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Loans and Allowance for Loan Losses
 6 Months Ended
Jun. 30, 2013
Loans and Allowance for Loan Losses [Abstract]  
LOANS AND ALLOWANCE FOR LOAN LOSSES
3. LOANS AND ALLOWANCE FOR LOAN LOSSES

Our total loans at June 30, 2013 were $1.06 billion compared to $1.04 billion at December 31, 2012, an increase of $17.5 million, or 1.7%. The components of our loan portfolio disaggregated by class of loan within the loan portfolio segments at June 30, 2013 and December 31, 2012, and the percentage change in loans from the end of 2012 to the end of the second quarter of 2013, are as follows:

 

                                         
                            Percent  
    June 30, 2013     December 31, 2012     Increase  
    Balance     %     Balance     %     (Decrease)  

Commercial:

                                        

Commercial and industrial

   $ 279,300,000       26.4 %    $ 285,322,000       27.4 %      (2.1 %) 

Vacant land, land development, and residential construction

     42,170,000       4.0       48,099,000       4.6       (12.3 ) 

Real estate – owner occupied

     253,172,000       23.9       259,277,000       24.9       (2.4 ) 

Real estate – non-owner occupied

     357,452,000       33.8       324,886,000       31.2       10.0  

Real estate – multi-family and residential rental

     53,522,000       5.0       50,922,000       4.9       5.1  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial

     985,616,000       93.1       968,506,000       93.0       1.8  
           

Retail:

                                        

Home equity and other

     37,337,000       3.5       38,917,000       3.7       (4.1 ) 

1-4 family mortgages

     35,709,000       3.4       33,766,000       3.3       5.8  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total retail

     73,046,000       6.9       72,683,000       7.0       0.5  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
           

Total loans

   $ 1,058,662,000       100.0 %    $ 1,041,189,000       100.0 %      1.7 % 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Nonperforming loans as of June 30, 2013 and December 31, 2012 were as follows:

 

                 
    June 30,
2013		     December 31,
2012		  
     

Loans past due 90 days or more still accruing interest

   $ 0     $ 0  

Nonaccrual loans

     10,526,000       18,970,000  
   

 

 

    

 

 

  
     

Total nonperforming loans

   $ 10,526,000     $ 18,970,000  
   

 

 

    

 

 

  

The recorded principal balance of nonaccrual loans, including troubled debt restructurings, was as follows:

 

                 
    June 30,
2013		     December 31,
2012		  
     

Commercial:

                

Commercial and industrial

   $ 1,581,000     $ 1,677,000  

Vacant land, land development, and residential construction

     922,000       2,194,000  

Real estate – owner occupied

     570,000       2,087,000  

Real estate – non-owner occupied

     4,642,000       9,010,000  

Real estate – multi-family and residential rental

     764,000       2,021,000  
   

 

 

    

 

 

  

Total commercial

     8,479,000       16,989,000  
     

Retail:

                

Home equity and other

     805,000       889,000  

1-4 family mortgages

     1,242,000       1,092,000  
   

 

 

    

 

 

  

Total retail

     2,047,000       1,981,000  
   

 

 

    

 

 

  
     

Total nonaccrual loans

   $ 10,526,000     $ 18,970,000  
   

 

 

    

 

 

  

 

An age analysis of past due loans is as follows as of June 30, 2013:

 

                                                         
    30 – 59
Days
Past Due		     60 – 89
Days
Past Due		     Greater
Than 89
Days
Past Due		     Total
Past Due		     Current     Total
Loans		     Recorded
Balance > 89
Days and
Accruing		  
               

Commercial:

                                                        

Commercial and industrial

   $ 0     $ 67,000     $ 578,000     $ 645,000     $ 278,655,000     $ 279,300,000     $ 0  

Vacant land, land development, and residential construction

     0       0       357,000       357,000       41,813,000       42,170,000       0  

Real estate – owner occupied

     0       61,000       58,000       119,000       253,053,000       253,172,000       0  

Real estate – non-owner occupied

     0       0       2,288,000       2,288,000       355,164,000       357,452,000       0  

Real estate – multi-family and residential rental

     0       0       264,000       264,000       53,258,000       53,522,000       0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial

     0       128,000       3,545,000       3,673,000       981,943,000       985,616,000       0  
               

Retail:

                                                        

Home equity and other

     48,000       0       0       48,000       37,289,000       37,337,000       0  

1-4 family mortgages

     86,000       306,000       433,000       825,000       34,884,000       35,709,000       0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total retail

     134,000       306,000       433,000       873,000       72,173,000       73,046,000       0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
               

