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Allowance for Loan Losses | 3 Months Ended
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Mar. 31, 2012
Allowance for Loan and Lease Losses, Provision for Loss, Net [Abstract] |
Allowance for Loan Losses | Note 4. Allowance for Loan Losses The Company provides for loan losses through the establishment of an allowance for loan losses which represents an estimated reserve for existing losses in the loan portfolio. A systematic methodology is used for determining the allowance that includes a quarterly review process, risk rating changes, and adjustments to the allowance. The loan portfolio is classified in eight segments and credit risk is evaluated separately in each segment. The appropriate level of the allowance is evaluated continually based on a review of significant loans, with a particular emphasis on nonaccruing, past due, and other loans that may require special attention. Other factors include general conditions in local and national economies; loan portfolio composition and asset quality indicators; and internal factors such as changes in underwriting policies, credit administration practices, experience, ability and depth of lending management, among others. The allowance consists of four elements: (1) specific reserves for loans evaluated individually for impairment; (2) general reserves for each portfolio segment based on historical loan loss experience, (3) qualitative reserves judgmentally adjusted for local and national economic conditions, concentrations, portfolio composition, volume and severity of delinquencies and nonaccrual loans, trends of criticized and classified loans, changes in credit policies, and underwriting standards, credit administration practices, and other factors as applicable for each portfolio segment; and (4) unallocated reserves. All outstanding loans are considered in evaluating the appropriateness of the allowance. A breakdown of the allowance for loan losses as of March 31, 2012, December 31, 2011, and March 31, 2011, by class of financing receivable and allowance element, is presented in the following tables:
As of March 31, 2012 |  | Specific Reserves on Loans Evaluated Individually for Impairment |  |  | General Reserves Based on Historical Loss Experience |  |  | Reserves for Qualitative Factors |  |  | Unallocated Reserves |  |  | Total Reserves |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  | $ | 944,000 |  |  | $ | 2,648,000 |  |  | $ | 2,270,000 |  |  | $ | - |  |  | $ | 5,862,000 |
Construction |  |  | 117,000 |  |  |  | 316,000 |  |  |  | 271,000 |  |  |  | - |  |  |  | 704,000 |
Other |  |  | 480,000 |  |  |  | 886,000 |  |  |  | 759,000 |  |  |  | - |  |  |  | 2,125,000 |
Municipal |  |  | - |  |  |  | - |  |  |  | 19,000 |  |  |  | - |  |  |  | 19,000 |
Residential |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Term |  |  | 592,000 |  |  |  | 185,000 |  |  |  | 459,000 |  |  |  | - |  |  |  | 1,236,000 |
Construction |  |  | 49,000 |  |  |  | 2,000 |  |  |  | 8,000 |  |  |  | - |  |  |  | 59,000 |
Home equity line of credit |  |  | 156,000 |  |  |  | 176,000 |  |  |  | 350,000 |  |  |  | - |  |  |  | 682,000 |
Consumer |  |  | 10,000 |  |  |  | 319,000 |  |  |  | 239,000 |  |  |  | - |  |  |  | 568,000 |
Unallocated |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,699,000 |  |  |  | 1,699,000 |
|  | $ | 2,348,000 |  |  | $ | 4,532,000 |  |  | $ | 4,375,000 |  |  | $ | 1,699,000 |  |  | $ | 12,954,000 |
