Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2014

The following table presents an aging analysis of accruing and nonaccruing loans as of June 30, 2014:



(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	$	—	$	—	$	—	$	400	$	400	$	76,908	$	77,308
Real estate - construction	136		—		—		2,773		2,909		58,678		61,587
Real estate - mortgage:
1-4 family residential	384		1,007		76		9,007		10,474		630,002		640,476
Commercial	84		133		206		19,192		19,615		273,039		292,654
Consumer	79		7		—		31		117		55,799		55,916
Total	$	683	$	1,147	$	282	$	31,403	$	33,515	$	1,094,426	$	1,127,941
PI loans
Commercial and agricultural	$	69	$	11	$	2,250	$	—	$	2,330	$	6,694	$	9,024
Real estate - construction	—		—		4,203		—		4,203		6,234		10,437
Real estate - mortgage:
1-4 family residential	289		58		2,921		—		3,268		16,260		19,528
Commercial	26		254		13,252		—		13,532		88,315		101,847
Consumer	6		2		13		—		21		1,067		1,088
Total	$	390	$	325	$	22,639	$	—	$	23,354	$	118,570	$	141,924
Total Loans	$	1,073	$	1,472	$	22,921	$	31,403	$	56,869	$	1,212,996	$	1,269,865

The following table presents an aging analysis of accruing and nonaccruing loans as of December 31, 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	$	18	$	43	$	—	$	516	$	577	$	60,946	$	61,523
Real estate - construction	168		634		—		4,677		5,479		48,711		54,190
Real estate - mortgage:
1-4 family residential	3,454		522		—		11,580		15,556		593,698		609,254
Commercial	1,765		77		—		18,380		20,222		261,524		281,746
Consumer	56		17		—		12		85		43,798		43,883
Total	$	5,461	$	1,293	$	—	$	35,165	$	41,919	$	1,008,677	$	1,050,596
PI loans
Commercial and agricultural	$	35	$	16	$	1,977	$	—	$	2,028	$	8,701	$	10,729
Real estate - construction	48		—		2,758		—		2,806		7,087		9,893
Real estate - mortgage:
1-4 family residential	135		9		2,907		—		3,051		23,802		26,853
Commercial	903		—		17,479		—		18,382		94,796		113,178
Consumer	6		—		12		—		18		981		999
Total	$	1,127	$	25	$	25,133	$	—	$	26,285	$	135,367	$	161,652
Total Loans	$	6,588	$	1,318	$	25,133	$	35,165	$	68,204	$	1,144,044	$	1,212,248

Loan Credit Quality Indicators

The following table presents loans held for investment balances by risk grade as of June 30, 2014:



(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful
	(Ratings 1-5)		(Rating 6)		(Rating 7)		(Rating 8)		Total
Commercial and agricultural	$	81,579	$	1,361	$	3,392	$	—	$	86,332
Real estate - construction	61,125		2,930		7,969		—		72,024
Real estate - mortgage:
1-4 family residential	633,335		8,347		18,322		—		660,004
Commercial	316,326		28,451		49,724		—		394,501
Consumer	56,614		19		63		308		57,004
Total	$	1,148,979	$	41,108	$	79,470	$	308	$	1,269,865

The following table presents loans held for investment balances by risk grade as of December 31, 2013:



(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful
	(Ratings 1-5)		(Rating 6)		(Rating 7)		(Rating 8)		Total
Commercial and agricultural	$	67,277	$	1,262	$	3,713	$	—	$	72,252
Real estate - construction	50,138		3,984		9,961		—		64,083
Real estate - mortgage:
1-4 family residential	601,304		10,887		23,916		—		636,107
Commercial	307,661		29,711		57,552		—		394,924
Consumer	44,450		40		47		345		44,882
Total	$	1,070,830	$	45,884	$	95,189	$	345	$	1,212,248

Schedule of Impaired Loans Receivables

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



	June 30, 2014				December 31, 2013
(dollars in thousands)	Recorded Investment		Associated Reserves		Recorded Investment		Associated Reserves
Impaired loans, not individually reviewed for impairment	$	4,750	$	—	$	4,612	$	—
Impaired loans, individually reviewed, with no impairment	29,890		—		39,865		—
Impaired loans, individually reviewed, with impairment	9,693		855		2,965		927
Total impaired loans, excluding purchased impaired *	$	44,333	$	855	$	47,442	$	927

Purchased impaired loans with subsequent deterioration	$	141,924	4,123		$	161,307	5,560
Purchased impaired loans with no subsequent deterioration	$	—	—		$	345	—
Total Reserves			$	4,978			$	6,487

