Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2015

The following table presents an aging analysis of accruing and nonaccruing loans as of June 30, 2015:



(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	$	3	$	—	$	—	$	469	$	472	$	122,254	$	122,726
Real estate - construction	52		—		—		799		851		62,881		63,732
Real estate - mortgage:
1-4 family residential	807		665		3		9,383		10,858		657,817		668,675
Commercial	413		—		56		8,304		8,773		388,193		396,966
Consumer	985		158		16		553		1,712		89,927		91,639
Total	2,260		823		75		19,508		22,666		1,321,072		1,343,738
PI loans
Commercial and agricultural	14		—		1,867		—		1,881		4,433		6,314
Real estate - construction	—		—		1,485		—		1,485		6,642		8,127
Real estate - mortgage:
1-4 family residential	13		—		1,804		—		1,817		14,008		15,825
Commercial	387		—		8,561		—		8,948		61,968		70,916
Consumer	6		—		8		—		14		919		933
Total	420		—		13,725		—		14,145		87,970		102,115
Total Loans	$	2,680	$	823	$	13,800	$	19,508	$	36,811	$	1,409,042	$	1,445,853

The following table presents an aging analysis of accruing and nonaccruing loans as of December 31, 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	$	—	$	—	$	—	$	608	$	608	$	105,269	$	105,877
Real estate - construction	100		—		—		2,307		2,407		66,723		69,130
Real estate - mortgage:
1-4 family residential	2,719		147		—		8,637		11,503		638,364		649,867
Commercial	105		141		—		13,381		13,627		325,356		338,983
Consumer	744		225		5		355		1,329		69,760		71,089
Total	3,668		513		5		25,288		29,474		1,205,472		1,234,946
PI loans
Commercial and agricultural	—		—		2,232		—		2,232		5,303		7,535
Real estate - construction	—		—		3,737		—		3,737		5,460		9,197
Real estate - mortgage:
1-4 family residential	579		15		2,209		—		2,803		14,934		17,737
Commercial	287		119		12,964		—		13,370		73,975		87,345
Consumer	2		—		10		—		12		1,016		1,028
Total	868		134		21,152		—		22,154		100,688		122,842
Total Loans	$	4,536	$	647	$	21,157	$	25,288	$	51,628	$	1,306,160	$	1,357,788

Loan Credit Quality Indicators

The following table presents loans held for investment balances by risk grade as of June 30, 2015:



(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful
	(Ratings 1-5)		(Rating 6)		(Rating 7)		(Rating 8)		Total
Commercial and agricultural	$	125,366	$	1,263	$	2,411	$	—	$	129,040
Real estate - construction	64,851		2,105		4,903		—		71,859
Real estate - mortgage:
1-4 family residential	663,849		4,978		15,673		—		684,500
Commercial	421,757		17,206		28,606		313		467,882
Consumer	91,680		6		572		314		92,572
Total	$	1,367,503	$	25,558	$	52,165	$	627	$	1,445,853

The following table presents loans held for investment balances by risk grade as of December 31, 2014:



(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful
	(Ratings 1-5)		(Rating 6)		(Rating 7)		(Rating 8)		Total
Commercial and agricultural	$	104,165	$	6,318	$	2,930	$	—	$	113,413
Real estate - construction	68,995		2,411		6,921		—		78,327
Real estate - mortgage:
1-4 family residential	646,897		5,363		15,342		—		667,602
Commercial	363,267		25,715		36,984		362		426,328
Consumer	71,350		11		376		381		72,118
Total	$	1,254,674	$	39,818	$	62,553	$	743	$	1,357,788

Schedule of Impaired Loans Receivables

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



	June 30, 2015				December 31, 2014
(dollars in thousands)	Recorded Investment		Associated Reserves		Recorded Investment		Associated Reserves
Impaired loans, not individually reviewed for impairment	$	4,362	$	—	$	4,967	$	—
Impaired loans, individually reviewed, with no impairment	24,739		—		26,631		—
Impaired loans, individually reviewed, with impairment	4,567		403		7,851		418
Total impaired loans, excluding purchased impaired *	$	33,668	403		$	39,449	418

Purchased impaired loans with subsequent deterioration	$	98,573	3,181		$	118,701	3,237
Purchased impaired loans with no subsequent deterioration	3,542		—		4,141		—
Total Reserves			$	3,584			$	3,655

Average impaired loans calculated using a simple average	36,559				43,446



* Included at June 30, 2015 and December 31, 2014 were $14.2 million and $14.1 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, 2015		December 31, 2014
Loans held for investment:
Commercial and agricultural	$	469	$	608
Real estate - construction	799		2,307
Real estate - mortgage:
1-4 family residential	9,383		8,637
Commercial	8,304		13,381
Consumer	553		355
Total nonaccrual loans	19,508		25,288
Loans more than 90 days delinquent, still on accrual	75		5
Total nonperforming loans	$	19,583	$	25,293

