10-Q

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, 2014

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)
300 SW Broad Street, Southern Pines, North Carolina	28387
(Address of Principal Executive Offices)	(Zip Code)
(Registrant's telephone number, including area code)	(910)   246-2500

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     ¨ 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     ¨ 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)

¨ Large Accelerated Filer   ý Accelerated Filer   ¨ Non-Accelerated Filer

¨ 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). ¨ YES      ý NO

The number of shares of the registrant's Common Stock outstanding on July 31, 2014 was 19,705,381.

INDEX

FIRST BANCORP AND SUBSIDIARIES

	Page
Part I.  Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets - June 30, 2014 and June 30, 2013 (With Comparative Amounts at December 31, 2013)	4
Consolidated Statements of Income - For the Periods Ended June 30, 2014 and 2013	5
Consolidated Statements of Comprehensive Income - For the Periods Ended June 30, 2014 and 2013	6
Consolidated Statements of Shareholders’ Equity - For the Periods Ended June 30, 2014 and 2013	7
Consolidated Statements of Cash Flows - For the Periods Ended June 30, 2014 and 2013	8
Notes to Consolidated Financial Statements	9
Item 2 – Management’s Discussion and Analysis of Consolidated Results of Operations and Financial Condition	42
Item 3 – Quantitative and Qualitative Disclosures About Market Risk	67
Item 4 – Controls and Procedures	69
Part II.  Other Information
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 6 – Exhibits	70
Signatures	71

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. Further, forward-looking statements are intended to speak only as of the date made. 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 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC).

Page 3

Part I. Financial Information

Item 1 - Financial Statements

First Bancorp and Subsidiaries

Consolidated Balance Sheets

($ in thousands-unaudited)	June 30, 2014			December 31, 2013 (audited)			June 30, 2013
ASSETS
Cash and due from banks, noninterest-bearing	$	92,633			83,881			82,798
Due from banks, interest-bearing		313,141			136,644			154,199
Federal funds sold		1,508			2,749			603
Total cash and cash equivalents		407,282			223,274			237,600
Securities available for sale		124,078			173,041			186,634
Securities held to maturity (fair values of $57,612, $56,700, and $58,376)		53,879			53,995			54,361
Presold mortgages in process of settlement		5,926			5,422			4,552
Loans – non-covered		2,257,530			2,252,885			2,190,583
Loans – covered by FDIC loss share agreement		176,855			210,309			240,279
Total loans		2,434,385			2,463,194			2,430,862
Allowance for loan losses – non-covered		(41,966	)		(44,263	)		(44,816	)
Allowance for loan losses – covered		(3,830	)		(4,242	)		(6,035	)
Total allowance for loan losses		(45,796	)		(48,505	)		(50,851	)
Net loans		2,388,589			2,414,689			2,380,011
Premises and equipment		76,705			77,448			77,597
Accrued interest receivable		8,795			9,649			9,780
FDIC indemnification asset		29,406			48,622			92,950
Goodwill		65,835			65,835			65,835
Other intangible assets		2,446			2,834			3,274
Foreclosed real estate – non-covered		9,346			12,251			15,425
Foreclosed real estate – covered		9,934			24,497			32,005
Bank-owned life insurance		44,685			44,040			43,276
Other assets		39,593			29,473			44,110
Total assets	$	3,266,499			3,185,070			3,247,410
LIABILITIES
Deposits:  Noninterest bearing checking accounts	$	525,332			482,650			454,785
Interest bearing checking accounts		551,577			557,413			546,203
Money market accounts		558,373			551,335			564,837
Savings accounts		175,084			169,023			166,497
Time deposits of $100,000 or more		554,537			564,527			612,912
Other time deposits		389,676			426,071			473,119
Total deposits		2,754,579			2,751,019			2,818,353
Borrowings		116,394			46,394			46,394
Accrued interest payable		778			879			1,071
Other liabilities		13,655			14,856			21,487
Total liabilities		2,885,406			2,813,148			2,887,305
Commitments and contingencies
SHAREHOLDERS’ EQUITY
Preferred stock, no par value per share.  Authorized: 5,000,000 shares
Series B issued & outstanding:  63,500, 63,500, and 63,500 shares		63,500			63,500			63,500
Series C, convertible, issued & outstanding:  728,706, 728,706, and 728,706 shares		7,287			7,287			7,287
Common stock, no par value per share.  Authorized: 40,000,000 shares
Issued & outstanding:  19,705,381, 19,679,659, and 19,679,659 shares		132,417			132,099			132,097
Retained earnings		175,871			167,136			158,708
Accumulated other comprehensive income (loss)		2,018			1,900			(1,487	)
Total shareholders’ equity		381,093			371,922			360,105
Total liabilities and shareholders’ equity	$	3,266,499			3,185,070			3,247,410

See accompanying notes to consolidated financial statements.

Page 4

First Bancorp and Subsidiaries

Consolidated Statements of Income

($ in thousands, except share data-unaudited)	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
INTEREST INCOME
Interest and fees on loans	$	34,376			37,030			70,462			70,581
Interest on investment securities:
Taxable interest income		876			824			1,877			1,729
Tax-exempt interest income		471			477			941			956
Other, principally overnight investments		232			173			351			327
Total interest income		35,955			38,504			73,631			73,593
INTEREST EXPENSE
Savings, checking and money market accounts		259			381			511			891
Time deposits of $100,000 or more		1,172			1,546			2,355			3,159
Other time deposits		419			719			875			1,508
Borrowings		297			256			547			512
Total interest expense		2,147			2,902			4,288			6,070
Net interest income		33,808			35,602			69,343			67,523
Provision for loan losses – non-covered		1,158			4,043			4,523			9,814
Provision for loan losses – covered		2,501			1,548			2,711			6,926
Total provision for loan losses		3,659			5,591			7,234			16,740
Net interest income after provision for loan losses		30,149			30,011			62,109			50,783
NONINTEREST INCOME
Service charges on deposit accounts		3,446			3,254			7,019			6,189
Other service charges, commissions and fees		2,562			2,340			4,929			4,515
Fees from presold mortgage loans		790			820			1,397			1,567
Commissions from sales of insurance and financial products		706			579			1,300			978
Bank-owned life insurance income		318			212			645			420
Foreclosed property gains (losses) – non-covered		(551	)		777			(707	)		1,535
Foreclosed property gains (losses) – covered		(1,173	)		(520	)		(3,290	)		(5,136	)
FDIC indemnification asset income (expense), net		(1,578	)		(3,407	)		(6,494	)		1,490
Securities gains		786			7			786			7
Other gains (losses)		(336	)		425			(317	)		30
Total noninterest income		4,970			4,487			5,268			11,595
NONINTEREST EXPENSES
Salaries		11,366			11,003			23,014			21,680
Employee benefits		2,286			2,546			4,597			5,173
Total personnel expense		13,652			13,549			27,611			26,853
Net occupancy expense		1,804			1,759			3,684			3,433
Equipment related expenses		1,024			1,106			1,952			2,194
Intangibles amortization		194			220			388			419
Other operating expenses		8,106			9,122			14,696			16,081
Total noninterest expenses		24,780			25,756			48,331			48,980
Income before income taxes		10,339			8,742			19,046			13,398
Income tax expense		3,693			3,154			6,724			4,710
Net income		6,646			5,588			12,322			8,688
Preferred stock dividends		(217	)		(217	)		(434	)		(462	)
Net income available to common shareholders	$	6,429			5,371			11,888			8,226
Earnings per common share:
Basic	$	0.33			0.27			0.60			0.42
Diluted		0.32			0.27			0.59			0.41
Dividends declared per common share	$	0.08			0.08			0.16			0.16
Weighted average common shares outstanding:
Basic		19,698,581			19,673,634			19,693,382			19,671,468
Diluted		20,434,263			20,415,103			20,428,861			20,412,456

See accompanying 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)	2014			2013			2014			2013
Net income	$	6,646			5,588			12,322			8,688
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period, pretax		749			(1,853	)		1,052			(2,159	)
Tax (expense) benefit		(292	)		723			(410	)		841
Reclassification to realized gains		(786	)		(7	)		(786	)		(7	)
Tax expense		306			3			306			3
Postretirement Plans:
Amortization of unrecognized net actuarial (gain) loss		(56	)		15			(110	)		18
Tax expense (benefit)		33			(6	)		66			(7	)
Other comprehensive income (loss)		(46	)		(1,125	)		118			(1,311	)
Comprehensive income	$	6,600			4,463			12,440			7,377

See accompanying notes to consolidated financial statements.

Page 6

First Bancorp and Subsidiaries

Consolidated Statements of Shareholders’ Equity

(In thousands, except per share - unaudited)	Preferred		Common Stock				Retained			Accumulated Other Comprehensive			Total Share- holders’
	Stock		Shares		Amount		Earnings			Income (Loss)			Equity
Balances, January 1, 2013	$	70,787		19,669	$	131,877		153,629			(176	)		356,117
Net income								8,688						8,688
Cash dividends declared ($0.16 per common share)								(3,147	)					(3,147	)
Preferred dividends								(462	)					(462	)
Stock-based compensation				11		220								220
Other comprehensive income (loss)											(1,311	)		(1,311	)
Balances, June 30, 2013	$	70,787		19,680	$	132,097		158,708			(1,487	)		360,105
Balances, January 1, 2014	$	70,787		19,680	$	132,099		167,136			1,900			371,922
Net income								12,322						12,322
Cash dividends declared ($0.16 per common share)								(3,153	)					(3,153	)
Preferred dividends								(434	)					(434	)
Stock-based compensation				25		318								318
Other comprehensive income (loss)											118			118
Balances, June 30, 2014	$	70,787		19,705	$	132,417		175,871			2,018			381,093

See accompanying notes to consolidated financial statements.

Page 7

First Bancorp and Subsidiaries

Consolidated Statements of Cash Flows

	Six Months Ended June 30,
($ in thousands-unaudited)	2014			2013
Cash Flows From Operating Activities
Net income	$	12,322			8,688
Reconciliation of net income to net cash provided by operating activities:
Provision for loan losses		7,234			16,740
Net security premium amortization		1,036			1,360
Purchase accounting accretion and amortization, net		(11,168	)		(10,055	)
Foreclosed property losses and write-downs, net		3,997			3,601
Gain on securities available for sale		(786	)		(7	)
Other losses (gains)		317			(30	)
Decrease in net deferred loan costs		277			156
Depreciation of premises and equipment		2,325			2,287
Stock-based compensation expense		225			220
Amortization of intangible assets		388			419
Origination of presold mortgages in process of settlement		(47,696	)		(51,664	)
Proceeds from sales of presold mortgages in process of settlement		47,347			55,602
Decrease in accrued interest receivable		854			421
Decrease (increase) in other assets		(6,866	)		8,089
Decrease in accrued interest payable		(101	)		(255	)
Increase (decrease) in other liabilities		(1,222	)		2,080
Net cash provided by operating activities		8,483			37,652
Cash Flows From Investing Activities
Purchases of securities available for sale		(17,528	)		(44,834	)
Proceeds from sales of securities available for sale		47,473			—
Proceeds from maturities/issuer calls of securities available for sale		19,151			22,147
Proceeds from maturities/issuer calls of securities held to maturity		—			1,587
Purchase of bank-owned life insurance		—			(15,000	)
Net decrease (increase) in loans		21,825			(50,937	)
Proceeds from FDIC loss share agreements		15,256			12,018
Proceeds from sales of foreclosed real estate		21,396			33,092
Purchases of premises and equipment		(2,842	)		(4,092	)
Proceeds from sale of premises and equipment		811			—
Proceeds from loans held for sale		—			30,393
Net cash received in acquisition		—			38,315
Net cash provided by investing activities		105,542			22,689
Cash Flows From Financing Activities
Net increase (decrease) in deposits		3,567			(60,324	)
Proceeds from borrowings, net		70,000			—
Cash dividends paid – common stock		(3,150	)		(3,147	)
Cash dividends paid – preferred stock		(434	)		(777	)
Net cash provided (used) by financing activities		69,983			(64,248	)
Increase (decrease) in cash and cash equivalents		184,008			(3,907	)
Cash and cash equivalents, beginning of period		223,274			241,507
Cash and cash equivalents, end of period	$	407,282			237,600
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	4,389			6,298
Income taxes		421			—
Non-cash transactions:
Unrealized gain (loss) on securities available for sale, net of taxes		162			(1,322	)
Foreclosed loans transferred to other real estate		7,925			10,548

See accompanying notes to consolidated financial statements.

Page 8

First Bancorp and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited) For the Periods Ended June 30, 2014 and 2013

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, 2014 and 2013 and the consolidated results of operations and consolidated cash flows for the periods ended June 30, 2014 and 2013. All such adjustments were of a normal, recurring nature. Reference is made to the 2013 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, 2014 and 2013 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 2013 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. The following paragraphs update that information as necessary.

In July 2013, the Financial Accounting Standards Board (FASB) issued guidance to eliminate the diversity in practice regarding presentation of unrecognized tax benefits in the statement of financial position. Under the clarified guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, will be presented in the financial statements as a reduction to a deferred tax asset unless certain criteria are met. The requirements should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The amendments became effective for the Company for reporting periods beginning after December 15, 2013 and did not have a material effect on its financial statements.

In January 2014, the FASB amended the Investments—Equity Method and Joint Ventures topic to address accounting for investments in qualified affordable housing projects. If certain conditions are met, the amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects by amortizing the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizing the net investment performance in the income statement as a component of income tax expense (benefit). If those conditions are not met, the investment should be accounted for as an equity method investment or a cost method investment in accordance with existing accounting guidance. The amendments will be effective for the Company for interim and annual reporting periods beginning after December 15, 2014 and should be applied retrospectively for all periods presented. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2014, the FASB amended the Receivables topic of the Accounting Standards Codification. The amendments are intended to resolve diversity in practice with respect to when a creditor should reclassify a collateralized consumer mortgage loan to other real estate owned (“OREO”). In addition, the amendments require a creditor to reclassify a collateralized consumer mortgage loan to OREO upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2014, with early implementation of the guidance permitted. In implementing this guidance, assets that are reclassified from real estate to loans are measured at the carrying value of the real estate at the date of adoption. Assets reclassified from loans to real estate are measured at the lower of the net amount of the loan receivable or the fair value of the real estate less costs to sell at the date of adoption. The Company can apply these amendments either prospectively or using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2016. The Company can apply the guidance using either the full retrospective approach or modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

Page 9

In June 2014, the FASB issued guidance which makes limited amendments to the guidance on accounting for certain repurchase agreements. The new guidance (1) requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. The amendments will be effective for the Company for the first interim or annual period beginning after December 15, 2014. The Company will apply the guidance by making a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company does not expect these amendments to have a material effect on its financial statements.

In June 2014, the FASB issued guidance which clarifies that performance targets associated with stock compensation should be treated as a performance condition and should not be reflected in the grant date fair value of the stock award. The amendments will be effective for the Company for fiscal years that begin after December 15, 2015. The Company will apply the guidance to all stock awards granted or modified after the amendments are effective. The Company does not expect these amendments to have a material effect on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Note 3 – Reclassifications

Certain amounts reported for the periods ended June 30, 2013 have been reclassified to conform to the presentation for June 30, 2014. 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, 2014, the Company had the following equity-based compensation plans: the First Bancorp 2014 Equity Plan, the First Bancorp 2007 Equity Plan, and the First Bancorp 2004 Stock Option Plan. The Company’s shareholders approved all equity-based compensation plans. The First Bancorp 2014 Equity Plan became effective upon the approval of shareholders on May 8, 2014. As of June 30, 2014, the First Bancorp 2014 Equity Plan was the only plan that had shares available for future grants.

The First Bancorp 2014 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 2014 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 $16,000, to each non-employee director (currently 11 in total) 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.

Pursuant to an employment agreement, the Company granted the chief executive officer 75,000 non-qualified stock options and 40,000 shares of restricted stock during the third quarter of 2012. The option award and the restricted stock award will vest in full on December 31, 2014 and December 31, 2015, respectively, if the Company achieves certain earnings targets for those years, and will be forfeited if the applicable targets are not achieved. Compensation expense for this grant will be recorded over the various periods based on the estimated number of options and restricted stock that are probable to vest. If the awards do not vest, no compensation cost will be recognized and any previously recognized compensation cost will be reversed. Based on current conditions, the Company has concluded that it is not probable that these awards will vest, and thus no compensation expense has been recorded.

Page 10

Based on the Company’s performance in 2013, the Company granted long-term restricted shares of common stock to the chief executive officer on February 11, 2014 with a two-year minimum vesting period. The total compensation expense associated with the grant was $278,200 and the grant will fully vest on January 1, 2016. One third of this value was expensed during 2013. The Company recorded $23,200 and $46,400 in compensation expense during the three and six months ended June 30, 2014, respectively, and expects to record $23,200 in compensation expense each quarter thereafter until the award vests.

The Company granted long-term restricted shares of common stock to certain senior executives on February 23, 2012 with a two year minimum vesting period. The total compensation expense associated with this grant was $58,900 and the grant fully vested on February 23, 2014. The Company recorded $600 and $14,900 in stock option expense related to this grant during the six months ended June 30, 2014 and 2013, respectively.

Under the terms of the predecessor plans and the First Bancorp 2014 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, 2014, there were 277,679 options outstanding related to the three First Bancorp plans, with exercise prices ranging from $9.76 to $22.12. At June 30, 2014, there were 989,935 shares remaining available for grant under the First Bancorp 2014 Equity Plan.

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, 2014 were the issuance of 1) 15,657 shares of long-term restricted stock to the chief executive officer on February 11, 2014, at a fair market value of $17.77 per share, which was the closing price of the Company’s common stock on that date, and 2) 10,065 shares of common stock to non-employee directors on June 2, 2014 (915 shares per director), at a fair market value of $17.60 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, 2013 were the issuance of 13,164 shares of common stock to non-employee directors on June 3, 2013 (1,097 shares per director), at a fair market value of $14.68 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 $225,000 and $220,000 for the six-month periods ended June 30, 2014 and 2013, respectively. Of the $224,000 in expense that was recorded in 2014, approximately $177,000 related to the June 2, 2014 director grants, which is classified as “other operating expenses” in the Consolidated Statements of Income. The remaining $47,000 in expense 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 Statements of Cash Flows. The Company recognized $87,000 and $86,000 of income tax benefits related to stock based compensation expense in the income statement for the six months ended June 30, 2014 and 2013, 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 11

The following table presents information regarding the activity for the first six months of 2014 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 January 1, 2014		408,408		$	17.75
Granted		—			—
Exercised		—			—
Forfeited		—			—
Expired		(130,729	)		21.22
Outstanding at June 30, 2014		277,679		$	16.11		4.5	$	856,677
Exercisable at June 30, 2014		202,679		$	18.46		3.1	$	227,802

The Company did not have any stock option exercises during the six months ended June 30, 2014 or 2013. The Company recorded no tax benefits from the exercise of nonqualified stock options during the six months ended June 30, 2014 or 2013.

The following table presents information regarding the activity the first six months of 2014 related to the Company’s outstanding restricted stock:

	Long-Term Restricted Stock
	Number of Units			Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2014		45,374		$	9.90
Granted during the period		15,657			17.77
Vested during the period		(10,593	)		14.32
Forfeited or expired during the period		—			—
Nonvested at June 30, 2014		50,438		$	11.42

Note 5 – Earnings Per Common Share

Basic Earnings Per Common Share is calculated by dividing net income 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 stock option grants under the Company’s equity-based compensation plans and the Company’s Series C Preferred Stock, which is convertible into common stock on a one-for-one ratio.

In computing Diluted Earnings Per Common Share, adjustments are made to the computation of Basic Earnings Per Common shares, as follows. As it relates to stock options, it is assumed that all dilutive stock options are exercised during the reporting period at their respective exercise prices, with the proceeds from the exercises used by the Company to buy back stock in the open market at the average market price in effect during the reporting period. The difference between the number of shares assumed to be exercised and the number of shares bought back is included in the calculation of dilutive securities. As it relates to the Series C Preferred Stock, it is assumed that the preferred stock was converted to common stock during the reporting period. Dividends on the preferred stock are added back to net income and the shares assumed to be converted are included in the number of shares outstanding.

Page 12

If any of the potentially dilutive common stock issuances have an anti-dilutive effect, which is the case when a net loss is reported, the potentially dilutive common stock issuance is disregarded.

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,
	2014						2013
($ 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	$	6,429		19,698,581	$	0.33	$	5,371		19,673,634	$	0.27
Effect of Dilutive Securities		58		735,682				58		741,469
Diluted EPS per common share	$	6,487		20,434,263	$	0.32	$	5,429		20,415,103	$	0.27

	For the Six Months Ended June 30
	2014						2013
($ 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	$	11,888		19,693,382	$	0.60	$	8,226		19,671,468	$	0.42
Effect of Dilutive Securities		117		735,479				117		740,988
Diluted EPS per common share	$	12,005		20,428,861	$	0.59	$	8,343		20,412,456	$	0.41

For both the three and six months ended June 30, 2014, there were 93,000 options that were anti-dilutive because the exercise price exceeded the average market price for the period, and thus are not included in the calculation to determine the effect of dilutive securities. Also, for the three and six months ended June 30, 2014, the Company excluded 75,000 options that had an exercise price below the average market price for the period, but had performance vesting requirements that the Company has concluded are not probable to vest. For both the three and six months ended June 30, 2013, there were 391,813 options that were antidilutive because the exercise price exceeded the average market price for the period, and thus are not included in the calculation to determine the effect of dilutive securities.

Note 6 – Securities

The book values and approximate fair values of investment securities at June 30, 2014 and December 31, 2013 are summarized as follows:

	June 30, 2014									December 31, 2013
	Amortized		Fair		Unrealized					Amortized		Fair		Unrealized
($ in thousands)	Cost		Value		Gains		(Losses)			Cost		Value		Gains		(Losses)
Securities available for sale:
Government-sponsored enterprise securities	$	12,555		12,459		—		(96	)		18,432		18,245		32		(219	)
Mortgage-backed securities		106,173		104,699		436		(1,910	)		148,646		147,187		1,415		(2,874	)
Corporate bonds		1,000		790		—		(210	)		3,999		3,598		44		(445	)
Equity securities		6,105		6,130		39		(14	)		3,984		4,011		40		(13	)
Total available for sale	$	125,833		124,078		475		(2,230	)		175,061		173,041		1,531		(3,551	)
Securities held to maturity:
State and local governments	$	53,879		57,612		3,733		—			53,995		56,700		2,709		(4	)

Page 13

Included in mortgage-backed securities at June 30, 2014 were collateralized mortgage obligations with an amortized cost of $145,000 and a fair value of $149,000. Included in mortgage-backed securities at December 31, 2013 were collateralized mortgage obligations with an amortized cost of $192,000 and a fair value of $200,000. 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 $6,016,000 at June 30, 2014 and $3,894,000 at December 31, 2013, 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. Periodically the FHLB recalculates the Company’s required level of holdings, and the Company either buys more stock or the FHLB redeems a portion of the stock at cost.

The following table presents information regarding securities with unrealized losses at June 30, 2014:

($ 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	$	6,539		16		5,920		80		12,459		96
Mortgage-backed securities		17,563		30		55,476		1,880		73,039		1,910
Corporate bonds		—		—		790		210		790		210
Equity securities		2		—		20		14		22		14
State and local governments		—		—		—		—		—		—
Total temporarily impaired securities	$	24,104		46		62,206		2,184		86,310		2,230

The following table presents information regarding securities with unrealized losses at December 31, 2013:

($ 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	$	12,212		219		—		—		12,212		219
Mortgage-backed securities		64,937		1,675		17,979		1,199		82,916		2,874
Corporate bonds		—		—		555		445		555		445
Equity securities		—		—		22		13		22		13
State and local governments		992		4		—		—		992		4
Total temporarily impaired securities	$	78,141		1,898		18,556		1,657		96,697		3,555

In the above tables, all of the non-equity securities that were in an unrealized loss position at June 30, 2014 and December 31, 2013 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, 2014 and December 31, 2013 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 $6,016,000 and $3,894,000 at June 30, 2014 and December 31, 2013, 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, 2014, 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.

Page 14

	Securities Available for Sale				Securities Held to Maturity
	Amortized		Fair		Amortized		Fair
($ in thousands)	Cost		Value		Cost		Value
Debt securities
Due within one year	$	—		—		—		—
Due after one year but within five years		12,555		12,459		8,853		9,481
Due after five years but within ten years		—		—		40,237		43,104
Due after ten years		1,000		790		4,789		5,027
Mortgage-backed securities		106,173		104,699		—		—
Total debt securities		119,728		117,948		53,879		57,612
Equity securities		6,105		6,130		—		—
Total securities	$	125,833		124,078		53,879		57,612

At June 30, 2014 and December 31, 2013 investment securities with carrying values of $63,670,000 and $79,838,000, respectively, were pledged as collateral for public deposits.

During the second quarter of 2014, the Company sold approximately $47,473,000 in securities and recorded a net gain of $786,000 related to the sale. During the six months ended June 30, 2013, the Company recorded a net gain of $7,000 related to the call of several municipal and bond securities.

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 Note 2 to the financial statements included in the Company’s 2011 Annual Report on Form 10-K for detailed information regarding these transactions. Because of the loss protection provided by the FDIC, the risk of the loans and foreclosed real estate that are covered by loss share agreements are significantly different from those assets not covered under the loss share agreements. Accordingly, the Company presents separately loans subject to the loss share agreements as “covered loans” in the information below and loans that are not subject to the loss share agreements as “non-covered loans.”

On July 1, 2014, the loss share protection over a substantial portion of First Bank’s covered loans and foreclosed real estate expired. In connection with the expiration of the loss share agreement related to Cooperative Bank’s non-single family assets, the remaining balances associated with these loans and foreclosed real estate were transferred from the covered portfolio to the non-covered portfolio on July 1, 2014. The Company will bear all future losses on this portfolio of loans and foreclosed real estate. At June 30, 2014, these loans and foreclosed properties were classified as covered. At June 30, 2014, the portfolio of loans had a carrying value of $39.7 million and the portfolio of foreclosed real estate had a carrying value of $3.0 million. Of the $39.7 million in loans that are losing loss share protection, approximately $9.7 million of these loans were on nonaccrual status and $2.1 million of these loans were classified as accruing troubled debt restructurings as of June 30, 2014. Additionally, approximately $1.7 million in allowance for loan losses that related to this portfolio of loans were transferred to the allowance for loan losses for non-covered loans on July 1, 2014.

Page 15

The following is a summary of the major categories of total loans outstanding:

($ in thousands)	June 30, 2014				December 31, 2013				June 30, 2013
	Amount		Percentage		Amount		Percentage		Amount		Percentage
All  loans (non-covered and covered):
Commercial, financial, and agricultural	$	165,021		7%	$	168,469		7%	$	164,767		7%
Real estate – construction, land development & other land loans		295,868		12%		305,246		12%		297,390		12%
Real estate – mortgage – residential (1-4 family) first mortgages		814,712		33%		838,862		34%		832,761		34%
Real estate – mortgage – home equity loans / lines of credit		227,381		9%		227,907		9%		231,446		10%
Real estate – mortgage – commercial and other		868,599		36%		855,249		35%		834,554		34%
Installment loans to individuals		62,153		3%		66,533		3%		68,776		3%
Subtotal		2,433,734		100%		2,462,266		100%		2,429,694		100%
Unamortized net deferred loan costs		651				928				1,168
Total loans	$	2,434,385			$	2,463,194			$	2,430,862

As of June 30, 2014, December 31, 2013 and June 30, 2013, net loans include unamortized premiums of $0, $98,000, and $252,000, respectively, related to acquired loans.

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

($ in thousands)	June 30, 2014				December 31, 2013				June 30, 2013
	Amount		Percentage		Amount		Percentage		Amount		Percentage
Non-covered loans:
Commercial, financial, and agricultural	$	162,303		7%	$	164,195		7%	$	159,964		7%
Real estate – construction, land development & other land loans		274,975		12%		273,412		12%		262,397		12%
Real estate – mortgage – residential (1-4 family) first mortgages		718,962		32%		730,712		32%		712,802		33%
Real estate – mortgage – home equity loans / lines of credit		213,542		9%		213,016		10%		214,473		10%
Real estate – mortgage – commercial and other		825,450		37%		804,621		36%		771,711		35%
Installment loans to individuals		61,647		3%		66,001		3%		68,068		3%
Subtotal		2,256,879		100%		2,251,957		100%		2,189,415		100%
Unamortized net deferred loan costs		651				928				1,168
Total non-covered loans	$	2,257,530			$	2,252,885			$	2,190,583

Page 16

The carrying amount of the covered loans at June 30, 2014 consisted of impaired and nonimpaired purchased loans (as determined on the date of acquisition), as follows:

($ in thousands)	Impaired Purchased Loans – Carrying Value		Impaired Purchased Loans – Unpaid Principal Balance		Nonimpaired Purchased Loans – Carrying Value		Nonimpaired Purchased Loans - Unpaid Principal Balance		Total Covered Loans – Carrying Value		Total Covered Loans – Unpaid Principal Balance
Covered loans:
Commercial, financial, and agricultural	$	69		129		2,649		3,015		2,718		3,144
Real estate – construction, land development & other land loans		322		548		20,571		28,878		20,893		29,426
Real estate – mortgage – residential (1-4 family) first mortgages		429		1,317		95,321		111,278		95,750		112,595
Real estate – mortgage – home equity loans / lines of credit		13		20		13,826		16,359		13,839		16,379
Real estate – mortgage – commercial and other		2,050		3,959		41,099		47,359		43,149		51,318
Installment loans to individuals		—		—		506		507		506		507
Total	$	2,883		5,973		173,972		207,396		176,855		213,369

The carrying amount of the covered loans at December 31, 2013 consisted of impaired and nonimpaired purchased loans (as determined on the date of the acquisition), as follows:

($ in thousands)	Impaired Purchased Loans – Carrying Value		Impaired Purchased Loans – Unpaid Principal Balance		Nonimpaired Purchased Loans – Carrying Value		Nonimpaired Purchased Loans - Unpaid Principal Balance		Total Covered Loans – Carrying Value		Total Covered Loans – Unpaid Principal Balance
Covered loans:
Commercial, financial, and agricultural	$	75		136		4,199		5,268		4,274		5,404
Real estate – construction, land development & other land loans		325		564		31,509		47,792		31,834		48,356
Real estate – mortgage – residential (1-4 family) first mortgages		575		1,500		107,575		126,882		108,150		128,382
Real estate – mortgage – home equity loans / lines of credit		14		21		14,877		18,318		14,891		18,339
Real estate – mortgage – commercial and other		2,153		4,042		48,475		62,630		50,628		66,672
Installment loans to individuals		—		—		532		607		532		607
Total	$	3,142		6,263		207,167		261,497		210,309		267,760

The following table presents information regarding covered purchased nonimpaired loans since December 31, 2012. 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, 2012	$	277,489
Principal repayments		(63,588	)
Transfers to foreclosed real estate		(13,977	)
Loan charge-offs		(12,957	)
Accretion of loan discount		20,200
Carrying amount of nonimpaired covered loans at December 31, 2013		207,167
Principal repayments		(36,715	)
Transfers to foreclosed real estate		(4,616	)
Loan charge-offs		(3,123	)
Accretion of loan discount		11,259
Carrying amount of nonimpaired covered loans at June 30, 2014	$	173,972

As reflected in the table above, the Company accreted $11,259,000 of the loan discount on purchased nonimpaired loans into interest income during the first six months of 2014. As of June 30, 2014, there was remaining loan discount of $21,374,000 related to purchased accruing loans. If these loans continue to be repaid by the borrowers, the Company will accrete the remaining loan discount into interest income over the estimated lives of the respective loans. In such circumstances, a corresponding entry to reduce the indemnification asset will be recorded amounting to 80% of the loan discount accretion, which reduces noninterest income. At June 30, 2014, the Company also had $4,386,000 of loan discount related to purchased nonperforming loans. It is not expected that a significant amount of this discount will be accreted, as it represents estimated losses on these loans.

Page 17

The following table presents information regarding all purchased impaired loans since December 31, 2012, all of which are covered loans. The Company has applied the cost recovery method to all purchased impaired loans at their respective acquisition dates due to the uncertainty as to the timing of expected cash flows, as reflected in the following table.

($ in thousands) Purchased Impaired Loans	Contractual Principal Receivable			Fair Market Value Adjustment – Write Down (Nonaccretable Difference)			Carrying Amount
Balance at December 31, 2012	$	8,815			3,990			4,825
Change due to payments received		(301	)		(31	)		(270	)
Transfer to foreclosed real estate		(2,100	)		(784	)		(1,316	)
Change due to loan charge-off		(150	)		(54	)		(96	)
Other		(1	)		—			(1	)
Balance at December 31, 2013	$	6,263			3,121			3,142
Change due to payments received		(487	)		84			(571	)
Other		197			(115	)		312
Balance at June 30, 2014	$	5,973			3,090			2,883

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 2014 and 2013, the Company received $179,000 and $38,000, respectively, in payments that exceeded the initial carrying amount of the purchased impaired loans, which is included in the loan discount accretion amount discussed previously.

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

ASSET QUALITY DATA ($ in thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Non-covered nonperforming assets
Nonaccrual loans	$	47,533	$	41,938	$	42,338
Restructured loans - accruing		27,250		27,776		21,333
Accruing loans > 90 days past due		—		—		—
Total non-covered nonperforming loans		74,783		69,714		63,671
Foreclosed real estate		9,346		12,251		15,425
Total non-covered nonperforming assets	$	84,129	$	81,965	$	79,096
Covered nonperforming assets
Nonaccrual loans (1)	$	20,938	$	37,217	$	50,346
Restructured loans - accruing		8,193		8,909		6,790
Accruing loans > 90 days past due		—		—		—
Total covered nonperforming loans		29,131		46,126		57,136
Foreclosed real estate		9,934		24,497		32,005
Total covered nonperforming assets	$	39,065	$	70,623	$	89,141
Total nonperforming assets	$	123,194	$	152,588	$	168,237

(1) At June 30, 2014, December 31, 2013, and June 30, 2013, the contractual balance of the nonaccrual loans covered by FDIC loss share agreements was $34.3 million, $60.4 million, and $89.3 million, respectively.

Page 18

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, 2014.

($ in thousands)	Non-covered		Covered		Total
Commercial, financial, and agricultural:
Commercial – unsecured	$	110		5		115
Commercial – secured		3,628		277		3,905
Secured by inventory and accounts receivable		338		—		338
Real estate – construction, land development & other land loans		9,001		5,299		14,300
Real estate – residential, farmland and multi-family		21,168		7,215		28,383
Real estate – home equity lines of credit		2,436		241		2,677
Real estate – commercial		10,297		7,899		18,196
Consumer		555		2		557
Total	$	47,533		20,938		68,471

The following table presents the Company’s nonaccrual loans as of December 31, 2013.

($ in thousands)	Non-covered		Covered		Total
Commercial, financial, and agricultural:
Commercial – unsecured	$	222		38		260
Commercial – secured		2,662		114		2,776
Secured by inventory and accounts receivable		545		782		1,327
Real estate – construction, land development & other land loans		8,055		13,502		21,557
Real estate – residential, farmland and multi-family		17,814		12,344		30,158
Real estate – home equity lines of credit		2,200		335		2,535
Real estate – commercial		10,115		10,099		20,214
Consumer		325		3		328
Total	$	41,938		37,217		79,155

Page 19

The following table presents an analysis of the payment status of the Company’s loans as of June 30, 2014.

($ 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	$	426		7		110		35,534		36,077
Commercial - secured		1,309		310		3,628		118,854		124,101
Secured by inventory and accounts receivable		146		64		338		17,944		18,492
Real estate – construction, land development & other land loans		308		605		9,001		237,455		247,369
Real estate – residential, farmland, and multi-family		7,867		3,523		21,168		834,617		867,175
Real estate – home equity lines of credit		1,058		133		2,436		196,883		200,510
Real estate - commercial		1,758		447		10,297		705,403		717,905
Consumer		411		139		555		44,145		45,250
Total non-covered	$	13,283		5,228		47,533		2,190,835		2,256,879
Unamortized net deferred loan costs										651
Total non-covered loans									$	2,257,530
Covered loans	$	994		1,025		20,938		153,898		176,855
Total loans	$	14,277		6,253		68,471		2,344,733		2,434,385

The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at June 30, 2014.

The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2013.

($ in thousands)	30-59 Days Past Due		60-89 Days Past Due		Nonaccrual Loans		Current		Total Loans Receivable
Non-covered loans
Commercial, financial, and agricultural:
Commercial - unsecured	$	347		94		222		36,352		37,015
Commercial - secured		1,233		462		2,662		117,923		122,280
Secured by inventory and accounts receivable		438		767		545		19,426		21,176
Real estate – construction, land development & other land loans		2,304		1,391		8,055		232,920		244,670
Real estate – residential, farmland, and multi-family		11,682		2,631		17,814		837,260		869,387
Real estate – home equity lines of credit		1,465		305		2,200		194,157		198,127
Real estate - commercial		3,196		214		10,115		696,081		709,606
Consumer		494		187		325		48,690		49,696
Total non-covered	$	21,159		6,051		41,938		2,182,809		2,251,957
Unamortized net deferred loan costs										928
Total non-covered loans									$	2,252,885
Covered loans	$	5,179		768		37,217		167,145		210,309
Total loans	$	26,338		6,819		79,155		2,349,954		2,463,194

The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at December 31, 2013.

Page 20

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, 2014.

($ 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, 2014
Beginning balance	$	8,889			8,650			12,733			3,662			9,375			1,030			367			44,706
Charge-offs		(2,041	)		(307	)		(861	)		(397	)		(277	)		(371	)		—			(4,254	)
Recoveries		21			73			114			6			26			116			—			356
Provisions		2,079			(1,002	)		(854	)		484			88			131			232			1,158
Ending balance	$	8,948			7,414			11,132			3,755			9,212			906			599			41,966
As of and for the six months ended June 30, 2014
Beginning balance	$	7,432			12,966			15,142			1,838			5,524			1,513			(152	)		44,263
Charge-offs		(2,666	)		(1,234	)		(1,631	)		(503	)		(889	)		(799	)		—			(7,722	)
Recoveries		49			309			179			11			121			233			—			902
Provisions		4,133			(4,627	)		(2,558	)		2,409			4,456			(41	)		751			4,523
Ending balance	$	8,948			7,414			11,132			3,755			9,212			906			599			41,966
Ending balances as of June 30, 2014:  Allowance for loan losses
Individually evaluated for impairment	$	290			818			2,016			—			528			—			—			3,652
Collectively evaluated for impairment	$	8,658			6,596			9,116			3,755			8,684			906			599			38,314
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—
Loans receivable as of June 30, 2014:
Ending balance – total	$	178,670			247,369			867,175			200,510			717,905			45,250			—			2,256,879
Ending balances as of June 30, 2014: Loans
Individually evaluated for impairment	$	679			7,541			22,505			483			17,009			10			—			48,227
Collectively evaluated for impairment	$	177,991			239,828			844,670			200,027			700,896			45,240			—			2,208,652
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—

Page 21

The following table presents the activity in the allowance for loan losses for non-covered loans for the year ended December 31, 2013.

($ in thousands)	Commercial, Financial, and Agricultural			Real Estate – Construction, Land Development, & Other Land Loans			Real Estate – Residential, Farmland, and Multi-family			Real Estate – Home Equity Lines of Credit			Real Estate – Commercial and Other			Consumer			Unallo- cated			Total
As of and for the year ended December 31, 2013
Beginning balance	$	4,687			12,856			14,082			1,884			5,247			1,939			948			41,643
Charge-offs		(4,418	)		(2,739	)		(3,732	)		(1,314	)		(4,346	)		(2,174	)		(660	)		(19,383	)
Recoveries		299			743			753			87			1,381			474			—			3,737
Provisions		6,864			2,106			4,039			1,181			3,242			1,274			(440	)		18,266
Ending balance	$	7,432			12,966			15,142			1,838			5,524			1,513			(152	)		44,263
Ending balances as of December 31, 2013:  Allowance for loan losses
Individually evaluated for impairment	$	202			544			1,162			1			649			1			—			2,559
Collectively evaluated for impairment	$	7,230			12,422			13,980			1,837			4,875			1,512			(152	)		41,704
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—
Loans receivable as of December 31, 2013:
Ending balance – total	$	180,471			244,670			869,387			198,127			709,606			49,696			—			2,251,957
Ending balances as of December 31, 2013: Loans
Individually evaluated for impairment	$	582			8,027			19,111			22			16,894			13			—			44,649
Collectively evaluated for impairment	$	179,889			236,643			850,276			198,105			692,712			49,683			—			2,207,308
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 three and six months ended June 30, 2013.

($ in thousands)	Commercial, Financial, and Agricultural			Real Estate – Construction, Land Development, & Other Land Loans			Real Estate – Residential, Farmland, and Multi- family			Real Estate – Home Equity Lines of Credit			Real Estate – Commercial and Other			Consumer			Unallo- cated			Total
As of and for the three months ended June 30, 2013
Beginning balance	$	4,949			14,857			15,285			2,040			5,714			1,791			125			44,761
Charge-offs		(560	)		(394	)		(858	)		(265	)		(1,907	)		(562	)		—			(4,546	)
Recoveries		214			24			117			4			93			106			—			558
Provisions		1,357			106			417			282			1,339			368			174			4,043
Ending balance	$	5,960			14,593			14,961			2,061			5,239			1,703			299			44,816
As of and for the six months ended June 30, 2013
Beginning balance	$	4,687			12,856			14,082			1,884			5,247			1,939			948			41,643
Charge-offs		(1,384	)		(1,217	)		(1,655	)		(889	)		(2,447	)		(1,090	)		(659	)		(9,341	)
Recoveries		233			617			663			62			882			243			—			2,700
Provisions		2,424			2,337			1,871			1,004			1,557			611			10			9,814
Ending balance	$	5,960			14,593			14,961			2,061			5,239			1,703			299			44,816
Ending balances as of June 30, 2013:  Allowance for loan losses
Individually evaluated for impairment	$	902			480			1,373			1			781			1			—			3,538
Collectively evaluated for impairment	$	5,058			14,113			13,588			2,060			4,458			1,702			299			41,278
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—
Loans receivable as of June 30, 2013:
Ending balance – total	$	176,662			232,352			850,060			198,281			680,607			51,453			—			2,189,415
Ending balances as of June 30, 2013: Loans
Individually evaluated for impairment	$	1,920			7,596			19,080			22			17,585			14			—			46,217
Collectively evaluated for impairment	$	174,742			224,756			830,980			198,259			663,022			51,439			—			2,143,198
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—

Page 23

The following table presents the activity in the allowance for loan losses for covered loans for the three and six months ended June 30, 2014.