As of December 31, 2011 |  | Specific Reserves on Loans Evaluated Individually for Impairment |  |  | General Reserves Based on Historical Loss Experience |  |  | Reserves for Qualitative Factors |  |  | Unallocated Reserves |  |  | Total Reserves |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  | $ | 808,000 |  |  | $ | 2,578,000 |  |  | $ | 2,273,000 |  |  | $ | - |  |  | $ | 5,659,000 |
Construction |  |  | 33,000 |  |  |  | 332,000 |  |  |  | 293,000 |  |  |  | - |  |  |  | 658,000 |
Other |  |  | 402,000 |  |  |  | 883,000 |  |  |  | 778,000 |  |  |  | - |  |  |  | 2,063,000 |
Municipal |  |  | - |  |  |  | - |  |  |  | 19,000 |  |  |  | - |  |  |  | 19,000 |
Residential |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Term |  |  | 478,000 |  |  |  | 222,000 |  |  |  | 459,000 |  |  |  | - |  |  |  | 1,159,000 |
Construction |  |  | 235,000 |  |  |  | 6,000 |  |  |  | 14,000 |  |  |  | - |  |  |  | 255,000 |
Home equity line of credit |  |  | 91,000 |  |  |  | 149,000 |  |  |  | 355,000 |  |  |  | - |  |  |  | 595,000 |
Consumer |  |  | 11,000 |  |  |  | 331,000 |  |  |  | 242,000 |  |  |  | - |  |  |  | 584,000 |
Unallocated |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,008,000 |  |  |  | 2,008,000 |
|  | $ | 2,058,000 |  |  | $ | 4,501,000 |  |  | $ | 4,433,000 |  |  | $ | 2,008,000 |  |  | $ | 13,000,000 |
As of March 31, 2011 |  | Specific Reserves Evaluated Individually for Impairment |  |  | General Reserves Based on Historical Loss Experience |  |  | Reserves for Qualitative Factors |  |  | Unallocated Reserves |  |  | Total Reserves |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  | $ | 593,000 |  |  | $ | 2,536,000 |  |  | $ | 3,181,000 |  |  | $ | - |  |  | $ | 6,310,000 |
Construction |  |  | - |  |  |  | 284,000 |  |  |  | 355,000 |  |  |  | - |  |  |  | 639,000 |
Other |  |  | 326,000 |  |  |  | 980,000 |  |  |  | 1,229,000 |  |  |  | - |  |  |  | 2,535,000 |
Municipal |  |  | - |  |  |  | - |  |  |  | 19,000 |  |  |  | - |  |  |  | 19,000 |
Residential |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Term |  |  | 381,000 |  |  |  | 457,000 |  |  |  | 567,000 |  |  |  | - |  |  |  | 1,405,000 |
Construction |  |  | 106,000 |  |  |  | 18,000 |  |  |  | 22,000 |  |  |  | - |  |  |  | 146,000 |
Home equity line of credit |  |  | 139,000 |  |  |  | 67,000 |  |  |  | 472,000 |  |  |  | - |  |  |  | 678,000 |
Consumer |  |  | 76,000 |  |  |  | 380,000 |  |  |  | 257,000 |  |  |  | - |  |  |  | 713,000 |
Unallocated |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,555,000 |  |  |  | 1,555,000 |
|  | $ | 1,621,000 |  |  | $ | 4,722,000 |  |  | $ | 6,102,000 |  |  | $ | 1,555,000 |  |  | $ | 14,000,000 |
Commercial loans are comprised of three major classes, commercial real estate loans, commercial construction loans and other commercial loans. Commercial real estate is primarily comprised of loans to small businesses collateralized by owner-occupied real estate, while other commercial is primarily comprised of loans to small businesses collateralized by plant and equipment, commercial fishing vessels and gear, and limited inventory-based lending. Commercial real estate loans typically have a maximum loan-to-value of 75% based upon current appraisal information at the time the loan is made. Municipal loans are comprised of loans to municipalities in Maine for capitalized expenditures, construction projects or tax-anticipation notes. All municipal loans are considered general obligations of the municipality and as such are collateralized by the taxing ability of the municipality for repayment