Loans and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2013

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



					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