Total past due loans

   $ 134,000     $ 434,000     $ 3,978,000     $ 4,546,000     $ 1,054,116,000     $ 1,058,662,000     $ 0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

An age analysis of past due loans is as follows as of December 31, 2012:

 

                                                         
    30 – 59
Days
Past Due		     60 – 89
Days
Past Due		     Greater
Than 89
Days
Past Due		     Total
Past Due		     Current     Total
Loans		     Recorded
Balance > 89
Days and
Accruing		  
               

Commercial:

                                                        

Commercial and industrial

   $ 80,000     $ 0     $ 871,000     $ 951,000     $ 284,371,000     $ 285,322,000     $ 0  

Vacant land, land development, and residential construction

     289,000       0       614,000       903,000       47,196,000       48,099,000       0  

Real estate – owner occupied

     199,000       0       1,337,000       1,536,000       257,741,000       259,277,000       0  

Real estate – non-owner occupied

     303,000       0       1,123,000       1,426,000       323,460,000       324,886,000       0  

Real estate – multi-family and residential rental

     0       0       613,000       613,000       50,309,000       50,922,000       0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial

     871,000       0       4,558,000       5,429,000       963,077,000       968,506,000       0  
               

Retail:

                                                        

Home equity and other

     1,000       0       13,000       14,000       38,903,000       38,917,000       0  

1-4 family mortgages

     47,000       190,000       437,000       674,000       33,092,000       33,766,000       0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total retail

     48,000       190,000       450,000       688,000       71,995,000       72,683,000       0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
               

Total past due loans

   $ 919,000     $ 190,000     $ 5,008,000     $ 6,117,000     $ 1,035,072,000     $ 1,041,189,000     $ 0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Impaired loans as of June 30, 2013, and average impaired loans for the three and six months ended June 30, 2013, were as follows:

 

                                     
    Unpaid
Contractual
Principal
Balance		     Recorded
Principal
Balance		     Related
Allowance		   Second Quarter
Average
Recorded
Principal
Balance		     Year-To-Date
Average
Recorded
Principal
Balance		  

With no related allowance recorded:

                                    
           

Commercial:

                                    

Commercial and industrial

   $ 2,793,000     $ 1,277,000         $ 1,416,000     $ 1,483,000  

Vacant land, land development and residential construction

     1,543,000       1,010,000           1,194,000       1,263,000  

Real estate – owner occupied

     2,020,000       1,383,000           1,366,000       1,430,000  

Real estate – non-owner occupied

     8,067,000       5,194,000           4,956,000       5,134,000  

Real estate – multi-family and residential rental

     1,468,000       514,000           599,000       537,000  
   

 

 

    

 

 

        

 

 

    

 

 

  

Total commercial

     15,891,000       9,378,000           9,531,000       9,847,000  

Retail:

                                    

Home equity and other

     508,000       468,000           474,000       477,000  

1-4 family mortgages

     1,235,000       676,000           721,000       744,000  
   

 

 

    

 

 

        

 

 

    

 

 

  

Total retail

     1,743,000       1,144,000           1,195,000       1,221,000  
   

 

 

    

 

 

        

 

 

    

 

 

  
           

Total with no related allowance recorded

   $ 17,634,000     $ 10,522,000         $ 10,726,000     $ 11,068,000  
   

 

 

    

 

 

        

 

 

    

 

 

  

 

                                         
    Unpaid
Contractual
Principal
Balance		     Recorded
Principal
Balance		     Related
Allowance		     Second Quarter
Average
Recorded
Principal
Balance		     Year-To-Date
Average
Recorded
Principal
Balance		  

With an allowance recorded:

                                        
           

Commercial:

                                        

Commercial and industrial

   $ 1,708,000     $ 1,587,000     $ 1,154,000     $ 2,046,000     $ 2,006,000  

Vacant land, land development and residential construction

     5,058,000       4,515,000       1,223,000       2,998,000       2,738,000  

Real estate – owner occupied

     2,402,000       2,350,000       922,000       2,652,000       2,976,000  

Real estate – non-owner occupied

     29,249,000       29,233,000       9,672,000       29,778,000       30,840,000  

Real estate – multi-family and residential rental

     2,589,000       2,527,000       835,000       2,609,000       3,047,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial

     41,006,000       40,212,000       13,806,000       40,083,000       41,607,000  

Retail:

                                        

Home equity and other

     350,000       324,000       134,000       335,000       355,000  

1-4 family mortgages

     2,644,000       2,619,000       896,000       1,545,000       1,189,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total retail

     2,994,000       2,943,000       1,030,000       1,880,000       1,544,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
           

Total with an allowance recorded

   $ 44,000,000     $ 43,155,000     $ 14,836,000     $ 41,963,000     $ 43,151,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
           

Total impaired loans:

                                        

Commercial

   $ 56,897,000     $ 49,590,000     $ 13,806,000     $ 49,614,000     $ 51,454,000  

Retail

     4,737,000       4,087,000       1,030,000       3,075,000       2,765,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total impaired loans

   $ 61,634,000     $ 53,677,000     $ 14,836,000     $ 52,689,000     $ 54,219,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Interest income of $0.7 million and $1.3 million was recognized on impaired loans during the second quarter and first six months of 2013, respectively.

