UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

Commission File Number 0-15572

FIRST BANCORP

(Exact Name of Registrant as Specified in its Charter)

North Carolina	56-1421916
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification Number)
341 North Main Street, Troy, North Carolina	27371-0508
(Address of Principal Executive Offices)	(Zip Code)
(Registrant's telephone number, including area code)	(910)   576-6171

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ý YES     o NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ý YES     o NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

o Large Accelerated Filer	ý Accelerated Filer	o Non-Accelerated Filer	o Smaller Reporting Company
		(Do not check if a smaller
		reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      o YES     ý NO

The number of shares of the registrant's Common Stock outstanding on July 31, 2012 was 16,975,481.

INDEX

FIRST BANCORP AND SUBSIDIARIES

	Page
Part I.  Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets - June 30, 2012 and June 30, 2011 (With Comparative Amounts at December 31, 2011)	4
Consolidated Statements of Income - For the Periods Ended June 30, 2012 and 2011	5
Consolidated Statements of Comprehensive Income -For the Periods Ended June 30, 2012 and 2011	6
Consolidated Statements of Shareholders’ Equity - For the Periods Ended June 30, 2012 and 2011	7
Consolidated Statements of Cash Flows - For the Periods Ended June 30, 2012 and 2011	8
Notes to Consolidated Financial Statements	9
Item 2 – Management’s Discussion and Analysis of Consolidated Results of Operations and Financial Condition	41
Item 3 – Quantitative and Qualitative Disclosures About Market Risk	65
Item 4 – Controls and Procedures	67
Part II.  Other Information
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 6 – Exhibits	68
Signatures	70

Page 2

FORWARD-LOOKING STATEMENTS

Part I of this report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, which statements are inherently subject to risks and uncertainties. Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often characterized by the use of qualifying words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” or other statements concerning our opinions or judgment about future events. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. Factors that could influence the accuracy of such forward-looking statements include, but are not limited to, the financial success or changing strategies of our customers, our level of success in integrating acquisitions, actions of government regulators, the level of market interest rates, and general economic conditions. For additional information about factors that could affect the matters discussed in this paragraph, see the “Risk Factors” section of our 2011 Annual Report on Form 10-K.

Page 3

Part I. Financial Information

Item 1 - Financial Statements

First Bancorp and Subsidiaries

Consolidated Balance Sheets

($ in thousands-unaudited)	June 30, 2012			December 31, 2011(audited)			June 30, 2011
ASSETS
Cash and due from banks, noninterest-bearing	$	58,872			80,341			73,676
Due from banks, interest-bearing		203,313			135,218			163,414
Federal funds sold		—			608			1,157
Total cash and cash equivalents		262,185			216,167			238,247
Securities available for sale		171,907			182,626			171,844
Securities held to maturity (fair values of $61,676, $62,754, and $59,860)		56,182			57,988			57,593
Presold mortgages in process of settlement		4,053			6,090			2,466
Loans – non-covered		2,114,906			2,069,152			2,040,714
Loans – covered by FDIC loss share agreement		322,895			361,234			401,726
Total loans		2,437,801			2,430,386			2,442,440
Allowance for loan losses – non-covered		(47,523	)		(35,610	)		(34,465	)
Allowance for loan losses – covered		(5,931	)		(5,808	)		(5,540	)
Total allowance for loan losses		(53,454	)		(41,418	)		(40,005	)
Net loans		2,384,347			2,388,968			2,402,435
Premises and equipment		73,642			69,975			68,898
Accrued interest receivable		10,932			11,779			12,000
FDIC indemnification asset		116,902			121,677			142,894
Goodwill		65,835			65,835			65,835
Other intangible assets		3,452			3,897			4,349
Other real estate owned – non-covered		37,895			37,023			31,849
Other real estate owned – covered		70,850			85,272			102,883
Bank-owned life insurance		27,380			2,207			2,160
Other assets		43,193			40,970			30,296
Total assets	$	3,328,755			3,290,474			3,333,749
LIABILITIES
Deposits:   Noninterest bearing checking accounts	$	381,353			335,833			323,223
Interest bearing checking accounts		472,342			423,452			371,693
Money market accounts		545,356			513,832			499,286
Savings accounts		160,137			146,481			145,576
Time deposits of $100,000 or more		725,699			753,233			765,787
Other time deposits		553,411			582,206			641,853
Total deposits		2,838,298			2,755,037			2,747,418
Securities sold under agreements to repurchase		—			17,105			68,608
Borrowings		111,394			133,925			138,796
Accrued interest payable		1,549			1,872			2,208
Other liabilities		37,440			37,385			24,421
Total liabilities		2,988,681			2,945,324			2,981,451
Commitments and contingencies
SHAREHOLDERS’ EQUITY
Preferred stock, no par value per share.  Authorized: 5,000,000 shares
Issued and outstanding:  63,500, 63,500, and 65,000 shares		63,500			63,500			65,000
Discount on preferred stock		—			—			(2,474	)
Common stock, no par value per share.  Authorized: 40,000,000 shares
Issued and outstanding:  16,973,008, 16,909,820 and 16,862,536 shares		105,437			104,841			105,141
Retained earnings		179,298			185,491			188,737
Accumulated other comprehensive income (loss)		(8,161	)		(8,682	)		(4,106	)
Total shareholders’ equity		340,074			345,150			352,298
Total liabilities and shareholders’ equity	$	3,328,755			3,290,474			3,333,749

See notes to consolidated financial statements.

