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Loans and Asset Quality Information | 6 Months Ended
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Jun. 30, 2013
Loans And Asset Quality Information |
Loans and Asset Quality Information | Note 8 – Loans and Asset Quality Information The loans and foreclosed real estate that were acquired in FDIC-assisted transactions are covered by loss share agreements between the FDIC and the Company’s banking subsidiary, First Bank, which afford First Bank significant loss protection - see Note 2 to the financial statements included in the Company’s 2011 Annual Report on Form 10-K for detailed information regarding these transactions. Because of the loss protection provided by the FDIC, the risk of the loans and foreclosed real estate that are covered by loss share agreements are significantly different from those assets not covered under the loss share agreements. Accordingly, the Company presents separately loans subject to the loss share agreements as “covered loans” in the information below and loans that are not subject to the loss share agreements as “non-covered loans.” The following is a summary of the major categories of total loans outstanding:
($ in thousands) |  | June 30, 2013 |  |  | December 31, 2012 |  |  | June 30, 2012 |
|  | Amount |  |  | Percentage |  |  | Amount |  |  | Percentage |  |  | Amount |  |  | Percentage |
All loans (non-covered and covered): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  | $ | 164,767 |  |  |  | 7% |  |  |  | 160,790 |  |  |  | 7% |  |  |  | 163,761 |  |  |  | 7% |
Real estate – construction, land development & other land loans |  |  | 297,390 |  |  |  | 12% |  |  |  | 298,458 |  |  |  | 13% |  |  |  | 343,620 |  |  |  | 14% |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 832,761 |  |  |  | 34% |  |  |  | 815,281 |  |  |  | 34% |  |  |  | 815,605 |  |  |  | 34% |
Real estate – mortgage – home equity loans / lines of credit |  |  | 231,446 |  |  |  | 10% |  |  |  | 238,925 |  |  |  | 10% |  |  |  | 250,627 |  |  |  | 10% |
Real estate – mortgage – commercial and other |  |  | 834,554 |  |  |  | 34% |  |  |  | 789,746 |  |  |  | 33% |  |  |  | 789,290 |  |  |  | 32% |
Installment loans to individuals |  |  | 68,776 |  |  |  | 3% |  |  |  | 71,933 |  |  |  | 3% |  |  |  | 73,522 |  |  |  | 3% |
Subtotal |  |  | 2,429,694 |  |  |  | 100% |  |  |  | 2,375,133 |  |  |  | 100% |  |  |  | 2,436,425 |  |  |  | 100% |
Unamortized net deferred loan costs |  |  | 1,168 |  |  |  |  |  |  |  | 1,324 |  |  |  |  |  |  |  | 1,376 |  |  |  |  |
Total loans |  | $ | 2,430,862 |  |  |  |  |  |  |  | 2,376,457 |  |  |  |  |  |  |  | 2,437,801 |  |  |  |  |
As of June 30, 2013, December 31, 2012 and June 30, 2012, net loans include unamortized premiums of $252,000, $485,000, and $717,000, respectively, related to acquired loans. At December 31, 2012, the Company also had $30 million classified as “loans held for sale” that are not included in the loan balances disclosed above or in the disclosures presented in the remainder of Note 8. In the fourth quarter of 2012, the Company identified approximately $68 million of non-covered higher risk loans that it targeted for sale to a third-party investor. Based on an offer to purchase these loans received prior to year-end, the Company wrote the loans down by approximately $38 million to their estimated liquidation value of approximately $30 million and reclassified them as “loans held for sale.” The sale of the loans was completed in January 2013 with the Company receiving sales proceeds of approximately $30 million. The following is a summary of the major categories of non-covered loans outstanding:
($ in thousands) |  | June 30, 2013 |  |  | December 31, 2012 |  |  | June 30, 2012 |
|  | Amount |  |  | Percentage |  |  | Amount |  |  | Percentage |  |  | Amount |  |  | Percentage |
Non-covered loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  | $ | 159,964 |  |  |  | 7% |  |  |  | 155,273 |  |  |  | 7% |  |  |  | 155,879 |  |  |  | 7% |
Real estate – construction, land development & other land loans |  |  | 262,397 |  |  |  | 12% |  |  |  | 251,569 |  |  |  | 12% |  |  |  | 283,818 |  |  |  | 13% |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 712,802 |  |  |  | 33% |  |  |  | 679,401 |  |  |  | 33% |  |  |  | 669,088 |  |  |  | 32% |
Real estate – mortgage – home equity loans / lines of credit |  |  | 214,473 |  |  |  | 10% |  |  |  | 219,443 |  |  |  | 11% |  |  |  | 229,415 |  |  |  | 11% |
Real estate – mortgage – commercial and other |  |  | 771,711 |  |  |  | 35% |  |  |  | 715,973 |  |  |  | 34% |  |  |  | 702,717 |  |  |  | 33% |
Installment loans to individuals |  |  | 68,068 |  |  |  | 3% |  |  |  | 71,160 |  |  |  | 3% |  |  |  | 72,613 |  |  |  | 4% |
Subtotal |  |  | 2,189,415 |  |  |  | 100% |  |  |  | 2,092,819 |  |  |  | 100% |  |  |  | 2,113,530 |  |  |  | 100% |
Unamortized net deferred loan costs |  |  | 1,168 |  |  |  |  |  |  |  | 1,324 |  |  |  |  |  |  |  | 1,376 |  |  |  |  |
Total non-covered loans |  | $ | 2,190,583 |  |  |  |  |  |  |  | 2,094,143 |  |  |  |  |  |  |  | 2,114,906 |  |  |  |  |
The carrying amount of the covered loans at June 30, 2013 consisted of impaired and nonimpaired purchased loans (as determined on the date of acquisition), as follows:
($ in thousands) |  | Impaired Purchased Loans – Carrying Value |  |  | Impaired Purchased Loans – Unpaid Principal Balance |  |  | Nonimpaired Purchased Loans – Carrying Value |  |  | Nonimpaired Purchased Loans - Unpaid Principal Balance |  |  | Total Covered Loans – Carrying Value |  |  | Total Covered Loans – Unpaid Principal Balance |
Covered loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  | $ | 69 |  |  |  | 142 |  |  |  | 4,734 |  |  |  | 6,096 |  |  |  | 4,803 |  |  |  | 6,238 |
Real estate – construction, land development & other land loans |  |  | 302 |  |  |  | 579 |  |  |  | 34,691 |  |  |  | 60,018 |  |  |  | 34,993 |  |  |  | 60,597 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 720 |  |  |  | 1,772 |  |  |  | 119,239 |  |  |  | 142,694 |  |  |  | 119,959 |  |  |  | 144,466 |
Real estate – mortgage – home equity loans / lines of credit |  |  | 15 |  |  |  | 53 |  |  |  | 16,958 |  |  |  | 21,060 |  |  |  | 16,973 |  |  |  | 21,113 |
Real estate – mortgage – commercial and other |  |  | 2,234 |  |  |  | 4,081 |  |  |  | 60,609 |  |  |  | 81,525 |  |  |  | 62,843 |  |  |  | 85,606 |
Installment loans to individuals |  |  | — |  |  |  | — |  |  |  | 708 |  |  |  | 743 |  |  |  | 708 |  |  |  | 743 |
Total |  | $ | 3,340 |  |  |  | 6,627 |  |  |  | 236,939 |  |  |  | 312,136 |  |  |  | 240,279 |  |  |  | 318,763 |
The carrying amount of the covered loans at December 31, 2012 consisted of impaired and nonimpaired purchased loans (as determined on the date of acquisition), as follows:
($ in thousands) |  | Impaired Purchased Loans – Carrying Value |  |  | Impaired Purchased Loans – Unpaid Principal Balance |  |  | Nonimpaired Purchased Loans – Carrying Value |  |  | Nonimpaired Purchased Loans - Unpaid Principal Balance |  |  | Total Covered Loans – Carrying Value |  |  | Total Covered Loans – Unpaid Principal Balance |
Covered loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  | $ | 71 |  |  |  | 148 |  |  |  | 5,446 |  |  |  | 7,009 |  |  |  | 5,517 |  |  |  | 7,157 |
Real estate – construction, land development & other land loans |  |  | 1,575 |  |  |  | 2,594 |  |  |  | 45,314 |  |  |  | 82,676 |  |  |  | 46,889 |  |  |  | 85,270 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 794 |  |  |  | 1,902 |  |  |  | 135,086 |  |  |  | 161,416 |  |  |  | 135,880 |  |  |  | 163,318 |
Real estate – mortgage – home equity loans / lines of credit |  |  | 16 |  |  |  | 56 |  |  |  | 19,466 |  |  |  | 24,431 |  |  |  | 19,482 |  |  |  | 24,487 |
Real estate – mortgage – commercial and other |  |  | 2,369 |  |  |  | 4,115 |  |  |  | 71,404 |  |  |  | 94,502 |  |  |  | 73,773 |  |  |  | 98,617 |
Installment loans to individuals |  |  | — |  |  |  | — |  |  |  | 773 |  |  |  | 828 |  |  |  | 773 |  |  |  | 828 |
Total |  | $ | 4,825 |  |  |  | 8,815 |  |  |  | 277,489 |  |  |  | 370,862 |  |  |  | 282,314 |  |  |  | 379,677 |
The following table presents information regarding covered purchased nonimpaired loans since December 31, 2011. The amounts include principal only and do not reflect accrued interest as of the date of the acquisition or beyond.