($ in thousands)	Covered Loans
As of and for the three months ended June 30, 2014
Beginning balance	$	3,421
Charge-offs		(2,722	)
Recoveries		630
Provisions		2,501
Ending balance	$	3,830
As of and for the six months ended June 30, 2014
Beginning balance	$	4,242
Charge-offs		(5,670	)
Recoveries		2,547
Provisions		2,711
Ending balance	$	3,830
Ending balances as of June 30, 2014: Allowance for loan losses
Individually evaluated for impairment	$	1,340
Collectively evaluated for impairment		2,490
Loans acquired with deteriorated credit quality		46
Loans receivable as of June 30, 2014:
Ending balance – total	$	176,855
Ending balances as of June 30, 2014: Loans
Individually evaluated for impairment	$	23,336
Collectively evaluated for impairment		153,519
Loans acquired with deteriorated credit quality		2,883

The following table presents the activity in the allowance for loan losses for covered loans for the year ended December 31, 2013.

($ in thousands)	Covered Loans
As of and for the year ended December 31, 2013
Beginning balance	$	4,759
Charge-offs		(13,053	)
Recoveries		186
Provisions		12,350
Ending balance	$	4,242
Ending balances as of December 31, 2013:  Allowance for loan losses
Individually evaluated for impairment	$	3,133
Collectively evaluated for impairment		1,109
Loans acquired with deteriorated credit quality		25
Loans receivable as of December 31, 2013:
Ending balance – total	$	210,309
Ending balances as of December 31, 2013: Loans
Individually evaluated for impairment	$	46,126
Collectively evaluated for impairment		164,183
Loans acquired with deteriorated credit quality		3,142

Page 24

The following table presents the activity in the allowance for loan losses for covered loans for the three and six months ended June 30, 2013.

($ in thousands)	Covered Loans
As of and for the three months ended June 30, 2013
Beginning balance	$	5,028
Charge-offs		(541	)
Recoveries		—
Provisions		1,548
Ending balance	$	6,035
As of and for the six months ended June 30, 2013
Beginning balance	$	4,759
Charge-offs		(5,650	)
Recoveries		—
Provisions		6,926
Ending balance	$	6,035
Ending balances as of June 30, 2013: Allowance for loan losses
Individually evaluated for impairment	$	4,700
Collectively evaluated for impairment		1,335
Loans acquired with deteriorated credit quality		17
Loans receivable as of June 30, 2013:
Ending balance – total	$	240,279
Ending balances as of June 30, 2013: Loans
Individually evaluated for impairment	$	57,136
Collectively evaluated for impairment		183,143
Loans acquired with deteriorated credit quality		3,340

Page 25

The following table presents the Company’s impaired loans as of June 30, 2014.

($ in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Non-covered loans with no related allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	—		—		—		22
Commercial - secured		71		74		—		134
Secured by inventory and accounts receivable		—		—		—		—
Real estate – construction, land development & other land loans		5,617		6,116		—		5,954
Real estate – residential, farmland, and multi-family		8,646		9,665		—		6,471
Real estate – home equity lines of credit		483		498		—		327
Real estate – commercial		9,514		11,453		—		8,495
Consumer		10		12		—		7
Total non-covered impaired loans with no allowance	$	24,341		27,818		—		21,410
Total covered impaired loans with no allowance	$	14,444		25,495		—		23,192
Total impaired loans with no allowance recorded	$	38,785		53,313		—		44,602
Non-covered  loans with an allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	99		100		80		110
Commercial - secured		509		509		210		494
Secured by inventory and accounts receivable		—		—		—		25
Real estate – construction, land development & other land loans		1,924		1,987		818		1,705
Real estate – residential, farmland, and multi-family		13,859		13,969		2,016		14,438
Real estate – home equity lines of credit		—		—		—		7
Real estate – commercial		7,495		7,588		528		8,156
Consumer		—		—		—		4
Total non-covered impaired loans with allowance	$	23,886		24,153		3,652		24,939
Total covered impaired loans with allowance	$	8,892		10,106		1,340		10,478
Total impaired loans with an allowance recorded	$	32,778		34,259		4,992		35,417

Interest income recorded on non-covered and covered impaired loans during the six months ended June 30, 2014 is considered insignificant.

Page 26

The following table presents the Company’s impaired loans as of December 31, 2013.

($ in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Non-covered loans with no related allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	—		—		—		—
Commercial - secured		—		—		—		334
Secured by inventory and accounts receivable		—		—		—		—
Real estate – construction, land development & other land loans		6,398		6,907		—		5,005
Real estate – residential, farmland, and multi-family		3,883		4,429		—		2,329
Real estate – home equity lines of credit		—		—		—		—
Real estate – commercial		7,324		9,008		—		9,981
Consumer		—		—		—		—
Total non-covered impaired loans with no allowance	$	17,605		20,344		—		17,649
Total covered impaired loans with no allowance	$	29,058		48,785		—		39,215
Total impaired loans with no allowance recorded	$	46,663		69,129		—		56,864
Non-covered  loans with an allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	115		115		63		72
Commercial - secured		392		394		64		1,081
Secured by inventory and accounts receivable		75		75		75		80
Real estate – construction, land development & other land loans		1,629		2,148		544		2,339
Real estate – residential, farmland, and multi-family		15,228		15,642		1,162		13,417
Real estate – home equity lines of credit		22		22		1		637
Real estate – commercial		9,570		10,873		649		5,914
Consumer		13		35		1		466
Total non-covered impaired loans with allowance	$	27,044		29,304		2,559		24,006
Total covered impaired loans with allowance	$	17,068		22,367		3,133		14,343
Total impaired loans with an allowance recorded	$	44,112		51,671		5,692		38,349

Interest income recorded on non-covered and covered impaired loans during the year ended December 31, 2013 was insignificant.

Page 27

The Company tracks credit quality based on its internal risk ratings. Upon origination a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. Loans that are risk-graded as substandard during the origination process are declined. After loans are initially graded, they are monitored monthly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type.

The following describes the Company’s internal risk grades in ascending order of likelihood of loss:

	Numerical Risk Grade	Description
Pass:
	1	Cash secured loans.
	2	Non-cash secured loans that have no minor or major exceptions to the lending guidelines.
	3	Non-cash secured loans that have no major exceptions to the lending guidelines.
Weak Pass:
	4	Non-cash secured loans that have minor or major exceptions to the lending guidelines, but the exceptions are properly mitigated.
Watch or Standard:
	9	Loans that meet the guidelines for a Risk Graded 5 loan, except the collateral coverage is sufficient to satisfy the debt with no risk of loss under reasonable circumstances.  This category also includes all loans to insiders and any other loan that management elects to monitor on the watch list.
Special Mention:
	5	Existing loans with major exceptions that cannot be mitigated.
Classified:
	6	Loans that have a well-defined weakness that may jeopardize the liquidation of the debt if deficiencies are not corrected.
	7	Loans that have a well-defined weakness that make the collection or liquidation improbable.
	8	Loans that are considered uncollectible and are in the process of being charged-off.

Page 28

The following table presents the Company’s recorded investment in loans by credit quality indicators as of June 30, 2014.

($ in thousands)	Credit Quality Indicator (Grouped by Internally Assigned Grade)
	Pass (Grades 1, 2, & 3)		Weak Pass (Grade 4)		Watch or Standard Loans (Grade 9)		Special Mention Loans (Grade 5)		Classified Loans (Grades 6, 7, & 8)		Nonaccrual Loans		Total
Non-covered loans:
Commercial, financial, and agricultural:
Commercial - unsecured	$	11,722		20,737		7		1,435		2,066		110		36,077
Commercial - secured		34,642		76,763		93		4,403		4,572		3,628		124,101
Secured by inventory and accounts receivable		5,863		9,912		—		1,346		1,033		338		18,492
Real estate – construction, land development & other land loans		65,376		149,982		2,118		11,174		9,718		9,001		247,369
Real estate – residential, farmland, and multi-family		222,681		536,597		5,038		45,084		36,607		21,168		867,175
Real estate – home equity lines of credit		122,853		64,446		1,293		4,030		5,452		2,436		200,510
Real estate - commercial		138,088		517,412		8,743		28,269		15,096		10,297		717,905
Consumer		24,700		18,404		54		684		853		555		45,250
Total	$	625,925		1,394,253		17,346		96,425		75,397		47,533		2,256,879
Unamortized net deferred loan costs														651
Total non-covered  loans													$	2,257,530
Total covered loans	$	17,850		96,435		82		12,888		28,662		20,938		176,855
Total loans	$	643,775		1,490,688		17,428		109,313		104,059		68,471		2,434,385

At June 30, 2014, there was an insignificant amount of loans that were graded “8” with an accruing status.

Page 29

The following table presents the Company’s recorded investment in loans by credit quality indicators as of December 31, 2013.

($ in thousands)	Credit Quality Indicator (Grouped by Internally Assigned Grade)
	Pass (Grades 1, 2, & 3)		Weak Pass (Grade 4)		Watch or Standard Loans (Grade 9)		Special Mention Loans (Grade 5)		Classified Loans (Grades 6, 7, & 8)		Nonaccrual Loans		Total
Non-covered loans:
Commercial, financial, and agricultural:
Commercial - unsecured	$	8,495		24,415		7		1,509		2,367		222		37,015
Commercial - secured		31,494		77,441		100		5,597		4,986		2,662		122,280
Secured by inventory and accounts receivable		4,098		12,800		—		2,022		1,711		545		21,176
Real estate – construction, land development & other land loans		31,221		181,050		2,365		11,646		10,333		8,055		244,670
Real estate – residential, farmland, and multi-family		227,053		540,349		5,062		41,583		37,526		17,814		869,387
Real estate – home equity lines of credit		120,205		63,400		1,499		5,699		5,124		2,200		198,127
Real estate - commercial		115,397		533,680		10,014		24,557		15,843		10,115		709,606
Consumer		25,703		21,790		54		829		995		325		49,696
Total	$	563,666		1,454,925		19,101		93,442		78,885		41,938		2,251,957
Unamortized net deferred loan costs														928
Total non-covered  loans													$	2,252,885
Total covered loans	$	25,078		92,147		—		8,857		47,010		37,217		210,309
Total loans	$	588,744		1,547,072		19,101		102,299		125,895		79,155		2,463,194

At December 31, 2013, there was an insignificant amount of loans that were graded “8” with an accruing status.

Troubled Debt Restructurings

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

The vast majority of the Company’s troubled debt restructurings modified during the periods ended June 30, 2014 and 2013 related to interest rate reductions combined with restructured amortization schedules. The Company does not generally grant principal forgiveness.

All loans classified as troubled debt restructurings are considered to be impaired and are evaluated as such for determination of the allowance for loan losses. The Company’s troubled debt restructurings can be classified as either nonaccrual or accruing based on the loan’s payment status. The troubled debt restructurings that are nonaccrual are reported within the nonaccrual loan totals presented previously.

Page 30

The following table presents information related to loans modified in a troubled debt restructuring during the three and six months ended June 30, 2014.

($ in thousands)	For the three months ended June 30, 2014
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		5	$	411	$	411
Non-covered TDRs - Nonaccrual
Real estate – residential, farmland, and multi-family		2		332		332
Total non-covered TDRs arising during period		7		743		743
Total covered TDRs arising during period– Accruing		2	$	248	$	245
Total covered TDRs arising during period – Nonaccrual		—		—		—
Total TDRs arising during period		9	$	991	$	988

($ in thousands)	For the six months ended June 30, 2014
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		6	$	677	$	677
Non-covered TDRs - Nonaccrual
Real estate – residential, farmland, and multi-family		4		438		438
Total non-covered TDRs arising during period		10		1,115		1,115
Total covered TDRs arising during period– Accruing		2	$	248	$	245
Total covered TDRs arising during period – Nonaccrual		5		710		682
Total TDRs arising during period		17	$	2,073	$	2,042

Page 31

The following table presents information related to loans modified in a troubled debt restructuring during the three and six months ended June 30, 2013.

($ in thousands)	For the three months ended June 30, 2013
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		3	$	574	$	576
Real estate – commercial		1		103		103
Non-covered TDRs – Nonaccrual		—		—		—
Total non-covered TDRs arising during period		4		677		679
Total covered TDRs arising during period– Accruing		3	$	312	$	311
Total covered TDRs arising during period – Nonaccrual		—		—		—
Total TDRs arising during period		7	$	989	$	990

($ in thousands)	For the six months ended June 30, 2013
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		9	$	1,082	$	1,084
Real estate – commercial		3		634		634
Consumer		1		14		14
Non-covered TDRs - Nonaccrual
Real estate – residential, farmland, and multi-family		3		209		209
Total non-covered TDRs arising during period		16		1,939		1,941
Total covered TDRs arising during period– Accruing		4	$	359	$	351
Total covered TDRs arising during period – Nonaccrual		—		—		—
Total TDRs arising during period		20	$	2,298	$	2,292

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Accruing restructured loans that were modified in the previous 12 months and that defaulted during the three and six months ended June 30, 2014 are presented in the table below. The Company considers a loan to have defaulted when it becomes 90 or more days delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to foreclosed real estate.

($ in thousands)	For the three months ended June 30, 2014				For the six months ended June 30, 2014
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Non-covered accruing TDRs that subsequently defaulted
Real estate – construction, land development & other land loans		—	$	—		1	$	5
Real estate – commercial		—		—		1		71
Total non-covered TDRs that subsequently defaulted		—	$	—		2	$	76
Total accruing covered TDRs that subsequently defaulted		—	$	—		—	$	—
Total accruing TDRs that subsequently defaulted		—	$	—		2	$	76

Accruing restructured loans that were modified in the previous 12 months and that defaulted during the three and six months ended June 30, 2013 are presented in the table below.

($ in thousands)	For the three months ended June 30, 2013				For the six months ended June 30, 2013
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Non-covered accruing TDRs that subsequently defaulted
Real estate – construction, land development & other land loans		1	$	342		1	$	342
Real estate – residential, farmland, and multi-family		—		—		1		252
Total non-covered TDRs that subsequently defaulted		1	$	342		2	$	594
Total accruing covered TDRs that subsequently defaulted		—	$	—		1	$	3,501
Total accruing TDRs that subsequently defaulted		1	$	342		3	$	4,095

Note 8 – Deferred Loan Costs

The amount of loans shown on the Consolidated Balance Sheets includes net deferred loan costs of approximately $651,000, $928,000, and $1,168,000 at June 30, 2014, December 31, 2013, and June 30, 2013, respectively.

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Note 9 – FDIC Indemnification Asset

The FDIC indemnification asset is the estimated amount that the Company will receive from the FDIC under loss share agreements associated with two FDIC-assisted failed bank acquisitions. See page 41 of the Company’s 2013 Annual Report on Form 10-K for a detailed explanation of this asset.

The FDIC indemnification asset was comprised of the following components as of the dates shown:

($ in thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Receivable related to loss claims incurred, not yet reimbursed	$	7,036		12,649		40,401
Receivable related to estimated future claims on loans		20,196		33,398		45,866
Receivable related to estimated future claims on foreclosed real estate		2,174		2,575		6,683
FDIC indemnification asset	$	29,406		48,622		92,950

The following presents a rollforward of the FDIC indemnification asset since December 31, 2013.

($ in thousands)
Balance at December 31, 2013	$	48,622
Increase related to unfavorable changes in loss estimates		4,210
Increase related to reimbursable expenses		2,210
Cash received from FDIC		(15,256	)
Accretion of loan discount		(10,380	)
Balance at June 30, 2014	$	29,406

Note 10 – Goodwill and Other Intangible Assets

The following is a summary of the gross carrying amount and accumulated amortization of amortizable intangible assets as of June 30, 2014, December 31, 2013, and June 30, 2013 and the carrying amount of unamortized intangible assets as of those same dates.

	June 30, 2014				December 31, 2013				June 30, 2013
($ in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizable intangible assets:
Customer lists	$	678		484		678		462		678		439
Core deposit premiums		8,560		6,308		8,560		5,942		8,560		5,525
Total	$	9,238		6,792		9,238		6,404		9,238		5,964
Unamortizable intangible assets:
Goodwill	$	65,835				65,835				65,835

Amortization expense totaled $194,000 and $220,000 for the three months ended June 30, 2014 and 2013, respectively. Amortization expense totaled $388,000 and $419,000 for the six months ended June 30, 2014 and 2013, respectively.

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The following table presents the estimated amortization expense for the last two quarters of calendar year 2014 and for each of the four calendar years ending December 31, 2018 and the estimated amount amortizable thereafter. These estimates are subject to change in future periods to the extent management determines it is necessary to make adjustments to the carrying value or estimated useful lives of amortized intangible assets.

($ in thousands)	Estimated Amortization Expense
July 1 to December 31, 2014	$	388
2015		721
2016		654
2017		404
2018		129
Thereafter		150
Total	$	2,446

Note 11 – Pension Plans

The Company has historically sponsored two defined benefit pension plans – a qualified retirement plan (the “Pension Plan”) which was generally available to all employees, and a Supplemental Executive Retirement Plan (the “SERP”), which was for the benefit of certain senior management executives of the Company. Effective December 31, 2012, the Company froze both plans for all participants. Although no previously accrued benefits were lost, employees no longer accrue benefits for service subsequent to 2012.

The Company recorded pension income totaling $242,000 and $190,000 for the three months ended June 30, 2014 and 2013, respectively, which primarily related to investment income from the Pension Plan’s assets. The following table contains the components of the pension income.

	For the Three Months Ended June 30,
	2014			2013			2014			2013		2014 Total			2013 Total
($ in thousands)	Pension Plan			Pension Plan			SERP			SERP		Both Plans			Both Plans
Service cost – benefits earned during the period	$	—			—			80			—		80			—
Interest cost		382			302			53			67		435			369
Expected return on plan assets		(701	)		(574	)		—			—		(701	)		(574	)
Amortization of transition obligation		—			—			—			—		—			—
Amortization of net (gain)/loss		—			15			(56	)		—		(56	)		15
Amortization of prior service cost		—			—			—			—		—			—
Net periodic pension cost	$	(319	)		(257	)		77			67		(242	)		(190	)

The Company recorded pension income totaling $528,000 and $327,000 for the six months ended June 30, 2014 and 2013, respectively, which primarily related to investment income from the Pension Plan’s assets. The following table contains the components of the pension income.

	For the Six Months Ended June 30,
	2014			2013			2014			2013		2014 Total			2013 Total
($ in thousands)	Pension Plan			Pension Plan			SERP			SERP		Both Plans			Both Plans
Service cost – benefits earned during the period	$	—			—			136			—		136			—
Interest cost		731			680			105			134		836			814
Expected return on plan assets		(1,390	)		(1,159	)		—			—		(1,390	)		(1,159	)
Amortization of transition obligation		—			—			—			—		—			—
Amortization of net (gain)/loss		—			18			(110	)		—		(110	)		18
Amortization of prior service cost		—			—			—			—		—			—
Net periodic pension cost	$	(659	)		(461	)		131			134		(528	)		(327	)

The Company’s contributions to the Pension Plan are based on computations by independent actuarial consultants and are intended to be deductible for income tax purposes. The contributions are invested to provide for benefits under the Pension Plan. The Company expects that it will not make any contributions to the Pension Plan in 2014.

The Company’s funding policy with respect to the SERP is to fund the related benefits from the operating cash flow of the Company.

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Note 12 – Comprehensive Income

Comprehensive income is defined as the change in equity during a period for non-owner transactions and is divided into net income and other comprehensive income. Other comprehensive income includes revenues, expenses, gains, and losses that are excluded from earnings under current accounting standards. The components of accumulated other comprehensive income for the Company are as follows:

($ in thousands)	June 30, 2014			December 31, 2013			June 30, 2013
Unrealized gain (loss) on securities available for sale	$	(1,755	)		(2,021	)		1,123
Deferred tax asset (liability)		685			789			(438	)
Net unrealized gain (loss) on securities available for sale		(1,070	)		(1,232	)		685
Additional pension asset (liability)		5,025			5,135			(3,561	)
Deferred tax asset (liability)		(1,937	)		(2,003	)		1,389
Net additional pension asset (liability)		3,088			3,132			(2,172	)
Total accumulated other comprehensive income (loss)	$	2,018			1,900			(1,487	)

The following table discloses the changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2014 (all amounts are net of tax).

($ in thousands)	Unrealized Gain (Loss) on Securities Available for Sale			Additional Pension Asset (Liability)			Total
Beginning balance at January 1, 2014	$	(1,232	)		3,132			1,900
Other comprehensive income (loss) before reclassifications		642			—			642
Amounts reclassified from accumulated other comprehensive income		(480	)		(44	)		(524	)
Net current-period other comprehensive income (loss)		162			(44	)		118
Ending balance at June 30, 2014	$	(1,070	)		3,088			2,018

The following table discloses the changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2013 (all amounts are net of tax).

($ in thousands)	Unrealized Gain (Loss) on Securities Available for Sale			Additional Pension Asset (Liability)			Total
Beginning balance at January 1, 2013	$	2,007			(2,183	)		(176	)
Other comprehensive income (loss) before reclassifications		(1,318	)		—			(1,318	)
Amounts reclassified from accumulated other comprehensive income		(4	)		11			7
Net current-period other comprehensive income (loss)		(1,322	)		11			(1,311	)
Ending balance at June 30, 2013	$	685			(2,172	)		(1,487	)

Note 13 – Fair Value

Relevant accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

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The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at June 30, 2014. The impaired loans shown below are those in which the value is based on the underlying collateral value.

($ in thousands)
Description of Financial Instruments	Fair Value at June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring
Securities available for sale:
Government-sponsored enterprise securities	$	12,459		—		12,459		—
Mortgage-backed securities		104,699		—		104,699		—
Corporate bonds		790		—		790		—
Equity securities		6,130		—		6,130		—
Total available for sale securities	$	124,078		—		124,078		—
Nonrecurring
Impaired loans – covered	$	6,678		—		—		6,678
Impaired loans – non-covered		5,825		—		—		5,825
Foreclosed real estate – covered		9,934		—		—		9,934
Foreclosed real estate – non-covered		9,346		—		—		9,346

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at December 31, 2013.

($ in thousands)
Description of Financial Instruments	Fair Value at December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring
Securities available for sale:
Government-sponsored enterprise securities	$	18,245		—		18,245		—
Mortgage-backed securities		147,187		—		147,187		—
Corporate bonds		3,598		—		3,598		—
Equity securities		4,011		—		4,011		—
Total available for sale securities	$	173,041		—		173,041		—
Nonrecurring
Impaired loans – covered	$	15,284		—		—		15,284
Impaired loans – non-covered		13,020		—		—		13,020
Foreclosed real estate – covered		24,497		—		—		24,497
Foreclosed real estate – non-covered		12,251		—		—		12,251

The following is a description of the valuation methodologies used for instruments measured at fair value.

Securities Available for Sale — When quoted market prices are available in an active market, the securities are classified as Level 1 in the valuation hierarchy. If quoted market prices are not available, but fair values can be estimated by observing quoted prices of securities with similar characteristics, the securities are classified as Level 2 on the valuation hierarchy. Most of the fair values for the Company’s Level 2 securities are determined by our third-party securities portfolio manager using matrix pricing. Matrix pricing is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. For the Company, Level 2 securities include mortgage-backed securities, collateralized mortgage obligations, government-sponsored enterprise securities, and corporate bonds. In cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

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The Company reviews the pricing methodologies utilized by the portfolio manager to ensure the fair value determination is consistent with the applicable accounting guidance and that the investments are properly classified in the fair value hierarchy. Further, the Company validates the fair values for a sample of securities in the portfolio by comparing the fair values provided by the portfolio manager to prices from other independent sources for the same or similar securities. The Company analyzes unusual or significant variances and conducts additional research with the portfolio manager, if necessary, and takes appropriate action based on its findings.

Impaired loans — Fair values for impaired loans in the above tables are generally collateral dependent and are estimated based on underlying collateral values securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined using an income or market valuation approach based on an appraisal conducted by an independent, licensed third party appraiser (Level 3). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3). Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.

Foreclosed real estate – Foreclosed real estate, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value, based on a current appraisal that is generally prepared using an income or market valuation approach and conducted by an independent, licensed third party appraiser, adjusted for estimated selling costs (Level 3). At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses. For any real estate valuations subsequent to foreclosure, any excess of the real estate recorded value over the fair value of the real estate is treated as a foreclosed real estate write-down on the Consolidated Statements of Income.

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of June 30, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

($ in thousands)
Description	Fair Value at June 30, 2014		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired loans – covered	$	6,678	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-10%
Impaired loans – non-covered		5,825	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-10%
Foreclosed real estate – covered		9,934	Appraised value	Discounts to reflect current market conditions and estimated costs to sell	0-10%
Foreclosed real estate – non-covered		9,346	Appraised value	Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell	0-40%

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For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2013, the significant unobservable inputs used in the fair value measurements were as follows:

($ in thousands)
Description	Fair Value at December 31, 2013		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired loans – covered	$	15,284	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-10%
Impaired loans – non-covered		13,020	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-37%
Foreclosed real estate – covered		24,497	Appraised value	Discounts to reflect current market conditions and estimated costs to sell	0-10%
Foreclosed real estate – non-covered		12,251	Appraised value	Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell	0-40%

Transfers of assets or liabilities between levels within the fair value hierarchy are recognized when an event or change in circumstances occurs. There were no transfers between Level 1 and Level 2 for assets or liabilities measured on a recurring basis during the three or six months ended June 30, 2014 or 2013.

For the six months ended June 30, 2014, the increase in the fair value of securities available for sale was $266,000, which is included in other comprehensive income (net of tax expense of $104,000). For the six months ended June 30, 2013, the decrease in the fair value of securities available for sale was $2,166,000, which is included in other comprehensive income (net of tax benefit of $844,000). Fair value measurement methods at June 30, 2014 and 2013 are consistent with those used in prior reporting periods.

The carrying amounts and estimated fair values of financial instruments at June 30, 2014 and December 31, 2013 are as follows:

		June 30, 2014				December 31, 2013
($ in thousands)	Level in Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Cash and due from banks, noninterest-bearing	Level 1	$	92,633		92,633		83,881		83,881
Due from banks, interest-bearing	Level 1		313,141		313,141		136,644		136,644
Federal funds sold	Level 1		1,508		1,508		2,749		2,749
Securities available for sale	Level 2		124,078		124,078		173,041		173,041
Securities held to maturity	Level 2		53,879		57,612		53,995		56,700
Presold mortgages in process of settlement	Level 1		5,926		5,926		5,422		5,422
Total loans, net of allowance	Level 3		2,388,589		2,330,633		2,414,689		2,352,834
Accrued interest receivable	Level 1		8,795		8,795		9,649		9,649
FDIC indemnification asset	Level 3		29,406		28,670		48,622		47,032
Bank-owned life insurance	Level 1		44,685		44,685		44,040		44,040
Deposits	Level 2		2,754,579		2,755,180		2,751,019		2,752,375
Borrowings	Level 2		116,394		101,928		46,394		34,795
Accrued interest payable	Level 2		778		778		879		879

Fair value methods and assumptions are set forth below for the Company’s financial instruments.

Cash and Amounts Due from Banks, Federal Funds Sold, Presold Mortgages in Process of Settlement, Accrued Interest Receivable, and Accrued Interest Payable - The carrying amounts approximate their fair value because of the short maturity of these financial instruments.

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Available for Sale and Held to Maturity Securities - Fair values are provided by a third-party and are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or matrix pricing.

Loans - For nonimpaired loans, fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, financial and agricultural, real estate construction, real estate mortgages and installment loans to individuals. Each loan category is further segmented into fixed and variable interest rate terms. The fair value for each category is determined by discounting scheduled future cash flows using current interest rates offered on loans with similar risk characteristics. Fair values for impaired loans are primarily based on estimated proceeds expected upon liquidation of the collateral.

FDIC Indemnification Asset – Fair value is equal to the FDIC reimbursement rate of the expected losses to be incurred and reimbursed by the FDIC and then discounted over the estimated period of receipt.

Bank-Owned Life Insurance – The carrying value of life insurance approximates fair value because this investment is carried at cash surrender value, as determined by the issuer.

Deposits - The fair value of deposits with no stated maturity, such as noninterest-bearing checking accounts, savings accounts, interest-bearing checking accounts, and money market accounts, is equal to the amount payable on demand as of the valuation date. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered in the marketplace for deposits of similar remaining maturities.

Borrowings - The fair value of borrowings is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered by the Company’s lenders for debt of similar remaining maturities.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no highly liquid market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable and other various accrued expenses. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

Note 14 – Shareholders’ Equity Transactions

Small Business Lending Fund

On September 1, 2011, the Company completed the sale of $63.5 million of Series B Preferred Stock to the Secretary of the Treasury under the Small Business Lending Fund (SBLF). The fund was established under the Small Business Jobs Act of 2010 that was created to encourage lending to small businesses by providing capital to qualified community banks with assets less than $10 billion.

Under the terms of the stock purchase agreement, the Treasury received 63,500 shares of non-cumulative perpetual preferred stock with a liquidation value of $1,000 per share, in exchange for $63.5 million.

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The Series B Preferred Stock qualifies as Tier 1 capital. The dividend rate, as a percentage of the liquidation amount, fluctuated on a quarterly basis during the first 10 quarters during which the Series B Preferred Stock was outstanding, based upon changes in the level of “Qualified Small Business Lending” or “QSBL”. For the first nine quarters after issuance, the dividend rate could range from one percent (1%) to five percent (5%) per annum based upon the increase in QSBL as compared to the baseline. For the tenth calendar quarter through four and one half years after issuance (the “temporary fixed rate period’’), the dividend rate is fixed at between one percent (1%) and seven percent (7%) based upon the level of QSBL compared to the baseline. After four and one half years from the issuance, the dividend rate will increase to nine percent (9%). For quarters subsequent to the issuance in 2011, the Company was able to continually increase its level of small business lending and as a result, the dividend rate steadily decreased from 5.0% in 2011 to 1.0% in early 2013. The Company is now in the “temporary fixed rate period,” in which the dividend rate is fixed for the Company at 1.0%. Unless redeemed, this rate will increase to 9.0% after four and one half years from the stock issuance, which is March 2016 for the Company. Subject to regulatory approval, the Company is generally permitted to redeem the Series B Preferred Shares at par plus unpaid dividends.

For each of the three months ended June 30, 2014 and 2013, the Company accrued approximately $159,000 in preferred dividend payments for the Series B Preferred Stock. For the six months ended June 30, 2014 and 2013, the Company accrued approximately $317,000 and $345,000, respectively, in preferred dividend payments for the Series B Preferred Stock. This amount is deducted from net income in computing “Net income available to common shareholders.”

Stock Issuance

On December 21, 2012, the Company issued 2,656,294 shares of its common stock and 728,706 shares of the Company’s Series C Preferred Stock to certain accredited investors, each at the price of $10.00 per share, pursuant to a private placement transaction. Net proceeds from this sale of common and preferred stock were $33.8 million and were used to strengthen and remove risk from the Company’s balance sheet in anticipation of a planned disposition of certain classified loans and write-down of foreclosed real estate.

The Series C Preferred Stock qualifies as Tier 1 capital and is Convertible Perpetual Preferred Stock, with dividend rights equal to the Company’s Common Stock. Each share of Series C Preferred Stock will automatically convert into one share of Common Stock on the date the holder of Series C Preferred Stock transfers any shares of Series C Preferred Stock to a non-affiliate of the holder in certain permissible transfers. The Series C Preferred Stock is non-voting, except in limited circumstances.

The Series C Preferred Stock pays a dividend per share equal to that of the Company’s common stock. During each of the second quarters of 2014 and 2013, the Company accrued approximately $58,000 in preferred dividend payments for the Series C Preferred Stock. During each of the first six months of 2014 and 2013, the Company accrued approximately $117,000 in preferred dividend payments for the Series C Preferred Stock.

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Item 2 - Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition

Critical Accounting Policies

The accounting principles we follow and our methods of applying these principles conform with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry. Certain of these principles involve a significant amount of judgment and may involve the use of estimates based on our best assumptions at the time of the estimation. The allowance for loan losses, intangible assets, and the fair value and discount accretion of loans acquired in FDIC-assisted transactions are three policies we have identified as being more sensitive in terms of judgments and estimates, taking into account their overall potential impact to our consolidated financial statements.

Allowance for Loan Losses

Due to the estimation process and the potential materiality of the amounts involved, we have identified the accounting for the allowance for loan losses and the related provision for loan losses as an accounting policy critical to our consolidated financial statements. The provision for loan losses charged to operations is an amount sufficient to bring the allowance for loan losses to an estimated balance considered adequate to absorb losses inherent in the portfolio.

Our determination of the adequacy of the allowance is based primarily on a mathematical model that estimates the appropriate allowance for loan losses. This model has three components. The first component involves the estimation of losses on individually significant “impaired loans”. A loan is considered to be impaired when, based on current information and events, it is probable we will be unable to collect all amounts due according to the contractual terms of the loan agreement. A loan is specifically evaluated for an appropriate valuation allowance if the loan balance is above a prescribed evaluation threshold (which varies based on credit quality, accruing status, and type of collateral) and the loan is determined to be impaired. The estimated valuation allowance is the difference, if any, between the loan balance outstanding and the value of the impaired loan as determined by either 1) an estimate of the cash flows that we expect to receive from the borrower discounted at the loan’s effective rate, or 2) in the case of a collateral-dependent loan, the fair value of the collateral.

The second component of the allowance model is the estimation of losses for impaired loans that have common risk characteristics and are aggregated to measure impairment. These impaired loans generally have loan balances below the thresholds that result in an individual review discussed above. For these impaired loans, we aggregate loans among similar loan types and apply loss rates that are derived from historical statistics.

The third component of the allowance model is the estimation of losses for loans that are not considered to be impaired loans. Loans not considered to be impaired are segregated by loan type, and estimated loss percentages are assigned to each loan type, based on historical losses, current economic conditions, and operational conditions specific to each loan type. For loans with more than standard risk, loss percentages are based on a multiple of the estimated loss rate for loans of a similar loan type with normal risk. The multiples assigned vary by type of loan, depending on risk, and we have consulted with an external credit review firm in assigning those multiples.

The reserves estimated for impaired loans (specifically reviewed and aggregate) are then added to the reserve estimated for all other loans. This becomes our “allocated allowance.” In addition to the allocated allowance derived from the model, we also evaluate other data such as the ratio of the allowance for loan losses to total loans, net loan growth information, nonperforming asset levels and trends in such data. Based on this additional analysis, we may determine that an additional amount of allowance for loan losses is necessary to reserve for probable losses. This additional amount, if any, is our “unallocated allowance.” The sum of the allocated allowance and the unallocated allowance is compared to the actual allowance for loan losses recorded on our books and any adjustment necessary for the recorded allowance to equal the computed allowance is recorded as a provision for loan losses. The provision for loan losses is a direct charge to earnings in the period recorded.

Loans covered under loss share agreements (referred to as “covered loans”) are recorded at fair value at acquisition date. Therefore, amounts deemed uncollectible at acquisition date become a part of the fair value calculation and are excluded from the allowance for loan losses. Subsequent decreases in the amount expected to be collected result in a provision for loan losses with a corresponding increase in the allowance for loan losses. Subsequent increases in the amount expected to be collected are accreted into income over the life of the loan. Proportional adjustments are also recorded to the FDIC indemnification asset.

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Although we use the best information available to make evaluations, future material adjustments may be necessary if economic, operational, or other conditions change. In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to recognize additions to the allowance based on the examiners’ judgment about information available to them at the time of their examinations.

For further discussion, see “Nonperforming Assets” and “Summary of Loan Loss Experience” below.

Intangible Assets

Due to the estimation process and the potential materiality of the amounts involved, we have also identified the accounting for intangible assets as an accounting policy critical to our consolidated financial statements.

When we complete an acquisition transaction, the excess of the purchase price over the amount by which the fair market value of assets acquired exceeds the fair market value of liabilities assumed represents an intangible asset. We must then determine the identifiable portions of the intangible asset, with any remaining amount classified as goodwill. Identifiable intangible assets associated with these acquisitions are generally amortized over the estimated life of the related asset, whereas goodwill is tested annually for impairment, but not systematically amortized. Assuming no goodwill impairment, it is beneficial to our future earnings to have a lower amount assigned to identifiable intangible assets and higher amount of goodwill as opposed to having a higher amount considered to be identifiable intangible assets and a lower amount classified as goodwill.

The primary identifiable intangible asset we typically record in connection with a whole bank or bank branch acquisition is the value of the core deposit intangible, whereas when we acquire an insurance agency, the primary identifiable intangible asset is the value of the acquired customer list. Determining the amount of identifiable intangible assets and their average lives involves multiple assumptions and estimates and is typically determined by performing a discounted cash flow analysis, which involves a combination of any or all of the following assumptions: customer attrition/runoff, alternative funding costs, deposit servicing costs, and discount rates. We typically engage a third party consultant to assist in each analysis. For the whole bank and bank branch transactions recorded to date, the core deposit intangibles have generally been estimated to have a life ranging from seven to ten years, with an accelerated rate of amortization. For insurance agency acquisitions, the identifiable intangible assets related to the customer lists were determined to have a life of ten to fifteen years, with amortization occurring on a straight-line basis.

Subsequent to the initial recording of the identifiable intangible assets and goodwill, we amortize the identifiable intangible assets over their estimated average lives, as discussed above. In addition, on at least an annual basis, goodwill is evaluated for impairment by comparing the fair value of our reporting units to their related carrying value, including goodwill (our community banking operation is our only material reporting unit). If the carrying value of a reporting unit were ever to exceed its fair value, we would determine whether the implied fair value of the goodwill, using a discounted cash flow analysis, exceeded the carrying value of the goodwill. If the carrying value of the goodwill exceeded the implied fair value of the goodwill, an impairment loss would be recorded in an amount equal to that excess. Performing such a discounted cash flow analysis would involve the significant use of estimates and assumptions.

In our 2013 goodwill impairment evaluation, we engaged a consulting firm that used various valuation techniques to assist us in concluding that our goodwill was not impaired.

We review identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our policy is that an impairment loss is recognized, equal to the difference between the asset’s carrying amount and its fair value, if the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Estimating future cash flows involves the use of multiple estimates and assumptions, such as those listed above.

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Fair Value and Discount Accretion of Loans Acquired in FDIC-Assisted Transactions

We consider the determination of the initial fair value of loans acquired in FDIC-assisted transactions, the initial fair value of the related FDIC indemnification asset, and the subsequent discount accretion of the purchased loans to involve a high degree of judgment and complexity. We determine fair value accounting estimates of newly assumed assets and liabilities in accordance with relevant accounting guidance. However, the amount that we realize on these assets could differ materially from the carrying value reflected in our financial statements, based upon the timing of collections on the acquired loans in future periods. To the extent the actual values realized for the acquired loans are different from the estimates, the FDIC indemnification asset will generally be impacted in an offsetting manner due to the loss-sharing support from the FDIC.

Because of the inherent credit losses associated with the acquired loans in a failed bank acquisition, the amount that we record as the fair values for the loans is generally less than the contractual unpaid principal balance due from the borrowers, with the difference being referred to as the “discount” on the acquired loans. We have applied the cost recovery method of accounting to all purchased impaired loans due to the uncertainty as to the timing of expected cash flows. This will generally result in the recognition of interest income on these impaired loans only when the cash payments received from the borrower exceed the recorded net book value of the related loans.

For nonimpaired purchased loans, we accrete the discount over the lives of the loans in a manner consistent with the guidance for accounting for loan origination fees and costs.

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FDIC Indemnification Asset

The FDIC indemnification asset is the estimated amount that the Company will receive from the FDIC under loss share agreements associated with two FDIC-assisted failed bank acquisitions. See page 41 of the Company’s 2013 Annual Report on Form 10-K for a detailed explanation of this asset.

The following table presents additional information regarding our covered loans, loan discounts, allowances for loan losses and the corresponding FDIC indemnification asset:

($ in thousands)
At June 30, 2014	Cooperative Single Family Loss Share Loans		Cooperative Non-Single Family Loss Share Loans		Bank of Asheville Single Family Loss Share Loans		Bank of Asheville Non-Single Family Loss Share Loans		Total
Expiration of loss share agreement		6/30/2019		6/30/2014		3/31/2021		3/31/2016
Nonaccrual covered loans
Unpaid principal balance	$	8,280		17,842		513		7,698		34,333
Carrying value prior to loan discount*		8,093		9,705		392		6,056		24,246
Loan discount		1,046		—		246		2,016		3,308
Net carrying value		7,047		9,705		146		4,040		20,938
Allowance for loan losses		762		402		24		475		1,663
Indemnification asset recorded		1,411		—		201		1,669		3,281
All other covered loans
Unpaid principal balance		106,999		30,432		10,518		31,087		179,036
Carrying value prior to loan discount*		106,901		29,968		10,427		31,073		178,369
Loan discount		14,630		—		2,576		5,246		22,452
Net carrying value		92,271		29,968		7,851		25,827		155,917
Allowance for loan losses		389		1,329		48		401		2,167
Indemnification asset recorded		11,044		—		2,010		3,965		17,019
All covered loans
Unpaid principal balance		115,279		48,274		11,031		38,785		213,369
Carrying value prior to loan discount*		114,994		39,673		10,819		37,129		202,615
Loan discount		15,676		—		2,822		7,262		25,760
Net carrying value		99,318		39,673		7,997		29,867		176,855
Allowance for loan losses		1,151		1,731		72		876		3,830
Indemnification asset recorded		12,455		—		2,211		5,634		20,300	**
Foreclosed Properties
Net carrying value		2,822		3,004		142		3,966		9,934
Indemnification asset recorded		1,314		—		83		777		2,174
For the Six Months Ended June 30, 2014
Loan discount accretion recognized		1,695		4,297		946		4,321		11,259
Indemnification asset expense associated with the loan discount accretion recognized		2,057		3,463		822		4,038		10,380

* Reflects partial charge-offs
** A present value adjustment of $104 reduces the carrying value of this asset to $20,196.

As noted in the table above, our loss share agreement related to Cooperative Bank’s non-single family assets expired on June 30, 2014. On July 1, 2014, the remaining balances associated with the Cooperative non-single family loans and foreclosed properties were transferred from the covered portfolio to the non-covered portfolio. Therefore, after June 30, 2014, we will bear all future losses on that portfolio of loans and foreclosed properties. At June 30, 2014, these loans and foreclosed properties were classified as covered. At June 30, 2014, the portfolio of loans had a carrying value of $39.7 million and the portfolio of foreclosed properties had a carrying value of $3.0 million. Of the $39.7 million in loans that are losing loss share protection, approximately $9.7 million of these loans were on nonaccrual status and $2.1 million of these loans were classified as accruing troubled debt restructurings as of June 30, 2014. Additionally, approximately $1.7 million in allowance for loan losses that related to this portfolio of loans were transferred to the allowance for loan losses for non-covered loans on July 1, 2014.

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As noted in the table above, there is no remaining loan discount or indemnification asset related to the Cooperative non-single family loss share loans or foreclosed properties. Loan discount accretion and indemnification asset expense will continue to be recorded on the other three portfolios.

Current Accounting Matters

See Note 2 to the Consolidated Financial Statements above for information about accounting standards that we have recently adopted.

