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ALLOWANCE FOR LOAN LOSSES:
 12 Months Ended
Dec. 31, 2011
ALLOWANCE FOR LOAN LOSSES:  
ALLOWANCE FOR LOAN LOSSES:

 

7.    ALLOWANCE FOR LOAN LOSSES:

 

The following table presents the activity of the allowance for loan losses by portfolio segment for the year ended December 31, 2011.

 

Allowance for Loan Losses:

 

 

 

 

 

December 31,

 

 

 

 

 

(Dollar amounts in thousands)

 

Commercial

 

Residential

 

Consumer

 

Unallocated

 

Total

 

Beginning balance

 

$

12,809

 

$

2,873

 

$

4,551

 

$

2,103

 

$

22,336

 

Provision for loan losses*

 

3,708

 

2,571

 

1,199

 

(1,598

)

5,880

 

Loans charged -off

 

(5,336

)

(2,811

)

(2,969

)

—

 

(11,116

)

Recoveries

 

938

 

95

 

1,108

 

—

 

2,141

 

Ending Balance

 

$

12,119

 

$

2,728

 

$

3,889

 

$

505

 

$

19,241

 

 

* Provision before decrease of $125 thousand in 2011 for increase in FDIC indemnification asset

 

Changes in the allowance for loan losses are summarized as follows:

 

 

 

December 31,

 

(Dollar amounts in thousands)

 

2010

 

2009

 

 

 

 

 

 

 

Balance at beginning of year

 

$

19,437

 

$

16,280

 

Provision for loan losses *

 

10,862

 

11,870

 

Recoveries of loans previously charged off

 

4,511

 

2,948

 

Loans charged off

 

(12,474

)

(11,661

)

BALANCE AT END OF YEAR

 

$

22,336

 

$

19,437

 

 

* In 2010 the provision charged to expense was reduced by $1.7 million for the increase to the FDIC Indemnification asset.

 

The following tables present the allocation of the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method at December 31, 2011 and 2010:

 

Allowance for Loan Losses: 

 

December 31, 2011

 

(Dollar amounts in thousands)

 

Commercial

 

Residential

 

Consumer

 

Unallocated

 

Total

 

Individually evaluated for impairment

 

$

3,071

 

$

190

 

$

—

 

$

—

 

$

3,261

 

Collectively evaluated for impairment

 

8,264

 

2,183

 

3,889

 

505

 

14,841

 

Acquired with deteriorated credit quality

 

784

 

355

 

—

 

—

 

1,139

 

BALANCE AT END OF YEAR

 

$

12,119

 

$

2,728

 

$

3,889

 

$

505

 

$

19,241

 

 

Loans

 

 

 

 

 

 

 

 

 

 

 

(Dollar amounts in thousands)

 

Commercial

 

Residential

 

Consumer

 

 

 

Total

 

Individually evaluated for impairment

 

$

25,393

 

$

2,213

 

$

—

 

 

 

$

27,606

 

Collectively evaluated for impairment

 

1,036,963

 

492,139

 

291,190

 

 

 

1,820,292

 

Acquired with deteriorated credit quality

 

43,389

 

12,986

 

11

 

 

 

56,386

 

BALANCE AT END OF YEAR

 

$

1,105,745

 

$

507,338

 

$

291,201

 

 

 

$

1,904,284

 

 

Allowance for Loan Losses: 

 

December 31, 2010

 

(Dollar amounts in thousands)

 

Commercial

 

Residential

 

Consumer

 

Unallocated

 

Total

 

Individually evaluated for impairment

 

$

3,893

 

$

625

 

$

—

 

$

—

 

$

4,518

 

Collectively evaluated for impairment

 

7,788

 

1,897

 

4,551

 

2,103

 

16,339

 

Acquired with deteriorated credit quality

 

1,128

 

351

 

—

 

—

 

1,479

 

BALANCE AT END OF YEAR

 

$

12,809

 

$

2,873

 

$

4,551

 

$

2,103

 

$

22,336

 

 

Loans

 

 

 

 

 

 

 

 

 

 

 

(Dollar amounts in thousands)

 

Commercial

 

Residential

 

Consumer

 

 

 

Total

 

Individually evaluated for impairment

 

$

27,717

 

$

2,770

 

$

—

 

 

 

$

30,487

 

Collectively evaluated for impairment

 

863,790

 

435,231

 

308,903

 

 

 

1,607,924

 

Acquired with deteriorated credit quality

 

9,938

 

1,113

 

15

 

 

 

11,066

 

BALANCE AT END OF YEAR

 

$

901,445

 

$

439,114

 

$

308,918

 

 

 

$

1,649,477

 

 

The following table presents loans individually evaluated for impairment by class of loan.