of debt. Construction loans, both commercial and residential, comprise a very small portion of the portfolio, and at 35.0% of capital are well under the regulatory guidance of 100.0% of capital. Construction loans and non-owner-occupied commercial real estate loans are at 99.0% of total capital, well under regulatory guidance of 300.0% of capital. The process of establishing the allowance with respect to our commercial loan portfolio begins when a loan officer initially assigns each loan a risk rating, using established credit criteria. Approximately 50% of our outstanding loans and commitments are subject to review and validation annually by an independent consulting firm, as well as periodically by our internal credit review function. The methodology employs Management's judgment as to the level of losses on existing loans based on our internal review of the loan portfolio, including an analysis of a borrower's current financial position, and the consideration of current and anticipated economic conditions and their potential effects on specific borrowers and or lines of business. In determining our ability to collect certain loans, we also consider the fair value of underlying collateral. The risk rating system has eight levels, defined as follows: 1 Strong Credits rated "1" are characterized by borrowers fully responsible for the credit with excellent capacity to pay principal and interest. Loans rated "1" may be secured with acceptable forms of liquid collateral. 2 Above Average Credits rated "2" are characterized by borrowers that have better than average liquidity, capitalization, earnings and/or cash flow with a consistent record of solid financial performance. 3 Satisfactory Credits rated "3" are characterized by borrowers with favorable liquidity, profitability and financial condition with adequate cash flow to pay debt service. 4 Average Credits rated "4" are characterized by borrowers that present risk more than 1, 2 and 3 rated loans and merit an ordinary level of ongoing monitoring. Financial condition is on par or somewhat below industry averages while cash flow is generally adequate to meet debt service requirements. 5 Watch Credits rated "5" are characterized by borrowers that warrant greater monitoring due to financial condition or unresolved and identified risk factors. 6 Other Assets Especially Mentioned (OAEM) Loans in this category are currently protected but are potentially weak and constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of substandard. OAEM have potential weaknesses which may, if not checked or corrected, weaken the asset or inadequately protect the Bank's credit position at some future date. 7 Substandard Loans in this category are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Bank may sustain some loss if the deficiencies are not corrected. 8 Doubtful Loans classified "Doubtful" have the same weaknesses as those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. The following table summarizes the risk ratings for the Company's commercial real estate, commercial construction, commercial other, and municipal loans as of March 31, 2012:
|  | Commercial Real Estate |  |  | Commercial Construction |  |  | Commercial Other |  |  | Municipal Loans |  |  | All Risk- Rated Loans |
1 Strong |  | $ | 23,000 |  |  | $ | - |  |  | $ | 486,000 |  |  | $ | 1,911,000 |  |  | $ | 2,420,000 |
2 Above Average |  |  | 19,788,000 |  |  |  | - |  |  |  | 4,418,000 |  |  |  | 7,602,000 |  |  |  | 31,808,000 |