RESULTS OF OPERATIONS

Net income available to common shareholders for the second quarter of 2014 amounted to $6.4 million, or $0.32 per diluted common share, an increase of 19.7% compared to the $5.4 million, or $0.27 per diluted common share, recorded in the second quarter of 2013. For the six months ended June 30, 2014, we recorded net income available to common shareholders of $11.9 million, or $0.59 per diluted common share, an increase of 44.5% compared to the $8.2 million, or $0.41 per diluted common share, for the six months ended June 30, 2013. The higher earnings were primarily the result of lower provisions for loan losses.

Net Interest Income and Net Interest Margin

Net interest income for the second quarter of 2014 amounted to $33.8 million, a 5.0% decrease from the $35.6 million recorded in the second quarter of 2013. Net interest income for the six months ended June 30, 2014 amounted to $69.3 million, a 2.7% increase from the $67.5 million recorded in the comparable period of 2013.

Our net interest margin (tax-equivalent net interest income divided by average earning assets) in the second quarter of 2014 was 4.65% compared to 5.10% for the second quarter of 2013. For the six month period ended June 30, 2014, our net interest margin was 4.89% compared to 4.90% for the same period in 2013. The lower margin realized in the second quarter of 2014 compared to the second quarter of 2013 was primarily due to a lower amount of discount accretion on loans purchased in failed-bank acquisitions and lower average asset yields. Loan discount accretion amounted to $4.9 million in the second quarter of 2014 and $6.6 million in the second quarter of 2013. For the first six months of 2014, loan discount accretion amounted to $11.3 million compared to $10.3 million for the first six months of 2013.

Our cost of funds has steadily declined from 0.41% in the second quarter of 2013 to 0.30% in the second quarter of 2014, which has had a positive impact on our net interest margin.

Provision for Loan Losses and Asset Quality

We recorded total provisions for loan losses of $3.7 million in the second quarter of 2014 compared to $5.6 million for the second quarter of 2013. For the six months ended June 30, 2014, we recorded total provisions for loan losses of $7.2 million compared to $16.7 million for the same period of 2013 – see explanation of the terms “non-covered” and “covered” in the section below entitled “Note Regarding Components of Earnings.”

Total non-covered nonperforming assets have remained relatively unchanged over the past year, amounting to $84.1 million at June 30, 2014 (2.73% of total non-covered assets), $82.0 million at December 31, 2013 and $79.1 million at June 30, 2013 (2.66% of total non-covered assets).

Total covered nonperforming assets have steadily declined in the past year, amounting to $39.1 million at June 30, 2014 compared to $70.6 million at December 31, 2013 and $89.1 million at June 30, 2013. Over the past twelve months, we have resolved a significant amount of covered loans and have experienced strong property sales along the North Carolina coast, which is where most of our covered assets are located.

Noninterest Income

Total noninterest income for the three months ended June 30, 2014 was $5.0 million compared to $4.5 million for the comparable period of 2013. For the six months ended June 30, 2014, noninterest income amounted to $5.3 million compared to $11.6 million for the six months ended June 30, 2013.

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Core noninterest income for the second quarter of 2014 was $7.8 million, an increase of 8.6% over the $7.2 million reported for the second quarter of 2013. For the first six months of 2014, core noninterest income amounted to $15.3 million, an 11.9% increase from the $13.7 million recorded in the comparable period of 2013. Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions, and fees, iii) fees from presold mortgages, iv) commissions from financial product sales, and v) bank-owned life insurance income. The primary factors that resulted in the increases in core noninterest income in 2014 were higher service charges on deposit accounts and higher debit and credit card interchange fees. Service charges on deposit accounts have increased primarily as a result of the December 2013 introduction of a new deposit product line-up that simplified the Company’s product offering and also altered the fee structure of many accounts. The increase in debit and credit card interchange fees is due to growth in the number and usage of debit and credit cards.

Noncore components of noninterest income resulted in net losses of $2.9 million in the second quarter of 2014 compared to net losses of $2.7 million in the second quarter of 2013. For the six months ended June 30, 2014 and 2013, the Company recorded net losses of $10.0 million and $2.1 million, respectively, related to the noncore components of noninterest income. The largest variances related to foreclosed property gains/losses and indemnification asset income (expense) – see discussion in the section entitled “Components of Earnings”.

During the second quarter of 2014, we realized $0.8 million in securities gains.

Noninterest Expenses

Noninterest expenses amounted to $24.8 million in the second quarter of 2014 compared to $25.8 million recorded in the second quarter of 2013. Noninterest expenses for the six months ended June 30, 2014 amounted to $48.3 million compared to $49.0 million recorded in the first half of 2013. The decreases in 2014 were due primarily to the Company accruing $1.6 million in severance expenses in the second quarter of 2013 (included in “other operating expenses” in the accompanying financial statements and tables).

Balance Sheet and Capital

Total assets at June 30, 2014 amounted to $3.3 billion, a 0.6% increase from a year earlier. Total loans at June 30, 2014 amounted to $2.4 billion, a 0.1% increase from a year earlier, and total deposits amounted to $2.8 billion at June 30, 2014, a 2.3% decrease from a year earlier.

Non-covered loans increased 3.1% from June 30, 2013 to June 30, 2014. Since January 1, 2014, growth in non-covered loans has slowed, with the progressive decline in covered loans outpacing non-covered loan growth. Strong competition in the marketplace for high quality loans has contributed to the low growth.

The lower amount of deposits at June 30, 2014 compared to June 30, 2013 was primarily due to declines in retail time deposits (called “other time deposits” and “other time deposits > $100,000” in the accompanying financial statements and tables), with increases in checking accounts offsetting a large portion of the decline. Retail time deposits are generally one of our most expensive funding sources, and thus the shift from this category benefited our overall cost of funds.

We obtained new borrowings in the first quarter of 2014 from a low cost funding source in order to offset declines in time deposit balances, and in anticipation of future loan growth. At June 30, 2014, these low-cost borrowings totaled $70 million, compared to none a year earlier.

We remain well-capitalized by all regulatory standards, with a Total Risk-Based Capital Ratio at June 30, 2014 of 17.14% compared to the 10.00% minimum to be considered well-capitalized. Our tangible common equity to tangible assets ratio was 7.57% at June 30, 2014, an increase of 64 basis points from a year earlier.

Note Regarding Components of Earnings

Our results of operation are significantly affected by the on-going accounting for two FDIC-assisted failed bank acquisitions. In the discussion above and elsewhere in this document, the term “covered” is used to describe assets included as part of FDIC loss share agreements, which generally result in the FDIC reimbursing the Company for 80% of losses incurred on those assets. The term “non-covered” refers to the Company’s legacy assets, which are not included in any type of loss share arrangement.

For covered loans that deteriorate in terms of repayment expectations, we record immediate allowances through the provision for loan losses. For covered loans that experience favorable changes in credit quality compared to what was expected at the acquisition date, including loans that payoff, we record positive adjustments to interest income over the life of the respective loan – also referred to as loan discount accretion. For covered foreclosed properties that are sold at gains or losses or that are written down to lower values, we record the gains/losses within noninterest income.

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The adjustments discussed above are recorded within the income statement line items noted without consideration of the FDIC loss share agreements. Because favorable changes in covered assets result in lower expected FDIC claims, and unfavorable changes in covered assets result in higher expected FDIC claims, the FDIC indemnification asset is adjusted to reflect those expectations. The net increase or decrease in the indemnification asset is reflected within noninterest income.

The adjustments noted above can result in volatility within individual income statement line items. Because of the FDIC loss share agreements and the associated indemnification asset, pretax income resulting from amounts recorded as provisions for loan losses on covered loans, discount accretion, and losses from covered foreclosed properties is generally only impacted by 20% of these amounts due to the corresponding adjustments made to the indemnification asset.

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Components of Earnings

Net interest income is the largest component of earnings, representing the difference between interest and fees generated from earning assets and the interest costs of deposits and other funds needed to support those assets. Net interest income for the three month period ended June 30, 2014 amounted to $33.8 million, a decrease of $1.8 million, or 5.0%, from the $35.6 million recorded in the second quarter of 2013. Net interest income on a tax-equivalent basis for the three month period ended June 30, 2014 amounted to $34.2 million, a decrease of $1.8 million, or 5.0%, from the $36.0 million recorded in the second quarter of 2013. We believe that analysis of net interest income on a tax-equivalent basis is useful and appropriate because it allows a comparison of net interest income amounts in different periods without taking into account the different mix of taxable versus non-taxable investments that may have existed during those periods.

	Three Months Ended June 30,
($ in thousands)	2014		2013
Net interest income, as reported	$	33,808		35,602
Tax-equivalent adjustment		375		373
Net interest income, tax-equivalent	$	34,183		35,975

Net interest income for the six month period ended June 30, 2014 amounted to $69.3 million, an increase of $1.8 million, or 2.7%, from the $67.5 million recorded in the first half of 2013. Net interest income on a tax-equivalent basis for the six month period ended June 30, 2014 amounted to $70.1 million, an increase of $1.8 million, or 2.7%, from the $68.3 million recorded in the comparable period of 2013.

	Six Months Ended June 30,
($ in thousands)	2014		2013
Net interest income, as reported	$	69,343		67,523
Tax-equivalent adjustment		749		745
Net interest income, tax-equivalent	$	70,092		68,268

There are two primary factors that cause changes in the amount of net interest income we record - 1) changes in our loans and deposits balances, and 2) our net interest margin (tax-equivalent net interest income divided by average interest-earning assets).

For the three months ended June 30, 2014, the lower net interest income compared to the same period of 2013 was due to lower net interest margins, which was partially offset by increases in interest-earning assets (see discussion below).

For the six months ended June 30, 2014, the higher net interest income compared to the same period of 2013 was due to increases in interest-earning assets (primarily average loan balances) and decreases in interest-bearing liabilities (see discussion below).

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The following tables present net interest income analysis on a tax-equivalent basis for the periods indicated.

	For the Three Months Ended June 30,
	2014						2013
($ in thousands)	Average Volume		Average Rate		Interest Earned or Paid		Average Volume		Average Rate		Interest Earned or Paid
Assets
Loans (1)	$	2,438,364		5.65%	$	34,376	$	2,409,037		6.17%	$	37,030
Taxable securities		176,382		1.99%		876		178,566		1.85%		824
Non-taxable securities (2)		53,917		6.29%		846		54,950		6.20%		850
Short-term investments, principally federal funds		277,923		0.33%		232		184,618		0.38%		173
Total interest-earning assets		2,946,586		4.95%		36,330		2,827,171		5.52%		38,877
Cash and due from banks		81,327						80,751
Premises and equipment		76,958						78,039
Other assets		154,679						258,814
Total assets	$	3,259,550					$	3,244,775
Liabilities
Interest bearing checking	$	535,304		0.06%	$	80	$	524,930		0.10%	$	131
Money market deposits		556,264		0.11%		156		566,147		0.16%		220
Savings deposits		175,504		0.05%		23		167,181		0.07%		30
Time deposits >$100,000		574,037		0.82%		1,172		632,488		0.98%		1,546
Other time deposits		396,885		0.42%		419		486,157		0.59%		719
Total interest-bearing deposits		2,237,994		0.33%		1,850		2,376,903		0.45%		2,646
Borrowings		116,774		1.02%		297		46,394		2.21%		256
Total interest-bearing liabilities		2,354,768		0.37%		2,147		2,423,297		0.48%		2,902
Noninterest bearing checking		513,472						441,344
Other liabilities		10,768						18,910
Shareholders’ equity		380,542						361,224
Total liabilities and shareholders’ equity	$	3,259,550					$	3,244,775
Net yield on interest-earning assets and net interest income				4.65%	$	34,183				5.10%	$	35,975
Interest rate spread				4.58%						5.04%
Average prime rate				3.25%						3.25%

(1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown.

(2) Includes tax-equivalent adjustments of $375,000 and $373,000 in 2014 and 2013, respectively, to reflect the tax benefit that we receive related to tax-exempt securities, which carry interest rates lower than similar taxable investments due to their tax exempt status. This amount has been computed assuming a 39% tax rate and is reduced by the related nondeductible portion of interest expense.

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	For the Six Months Ended June 30,
	2014						2013
($ in thousands)	Average Volume		Average Rate		Interest Earned or Paid		Average Volume		Average Rate		Interest Earned or Paid
Assets
Loans (1)	$	2,448,866		5.80%	$	70,462	$	2,395,949		5.94%	$	70,581
Taxable securities		178,305		2.12%		1,877		171,425		2.03%		1,729
Non-taxable securities (2)		53,946		6.32%		1,690		55,449		6.19%		1,701
Short-term investments, principally federal funds		210,579		0.34%		351		186,135		0.35%		327
Total interest-earning assets		2,891,696		5.19%		74,380		2,808,958		5.34%		74,338
Cash and due from banks		82,285						80,916
Premises and equipment		77,199						76,647
Other assets		168,019						270,098
Total assets	$	3,219,199					$	3,236,619
Liabilities
Interest bearing checking	$	532,207		0.06%	$	160	$	522,933		0.11%	$	293
Money market deposits		555,028		0.11%		307		563,175		0.19%		526
Savings deposits		174,366		0.05%		44		164,792		0.09%		72
Time deposits >$100,000		574,832		0.83%		2,355		643,209		0.99%		3,159
Other time deposits		405,936		0.43%		875		491,093		0.62%		1,508
Total interest-bearing deposits		2,242,369		0.34%		3,741		2,385,202		0.47%		5,558
Borrowings		82,084		1.34%		547		46,394		2.23%		512
Total interest-bearing liabilities		2,324,453		0.37%		4,288		2,431,596		0.50%		6,070
Noninterest bearing checking		502,961						425,544
Other liabilities		13,305						19,186
Shareholders’ equity		378,480						360,293
Total liabilities and shareholders’ equity	$	3,219,199					$	3,236,619
Net yield on interest-earning assets and net interest income				4.89%	$	70,092				4.90%	$	68,268
Interest rate spread				4.82%						4.84%
Average prime rate				3.25%						3.25%

(1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown.

(2) Includes tax-equivalent adjustments of $749,000 and $745,000 in 2014 and 2013, respectively, to reflect the tax benefit that we receive related to tax-exempt securities, which carry interest rates lower than similar taxable investments due to their tax exempt status. This amount has been computed assuming a 39% tax rate and is reduced by the related nondeductible portion of interest expense.

Average loans outstanding for the second quarter of 2014 were $2.438 billion, which was 1.2% more than the average loans outstanding for the second quarter of 2013 ($2.409 billion). Average loans outstanding for the six months ended June 30, 2014 were $2.449 billion, which was 2.2% more than the average loans outstanding for the six months ended June 30, 2013 ($2.396 billion). The higher amount of average loans outstanding in 2014 is due to internal loan growth. Partially offsetting the internal loan growth was the resolution of covered loans within our “covered loan” portfolio through foreclosure, charge-off, or repayment.

The mix of our loan portfolio remained substantially the same at June 30, 2014 compared to December 31, 2013, with approximately 90% of our loans being real estate loans, 7% being commercial, financial, and agricultural loans, and the remaining 3% being consumer installment loans. The majority of our real estate loans are personal and commercial loans where real estate provides additional security for the loan.

Average total deposits outstanding for the second quarter of 2014 were $2.751 billion, which was 2.4% less than the average deposits outstanding for the second quarter of 2013 ($2.818 billion). Average deposits outstanding for the six months ended June 30, 2014 were $2.745 billion, which was 2.3% less than the average deposits outstanding for the six months ended June 30, 2013 ($2.811 billion).

Average transaction deposit accounts (noninterest bearing checking, interest bearing checking, money market and savings accounts) increased from $1.676 billion during the first six months of 2013 to $1.765 billion for the first six months of 2014, representing growth of $88 million, or 5.3%. With the growth of our transaction deposit accounts, we were able to reduce our reliance on higher cost sources of funding, specifically time deposits. Average time deposits declined from $1.13 billion for the first six months of 2013 to $981 million for the first six months of 2014, a decrease of $154 million, or 13.5%. Average borrowings increased from $46 million for the first six months of 2013 to $82 million for the first six months of 2014. This favorable change in funding mix was largely responsible for our average cost of interest bearing liabilities decreasing from 0.50% for the first six months of 2013 to 0.37% for the first six months of 2014. Our total cost of funds, which includes noninterest bearing checking accounts at a zero percent cost, was 0.43% for the first six months of 2013 compared to 0.31% for the first six months of 2014.

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See additional information regarding changes in the Company’s loans and deposits in the section below entitled “Financial Condition.”

Our net interest margin (tax-equivalent net interest income divided by average earning assets) for the second quarter of 2014 was 4.65% compared to 5.10% for the second quarter of 2013. The lower quarterly margin was primarily a result of a lower amount of discount accretion on loans purchased in failed bank acquisitions (see discussion below), and lower average asset yields that are primarily a result of the prolonged low interest rate environment. During this long period of low interest rates, loans and securities originated/purchased during times of higher interest rates are experiencing payoffs and redemptions, the proceeds of which are being reinvested into the currently lower interest rate environment. Because of the short-term nature of most of our interest-bearing liabilities, they are already reflective of the current interest rate environment.

For the six month period ended June 30, 2014, our net interest margin remained relatively stable – 4.89% compared to 4.90% for the same period in 2013. The virtually flat net interest margin is a result of asset yields and interest costs declining by approximately the same amounts.

Our net interest margin benefitted from net accretion of purchase accounting premiums/discounts associated with the Cooperative acquisition in June 2009 and, to a lesser degree, the acquisition of The Bank of Asheville in January 2011. For the three months ended June 30, 2014 and 2013, we recorded $4,806,000 and $6,504,000, respectively, in net accretion of purchase accounting premiums/discounts, which increased net interest income. For the six months ended June 30, 2014 and 2013, we recorded $11,168,000 and $10,055,000, respectively, in net accretion of purchase accounting premiums/discounts. The following table presents the detail of the purchase accounting adjustments that impacted net interest income.

	For the Three Months Ended						For the Six Months Ended
$ in thousands	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Interest income – reduced by premium amortization on loans	$	(49	)		(116	)		(98	)		(232	)
Interest income – increased by accretion of loan discount		4,851			6,612			11,259			10,270
Interest expense – reduced by premium amortization of deposits		4			8			7			17
Impact on net interest income	$	4,806			6,504			11,168			10,055

See additional information regarding net interest income in the section below entitled “Interest Rate Risk.”

We recorded total provisions for loan losses of $3.7 million in the second quarter of 2014 compared to $5.6 million in the second quarter of 2013. For the six months ended June 30, 2014, we recorded total provisions for loans losses of $7.2 million compared to $16.7 million in the same period of 2013.

The provision for loan losses on non-covered loans amounted to $1.2 million in the second quarter of 2014 compared to $4.0 million in the second quarter of 2013. For the first six months of 2014, the provision for loan losses on non-covered loans amounted to $4.5 million compared to $9.8 million for the same period of 2013. The decreases in 2014 were primarily the result of lower loan growth during the respective periods and stable asset quality trends. See additional discussion below in the section entitled “Allowance for Loan Losses and Summary of Loan Loss Experience.”

The provision for loan losses on covered loans amounted to $2.5 million in the second quarter of 2014 compared to $1.5 million in the second quarter of 2013. The higher provision in 2014 is primarily the result of losses associated with several large loans that were experienced during the quarter. For the six months ended June 30, 2014, the provision for loan losses on covered loans amounted to $2.7 million compared to $6.9 million for the same period of 2013. The decrease was primarily due to lower levels of covered nonperforming loans during the period, stabilization in the underlying collateral values of nonperforming loans, and a $1.9 million recovery recorded in the first quarter of 2014.

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Total noninterest income was $5.0 million in the second quarter of 2014 compared to $4.5 million for the second quarter of 2013. Total noninterest income was $5.3 million for the first six months of 2014 compared to $11.6 million for the same period in 2013.

As presented in the table below, core noninterest income for the second quarter of 2014 was $7.8 million, an increase of 8.6% over the $7.2 million reported for the second quarter of 2013. Core noninterest income for the six months ended June 30, 2014 was $15.3 million, an increase of 11.9% over the $13.7 million reported for the comparable period in 2013. Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions, and fees, iii) fees from presold mortgages, iv) commissions from sales of insurance and financial products, and v) bank-owned life insurance income.

The following table presents our core noninterest income for the three and six month periods ending June 30, 2014 and 2013, respectively.

	For the Three Months Ended				For the Six Months Ended
$ in thousands	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
Service charges on deposit accounts	$	3,446		3,254		7,019		6,189
Other service charges, commissions, and fees		2,562		2,340		4,929		4,515
Fees from presold mortgages		790		820		1,397		1,567
Commissions from sales of insurance and financial products		706		579		1,300		978
Bank-owned life insurance income		318		212		645		420
Core noninterest income	$	7,822		7,205		15,290		13,669

Most categories of core noninterest income increased during 2014 compared to the same periods in 2013.

As shown in the table above, service charges on deposit accounts increased in 2014 compared to 2013 primarily due to a new deposit product line-up that we introduced in December 2013. The new line-up simplified our product offering and also altered the fee structure of many accounts. Some customer charges were lowered or eliminated, while other fees were increased, with the most significant change being the elimination of free checking for most customers maintaining low account balances, which is the primary cause of the higher service charges in 2014.

Other service charges, commissions, and fees increased in 2014 compared to 2013 primarily as a result of higher debit card and credit card interchange fees. We earn a small fee each time a customer uses a debit card to make a purchase. Due to the growth in checking accounts and increased customer usage of debit cards, we have experienced increases in this line item. Interchange income from credit cards has also increased due to growth in the number and usage of credit cards, which we believe is a result of increased promotion of this product.

Fees from presold mortgages decreased slightly for both the three and six month periods ended June 30, 2014 compared to the comparable periods of 2013, due primarily to lower refinancing activity.

Commissions from sales of insurance and financial products have increased in 2014 compared to 2013 as a result of increased sales volume generated by additional personnel hired in our wealth management division over the past three years.

Bank-owned life insurance income increased in 2014 compared 2013 as a result of $15 million in additional bank-owned life insurance purchased in June 2013.

Within the noncore components of noninterest income, we recorded net losses on non-covered foreclosed properties of $0.6 million and $0.7 million for the three and six months ended June 30, 2014, respectively, compared to net gains of $0.8 million and $1.5 million for the same periods of 2013. In the second quarter of 2014, we had a significant write-down associated with one property and incurred losses on the sale of several of our least desirable properties. In 2013, we experienced several large gains related to the sale of properties along the North Carolina coast that had recovered in value.

Losses on covered foreclosed properties amounted to $1.2 million and $3.3 million during the three and six month periods ended June 30, 2014, respectively, compared to $0.5 million and $5.1 million in the comparable periods of 2013. Losses on covered foreclosed properties have generally declined over the past several years as a result of stabilization in property values and declining numbers of properties that we hold. In the second quarter of 2014, we sold many of our least desirable covered foreclosed properties at amounts that resulted in losses.

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Indemnification asset income (expense) is recorded to reflect additional (decreased) amounts expected to be received from the FDIC during the period related to covered assets. The three primary items that result in recording indemnification asset income (expense) are 1) income from loan discount accretion, which results in indemnification expense, 2) provisions for loan losses on covered loans, which result in indemnification income and 3) foreclosed property losses on covered assets, which also result in indemnification income. In the second quarter of 2014, the Company recorded $1.6 million in indemnification asset expense compared to $3.4 million in indemnification asset expense in the second quarter of 2013. The variance was because in the second quarter of 2014, higher amounts of loan and foreclosed property losses resulted in more indemnification income compared to the second quarter of 2013, which reduced the indemnification expense associated with loan discount accretion income to a greater degree. For the six months ended June 30, 2014, indemnification asset expense amounted to $6.5 million compared to indemnification asset income of $1.5 million for the same period of 2013. The variance was primarily caused by higher amounts of covered losses experienced in 2013 that resulted in the recording of indemnification income, as shown in the following table:

($ in millions)	For the Three Months Ended						For the Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Indemnification asset expense associated with loan discount accretion income	$	(4.4	)		(5.3	)		(10.4	)		(8.2	)
Indemnification asset income (expense) associated with loan losses (recoveries),net		1.9			1.5			1.6			5.4
Indemnification asset income associated with foreclosed property losses		0.9			0.4			2.6			4.1
Other sources of indemnification asset income (expense)		—			—			(0.3	)		0.2
Total indemnification asset income (expense)	$	(1.6	)		(3.4	)		(6.5	)		1.5

For the three and six month periods ended June 30, 2014, we recorded $0.8 million in gains on sales of approximately $46.7 million in available for sale securities. We recorded negligible gains on securities during the first six months of 2013.

Noninterest expenses amounted to $24.8 million in the second quarter of 2014 compared to $25.8 million recorded in the same period of 2013. Noninterest expenses for the six months ended June 30, 2014 amounted to $48.3 million compared to $49.0 million recorded in the first half of 2013.

Salaries expense was $11.4 million for the second quarter of 2014 compared to $11.0 million in the second quarter of 2013. Salaries expense amounted to $23.0 million for the first half of 2014 compared to $21.7 million for the comparable period of 2013. The increase in salaries expense has been primarily associated with the hiring of additional employees in our credit administration and mortgage banking divisions.

Employee benefits expense was $2.3 million in the second quarter of 2014 compared to $2.5 million in the second quarter of 2013. For the first six months of 2013, employee benefits expense was $4.6 million compared to $5.2 million for the same period in 2013. The decrease primarily relates to a $0.2 million and $0.5 million decline in health care expense resulting from lower incurred medical claims for the three and six month periods ended June 30, 2014, respectively.

Occupancy and equipment expense did not vary materially when comparing the three and six month periods ending June 30, 2014 to the same periods of 2013. Total occupancy and equipment expense was approximately $2.8 million for the second quarters of 2014 and 2013 and $5.6 million for the first six months of 2014 and 2013.

Other operating expenses amounted to $8.1 million and $9.1 million for the second quarters of 2014 and 2013, respectively, and $14.7 million and $16.1 million for the six month periods ended June 30, 2014 and 2013, respectively. The primary reason for the decreases in both periods relates to higher severance expenses recorded in 2013. In the second quarter of 2013, we accrued approximately $1.6 million in severance expenses due to separation of service of several employees during the quarter, including the Company’s former chief executive officer.

For the second quarter of 2014, the provision for income taxes was $3.7 million, an effective tax rate of 35.7%, compared to $3.2 million for the same period of 2013, which was an effective tax rate of 36.1%. For the first six months of 2014, the provision for income taxes was $6.7 million, an effective tax rate of 35.3%, compared to $4.7 million for the same period of 2014, which was an effective tax rate of 35.2%.

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We accrued total preferred stock dividends of $0.2 million in each of the three months ended June 30, 2014 and 2013. For the first six months of 2014 and 2013, we accrued preferred stock dividends of $0.4 million and $0.5 million, respectively. These amounts are deducted from net income in computing “net income available to common shareholders.” Preferred dividends related to our Series B Preferred Stock and our Series C Preferred Stock. Our Series B Preferred Stock relates to $63.5 million in preferred stock that was issued to the U.S. Treasury in September 2011 in connection with our participation in the Small Business Lending Fund. From the September 2011 issuance date until December 31, 2013, the dividend rate on this stock was subject to fluctuation between 1% and 5% per anum based upon changes in the level of our “Qualified Small Business Lending” (“QSBL”).  We were able to continually increase our levels of QSBL such that our dividend rate decreased to approximately 1.0% by the first quarter of 2013 and remained at that level through December 31, 2013, at which point the dividend rate became fixed at 1.0%. The dividend rate will remain at 1.0% until March 2016, at which point the dividend rate automatically increases to 9%. Our Series C Preferred Stock relates to the December 2012 issuance of 728,706 shares of preferred stock that pay dividends at the same rate as we pay to holders of our common stock.

The Consolidated Statements of Comprehensive Income reflect other comprehensive loss of $46,000 during the second quarter of 2014 compared to other comprehensive loss of $1,125,000 during the second quarter of 2013. During the six months ended June 30, 2014 and 2013, we recorded other comprehensive income of $118,000 and other comprehensive loss of $1,311,000, respectively. The primary component of other comprehensive income (loss) for the periods presented was changes in unrealized holding gains (losses) of our available for sale securities. Our available for sale securities portfolio is predominantly comprised of fixed rate bonds that generally increase in value when market yields for fixed rate bonds decrease and decline in value when market yields for fixed rate bonds increase. Management has evaluated any unrealized losses on individual securities at each period end and determined that there is no other-than-temporary impairment.

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FINANCIAL CONDITION

Total assets at June 30, 2014 amounted to $3.27 billion, a 0.6% increase from a year earlier. Total loans at June 30, 2014 amounted to $2.43 billion, a 0.1% increase from a year earlier, and total deposits amounted to $2.75 billion, a 2.3% decrease from a year earlier.

The following table presents information regarding the nature of our growth for the twelve months ended June 30, 2014 and for the first six months of 2014.

July 1, 2013 to June 30, 2014	Balance at beginning of period		Internal Growth, net (1)			Growth from Acquisitions		Balance at end of period		Total percentage growth		Internal percentage growth (1)
Loans – Non-covered	$	2,190,583		66,947			—		2,257,530		3.1%		3.1%
Loans – Covered		240,279		(63,424	)		—		176,855		-26.4%		-26.4%
Total loans		2,430,862		3,523			—		2,434,385		0.1%		0.1%
Deposits – Noninterest bearing checking		454,785		70,547			—		525,332		15.5%		15.5%
Deposits – Interest bearing checking		546,203		5,374			—		551,577		1.0%		1.0%
Deposits – Money market		560,612		(5,881	)		—		554,731		-1.0%		-1.0%
Deposits – Savings		166,497		8,587			—		175,084		5.2%		5.2%
Deposits – Brokered		109,510		25,790			—		135,300		23.6%		23.6%
Deposits – Internet time		6,847		(4,631	)		—		2,216		-67.6%		-67.6%
Deposits – Time>$100,000		501,811		(80,556	)		—		421,255		-16.1%		-16.1%
Deposits – Time<$100,000		472,088		(83,004	)		—		389,084		-17.6%		-17.6%
Total deposits	$	2,818,353		(63,774	)		—		2,754,579		-2.3%		-2.3%

January 1, 2014 to June 30, 2014
Loans – Non-covered	$	2,252,885	4,645		—	2,257,530	0.2%	0.2%
Loans – Covered		210,309	(33,454	)	—	176,855	-15.9%	-15.9%
Total loans	$	2,463,194	(28,809	)	—	2,434,385	-1.2%	-1.2%
Deposits – Noninterest bearing checking	$	482,650	42,682		—	525,332	8.8%	8.8%
Deposits – Interest bearing checking		557,413	(5,836	)	—	551,577	-1.0%	-1.0%
Deposits – Money market		547,556	7,175		—	554,731	1.3%	1.3%
Deposits – Savings		169,023	6,061		—	175,084	3.6%	3.6%
Deposits – Brokered		116,087	19,213		—	135,300	16.6%	16.6%
Deposits – Internet time		1,319	897		—	2,216	68.0%	68.0%
Deposits – Time>$100,000		451,741	(30,486	)	—	421,255	-6.7%	-6.7%
Deposits – Time<$100,000		425,230	(36,146	)	—	389,084	-8.5%	-8.5%
Total deposits	$	2,751,019	3,560		—	2,754,579	0.1%	0.1%

(1) Excludes the impact of acquisitions in the year of acquisition, but includes growth or declines in acquired operations after the date of acquisition.

As derived from the table above, for the twelve months preceding June 30, 2014, our total loans increased $4 million, or 0.1%. Over that period, we experienced internal growth in our non-covered loan portfolio of $67 million, or 3.1%. Partially offsetting the growth in non-covered loans were normal pay-downs, foreclosures, and charge-offs of our covered loans, which declined by $63 million at June 30, 2014 compared to a year earlier. We continue to pursue lending opportunities in order to improve our asset yields.

For the first six months of 2014, we experienced internal growth in our non-covered loan portfolio of $5 million, or 0.2%. This increase was more than offset by a decline in our covered loans of $33 million. While we expect higher loan growth in our non-covered loans portfolio for the remainder of 2014, the strong competition in the marketplace for high quality loans is expected to remain a challenge and constrain our net loan growth. We expect our current portfolio of covered loans to continue to steadily decline. As discussed previously, on June 30, 2014, one of our loss share agreements expired and we transferred that portfolio of loans from the “covered” category to the “non-covered” category on July 1, 2014.

The mix of our loan portfolio remains substantially the same at June 30, 2014 compared to December 31, 2013. The majority of our real estate loans are personal and commercial loans where real estate provides additional security for the loan.

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Note 7 to the consolidated financial statements presents additional detailed information regarding our mix of loans, including a break-out between loans covered by FDIC loss share agreements and non-covered loans. Additionally, the section above titled “FDIC Indemnification Asset” contains detail of our covered loans and foreclosed properties segregated by each of the four loss-share agreements.

For the twelve month period ended June 30, 2014, we experienced a net decline in total deposits of $64 million, which was a result of growth in our transaction account deposits (checking, money market, and savings) and declines in our time deposit accounts. Over this period, growth of $79 million in our transaction account categories was more than offset by a $142 million decline in time deposits, including brokered deposits and internet time deposits.

For the first six months of 2014, we experienced a net increase in total deposits of $4 million. Transaction account deposits increased $50 million, while the net decline in time deposits was $47 million. Within time deposits, we obtained $34 million in brokered deposits in the first quarter of 2014 to help offset declines in the retail time deposit categories (“Time>$100,000” and “Time<$100,000” categories).

As shown above, the retail time deposit categories experienced significant declines over the time periods shown. Due to the low interest rates we are currently offering as a result of the overall low interest rate environment in the marketplace, our analysis indicates that some customers are shifting their funds related to matured time deposits to their transaction accounts at our company, while other customers are withdrawing their funds from our company in search of higher yields from other companies. We expect this trend to continue.

We obtained new borrowings of $90 million in the first quarter of 2014 from a low cost funding source in order to enhance our cash position and in anticipation of future loan growth. During the second quarter of 2014, we repaid $20 million of these borrowings, which resulted in our total borrowings at June 30, 2014 amounting to $116.4 million compared to $46.4 million a year earlier.

Nonperforming Assets

Nonperforming assets include nonaccrual loans, troubled debt restructurings, loans past due 90 or more days and still accruing interest, nonperforming loans held for sale, and foreclosed real estate. As previously discussed, as a result of two FDIC-assisted transactions, we entered into loss share agreements that afford us significant protection from losses from all loans and foreclosed real estate acquired in those acquisitions.

Because of the loss protection provided by the FDIC, the financial risk of the acquired loans and foreclosed real estate is significantly different from the risk associated with assets not covered under the loss share agreements. Accordingly, we present separately nonperforming assets subject to the loss share agreements as “covered” nonperforming assets, and nonperforming assets that are not subject to the loss share agreements as “non-covered.”

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Nonperforming assets are summarized as follows:

ASSET QUALITY DATA ($ in thousands)	As of/for the quarter ended June 30, 2014		As of/for the quarter ended December 31, 2013		As of/for the quarter ended June 30, 2013
Non-covered nonperforming assets
Nonaccrual loans	$	47,533		41,938		42,338
Restructured loans – accruing		27,250		27,776		21,333
Accruing loans >90 days past due		—		—		—
Total non-covered nonperforming loans		74,783		69,714		63,671
Foreclosed real estate		9,346		12,251		15,425
Total non-covered nonperforming assets	$	84,129		81,965		79,096
Covered nonperforming assets (1)
Nonaccrual loans (2)	$	20,938		37,217		50,346
Restructured loans – accruing		8,193		8,909		6,790
Accruing loans > 90 days past due		—		—		—
Total covered nonperforming loans		29,131		46,126		57,136
Foreclosed real estate		9,934		24,497		32,005
Total covered nonperforming assets	$	39,065		70,623		89,141
Total nonperforming assets	$	123,194		152,588		168,237
Asset Quality Ratios – All Assets
Net charge-offs to average loans - annualized		0.99%		1.31%		0.75%
Nonperforming loans to total loans		4.27%		4.70%		4.97%
Nonperforming assets to total assets		3.77%		4.79%		5.18%
Allowance for loan losses to total loans		1.88%		1.97%		2.09%
Allowance for loan losses to nonperforming loans		44.07%		41.87%		42.09%
Asset Quality Ratios – Based on Non-covered Assets only
Net charge-offs to average non-covered loans - annualized		0.69%		0.74%		0.74%
Non-covered nonperforming loans to non-covered loans		3.31%		3.09%		2.91%
Non-covered nonperforming assets to total non-covered assets		2.73%		2.78%		2.66%
Allowance for loan losses to non-covered loans		1.86%		1.96%		2.05%
Allowance for loan losses to non-covered nonperforming loans		56.12%		63.49%		70.39%

(1) Covered nonperforming assets consist of assets that are included in loss share agreements with the FDIC.

(2) At June 30, 2014, the contractual balance of the nonaccrual loans covered by FDIC loss share agreements was $34.3 million. As discussed elsewhere in this document, $9.7 million of covered nonaccrual loans were transferred to non-covered status on July 1, 2014 due to the expiration of one of our non-single family loss share agreements with the FDIC on June 30, 2014.

We have reviewed the collateral for our nonperforming assets, including nonaccrual loans, and have included this review among the factors considered in the evaluation of the allowance for loan losses discussed below.

Consistent with the continuing weak economy experienced in much of our market area since the onset of the recession that began in 2008, we have experienced high levels of loan losses, delinquencies and nonperforming assets compared to our historical averages.

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The following is the composition, by loan type, of all of our nonaccrual loans (covered and non-covered) at each period end, as classified for regulatory purposes:

($ in thousands)	At June 30, 2014		At December 31, 2013		At June 30, 2013
Commercial, financial, and agricultural	$	4,305		5,690		3,408
Real estate – construction, land development, and other land loans		15,466		22,688		25,405
Real estate – mortgage – residential (1-4 family) first mortgages		21,230		21,751		24,806
Real estate – mortgage – home equity loans/lines of credit		4,190		4,081		2,750
Real estate – mortgage – commercial and other		22,670		24,568		35,461
Installment loans to individuals		610		377		854
Total nonaccrual loans	$	68,471		79,155		92,684

The following segregates our nonaccrual loans at June 30, 2014 into covered and non-covered loans, as classified for regulatory purposes:

($ in thousands)	Covered Nonaccrual Loans		Non-covered Nonaccrual Loans		Total Nonaccrual Loans
Commercial, financial, and agricultural	$	282		4,023		4,305
Real estate – construction, land development, and other land loans		5,300		10,166		15,466
Real estate – mortgage – residential (1-4 family) first mortgages		5,576		15,654		21,230
Real estate – mortgage – home equity loans/lines of credit		327		3,863		4,190
Real estate – mortgage – commercial and other		9,451		13,219		22,670
Installment loans to individuals		2		608		610
Total nonaccrual loans	$	20,938		47,533		68,471

The following segregates our nonaccrual loans at December 31, 2013 into covered and non-covered loans, as classified for regulatory purposes:

($ in thousands)	Covered Nonaccrual Loans		Non-covered Nonaccrual Loans		Total Nonaccrual Loans
Commercial, financial, and agricultural	$	935		4,755		5,690
Real estate – construction, land development, and other land loans		13,274		9,414		22,688
Real estate – mortgage – residential (1-4 family) first mortgages		9,447		12,304		21,751
Real estate – mortgage – home equity loans/lines of credit		509		3,572		4,081
Real estate – mortgage – commercial and other		13,050		11,518		24,568
Installment loans to individuals		2		375		377
Total nonaccrual loans	$	37,217		41,938		79,155

Among non-covered loans, the tables above indicate small increases in most categories of non-covered nonaccrual loans. Residential first mortgage loans experienced the largest increase, which was caused by increased efforts to work with home borrowers on repayment plans, increased legal delays in the foreclosure process, and continued challenging economic conditions in some of our more rural market areas.

“Restructured loans – accruing”, or troubled debt restructurings (TDRs), are accruing loans for which we have granted concessions to the borrower as a result of the borrower’s financial difficulties.As seen in the previous table “Asset Quality Data”, at June 30, 2014, total TDRs (covered and non-covered) amounted to $35.4 million, compared to $36.7 million at December 31, 2013, and $28.1 million at June 30, 2013.

Foreclosed real estate includes primarily foreclosed properties. Non-covered foreclosed real estate has decreased over the past year, amounting to $9.3 million at June 30, 2014, $12.3 million at December 31, 2013, and $15.4 million at June 30, 2013. The decreases were the result of strong sales activity during the periods, which was consistent with our strategy implemented in 2012 to accelerate the disposition of foreclosed properties.

At June 30, 2014, we also held $9.9 million in foreclosed real estate that is subject to the loss share agreements with the FDIC, which is a decline from $24.5 million at December 31, 2013 and $32.0 million at June 30, 2013. The decreases are due to increased property sales activity, particularly along the North Carolina coast, which is where most of our covered foreclosed properties are located

As discussed elsewhere in this document, on July 1, 2014, we transferred $9.7 million of covered nonaccrual loans, $2.1 million of covered accruing troubled debt restructurings, and $3.0 million of covered foreclosed real estate to non-covered status due to the expiration of one of our non-single family loss share agreements with the FDIC on June 30, 2014.

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We believe that the fair values of the items of foreclosed real estate, less estimated costs to sell, equal or exceed their respective carrying values at the dates presented.

The following table presents the detail of all of our foreclosed real estate at each period end (covered and non-covered):

($ in thousands)	At June 30, 2014		At December 31, 2013		At June 30, 2013
Vacant land	$	6,838		19,295		29,089
1-4 family residential properties		5,536		7,982		10,087
Commercial real estate		6,906		9,471		8,254
Total foreclosed real estate	$	19,280		36,748		47,430

The following segregates our foreclosed real estate at June 30, 2014 into covered and non-covered:

($ in thousands)	Covered Foreclosed Real Estate		Non-covered Foreclosed Real Estate		Total Foreclosed Real Estate
Vacant land	$	3,268		3,570		6,838
1-4 family residential properties		3,590		1,946		5,536
Commercial real estate		3,076		3,830		6,906
Total foreclosed real estate	$	9,934		9,346		19,280

The following segregates our foreclosed real estate at December 31, 2013 into covered and non-covered:

($ in thousands)	Covered Foreclosed Real Estate		Non-covered Foreclosed Real Estate		Total Foreclosed Real Estate
Vacant land	$	14,043		5,252		19,295
1-4 family residential properties		5,102		2,880		7,982
Commercial real estate		5,352		4,119		9,471
Total foreclosed real estate	$	24,497		12,251		36,748

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The following table presents geographical information regarding our nonperforming assets at June 30, 2014.

