Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2011

Loans and Allowance for Loan Losses

Loans and Allowance for Loan Losses

Note 6 — Loans and Allowance for Loan Losses

The following is a summary of non-acquired loans:

	June 30,			December 31,			June 30,
(Dollars in thousands)	2011			2010			2010
Non-acquired loans:
Commercial non-owner occupied real estate:
Construction and land development	$	338,288		391,987			$	422,866
Commercial non-owner occupied	306,698			320,203			308,980
Total commercial non-owner occupied real estate	644,986			712,190			731,846
Consumer real estate:
Consumer owner occupied	367,910			325,470			307,398
Home equity loans	263,667			263,961			251,951
Total consumer real estate	631,577			589,431			559,349
Commercial owner occupied real estate	669,223			578,587			502,795
Commercial and industrial	215,901			202,987			212,863
Other income producing property	133,152			124,431			126,004
Consumer	80,072			67,768			63,133
Other loans	30,702			20,806			31,452
Total non-acquired loans	2,405,613			2,296,200			2,227,442
Less, allowance for loan losses	(48,180		)	(47,512		)	(46,167		)
Non-acquired loans, net	$	2,357,433		$	2,248,688		$	2,181,275

In accordance with FASB ASC Topic 310-30, the Company aggregated acquired loans that have common risk characteristics into pools within the following loan categories: commercial loans greater than or equal to $1 million, commercial real estate, commercial real estate—construction and development, residential real estate, residential real estate—junior lien, home equity, consumer, commercial and industrial, and single pay.  Substantially all of the acquired loans are covered under FDIC loss share agreements.

The Company’s acquired loan portfolio is comprised of the following balances net of related discount:

	June 30, 2011
				Loans
	Loans Impaired			Not Impaired
(Dollars in thousands)	at Acquisition			at Acquisition		Total
Acquired loans:
Commercial loans greater than or equal to $1 million	$	25,740		$	40,994	$	66,734
Commercial real estate	37,035			47,893		84,928
Commercial real estate—construction and development	32,465			18,685		51,150
Residential real estate	53,119			61,919		115,038
Residential real estate—junior lien	1,265			1,314		2,579
Home equity	479			930		1,409
Consumer	8,281			3,440		11,721
Commercial and industrial	10,764			20,808		31,572
Single pay	2,031			329		2,360
Total acquired loans	$	171,179		$	196,312	$	367,491
Less, allowance for loan losses	(13,695		)	—		(13,695		)
Acquired loans, net	$	157,484		$	196,312	$	353,796

	December 31, 2010
			Loans
	Loans Impaired		Not Impaired
(Dollars in thousands)	at Acquisition		at Acquisition		Total
Acquired loans:
Commercial loans greater than or equal to $1 million	$	32,744	$	51,544	$	84,288
Commercial real estate	21,302		45,326		66,628
Commercial real estate—construction and development	15,262		17,050		32,312
Residential real estate	45,299		42,246		87,545
Residential real estate—junior lien	2,100		1,573		3,673
Home equity	496		1,023		1,519
Consumer	5,879		5,036		10,915
Commercial and industrial	10,821		13,921		24,742
Single pay	9,156		260		9,416
Total acquired loans	$	143,059	$	177,979	$	321,038

	June 30, 2010
			Loans
	Loans Impaired		Not Impaired
(Dollars in thousands)	at Acquisition		at Acquisition		Total
Acquired loans:
Commercial loans greater than or equal to $1 million	$	48,441	$	55,821	$	104,262
Commercial real estate	28,913		51,869		80,782
Commercial real estate—construction and development	29,967		19,497		49,464
Residential real estate	62,241		48,217		110,458
Residential real estate—junior lien	2,172		2,167		4,339
Home equity	645		1,199		1,844
Consumer	9,501		7,795		17,296
Commercial and industrial	12,649		16,615		29,264
Single pay	15,069		771		15,840
Total acquired loans	$	209,598	$	203,951	$	413,549

Contractual loan payments receivable, estimates of amounts not expected to be collected, other fair value adjustments and the resulting fair values of acquired loans impaired and non-impaired at the acquisition date for Habersham (February 18, 2011) are as follows:

	February 18, 2011
				Loans
	Loans Impaired			Not Impaired
(Dollars in thousands)	at Acquisition			at Acquisition			Total
Contractual principal and interest	$	132,386		$	135,500		$	267,886
Non-accretable difference	(68,996		)	(43,322		)	(112,318		)
Cash flows expected to be collected	63,390			92,178			155,568
Accretable yield	(8,747		)	(19,368		)	(28,115		)
Carrying value	$	54,643		$	72,810		$	127,453

Contractual loan payments receivable, estimates of amounts not expected to be collected, other fair value adjustments and the resulting fair values of acquired loans impaired and non-impaired as of June 30, 2011, December 31, 2010, and June 30, 2010 - refined are as follows:

	June 30, 2011
				Loans
	Loans Impaired			Not Impaired
(Dollars in thousands)	at Acquisition			at Acquisition			Total
Contractual principal and interest	$	378,806		$	317,924		$	696,730
Non-accretable difference	(173,183		)	(63,997		)	(237,180		)
Cash flows expected to be collected	205,623			253,927			459,550
Accretable yield	(34,444		)	(57,615		)	(92,059		)
Carrying value	$	171,179		$	196,312		$	367,491