Page 4

First Bancorp and Subsidiaries

Consolidated Statements of Income

	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands, except share data-unaudited)	2012			2011			2012			2011
INTEREST INCOME
Interest and fees on loans	$	35,636			38,464			70,678			75,271
Interest on investment securities:
Taxable interest income		1,149			1,463			2,407			2,895
Tax-exempt interest income		491			499			984			999
Other, principally overnight investments		178			103			317			193
Total interest income		37,454			40,529			74,386			79,358
INTEREST EXPENSE
Savings, checking and money market		759			1,103			1,608			2,333
Time deposits of $100,000 or more		2,085			2,661			4,260			5,265
Other time deposits		1,169			1,767			2,438			3,936
Securities sold under agreements to repurchase		—			48			4			98
Borrowings		490			470			1,034			932
Total interest expense		4,503			6,049			9,344			12,564
Net interest income		32,951			34,480			65,042			66,794
Provision for loan losses – non-covered		5,194			7,607			23,751			15,177
Provision for loan losses – covered		1,273			3,327			4,271			7,100
Total provision for loan losses		6,467			10,934			28,022			22,277
Net interest income after provision for loan losses		26,484			23,546			37,020			44,517
NONINTEREST INCOME
Service charges on deposit accounts		2,967			3,294			5,814			5,939
Other service charges, commissions and fees		2,340			2,070			4,532			3,985
Fees from presold mortgage loans		489			346			900			641
Commissions from sales of insurance and financial products		432			409			815			764
Gain from acquisition		─			─			—			10,196
Foreclosed property losses and write-downs – non-covered		(1,318	)		(271	)		(2,006	)		(1,624	)
Foreclosed property losses and write-downs – covered		(6,554	)		(2,583	)		(11,101	)		(7,517	)
FDIC indemnification asset income, net		3,558			1,826			7,663			6,866
Securities gains (losses)		(3	)		60			449			74
Other gains (losses)		(141	)		(37	)		53			(17	)
Total noninterest income		1,770			5,114			7,119			19,307
NONINTEREST EXPENSES
Salaries		10,173			9,694			20,347			19,405
Employee benefits		2,777			2,954			6,691			6,156
Total personnel expense		12,950			12,648			27,038			25,561
Net occupancy expense		1,615			1,598			3,296			3,270
Equipment related expenses		1,164			1,110			2,334			2,172
Intangibles amortization		223			226			446			450
Acquisition expenses		—			243			—			594
Other operating expenses		7,496			7,088			14,709			15,909
Total noninterest expenses		23,448			22,913			47,823			47,956
Income (loss) before income taxes		4,806			5,747			(3,684	)		15,868
Income taxes (benefit)		1,516			2,021			(1,792	)		5,767
Net income (loss)		3,290			3,726			(1,892	)		10,101
Preferred stock dividends		(829	)		(812	)		(1,589	)		(1,625	)
Accretion of preferred stock discount		—			(229	)		—			(458	)
Net income (loss) available to common shareholders	$	2,461			2,685			(3,481	)		8,018
Earnings (loss) per common share:
Basic	$	0.15			0.16			(0.21	)		0.48
Diluted		0.15			0.16			(0.21	)		0.48
Dividends declared per common share	$	0.08			0.08			0.16			0.16
Weighted average common shares outstanding:
Basic		16,952,624			16,841,289			16,938,620			16,827,615
Diluted		16,952,624			16,868,571			16,938,620			16,855,027

See notes to consolidated financial statements.

Page 5

First Bancorp and Subsidiaries

Consolidated Statements of Comprehensive Income

	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands-unaudited)	2012			2011			2012			2011
Net income (loss)	$	3,290			3,726			(1,892	)		10,101
Other comprehensive income (loss):
Unrealized gains on securities available for sale:
Unrealized holding gains arising during the period, pretax		186			1,198			901			1,387
Tax benefit		(72	)		(467	)		(350	)		(541	)
Reclassification to realized losses (gains)		3			(60	)		(449	)		(74	)
Tax expense (benefit)		(1	)		23			175			29
Postretirement Plans:
Amortization of unrecognized net actuarial loss		82			140			383			280
Tax expense		(32	)		(56	)		(149	)		(112	)
Amortization of prior service cost and transition obligation		8			9			17			18
Tax expense		(3	)		(4	)		(7	)		(8	)
Other comprehensive income		171			783			521			979
Comprehensive income (loss)	$	3,461			4,509			(1,371	)		11,080

See notes to consolidated financial statements.

Page 6

First Bancorp and Subsidiaries

Consolidated Statements of Shareholders’ Equity

(In thousands, except per share - unaudited)	Preferred		Preferred Stock			Common Stock					Retained			Accumulated Other Comprehensive			Total Share- holders’
	Stock		Discount			Shares		Amount			Earnings			Income (Loss)			Equity
Balances, January 1, 2011	$	65,000		(2,932	)		16,801	$	104,207			183,413			(5,085	)		344,603
Net income												10,101						10,101
Common stock issued under stock option plans							2		30									30
Common stock issued into dividend reinvestment plan							30		421									421
Cash dividends declared ($0.16 per common share)												(2,694	)					(2,694	)
Preferred dividends												(1,625	)					(1,625	)
Accretion of preferred stock discount				458								(458	)					—
Stock-based compensation							29		483									483
Other comprehensive income															979			979
Balances, June 30, 2011	$	65,000		(2,474	)		16,862	$	105,141			188,737			(4,106	)		352,298
Balances, January 1, 2012	$	63,500		—			16,910	$	104,841			185,491			(8,682	)		345,150
Net income (loss)												(1,892	)					(1,892	)
Common stock issued into dividend reinvestment plan							31		335									335
Repurchases of common stock							—		(2	)								(2	)
Cash dividends declared ($0.16 per common share)												(2,712	)					(2,712	)
Preferred dividends												(1,589	)					(1,589	)
Stock-based compensation							32		263									263
Other comprehensive income															521			521
Balances, June 30, 2012	$	63,500		—			16,973	$	105,437			179,298			(8,161	)		340,074

See notes to consolidated financial statements.