	As of June 30, 2014
($ in thousands)	Covered		Non-covered		Total		Total Loans		Nonperforming Loans to Total Loans
Nonaccrual loans and       Troubled Debt Restructurings (1)
Eastern Region (NC)	$	20,733		10,480		31,213	$	568,000		5.5%
Triangle Region (NC)		—		24,903		24,903		752,000		3.3%
Triad Region (NC)		—		18,197		18,197		366,000		5.0%
Charlotte Region (NC)		—		2,779		2,779		96,000		2.9%
Southern Piedmont Region (NC)		1,667		6,497		8,164		244,000		3.3%
Western Region (NC)		6,606		13		6,619		58,000		11.4%
South Carolina Region		125		3,915		4,040		105,000		3.8%
Virginia Region		—		7,999		7,999		230,000		3.5%
Other		—		—		—		15,000		0.0%
Total nonaccrual loans and troubled debt restructurings	$	29,131		74,783		103,914	$	2,434,000		4.3%
Foreclosed Real Estate (1)
Eastern Region (NC)	$	5,367		985		6,352
Triangle Region (NC)		—		3,322		3,322
Triad Region (NC)		—		2,300		2,300
Charlotte Region (NC)		—		647		647
Southern Piedmont Region (NC)		411		622		1,033
Western Region (NC)		4,108		—		4,108
South Carolina Region		48		961		1,009
Virginia Region		—		92		92
Other		—		417		417
Total foreclosed real estate		9,934		9,346		19,280

(1) The counties comprising each region are as follows:

Eastern North Carolina Region - New Hanover, Brunswick, Duplin, Dare, Beaufort, Onslow, Carteret

Triangle North Carolina Region - Moore, Lee, Harnett, Chatham, Wake

Triad North Carolina Region - Montgomery, Randolph, Davidson, Rockingham, Guilford, Stanly

Charlotte North Carolina Region - Iredell, Cabarrus, Rowan

Southern Piedmont North Carolina Region - Anson, Richmond, Scotland, Robeson, Bladen, Columbus, Cumberland

Western North Carolina Region – Buncombe

South Carolina Region - Chesterfield, Dillon, Florence, Horry

Virginia Region - Wythe, Washington, Montgomery, Pulaski, Roanoke

Summary of Loan Loss Experience

The allowance for loan losses is created by direct charges to operations (known as a “provision for loan losses” for the period in which the charge in taken). Losses on loans are charged against the allowance in the period in which such loans, in management’s opinion, become uncollectible. The recoveries realized during the period are credited to this allowance.

We have no foreign loans, few agricultural loans and do not engage in significant lease financing or highly leveraged transactions. Commercial loans are diversified among a variety of industries. The majority of our real estate loans are primarily personal and commercial loans where real estate provides additional security for the loan. Collateral for virtually all of these loans is located within our principal market area.

The weak economic environment since 2009 has resulted in elevated levels of classified and nonperforming assets, which has led to higher provisions for loan losses compared to historical averages. While we have begun to see signs of a recovering economy in most of our market areas, the recovery seems to be lagging and is less robust than that of the national economy. We continue to have an elevated level of past due and adversely classified assets compared to historic averages. In fact, over the past year we have experienced steady, but small, increases in our non-covered nonperforming and adversely classified assets – see Note 7 to the consolidated financial statements for detail. Despite the higher levels of these problem assets, based on our analysis, we believe the severity of the loss rate inherent in our classified loans is less than in recent years. In addition, we believe that our allowance for loan losses is sufficient to absorb the probable losses inherent in our portfolio at June 30, 2014.

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Our total provision for loan losses was $3.7 million for the second quarter of 2014 compared to $5.6 million in the second quarter of 2013. Our total provision for loan losses for the first six months of 2014 and 2013 was $7.2 million and $16.7 million, respectively. The total provision for loan losses is comprised of provision for loan losses for non-covered loans and provision for loan losses for covered loans, as discussed in the following paragraphs.

The provision for loan losses on non-covered loans amounted to $1.2 million and $4.0 million in the second quarters of 2014 and 2013, respectively, and $4.5 million and $9.8 million for the first half of 2014 and 2013, respectively. The lower provisions in 2014 were primarily the result of lower loan growth during 2014 and stable asset quality trends, as discussed in the following paragraph.

Non-covered loan growth for the first six months of 2014 was $5 million compared to $96 million for the first six months of 2013, which resulted in a smaller incremental provision for loan losses attributable to loan growth. As it relates to asset quality trends, as shown in a table within Note 7 to the consolidated financial statements, our total non-covered classified and nonaccrual loans remained almost unchanged at $121-$123 million when comparing June 30, 2014 to December 31, 2013. Comparatively, in the first six months of 2013, these same classifications of non-covered loans increased from $75 million to $103 million, which resulted in the need to record additional provisions for loan losses during that period. Additionally, our allowance for loan loss model utilizes the net charge-offs experienced in the most recent years as a significant component of estimating the current allowance for loan losses that is necessary. Thus, older years (and parts thereof) systematically age out and are excluded from the analysis as time goes on. Periods of high net charge-offs we experienced during the peak of the recession are now dropping out of the analysis and being replaced by the more modest levels of net charge-offs now being experienced. The second quarter of 2014 marked our sixth consecutive quarter of annualized net charge-offs related to non-covered loans being less than 1.00%, whereas at the peak of the recession, that ratio was frequently over 1.00%. In the near term, we expect that net charge-offs experienced in the next few quarters will continue to be less than those experienced in the recession periods that are dropping out of the analysis, and for that reason, we expect our resulting provisions for loan losses to be impacted.

The provision for loan losses on covered loans amounted to $2.5 million in the second quarter of 2014 compared to $1.5 million in the second quarter of 2013. The higher provision in 2014 is primarily the result of losses associated with several large loans that were experienced during the quarter. For the six months ended June 30, 2014, the provision for loan losses on covered loans amounted to $2.7 million compared to $6.9 million for the same period of 2013. The decrease in the six month period was primarily due to lower levels of covered nonperforming loans during the period, stabilization in the underlying collateral values of nonperforming loans, and a $1.9 million recovery that we realized in the first quarter of 2014.

For the first six months of 2014, we recorded $9.9 million in net charge-offs, compared to $12.3 million for the comparable period of 2013. Of these amounts, net charge-offs of non-covered loans amounted to $6.8 million in the first six months of 2014 compared to $6.6 million in the first six months of 2013. Net charge-offs of covered loans amounted to $3.1 million for the first six months of 2014 compared to $5.7 million for the first six months of 2013. The charge-offs in 2014 continue a trend that began in 2010, with the largest amount of charge-offs being in the construction and land development real estate categories. These types of loans were impacted the most by the recession and decline in new housing.

The total allowance for loan losses amounted to $45.8 million at June 30, 2014, compared to $48.5 million at December 31, 2013 and $50.9 million at June 30, 2013. The allowance for loan losses for non-covered loans was $42.0 million, $44.3 million, and $44.8 million at June 30, 2014, December 31, 2013, and June 30, 2013, respectively. The ratio of our allowance for non-covered loans to total non-covered loans has declined from 2.05% at June 30, 2013 to 1.96% at December 31, 2013 to 1.86% at June 30, 2014 as a result of the factors discussed above that impacted our provision for loan losses on non-covered loans.

At June 30, 2014, December 31, 2013, and June 30, 2013, the allowance for loan losses attributable to covered loans was $3.8 million, $4.2 million, and $6.0 million, respectively. The steady decline has been primarily due to the resolution of many of those loans via charge-off or foreclosure, and thus the declining amount of problem covered loans.

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We believe our reserve levels are adequate to cover probable loan losses on the loans outstanding as of each reporting date. It must be emphasized, however, that the determination of the reserve using our procedures and methods rests upon various judgments and assumptions about economic conditions and other factors affecting loans. No assurance can be given that we will not in any particular period sustain loan losses that are sizable in relation to the amounts reserved or that subsequent evaluations of the loan portfolio, in light of conditions and factors then prevailing, will not require significant changes in the allowance for loan losses or future charges to earnings. See “Critical Accounting Policies – Allowance for Loan Losses” above.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses and value of other real estate. Such agencies may require us to recognize adjustments to the allowance or the carrying value of other real estate based on their judgments about information available at the time of their examinations.

For the periods indicated, the following table summarizes our balances of loans outstanding, average loans outstanding, changes in the allowance for loan losses arising from charge-offs and recoveries, and additions to the allowance for loan losses that have been charged to expense.

($ in thousands)	Six Months Ended June 30,			Twelve Months Ended December 31,			Six Months Ended June 30,
	2014			2013			2013
Loans outstanding at end of period	$	2,434,385			2,463,194			2,430,862
Average amount of loans outstanding	$	2,448,866			2,419,679			2,395,949
Allowance for loan losses, at beginning of year	$	48,505			46,402			46,402
Provision for loan losses		7,234			30,616			16,740
		55,739			77,018			63,142
Loans charged off:
Commercial, financial, and agricultural		(3,566	)		(4,667	)		(1,583	)
Real estate – construction, land development & other land loans		(4,791	)		(10,582	)		(4,091	)
Real estate – mortgage – residential (1-4 family) first mortgages		(1,886	)		(4,764	)		(2,182	)
Real estate – mortgage – home equity loans / lines of credit		(753	)		(3,143	)		(1,859	)
Real estate – mortgage – commercial and other		(1,432	)		(7,027	)		(4,191	)
Installment loans to individuals		(964	)		(2,253	)		(1,085	)
Total charge-offs		(13,392	)		(32,436	)		(14,991	)
Recoveries of loans previously charged-off:
Commercial, financial, and agricultural		50			198			132
Real estate – construction, land development & other land loans		2,535			777			634
Real estate – mortgage – residential (1-4 family) first mortgages		314			595			561
Real estate – mortgage – home equity loans / lines of credit		30			199			131
Real estate – mortgage – commercial and other		286			1,531			897
Installment loans to individuals		234			623			345
Total recoveries		3,449			3,923			2,700
Net charge-offs		(9,943	)		(28,513	)		(12,291	)
Allowance for loan losses, at end of period	$	45,796			48,505			50,851
Ratios:
Net charge-offs as a percent of average loans (annualized)		0.82%			1.18%			1.03%
Allowance for loan losses as a percent of loans at end of  period		1.88%			1.97%			2.09%

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The following table discloses the activity in the allowance for loan losses for the six months ended June 30, 2014, segregated into covered and non-covered.

	Six Months Ended June 30, 2014
($ in thousands)	Covered			Non-covered			Total
Loans outstanding at end of period	$	176,855			2,257,530			2,434,385
Average amount of loans outstanding	$	192,572			2,256,294			2,448,866
Allowance for loan losses, at beginning of year	$	4,242			44,263			48,505
Provision for loan losses		2,711			4,523			7,234
		6,953			48,786			55,739
Loans charged off:
Commercial, financial, and agricultural		(1,086	)		(2,480	)		(3,566	)
Real estate – construction, land development & other land loans		(3,520	)		(1,271	)		(4,791	)
Real estate – mortgage – residential (1-4 family) first mortgages		(558	)		(1,328	)		(1,886	)
Real estate – mortgage – home equity loans / lines of credit		(74	)		(679	)		(753	)
Real estate – mortgage – commercial and other		(430	)		(1,002	)		(1,432	)
Installment loans to individuals		(2	)		(962	)		(964	)
Total charge-offs		(5,670	)		(7,722	)		(13,392	)
Recoveries of loans previously charged-off:
Commercial, financial, and agricultural		2			48			50
Real estate – construction, land development & other land loans		2,213			322			2,535
Real estate – mortgage – residential (1-4 family) first mortgages		184			130			314
Real estate – mortgage – home equity loans / lines of credit		—			30			30
Real estate – mortgage – commercial and other		148			138			286
Installment loans to individuals		—			234			234
Total recoveries		2,547			902			3,449
Net charge-offs		(3,123	)		(6,820	)		(9,943	)
Allowance for loan losses, at end of period	$	3,830			41,966			45,796

The following table discloses the activity in the allowance for loan losses for the six months ended June 30, 2013, segregated into covered and non-covered.

	Six Months Ended June 30, 2013
($ in thousands)	Covered			Non-covered			Total
Loans outstanding at end of period	$	240,279			2,190,583			2,430,862
Average amount of loans outstanding	$	262,020			2,133,929			2,395,949
Allowance for loan losses, at beginning of year	$	4,759			41,643			46,402
Provision for loan losses		6,926			9,814			16,740
		11,685			51,457			63,142
Loans charged off:
Commercial, financial, and agricultural		(194	)		(1,389	)		(1,583	)
Real estate – construction, land development & other land loans		(1,915	)		(2,176	)		(4,091	)
Real estate – mortgage – residential (1-4 family) first mortgages		(1,057	)		(1,125	)		(2,182	)
Real estate – mortgage – home equity loans / lines of credit		(758	)		(1,101	)		(1,859	)
Real estate – mortgage – commercial and other		(1,725	)		(2,466	)		(4,191	)
Installment loans to individuals		(1	)		(1,084	)		(1,085	)
Total charge-offs		(5,650	)		(9,341	)		(14,991	)
Recoveries of loans previously charged-off:
Commercial, financial, and agricultural		—			132			132
Real estate – construction, land development & other land loans		—			634			634
Real estate – mortgage – residential (1-4 family) first mortgages		—			561			561
Real estate – mortgage – home equity loans / lines of credit		—			131			131
Real estate – mortgage – commercial and other		—			897			897
Installment loans to individuals		—			345			345
Total recoveries		—			2,700			2,700
Net charge-offs		(5,650	)		(6,641	)		(12,291	)
Allowance for loan losses, at end of period	$	6,035			44,816			50,851

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Based on the results of our loan analysis and grading program and our evaluation of the allowance for loan losses at June 30, 2014, there have been no material changes to the allocation of the allowance for loan losses among the various categories of loans since December 31, 2013.

Liquidity, Commitments, and Contingencies

Our liquidity is determined by our ability to convert assets to cash or acquire alternative sources of funds to meet the needs of our customers who are withdrawing or borrowing funds, and to maintain required reserve levels, pay expenses and operate the Company on an ongoing basis. Our primary liquidity sources are net income from operations, cash and due from banks, federal funds sold and other short-term investments. Our securities portfolio is comprised almost entirely of readily marketable securities, which could also be sold to provide cash.

In addition to internally generated liquidity sources, we have the ability to obtain borrowings from the following three sources - 1) an approximately $439 million line of credit with the Federal Home Loan Bank (of which $70 million was outstanding at June 30, 2014), 2) a $50 million overnight federal funds line of credit with a correspondent bank (none of which was outstanding at June 30, 2014), and 3) an approximately $90 million line of credit through the Federal Reserve Bank of Richmond’s discount window (none of which was outstanding at June 30, 2014). In addition to the outstanding borrowings from the FHLB that reduce the available borrowing capacity of that line of credit, our borrowing capacity was reduced by $193 million and $143 million at June 30, 2014 and 2013, respectively, as a result of our pledging letters of credit for public deposits at each of those dates. Unused and available lines of credit amounted to $316 million at June 30, 2014 compared to $254 million at December 31, 2013.

Our overall liquidity has increased since June 30, 2013, primarily as a result of our increased borrowings. Our liquid assets (cash and securities) as a percentage of our total deposits and borrowings increased from 16.7% at June 30, 2013 to 20.4% at June 30, 2014.

We believe our liquidity sources, including unused lines of credit, are at an acceptable level and remain adequate to meet our operating needs in the foreseeable future. We will continue to monitor our liquidity position carefully and will explore and implement strategies to increase liquidity if deemed appropriate.

The amount and timing of our contractual obligations and commercial commitments has not changed materially since December 31, 2013, detail of which is presented in Table 18 on page 87 of our 2013 Annual Report on Form 10-K.

We are not involved in any legal proceedings that, in our opinion, could have a material effect on our consolidated financial position.

Off-Balance Sheet Arrangements and Derivative Financial Instruments

Off-balance sheet arrangements include transactions, agreements, or other contractual arrangements pursuant to which we have obligations or provide guarantees on behalf of an unconsolidated entity. We have no off-balance sheet arrangements of this kind other than letters of credit and repayment guarantees associated with our trust preferred securities.

Derivative financial instruments include futures, forwards, interest rate swaps, options contracts, and other financial instruments with similar characteristics. We have not engaged in significant derivative activities through June 30, 2014, and have no current plans to do so.

Capital Resources

We are regulated by the Board of Governors of the Federal Reserve Board (FED) and are subject to the securities registration and public reporting regulations of the Securities and Exchange Commission. Our banking subsidiary is regulated by the Federal Deposit Insurance Corporation (FDIC) and the North Carolina Office of the Commissioner of Banks. We are not aware of any recommendations of regulatory authorities or otherwise which, if they were to be implemented, would have a material effect on our liquidity, capital resources, or operations.

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We must comply with regulatory capital requirements established by the FED and FDIC. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. These capital standards require us to maintain minimum ratios of “Tier 1” capital to total risk-weighted assets and total capital to risk-weighted assets of 4.00% and 8.00%, respectively. Tier 1 capital is comprised of total shareholders’ equity calculated in accordance with generally accepted accounting principles, excluding accumulated other comprehensive income (loss), less intangible assets, and total capital is comprised of Tier 1 capital plus certain adjustments, the largest of which is our allowance for loan losses. Risk-weighted assets refer to our on- and off-balance sheet exposures, adjusted for their related risk levels using formulas set forth in FED and FDIC regulations.

In addition to the risk-based capital requirements described above, we are subject to a leverage capital requirement, which calls for a minimum ratio of Tier 1 capital (as defined above) to quarterly average total assets of 3.00% to 5.00%, depending upon the institution’s composite ratings as determined by its regulators. The FED has not advised us of any requirement specifically applicable to us.

At June 30, 2014, our capital ratios exceeded the regulatory minimum ratios discussed above. The following table presents our capital ratios and the regulatory minimums discussed above for the periods indicated.

	June 30, 2014		December 31, 2013		June 30, 2013
Risk-based capital ratios:
Tier I capital to Tier I risk adjusted assets		15.88%		15.53%		15.32%
Minimum required Tier I capital		4.00%		4.00%		4.00%
Total risk-based capital to Tier II risk-adjusted assets		17.14%		16.79%		16.58%
Minimum required total risk-based capital		8.00%		8.00%		8.00%
Leverage capital ratios:
Tier I leverage capital to adjusted most recent quarter average assets		11.15%		11.18%		10.63%
Minimum required Tier I leverage capital		4.00%		4.00%		4.00%

Our bank subsidiary is also subject to capital requirements similar to those discussed above. The bank subsidiary’s capital ratios do not vary materially from our capital ratios presented above. At June 30, 2014, our bank subsidiary exceeded the minimum ratios established by the FED and FDIC.

In addition to regulatory capital ratios, we also closely monitor our ratio of tangible common equity to tangible assets (“TCE Ratio”). Our TCE Ratio was 7.57% at June 30, 2014 compared to 7.46% at December 31, 2013 and 6.93% at June 30, 2013.

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BUSINESS DEVELOPMENT MATTERS

The following is a list of business development and other miscellaneous matters affecting First Bancorp and First Bank, our bank subsidiary.

· On June 16, 2014, the Company announced a quarterly cash dividend of $0.08 cents per share payable on July 25, 2014 to shareholders of record on June 30, 2014. This is the same dividend rate as the Company declared in the second quarter of 2013.

· On May 19, 2014, the Company opened a full-service branch in Fuquay-Varina, North Carolina. The new branch is located at 125 North Main Street.

· The Company is planning to construct a new branch facility at 4110 Bradham Drive, Jacksonville, North Carolina. Upon completion, the First Bank branch located on Western Boulevard will be closed and the accounts serviced at that branch will be reassigned to the new and improved branch. This is expected to occur in the first quarter of 2015 and is subject to regulatory approval.

SHARE REPURCHASES

We did not repurchase any shares of our common stock during the first six months of 2014. At June 30, 2014, we had approximately 214,000 shares available for repurchase under existing authority from our board of directors. We may repurchase these shares in open market or privately negotiated transactions, as market conditions and our liquidity warrants, subject to compliance with applicable regulations. See also Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds.”

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

INTEREST RATE RISK (INCLUDING QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK)

Net interest income is our most significant component of earnings. Notwithstanding changes in volumes of loans and deposits, our level of net interest income is continually at risk due to the effect that changes in general market interest rate trends have on interest yields earned and paid with respect to our various categories of earning assets and interest-bearing liabilities. It is our policy to maintain portfolios of earning assets and interest-bearing liabilities with maturities and repricing opportunities that will afford protection, to the extent practical, against wide interest rate fluctuations. Our exposure to interest rate risk is analyzed on a regular basis by management using standard GAP reports, maturity reports, and an asset/liability software model that simulates future levels of interest income and expense based on current interest rates, expected future interest rates, and various intervals of “shock” interest rates. Over the years, we have been able to maintain a fairly consistent yield on average earning assets (net interest margin). Over the past five calendar years, our net interest margin has ranged from a low of 3.81% (realized in 2009) to a high of 4.92% (realized in 2013). During that five year period, the prime rate of interest has consistently remained at 3.25% (which was the rate as of June 30, 2014). The consistency of the net interest margin is aided by the relatively low level of long-term interest rate exposure that we maintain. At June 30, 2014, approximately 75% of our interest-earning assets are subject to repricing within five years (because they are either adjustable rate assets or they are fixed rate assets that mature) and substantially all of our interest-bearing liabilities reprice within five years.

Using stated maturities for all fixed rate instruments except mortgage-backed securities (which are allocated in the periods of their expected payback) and securities and borrowings with call features that are expected to be called (which are shown in the period of their expected call), at June 30, 2014, we had approximately $832 million more in interest-bearing liabilities that are subject to interest rate changes within one year than earning assets. This generally would indicate that net interest income would experience downward pressure in a rising interest rate environment and would benefit from a declining interest rate environment. However, this method of analyzing interest sensitivity only measures the magnitude of the timing differences and does not address earnings, market value, or management actions. Also, interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. In addition to the effects of “when” various rate-sensitive products reprice, market rate changes may not result in uniform changes in rates among all products. For example, included in interest-bearing liabilities subject to interest rate changes within one year at June 30, 2014 are deposits totaling $1.3 billion comprised of checking, savings, and certain types of money market deposits with interest rates set by management. These types of deposits historically have not repriced with, or in the same proportion, as general market indicators.

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Overall, we believe that in the near term (twelve months), net interest income will not likely experience significant downward pressure from rising interest rates. Similarly, we would not expect a significant increase in near term net interest income from falling interest rates. Generally, when rates change, our interest-sensitive assets that are subject to adjustment reprice immediately at the full amount of the change, while our interest-sensitive liabilities that are subject to adjustment reprice at a lag to the rate change and typically not to the full extent of the rate change. In the short-term (less than six months), this results in us being asset-sensitive, meaning that our net interest income benefits from an increase in interest rates and is negatively impacted by a decrease in interest rates. However, in the twelve-month horizon, the impact of having a higher level of interest-sensitive liabilities lessens the short-term effects of changes in interest rates.

The general discussion in the foregoing paragraph applies most directly in a “normal” interest rate environment in which longer-term maturity instruments carry higher interest rates than short-term maturity instruments, and is less applicable in periods in which there is a “flat” interest rate curve. A “flat yield curve” means that short-term interest rates are substantially the same as long-term interest rates. As a result of the prolonged negative economic environment that continued into 2013, the Federal Reserve took steps to suppress long-term interest rates in an effort to boost the housing market, increase employment, and stimulate the economy, which resulted in a flat interest rate curve. A flat interest rate curve is an unfavorable interest rate environment for many banks, including the Company, as short-term interest rates generally drive our deposit pricing and longer-term interest rates generally drive loan pricing. When these rates converge, the profit spread we realize between loan yields and deposit rates narrows, which pressures our net interest margin.

In June 2013, the economy began to show signs of improvement and the Federal Reserve suggested that it may lessen its involvement in the economic recovery process in the near future, which could result in a rise in interest rates, especially longer-term interest rates. The marketplace began to anticipate that result and accordingly, longer-term interest rates increased in 2013, while short-term rates have remained stable. For example, from March 31, 2013 to June 30, 2014, the interest rate on three-month Treasury bills decreased three basis points, but the interest rate for seven-year Treasury notes increased by 89 basis points. These increases result in a “steepening” of the yield curve and is a more favorable interest rate environment for many banks, including the Company, because as noted above, short-term interest rates generally drive our deposit pricing and longer-term interest rates generally drive loan pricing. However, intense competition for high-quality loans in our market areas has thus far negated the impact of the higher long-term market rates by limiting our ability to charge higher rates on loans, and thus we continue to experience downward pressure on our loan yields and net interest margin.

As it relates to deposits, the Federal Reserve has made no changes to the short term interest rates it sets directly since 2008, and since that time we have been able to reprice many of our maturing time deposits at lower interest rates. We were also able to generally decrease the rates we paid on other categories of deposits as a result of declining short-term interest rates in the marketplace and an increase in liquidity that lessened our need to offer premium interest rates. However, as short-term rates are already near zero, it is unlikely that we will be able to continue the trend of reducing our funding costs in the same proportion as experienced in recent years.

As previously discussed in the section “Net Interest Income,” our net interest income has been impacted by certain purchase accounting adjustments related primarily to our acquisitions of Cooperative Bank and The Bank of Asheville. The purchase accounting adjustments related to the premium amortization on loans, deposits and borrowings are based on amortization schedules and are thus systematic and predictable. The accretion of the loan discount on loans acquired from Cooperative Bank and The Bank of Asheville, which amounted to $11.3 million and $10.3 million for the first half of 2014 and 2013, respectively, is less predictable and could be materially different among periods. This is because of the magnitude of the discounts that were initially recorded ($280 million in total) and the fact that the accretion being recorded is dependent on both the credit quality of the acquired loans and the impact of any accelerated loan repayments, including payoffs. If the credit quality of the loans declines, some, or all, of the remaining discount will cease to be accreted into income. If the underlying loans experience accelerated paydowns or improved performance expectations, the remaining discount will be accreted into income on an accelerated basis. In the event of total payoff, the remaining discount will be entirely accreted into income in the period of the payoff. Each of these factors is difficult to predict and susceptible to volatility.

Page 68

Based on our most recent interest rate modeling, which assumes no changes in interest rates for 2014 (federal funds rate = 0.25%, prime = 3.25%), we project that our net interest margin for the remainder of 2014 will continue to experience some compression. We expect loan yields to continue to trend downwards, while many of our deposit products already have interest rates near zero.

We have no market risk sensitive instruments held for trading purposes, nor do we maintain any foreign currency positions.

See additional discussion regarding net interest income, as well as discussion of the changes in the annual net interest margin in the section entitled “Net Interest Income” above.

Item 4 – Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, which are our controls and other procedures that are designed to ensure that information required to be disclosed in our periodic reports with the SEC is recorded, processed, summarized and reported within the required time periods.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is communicated to our management to allow timely decisions regarding required disclosure.  Based on the evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in allowing timely decisions regarding disclosure to be made about material information required to be included in our periodic reports with the SEC. In addition, no change in our internal control over financial reporting has occurred during, or subsequent to, the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased (2)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
April 1, 2014 to April 30, 2014		—		—		—		214,241
May 1, 2014 to May 31, 2014		—		—		—		214,241
June 1, 2014 to June 30, 2014		—		—		—		214,241
Total		—		—		—		214,241

Footnotes to the Above Table

(1) All shares available for repurchase are pursuant to publicly announced share repurchase authorizations. On July 30, 2004, the Company announced that its board of directors had approved the repurchase of 375,000 shares of the Company’s common stock. The repurchase authorization does not have an expiration date. There are no plans or programs the Company has determined to terminate prior to expiration, or under which we do not intend to make further purchases.

(2) The table above does not include shares that were used by option holders to satisfy the exercise price of the call options issued by the Company to its employees and directors pursuant to the Company’s stock option plans. There were no such exercises during the three months ended June 30, 2014.

There were no unregistered sales of our securities during the three months ended June 30, 2014.

Page 69

Item 6 - Exhibits

The following exhibits are filed with this report or, as noted, are incorporated by reference. Management contracts, compensatory plans and arrangements are marked with an asterisk (*).

3.a Articles of Incorporation of the Company and amendments thereto were filed as Exhibits 3.a.i through 3.a.v to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2002, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed as Exhibits 3.1 and 3.2 to the Company’s Current Report on Form 8-K filed on January 13, 2009, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed as Exhibit 3.1.b to the Company’s Registration Statement on Form S-3D filed on June 29, 2010, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on September 6, 2011, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 26, 2012, and are incorporated herein by reference.

3.b Amended and Restated Bylaws of the Company were filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 23, 2009, and are incorporated herein by reference.

4.a Form of Common Stock Certificate was filed as Exhibit 4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, and is incorporated herein by reference.

4.b Form of Certificate for Series B Preferred Stock was filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 6, 2011, and is incorporated herein by reference.

4.c Form of Certificate for Series C Preferred Stock was filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 26, 2012, and is incorporated herein by reference.

12 Computation of Ratio of Earnings to Fixed Charges.

31.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

31.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

32.1 Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income (Loss), (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements. (1)

Copies of exhibits are available upon written request to: First Bancorp, Elizabeth B. Bostian, Secretary, 300 SW Broad Street, Southern Pines, North Carolina, 28387.

________________

(1) As provided in Rule 406T of Regulation S-T, this information shall not be deemed “filed” for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liability under those sections.

Page 70

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FIRST BANCORP
August 11, 2014	BY:/s/Richard H. Moore
	Richard H. Moore
	President,
	Chief Executive Officer,
	and Treasurer
August 11, 2014	BY:/s/Eric P. Credle
	Eric P. Credle
	Executive Vice President
	and Chief Financial Officer

Page 71

EX-12

Exhibit 12

FIRST BANCORP

COMPUTATION OF EARNINGS TO FIXED CHARGES AND PREFERRED SHARE DIVIDENDS

($ in thousands, except for ratios)

(Unaudited)

	Six Months Ended June 30,						Years Ended December 31,
	2014			2013			2013			2012			2011			2010			2009
Including Interest on Deposits:
Earnings:
Income (loss) before income taxes	$	19,046			13,398			32,780			(40,358	)		21,012			14,942			97,877
Fixed charges		4,483			6,241			11,345			17,762			23,973			32,087			49,075
Total earnings (loss)	$	23,529			19,639			44,125			(22,596	)		44,985			47,029			146,952
Fixed charges:
Interest on deposits	$	3,741			5,558			9,960			15,454			21,351			29,930			45,518
Interest on borrowings		547			512			1,025			1,866			2,214			1,977			3,377
Amortization of debt issuance costs		—			—			—			—			—			—			—
Interest portion of rental expense (1)		195			171			360			442			408			180			180
Total fixed charges	$	4,483			6,241			11,345			17,762			23,973			32,087			49,075
Preferred dividend requirements		434			462			895			2,809			3,234			3,249			3,169
Total fixed charges and preferred dividends	$	4,917			6,703			12,240			20,571			27,207			35,336			52,244
Ratio of earnings to fixed charges, including interest on deposits		5.25	x		3.15	x		3.89	x		(1.27	x)		1.88	x		1.47	x		2.99	x
Ratio of earnings to fixed charges and preferred dividends, including interest on deposits		4.79	x		2.93	x		3.60	x		(1.10	x)		1.65	x		1.33	x		2.81	x
Excluding Interest on Deposits:
Earnings:
Income (loss) before income taxes	$	19,046			13,398			32,780			(40,358	)		21,012			14,942			97,877
Fixed charges		742			683			1,385			2,308			2,622			2,157			3,557
Total earnings (loss)	$	19,788			14,081			34,165			(38,050	)		23,634			17,099			101,434
Fixed charges:
Interest on borrowings	$	547			512			1,025			1,866			2,214			1,977			3,377
Amortization of debt issuance costs		—			—			—			—			—			—			—
Interest portion of rental expense (1)		195			171			360			442			408			180			180
Total fixed charges	$	742			683			1,385			2,308			2,622			2,157			3,557
Preferred dividend requirements		434			462			895			2,809			3,234			3,249			3,169
Total fixed charges and preferred dividends	$	1,176			1,145			2,280			5,117			5,856			5,406			6,726
Ratio of earnings to fixed charges, excluding interest on deposits		26.67	x		20.62	x		24.67	x		(16.49	x)		9.01	x		7.93	x		28.52	x
Ratio of earnings to fixed charges and preferred dividends, excluding interest on deposits		16.83	x		12.30	x		14.98	x		(7.44	x)		4.04	x		3.16	x		15.08	x

(1) Estimated to be one-third of rental expense.

EX-31.1

Exhibit 31.1

Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002

I, Richard H. Moore, certify that:

1.     I have reviewed this Form 10-Q of First Bancorp;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2014	/s/ Richard H. Moore
	Richard H. Moore
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002

I, Eric P. Credle, certify that:

1.     I have reviewed this Form 10-Q of First Bancorp;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2014	/s/ Eric P. Credle
	Eric P. Credle
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Chief Executive Officer

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of First Bancorp (the "Company") on Form 10-Q for the period ending June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard H. Moore, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Richard H. Moore
Richard H. Moore
Chief Executive Officer
August 11, 2014

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to First Bancorp and will be retained by First Bancorp and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Chief Financial Officer

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of First Bancorp (the "Company") on Form 10-Q for the period ending June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Eric P. Credle, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Eric P. Credle
Eric P. Credle
Chief Financial Officer
August 11, 2014

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to First Bancorp and will be retained by First Bancorp and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Securities (Details 1) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Securities in an Unrealized Loss Position for Less than 12 Months
Total temporarily impaired securities Fair Value	$ 24,104	$ 78,141
Total temporarily impaired securities Unrealized Losses	46	1,898
Securities in an Unrealized Loss Position for More than 12 Months
Total temporarily impaired securities Fair Value	62,206	18,556
Total temporarily impaired securities Unrealized Losses	2,184	1,657
Total temporarily impaired securities Fair Value	86,310	96,697
Total temporarily impaired securities Unrealized Losses	2,230	3,555
US Government-sponsored enterprises securities [Member]
Securities in an Unrealized Loss Position for Less than 12 Months
AFS Fair Value	6,539	12,212
AFS Unrealized Losses	16	219
Securities in an Unrealized Loss Position for More than 12 Months
AFS Fair Value	5,920
AFS Unrealized Losses	80
Total temporarily impaired securities Fair Value	12,459	12,212
Total temporarily impaired securities Unrealized Losses	96	219
Mortgage-backed securities [Member]
Securities in an Unrealized Loss Position for Less than 12 Months
AFS Fair Value	17,563	64,937
AFS Unrealized Losses	30	1,675
Securities in an Unrealized Loss Position for More than 12 Months
AFS Fair Value	55,476	17,979
AFS Unrealized Losses	1,880	1,199
Total temporarily impaired securities Fair Value	73,039	82,916
Total temporarily impaired securities Unrealized Losses	1,910	2,874
Corporate bonds [Member]
Securities in an Unrealized Loss Position for More than 12 Months
AFS Fair Value	790	555
AFS Unrealized Losses	210	445
Total temporarily impaired securities Fair Value	790	555
Total temporarily impaired securities Unrealized Losses	210	445
Equities [Member]
Securities in an Unrealized Loss Position for Less than 12 Months
AFS Fair Value	2
Securities in an Unrealized Loss Position for More than 12 Months
AFS Fair Value	20	22
AFS Unrealized Losses	14	13
Total temporarily impaired securities Fair Value	22	22
Total temporarily impaired securities Unrealized Losses	14	13
States and local governments [Member]
Securities in an Unrealized Loss Position for Less than 12 Months
AFS Fair Value		992
AFS Unrealized Losses		4
Securities in an Unrealized Loss Position for More than 12 Months
Total temporarily impaired securities Fair Value		992
Total temporarily impaired securities Unrealized Losses		$ 4

XML

Loans and Asset Quality Information (Details 12) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014 N	Jun. 30, 2013 N	Jun. 30, 2014 N	Jun. 30, 2013 N
Information related to loans modified in a troubled debt restructuring:
Number of contracts, TDRs	9	7	17	20
TDRs arising during period Pre-Modification	$ 991	$ 989	$ 2,073	$ 2,298
TDRs arising during period Post-Modification	988	990	2,042	2,292
Non-covered [Member]
Information related to loans modified in a troubled debt restructuring:
Number of contracts, TDRs	7	4	10	16
TDRs arising during period Pre-Modification	743	677	1,115	1,939
TDRs arising during period Post-Modification	743	679	1,115	1,941
Non-covered [Member] | Real estate residential, farmland and mutli-family [Member]
Information related to loans modified in a troubled debt restructuring:
Number of contracts, TDRs Accruing	5	3	6	9
TDRs arising during period - Accruing Pre-Modification	411	574	677	1,082
TDRs arising during period - Accruing Post-Modification	411	576	677	1,084
Number of contracts, TDRs Nonaccrual	2		4	3
TDRs arising during period - Nonaccrual Pre-Modification	332		438	209
TDRs arising during period - Nonaccrual Post-Modification	332		438	209
Non-covered [Member] | Real estate commercial [Member]
Information related to loans modified in a troubled debt restructuring:
Number of contracts, TDRs Accruing		1		3
TDRs arising during period - Accruing Pre-Modification		103		634
TDRs arising during period - Accruing Post-Modification		103		634
Non-covered [Member] | Consumer [Member]
Information related to loans modified in a troubled debt restructuring:
Number of contracts, TDRs Accruing				1
TDRs arising during period - Accruing Pre-Modification				14
TDRs arising during period - Accruing Post-Modification				14
Covered [Member]
Information related to loans modified in a troubled debt restructuring:
Number of contracts, TDRs Accruing	2	3	2	4
TDRs arising during period - Accruing Pre-Modification	248	312	248	359
TDRs arising during period - Accruing Post-Modification	245	311	245	351
Number of contracts, TDRs Nonaccrual			5
TDRs arising during period - Nonaccrual Pre-Modification			710
TDRs arising during period - Nonaccrual Post-Modification			$ 682

XML

Loans and Asset Quality Information (Details 6) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Company's nonaccrual loans:
Nonaccrual loans	$ 68,471	$ 79,155
Commercial Unsecured [Member]
Company's nonaccrual loans:
Nonaccrual loans	115	260
Commercial Secured [Member]
Company's nonaccrual loans:
Nonaccrual loans	3,905	2,776
Secured by Inventory and Accounts Receivable [Member]
Company's nonaccrual loans:
Nonaccrual loans	338	1,327
Real estate construction, land development other land loans [Member]
Company's nonaccrual loans:
Nonaccrual loans	14,300	21,557
Real estate residential, farmland and mutli-family [Member]
Company's nonaccrual loans:
Nonaccrual loans	28,383	30,158
Real estate home equity lines of credit [Member]
Company's nonaccrual loans:
Nonaccrual loans	2,677	2,535
Real estate commercial [Member]
Company's nonaccrual loans:
Nonaccrual loans	18,196	20,214
Consumer [Member]
Company's nonaccrual loans:
Nonaccrual loans	557	328
Non-covered [Member]
Company's nonaccrual loans:
Nonaccrual loans	47,533	41,938
Non-covered [Member] | Commercial Unsecured [Member]
Company's nonaccrual loans:
Nonaccrual loans	110	222
Non-covered [Member] | Commercial Secured [Member]
Company's nonaccrual loans:
Nonaccrual loans	3,628	2,662
Non-covered [Member] | Secured by Inventory and Accounts Receivable [Member]
Company's nonaccrual loans:
Nonaccrual loans	338	545
Non-covered [Member] | Real estate construction, land development other land loans [Member]
Company's nonaccrual loans:
Nonaccrual loans	9,001	8,055
Non-covered [Member] | Real estate residential, farmland and mutli-family [Member]
Company's nonaccrual loans:
Nonaccrual loans	21,168	17,814
Non-covered [Member] | Real estate home equity lines of credit [Member]
Company's nonaccrual loans:
Nonaccrual loans	2,436	2,200
Non-covered [Member] | Real estate commercial [Member]
Company's nonaccrual loans:
Nonaccrual loans	10,297	10,115
Non-covered [Member] | Consumer [Member]
Company's nonaccrual loans:
Nonaccrual loans	555	325
Covered [Member]
Company's nonaccrual loans:
Nonaccrual loans	20,938	37,217
Covered [Member] | Commercial Unsecured [Member]
Company's nonaccrual loans:
Nonaccrual loans	5	38
Covered [Member] | Commercial Secured [Member]
Company's nonaccrual loans:
Nonaccrual loans	277	114
Covered [Member] | Secured by Inventory and Accounts Receivable [Member]
Company's nonaccrual loans:
Nonaccrual loans		782
Covered [Member] | Real estate construction, land development other land loans [Member]
Company's nonaccrual loans:
Nonaccrual loans	5,299	13,502
Covered [Member] | Real estate residential, farmland and mutli-family [Member]
Company's nonaccrual loans:
Nonaccrual loans	7,215	12,344
Covered [Member] | Real estate home equity lines of credit [Member]
Company's nonaccrual loans:
Nonaccrual loans	241	335
Covered [Member] | Real estate commercial [Member]
Company's nonaccrual loans:
Nonaccrual loans	7,899	10,099
Covered [Member] | Consumer [Member]
Company's nonaccrual loans:
Nonaccrual loans	$ 2	$ 3

XML

Shareholders' Equity Transactions (Details Narrative) (USD $)
In Thousands, except Share data, unless otherwise specified

3 Months Ended

6 Months Ended

0 Months Ended

3 Months Ended

6 Months Ended

3 Months Ended

6 Months Ended

0 Months Ended

6 Months Ended

0 Months Ended

Jun. 30, 2014

Jun. 30, 2013

Dec. 31, 2012

Jun. 30, 2014

Jun. 30, 2013

Dec. 21, 2012

Series C Preferred Stock [Member]

Jun. 30, 2014

Series C Preferred Stock [Member]

Jun. 30, 2013

Series C Preferred Stock [Member]

Jun. 30, 2014

Series C Preferred Stock [Member]

Jun. 30, 2013

Series C Preferred Stock [Member]

Dec. 31, 2012

Series C Preferred Stock [Member]

Jun. 30, 2014

Series B Preferred Stock [Member]

Jun. 30, 2013

Series B Preferred Stock [Member]

Jun. 30, 2014

Series B Preferred Stock [Member]

Jun. 30, 2013

Series B Preferred Stock [Member]

Dec. 21, 2012

Common stock [Member]

Jun. 30, 2014

Small Business Lending Fund [Member]

Dec. 31, 2011

Small Business Lending Fund [Member]

Sep. 01, 2011

Small Business Lending Fund [Member]

Series B Preferred Stock [Member]

Stock issued

$ 63,500

Stock issued, shares

728,706

2,656,294

63,500

Threshold for qualified community banks

10,000,000

Liquidation value of shares

$ 1,000

Description of dividend rate percentages

The dividend rate could range from one percent (1%) to five percent (5%) per annum based upon the increase in QSBL as compared to the baseline. For the tenth calendar quarter through four and one half years after issuance (the “temporary fixed rate period’’), the dividend rate is fixed at between one percent (1%) and seven percent (7%) based upon the level of QSBL compared to the baseline. After four and one half years from the issuance, the dividend rate will increase to nine percent (9%).

