UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended March 31, 2012
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission file number 001-35095
UNITED COMMUNITY BANKS, INC.
(Exact name of registrant as specified in its charter)
Georgia | 58-1807304 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
125 Highway 515 East Blairsville, Georgia |
30512 | |
Address of Principal Executive Offices | (Zip Code) |
(706) 781-2265
(Telephone Number)
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 12 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. YES x NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x 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 definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | x | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller Reporting Company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ¨ NO x
Common stock, par value $1 per share 57,613,842 shares outstanding as of April 30, 2012
2
Part I Financial Information
UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Operations (Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
(in thousands, except per share data) |
2012 | 2011 | ||||||
Interest revenue: |
||||||||
Loans, including fees |
$ | 55,759 | $ | 61,107 | ||||
Investment securities, including tax exempt of $250 and $259 |
13,004 | 13,604 | ||||||
Federal funds sold, reverse repurchase agreements, commercial paper and deposits in banks |
1,012 | 819 | ||||||
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Total interest revenue |
69,775 | 75,530 | ||||||
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Interest expense: |
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Deposits: |
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NOW |
637 | 1,324 | ||||||
Money market |
641 | 2,028 | ||||||
Savings |
37 | 77 | ||||||
Time |
6,159 | 11,732 | ||||||
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Total deposit interest expense |
7,474 | 15,161 | ||||||
Federal funds purchased, repurchase agreements and other short-term borrowings |
1,045 | 1,042 | ||||||
Federal Home Loan Bank advances |
466 | 590 | ||||||
Long-term debt |
2,372 | 2,780 | ||||||
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Total interest expense |
11,357 | 19,573 | ||||||
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Net interest revenue |
58,418 | 55,957 | ||||||
Provision for loan losses |
15,000 | 190,000 | ||||||
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Net interest revenue after provision for loan losses |
43,418 | (134,043 | ) | |||||
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Fee revenue: |
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Service charges and fees |
7,783 | 6,720 | ||||||
Mortgage loan and other related fees |
2,099 | 1,494 | ||||||
Brokerage fees |
813 | 677 | ||||||
Securities gains, net |
557 | 55 | ||||||
Loss from prepayment of debt |
(482 | ) | | |||||
Other |
4,609 | 2,892 | ||||||
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Total fee revenue |
15,379 | 11,838 | ||||||
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Total revenue |
58,797 | (122,205 | ) | |||||
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Operating expenses: |
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Salaries and employee benefits |
25,225 | 24,924 | ||||||
Communications and equipment |
3,155 | 3,344 | ||||||
Occupancy |
3,771 | 4,074 | ||||||
Advertising and public relations |
846 | 978 | ||||||
Postage, printing and supplies |
979 | 1,118 | ||||||
Professional fees |
1,975 | 3,330 | ||||||
Foreclosed property |
3,825 | 64,899 | ||||||
FDIC assessments and other regulatory charges |
2,510 | 5,413 | ||||||
Amortization of intangibles |
732 | 762 | ||||||
Other |
3,937 | 6,429 | ||||||
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Total operating expenses |
46,955 | 115,271 | ||||||
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Net income (loss) before income taxes |
11,842 | (237,476 | ) | |||||
Income tax expense (benefit) |
314 | (140 | ) | |||||
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Net income (loss) |
11,528 | (237,336 | ) | |||||
Preferred stock dividends and discount accretion |
3,030 | 2,778 | ||||||
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Net income (loss) available to common shareholders |
$ | 8,498 | $ | (240,114 | ) | |||
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Earnings (loss) per common shareBasic / Diluted |
$ | .15 | $ | (13.00 | ) | |||
Weighted average common shares outstandingBasic / Diluted |
57,764 | 18,466 |
See accompanying notes to consolidated financial statements.
3
UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Comprehensive Income (Loss) (Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
(in thousands) |
2012 | 2011 | ||||||
Net income (loss) |
$ | 11,528 | $ | (237,336 | ) | |||
Other comprehensive loss: |
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Unrealized losses on available for sale securities: |
||||||||
Unrealized holding losses arising during period |
(3,340 | ) | (959 | ) | ||||
Reclassification adjustment for gains included in net income |
(557 | ) | (55 | ) | ||||
Amortization of gains included in net income (loss) on available for sale securities transferred to held to maturity |
(413 | ) | (663 | ) | ||||
Amortization of gains included in net income (loss) on derivative financial instruments accounted for as cash flow hedges |
(1,600 | ) | (4,223 | ) | ||||
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plans |
154 | | ||||||
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Total other comprehensive loss |
(5,756 | ) | (5,900 | ) | ||||
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Comprehensive income (loss) |
$ | 5,772 | $ | (243,236 | ) | |||
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See accompanying notes to consolidated financial statements.
4
UNITED COMMUNITY BANKS, INC.
March 31, | December 31, | March 31, | ||||||||||
2012 | 2011 | 2011 | ||||||||||
(in thousands, except share and per share data) |
(unaudited) | (audited) | (unaudited) | |||||||||
ASSETS |
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Cash and due from banks |
$ | 53,147 | $ | 53,807 | $ | 153,891 | ||||||
Interest-bearing deposits in banks |
139,439 | 139,609 | 465,656 | |||||||||
Federal funds sold, reverse repurchase agreements, commercial paper and short-term investments |
235,000 | 185,000 | 470,087 | |||||||||
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Cash and cash equivalents |
427,586 | 378,416 | 1,089,634 | |||||||||
Securities available for sale |
1,898,815 | 1,790,047 | 1,638,494 | |||||||||
Securities held to maturity (fair value $318,490, $343,531 and $248,361) |
303,636 | 330,203 | 245,430 | |||||||||
Loans held for sale |
| | 80,629 | |||||||||
Mortgage loans held for sale |
24,809 | 23,881 | 25,364 | |||||||||
Loans, net of unearned income |
4,127,566 | 4,109,614 | 4,194,372 | |||||||||
Less allowance for loan losses |
113,601 | 114,468 | 133,121 | |||||||||
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Loans, net |
4,013,965 | 3,995,146 | 4,061,251 | |||||||||
Assets covered by loss sharing agreements with the FDIC |
72,854 | 78,145 | 125,789 | |||||||||
Premises and equipment, net |
174,419 | 175,088 | 179,143 | |||||||||
Bank owned life insurance |
80,956 | 80,599 | 79,777 | |||||||||
Accrued interest receivable |
20,292 | 20,693 | 21,687 | |||||||||
Intangible assets |
7,695 | 8,428 | 10,684 | |||||||||
Foreclosed property |
31,887 | 32,859 | 54,378 | |||||||||