Page 7

First Bancorp and Subsidiaries

Consolidated Statements of Cash Flows

	Six Months Ended June 30,
($ in thousands-unaudited)	2012			2011
Cash Flows From Operating Activities
Net income (loss)	$	(1,892	)		10,101
Reconciliation of net income to net cash provided by operating activities:
Provision for loan losses		28,022			22,277
Net security premium amortization		907			748
Purchase accounting accretion and amortization, net		(5,721	)		(6,565	)
Gain from acquisition		—			(10,196	)
Foreclosed property losses and write-downs		13,107			9,141
Gain on securities available for sale		(449	)		(74	)
Other losses (gains)		(53	)		17
Increase in net deferred loan costs		(96	)		(323	)
Depreciation of premises and equipment		2,278			2,182
Stock-based compensation expense		263			483
Amortization of intangible assets		446			450
Origination of presold mortgages in process of settlement		(41,858	)		(35,532	)
Proceeds from sales of presold mortgages in process of settlement		43,895			37,028
Decrease in accrued interest receivable		847			1,579
Increase in other assets		(13,188	)		(6,866	)
Increase (decrease) in accrued interest payable		(323	)		126
Increase (decrease) in other liabilities		415			(5,238	)
Net cash provided by operating activities		26,600			19,338
Cash Flows From Investing Activities
Purchases of securities available for sale		(47,395	)		(23,721	)
Purchases of securities held to maturity		—			(3,816	)
Proceeds from sales of securities available for sale		9,641			2,518
Proceeds from maturities/issuer calls of securities available for sale		48,590			34,829
Proceeds from maturities/issuer calls of securities held to maturity		1,685			1,053
Purchase of bank-owned life insurance		(25,000	)		—
Net decrease (increase) in loans		(42,993	)		45,905
Proceeds from FDIC loss share agreements		15,286			32,468
Proceeds from sales of foreclosed real estate		25,767			16,425
Purchases of premises and equipment		(5,945	)		(3,323	)
Net cash received in acquisition		—			54,037
Net cash provided (used) by investing activities		(20,364	)		156,375
Cash Flows From Financing Activities
Net increase (decrease) in deposits and repurchase agreements		66,211			(83,523	)
Repayments of borrowings, net		(22,500	)		(62,081	)
Cash dividends paid – common stock		(2,708	)		(2,690	)
Cash dividends paid – preferred stock		(1,554	)		(1,625	)
Proceeds from issuance of common stock		335			451
Repurchase of common stock		(2	)		—
Net cash provided (used) by financing activities		39,782			(149,468	)
Increase in cash and cash equivalents		46,018			26,245
Cash and cash equivalents, beginning of period		216,167			212,002
Cash and cash equivalents, end of period	$	262,185			238,247
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	9,667			12,438
Income taxes		5,275			11,710
Non-cash transactions:
Unrealized gain on securities available for sale, net of taxes		277			801
Foreclosed loans transferred to other real estate		25,324			42,984

See notes to consolidated financial statements.

Page 8

First Bancorp and Subsidiaries

Notes to Consolidated Financial Statements

 (unaudited)   For the Periods Ended June 30, 2012 and 2011

Note 1 - Basis of Presentation

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of June 30, 2012 and 2011 and the consolidated results of operations and consolidated cash flows for the periods ended June 30, 2012 and 2011. All such adjustments were of a normal, recurring nature. Reference is made to the 2011 Annual Report on Form 10-K filed with the SEC for a discussion of accounting policies and other relevant information with respect to the financial statements. The results of operations for the periods ended June 30, 2012 and 2011 are not necessarily indicative of the results to be expected for the full year. The Company has evaluated all subsequent events through the date the financial statements were issued.

Note 2 – Accounting Policies

Note 1 to the 2011 Annual Report on Form 10-K filed with the SEC contains a description of the accounting policies followed by the Company and discussion of recent accounting pronouncements. During the first six months of 2012, there were no new standards or guidance issued by the regulatory authorities relevant to the Company.

Note 3 – Reclassifications

Certain amounts reported in the period ended June 30, 2011 have been reclassified to conform to the presentation for June 30, 2012. These reclassifications had no effect on net income or shareholders’ equity for the periods presented, nor did they materially impact trends in financial information.

Note 4 – Equity-Based Compensation Plans

At June 30, 2012, the Company had the following equity-based compensation plans: the First Bancorp 2007 Equity Plan, the First Bancorp 2004 Stock Option Plan, the First Bancorp 1994 Stock Option Plan, and one plan that was assumed from an acquired entity. The Company’s shareholders approved all equity-based compensation plans, except for those assumed from acquired companies. The First Bancorp 2007 Equity Plan became effective upon the approval of shareholders on May 2, 2007. As of June 30, 2012, the First Bancorp 2007 Equity Plan was the only plan that had shares available for future grants.