	December 31, 2010
				Loans
	Loans Impaired			Not Impaired
(Dollars in thousands)	at Acquisition			at Acquisition			Total
Contractual principal and interest	$	301,080		$	303,153		$	604,233
Non-accretable difference	(140,723		)	(97,788		)	(238,511		)
Cash flows expected to be collected	160,357			205,365			365,722
Accretable yield	(17,298		)	(27,386		)	(44,684		)
Carrying value	$	143,059		$	177,979		$	321,038

	June 30, 2010
				Loans
	Loans Impaired			Not Impaired
(Dollars in thousands)	at Acquisition			at Acquisition			Total
Contractual principal and interest	$	421,213		$	322,513		$	743,726
Non-accretable difference	(208,981		)	(102,054		)	(311,035		)
Cash flows expected to be collected	212,232			220,459			432,691
Accretable yield	(2,634		)	(16,508		)	(19,142		)
Carrying value	$	209,598		$	203,951		$	413,549

Income on acquired loans that are not impaired at the acquisition date is recognized in the same manner as loans impaired at the acquisition date. A portion of the fair value discount on acquired non-impaired loans has been ascribed as an accretable yield that is accreted into interest income over the estimated remaining life of the loans. The remaining nonaccretable difference represents cash flows not expected to be collected.

The unpaid principal balance for acquired loans was $571.8 million at June 30, 2011, $519.2 million at December 31, 2010 and $694.5 million at June 30, 2010.

The following are changes in the carrying value of acquired loans at the acquisition date during the periods ended June 30, 2011 and 2010:

				Loans
	Loans Impaired			Not Impaired
(Dollars in thousands)	at Acquisition			at Acquisition			Total
Balance, December 31, 2010	$	143,059		$	177,979		$	321,038
Fair value of acquired loans	54,643			72,810			127,453
Reductions for payments and foreclosures	(26,523		)	(54,477		)	(81,000		)
Change in the acquired allowance for loan losses	(13,695		)	—			(13,695		)
Balance, June 30, 2011	$	157,484		$	196,312		$	353,796
Balance, December 31, 2009	$	—		$	—		$	—
Fair value of acquired loans	233,236			226,229			459,465
Reductions for payments and foreclosures	(23,638		)	(22,278		)	(45,916		)
Balance, June 30, 2010	$	209,598		$	203,951		$	413,549

The following are changes in the carrying amount of accretable difference for purchased impaired and non-impaired loans for the period ended June 30, 2011:

Beginning balance December 31, 2010	$	44,684
Addition from the Habersham acquisition	28,115
Interest income	(18,702		)
Improved cash flows affecting nonaccretable difference	42,266
Other changes, net	(4,304		)
Ending balance, June 30, 2011	$	92,059

On December 13, 2006, the OCC, Federal Reserve, FDIC, and other regulatory agencies collectively revised the banking agencies’ 1993 policy statement on the allowance for loan and lease losses to ensure consistency with generally accepted accounting principles in the United States and more recent supervisory guidance. Our loan loss policy adheres to the interagency guidance.

The allowance for loan losses is based upon estimates made by management. We maintain an allowance for loan losses at a level that we believe is appropriate to cover estimated credit losses on individually evaluated loans that are determined to be impaired as well as estimated credit losses inherent in the remainder of our loan portfolio. Arriving at the allowance involves a high degree of management judgment and results in a range of estimated losses. We regularly evaluate the adequacy of the allowance through our internal risk rating system, outside credit review, and regulatory agency examinations to assess the quality of the loan portfolio and identify problem loans. The evaluation process also includes our analysis of current economic conditions, composition of the loan portfolio, past due and nonaccrual loans, concentrations of credit, lending policies and procedures, and historical loan loss experience. The provision for loan losses is charged to expense in an amount necessary to maintain the allowance at an appropriate level.

The allowance consists of general and specific reserves. The general reserves are determined by applying loss percentages to the portfolio that are based on historical loss experience for each class of loans and management’s evaluation and “risk grading” of the loan portfolio. Additionally, the general economic and business conditions affecting key lending areas, credit quality trends, collateral values, loan volumes and concentrations, seasoning of the loan portfolio, the findings of internal and external credit reviews and results from external bank regulatory examinations are included in this evaluation. Currently, these adjustments are applied to the portfolio when estimating the level of reserve required.  The specific reserves are determined on a loan-by-loan basis based on management’s evaluation of our exposure for each credit, given the current payment status of the loan and the value of any underlying collateral. These are loans classified by management as doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. Generally, the need for a specific reserve is evaluated on impaired loans greater than $250,000. Loans that are determined to be impaired are provided a specific reserve, if necessary, and are excluded from the calculation of the general reserves.

In determining the acquisition date fair value of purchased loans, and in subsequent accounting, SCBT generally aggregates purchased loans into pools of loans with common risk characteristics. Expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows of the pool is reasonably estimable. Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are recognized as interest income prospectively. Decreases in expected cash flows after the acquisition date are recognized by recording an allowance for loan losses. Evidence of credit quality deterioration for the loan pools may include information such as increased past-due and nonaccrual levels and migration in the pools to lower loan grades. To determine the reserve needed by loan pool, credit risk is assessed each quarter relative to grade, past due status, and accruing status of each loan with the loan pools. Offsetting the impact of the provision established for the loan, the receivable from the FDIC is adjusted to reflect the indemnified portion of the post-acquisition exposure with a corresponding credit to the provision for loan losses. (For further discussion of the Company’s allowance for loan losses on acquired loans, see Note 1—Summary of Significant Accounting Policies and Note 4—Mergers and Acquisitions.)