 

Impaired loans as of December 31, 2012, and average impaired loans for the three and six months ended June 30, 2012, were as follows:

 

                                     
    Unpaid
Contractual
Principal
Balance		     Recorded
Principal
Balance		     Related
Allowance		   Second Quarter
Average
Recorded
Principal
Balance		     Year-To-Date
Average
Recorded
Principal
Balance		  

With no related allowance recorded:

                                    
           

Commercial:

                                    

Commercial and industrial

   $ 1,926,000     $ 1,617,000         $ 3,270,000     $ 3,598,000  

Vacant land, land development and residential construction

     2,356,000       1,401,000           1,958,000       2,224,000  

Real estate – owner occupied

     2,368,000       1,557,000           3,661,000       3,631,000  

Real estate – non-owner occupied

     9,984,000       5,492,000           7,145,000       7,473,000  

Real estate – multi-family and residential rental

     1,188,000       413,000           855,000       794,000  
   

 

 

    

 

 

        

 

 

    

 

 

  

Total commercial

     17,822,000       10,480,000           16,889,000       17,720,000  

Retail:

                                    

Home equity and other

     580,000       483,000           600,000       642,000  

1-4 family mortgages

     1,636,000       789,000           675,000       693,000  
   

 

 

    

 

 

        

 

 

    

 

 

  

Total retail

     2,216,000       1,272,000           1,275,000       1,335,000  
   

 

 

    

 

 

        

 

 

    

 

 

  
           

Total with no related allowance recorded

   $ 20,038,000     $ 11,752,000         $ 18,164,000     $ 19,055,000  
   

 

 

    

 

 

        

 

 

    

 

 

  

 

                                         
    Unpaid
Contractual
Principal
Balance		     Recorded
Principal
Balance		     Related
Allowance		     Second Quarter
Average
Recorded
Principal
Balance		     Year-To-Date
Average
Recorded
Principal
Balance		  

With an allowance recorded:

                                        
           

Commercial:

                                        

Commercial and industrial

   $ 3,221,000     $ 1,926,000     $ 924,000     $ 3,909,000     $ 3,613,000  

Vacant land, land development and residential construction

     2,333,000       2,219,000       1,367,000       3,366,000       3,667,000  

Real estate – owner occupied

     4,307,000       3,626,000       1,388,000       5,545,000       6,043,000  

Real estate – non-owner occupied

     33,818,000       32,964,000       11,773,000       17,904,000       19,272,000  

Real estate – multi-family and residential rental

     4,471,000       3,923,000       1,408,000       7,787,000       9,582,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial

     48,150,000       44,658,000       16,860,000       38,511,000       42,177,000  

Retail:

                                        

Home equity and other

     423,000       394,000       204,000       300,000       277,000  

1-4 family mortgages

     555,000       475,000       125,000       586,000       524,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total retail

     978,000       869,000       329,000       886,000       801,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
           

Total with an allowance recorded

   $ 49,128,000     $ 45,527,000     $ 17,189,000     $ 39,397,000     $ 42,978,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
           

Total impaired loans:

                                        

Commercial

   $ 65,972,000     $ 55,138,000     $ 16,860,000     $ 55,400,000     $ 59,897,000  

Retail

     3,194,000       2,141,000       329,000       2,161,000       2,136,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total impaired loans

   $ 69,166,000     $ 57,279,000     $ 17,189,000     $ 57,561,000     $ 62,033,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Interest income of $0.4 million and $0.8 million was recognized on impaired loans during the second quarter and first six months of 2012, respectively.

 

Credit Quality Indicators. We utilize a comprehensive grading system for our commercial loans. All commercial loans are graded on a ten grade rating system. The rating system utilizes standardized grade paradigms that analyze several critical factors such as cash flow, operating performance, financial condition, collateral, industry condition and management. All commercial loans are graded at inception and reviewed and, if appropriate, re-graded at various intervals thereafter. The risk assessment for retail loans is primarily based on the type of collateral and payment activity.