The First Bancorp 2007 Equity Plan is intended to serve as a means to attract, retain and motivate key employees and directors and to associate the interests of the plans’ participants with those of the Company and its shareholders. The First Bancorp 2007 Equity Plan allows for both grants of stock options and other types of equity-based compensation, including stock appreciation rights, restricted stock, restricted performance stock, unrestricted stock, and performance units.

Recent equity grants to employees have either had performance vesting conditions, service vesting conditions, or both. Compensation expense for these grants is recorded over the various service periods based on the estimated number of equity grants that are probable to vest. No compensation cost is recognized for grants that do not vest and any previously recognized compensation cost will be reversed. As it relates to director equity grants, the Company grants common shares, valued at approximately $226,000 in the aggregate on the date of the grant, to non-employee directors in June of each year. Compensation expense associated with these director grants is recognized on the date of grant since there are no vesting conditions.

Page 9

The Company granted long-term restricted shares of common stock to certain senior executives on February 24, 2011 and February 23, 2012 with a two year minimum vesting period. The total compensation expense associated with the February 24, 2011 grant was $105,500 and the grant will fully vest on February 24, 2013. The Company recorded $22,000 in stock option expense in the first six months of 2012 and will record $9,700 in each subsequent quarter of 2012 related to this grant. The total compensation expense associated with the February 23, 2012 grant was $89,700 and the grant will fully vest on February 23, 2014. The Company recorded $14,900 in the first six months of 2012 and will record $11,200 in each subsequent quarter of 2012 related to this grant.

Under the terms of the predecessor plans and the First Bancorp 2007 Equity Plan, options can have a term of no longer than ten years, and all options granted thus far under these plans have had a term of ten years. The Company’s options provide for immediate vesting if there is a change in control (as defined in the plans).

At June 30, 2012, there were 476,624 options outstanding related to the three First Bancorp plans, with exercise prices ranging from $14.35 to $22.12. At June 30, 2012, there were 871,257 shares remaining available for grant under the First Bancorp 2007 Equity Plan. The Company also has a stock option plan as a result of a corporate acquisition. At June 30, 2012, there were 4,788 stock options outstanding in connection with the acquired plan, with option prices ranging from $10.66 to $15.22.

The Company issues new shares of common stock when options are exercised.

The Company measures the fair value of each option award on the date of grant using the Black-Scholes option-pricing model. The Company determines the assumptions used in the Black-Scholes option pricing model as follows: the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant; the dividend yield is based on the Company’s dividend yield at the time of the grant (subject to adjustment if the dividend yield on the grant date is not expected to approximate the dividend yield over the expected life of the option); the volatility factor is based on the historical volatility of the Company’s stock (subject to adjustment if future volatility is reasonably expected to differ from the past); and the weighted-average expected life is based on the historical behavior of employees related to exercises, forfeitures and cancellations.

The Company’s equity grants for the six months ended June 30, 2012 were the issuance of 1) 9,559 shares of long-term restricted stock to certain senior executives on February 23, 2012, at a fair market value of $10.96 per share, which was the closing price of the Company’s common stock on that date, and 2) 25,452 shares of common stock to non-employee directors on June 1, 2012 (1,818 shares per director), at a fair market value of $8.86 per share, which was the closing price of the Company’s common stock on that date.

The Company’s equity grants for the six months ended June 30, 2011 were the issuance of 1) 7,259 shares of long-term restricted stock to certain senior executives on February 24, 2011, at a fair market value of $14.54 per share, which was the closing price of the Company’s common stock on that date, and 2) 21,210 shares of common stock to non-employee directors on June 1, 2011 (1,414 shares per director), at a fair market value of $11.39 per share, which was the closing price of the Company’s common stock on that date.

The Company recorded total stock-based compensation expense of $263,000 and $483,000 for the six month periods ended June 30, 2012 and 2011, respectively, which relates to the employee grants discussed above and is recorded as “salaries expense.” Stock based compensation is reflected as an adjustment to cash flows from operating activities on the Company’s Consolidated Statement of Cash Flows. The Company recognized $103,000 and $188,000 of income tax benefits related to stock based compensation expense in the income statement for the six months ended June 30, 2012 and 2011, respectively.

As noted above, certain of the Company’s stock option grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. The Company has elected to recognize compensation expense for awards with graded vesting schedules on a straight-line basis over the requisite service period for the entire award. Compensation expense is based on the estimated number of stock options and awards that will ultimately vest. Over the past five years, there have only been minimal amounts of forfeitures, and therefore the Company assumes that all options granted without performance conditions will become vested.

Page 10

The following table presents information regarding the activity for the first six months of 2012 related to all of the Company’s stock options outstanding:

	Options Outstanding
	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Contractual Term (years)		Aggregate Intrinsic Value
Balance at December 31, 2011		493,850		$	18.92
Granted		—			—
Exercised		—			—
Forfeited		—			—
Expired		(12,438	)		18.71
Outstanding at June 30, 2012		481,412		$	18.92		3.2	$	—
Exercisable at June 30, 2012		480,412		$	18.92		3.2	$	—

The Company did not have any stock option exercises during the six months ended June 30, 2012 and received $30,000 as a result of stock option exercises during the six months ended June 30, 2011. The Company recorded no tax benefits from the exercise of nonqualified stock options during the six months ended June 30, 2012 or 2011.

As discussed above, the Company granted 7,259 and 9,559 long-term restricted shares of common stock to certain senior executives on February 24, 2011 and February 23, 2012, respectively.