Unsettled securities sales |
43,527 | | | |||||||||
Other assets |
73,252 | 69,915 | 97,228 | |||||||||
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Total assets |
$ | 7,173,693 | $ | 6,983,420 | $ | 7,709,488 | ||||||
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Liabilities: |
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Deposits: |
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Demand |
$ | 1,101,757 | $ | 992,109 | $ | 864,708 | ||||||
NOW |
1,389,016 | 1,509,896 | 1,320,136 | |||||||||
Money market |
1,123,734 | 1,038,778 | 967,938 | |||||||||
Savings |
214,150 | 199,007 | 193,591 | |||||||||
Time: |
||||||||||||
Less than $100,000 |
1,207,479 | 1,332,394 | 1,576,505 | |||||||||
Greater than $100,000 |
796,882 | 847,152 | 990,289 | |||||||||
Brokered |
167,521 | 178,647 | 684,581 | |||||||||
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Total deposits |
6,000,539 | 6,097,983 | 6,597,748 | |||||||||
Federal funds purchased, repurchase agreements, and other short-term borrowings |
101,925 | 102,577 | 102,107 | |||||||||
Federal Home Loan Bank advances |
215,125 | 40,625 | 55,125 | |||||||||
Long-term debt |
120,245 | 120,225 | 150,166 | |||||||||
Unsettled securities purchases |
119,565 | 10,325 | 177,532 | |||||||||
Accrued expenses and other liabilities |
36,755 | 36,199 | 40,766 | |||||||||
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Total liabilities |
6,594,154 | 6,407,934 | 7,123,444 | |||||||||
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Shareholders equity: |
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Preferred stock, $1 par value; 10,000,000 shares authorized; |
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Series A; $10 stated value; 21,700 shares issued and outstanding |
217 | 217 | 217 | |||||||||
Series B; $1,000 stated value; 180,000 shares issued and outstanding |
177,451 | 177,092 | 176,049 | |||||||||
Series D; $1,000 stated value; 16,613 shares issued and outstanding |
16,613 | 16,613 | 16,613 | |||||||||
Series F; $1,000 stated value; 195,872 shares issued and outstanding |
| | 195,872 | |||||||||
Series G; $1,000 stated value; 151,185 shares issued and outstanding |
| | 151,185 | |||||||||
Common stock, $1 par value; 100,000,000 shares authorized; 41,688,647, 41,647,100 and 20,903,111 shares issued and outstanding |
41,689 | 41,647 | 20,903 | |||||||||
Common stock, non-voting, $1 par value; 30,000,000 shares authorized; 15,914,209 shares issued and outstanding |
15,914 | 15,914 | | |||||||||
Common stock issuable; 90,126, 93,681 and 79,428 shares |
2,948 | 3,233 | 3,681 | |||||||||
Capital surplus |
1,056,135 | 1,054,940 | 738,963 | |||||||||
Accumulated deficit |
(722,363 | ) | (730,861 | ) | (732,390 | ) | ||||||
Accumulated other comprehensive (loss) income |
(9,065 | ) | (3,309 | ) | 14,951 | |||||||
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Total shareholders equity |
579,539 | 575,486 | 586,044 | |||||||||
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Total liabilities and shareholders equity |
$ | 7,173,693 | $ | 6,983,420 | $ | 7,709,488 | ||||||
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See accompanying notes to consolidated financial statements.
5
UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Changes in Shareholders Equity (Unaudited)
For the Three Months Ended March 31,
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Non-Voting | Common | Other | |||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except share and |
Series A |
Series B |
Series D |
Series F |
Series G |
Common Stock |
Common Stock |
Stock Issuable |
Capital Surplus |
Accumulated Deficit |
Comprehensive Income (Loss) |
Total | ||||||||||||||||||||||||||||||||||||
Balance, December 31, 2010 |
$ | 217 | $ | 175,711 | $ | | $ | | $ | | $ | 18,937 | $ | | $ | 3,894 | $ | 741,244 | $ | (492,276 | ) | $ | 20,851 | $ | 468,578 | |||||||||||||||||||||||
Net loss |
(237,336 | ) | (237,336 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss |
(5,900 | ) | (5,900 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Preferred for common equity exchange related to tax benefits preservation plan (1,551,126 common shares) |
16,613 | (1,551 | ) | (15,062 | ) | | ||||||||||||||||||||||||||||||||||||||||||
Common stock issued to dividend reinvestment plan and employee benefit plans (46,019 shares) |
46 | 329 | 375 | |||||||||||||||||||||||||||||||||||||||||||||
Common and preferred stock issued (3,467,699 common shares) |
195,872 | 151,185 | 3,468 | 12,004 | 362,529 | |||||||||||||||||||||||||||||||||||||||||||
Amortization of stock options and restricted stock awards |
549 | 549 | ||||||||||||||||||||||||||||||||||||||||||||||
Vesting of restricted stock (1,419 shares issued, 6,382 shares deferred) |
1 | 54 | (55 | ) | | |||||||||||||||||||||||||||||||||||||||||||
Deferred compensation plan, net, including dividend equivalents |
65 | 65 | ||||||||||||||||||||||||||||||||||||||||||||||
Shares issued from deferred compensation plan (2,098 shares) |
2 | (332 | ) | 330 | | |||||||||||||||||||||||||||||||||||||||||||
Tax on option exercise and restricted stock vesting |
(376 | ) | (376 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends: |
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Series A |
(3 | ) | (3 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Series B |
338 | (2,602 | ) | (2,264 | ) | |||||||||||||||||||||||||||||||||||||||||||
Series D |
(173 | ) | (173 | ) | ||||||||||||||||||||||||||||||||||||||||||||
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Balance, March 31, 2011 |
$ | 217 | $ | 176,049 | $ | 16,613 | $ | 195,872 | $ | 151,185 | $ | 20,903 | $ | | $ | 3,681 | $ | 738,963 | $ | (732,390 | ) | $ | 14,951 | $ | 586,044 | |||||||||||||||||||||||
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Balance, December 31, 2011 |
$ | 217 | $ | 177,092 | $ | 16,613 | $ | | $ | | $ | 41,647 | $ | 15,914 | $ | 3,233 | $ | 1,054,940 | $ | (730,861 | ) | $ | (3,309 | ) | $ | 575,486 | ||||||||||||||||||||||
Net income |
11,528 | 11,528 | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss |
(5,756 | ) | (5,756 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Common stock issued to dividend reinvestment plan and to employee benefit plans (35,648 shares) |
36 | 242 | 278 | |||||||||||||||||||||||||||||||||||||||||||||
Amortization of stock options and restricted stock awards |
585 | 585 | ||||||||||||||||||||||||||||||||||||||||||||||
Vesting of restricted stock (4,397 shares issued, 8,399 shares deferred) |
4 | (151 | ) | 187 | 40 | |||||||||||||||||||||||||||||||||||||||||||
Deferred compensation plan, net, including dividend equivalents |
49 | 49 | ||||||||||||||||||||||||||||||||||||||||||||||
Shares issued from deferred compensation plan (1,502 shares) |
2 | (183 | ) | 181 | | |||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends: |
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Series A |
(3 | ) | (3 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Series B |
359 | (2,608 | ) | (2,249 | ) | |||||||||||||||||||||||||||||||||||||||||||
Series D |
(419 | ) | (419 | ) | ||||||||||||||||||||||||||||||||||||||||||||
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Balance, March 31, 2012 |
$ | 217 | $ | 177,451 | $ | 16,613 | $ | | $ | | $ | 41,689 | $ | 15,914 | $ | 2,948 | $ | 1,056,135 | $ | (722,363 | ) | $ | (9,065 | ) | $ | 579,539 | ||||||||||||||||||||||
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See accompanying notes to consolidated financial statements.