Loans by credit quality indicators were as follows as of June 30, 2013:

Commercial credit exposure – credit risk profiled by internal credit risk grades:

 

                                         
    Commercial
and
Industrial		     Commercial
Vacant Land,
Land Development,
and Residential
Construction		     Commercial
Real Estate –
Owner
Occupied		     Commercial
Real Estate –
Non-Owner
Occupied		     Commercial
Real Estate –
Multi-Family
and Residential
Rental		  
           

Internal credit risk grade groupings:

                                        

Grades 1 – 4

   $ 189,786,000     $ 8,496,000     $ 151,604,000     $ 186,434,000     $ 29,005,000  

Grades 5 – 7

     87,117,000       27,903,000       98,264,000       134,121,000       21,012,000  

Grades 8 – 9

     2,397,000       5,771,000       3,304,000       36,897,000       3,505,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial

   $ 279,300,000     $ 42,170,000     $ 253,172,000     $ 357,452,000     $ 53,522,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Retail credit exposure – credit risk profiled by collateral type:

 

                 
    Retail
Home Equity
and Other		     Retail
1-4 Family
Mortgages		  
     

Total retail

   $ 37,337,000     $ 35,709,000  
   

 

 

    

 

 

  

 

Loans by credit quality indicators were as follows as of December 31, 2012:

Commercial credit exposure – credit risk profiled by internal credit risk grades:

 

                                         
    Commercial
and
Industrial		     Commercial
Vacant Land,
Land Development,
and Residential
Construction		     Commercial
Real Estate –
Owner Occupied		     Commercial
Real Estate –
Non-Owner
Occupied		     Commercial
Real Estate –
Multi-Family
and Residential
Rental		  
           

Internal credit risk grade groupings:

                                        

Grades 1 – 4

   $ 180,314,000     $ 6,526,000     $ 150,467,000     $ 154,127,000     $ 24,015,000  

Grades 5 – 7

     101,832,000       37,697,000       102,988,000       128,041,000       22,082,000  

Grades 8 – 9

     3,176,000       3,876,000       5,822,000       42,718,000       4,825,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial

   $ 285,322,000     $ 48,099,000     $ 259,277,000     $ 324,886,000     $ 50,922,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Retail credit exposure – credit risk profiled by collateral type:

 

                 
    Retail
Home Equity
and Other		     Retail
1-4 Family
Mortgages		  
     

Total retail

   $ 38,917,000     $ 33,766,000  
   

 

 

    

 

 

  

 

All commercial loans are graded using the following criteria:

 

     
Grade 1.   Excellent credit rating that contain very little, if any, risk of loss.
   
Grade 2.   Strong sources of repayment and have low repayment risk.
   
Grade 3.   Good sources of repayment and have limited repayment risk.
   
Grade 4.   Adequate sources of repayment and acceptable repayment risk; however, characteristics are present that render the credit more vulnerable to a negative event.
   
Grade 5.   Marginally acceptable sources of repayment and exhibit defined weaknesses and negative characteristics.
   
Grade 6.   Well defined weaknesses which may include negative current cash flow, high leverage, or operating losses. Generally, if the credit does not stabilize or if further deterioration is observed in the near term, the loan will likely be downgraded and placed on the Watch List (i.e., list of lending relationships that receive increased scrutiny and review by the Board of Directors and senior management).
   
Grade 7.   Defined weaknesses or negative trends that merit close monitoring through Watch List status.
   
Grade 8.   Inadequately protected by current sound net worth, paying capacity of the obligor, or pledged collateral, resulting in a distinct possibility of loss requiring close monitoring through Watch List status.
   
Grade 9.   Vital weaknesses exist where collection of principal is highly questionable.
   
Grade 10.   Considered uncollectable and of such little value that continuance as an asset is not warranted.

The primary risk elements with respect to commercial loans are the financial condition of the borrower, the sufficiency of collateral, and timeliness of scheduled payments. We have a policy of requesting and reviewing periodic financial statements from commercial loan customers and employ a disciplined and formalized review of the existence of collateral and its value. The primary risk element with respect to each residential real estate loan and consumer loan is the timeliness of scheduled payments. We have a reporting system that monitors past due loans and have adopted policies to pursue creditor’s rights in order to preserve our collateral position.