3 Satisfactory |  |  | 32,903,000 |  |  |  | 1,396,000 |  |  |  | 12,183,000 |  |  |  | 3,819,000 |  |  |  | 50,301,000 |
4 Average |  |  | 105,446,000 |  |  |  | 19,130,000 |  |  |  | 31,412,000 |  |  |  | 2,629,000 |  |  |  | 158,617,000 |
5 Watch |  |  | 42,680,000 |  |  |  | 3,530,000 |  |  |  | 19,473,000 |  |  |  | - |  |  |  | 65,683,000 |
6 OAEM |  |  | 18,302,000 |  |  |  | 538,000 |  |  |  | 4,644,000 |  |  |  | - |  |  |  | 23,484,000 |
7 Substandard |  |  | 34,887,000 |  |  |  | 6,234,000 |  |  |  | 12,158,000 |  |  |  | - |  |  |  | 53,279,000 |
8 Doubtful |  |  | 679,000 |  |  |  | - |  |  |  | 693,000 |  |  |  | - |  |  |  | 1,372,000 |
Total |  | $ | 254,708,000 |  |  | $ | 30,828,000 |  |  | $ | 85,467,000 |  |  | $ | 15,961,000 |  |  | $ | 386,964,000 |
The following table summarizes the risk ratings for the Company's commercial real estate, commercial construction, commercial other, and municipal loans as of December 31, 2011:
|  | Commercial Real Estate |  |  | Commercial Construction |  |  | Commercial Other |  |  | Municipal Loans |  |  | All Risk- Rated Loans |
1 Strong |  | $ | 23,000 |  |  | $ | - |  |  | $ | 465,000 |  |  | $ | 2,158,000 |  |  | $ | 2,646,000 |
2 Above Average |  |  | 21,334,000 |  |  |  | - |  |  |  | 4,229,000 |  |  |  | 7,509,000 |  |  |  | 33,072,000 |
3 Satisfactory |  |  | 33,119,000 |  |  |  | 1,365,000 |  |  |  | 10,981,000 |  |  |  | 3,861,000 |  |  |  | 49,326,000 |
4 Average |  |  | 106,171,000 |  |  |  | 17,125,000 |  |  |  | 31,600,000 |  |  |  | 2,693,000 |  |  |  | 157,589,000 |
5 Watch |  |  | 44,215,000 |  |  |  | 3,287,000 |  |  |  | 17,893,000 |  |  |  | - |  |  |  | 65,395,000 |
6 OAEM |  |  | 18,309,000 |  |  |  | 2,320,000 |  |  |  | 5,303,000 |  |  |  | - |  |  |  | 25,932,000 |
7 Substandard |  |  | 31,575,000 |  |  |  | 7,323,000 |  |  |  | 16,362,000 |  |  |  | - |  |  |  | 55,260,000 |
8 Doubtful |  |  | 678,000 |  |  |  | 1,154,000 |  |  |  | 149,000 |  |  |  | - |  |  |  | 1,981,000 |
Total |  | $ | 255,424,000 |  |  | $ | 32,574,000 |  |  | $ | 86,982,000 |  |  | $ | 16,221,000 |  |  | $ | 391,201,000 |
The following table summarizes the risk ratings for the Company's commercial real estate, commercial construction, commercial other, and municipal loans as of March 31, 2011:
|  | Commercial Real Estate |  |  | Commercial Construction |  |  | Commercial Other |  |  | Municipal Loans |  |  | All Risk- Rated Loans |
1 Strong |  | $ | 30,000 |  |  | $ | - |  |  | $ | 462,000 |  |  | $ | 2,448,000 |  |  | $ | 2,940,000 |
2 Above Average |  |  | 21,270,000 |  |  |  | 10,000 |  |  |  | 4,399,000 |  |  |  | 11,417,000 |  |  |  | 37,096,000 |
3 Satisfactory |  |  | 45,331,000 |  |  |  | 10,000 |  |  |  | 17,258,000 |  |  |  | 4,023,000 |  |  |  | 66,622,000 |
4 Average |  |  | 120,462,000 |  |  |  | 14,650,000 |  |  |  | 40,071,000 |  |  |  | 2,946,000 |  |  |  | 178,129,000 |
5 Watch |  |  | 26,660,000 |  |  |  | 5,896,000 |  |  |  | 12,425,000 |  |  |  | - |  |  |  | 44,981,000 |
6 OAEM |  |  | 18,797,000 |  |  |  | 3,948,000 |  |  |  | 6,700,000 |  |  |  | - |  |  |  | 29,445,000 |
7 Substandard |  |  | 31,250,000 |  |  |  | 4,802,000 |  |  |  | 20,447,000 |  |  |  | - |  |  |  | 56,499,000 |
8 Doubtful |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 263,800,000 |  |  | $ | 29,316,000 |  |  | $ | 101,762,000 |  |  | $ | 20,834,000 |  |  | $ | 415,712,000 |