($ in thousands) |  |  |
Carrying amount of nonimpaired covered loans at December 31, 2011 |  | $ | 353,370 |
Principal repayments |  |  | (51,582 | )
Transfers to foreclosed real estate |  |  | (30,181 | )
Loan charge-offs |  |  | (10,584 | )
Accretion of loan discount |  |  | 16,466 |
Carrying amount of nonimpaired covered loans at December 31, 2012 |  |  | 277,489 |
Principal repayments |  |  | (37,938 | )
Transfers to foreclosed real estate |  |  | (7,232 | )
Loan charge-offs |  |  | (5,650 | )
Accretion of loan discount |  |  | 10,270 |
Carrying amount of nonimpaired covered loans at June 30, 2013 |  | $ | 236,939 |
As reflected in the table above, the Company accreted $10,270,000 of the loan discount on purchased nonimpaired loans into interest income during the first six months of 2013. As of June 30, 2013, there was remaining loan discount of $36,068,000 related to purchased performing loans. If these loans continue to be repaid by the borrowers, the Company will accrete the remaining loan discount into interest income over the covered lives of the respective loans. In such circumstances, a corresponding entry to reduce the indemnification asset will be recorded amounting to 80% of the loan discount accretion, which reduces noninterest income. At June 30, 2013, the Company also had $17,262,000 of loan discount related to purchased nonperforming loans. It is not expected that a significant amount of this discount will be accreted, as it represents estimated losses on these loans. The following table presents information regarding all purchased impaired loans since December 31, 2011, substantially all of which are covered loans. The Company has applied the cost recovery method to all purchased impaired loans at their respective acquisition dates due to the uncertainty as to the timing of expected cash flows, as reflected in the following table.
($ in thousands) Purchased Impaired Loans |  | Contractual Principal Receivable |  |  | Fair Market Value Adjustment – Write Down (Nonaccretable Difference) |  |  | Carrying Amount |
Balance at December 31, 2011 |  | $ | 18,316 |  |  |  | 9,532 |  |  |  | 8,784 |
Change due to payments received |  |  | (355 | ) |  |  | 44 |  |  |  | (399 | )
Transfer to foreclosed real estate |  |  | (7,636 | ) |  |  | (3,487 | ) |  |  | (4,149 | )
Change due to loan charge-off |  |  | (359 | ) |  |  | (531 | ) |  |  | 172 |
Other |  |  | (1,151 | ) |  |  | (1,568 | ) |  |  | 417 |
Balance at December 31, 2012 |  |  | 8,815 |  |  |  | 3,990 |  |  |  | 4,825 |
Change due to payments received |  |  | (187 | ) |  |  | 27 |  |  |  | (214 | )
Transfer to foreclosed real estate |  |  | (2,000 | ) |  |  | (730 | ) |  |  | (1,270 | )
Other |  |  | (1 | ) |  |  | — |  |  |  | (1 | )
Balance at June 30, 2013 |  | $ | 6,627 |  |  |  | 3,287 |  |  |  | 3,340 |
Each of the purchased impaired loans is on nonaccrual status and considered to be impaired. Because of the uncertainty of the expected cash flows, the Company is accounting for each purchased impaired loan under the cost recovery method, in which all cash payments are applied to principal. Thus, there is no accretable yield associated with the above loans. During the first six months of 2013 and 2012, the Company received $38,000 and $0, respectively, in payments that exceeded the initial carrying amount of the purchased impaired loans, which is included in the loan discount accretion amount discussed previously. Nonperforming assets are defined as nonaccrual loans, restructured loans, loans past due 90 or more days and still accruing interest, nonperforming loans held for sale, and foreclosed real estate. Nonperforming assets are summarized as follows:
ASSET QUALITY DATA ($ in thousands) |  | June 30, 2013 |  |  | December 31, 2012 |  |  | June 30, 2012 |
Non-covered nonperforming assets |  |  |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 42,338 |  |  |  | 33,034 |  |  |  | 73,918 |
Restructured loans - accruing |  |  | 21,333 |  |  |  | 24,848 |  |  |  | 20,684 |
Accruing loans > 90 days past due |  |  | — |  |  |  | — |  |  |  | — |
Total non-covered nonperforming loans |  |  | 63,671 |  |  |  | 57,882 |  |  |  | 94,602 |
Nonperforming loans held for sale |  |  | — |  |  |  | 21,938 |  |  |  | — |
Foreclosed real estate |  |  | 15,425 |  |  |  | 26,285 |  |  |  | 37,895 |
Total non-covered nonperforming assets |  | $ | 79,096 |  |  |  | 106,105 |  |  |  | 132,497 |
Covered nonperforming assets |  |  |  |  |  |  |  |  |  |  |  |
Nonaccrual loans (1) |  | $ | 50,346 |  |  |  | 33,491 |  |  |  | 39,075 |
Restructured loans - accruing |  |  | 6,790 |  |  |  | 15,465 |  |  |  | 19,054 |
Accruing loans > 90 days past due |  |  | — |  |  |  | — |  |  |  | — |
Total covered nonperforming loans |  |  | 57,136 |  |  |  | 48,956 |  |  |  | 58,129 |
Foreclosed real estate |  |  | 32,005 |  |  |  | 47,290 |  |  |  | 70,850 |
Total covered nonperforming assets |  | $ | 89,141 |  |  |  | 96,246 |  |  |  | 128,979 |
Total nonperforming assets |  | $ | 168,237 |  |  |  | 202,351 |  |  |  | 261,476 |
(1) At June 30, 2013, December 31, 2012, and June 30, 2012, the contractual balance of the nonaccrual loans covered by FDIC loss share agreements was $89.3 million, $64.4 million, and $60.4 million, respectively. The following table presents information related to the Company’s impaired loans.