An aggregated analysis of the changes in allowance for loan losses for the three and six months ended June 30 is as follows:

	Non-acquired
(Dollars in thousands)	Loans			Acquired Loans			Total
Three months ended June 30, 2011:
Balance at beginning of period	$	48,164		$	25,833		$	73,997
Loans charged-off	(4,770		)	(11,850		)	(16,620		)
Recoveries of loans previously charged off	557			—			557
Net charge-offs	(4,213		)	(11,850		)	(16,063		)
Provision for loan losses	4,229			(288		)	3,941
Benefit attributable to FDIC loss share agreements	—			274			274
Total provision for loan losses charged to operations	4,229			(14		)	4,215
Provision for loan losses recorded through the FDIC loss share receivable	—			(274		)	(274		)
Balance at end of period	$	48,180		$	13,695		$	61,875
Three months ended June 30, 2010:
Balance at beginning of period	$	41,397		$	—		$	41,397
Loans charged-off	(8,173		)	—			(8,173		)
Recoveries of loans previously charged off	434			—			434
Net charge-offs	(7,739		)	—			(7,739		)
Provision for loan losses	12,509			—			12,509
Balance at end of period	$	46,167		$	—		$	46,167

	Non-acquired
(Dollars in thousands)	Loans			Acquired Loans			Total
Six months ended June 30, 2011:
Balance at beginning of period	$	47,512		$	—		$	47,512
Loans charged-off	(14,092		)	(11,850		)	(25,942		)
Recoveries of loans previously charged off	1,182			—			1,182
Net charge-offs	(12,910		)	(11,850		)	(24,760		)
Provision for loan losses	13,578			25,545			39,123
Benefit attributable to FDIC loss share agreements	—			(24,267		)	(24,267		)
Total provision for loan losses charged to operations	13,578			1,278			14,856
Provision for loan losses recorded through the FDIC loss share receivable	—			24,267			24,267
Balance at end of period	$	48,180		$	13,695		$	61,875
Six months ended June 30, 2010:
Balance at beginning of period	$	37,488		$	—		$	37,488
Loans charged-off	(25,543		)	—			(25,543		)
Recoveries of loans previously charged off	935			—			935
Net charge-offs	(24,608		)	—			(24,608		)
Provision for loan losses	33,287			—			33,287
Balance at end of period	$	46,167		$	—		$	46,167

The following tables present a disaggregated analysis of activity in the allowance for loan losses and loan balances for non-acquired loans for the three months ended June 30, 2011and June 30, 2010.

	Construction			Commercial			Commerical			Consumer									Other Income
	& Land			Non-owner			Owner			Owner			Home			Commercial			Producing						Other
(Dollars in thousands)	Development			Occupied			Occupied			Occupied			Equity			& Industrial			Property			Consumer			Loans			Total
June 30, 2011
Allowance for loan losses:
Balance, March 31, 2011	$	14,130		$	6,317		$	7,976		$	6,188		$	4,477		$	4,395		$	3,187		$	1,268		$	226		$	48,164
Charge-offs	(2,239		)	(520		)	(303		)	(639		)	(243		)	(219		)	(344		)	(11		)	(252		)	(4,770		)
Recoveries	141			18			7			178			33			30			—			47			103			557
Provision	1,516			456			677			674			136			93			246			224			207			4,229
Balance, June 30, 2011	$	13,548		$	6,271		$	8,357		$	6,401		$	4,403		$	4,299		$	3,089		$	1,528		$	284		$	48,180
Loans individually evaluated for impairment	$	1,843		$	634		$	1,105		$	—		$	—		$	—		$	156		$	293		$	—		$	4,031
Loans collectively evaluated for impairment	$	11,705		$	5,637		$	7,252		$	6,401		$	4,403		$	4,299		$	2,933		$	1,235		$	284		$	44,149
Loans:
Loans individually evaluated for impairment	$	21,965		$	12,963		$	11,103		$	2,450		$	—		$	1,114		$	2,039		$	—		$	—		$	51,634
Loans collectively evaluated for impairment	316,323			293,735			658,120			365,460			263,667			214,787			131,113			80,072			30,702			2,353,979
Total non-acquired loans	$	338,288		$	306,698		$	669,223		$	367,910		$	263,667		$	215,901		$	133,152		$	80,072		$	30,702		$	2,405,613

	Construction			Commercial			Commerical			Consumer									Other Income
	& Land			Non-owner			Owner			Owner			Home			Commercial			Producing						Other
(Dollars in thousands)	Development			Occupied			Occupied			Occupied			Equity			& Industrial			Property			Consumer			Loans			Total
June 30, 2010
Allowance for loan losses:
Balance, March 31, 2010	$	10,844		$	6,002		$	7,001		$	5,313		$	4,304		$	3,891		$	2,422		$	1,287		$	333		$	41,397
Charge-offs	(3,630		)	(490		)	(917		)	(810		)	(533		)	(598		)	(780		)	(69		)	(346		)	(8,173		)
Recoveries	195			24			9			9			14			52			—			42			89			434
Provision	6,006			1,460			1,001			1,151			439			728			1,244			85			395			12,509
Balance, June 30, 2010	$	13,415		$	6,996		$	7,094		$	5,663		$	4,224		$	4,073		$	2,886		$	1,345		$	471		$	46,167
Loans individually evaluated for impairment	$	3,940		$	2,614		$	293		$	148		$	—		$	—		$	698		$	—		$	—		$	7,693
Loans collectively evaluated for impairment	$	9,475		$	4,382		$	6,801		$	5,515		$	4,224		$	4,073		$	2,188		$	1,345		$	471		$	38,474
Loans:
Loans individually evaluated for impairment	$	30,800		$	11,592		$	5,791		$	890		$	—		$	1,845		$	3,799		$	—		$	—		$	54,717
Loans collectively evaluated for impairment	392,066			297,388			497,004			306,508			251,951			211,018			122,205			63,133			31,452			2,172,725
Total non-acquired loans	$	422,866		$	308,980		$	502,795		$	307,398		$	251,951		$	212,863		$	126,004		$	63,133		$	31,452		$	2,227,442