Stock sold price per share

$ 10.00

Net proceeds from the sale of preferred and common stock

33,800

Preferred stock dividends

$ 217

$ 217

$ 434

$ 462

$ 58

$ 58

$ 117

$ 117

$ 159

$ 159

$ 317

$ 345

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Loans and Asset Quality Information (Details 13) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013 N	Jun. 30, 2014 N	Jun. 30, 2013 N
Accruing restructured loans that defaulted in the period:
Number of Contracts - Subsequent Default	1	2	3
Subsequently defaulted - Recorded Investment	$ 342	$ 76	$ 4,095
Non-covered [Member]
Accruing restructured loans that defaulted in the period:
Number of Contracts - Subsequent Default	1	2	2
Subsequently defaulted - Recorded Investment	342	76	594
Non-covered [Member] | Real estate construction, land development other land loans [Member]
Accruing restructured loans that defaulted in the period:
Number of Contracts - Subsequent Default	1	1	1
Subsequently defaulted - Recorded Investment	342	5	342
Non-covered [Member] | Real estate commercial [Member]
Accruing restructured loans that defaulted in the period:
Number of Contracts - Subsequent Default		1
Subsequently defaulted - Recorded Investment		71
Non-covered [Member] | Real estate residential, farmland and mutli-family [Member]
Accruing restructured loans that defaulted in the period:
Number of Contracts - Subsequent Default			1
Subsequently defaulted - Recorded Investment			252
Covered [Member]
Accruing restructured loans that defaulted in the period:
Number of Contracts - Subsequent Default			1
Subsequently defaulted - Recorded Investment			$ 3,501

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Loans and Asset Quality Information (Details 4) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Purchased impaired loans (substantially all of which are covered loans)
Balance, beginning, carrying value	$ 3,142	$ 4,825
Change due to payments received	(571)	(270)
Transfer to foreclosed real estate		(1,316)
Change due to loan charge-off		(96)
Other	312	(1)
Balance, ending, carrying value	2,883	3,142
Contractual Principal Receivable [Member]
Purchased impaired loans (substantially all of which are covered loans)
Balance, beginning, contractual principal	6,263	8,815
Change due to payments received	(487)	(301)
Transfer to foreclosed real estate		(2,100)
Change due to loan charge-off		(150)
Other	197	(1)
Balance, ending, contractual principal	5,973	6,263
Fair Value Adjustment Write Down [Member]
Purchased impaired loans (substantially all of which are covered loans)
Balance, beginning, FMV	3,121	3,990
Change due to payments received	84	(31)
Transfer to foreclosed real estate		(784)
Change due to loan charge-off		(54)
Other	(115)
Balance, ending, FMV	$ 3,090	$ 3,121

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Equity-Based Compensation Plans (Details) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Number of shares:
Balance options outstanding, end	277,679
Stock Options [Member]
Weighted Average Exercise Price
Balance, beginning	$ 17.75
Expired	$ 21.22
Outstanding	$ 16.11
Exercisable	$ 18.46
Number of shares:
Balance options outstanding, beginning	408,408
Expired	(130,729)
Balance options outstanding, end	277,679
Exercisable, end of period	202,679
Weighted- Average Contractual Term (years), outstanding	4 years 6 months
Weighted- Average Contractual Term (years), exercisable	3 years 1 month 6 days
Aggregate Intrinsic Value, outstanding	$ 856,677
Aggregate Intrinsic Value, exercisable	$ 227,802

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FDIC Indemnification Asset (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
FDIC indemnification asset components
Receivable related to loss claims incurred, not yet reimbursed	$ 7,036	$ 12,649	$ 40,401
Receivable related to estimated future claims on loans	20,196	33,398	45,866
Receivable related to estimated future claims on foreclosed real estate	2,174	2,575	6,683
FDIC indemnification asset	$ 29,406	$ 48,622	$ 92,950

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Securities (Tables)

6 Months Ended

Jun. 30, 2014

Securities Tables

Book values and approximate fair values of investment securities

The book values and approximate fair values of investment securities at June 30, 2014 and December 31, 2013 are summarized as follows:

	June 30, 2014									December 31, 2013
	Amortized		Fair		Unrealized					Amortized		Fair		Unrealized
($ in thousands)	Cost		Value		Gains		(Losses)			Cost		Value		Gains		(Losses)
Securities available for sale:
Government-sponsored enterprise securities	$	12,555		12,459		—		(96	)		18,432		18,245		32		(219	)
Mortgage-backed securities		106,173		104,699		436		(1,910	)		148,646		147,187		1,415		(2,874	)
Corporate bonds		1,000		790		—		(210	)		3,999		3,598		44		(445	)
Equity securities		6,105		6,130		39		(14	)		3,984		4,011		40		(13	)
Total available for sale	$	125,833		124,078		475		(2,230	)		175,061		173,041		1,531		(3,551	)
Securities held to maturity:
State and local governments	$	53,879		57,612		3,733		—			53,995		56,700		2,709		(4	)

Schedule of information regarding securities with unrealized losses

The following table presents information regarding securities with unrealized losses at June 30, 2014:

($ 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	$	6,539		16		5,920		80		12,459		96
Mortgage-backed securities		17,563		30		55,476		1,880		73,039		1,910
Corporate bonds		—		—		790		210		790		210
Equity securities		2		—		20		14		22		14
State and local governments		—		—		—		—		—		—
Total temporarily impaired securities	$	24,104		46		62,206		2,184		86,310		2,230

The following table presents information regarding securities with unrealized losses at December 31, 2013:

($ 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	$	12,212		219		—		—		12,212		219
Mortgage-backed securities		64,937		1,675		17,979		1,199		82,916		2,874
Corporate bonds		—		—		555		445		555		445
Equity securities		—		—		22		13		22		13
State and local governments		992		4		—		—		992		4
Total temporarily impaired securities	$	78,141		1,898		18,556		1,657		96,697		3,555

Schedule of book values and approximate fair values of investment securities by contractual maturity

The book values and approximate fair values of investment securities at June 30, 2014, 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	$	—		—		—		—
Due after one year but within five years		12,555		12,459		8,853		9,481
Due after five years but within ten years		—		—		40,237		43,104
Due after ten years		1,000		790		4,789		5,027
Mortgage-backed securities		106,173		104,699		—		—
Total debt securities		119,728		117,948		53,879		57,612
Equity securities		6,105		6,130		—		—
Total securities	$	125,833		124,078		53,879		57,612

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Loans and Asset Quality Information (Details 8) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Provisions	$ 3,659	$ 5,591	$ 7,234	$ 16,740
Loans receivable:
Loans - non-covered	2,257,530	2,190,583	2,257,530	2,190,583	2,252,885
Non-covered [Member]
Beginning balance	44,706	44,761	44,263	41,643	41,643
Charge-offs	(4,254)	(4,546)	(7,722)	(9,341)	(19,383)
Recoveries	356	558	902	2,700	3,737
Provisions	1,158	4,043	4,523	9,814	18,266
Ending balance	41,966	44,816	41,966	44,816	44,263
Ending balances: Allowance for loan losses
Individually evaluated for impairment	3,652	3,538	3,652	3,538	2,559
Collectively evaluated for impairment	38,314	41,278	38,314	41,278	41,704
Loans receivable:
Loans - non-covered	2,256,879	2,189,415	2,256,879	2,189,415	2,251,957
Ending balances: Loans
Individually evaluated for impairment	48,227	46,217	48,227	46,217	44,649
Collectively evaluated for impairment	2,208,652	2,143,198	2,208,652	2,143,198	2,207,308
Commercial, financial and agricultural [Member]
Beginning balance	8,889	4,949	7,432	4,687	4,687
Charge-offs	(2,041)	(560)	(2,666)	(1,384)	(4,418)
Recoveries	21	214	49	233	299
Provisions	2,079	1,357	4,133	2,424	6,864
Ending balance	8,948	5,960	8,948	5,960	7,432
Ending balances: Allowance for loan losses
Individually evaluated for impairment	290	902	290	902	202
Collectively evaluated for impairment	8,658	5,058	8,658	5,058	7,230
Loans receivable:
Loans - non-covered	178,670	176,662	178,670	176,662	180,471
Ending balances: Loans
Individually evaluated for impairment	679	1,920	679	1,920	582
Collectively evaluated for impairment	177,991	174,742	177,991	174,742	179,889
Real Estate construction, land development and other land loans [Member]
Beginning balance	8,650	14,857	12,966	12,856	12,856
Charge-offs	(307)	(394)	(1,234)	(1,217)	(2,739)
Recoveries	73	24	309	617	743
Provisions	(1,002)	106	(4,627)	2,337	2,106
Ending balance	7,414	14,593	7,414	14,593	12,966
Ending balances: Allowance for loan losses
Individually evaluated for impairment	818	480	818	480	544
Collectively evaluated for impairment	6,596	14,113	6,596	14,113	12,422
Loans receivable:
Loans - non-covered	247,369	232,352	247,369	232,352	244,670
Ending balances: Loans
Individually evaluated for impairment	7,541	7,596	7,541	7,596	8,027
Collectively evaluated for impairment	239,828	224,756	239,828	224,756	236,643
Real estate residential, farmland and mutli-family [Member]
Beginning balance	12,733	15,285	15,142	14,082	14,082
Charge-offs	(861)	(858)	(1,631)	(1,655)	(3,732)
Recoveries	114	117	179	663	753
Provisions	(854)	417	(2,558)	1,871	4,039
Ending balance	11,132	14,961	11,132	14,961	15,142
Ending balances: Allowance for loan losses
Individually evaluated for impairment	2,016	1,373	2,016	1,373	1,162
Collectively evaluated for impairment	9,116	13,588	9,116	13,588	13,980
Loans receivable:
Loans - non-covered	867,175	850,060	867,175	850,060	869,387
Ending balances: Loans
Individually evaluated for impairment	22,505	19,080	22,505	19,080	19,111
Collectively evaluated for impairment	844,670	830,980	844,670	830,980	850,276
Real estate residential, farmland and mutli-family [Member] | Non-covered [Member]
Loans receivable:
Loans - non-covered	867,175		867,175		869,387
Real estate home equity lines of credit [Member]
Beginning balance	3,662	2,040	1,838	1,884	1,884
Charge-offs	(397)	(265)	(503)	(889)	(1,314)
Recoveries	6	4	11	62	87
Provisions	484	282	2,409	1,004	1,181
Ending balance	3,755	2,061	3,755	2,061	1,838
Ending balances: Allowance for loan losses
Individually evaluated for impairment		1		1	1
Collectively evaluated for impairment	3,755	2,060	3,755	2,060	1,837
Loans receivable:
Loans - non-covered	200,510	198,281	200,510	198,281	198,127
Ending balances: Loans
Individually evaluated for impairment	483	22	483	22	22
Collectively evaluated for impairment	200,027	198,259	200,027	198,259	198,105
Real estate home equity lines of credit [Member] | Non-covered [Member]
Loans receivable:
Loans - non-covered	200,510		200,510		198,127
Real estate mortgage commercial and other [Member]
Beginning balance	9,375	5,714	5,524	5,247	5,247
Charge-offs	(277)	(1,907)	(889)	(2,447)	(4,346)
Recoveries	26	93	121	882	1,381
Provisions	88	1,339	4,456	1,557	3,242
Ending balance	9,212	5,239	9,212	5,239	5,524
Ending balances: Allowance for loan losses
Individually evaluated for impairment	528	781	528	781	649
Collectively evaluated for impairment	8,684	4,458	8,684	4,458	4,875
Loans receivable:
Loans - non-covered	717,905	680,607	717,905	680,607	709,606
Ending balances: Loans
Individually evaluated for impairment	17,009	17,585	17,009	17,585	16,894
Collectively evaluated for impairment	700,896	663,022	700,896	663,022	692,712
Consumer [Member]
Beginning balance	1,030	1,791	1,513	1,939	1,939
Charge-offs	(371)	(562)	(799)	(1,090)	(2,174)
Recoveries	116	106	233	243	474
Provisions	131	368	(41)	611	1,274
Ending balance	906	1,703	906	1,703	1,513
Ending balances: Allowance for loan losses
Individually evaluated for impairment		1		1	1
Collectively evaluated for impairment	906	1,702	906	1,702	1,512
Loans receivable:
Loans - non-covered	45,250	51,453	45,250	51,453	49,696
Ending balances: Loans
Individually evaluated for impairment	10	14	10	14	13
Collectively evaluated for impairment	45,240	51,439	45,240	51,439	49,683
Consumer [Member] | Non-covered [Member]
Loans receivable:
Loans - non-covered	45,250		45,250		49,696
Unallocated [Member]
Beginning balance	367	125	(152)	948	948
Charge-offs				(659)	(660)
Recoveries
Provisions	232	174	751	10	(440)
Ending balance	599	299	599	299	(152)
Ending balances: Allowance for loan losses
Collectively evaluated for impairment	$ 599	$ 299	$ 599	$ 299	$ (152)

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Loans and Asset Quality Information (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
All loans (non-covered and covered):
Amount of loans	$ 2,433,734	$ 2,462,266	$ 2,429,694
Percentage of Loans	100.00%	100.00%	100.00%
Unamortized net deferred loan costs	651	928	1,168
Loans, total	2,434,385	2,463,194	2,430,862
Commercial, financial and agricultural [Member]
All loans (non-covered and covered):
Amount of loans	165,021	168,469	164,767
Percentage of Loans	7.00%	7.00%	7.00%
Real Estate construction, land development and other land loans [Member]
All loans (non-covered and covered):
Amount of loans	295,868	305,246	297,390
Percentage of Loans	12.00%	12.00%	12.00%
Real estate mortgage residential (1-4 family) first mortgages [Member]
All loans (non-covered and covered):
Amount of loans	814,712	838,862	832,761
Percentage of Loans	33.00%	34.00%	34.00%
Real estate mortgage home equity loans/lines of credit [Member]
All loans (non-covered and covered):
Amount of loans	227,381	227,907	231,446
Percentage of Loans	9.00%	9.00%	10.00%
Real estate mortgage commercial and other [Member]
All loans (non-covered and covered):
Amount of loans	868,599	855,249	834,554
Percentage of Loans	36.00%	35.00%	34.00%
Installment loans to individual [Member]
All loans (non-covered and covered):
Amount of loans	$ 62,153	$ 66,533	$ 68,776
Percentage of Loans	3.00%	3.00%	3.00%

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Securities (Details Narrative) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Securities Details Narrative
Collateralized mortage obligations, amortized cost	$ 145		$ 192
Collateralized mortage obligations, fair value	149		200
Federal Home Loan Bank Stock, cost	6,016		3,894
Investment securities, pledged as collateral for public deposits	63,670		79,838
Sales of investment securities	47,473
Net realized gains of investment securities	786
Net realized gain on the call of municipal securities		$ 7

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Loans and Asset Quality Information (Details 10) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Loans with no related allowance recorded:
Impaired loans with no related allowance - Recorded Investment	$ 38,785	$ 46,663
Imapired loans with no related allowance - Unpaid Principal Balance	53,313	69,129
Impaired loans with no related allowance - Average Recorded Investment	44,602	56,864
Loans with an allowance recorded:
Impaired loans with allowance - Recorded Investment	32,778	44,112
Impaired loans with allowance - Unpaid Principal Balance	34,259	51,671
Impaired loans with related allowance - Related Allowance	4,992	5,692
Impaired loans with related allowance - Average Recorded Investment	35,417	38,349
Non-covered [Member]
Loans with no related allowance recorded:
Impaired loans with no related allowance - Recorded Investment	24,341	17,605
Imapired loans with no related allowance - Unpaid Principal Balance	27,818	20,344
Impaired loans with no related allowance - Average Recorded Investment	21,410	17,649
Loans with an allowance recorded:
Impaired loans with allowance - Recorded Investment	23,886	27,044
Impaired loans with allowance - Unpaid Principal Balance	24,153	29,304
Impaired loans with related allowance - Related Allowance	3,652	2,559
Impaired loans with related allowance - Average Recorded Investment	24,939	24,006
Non-covered [Member] | Commercial Unsecured [Member]
Loans with no related allowance recorded:
Impaired loans with no related allowance - Average Recorded Investment	22
Loans with an allowance recorded:
Impaired loans with allowance - Recorded Investment	99	115
Impaired loans with allowance - Unpaid Principal Balance	100	115
Impaired loans with related allowance - Related Allowance	80	63
Impaired loans with related allowance - Average Recorded Investment	110	72
Non-covered [Member] | Commercial Secured [Member]
Loans with no related allowance recorded:
Impaired loans with no related allowance - Recorded Investment	71
Imapired loans with no related allowance - Unpaid Principal Balance	74
Impaired loans with no related allowance - Average Recorded Investment	134	334
Loans with an allowance recorded:
Impaired loans with allowance - Recorded Investment	509	392
Impaired loans with allowance - Unpaid Principal Balance	509	394
Impaired loans with related allowance - Related Allowance	210	64
Impaired loans with related allowance - Average Recorded Investment	494	1,081
Non-covered [Member] | Secured by Inventory and Accounts Receivable [Member]
Loans with an allowance recorded:
Impaired loans with allowance - Recorded Investment		75
Impaired loans with allowance - Unpaid Principal Balance		75
Impaired loans with related allowance - Related Allowance		75
Impaired loans with related allowance - Average Recorded Investment	25	80
Non-covered [Member] | Real estate construction, land development other land loans [Member]
Loans with no related allowance recorded:
Impaired loans with no related allowance - Recorded Investment	5,617	6,398
Imapired loans with no related allowance - Unpaid Principal Balance	6,116	6,907
Impaired loans with no related allowance - Average Recorded Investment	5,954	5,005
Loans with an allowance recorded:
Impaired loans with allowance - Recorded Investment	1,924	1,629
Impaired loans with allowance - Unpaid Principal Balance	1,987	2,148
Impaired loans with related allowance - Related Allowance	818	544
Impaired loans with related allowance - Average Recorded Investment	1,705	2,339
Non-covered [Member] | Real estate residential, farmland and mutli-family [Member]
Loans with no related allowance recorded:
Impaired loans with no related allowance - Recorded Investment	8,646	3,883
Imapired loans with no related allowance - Unpaid Principal Balance	9,665	4,429
Impaired loans with no related allowance - Average Recorded Investment	6,471	2,329
Loans with an allowance recorded:
Impaired loans with allowance - Recorded Investment	13,859	15,228
Impaired loans with allowance - Unpaid Principal Balance	13,969	15,642
Impaired loans with related allowance - Related Allowance	2,016	1,162
Impaired loans with related allowance - Average Recorded Investment	14,438	13,417
Non-covered [Member] | Real estate home equity lines of credit [Member]
Loans with no related allowance recorded:
Impaired loans with no related allowance - Recorded Investment	483
Imapired loans with no related allowance - Unpaid Principal Balance	498
Impaired loans with no related allowance - Average Recorded Investment	327
Loans with an allowance recorded:
Impaired loans with allowance - Recorded Investment		22
Impaired loans with allowance - Unpaid Principal Balance		22
Impaired loans with related allowance - Related Allowance		1
Impaired loans with related allowance - Average Recorded Investment	7	637
Non-covered [Member] | Real estate commercial [Member]
Loans with no related allowance recorded:
Impaired loans with no related allowance - Recorded Investment	9,514	7,324
Imapired loans with no related allowance - Unpaid Principal Balance	11,453	9,008
Impaired loans with no related allowance - Average Recorded Investment	8,495	9,981
Loans with an allowance recorded:
Impaired loans with allowance - Recorded Investment	7,495	9,570
Impaired loans with allowance - Unpaid Principal Balance	7,588	10,873
Impaired loans with related allowance - Related Allowance	528	649
Impaired loans with related allowance - Average Recorded Investment	8,156	5,914
Non-covered [Member] | Consumer [Member]
Loans with no related allowance recorded:
Impaired loans with no related allowance - Recorded Investment	10
Imapired loans with no related allowance - Unpaid Principal Balance	12
Impaired loans with no related allowance - Average Recorded Investment	7
Loans with an allowance recorded:
Impaired loans with allowance - Recorded Investment		13
Impaired loans with allowance - Unpaid Principal Balance		35
Impaired loans with related allowance - Related Allowance		1
Impaired loans with related allowance - Average Recorded Investment	4	466
Covered [Member]
Loans with no related allowance recorded:
Impaired loans with no related allowance - Recorded Investment	14,444	29,058
Imapired loans with no related allowance - Unpaid Principal Balance	25,495	48,785
Impaired loans with no related allowance - Average Recorded Investment	23,192	39,215
Loans with an allowance recorded:
Impaired loans with allowance - Recorded Investment	8,892	17,068
Impaired loans with allowance - Unpaid Principal Balance	10,106	22,367
Impaired loans with related allowance - Related Allowance	1,340	3,133
Impaired loans with related allowance - Average Recorded Investment	$ 10,478	$ 14,343

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Fair Value (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Securities available for sale:
Securities available for sale	$ 124,078	$ 173,041	$ 186,634
Recurring [Member] | Fair Value [Member]
Securities available for sale:
Government-sponsored enterprise securities	12,459	18,245
Mortgage-backed securities	104,699	147,187
Corporate bonds	790	3,598
Equity securities	6,130	4,011
Securities available for sale	124,078	173,041
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Securities available for sale:
Government-sponsored enterprise securities	12,459	18,245
Mortgage-backed securities	104,699	147,187
Corporate bonds	790	3,598
Equity securities	6,130	4,011
Securities available for sale	124,078	173,041
Nonrecurring [Member] | Fair Value [Member]
Securities available for sale:
Impaired loans - covered	6,678	15,284
Impaired loans - non-covered	5,825	13,020
Other real estate - covered	9,934	24,497
Other real estate - non-covered	9,346	12,251
Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Securities available for sale:
Impaired loans - covered	6,678	15,284
Impaired loans - non-covered	5,825	13,020
Other real estate - covered	9,934	24,497
Other real estate - non-covered	$ 9,346	$ 12,251

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Goodwill and Other Intangible Assets (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014
The estimated amortization expense for five succeeding years:
July 1 to December 31, 2014	$ 388
2015	721
2016	654
2017	404
2018	129
Thereafter	150
Total	$ 2,446

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Loans and Asset Quality Information (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014		Dec. 31, 2013		Jun. 30, 2013
ASSET QUALITY DATA
Nonaccrual loans	$ 68,471		$ 79,155
Foreclosed real estate - non-covered	9,346		12,251		15,425
Foreclosed real estate - covered	9,934		24,497		32,005
Total nonperforming assets	123,194		152,588		168,237
Non-covered nonperforming Assets [Member]
ASSET QUALITY DATA
Nonaccrual loans	47,533		41,938		42,338
Restructured loans - accruing	27,250		27,776		21,333
Total nonperforming loans	74,783		69,714		63,671
Foreclosed real estate - non-covered	9,346		12,251		15,425
Total nonperforming assets	84,129		81,965		79,096
Covered nonperforming Assets [Member]
ASSET QUALITY DATA
Nonaccrual loans	20,938	[1]	37,217	[1]	50,346	[1]
Restructured loans - accruing	8,193		8,909		6,790
Total nonperforming loans	29,131		46,126		57,136
Foreclosed real estate - covered	9,934		24,497		32,005
Total nonperforming assets	$ 39,065		$ 70,623		$ 89,141

[1] At June 30, 2014, December 31, 2013, and June 30, 2013, the contractual balance of the nonaccrual loans covered by FDIC loss share agreements was $34.3 million, $60.4 million, and $89.3 million, respectively.

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Basis of Presentation

6 Months Ended

Jun. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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, 2014 and 2013 and the consolidated results of operations and consolidated cash flows for the periods ended June 30, 2014 and 2013. All such adjustments were of a normal, recurring nature. Reference is made to the 2013 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, 2014 and 2013 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.

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Pension Plans (Details Narrative) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Pension Plans Details Narrative
Net periodic pension cost	$ (242)	$ (190)	$ (528)	$ (327)

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Loans and Asset Quality Information (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Non-covered loans:
Total loans	$ 2,256,879	$ 2,251,957	$ 2,189,415
Percentage of Loans	100.00%	100.00%	100.00%
Unamortized net deferred loan costs	651	928	1,168
Loans - non-covered	2,257,530	2,252,885	2,190,583
Commercial, financial and agricultural [Member]
Non-covered loans:
Total loans	162,303	164,195	159,964
Percentage of Loans	7.00%	7.00%	7.00%
Real Estate construction, land development and other land loans [Member]
Non-covered loans:
Total loans	274,975	273,412	262,397
Percentage of Loans	12.00%	12.00%	12.00%
Real estate mortgage residential (1-4 family) first mortgages [Member]
Non-covered loans:
Total loans	718,962	730,712	712,802
Percentage of Loans	32.00%	32.00%	33.00%
Real estate mortgage home equity loans/lines of credit [Member]
Non-covered loans:
Total loans	213,542	213,016	214,473
Percentage of Loans	9.00%	10.00%	10.00%
Real estate mortgage commercial and other [Member]
Non-covered loans:
Total loans	825,450	804,621	771,711
Percentage of Loans	37.00%	36.00%	35.00%
Installment loans to individual [Member]
Non-covered loans:
Total loans	$ 61,647	$ 66,001	$ 68,068
Percentage of Loans	3.00%	3.00%	3.00%

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Pension Plans (Tables)

6 Months Ended

Jun. 30, 2014

Compensation and Retirement Disclosure [Abstract]

Schedule of the components of pension (income) expense

The Company recorded pension income totaling $242,000 and $190,000 for the three months ended June 30, 2014 and 2013, respectively, which primarily related to investment income from the Pension Plan’s assets. The following table contains the components of the pension income.

	For the Three Months Ended June 30,
	2014			2013			2014			2013		2014 Total			2013 Total
($ in thousands)	Pension Plan			Pension Plan			SERP			SERP		Both Plans			Both Plans
Service cost – benefits earned during the period	$	—			—			80			—		80			—
Interest cost		382			302			53			67		435			369
Expected return on plan assets		(701	)		(574	)		—			—		(701	)		(574	)
Amortization of transition obligation		—			—			—			—		—			—
Amortization of net (gain)/loss		—			15			(56	)		—		(56	)		15
Amortization of prior service cost		—			—			—			—		—			—
Net periodic pension cost	$	(319	)		(257	)		77			67		(242	)		(190	)

The Company recorded pension income totaling $528,000 and $327,000 for the six months ended June 30, 2014 and 2013, respectively, which primarily related to investment income from the Pension Plan’s assets. The following table contains the components of the pension income.

	For the Six Months Ended June 30,
	2014			2013			2014			2013		2014 Total			2013 Total
($ in thousands)	Pension Plan			Pension Plan			SERP			SERP		Both Plans			Both Plans
Service cost – benefits earned during the period	$	—			—			136			—		136			—
Interest cost		731			680			105			134		836			814
Expected return on plan assets		(1,390	)		(1,159	)		—			—		(1,390	)		(1,159	)
Amortization of transition obligation		—			—			—			—		—			—
Amortization of net (gain)/loss		—			18			(110	)		—		(110	)		18
Amortization of prior service cost		—			—			—			—		—			—
Net periodic pension cost	$	(659	)		(461	)		131			134		(528	)		(327	)

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Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2014

Goodwill And Other Intangible Assets Tables

Summary of the gross carrying amount and accumulated amortization of amortizable intangible assets and the carrying amount of unamortized intangible assets

The following is a summary of the gross carrying amount and accumulated amortization of amortizable intangible assets as of June 30, 2014, December 31, 2013, and June 30, 2013 and the carrying amount of unamortized intangible assets as of those same dates.

	June 30, 2014				December 31, 2013				June 30, 2013
($ in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizable intangible assets:
Customer lists	$	678		484		678		462		678		439
Core deposit premiums		8,560		6,308		8,560		5,942		8,560		5,525
Total	$	9,238		6,792		9,238		6,404		9,238		5,964
Unamortizable intangible assets:
Goodwill	$	65,835				65,835				65,835

Schedule of the estimated amortization expense for the five succeeding fiscal years

The following table presents the estimated amortization expense for the last two quarters of calendar year 2014 and for each of the four calendar years ending December 31, 2018 and the estimated amount amortizable thereafter. These estimates are subject to change in future periods to the extent management determines it is necessary to make adjustments to the carrying value or estimated useful lives of amortized intangible assets.

($ in thousands)	Estimated Amortization Expense
July 1 to December 31, 2014	$	388
2015		721
2016		654
2017		404
2018		129
Thereafter		150
Total	$	2,446

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Deferred Loan Costs (Details Narrative) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Deferred Loan Costs Details Narrative
Net deferred loan costs	$ 651	$ 928	$ 1,168

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Loans and Asset Quality Information (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Covered loans:
Impaired Purchased Loans - Carrying Value	$ 2,883	$ 3,142
Impaired Purchased Loans - Unpaid Principal Balance	5,973	6,263
Nonimpaired Purchased Loans - Carrying Value	173,972	207,167
Nonimpaired Purchased Loans - Unpaid Principal Balance	207,396	261,497
Total Covered Loans - Carrying Value	176,855	210,309	240,279
Total Covered Loans - Unpaid Principal Balance	213,369	267,760
Commercial, financial and agricultural [Member]
Covered loans:
Impaired Purchased Loans - Carrying Value	69	75
Impaired Purchased Loans - Unpaid Principal Balance	129	136
Nonimpaired Purchased Loans - Carrying Value	2,649	4,199
Nonimpaired Purchased Loans - Unpaid Principal Balance	3,015	5,268
Total Covered Loans - Carrying Value	2,718	4,274
Total Covered Loans - Unpaid Principal Balance	3,144	5,404
Real Estate construction, land development and other land loans [Member]
Covered loans:
Impaired Purchased Loans - Carrying Value	322	325
Impaired Purchased Loans - Unpaid Principal Balance	548	564
Nonimpaired Purchased Loans - Carrying Value	20,571	31,509
Nonimpaired Purchased Loans - Unpaid Principal Balance	28,878	47,792
Total Covered Loans - Carrying Value	20,893	31,834
Total Covered Loans - Unpaid Principal Balance	29,426	48,356
Real estate mortgage residential (1-4 family) first mortgages [Member]
Covered loans:
Impaired Purchased Loans - Carrying Value	429	575
Impaired Purchased Loans - Unpaid Principal Balance	1,317	1,500
Nonimpaired Purchased Loans - Carrying Value	95,321	107,575
Nonimpaired Purchased Loans - Unpaid Principal Balance	111,278	126,882
Total Covered Loans - Carrying Value	95,750	108,150
Total Covered Loans - Unpaid Principal Balance	112,595	128,382
Real estate mortgage home equity loans/lines of credit [Member]
Covered loans:
Impaired Purchased Loans - Carrying Value	13	14
Impaired Purchased Loans - Unpaid Principal Balance	20	21
Nonimpaired Purchased Loans - Carrying Value	13,826	14,877
Nonimpaired Purchased Loans - Unpaid Principal Balance	16,359	18,318
Total Covered Loans - Carrying Value	13,839	14,891
Total Covered Loans - Unpaid Principal Balance	16,379	18,339
Real estate mortgage commercial and other [Member]
Covered loans:
Impaired Purchased Loans - Carrying Value	2,050	2,153
Impaired Purchased Loans - Unpaid Principal Balance	3,959	4,042
Nonimpaired Purchased Loans - Carrying Value	41,099	48,475
Nonimpaired Purchased Loans - Unpaid Principal Balance	47,359	62,630
Total Covered Loans - Carrying Value	43,149	50,628
Total Covered Loans - Unpaid Principal Balance	51,318	66,672
Installment loans to individual [Member]
Covered loans:
Nonimpaired Purchased Loans - Carrying Value	506	532
Nonimpaired Purchased Loans - Unpaid Principal Balance	507	607
Total Covered Loans - Carrying Value	506	532
Total Covered Loans - Unpaid Principal Balance	$ 507	$ 607

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Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2014

Comprehensive Income Tables

Schedule of accumulated other comprehensive income

Comprehensive income is defined as the change in equity during a period for non-owner transactions and is divided into net income and other comprehensive income. Other comprehensive income includes revenues, expenses, gains, and losses that are excluded from earnings under current accounting standards. The components of accumulated other comprehensive income for the Company are as follows:

($ in thousands)	June 30, 2014			December 31, 2013			June 30, 2013
Unrealized gain (loss) on securities available for sale	$	(1,755	)		(2,021	)		1,123
Deferred tax asset (liability)		685			789			(438	)
Net unrealized gain (loss) on securities available for sale		(1,070	)		(1,232	)		685
Additional pension asset (liability)		5,025			5,135			(3,561	)
Deferred tax asset (liability)		(1,937	)		(2,003	)		1,389
Net additional pension asset (liability)		3,088			3,132			(2,172	)
Total accumulated other comprehensive income (loss)	$	2,018			1,900			(1,487	)

Schedule of changes in accumulated other comprehensive income

The following table discloses the changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2014 (all amounts are net of tax).

($ in thousands)	Unrealized Gain (Loss) on Securities Available for Sale			Additional Pension Asset (Liability)			Total
Beginning balance at January 1, 2014	$	(1,232	)		3,132			1,900
Other comprehensive income (loss) before reclassifications		642			—			642
Amounts reclassified from accumulated other comprehensive income		(480	)		(44	)		(524	)
Net current-period other comprehensive income (loss)		162			(44	)		118
Ending balance at June 30, 2014	$	(1,070	)		3,088			2,018

The following table discloses the changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2013 (all amounts are net of tax).

($ in thousands)	Unrealized Gain (Loss) on Securities Available for Sale			Additional Pension Asset (Liability)			Total
Beginning balance at January 1, 2013	$	2,007			(2,183	)		(176	)
Other comprehensive income (loss) before reclassifications		(1,318	)		—			(1,318	)
Amounts reclassified from accumulated other comprehensive income		(4	)		11			7
Net current-period other comprehensive income (loss)		(1,322	)		11			(1,311	)
Ending balance at June 30, 2013	$	685			(2,172	)		(1,487	)

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Tables

Financial instruments that were measured at fair value on a recurring and nonrecurring basis

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at June 30, 2014. The impaired loans shown below are those in which the value is based on the underlying collateral value.

($ in thousands)
Description of Financial Instruments	Fair Value at June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring
Securities available for sale:
Government-sponsored enterprise securities	$	12,459		—		12,459		—
Mortgage-backed securities		104,699		—		104,699		—
Corporate bonds		790		—		790		—
Equity securities		6,130		—		6,130		—
Total available for sale securities	$	124,078		—		124,078		—
Nonrecurring
Impaired loans – covered	$	6,678		—		—		6,678
Impaired loans – non-covered		5,825		—		—		5,825
Foreclosed real estate – covered		9,934		—		—		9,934
Foreclosed real estate – non-covered		9,346		—		—		9,346

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at December 31, 2013.

($ in thousands)
Description of Financial Instruments	Fair Value at December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring
Securities available for sale:
Government-sponsored enterprise securities	$	18,245		—		18,245		—
Mortgage-backed securities		147,187		—		147,187		—
Corporate bonds		3,598		—		3,598		—
Equity securities		4,011		—		4,011		—
Total available for sale securities	$	173,041		—		173,041		—
Nonrecurring
Impaired loans – covered	$	15,284		—		—		15,284
Impaired loans – non-covered		13,020		—		—		13,020
Foreclosed real estate – covered		24,497		—		—		24,497
Foreclosed real estate – non-covered		12,251		—		—		12,251

Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of June 30, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

($ in thousands)
Description	Fair Value at June 30, 2014		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired loans – covered	$	6,678	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-10%
Impaired loans – non-covered		5,825	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-10%
Foreclosed real estate – covered		9,934	Appraised value	Discounts to reflect current market conditions and estimated costs to sell	0-10%
Foreclosed real estate – non-covered		9,346	Appraised value	Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell	0-40%

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2013, the significant unobservable inputs used in the fair value measurements were as follows:

($ in thousands)
Description	Fair Value at December 31, 2013		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired loans – covered	$	15,284	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-10%
Impaired loans – non-covered		13,020	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-37%
Foreclosed real estate – covered		24,497	Appraised value	Discounts to reflect current market conditions and estimated costs to sell	0-10%
Foreclosed real estate – non-covered		12,251	Appraised value	Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell	0-40%

Schedule of the carrying amounts and estimated fair values of financial instruments

The carrying amounts and estimated fair values of financial instruments at June 30, 2014 and December 31, 2013 are as follows:

		June 30, 2014				December 31, 2013
($ in thousands)	Level in Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Cash and due from banks, noninterest-bearing	Level 1	$	92,633		92,633		83,881		83,881
Due from banks, interest-bearing	Level 1		313,141		313,141		136,644		136,644
Federal funds sold	Level 1		1,508		1,508		2,749		2,749
Securities available for sale	Level 2		124,078		124,078		173,041		173,041
Securities held to maturity	Level 2		53,879		57,612		53,995		56,700
Presold mortgages in process of settlement	Level 1		5,926		5,926		5,422		5,422
Total loans, net of allowance	Level 3		2,388,589		2,330,633		2,414,689		2,352,834
Accrued interest receivable	Level 1		8,795		8,795		9,649		9,649
FDIC indemnification asset	Level 3		29,406		28,670		48,622		47,032
Bank-owned life insurance	Level 1		44,685		44,685		44,040		44,040
Deposits	Level 2		2,754,579		2,755,180		2,751,019		2,752,375
Borrowings	Level 2		116,394		101,928		46,394		34,795
Accrued interest payable	Level 2		778		778		879		879

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Consolidated Statements of Cash Flows (unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash Flows From Operating Activities
Net income	$ 12,322	$ 8,688
Reconciliation of net income to net cash provided by operating activities:
Provision for loan losses	7,234	16,740
Net security premium amortization	1,036	1,360
Purchase accounting accretion and amortization, net	(11,168)	(10,055)
Foreclosed property losses and write-downs, net	3,997	3,601
Gain on securities available for sale	(786)	(7)
Other losses (gains)	317	(30)
Decrease in net deferred loan costs	277	156
Depreciation of premises and equipment	2,325	2,287
Stock-based compensation expense	225	220
Amortization of intangible assets	388	419
Origination of presold mortgages in process of settlement	(47,696)	(51,664)
Proceeds from sales of presold mortgages in process of settlement	47,347	55,602
Decrease in accrued interest receivable	854	421
Decrease (increase) in other assets	(6,866)	8,089
Decrease in accrued interest payable	(101)	(255)
Increase (decrease) in other liabilities	(1,222)	2,080
Net cash provided by operating activities	8,483	37,652
Cash Flows From Investing Activities
Purchases of securities available for sale	(17,528)	(44,834)
Proceeds from sales of securities available for sale	47,473
Proceeds from maturities/issuer calls of securities available for sale	19,151	22,147
Proceeds from maturities/issuer calls of securities held to maturity		1,587
Purchase of bank-owned life insurance		(15,000)
Net decrease (increase) in loans	21,825	(50,937)
Proceeds from FDIC loss share agreements	15,256	12,018
Proceeds from sales of foreclosed real estate	21,396	33,092
Purchases of premises and equipment	(2,842)	(4,092)
Proceeds from sale of premises and equipment	811
Proceeds from loans held for sale		30,393
Net cash received in acquisition		38,315
Net cash provided by investing activities	105,542	22,689
Cash Flows From Financing Activities
Net increase (decrease) in deposits	3,567	(60,324)
Proceeds from borrowings, net	70,000
Cash dividends paid - common stock	(3,150)	(3,147)
Cash dividends paid - preferred stock	(434)	(777)
Net cash provided (used) by financing activities	69,983	(64,248)
Increase (decrease) in cash and cash equivalents	184,008	(3,907)
Cash and cash equivalents, beginning of period	223,274	241,507
Cash and cash equivalents, end of period	407,282	237,600
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest	4,389	6,298
Cash paid during the period for income taxes	421
Non-cash transactions:
Unrealized gain (loss) on securities available for sale, net of taxes	162	(1,322)
Foreclosed loans transferred to other real estate	$ 7,925	$ 10,548

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Equity-Based Compensation Plans (Details Narrative) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended		3 Months Ended		6 Months Ended				3 Months Ended	6 Months Ended		6 Months Ended			6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Sep. 30, 2012 Stock options [Member] CEO [Member]	Sep. 30, 2012 Restricted Stock [Member] CEO [Member]	Jun. 30, 2014 Restricted Stock [Member] CEO [Member]	Jun. 30, 2014 Common stock [Member] Non-employee directors [Member]	Jun. 30, 2013 Common stock [Member] Non-employee directors [Member]	Jun. 30, 2014 First Bancorp 2014 Equity Plan [Member]	Jun. 30, 2014 First Bancorp 2007 Equity Plan [Member] February 2014 Award [Member]	Jun. 30, 2014 First Bancorp 2007 Equity Plan [Member] February 2014 Award [Member]	Feb. 11, 2014 First Bancorp 2007 Equity Plan [Member] February 2014 Award [Member]	Jun. 30, 2014 First Bancorp 2007 Equity Plan [Member] February 2012 Award [Member]	Jun. 30, 2013 First Bancorp 2007 Equity Plan [Member] February 2012 Award [Member]	Feb. 23, 2012 First Bancorp 2007 Equity Plan [Member] February 2012 Award [Member]	Jun. 30, 2014 First Bancorp Plans [Member]
Director equity grants granted, value								$ 16,000
Grants in period (options)			75,000	40,000
Total compensation expense											278,200			58,900
Stock based compensation expense	225,000	220,000							23,200	46,400		600	14,900
Subsequent quarter compensation expense associated with senior executives grants										23,200
Exercise price range - floor															$ 9.76
Exercise prices range - ceiling															$ 22.12
Shares remaining available for grant															989,935
Equity grants					15,657	10,065	13,164
Fair value of equity grant, per share					$ 17.77	$ 17.6	$ 14.68
Stock based compensation, income tax benefit	$ 87,000	$ 86,000
Stock options outstanding	277,679

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Securities (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Securities Available for Sale - Amortized Cost
Due after one year but within five years	$ 12,555
Due after ten years	1,000
Mortgage-backed securities	106,173
Total debt securities	119,728
Equity securities	6,105
Total securities	125,833	175,061
Securities Available for Sale - Fair Value
Due after one year but within five years	12,459
Due after ten years	790
Mortgage-backed securities	104,699
Total debt securities	117,948
Equity securities	6,130
Total securities	124,078	173,041	186,634
Securities Held to Maturity - Amortized Cost
Due after one year but within five years	8,853
Due after five years but within ten years	40,237
Due after ten years	4,789
Total debt securities	53,879
Total securities	53,879	53,995	54,361
Securities Held to Maturity - Fair Value
Due after one year but within five years	9,481
Due after five years but within ten years	43,104
Due after ten years	5,027
Total debt securities	57,612
Securities held to maturity	$ 57,612	$ 56,700	$ 58,376

