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Loans and Allowance for Loan Losses
9 Months Ended
Sep. 30, 2011
Loans and Allowance for Loan Losses [Abstract] 
Loans and Allowance for Loan Losses
(2)   Loans and Allowance for Loan Losses

A summary of loans, by major class within our Company’s loan portfolio, at September 30, 2011 and December 31, 2010 are as follows:

 

                 
    September 30,
2011		     December 31,
2010		  

Commercial, financial, and agricultural

   $ 126,065,400     $ 131,382,467  

Real estate construction - residential

     29,129,725       31,834,174  

Real estate construction - commercial

     46,039,024       56,052,910  

Real estate mortgage - residential

     204,666,555       207,834,488  

Real estate mortgage - commercial

     413,682,553       439,068,622  

Installment and other consumer

     30,038,205       32,132,336  

Unamortized loan origination fees and costs, net

     179,538       167,466  
   

 

 

    

 

 

  

Total loans

  $ 849,801,000     $ 898,472,463  
   

 

 

    

 

 

  

The Bank grants real estate, commercial, installment, and other consumer loans to customers located within the communities of and surrounding Jefferson City, Clinton, Warsaw, Springfield, Branson and Lee’s Summit, Missouri. As such, the Bank is susceptible to changes in the economic environment in these communities. The Bank does not have a concentration of credit in any one economic sector. Installment and other consumer loans consist primarily of the financing of vehicles.

At September 30, 2011, loans with a carrying value of $440,525,000 were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit.

Allowance for loan losses

The following table provides the balance in the allowance for loan losses at September 30, 2011 and December 31, 2010, and the related loan balance by impairment methodology. Loans evaluated under ASC 310-10-35 include loans on non-accrual status, which are individually evaluated for impairment, troubled debt restructurings, and other impaired loans deemed to have similar risk characteristics. All other loans are collectively evaluated for impairment under ASC 450-20. Although the allowance for loan losses is comprised of specific and general allocations, the entire allowance is available to absorb credit losses.

 

The following is a summary of the allowance for loan losses at or for the three and nine months ended September 30, 2011 as follows:

 

                                                                 
    For the Three Months Ended September 30, 2011  

(in thousands)

   Commercial,
Financial, and
Agricultural		     Real Estate
Construction -
Residential		     Real Estate
Construction -
Commercial		     Real Estate
Mortgage -
Residential		     Real Estate
Mortgage -
Commercial		     Installment
Loans to
Individuals		     Unallocated     Total  

Allowance for loan losses:

                                                                

Balance, beginning of period

   $ 2,533     $ 986     $ 1,330     $ 2,990     $ 4,837     $ 219     $ 968     $ 13,863  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Additions:

                                                                

Provision for loan losses

     562       284       490       (9 )     1,550       99       (966 )     2,010  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Deductions:

                                                                

Loans charged off

     1,273       311       512       219       884       122       —         3,321  

Less recoveries on loans

     —         (2 )      —         (27 )     (40 )     (69 )     —         (138 )
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loans charged off

     1,273       309       512       192       844       53       —         3,183  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance, end of period

   $ 1,822     $ 961     $ 1,308     $ 2,789     $ 5,543     $ 265     $ 2     $ 12,690  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
   
    For the Nine Months Ended September 30, 2011  

(in thousands)

   Commercial,
Financial, and
Agricultural		     Real Estate
Construction -
Residential		     Real Estate
Construction -
Commercial		     Real Estate
Mortgage -
Residential		     Real Estate
Mortgage -
Commercial		     Installment
Loans to
Individuals		     Unallocated     Total  

Allowance for loan losses:

                                                                

Balance, beginning of period

   $ 2,931     $ 2,067     $ 1,339     $ 3,922     $ 3,458     $ 231     $ 617     $ 14,565  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Additions:

                                                                

Provision for loan losses

     968       688       231       524       3,641       206       (615 )     5,643  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Deductions:

                                                                