($ in thousands) |  | As of /for the six months ended June 30, 2013 |  |  | As of /for the year ended December 31, 2012 |  |  | As of /for the six months ended June 30, 2012 |
Impaired loans at period end |  |  |  |  |  |  |  |  |  |  |  |
Non-covered |  | $ | 68,445 |  |  |  | 57,882 |  |  |  | 94,602 |
Covered |  |  | 57,136 |  |  |  | 48,956 |  |  |  | 58,129 |
Total impaired loans at period end |  | $ | 125,581 |  |  |  | 106,838 |  |  |  | 152,731 |
Average amount of impaired loans for period |  |  |  |  |  |  |  |  |  |  |  |
Non-covered |  | $ | 63,208 |  |  |  | 85,198 |  |  |  | 86,723 |
Covered |  |  | 55,965 |  |  |  | 54,773 |  |  |  | 56,449 |
Average amount of impaired loans for period – total |  | $ | 119,173 |  |  |  | 139,971 |  |  |  | 143,172 |
Allowance for loan losses related to impaired loans at period end |  |  |  |  |  |  |  |  |  |  |  |
Non-covered |  | $ | 5,960 |  |  |  | 5,051 |  |  |  | 11,051 |
Covered |  |  | 4,700 |  |  |  | 3,509 |  |  |  | 5,158 |
Allowance for loan losses related to impaired loans - total |  | $ | 10,660 |  |  |  | 8,560 |  |  |  | 16,209 |
Amount of impaired loans with no related allowance at period end |  |  |  |  |  |  |  |  |  |  |  |
Non-covered |  | $ | 20,072 |  |  |  | 12,049 |  |  |  | 22,235 |
Covered |  |  | 43,708 |  |  |  | 35,196 |  |  |  | 40,613 |
Total impaired loans with no related allowance at period end |  | $ | 63,780 |  |  |  | 47,245 |  |  |  | 62,848 |
The remaining tables in this note present information derived from the Company’s allowance for loan loss model. Relevant accounting guidance requires certain disclosures to be disaggregated based on how the Company develops its allowance for loan losses and manages its credit exposure. This model combines loan types in a different manner than the tables previously presented. The following table presents the Company’s nonaccrual loans as of June 30, 2013.
($ in thousands) |  | Non-covered |  |  | Covered |  |  | Total |
Commercial, financial, and agricultural: |  |  |  |  |  |  |  |  |  |  |  |
Commercial – unsecured |  | $ | 66 |  |  |  | 101 |  |  |  | 167 |
Commercial – secured |  |  | 2,270 |  |  |  | 127 |  |  |  | 2,397 |
Secured by inventory and accounts receivable |  |  | 36 |  |  |  | 826 |  |  |  | 862 |
Real estate – construction, land development & other land loans |  |  | 9,408 |  |  |  | 20,066 |  |  |  | 29,474 |
Real estate – residential, farmland and multi-family |  |  | 15,840 |  |  |  | 16,393 |  |  |  | 32,233 |
Real estate – home equity lines of credit |  |  | 1,519 |  |  |  | 504 |  |  |  | 2,023 |
Real estate – commercial |  |  | 12,427 |  |  |  | 12,265 |  |  |  | 24,692 |
Consumer |  |  | 772 |  |  |  | 64 |  |  |  | 836 |
Total |  | $ | 42,338 |  |  |  | 50,346 |  |  |  | 92,684 |
The following table presents the Company’s nonaccrual loans as of December 31, 2012.
($ in thousands) |  | Non-covered |  |  | Covered |  |  | Total |
Commercial, financial, and agricultural: |  |  |  |  |  |  |  |  |  |  |  |
Commercial - unsecured |  | $ | 307 |  |  |  | 150 |  |  |  | 457 |
Commercial - secured |  |  | 2,398 |  |  |  | 3 |  |  |  | 2,401 |
Secured by inventory and accounts receivable |  |  | 17 |  |  |  | 59 |  |  |  | 76 |
Real estate – construction, land development & other land loans |  |  | 6,354 |  |  |  | 11,698 |  |  |  | 18,052 |
Real estate – residential, farmland and multi-family |  |  | 9,629 |  |  |  | 10,712 |  |  |  | 20,341 |
Real estate – home equity lines of credit |  |  | 1,622 |  |  |  | 465 |  |  |  | 2,087 |
Real estate - commercial |  |  | 9,885 |  |  |  | 10,342 |  |  |  | 20,227 |
Consumer |  |  | 2,822 |  |  |  | 62 |  |  |  | 2,884 |
Total |  | $ | 33,034 |  |  |  | 33,491 |  |  |  | 66,525 |
The following table presents an analysis of the payment status of the Company’s loans as of June 30, 2013.
($ in thousands) |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Nonaccrual Loans |  |  | Current |  |  | Total Loans Receivable |
Non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial - unsecured |  | $ | 158 |  |  |  | 85 |  |  |  | 66 |  |  |  | 35,532 |  |  |  | 35,841 |
Commercial - secured |  |  | 526 |  |  |  | 536 |  |  |  | 2,270 |  |  |  | 116,948 |  |  |  | 120,280 |
Secured by inventory and accounts receivable |  |  | 38 |  |  |  | 15 |  |  |  | 36 |  |  |  | 20,452 |  |  |  | 20,541 |
Real estate – construction, land development & other land loans |  |  | 669 |  |  |  | 192 |  |  |  | 9,408 |  |  |  | 222,083 |  |  |  | 232,352 |
Real estate – residential, farmland, and multi-family |  |  | 7,320 |  |  |  | 1,043 |  |  |  | 15,840 |  |  |  | 825,857 |  |  |  | 850,060 |
Real estate – home equity lines of credit |  |  | 1,363 |  |  |  | 394 |  |  |  | 1,519 |  |  |  | 195,005 |  |  |  | 198,281 |
Real estate - commercial |  |  | 1,441 |  |  |  | 275 |  |  |  | 12,427 |  |  |  | 666,464 |  |  |  | 680,607 |
Consumer |  |  | 372 |  |  |  | 210 |  |  |  | 772 |  |  |  | 50,099 |  |  |  | 51,453 |
Total non-covered |  | $ | 11,887 |  |  |  | 2,750 |  |  |  | 42,338 |  |  |  | 2,132,440 |  |  |  | 2,189,415 |
Unamortized net deferred loan costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,168 |
Total non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,190,583 |
Covered loans |  | $ | 2,970 |  |  |  | 458 |  |  |  | 50,346 |  |  |  | 186,505 |  |  |  | 240,279 |
Total loans |  | $ | 14,857 |  |  |  | 3,208 |  |  |  | 92,684 |  |  |  | 2,318,945 |  |  |  | 2,430,862 |
The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at June 30, 2013. The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2012.