Average impaired loans calculated using a simple average	$	45,888			$	65,527



* Included at June 30, 2014 and December 31, 2013 were $12.9 million and $12.1 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)
	June 30, 2014		December 31, 2013
Loans held for investment:
Commercial and agricultural	$	400	$	516
Real estate - construction	2,773		4,677
Real estate - mortgage:
1-4 family residential	9,007		11,580
Commercial	19,192		18,380
Consumer	31		12
Total nonaccrual loans	$	31,403	$	35,165
Loans more than 90 days delinquent, still on accrual	282		—
Total nonperforming loans	$	31,685	$	35,165

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 June 30, 2014:



			Unpaid
(dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and agricultural	$	242	$	485	$	—
Real estate - construction	2,179		2,736		—
Real estate - mortgage:
1-4 family residential	8,220		10,940		—
Commercial	19,249		24,655		—
Consumer	—		—		—
Total	$	29,890	$	38,816	$	—
With an allowance recorded:
Commercial and agricultural	$	—	$	—	$	—
Real estate - construction	547		643		280
Real estate - mortgage:
1-4 family residential	3,698		4,020		452
Commercial	5,448		5,792		123
Consumer	—		—		—
Total	$	9,693	$	10,455	$	855
Total individually evaluated impaired loans
Commercial and agricultural	$	242	$	485	$	—
Real estate - construction	2,726		3,379		280
Real estate - mortgage:
1-4 family residential	11,918		14,960		452
Commercial	24,697		30,447		123
Consumer	—		—		—
Total	$	39,583	$	49,271	$	855

PI loans with subsequent credit deterioration:
Commercial and agricultural	$	9,024	$	7,823	$	581
Real estate - construction	10,437		11,521		729
Real estate - mortgage:
1-4 family residential	19,528		21,076		411
Commercial	101,847		109,289		2,212
Consumer	1,088		712		190
Total	$	141,924	$	150,421	$	4,123

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, 2013:



			Unpaid
(dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and agricultural	$	398	$	643	$	—
Real estate - construction	4,734		8,893		—
Real estate - mortgage:
1-4 family residential	11,154		14,431		—
Commercial	23,579		28,905		—
Consumer	—		—		—
Total	$	39,865	$	52,872	$	—
With an allowance recorded:
Commercial and agricultural	$	—	$	—	$	—
Real estate - construction	—		—		—
Real estate - mortgage:
1-4 family residential	2,965		3,032		927
Commercial	—		—		—
Consumer	—		—		—
Total	$	2,965	$	3,032	$	927
Total individually evaluated impaired loans
Commercial and agricultural	$	398	$	643	$	—
Real estate - construction	4,734		8,893		—
Real estate - mortgage:
1-4 family residential	14,119		17,463		927
Commercial	23,579		28,905		—
Consumer	—		—		—
Total	$	42,830	$	55,904	$	927
PI loans with subsequent credit deterioration:
Commercial and agricultural	$	10,729	$	10,344	$	382
Real estate - construction	9,792		11,216		1,015
Real estate - mortgage:
1-4 family residential	26,628		28,143		724
Commercial	113,178		121,813		3,251
Consumer	980		785		188
Total	$	161,307	$	172,301	$	5,560

Impaired Loans, Average Recorded Investment and Interest Income

The following summary includes impaired loans individually reviewed. Average recorded investment and interest income recognized on impaired loans, segregated by portfolio segment, is shown in the following tables as of June 30, 2014 and June 30, 2013:



	For Three Months Ended				For Three Months Ended
	June 30, 2014				June 30, 2013
	Average		Interest		Average		Interest
(dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and agricultural	$	242	$	—	$	1,398	$	1
Real estate - construction	2,191		7		9,513		—
Real estate - mortgage:
1-4 family residential	8,263		23		12,662		9
Commercial	19,686		33		30,466		25
Consumer	—		—		—		—
Total	$	30,382	$	63	$	54,039	$	35
With an allowance recorded:
Commercial and agricultural	$	—	$	—	$	107	$	—
Real estate - construction	583		—		219		3
Real estate - mortgage:
1-4 family residential	3,706		14		1,662		1
Commercial	5,474		33		3,912		—
Consumer	—		—		164		—
Total	$	9,763	$	47	$	6,064	$	4
Total:
Commercial and agricultural	$	242	$	—	$	1,505	$	1
Real estate - construction	2,774		7		9,732		3
Real estate - mortgage:
1-4 family residential	11,969		37		14,324		10
Commercial	25,160		66		34,378		25
Consumer	—		—		164		—
Total	$	40,145	$	110	$	60,103	$	39