Loans charged off

     2,146       1,858       512       1,758       1,625       369       —         8,268  

Less recoveries on loans

     (69 )      (64 )      (250 )      (101 )     (69 )     (197 )     —         (750 )
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loans charged off

     2,077       1,794       262       1,657       1,556       172       —         7,518  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance, end of period

   $ 1,822     $ 961     $ 1,308     $ 2,789     $ 5,543     $ 265     $ 2     $ 12,690  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The tables provide other information regarding the allowance for loan losses and balance by type of allowance methodology at September 30, 2011 and December 31, 2010 as follows:

 

                                                                 

(in thousands)

   Commercial,
Financial,
and
Agricultural		     Real Estate
Construction
- Residential		     Real Estate
Construction -
Commercial		     Real
Estate
Mortgage -
Residential		     Real Estate
Mortgage -
Commercial		     Installment
Loans to
Individuals		     Unallocated     Total  

September 30, 2011

                                                                

Allowance for loan losses:

                                                                

Individually evaluated for impairment

   $ 242     $ —       $ 85     $ 334     $ 3,272     $ —       $ —       $ 3,933  

Collectively evaluated for impairment

     1,580       961       1,223       2,455       2,271       265       2       8,757  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 1,822     $ 961     $ 1,308     $ 2,789     $ 5,543     $ 265     $ 2     $ 12,690  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans outstanding:

                                                                

Individually evaluated for impairment

   $ 3,966     $ 650     $ 7,232     $ 6,316     $ 35,351     $ —       $ —       $ 53,515  

Collectively evaluated for impairment

     122,099       28,480       38,807       198,350       378,332       30,218       —         796,286  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 126,065     $ 29,130     $ 46,039     $ 204,666     $ 413,683     $ 30,218     $ —       $ 849,801  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2010

                                                                

Allowance for loan losses:

                                                                

Individually evaluated for impairment

   $ 1,737     $ 1,553     $ 201     $ 1,117     $ 1,768     $ —       $ —       $ 6,376  

Collectively evaluated for impairment

     1,194       514       1,138       2,805       1,690       231       617       8,189  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 2,931     $ 2,067     $ 1,339     $ 3,922     $ 3,458     $ 231     $ 617     $ 14,565  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans outstanding:

                                                                

Individually evaluated for impairment

   $ 3,660     $ 3,586     $ 11,783     $ 8,040     $ 29,076     $ —       $ —       $ 56,145  

Collectively evaluated for impairment

     127,722       28,248       44,270       199,795       409,993       32,299       —         842,327  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 131,382     $ 31,834     $ 56,053     $ 207,835     $ 439,069     $ 32,299     $ —       $ 898,472  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans, or portions of loans, are charged off to the extent deemed uncollectible. Loan charge-offs reduce the allowance for loan losses, and recoveries of loans previously charged off are added back to the allowance. Once the fair value for a collateral dependent loan has been determined, any impaired amount is typically charged off unless the loan has other income streams to support repayment. For impaired loans which have other income streams to support repayment, a specific reserve is established for the amount determined to be impaired.

Impaired loans

Impaired loans totaled $53,683,301 and $56,270,543 at September 30, 2011 and December 31, 2010 respectively, and are comprised of loans on non-accrual status and loans which have been classified as troubled debt restructurings.

The categories of impaired loans at September 30, 2011 and December 31, 2010 are as follows:

 

                 
    September 30,
2011		     December 31,
2010		  

Non-accrual loans

   $ 46,661,244     $ 50,586,887  

Troubled debt restructurings continuing to accrue interest

     7,022,057       5,683,656  
   

 

 

    

 

 

  

Total impaired loans

   $ 53,683,301     $ 56,270,543  
   

 

 

    

 

 

  