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Loans and Asset Quality Information (Details 11) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Recorded investment in loans by credit quality indicators:
Non-covered loans	$ 2,256,879	$ 2,251,957
Unamortized net deferred loan costs	651	928	1,168
Covered loans	176,855	210,309	240,279
Total loans	2,434,385	2,463,194	2,430,862
Non-covered [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	2,257,530	2,252,885
Commercial Unsecured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	36,077	37,015
Commercial Secured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	124,101	122,280
Secured by Inventory and Accounts Receivable [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	18,492	21,176
Real estate construction, land development other land loans [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	247,369	244,670
Real estate residential, farmland and mutli-family [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	867,175	869,387
Real estate home equity lines of credit [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	200,510	198,127
Real estate commercial [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	717,905	709,606
Consumer [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	45,250	49,696
Pass (Grades 1, 2 and 3) [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	625,925	563,666
Covered loans	17,850	25,078
Total loans	643,775	588,744
Pass (Grades 1, 2 and 3) [Member] | Commercial Unsecured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	11,722	8,495
Pass (Grades 1, 2 and 3) [Member] | Commercial Secured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	34,642	31,494
Pass (Grades 1, 2 and 3) [Member] | Secured by Inventory and Accounts Receivable [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	5,863	4,098
Pass (Grades 1, 2 and 3) [Member] | Real estate construction, land development other land loans [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	65,376	31,221
Pass (Grades 1, 2 and 3) [Member] | Real estate residential, farmland and mutli-family [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	222,681	227,053
Pass (Grades 1, 2 and 3) [Member] | Real estate home equity lines of credit [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	122,853	120,205
Pass (Grades 1, 2 and 3) [Member] | Real estate commercial [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	138,088	115,397
Pass (Grades 1, 2 and 3) [Member] | Consumer [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	24,700	25,703
Weak Pass (Grade 4) [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	1,394,253	1,454,925
Covered loans	96,435	92,147
Total loans	1,490,688	1,547,072
Weak Pass (Grade 4) [Member] | Commercial Unsecured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	20,737	24,415
Weak Pass (Grade 4) [Member] | Commercial Secured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	76,763	77,441
Weak Pass (Grade 4) [Member] | Secured by Inventory and Accounts Receivable [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	9,912	12,800
Weak Pass (Grade 4) [Member] | Real estate construction, land development other land loans [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	149,982	181,050
Weak Pass (Grade 4) [Member] | Real estate residential, farmland and mutli-family [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	536,597	540,349
Weak Pass (Grade 4) [Member] | Real estate home equity lines of credit [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	64,446	63,400
Weak Pass (Grade 4) [Member] | Real estate commercial [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	517,412	533,680
Weak Pass (Grade 4) [Member] | Consumer [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	18,404	21,790
Watch or Standard Loans (Grade 9) [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	17,346	19,101
Covered loans	82
Total loans	17,428	19,101
Watch or Standard Loans (Grade 9) [Member] | Commercial Unsecured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	7	7
Watch or Standard Loans (Grade 9) [Member] | Commercial Secured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	93	100
Watch or Standard Loans (Grade 9) [Member] | Secured by Inventory and Accounts Receivable [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans
Watch or Standard Loans (Grade 9) [Member] | Real estate construction, land development other land loans [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	2,118	2,365
Watch or Standard Loans (Grade 9) [Member] | Real estate residential, farmland and mutli-family [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	5,038	5,062
Watch or Standard Loans (Grade 9) [Member] | Real estate home equity lines of credit [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	1,293	1,499
Watch or Standard Loans (Grade 9) [Member] | Real estate commercial [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	8,743	10,014
Watch or Standard Loans (Grade 9) [Member] | Consumer [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	54	54
Special Mention Loans (Grade 5) [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	96,425	93,442
Covered loans	12,888	8,857
Total loans	109,313	102,299
Special Mention Loans (Grade 5) [Member] | Commercial Unsecured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	1,435	1,509
Special Mention Loans (Grade 5) [Member] | Commercial Secured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	4,403	5,597
Special Mention Loans (Grade 5) [Member] | Secured by Inventory and Accounts Receivable [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	1,346	2,022
Special Mention Loans (Grade 5) [Member] | Real estate construction, land development other land loans [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	11,174	11,646
Special Mention Loans (Grade 5) [Member] | Real estate residential, farmland and mutli-family [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	45,084	41,583
Special Mention Loans (Grade 5) [Member] | Real estate home equity lines of credit [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	4,030	5,699
Special Mention Loans (Grade 5) [Member] | Real estate commercial [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	28,269	24,557
Special Mention Loans (Grade 5) [Member] | Consumer [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	684	829
Classified Loans (Grades 6,7 and 8) [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	75,397	78,885
Covered loans	28,662	47,010
Total loans	104,059	125,895
Classified Loans (Grades 6,7 and 8) [Member] | Commercial Unsecured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	2,066	2,367
Classified Loans (Grades 6,7 and 8) [Member] | Commercial Secured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	4,572	4,986
Classified Loans (Grades 6,7 and 8) [Member] | Secured by Inventory and Accounts Receivable [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	1,033	1,711
Classified Loans (Grades 6,7 and 8) [Member] | Real estate construction, land development other land loans [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	9,718	10,333
Classified Loans (Grades 6,7 and 8) [Member] | Real estate residential, farmland and mutli-family [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	36,607	37,526
Classified Loans (Grades 6,7 and 8) [Member] | Real estate home equity lines of credit [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	5,452	5,124
Classified Loans (Grades 6,7 and 8) [Member] | Real estate commercial [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	15,096	15,843
Classified Loans (Grades 6,7 and 8) [Member] | Consumer [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	853	995
Nonaccrual Loans [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	47,533	41,938
Covered loans	20,938	37,217
Total loans	68,471	79,155
Nonaccrual Loans [Member] | Commercial Unsecured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	110	222
Nonaccrual Loans [Member] | Commercial Secured [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	3,628	2,662
Nonaccrual Loans [Member] | Secured by Inventory and Accounts Receivable [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	338	545
Nonaccrual Loans [Member] | Real estate construction, land development other land loans [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	9,001	8,055
Nonaccrual Loans [Member] | Real estate residential, farmland and mutli-family [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	21,168	17,814
Nonaccrual Loans [Member] | Real estate home equity lines of credit [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	2,436	2,200
Nonaccrual Loans [Member] | Real estate commercial [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	10,297	10,115
Nonaccrual Loans [Member] | Consumer [Member]
Recorded investment in loans by credit quality indicators:
Non-covered loans	$ 555	$ 325

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Consolidated Balance Sheets (unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
ASSETS
Cash and due from banks, noninterest-bearing	$ 92,633	$ 83,881	$ 82,798
Due from banks, interest-bearing	313,141	136,644	154,199
Federal funds sold	1,508	2,749	603
Total cash and cash equivalents	407,282	223,274	237,600
Securities available for sale	124,078	173,041	186,634
Securities held to maturity (fair values of $57,612, $56,700, and $58,376)	53,879	53,995	54,361
Presold mortgages in process of settlement	5,926	5,422	4,552
Loans - non-covered	2,257,530	2,252,885	2,190,583
Loans - covered by FDIC loss share agreement	176,855	210,309	240,279
Total loans	2,434,385	2,463,194	2,430,862
Allowance for loan losses - non-covered	(41,966)	(44,263)	(44,816)
Allowance for loan losses - covered	(3,830)	(4,242)	(6,035)
Total allowance for loan losses	(45,796)	(48,505)	(50,851)
Net loans	2,388,589	2,414,689	2,380,011
Premises and equipment	76,705	77,448	77,597
Accrued interest receivable	8,795	9,649	9,780
FDIC indemnification asset	29,406	48,622	92,950
Goodwill	65,835	65,835	65,835
Other intangible assets	2,446	2,834	3,274
Foreclosed real estate - non-covered	9,346	12,251	15,425
Foreclosed real estate - covered	9,934	24,497	32,005
Bank-owned life insurance	44,685	44,040	43,276
Other assets	39,593	29,473	44,110
Total assets	3,266,499	3,185,070	3,247,410
LIABILITIES
Deposits: Noninterest bearing checking accounts	525,332	482,650	454,785
Interest bearing checking accounts	551,577	557,413	546,203
Money market accounts	558,373	551,335	564,837
Savings accounts	175,084	169,023	166,497
Time deposits of $100,000 or more	554,537	564,527	612,912
Other time deposits	389,676	426,071	473,119
Total deposits	2,754,579	2,751,019	2,818,353
Borrowings	116,394	46,394	46,394
Accrued interest payable	778	879	1,071
Other liabilities	13,655	14,856	21,487
Total liabilities	2,885,406	2,813,148	2,887,305
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common stock, no par value per share. Authorized: 40,000,000 shares Issued & outstanding: 19,705,381, 19,679,659, and 19,679,659 shares	132,417	132,099	132,097
Retained earnings	175,871	167,136	158,708
Accumulated other comprehensive income (loss)	2,018	1,900	(1,487)
Total shareholders' equity	381,093	371,922	360,105
Total liabilities and shareholders' equity	3,266,499	3,185,070	3,247,410
Series B Preferred Stock [Member]
SHAREHOLDERS' EQUITY
Preferred stock, no par value per share. Authorized: 5,000,000 shares Series B issued & outstanding: 63,500, 63,500, and 63,500 shares Series C, convertible, issued & outstanding: 728,706, 728,706, and 728,706 shares	63,500	63,500	63,500
Series C Preferred Stock [Member]
SHAREHOLDERS' EQUITY
Preferred stock, no par value per share. Authorized: 5,000,000 shares Series B issued & outstanding: 63,500, 63,500, and 63,500 shares Series C, convertible, issued & outstanding: 728,706, 728,706, and 728,706 shares	$ 7,287	$ 7,287	$ 7,287

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Loans and Asset Quality Information (Details 3) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Covered purchased nonimpaired loans:
Carrying amount of nonimpaired covered loans, beginning balance	$ 207,167	$ 277,489
Principal repayments	(36,715)	(63,588)
Transfers to foreclosed real estate	(4,616)	(13,977)
Loan charge-offs	(3,123)	(12,957)
Accretion of loan discount	11,259	20,200
Balance, ending, carrying value	$ 173,972	$ 207,167

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Consolidated Statements of Shareholders' Equity (Unaudited) (USD $) In Thousands, except Share data	Preferred Stock [Member]	Common stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Beginning balance at Dec. 31, 2012	$ 70,787	$ 131,877	$ 153,629	$ (176)	$ 356,117
Beginning balance, shares at Dec. 31, 2012		19,669
Net income			8,688		8,688
Cash dividends declared ($0.16 per common share)			(3,147)		(3,147)
Preferred dividends			(462)		(462)
Stock-based compensation		220			220
Stock-based compensation, shares		11
Other comprehensive income (loss)				(1,311)	(1,311)
Ending balance at Jun. 30, 2013	70,787	132,097	158,708	(1,487)	360,105
Ending balance, shares at Jun. 30, 2013		19,680			19,679,659
Beginning balance at Dec. 31, 2013	70,787	132,099	167,136	1,900	371,922
Beginning balance, shares at Dec. 31, 2013		19,680			19,679,659
Net income			12,322		12,322
Cash dividends declared ($0.16 per common share)			(3,153)		(3,153)
Preferred dividends			(434)		(434)
Stock-based compensation		318			318
Stock-based compensation, shares		25
Other comprehensive income (loss)				118	118
Ending balance at Jun. 30, 2014	$ 70,787	$ 132,417	$ 175,871	$ 2,018	$ 381,093
Ending balance, shares at Jun. 30, 2014		19,705			19,705,381

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Goodwill and Other Intangible Assets (Details Narrative) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Goodwill And Other Intangible Assets Details Narrative
Amortization expense of intangible assets	$ 194	$ 220	$ 388	$ 419

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Earnings Per Common Share (Details Narrative)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Stock options [Member]
Number of anti-dilutive securities	93,000	391,813	93,000	391,813
Stock options - Improbability of Vesting [Member]
Number of anti-dilutive securities	75,000		75,000

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Comprehensive Income (Details 1) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Accumulated other comprehensive income (loss),beginning balance	$ 1,900	$ (176)
Other comprehensive income (loss) before reclassifications	642	(1,318)
Amounts reclassified from accumulated other comprehensive income	(524)	7
Net current-period other comprehensive income (loss)	118	(1,311)
Accumulated other comprehensive income (loss), ending balance	2,018	(1,487)
Unrealized Gain (Loss) on Securities Available for Sale [Member]
Accumulated other comprehensive income (loss),beginning balance	(1,232)	2,007
Other comprehensive income (loss) before reclassifications	642	(1,318)
Amounts reclassified from accumulated other comprehensive income	(480)	(4)
Net current-period other comprehensive income (loss)	162	(1,322)
Accumulated other comprehensive income (loss), ending balance	(1,070)	685
Additional Pension Asset (Liability) [Member]
Accumulated other comprehensive income (loss),beginning balance	3,132	(2,183)
Amounts reclassified from accumulated other comprehensive income	(44)	11
Net current-period other comprehensive income (loss)	(44)	11
Accumulated other comprehensive income (loss), ending balance	$ 3,088	$ (2,172)

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Shareholders' Equity Transactions

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Shareholders Equity Transactions

Note 14 – Shareholders’ Equity Transactions

Small Business Lending Fund

On September 1, 2011, the Company completed the sale of $63.5 million of Series B Preferred Stock to the Secretary of the Treasury under the Small Business Lending Fund (SBLF). The fund was established under the Small Business Jobs Act of 2010 that was created to encourage lending to small businesses by providing capital to qualified community banks with assets less than $10 billion.

Under the terms of the stock purchase agreement, the Treasury received 63,500 shares of non-cumulative perpetual preferred stock with a liquidation value of $1,000 per share, in exchange for $63.5 million.

The Series B Preferred Stock qualifies as Tier 1 capital. The dividend rate, as a percentage of the liquidation amount, fluctuated on a quarterly basis during the first 10 quarters during which the Series B Preferred Stock was outstanding, based upon changes in the level of “Qualified Small Business Lending” or “QSBL”. For the first nine quarters after issuance, the dividend rate could range from one percent (1%) to five percent (5%) per annum based upon the increase in QSBL as compared to the baseline. For the tenth calendar quarter through four and one half years after issuance (the “temporary fixed rate period’’), the dividend rate is fixed at between one percent (1%) and seven percent (7%) based upon the level of QSBL compared to the baseline. After four and one half years from the issuance, the dividend rate will increase to nine percent (9%). For quarters subsequent to the issuance in 2011, the Company was able to continually increase its level of small business lending and as a result, the dividend rate steadily decreased from 5.0% in 2011 to 1.0% in early 2013. The Company is now in the “temporary fixed rate period,” in which the dividend rate is fixed for the Company at 1.0%. Unless redeemed, this rate will increase to 9.0% after four and one half years from the stock issuance, which is March 2016 for the Company. Subject to regulatory approval, the Company is generally permitted to redeem the Series B Preferred Shares at par plus unpaid dividends.

For each of the three months ended June 30, 2014 and 2013, the Company accrued approximately $159,000 in preferred dividend payments for the Series B Preferred Stock. For the six months ended June 30, 2014 and 2013, the Company accrued approximately $317,000 and $345,000, respectively, in preferred dividend payments for the Series B Preferred Stock. This amount is deducted from net income in computing “Net income available to common shareholders.”

Stock Issuance

On December 21, 2012, the Company issued 2,656,294 shares of its common stock and 728,706 shares of the Company’s Series C Preferred Stock to certain accredited investors, each at the price of $10.00 per share, pursuant to a private placement transaction. Net proceeds from this sale of common and preferred stock were $33.8 million and were used to strengthen and remove risk from the Company’s balance sheet in anticipation of a planned disposition of certain classified loans and write-down of foreclosed real estate.

The Series C Preferred Stock qualifies as Tier 1 capital and is Convertible Perpetual Preferred Stock, with dividend rights equal to the Company’s Common Stock. Each share of Series C Preferred Stock will automatically convert into one share of Common Stock on the date the holder of Series C Preferred Stock transfers any shares of Series C Preferred Stock to a non-affiliate of the holder in certain permissible transfers. The Series C Preferred Stock is non-voting, except in limited circumstances.

The Series C Preferred Stock pays a dividend per share equal to that of the Company’s common stock. During each of the second quarters of 2014 and 2013, the Company accrued approximately $58,000 in preferred dividend payments for the Series C Preferred Stock. During each of the first six months of 2014 and 2013, the Company accrued approximately $117,000 in preferred dividend payments for the Series C Preferred Stock.

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Earnings Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Basic EPS
Net income (loss) available to common shareholders	$ 6,429	$ 5,371	$ 11,888	$ 8,226
Shares (denominator)	19,698,581	19,673,634	19,693,382	19,671,468
Basic EPS	$ 0.33	$ 0.27	$ 0.6	$ 0.42
Effect of Dilutive Securities Income (numerator)	58	58	117	117
Effect of Dilutive Securities Shares (denominator)	735,682	741,469	735,479	740,988
Diluted EPS per common share
Income (numerator)	$ 6,487	$ 5,429	$ 12,005	$ 8,343
Shares (denominator)	20,434,263	20,415,103	20,428,861	20,412,456
Diluted EPS per common share	$ 0.32	$ 0.27	$ 0.59	$ 0.41

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Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Schedule of reconciliation of the numerators and denominators used in computing Basic and Diluted Earnings Per Common Share

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,
	2014						2013
($ 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	$	6,429		19,698,581	$	0.33	$	5,371		19,673,634	$	0.27
Effect of Dilutive Securities		58		735,682				58		741,469
Diluted EPS per common share	$	6,487		20,434,263	$	0.32	$	5,429		20,415,103	$	0.27

	For the Six Months Ended June 30
	2014						2013
($ 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	$	11,888		19,693,382	$	0.60	$	8,226		19,671,468	$	0.42
Effect of Dilutive Securities		117		735,479				117		740,988
Diluted EPS per common share	$	12,005		20,428,861	$	0.59	$	8,343		20,412,456	$	0.41

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Fair Value (Details 1) (USD $)
In Thousands, unless otherwise specified

6 Months Ended

12 Months Ended

Jun. 30, 2014

Dec. 31, 2013

Foreclosed Real Estate - Covered [Member]

Other real estate - covered

$ 9,934

$ 24,497

Valuation technique

Appraised value

Appraised value

Significant unobservable inputs

Discounts to reflect current market conditions and estimated costs to sell

Discounts to reflect current market conditions and estimated costs to sell

General range of significant input values, minimum

0.00%

0.00%

General range of significant input values, maximum

10.00%

10.00%

Impaired Loans - Non - Covered [Member]

Impaired loans - non-covered

5,825

13,020

Valuation technique

Appraised value

Appraised value

Significant unobservable inputs

Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell

Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell

General range of significant input values, minimum

0.00%

0.00%

General range of significant input values, maximum

10.00%

37.00%

Impaired Loans - Covered [Member]

Impaired loans - covered

6,678

15,284

Valuation technique

Appraised value

Appraised value

Significant unobservable inputs

Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell

Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell

General range of significant input values, minimum

0.00%

0.00%

General range of significant input values, maximum

10.00%

10.00%

Foreclosed Real Estate - Non-Covered [Member]

Other real estate - non-covered

$ 9,346

$ 12,251

Valuation technique

Appraised value

Appraised value

Significant unobservable inputs

Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell

Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell

General range of significant input values, minimum

0.00%

0.00%

General range of significant input values, maximum

40.00%

40.00%

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Consolidated Statements of Shareholders' Equity (Parenthetical) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Statement of Stockholders' Equity [Abstract]
Cash dividends declared, per share	$ 0.08	$ 0.08	$ 0.16	$ 0.16

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Consolidated Balance Sheets (unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Securities held to maturity fair values	$ 57,612	$ 56,700	$ 58,376
Preferred stock, shares authorized	5,000,000	5,000,000	5,000,000
Common stock, shares authorized	40,000,000	40,000,000	40,000,000
Common stock, shares issued	19,705,381	19,679,659	19,679,659
Common stock, shares outstanding	19,705,381	19,679,659	19,679,659
Series C Preferred Stock [Member]
Preferred stock, shares issued	728,706	728,706	728,706
Preferred stock, shares outstanding	728,706	728,706	728,706
Series B Preferred Stock [Member]
Preferred stock, shares issued	63,500	63,500	63,500
Preferred stock, shares outstanding	63,500	63,500	63,500

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FDIC Indemnification Asset

6 Months Ended

Jun. 30, 2014

Fdic Indemnification Asset

FDIC Indemnification Asset

Note 9 – FDIC Indemnification Asset

The FDIC indemnification asset is the estimated amount that the Company will receive from the FDIC under loss share agreements associated with two FDIC-assisted failed bank acquisitions. See page 41 of the Company’s 2013 Annual Report on Form 10-K for a detailed explanation of this asset.

The FDIC indemnification asset was comprised of the following components as of the dates shown:

($ in thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Receivable related to loss claims incurred, not yet reimbursed	$	7,036		12,649		40,401
Receivable related to estimated future claims on loans		20,196		33,398		45,866
Receivable related to estimated future claims on foreclosed real estate		2,174		2,575		6,683
FDIC indemnification asset	$	29,406		48,622		92,950

The following presents a rollforward of the FDIC indemnification asset since December 31, 2013.

($ in thousands)
Balance at December 31, 2013	$	48,622
Increase related to unfavorable changes in loss estimates		4,210
Increase related to reimbursable expenses		2,210
Cash received from FDIC		(15,256	)
Accretion of loan discount		(10,380	)
Balance at June 30, 2014	$	29,406

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document And Entity Information
Entity Registrant Name	FIRST BANCORP /NC/
Entity Central Index Key	0000811589
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		19,705,381
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2014

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Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2014

Goodwill And Other Intangible Assets

Goodwill and Other Intangible Assets

Note 10 – Goodwill and Other Intangible Assets

The following is a summary of the gross carrying amount and accumulated amortization of amortizable intangible assets as of June 30, 2014, December 31, 2013, and June 30, 2013 and the carrying amount of unamortized intangible assets as of those same dates.

	June 30, 2014				December 31, 2013				June 30, 2013
($ in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizable intangible assets:
Customer lists	$	678		484		678		462		678		439
Core deposit premiums		8,560		6,308		8,560		5,942		8,560		5,525
Total	$	9,238		6,792		9,238		6,404		9,238		5,964
Unamortizable intangible assets:
Goodwill	$	65,835				65,835				65,835

Amortization expense totaled $194,000 and $220,000 for the three months ended June 30, 2014 and 2013, respectively. Amortization expense totaled $388,000 and $419,000 for the six months ended June 30, 2014 and 2013, respectively.

The following table presents the estimated amortization expense for the last two quarters of calendar year 2014 and for each of the four calendar years ending December 31, 2018 and the estimated amount amortizable thereafter. These estimates are subject to change in future periods to the extent management determines it is necessary to make adjustments to the carrying value or estimated useful lives of amortized intangible assets.

($ in thousands)	Estimated Amortization Expense
July 1 to December 31, 2014	$	388
2015		721
2016		654
2017		404
2018		129
Thereafter		150
Total	$	2,446

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Consolidated Statements of Income (unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
INTEREST INCOME
Interest and fees on loans	$ 34,376	$ 37,030	$ 70,462	$ 70,581
Interest on investment securities:
Taxable interest income	876	824	1,877	1,729
Tax-exempt interest income	471	477	941	956
Other, principally overnight investments	232	173	351	327
Total interest income	35,955	38,504	73,631	73,593
INTEREST EXPENSE
Savings, checking and money market accounts	259	381	511	891
Time deposits of $100,000 or more	1,172	1,546	2,355	3,159
Other time deposits	419	719	875	1,508
Borrowings	297	256	547	512
Total interest expense	2,147	2,902	4,288	6,070
Net interest income	33,808	35,602	69,343	67,523
Provision for loan losses - non-covered	1,158	4,043	4,523	9,814
Provision for loan losses - covered	2,501	1,548	2,711	6,926
Total provision for loan losses	3,659	5,591	7,234	16,740
Net interest income after provision for loan losses	30,149	30,011	62,109	50,783
NONINTEREST INCOME
Service charges on deposit accounts	3,446	3,254	7,019	6,189
Other service charges, commissions and fees	2,562	2,340	4,929	4,515
Fees from presold mortgage loans	790	820	1,397	1,567
Commissions from sales of insurance and financial products	706	579	1,300	978
Bank-owned life insurance income	318	212	645	420
Foreclosed property gains (losses) - non-covered	(551)	777	(707)	1,535
Foreclosed property gains (losses) - covered	(1,173)	(520)	(3,290)	(5,136)
FDIC indemnification asset income (expense), net	(1,578)	(3,407)	(6,494)	1,490
Securities gains	786	7	786	7
Other gains (losses)	(336)	425	(317)	30
Total noninterest income	4,970	4,487	5,268	11,595
NONINTEREST EXPENSES
Salaries	11,366	11,003	23,014	21,680
Employee benefits	2,286	2,546	4,597	5,173
Total personnel expense	13,652	13,549	27,611	26,853
Net occupancy expense	1,804	1,759	3,684	3,433
Equipment related expenses	1,024	1,106	1,952	2,194
Intangibles amortization	194	220	388	419
Other operating expenses	8,106	9,122	14,696	16,081
Total noninterest expenses	24,780	25,756	48,331	48,980
Income before income taxes	10,339	8,742	19,046	13,398
Income tax expense	3,693	3,154	6,724	4,710
Net income	6,646	5,588	12,322	8,688
Preferred stock dividends	(217)	(217)	(434)	(462)
Net income available to common shareholders	$ 6,429	$ 5,371	$ 11,888	$ 8,226
Earnings per common share - Basic	$ 0.33	$ 0.27	$ 0.6	$ 0.42
Earnings per common share - Diluted	$ 0.32	$ 0.27	$ 0.59	$ 0.41
Dividends declared per common share	$ 0.08	$ 0.08	$ 0.16	$ 0.16
Weighted average common shares outstanding: Basic	19,698,581	19,673,634	19,693,382	19,671,468
Weighted average common shares outstanding: Diluted	20,434,263	20,415,103	20,428,861	20,412,456

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Equity-Based Compensation Plans

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity-Based Compensation Plans

Note 4 – Equity-Based Compensation Plans

At June 30, 2014, the Company had the following equity-based compensation plans: the First Bancorp 2014 Equity Plan, the First Bancorp 2007 Equity Plan, and the First Bancorp 2004 Stock Option Plan. The Company’s shareholders approved all equity-based compensation plans. The First Bancorp 2014 Equity Plan became effective upon the approval of shareholders on May 8, 2014. As of June 30, 2014, the First Bancorp 2014 Equity Plan was the only plan that had shares available for future grants.

The First Bancorp 2014 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 2014 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 $16,000, to each non-employee director (currently 11 in total) 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.

Pursuant to an employment agreement, the Company granted the chief executive officer 75,000 non-qualified stock options and 40,000 shares of restricted stock during the third quarter of 2012. The option award and the restricted stock award will vest in full on December 31, 2014 and December 31, 2015, respectively, if the Company achieves certain earnings targets for those years, and will be forfeited if the applicable targets are not achieved. Compensation expense for this grant will be recorded over the various periods based on the estimated number of options and restricted stock that are probable to vest. If the awards do not vest, no compensation cost will be recognized and any previously recognized compensation cost will be reversed. Based on current conditions, the Company has concluded that it is not probable that these awards will vest, and thus no compensation expense has been recorded.

Based on the Company’s performance in 2013, the Company granted long-term restricted shares of common stock to the chief executive officer on February 11, 2014 with a two-year minimum vesting period. The total compensation expense associated with the grant was $278,200 and the grant will fully vest on January 1, 2016. One third of this value was expensed during 2013. The Company recorded $23,200 and $46,400 in compensation expense during the three and six months ended June 30, 2014, respectively, and expects to record $23,200 in compensation expense each quarter thereafter until the award vests.

The Company granted long-term restricted shares of common stock to certain senior executives on February 23, 2012 with a two year minimum vesting period. The total compensation expense associated with this grant was $58,900 and the grant fully vested on February 23, 2014. The Company recorded $600 and $14,900 in stock option expense related to this grant during the six months ended June 30, 2014 and 2013, respectively.

Under the terms of the predecessor plans and the First Bancorp 2014 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, 2014, there were 277,679 options outstanding related to the three First Bancorp plans, with exercise prices ranging from $9.76 to $22.12. At June 30, 2014, there were 989,935 shares remaining available for grant under the First Bancorp 2014 Equity Plan.

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, 2014 were the issuance of 1) 15,657 shares of long-term restricted stock to the chief executive officer on February 11, 2014, at a fair market value of $17.77 per share, which was the closing price of the Company’s common stock on that date, and 2) 10,065 shares of common stock to non-employee directors on June 2, 2014 (915 shares per director), at a fair market value of $17.60 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, 2013 were the issuance of 13,164 shares of common stock to non-employee directors on June 3, 2013 (1,097 shares per director), at a fair market value of $14.68 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 $225,000 and $220,000 for the six-month periods ended June 30, 2014 and 2013, respectively. Of the $224,000 in expense that was recorded in 2014, approximately $177,000 related to the June 2, 2014 director grants, which is classified as “other operating expenses” in the Consolidated Statements of Income. The remaining $47,000 in expense 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 Statements of Cash Flows. The Company recognized $87,000 and $86,000 of income tax benefits related to stock based compensation expense in the income statement for the six months ended June 30, 2014 and 2013, 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.

The following table presents information regarding the activity for the first six months of 2014 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 January 1, 2014		408,408		$	17.75
Granted		—			—
Exercised		—			—
Forfeited		—			—
Expired		(130,729	)		21.22
Outstanding at June 30, 2014		277,679		$	16.11		4.5	$	856,677
Exercisable at June 30, 2014		202,679		$	18.46		3.1	$	227,802

The Company did not have any stock option exercises during the six months ended June 30, 2014 or 2013. The Company recorded no tax benefits from the exercise of nonqualified stock options during the six months ended June 30, 2014 or 2013.

The following table presents information regarding the activity the first six months of 2014 related to the Company’s outstanding restricted stock:

	Long-Term Restricted Stock
	Number of Units			Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2014		45,374		$	9.90
Granted during the period		15,657			17.77
Vested during the period		(10,593	)		14.32
Forfeited or expired during the period		—			—
Nonvested at June 30, 2014		50,438		$	11.42

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Reclassifications

6 Months Ended

Jun. 30, 2014

Reclassifications

Reclassifications

Note 3 – Reclassifications

Certain amounts reported for the periods ended June 30, 2013 have been reclassified to conform to the presentation for June 30, 2014. These reclassifications had no effect on net income or shareholders’ equity for the periods presented, nor did they materially impact trends in financial information.

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Equity-Based Compensation Plans (Tables)

6 Months Ended

Jun. 30, 2014

Equity-Based Compensation Plans Tables

Schedule of Company's stock options outstanding

The following table presents information regarding the activity for the first six months of 2014 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 January 1, 2014		408,408		$	17.75
Granted		—			—
Exercised		—			—
Forfeited		—			—
Expired		(130,729	)		21.22
Outstanding at June 30, 2014		277,679		$	16.11		4.5	$	856,677
Exercisable at June 30, 2014		202,679		$	18.46		3.1	$	227,802

Schedule of activity related to outstanding restricted stock

The following table presents information regarding the activity the first six months of 2014 related to the Company’s outstanding restricted stock:

	Long-Term Restricted Stock
	Number of Units			Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2014		45,374		$	9.90
Granted during the period		15,657			17.77
Vested during the period		(10,593	)		14.32
Forfeited or expired during the period		—			—
Nonvested at June 30, 2014		50,438		$	11.42

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Pension Plans

6 Months Ended

Jun. 30, 2014

Compensation and Retirement Disclosure [Abstract]

Pension Plans

Note 11 – Pension Plans

The Company has historically sponsored two defined benefit pension plans – a qualified retirement plan (the “Pension Plan”) which was generally available to all employees, and a Supplemental Executive Retirement Plan (the “SERP”), which was for the benefit of certain senior management executives of the Company. Effective December 31, 2012, the Company froze both plans for all participants. Although no previously accrued benefits were lost, employees no longer accrue benefits for service subsequent to 2012.

The Company recorded pension income totaling $242,000 and $190,000 for the three months ended June 30, 2014 and 2013, respectively, which primarily related to investment income from the Pension Plan’s assets. The following table contains the components of the pension income.

	For the Three Months Ended June 30,
	2014			2013			2014			2013		2014 Total			2013 Total
($ in thousands)	Pension Plan			Pension Plan			SERP			SERP		Both Plans			Both Plans
Service cost – benefits earned during the period	$	—			—			80			—		80			—
Interest cost		382			302			53			67		435			369
Expected return on plan assets		(701	)		(574	)		—			—		(701	)		(574	)
Amortization of transition obligation		—			—			—			—		—			—
Amortization of net (gain)/loss		—			15			(56	)		—		(56	)		15
Amortization of prior service cost		—			—			—			—		—			—
Net periodic pension cost	$	(319	)		(257	)		77			67		(242	)		(190	)

The Company recorded pension income totaling $528,000 and $327,000 for the six months ended June 30, 2014 and 2013, respectively, which primarily related to investment income from the Pension Plan’s assets. The following table contains the components of the pension income.

	For the Six Months Ended June 30,
	2014			2013			2014			2013		2014 Total			2013 Total
($ in thousands)	Pension Plan			Pension Plan			SERP			SERP		Both Plans			Both Plans
Service cost – benefits earned during the period	$	—			—			136			—		136			—
Interest cost		731			680			105			134		836			814
Expected return on plan assets		(1,390	)		(1,159	)		—			—		(1,390	)		(1,159	)
Amortization of transition obligation		—			—			—			—		—			—
Amortization of net (gain)/loss		—			18			(110	)		—		(110	)		18
Amortization of prior service cost		—			—			—			—		—			—
Net periodic pension cost	$	(659	)		(461	)		131			134		(528	)		(327	)

The Company’s contributions to the Pension Plan are based on computations by independent actuarial consultants and are intended to be deductible for income tax purposes. The contributions are invested to provide for benefits under the Pension Plan. The Company expects that it will not make any contributions to the Pension Plan in 2014.

The Company’s funding policy with respect to the SERP is to fund the related benefits from the operating cash flow of the Company.

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Loans and Asset Quality Information

6 Months Ended

Jun. 30, 2014

Loans And Asset Quality Information

Loans and Asset Quality Information Part I

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 Note 2 to the financial statements included in the Company’s 2011 Annual Report on Form 10-K for detailed information regarding these transactions. Because of the loss protection provided by the FDIC, the risk of the loans and foreclosed real estate that are covered by loss share agreements are significantly different from those assets not covered under the loss share agreements. Accordingly, the Company presents separately loans subject to the loss share agreements as “covered loans” in the information below and loans that are not subject to the loss share agreements as “non-covered loans.”

On July 1, 2014, the loss share protection over a substantial portion of First Bank’s covered loans and foreclosed real estate expired. In connection with the expiration of the loss share agreement related to Cooperative Bank’s non-single family assets, the remaining balances associated with these loans and foreclosed real estate were transferred from the covered portfolio to the non-covered portfolio on July 1, 2014. The Company will bear all future losses on this portfolio of loans and foreclosed real estate. At June 30, 2014, these loans and foreclosed properties were classified as covered. At June 30, 2014, the portfolio of loans had a carrying value of $39.7 million and the portfolio of foreclosed real estate had a carrying value of $3.0 million. Of the $39.7 million in loans that are losing loss share protection, approximately $9.7 million of these loans were on nonaccrual status and $2.1 million of these loans were classified as accruing troubled debt restructurings as of June 30, 2014. Additionally, approximately $1.7 million in allowance for loan losses that related to this portfolio of loans were transferred to the allowance for loan losses for non-covered loans on July 1, 2014.

The following is a summary of the major categories of total loans outstanding:

($ in thousands)	June 30, 2014				December 31, 2013				June 30, 2013
	Amount		Percentage		Amount		Percentage		Amount		Percentage
All  loans (non-covered and covered):
Commercial, financial, and agricultural	$	165,021		7%	$	168,469		7%	$	164,767		7%
Real estate – construction, land development & other land loans		295,868		12%		305,246		12%		297,390		12%
Real estate – mortgage – residential (1-4 family) first mortgages		814,712		33%		838,862		34%		832,761		34%
Real estate – mortgage – home equity loans / lines of credit		227,381		9%		227,907		9%		231,446		10%
Real estate – mortgage – commercial and other		868,599		36%		855,249		35%		834,554		34%
Installment loans to individuals		62,153		3%		66,533		3%		68,776		3%
Subtotal		2,433,734		100%		2,462,266		100%		2,429,694		100%
Unamortized net deferred loan costs		651				928				1,168
Total loans	$	2,434,385			$	2,463,194			$	2,430,862

As of June 30, 2014, December 31, 2013 and June 30, 2013, net loans include unamortized premiums of $0, $98,000, and $252,000, respectively, related to acquired loans.

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

($ in thousands)	June 30, 2014				December 31, 2013				June 30, 2013
	Amount		Percentage		Amount		Percentage		Amount		Percentage
Non-covered loans:
Commercial, financial, and agricultural	$	162,303		7%	$	164,195		7%	$	159,964		7%
Real estate – construction, land development & other land loans		274,975		12%		273,412		12%		262,397		12%
Real estate – mortgage – residential (1-4 family) first mortgages		718,962		32%		730,712		32%		712,802		33%
Real estate – mortgage – home equity loans / lines of credit		213,542		9%		213,016		10%		214,473		10%
Real estate – mortgage – commercial and other		825,450		37%		804,621		36%		771,711		35%
Installment loans to individuals		61,647		3%		66,001		3%		68,068		3%
Subtotal		2,256,879		100%		2,251,957		100%		2,189,415		100%
Unamortized net deferred loan costs		651				928				1,168
Total non-covered loans	$	2,257,530			$	2,252,885			$	2,190,583

The carrying amount of the covered loans at June 30, 2014 consisted of impaired and nonimpaired purchased loans (as determined on the date of acquisition), as follows:

($ in thousands)	Impaired Purchased Loans – Carrying Value		Impaired Purchased Loans – Unpaid Principal Balance		Nonimpaired Purchased Loans – Carrying Value		Nonimpaired Purchased Loans - Unpaid Principal Balance		Total Covered Loans – Carrying Value		Total Covered Loans – Unpaid Principal Balance
Covered loans:
Commercial, financial, and agricultural	$	69		129		2,649		3,015		2,718		3,144
Real estate – construction, land development & other land loans		322		548		20,571		28,878		20,893		29,426
Real estate – mortgage – residential (1-4 family) first mortgages		429		1,317		95,321		111,278		95,750		112,595
Real estate – mortgage – home equity loans / lines of credit		13		20		13,826		16,359		13,839		16,379
Real estate – mortgage – commercial and other		2,050		3,959		41,099		47,359		43,149		51,318
Installment loans to individuals		—		—		506		507		506		507
Total	$	2,883		5,973		173,972		207,396		176,855		213,369

The carrying amount of the covered loans at December 31, 2013 consisted of impaired and nonimpaired purchased loans (as determined on the date of the acquisition), as follows:

($ in thousands)	Impaired Purchased Loans – Carrying Value		Impaired Purchased Loans – Unpaid Principal Balance		Nonimpaired Purchased Loans – Carrying Value		Nonimpaired Purchased Loans - Unpaid Principal Balance		Total Covered Loans – Carrying Value		Total Covered Loans – Unpaid Principal Balance
Covered loans:
Commercial, financial, and agricultural	$	75		136		4,199		5,268		4,274		5,404
Real estate – construction, land development & other land loans		325		564		31,509		47,792		31,834		48,356
Real estate – mortgage – residential (1-4 family) first mortgages		575		1,500		107,575		126,882		108,150		128,382
Real estate – mortgage – home equity loans / lines of credit		14		21		14,877		18,318		14,891		18,339
Real estate – mortgage – commercial and other		2,153		4,042		48,475		62,630		50,628		66,672
Installment loans to individuals		—		—		532		607		532		607
Total	$	3,142		6,263		207,167		261,497		210,309		267,760

The following table presents information regarding covered purchased nonimpaired loans since December 31, 2012. 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, 2012	$	277,489
Principal repayments		(63,588	)
Transfers to foreclosed real estate		(13,977	)
Loan charge-offs		(12,957	)
Accretion of loan discount		20,200
Carrying amount of nonimpaired covered loans at December 31, 2013		207,167
Principal repayments		(36,715	)
Transfers to foreclosed real estate		(4,616	)
Loan charge-offs		(3,123	)
Accretion of loan discount		11,259
Carrying amount of nonimpaired covered loans at June 30, 2014	$	173,972

As reflected in the table above, the Company accreted $11,259,000 of the loan discount on purchased nonimpaired loans into interest income during the first six months of 2014. As of June 30, 2014, there was remaining loan discount of $21,374,000 related to purchased accruing loans. If these loans continue to be repaid by the borrowers, the Company will accrete the remaining loan discount into interest income over the estimated lives of the respective loans. In such circumstances, a corresponding entry to reduce the indemnification asset will be recorded amounting to 80% of the loan discount accretion, which reduces noninterest income. At June 30, 2014, the Company also had $4,386,000 of loan discount related to purchased nonperforming loans. It is not expected that a significant amount of this discount will be accreted, as it represents estimated losses on these loans.

The following table presents information regarding all purchased impaired loans since December 31, 2012, all of which are covered loans. The Company has applied the cost recovery method to all purchased impaired loans at their respective acquisition dates due to the uncertainty as to the timing of expected cash flows, as reflected in the following table.

($ in thousands) Purchased Impaired Loans	Contractual Principal Receivable			Fair Market Value Adjustment – Write Down (Nonaccretable Difference)			Carrying Amount
Balance at December 31, 2012	$	8,815			3,990			4,825
Change due to payments received		(301	)		(31	)		(270	)
Transfer to foreclosed real estate		(2,100	)		(784	)		(1,316	)
Change due to loan charge-off		(150	)		(54	)		(96	)
Other		(1	)		—			(1	)
Balance at December 31, 2013	$	6,263			3,121			3,142
Change due to payments received		(487	)		84			(571	)
Other		197			(115	)		312
Balance at June 30, 2014	$	5,973			3,090			2,883

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 2014 and 2013, the Company received $179,000 and $38,000, respectively, in payments that exceeded the initial carrying amount of the purchased impaired loans, which is included in the loan discount accretion amount discussed previously.

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

ASSET QUALITY DATA ($ in thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Non-covered nonperforming assets
Nonaccrual loans	$	47,533	$	41,938	$	42,338
Restructured loans - accruing		27,250		27,776		21,333
Accruing loans > 90 days past due		—		—		—
Total non-covered nonperforming loans		74,783		69,714		63,671
Foreclosed real estate		9,346		12,251		15,425
Total non-covered nonperforming assets	$	84,129	$	81,965	$	79,096
Covered nonperforming assets
Nonaccrual loans (1)	$	20,938	$	37,217	$	50,346
Restructured loans - accruing		8,193		8,909		6,790
Accruing loans > 90 days past due		—		—		—
Total covered nonperforming loans		29,131		46,126		57,136
Foreclosed real estate		9,934		24,497		32,005
Total covered nonperforming assets	$	39,065	$	70,623	$	89,141
Total nonperforming assets	$	123,194	$	152,588	$	168,237

(1) At June 30, 2014, December 31, 2013, and June 30, 2013, the contractual balance of the nonaccrual loans covered by FDIC loss share agreements was $34.3 million, $60.4 million, and $89.3 million, respectively.