6
UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Cash Flows (Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
(in thousands) |
2012 | 2011 | ||||||
Operating activities: |
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Net income (loss) |
$ | 11,528 | $ | (237,336 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation, amortization and accretion |
6,803 | 4,743 | ||||||
Provision for loan losses |
15,000 | 190,000 | ||||||
Stock based compensation |
585 | 549 | ||||||
Securities gains, net |
(557 | ) | (55 | ) | ||||
Losses and write downs on sales of other real estate owned |
2,204 | 60,605 | ||||||
Loss on prepayment of borrowings |
482 | | ||||||
Changes in assets and liabilities: |
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Other assets and accrued interest receivable |
(2,612 | ) | (4,770 | ) | ||||
Accrued expenses and other liabilities |
646 | 6,518 | ||||||
Mortgage loans held for sale |
(928 | ) | 10,544 | |||||
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Net cash provided by operating activities |
33,151 | 30,798 | ||||||
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Investing activities: |
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Investment securities held to maturity: |
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Proceeds from maturities and calls |
25,653 | 21,116 | ||||||
Purchases |
| (1,500 | ) | |||||
Investment securities available for sale: |
||||||||
Proceeds from sales |
61,585 | 51,240 | ||||||
Proceeds from maturities and calls |
142,236 | 116,175 | ||||||
Purchases |
(253,229 | ) | (405,979 | ) | ||||
Net (increase) decrease in loans |
(41,418 | ) | 93,949 | |||||
Funds collected from FDIC under loss sharing agreements |
2,568 | 9,299 | ||||||
Proceeds from sales of premises and equipment |
14 | 160 | ||||||
Purchases of premises and equipment |
(1,614 | ) | (3,604 | ) | ||||
Proceeds from sale of other real estate |
6,696 | 36,003 | ||||||
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Net cash used in investing activities |
(57,509 | ) | (83,141 | ) | ||||
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Financing activities: |
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Net change in deposits |
(97,444 | ) | 128,576 | |||||
Net change in federal funds purchased, repurchase agreements, and other short-term borrowings |
(652 | ) | 1,040 | |||||
Proceeds from Federal Home Loan Bank advances |
499,000 | | ||||||
Settlement of Federal Home Loan Bank advances |
(324,982 | ) | | |||||
Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans |
278 | 375 | ||||||
Proceeds from issuance of common and preferred stock, net of offering costs |
| 362,529 | ||||||
Cash dividends on preferred stock |
(2,672 | ) | | |||||
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Net cash provided by financing activities |
73,528 | 492,520 | ||||||
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Net change in cash and cash equivalents |
49,170 | 440,177 | ||||||
Cash and cash equivalents at beginning of period |
378,416 | 649,457 | ||||||
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Cash and cash equivalents at end of period |
$ | 427,586 | $ | 1,089,634 | ||||
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Supplemental disclosures of cash flow information: |
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Cash paid during the period for: |
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Interest |
$ | 12,252 | $ | 17,936 | ||||
Income taxes |
1,026 | 1,287 | ||||||
Unsettled securities sales |
43,527 | | ||||||
Unsettled securities purchases |
119,565 | 177,532 |
See accompanying notes to consolidated financial statements.
7
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 Accounting Policies
The accounting and financial reporting policies of United Community Banks, Inc. (United) and its subsidiaries conform to accounting principles generally accepted in the United States of America (GAAP) and general banking industry practices. The accompanying interim consolidated financial statements have not been audited. All material intercompany balances and transactions have been eliminated. A more detailed description of Uniteds accounting policies is included in its Annual Report on Form 10-K for the year ended December 31, 2011.
In managements opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods.
Foreclosed property is initially recorded at fair value, less estimated costs to sell. If the fair value, less estimated costs to sell at the time of foreclosure, is less than the loan balance, the deficiency is charged against the allowance for loan losses. If the fair value, less cost to sell, of the foreclosed property decreases during the holding period, a valuation allowance is established with a charge to operating expenses. When the foreclosed property is sold, a gain or loss is recognized on the sale for the difference between the sales proceeds and the carrying amount of the property. Financed sales of foreclosed property are accounted for in accordance with the Financial Accounting Standards Boards Accounting Standards Codification (ASC) 360-20, Real Estate Sales.
Note 2 Accounting Standards Updates
In April 2012, the Financial Accounting Standards Board issued a proposed Accounting Standards Update to address the subsequent measurement of indemnification assets recognized as a result of a government assisted acquisition of a financial institution. The proposal requires an indemnification asset recognized as a result of a government assisted acquisition to be subsequently measured on the same basis as the indemnified item subject to the contractual limitations and amounts of the underlying contract. Comment letters on this proposed guidance are due by July 16, 2012. Because this standard is still in the proposal stage, the impact on Uniteds financial position, results of operations and disclosures has not been assessed.
Note 3 Mergers and Acquisitions
On June 19, 2009, United Community Bank (UCB or the Bank) purchased substantially all the assets and assumed substantially all the liabilities of Southern Community Bank (SCB) from the Federal Deposit Insurance Corporation (FDIC), as Receiver of SCB. UCB and the FDIC entered loss sharing agreements regarding future losses incurred on loans and foreclosed loan collateral existing at June 19, 2009. Under the terms of the loss sharing agreements, the FDIC will absorb 80 percent of losses and share 80 percent of loss recoveries on the first $109 million of losses and, absorb 95 percent of losses and share in 95 percent of loss recoveries on losses exceeding $109 million. The term for loss sharing on 1-4 Family loans is ten years, while the term for loss sharing on all other loans is five years.
Under the loss sharing agreement, the portion of the losses expected to be indemnified by FDIC is considered an indemnification asset in accordance with ASC 805, Business Combinations. The indemnification asset, referred to as estimated loss reimbursement from the FDIC is included in the balance of Assets covered by loss sharing agreements with the FDIC on the Consolidated Balance Sheet. The indemnification asset was recognized at fair value, which was estimated at the acquisition date based on the terms of the loss sharing agreement. The indemnification asset is expected to be collected over a four-year average life. No valuation allowance was required.
Loans, foreclosed property and the estimated FDIC reimbursement resulting from the loss sharing agreements with the FDIC are reported as assets covered by loss sharing agreements with the FDIC in the consolidated balance sheet.
8
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The table below shows the components of covered assets at March 31, 2012 (in thousands).
(in thousands) |
Purchased Impaired Loans |
Other Purchased Loans |
Other | Total | ||||||||||||
Commercial (secured by real estate) |
$ | | $ | 29,888 | $ | | $ | 29,888 | ||||||||
Commercial & industrial |
| 1,751 | | 1,751 | ||||||||||||
Construction and land development |
546 | 7,896 | | 8,442 | ||||||||||||
Residential mortgage |
145 | 6,797 | | 6,942 | ||||||||||||
Consumer installment |
| 143 | | 143 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total covered loans |
691 | 46,475 | | 47,166 | ||||||||||||
Covered foreclosed property |
| | 13,983 | 13,983 | ||||||||||||
Estimated loss reimbursement from the FDIC |
| | 11,705 | 11,705 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total covered assets |
$ | 691 | $ | 46,475 | $ | 25,688 | $ | 72,854 | ||||||||
|
|
|
|
|
|
|
|
Note 4 Reverse Repurchase Agreements
United enters into reverse repurchase agreements in order to invest short-term funds. In addition, United enters into repurchase agreements and reverse repurchase agreements with the same counter party in transactions that are subject to master netting agreements under which the balances are netted in the balance sheet in accordance with ASC 210-20. The following table presents a summary of amounts outstanding under reverse repurchase agreements including those entered into in connection with repurchase agreements with the same counterparty under master netting agreements (in thousands).
March 31, 2012 | ||||||||||||
Reverse Repurchase Agreements (Assets) |
Repurchase Agreements (Liabilities) |
Net Reported Balance (Asset) |
||||||||||
Amounts subject to master netting agreements |
$ | 171,000 | $ | 171,000 | $ | | ||||||
Other reverse repurchase agreements |
235,000 | | 235,000 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 406,000 | $ | 171,000 | $ | 235,000 | ||||||
|
|
|
|
|
|
|||||||
Weighted average interest rate |
1.17 | % | .32 | % |
United did not have any outstanding reverse repurchase agreements at March 31, 2011.
Note 5 Securities
Realized gains and losses are derived using the specific identification method for determining the cost of securities sold. The following table summarizes securities sales activity for the three months ended March 31, 2012 and 2011(in thousands).