($ in thousands) |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Nonaccrual Loans |  |  | Current |  |  | Total Loans Receivable |
Non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial - unsecured |  | $ | 91 |  |  |  | 10 |  |  |  | 307 |  |  |  | 35,278 |  |  |  | 35,686 |
Commercial - secured |  |  | 1,020 |  |  |  | 220 |  |  |  | 2,398 |  |  |  | 110,074 |  |  |  | 113,712 |
Secured by inventory and accounts receivable |  |  | 52 |  |  |  | 4 |  |  |  | 17 |  |  |  | 21,270 |  |  |  | 21,343 |
Real estate – construction, land development & other land loans |  |  | 490 |  |  |  | 263 |  |  |  | 6,354 |  |  |  | 211,001 |  |  |  | 218,108 |
Real estate – residential, farmland, and multi-family |  |  | 9,673 |  |  |  | 2,553 |  |  |  | 9,629 |  |  |  | 797,584 |  |  |  | 819,439 |
Real estate – home equity lines of credit |  |  | 976 |  |  |  | 320 |  |  |  | 1,622 |  |  |  | 197,962 |  |  |  | 200,880 |
Real estate - commercial |  |  | 4,326 |  |  |  | 1,131 |  |  |  | 9,885 |  |  |  | 612,598 |  |  |  | 627,940 |
Consumer |  |  | 462 |  |  |  | 219 |  |  |  | 2,822 |  |  |  | 52,208 |  |  |  | 55,711 |
Total non-covered |  | $ | 17,090 |  |  |  | 4,720 |  |  |  | 33,034 |  |  |  | 2,037,975 |  |  |  | 2,092,819 |
Unamortized net deferred loan costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,324 |
Total non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,094,143 |
Covered loans |  | $ | 6,564 |  |  |  | 3,417 |  |  |  | 33,491 |  |  |  | 238,842 |  |  |  | 282,314 |
Total loans |  | $ | 23,654 |  |  |  | 8,137 |  |  |  | 66,525 |  |  |  | 2,276,817 |  |  |  | 2,376,457 |
The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at December 31, 2012. The following table presents the activity in the allowance for loan losses for non-covered loans for the three and six months ended June 30, 2013.
($ in thousands) |  | Commercial, Financial, and Agricultural |  |  | Real Estate – Construction, Land Development, & Other Land Loans |  |  | Real Estate – Residential, Farmland, and Multi- family |  |  | Real Estate – Home Equity Lines of Credit |  |  | Real Estate – Commercial and Other |  |  | Consumer |  |  | Unallo- cated |  |  | Total |
As of and for the three months ended June 30, 2013
Beginning balance |  | $ | 4,949 |  |  |  | 14,857 |  |  |  | 15,285 |  |  |  | 2,040 |  |  |  | 5,714 |  |  |  | 1,791 |  |  |  | 125 |  |  |  | 44,761 |
Charge-offs |  |  | (560 | ) |  |  | (394 | ) |  |  | (858 | ) |  |  | (265 | ) |  |  | (1,907 | ) |  |  | (562 | ) |  |  | — |  |  |  | (4,546 | )
Recoveries |  |  | 214 |  |  |  | 24 |  |  |  | 117 |  |  |  | 4 |  |  |  | 93 |  |  |  | 106 |  |  |  | — |  |  |  | 558 |
Provisions |  |  | 1,357 |  |  |  | 106 |  |  |  | 417 |  |  |  | 282 |  |  |  | 1,339 |  |  |  | 368 |  |  |  | 174 |  |  |  | 4,043 |
Ending balance |  | $ | 5,960 |  |  |  | 14,593 |  |  |  | 14,961 |  |  |  | 2,061 |  |  |  | 5,239 |  |  |  | 1,703 |  |  |  | 299 |  |  |  | 44,816 |
As of and for the six months ended June 30, 2013
Beginning balance |  | $ | 4,687 |  |  |  | 12,856 |  |  |  | 14,082 |  |  |  | 1,884 |  |  |  | 5,247 |  |  |  | 1,939 |  |  |  | 948 |  |  |  | 41,643 |
Charge-offs |  |  | (1,384 | ) |  |  | (1,217 | ) |  |  | (1,655 | ) |  |  | (889 | ) |  |  | (2,447 | ) |  |  | (1,090 | ) |  |  | (659 | ) |  |  | (9,341 | )
Recoveries |  |  | 233 |  |  |  | 617 |  |  |  | 663 |  |  |  | 62 |  |  |  | 882 |  |  |  | 243 |  |  |  | — |  |  |  | 2,700 |
Provisions |  |  | 2,424 |  |  |  | 2,337 |  |  |  | 1,871 |  |  |  | 1,004 |  |  |  | 1,557 |  |  |  | 611 |  |  |  | 10 |  |  |  | 9,814 |
Ending balance |  | $ | 5,960 |  |  |  | 14,593 |  |  |  | 14,961 |  |  |  | 2,061 |  |  |  | 5,239 |  |  |  | 1,703 |  |  |  | 299 |  |  |  | 44,816 |
Ending balances as of June 30, 2013: Allowance for loan losses
Individually evaluated for impairment |  | $ | 901 |  |  |  | — |  |  |  | 52 |  |  |  | — |  |  |  | 683 |  |  |  | — |  |  |  | — |  |  |  | 1,636 |
Collectively evaluated for impairment |  | $ | 5,059 |  |  |  | 14,593 |  |  |  | 14,909 |  |  |  | 2,061 |  |  |  | 4,556 |  |  |  | 1,703 |  |  |  | 299 |  |  |  | 43,180 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Loans receivable as of June 30, 2013:
Ending balance – total |  | $ | 176,662 |  |  |  | 232,352 |  |  |  | 850,060 |  |  |  | 198,281 |  |  |  | 680,607 |  |  |  | 51,453 |  |  |  | — |  |  |  | 2,189,415 |
Ending balances as of June 30, 2013: Loans
Individually evaluated for impairment |  | $ | 1,911 |  |  |  | 5,977 |  |  |  | 1,739 |  |  |  | — |  |  |  | 14,040 |  |  |  | — |  |  |  | — |  |  |  | 23,667 |
Collectively evaluated for impairment |  | $ | 174,751 |  |  |  | 226,375 |  |  |  | 848,321 |  |  |  | 198,281 |  |  |  | 666,567 |  |  |  | 51,453 |  |  |  | — |  |  |  | 2,165,748 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
The following table presents the activity in the allowance for loan losses for non-covered loans for the year ended December 31, 2012.
($ in thousands) |  | Commercial, Financial, and Agricultural |  |  | Real Estate – Construction, Land Development, & Other Land Loans |  |  | Real Estate – Residential, Farmland, and Multi- family |  |  | Real Estate – Home Equity Lines of Credit |  |  | Real Estate – Commercial and Other |  |  | Consumer |  |  | Unallo- cated |  |  | Total |
As of and for the year ended December 31, 2012
Beginning balance |  | $ | 3,780 |  |  |  | 11,306 |  |  |  | 13,532 |  |  |  | 1,690 |  |  |  | 3,414 |  |  |  | 1,872 |  |  |  | 16 |  |  |  | 35,610 |
Charge-offs |  |  | (4,912 | ) |  |  | (19,312 | ) |  |  | (20,879 | ) |  |  | (3,287 | ) |  |  | (16,616 | ) |  |  | (1,539 | ) |  |  | — |  |  |  | (66,545 | )
Recoveries |  |  | 354 |  |  |  | 986 |  |  |  | 430 |  |  |  | 209 |  |  |  | 333 |  |  |  | 273 |  |  |  | — |  |  |  | 2,585 |
Provisions |  |  | 5,465 |  |  |  | 19,876 |  |  |  | 20,999 |  |  |  | 3,272 |  |  |  | 18,116 |  |  |  | 1,333 |  |  |  | 932 |  |  |  | 69,993 |
Ending balance |  | $ | 4,687 |  |  |  | 12,856 |  |  |  | 14,082 |  |  |  | 1,884 |  |  |  | 5,247 |  |  |  | 1,939 |  |  |  | 948 |  |  |  | 41,643 |
Ending balances as of December 31, 2012: Allowance for loan losses
Individually evaluated for impairment |  | $ | — |  |  |  | — |  |  |  | 50 |  |  |  | — |  |  |  | 957 |  |  |  | — |  |  |  | — |  |  |  | 1,007 |
Collectively evaluated for impairment |  | $ | 4,687 |  |  |  | 12,856 |  |  |  | 14,032 |  |  |  | 1,884 |  |  |  | 4,290 |  |  |  | 1,939 |  |  |  | 948 |  |  |  | 40,636 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Loans receivable as of December 31, 2012:
Ending balance – total |  | $ | 170,741 |  |  |  | 218,108 |  |  |  | 819,439 |  |  |  | 200,880 |  |  |  | 627,940 |  |  |  | 55,711 |  |  |  | — |  |  |  | 2,092,819 |
Ending balances as of December 31, 2012: Loans
Individually evaluated for impairment |  | $ | — |  |  |  | 4,276 |  |  |  | 1,705 |  |  |  | — |  |  |  | 15,040 |  |  |  | — |  |  |  | — |  |  |  | 21,021 |
Collectively evaluated for impairment |  | $ | 170,741 |  |  |  | 213,832 |  |  |  | 817,734 |  |  |  | 200,880 |  |  |  | 612,900 |  |  |  | 55,711 |  |  |  | — |  |  |  | 2,071,798 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
The following table presents the activity in the allowance for loan losses for non-covered loans for the three and six months ended June 30, 2012.
