	86,183,000
Number of assets under contract for sale	13		13
Net carrying value of assets under contract for sale	$ 7,200,000		$ 7,200,000

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Loans and Allowance for Loan Losses (Allowance for Loan Losses, by Segment Portfolio) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Mar. 31, 2013	Mar. 31, 2012
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period			$ 29,314	$ 39,360	$ 25,085	$ 38,551
Charge-offs	(1,724)	(9,276)	(10,836)	(23,580)
Recoveries	2,376	1,552	8,206	4,202
Provision for losses charged to continuing operations	(350)	32	(1,297)	10,877
Balance, end of period	25,387	30,859	25,387	30,859	25,085	38,551
Commercial and agricultural [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period			3,238	5,776	2,192	7,151
Charge-offs	(2)	(1,156)	(1,196)	(2,774)
Recoveries	465	286	1,376	777
Provision for losses charged to continuing operations	(45)	(1,128)	(808)	1,374
Balance, end of period	2,610	5,153	2,610	5,153	2,192	7,151
Real estate - construction [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period			4,987	11,995	5,652	11,320
Charge-offs	(36)	(2,465)	(964)	(8,761)
Recoveries	1,039	323	2,106	1,169
Provision for losses charged to continuing operations	(1,560)	(3,195)	(1,034)	1,580
Balance, end of period	5,095	5,983	5,095	5,983	5,652	11,320
Real estate - mortgage, 1-4 family residential [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period			8,701	8,885	7,400	8,784
Charge-offs	(394)	(1,646)	(3,563)	(4,805)
Recoveries	285	69	962	447
Provision for losses charged to continuing operations	1,493	2,787	2,684	5,467
Balance, end of period	8,784	9,994	8,784	9,994	7,400	8,784
Real estate - mortgage, commercial [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period			9,627	11,063	7,387	9,218
Charge-offs	(592)	(2,602)	(2,853)	(3,594)
Recoveries	357	388	2,363	725
Provision for losses charged to continuing operations	(677)	54	(2,662)	(1,136)
Balance, end of period	6,475	7,058	6,475	7,058	7,387	9,218
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period			2,761	1,641	2,454	2,078
Charge-offs	(700)	(1,407)	(2,260)	(3,646)
Recoveries	230	486	1,399	1,084
Provision for losses charged to continuing operations	439	1,514	523	3,592
Balance, end of period	$ 2,423	$ 2,671	$ 2,423	$ 2,671	$ 2,454	$ 2,078

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Investment Securities (Continuous Unrealized Loss Position) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013 securities	Dec. 31, 2012 securities
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, estimated fair value	$ 344,772	$ 134,237
Less than 12 months, gross unrealized losses	19,373	1,375
12 months or more, estimated fair value	0	7,027
12 months or more, gross unrealized losses	0	44
Total, estimated fair value	344,772	141,264
Total, gross unrealized losses	19,373	1,419
Held-to-maturity Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, estimated fair value	146,474
Less than 12 months, gross unrealized losses	7,210
12 months or more, estimated fair value	0
12 months or more, gross unrealized losses	0
Total, estimated fair value	146,474
Total, gross unrealized losses	7,210
Continuous Unrealized Loss Position [Abstract]
Less than 12 months, estimated fair value	491,246
Less than 12 months, gross unrealized losses	26,583
12 months or more, estimated fair value	0
12 months or more, gross unrealized losses	0
Total, estimated fair value	491,246
Total, gross unrealized losses	26,583
12 months or more, number of securities	0	4
Residential mortgage-backed securities - GSE [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, estimated fair value	312,145	123,489
Less than 12 months, gross unrealized losses	17,358	904
12 months or more, estimated fair value	0	7,027
12 months or more, gross unrealized losses	0	44
Total, estimated fair value	312,145	130,516
Total, gross unrealized losses	17,358	948
Held-to-maturity Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, estimated fair value	137,055
Less than 12 months, gross unrealized losses	6,556
12 months or more, estimated fair value	0
12 months or more, gross unrealized losses	0
Total, estimated fair value	137,055
Total, gross unrealized losses	6,556
Residential mortgage-backed securities - Private [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, estimated fair value	1,350	7,499
Less than 12 months, gross unrealized losses	10	454
12 months or more, estimated fair value	0	0
12 months or more, gross unrealized losses	0	0
Total, estimated fair value	1,350	7,499
Total, gross unrealized losses	10	454
Commercial mortgage-backed securities - Private [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, estimated fair value	21,644
Less than 12 months, gross unrealized losses	1,219
12 months or more, estimated fair value	0
12 months or more, gross unrealized losses	0
Total, estimated fair value	21,644
Total, gross unrealized losses	1,219
Held-to-maturity Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, estimated fair value	9,419
Less than 12 months, gross unrealized losses	654
12 months or more, estimated fair value	0
12 months or more, gross unrealized losses	0
Total, estimated fair value	9,419
Total, gross unrealized losses	654
Corporate notes [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, estimated fair value	9,633	3,249
Less than 12 months, gross unrealized losses	786	17
12 months or more, estimated fair value	0	0
12 months or more, gross unrealized losses	0	0
Total, estimated fair value	9,633	3,249
Total, gross unrealized losses	$ 786	$ 17