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, 2014.

($ in thousands)	Non-covered		Covered		Total
Commercial, financial, and agricultural:
Commercial – unsecured	$	110		5		115
Commercial – secured		3,628		277		3,905
Secured by inventory and accounts receivable		338		—		338
Real estate – construction, land development & other land loans		9,001		5,299		14,300
Real estate – residential, farmland and multi-family		21,168		7,215		28,383
Real estate – home equity lines of credit		2,436		241		2,677
Real estate – commercial		10,297		7,899		18,196
Consumer		555		2		557
Total	$	47,533		20,938		68,471

The following table presents the Company’s nonaccrual loans as of December 31, 2013.

($ in thousands)	Non-covered		Covered		Total
Commercial, financial, and agricultural:
Commercial – unsecured	$	222		38		260
Commercial – secured		2,662		114		2,776
Secured by inventory and accounts receivable		545		782		1,327
Real estate – construction, land development & other land loans		8,055		13,502		21,557
Real estate – residential, farmland and multi-family		17,814		12,344		30,158
Real estate – home equity lines of credit		2,200		335		2,535
Real estate – commercial		10,115		10,099		20,214
Consumer		325		3		328
Total	$	41,938		37,217		79,155

The following table presents an analysis of the payment status of the Company’s loans as of June 30, 2014.

($ 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	$	426		7		110		35,534		36,077
Commercial - secured		1,309		310		3,628		118,854		124,101
Secured by inventory and accounts receivable		146		64		338		17,944		18,492
Real estate – construction, land development & other land loans		308		605		9,001		237,455		247,369
Real estate – residential, farmland, and multi-family		7,867		3,523		21,168		834,617		867,175
Real estate – home equity lines of credit		1,058		133		2,436		196,883		200,510
Real estate - commercial		1,758		447		10,297		705,403		717,905
Consumer		411		139		555		44,145		45,250
Total non-covered	$	13,283		5,228		47,533		2,190,835		2,256,879
Unamortized net deferred loan costs										651
Total non-covered loans									$	2,257,530
Covered loans	$	994		1,025		20,938		153,898		176,855
Total loans	$	14,277		6,253		68,471		2,344,733		2,434,385

The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at June 30, 2014.

The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2013.

($ in thousands)	30-59 Days Past Due		60-89 Days Past Due		Nonaccrual Loans		Current		Total Loans Receivable
Non-covered loans
Commercial, financial, and agricultural:
Commercial - unsecured	$	347		94		222		36,352		37,015
Commercial - secured		1,233		462		2,662		117,923		122,280
Secured by inventory and accounts receivable		438		767		545		19,426		21,176
Real estate – construction, land development & other land loans		2,304		1,391		8,055		232,920		244,670
Real estate – residential, farmland, and multi-family		11,682		2,631		17,814		837,260		869,387
Real estate – home equity lines of credit		1,465		305		2,200		194,157		198,127
Real estate - commercial		3,196		214		10,115		696,081		709,606
Consumer		494		187		325		48,690		49,696
Total non-covered	$	21,159		6,051		41,938		2,182,809		2,251,957
Unamortized net deferred loan costs										928
Total non-covered loans									$	2,252,885
Covered loans	$	5,179		768		37,217		167,145		210,309
Total loans	$	26,338		6,819		79,155		2,349,954		2,463,194

The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at December 31, 2013.

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, 2014.

($ 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, 2014
Beginning balance	$	8,889			8,650			12,733			3,662			9,375			1,030			367			44,706
Charge-offs		(2,041	)		(307	)		(861	)		(397	)		(277	)		(371	)		—			(4,254	)
Recoveries		21			73			114			6			26			116			—			356
Provisions		2,079			(1,002	)		(854	)		484			88			131			232			1,158
Ending balance	$	8,948			7,414			11,132			3,755			9,212			906			599			41,966
As of and for the six months ended June 30, 2014
Beginning balance	$	7,432			12,966			15,142			1,838			5,524			1,513			(152	)		44,263
Charge-offs		(2,666	)		(1,234	)		(1,631	)		(503	)		(889	)		(799	)		—			(7,722	)
Recoveries		49			309			179			11			121			233			—			902
Provisions		4,133			(4,627	)		(2,558	)		2,409			4,456			(41	)		751			4,523
Ending balance	$	8,948			7,414			11,132			3,755			9,212			906			599			41,966
Ending balances as of June 30, 2014:  Allowance for loan losses
Individually evaluated for impairment	$	290			818			2,016			—			528			—			—			3,652
Collectively evaluated for impairment	$	8,658			6,596			9,116			3,755			8,684			906			599			38,314
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—
Loans receivable as of June 30, 2014:
Ending balance – total	$	178,670			247,369			867,175			200,510			717,905			45,250			—			2,256,879
Ending balances as of June 30, 2014: Loans
Individually evaluated for impairment	$	679			7,541			22,505			483			17,009			10			—			48,227
Collectively evaluated for impairment	$	177,991			239,828			844,670			200,027			700,896			45,240			—			2,208,652
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—

The following table presents the activity in the allowance for loan losses for non-covered loans for the year ended December 31, 2013.

($ in thousands)	Commercial, Financial, and Agricultural			Real Estate – Construction, Land Development, & Other Land Loans			Real Estate – Residential, Farmland, and Multi-family			Real Estate – Home Equity Lines of Credit			Real Estate – Commercial and Other			Consumer			Unallo- cated			Total
As of and for the year ended December 31, 2013
Beginning balance	$	4,687			12,856			14,082			1,884			5,247			1,939			948			41,643
Charge-offs		(4,418	)		(2,739	)		(3,732	)		(1,314	)		(4,346	)		(2,174	)		(660	)		(19,383	)
Recoveries		299			743			753			87			1,381			474			—			3,737
Provisions		6,864			2,106			4,039			1,181			3,242			1,274			(440	)		18,266
Ending balance	$	7,432			12,966			15,142			1,838			5,524			1,513			(152	)		44,263
Ending balances as of December 31, 2013:  Allowance for loan losses
Individually evaluated for impairment	$	202			544			1,162			1			649			1			—			2,559
Collectively evaluated for impairment	$	7,230			12,422			13,980			1,837			4,875			1,512			(152	)		41,704
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—
Loans receivable as of December 31, 2013:
Ending balance – total	$	180,471			244,670			869,387			198,127			709,606			49,696			—			2,251,957
Ending balances as of December 31, 2013: Loans
Individually evaluated for impairment	$	582			8,027			19,111			22			16,894			13			—			44,649
Collectively evaluated for impairment	$	179,889			236,643			850,276			198,105			692,712			49,683			—			2,207,308
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—

Loans and Asset Quality Information Part II

The following table presents the activity in the allowance for loan losses for non-covered loans for the three and six months ended June 30, 2013.

($ in thousands)	Commercial, Financial, and Agricultural			Real Estate – Construction, Land Development, & Other Land Loans			Real Estate – Residential, Farmland, and Multi- family			Real Estate – Home Equity Lines of Credit			Real Estate – Commercial and Other			Consumer			Unallo- cated			Total
As of and for the three months ended June 30, 2013
Beginning balance	$	4,949			14,857			15,285			2,040			5,714			1,791			125			44,761
Charge-offs		(560	)		(394	)		(858	)		(265	)		(1,907	)		(562	)		—			(4,546	)
Recoveries		214			24			117			4			93			106			—			558
Provisions		1,357			106			417			282			1,339			368			174			4,043
Ending balance	$	5,960			14,593			14,961			2,061			5,239			1,703			299			44,816
As of and for the six months ended June 30, 2013
Beginning balance	$	4,687			12,856			14,082			1,884			5,247			1,939			948			41,643
Charge-offs		(1,384	)		(1,217	)		(1,655	)		(889	)		(2,447	)		(1,090	)		(659	)		(9,341	)
Recoveries		233			617			663			62			882			243			—			2,700
Provisions		2,424			2,337			1,871			1,004			1,557			611			10			9,814
Ending balance	$	5,960			14,593			14,961			2,061			5,239			1,703			299			44,816
Ending balances as of June 30, 2013:  Allowance for loan losses
Individually evaluated for impairment	$	902			480			1,373			1			781			1			—			3,538
Collectively evaluated for impairment	$	5,058			14,113			13,588			2,060			4,458			1,702			299			41,278
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—
Loans receivable as of June 30, 2013:
Ending balance – total	$	176,662			232,352			850,060			198,281			680,607			51,453			—			2,189,415
Ending balances as of June 30, 2013: Loans
Individually evaluated for impairment	$	1,920			7,596			19,080			22			17,585			14			—			46,217
Collectively evaluated for impairment	$	174,742			224,756			830,980			198,259			663,022			51,439			—			2,143,198
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—

The following table presents the activity in the allowance for loan losses for covered loans for the three and six months ended June 30, 2014.

($ in thousands)	Covered Loans
As of and for the three months ended June 30, 2014
Beginning balance	$	3,421
Charge-offs		(2,722	)
Recoveries		630
Provisions		2,501
Ending balance	$	3,830
As of and for the six months ended June 30, 2014
Beginning balance	$	4,242
Charge-offs		(5,670	)
Recoveries		2,547
Provisions		2,711
Ending balance	$	3,830
Ending balances as of June 30, 2014: Allowance for loan losses
Individually evaluated for impairment	$	1,340
Collectively evaluated for impairment		2,490
Loans acquired with deteriorated credit quality		46
Loans receivable as of June 30, 2014:
Ending balance – total	$	176,855
Ending balances as of June 30, 2014: Loans
Individually evaluated for impairment	$	23,336
Collectively evaluated for impairment		153,519
Loans acquired with deteriorated credit quality		2,883

The following table presents the activity in the allowance for loan losses for covered loans for the year ended December 31, 2013.

($ in thousands)	Covered Loans
As of and for the year ended December 31, 2013
Beginning balance	$	4,759
Charge-offs		(13,053	)
Recoveries		186
Provisions		12,350
Ending balance	$	4,242
Ending balances as of December 31, 2013:  Allowance for loan losses
Individually evaluated for impairment	$	3,133
Collectively evaluated for impairment		1,109
Loans acquired with deteriorated credit quality		25
Loans receivable as of December 31, 2013:
Ending balance – total	$	210,309
Ending balances as of December 31, 2013: Loans
Individually evaluated for impairment	$	46,126
Collectively evaluated for impairment		164,183
Loans acquired with deteriorated credit quality		3,142

The following table presents the activity in the allowance for loan losses for covered loans for the three and six months ended June 30, 2013.

($ in thousands)	Covered Loans
As of and for the three months ended June 30, 2013
Beginning balance	$	5,028
Charge-offs		(541	)
Recoveries		—
Provisions		1,548
Ending balance	$	6,035
As of and for the six months ended June 30, 2013
Beginning balance	$	4,759
Charge-offs		(5,650	)
Recoveries		—
Provisions		6,926
Ending balance	$	6,035
Ending balances as of June 30, 2013: Allowance for loan losses
Individually evaluated for impairment	$	4,700
Collectively evaluated for impairment		1,335
Loans acquired with deteriorated credit quality		17
Loans receivable as of June 30, 2013:
Ending balance – total	$	240,279
Ending balances as of June 30, 2013: Loans
Individually evaluated for impairment	$	57,136
Collectively evaluated for impairment		183,143
Loans acquired with deteriorated credit quality		3,340

The following table presents the Company’s impaired loans as of June 30, 2014.

($ in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Non-covered loans with no related allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	—		—		—		22
Commercial - secured		71		74		—		134
Secured by inventory and accounts receivable		—		—		—		—
Real estate – construction, land development & other land loans		5,617		6,116		—		5,954
Real estate – residential, farmland, and multi-family		8,646		9,665		—		6,471
Real estate – home equity lines of credit		483		498		—		327
Real estate – commercial		9,514		11,453		—		8,495
Consumer		10		12		—		7
Total non-covered impaired loans with no allowance	$	24,341		27,818		—		21,410
Total covered impaired loans with no allowance	$	14,444		25,495		—		23,192
Total impaired loans with no allowance recorded	$	38,785		53,313		—		44,602
Non-covered  loans with an allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	99		100		80		110
Commercial - secured		509		509		210		494
Secured by inventory and accounts receivable		—		—		—		25
Real estate – construction, land development & other land loans		1,924		1,987		818		1,705
Real estate – residential, farmland, and multi-family		13,859		13,969		2,016		14,438
Real estate – home equity lines of credit		—		—		—		7
Real estate – commercial		7,495		7,588		528		8,156
Consumer		—		—		—		4
Total non-covered impaired loans with allowance	$	23,886		24,153		3,652		24,939
Total covered impaired loans with allowance	$	8,892		10,106		1,340		10,478
Total impaired loans with an allowance recorded	$	32,778		34,259		4,992		35,417

Interest income recorded on non-covered and covered impaired loans during the six months ended June 30, 2014 is considered insignificant.

The following table presents the Company’s impaired loans as of December 31, 2013.

($ in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Non-covered loans with no related allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	—		—		—		—
Commercial - secured		—		—		—		334
Secured by inventory and accounts receivable		—		—		—		—
Real estate – construction, land development & other land loans		6,398		6,907		—		5,005
Real estate – residential, farmland, and multi-family		3,883		4,429		—		2,329
Real estate – home equity lines of credit		—		—		—		—
Real estate – commercial		7,324		9,008		—		9,981
Consumer		—		—		—		—
Total non-covered impaired loans with no allowance	$	17,605		20,344		—		17,649
Total covered impaired loans with no allowance	$	29,058		48,785		—		39,215
Total impaired loans with no allowance recorded	$	46,663		69,129		—		56,864
Non-covered  loans with an allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	115		115		63		72
Commercial - secured		392		394		64		1,081
Secured by inventory and accounts receivable		75		75		75		80
Real estate – construction, land development & other land loans		1,629		2,148		544		2,339
Real estate – residential, farmland, and multi-family		15,228		15,642		1,162		13,417
Real estate – home equity lines of credit		22		22		1		637
Real estate – commercial		9,570		10,873		649		5,914
Consumer		13		35		1		466
Total non-covered impaired loans with allowance	$	27,044		29,304		2,559		24,006
Total covered impaired loans with allowance	$	17,068		22,367		3,133		14,343
Total impaired loans with an allowance recorded	$	44,112		51,671		5,692		38,349

Interest income recorded on non-covered and covered impaired loans during the year ended December 31, 2013 was insignificant.

The Company tracks credit quality based on its internal risk ratings. Upon origination a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. Loans that are risk-graded as substandard during the origination process are declined. After loans are initially graded, they are monitored monthly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type.

The following describes the Company’s internal risk grades in ascending order of likelihood of loss:

	Numerical Risk Grade	Description
Pass:
	1	Cash secured loans.
	2	Non-cash secured loans that have no minor or major exceptions to the lending guidelines.
	3	Non-cash secured loans that have no major exceptions to the lending guidelines.
Weak Pass:
	4	Non-cash secured loans that have minor or major exceptions to the lending guidelines, but the exceptions are properly mitigated.
Watch or Standard:
	9	Loans that meet the guidelines for a Risk Graded 5 loan, except the collateral coverage is sufficient to satisfy the debt with no risk of loss under reasonable circumstances.  This category also includes all loans to insiders and any other loan that management elects to monitor on the watch list.
Special Mention:
	5	Existing loans with major exceptions that cannot be mitigated.
Classified:
	6	Loans that have a well-defined weakness that may jeopardize the liquidation of the debt if deficiencies are not corrected.
	7	Loans that have a well-defined weakness that make the collection or liquidation improbable.
	8	Loans that are considered uncollectible and are in the process of being charged-off.

The following table presents the Company’s recorded investment in loans by credit quality indicators as of June 30, 2014.

($ in thousands)	Credit Quality Indicator (Grouped by Internally Assigned Grade)
	Pass (Grades 1, 2, & 3)		Weak Pass (Grade 4)		Watch or Standard Loans (Grade 9)		Special Mention Loans (Grade 5)		Classified Loans (Grades 6, 7, & 8)		Nonaccrual Loans		Total
Non-covered loans:
Commercial, financial, and agricultural:
Commercial - unsecured	$	11,722		20,737		7		1,435		2,066		110		36,077
Commercial - secured		34,642		76,763		93		4,403		4,572		3,628		124,101
Secured by inventory and accounts receivable		5,863		9,912		—		1,346		1,033		338		18,492
Real estate – construction, land development & other land loans		65,376		149,982		2,118		11,174		9,718		9,001		247,369
Real estate – residential, farmland, and multi-family		222,681		536,597		5,038		45,084		36,607		21,168		867,175
Real estate – home equity lines of credit		122,853		64,446		1,293		4,030		5,452		2,436		200,510
Real estate - commercial		138,088		517,412		8,743		28,269		15,096		10,297		717,905
Consumer		24,700		18,404		54		684		853		555		45,250
Total	$	625,925		1,394,253		17,346		96,425		75,397		47,533		2,256,879
Unamortized net deferred loan costs														651
Total non-covered  loans													$	2,257,530
Total covered loans	$	17,850		96,435		82		12,888		28,662		20,938		176,855
Total loans	$	643,775		1,490,688		17,428		109,313		104,059		68,471		2,434,385

At June 30, 2014, there was an insignificant amount of loans that were graded “8” with an accruing status.

The following table presents the Company’s recorded investment in loans by credit quality indicators as of December 31, 2013.

($ in thousands)	Credit Quality Indicator (Grouped by Internally Assigned Grade)
	Pass (Grades 1, 2, & 3)		Weak Pass (Grade 4)		Watch or Standard Loans (Grade 9)		Special Mention Loans (Grade 5)		Classified Loans (Grades 6, 7, & 8)		Nonaccrual Loans		Total
Non-covered loans:
Commercial, financial, and agricultural:
Commercial - unsecured	$	8,495		24,415		7		1,509		2,367		222		37,015
Commercial - secured		31,494		77,441		100		5,597		4,986		2,662		122,280
Secured by inventory and accounts receivable		4,098		12,800		—		2,022		1,711		545		21,176
Real estate – construction, land development & other land loans		31,221		181,050		2,365		11,646		10,333		8,055		244,670
Real estate – residential, farmland, and multi-family		227,053		540,349		5,062		41,583		37,526		17,814		869,387
Real estate – home equity lines of credit		120,205		63,400		1,499		5,699		5,124		2,200		198,127
Real estate - commercial		115,397		533,680		10,014		24,557		15,843		10,115		709,606
Consumer		25,703		21,790		54		829		995		325		49,696
Total	$	563,666		1,454,925		19,101		93,442		78,885		41,938		2,251,957
Unamortized net deferred loan costs														928
Total non-covered  loans													$	2,252,885
Total covered loans	$	25,078		92,147		—		8,857		47,010		37,217		210,309
Total loans	$	588,744		1,547,072		19,101		102,299		125,895		79,155		2,463,194

At December 31, 2013, there was an insignificant amount of loans that were graded “8” with an accruing status.

Troubled Debt Restructurings

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

The vast majority of the Company’s troubled debt restructurings modified during the periods ended June 30, 2014 and 2013 related to interest rate reductions combined with restructured amortization schedules. The Company does not generally grant principal forgiveness.

All loans classified as troubled debt restructurings are considered to be impaired and are evaluated as such for determination of the allowance for loan losses. The Company’s troubled debt restructurings can be classified as either nonaccrual or accruing based on the loan’s payment status. The troubled debt restructurings that are nonaccrual are reported within the nonaccrual loan totals presented previously.

The following table presents information related to loans modified in a troubled debt restructuring during the three and six months ended June 30, 2014.

($ in thousands)	For the three months ended June 30, 2014
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		5	$	411	$	411
Non-covered TDRs - Nonaccrual
Real estate – residential, farmland, and multi-family		2		332		332
Total non-covered TDRs arising during period		7		743		743
Total covered TDRs arising during period– Accruing		2	$	248	$	245
Total covered TDRs arising during period – Nonaccrual		—		—		—
Total TDRs arising during period		9	$	991	$	988

($ in thousands)	For the six months ended June 30, 2014
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		6	$	677	$	677
Non-covered TDRs - Nonaccrual
Real estate – residential, farmland, and multi-family		4		438		438
Total non-covered TDRs arising during period		10		1,115		1,115
Total covered TDRs arising during period– Accruing		2	$	248	$	245
Total covered TDRs arising during period – Nonaccrual		5		710		682
Total TDRs arising during period		17	$	2,073	$	2,042

The following table presents information related to loans modified in a troubled debt restructuring during the three and six months ended June 30, 2013.

($ in thousands)	For the three months ended June 30, 2013
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		3	$	574	$	576
Real estate – commercial		1		103		103
Non-covered TDRs – Nonaccrual		—		—		—
Total non-covered TDRs arising during period		4		677		679
Total covered TDRs arising during period– Accruing		3	$	312	$	311
Total covered TDRs arising during period – Nonaccrual		—		—		—
Total TDRs arising during period		7	$	989	$	990

($ in thousands)	For the six months ended June 30, 2013
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		9	$	1,082	$	1,084
Real estate – commercial		3		634		634
Consumer		1		14		14
Non-covered TDRs - Nonaccrual
Real estate – residential, farmland, and multi-family		3		209		209
Total non-covered TDRs arising during period		16		1,939		1,941
Total covered TDRs arising during period– Accruing		4	$	359	$	351
Total covered TDRs arising during period – Nonaccrual		—		—		—
Total TDRs arising during period		20	$	2,298	$	2,292

Accruing restructured loans that were modified in the previous 12 months and that defaulted during the three and six months ended June 30, 2014 are presented in the table below. The Company considers a loan to have defaulted when it becomes 90 or more days delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to foreclosed real estate.

($ in thousands)	For the three months ended June 30, 2014				For the six months ended June 30, 2014
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Non-covered accruing TDRs that subsequently defaulted
Real estate – construction, land development & other land loans		—	$	—		1	$	5
Real estate – commercial		—		—		1		71
Total non-covered TDRs that subsequently defaulted		—	$	—		2	$	76
Total accruing covered TDRs that subsequently defaulted		—	$	—		—	$	—
Total accruing TDRs that subsequently defaulted		—	$	—		2	$	76

Accruing restructured loans that were modified in the previous 12 months and that defaulted during the three and six months ended June 30, 2013 are presented in the table below.

($ in thousands)	For the three months ended June 30, 2013				For the six months ended June 30, 2013
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Non-covered accruing TDRs that subsequently defaulted
Real estate – construction, land development & other land loans		1	$	342		1	$	342
Real estate – residential, farmland, and multi-family		—		—		1		252
Total non-covered TDRs that subsequently defaulted		1	$	342		2	$	594
Total accruing covered TDRs that subsequently defaulted		—	$	—		1	$	3,501
Total accruing TDRs that subsequently defaulted		1	$	342		3	$	4,095

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Goodwill and Other Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Amortizable intangible assets:
Customer lists	$ 678	$ 678	$ 678
Customer Lists Accumulated Amortization	484	462	439
Core deposit premiums	8,560	8,560	8,560
Core Deposit premiums accumulated amortization	6,308	5,942	5,525
Finite-Lived Intangible Assets, Gross	9,238	9,238	9,238
Finite-Lived Intangible Assets, Accumulated Amortization	6,792	6,404	5,964
Unamortizable intangible assets:
Goodwill	$ 65,835	$ 65,835	$ 65,835

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Earnings Per Common Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Common Share

Note 5 – Earnings Per Common Share

Basic Earnings Per Common Share is calculated by dividing net income 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 stock option grants under the Company’s equity-based compensation plans and the Company’s Series C Preferred Stock, which is convertible into common stock on a one-for-one ratio.

In computing Diluted Earnings Per Common Share, adjustments are made to the computation of Basic Earnings Per Common shares, as follows. As it relates to stock options, it is assumed that all dilutive stock options are exercised during the reporting period at their respective exercise prices, with the proceeds from the exercises used by the Company to buy back stock in the open market at the average market price in effect during the reporting period. The difference between the number of shares assumed to be exercised and the number of shares bought back is included in the calculation of dilutive securities. As it relates to the Series C Preferred Stock, it is assumed that the preferred stock was converted to common stock during the reporting period. Dividends on the preferred stock are added back to net income and the shares assumed to be converted are included in the number of shares outstanding.

If any of the potentially dilutive common stock issuances have an anti-dilutive effect, which is the case when a net loss is reported, the potentially dilutive common stock issuance is disregarded.

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,
	2014						2013
($ 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	$	6,429		19,698,581	$	0.33	$	5,371		19,673,634	$	0.27
Effect of Dilutive Securities		58		735,682				58		741,469
Diluted EPS per common share	$	6,487		20,434,263	$	0.32	$	5,429		20,415,103	$	0.27

	For the Six Months Ended June 30
	2014						2013
($ 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	$	11,888		19,693,382	$	0.60	$	8,226		19,671,468	$	0.42
Effect of Dilutive Securities		117		735,479				117		740,988
Diluted EPS per common share	$	12,005		20,428,861	$	0.59	$	8,343		20,412,456	$	0.41

For both the three and six months ended June 30, 2014, there were 93,000 options that were anti-dilutive because the exercise price exceeded the average market price for the period, and thus are not included in the calculation to determine the effect of dilutive securities. Also, for the three and six months ended June 30, 2014, the Company excluded 75,000 options that had an exercise price below the average market price for the period, but had performance vesting requirements that the Company has concluded are not probable to vest. For both the three and six months ended June 30, 2013, there were 391,813 options that were antidilutive because the exercise price exceeded the average market price for the period, and thus are not included in the calculation to determine the effect of dilutive securities.

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Securities

6 Months Ended

Jun. 30, 2014

Securities

Securities

Note 6 – Securities

The book values and approximate fair values of investment securities at June 30, 2014 and December 31, 2013 are summarized as follows:

	June 30, 2014									December 31, 2013
	Amortized		Fair		Unrealized					Amortized		Fair		Unrealized
($ in thousands)	Cost		Value		Gains		(Losses)			Cost		Value		Gains		(Losses)
Securities available for sale:
Government-sponsored enterprise securities	$	12,555		12,459		—		(96	)		18,432		18,245		32		(219	)
Mortgage-backed securities		106,173		104,699		436		(1,910	)		148,646		147,187		1,415		(2,874	)
Corporate bonds		1,000		790		—		(210	)		3,999		3,598		44		(445	)
Equity securities		6,105		6,130		39		(14	)		3,984		4,011		40		(13	)
Total available for sale	$	125,833		124,078		475		(2,230	)		175,061		173,041		1,531		(3,551	)
Securities held to maturity:
State and local governments	$	53,879		57,612		3,733		—			53,995		56,700		2,709		(4	)

Included in mortgage-backed securities at June 30, 2014 were collateralized mortgage obligations with an amortized cost of $145,000 and a fair value of $149,000. Included in mortgage-backed securities at December 31, 2013 were collateralized mortgage obligations with an amortized cost of $192,000 and a fair value of $200,000. 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 $6,016,000 at June 30, 2014 and $3,894,000 at December 31, 2013, 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. Periodically the FHLB recalculates the Company’s required level of holdings, and the Company either buys more stock or the FHLB redeems a portion of the stock at cost.

The following table presents information regarding securities with unrealized losses at June 30, 2014:

($ 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	$	6,539		16		5,920		80		12,459		96
Mortgage-backed securities		17,563		30		55,476		1,880		73,039		1,910
Corporate bonds		—		—		790		210		790		210
Equity securities		2		—		20		14		22		14
State and local governments		—		—		—		—		—		—
Total temporarily impaired securities	$	24,104		46		62,206		2,184		86,310		2,230

The following table presents information regarding securities with unrealized losses at December 31, 2013:

($ 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	$	12,212		219		—		—		12,212		219
Mortgage-backed securities		64,937		1,675		17,979		1,199		82,916		2,874
Corporate bonds		—		—		555		445		555		445
Equity securities		—		—		22		13		22		13
State and local governments		992		4		—		—		992		4
Total temporarily impaired securities	$	78,141		1,898		18,556		1,657		96,697		3,555

In the above tables, all of the non-equity securities that were in an unrealized loss position at June 30, 2014 and December 31, 2013 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, 2014 and December 31, 2013 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 $6,016,000 and $3,894,000 at June 30, 2014 and December 31, 2013, 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, 2014, 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	$	—		—		—		—
Due after one year but within five years		12,555		12,459		8,853		9,481
Due after five years but within ten years		—		—		40,237		43,104
Due after ten years		1,000		790		4,789		5,027
Mortgage-backed securities		106,173		104,699		—		—
Total debt securities		119,728		117,948		53,879		57,612
Equity securities		6,105		6,130		—		—
Total securities	$	125,833		124,078		53,879		57,612

At June 30, 2014 and December 31, 2013 investment securities with carrying values of $63,670,000 and $79,838,000, respectively, were pledged as collateral for public deposits.

During the second quarter of 2014, the Company sold approximately $47,473,000 in securities and recorded a net gain of $786,000 related to the sale. During the six months ended June 30, 2013, the Company recorded a net gain of $7,000 related to the call of several municipal and bond securities.

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Deferred Loan Costs

6 Months Ended

Jun. 30, 2014

Deferred Loan Costs

Deferred Loan Costs

Note 8 – Deferred Loan Costs

The amount of loans shown on the Consolidated Balance Sheets includes net deferred loan costs of approximately $651,000, $928,000, and $1,168,000 at June 30, 2014, December 31, 2013, and June 30, 2013, respectively.

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Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012
The components of accumulated other comprehensive income (loss):
Total accumulated other comprehensive income (loss)	$ 2,018	$ 1,900	$ (1,487)	$ (176)
Unrealized Gain (Loss) on Securities Available for Sale [Member]
The components of accumulated other comprehensive income (loss):
Total accumulated other comprehensive income (loss)	(1,755)	(2,021)	1,123
Deferred tax asset (liability)	685	789	(438)
Total accumulated other comprehensive income (loss)	(1,070)	(1,232)	685	2,007
Additional Pension Asset (Liability) [Member]
The components of accumulated other comprehensive income (loss):
Total accumulated other comprehensive income (loss)	5,025	5,135	(3,561)
Deferred tax asset (liability)	(1,937)	(2,003)	1,389
Total accumulated other comprehensive income (loss)	$ 3,088	$ 3,132	$ (2,172)	$ (2,183)

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Fair Value (Details Narrative) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Fair Value Details Narrative
Change in fair value of securities available for sale	$ 266	$ (2,166)
Tax expense (benefit) of change in fair value securities available for sale	$ 104	$ (844)

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Pension Plans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Service cost - benefits earned during the period	$ 80		$ 136
Interest cost	435	369	836	814
Expected return on plan assets	(701)	(574)	(1,390)	(1,159)
Amortization of net (gain)/loss	(56)	15	(110)	18
Net periodic pension cost	(242)	(190)	(528)	(327)
Pension Plan [Member]
Interest cost	382	302	731	680
Expected return on plan assets	(701)	(574)	(1,390)	(1,159)
Amortization of net (gain)/loss		15		18
Net periodic pension cost	(319)	(257)	(659)	(461)
SERP [Member]
Service cost - benefits earned during the period	80		136
Interest cost	53	67	105	134
Amortization of net (gain)/loss	(56)		(110)
Net periodic pension cost	$ 77	$ 67	$ 131	$ 134

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Equity-Based Compensation Plans (Details 1) (Long-Term Restricted Stock [Member], USD $)	6 Months Ended
	Jun. 30, 2014
Long-Term Restricted Stock [Member]
Number of Units:
Nonvested, beginning	45,374
Granted during the period	15,657
Vested during the period	(10,593)
Nonvested, ending	50,438
Weighted-Average Grant Date Fair Value:
Nonvested, beginning	$ 9.90
Granted during the period	$ 17.77
Vested during the period	$ 14.32
Nonvested, ending	$ 11.42

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Loans and Asset Quality Information (Details 9) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Provisions	$ 3,659	$ 5,591	$ 7,234	$ 16,740
Loans receivable:
Total Covered Loans - Carrying Value	176,855	240,279	176,855	240,279	210,309
Covered [Member]
Beginning balance	3,421	5,028	4,242	4,759	4,759
Charge-offs	(2,722)	(541)	(5,670)	(5,650)	(13,053)
Recoveries	630		2,547		186
Provisions	2,501	1,548	2,711	6,926	12,350
Ending balance	3,830	6,035	3,830	6,035	4,242
Ending balances: Allowance for loan losses
Individually evaluated for impairment	1,340	4,700	1,340	4,700	3,133
Collectively evaluated for impairment	2,490	1,335	2,490	1,335	1,109
Loans acquired with deteriorated credit quality	46	17	46	17	25
Loans receivable:
Total Covered Loans - Carrying Value	176,855	240,279	176,855	240,279	210,309
Ending balances: Loans
Individually evaluated for impairment	23,336	57,136	23,336	57,136	46,126
Collectively evaluated for impairment	153,519	183,143	153,519	183,143	164,183
Loans acquired with deteriorated credit quality	$ 2,883	$ 3,340	$ 2,883	$ 3,340	$ 3,142

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Fair Value

6 Months Ended

Jun. 30, 2014

Fair Value

Fair Value

Note 13 – Fair Value

Relevant accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at June 30, 2014. The impaired loans shown below are those in which the value is based on the underlying collateral value.

($ in thousands)
Description of Financial Instruments	Fair Value at June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring
Securities available for sale:
Government-sponsored enterprise securities	$	12,459		—		12,459		—
Mortgage-backed securities		104,699		—		104,699		—
Corporate bonds		790		—		790		—
Equity securities		6,130		—		6,130		—
Total available for sale securities	$	124,078		—		124,078		—
Nonrecurring
Impaired loans – covered	$	6,678		—		—		6,678
Impaired loans – non-covered		5,825		—		—		5,825
Foreclosed real estate – covered		9,934		—		—		9,934
Foreclosed real estate – non-covered		9,346		—		—		9,346

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at December 31, 2013.

($ in thousands)
Description of Financial Instruments	Fair Value at December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring
Securities available for sale:
Government-sponsored enterprise securities	$	18,245		—		18,245		—
Mortgage-backed securities		147,187		—		147,187		—
Corporate bonds		3,598		—		3,598		—
Equity securities		4,011		—		4,011		—
Total available for sale securities	$	173,041		—		173,041		—
Nonrecurring
Impaired loans – covered	$	15,284		—		—		15,284
Impaired loans – non-covered		13,020		—		—		13,020
Foreclosed real estate – covered		24,497		—		—		24,497
Foreclosed real estate – non-covered		12,251		—		—		12,251

The following is a description of the valuation methodologies used for instruments measured at fair value.

Securities Available for Sale — When quoted market prices are available in an active market, the securities are classified as Level 1 in the valuation hierarchy. If quoted market prices are not available, but fair values can be estimated by observing quoted prices of securities with similar characteristics, the securities are classified as Level 2 on the valuation hierarchy. Most of the fair values for the Company’s Level 2 securities are determined by our third-party securities portfolio manager using matrix pricing. Matrix pricing is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. For the Company, Level 2 securities include mortgage-backed securities, collateralized mortgage obligations, government-sponsored enterprise securities, and corporate bonds. In cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

The Company reviews the pricing methodologies utilized by the portfolio manager to ensure the fair value determination is consistent with the applicable accounting guidance and that the investments are properly classified in the fair value hierarchy. Further, the Company validates the fair values for a sample of securities in the portfolio by comparing the fair values provided by the portfolio manager to prices from other independent sources for the same or similar securities. The Company analyzes unusual or significant variances and conducts additional research with the portfolio manager, if necessary, and takes appropriate action based on its findings.

Impaired loans — Fair values for impaired loans in the above tables are generally collateral dependent and are estimated based on underlying collateral values securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined using an income or market valuation approach based on an appraisal conducted by an independent, licensed third party appraiser (Level 3). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3). Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.

Foreclosed real estate – Foreclosed real estate, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value, based on a current appraisal that is generally prepared using an income or market valuation approach and conducted by an independent, licensed third party appraiser, adjusted for estimated selling costs (Level 3). At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses. For any real estate valuations subsequent to foreclosure, any excess of the real estate recorded value over the fair value of the real estate is treated as a foreclosed real estate write-down on the Consolidated Statements of Income.

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of June 30, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

($ in thousands)
Description	Fair Value at June 30, 2014		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired loans – covered	$	6,678	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-10%
Impaired loans – non-covered		5,825	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-10%
Foreclosed real estate – covered		9,934	Appraised value	Discounts to reflect current market conditions and estimated costs to sell	0-10%
Foreclosed real estate – non-covered		9,346	Appraised value	Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell	0-40%

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2013, the significant unobservable inputs used in the fair value measurements were as follows:

($ in thousands)
Description	Fair Value at December 31, 2013		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired loans – covered	$	15,284	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-10%
Impaired loans – non-covered		13,020	Appraised value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0-37%
Foreclosed real estate – covered		24,497	Appraised value	Discounts to reflect current market conditions and estimated costs to sell	0-10%
Foreclosed real estate – non-covered		12,251	Appraised value	Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell	0-40%

Transfers of assets or liabilities between levels within the fair value hierarchy are recognized when an event or change in circumstances occurs. There were no transfers between Level 1 and Level 2 for assets or liabilities measured on a recurring basis during the three or six months ended June 30, 2014 or 2013.

For the six months ended June 30, 2014, the increase in the fair value of securities available for sale was $266,000, which is included in other comprehensive income (net of tax expense of $104,000). For the six months ended June 30, 2013, the decrease in the fair value of securities available for sale was $2,166,000, which is included in other comprehensive income (net of tax benefit of $844,000). Fair value measurement methods at June 30, 2014 and 2013 are consistent with those used in prior reporting periods.

The carrying amounts and estimated fair values of financial instruments at June 30, 2014 and December 31, 2013 are as follows:

		June 30, 2014				December 31, 2013
($ in thousands)	Level in Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Cash and due from banks, noninterest-bearing	Level 1	$	92,633		92,633		83,881		83,881
Due from banks, interest-bearing	Level 1		313,141		313,141		136,644		136,644
Federal funds sold	Level 1		1,508		1,508		2,749		2,749
Securities available for sale	Level 2		124,078		124,078		173,041		173,041
Securities held to maturity	Level 2		53,879		57,612		53,995		56,700
Presold mortgages in process of settlement	Level 1		5,926		5,926		5,422		5,422
Total loans, net of allowance	Level 3		2,388,589		2,330,633		2,414,689		2,352,834
Accrued interest receivable	Level 1		8,795		8,795		9,649		9,649
FDIC indemnification asset	Level 3		29,406		28,670		48,622		47,032
Bank-owned life insurance	Level 1		44,685		44,685		44,040		44,040
Deposits	Level 2		2,754,579		2,755,180		2,751,019		2,752,375
Borrowings	Level 2		116,394		101,928		46,394		34,795
Accrued interest payable	Level 2		778		778		879		879

Fair value methods and assumptions are set forth below for the Company’s financial instruments.

Cash and Amounts Due from Banks, Federal Funds Sold, Presold Mortgages in Process of Settlement, Accrued Interest Receivable, and Accrued Interest Payable - The carrying amounts approximate their fair value because of the short maturity of these financial instruments.

Available for Sale and Held to Maturity Securities - Fair values are provided by a third-party and are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or matrix pricing.

Loans - For nonimpaired loans, fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, financial and agricultural, real estate construction, real estate mortgages and installment loans to individuals. Each loan category is further segmented into fixed and variable interest rate terms. The fair value for each category is determined by discounting scheduled future cash flows using current interest rates offered on loans with similar risk characteristics. Fair values for impaired loans are primarily based on estimated proceeds expected upon liquidation of the collateral.

FDIC Indemnification Asset – Fair value is equal to the FDIC reimbursement rate of the expected losses to be incurred and reimbursed by the FDIC and then discounted over the estimated period of receipt.

Bank-Owned Life Insurance – The carrying value of life insurance approximates fair value because this investment is carried at cash surrender value, as determined by the issuer.

Deposits - The fair value of deposits with no stated maturity, such as noninterest-bearing checking accounts, savings accounts, interest-bearing checking accounts, and money market accounts, is equal to the amount payable on demand as of the valuation date. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered in the marketplace for deposits of similar remaining maturities.

Borrowings - The fair value of borrowings is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered by the Company’s lenders for debt of similar remaining maturities.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no highly liquid market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable and other various accrued expenses. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

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Loans and Asset Quality Information (Tables)

6 Months Ended

Jun. 30, 2014

Loans And Asset Quality Information Tables

Summary of the major categories of total loans outstanding

The following is a summary of the major categories of total loans outstanding:

($ in thousands)	June 30, 2014				December 31, 2013				June 30, 2013
	Amount		Percentage		Amount		Percentage		Amount		Percentage
All  loans (non-covered and covered):
Commercial, financial, and agricultural	$	165,021		7%	$	168,469		7%	$	164,767		7%
Real estate – construction, land development & other land loans		295,868		12%		305,246		12%		297,390		12%
Real estate – mortgage – residential (1-4 family) first mortgages		814,712		33%		838,862		34%		832,761		34%
Real estate – mortgage – home equity loans / lines of credit		227,381		9%		227,907		9%		231,446		10%
Real estate – mortgage – commercial and other		868,599		36%		855,249		35%		834,554		34%
Installment loans to individuals		62,153		3%		66,533		3%		68,776		3%
Subtotal		2,433,734		100%		2,462,266		100%		2,429,694		100%
Unamortized net deferred loan costs		651				928				1,168
Total loans	$	2,434,385			$	2,463,194			$	2,430,862

Summary of the major categories of non-covered loans outstanding

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

($ in thousands)	June 30, 2014				December 31, 2013				June 30, 2013
	Amount		Percentage		Amount		Percentage		Amount		Percentage
Non-covered loans:
Commercial, financial, and agricultural	$	162,303		7%	$	164,195		7%	$	159,964		7%
Real estate – construction, land development & other land loans		274,975		12%		273,412		12%		262,397		12%
Real estate – mortgage – residential (1-4 family) first mortgages		718,962		32%		730,712		32%		712,802		33%
Real estate – mortgage – home equity loans / lines of credit		213,542		9%		213,016		10%		214,473		10%
Real estate – mortgage – commercial and other		825,450		37%		804,621		36%		771,711		35%
Installment loans to individuals		61,647		3%		66,001		3%		68,068		3%
Subtotal		2,256,879		100%		2,251,957		100%		2,189,415		100%
Unamortized net deferred loan costs		651				928				1,168
Total non-covered loans	$	2,257,530			$	2,252,885			$	2,190,583

Schedule of the carrying amount of the covered loans

The carrying amount of the covered loans at June 30, 2014 consisted of impaired and nonimpaired purchased loans (as determined on the date of acquisition), as follows:

($ in thousands)	Impaired Purchased Loans – Carrying Value		Impaired Purchased Loans – Unpaid Principal Balance		Nonimpaired Purchased Loans – Carrying Value		Nonimpaired Purchased Loans - Unpaid Principal Balance		Total Covered Loans – Carrying Value		Total Covered Loans – Unpaid Principal Balance
Covered loans:
Commercial, financial, and agricultural	$	69		129		2,649		3,015		2,718		3,144
Real estate – construction, land development & other land loans		322		548		20,571		28,878		20,893		29,426
Real estate – mortgage – residential (1-4 family) first mortgages		429		1,317		95,321		111,278		95,750		112,595
Real estate – mortgage – home equity loans / lines of credit		13		20		13,826		16,359		13,839		16,379
Real estate – mortgage – commercial and other		2,050		3,959		41,099		47,359		43,149		51,318
Installment loans to individuals		—		—		506		507		506		507
Total	$	2,883		5,973		173,972		207,396		176,855		213,369

The carrying amount of the covered loans at December 31, 2013 consisted of impaired and nonimpaired purchased loans (as determined on the date of the acquisition), as follows:

($ in thousands)	Impaired Purchased Loans – Carrying Value		Impaired Purchased Loans – Unpaid Principal Balance		Nonimpaired Purchased Loans – Carrying Value		Nonimpaired Purchased Loans - Unpaid Principal Balance		Total Covered Loans – Carrying Value		Total Covered Loans – Unpaid Principal Balance
Covered loans:
Commercial, financial, and agricultural	$	75		136		4,199		5,268		4,274		5,404
Real estate – construction, land development & other land loans		325		564		31,509		47,792		31,834		48,356
Real estate – mortgage – residential (1-4 family) first mortgages		575		1,500		107,575		126,882		108,150		128,382
Real estate – mortgage – home equity loans / lines of credit		14		21		14,877		18,318		14,891		18,339
Real estate – mortgage – commercial and other		2,153		4,042		48,475		62,630		50,628		66,672
Installment loans to individuals		—		—		532		607		532		607
Total	$	3,142		6,263		207,167		261,497		210,309		267,760

Schedule of covered purchased nonimpaired loans

The following table presents information regarding covered purchased nonimpaired loans since December 31, 2012. 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, 2012	$	277,489
Principal repayments		(63,588	)
Transfers to foreclosed real estate		(13,977	)
Loan charge-offs		(12,957	)
Accretion of loan discount		20,200
Carrying amount of nonimpaired covered loans at December 31, 2013		207,167
Principal repayments		(36,715	)
Transfers to foreclosed real estate		(4,616	)
Loan charge-offs		(3,123	)
Accretion of loan discount		11,259
Carrying amount of nonimpaired covered loans at June 30, 2014	$	173,972

Schedule of purchased impaired loans

The following table presents information regarding all purchased impaired loans since December 31, 2012, all of which are covered loans. The Company has applied the cost recovery method to all purchased impaired loans at their respective acquisition dates due to the uncertainty as to the timing of expected cash flows, as reflected in the following table.