Commercial loans are generally charged off when all or a portion of the principal amount is determined to be uncollectable. This determination is based on circumstances specific to a borrower including repayment ability, analysis of collateral and other factors as applicable. Residential loans are comprised of two classes: term loans, which include traditional amortizing home mortgages, and construction loans, which include loans for owner-occupied residential construction. Residential loans typically have a 75% to 80% loan to value based upon current appraisal information at the time the loan is made. Home equity loans and lines of credit are typically written to the same underwriting standards. Consumer loans are primarily amortizing loans to individuals collateralized by automobiles, pleasure craft and recreation vehicles, typically with a maximum loan to value of 80%-90% of the purchase price of the collateral. Consumer loans also include a small amount of unsecured short-term time notes to individuals. Residential loans, consumer loans and home equity lines of credit are segregated into homogeneous pools with similar risk characteristics. Trends and current conditions are analyzed and historical loss experience is adjusted accordingly. Quantitative and qualitative adjustment factors for these segments are consistent with those for the commercial and municipal classes. Certain loans in the residential, home equity lines of credit and consumer classes identified as having the potential for further deterioration are analyzed individually to confirm impairment status, and to determine the need for a specific reserve, however there is no formal rating system used for these classes. Consumer loans greater than 120 days past due are generally charged off. Residential loans 90 days or more past due are placed on non-accrual status unless the loans are both well secured and in the process of collection. There were no changes to the Company's accounting policies or methodology used to estimate the allowance for loan losses during the three months ended March 31, 2012. Allowance for loan losses transactions for the three months ended March 31, 2012 and 2011 and for the year ended December 31, 2011 were as follows:
For the three months ended |  | Commercial |  |  | Municipal |  |  | Residential |  |  | Home Equity |  |  | Consumer |  |  | Unallocated |  |  | Total |
March 31, 2012 |  | Real Estate |  |  | Construction |  |  | Other |  |  |  |  |  | Term |  |  | Construction |  |  | Line of Credit |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 5,659,000 |  |  | $ | 658,000 |  |  | $ | 2,063,000 |  |  | $ | 19,000 |  |  | $ | 1,159,000 |  |  | $ | 255,000 |  |  | $ | 595,000 |  |  | $ | 584,000 |  |  | $ | 2,008,000 |  |  | $ | 13,000,000 |
Charge offs |  |  | - |  |  |  | - |  |  |  | 2,002,000 |  |  |  | - |  |  |  | 239,000 |  |  |  | - |  |  |  | 49,000 |  |  |  | 180,000 |  |  |  | - |  |  |  | 2,470,000 |
Recoveries |  |  | - |  |  |  | 246,000 |  |  |  | 2,000 |  |  |  | - |  |  |  | 1,000 |  |  |  | - |  |  |  | - |  |  |  | 75,000 |  |  |  | - |  |  |  | 324,000 |
Provision |  |  | 203,000 |  |  |  | (200,000 | ) |  |  | 2,062,000 |  |  |  | - |  |  |  | 315,000 |  |  |  | (196,000 | ) |  |  | 136,000 |  |  |  | 89,000 |  |  |  | (309,000 | ) |  |  | 2,100,000 |
Ending balance |  | $ | 5,862,000 |  |  | $ | 704,000 |  |  | $ | 2,125,000 |  |  | $ | 19,000 |  |  | $ | 1,236,000 |  |  | $ | 59,000 |  |  | $ | 682,000 |  |  | $ | 568,000 |  |  | $ | 1,699,000 |  |  | $ | 12,954,000 |
Ending balance specifically evaluated for impairment |  | $ | 944,000 |  |  | $ | 117,000 |  |  | $ | 480,000 |  |  | $ | - |  |  | $ | 592,000 |  |  | $ | 49,000 |  |  | $ | 156,000 |  |  | $ | 10,000 |  |  | $ | - |  |  | $ | 2,348,000 |