	For Six Months Ended				For Six Months Ended
	June 30, 2014				June 30, 2013
	Average		Interest		Average		Interest
(dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and agricultural	$	242	$	—	$	1,414	$	8
Real estate - construction	2,209		18		9,705		—
Real estate - mortgage:
1-4 family residential	8,250		51		12,643		33
Commercial	20,004		137		31,042		144
Consumer	—		—		—		—
Total	$	30,705	$	206	$	54,804	$	185
With an allowance recorded:
Commercial and agricultural	$	—	$	—	$	107	$	—
Real estate - construction	594		—		220		6
Real estate - mortgage:
1-4 family residential	3,722		32		1,682		4
Commercial	5,504		91		3,933		—
Consumer	—		—		167		1
Total	$	9,820	$	123	$	6,109	$	11
Total:
Commercial and agricultural	$	242	$	—	$	1,521	$	8
Real estate - construction	2,803		18		9,925		6
Real estate - mortgage:
1-4 family residential	11,972		83		14,325		37
Commercial	25,508		228		34,975		144
Consumer	—		—		167		1
Total	$	40,525	$	329	$	60,913	$	196

Schedule of Loans Receivable, Acquired Loans

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



	At June 30, 2014
(dollars in thousands)	Purchased Impaired		Purchased Contractual		Total Purchased Loans		Unpaid Principal Balance
Commercial and agricultural	$	9,024	$	3,727	$	12,751	$	11,627
Real estate - construction	10,437		—		10,437		11,521
Real estate - mortgage:
1-4 family residential	19,528		24,232		43,760		46,072
Commercial	101,847		11		101,858		109,300
Consumer	1,088		—		1,088		712
Total	$	141,924	$	27,970	$	169,894	$	179,232



	At December 31, 2013
(dollars in thousands)	Purchased Impaired		Purchased Contractual		Total Purchased Loans		Unpaid Principal Balance
Commercial and agricultural	$	10,729	$	5,948	$	16,677	$	16,452
Real estate - construction	9,893		—		9,893		11,368
Real estate - mortgage:
1-4 family residential	26,853		22,127		48,980		51,359
Commercial	113,178		373		113,551		122,197
Consumer	999		—		999		798
Total	$	161,652	$	28,448	$	190,100	$	202,174

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
	June 30, 2014						June 30, 2013
	Purchased Impaired						Purchased Impaired
(dollars in thousands)	Carrying Amount			Future Accretion			Carrying Amount			Future Accretion
Balance, beginning of period	$	149,033		$	28,327		$	205,884		$	26,096
Accretion	2,415			(2,415		)	4,191			(4,191		)
Increase in future accretion	—			1,852			—			6,801
Payments received	(9,524		)	—			(20,403		)	—
Foreclosed and transferred to OREO	—			—			(513		)	—
Subtotal before allowance	141,924			27,764			189,159			28,706
Allowance for credit losses	(4,123		)	—			(4,066		)	—
Net carrying amount, end of period	$	137,801		$	27,764		$	185,093		$	28,706



	For Six Months Ended						For Six Months Ended
	June 30, 2014						June 30, 2013
	Purchased Impaired						Purchased Impaired
(dollars in thousands)	Carrying Amount			Future Accretion			Carrying Amount			Future Accretion
Balance, beginning of period	$	161,652		$	29,987		$	228,392		$	30,299
Accretion	5,079			(5,079		)	8,394			(8,394		)
Increase in future accretion	—			2,856			—			6,801
Reclassification of loans and adjustments	(4,180		)	—			—			—
Payments received	(20,605		)	—			(46,331		)	—
Foreclosed and transferred to OREO	(22		)	—			(1,296		)	—
Subtotal before allowance	141,924			27,764			189,159			28,706
Allowance for credit losses	(4,123		)	—			(4,066		)	—
Net carrying amount, end of period	$	137,801		$	27,764		$	185,093		$	28,706

Allowance for Loan Losses

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



	For Three Months Ended						For Six Months Ended
(dollars in thousands)	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Balance, beginning of period	$	26,039		$	29,641		$	26,785		$	29,314
Recovery of losses charged to continuing operations	(1,685		)	(1,057		)	(2,369		)	(947		)
Net recoveries (charge-offs):
Charge-offs	(2,033		)	(6,102		)	(4,010		)	(9,113		)
Recoveries	1,654			2,603			3,569			5,831
Net charge-offs	(379		)	(3,499		)	(441		)	(3,282		)
Balance, end of period	$	23,975		$	25,085		$	23,975		$	25,085
Annualized net charge-offs during the period to average loans held for investment	0.12		%	1.26		%	0.07		%	0.59		%
Annualized net charge-offs during the period to ALL	6.34		%	55.79		%	3.71		%	26.17		%
Allowance for loan losses to loans held for investment	1.89		%	2.11		%	1.89		%	2.11		%

Allowance for Loan Losses by Portfolio Segment

The following table presents ALL activity by portfolio segment for the three months ended June 30, 2014:



							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total

ALL:
Beginning balance April 1, 2014	$	3,441		$	5,308		$	7,923		$	6,966		$	2,401		$	26,039
Charge-offs	(621		)	(91		)	(151		)	(730		)	(440		)	(2,033		)
Recoveries	262			363			263			527			239			1,654
Provision (recovery of provision)	426			(802		)	(625		)	(1,097		)	413			(1,685		)
Ending balance June 30, 2014	$	3,508		$	4,778		$	7,410		$	5,666		$	2,613		$	23,975

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



							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:

Beginning balance April 1, 2013	$	3,373		$	5,594		$	8,803		$	9,291		$	2,580		$	29,641
Charge-offs	(875		)	(584		)	(2,537		)	(1,371		)	(735		)	(6,102		)
Recoveries	633			271			492			1,075			132			2,603
Provision (recovery of provision)	(939		)	371			642			(1,608		)	477			(1,057		)
Ending balance June 30, 2013	$	2,192		$	5,652		$	7,400		$	7,387		$	2,454		$	25,085

The following table presents ALL activity by portfolio segment for the six months ended June 30, 2014:



							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, 2014	$	2,931		$	5,233		$	8,869		$	7,195		$	2,557		$	26,785
Charge-offs	(1,010		)	(624		)	(635		)	(796		)	(945		)	(4,010		)
Recoveries	654			1,327			498			593			497			3,569
Provision (recovery of provision)	933			(1,158		)	(1,322		)	(1,326		)	504			(2,369		)
Ending balance at June 30, 2014	$	3,508		$	4,778		$	7,410		$	5,666		$	2,613		$	23,975

The following table presents ALL activity by portfolio segment for the six months ended June 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	(1,194		)	(928		)	(3,169		)	(2,262		)	(1,560		)	(9,113		)
Recoveries	911			1,067			677			2,007			1,169			5,831
Provision (recovery of provision)	(763		)	526			1,191			(1,985		)	84			(947		)
Ending balance at June 30, 2013	$	2,192		$	5,652		$	7,400		$	7,387		$	2,454		$	25,085

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 June 30, 2014:



					Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural		Real Estate - Construction		1-4 Family Residential		Commercial		Consumer		Total
ALL:
Individually evaluated for impairment	$	—	$	280	$	452	$	123	$	—	$	855
Collectively evaluated for impairment	2,927		3,769		6,547		3,331		2,423		18,997
PI loans evaluated for credit impairment	581		729		411		2,212		190		4,123
Total ALL	$	3,508	$	4,778	$	7,410	$	5,666	$	2,613	$	23,975
Loans held for investment
Individually evaluated for impairment	$	242	$	2,726	$	11,929	$	24,698	$	—	$	39,595
Collectively evaluated for impairment	77,066		58,861		628,547		267,956		55,916		1,088,346
PI loans with subsequent credit deterioration	9,024		10,437		19,528		101,847		1,088		141,924
Total loans	$	86,332	$	72,024	$	660,004	$	394,501	$	57,004	$	1,269,865



					Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural		Real Estate - Construction		1-4 Family Residential		Commercial		Consumer		Total
ALL:
Individually evaluated for impairment	$	—	$	—	$	927	$	—	$	—	$	927
Collectively evaluated for impairment	2,549		4,218		7,218		3,944		2,369		20,298
PI loans evaluated for credit impairment	382		1,015		724		3,251		188		5,560
PI loans with no credit deterioration	—		—		—		—		—		—
Total ALL	$	2,931	$	5,233	$	8,869	$	7,195	$	2,557	$	26,785
Loans held for investment
Individually evaluated for impairment	$	398	$	4,734	$	14,119	$	23,579	$	—	$	42,830
Collectively evaluated for impairment	61,125		49,456		595,135		258,167		43,883		1,007,766
PI loans with subsequent credit deterioration	10,729		9,792		26,628		113,178		980		161,307
PI loans with no credit deterioration	—		101		225		—		19		345
Total loans	$	72,252	$	64,083	$	636,107	$	394,924	$	44,882	$	1,212,248

Troubled Debt Restructurings on Loans

The following tables present a breakdown of troubled debt restructurings that were restructured during the three months and six months ended June 30, 2014 and June 30, 2013, respectively, segregated by portfolio segment:



	For Three Months Ended June 30, 2014					For Three Months Ended June 30, 2013
		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	—	—		—		1	114		114
Real estate - mortgage:
1-4 family residential	1	17		21		4	915		894
Commercial	—	—		—		1	460		421
Consumer	—	—		—		—	—		—
Total	1	$	17	$	21	6	$	1,489	$	1,429



	For Six Months Ended June 30, 2014					For Six Months Ended June 30, 2013
		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	—	—		—		1	114		114
Real estate - mortgage:
1-4 family residential	7	752		828		8	2,692		2,667
Commercial	—	—		—		2	1,611		1,228
Consumer	—	—		—		—	—		—
Total	7	$	752	$	828	11	$	4,417	$	4,009