NOTE 5 – ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS

From October 2009 through July 2012, the Company participated in ten FDIC-assisted acquisitions whereby the Company purchased certain failed institutions out of the FDIC’s receivership. These institutions include the following:


Bank Acquired	Location:	Branches:	Date Acquired
American United Bank (“AUB”)	Lawrenceville, Ga.	1	October 23, 2009
United Security Bank (“USB”)	Sparta, Ga.	2	November 6, 2009
Satilla Community Bank (“SCB”)	St. Marys, Ga.	1	May 14, 2010
First Bank of Jacksonville (“FBJ”)	Jacksonville, Fl.	2	October 22, 2010
Tifton Banking Company (“TBC”)	Tifton, Ga.	1	November 12, 2010
Darby Bank & Trust (“DBT”)	Vidalia, Ga.	7	November 12, 2010
High Trust Bank (“HTB”)	Stockbridge, Ga.	2	July 15, 2011
One Georgia Bank (“OGB”)	Midtown Atlanta, Ga.	1	July 15, 2011
Central Bank of Georgia (“CBG”)	Ellaville, Ga.	5	February 24, 2012
Montgomery Bank & Trust (“MBT”)	Ailey, Ga.	2	July 6, 2012

The determination of the initial fair values of loans at the acquisition date and the initial fair values of the related FDIC indemnification assets involves a high degree of judgment and complexity. The carrying values of the acquired loans and the FDIC indemnification assets reflect management’s best estimate of the fair value of each of these assets as of the date of acquisition. However, the amount that the Company realizes on these assets could differ materially from the carrying values reflected in the financial statements included in this report, based upon the timing and amount of collections on the acquired loans in future periods. Because of the loss-sharing agreements with the FDIC on these assets, the Company does not expect to incur any significant losses. The Company’s FDIC-assisted acquisition of MBT did not include a loss-sharing agreement. To the extent the actual values realized for the acquired loans are different from the estimates, the indemnification assets will generally be affected in an offsetting manner due to the loss-sharing support from the FDIC.

FASB ASC 310 – 30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310”), applies to a loan with evidence of deterioration of credit quality since origination, acquired by completion of a transfer for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. ASC 310 prohibits carrying over or creating an allowance for loan losses upon initial recognition for loans which fall under the scope of this statement. At the acquisition dates, a majority of these loans were valued based on the liquidation value of the underlying collateral because the future cash flows are primarily based on the liquidation of underlying collateral. There was no allowance for credit losses established related to these ASC 310 loans at the acquisition dates, based on the provisions of this statement. Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected. If the expected cash flows expected to be collected increases, then the Company adjusts the amount of accretable discount recognized on a prospective basis over the loan’s remaining life. If the expected cash flows expected to be collected decreases, then the Company records a provision for loan loss in its consolidated statement of operations.

At June 30, 2015, the Company’s FDIC loss-sharing receivable totaled $15.0 million, which is comprised of $13.4 million in indemnification asset (for reimbursements associated with anticipated losses in future quarters) and $8.9 million in current charge-offs and expenses already incurred but not yet submitted for reimbursement, less the accrued clawback liability of $7.3 million.

The following table summarizes components of all covered assets at June 30, 2015, December 31, 2014 and June 30, 2014 and their origin:


	Covered loans		Less: Fair value adjustments		Total covered loans		OREO		Less: Fair value adjustments		Total covered OREO		Total covered assets		FDIC indemnification asset
As of June 30, 2015:
AUB	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	187
USB		3,883		18		3,865		165		—		165		4,030		(1,232	)
SCB		5,318		209		5,109		95		—		95		5,204		1,300
FBJ		17,708		1,286		16,422		815		121		694		17,116		1,227
DBT		46,269		3,667		42,602		5,216		700		4,516		47,118		2,126
TBC		19,609		515		19,094		1,480		116		1,364		20,458		521
HTB		47,176		4,127		43,049		3,085		955		2,130		45,179		4,806
OGB		34,218		2,192		32,026		442		—		442		32,468		1,856
CBG		52,259		4,828		47,431		3,559		339		3,220		50,651		4,166