The following tables present a disaggregated analysis of activity in the allowance for loan losses and loan balances for non-acquired loans for the six months ended June 30, 2011and June 30, 2010.

	Construction			Commercial			Commerical			Consumer									Other Income
	& Land			Non-owner			Owner			Owner			Home			Commercial			Producing						Other
(Dollars in thousands)	Development			Occupied			Occupied			Occupied			Equity			& Industrial			Property			Consumer			Loans			Total
June 30, 2011
Allowance for loan losses:
Balance, December 31, 2010	$	14,242		$	6,428		$	7,814		$	6,060		$	4,424		$	4,313		$	2,834		$	1,191		$	206		$	47,512
Charge-offs	(6,777		)	(1,756		)	(1,032		)	(1,953		)	(754		)	(448		)	(843		)	(116		)	(413		)	(14,092		)
Recoveries	231			38			8			212			91			109			134			87			272			1,182
Provision	5,852			1,561			1,567			2,082			642			325			964			366			219			13,578
Balance, June 30, 2011	$	13,548		$	6,271		$	8,357		$	6,401		$	4,403		$	4,299		$	3,089		$	1,528		$	284		$	48,180
Loans individually evaluated for impairment	$	1,843		$	634		$	1,105		$	—		$	—		$	—		$	156		$	293		$	—		$	4,031
Loans collectively evaluated for impairment	$	11,705		$	5,637		$	7,252		$	6,401		$	4,403		$	4,299		$	2,933		$	1,235		$	284		$	44,149
Loans:
Loans individually evaluated for impairment	$	21,965		$	12,963		$	11,103		$	2,450		$	—		$	1,114		$	2,039		$	—		$	—		$	51,634
Loans collectively evaluated for impairment	316,323			293,735			658,120			365,460			263,667			214,787			131,113			80,072			30,702			2,353,979
Total non-acquired loans	$	338,288		$	306,698		$	669,223		$	367,910		$	263,667		$	215,901		$	133,152		$	80,072		$	30,702		$	2,405,613

	Construction			Commercial			Commerical			Consumer									Other Income
	& Land			Non-owner			Owner			Owner			Home			Commercial			Producing						Other
(Dollars in thousands)	Development			Occupied			Occupied			Occupied			Equity			& Industrial			Property			Consumer			Loans			Total
June 30, 2010
Allowance for loan losses:
Balance, December 31, 2009	$	9,169		$	5,792		$	5,978		$	4,635		$	3,751		$	4,330		$	2,375		$	1,258		$	200		$	37,488
Charge-offs	(9,292		)	(1,064		)	(1,892		)	(2,569		)	(1,537		)	(7,033		)	(1,296		)	(200		)	(660		)	(25,543		)
Recoveries	402			24			10			14			18			141			—			92			237			938
Provision	13,136			2,415			2,998			3,583			1,992			6,635			1,807			24			694			33,284
Balance, June 30, 2010	$	13,415		$	7,167		$	7,094		$	5,663		$	4,224		$	4,073		$	2,886		$	1,174		$	471		$	46,167
Loans individually evaluated for impairment	$	3,940		$	2,614		$	293		$	148		$	—		$	—		$	698		$	—		$	—		$	7,693
Loans collectively evaluated for impairment	$	9,475		$	4,553		$	6,801		$	5,515		$	4,224		$	4,073		$	2,188		$	1,174		$	471		$	38,474
Loans:
Loans individually evaluated for impairment	$	30,800		$	11,592		$	5,791		$	890		$	—		$	1,845		$	3,799		$	—		$	—		$	54,717
Loans collectively evaluated for impairment	392,066			297,388			497,004			306,508			251,951			211,018			122,205			63,133			31,452			2,172,725
Total non-acquired loans	$	422,866		$	308,980		$	502,795		$	307,398		$	251,951		$	212,863		$	126,004		$	63,133		$	31,452		$	2,227,442

The following tables present a disaggregated analysis of activity in the allowance for loan losses and loan balances for acquired loans for the three months and six months ended June 30, 2011. As of June 30, 2010, no provision had been made for acquired loans.