At September 30, 2011, loans classified as troubled debt restructurings (TDRs) totaled $33,694,501, of which $26,672,444 were on non-accrual status and $7,022,057 were on accrual status. At December 31, 2010, loans classified as TDRs totaled $22,080,431, of which $16,396,775 were on non-accrual status and $5,683,656 was on accrual status. When an individual loan is determined to be a TDR, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral less applicable selling costs. Accordingly, specific reserves of $2,281,000 and $1,359,000 were allocated to the allowance for loan losses at September 30, 2011 and December 31, 2010, respectively. As a result of adopting the amendments in Accounting Standards Update (ASU) No. 2011-02 – Receivables (ASC Topic 310) – A Creditor’s Determination of Whether a restructuring Is a Troubled Debt Restructuring, our Company reassessed all restructurings that occurred on or after January 1, 2011 for identification as TDRs.

The following table summarizes loans that were modified as TDRs during the three and nine months ended September 30, 2011:

 

                                                 
    Three Months Ended
September 30, 2011		     Nine Months Ended
September 30, 2011		  
    Recorded Investment (1)     Recorded Investment (1)  
    Number of
Contracts		     Pre-
Modification		     Post-
Modification		     Number of
Contracts		     Pre-
Modification		     Post-
Modification		  

Troubled Debt Restructurings

                                                

Commercial, financial and agricultural

     1     $ 1,196,080     $ 1,196,080       8     $ 3,200,191     $ 3,199,086  

Real estate construction - commercial

    5       5,934,672       5,547,861       5       5,934,672       5,547,861  

Real estate mortgage- residential

     1       202,185       202,185       5       954,603       933,304  

Real estate mortgage - commercial

    7       5,412,927       5,146,928       9       7,539,214       7,273,215  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

     14     $ 12,745,864     $ 12,093,054       27     $ 17,628,680     $ 16,953,466  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) The amounts reported post-modification are inclusive of all partial pay-downs and charge-offs, and no portion of the debt was forgiven. Loans modified as a TDR that were fully paid down, charged-off or foreclosed upon during the period ended are not reported.

According to guidance provided in ASC subtopic 310-40, Troubled Debt Restructurings by Creditors, a loan restructuring or modification of terms is a TDR if the creditor for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider. Our Company’s portfolio of loans classified as TDRs include concessions such as interest rates below the current market rate, deferring principal payments, and extending maturity dates. Once a loan becomes a TDR, it will continue to be reported as a TDR until it is ultimately repaid in full, charged-off, or foreclosed and sold. Our Company considers a loan in TDR status in default when the borrowers payment according to the modified terms is at least 90 days past due or has defaulted due to expiration of the loans maturity date. During the nine months ended September 30, 2011, twenty-seven loans were modified meeting the criteria for troubled debt restructurings. During this time period none of these twenty-seven 2011 TDRs have subsequently defaulted.

Interest income recognized on loans in non-accrual status and contractual interest that would be recorded had the loans performed in accordance with their original contractual terms is as follows:

 

                                 
    Three Months  Ended
September 30,		     Nine Months  Ended
September 30,		  
    2011     2010     2011     2010  

Contractual interest due on non-accrual loans

   $ 572,643     $ 606,927     $ 1,791,551     $ 1,885,164  

Interest income recognized on loans in non-accrual status

     7,705       6,513       40,545       10,733  
   

 

 

    

 

 

    

 

 

    

 

 

  

Net reduction in interest income

   $ 564,938     $ 600,414     $ 1,751,006     $ 1,874,431  
   

 

 

    

 

 

    

 

 

    

 

 

  

The specific reserve component of our Company’s allowance for loan losses at September 30, 2011 and December 31, 2010 was determined by using fair values of the underlying collateral obtained through independent appraisals and internal evaluations, or by discounting the total expected future cash flows. The recorded investment varies from the unpaid principal balance primarily due to partial charge-offs taken resulting from current appraisals received. The amount recognized as interest income on impaired loans continuing to accrue interest, primarily related to troubled debt restructurings, was $149,981 and $480,950 for the nine months ended September 30, 2011 and September 30, 2010, respectively. Average recorded investment in impaired loans is calculated on a monthly basis during the period.