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 allowance for loan losses as of June 30, 2015:



			Unpaid
(dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
Individually reviewed impaired loans with no related allowance recorded:
Commercial and agricultural	$	418	$	479	$	—
Real estate - construction	1,116		1,444		—
Real estate - mortgage:
1-4 family residential	7,553		9,239		—
Commercial	15,652		20,891		—
Consumer	—		—		—
Total	24,739		32,053		—
Individually reviewed impaired loans with an allowance recorded:
Commercial and agricultural	—		—		—
Real estate - construction	—		—		—
Real estate - mortgage:
1-4 family residential	4,567		5,271		403
Commercial	—		—		—
Consumer	—		—		—
Total	4,567		5,271		403
Total individually reviewed impaired loans:
Commercial and agricultural	418		479		—
Real estate - construction	1,116		1,444		—
Real estate - mortgage:
1-4 family residential	12,120		14,510		403
Commercial	15,652		20,891		—
Consumer	—		—		—
Total	$	29,306	$	37,324	$	403

PI loans with subsequent credit deterioration:
Commercial and agricultural	$	6,314	$	5,088	$	289
Real estate - construction	7,652		8,689		808
Real estate - mortgage:
1-4 family residential	12,758		13,275		155
Commercial	70,916		72,312		1,741
Consumer	933		623		188
Total	$	98,573	$	99,987	$	3,181

The following table presents individually reviewed impaired loans, and purchased impaired loans with subsequent credit deterioration, segregated by portfolio segment, and the corresponding allowance for loan losses as of December 31, 2014:



			Unpaid
(dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
Individually reviewed impaired loans with no related allowance recorded:
Commercial and agricultural	$	—	$	—	$	—
Real estate - construction	2,344		2,898		—
Real estate - mortgage:
1-4 family residential	8,115		10,238		—
Commercial	16,172		22,060		—
Consumer	—		—		—
Total	26,631		35,196		—
Individually reviewed impaired loans with an allowance recorded:
Commercial and agricultural	498		498		58
Real estate - construction	—		—		—
Real estate - mortgage:
1-4 family residential	3,294		3,676		331
Commercial	4,059		4,228		29
Consumer	—		—		—
Total	7,851		8,402		418
Total individually reviewed impaired loans:
Commercial and agricultural	498		498		58
Real estate - construction	2,344		2,898		—
Real estate - mortgage:
1-4 family residential	11,409		13,914		331
Commercial	20,231		26,288		29
Consumer	—		—		—
Total	$	34,482	$	43,598	$	418
PI loans with subsequent credit deterioration:
Commercial and agricultural	$	7,535	$	6,149	$	257
Real estate - construction	8,619		9,855		507
Real estate - mortgage:
1-4 family residential	14,174		15,278		199
Commercial	87,345		90,830		2,085
Consumer	1,028		667		189
Total	$	118,701	$	122,779	$	3,237

Impaired Loans, Average Recorded Investment and Interest Income

The following summary presents individually reviewed impaired loans. Average recorded investment and interest income recognized on impaired loans, segregated by portfolio segment, is shown in the following tables as of June 30, 2015 and June 30, 2014:



	For Three Months Ended				For Three Months Ended
	June 30, 2015				June 30, 2014
	Average		Interest		Average		Interest
(dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Individually reviewed impaired loans with no related allowance recorded:
Commercial and agricultural	$	435	$	—	$	242	$	—
Real estate - construction	1,126		8		2,191		7
Real estate - mortgage:
1-4 family residential	7,099		24		8,263		23
Commercial	15,770		57		19,686		33
Consumer	—		—		—		—
Total	24,430		89		30,382		63
Individually reviewed impaired loans with an allowance recorded:
Commercial and agricultural	—		—		—		—
Real estate - construction	—		—		583		—
Real estate - mortgage:
1-4 family residential	4,646		14		3,706		14
Commercial	—		—		5,474		33
Consumer	—		—		—		—
Total	4,646		14		9,763		47
Total individually reviewed impaired loans:
Commercial and agricultural	435		—		242		—
Real estate - construction	1,126		8		2,774		7
Real estate - mortgage:
1-4 family residential	11,745		38		11,969		37
Commercial	15,770		57		25,160		66
Consumer	—		—		—		—
Total	$	29,076	$	103	$	40,145	$	110