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Fair Values of Assets and Liabilities (Quantitative Information about Level 3 Fair Value Measurements) (Details) (Level 3 [Member], Nonrecurring [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Discounted Appraisal [Member]
Fair Value Inputs, Quantitative Information [Line Items]
Impaired loans, net	$ 2,477	$ 13,575
Other real estate owned	25,271	48,480
Discounted Cash Flows [Member]
Fair Value Inputs, Quantitative Information [Line Items]
Mortgage servicing rights	1,482	726
Impaired loans [Member] | Discounted Appraisal [Member] | Lower range [Member]
Fair Value Inputs, Quantitative Information [Line Items]
Collateral discounts	6.00%	6.00%
Impaired loans [Member] | Discounted Appraisal [Member] | Upper range [Member]
Fair Value Inputs, Quantitative Information [Line Items]
Collateral discounts	40.00%	40.00%
Other real estate owned [Member] | Discounted Appraisal [Member] | Lower range [Member]
Fair Value Inputs, Quantitative Information [Line Items]
Collateral discounts	6.00%	6.00%
Other real estate owned [Member] | Discounted Appraisal [Member] | Upper range [Member]
Fair Value Inputs, Quantitative Information [Line Items]
Collateral discounts	40.00%	40.00%
Mortgage servicing rights [Member] | Discounted Cash Flows [Member] | Lower range [Member]
Fair Value Inputs, Quantitative Information [Line Items]
Prepayment rate	10.00%	10.00%
Discount rate	6.00%	6.00%
Mortgage servicing rights [Member] | Discounted Cash Flows [Member] | Upper range [Member]
Fair Value Inputs, Quantitative Information [Line Items]
Prepayment rate	25.00%	30.00%
Discount rate	10.00%	12.00%
Continuing operations [Member]
Fair Value Inputs, Quantitative Information [Line Items]
Impaired loans, net	2,477	13,575
Other real estate owned	$ 25,271	$ 48,480

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Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States ("GAAP"). Actual results could differ from those estimates. Material estimates subject to change in the near term include, among other items, the allowances for loan losses (“ALL”), estimated cash flows of purchased impaired loans, the carrying value of other real estate owned (“OREO”), the carrying value of intangible assets and the realization of deferred tax assets.

Reclassification

Reclassification

Certain reclassifications have been made to the prior period consolidated financial statements to place them on a comparable basis with the current period consolidated financial statements. These reclassifications have no effect on net income or shareholders' equity as previously reported.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Comprehensive Income - In February 2013, the FASB issued ASU No. 2013-02 Comprehensive Income (Topic 220): "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" (“ASU No. 2013-02”). This pronouncement requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income for each applicable component of net income, as well as a roll forward of the components of accumulated other comprehensive income on a prospective basis. This pronouncement is effective beginning January 1, 2013. The provisions of ASU No. 2013-02 relate only to financial statement presentation of other comprehensive income and, accordingly, its adoption did not have a material effect on COB's financial statements. These new disclosures appear in Note 10.

FASB - From time to time, the Financial Accounting Standards Board (“FASB”) issues exposure drafts for proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards.

Management considers the effect of the proposed statements on the consolidated financial statements of COB and monitors the status of changes to and proposed effective dates of exposure drafts. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on our financial position, results of operations or cash flows.

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Earnings Per Share

9 Months Ended

Sep. 30, 2013

Earnings Per Share, Diluted, Other Disclosures [Abstract]

Earnings Per Share

Earnings Per Share

Basic net loss per share, or basic earnings/(loss) per share (“EPS”), is computed by dividing net loss to common shareholders by the weighted average number of common shares outstanding for the period. We retired our preferred stock in 2011.

Diluted EPS reflects the potential dilution that could occur if COB's potential common stock, which consists of dilutive stock options and a common stock warrant, were issued. As required for entities with complex capital structures, a dual presentation of basic and diluted EPS is included on the face of the income statement, and a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation is provided in this note.

(dollars in thousands, except per share data)	For Three Months Ended					For Nine Months Ended
	September 30, 2013		September 30, 2012			September 30, 2013			September 30, 2012
Income (Loss) from continuing operations, net of tax	$	4,006	$	(4,712	)	$	(3,773	)	$	(33,682	)
Loss from discontinued operations, net of tax	—		—			—			(27		)
Net income (loss) to common shareholders	$	4,006	$	(4,712	)	$	(3,773	)	$	(33,709	)
Weighted average number of common shares outstanding - basic and diluted	21,738,770		21,588,027			21,722,536			21,294,727
Net income (loss) per common share from continuing operations - basic and diluted	$	0.18	$	(0.22	)	$	(0.17	)	$	(1.58	)
Net loss per common share from discontinued operations - basic and diluted	—		—			—			—
Net income (loss) per common share - basic and diluted	$	0.18	$	(0.22	)	$	(0.17	)	$	(1.58	)

During the three months and nine months ended September 30, 2013 and 2012, the price of the Company's common stock (as quoted on the Nasdaq Capital Market) was below the exercise price of all vested stock options and the common stock warrant. As a result, the options and warrants were considered antidilutive and thus are not included in the diluted share calculation. For the three months and nine months ended September 30, 2013, there were 23,197 antidilutive shares. For the three and nine months ended September 30, 2012, there were 23,347 antidilutive shares. Of the antidilutive shares, the number of shares relating to stock options were 1,125 for the three months and nine months ended September 30, 2013, and 1,275 for both the three months and nine months ended September 30, 2012, while the number relating to the warrant was 22,072 for all periods presented.