 

 

 

 

 

 

 

Allowance

 

 

 

 

 

Cash Basis

 

 

 

Unpaid

 

 

 

for Loan

 

Average

 

Interest

 

Interest

 

 

 

Principal

 

Recorded

 

Losses

 

Recorded

 

Income

 

Income

 

December 31, 2011 

 

Balance

 

Investment

 

Allocated

 

Investment

 

Recognized

 

Recognized

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Industrial

 

$

—

 

$

—

 

$

—

 

$

1,929

 

$

165

 

$

—

 

Farmland

 

—

 

—

 

—

 

—

 

—

 

—

 

Non Farm, Non Residential

 

4,444

 

4,444

 

—

 

3,262

 

—

 

—

 

Agriculture

 

—

 

—

 

—

 

—

 

—

 

—

 

All Other Commercial

 

—

 

—

 

—

 

—

 

—

 

—

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

First Liens

 

750

 

750

 

—

 

150

 

—

 

—

 

Home Equity

 

—

 

—

 

—

 

—

 

—

 

—

 

Junior Liens

 

—

 

—

 

—

 

—

 

—

 

—

 

Multifamily

 

250

 

250

 

—

 

50

 

—

 

—

 

All Other Residential

 

—

 

—

 

—

 

—

 

—

 

—

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

Motor Vehicle

 

—

 

—

 

—

 

—

 

—

 

—

 

All Other Consumer

 

—

 

—

 

—

 

—

 

—

 

—

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Industrial

 

17,890

 

17,866

 

2,664

 

16,746

 

—

 

—

 

Farmland

 

891

 

891

 

49

 

360

 

—

 

—

 

Non Farm, Non Residential

 

4,816

 

4,816

 

957

 

8,717

 

—

 

—

 

Agriculture

 

—

 

—

 

—

 

—

 

—

 

—

 

All Other Commercial

 

1,517

 

1,517

 

66

 

1,671

 

—

 

—

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

First Liens

 

1,213

 

1,213

 

190

 

2,014

 

—

 

—

 

Home Equity

 

—

 

—

 

—

 

—

 

—

 

—

 

Junior Liens

 

879

 

879

 

347

 

937

 

—

 

—

 

Multifamily

 

—

 

—

 

—

 

510

 

—

 

—

 

All Other Residential

 

—

 

—

 

—

 

—

 

—

 

—

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

Motor Vehicle

 

—

 

—

 

—

 

—

 

—

 

—

 

All Other Consumer

 

—

 

—

 

—

 

—

 

—

 

—

 

TOTAL

 

$

32,650

 

$

32,626

 

$

4,273

 

$

36,346

 

$

165

 

$

—

 

 

 

 

 

 

 

 

Allowance

 

 

 

Unpaid

 

 

 

for Loan

 

 

 

Principal

 

Recorded

 

Losses

 

December 31, 2010 

 

Balance

 

Investment

 

Allocated

 

With no related allowance recorded:

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

Commercial & Industrial

 

$

8,935

 

$

8,993

 

$

—

 

Farmland

 

—

 

—

 

—

 

Non Farm, Non Residential

 

2,955

 

2,955

 

—

 

Agriculture

 

—

 

—

 

—

 

All Other Commercial

 

—

 

—

 

—

 

Residential

 

 

 

 

 

 

 

First Liens

 

—

 

—

 

—

 

Home Equity

 

—

 

—

 

—

 

Junior Liens

 

—

 

—

 

—

 

Multifamily

 

—

 

—

 

—

 

All Other Residential

 

—

 

—

 

—

 