Ending balance collectively evaluated for impairment |  | $ | 4,918,000 |  |  | $ | 587,000 |  |  | $ | 1,645,000 |  |  | $ | 19,000 |  |  | $ | 644,000 |  |  | $ | 10,000 |  |  | $ | 526,000 |  |  | $ | 558,000 |  |  | $ | 1,699,000 |  |  | $ | 10,606,000 |
Related loan balances: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 254,708,000 |  |  | $ | 30,828,000 |  |  | $ | 85,467,000 |  |  | $ | 15,961,000 |  |  | $ | 358,394,000 |  |  | $ | 6,451,000 |  |  | $ | 103,372,000 |  |  | $ | 15,711,000 |  |  | $ | - |  |  | $ | 870,892,000 |
Ending balance specifically evaluated for impairment |  | $ | 14,295,000 |  |  | $ | 2,093,000 |  |  | $ | 3,886,000 |  |  | $ | - |  |  | $ | 18,054,000 |  |  | $ | 1,454,000 |  |  | $ | 1,336,000 |  |  | $ | 15,000 |  |  | $ | - |  |  | $ | 41,133,000 |
Ending balance collectively evaluated for impairment |  | $ | 240,413,000 |  |  | $ | 28,735,000 |  |  | $ | 81,581,000 |  |  | $ | 15,961,000 |  |  | $ | 340,340,000 |  |  | $ | 4,997,000 |  |  | $ | 102,036,000 |  |  | $ | 15,696,000 |  |  | $ | - |  |  | $ | 829,759,000 |
For the year ended |  | Commercial |  |  | Municipal |  |  | Residential |  |  | Home Equity |  |  | Consumer |  |  | Unallocated |  |  | Total |
December 31, 2011 |  | Real Estate |  |  | Construction |  |  | Other |  |  |  |  |  | Term |  |  | Construction |  |  | Line of Credit |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 5,260,000 |  |  | $ | 1,012,000 |  |  | $ | 2,377,000 |  |  | $ | 19,000 |  |  | $ | 1,408,000 |  |  | $ | 44,000 |  |  | $ | 670,000 |  |  | $ | 646,000 |  |  | $ | 1,880,000 |  |  | $ | 13,316,000 |
Charge offs |  |  | 1,619,000 |  |  |  | 346,000 |  |  |  | 6,492,000 |  |  |  | - |  |  |  | 1,421,000 |  |  |  | 505,000 |  |  |  | 415,000 |  |  |  | 381,000 |  |  |  | - |  |  |  | 11,179,000 |
Recoveries |  |  | 23,000 |  |  |  | - |  |  |  | 60,000 |  |  |  | - |  |  |  | 7,000 |  |  |  | - |  |  |  | 1,000 |  |  |  | 222,000 |  |  |  | - |  |  |  | 313,000 |
Provision |  |  | 1,995,000 |  |  |  | (8,000 | ) |  |  | 6,118,000 |  |  |  | - |  |  |  | 1,165,000 |  |  |  | 716,000 |  |  |  | 339,000 |  |  |  | 97,000 |  |  |  | 128,000 |  |  |  | 10,550,000 |
Ending balance |  | $ | 5,659,000 |  |  | $ | 658,000 |  |  | $ | 2,063,000 |  |  | $ | 19,000 |  |  | $ | 1,159,000 |  |  | $ | 255,000 |  |  | $ | 595,000 |  |  | $ | 584,000 |  |  | $ | 2,008,000 |  |  | $ | 13,000,000 |
Ending balance specifically evaluated for impairment |  | $ | 808,000 |  |  | $ | 33,000 |  |  | $ | 402,000 |  |  | $ | - |  |  | $ | 478,000 |  |  | $ | 235,000 |  |  | $ | 91,000 |  |  | $ | 11,000 |  |  | $ | - |  |  | $ | 2,058,000 |
Ending balance collectively evaluated for impairment |  | $ | 4,851,000 |  |  | $ | 625,000 |  |  | $ | 1,661,000 |  |  | $ | 19,000 |  |  | $ | 681,000 |  |  | $ | 20,000 |  |  | $ | 504,000 |  |  | $ | 573,000 |  |  | $ | 2,008,000 |  |  | $ | 10,942,000 |
Related loan balances: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 255,424,000 |  |  | $ | 32,574,000 |  |  | $ | 86,982,000 |  |  | $ | 16,221,000 |  |  | $ | 341,286,000 |  |  | $ | 10,469,000 |  |  | $ | 105,244,000 |  |  | $ | 16,788,000 |  |  | $ | - |  |  | $ | 864,988,000 |
Ending balance specifically evaluated for impairment |  | $ | 10,141,000 |  |  | $ | 5,702,000 |  |  | $ | 7,042,000 |  |  | $ | - |  |  | $ | 16,821,000 |  |  | $ | 1,198,000 |  |  | $ | 1,163,000 |  |  | $ | 53,000 |  |  | $ | - |  |  | $ | 42,120,000 |