Three Months Ended March 31, |
||||||||
2012 | 2011 | |||||||
Proceeds from sales |
$ | 105,111 | $ | 51,240 | ||||
|
|
|
|
|||||
Gross gains on sales |
$ | 557 | $ | 331 | ||||
Gross losses on sales |
| (276 | ) | |||||
|
|
|
|
|||||
Net gains on sales of securities |
$ | 557 | $ | 55 | ||||
|
|
|
|
9
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Substantially all securities with a carrying value of $1.38 billion, $1.72 billion, and $1.83 billion were pledged to secure public deposits, FHLB advances and other secured borrowings at March 31, 2012, December 31, 2011 and March 31, 2011, respectively.
Securities are classified as held to maturity when management has the positive intent and ability to hold them until maturity. Securities held to maturity are carried at amortized cost. The amortized cost, gross unrealized gains and losses and fair value of securities held to maturity at March 31, 2012, December 31, 2011, and March 31, 2011 are as follows (in thousands).
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
As of March 31, 2012 |
||||||||||||||||
State and political subdivisions |
$ | 51,893 | 4,413 | | $ | 56,306 | ||||||||||
Mortgage-backed securities (1) |
251,743 | 10,441 | | 262,184 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 303,636 | $ | 14,854 | $ | | $ | 318,490 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
As of December 31, 2011 |
||||||||||||||||
U.S. Government agencies |
$ | 5,000 | $ | 6 | $ | | $ | 5,006 | ||||||||
State and political subdivisions |
51,903 | 4,058 | 13 | 55,948 | ||||||||||||
Mortgage-backed securities (1) |
273,300 | 9,619 | 342 | 282,577 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 330,203 | $ | 13,683 | $ | 355 | $ | 343,531 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
As of March 31, 2011 |
||||||||||||||||
U.S. Government agencies |
$ | 4,989 | $ | 12 | $ | | $ | 5,001 | ||||||||
State and political subdivisions |
48,497 | 616 | 731 | 48,382 | ||||||||||||
Mortgage-backed securities (1) |
191,944 | 3,041 | 7 | 194,978 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 245,430 | $ | 3,669 | $ | 738 | $ | 248,361 | ||||||||
|
|
|
|
|
|
|
|
(1) | All are residential type mortgage-backed securities |
The cost basis, unrealized gains and losses, and fair value of securities available for sale at March 31, 2012, December 31, 2011 and March 31, 2011 are presented below (in thousands).
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
As of March 31, 2012 |
||||||||||||||||
U.S. Government agencies |
$ | 43,593 | $ | 286 | $ | 90 | $ | 43,789 | ||||||||
State and political subdivisions |
21,490 | 1,321 | 3 | 22,808 | ||||||||||||
Mortgage-backed securities (1) |
1,692,446 | 33,212 | 590 | 1,725,068 | ||||||||||||
Corporate bonds |
119,154 | | 14,568 | 104,586 | ||||||||||||
Other |
2,564 | | | 2,564 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 1,879,247 | $ | 34,819 | $ | 15,251 | $ | 1,898,815 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
As of December 31, 2011 |
||||||||||||||||
U.S. Government agencies |
$ | 43,592 | $ | 158 | $ | | $ | 43,750 | ||||||||
State and political subdivisions |
24,997 | 1,345 | 3 | 26,339 | ||||||||||||
Mortgage-backed securities (1) |
1,576,064 | 33,988 | 143 | 1,609,909 | ||||||||||||
Corporate bonds |
119,110 | | 11,432 | 107,678 | ||||||||||||
Other |
2,371 | | | 2,371 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 1,766,134 | $ | 35,491 | $ | 11,578 | $ | 1,790,047 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
As of March 31, 2011 |
||||||||||||||||
U.S. Government agencies |
$ | 94,966 | $ | 16 | $ | 1,204 | $ | 93,778 | ||||||||
State and political subdivisions |
26,870 | 983 | 20 | 27,833 | ||||||||||||
Mortgage-backed securities (1) |
1,388,702 | 27,617 | 1,474 | 1,414,845 | ||||||||||||
Corporate bonds |
100,956 | 150 | 1,520 | 99,586 | ||||||||||||
Other |
2,452 | | | 2,452 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 1,613,946 | $ | 28,766 | $ | 4,218 | $ | 1,638,494 | ||||||||
|
|
|
|
|
|
|
|
(1) | All are residential type mortgage-backed securities |
10
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
There were no held to maturity securities in an unrealized loss position at March 31, 2012. The following table summarizes held to maturity securities in an unrealized loss position as of December 31, 2011 and March 31, 2011 (in thousands).
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Unrealized Loss |
Fair Value | Unrealized Loss |
Fair Value | Unrealized Loss |
|||||||||||||||||||
As of December 31, 2011 |
||||||||||||||||||||||||
State and political subdivisions |
$ | | $ | | $ | 363 | $ | 13 | $ | 363 | $ | 13 | ||||||||||||
Mortgage-backed securities |
10,967 | 342 | | | 10,967 | 342 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total unrealized loss position |
$ | 10,967 | $ | 342 | $ | 363 | $ | 13 | $ | 11,330 | $ | 355 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
As of March 31, 2011 |
||||||||||||||||||||||||
State and political subdivisions |
$ | 21,313 | $ | 731 | $ | | $ | | $ | 21,313 | $ | 731 | ||||||||||||
Mortgage-backed securities |
1,942 | 7 | | | 1,942 | 7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total unrealized loss position |
$ | 23,255 | $ | 738 | $ | | $ | | $ | 23,255 | $ | 738 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes available for sale securities in an unrealized loss position as of March 31, 2012, December 31, 2011 and March 31, 2011 (in thousands).
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Unrealized Loss |
Fair Value | Unrealized Loss |
Fair Value | Unrealized Loss |
|||||||||||||||||||
As of March 31, 2012 |
||||||||||||||||||||||||
U.S. Government agencies |
$ | 9,905 | $ | 90 | $ | | $ | | $ | 9,905 | $ | 90 | ||||||||||||
State and political subdivisions |
| | 11 | 3 | 11 | 3 | ||||||||||||||||||
Mortgage-backed securities |
405,039 | 574 | 21,067 | 16 | 426,106 | 590 | ||||||||||||||||||
Corporate bonds |
35,306 | 2,872 | 69,230 | 11,696 | 104,536 | 14,568 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total unrealized loss position |
$ | 450,250 | $ | 3,536 | $ | 90,308 | $ | 11,715 | $ | 540,558 | $ | 15,251 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
As of December 31, 2011 |
||||||||||||||||||||||||
State and political subdivisions |
$ | | $ | | $ | 11 | $ | 3 | $ | 11 | $ | 3 | ||||||||||||
Mortgage-backed securities |
98,687 | 110 | 22,719 | 33 | 121,406 | 143 | ||||||||||||||||||
Corporate bonds |
42,864 | 5,197 | 64,765 | 6,235 | 107,629 | 11,432 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total unrealized loss position |
$ | 141,551 | $ | 5,307 | $ | 87,495 | $ | 6,271 | $ | 229,046 | $ | 11,578 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
As of March 31, 2011 |
||||||||||||||||||||||||
U.S. Government agencies |
$ | 73,763 | $ | 1,204 | $ | | $ | | $ | 73,763 | $ | 1,204 | ||||||||||||
State and political subdivisions |
1,098 | 15 | 11 | 5 | 1,109 | 20 | ||||||||||||||||||
Mortgage-backed securities |
292,379 | 1,474 | | | 292,379 | 1,474 | ||||||||||||||||||
Corporate bonds |
79,386 | 1,520 | | | 79,386 | 1,520 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total unrealized loss position |
$ | 446,626 | $ | 4,213 | $ | 11 | $ | 5 | $ | 446,637 | $ | 4,218 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2012, there were 53 available for sale securities and no held to maturity securities that were in an unrealized loss position. United does not intend to sell nor believes it will be required to sell securities in an unrealized loss position prior to the recovery of its amortized cost basis. Unrealized losses at March 31, 2012 are primarily related to changes in interest rates, however the unrealized losses in corporate bonds also reflect downgrades in the underlying securities ratings. The bonds remain above investment grade and United does not consider them to be impaired. Unrealized losses at March 31, 2011 were primarily attributable to changes in interest rates.
Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, among other factors. In analyzing an issuers financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts reports. No impairment charges were recognized during the first quarter of 2012 or 2011.
11
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The amortized cost and fair value of available for sale and held to maturity securities at March 31, 2012, by contractual maturity, are presented in the following table (in thousands).
Available for Sale | Held to Maturity | |||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||
U.S. Government agencies: |
||||||||||||||||
5 to 10 years |
$ | 34,995 | $ | 35,153 | $ | | $ | | ||||||||
More than 10 years |
8,598 | 8,636 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
43,593 | 43,789 | | | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
State and political subdivisions: |
||||||||||||||||
Within 1 year |
1,600 | 1,608 | | | ||||||||||||
1 to 5 years |
14,121 | 14,966 | 4,813 | 5,132 | ||||||||||||
5 to 10 years |
4,921 | 5,317 | 23,667 | 25,896 | ||||||||||||
More than 10 years |
848 | 917 | 23,413 | 25,278 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
21,490 | 22,808 | 51,893 | 56,306 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Corporate bonds: |
||||||||||||||||
1 to 5 years |
18,594 | 17,668 | | | ||||||||||||
5 to 10 years |
99,560 | 86,618 | | | ||||||||||||
More than 10 years |
1,000 | 300 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
119,154 | 104,586 | | | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other: |
||||||||||||||||
More than 10 years |
2,564 | 2,564 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
2,564 | 2,564 | | | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total securities other than mortgage-backed securities: |
||||||||||||||||
Within 1 year |
1,600 | 1,608 | | | ||||||||||||
1 to 5 years |
32,715 | 32,634 | 4,813 | 5,132 | ||||||||||||
5 to 10 years |
139,476 | 127,088 | 23,667 | 25,896 | ||||||||||||
More than 10 years |
13,010 | 12,417 | 23,413 | 25,278 | ||||||||||||
Mortgage-backed securities |
1,692,446 | 1,725,068 | 251,743 | 262,184 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 1,879,247 | $ | 1,898,815 | $ | 303,636 | $ | 318,490 | |||||||||
|
|
|
|
|
|
|
|
Maturities of mortgage-backed securities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
12
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 6 Loans and Allowance for Loan Losses
Major classifications of loans as of March 31, 2012, December 31, 2011 and March 31, 2011, are summarized as follows (in thousands).
March 31, | December 31, | March 31, | ||||||||||
2012 | 2011 | 2011 | ||||||||||
Commercial (secured by real estate) |
$ | 1,843,207 | $ | 1,821,414 | $ | 1,692,154 | ||||||
Commercial & industrial |
439,496 | 428,249 | 431,473 | |||||||||
Commercial construction |
167,122 | 164,155 | 213,177 | |||||||||
|
|
|
|
|
|
|||||||
Total commercial |
2,449,825 | 2,413,818 | 2,336,804 | |||||||||
Residential mortgage |
1,131,248 | 1,134,902 | 1,186,531 | |||||||||
Residential construction |
435,375 | 448,391 | 549,618 | |||||||||
Consumer installment |
111,118 | 112,503 | 121,419 | |||||||||
|
|
|
|
|
|
|||||||
Total loans |
4,127,566 | 4,109,614 | 4,194,372 | |||||||||
Less allowance for loan losses |
113,601 | 114,468 | 133,121 | |||||||||
|
|
|
|
|
|
|||||||
Loans, net |
$ | 4,013,965 | $ | 3,995,146 | $ | 4,061,251 | ||||||
|
|
|
|
|
|
The Bank makes loans and extensions of credit to individuals and a variety of firms and corporations located primarily in counties in north Georgia, the Atlanta, Georgia metropolitan statistical area, the Gainesville, Georgia metropolitan statistical area, coastal Georgia, western North Carolina and east Tennessee. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent upon the real estate market.
Changes in the allowance for loan losses for the three months ended March 31, 2012 and 2011 are summarized as follows (in thousands).
Three Months Ended | ||||||||
March 31, | ||||||||
2012 | 2011 | |||||||
Balance beginning of period |
$ | 114,468 | $ | 174,695 | ||||
Provision for loan losses |
15,000 | 190,000 | ||||||
Charge-offs: |
||||||||
Commercial (secured by real estate) |
3,928 | 48,707 | ||||||
Commercial & industrial |
756 | 4,362 | ||||||
Commercial construction |
364 | 49,715 | ||||||
Residential mortgage |
5,767 | 36,676 | ||||||
Residential construction |
5,629 | 92,255 | ||||||
Consumer installment |
753 | 1,096 | ||||||
|
|
|
|
|||||
Total loans charged-off |
17,197 | 232,811 | ||||||
|
|
|
|
|||||
Recoveries: |
||||||||
Commercial (secured by real estate) |
231 | 100 | ||||||
Commercial & industrial |
87 | 322 | ||||||
Commercial construction |
30 | | ||||||
Residential mortgage |
392 | 293 | ||||||
Residential construction |
315 | 117 | ||||||
Consumer installment |
275 | 405 | ||||||
|
|
|
|
|||||
Total recoveries |
1,330 | 1,237 | ||||||
|
|
|
|
|||||
Net charge-offs |
15,867 | 231,574 | ||||||
|
|
|
|
|||||
Balance end of period |
$ | 113,601 | $ | 133,121 | ||||
|
|
|
|
At March 31, 2012, December 31, 2011 and March 31, 2011, loans with a carrying value of $1.58 billion, $1.52 billion and $857 million were pledged as collateral to secure FHLB advances and other contingent funding sources.
13
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table presents the balance and activity in the allowance for loan losses by portfolio segment and the recorded investment in loans by portfolio segment based on impairment method as of March 31, 2012, December 31, 2011 and March 31, 2011 (in thousands).