Consumer

 

 

 

 

 

 

 

Motor Vehicle

 

—

 

—

 

—

 

All Other Consumer

 

—

 

—

 

—

 

With an allowance recorded:

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

Commercial & Industrial

 

10,933

 

10,996

 

1,508

 

Farmland

 

—

 

—

 

—

 

Non Farm, Non Residential

 

9,442

 

9,442

 

3,255

 

Agriculture

 

—

 

—

 

—

 

All Other Commercial

 

1,577

 

1,577

 

128

 

Residential

 

 

 

 

 

 

 

First Liens

 

1,910

 

1,910

 

533

 

Home Equity

 

—

 

—

 

—

 

Junior Liens

 

1,129

 

1,129

 

443

 

Multifamily

 

638

 

638

 

—

 

All Other Residential

 

—

 

—

 

—

 

Consumer

 

 

 

 

 

 

 

Motor Vehicle

 

—

 

—

 

—

 

All Other Consumer

 

—

 

—

 

—

 

TOTAL

 

$

37,519

 

$

37,640

 

$

5,867

 

 

(Dollar amounts in thousands) 

 

2010

 

2009

 

Average of impaired loans during the year

 

$

27,772

 

$

21,731

 

Interest income recognized during impairment

 

660

 

36

 

Cash-basis interest income recognized

 

57

 

19

 

 

The following table presents the recorded investment in nonperforming loans by class of loans.

 

 

 

Loans Past

 

 

 

 

 

Loans Past

 

 

 

 

 

 

 

Due Over

 

 

 

 

 

Due Over

 

 

 

 

 

 

 

90 Day Still

 

December 31, 2011

 

90 Day Still

 

December 31, 2010

 

(Dollar amounts in thousands)

 

Accruing

 

Restructured

 

Nonaccrual

 

Accruing

 

Restructured

 

Nonaccrual

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Industrial

 

$

317

 

$

12,590

 

$

9,673

 

$

1,462

 

$

13,671

 

$

11,677

 

Farmland

 

74

 

—

 

979

 

—

 

—

 

68

 

Non Farm, Non Residential

 

237

 

—

 

12,542

 

506

 

—

 

13,808

 

Agriculture

 

—

 

—

 

225

 

—

 

—

 

284

 

All Other Commercial

 

—

 

—

 

3,171

 

158

 

—

 

2,011

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

First Liens

 

1,150

 

3,856

 

7,398

 

971

 

2,605

 

6,141

 

Home Equity

 

8

 

—

 

—

 

45

 

—

 

—

 

Junior Liens

 

154

 

898

 

1,240

 

66

 

928

 

1,454

 

Multifamily

 

—

 

—

 

668

 

—

 

—

 

990

 

All Other Residential

 

136

 

—

 

171

 

—

 

—

 

150

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

Motor Vehicle

 

77

 

—

 

294

 

91

 

—

 

259

 

All Other Consumer

 

4

 

—

 

1,741

 

4

 

—

 

1,675

 

TOTAL

 

$

2,157

 

$

17,344

 

$

38,102

 

$

3,303

 

$

17,204

 

$

38,517

 

 

Covered loans included in loans past due over 90 days still on accrual are $413 thousand at December 31, 2011 and $377 thousand at December 31, 2010. Covered loans included in non-accrual loans are $5.6 million at December 31, 2011 and $8.7 million at December 31, 2010. Covered loans of $5.0 million are deemed impaired at December 31, 2011 and have allowance for loan loss allocated to them of $1.0 million. On December 31, 2010 there were $4.3 million of covered loans deemed impaired that had an allowance for loan loss allocated to them of $1.3 million. Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

 

During the year ending December 31, 2011, the terms of certain loans were modified as troubled debt restructurings. Four commercial loans totaling $631 thousand and four residential loan totaling $212 thousand were loans modified in 2011, and the modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. No modifications resulted in the permanent reduction of the recorded investment in the loan. The dollar amount of loans modified in trouble debt restructurings that subsequently defaulted and were charged off was insignificant to the allowance for loan losses.

 

Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from twelve months to five years. Modifications involving an extension of the maturity date were for periods ranging from twelve months to 10 years.