	Commercial						Commerical
	Loans Greater						Real Estate-					Residential
	Than or Equal			Commercial			Construction and		Residential			Real Estate-							Commercial
(Dollars in thousands)	to $1 Million			Real Estate			Development		Real Estate			Junior Lien			Home Equity		Consumer		and Industrial			Single Pay			Total
2011
Allowance for loan losses:
Balance, March 31, 2011	$	19,084		$	—		$	—	$	—		$	462		$	—	$	—	$	1,234		$	5,053		$	25,833
Charge-offs	(5,894		)	—			—		—			(462		)	—		—		(1,929		)	(3,565		)	(11,850		)
Recoveries	—			—			—		—			—			—		—		—			—			—
Provision for loan losses before benefit attibutable attibutable to FDIC loss share agreements	(2,277		)	1,318			—		1,464						—		—		695			(1,488		)	(288		)
Benefit attributable to FDIC loss share agreements	2,163			(1,252		)	—		(1,391		)	—			—		—		(660		)	1,414			274
Total provision for loan losses charged to operations	(114		)	66			—		73			—			—		—		35			(74		)	(14		)
Provision for loan losses recorded through the FDIC loss share receivable	(2,163		)	1,252			—		1,391			—			—		—		660			(1,414		)	274
Balance, June 30, 2011	$	10,913		$	1,318		$	—	$	1,464		$	—		$	—	$	—	$	—		$	—		$	13,695
Loans individually evaluated for impairment	$	—		$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—		$	—
Loans collectively evaluated for impairment	$	10,913		$	1,318		$	—	$	1,464		$	—		$	—	$	—	$	—		$	—		$	13,695
Loans:
Loans individually evaluated for impairment	$	—		$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—		$	—
Loans collectively evaluated for impairment	66,734			84,928			51,150		115,038			2,579			1,409		11,721		31,572			2,360			367,491
Total acquired loans	$	66,734		$	84,928		$	51,150	$	115,038		$	2,579		$	1,409	$	11,721	$	31,572		$	2,360		$	367,491

	Commercial						Commerical
	Loans Greater						Real Estate-					Residential
	Than or Equal			Commercial			Construction and		Residential			Real Estate-							Commercial
(Dollars in thousands)	to $1 Million			Real Estate			Development		Real Estate			Junior Lien			Home Equity		Consumer		and Industrial			Single Pay			Total
2011
Allowance for loan losses:
Balance, December 31, 2010	$	—		$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—		$	—
Charge-offs	(5,894		)	—			—		—			(462		)	—		—		(1,929		)	(3,565		)	(11,850		)
Recoveries	—			—			—		—			—			—		—		—			—			—
Provision for loan losses before benefit attibutable attibutable to FDIC loss share agreements	16,807			1,318			—		1,464			462			—		—		1,929			3,565			25,545
Benefit attributable to FDIC loss share agreements	(15,966		)	(1,252		)	—		(1,391		)	(439		)	—		—		(1,833		)	(3,387		)	(24,267		)
Total provision for loan losses charged to operations	841			66			—		73			23			—		—		96			178			1,278
Provision for loan losses recorded through the FDIC loss share receivable	15,966			1,252			—		1,391			439			—		—		1,833			3,387			24,267
Balance, June 30, 2011	$	10,913		$	1,318		$	—	$	1,464		$	—		$	—	$	—	$	—		$	—		$	13,695
Loans individually evaluated for impairment	$	—		$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—		$	—
Loans collectively evaluated for impairment	$	10,913		$	1,318		$	—	$	1,464		$	—		$	—	$	—	$	—		$	—		$	13,695
Loans:
Loans individually evaluated for impairment	$	—		$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—		$	—
Loans collectively evaluated for impairment	66,734			84,928			51,150		115,038			2,579			1,409		11,721		31,572			2,360			367,491
Total acquired loans	$	66,734		$	84,928		$	51,150	$	115,038		$	2,579		$	1,409	$	11,721	$	31,572		$	2,360		$	367,491

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk grade, (ii) the level of classified loans, (iii) net charge-offs, (iv) non-performing loans (see details below) and (v) the general economic conditions of the markets that we serve.

The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. A description of the general characteristics of the risk grades is as follows:

· Pass—These loans range from minimal credit risk to lower than average however still acceptable credit risk.

· Special mention—A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

· Substandard—A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

· Doubtful—A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.

The following table presents the credit risk profile by risk grade of commercial loans for non-acquired loans:

	Construction & Development						Commercial Non-owner Occupied						Commercial Owner Occupied
	June 30,		December 31,		June 30,		June 30,		December 31,		June 30,		June 30,		December 31,		June 30,
(Dollars in thousands)	2011		2010		2010		2011		2010		2010		2011		2010		2010
Pass	$	246,610	$	284,708	$	296,425	$	239,863	$	258,698	$	258,742	$	586,151	$	503,367	$	423,843
Special mention	37,815		40,463		39,383		43,651		37,487		25,460		42,689		38,204		47,389
Substandard	53,863		66,816		87,005		23,184		24,018		24,555		40,383		36,785		31,559
Doubtful	—		—		53		—		—		223		—		231		4
	$	338,288	$	391,987	$	422,866	$	306,698	$	320,203	$	308,980	$	669,223	$	578,587	$	502,795

	Commercial & Industrial						Other Income Producing Property						Commercial Total
	June 30,		December 31,		June 30,		June 30,		December 31,		June 30,		June 30,		December 31,		June 30,
	2011		2010		2010		2011		2010		2010		2011		2010		2010
Pass	$	202,111	$	190,608	$	202,639	$	108,780	$	101,441	$	99,933	$	1,383,515	$	1,338,822	$	1,281,582
Special mention	5,642		8,104		4,382		11,661		10,074		10,910		141,458		134,332		127,524
Substandard	8,148		4,275		5,842		12,711		12,872		15,076		138,289		144,766		164,037
Doubtful	—		—		—		—		44		85		—		275		365
	$	215,901	$	202,987	$	212,863	$	133,152	$	124,431	$	126,004	$	1,663,262	$	1,618,195	$	1,573,508