 

Activity in the allowance for loan losses and the recorded investments in loans as of and during the three and six months ended June 30, 2013 are as follows:

 

                                 
    Commercial
Loans		     Retail
Loans		     Unallocated     Total  
         

Allowance for loan losses:

                                

Balance at March 31, 2013

   $ 23,717,000     $ 2,302,000     $ 16,000     $ 26,035,000  

Provision for loan losses

     (1,480,000 )      (10,000 )      (10,000 )      (1,500,000 ) 

Charge-offs

     (363,000 )      (19,000 )      0       (382,000 ) 

Recoveries

     508,000       286,000       0       794,000  
   

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance

   $ 22,382,000     $ 2,559,000     $ 6,000     $ 24,947,000  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Allowance for loan losses:

                                

Balance at December 31, 2012

   $ 26,043,000     $ 2,645,000     $ (11,000 )    $ 28,677,000  

Provision for loan losses

     (2,644,000 )      (373,000 )      17,000       (3,000,000 ) 

Charge-offs

     (2,775,000 )      (22,000 )      0       (2,797,000 ) 

Recoveries

     1,758,000       309,000       0       2,067,000  
   

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance

   $ 22,382,000     $ 2,559,000     $ 6,000     $ 24,947,000  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Ending balance: individually evaluated for impairment

   $ 13,806,000     $ 1,030,000     $ 0     $ 14,836,000  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Ending balance: collectively evaluated for impairment

   $ 8,576,000     $ 1,529,000     $ 6,000     $ 10,111,000  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Total loans:

                                

Ending balance

   $ 985,616,000     $ 73,046,000             $ 1,058,662,000  
   

 

 

    

 

 

            

 

 

  
         

Ending balance: individually evaluated for impairment

   $ 49,590,000     $ 4,087,000             $ 53,677,000  
   

 

 

    

 

 

            

 

 

  
         

Ending balance: collectively evaluated for impairment

   $ 936,026,000     $ 68,959,000             $ 1,004,985,000  
   

 

 

    

 

 

            

 

 

  

 

Activity in the allowance for loan losses and the recorded investments in loans as of and during the three and six months ended June 30, 2012 are as follows:

 

                                 
    Commercial
Loans		     Retail
Loans		     Unallocated     Total  
         

Allowance for loan losses:

                                

Balance at March 31, 2012

   $ 27,808,000     $ 3,048,000     $ 87,000     $ 30,943,000  

Provision for loan losses

     (3,026,000 )      62,000       (36,000 )      (3,000,000 ) 

Charge-offs

     (1,650,000 )      (58,000 )      0       (1,708,000 ) 

Recoveries

     3,339,000       115,000       0       3,454,000  
   

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance

   $ 26,471,000     $ 3,167,000     $ 51,000     $ 29,689,000  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Allowance for loan losses:

                                

Balance at December 31, 2011

   $ 33,431,000     $ 3,019,000     $ 82,000     $ 36,532,000  

Provision for loan losses

     (3,125,000 )      156,000       (31,000 )      (3,000,000 ) 

Charge-offs

     (9,113,000 )      (171,000 )      0       (9,284,000 ) 

Recoveries

     5,278,000       163,000       0       5,441,000  
   

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance

   $ 26,471,000     $ 3,167,000     $ 51,000     $ 29,689,000  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Ending balance: individually evaluated for impairment

   $ 12,584,000     $ 616,000     $ 0     $ 13,200,000  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Ending balance: collectively evaluated for impairment

   $ 13,887,000     $ 2,551,000     $ 51,000     $ 16,489,000  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Total loans:

                                

Ending balance

   $ 987,491,000     $ 73,505,000             $ 1,060,996,000  
   

 

 

    

 

 

            

 

 

  
         

Ending balance: individually evaluated for impairment

   $ 49,478,000     $ 2,145,000             $ 51,623,000  
   

 

 

    

 

 

            

 

 

  
         

Ending balance: collectively evaluated for impairment

   $ 938,013,000     $ 71,360,000             $ 1,009,373,000  
   

 

 

    

 

 

            

 

 

  

 

Loans modified as troubled debt restructurings during the three months ended June 30, 2013 were as follows:

 

                         
    Number of
Contracts		     Pre-
Modification
Recorded
Principal
Balance		     Post-
Modification
Recorded
Principal
Balance		  

Commercial:

                        

Commercial and industrial

     1     $ 60,000     $ 60,000  

Vacant land, land development and residential construction

     2       3,247,000       3,247,000  

Real estate – owner occupied

     2       680,000       680,000  

Real estate – non-owner occupied

     0       0       0  

Real estate – multi-family and residential rental

     0       0       0  
   

 

 

    

 

 

    

 

 

  

Total commercial

     5       3,987,000       3,987,000  
       

Retail:

                        

Home equity and other

     0       0       0  

1-4 family mortgages

     1       1,879,000       1,879,000  
   

 

 

    

 

 

    

 

 

  

Total retail

     1       1,879,000       1,879,000  
   

 

 

    

 

 

    

 

 

  
       

Total

     6     $ 5,866,000     $ 5,866,000  
   

 