Page 11

The following table presents information regarding the activity during 2012 related to the Company’s outstanding restricted stock:

	Long-Term Restricted Stock
	Number of Units			Weighted- Average Grant-Date Fair Value
Nonvested at December 31, 2011		7,259		$	14.54
Granted during the period		9,559		$	10.96
Vested during the period		—			—
Forfeited or expired during the period		(2,474	)		12.55
Nonvested at June 30, 2012		14,344		$	12.50

Note 5 – Earnings Per Common Share

Basic earnings per common share were computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed by assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period. Currently, the Company’s potentially dilutive common stock issuances relate to grants under the Company’s equity-based compensation plans, including stock options and restricted stock. The following is a reconciliation of the numerators and denominators used in computing basic and diluted earnings per common share:

	For the Three Months Ended June 30,
	2012						2011
($ in thousands except per share amounts)	Income (Numer- ator)		Shares (Denom- inator)		Per Share Amount		Income (Numer- ator)		Shares (Denom- inator)		Per Share Amount
Basic EPS
Net income available to common shareholders	$	2,461		16,952,624	$	0.15	$	2,685		16,841,289	$	0.16
Effect of Dilutive Securities		—		—				—		27,282
Diluted EPS per common share	$	2,461		16,952,624	$	0.15	$	2,685		16,868,571	$	0.16

	For the Six Months Ended June 30,
	2012								2011
($ in thousands except per share amounts)	Income (Numer- ator)			Shares (Denom- inator)		Per Share Amount			Income (Numer- ator)		Shares (Denom- inator)		Per Share Amount
Basic EPS
Net income (loss) available to common shareholders	$	(3,481	)		16,938,620	$	(0.21	)	$	8,018		16,827,615	$	0.48
Effect of Dilutive Securities		—			—					—		27,412
Diluted EPS per common share	$	(3,481	)		16,938,620	$	(0.21	)	$	8,018		16,855,027	$	0.48

Page 12

For both the three and six months ended June 30, 2012, there were 386,662 options, respectively, that were antidilutive because the exercise price exceeded the average market price for the period. For both the three and six month periods ended June 30, 2011, there were 542,916 options that were antidilutive because the exercise price exceeded the average market price for the period. Antidilutive options have been omitted from the calculation of diluted earnings per share for the respective periods.

Note 6 – Securities

The book values and approximate fair values of investment securities at June 30, 2012 and December 31, 2011 are summarized as follows:

	June 30, 2012									December 31, 2011
	Amortized		Fair		Unrealized					Amortized		Fair		Unrealized
($ in thousands)	Cost		Value		Gains		(Losses)			Cost		Value		Gains		(Losses)
Securities available for sale:
Government-sponsored enterprise securities	$	29,504		29,626		122		—			34,511		34,665		170		(16	)
Mortgage-backed securities		115,674		119,536		3,862		—			120,032		124,105		4,164		(91	)
Corporate bonds		13,186		13,139		253		(300	)		13,189		12,488		279		(980	)
Equity securities		9,195		9,606		438		(27	)		10,998		11,368		409		(39	)
Total available for sale	$	167,559		171,907		4,675		(327	)		178,730		182,626		5,022		(1,126	)
Securities held to maturity:
State and local governments	$	56,182		61,676		5,494		—			57,988		62,754		4,766		—
Total held to maturity	$	56,182		61,676		5,494		—			57,988		62,754		4,766		—

Included in mortgage-backed securities at June 30, 2012 were collateralized mortgage obligations with an amortized cost of $663,000 and a fair value of $684,000. Included in mortgage-backed securities at December 31, 2011 were collateralized mortgage obligations with an amortized cost of $1,462,000 and a fair value of $1,515,000. All of the Company’s mortgage-backed securities, including collateralized mortgage obligations, were issued by government-sponsored corporations.

The Company owned Federal Home Loan Bank (FHLB) stock with a cost and fair value of $9,102,000 at June 30, 2012 and $10,904,000 at December 31, 2011, which is included in equity securities above and serves as part of the collateral for the Company’s line of credit with the FHLB. The investment in this stock is a requirement for membership in the FHLB system.

The following table presents information regarding securities with unrealized losses at June 30, 2012:

($ in thousands)	Securities in an Unrealized Loss Position for Less than 12 Months				Securities in an Unrealized Loss Position for More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Government-sponsored enterprise securities	$	—		—		—		—		—		—
Mortgage-backed securities		—		—		—		—		—		—
Corporate bonds		—		—		5,029		300		5,029		300
Equity securities		—		—		31		27		31		27
State and local governments		—		—		—		—		—		—
Total temporarily impaired securities	$	—		—		5,060		327		5,060		327

Page 13

The following table presents information regarding securities with unrealized losses at December 31, 2011:

($ in thousands)	Securities in an Unrealized Loss Position for Less than 12 Months				Securities in an Unrealized Loss Position for More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Government-sponsored enterprise securities	$	8,984		16		—		—		8,984		16
Mortgage-backed securities		14,902		61		9,302		30		24,204		91
Corporate bonds		4,588		458		2,773		522		7,361		980
Equity securities		4		2		22		37		26		39
State and local governments		—		—		—		—		—		—
Total temporarily impaired securities	$	28,478		537		12,097		589		40,575		1,126

In the above tables, all of the non-equity securities that were in an unrealized loss position at June 30, 2012 and December 31, 2011 are bonds that the Company has determined are in a loss position due to interest rate factors, the overall economic downturn in the financial sector, and the broader economy in general. The Company has evaluated the collectability of each of these bonds and has concluded that there is no other-than-temporary impairment. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost. The Company has also concluded that each of the equity securities in an unrealized loss position at June 30, 2012 and December 31, 2011 was in such a position due to temporary fluctuations in the market prices of the securities. The Company’s policy is to record an impairment charge for any of these equity securities that remains in an unrealized loss position for twelve consecutive months unless the amount is insignificant.