 

The following table provides additional information about impaired loans at September 30, 2011 and December 31, 2010, respectively, segregated between loans for which an allowance has been provided and loans for which no allowance has been provided:

 

                                                 
    Recorded
Investment		     Unpaid
Principal
Balance		     Related
Allowance		     Average
Recorded
Investment		     Interest Income  Recognized
For the Period Ended		  
            Three Months     Nine Months  

At September 30, 2011

                                                

With no related allowance recorded:

                                                

Commercial, financial and Agricultural

   $ 3,006,014     $ 3,060,554     $ —       $ 3,516,582     $ 29,671     $ 18,597  

Real estate - construction residential

    649,985       844,642       —         1,488,000       —         —    

Real estate - construction commercial

    7,046,795       7,360,078       —         9,818,048       —         —    

Real estate - residential

    2,455,915       2,765,299       —         3,630,896       18,916       7,218  

Real estate - commercial

    14,181,853       15,584,303       —         11,844,195       41,287       23,247  

Consumer

     167,752       189,955       —         194,996       2,948       1,599  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 27,508,314     $ 29,804,831     $ —       $ 30,492,717     $ 92,822     $ 50,661  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

With an allowance recorded:

                                                

Commercial, financial and Agricultural

   $ 960,623     $ 849,256     $ 242,308     $ 660,959     $ 9,843     $ 5,443  

Real estate - construction residential

    —         —         —         —         —         —    

Real estate - construction commercial

    185,154       188,278       85,000       82,846       —         —    

Real estate - residential

    3,860,337       3,749,523       333,907       3,286,520       82,807       28,335  

Real estate - commercial

    21,168,873       21,897,239       3,272,050       17,685,872       5,054       1,765  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 26,174,987     $ 26,684,296     $ 3,933,265     $ 21,716,197     $ 97,704     $ 35,543  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total impaired loans

   $ 53,683,301     $ 56,489,127     $ 3,933,265     $ 52,208,914     $ 190,526     $ 86,204  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

At December 31, 2010

                                                

With no related allowance recorded:

                                                

Commercial, financial and Agricultural

   $ 441,861     $ 629,296     $ —                            

Real estate - construction residential

    1,769,622       2,355,936       —                            

Real estate - construction commercial

    8,297,388       9,393,368       —                            

Real estate - residential

    2,463,735       2,950,560       —                            

Real estate - commercial

    12,939,973       14,869,833       —                            

Consumer

     125,858       132,688       —                            
   

 

 

    

 

 

    

 

 

                          

Total

   $ 26,038,437     $ 30,331,681     $ —                            
   

 

 

    

 

 

    

 

 

                          

With an allowance recorded:

                                                

Commercial, financial and Agricultural

   $ 3,217,995     $ 3,260,009     $ 1,737,159                          

Real estate - construction residential

    1,816,276       1,848,593       1,552,406                          

Real estate - construction commercial

    3,485,517       4,740,517       201,147                          

Real estate - residential

    5,576,292       5,669,041       1,117,141                          

Real estate - commercial

    16,136,025       16,215,862       1,767,893                          
   

 

 

    

 

 

    

 

 

                          

Total

   $ 30,232,106     $ 31,734,022     $ 6,375,746                          
   

 

 

    

 

 

    

 

 

                          

Total impaired loans

   $ 56,270,543     $ 62,065,703     $ 6,375,746                          
   

 

 

    

 

 

    

 

 

                          

 

It is our Company’s policy to discontinue the accrual of interest income on loans when management believes that the borrower’s financial condition, after consideration of business conditions and collection efforts, is such that the collection of interest is doubtful, or upon which principal or interest has been in default for a period of 90 days or more and the asset is not both well secured and in the process of collection. Subsequent interest payments received on such loans are applied to principal if any doubt exists as to the collectability of such principal; otherwise, such receipts are recorded as interest income on a cash basis.