Ending balance collectively evaluated for impairment |  | $ | 245,283,000 |  |  | $ | 26,872,000 |  |  | $ | 79,940,000 |  |  | $ | 16,221,000 |  |  | $ | 324,465,000 |  |  | $ | 9,271,000 |  |  | $ | 104,081,000 |  |  | $ | 16,735,000 |  |  | $ | - |  |  | $ | 822,868,000 |
For the three months ended |  | Commercial |  |  | Municipal |  |  | Residential |  |  | Home Equity |  |  | Consumer |  |  | Unallocated |  |  | Total |
March 31, 2011 |  | Real Estate |  |  | Construction |  |  | Other |  |  |  |  |  | Term |  |  | Construction |  |  | Line of Credit |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 5,260,000 |  |  | $ | 1,012,000 |  |  | $ | 2,377,000 |  |  | $ | 19,000 |  |  | $ | 1,408,000 |  |  | $ | 44,000 |  |  | $ | 670,000 |  |  | $ | 646,000 |  |  | $ | 1,880,000 |  |  | $ | 13,316,000 |
Charge offs |  |  | 289,000 |  |  |  | - |  |  |  | 161,000 |  |  |  | - |  |  |  | 457,000 |  |  |  | 505,000 |  |  |  | 1,000 |  |  |  | 100,000 |  |  |  | - |  |  |  | 1,513,000 |
Recoveries |  |  | 5,000 |  |  |  | - |  |  |  | 17,000 |  |  |  | - |  |  |  | 3,000 |  |  |  | - |  |  |  | - |  |  |  | 72,000 |  |  |  | - |  |  |  | 97,000 |
Provision |  |  | 1,334,000 |  |  |  | (373,000 | ) |  |  | 302,000 |  |  |  | - |  |  |  | 451,000 |  |  |  | 607,000 |  |  |  | 9,000 |  |  |  | 95,000 |  |  |  | (325,000 | ) |  |  | 2,100,000 |
Ending balance |  | $ | 6,310,000 |  |  | $ | 639,000 |  |  | $ | 2,535,000 |  |  | $ | 19,000 |  |  | $ | 1,405,000 |  |  | $ | 146,000 |  |  | $ | 678,000 |  |  | $ | 713,000 |  |  | $ | 1,555,000 |  |  | $ | 14,000,000 |
Ending balance specifically evaluated for impairment |  | $ | 593,000 |  |  | $ | - |  |  | $ | 326,000 |  |  | $ | - |  |  | $ | 381,000 |  |  | $ | 106,000 |  |  | $ | 139,000 |  |  | $ | 76,000 |  |  | $ | - |  |  | $ | 1,621,000 |
Ending balance collectively evaluated for impairment |  | $ | 5,717,000 |  |  | $ | 639,000 |  |  | $ | 2,209,000 |  |  | $ | 19,000 |  |  | $ | 1,024,000 |  |  | $ | 40,000 |  |  | $ | 539,000 |  |  | $ | 637,000 |  |  | $ | 1,555,000 |  |  | $ | 12,379,000 |
Related loan balances: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 263,800,000 |  |  | $ | 29,316,000 |  |  | $ | 101,762,000 |  |  | $ | 20,834,000 |  |  | $ | 340,841,000 |  |  | $ | 13,370,000 |  |  | $ | 106,172,000 |  |  | $ | 18,589,000 |  |  | $ | - |  |  | $ | 894,684,000 |
Ending balance specifically evaluated for impairment |  | $ | 7,482,000 |  |  | $ | 813,000 |  |  | $ | 1,604,000 |  |  | $ | - |  |  | $ | 13,948,000 |  |  | $ | 2,248,000 |  |  | $ | 604,000 |  |  | $ | 115,000 |  |  | $ | - |  |  | $ | 26,814,000 |
Ending balance collectively evaluated for impairment |  | $ | 256,318,000 |  |  | $ | 28,503,000 |  |  | $ | 100,158,000 |  |  | $ | 20,834,000 |  |  | $ | 326,893,000 |  |  | $ | 11,122,000 |  |  | $ | 105,568,000 |  |  | $ | 18,474,000 |  |  | $ | - |  |  | $ | 867,870,000 |
A troubled debt restructure ("TDR") constitutes a restructuring of debt if the Company, for economic or legal reasons related to the borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. To determine whether or not a loan should be classified as a TDR, Management evaluates a loan based upon the following criteria:
� | The borrower demonstrates financial difficulty; common indicators include past due status with bank obligations, substandard credit bureau reports, or an inability to refinance with another lender, and
� | The Company has granted a concession; common concession types include maturity date extension, interest rate adjustments to below market pricing, and deferment of payments.