 

The Corporation has allocated $1.6 million and $657 thousand of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2011 and 2010.  The Corporation has not committed to lend additional amounts as of December 31, 2011 and 2010 to customers with outstanding loans that are classified as troubled debt restructurings.

 

The following table presents the aging of the recorded investment in loans by past due category and class of loans.

 

 

 

 

 

 

 

Greater

 

 

 

 

 

 

 

December 31, 2011

 

30-59 Days

 

60-89 Days

 

than 90 days

 

Total

 

 

 

 

 

(Dollar amounts in thousands)

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Current

 

Total

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Industrial

 

$

2,717

 

$

740

 

$

4,452

 

$

7,909

 

$

472,370

 

$

480,279

 

Farmland

 

5

 

57

 

1,034

 

1,096

 

98,159

 

99,255

 

Non Farm, Non Residential

 

2,945

 

420

 

7,754

 

11,119

 

310,724

 

321,843

 

Agriculture

 

88

 

—

 

97

 

185

 

114,162

 

114,347

 

All Other Commercial

 

120

 

—

 

1,588

 

1,708

 

88,313

 

90,021

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

First Liens

 

11,435

 

2,016

 

5,316

 

18,767

 

340,269

 

359,036

 

Home Equity

 

175

 

62

 

8

 

245

 

44,939

 

45,184

 

Junior Liens

 

1,333

 

183

 

190

 

1,706

 

39,903

 

41,609

 

Multifamily

 

—

 

100

 

668

 

768

 

46,216

 

46,984

 

All Other Residential

 

128

 

—

 

136

 

264

 

14,261

 

14,525

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

Motor Vehicle

 

3,450

 

563

 

77

 

4,090

 

260,102

 

264,192

 

All Other Consumer

 

174

 

48

 

5

 

227

 

26,782

 

27,009

 

TOTAL

 

$

22,570

 

$

4,189

 

$

21,325

 

$

48,084

 

$

1,856,200

 

$

1,904,284

 

 

 

 

 

 

 

 

Greater

 

 

 

 

 

 

 

December 31, 2010

 

30-59 Days

 

60-89 Days

 

than 90 days

 

Total

 

 

 

 

 

(Dollar amounts in thousands)

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Current

 

Total

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Industrial

 

$

2,619

 

$

882

 

$

3,868

 

$

7,369

 

$

405,319

 

$

412,688

 

Farmland

 

63

 

198

 

—

 

261

 

71,672

 

71,933

 

Non Farm, Non Residential

 

761

 

1,763

 

4,366

 

6,890

 

260,685

 

267,575

 

Agriculture

 

55

 

—

 

284

 

339

 

85,275

 

85,614

 

All Other Commercial

 

—

 

135

 

283

 

418

 

63,217

 

63,635

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

First Liens

 

5,405

 

1,649

 

3,793

 

10,847

 

310,722

 

321,569

 

Home Equity

 

78

 

11

 

45

 

134

 

38,638

 

38,772

 

Junior Liens

 

287

 

165

 

175

 

627

 

33,394

 

34,021

 

Multifamily

 

706

 

—

 

352

 

1,058

 

32,605

 

33,663

 

All Other Residential

 

144

 

—

 

—

 

144

 

10,945

 

11,089

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

Motor Vehicle

 

2,994

 

378

 

91

 

3,463

 

279,029

 

282,492

 

All Other Consumer

 

138

 

23

 

6

 

167

 

26,259

 

26,426

 

TOTAL

 

$

13,250

 

$

5,204

 

$

13,263

 

$

31,717

 

$

1,617,760

 

$

1,649,477

 

 

Credit Quality Indicators:

 

The Corporation 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, and current economic trends, among other factors.  The Corporation analyzes loans individually by classifying the loans as to credit risk.  This analysis includes non-homogeneous loans, such as commercial loans, with an outstanding balance greater than $50 thousand.  Any consumer loans outstanding to a borrower who had commercial loans analyzed will be similarly risk rated.  This analysis is performed on a quarterly basis.  The Corporation uses the following definitions for risk ratings:

 

Special Mention:  Loans classified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

 

Substandard:  Loans classified as substandard are inadequately protected by the current net worth and debt service capacity of the borrower or of any pledged collateral.  These loans have a well-defined weakness or weaknesses which have clearly jeopardized repayment of principal and interest as originally intended.  They are characterized by the distinct possibility that the institution will sustain some future loss if the deficiencies are not corrected.