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Loans and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2013

Loans Receivable, Net [Abstract]

Loan Credit Quality Indicators

The following table presents loans held for investment balances by risk grade as of September 30, 2013:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful
	(Ratings 1-5)		(Rating 6)		(Rating 7)		(Rating 8)		Total
Commercial and agricultural	$	65,556	$	640	$	3,421	$	—	$	69,617
Real estate - construction	48,665		3,310		15,567		—		67,542
Real estate - mortgage:
1-4 family residential	578,197		12,638		27,427		—		618,262
Commercial	300,609		26,918		67,559		—		395,086
Consumer	43,997		48		241		349		44,635
Total	$	1,037,024	$	43,554	$	114,215	$	349	$	1,195,142

The following table presents loans held for investment balances by risk grade as of December 31, 2012:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful
	(Ratings 1-5)		(Rating 6)		(Rating 7)		(Rating 8)		Total
Commercial and agricultural	$	69,003	$	3,447	$	6,953	$	301	$	79,704
Real estate - construction	40,117		2,031		16,266		—		58,414
Real estate - mortgage:
1-4 family residential	504,819		15,855		32,625		239		553,538
Commercial	296,271		50,275		95,126		164		441,836
Consumer	42,495		178		426		444		43,543
Total	$	952,705	$	71,786	$	151,396	$	1,148	$	1,177,035

Past Due Loans

The following table presents an aging analysis of accruing and nonaccruing loans as of September 30, 2013:

(dollars in thousands)	Accruing
	30-59 days past due		60-89 days past due		More than 90 days past due		Nonaccrual		Total past due and nonaccrual		Current and accruing		Total Loans
PC and Originated Loans
Commercial and agricultural	$	52	$	—	$	—	$	590	$	642	$	57,558	$	58,200
Real estate - construction	47		—		76		10,190		10,313		47,034		57,347
Real estate - mortgage:
1-4 family residential	1,269		759		—		12,822		14,850		573,700		588,550
Commercial	220		153		—		27,425		27,798		243,108		270,906
Consumer	97		13		—		104		214		43,332		43,546
Total	$	1,685	$	925	$	76	$	51,131	$	53,817	$	964,732	$	1,018,549
PI loans
Commercial and agricultural	$	77	$	—	$	2,235	$	—	$	2,312	$	9,106	$	11,418
Real estate - construction	—		—		2,884		—		2,884		7,312		10,196
Real estate - mortgage:
1-4 family residential	10		—		5,242		—		5,252		24,460		29,712
Commercial	174		594		19,228		—		19,996		104,182		124,178
Consumer	7		—		15		—		22		1,067		1,089
Total	$	268	$	594	$	29,604	$	—	$	30,466	$	146,127	$	176,593
Total Loans	$	1,953	$	1,519	$	29,680	$	51,131	$	84,283	$	1,110,859	$	1,195,142

The following table presents an aging analysis of accruing and nonaccruing loans as of December 31, 2012:

(dollars in thousands)	Accruing
	30-59 days past due		60-89 days past due		More than 90 days past due		Nonaccrual		Total past due and nonaccrual		Current and accruing		Total Loans
PC and Originated Loans
Commercial and agricultural	$	515	$	—	$	50	$	2,746	$	3,311	$	61,727	$	65,038
Real estate - construction	26		119		—		14,297		14,442		41,290		55,732
Real estate - mortgage:
1-4 family residential	6,173		880		—		18,372		25,425		488,898		514,323
Commercial	617		—		177		43,621		44,415		226,948		271,363
Consumer	24		—		—		206		230		41,957		42,187
Total	$	7,355	$	999	$	227	$	79,242	$	87,823	$	860,820	$	948,643
PI loans
Commercial and agricultural	$	100	$	1	$	1,103	$	—	$	1,204	$	13,462	$	14,666
Real estate - construction	117		—		655		—		772		1,910		2,682
Real estate - mortgage:
1-4 family residential	1,308		495		4,678		—		6,481		32,734		39,215
Commercial	2,559		4,300		17,384		—		24,243		146,230		170,473
Consumer	4		—		13		—		17		1,339		1,356
Total	$	4,088	$	4,796	$	23,833	$	—	$	32,717	$	195,675	$	228,392
Total Loans	$	11,443	$	5,795	$	24,060	$	79,242	$	120,540	$	1,056,495	$	1,177,035

All PI loans are considered to be accruing for all periods presented, in accordance with ASC 310-30.