 

    

 

 

    

 

 

  

Loans modified as troubled debt restructurings during the six months ended June 30, 2013 were as follows:

 

                         
    Number of
Contracts		     Pre-
Modification
Recorded
Principal
Balance		     Post-
Modification
Recorded
Principal
Balance		  

Commercial:

                        

Commercial and industrial

     1     $ 60,000     $ 60,000  

Vacant land, land development and residential construction

     2       3,247,000       3,247,000  

Real estate – owner occupied

     3       904,000       904,000  

Real estate – non-owner occupied

     2       2,068,000       2,068,000  

Real estate – multi-family and residential rental

     0       0       0  
   

 

 

    

 

 

    

 

 

  

Total commercial

     8       6,279,000       6,279,000  
       

Retail:

                        

Home equity and other

     0       0       0  

1-4 family mortgages

     1       1,879,000       1,879,000  
   

 

 

    

 

 

    

 

 

  

Total retail

     1       1,879,000       1,879,000  
   

 

 

    

 

 

    

 

 

  
       

Total

     9     $ 8,158,000     $ 8,158,000  
   

 

 

    

 

 

    

 

 

  

 

Loans modified as troubled debt restructurings during the three months ended June 30, 2012 were as follows:

 

                         
    Number of
Contracts		     Pre-
Modification
Recorded
Principal
Balance		     Post-
Modification
Recorded
Principal
Balance		  

Commercial:

                        

Commercial and industrial

     3     $ 190,000     $ 190,000  

Vacant land, land development and residential construction

     0       0       0  

Real estate – owner occupied

     2       567,000       567,000  

Real estate – non-owner occupied

     0       0       0  

Real estate – multi-family and residential rental

     1       100,000       100,000  
   

 

 

    

 

 

    

 

 

  

Total commercial

     6       857,000       857,000  
       

Retail:

                        

Home equity and other

     0       0       0  

1-4 family mortgages

     0       0       0  
   

 

 

    

 

 

    

 

 

  

Total retail

     0       0       0  
   

 

 

    

 

 

    

 

 

  
       

Total

     6     $ 857,000     $ 857,000  
   

 

 

    

 

 

    

 

 

  

Loans modified as troubled debt restructurings during the six months ended June 30, 2012 were as follows:

 

                         
    Number of
Contracts		     Pre-
Modification
Recorded
Principal
Balance		     Post-
Modification
Recorded
Principal
Balance		  

Commercial:

                        

Commercial and industrial

     6     $ 773,000     $ 770,000  

Vacant land, land development and residential construction

     0       0       0  

Real estate – owner occupied

     5       1,613,000       1,612,000  

Real estate – non-owner occupied

     1       4,391,000       4,391,000  

Real estate – multi-family and residential rental

     1       100,000       100,000  
   

 

 

    

 

 

    

 

 

  

Total commercial

     13       6,877,000       6,873,000  
       

Retail:

                        

Home equity and other

     0       0       0  

1-4 family mortgages

     0       0       0  
   

 

 

    

 

 

    

 

 

  

Total retail

     0       0       0  
   

 

 

    

 

 

    

 

 

  
       

Total

     13     $ 6,877,000     $ 6,873,000  
   

 

 

    

 

 

    

 

 

  

 

The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the three months ended June 30, 2013 (amounts as of period end):

 

                 
    Number of
Contracts		     Recorded
Principal
Balance		  

Commercial:

                

Commercial and industrial

     0     $ 0  

Vacant land, land development and residential construction

     0       0  

Real estate – owner occupied

     0       0  

Real estate – non-owner occupied

     0       0  

Real estate – multi-family and residential rental

     0       0  
   

 

 

    

 

 

  

Total commercial

     0       0  
     

Retail:

                

Home equity and other

     0       0  

1-4 family mortgages

     0       0  
   

 

 

    

 

 

  

Total retail

     0       0  
   

 

 

    

 

 

  
     

Total

     0     $ 0  
   

 

 

    

 

 

  

The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the six months ended June 30, 2013 (amounts as of period end):

 

                 
    Number of
Contracts		     Recorded
Principal
Balance		  

Commercial:

                

Commercial and industrial

     0     $ 0  

Vacant land, land development and residential construction

     0       0  

Real estate – owner occupied

     0       0  

Real estate – non-owner occupied

     0       0  

Real estate – multi-family and residential rental

     0       0  
   

 

 

    

 

 

  

Total commercial

     0       0  
     

Retail:

                

Home equity and other

     0       0  

1-4 family mortgages

     0       0  
   

 

 

    

 

 

  

Total retail

     0       0  
   

 

 

    

 

 

  
     