As of March 31, 2012, the Company had 71 loans with a value of $20,647,000 that have been classified as TDRs. This compares to 59 loans with a value of $22,858,000 and 36 loans with a value of $6,021,000 classified as TDRs as of December 31, 2011 and March 31, 2011, respectively. The impairment carried as a specific reserve in the allowance for loan losses is calculated by present valuing the cashflow modification on the loan, or, for collateral-dependent loans, using the fair value of the collateral less costs to sell. The following table shows TDRs by class and the specific reserve as of March 31, 2012:
|  | Number of Loans |  |  | Balance |  |  | Specific Reserves |
Commercial |  |  |  |  |  |  |  |  |
Real estate |  |  | 12 |  |  | $ | 7,610,000 |  |  | $ | 271,000 |
Construction |  |  | 1 |  |  |  | 1,148,000 |  |  |  | - |
Other |  |  | 12 |  |  |  | 1,919,000 |  |  |  | 85,000 |
Municipal |  |  | - |  |  |  | - |  |  |  | - |
Residential |  |  |  |  |  |  |  |  |  |  |  |
Term |  |  | 46 |  |  |  | 9,970,000 |  |  |  | 250,000 |
Construction |  |  | - |  |  |  | - |  |  |  | - |
Home equity line of credit |  |  | - |  |  |  | - |  |  |  | - |
Consumer |  |  | - |  |  |  | - |  |  |  | - |
Unallocated |  |  | - |  |  |  | - |  |  |  | - |
|  |  | 71 |  |  | $ | 20,647,000 |  |  | $ | 606,000 |
As of March 31, 2012, 11 of the loans classified as TDRs with a total balance of $2,258,000 were more than 30 days past due. Of these loans, 7 loans with an outstanding balance of $1,733,000 had been placed on TDR status in the previous 12 months. The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of March 31, 2012:
|  | Number of Loans |  |  | Balance |  |  | Specific Reserves |
Commercial |  |  |  |  |  |  |  |  |
Real estate |  |  | - |  |  | $ | - |  |  | $ | - |
Construction |  |  | - |  |  |  | - |  |  |  | - |
Other |  |  | 4 |  |  |  | 667,000 |  |  |  | 44,000 |
Municipal |  |  | - |  |  |  | - |  |  |  | - |
Residential |  |  |  |  |  |  |  |  |  |  |  |
Term |  |  | 7 |  |  |  | 1,591,000 |  |  |  | 29,000 |
Construction |  |  | - |  |  |  | - |  |  |  | - |
Home equity line of credit |  |  | - |  |  |  | - |  |  |  | - |
Consumer |  |  | - |  |  |  | - |  |  |  | - |
Unallocated |  |  | - |  |  |  | - |  |  |  | - |
|  |  | 11 |  |  | $ | 2,258,000 |  |  | $ | 73,000 |
In the first three months of 2012, 14 loans were placed on TDR status with an outstanding balance of $3,007,000. These were considered to be TDRs because concessions had been granted to borrowers experiencing financial difficulties. Concessions include reductions in interest rates, principal and/or interest forbearance, payment extensions, or combinations thereof. The following table shows loans placed on TDR status by class of loan and the associated specific reserve included in the allowance for loan losses as of March 31, 2012:
|  | Number of Loans |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |  |  | Specific Reserves |
Commercial |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 7 |  |  | $ | 2,438,000 |  |  | $ | 2,404,000 |  |  | $ | - |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Other |  |  | 3 |  |  |  | 12,000 |  |  |  | 12,000 |  |  |  | - |
Municipal |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Residential |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Term |  |  | 4 |  |  |  | 557,000 |  |  |  | 557,000 |  |  |  | 16,000 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Home equity line of credit |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Consumer |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Unallocated |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
|  |  | 14 |  |  | $ | 3,007,000 |  |  | $ | 2,973,000 |  |  | $ | 16,000 |
As of March 31, 2012, Management is aware of 6 loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $1,021,000. As of March 31, 2012, there were 19 loans with an outstanding balance of $3,160,000 that were classified as TDRs and on non-accrual status.

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