Commercial (Secured by Real Estate) |
Commercial & Industrial |
Commercial Construction |
Residential Mortgage |
Residential Construction |
Consumer Installment |
Unallocated | Total | |||||||||||||||||||||||||
Three Months Ended March 31, 2012 |
||||||||||||||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||||||||||||||
Beginning balance |
$ | 31,644 | $ | 5,681 | $ | 6,097 | $ | 29,076 | $ | 30,379 | $ | 2,124 | $ | 9,467 | $ | 114,468 | ||||||||||||||||
Charge-offs |
(3,928 | ) | (756 | ) | (364 | ) | (5,767 | ) | (5,629 | ) | (753 | ) | | (17,197 | ) | |||||||||||||||||
Recoveries |
231 | 87 | 30 | 392 | 315 | 275 | | 1,330 | ||||||||||||||||||||||||
Provision |
2,667 | 460 | 3,820 | 3,655 | 4,408 | 252 | (262 | ) | 15,000 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Ending balance |
$ | 30,614 | $ | 5,472 | $ | 9,583 | $ | 27,356 | $ | 29,473 | $ | 1,898 | $ | 9,205 | $ | 113,601 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Ending allowance attributable to loans: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 7,654 | $ | 1,122 | $ | 1,920 | $ | 2,254 | $ | 3,236 | $ | 63 | $ | | $ | 16,249 | ||||||||||||||||
Collectively evaluated for impairment |
22,960 | 4,350 | 7,663 | 25,102 | 26,237 | 1,835 | 9,205 | 97,352 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total ending allowance balance |
$ | 30,614 | $ | 5,472 | $ | 9,583 | $ | 27,356 | $ | 29,473 | $ | 1,898 | $ | 9,205 | $ | 113,601 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Loans: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 117,999 | $ | 60,568 | $ | 46,549 | $ | 21,525 | $ | 47,048 | $ | 331 | $ | | $ | 294,020 | ||||||||||||||||
Collectively evaluated for impairment |
1,725,208 | 378,928 | 120,573 | 1,109,723 | 388,327 | 110,787 | | 3,833,546 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total loans |
$ | 1,843,207 | $ | 439,496 | $ | 167,122 | $ | 1,131,248 | $ | 435,375 | $ | 111,118 | $ | | $ | 4,127,566 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
December 31, 2011 |
||||||||||||||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||||||||||||||
Ending allowance attributable to loans: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 7,491 | $ | 1,117 | $ | 236 | $ | 2,234 | $ | 3,731 | $ | 16 | $ | | $ | 14,825 | ||||||||||||||||
Collectively evaluated for impairment |
24,153 | 4,564 | 5,861 | 26,842 | 26,648 | 2,108 | 9,467 | 99,643 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total ending allowance balance |
$ | 31,644 | $ | 5,681 | $ | 6,097 | $ | 29,076 | $ | 30,379 | $ | 2,124 | $ | 9,467 | $ | 114,468 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Loans: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 107,831 | $ | 57,828 | $ | 26,245 | $ | 18,376 | $ | 46,687 | $ | 292 | $ | | $ | 257,259 | ||||||||||||||||
Collectively evaluated for impairment |
1,713,583 | 370,421 | 137,910 | 1,116,526 | 401,704 | 112,211 | | 3,852,355 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total loans |
$ | 1,821,414 | $ | 428,249 | $ | 164,155 | $ | 1,134,902 | $ | 448,391 | $ | 112,503 | $ | | $ | 4,109,614 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Three Months Ended March 31, 2011 |
||||||||||||||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||||||||||||||
Beginning balance |
$ | 31,191 | $ | 7,580 | $ | 6,780 | $ | 22,305 | $ | 92,571 | $ | 3,030 | $ | 11,238 | $ | 174,695 | ||||||||||||||||
Charge-offs |
(48,707 | ) | (4,362 | ) | (49,715 | ) | (36,676 | ) | (92,255 | ) | (1,096 | ) | | (232,811 | ) | |||||||||||||||||
Recoveries |
100 | 322 | | 293 | 117 | 405 | | 1,237 | ||||||||||||||||||||||||
Provision |
37,675 | 4,047 | 48,916 | 39,207 | 62,087 | 217 | (2,149 | ) | 190,000 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Ending balance |
$ | 20,259 | $ | 7,587 | $ | 5,981 | $ | 25,129 | $ | 62,520 | $ | 2,556 | $ | 9,089 | $ | 133,121 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Ending allowance attributable to loans: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||
Collectively evaluated for impairment |
20,259 | 7,587 | 5,981 | 25,129 | 62,520 | 2,556 | 9,089 | 133,121 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total ending allowance balance |
$ | 20,259 | $ | 7,587 | $ | 5,981 | $ | 25,129 | $ | 62,520 | $ | 2,556 | $ | 9,089 | $ | 133,121 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Loans: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 17,154 | $ | | $ | 3,624 | $ | 5,157 | $ | 22,667 | $ | | $ | | $ | 48,602 | ||||||||||||||||
Collectively evaluated for impairment |
1,675,000 | 431,473 | 209,553 | 1,181,374 | 526,951 | 121,419 | | 4,145,770 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total loans |
$ | 1,692,154 | $ | 431,473 | $ | 213,177 | $ | 1,186,531 | $ | 549,618 | $ | 121,419 | $ | | $ | 4,194,372 | ||||||||||||||||
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|
|
|
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|
|
|
|
|
|
|
|
United reviews all loans that are on nonaccrual with a balance of $500,000 or greater for impairment as well as accruing substandard relationships greater than $2 million and all troubled debt restructurings (TDRs). A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due, according to the contractual terms of the loan, will not be collected. All troubled debt restructurings are considered impaired regardless of accrual status. Impaired loans are measured based on the present value of expected future cash flows, discounted at the loans effective interest rate, at the loans observable market price, or the fair value of the collateral if the loan is collateral dependent. Interest payments received on impaired loans that are on nonaccrual status are applied as a reduction of the outstanding principal balance. For impaired loans not on nonaccrual status, interest is accrued according to the terms of the loan agreement. Impairment amounts are recorded quarterly and specific reserves are recorded in the allowance for loan losses.
In the first quarter of 2011, Uniteds Board of Directors adopted an accelerated problem asset disposition plan which included the bulk sale of $267 million in classified loans. Those loans were classified as held for sale at the end of the first quarter and were written down to the expected proceeds from the sale. The charge-offs on the loans transferred to held for sale in anticipation of the bulk loan sale, which closed on April 18, 2011, increased first quarter 2011 loan charge-offs by $186 million. The actual loss on the bulk loan sale at closing was less than the amount charged-off in the first quarter, resulting in a $7.27 million reduction of second quarter 2011 charge-offs.
14
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The recorded investments in individually evaluated impaired loans at March 31, 2012, December 31, 2011 and March 31, 2011 were as follows (in thousands).
March 31, | December 31, | March 31, | ||||||||||
2012 | 2011 | 2011 | ||||||||||
Period-end loans with no allocated allowance for loan losses |
$ | 208,302 | $ | 188,509 | $ | 48,602 | ||||||
Period-end loans with allocated allowance for loan losses |
85,718 | 68,750 | | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 294,020 | $ | 257,259 | $ | 48,602 | ||||||
|
|
|
|
|
|
|||||||
Amount of allowance for loan losses allocated |
$ | 16,249 | $ | 14,825 | $ | |
The increase in the amount of impaired loans is due to an increase in the number and balance of TDRs. The average balances of impaired loans and income recognized on impaired loans while they were considered impaired is presented below for the three months ended March 31, 2012 and March 31, 2011 (in thousands).
Three Months Ended | ||||||||
March 31, | ||||||||
2012 | 2011 | |||||||
Average balance of individually evaluated impaired loans during period |
$ | 280,626 | $ | 95,163 | ||||
Interest income recognized during impairment |
2,267 | | ||||||
Cash-basis interest income recognized |
3,192 | |
The following table presents loans individually evaluated for impairment by class of loans as of March 31, 2012, December 31, 2011 and March 31, 2011 (in thousands).