Schedule of Impaired Loans Receivables

The following table summarizes information relative to impaired loans for the dates indicated:

	September 30, 2013				December 31, 2012
(dollars in thousands)	Balance		Associated Reserves		Balance		Associated Reserves
Impaired loans, not individually reviewed for impairment	$	4,550	$	—	$	6,017	$	—
Impaired loans, individually reviewed, with no impairment	49,356		—		62,282		—
Impaired loans, individually reviewed, with impairment	2,963		486		15,312		1,737
Total impaired loans, excluding purchased impaired *	$	56,869	$	486	$	83,611	$	1,737
Purchased impaired loans with subsequent deterioration	$	147,852	4,066		$	192,115	5,373
Purchased impaired loans with no subsequent deterioration	$	28,741	—		$	36,277	—
Total Reserves			$	4,552			$	7,110
Average impaired loans calculated using a simple average	$	61,837			$	94,754

* Included at September 30, 2013 and December 31, 2012 were $6.7 million and $4.5 million, respectively, in restructured and performing loans.

Schedule of Loans, Non Accrual Status

The following table presents loans held for investment on nonaccrual status by loan class for the dates indicated:

(dollars in thousands)
	September 30, 2013		December 31, 2012
Loans held for investment:
Commercial and agricultural	$	590	$	2,746
Real estate - construction	10,190		14,297
Real estate - mortgage:
1-4 family residential	12,822		18,372
Commercial	27,425		43,621
Consumer	104		206
Total nonaccrual loans	$	51,131	$	79,242
Loans more than 90 days delinquent, still on accrual	76		227
Total nonperforming loans	$	51,207	$	79,469

Impaired Loans

The following table presents individually reviewed impaired loans and purchased impaired loans with subsequent credit deterioration, segregated by portfolio segment, and the corresponding reserve for impaired loan losses as of September 30, 2013:

			Unpaid
(dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and agricultural	$	416	$	776	$	—
Real estate - construction	9,900		14,246		—
Real estate - mortgage:
1-4 family residential	10,465		13,416		—
Commercial	28,576		34,748		—
Consumer	—		—		—
Total	$	49,357	$	63,186	$	—
With an allowance recorded:
Commercial and agricultural	$	—	$	—	$	—
Real estate - construction	97		112		1
Real estate - mortgage:
1-4 family residential	2,595		2,994		446
Commercial	271		397		39
Consumer	—		—		—
Total	$	2,963	$	3,503	$	486
Total individually evaluated impaired loans
Commercial and agricultural	$	416	$	776	$	—
Real estate - construction	9,997		14,358		1
Real estate - mortgage:
1-4 family residential	13,060		16,410		446
Commercial	28,847		35,145		39
Consumer	—		—		—
Total	$	52,320	$	66,689	$	486
PI loans with subsequent credit deterioration:
Commercial and agricultural	$	8,821	$	9,042	$	34
Real estate - construction	8,258		8,897		747
Real estate - mortgage:
1-4 family residential	26,661		27,130		527
Commercial	103,028		106,249		2,567
Consumer	1,084		848		191
Total	$	147,852	$	152,166	$	4,066

The following table presents individually reviewed impaired loans, and purchased impaired loans with subsequent credit deterioration, segregated by portfolio segment, and the corresponding reserve for impaired loan losses as of December 31, 2012:

			Unpaid
(dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and agricultural	$	1,755	$	2,608	$	—
Real estate - construction	11,875		18,553		—
Real estate - mortgage:
1-4 family residential	16,437		20,764		—
Commercial	32,215		38,585		—
Consumer	—		—		—
Total	$	62,282	$	80,510	$	—
With an allowance recorded:
Commercial and agricultural	$	579	$	602	$	282
Real estate - construction	1,658		1,843		82
Real estate - mortgage:
1-4 family residential	1,681		1,745		607
Commercial	11,394		14,714		766
Consumer	—		—		—
Total	$	15,312	$	18,904	$	1,737
Total individually evaluated impaired loans
Commercial and agricultural	$	2,334	$	3,210	$	282
Real estate - construction	13,533		20,396		82
Real estate - mortgage:
1-4 family residential	18,118		22,509		607
Commercial	43,609		53,299		766
Consumer	—		—		—
Total	$	77,594	$	99,414	$	1,737
PI loans with subsequent credit deterioration:
Commercial and agricultural	$	11,533	$	11,728	$	524
Real estate - construction	2,285		2,236		200
Real estate - mortgage:
1-4 family residential	34,961		35,802		711
Commercial	141,974		145,704		3,388
Consumer	1,362		1,147		550
Total	$	192,115	$	196,617	$	5,373

Impaired Loans, Average Recorded Investment and Interest Income

The following summary includes impaired loans individually reviewed as well as impaired loans held for sale. Average recorded investment and interest income recognized on impaired loans, segregated by portfolio segment, is shown in the following tables as of September 30, 2013 and September 30, 2012:

	For Three Months Ended				For Three Months Ended
	September 30, 2013				September 30, 2012
	Average		Interest		Average		Interest
(dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and agricultural	$	434	$	—	$	1,557	$	56
Real estate - construction	10,006		3		15,484		104
Real estate - mortgage:
1-4 family residential	10,516		—		14,265		81
Commercial	27,844		4		44,480		567
Consumer	—		—		162		4
Total	$	48,800	$	7	$	75,948	$	812
With an allowance recorded:
Commercial and agricultural	$	—	$	—	$	1,274	$	6
Real estate - construction	97		—		2,802		9
Real estate - mortgage:
1-4 family residential	2,605		—		6,436		41
Commercial	273		—		4,689		27
Consumer	—		—		100		1
Total	$	2,975	$	—	$	15,301	$	84
Total:
Commercial and agricultural	$	434	$	—	$	2,831	$	62
Real estate - construction	10,103		3		18,286		113
Real estate - mortgage:
1-4 family residential	13,121		—		20,701		122
Commercial	28,117		4		49,169		594
Consumer	—		—		262		5
Total	$	51,775	$	7	$	91,249	$	896