The aggregate carrying amount of cost-method investments was $9,102,000 at June 30, 2012 and $10,904,000 at December 31, 2011, respectively, which was the FHLB stock discussed above. The Company determined that none of its cost-method investments were impaired at either period end.

The book values and approximate fair values of investment securities at June 30, 2012, by contractual maturity, are summarized in the table below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Securities Available for Sale				Securities Held to Maturity
	Amortized		Fair		Amortized		Fair
($ in thousands)	Cost		Value		Cost		Value
Debt securities
Due within one year	$	3,004		3,040		350		358
Due after one year but within five years		26,497		26,679		2,958		3,210
Due after five years but within ten years		3,000		3,000		29,731		32,673
Due after ten years		10,189		10,046		23,143		25,435
Mortgage-backed securities		115,674		119,536		—		—
Total debt securities		158,364		162,301		56,182		61,676
Equity securities		9,195		9,606		—		—
Total securities	$	167,559		171,907		56,182		61,676

At June 30, 2012 investment securities with a book value of $86,865,000 were pledged as collateral for public deposits. At December 31, 2011, investment securities with a book value of $47,418,000 were pledged as collateral for public and private deposits and securities sold under agreements to repurchase.

There were $9,641,000 in sales of securities during the six months ended June 30, 2012, which resulted in a net gain of $439,000. There were $2,518,000 in sales during the six months ended June 30, 2011, which resulted in a net gain of $8,000. During the six months ended June 30, 2012 and 2011, the Company recorded a net gain of $11,000 and $71,000, respectively, related to the call of several municipal and bond securities. Also, during the six months ended June 30, 2012 and 2011, the Company recorded a net loss of $1,000 and $5,000, respectively, related to write-downs of the Company’s equity portfolio.

Page 14

Note 7 – 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 the Company’s 2011 Annual Report on Form 10-K for more information regarding these transactions.) Because of the loss protection provided by the FDIC, the risk of the Cooperative Bank and The Bank of Asheville loans and foreclosed real estate 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, 2012				December 31, 2011				June 30, 2011
	Amount		Percentage		Amount		Percentage		Amount		Percentage
All  loans (non-covered and covered):
Commercial, financial, and agricultural	$	163,761		7%		162,099		7%		158,303		6%
Real estate – construction, land development & other land loans		343,620		14%		363,079		15%		386,354		16%
Real estate – mortgage – residential (1-4 family) first mortgages		815,605		34%		805,542		33%		803,209		33%
Real estate – mortgage – home equity loans / lines of credit		250,627		10%		256,509		11%		266,995		11%
Real estate – mortgage – commercial and other		789,290		32%		762,895		31%		745,858		31%
Installment loans to individuals		73,522		3%		78,982		3%		80,423		3%
Subtotal		2,436,425		100%		2,429,106		100%		2,441,142		100%
Unamortized net deferred loan costs		1,376				1,280				1,298
Total loans	$	2,437,801				2,430,386				2,442,440

As of June 30, 2012, December 31, 2011 and June 30, 2011, net loans include unamortized premiums of $717,000, $949,000, and $1,182,000, respectively, related to acquired loans.

Page 15

The following is a summary of the major categories of non-covered loans outstanding:

($ in thousands)	June 30, 2012				December 31, 2011				June 30, 2011
	Amount		Percentage		Amount		Percentage		Amount		Percentage
Non-covered loans:
Commercial, financial, and agricultural	$	155,879		7%		152,627		8%		145,811		7%
Real estate – construction, land development & other land loans		283,818		13%		290,983		14%		306,140		15%
Real estate – mortgage – residential (1-4 family) first mortgages		669,088		32%		646,616		31%		631,640		31%
Real estate – mortgage – home equity loans / lines of credit		229,415		11%		233,171		11%		241,973		12%
Real estate – mortgage – commercial and other		702,717		33%		666,882		32%		635,103		31%
Installment loans to individuals		72,613		4%		77,593		4%		78,749		4%
Subtotal		2,113,530		100%		2,067,872		100%		2,039,416		100%
Unamortized net deferred loan costs		1,376				1,280				1,298
Total non-covered loans	$	2,114,906				2,069,152				2,040,714

The carrying amount of the covered loans at June 30, 2012 consisted of impaired and nonimpaired purchased loans, 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	$	68		146		7,814		9,885		7,882		10,031
Real estate – construction, land development & other land loans		1,577		2,606		58,225		99,332		59,802		101,938
Real estate – mortgage – residential (1-4 family) first mortgages		827		1,915		145,690		173,707		146,517		175,622
Real estate – mortgage – home equity loans / lines of credit		12		309		21,200		26,400		21,212		26,709
Real estate – mortgage – commercial and other		2,332		4,153		84,241		113,936		86,573		118,089
Installment loans to individuals		3		4		906		990		909		994
Total	$	4,819		9,133		318,076		424,250		322,895		433,383