March 31, 2012 | December 31, 2011 | March 31, 2011 | ||||||||||||||||||||||||||||||||||
Unpaid Principal Balance |
Recorded Investment |
Allowance for Loan Losses Allocated |
Unpaid Principal Balance |
Recorded Investment |
Allowance for Loan Losses Allocated |
Unpaid Principal Balance |
Recorded Investment |
Allowance for Loan Losses Allocated |
||||||||||||||||||||||||||||
With no related allowance recorded: |
||||||||||||||||||||||||||||||||||||
Commercial (secured by real estate) |
$ | 91,399 | $ | 82,593 | $ | | $ | 82,887 | $ | 76,215 | $ | | $ | 27,811 | $ | 17,154 | $ | | ||||||||||||||||||
Commercial & industrial |
81,896 | 56,896 | | 77,628 | 52,628 | | | | | |||||||||||||||||||||||||||
Commercial construction |
30,188 | 27,295 | | 24,927 | 23,609 | | 4,360 | 3,624 | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total commercial |
203,483 | 166,784 | | 185,442 | 152,452 | | 32,171 | 20,778 | | |||||||||||||||||||||||||||
Residential mortgage |
15,375 | 13,041 | | 13,845 | 10,804 | | 8,801 | 5,157 | | |||||||||||||||||||||||||||
Residential construction |
44,018 | 28,477 | | 38,955 | 25,190 | | 49,205 | 22,667 | | |||||||||||||||||||||||||||
Consumer installment |
| | | 63 | 63 | | | | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total with no related allowance recorded |
262,876 | 208,302 | | 238,305 | 188,509 | | 90,177 | 48,602 | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
With an allowance recorded: |
||||||||||||||||||||||||||||||||||||
Commercial (secured by real estate) |
36,536 | 35,406 | 7,654 | 31,806 | 31,616 | 7,491 | | | | |||||||||||||||||||||||||||
Commercial & industrial |
3,672 | 3,672 | 1,122 | 5,200 | 5,200 | 1,117 | | | | |||||||||||||||||||||||||||
Commercial construction |
20,056 | 19,254 | 1,920 | 2,636 | 2,636 | 236 | | | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total commercial |
60,264 | 58,332 | 10,696 | 39,642 | 39,452 | 8,844 | | | | |||||||||||||||||||||||||||
Residential mortgage |
9,255 | 8,484 | 2,254 | 7,642 | 7,572 | 2,234 | | | | |||||||||||||||||||||||||||
Residential construction |
19,235 | 18,571 | 3,236 | 21,629 | 21,497 | 3,731 | | | | |||||||||||||||||||||||||||
Consumer installment |
340 | 331 | 63 | 235 | 229 | 16 | | | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total with an allowance recorded |
89,094 | 85,718 | 16,249 | 69,148 | 68,750 | 14,825 | | | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | 351,970 | $ | 294,020 | $ | 16,249 | $ | 307,453 | $ | 257,259 | $ | 14,825 | $ | 90,177 | $ | 48,602 | $ | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no loans more than 90 days past due and still accruing interest at March 31, 2012, December 31, 2011 or March 31, 2011. Nonaccrual loans at March 31, 2012, December 31, 2011 and March 31, 2011 were $130 million, $127 million and $83.8, respectively. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually evaluated impaired loans with larger balances.
15
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table presents the recorded investment (unpaid principal less amounts charged-off) in nonaccrual loans by loan class as of March 31, 2012, December 31, 2011 and March 31, 2011 (in thousands).
Nonaccrual Loans | ||||||||||||
March 31, 2012 |
December 31, 2011 |
March 31, 2011 |
||||||||||
Commercial (secured by real estate) |
$ | 26,081 | $ | 27,322 | $ | 20,648 | ||||||
Commercial & industrial |
36,314 | 34,613 | 2,198 | |||||||||
Commercial construction |
23,319 | 16,655 | 3,701 | |||||||||
|
|
|
|
|||||||||
Total commercial |
85,714 | 78,590 | 26,547 | |||||||||
Residential mortgage |
18,741 | 22,358 | 23,711 | |||||||||
Residential construction |
24,341 | 25,523 | 32,038 | |||||||||
Consumer installment |
908 | 1,008 | 1,473 | |||||||||
|
|
|
|
|||||||||
Total |
$ | 129,704 | $ | 127,479 | $ | 83,769 | ||||||
|
|
|
|
|||||||||
Balance as a percentage of unpaid principal |
70.6 | % | 71.3 | % | 57.3 | % |
The following table presents the aging of the recorded investment in past due loans as of March 31, 2012, December 31, 2011 and March 31, 2011 by class of loans (in thousands).
Loans Past Due | Loans Not | |||||||||||||||||||||||
30 - 59 Days | 60 - 89 Days | > 90 Days | Total | Past Due | Total | |||||||||||||||||||
As of March 31, 2012 |
||||||||||||||||||||||||
Commercial (secured by real estate) |
$ | 6,777 | $ | 3,219 | $ | 14,461 | $ | 24,457 | $ | 1,818,750 | $ | 1,843,207 | ||||||||||||
Commercial & industrial |
1,930 | 244 | 2,905 | 5,079 | 434,417 | 439,496 | ||||||||||||||||||
Commercial construction |
256 | 55 | 8,620 | 8,931 | 158,191 | 167,122 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total commercial |
8,963 | 3,518 | 25,986 | 38,467 | 2,411,358 | 2,449,825 | ||||||||||||||||||
Residential mortgage |
14,540 | 5,223 | 9,103 | 28,866 | 1,102,382 | 1,131,248 | ||||||||||||||||||
Residential construction |
7,462 | 1,584 | 11,201 | 20,247 | 415,128 | 435,375 | ||||||||||||||||||
Consumer installment |
961 | 248 | 346 | 1,555 | 109,563 | 111,118 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total loans |
$ | 31,926 | $ | 10,573 | $ | 46,636 | $ | 89,135 | $ | 4,038,431 | $ | 4,127,566 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
As of December 31, 2011 |
||||||||||||||||||||||||
Commercial (secured by real estate) |
$ | 8,036 | $ | 4,182 | $ | 10,614 | $ | 22,832 | $ | 1,798,582 | $ | 1,821,414 | ||||||||||||
Commercial & industrial |
3,869 | 411 | 407 | 4,687 | 423,562 | 428,249 | ||||||||||||||||||
Commercial construction |
166 | | 1,128 | 1,294 | 162,861 | 164,155 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total commercial |
12,071 | 4,593 | 12,149 | 28,813 | 2,385,005 | 2,413,818 | ||||||||||||||||||
Residential mortgage |
15,185 | 4,617 | 9,071 | 28,873 | 1,106,029 | 1,134,902 | ||||||||||||||||||
Residential construction |
3,940 | 2,636 | 10,270 | 16,846 | 431,545 | 448,391 | ||||||||||||||||||
Consumer installment |
1,534 | 308 | 430 | 2,272 | 110,231 | 112,503 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total loans |
$ | 32,730 | $ | 12,154 | $ | 31,920 | $ | 76,804 | $ | 4,032,810 | $ | 4,109,614 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
As of March 31, 2011 |
||||||||||||||||||||||||
Commercial (secured by real estate) |
$ | 11,522 | $ | 9,244 | $ | 9,659 | $ | 30,425 | $ | 1,661,729 | $ | 1,692,154 | ||||||||||||
Commercial & industrial |
1,485 | 854 | 876 | 3,215 | 428,258 | 431,473 | ||||||||||||||||||
Commercial construction |
5,458 | 1,880 | 1,237 | 8,575 | 204,602 | 213,177 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total commercial |
18,465 | 11,978 | 11,772 | 42,215 | 2,294,589 | 2,336,804 | ||||||||||||||||||
Residential mortgage |
16,439 | 6,658 | 10,789 | 33,886 | 1,152,645 | 1,186,531 | ||||||||||||||||||
Residential construction |
13,349 | 9,514 | 13,405 | 36,268 | 513,350 | 549,618 | ||||||||||||||||||
Consumer installment |
1,705 | 346 | 573 | 2,624 | 118,795 | 121,419 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total loans |
$ | 49,958 | $ | 28,496 | $ | 36,539 | $ | 114,993 | $ | 4,079,379 | $ | 4,194,372 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
16
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
As of March 31, 2012 and December 31, 2011, United has allocated $12.2 million and $8.65 million, respectively, of specific reserves to customers whose loan terms have been modified in troubled debt restructurings. There were no specific reserves established for loans considered to be troubled debt restructurings at March 31, 2011. United committed to lend additional amounts totaling up to $891,000, $1.12 million and $519,000 as of March 31, 2012, December 31, 2011 and March 31, 2011, respectively, to customers with outstanding loans that are classified as TDRs.