	For Six Months Ended				For Six Months Ended
	June 30, 2015				June 30, 2014
	Average		Interest		Average		Interest
(dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Individually reviewed impaired loans with no related allowance recorded:
Commercial and agricultural	$	457	$	—	$	242	$	—
Real estate - construction	1,201		9		2,209		18
Real estate - mortgage:
1-4 family residential	7,512		27		8,250		51
Commercial	14,425		65		20,004		137
Consumer	—		—		—		—
Total	23,595		101		30,705		206
Individually reviewed impaired loans with an allowance recorded:
Commercial and agricultural	$	—	$	—	$	—	$	—
Real estate - construction	—		—		594		—
Real estate - mortgage:
1-4 family residential	4,195		17		3,722		32
Commercial	1,915		26		5,504		91
Consumer	—		—		—		—
Total	6,110		43		9,820		123
Total individually reviewed impaired loans:
Commercial and agricultural	457		—		242		—
Real estate - construction	1,201		9		2,803		18
Real estate - mortgage:
1-4 family residential	11,707		44		11,972		83
Commercial	16,340		91		25,508		228
Consumer	—		—		—		—
Total	$	29,705	$	144	$	40,525	$	329

Schedule of Loans Receivable, Acquired Loans

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



	At June 30, 2015
(dollars in thousands)	Purchased Impaired		Purchased Contractual		Total Purchased Loans		Unpaid Principal Balance
Commercial and agricultural	$	6,314	$	1,394	$	7,708	$	6,502
Real estate - construction	8,127		—		8,127		9,200
Real estate - mortgage:
1-4 family residential	15,825		20,199		36,024		37,333
Commercial	70,916		—		70,916		72,312
Consumer	933		—		933		629
Total	$	102,115	$	21,593	$	123,708	$	125,976



	At December 31, 2014
(dollars in thousands)	Purchased Impaired		Purchased Contractual		Total Purchased Loans		Unpaid Principal Balance
Commercial and agricultural	$	7,535	$	4,288	$	11,823	$	10,508
Real estate - construction	9,197		—		9,197		10,463
Real estate - mortgage:
1-4 family residential	17,737		21,660		39,397		41,295
Commercial	87,345		—		87,345		90,830
Consumer	1,028		—		1,028		678
Total	$	122,842	$	25,948	$	148,790	$	153,774

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 PC loans or purchased residential mortgage loan pools.



	For Three Months Ended						For Three Months Ended
	June 30, 2015						June 30, 2014
	Purchased Impaired						Purchased Impaired
(dollars in thousands)	Carrying Amount			Future Accretion			Carrying Amount			Future Accretion
Balance, beginning of period	$	109,262		$	20,925		$	149,033		$	28,327
Accretion	1,841			(1,841		)	2,415			(2,415		)
Increase (Decrease) in future accretion	—			1,716			—			1,852
Reclassification of loans and adjustments	—			—			—			—
Payments received	(8,522		)	—			(9,524		)	—
Foreclosed and transferred to OREO	(466		)	—			—			—
Subtotal before allowance	102,115			20,800			141,924			27,764
Allowance for loan losses	(3,181		)	—			(4,123		)	—
Net carrying amount, end of period	$	98,934		$	20,800		$	137,801		$	27,764



	For Six Months Ended						For Six Months Ended
	June 30, 2015						June 30, 2014
	Purchased Impaired						Purchased Impaired
(dollars in thousands)	Carrying Amount			Future Accretion			Carrying Amount			Future Accretion
Balance, beginning of period	$	122,842		$	24,898		$	161,652		$	29,987
Accretion	3,889			(3,889		)	5,079			(5,079		)
Increase in future accretion	—			(209		)	—			2,856
Reclassification of loans and adjustments	—			—			(4,180		)	—
Payments received	(23,376		)	—			(20,605		)	—
Foreclosed and transferred to OREO	(1,240		)	—			(22		)	—
Subtotal before allowance	102,115			20,800			141,924			27,764
Allowance for credit losses	(3,181		)	—			(4,123		)	—
Net carrying amount, end of period	$	98,934		$	20,800		$	137,801		$	27,764

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, 2015			June 30, 2014			June 30, 2015			June 30, 2014
Balance, beginning of period	$	19,008		$	26,039		$	20,345		$	26,785
Recovery of losses charged to continuing operations	(788		)	(1,685		)	(1,926		)	(2,369		)
Net charge-offs:
Charge-offs	(1,567		)	(2,033		)	(2,562		)	(4,010		)
Recoveries	1,336			1,654			2,132			3,569
Net charge-offs	(231		)	(379		)	(430		)	(441		)
Balance, end of period	$	17,989		$	23,975		$	17,989		$	23,975
Annualized net charge-offs during the period to average loans held for investment	0.07		%	0.12		%	0.06		%	0.07		%
Annualized net charge-offs during the period to ALL	5.15		%	6.34		%	4.82		%	3.71		%
Allowance for loan losses to loans held for investment	1.24		%	1.89		%	1.24		%	1.89		%