Total

     0     $ 0  
   

 

 

    

 

 

  

 

The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the three months ended June 30, 2012 (amounts as of period end):

 

                 
    Number of
Contracts		     Recorded
Principal
Balance		  

Commercial:

                

Commercial and industrial

     1     $ 51,000  

Vacant land, land development and residential construction

     0       0  

Real estate – owner occupied

     0       0  

Real estate – non-owner occupied

     0       0  

Real estate – multi-family and residential rental

     0       0  
   

 

 

    

 

 

  

Total commercial

     1       51,000  
     

Retail:

                

Home equity and other

     0       0  

1-4 family mortgages

     0       0  
   

 

 

    

 

 

  

Total retail

     0       0  
   

 

 

    

 

 

  
     

Total

     1     $ 51,000  
   

 

 

    

 

 

  

The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the six months ended June, 30, 2012 (amounts as of period end):

 

                 
    Number of
Contracts		     Recorded
Principal
Balance		  

Commercial:

                

Commercial and industrial

     1     $ 51,000  

Vacant land, land development and residential construction

     0       0  

Real estate – owner occupied

     0       0  

Real estate – non-owner occupied

     0       0  

Real estate – multi-family and residential rental

     0       0  
   

 

 

    

 

 

  

Total commercial

     1       51,000  
     

Retail:

                

Home equity and other

     0       0  

1-4 family mortgages

     0       0  
   

 

 

    

 

 

  

Total retail

     0       0  
   

 

 

    

 

 

  
     

Total

     1     $ 51,000  
   

 

 

    

 

 

  

 

Activity for loans categorized as troubled debt restructurings during the three months ended June 30, 2013 is as follows:

 

                                         
    Commercial
and
Industrial		     Commercial
Vacant Land,
Land Development,
and Residential
Construction		     Commercial
Real Estate –
Owner
Occupied		     Commercial
Real Estate –
Non-Owner
Occupied		     Commercial
Real Estate –
Multi-Family
and Residential
Rental		  
           

Commercial Loan Portfolio:

                                        

Beginning Balance

   $ 3,269,000     $ 2,327,000     $ 3,879,000     $ 35,003,000     $ 2,958,000  

Charge-Offs

     0       (30,000 )      (70,000 )      (5,000 )      0  

Payments

     (1,063,000 )      (104,000 )      (979,000 )      (574,000 )      (183,000 ) 

Transfers to ORE

     0       0       0       0       0  

Additions

     60,000       3,247,000       749,000       0       0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 2,266,000     $ 5,440,000     $ 3,579,000     $ 34,424,000     $ 2,775,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                 
    Retail
Home Equity
and Other		     Retail
1-4 Family
Mortgages		  

Retail Loan Portfolio:

                

Beginning Balance

   $ 152,000     $ 0  

Charge-Offs

     0       0  

Payments

     (2,000 )      0  

Transfers to ORE

     0       0  

Additions

     1,879,000       0  
   

 

 

    

 

 

  

Ending Balance

   $ 2,029,000     $ 0  
   

 

 

    

 

 

  

 

Activity for loans categorized as troubled debt restructurings during the six months ended June 30, 2013 is as follows:

 

                                         
    Commercial
and
Industrial		     Commercial
Vacant Land,
Land Development,
and Residential
Construction		     Commercial
Real Estate –
Owner
Occupied		     Commercial
Real Estate –
Non-Owner
Occupied		     Commercial
Real Estate –
Multi-Family
and Residential
Rental		  
           

Commercial Loan Portfolio:

                                        

Beginning Balance

   $ 2,721,000     $ 3,071,000     $ 4,115,000     $ 37,672,000     $ 3,025,000  

Charge-Offs

     (34,000 )      (725,000 )      (70,000 )      (716,000 )      (15,000 ) 

Payments

     (1,578,000 )      (153,000 )      (1,039,000 )      (3,786,000 )      (235,000 ) 

Transfers to ORE

     (74,000 )      0       (363,000 )      (802,000 )      0  

Additions

     1,231,000       3,247,000       936,000       2,056,000       0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 2,266,000     $ 5,440,000     $ 3,579,000     $ 34,424,000     $ 2,775,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                 
    Retail
Home Equity
and Other		     Retail
1-4 Family
Mortgages		  

Retail Loan Portfolio:

                

Beginning Balance

   $ 155,000     $ 0  

Charge-Offs

     0       0  

Payments

     (5,000 )      0  

Transfers to ORE

     0       0  

Additions

     1,879,000       0  
   

 

 

    

 

 

  

Ending Balance

   $ 2,029,000     $ 0  
   

 

 

    

 

 

  

 