Age Analysis of Past Due and Non-Accrual Loans

 

                                         
    Current or
Less Than
30 Days
Past Due		     30 - 89 Days
Past Due		     90 Days
Past Due
And Still
Accruing		     Non-Accrual     Total  

September 30, 2011

                                        

Commercial, Financial, and Agricultural

   $ 123,612,428     $ 544,765     $ 3,230     $ 1,904,977     $ 126,065,400  

Real Estate Construction - Residential

    28,479,740       —         —         649,985       29,129,725  

Real Estate Construction - Commercial

    38,256,216       550,860       —         7,231,948       46,039,024  

Real Estate Mortgage - Residential

    199,396,369       1,389,622       23,076       3,857,488       204,666,555  

Real Estate Mortgage - Commercial

    379,754,317       936,979       142,163       32,849,094       413,682,553  

Installment and Other Consumer

     29,736,706       304,500       8,785       167,752       30,217,743  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 799,235,776     $ 3,726,726     $ 177,254     $ 46,661,244     $ 849,801,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2010

                                        

Commercial, Financial, and Agricultural

   $ 127,315,586     $ 534,865     $ —       $ 3,532,016     $ 131,382,467  

Real Estate Construction - Residential

    28,200,876       47,400       —         3,585,898       31,834,174  

Real Estate Construction - Commercial

    45,511,088       474,934       —         10,066,888       56,052,910  

Real Estate Mortgage - Residential

    199,386,784       2,775,654       —         5,672,050       207,834,488  

Real Estate Mortgage - Commercial

    409,906,845       1,557,599       —         27,604,178       439,068,622  

Installment and Other Consumer

     31,784,217       356,812       32,916       125,857       32,299,802  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 842,105,396     $ 5,747,264     $ 32,916     $ 50,586,887     $ 898,472,463  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The following table provides information about the credit quality of the loan portfolio using our Company’s internal rating system reflecting management’s risk assessment. Loans are placed on watch status when (1) one or more weaknesses which could jeopardize timely liquidation exits; or (2) the margin or liquidity of an asset is sufficiently tenuous that adverse trends could result in a collection problem. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified may have a well defined weakness or weaknesses that jeopardize the repayment of the debt. Such loans are characterized by the distinct possibility that our Company may sustain some loss if the deficiencies are not corrected. Loans are placed on non-accrual status when (1) deterioration in the financial condition of the borrower exists such that payment of full principal and interest is not expected, or (2) payment of principal or interest has been in default for a period of 90 days or more and the asset is not both well secured and in the process of collection.

 

                                                         
    Commercial     Real Estate
Construction -
Residential		     Real Estate
Construction -
Commercial		     Real Estate
Mortgage -
Residential		     Real Estate
Mortgage -
Commercial		     Installment
and other
Consumer		     Total  

At September 30, 2011

                                                        

Watch

   $ 23,346,703     $ 8,114,728     $ 9,374,238     $ 13,176,253     $ 31,455,825     $ 519,742     $ 85,987,489  

Substandard

     4,198,655       784,288       1,704,497       4,317,855       9,845,321       403,971       21,254,587  

Non-accrual

     1,904,977       649,985       7,231,948       3,857,488       32,849,094       167,752       46,661,244  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 29,450,335     $ 9,549,001     $ 18,310,683     $ 21,351,596     $ 74,150,240     $ 1,091,465     $ 153,903,320  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

At December 31, 2010

                                                        

Watch

   $ 21,981,367     $ 7,519,394     $ 9,400,584     $ 9,184,659     $ 35,050,206     $ 564,489     $ 83,700,699  

Substandard

     2,840,703       757,637       4,242,934       4,423,219       12,635,163       441,514       25,341,170  

Non-accrual

     3,532,016       3,585,898       10,066,888       5,672,050       27,604,178       125,857       50,586,887  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 28,354,086     $ 11,862,929     $ 23,710,406     $ 19,279,928     $ 75,289,547     $ 1,131,860     $ 159,628,756