The modification of the terms of troubled debt restructurings included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date or an extension of the amortization period at a stated rate lower than the current market rate for new debt with similar risk; or a permanent reduction of the principal amount.
The following table presents additional information on troubled debt restructurings including the number of loan contracts restructured and the pre and post modification recorded investment (dollars in thousands).
March 31, 2012 | December 31, 2011 | March 31, 2011 | ||||||||||||||||||||||||||||||||||
Number of Contracts |
Pre- Modification Outstanding Recorded Investment |
Post- Modification Outstanding Recorded Investment |
Number of Contracts |
Pre- Modification Outstanding Recorded Investment |
Post- Modification Outstanding Recorded Investment |
Number of Contracts |
Pre- Modification Outstanding Recorded Investment |
Post- Modification Outstanding Recorded Investment |
||||||||||||||||||||||||||||
Commercial (sec by RE) |
92 | $ | 83,230 | $ | 79,844 | 74 | $ | 70,380 | $ | 69,054 | 29 | $ | 25,094 | $ | 22,211 | |||||||||||||||||||||
Commercial & industrial |
26 | 3,487 | 3,487 | 18 | 806 | 806 | 5 | 155 | 155 | |||||||||||||||||||||||||||
Commercial construction |
16 | 35,184 | 34,066 | 11 | 18,053 | 18,053 | 6 | 9,622 | 9,622 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total commercial |
134 | 121,901 | 117,397 | 103 | 89,239 | 87,913 | 40 | 34,871 | 31,988 | |||||||||||||||||||||||||||
Residential mortgage |
99 | 15,718 | 14,832 | 80 | 11,943 | 11,379 | 32 | 4,013 | 3,882 | |||||||||||||||||||||||||||
Residential construction |
63 | 27,128 | 25,948 | 54 | 24,921 | 24,145 | 54 | 14,582 | 13,759 | |||||||||||||||||||||||||||
Consumer installment |
40 | 340 | 330 | 34 | 298 | 293 | 7 | 122 | 117 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total loans |
336 | $ | 165,087 | $ | 158,507 | 271 | $ | 126,401 | $ | 123,730 | 133 | $ | 53,588 | $ | 49,746 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents new troubled debt restructurings during the three months ended March 31, 2012 and those troubled debt restructurings that have subsequently defaulted, which we define as 90 days or more past due (dollars in thousands).
Number of Contracts |
Pre- Modification Outstanding Recorded Investment |
Post- Modification Outstanding Recorded Investment |
Troubled Debt Restructurings Modified Within the Previous Twelve Months that Have Subsequently Defaulted During the Three Months Ended March 31, 2012 |
|||||||||||||||||
New Troubled Debt Restructurings for the Three Months Ended March 31, 2012 |
Number of Contracts |
Recorded Investment |
||||||||||||||||||
Commercial (secured by real estate) |
24 | $ | 15,099 | $ | 13,741 | $ | | $ | | |||||||||||
Commercial & industrial |
10 | 2,724 | 2,724 | 1 | 43 | |||||||||||||||
Commercial construction |
7 | 20,781 | 20,781 | 2 | 4,174 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total commercial |
41 | 38,604 | 37,246 | 3 | 4,217 | |||||||||||||||
Residential mortgage |
24 | 5,279 | 5,273 | 3 | 373 | |||||||||||||||
Residential construction |
14 | 3,751 | 3,189 | 3 | 1,476 | |||||||||||||||
Consumer installment |
7 | 60 | 55 | | | |||||||||||||||
|
|
|
|
|
|
|
|
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Total loans |
86 | $ | 47,694 | $ | 45,763 | 9 | $ | 6,066 | ||||||||||||
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17
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Risk Ratings
United categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, current economic trends, among other factors. United analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. United uses the following definitions for its risk ratings:
Watch. Loans in this category are presently protected from apparent loss; however weaknesses exist that could cause future impairment, including the deterioration of financial ratios, past due status and questionable management capabilities. These loans require more than the ordinary amount of supervision. Collateral values generally afford adequate coverage, but may not be immediately marketable.
Substandard. These loans are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged. Specific and well-defined weaknesses exist that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. There is the distinct possibility that the Company will sustain some loss if deficiencies are not corrected. Immediate corrective action is necessary.
Doubtful. Specific weaknesses characterized as Substandard that are severe enough to make collection in full highly questionable and improbable. There is no reliable secondary source of full repayment.
Loss. Loans categorized as Loss have the same characteristics as Doubtful however probability of loss is certain. Loans classified as Loss are charged-off.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are generally deposit account overdrafts or new loans that have not yet been assigned a grade.
As of March 31, 2012, December 31, 2011 and March 31, 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands).
Pass | Watch | Substandard | Doubtful / Loss |
Not Rated | Total | |||||||||||||||||||
As of March 31, 2012 |
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Commercial (secured by real estate) |
$ | 1,586,934 | $ | 96,352 | $ | 159,921 | $ | | $ | | $ | 1,843,207 | ||||||||||||
Commercial & industrial |
381,097 | 4,126 | 53,532 | | 741 | 439,496 | ||||||||||||||||||
Commercial construction |
99,825 | 20,722 | 46,575 | | | 167,122 | ||||||||||||||||||
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Total commercial |
2,067,856 | 121,200 | 260,028 | | 741 | 2,449,825 | ||||||||||||||||||
Residential mortgage |
995,982 | 40,790 | 94,476 | | | 1,131,248 | ||||||||||||||||||
Residential construction |
298,592 | 48,168 | 88,615 | | | 435,375 | ||||||||||||||||||
Consumer installment |
106,124 | 1,476 | 3,518 | | | 111,118 | ||||||||||||||||||
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Total loans |
$ | 3,468,554 | $ | 211,634 | $ | 446,637 | $ | | $ | 741 | $ | 4,127,566 | ||||||||||||
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As of December 31, 2011 |
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Commercial (secured by real estate) |
$ | 1,561,204 | $ | 89,830 | $ | 170,380 | $ | | $ | | $ | 1,821,414 | ||||||||||||
Commercial & industrial |
369,343 | 7,630 | 50,366 | | 910 | 428,249 | ||||||||||||||||||
Commercial construction |
114,817 | 14,173 | 35,165 | | | 164,155 | ||||||||||||||||||
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Total commercial |
2,045,364 | 111,633 | 255,911 | | 910 | 2,413,818 | ||||||||||||||||||
Residential mortgage |
993,779 | 42,323 | 98,800 | | | 1,134,902 | ||||||||||||||||||
Residential construction |
312,527 | 38,386 | 97,478 | | | 448,391 | ||||||||||||||||||
Consumer installment |
107,333 | 1,411 | 3,759 | | | 112,503 | ||||||||||||||||||
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Total loans |
$ | 3,459,003 | $ | 193,753 | $ | 455,948 | $ | | $ | 910 | $ | 4,109,614 | ||||||||||||
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As of March 31, 2011 |
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Commercial (secured by real estate) |
$ | 1,469,140 | $ | 82,715 | $ | 140,299 | $ | | $ | | $ | 1,692,154 | ||||||||||||
Commercial & industrial |
405,059 | 6,824 | 18,608 | | 982 |