	For Nine Months Ended				For Nine Months Ended
	September 30, 2013				September 30, 2012
	Average		Interest		Average		Interest
(dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and agricultural	$	455	$	7	$	1,879	$	152
Real estate - construction	10,300		23		18,140		350
Real estate - mortgage:
1-4 family residential	10,442		14		15,096		292
Commercial	29,288		58		46,051		1,388
Consumer	—		—		279		6
Total	$	50,485	$	102	$	81,445	$	2,188
With an allowance recorded:
Commercial and agricultural	$	107	$	—	$	1,266	$	36
Real estate - construction	220		6		2,873		32
Real estate - mortgage:
1-4 family residential	1,682		4		6,869		163
Commercial	3,933		—		4,687		145
Consumer	167		1		95		2
Total	$	6,109	$	11	$	15,790	$	378
Total:
Commercial and agricultural	$	562	$	7	$	3,145	$	188
Real estate - construction	10,520		29		21,013		382
Real estate - mortgage:
1-4 family residential	12,124		18		21,965		455
Commercial	33,221		58		50,738		1,533
Consumer	167		1		374		8
Total	$	56,594	$	113	$	97,235	$	2,566

Schedule of Loans Receivable, Sold Loans

The following table presents sold loans by portfolio segment for the periods indicated below:

	For Three Months Ended					For Three Months Ended
	September 30, 2013					September 30, 2012
(dollars in thousands)	Number	Recorded		Contract		Number	Recorded		Contract
	of Loans	Investment		Pricing		of Loans	Investment		Pricing
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		—	—		—
Real estate - mortgage:
1-4 family residential	—	—		—		1	602		540
Commercial	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	1	$	602	$	540

	For Nine Months Ended					For Nine Months Ended
	September 30, 2013					September 30, 2012
(dollars in thousands)	Number	Recorded		Contract		Number	Recorded		Contract
	of Loans	Investment		Pricing		of Loans	Investment		Pricing
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		—	—		—
Real estate - mortgage:
1-4 family residential	—	—		—		7	1,865		1,896
Commercial	—	—		—		2	4,402		4,590
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	9	$	6,267	$	6,486

Schedule of Loans Recievable, Acquired Loans

The following table presents the balance of all Granite Purchased Loans:

	At September 30, 2013
(dollars in thousands)	Purchased Impaired		Purchased Contractual		Total Purchased Loans		Unpaid Principal Balance
Commercial and agricultural	$	11,418	$	4,874	$	16,292	$	15,597
Real estate - construction	10,196		—		10,196		9,902
Real estate - mortgage:
1-4 family residential	29,712		22,833		52,545		53,476
Commercial	124,178		381		124,559		125,395
Consumer	1,089		—		1,089		860
Total	$	176,593	$	28,088	$	204,681	$	205,230

	At December 31, 2012
(dollars in thousands)	Purchased Impaired		Purchased Contractual		Total Purchased Loans		Unpaid Principal Balance
Commercial and agricultural	$	14,666	$	7,311	$	21,977	$	21,692
Real estate - construction	2,682		—		2,682		2,677
Real estate - mortgage:
1-4 family residential	39,215		27,484		66,699		69,200
Commercial	170,467		49		170,516		176,347
Consumer	1,362		—		1,362		1,144
Total	$	228,392	$	34,844	$	263,236	$	271,060

Deteriorated Loans Acquired, Accretable Yield Movement Schedule

The tables below include only those Granite Purchased Loans accounted for under the expected cash flow method (PI loans) for the periods indicated. These tables do not include PC loans, including Granite Purchased PC loans or purchased performing residential mortgage loans.

	For Three Months Ended						For Three Months Ended
	September 30, 2013						September 30, 2012
	Purchased Impaired						Purchased Impaired
(dollars in thousands)	Carrying Amount			Future Accretion			Carrying Amount			Future Accretion
Balance, beginning of period	$	189,159		$	28,706		$	287,092		$	41,133
Accretion	4,283			(4,283		)	4,568			(4,568		)
Increase in future accretion	—			—			—			—
Payments received	(16,225		)	—			(34,043		)	—
Foreclosed and transferred to OREO	(624		)	—			(5,412		)	—
Subtotal before allowance	176,593			24,423			252,205			36,565
Allowance for credit losses	(4,066		)	—			(3,296		)	—
Net carrying amount, end of period	$	172,527		$	24,423		$	248,909		$	36,565

Allowance for Loan Losses

An analysis of the changes in the ALL is as follows:

	For Three Months Ended						For Nine Months Ended
(dollars in thousands)	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Balance, beginning of period	$	25,085		$	38,551		$	29,314		$	39,360
Provision for (recoveries of) losses charged to continuing operations	(350		)	32			(1,297		)	10,877
Net charge-offs:
Charge-offs	(1,724		)	(9,276		)	(10,836		)	(23,580		)
Recoveries	2,376			1,552			8,206			4,202
Net recoveries (charge-offs)	652			(7,724		)	(2,630		)	(19,378		)
Balance, end of period	$	25,387		$	30,859		$	25,387		$	30,859
Annualized net charge-offs (recoveries) during the period to average loans	(0.22		)%	2.46		%	0.31		%	2.06		%
Annualized net charge-offs (recoveries) during the period to ALL	(10.19		)%	100.12		%	13.85		%	83.73		%
Allowance for loan losses to loans held for investment (1)	2.12		%	2.51		%	2.12		%	2.51		%

(1) Excludes discontinued operations.