Allowance for Loan Losses by Portfolio Segment

The following table presents ALL activity by portfolio segment for the three months ended June 30, 2015:



							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance April 1, 2015	$	3,398		$	3,120		$	5,623		$	3,152		$	3,715		$	19,008
Charge-offs	(257		)	(4		)	(251		)	(261		)	(794		)	(1,567		)
Recoveries	428			179			171			328			230			1,336
Provision (recovery of provision)	(857		)	(1,088		)	(26		)	87			1,096			(788		)
Ending balance June 30, 2015	$	2,712		$	2,207		$	5,517		$	3,306		$	4,247		$	17,989

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 six months ended June 30, 2015:



							Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural			Real Estate - Construction			1-4 Family Residential			Commercial			Consumer			Total
ALL:
Beginning balance January 1, 2015	$	3,915		$	3,163		$	5,847		$	4,179		$	3,241		$	20,345
Charge-offs	(306		)	(85		)	(376		)	(268		)	(1,527		)	(2,562		)
Recoveries	649			375			309			386			413			2,132
Provision (recovery of provision)	(1,546		)	(1,246		)	(263		)	(991		)	2,120			(1,926		)
Ending balance June 30, 2015	$	2,712		$	2,207		$	5,517		$	3,306		$	4,247		$	17,989

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 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 June 30, 2014	$	3,508		$	4,778		$	7,410		$	5,666		$	2,613		$	23,975

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, 2015:



					Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural		Real Estate - Construction		1-4 Family Residential		Commercial		Consumer		Total
ALL:
Individually reviewed for impairment	$	—	$	—	$	404	$	—	$	—	$	404
Collectively reviewed for impairment	2,423		1,399		4,958		1,565		4,059		14,404
PI loans reviewed for credit impairment	289		808		155		1,741		188		3,181
PI loans with no credit deterioration	—		—		—		—		—		—
Total ALL	$	2,712	$	2,207	$	5,517	$	3,306	$	4,247	$	17,989
Loans held for investment:
Individually reviewed for impairment	$	418	$	1,116	$	12,120	$	15,652	$	—	$	29,306
Collectively reviewed for impairment	122,308		62,616		656,555		381,314		91,639		1,314,432
PI loans with subsequent credit deterioration	6,314		7,652		12,758		70,916		933		98,573
PI loans with no credit deterioration	—		475		3,067		—		—		3,542
Total loans	$	129,040	$	71,859	$	684,500	$	467,882	$	92,572	$	1,445,853



					Real Estate - Mortgage
(dollars in thousands)	Commercial and Agricultural		Real Estate - Construction		1-4 Family Residential		Commercial		Consumer		Total
ALL:
Individually reviewed for impairment	$	58	$	—	$	331	$	29	$	—	$	418
Collectively reviewed for impairment	3,600		2,656		5,317		2,065		3,052		16,690
PI loans reviewed for credit impairment	257		507		199		2,085		189		3,237
PI loans with no credit deterioration	—		—		—		—		—		—
Total ALL	$	3,915	$	3,163	$	5,847	$	4,179	$	3,241	$	20,345
Loans held for investment:
Individually reviewed for impairment	$	498	$	2,344	$	11,409	$	20,231	$	—	$	34,482
Collectively reviewed for impairment	105,380		66,786		638,456		318,752		71,090		1,200,464
PI loans with subsequent credit deterioration	7,535		8,619		14,174		87,345		1,028		118,701
PI loans with no credit deterioration	—		578		3,563		—		—		4,141
Total loans	$	113,413	$	78,327	$	667,602	$	426,328	$	72,118	$	1,357,788

Troubled Debt Restructurings on Loans

The following tables present a breakdown of troubled debt restructurings that were restructured during the three and six months ended June 30, 2015 and June 30, 2014, respectively, segregated by portfolio segment:



	For Three Months Ended June 30, 2015					For Three Months Ended June 30, 2014
		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	370		370		—	—		—
Real estate - mortgage:
1-4 family residential	1	446		446		1	17		21
Commercial	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	2	$	816	$	816	1	$	17	$	21



	For Six Months Ended June 30, 2015					For Six Months Ended June 30, 2014
		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	370		370		—	—		—
Real estate - mortgage:
1-4 family residential	1	446		446		7	752		828
Commercial	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	2	$	816	$	816	7	$	752	$	828