The following table presents the credit risk profile by risk grade of consumer loans for non-acquired loans at June 30:

	Consumer Owner Occupied						Home Equity						Consumer
	June 30,		December 31,		June 30,		June 30,		December 31,		June 30,		June 30,		December 31,		June 30,
(Dollars in thousands)	2011		2010		2010		2011		2010		2010		2011		2010		2010
Pass	$	328,952	$	289,168	$	277,302	$	247,862	$	248,261	$	239,278	$	78,793	$	66,775	$	62,300
Special mention	20,040		17,919		10,402		9,657		7,794		6,392		778		532		349
Substandard	18,918		18,383		18,718		6,148		7,906		6,281		501		461		484
Doubtful	—		—		976		—		—		—		—		—		—
	$	367,910	$	325,470	$	307,398	$	263,667	$	263,961	$	251,951	$	80,072	$	67,768	$	63,133

	Other						Consumer Total
	June 30,		December 31,		June 30,		June 30,		December 31,		June 30,
	2011		2010		2010		2011		2010		2010
Pass	$	30,702	$	20,806	$	31,452	$	686,309	$	625,010	$	610,332
Special mention	—		—		—		30,475		26,245		17,143
Substandard	—		—		—		25,567		26,750		25,483
Doubtful	—		—		—		—		—		976
	$	30,702	$	20,806	$	31,452	$	742,351	$	678,005	$	653,934

The following table presents the credit risk profile by risk grade of total non-acquired loans at June 30:

	Total Non-acquired Loans
	June 30,		December 31,		June 30,
	2011		2010		2010
Pass	$	2,069,824	$	1,963,832	$	1,891,914
Special mention	171,933		160,577		144,667
Substandard	163,856		171,516		189,520
Doubtful	—		275		1,341
	$	2,405,613	$	2,296,200	$	2,227,442

At June 30, 2011, the aggregate amount of non-acquired substandard and doubtful loans totaled $163.9 million. When these loans are combined with non-acquired OREO of $24.9 million, our non-acquired classified assets (as defined by our primary federal regulator, the Office of the Comptroller of the Currency (the “OCC”)) were $188.8 million. At December 31, 2010, the amounts were $171.8 million, $17.3 million, and $189.1 million, respectively. At June 30, 2010, the amounts were $190.9 million, $10.0 million, and $204.1 million, respectively.

The following table presents the credit risk profile by risk grade of acquired loans, net of the related discount at June 30:

	Commercial Loans Greater Than												Commercial Real Estate—
	or Equal to $1 million						Commercial Real Estate						Construction and Development
	June 30,		December 31,		June 30,		June 30,		December 31,		June 30,		June 30,		December 31,		June 30,
(Dollars in thousands)	2011		2010		2010		2011		2010		2010		2011		2010		2010
Pass	$	19,270	$	26,395	$	28,766	$	30,114	$	29,506	$	38,093	$	12,972	$	11,897	$	17,564
Special mention	9,548		10,317		15,053		14,142		10,048		13,894		5,685		3,218		5,836
Substandard	37,745		46,952		58,705		40,672		26,696		28,339		32,412		16,877		24,390
Doubtful	171		624		1,738		—		378		456		81		320		1,674
	$	66,734	$	84,288	$	104,262	$	84,928	$	66,628	$	80,782	$	51,150	$	32,312	$	49,464

							Residential Real Estate—
	Residential Real Estate						Junior Lien						Home Equity
	June 30,		December 31,		June 30,		June 30,		December 31,		June 30,		June 30,		December 31,		June 30,
	2011		2010		2010		2011		2010		2010		2011		2010		2010
Pass	$	57,390	$	42,807	$	57,946	$	1,659	$	2,219	$	2,838	$	980	$	1,069	$	1,549
Special mention	15,686		10,470		12,566		66		93		100		224		156		213
Substandard	41,676		33,112		32,134		787		1,112		1,160		205		294		82
Doubtful	286		1,156		7,812		67		249		241		—		—		—
	$	115,038	$	87,545	$	110,458	$	2,579	$	3,673	$	4,339	$	1,409	$	1,519	$	1,844

	Consumer						Commercial & Industrial						Single Pay
	June 30,		December 31,		June 30,		June 30,		December 31,		June 30,		June 30,		December 31,		June 30,
	2011		2010		2010		2011		2010		2010		2011		2010		2010
Pass	$	8,610	$	7,401	$	12,962	$	16,014	$	10,482	$	15,487	$	167	$	258	$	635
Special mention	825		528		829		3,749		3,389		3,127		62		65		—
Substandard	2,270		2,828		3,158		11,724		10,503		9,545		2,066		8,877		14,480
Doubtful	16		158		347		85		368		1,105		65		216		725
	$	11,721	$	10,915	$	17,296	$	31,572	$	24,742	$	29,264	$	2,360	$	9,416	$	15,840

The risk grading of acquired loans is determined utilizing a loan’s contractual balance, while the amount recorded in the financial statements and reflected above is the carrying value. In an FDIC assisted acquisition, acquired loans are recorded at their fair value, including a credit discount due to the high concentration of substandard and doubtful loans. In addition to the credit discount, the Company’s risk of loss is mitigated because of the FDIC loss share arrangement.