 

Doubtful:  Loans classified as doubtful have all the weaknesses inherent in those graded substandard, with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values.

 

Furthermore, non-homogeneous loans which were not individually analyzed, but are 90+ days past due or on non-accrual are classified as substandard.  Loans included in homogeneous pools, such as residential or consumer, may be classified as substandard due to 90+ days delinquency, non-accrual status, bankruptcy, or loan restructuring.

 

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 either less than $50 thousand or are included in groups of homogeneous loans.  As of December 31, 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

December 31, 2011

 

 

 

Special

 

 

 

 

 

 

 

 

 

(Dollar amounts in thousands)

 

Pass

 

Mention

 

Substandard

 

Doubtful

 

Not Rated

 

Total

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Industrial

 

$

386,734

 

$

25,343

 

$

53,026

 

$

7,128

 

$

6,717

 

$

478,948

 

Farmland

 

89,213

 

4,250

 

3,015

 

69

 

619

 

97,166

 

Non Farm, Non Residential

 

254,761

 

28,684

 

32,704

 

4,271

 

393

 

320,813

 

Agriculture

 

109,869

 

2,100

 

623

 

79

 

122

 

112,793

 

All Other Commercial

 

77,330

 

6,097

 

5,099

 

67

 

1,011

 

89,604

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

First Liens

 

113,234

 

5,175

 

19,895

 

1,318

 

218,118

 

357,740

 

Home Equity

 

13,613

 

520

 

671

 

19

 

30,278

 

45,101

 

Junior Liens

 

11,887

 

714

 

783

 

968

 

27,105

 

41,457

 

Multifamily

 

35,837

 

3,911

 

6,224

 

606

 

258

 

46,836

 

All Other Residential

 

4,658

 

445

 

53

 

—

 

9,310

 

14,466

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

Motor Vehicle

 

12,988

 

330

 

501

 

59

 

249,018

 

262,896

 

All Other Consumer

 

6,120

 

57

 

141

 

12

 

20,491

 

26,821

 

TOTAL

 

$

1,116,244

 

$

77,626

 

$

122,735

 

$

14,596

 

$

563,440

 

$

1,894,641

 

 

December 31, 2010

 

 

 

Special

 

 

 

 

 

 

 

 

 

(Dollar amounts in thousands)

 

Pass

 

Mention

 

Substandard

 

Doubtful

 

Not Rated

 

Total

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Industrial

 

$

311,258

 

$

26,956

 

$

63,334

 

$

2,910

 

$

6,977

 

$

411,435

 

Farmland

 

66,920

 

1,535

 

1,691

 

68

 

109

 

70,323

 

Non Farm, Non Residential

 

208,847

 

29,399

 

24,579

 

3,364

 

544

 

266,733

 

Agriculture

 

82,275

 

602

 

1,008

 

284

 

154

 

84,323

 

All Other Commercial

 

52,704

 

6,188

 

2,799

 

468

 

1,134

 

63,293

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

First Liens

 

93,887

 

6,201

 

7,495

 

2,944

 

209,804

 

320,331

 

Home Equity

 

8,641

 

4,447

 

427

 

23

 

25,200

 

38,738

 

Junior Liens

 

4,796

 

107

 

1,733

 

167

 

27,090

 

33,893

 

Multifamily

 

22,678

 

8,516

 

1,255

 

990

 

127

 

33,566

 

All Other Residential

 

1,349

 

—

 

26

 

—

 

9,673

 

11,048

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

Motor Vehicle

 

12,902

 

331

 

492

 

29

 

267,424

 

281,178

 

All Other Consumer

 

3,945

 

64

 

174

 

42

 

22,000

 

26,225

 

TOTAL

 

$

870,202

 

$

84,346

 

$

105,013

 

$

11,289

 

$

570,236

 

$

1,641,086