($ in thousands) |  | Commercial, Financial, and Agricultural |  |  | Real Estate – Construction, Land Development, & Other Land Loans |  |  | Real Estate – Residential, Farmland, and Multi- family |  |  | Real Estate – Home Equity Lines of Credit |  |  | Real Estate – Commercial and Other |  |  | Consumer |  |  | Unallo- cated |  |  | Total |
As of and for the three months ended June 30, 2012
Beginning balance |  | $ | 4,954 |  |  |  | 16,419 |  |  |  | 15,369 |  |  |  | 2,132 |  |  |  | 5,737 |  |  |  | 1,826 |  |  |  | 18 |  |  |  | 46,455 |
Charge-offs |  |  | (744 | ) |  |  | (174 | ) |  |  | (2,144 | ) |  |  | (281 | ) |  |  | (805 | ) |  |  | (334 | ) |  |  | — |  |  |  | (4,482 | )
Recoveries |  |  | 18 |  |  |  | 126 |  |  |  | 60 |  |  |  | 85 |  |  |  | 6 |  |  |  | 62 |  |  |  | — |  |  |  | 357 |
Provisions |  |  | 833 |  |  |  | 1,448 |  |  |  | 1,674 |  |  |  | 210 |  |  |  | 781 |  |  |  | 237 |  |  |  | 10 |  |  |  | 5,193 |
Ending balance |  | $ | 5,061 |  |  |  | 17,819 |  |  |  | 14,959 |  |  |  | 2,146 |  |  |  | 5,719 |  |  |  | 1,791 |  |  |  | 28 |  |  |  | 47,523 |
As of and for the six months ended June 30, 2012
Beginning balance |  | $ | 3,780 |  |  |  | 11,306 |  |  |  | 13,532 |  |  |  | 1,690 |  |  |  | 3,414 |  |  |  | 1,872 |  |  |  | 16 |  |  |  | 35,610 |
Charge-offs |  |  | (2,062 | ) |  |  | (2,852 | ) |  |  | (4,235 | ) |  |  | (732 | ) |  |  | (2,170 | ) |  |  | (686 | ) |  |  | — |  |  |  | (12,737 | )
Recoveries |  |  | 34 |  |  |  | 314 |  |  |  | 254 |  |  |  | 119 |  |  |  | 47 |  |  |  | 132 |  |  |  | — |  |  |  | 900 |
Provisions |  |  | 3,309 |  |  |  | 9,051 |  |  |  | 5,408 |  |  |  | 1,069 |  |  |  | 4,428 |  |  |  | 473 |  |  |  | 12 |  |  |  | 23,750 |
Ending balance |  | $ | 5,061 |  |  |  | 17,819 |  |  |  | 14,959 |  |  |  | 2,146 |  |  |  | 5,719 |  |  |  | 1,791 |  |  |  | 28 |  |  |  | 47,523 |
Ending balances as of June 30, 2012: Allowance for loan losses
Individually evaluated for impairment |  | $ | 869 |  |  |  | 4,819 |  |  |  | 635 |  |  |  | 439 |  |  |  | 1,480 |  |  |  | — |  |  |  | — |  |  |  | 8,242 |
Collectively evaluated for impairment |  | $ | 4,192 |  |  |  | 13,000 |  |  |  | 14,324 |  |  |  | 1,707 |  |  |  | 4,239 |  |  |  | 1,791 |  |  |  | 28 |  |  |  | 39,281 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Loans receivable as of June 30, 2012:
Ending balance – total |  | $ | 173,676 |  |  |  | 244,723 |  |  |  | 810,106 |  |  |  | 207,686 |  |  |  | 622,508 |  |  |  | 54,831 |  |  |  | — |  |  |  | 2,113,530 |
Ending balances as of June 30, 2012: Loans
Individually evaluated for impairment |  | $ | 1,009 |  |  |  | 23,860 |  |  |  | 9,508 |  |  |  | 1,331 |  |  |  | 21,918 |  |  |  | — |  |  |  | — |  |  |  | 57,626 |
Collectively evaluated for impairment |  | $ | 172,667 |  |  |  | 220,863 |  |  |  | 800,598 |  |  |  | 206,355 |  |  |  | 600,590 |  |  |  | 54,831 |  |  |  | — |  |  |  | 2,055,904 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
The following table presents the activity in the allowance for loan losses for covered loans for the three and six months ended June 30, 2013.
($ in thousands) |  | Covered Loans |
As of and for the three months ended June 30, 2013
Beginning balance |  | $ | 5,028 |
Charge-offs |  |  | (541 | )
Recoveries |  |  | — |
Provisions |  |  | 1,548 |
Ending balance |  | $ | 6,035 |
As of and for the six months ended June 30, 2013
Beginning balance |  | $ | 4,759 |
Charge-offs |  |  | (5,650 | )
Recoveries |  |  | — |
Provisions |  |  | 6,926 |
Ending balance |  | $ | 6,035 |
Ending balances as of June 30, 2013: Allowance for loan losses
Individually evaluated for impairment |  | $ | 5,583 |
Collectively evaluated for impairment |  |  | 452 |
Loans acquired with deteriorated credit quality |  |  | 17 |
Loans receivable as of June 30, 2013:
Ending balance – total |  | $ | 240,279 |
Ending balances as of June 30, 2013: Loans
Individually evaluated for impairment |  | $ | 74,690 |
Collectively evaluated for impairment |  |  | 165,589 |
Loans acquired with deteriorated credit quality |  |  | 3,340 |
The following table presents the activity in the allowance for loan losses for covered loans for the year ended December 31, 2012.
($ in thousands) |  | Covered Loans |
As of and for the year ended December 31, 2012
Beginning balance |  | $ | 5,808 |
Charge-offs |  |  | (10,728 | )
Recoveries |  |  | — |
Provisions |  |  | 9,679 |
Ending balance |  | $ | 4,759 |
Ending balances as of December 31, 2012: Allowance for loan losses
Individually evaluated for impairment |  | $ | 4,459 |
Collectively evaluated for impairment |  |  | 300 |
Loans acquired with deteriorated credit quality |  |  | 17 |
Loans receivable as of December 31, 2012:
Ending balance – total |  | $ | 282,314 |
Ending balances as of December 31, 2012: Loans
Individually evaluated for impairment |  | $ | 74,914 |
Collectively evaluated for impairment |  |  | 207,400 |
Loans acquired with deteriorated credit quality |  |  | 4,825 |
The following table presents the activity in the allowance for loan losses for covered loans for the three and six months ended June 30, 2012.