Activity for loans categorized as troubled debt restructurings during the three months ended June 30, 2012 is as follows:

 

                                         
    Commercial
and
Industrial		     Commercial
Vacant Land,
Land Development,
and Residential
Construction		     Commercial
Real Estate –
Owner
Occupied		     Commercial
Real Estate –
Non-Owner
Occupied		     Commercial
Real Estate –
Multi-Family
and Residential
Rental		  
           

Commercial Loan Portfolio:

                                        

Beginning Balance

   $ 4,834,000     $ 3,930,000     $ 6,331,000     $ 16,115,000     $ 10,286,000  

Charge-Offs

     (76,000 )      0       0       0       0  

Payments

     (209,000 )      (1,040,000 )      (89,000 )      (222,000 )      (5,402,000 ) 

Transfers to ORE

     (51,000 )      0       0       0       0  

Additions

     1,089,000       338,000       568,000       88,000       100,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 5,587,000     $ 3,228,000     $ 6,810,000     $ 15,981,000     $ 4,984,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                 
    Retail
Home Equity
and Other		     Retail
1-4 Family
Mortgages		  

Retail Loan Portfolio:

                

Beginning Balance

   $ 161,000     $ 0  

Charge-Offs

     0       0  

Payments

     (2,000 )      0  

Transfers to ORE

     0       0  

Additions

     0       0  
   

 

 

    

 

 

  

Ending Balance

   $ 159,000     $ 0  
   

 

 

    

 

 

  

 

Activity for loans categorized as troubled debt restructurings during the six months ended June 30, 2012 is as follows:

 

                                         
    Commercial
and
Industrial		     Commercial
Vacant Land,
Land Development,
and Residential
Construction		     Commercial
Real Estate –
Owner
Occupied		     Commercial
Real Estate –
Non-Owner
Occupied		     Commercial
Real Estate –
Multi-Family
and Residential
Rental		  
           

Commercial Loan Portfolio:

                                        

Beginning Balance

   $ 4,575,000     $ 5,078,000     $ 6,183,000     $ 12,037,000     $ 12,626,000  

Charge-Offs

     (112,000 )      0       (414,000 )      (25,000 )      (2,181,000 ) 

Payments

     (495,000 )      (1,897,000 )      (566,000 )      (511,000 )      (5,650,000 ) 

Transfers to ORE

     (51,000 )      0       0       0       0  

Additions

     1,670,000       47,000       1,607,000       4,480,000       189,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 5,587,000     $ 3,228,000     $ 6,810,000     $ 15,981,000     $ 4,984,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                 
    Retail
Home Equity
and Other		     Retail
1-4  Family
Mortgages		  

Retail Loan Portfolio:

                

Beginning Balance

   $ 164,000     $ 0  

Charge-Offs

     0       0  

Payments

     (5,000 )      0  

Transfers to ORE

     0       0  

Additions

     0       0  
   

 

 

    

 

 

  

Ending Balance

   $ 159,000     $ 0  
   

 

 

    

 

 

  

 

The allowance related to loans categorized as troubled debt restructurings was as follows:

 

                 
    June 30,
2013		     December 31,
2012		  
     

Commercial:

                

Commercial and industrial

   $ 680,000     $ 772,000  

Vacant land, land development, and residential construction

     1,204,000       713,000  

Real estate – owner occupied

     921,000       1,116,000  

Real estate – non-owner occupied

     9,517,000       9,751,000  

Real estate – multi-family and residential rental

     748,000       745,000  
   

 

 

    

 

 

  

Total commercial

     13,070,000       13,097,000  
     

Retail:

                

Home equity and other

     0       0  

1-4 family mortgages

     644,000       0  
   

 

 

    

 

 

  

Total retail

     644,000       0  
   

 

 

    

 

 

  
     

Total related allowance

   $ 13,714,000     $ 13,097,000  
   

 

 

    

 

 

  

In general, our policy dictates that a renewal or modification of an 8- or 9-rated loan meets the criteria of a troubled debt restructuring, although we review and consider all renewed and modified loans as part of our troubled debt restructuring assessment procedures. Loan relationships rated 8 contain significant financial weaknesses, resulting in a distinct possibility of loss, while relationships rated 9 reflect vital financial weaknesses, resulting in a highly questionable ability on our part to collect principal; we believe borrowers warranting such ratings would have difficulty obtaining financing from other market participants. Thus, due to the lack of comparable market rates for loans with similar risk characteristics, we believe 8- or 9-rated loans renewed or modified were done so at below market rates. Loans that are identified as troubled debt restructurings are considered impaired and are individually evaluated for impairment when assessing these credits in our allowance for loan losses calculation.