An aging analysis of past due loans, segregated by class for non-acquired loans, as of June 30, 2011 was as follows: 

					90+ Days		Total
	30-59 Days		60-89 Days		Past Due		Past						Total
(Dollars in thousands)	Past Due		Past Due		and Accruing		Due		Nonaccruals		Current		Loans
Commercial real estate:
Construction and land development	$	991	$	468	$	—	$	1,459	$	28,525	$	308,304	$	338,288
Commercial non-owner occupied	28		95		—		123		12,630		293,945		306,698
Commercial owner occupied	2,745		1,758		—		4,503		11,183		653,537		669,223
Consumer real estate:
Consumer owner occupied	1,139		208		—		1,347		8,344		358,219		367,910
Home equity loans	1,257		116		—		1,373		1,742		260,552		263,667
Commercial and industrial	600		112		7		719		1,482		213,700		215,901
Other income producing property	549		821		—		1,370		4,234		127,548		133,152
Consumer	375		45		—		420		130		79,522		80,072
Other loans	82		62		87		231		416		30,055		30,702
	$	7,766	$	3,685	$	94	$	11,545	$	68,686	$	2,325,382	$	2,405,613

An aging analysis of past due loans, segregated by class for non-acquired loans, as of December 31, 2010 was as follows:

					90+ Days		Total
	30-59 Days		60-89 Days		Past Due		Past						Total
(Dollars in thousands)	Past Due		Past Due		and Accruing		Due		Nonaccruals		Current		Loans
Commercial real estate:
Construction and land development	$	3,304	$	1,133	$	—	$	4,437	$	28,390	$	359,160	$	391,987
Commercial non-owner occupied	779		240		—		1,019		10,073		309,111		320,203
Commercial owner occupied	1,063		453		—		1,516		13,056		564,015		578,587
Consumer real estate:
Consumer owner occupied	1,626		1,086		16		2,728		7,176		315,566		325,470
Home equity loans	725		79		14		818		2,517		260,626		263,961
Commercial and industrial	622		98		—		720		1,282		200,985		202,987
Other income producing property	806		103		18		927		6,356		117,148		124,431
Consumer	597		175		33		805		176		66,787		67,768
Other loans	35		16		37		88		—		20,718		20,806
	$	9,557	$	3,383	$	118	$	13,058	$	69,026	$	2,214,116	$	2,296,200

An aging analysis of past due loans, segregated by class for non-acquired loans, as of June 30, 2010 was as follows:

					90+ Days		Total
	30-59 Days		60-89 Days		Past Due		Past						Total
(Dollars in thousands)	Past Due		Past Due		and Accruing		Due		Nonaccruals		Current		Loans
Commercial real estate:
Construction and land development	$	2,037	$	1,172	$	—	$	3,209	$	37,612	$	382,045	$	422,866
Commercial non-owner occupied	888		556		—		1,444		11,875		295,661		308,980
Commercial owner occupied	1,589		51		507		2,147		8,846		491,802		502,795
Consumer real estate:
Consumer owner occupied	1,861		353		—		2,214		7,784		297,400		307,398
Home equity loans	427		230		—		657		334		250,960		251,951
Commercial and industrial	349		89		—		438		2,528		209,897		212,863
Other income producing property	144		416		28		588		6,023		119,393		126,004
Consumer	550		35		1		586		211		62,336		63,133
Other loans	—		—		—		—		100		31,352		31,452
	$	7,845	$	2,902	$	536	$	11,283	$	75,313	$	2,140,846	$	2,227,442

Acquired loans that are past due continue to accrue accretable yield under the accretion method of accounting and therefore are not considered to be nonaccrual.

An aging analysis of past due loans, segregated by type for acquired loans as of June 30, 2011 was as follows:

					90+ Days		Total
	30-59 Days		60-89 Days		Past Due		Past						Total
(Dollars in thousands)	Past Due		Past Due		and Accruing		Due		Nonaccruals		Current		Loans
Commercial loans greater than or equal to $1 million	$	714	$	—	$	25,513	$	26,227	$	—	$	40,507	$	66,734
Commercial real estate	2,398		5,864		13,952		22,214		—		62,714		84,928
Commercial real estate—construction and development	397		491		24,902		25,790		—		25,360		51,150
Residential real estate	3,378		1,454		15,999		20,831		—		94,207		115,038
Residential real estate—junior lien	186		3		341		530		—		2,049		2,579
Home equity	28		3		7		38		—		1,371		1,409
Consumer	467		178		655		1,300		—		10,421		11,721
Commercial and industrial	762		795		6,613		8,170		—		23,402		31,572
Single pay	4		2		1,928		1,934		—		426		2,360
	$	8,334	$	8,790	$	89,910	$	107,034	$	—	$	260,457	$	367,491

An aging analysis of past due loans, segregated by type for acquired loans, as of December 31, 2010 was as follows:

					90+ Days		Total
	30-59 Days		60-89 Days		Past Due		Past						Total
(Dollars in thousands)	Past Due		Past Due		and Accruing		Due		Nonaccruals		Current		Loans
Commercial loans greater than or equal to $1 million	$	3,993	$	—	$	30,220	$	34,213	$	—	$	50,075	$	84,288
Commercial real estate	1,067		458		14,240		15,765		—		50,864		66,629
Commercial real estate—construction and development	1,197		499		10,915		12,611		—		19,702		32,313
Residential real estate	2,508		1,397		20,077		23,982		—		63,563		87,545
Residential real estate—junior lien	165		59		863		1,087		—		2,586		3,673
Home equity	15		56		101		172		—		1,346		1,518
Consumer	614		323		1,303		2,240		—		8,675		10,915
Commercial and industrial	1,533		470		6,986		8,989		—		15,752		24,741
Single pay	—		—		8,900		8,900		—		516		9,416
	$	11,092	$	3,262	$	93,605	$	107,959	$	—	$	213,079	$	321,038