($ in thousands) |  | Covered Loans |
As of and for the three months ended June 30, 2012
Beginning balance |  | $ | 6,372 |
Charge-offs |  |  | (1,714 | )
Recoveries |  |  | — |
Provisions |  |  | 1,273 |
Ending balance |  | $ | 5,931 |
As of and for the six months ended June 30, 2012
Beginning balance |  | $ | 5,808 |
Charge-offs |  |  | (4,148 | )
Recoveries |  |  | — |
Provisions |  |  | 4,271 |
Ending balance |  | $ | 5,931 |
Ending balances as of June 30, 2012: Allowance for loan losses
Individually evaluated for impairment |  | $ | 5,931 |
Collectively evaluated for impairment |  |  | — |
Loans acquired with deteriorated credit quality |  |  | 17 |
Loans receivable as of June 30, 2012:
Ending balance – total |  | $ | 322,895 |
Ending balances as of June 30, 2012: Loans
Individually evaluated for impairment |  | $ | 42,598 |
Collectively evaluated for impairment |  |  | 280,297 |
Loans acquired with deteriorated credit quality |  |  | 4,819 |
The following table presents the Company’s impaired loans as of June 30, 2013.
($ in thousands) |  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |  |  | Average Recorded Investment |
Non-covered loans with no related allowance recorded:
Commercial, financial, and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial - unsecured |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial - secured |  |  | 844 |  |  |  | 1,066 |  |  |  | — |  |  |  | 281 |
Secured by inventory and accounts receivable |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – construction, land development & other land loans |  |  | 5,977 |  |  |  | 6,705 |  |  |  | — |  |  |  | 3,935 |
Real estate – residential, farmland, and multi-family |  |  | 1,522 |  |  |  | 1,605 |  |  |  | — |  |  |  | 1,040 |
Real estate – home equity lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – commercial |  |  | 11,729 |  |  |  | 14,730 |  |  |  | — |  |  |  | 8,309 |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total non-covered impaired loans with no allowance |  | $ | 20,072 |  |  |  | 24,106 |  |  |  | — |  |  |  | 13,565 |
Total covered impaired loans with no allowance |  | $ | 43,708 |  |  |  | 82,622 |  |  |  | — |  |  |  | 41,251 |
Total impaired loans with no allowance recorded |  | $ | 63,780 |  |  |  | 106,728 |  |  |  | — |  |  |  | 54,816 |
Non-covered loans with an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial - unsecured |  | $ | 66 |  |  |  | 66 |  |  |  | 48 |  |  |  | 133 |
Commercial - secured |  |  | 2,924 |  |  |  | 3,326 |  |  |  | 819 |  |  |  | 2,568 |
Secured by inventory and accounts receivable |  |  | 405 |  |  |  | 432 |  |  |  | 377 |  |  |  | 148 |
Real estate – construction, land development & other land loans |  |  | 5,103 |  |  |  | 6,969 |  |  |  | 1,455 |  |  |  | 5,600 |
Real estate – residential, farmland, and multi-family |  |  | 28,728 |  |  |  | 29,309 |  |  |  | 2,210 |  |  |  | 26,974 |
Real estate – home equity lines of credit |  |  | 1,519 |  |  |  | 1,802 |  |  |  | 89 |  |  |  | 1,555 |
Real estate – commercial |  |  | 8,855 |  |  |  | 9,557 |  |  |  | 863 |  |  |  | 11,163 |
Consumer |  |  | 773 |  |  |  | 1,118 |  |  |  | 99 |  |  |  | 1,502 |
Total non-covered impaired loans with allowance |  | $ | 48,373 |  |  |  | 52,579 |  |  |  | 5,960 |  |  |  | 49,643 |
Total covered impaired loans with allowance |  | $ | 13,428 |  |  |  | 15,494 |  |  |  | 4,700 |  |  |  | 14,714 |
Total impaired loans with an allowance recorded |  | $ | 61,801 |  |  |  | 68,073 |  |  |  | 10,660 |  |  |  | 64,357 |
Interest income recorded on non-covered and covered impaired loans during the six months ended June 30, 2013 is considered insignificant. The related allowance listed above includes both reserves on loans specifically reviewed for impairment and general reserves on impaired loans that were not specifically reviewed for impairment. The following table presents the Company’s impaired loans as of December 31, 2012.
($ in thousands) |  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |  |  | Average Recorded Investment |
Non-covered loans with no related allowance recorded:
Commercial, financial, and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial – unsecured |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial - secured |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 87 |
Secured by inventory and accounts receivable |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5 |
Real estate – construction, land development & other land loans |  |  | 4,277 |  |  |  | 4,305 |  |  |  | — |  |  |  | 8,600 |
Real estate – residential, farmland, and multi-family |  |  | 1,597 |  |  |  | 1,618 |  |  |  | — |  |  |  | 2,692 |
Real estate – home equity lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 64 |
Real estate – commercial |  |  | 6,175 |  |  |  | 6,851 |  |  |  | — |  |  |  | 12,724 |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2 |
Total non-covered impaired loans with no allowance |  | $ | 12,049 |  |  |  | 12,774 |  |  |  | — |  |  |  | 24,174 |
Total covered impaired loans with no allowance |  | $ | 35,196 |  |  |  | 71,413 |  |  |  | — |  |  |  | 39,372 |
Total impaired loans with no allowance recorded |  | $ | 47,245 |  |  |  | 84,187 |  |  |  | — |  |  |  | 63,546 |
Non-covered loans with an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial - unsecured |  | $ | 307 |  |  |  | 386 |  |  |  | 58 |  |  |  | 221 |
Commercial - secured |  |  | 2,398 |  |  |  | 2,762 |  |  |  | 436 |  |  |  | 2,304 |
Secured by inventory and accounts receivable |  |  | 17 |  |  |  | 43 |  |  |  | 4 |  |  |  | 548 |
Real estate – construction, land development & other land loans |  |  | 3,934 |  |  |  | 5,730 |  |  |  | 1,213 |  |  |  | 12,199 |
Real estate – residential, farmland, and multi-family |  |  | 23,859 |  |  |  | 25,844 |  |  |  | 1,955 |  |  |  | 27,186 |
Real estate – home equity lines of credit |  |  | 1,645 |  |  |  | 2,120 |  |  |  | 96 |  |  |  | 2,901 |
Real estate – commercial |  |  | 10,851 |  |  |  | 13,048 |  |  |  | 936 |  |  |  | 12,863 |
Consumer |  |  | 2,822 |  |  |  | 2,858 |  |  |  | 353 |  |  |  | 2,802 |
Total non-covered impaired loans with allowance |  | $ | 45,833 |  |  |  | 52,791 |  |  |  | 5,051 |  |  |  | 61,024 |
Total covered impaired loans with allowance |  | $ | 13,760 |  |  |  | 18,271 |  |  |  | 3,509 |  |  |  | 15,401 |
Total impaired loans with an allowance recorded |  | $ | 59,593 |  |  |  | 71,062 |  |  |  | 8,560 |  |  |  | 76,425 |
Interest income recorded on non-covered and covered impaired loans during the year ended December 31, 2012 is considered insignificant. The related allowance listed above includes both reserves on loans specifically reviewed for impairment and general reserves on impaired loans that were not specifically reviewed for impairment.