Allowance for Loan Losses by Portfolio Segment

The following table presents ALL activity by portfolio segment for the three months ended September 30, 2013:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at July 1, 2013	$	2,192		$	5,652		$	7,400		$	7,387		$	2,454		$	25,085
Charge-offs	(2		)	(36		)	(394		)	(592		)	(700		)	(1,724		)
Recoveries	465			1,039			285			357			230			2,376
Provision	(45		)	(1,560		)	1,493			(677		)	439			(350		)
Ending balance at September 30, 2013	$	2,610		$	5,095		$	8,784		$	6,475		$	2,423		$	25,387

The following table presents ALL activity by portfolio segment for the three months ended September 30, 2012:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at July 1, 2012	$	7,151		$	11,320		$	8,784		$	9,218		$	2,078		$	38,551
Charge-offs	(1,156		)	(2,465		)	(1,646		)	(2,602		)	(1,407		)	(9,276		)
Recoveries	286			323			69			388			486			1,552
Provision	(1,128		)	(3,195		)	2,787			54			1,514			32
Ending balance at September 30, 2012	$	5,153		$	5,983		$	9,994		$	7,058		$	2,671		$	30,859

The following table presents ALL activity by portfolio segment for the nine months ended September 30, 2013:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at January 1, 2013	$	3,238		$	4,987		$	8,701		$	9,627		$	2,761		$	29,314
Charge-offs	(1,196		)	(964		)	(3,563		)	(2,853		)	(2,260		)	(10,836		)
Recoveries	1,376			2,106			962			2,363			1,399			8,206
Provision	(808		)	(1,034		)	2,684			(2,662		)	523			(1,297		)
Ending balance at September 30, 2013	$	2,610		$	5,095		$	8,784		$	6,475		$	2,423		$	25,387

The following table presents ALL activity by portfolio segment for the nine months ended September 30, 2012:

							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance at January 1, 2012	$	5,776		$	11,995		$	8,885		$	11,063		$	1,641		$	39,360
Charge-offs	(2,774		)	(8,761		)	(4,805		)	(3,594		)	(3,646		)	(23,580		)
Recoveries	777			1,169			447			725			1,084			4,202
Provision	1,374			1,580			5,467			(1,136		)	3,592			10,877
Ending balance at September 30, 2012	$	5,153		$	5,983		$	9,994		$	7,058		$	2,671		$	30,859

Allowance for Loan Losses, Impairment Methodology

The following table details the recorded investment in loans related to each segment in the allowance for loan losses by portfolio segment and disaggregated on the basis of impairment evaluation methodology at September 30, 2013:

					Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural		Real Estate - Construction		1-4 Family Residential		Commercial		Consumer		Total
ALL:
Individually evaluated for impairment	$	—	$	1	$	446	$	39	$	—	$	486
Collectively evaluated for impairment	2,576		4,347		7,811		3,869		2,232		20,835
PI loans evaluated for credit impairment	34		747		527		2,567		191		4,066
PI loans with no credit deterioration	—		—		—		—		—		—
Total ALL	$	2,610	$	5,095	$	8,784	$	6,475	$	2,423	$	25,387
Loans held for investment
Individually evaluated for impairment	$	416	$	9,998	$	13,060	$	28,846	$	—	$	52,320
Collectively evaluated for impairment	57,783		47,348		575,490		242,062		43,546		966,229
PI loans with subsequent credit deterioration	8,821		8,258		26,661		103,028		1,084		147,852
PI loans with no credit deterioration	2,597		1,938		3,051		21,150		5		28,741
Total loans	$	69,617	$	67,542	$	618,262	$	395,086	$	44,635	$	1,195,142

The following table details the recorded investment in loans related to each segment in the allowance for loan losses by portfolio segment and disaggregated on the basis of impairment evaluation methodology at December 31, 2012:

					Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural		Real Estate - Construction		1-4 Family Residential		Commercial		Consumer		Total
ALL:
Individually evaluated for impairment	$	282	$	82	$	607	$	766	$	—	$	1,737
Collectively evaluated for impairment	2,432		4,705		7,383		5,473		2,211		22,204
PI loans evaluated for credit impairment	524		200		711		3,388		550		5,373
PI loans with no credit deterioration	—		—		—		—		—		—
Total ALL	$	3,238	$	4,987	$	8,701	$	9,627	$	2,761	$	29,314
Loans held for investment
Individually evaluated for impairment	$	2,334	$	13,533	$	18,118	$	43,609	$	—	$	77,594
Collectively evaluated for impairment	62,704		42,199		496,205		227,760		42,181		871,049
PI loans with subsequent credit deterioration	11,533		2,285		34,961		141,974		1,362		192,115
PI loans with no credit deterioration	3,133		397		4,254		28,493		—		36,277
Total loans	$	79,704	$	58,414	$	553,538	$	441,836	$	43,543	$	1,177,035