Page 16

The carrying amount of the covered loans at December 31, 2011 consisted of impaired and nonimpaired purchased loans, 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		319		9,403		11,736		9,472		12,055
Real estate – construction, land development & other land loans		3,865		8,505		68,231		115,489		72,096		123,994
Real estate – mortgage – residential (1-4 family) first mortgages		1,214		2,639		157,712		189,436		158,926		192,075
Real estate – mortgage – home equity loans / lines of credit		127		577		23,211		29,249		23,338		29,826
Real estate – mortgage – commercial and other		2,585		4,986		93,428		125,450		96,013		130,436
Installment loans to individuals		4		6		1,385		1,583		1,389		1,589
Total	$	7,864		17,032		353,370		472,943		361,234		489,975

The following table presents information regarding covered purchased nonimpaired loans since December 31, 2010. 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, 2010	$	366,521
Additions due to acquisition of The Bank of Asheville (at fair value)		84,623
Principal repayments		(40,576	)
Transfers to foreclosed real estate		(53,999	)
Loan charge-offs		(14,797	)
Accretion of loan discount		11,598
Carrying amount of nonimpaired covered loans at December 31, 2011	$	353,370
Principal repayments		(25,012	)
Transfers to foreclosed real estate		(11,974	)
Loan charge-offs		(4,176	)
Accretion of loan discount		5,868
Carrying amount of nonimpaired covered loans at June 30, 2012	$	318,076

As reflected in the table above, the Company accreted $5,868,000 of the loan discount on purchased nonimpaired loans into interest income during the first six months of 2012. As of June 30, 2012, there was remaining loan discount of $73,519,000 related to purchased nonimpaired loans. If these loans continue to be repaid by the borrowers, the Company will accrete the remaining loan discount into interest income over the 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.

The following table presents information regarding all purchased impaired loans since December 31, 2010, 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.

Page 17

($ in thousands) Purchased Impaired Loans	Contractual Principal Receivable			Fair Market Value Adjustment – Write Down (Nonaccretable Difference)			Carrying Amount
Balance at December 31, 2010	$	8,080			2,329			5,751
Additions due to acquisition of The Bank of Asheville		38,452			20,807			17,645
Change due to payments received		(1,620	)		(327	)		(1,293	)
Transfer to foreclosed real estate		(19,881	)		(9,308	)		(10,573	)
Change due to loan charge-off		(7,522	)		(4,193	)		(3,329	)
Other		807			224			583
Balance at December 31, 2011	$	18,316			9,532			8,784
Change due to payments received		(287	)		(54	)		(233	)
Transfer to foreclosed real estate		(7,636	)		(3,487	)		(4,149	)
Change due to loan charge-off		(109	)		(109	)		—
Other		(1,151	)		(1,568	)		417
Balance at June 30, 2012	$	9,133			4,314			4,819

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 2012 and 2011, the Company received no payments that exceeded the initial carrying amount of the purchased impaired loans.

Nonperforming assets are defined as nonaccrual loans, restructured loans, loans past due 90 or more days and still accruing interest, and other real estate. Nonperforming assets are summarized as follows:

ASSET QUALITY DATA ($ in thousands)	June 30, 2012		December 31, 2011		June 30, 2011
Non-covered nonperforming assets
Nonaccrual loans	$	73,918		73,566		71,570
Restructured loans - accruing		20,684		11,720		16,893
Accruing loans > 90 days past due		—		—		—
Total non-covered nonperforming loans		94,602		85,286		88,463
Other real estate		37,895		37,023		31,849
Total non-covered nonperforming assets	$	132,497		122,309		120,312
Covered nonperforming assets
Nonaccrual loans (1)	$	39,075		41,472		37,057
Restructured loans - accruing		19,054		14,218		24,325
Accruing loans > 90 days past due		—		—		—
Total covered nonperforming loans		58,129		55,690		61,382
Other real estate		70,850		85,272		102,883
Total covered nonperforming assets	$	128,979		140,962		164,265
Total nonperforming assets	$	261,476		263,271		284,577

(1) At June 30, 2012, December 31, 2011, and June 30, 2011, the contractual balance of the nonaccrual loans covered by FDIC loss share agreements was $60.4 million, $69.0 million, and $69.4 million, respectively.

Page 18

The following table presents information related to the Company’s impaired loans.

($ in thousands)	As of /for the six months ended June 30, 2012		As of /for the year ended December 31, 2011		As of /for the six months ended June 30, 2011
Impaired loans at period end
Non-covered	$	94,602		85,286		88,463
Covered		58,129		55,690		61,382
Total impaired loans at period end	$	152,731		140,976		149,845
Average amount of impaired loans for period
Non-covered	$	86,723		89,023		91,187
Covered		56,449		63,289		69,102
Average amount of impaired loans for period – total	$	143,172		152,312		160,289
Allowance for loan losses related to impaired loans at period end
Non-covered	$	11,051		5,804		6,019
Covered		5,158		5,106		4,727
Allowance for loan losses related to impaired loans - total	$	16,209		10,910		10,746
Amount of impaired loans with no related allowance at period end
Non-covered	$	22,235		35,721		31,514
Covered		40,613		43,702		49,755
Total impaired loans with no related allowance at period end	$	62,848		79,423		81,269

All of the impaired loans noted in the table above were on nonaccrual status at each respective period end except for those classified as restructured loans (see table on previous page for balances).

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, 2012.

($ in thousands)	Non-covered		Covered		Total
Commercial, financial, and agricultural:
Commercial – unsecured	$	211		188		399
Commercial – secured		2,227		—		2,227
Secured by inventory and accounts receivable		637		—		637
Real estate – construction, land development & other land loans		19,781		16,963		36,744
Real estate – residential, farmland and multi-family		24,146		10,084		34,230
Real estate – home equity lines of credit		3,878		758		4,636
Real estate – commercial		20,277		11,009		31,286
Consumer		2,761		73		2,834
Total	$	73,918		39,075		112,993

Page 19

The following table presents the Company’s nonaccrual loans as of December 31, 2011.