Total	$	226,440	$	16,842	$	209,598	$	14,857	$	2,231	$	12,626	$	222,224	$	14,957


	Covered loans		Less: Fair value adjustments		Total covered loans		OREO		Less: Fair value adjustments		Total covered OREO		Total covered assets		FDIC indemnification asset
As of December 31, 2014:
AUB	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	188
USB		4,350		150		4,200		165		—		165		4,365		(1,197	)
SCB		26,686		602		26,084		2,849		389		2,460		28,544		1,828
FBJ		21,243		1,825		19,418		632		—		632		20,050		1,885
DBT		64,338		6,437		57,901		6,655		514		6,141		64,042		6,860
TBC		23,487		1,117		22,370		2,388		367		2,021		24,391		3,287
HTB		52,699		5,120		47,579		3,670		1,283		2,387		49,966		6,459
OGB		42,971		3,785		39,186		2,244		39		2,205		41,391		3,906
CBG		60,950		6,409		54,541		4,805		909		3,896		58,437		8,135

Total	$	296,724	$	25,445	$	271,279	$	23,408	$	3,501	$	19,907	$	291,186	$	31,351


	Covered loans		Less: Fair value adjustments		Total covered loans		OREO		Less: Fair value adjustments		Total covered OREO		Total covered assets		FDIC indemnification asset
As of June 30, 2014:
AUB	$	9,106	$	133	$	8,973	$	1,690	$	—	$	1,690	$	10,663	$	1,676
USB		14,030		805		13,225		2,927		62		2,865		16,090		920
SCB		30,545		954		29,591		3,332		308		3,024		32,615		3,073
FBJ		23,264		2,696		20,568		1,734		135		1,599		22,167		2,752
DBT		81,700		8,774		72,926		12,766		913		11,853		84,779		10,119
TBC		28,363		1,853		26,510		4,493		758		3,735		30,245		3,543
HTB		59,267		6,535		52,732		4,130		1,349		2,781		55,513		9,000
OGB		49,501		4,937		44,564		7,964		2,984		4,980		49,544		7,268
CBG		71,959		9,798		62,161		7,432		1,533		5,899		68,060		10,829

Total	$	367,735	$	36,485	$	331,250	$	46,468	$	8,042	$	38,426	$	369,676	$	49,180

A rollforward of acquired covered loans for the six months ended June 30, 2015, the year ended December 31, 2014 and the six months ended June 30, 2014 is shown below:


(Dollars in Thousands)	June 30, 2015			December 31, 2014			June 30, 2014
Balance, January 1	$	271,279		$	390,237		$	390,237
Charge-offs		(7,065	)		(9,255	)		(5,694	)
Accretion		6,251			22,188			13,330
Transfer to covered other real estate owned		(6,534	)		(13,650	)		(9,083	)
Transfer to purchased, non-covered loans due to loss-share expiration		(15,462	)		(15,475	)		—
Payments received		(38,871	)		(102,996	)		(57,540	)
Other		—			230			—

Ending balance	$	209,598		$	271,279		$	331,250

The following is a summary of changes in the accretable discounts of acquired loans during the six months ended June 30, 2015, the year ended December 31, 2014 and the six months ended June 30, 2014:


(Dollars in Thousands)	June 30, 2015			December 31, 2014			June 30, 2014
Balance, January 1	$	15,578		$	25,493		$	25,493
Accretion		(6,251	)		(22,188	)		(15,432	)
Transfer to purchased, non-covered loans due to loss-share expiration		(84	)		—			—
Transfers between non-accretable and accretable discounts, net		2,817			12,273			5,850

Ending balance	$	12,060		$	15,578		$	15,911

The shared-loss agreements are subject to the servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the shared-loss agreements were recorded as an indemnification asset at their estimated fair values on the acquisition dates. As of June 30, 2015, December 31, 2014 and June 30, 2014, the Company has recorded a clawback liability of $7.3 million, $6.2 million and $5.2 million, respectively, which represents the obligation of the Company to reimburse the FDIC should actual losses be less than certain thresholds established in each loss-share agreement. Changes in the FDIC shared-loss receivable for the six months ended June 30, 2015, for the year ended December 31, 2014 and for the six months ended June 30, 2014 are as follows:


(Dollars in Thousands)	June 30, 2015			December 31, 2014			June 30, 2014
Beginning balance, January 1	$	31,351		$	65,441		$	65,441
Payments received from FDIC		(12,539	)		(22,494	)		(10,576	)
Accretion (amortization)		(5,393	)		(18,449	)		(11,390	)
Changes in clawback liability		(1,057	)		(1,222	)		(228	)
Increase in receivable due to:
Charge-offs on covered loans		1,955			3,372			2,372
Write downs of covered other real estate		2,206			4,771			2,090
Reimbursable expenses on covered assets		1,866			1,078			2,248
Other activity, net		(3,432	)		(1,146	)		(777	)

Ending balance	$	14,957		$	31,351		$	49,180