Troubled Debt Restructurings on Loans

The following tables presents a breakdown of troubled debt restructurings that were restructured during the three months and nine months ended September 30, 2013 and September 30, 2012, segregated by portfolio segment:

	Three Months Ended September 30, 2013					For Three Months Ended September 30, 2012
		Pre-Modification		Post-Modification			Pre-Modification		Post-Modification
		Outstanding		Outstanding			Outstanding		Outstanding
(dollars in thousands)	Number	Recorded		Recorded		Number	Recorded		Recorded
	of Loans	Investment		Investment		of Loans	Investment		Investment
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		—	—		—
Real estate - mortgage:
1-4 family residential	—	—		—		1	202		202
Commercial	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	1	$	202	$	202

	For Nine Months Ended September 30, 2013					For Nine Months Ended September 30, 2012
		Pre-Modification		Post-Modification			Pre-Modification		Post-Modification
		Outstanding		Outstanding			Outstanding		Outstanding
(dollars in thousands)	Number	Recorded		Recorded		Number	Recorded		Recorded
	of Loans	Investment		Investment		of Loans	Investment		Investment
Commercial and agricultural	—	$	—	$	—	—	$	—	$	—
Real estate - construction	—	—		—		9	2,526		1,603
Real estate - mortgage:
1-4 family residential	9	2,733		2,630		3	260		260
Commercial	2	1,611		1,195		8	1,356		1,353
Consumer	—	—		—		—	—		—
Total	11	$	4,344	$	3,825	20	$	4,142	$	3,216

XML

Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2013

Discontinued Operation, Additional Disclosures [Abstract]

Schedule of Net Income (Loss) from Discontinued Operations

Net loss from discontinued operations, net of tax, at the dates indicated were as follows:

(dollars in thousands)	Nine Months Ended September 30,
	2013		2012
Interest Income
Total interest income	$	—	$	—
Interest Expense
Total interest expense	—		—
Net Interest Income before Provision for Loan Losses	—		—
Provision for loan losses	—		—
Net Interest Income after Provision for Loan Losses	—		—
Noninterest Income
Total noninterest income	—		—
Noninterest Expense
Personnel expense	—		1
Net occupancy expense	—		1
Professional fees	—		25
Total noninterest expense	—		27
Loss before income taxes	—		(27		)
Income tax (benefit)/expense	—		—
Net loss from discontinued operations, net of tax	$	—	$	(27	)

XML

Document And Entity Information	3 Months Ended
	Sep. 30, 2013	Nov. 01, 2013
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2013
Document Period End Date	Sep. 30, 2013
Current Fiscal Year End Date	--12-31
Entity Registrant Name	CommunityOne Bancorp
Entity Central Index Key	0000764811
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		21,739,646

XML

Investment Securities (Tables)

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-for-sale Securities Reconciliation

The following table summarizes the amortized cost and estimated fair value of investment securities and presents the related gross unrealized gains and losses:

September 30, 2013
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale:
Obligations of:
U.S. government sponsored enterprises	$	2,057	$	25	$	—	$	2,082
Residential mortgage-backed securities-GSE	373,860		945		17,358		357,447
Residential mortgage-backed securities-Private	20,484		784		10		21,258
Commercial mortgage backed securities-GSE	22,863		—		1,219		21,644
Commercial mortgage-backed securities-Private	10,419		—		786		9,633
Business Development Company investment	1,753		887		—		2,640
Corporate notes	24,874		134		—		25,008
Total available for sale	$	456,310	$	2,775	$	19,373	$	439,712
Held to Maturity:
Residential mortgage-backed securities-GSE	143,611		—		6,556		137,055
Commercial mortgage-backed securities-Private	10,073		—		654		9,419
Total held to maturity	$	153,684	$	—	$	7,210	$	146,474
Total investment securities	$	609,994	$	2,775	$	26,583	$	586,186
December 31, 2012
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale:
Obligations of:
U.S. Treasury and government agencies	$	6,646	$	335	$	—	$	6,981
U.S. government sponsored enterprises	22,118		55		—		22,173
States and political subdivisions	5,918		120		—		6,038
Residential mortgage-backed securities-GSE	436,344		5,678		948		441,074
Residential mortgage-backed securities-Private	22,649		750		454		22,945
Commercial mortgage backed securities-GSE	23,150		209		—		23,359
Commercial mortgage backed securities-Private	5,283		34		—		5,317
Corporate notes	36,710		270		17		36,963
Total	$	558,818	$	7,451	$	1,419	$	564,850

Available-for-sale Securities, Continuous Unrealized Loss Position

The following tables show our investments' estimated fair value and gross unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2013 and December 31, 2012. The change in unrealized losses during the three and nine month periods ending September 30, 2013 was attributed to changes in interest rates and not to changes in the credit quality of these securities. All unrealized losses on investment securities are considered by management to be temporary given the credit quality of these investment securities or the short duration of the unrealized loss, or both.