($ in thousands)	Non-covered		Covered		Total
Commercial, financial, and agricultural:
Commercial - unsecured	$	452		—		452
Commercial - secured		2,190		358		2,548
Secured by inventory and accounts receivable		588		102		690
Real estate – construction, land development & other land loans		22,772		21,204		43,976
Real estate – residential, farmland and multi-family		25,430		11,050		36,480
Real estate – home equity lines of credit		3,161		1,068		4,229
Real estate - commercial		16,203		7,459		23,662
Consumer		2,770		231		3,001
Total	$	73,566		41,472		115,038

The following table presents an analysis of the payment status of the Company’s loans as of June 30, 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	$	83		58		211		37,991		38,343
Commercial - secured		446		443		2,227		110,248		113,364
Secured by inventory and accounts receivable		55		—		637		21,277		21,969
Real estate – construction, land development & other land loans		1,544		425		19,781		222,973		244,723
Real estate – residential, farmland, and multi-family		6,648		2,109		24,146		777,203		810,106
Real estate – home equity lines of credit		1,759		460		3,878		201,589		207,686
Real estate - commercial		4,715		381		20,277		597,135		622,508
Consumer		690		181		2,761		51,199		54,831
Total non-covered	$	15,940		4,057		73,918		2,019,615		2,113,530
Unamortized net deferred loan costs										1,376
Total non-covered loans									$	2,114,906
Covered loans	$	5,253		2,147		39,075		276,420		322,895
Total loans	$	21,193		6,204		112,993		2,296,035		2,437,801

The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at June 30, 2012.

Page 20

The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2011.

($ 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	$	67		591		452		37,668		38,778
Commercial - secured		672		207		2,190		108,682		111,751
Secured by inventory and accounts receivable		247		—		588		20,993		21,828
Real estate – construction, land development & other land loans		1,250		1,411		22,772		221,372		246,805
Real estate – residential, farmland, and multi-family		9,751		4,259		25,430		756,215		795,655
Real estate – home equity lines of credit		1,126		237		3,161		202,912		207,436
Real estate - commercial		2,620		1,006		16,203		567,354		587,183
Consumer		657		286		2,770		54,723		58,436
Total non-covered	$	16,390		7,997		73,566		1,969,919		2,067,872
Unamortized net deferred loan costs										1,280
Total non-covered loans									$	2,069,152
Covered loans	$	6,511		3,388		41,472		309,863		361,234
Total loans	$	22,901		11,385		115,038		2,279,782		2,430,386

The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at December 31, 2011.

Page 21

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	)		(2,145	)		(281	)		(805	)		(334	)		—		(4,483	)
Recoveries		18			126			60			85			6			62			—		357
Provisions		833			1,448			1,675			210			781			237			10		5,194
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	)		(4,236	)		(732	)		(2,170	)		(686	)		—		(12,738	)
Recoveries		34			314			254			119			47			132			—		900
Provisions		3,309			9,051			5,409			1,069			4,428			473			12		23,751
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	$	—			—			—			—			—			—			—		—

Page 22

The following table presents the activity in the allowance for loan losses for non-covered loans for the year ended December 31, 2011.

($ 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
Beginning balance	$	4,731			12,520			11,283			3,634			3,972			1,961			174			38,275
Charge-offs		(2,703	)		(16,240	)		(9,045	)		(1,147	)		(3,355	)		(845	)		(524	)		(33,859	)
Recoveries		389			1,142			719			107			37			182			93			2,669
Provisions		1,363			13,884			10,575			(904	)		2,760			574			273			28,525
Ending balance	$	3,780			11,306			13,532			1,690			3,414			1,872			16			35,610
Ending balances:  Allowance for loan losses
Individually evaluated for impairment	$	60			607			150			—			200			—			—			1,017
Collectively evaluated for impairment	$	3,720			10,699			13,382			1,690			3,214			1,872			16			34,593
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—
Loans receivable:
Ending balance – total	$	172,357			246,805			795,655			207,436			587,183			58,436			—			2,067,872
Ending balances: Loans
Individually evaluated for impairment	$	2,526			34,750			11,880			527			30,846			12			—			80,541
Collectively evaluated for impairment	$	169,831			212,055			783,775			206,909			556,337			58,424			—			1,987,331
Loans acquired with deteriorated credit quality	$	—			920			—			—			—			—			—			920

Page 23

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, 2011.

($ 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, 2011
Beginning balance	$	4,142			10,203			12,463			3,359			3,359			2,223			24			35,773
Charge-offs		(740	)		(5,589	)		(2,248	)		(141	)		(313	)		(157	)		(121	)		(9,309	)
Recoveries		28			219			61			37			—			20			29			394
Provisions		475			6,957			1,808			(1,406	)		(187	)		(126	)		86			7,607
Ending balance	$	3,905			11,790			12,084			1,849			2,859			1,960			18			34,465
As of and for the six months ended June 30, 2011
Beginning balance	$	4,731			12,520			11,283			3,634			3,972			1,961			174			38,275
Charge-offs		(1,896	)		(9,582	)		(5,596	)		(764	)		(1,380	)		(360	)		(236	)		(19,814	)
Recoveries		36			251			293			43			28			103			73			827
Provisions		1,034			8,601			6,104