Loan and Asset Quality Information Part II | The Company tracks credit quality based on its internal risk ratings. Upon origination a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. Loans that are risk-graded as substandard during the origination process are declined. After loans are initially graded, they are monitored monthly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type. The following describes the Company’s internal risk grades in ascending order of likelihood of loss:
| Numerical Risk Grade | Description
Pass: |
| 1 | Cash secured loans.
| 2 | Non-cash secured loans that have no minor or major exceptions to the lending guidelines.
| 3 | Non-cash secured loans that have no major exceptions to the lending guidelines.
Weak Pass: |
| 4 | Non-cash secured loans that have minor or major exceptions to the lending guidelines, but the exceptions are properly mitigated.
Watch or Standard: |
| 9 | Loans that meet the guidelines for a Risk Graded 5 loan, except the collateral coverage is sufficient to satisfy the debt with no risk of loss under reasonable circumstances. This category also includes all loans to insiders and any other loan that management elects to monitor on the watch list.
Special Mention: |
| 5 | Existing loans with major exceptions that cannot be mitigated.
Classified: |
| 6 | Loans that have a well-defined weakness that may jeopardize the liquidation of the debt if deficiencies are not corrected.
| 7 | Loans that have a well-defined weakness that make the collection or liquidation improbable.
| 8 | Loans that are considered uncollectible and are in the process of being charged-off.
The following table presents the Company’s recorded investment in loans by credit quality indicators as of June 30, 2013.
($ in thousands) |  | Credit Quality Indicator (Grouped by Internally Assigned Grade) |
|  | Pass (Grades 1, 2, & 3) |  |  | Weak Pass (Grade 4) |  |  | Watch or Standard Loans (Grade 9) |  |  | Special Mention Loans (Grade 5) |  |  | Classified Loans (Grades 6, 7, & 8) |  |  | Nonaccrual Loans |  |  | Total |
Non-covered loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial - unsecured |  | $ | 6,585 |  |  |  | 27,158 |  |  |  | 10 |  |  |  | 1,073 |  |  |  | 949 |  |  |  | 66 |  |  |  | 35,841 |
Commercial - secured |  |  | 31,523 |  |  |  | 77,010 |  |  |  | 535 |  |  |  | 3,915 |  |  |  | 5,027 |  |  |  | 2,270 |  |  |  | 120,280 |
Secured by inventory and accounts receivable |  |  | 2,233 |  |  |  | 14,147 |  |  |  | 231 |  |  |  | 2,228 |  |  |  | 1,666 |  |  |  | 36 |  |  |  | 20,541 |
Real estate – construction, land development & other land loans |  |  | 29,496 |  |  |  | 171,173 |  |  |  | 2,619 |  |  |  | 10,453 |  |  |  | 9,203 |  |  |  | 9,408 |  |  |  | 232,352 |
Real estate – residential, farmland, and multi-family |  |  | 247,194 |  |  |  | 517,930 |  |  |  | 6,198 |  |  |  | 33,761 |  |  |  | 29,137 |  |  |  | 15,840 |  |  |  | 850,060 |
Real estate – home equity lines of credit |  |  | 120,662 |  |  |  | 66,336 |  |  |  | 1,408 |  |  |  | 5,783 |  |  |  | 2,573 |  |  |  | 1,519 |  |  |  | 198,281 |
Real estate - commercial |  |  | 100,233 |  |  |  | 516,284 |  |  |  | 17,002 |  |  |  | 22,878 |  |  |  | 11,783 |  |  |  | 12,427 |  |  |  | 680,607 |
Consumer |  |  | 25,171 |  |  |  | 23,680 |  |  |  | 82 |  |  |  | 953 |  |  |  | 795 |  |  |  | 772 |  |  |  | 51,453 |
Total |  | $ | 563,097 |  |  |  | 1,413,718 |  |  |  | 28,085 |  |  |  | 81,044 |  |  |  | 61,133 |  |  |  | 42,338 |  |  |  | 2,189,415 |
Unamortized net deferred loan costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,168 |
Total non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,190,583 |
Total covered loans |  | $ | 31,985 |  |  |  | 99,378 |  |  |  | — |  |  |  | 9,968 |  |  |  | 48,602 |  |  |  | 50,346 |  |  |  | 240,279 |
Total loans |  | $ | 595,082 |  |  |  | 1,513,096 |  |  |  | 28,085 |  |  |  | 91,012 |  |  |  | 109,735 |  |  |  | 92,684 |  |  |  | 2,430,862 |
At June 30, 2013, there was an insignificant amount of loans that were graded “8” with an accruing status. The following table presents the Company’s recorded investment in loans by credit quality indicators as of December 31, 2012.
($ in thousands) |  | Credit Quality Indicator (Grouped by Internally Assigned Grade) |
|  | Pass (Grades 1, 2, & 3) |  |  | Weak Pass (Grade 4) |  |  | Watch or Standard Loans (Grade 9) |  |  | Special Mention Loans (Grade 5) |  |  | Classified Loans (Grades 6, 7, & 8) |  |  | Nonaccrual Loans |  |  | Total |
Non-covered loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial - unsecured |  | $ | 10,283 |  |  |  | 24,031 |  |  |  | 10 |  |  |  | 472 |  |  |  | 583 |  |  |  | 307 |  |  |  | 35,686 |
Commercial - secured |  |  | 32,196 |  |  |  | 72,838 |  |  |  | 1,454 |  |  |  | 3,676 |  |  |  | 1,150 |  |  |  | 2,398 |  |  |  | 113,712 |
Secured by inventory and accounts receivable |  |  | 2,344 |  |  |  | 18,126 |  |  |  | 248 |  |  |  | 491 |  |  |  | 117 |  |  |  | 17 |  |  |  | 21,343 |
Real estate – construction, land development & other land loans |  |  | 31,582 |  |  |  | 163,588 |  |  |  | 3,830 |  |  |  | 9,045 |  |  |  | 3,709 |  |  |  | 6,354 |  |  |  | 218,108 |
Real estate – residential, farmland, and multi-family |  |  | 249,313 |  |  |  | 499,922 |  |  |  | 7,154 |  |  |  | 29,091 |  |  |  | 24,330 |  |  |  | 9,629 |  |  |  | 819,439 |
Real estate – home equity lines of credit |  |  | 125,310 |  |  |  | 66,412 |  |  |  | 2,160 |  |  |  | 3,526 |  |  |  | 1,850 |  |  |  | 1,622 |  |  |  | 200,880 |
Real estate - commercial |  |  | 123,814 |  |  |  | 449,316 |  |  |  | 21,801 |  |  |  | 14,050 |  |  |  | 9,074 |  |  |  | 9,885 |  |  |  | 627,940 |
Consumer |  |  | 27,826 |  |  |  | 23,403 |  |  |  | 77 |  |  |  | 954 |  |  |  | 629 |  |  |  | 2,822 |  |  |  | 55,711 |
Total |  | $ | 602,668 |  |  |  | 1,317,636 |  |  |  | 36,734 |  |  |  | 61,305 |  |  |  | 41,442 |  |  |  | 33,034 |  |  |  | 2,092,819 |
Unamortized net deferred loan costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,324 |
Total non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,094,143 |
Total covered loans |  | $ | 42,935 |  |  |  | 124,451 |  |  |  | — |  |  |  | 7,569 |  |  |  | 73,868 |  |  |  | 33,491 |  |  |  | 282,314 |
Total loans |  | $ | 645,603 |  |  |  | 1,442,087 |  |  |  | 36,734 |  |  |  | 68,874 |  |  |  | 115,310 |  |  |  | 66,525 |  |  |  | 2,376,457 |
At December 31, 2012, there was an insignificant amount of loans that were graded “8” with an accruing status. Troubled Debt Restructurings The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The vast majority of the Company’s troubled debt restructurings modified during the three and six months ended June 30, 2013 related to interest rate reductions combined with restructured amortization schedules. The Company does not generally grant principal forgiveness. All loans classified as troubled debt restructurings are considered to be impaired and are evaluated as such for determination of the allowance for loan losses. The Company’s troubled debt restructurings can be classified as either nonaccrual or accruing based on the loan’s payment status. The troubled debt restructurings that are nonaccrual are reported within the nonaccrual loan totals presented previously. The following table presents information related to loans modified in a troubled debt restructuring during the three and six months ended June 30, 2013.