	Less than 12 Months				12 Months or More				Total
(dollars in thousands)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
September 30, 2013
Available for Sale:
Residential mortgage-backed securities-GSE	$	312,145	$	17,358	$	—	$	—	$	312,145	$	17,358
Residential mortgage-backed securities-Private	1,350		10		—		—		1,350		10
Commercial mortgage-backed securities-GSE	21,644		1,219		—		—		21,644		1,219
Commercial mortgage-backed securities-Private	9,633		786		—		—		9,633		786
Total available for sale	$	344,772	$	19,373	$	—	$	—	$	344,772	$	19,373
Held to Maturity:
Residential mortgage-backed securities-GSE	$	137,055	$	6,556	$	—	$	—	$	137,055	$	6,556
Commercial mortgage-backed securities-Private	9,419		654		—		—		9,419		654
Total held to maturity	$	146,474	$	7,210	$	—	$	—	$	146,474	$	7,210
Total	$	491,246	$	26,583	$	—	$	—	$	491,246	$	26,583
December 31, 2012
Obligations of:
Residential mortgage-backed securities-GSE	$	123,489	$	904	$	7,027	$	44	$	130,516	$	948
Residential mortgage-backed securities-Private	7,499		454		—		—		7,499		454
Corporate notes	3,249		17		—		—		3,249		17
Total	$	134,237	$	1,375	$	7,027	$	44	$	141,264	$	1,419

Available-for-sale Securities, by Maturity Dates

The aggregate amortized cost and fair value of securities at September 30, 2013, by remaining contractual maturity, are shown in the following table. Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.

	Available-for-Sale				Held-to-Maturity
(dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	16,486	$	16,539	$	—	$	—
Due after one year through five years	10,445		10,551		—		—
With no stated maturity	1,753		2,640		—		—
Total	28,684		29,730		—		—
Mortgage-backed securities	427,626		409,982		153,684		146,474
Total	$	456,310	$	439,712	$	153,684	$	146,474

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Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013		Sep. 30, 2012
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			$ (323)	[1]
Other comprehensive income before reclassifications			(12,221)
Amounts reclassified from accumulated other comprehensive income			(2,140)
Net current period other comprehensive income	570	3,799	(14,361)		5,780
Ending balance	(14,684)		(14,684)
Unrealized gains (losses) on available for sale securities [Member]
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			3,650
Other comprehensive income before reclassifications			(12,221)
Amounts reclassified from accumulated other comprehensive income			(1,679)
Net current period other comprehensive income			(13,900)
Ending balance	(10,250)		(10,250)
Defined benefit plan items [Member]
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			(3,973)
Other comprehensive income before reclassifications			0
Amounts reclassified from accumulated other comprehensive income			(461)
Net current period other comprehensive income			(461)
Ending balance	$ (4,434)		$ (4,434)

[1] Derived from audited consolidated financial statements

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Fair Values of Assets and Liabilities (Fair Value of Financial Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Fair Value, Balance Sheet [Line Items]
Investment securities: Held-to-maturity	$ 146,474
Continuing operations [Member] | Carrying value [Member]
Fair Value, Balance Sheet [Line Items]
Cash and cash equivalents	103,074	239,610
Investment securities: Available-for-sale	439,712	564,850
Investment securities: Held-to-maturity	153,684
Loans held for sale	2,734	6,974
Loans, net	1,169,755	1,147,721
Accrued interest receivable	6,527	6,102
Deposits	1,790,608	1,906,988
Retail repurchase agreements	12,422	8,675
Federal Home Loan Bank advances	73,295	58,328
Notes Payable, Noncurrent	5,244
Junior subordinated debentures	56,702	56,702
Accrued interest payable	2,410	2,111
Continuing operations [Member] | Estimated fair value [Member]
Fair Value, Balance Sheet [Line Items]
Cash and cash equivalents	103,074	239,610
Investment securities: Available-for-sale	439,712	564,850
Investment securities: Held-to-maturity	146,474
Loans held for sale	2,734	6,974
Loans, net	1,137,425	1,140,088
Accrued interest receivable	6,527	6,102
Deposits	1,791,409	1,910,927
Retail repurchase agreements	12,422	8,675
Federal Home Loan Bank advances	77,010	62,950
Notes Payable, Noncurrent	5,244
Junior subordinated debentures	21,818	18,760
Accrued interest payable	2,410	2,111
Continuing operations [Member] | Level 1 [Member]
Fair Value, Balance Sheet [Line Items]
Cash and cash equivalents	103,074	239,610
Investment securities: Available-for-sale	2,640
Continuing operations [Member] | Level 2 [Member]
Fair Value, Balance Sheet [Line Items]
Investment securities: Available-for-sale	437,072	564,850
Investment securities: Held-to-maturity	146,474
Loans held for sale	2,734	6,974
Accrued interest receivable	1,735	1,812
Deposits	1,791,409	1,910,927
Retail repurchase agreements	12,422	8,675
Federal Home Loan Bank advances	77,010	62,950
Accrued interest payable	439	937
Continuing operations [Member] | Level 3 [Member]
Fair Value, Balance Sheet [Line Items]
Loans, net	1,137,425	1,140,088
Accrued interest receivable	4,792	4,290
Notes Payable, Noncurrent	5,244
Junior subordinated debentures	21,818	18,760
Accrued interest payable	$ 1,971	$ 1,174