An aging analysis of past due loans, segregated by type for acquired loans, as of June 30, 2010 was as follows:

					90+ Days		Total
	30-59 Days		60-89 Days		Past Due		Past						Total
(Dollars in thousands)	Past Due		Past Due		and Accruing		Due		Nonaccruals		Current		Loans
Commercial loans greater than or equal to $1 million	$	804	$	7,513	$	36,455	$	44,772	$	—	$	59,490	$	104,262
Commercial real estate	4,075		3,181		15,521		22,777		—		58,005		80,782
Commercial real estate—construction and development	3,688		1,812		16,914		22,414		—		27,050		49,464
Residential real estate	7,120		4,960		20,577		32,657		—		77,801		110,458
Residential real estate—junior lien	484		8		638		1,130		—		3,209		4,339
Home equity	19		75		33		127		—		1,717		1,844
Consumer	1,135		635		1,526		3,296		—		14,000		17,296
Commercial and industrial	2,253		1,419		5,242		8,914		—		20,350		29,264
Single pay	150		41		10,800		10,991		—		4,849		15,840
	$	19,728	$	19,644	$	107,706	$	147,078	$	—	$	266,471	$	413,549

The following is a summary of information pertaining to impaired non-acquired loans:

					Gross
	Unpaid		Recorded		Recorded
	Contractual		Investment		Investment		Total				Average
	Principal		With No		With		Recorded		Related		Recorded
(Dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance		Investment
June 30, 2011
Commercial real estate:
Construction and land development	$	32,078	$	14,773	$	7,192	$	21,965	$	1,843	$	22,523
Commercial non-owner occupied	16,923		6,537		6,426		12,963		634		11,956
Commercial owner occupied	12,780		4,838		6,265		11,103		1,105		10,925
Consumer real estate:
Consumer owner occupied	2,799		414		2,036		2,450		293		1,995
Home equity loans	—		—		—		—		—		—
Commercial and industrial	1,199		1,114		—		1,114		—		1,129
Other income producing property	2,244		1,622		417		2,039		156		2,596
Consumer	—		—		—		—		—		—
Other loans	—		—		—		—		—		—
Total impaired loans	$	68,023	$	29,298	$	22,336	$	51,634	$	4,031	$	51,124
December 31, 2010
Commercial real estate:
Construction and land development	$	29,656	$	13,362	$	9,719	$	23,081	$	1,718	$	20,338
Commercial non-owner occupied	12,902		5,824		5,124		10,948		1,444		8,752
Commercial owner occupied	11,279		5,353		5,394		10,747		830		8,913
Consumer real estate:
Consumer owner occupied	1,725		—		1,540		1,540		80		1,143
Home equity loans	—		—		—		—		—		—
Commercial and industrial	1,145		—		1,144		1,144		36		1,040
Other income producing property	4,402		2,246		907		3,153		28		2,477
Consumer	—		—		—		—		—		—
Other loans	—		—		—		—		—		—
Total impaired loans	$	61,109	$	26,785	$	23,828	$	50,613	$	4,136	$	42,663
June 30, 2010
Commercial real estate:
Construction and land development	$	39,892	$	11,663	$	19,137	$	30,800	$	3,940	$	24,198
Commercial non-owner occupied	12,607		3,912		7,680		11,592		2,614		9,074
Commercial owner occupied	6,380		2,970		2,821		5,791		293		6,435
Consumer real estate:
Consumer owner occupied	890		—		890		890		148		817
Home equity loans	—		—		—		—		—		—
Commercial and industrial	7,509		1,845		—		1,845		—		1,391
Other income producing property	4,236		1,018		2,781		3,799		698		2,800
Consumer	—		—		—		—		—		—
Other loans	—		—		—		—		—		—
Total impaired loans	$	71,514	$	21,408	$	33,309	$	54,717	$	7,693	$	44,715

Acquired loans are accounted for in pools as shown on page 16 rather than being individually evaluated for impairment; therefore, the table above only pertains to non-acquired loans.

The following is a summary of information pertaining to non-acquired nonaccrual loans by class, including restructured loans:

	June 30,		December 31,		June 30,
(Dollars in thousands)	2011		2010		2010
Commercial non-owner occupied real estate:
Construction and land development	$	22,977	$	27,207	$	37,612
Commercial non-owner occupied	12,218		8,407		11,875
Total commercial non-owner occupied real estate	35,195		35,614		49,487
Consumer real estate:
Consumer owner occupied	6,309		6,865		7,784
Home equity loans	1,742		2,517		334
Total consumer real estate	8,051		9,382		8,118
Commercial owner occupied real estate	8,426		10,499		8,846
Commercial and industrial	1,482		1,282		2,528
Other income producing property	4,522		5,708		6,023
Consumer	130		176		211
Other loans	—		—		100
Restructured loans	10,880		6,365		—
Total loans on nonaccrual status	$	68,686	$	69,026	$	75,313

At June 30, 2011 and, December 31, 2011, there were $3.3 million and $3.1 million, respectively, in non-acquired restructured loans that were still accruing contractual interest.  There were no non-acquired restructured loans that were still accruing contractual interest at June 30, 2010.