($ in thousands) Purchased Impaired Loans	Contractual Principal Receivable			Fair Market Value Adjustment – Write Down (Nonaccretable Difference)			Carrying Amount
Balance at December 31, 2012	$	8,815			3,990			4,825
Change due to payments received		(301	)		(31	)		(270	)
Transfer to foreclosed real estate		(2,100	)		(784	)		(1,316	)
Change due to loan charge-off		(150	)		(54	)		(96	)
Other		(1	)		—			(1	)
Balance at December 31, 2013	$	6,263			3,121			3,142
Change due to payments received		(487	)		84			(571	)
Other		197			(115	)		312
Balance at June 30, 2014	$	5,973			3,090			2,883

Summary of nonperforming assets

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

ASSET QUALITY DATA ($ in thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Non-covered nonperforming assets
Nonaccrual loans	$	47,533	$	41,938	$	42,338
Restructured loans - accruing		27,250		27,776		21,333
Accruing loans > 90 days past due		—		—		—
Total non-covered nonperforming loans		74,783		69,714		63,671
Foreclosed real estate		9,346		12,251		15,425
Total non-covered nonperforming assets	$	84,129	$	81,965	$	79,096
Covered nonperforming assets
Nonaccrual loans (1)	$	20,938	$	37,217	$	50,346
Restructured loans - accruing		8,193		8,909		6,790
Accruing loans > 90 days past due		—		—		—
Total covered nonperforming loans		29,131		46,126		57,136
Foreclosed real estate		9,934		24,497		32,005
Total covered nonperforming assets	$	39,065	$	70,623	$	89,141
Total nonperforming assets	$	123,194	$	152,588	$	168,237

(1) At June 30, 2014, December 31, 2013, and June 30, 2013, the contractual balance of the nonaccrual loans covered by FDIC loss share agreements was $34.3 million, $60.4 million, and $89.3 million, respectively.

Schedule of nonaccrual loans

The following table presents the Company’s nonaccrual loans as of June 30, 2014.

($ in thousands)	Non-covered		Covered		Total
Commercial, financial, and agricultural:
Commercial – unsecured	$	110		5		115
Commercial – secured		3,628		277		3,905
Secured by inventory and accounts receivable		338		—		338
Real estate – construction, land development & other land loans		9,001		5,299		14,300
Real estate – residential, farmland and multi-family		21,168		7,215		28,383
Real estate – home equity lines of credit		2,436		241		2,677
Real estate – commercial		10,297		7,899		18,196
Consumer		555		2		557
Total	$	47,533		20,938		68,471

The following table presents the Company’s nonaccrual loans as of December 31, 2013.

($ in thousands)	Non-covered		Covered		Total
Commercial, financial, and agricultural:
Commercial – unsecured	$	222		38		260
Commercial – secured		2,662		114		2,776
Secured by inventory and accounts receivable		545		782		1,327
Real estate – construction, land development & other land loans		8,055		13,502		21,557
Real estate – residential, farmland and multi-family		17,814		12,344		30,158
Real estate – home equity lines of credit		2,200		335		2,535
Real estate – commercial		10,115		10,099		20,214
Consumer		325		3		328
Total	$	41,938		37,217		79,155

Schedule of analysis of the payment status of loans

The following table presents an analysis of the payment status of the Company’s loans as of June 30, 2014.

($ 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	$	426		7		110		35,534		36,077
Commercial - secured		1,309		310		3,628		118,854		124,101
Secured by inventory and accounts receivable		146		64		338		17,944		18,492
Real estate – construction, land development & other land loans		308		605		9,001		237,455		247,369
Real estate – residential, farmland, and multi-family		7,867		3,523		21,168		834,617		867,175
Real estate – home equity lines of credit		1,058		133		2,436		196,883		200,510
Real estate - commercial		1,758		447		10,297		705,403		717,905
Consumer		411		139		555		44,145		45,250
Total non-covered	$	13,283		5,228		47,533		2,190,835		2,256,879
Unamortized net deferred loan costs										651
Total non-covered loans									$	2,257,530
Covered loans	$	994		1,025		20,938		153,898		176,855
Total loans	$	14,277		6,253		68,471		2,344,733		2,434,385

The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2013.

($ in thousands)	30-59 Days Past Due		60-89 Days Past Due		Nonaccrual Loans		Current		Total Loans Receivable
Non-covered loans
Commercial, financial, and agricultural:
Commercial - unsecured	$	347		94		222		36,352		37,015
Commercial - secured		1,233		462		2,662		117,923		122,280
Secured by inventory and accounts receivable		438		767		545		19,426		21,176
Real estate – construction, land development & other land loans		2,304		1,391		8,055		232,920		244,670
Real estate – residential, farmland, and multi-family		11,682		2,631		17,814		837,260		869,387
Real estate – home equity lines of credit		1,465		305		2,200		194,157		198,127
Real estate - commercial		3,196		214		10,115		696,081		709,606
Consumer		494		187		325		48,690		49,696
Total non-covered	$	21,159		6,051		41,938		2,182,809		2,251,957
Unamortized net deferred loan costs										928
Total non-covered loans									$	2,252,885
Covered loans	$	5,179		768		37,217		167,145		210,309
Total loans	$	26,338		6,819		79,155		2,349,954		2,463,194

Schedule of activity in the allowance for loan losses for non-covered loans

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, 2014.

($ 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, 2014
Beginning balance	$	8,889			8,650			12,733			3,662			9,375			1,030			367			44,706
Charge-offs		(2,041	)		(307	)		(861	)		(397	)		(277	)		(371	)		—			(4,254	)
Recoveries		21			73			114			6			26			116			—			356
Provisions		2,079			(1,002	)		(854	)		484			88			131			232			1,158
Ending balance	$	8,948			7,414			11,132			3,755			9,212			906			599			41,966
As of and for the six months ended June 30, 2014
Beginning balance	$	7,432			12,966			15,142			1,838			5,524			1,513			(152	)		44,263
Charge-offs		(2,666	)		(1,234	)		(1,631	)		(503	)		(889	)		(799	)		—			(7,722	)
Recoveries		49			309			179			11			121			233			—			902
Provisions		4,133			(4,627	)		(2,558	)		2,409			4,456			(41	)		751			4,523
Ending balance	$	8,948			7,414			11,132			3,755			9,212			906			599			41,966
Ending balances as of June 30, 2014:  Allowance for loan losses
Individually evaluated for impairment	$	290			818			2,016			—			528			—			—			3,652
Collectively evaluated for impairment	$	8,658			6,596			9,116			3,755			8,684			906			599			38,314
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—
Loans receivable as of June 30, 2014:
Ending balance – total	$	178,670			247,369			867,175			200,510			717,905			45,250			—			2,256,879
Ending balances as of June 30, 2014: Loans
Individually evaluated for impairment	$	679			7,541			22,505			483			17,009			10			—			48,227
Collectively evaluated for impairment	$	177,991			239,828			844,670			200,027			700,896			45,240			—			2,208,652
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—

The following table presents the activity in the allowance for loan losses for non-covered loans for the year ended December 31, 2013.

($ in thousands)	Commercial, Financial, and Agricultural			Real Estate – Construction, Land Development, & Other Land Loans			Real Estate – Residential, Farmland, and Multi-family			Real Estate – Home Equity Lines of Credit			Real Estate – Commercial and Other			Consumer			Unallo- cated			Total
As of and for the year ended December 31, 2013
Beginning balance	$	4,687			12,856			14,082			1,884			5,247			1,939			948			41,643
Charge-offs		(4,418	)		(2,739	)		(3,732	)		(1,314	)		(4,346	)		(2,174	)		(660	)		(19,383	)
Recoveries		299			743			753			87			1,381			474			—			3,737
Provisions		6,864			2,106			4,039			1,181			3,242			1,274			(440	)		18,266
Ending balance	$	7,432			12,966			15,142			1,838			5,524			1,513			(152	)		44,263
Ending balances as of December 31, 2013:  Allowance for loan losses
Individually evaluated for impairment	$	202			544			1,162			1			649			1			—			2,559
Collectively evaluated for impairment	$	7,230			12,422			13,980			1,837			4,875			1,512			(152	)		41,704
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—
Loans receivable as of December 31, 2013:
Ending balance – total	$	180,471			244,670			869,387			198,127			709,606			49,696			—			2,251,957
Ending balances as of December 31, 2013: Loans
Individually evaluated for impairment	$	582			8,027			19,111			22			16,894			13			—			44,649
Collectively evaluated for impairment	$	179,889			236,643			850,276			198,105			692,712			49,683			—			2,207,308
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—

The following table presents the activity in the allowance for loan losses for non-covered loans for the three and six months ended June 30, 2013.

($ in thousands)	Commercial, Financial, and Agricultural			Real Estate – Construction, Land Development, & Other Land Loans			Real Estate – Residential, Farmland, and Multi- family			Real Estate – Home Equity Lines of Credit			Real Estate – Commercial and Other			Consumer			Unallo- cated			Total
As of and for the three months ended June 30, 2013
Beginning balance	$	4,949			14,857			15,285			2,040			5,714			1,791			125			44,761
Charge-offs		(560	)		(394	)		(858	)		(265	)		(1,907	)		(562	)		—			(4,546	)
Recoveries		214			24			117			4			93			106			—			558
Provisions		1,357			106			417			282			1,339			368			174			4,043
Ending balance	$	5,960			14,593			14,961			2,061			5,239			1,703			299			44,816
As of and for the six months ended June 30, 2013
Beginning balance	$	4,687			12,856			14,082			1,884			5,247			1,939			948			41,643
Charge-offs		(1,384	)		(1,217	)		(1,655	)		(889	)		(2,447	)		(1,090	)		(659	)		(9,341	)
Recoveries		233			617			663			62			882			243			—			2,700
Provisions		2,424			2,337			1,871			1,004			1,557			611			10			9,814
Ending balance	$	5,960			14,593			14,961			2,061			5,239			1,703			299			44,816
Ending balances as of June 30, 2013:  Allowance for loan losses
Individually evaluated for impairment	$	902			480			1,373			1			781			1			—			3,538
Collectively evaluated for impairment	$	5,058			14,113			13,588			2,060			4,458			1,702			299			41,278
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—
Loans receivable as of June 30, 2013:
Ending balance – total	$	176,662			232,352			850,060			198,281			680,607			51,453			—			2,189,415
Ending balances as of June 30, 2013: Loans
Individually evaluated for impairment	$	1,920			7,596			19,080			22			17,585			14			—			46,217
Collectively evaluated for impairment	$	174,742			224,756			830,980			198,259			663,022			51,439			—			2,143,198
Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—			—

Schedule of activity in the allowance for loan losses for covered loans

The following table presents the activity in the allowance for loan losses for covered loans for the three and six months ended June 30, 2014.

($ in thousands)	Covered Loans
As of and for the three months ended June 30, 2014
Beginning balance	$	3,421
Charge-offs		(2,722	)
Recoveries		630
Provisions		2,501
Ending balance	$	3,830
As of and for the six months ended June 30, 2014
Beginning balance	$	4,242
Charge-offs		(5,670	)
Recoveries		2,547
Provisions		2,711
Ending balance	$	3,830
Ending balances as of June 30, 2014: Allowance for loan losses
Individually evaluated for impairment	$	1,340
Collectively evaluated for impairment		2,490
Loans acquired with deteriorated credit quality		46
Loans receivable as of June 30, 2014:
Ending balance – total	$	176,855
Ending balances as of June 30, 2014: Loans
Individually evaluated for impairment	$	23,336
Collectively evaluated for impairment		153,519
Loans acquired with deteriorated credit quality		2,883

The following table presents the activity in the allowance for loan losses for covered loans for the year ended December 31, 2013.

($ in thousands)	Covered Loans
As of and for the year ended December 31, 2013
Beginning balance	$	4,759
Charge-offs		(13,053	)
Recoveries		186
Provisions		12,350
Ending balance	$	4,242
Ending balances as of December 31, 2013:  Allowance for loan losses
Individually evaluated for impairment	$	3,133
Collectively evaluated for impairment		1,109
Loans acquired with deteriorated credit quality		25
Loans receivable as of December 31, 2013:
Ending balance – total	$	210,309
Ending balances as of December 31, 2013: Loans
Individually evaluated for impairment	$	46,126
Collectively evaluated for impairment		164,183
Loans acquired with deteriorated credit quality		3,142

The following table presents the activity in the allowance for loan losses for covered loans for the three and six months ended June 30, 2013.

($ in thousands)	Covered Loans
As of and for the three months ended June 30, 2013
Beginning balance	$	5,028
Charge-offs		(541	)
Recoveries		—
Provisions		1,548
Ending balance	$	6,035
As of and for the six months ended June 30, 2013
Beginning balance	$	4,759
Charge-offs		(5,650	)
Recoveries		—
Provisions		6,926
Ending balance	$	6,035
Ending balances as of June 30, 2013: Allowance for loan losses
Individually evaluated for impairment	$	4,700
Collectively evaluated for impairment		1,335
Loans acquired with deteriorated credit quality		17
Loans receivable as of June 30, 2013:
Ending balance – total	$	240,279
Ending balances as of June 30, 2013: Loans
Individually evaluated for impairment	$	57,136
Collectively evaluated for impairment		183,143
Loans acquired with deteriorated credit quality		3,340

Schedule of impaired loans

The following table presents the Company’s impaired loans as of June 30, 2014.

($ in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Non-covered loans with no related allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	—		—		—		22
Commercial - secured		71		74		—		134
Secured by inventory and accounts receivable		—		—		—		—
Real estate – construction, land development & other land loans		5,617		6,116		—		5,954
Real estate – residential, farmland, and multi-family		8,646		9,665		—		6,471
Real estate – home equity lines of credit		483		498		—		327
Real estate – commercial		9,514		11,453		—		8,495
Consumer		10		12		—		7
Total non-covered impaired loans with no allowance	$	24,341		27,818		—		21,410
Total covered impaired loans with no allowance	$	14,444		25,495		—		23,192
Total impaired loans with no allowance recorded	$	38,785		53,313		—		44,602
Non-covered  loans with an allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	99		100		80		110
Commercial - secured		509		509		210		494
Secured by inventory and accounts receivable		—		—		—		25
Real estate – construction, land development & other land loans		1,924		1,987		818		1,705
Real estate – residential, farmland, and multi-family		13,859		13,969		2,016		14,438
Real estate – home equity lines of credit		—		—		—		7
Real estate – commercial		7,495		7,588		528		8,156
Consumer		—		—		—		4
Total non-covered impaired loans with allowance	$	23,886		24,153		3,652		24,939
Total covered impaired loans with allowance	$	8,892		10,106		1,340		10,478
Total impaired loans with an allowance recorded	$	32,778		34,259		4,992		35,417

 The following table presents the Company’s impaired loans as of December 31, 2013.

($ in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Non-covered loans with no related allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	—		—		—		—
Commercial - secured		—		—		—		334
Secured by inventory and accounts receivable		—		—		—		—
Real estate – construction, land development & other land loans		6,398		6,907		—		5,005
Real estate – residential, farmland, and multi-family		3,883		4,429		—		2,329
Real estate – home equity lines of credit		—		—		—		—
Real estate – commercial		7,324		9,008		—		9,981
Consumer		—		—		—		—
Total non-covered impaired loans with no allowance	$	17,605		20,344		—		17,649
Total covered impaired loans with no allowance	$	29,058		48,785		—		39,215
Total impaired loans with no allowance recorded	$	46,663		69,129		—		56,864
Non-covered  loans with an allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	115		115		63		72
Commercial - secured		392		394		64		1,081
Secured by inventory and accounts receivable		75		75		75		80
Real estate – construction, land development & other land loans		1,629		2,148		544		2,339
Real estate – residential, farmland, and multi-family		15,228		15,642		1,162		13,417
Real estate – home equity lines of credit		22		22		1		637
Real estate – commercial		9,570		10,873		649		5,914
Consumer		13		35		1		466
Total non-covered impaired loans with allowance	$	27,044		29,304		2,559		24,006
Total covered impaired loans with allowance	$	17,068		22,367		3,133		14,343
Total impaired loans with an allowance recorded	$	44,112		51,671		5,692		38,349

Schedule of recorded investment in loans by credit quality indicators

The following describes the Company’s internal risk grades in ascending order of likelihood of loss:

	Numerical Risk Grade	Description
Pass:
	1	Cash secured loans.
	2	Non-cash secured loans that have no minor or major exceptions to the lending guidelines.
	3	Non-cash secured loans that have no major exceptions to the lending guidelines.
Weak Pass:
	4	Non-cash secured loans that have minor or major exceptions to the lending guidelines, but the exceptions are properly mitigated.
Watch or Standard:
	9	Loans that meet the guidelines for a Risk Graded 5 loan, except the collateral coverage is sufficient to satisfy the debt with no risk of loss under reasonable circumstances.  This category also includes all loans to insiders and any other loan that management elects to monitor on the watch list.
Special Mention:
	5	Existing loans with major exceptions that cannot be mitigated.
Classified:
	6	Loans that have a well-defined weakness that may jeopardize the liquidation of the debt if deficiencies are not corrected.
	7	Loans that have a well-defined weakness that make the collection or liquidation improbable.
	8	Loans that are considered uncollectible and are in the process of being charged-off.

The following table presents the Company’s recorded investment in loans by credit quality indicators as of June 30, 2014.

($ in thousands)	Credit Quality Indicator (Grouped by Internally Assigned Grade)
	Pass (Grades 1, 2, & 3)		Weak Pass (Grade 4)		Watch or Standard Loans (Grade 9)		Special Mention Loans (Grade 5)		Classified Loans (Grades 6, 7, & 8)		Nonaccrual Loans		Total
Non-covered loans:
Commercial, financial, and agricultural:
Commercial - unsecured	$	11,722		20,737		7		1,435		2,066		110		36,077
Commercial - secured		34,642		76,763		93		4,403		4,572		3,628		124,101
Secured by inventory and accounts receivable		5,863		9,912		—		1,346		1,033		338		18,492
Real estate – construction, land development & other land loans		65,376		149,982		2,118		11,174		9,718		9,001		247,369
Real estate – residential, farmland, and multi-family		222,681		536,597		5,038		45,084		36,607		21,168		867,175
Real estate – home equity lines of credit		122,853		64,446		1,293		4,030		5,452		2,436		200,510
Real estate - commercial		138,088		517,412		8,743		28,269		15,096		10,297		717,905
Consumer		24,700		18,404		54		684		853		555		45,250
Total	$	625,925		1,394,253		17,346		96,425		75,397		47,533		2,256,879
Unamortized net deferred loan costs														651
Total non-covered  loans													$	2,257,530
Total covered loans	$	17,850		96,435		82		12,888		28,662		20,938		176,855
Total loans	$	643,775		1,490,688		17,428		109,313		104,059		68,471		2,434,385

The following table presents the Company’s recorded investment in loans by credit quality indicators as of December 31, 2013.

($ in thousands)	Credit Quality Indicator (Grouped by Internally Assigned Grade)
	Pass (Grades 1, 2, & 3)		Weak Pass (Grade 4)		Watch or Standard Loans (Grade 9)		Special Mention Loans (Grade 5)		Classified Loans (Grades 6, 7, & 8)		Nonaccrual Loans		Total
Non-covered loans:
Commercial, financial, and agricultural:
Commercial - unsecured	$	8,495		24,415		7		1,509		2,367		222		37,015
Commercial - secured		31,494		77,441		100		5,597		4,986		2,662		122,280
Secured by inventory and accounts receivable		4,098		12,800		—		2,022		1,711		545		21,176
Real estate – construction, land development & other land loans		31,221		181,050		2,365		11,646		10,333		8,055		244,670
Real estate – residential, farmland, and multi-family		227,053		540,349		5,062		41,583		37,526		17,814		869,387
Real estate – home equity lines of credit		120,205		63,400		1,499		5,699		5,124		2,200		198,127
Real estate - commercial		115,397		533,680		10,014		24,557		15,843		10,115		709,606
Consumer		25,703		21,790		54		829		995		325		49,696
Total	$	563,666		1,454,925		19,101		93,442		78,885		41,938		2,251,957
Unamortized net deferred loan costs														928
Total non-covered  loans													$	2,252,885
Total covered loans	$	25,078		92,147		—		8,857		47,010		37,217		210,309
Total loans	$	588,744		1,547,072		19,101		102,299		125,895		79,155		2,463,194

Schedule of information related to loans modified in a troubled debt restructuring

The following table presents information related to loans modified in a troubled debt restructuring during the three and six months ended June 30, 2014.

($ in thousands)	For the three months ended June 30, 2014
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		5	$	411	$	411
Non-covered TDRs - Nonaccrual
Real estate – residential, farmland, and multi-family		2		332		332
Total non-covered TDRs arising during period		7		743		743
Total covered TDRs arising during period– Accruing		2	$	248	$	245
Total covered TDRs arising during period – Nonaccrual		—		—		—
Total TDRs arising during period		9	$	991	$	988

($ in thousands)	For the six months ended June 30, 2014
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		6	$	677	$	677
Non-covered TDRs - Nonaccrual
Real estate – residential, farmland, and multi-family		4		438		438
Total non-covered TDRs arising during period		10		1,115		1,115
Total covered TDRs arising during period– Accruing		2	$	248	$	245
Total covered TDRs arising during period – Nonaccrual		5		710		682
Total TDRs arising during period		17	$	2,073	$	2,042

The following table presents information related to loans modified in a troubled debt restructuring during the three and six months ended June 30, 2013.

($ in thousands)	For the three months ended June 30, 2013
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		3	$	574	$	576
Real estate – commercial		1		103		103
Non-covered TDRs – Nonaccrual		—		—		—
Total non-covered TDRs arising during period		4		677		679
Total covered TDRs arising during period– Accruing		3	$	312	$	311
Total covered TDRs arising during period – Nonaccrual		—		—		—
Total TDRs arising during period		7	$	989	$	990

($ in thousands)	For the six months ended June 30, 2013
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Real estate – residential, farmland, and multi-family		9	$	1,082	$	1,084
Real estate – commercial		3		634		634
Consumer		1		14		14
Non-covered TDRs - Nonaccrual
Real estate – residential, farmland, and multi-family		3		209		209
Total non-covered TDRs arising during period		16		1,939		1,941
Total covered TDRs arising during period– Accruing		4	$	359	$	351
Total covered TDRs arising during period – Nonaccrual		—		—		—
Total TDRs arising during period		20	$	2,298	$	2,292

Schedule od accruing restructured loans that defaulted in the period

Accruing restructured loans that were modified in the previous 12 months and that defaulted during the three and six months ended June 30, 2014 are presented in the table below. The Company considers a loan to have defaulted when it becomes 90 or more days delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to foreclosed real estate.

($ in thousands)	For the three months ended June 30, 2014				For the six months ended June 30, 2014
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Non-covered accruing TDRs that subsequently defaulted
Real estate – construction, land development & other land loans		—	$	—		1	$	5
Real estate – commercial		—		—		1		71
Total non-covered TDRs that subsequently defaulted		—	$	—		2	$	76
Total accruing covered TDRs that subsequently defaulted		—	$	—		—	$	—
Total accruing TDRs that subsequently defaulted		—	$	—		2	$	76

Accruing restructured loans that were modified in the previous 12 months and that defaulted during the three and six months ended June 30, 2013 are presented in the table below.

($ in thousands)	For the three months ended June 30, 2013				For the six months ended June 30, 2013
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Non-covered accruing TDRs that subsequently defaulted
Real estate – construction, land development & other land loans		1	$	342		1	$	342
Real estate – residential, farmland, and multi-family		—		—		1		252
Total non-covered TDRs that subsequently defaulted		1	$	342		2	$	594
Total accruing covered TDRs that subsequently defaulted		—	$	—		1	$	3,501
Total accruing TDRs that subsequently defaulted		1	$	342		3	$	4,095

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Loans and Asset Quality Information (Details 7) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Analysis of the payment status of loans
30-59 Days Past Due	$ 14,277	$ 26,338
60-89 Days Past Due	6,253	6,819
Nonaccrual loans	68,471	79,155
Current	2,344,733	2,349,954
Loans - non-covered	2,257,530	2,252,885	2,190,583
Unamortized net deferred loan costs	651	928	1,168
Total Covered Loans - Carrying Value	176,855	210,309	240,279
Loans	2,434,385	2,463,194	2,430,862
Commercial Unsecured [Member]
Analysis of the payment status of loans
Nonaccrual loans	115	260
Commercial Secured [Member]
Analysis of the payment status of loans
Nonaccrual loans	3,905	2,776
Secured by Inventory and Accounts Receivable [Member]
Analysis of the payment status of loans
Nonaccrual loans	338	1,327
Real estate construction, land development other land loans [Member]
Analysis of the payment status of loans
Nonaccrual loans	14,300	21,557
Real estate residential, farmland and mutli-family [Member]
Analysis of the payment status of loans
Nonaccrual loans	28,383	30,158
Loans - non-covered	867,175	869,387	850,060
Real estate home equity lines of credit [Member]
Analysis of the payment status of loans
Nonaccrual loans	2,677	2,535
Loans - non-covered	200,510	198,127	198,281
Real estate commercial [Member]
Analysis of the payment status of loans
Nonaccrual loans	18,196	20,214
Consumer [Member]
Analysis of the payment status of loans
Nonaccrual loans	557	328
Loans - non-covered	45,250	49,696	51,453
Non-covered [Member]
Analysis of the payment status of loans
30-59 Days Past Due	13,283	21,159
60-89 Days Past Due	5,228	6,051
Nonaccrual loans	47,533	41,938
Current	2,190,835	2,182,809
Loans - non-covered	2,256,879	2,251,957	2,189,415
Non-covered [Member] | Commercial Unsecured [Member]
Analysis of the payment status of loans
30-59 Days Past Due	426	347
60-89 Days Past Due	7	94
Nonaccrual loans	110	222
Current	35,534	36,352
Loans - non-covered	36,077	37,015
Non-covered [Member] | Commercial Secured [Member]
Analysis of the payment status of loans
30-59 Days Past Due	1,309	1,233
60-89 Days Past Due	310	462
Nonaccrual loans	3,628	2,662
Current	118,854	117,923
Loans - non-covered	124,101	122,280
Non-covered [Member] | Secured by Inventory and Accounts Receivable [Member]
Analysis of the payment status of loans
30-59 Days Past Due	146	438
60-89 Days Past Due	64	767
Nonaccrual loans	338	545
Current	17,944	19,426
Loans - non-covered	18,492	21,176
Non-covered [Member] | Real estate construction, land development other land loans [Member]
Analysis of the payment status of loans
30-59 Days Past Due	308	2,304
60-89 Days Past Due	605	1,391
Nonaccrual loans	9,001	8,055
Current	237,455	232,920
Loans - non-covered	247,369	244,670
Non-covered [Member] | Real estate residential, farmland and mutli-family [Member]
Analysis of the payment status of loans
30-59 Days Past Due	7,867	11,682
60-89 Days Past Due	3,523	2,631
Nonaccrual loans	21,168	17,814
Current	834,617	837,260
Loans - non-covered	867,175	869,387
Non-covered [Member] | Real estate home equity lines of credit [Member]
Analysis of the payment status of loans
30-59 Days Past Due	1,058	1,465
60-89 Days Past Due	133	305
Nonaccrual loans	2,436	2,200
Current	196,883	194,157
Loans - non-covered	200,510	198,127
Non-covered [Member] | Real estate commercial [Member]
Analysis of the payment status of loans
30-59 Days Past Due	1,758	3,196
60-89 Days Past Due	447	214
Nonaccrual loans	10,297	10,115
Current	705,403	696,081
Loans - non-covered	717,905	709,606
Non-covered [Member] | Consumer [Member]
Analysis of the payment status of loans
30-59 Days Past Due	411	494
60-89 Days Past Due	139	187
Nonaccrual loans	555	325
Current	44,145	48,690
Loans - non-covered	45,250	49,696
Covered [Member]
Analysis of the payment status of loans
30-59 Days Past Due	994	5,179
60-89 Days Past Due	1,025	768
Nonaccrual loans	20,938	37,217
Current	153,898	167,145
Total Covered Loans - Carrying Value	176,855	210,309	240,279
Covered [Member] | Commercial Unsecured [Member]
Analysis of the payment status of loans
Nonaccrual loans	5	38
Covered [Member] | Commercial Secured [Member]
Analysis of the payment status of loans
Nonaccrual loans	277	114
Covered [Member] | Secured by Inventory and Accounts Receivable [Member]
Analysis of the payment status of loans
Nonaccrual loans		782
Covered [Member] | Real estate construction, land development other land loans [Member]
Analysis of the payment status of loans
Nonaccrual loans	5,299	13,502
Covered [Member] | Real estate residential, farmland and mutli-family [Member]
Analysis of the payment status of loans
Nonaccrual loans	7,215	12,344
Covered [Member] | Real estate home equity lines of credit [Member]
Analysis of the payment status of loans
Nonaccrual loans	241	335
Covered [Member] | Real estate commercial [Member]
Analysis of the payment status of loans
Nonaccrual loans	7,899	10,099
Covered [Member] | Consumer [Member]
Analysis of the payment status of loans
Nonaccrual loans	$ 2	$ 3

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Loans and Asset Quality Information (Details Narrative) (USD $) In Thousands, unless otherwise specified	6 Months Ended		12 Months Ended			0 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Jun. 30, 2014 Purchased Nonimpaired Loans [Member]	Jun. 30, 2014 Purchased Nonperfoming Loans [Member]	Jul. 01, 2014 Covered Loss Sharing Subsequent Change to Noncovered [Member]	Jun. 30, 2014 Covered Loss Sharing Subsequent Change to Noncovered [Member]
Unamortized premiums on loans	$ 0	$ 252	$ 98
Accretion of loan discount	11,259		20,200
Loan discount on loans				21,374	4,386
Percentage of loan discount accretion	80.00%
Payments that exceeded the initial carrying amount on purchased impaired loans	179	38
Contractual balance of nonaccrual loans	34,300	89,300	60,400
Total Covered Loans - Carrying Value	176,855	240,279	210,309				39,700
Foreclosed real estate - covered	9,934	32,005	24,497				3,000
Nonaccrual loans	68,471		79,155				9,700
Restructured loans - accruing							2,100
Transfer of allowance of loan losses from covered to non-covered						$ 1,700

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Consolidated Statements of Comprehensive Income (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Consolidated Statements Of Comprehensive Income
Net income	$ 6,646	$ 5,588	$ 12,322	$ 8,688
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period, pretax	749	(1,853)	1,052	(2,159)
Tax (expense) benefit	(292)	723	(410)	841
Reclassification to realized gains	(786)	(7)	(786)	(7)
Tax expense	306	3	306	3
Postretirement Plans:
Amortization of unrecognized net actuarial (gain) loss	(56)	15	(110)	18
Tax expense (benefit)	33	(6)	66	(7)
Other comprehensive income (loss)	(46)	(1,125)	118	(1,311)
Comprehensive income	$ 6,600	$ 4,463	$ 12,440	$ 7,377

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Accounting Policies

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Accounting Policies

Note 2 – Accounting Policies

Note 1 to the 2013 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. The following paragraphs update that information as necessary.

In July 2013, the Financial Accounting Standards Board (FASB) issued guidance to eliminate the diversity in practice regarding presentation of unrecognized tax benefits in the statement of financial position. Under the clarified guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, will be presented in the financial statements as a reduction to a deferred tax asset unless certain criteria are met. The requirements should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The amendments became effective for the Company for reporting periods beginning after December 15, 2013 and did not have a material effect on its financial statements.

In January 2014, the FASB amended the Investments—Equity Method and Joint Ventures topic to address accounting for investments in qualified affordable housing projects. If certain conditions are met, the amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects by amortizing the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizing the net investment performance in the income statement as a component of income tax expense (benefit). If those conditions are not met, the investment should be accounted for as an equity method investment or a cost method investment in accordance with existing accounting guidance. The amendments will be effective for the Company for interim and annual reporting periods beginning after December 15, 2014 and should be applied retrospectively for all periods presented. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2014, the FASB amended the Receivables topic of the Accounting Standards Codification. The amendments are intended to resolve diversity in practice with respect to when a creditor should reclassify a collateralized consumer mortgage loan to other real estate owned (“OREO”). In addition, the amendments require a creditor to reclassify a collateralized consumer mortgage loan to OREO upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2014, with early implementation of the guidance permitted. In implementing this guidance, assets that are reclassified from real estate to loans are measured at the carrying value of the real estate at the date of adoption. Assets reclassified from loans to real estate are measured at the lower of the net amount of the loan receivable or the fair value of the real estate less costs to sell at the date of adoption. The Company can apply these amendments either prospectively or using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2016. The Company can apply the guidance using either the full retrospective approach or modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In June 2014, the FASB issued guidance which makes limited amendments to the guidance on accounting for certain repurchase agreements. The new guidance (1) requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. The amendments will be effective for the Company for the first interim or annual period beginning after December 15, 2014. The Company will apply the guidance by making a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company does not expect these amendments to have a material effect on its financial statements.

In June 2014, the FASB issued guidance which clarifies that performance targets associated with stock compensation should be treated as a performance condition and should not be reflected in the grant date fair value of the stock award. The amendments will be effective for the Company for fiscal years that begin after December 15, 2015. The Company will apply the guidance to all stock awards granted or modified after the amendments are effective. The Company does not expect these amendments to have a material effect on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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FDIC Indemnification Asset (Details 1) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Rollforward of the FDIC indemnification asset
FDIC indemnification asset, beginning	$ 48,622
Increase related to unfavorable changes in loss estimates	4,210
Increase related to reimbursable expenses	2,210
Cash received from FDIC	(15,256)	(12,018)
Accretion of loan discount	(10,380)
FDIC indemnification asset, ending	$ 29,406	$ 92,950

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Fair Value (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Carrying amounts and estimated fair values of financial instruments:
Securities available for sale	$ 124,078	$ 173,041	$ 186,634
Securities held to maturity	57,612	56,700	58,376
Total loans, net of allowance	2,388,589	2,414,689	2,380,011
Accrued interest receivable	8,795	9,649	9,780
FDIC indemnification asset	29,406	48,622	92,950
Bank-owned life insurance	44,685	44,040	43,276
Accrued interest payable	778	879	1,071
Carrying Amount [Member]
Carrying amounts and estimated fair values of financial instruments:
Cash and due from banks, noninterest-bearing	92,633	83,881
Due from banks, interest-bearing	313,141	136,644
Federal funds sold	1,508	2,749
Securities available for sale	124,078	173,041
Securities held to maturity	53,879	53,995
Presold mortgages in process of settlement	5,926	5,422
Total loans, net of allowance	2,388,589	2,414,689
Accrued interest receivable	8,795	9,649
FDIC indemnification asset	29,406	48,622
Bank-owned life insurance	44,685	44,040
Deposits	2,754,579	2,751,019
Borrowings	116,394	46,394
Accrued interest payable	778	879
Fair Value [Member]
Carrying amounts and estimated fair values of financial instruments:
Cash and due from banks, noninterest-bearing	92,633	83,881
Due from banks, interest-bearing	313,141	136,644
Federal funds sold	1,508	2,749
Securities available for sale	124,078	173,041
Securities held to maturity	57,612	56,700
Presold mortgages in process of settlement	5,926	5,422
Total loans, net of allowance	2,330,633	2,352,834
Accrued interest receivable	8,795	9,649
FDIC indemnification asset	28,670	47,032
Bank-owned life insurance	44,685	44,040
Deposits	2,755,180	2,752,375
Borrowings	101,928	34,795
Accrued interest payable	778	879
Level in Fair Value Hierachy [Member]
Carrying amounts and estimated fair values of financial instruments:
Cash and due from banks, noninterest-bearing	1	1
Due from banks, interest-bearing	1	1
Federal funds sold	1	1
Securities available for sale	2	2
Securities held to maturity	2	2
Presold mortgages in process of settlement	1	1
Total loans, net of allowance	3	3
Accrued interest receivable	1	1
FDIC indemnification asset	3	3
Bank-owned life insurance	1	1
Deposits	2	2
Borrowings	2	2
Accrued interest payable	$ 2	$ 2

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FDIC Indemnification Asset (Tables)

6 Months Ended

Jun. 30, 2014

Fdic Indemnification Asset Tables

Schedule of the FDIC indemnification asset components

The FDIC indemnification asset was comprised of the following components as of the dates shown:

($ in thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Receivable related to loss claims incurred, not yet reimbursed	$	7,036		12,649		40,401
Receivable related to estimated future claims on loans		20,196		33,398		45,866
Receivable related to estimated future claims on foreclosed real estate		2,174		2,575		6,683
FDIC indemnification asset	$	29,406		48,622		92,950

Rollforward of the FDIC indemnification asset

The following presents a rollforward of the FDIC indemnification asset since December 31, 2013.

($ in thousands)
Balance at December 31, 2013	$	48,622
Increase related to unfavorable changes in loss estimates		4,210
Increase related to reimbursable expenses		2,210
Cash received from FDIC		(15,256	)
Accretion of loan discount		(10,380	)
Balance at June 30, 2014	$	29,406

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Securities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Securities available for sale:
Amortized Cost	$ 125,833	$ 175,061
Fair Value	124,078	173,041	186,634
Unrealized Gain	475	1,531
Unrealized (losses)	(2,230)	(3,551)
Securities held to maturity:
Amortized Cost	53,879	53,995	54,361
Fair Value	57,612	56,700	58,376
Unrealized Gain	3,733	2,709
Unrealized (losses)		(4)
US Government-sponsored enterprises securities [Member]
Securities available for sale:
Amortized Cost	12,555	18,432
Fair Value	12,459	18,245
Unrealized Gain		32
Unrealized (losses)	(96)	(219)
Mortgage-backed securities [Member]
Securities available for sale:
Amortized Cost	106,173	148,646
Fair Value	104,699	147,187
Unrealized Gain	436	1,415
Unrealized (losses)	(1,910)	(2,874)
Corporate bonds [Member]
Securities available for sale:
Amortized Cost	1,000	3,999
Fair Value	790	3,598
Unrealized Gain		44
Unrealized (losses)	(210)	(445)
Equities [Member]
Securities available for sale:
Amortized Cost	6,105	3,984
Fair Value	6,130	4,011
Unrealized Gain	39	40
Unrealized (losses)	(14)	(13)
States and local governments [Member]
Securities held to maturity:
Amortized Cost	53,879	53,995
Fair Value	57,612	56,700
Unrealized Gain	3,733	2,709
Unrealized (losses)		$ (4)

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Comprehensive Income

6 Months Ended

Jun. 30, 2014

Comprehensive Income

Comprehensive Income

Note 12 – Comprehensive Income

Comprehensive income is defined as the change in equity during a period for non-owner transactions and is divided into net income and other comprehensive income. Other comprehensive income includes revenues, expenses, gains, and losses that are excluded from earnings under current accounting standards. The components of accumulated other comprehensive income for the Company are as follows:

($ in thousands)	June 30, 2014			December 31, 2013			June 30, 2013
Unrealized gain (loss) on securities available for sale	$	(1,755	)		(2,021	)		1,123
Deferred tax asset (liability)		685			789			(438	)
Net unrealized gain (loss) on securities available for sale		(1,070	)		(1,232	)		685
Additional pension asset (liability)		5,025			5,135			(3,561	)
Deferred tax asset (liability)		(1,937	)		(2,003	)		1,389
Net additional pension asset (liability)		3,088			3,132			(2,172	)
Total accumulated other comprehensive income (loss)	$	2,018			1,900			(1,487	)

The following table discloses the changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2014 (all amounts are net of tax).

($ in thousands)	Unrealized Gain (Loss) on Securities Available for Sale			Additional Pension Asset (Liability)			Total
Beginning balance at January 1, 2014	$	(1,232	)		3,132			1,900
Other comprehensive income (loss) before reclassifications		642			—			642
Amounts reclassified from accumulated other comprehensive income		(480	)		(44	)		(524	)
Net current-period other comprehensive income (loss)		162			(44	)		118
Ending balance at June 30, 2014	$	(1,070	)		3,088			2,018

The following table discloses the changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2013 (all amounts are net of tax).

($ in thousands)	Unrealized Gain (Loss) on Securities Available for Sale			Additional Pension Asset (Liability)			Total
Beginning balance at January 1, 2013	$	2,007			(2,183	)		(176	)
Other comprehensive income (loss) before reclassifications		(1,318	)		—			(1,318	)
Amounts reclassified from accumulated other comprehensive income		(4	)		11			7
Net current-period other comprehensive income (loss)		(1,322	)		11			(1,311	)
Ending balance at June 30, 2013	$	685			(2,172	)		(1,487	)