($ in thousands) |  | For the three months ended June 30, 2013 |
|  | Number of Contracts |  |  | Pre-Modification Restructured Balances |  |  | Post-Modification Restructured Balances |
Non-covered TDRs – Accruing |  |  |  |  |  |  |  |  |  |  |  |
Real estate – residential, farmland, and multi-family |  |  | 3 |  |  | $ | 574 |  |  | $ | 576 |
Real estate – commercial |  |  | 1 |  |  |  | 103 |  |  |  | 103 |
Non-covered TDRs – Nonaccrual |  |  | — |  |  |  | — |  |  |  | — |
Total non-covered TDRs arising during period |  |  | 4 |  |  |  | 677 |  |  |  | 679 |
Total covered TDRs arising during period– Accruing |  |  | 3 |  |  | $ | 312 |  |  | $ | 311 |
Total covered TDRs arising during period – Nonaccrual |  |  | — |  |  |  | — |  |  |  | — |
Total TDRs arising during period |  |  | 7 |  |  | $ | 989 |  |  | $ | 990 |
($ in thousands) |  | For the six months ended June 30, 2013 |
|  | Number of Contracts |  |  | Pre-Modification Restructured Balances |  |  | Post-Modification Restructured Balances |
Non-covered TDRs – Accruing |  |  |  |  |  |  |  |  |  |  |  |
Real estate – residential, farmland, and multi-family |  |  | 9 |  |  | $ | 1,082 |  |  | $ | 1,084 |
Real estate – commercial |  |  | 2 |  |  |  | 164 |  |  |  | 164 |
Consumer |  |  | 1 |  |  |  | 14 |  |  |  | 14 |
Non-covered TDRs - Nonaccrual |  |  |  |  |  |  |  |  |  |  |  |
Real estate – residential, farmland, and multi-family |  |  | 3 |  |  |  | 209 |  |  |  | 209 |
Total non-covered TDRs arising during period |  |  | 15 |  |  |  | 1,469 |  |  |  | 1,471 |
Total covered TDRs arising during period– Accruing |  |  | 4 |  |  | $ | 359 |  |  | $ | 351 |
Total covered TDRs arising during period – Nonaccrual |  |  | — |  |  |  | — |  |  |  | — |
Total TDRs arising during period |  |  | 19 |  |  | $ | 1,828 |  |  | $ | 1,822 |
The following table presents information related to loans modified in a troubled debt restructuring during the three and six months ended June 30, 2012.
($ in thousands) |  | For the three months ended June 30, 2012 |
|  | Number of Contracts |  |  | Pre-Modification Restructured Balances |  |  | Post-Modification Restructured Balances |
Non-covered TDRs – Accruing |  |  |  |  |  |  |  |  |  |  |  |
Real estate – construction, land development & other land loans |  |  | 1 |  |  | $ | 300 |  |  | $ | 300 |
Real estate – residential, farmland, and multi-family |  |  | 1 |  |  |  | 303 |  |  |  | 303 |
Non-covered TDRs – Nonaccrual |  |  |  |  |  |  |  |  |  |  |  |
Real estate – construction, land development & other land loans |  |  | 1 |  |  |  | 238 |  |  |  | 238 |
Total non-covered TDRs arising during period |  |  | 3 |  |  |  | 841 |  |  |  | 841 |
Total covered TDRs arising during period– Accruing |  |  | 3 |  |  | $ | 5,428 |  |  | $ | 5,428 |
Total covered TDRs arising during period – Nonaccrual |  |  | — |  |  |  | — |  |  |  | — |
Total TDRs arising during period |  |  | 6 |  |  | $ | 6,269 |  |  | $ | 6,269 |
($ in thousands) |  | For the six months ended June 30, 2012 |
|  | Number of Contracts |  |  | Pre-Modification Restructured Balances |  |  | Post-Modification Restructured Balances |
Non-covered TDRs – Accruing |  |  |  |  |  |  |  |  |  |  |  |
Real estate – construction, land development & other land loans |  |  | 1 |  |  | $ | 300 |  |  | $ | 300 |
Real estate – residential, farmland, and multi-family |  |  | 1 |  |  |  | 303 |  |  |  | 303 |
Non-covered TDRs – Nonaccrual |  |  |  |  |  |  |  |  |  |  |  |
Real estate – construction, land development & other land loans |  |  | 1 |  |  |  | 238 |  |  |  | 238 |
Total non-covered TDRs arising during period |  |  | 3 |  |  |  | 841 |  |  |  | 841 |
Total covered TDRs arising during period– Accruing |  |  | 6 |  |  | $ | 7,526 |  |  | $ | 7,526 |
Total covered TDRs arising during period – Nonaccrual |  |  | — |  |  |  | — |  |  |  | — |
Total TDRs arising during period |  |  | 9 |  |  | $ | 8,367 |  |  | $ | 8,367 |
Accruing restructured loans that were modified in the previous 12 months and that defaulted during the three and six months ended June 30, 2013 are presented in the table below. The Company considers a loan to have defaulted when it becomes 90 or more days delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to foreclosed real estate.
($ in thousands) |  | For the three months ended June 30, 2013 |  |  | For the six months ended June 30, 2013 |
|  | Number of Contracts |  |  | Recorded Investment |  |  | Number of Contracts |  |  | Recorded Investment |
Non-covered accruing TDRs that subsequently defaulted |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate – construction, land development & other land loans |  |  | 1 |  |  | $ | 342 |  |  |  | 1 |  |  | $ | 342 |
Real estate – residential, farmland, and multi-family |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 252 |
Total non-covered TDRs that subsequently defaulted |  |  | 1 |  |  | $ | 342 |  |  |  | 2 |  |  | $ | 594 |
Total accruing covered TDRs that subsequently defaulted |  |  | — |  |  | $ | — |  |  |  | 1 |  |  | $ | 3,501 |
Total accruing TDRs that subsequently defaulted |  |  | 1 |  |  | $ | 342 |  |  |  | 3 |  |  | $ | 4,095 |
Accruing restructured loans that were modified in the previous 12 months and that defaulted during the three and six months ended June 30, 2012 are presented in the table below.
($ in thousands) |  | For the three months ended June 30, 2012 |  |  | For the six months ended June 30, 2012 |
|  | Number of Contracts |  |  | Recorded Investment |  |  | Number of Contracts |  |  | Recorded Investment |
Non-covered accruing TDRs that subsequently defaulted |  |  | — |  |  | $ | — |  |  |  | — |  |  | $ | — |
Total non-covered TDRs that subsequently defaulted |  |  | — |  |  | $ | — |  |  |  | — |  |  | $ | — |
Total accruing covered TDRs that subsequently defaulted |  |  | 1 |  |  | $ | 439 |  |  |  | 1 |  |  | $ | 439 |
Total accruing TDRs that subsequently defaulted |  |  | 1 |  |  | $ | 439 |  |  |  | 1 |  |  | $ | 439 |

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