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Loans and Allowance for Loan Losses | 9 Months Ended
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Sep. 30, 2012
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, 2012 and December 31, 2011 are as follows:
(in thousands) |  | September 30, 2012 |  |  | December 31, 2011 |
Commercial, financial, and agricultural |  | $ | 124,977 |  |  | $ | 128,555 |
Real estate construction - residential |  |  | 22,074 |  |  |  | 30,201 |
Real estate construction - commercial |  |  | 44,751 |  |  |  | 47,697 |
Real estate mortgage - residential |  |  | 222,124 |  |  |  | 203,454 |
Real estate mortgage - commercial |  |  | 402,969 |  |  |  | 402,960 |
Installment and other consumer |  |  | 26,006 |  |  |  | 29,884 |
Unamortized loan origination fees and costs, net |  |  | 197 |  |  |  | 179 |
Total loans |  | $ | 843,098 |  |  | $ | 842,930 |
The Bank grants real estate, commercial, installment, and other consumer loans to customers located within the communities 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, 2012, loans with a carrying value of $452,000,000 were pledged to Federal Home Loan Bank as collateral for borrowings and letters of credit. Allowance for loan losses The following is a summary of the allowance for loan losses for the three and nine months ended September 30, 2012 and 2011:
|  | For the Three Months Ended September 30, 2012 |
(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 |
Balance, beginning of period |  | $ | 3,045 |  |  | $ | 709 |  |  | $ | 1,644 |  |  | $ | 3,560 |  |  | $ | 6,107 |  |  | $ | 232 |  |  | $ | 17 |  |  | $ | 15,314 |
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for loan losses |  |  | 1,239 |  |  |  | (68 | ) |  |  | 90 |  |  |  | 118 |  |  |  | 3,241 |  |  |  | 91 |  |  |  | (11 | ) |  |  | 4,700 |
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off |  |  | 742 |  |  |  | 0 |  |  |  | 0 |  |  |  | 41 |  |  |  | 2,366 |  |  |  | 154 |  |  |  | 0 |  |  |  | 3,303 |
Less recoveries on loans |  |  | (18 | ) |  |  | 0 |  |  |  | 0 |  |  |  | (19 | ) |  |  | (96 | ) |  |  | (76 | ) |  |  | 0 |  |  |  | (209 | )
Net loans charged off |  |  | 724 |  |  |  | 0 |  |  |  | 0 |  |  |  | 22 |  |  |  | 2,270 |  |  |  | 78 |  |  |  | 0 |  |  |  | 3,094 |
Balance, end of period |  | $ | 3,560 |  |  | $ | 641 |  |  | $ | 1,734 |  |  | $ | 3,656 |  |  | $ | 7,078 |  |  | $ | 245 |  |  | $ | 6 |  |  | $ | 16,920 |
|  | For the Nine Months Ended September 30, 2012 |
(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 |
Balance, beginning of period |  | $ | 1,804 |  |  | $ | 1,188 |  |  | $ | 1,562 |  |  | $ | 3,251 |  |  | $ | 5,734 |  |  | $ | 267 |  |  | $ | 3 |  |  | $ | 13,809 |
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for loan losses |  |  | 2,469 |  |  |  | (614 | ) |  |  | 149 |  |  |  | 913 |  |  |  | 4,793 |  |  |  | 187 |  |  |  | 3 |  |  |  | 7,900 |
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off |  |  | 846 |  |  |  | 0 |  |  |  | 0 |  |  |  | 618 |  |  |  | 3,666 |  |  |  | 425 |  |  |  | 0 |  |  |  | 5,555 |
Less recoveries on loans |  |  | (133 | ) |  |  | (67 | ) |  |  | (23 | ) |  |  | (110 | ) |  |  | (217 | ) |  |  | (216 | ) |  |  | 0 |  |  |  | (766 | )
Net loans charged off |  |  | 713 |  |  |  | (67 | ) |  |  | (23 | ) |  |  | 508 |  |  |  | 3,449 |  |  |  | 209 |  |  |  | 0 |  |  |  | 4,789 |
Balance, end of period |  | $ | 3,560 |  |  | $ | 641 |  |  | $ | 1,734 |  |  | $ | 3,656 |  |  | $ | 7,078 |  |  | $ | 245 |  |  | $ | 6 |  |  | $ | 16,920 |
|  | 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 |
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 |  |  |  | 0 |  |  |  | 3,321 |
Less recoveries on loans |  |  | 0 |  |  |  | (2 | ) |  |  | 0 |  |  |  | (27 | ) |  |  | (40 | ) |  |  | (69 | ) |  |  | 0 |  |  |  | (138 | )
Net loans charged off |  |  | 1,273 |  |  |  | 309 |  |  |  | 512 |  |  |  | 192 |  |  |  | 844 |  |  |  | 53 |  |  |  | 0 |  |  |  | 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 |
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 |  |  |  | 0 |  |  |  | 8,268 |
Less recoveries on loans |  |  | (69 | ) |  |  | (64 | ) |  |  | (250 | ) |  |  | (101 | ) |  |  | (69 | ) |  |  | (197 | ) |  |  | 0 |  |  |  | (750 | )
Net loans charged off |  |  | 2,077 |  |  |  | 1,794 |  |  |  | 262 |  |  |  | 1,657 |  |  |  | 1,556 |  |  |  | 172 |  |  |  | 0 |  |  |  | 7,518 |
Balance, end of period |  | $ | 1,822 |  |  | $ | 961 |  |  | $ | 1,308 |  |  | $ | 2,789 |  |  | $ | 5,543 |  |  | $ | 265 |  |  | $ | 2 |  |  | $ | 12,690 |
The following table provides the balance in the allowance for loan losses at September 30, 2012 and December 31, 2011, 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.
(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, 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 1,952 |  |  | $ | 60 |  |  | $ | 553 |  |  | $ | 858 |  |  | $ | 2,439 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 5,862 |
Collectively evaluated for impairment |  |  | 1,608 |  |  |  | 581 |  |  |  | 1,181 |  |  |  | 2,798 |  |  |  | 4,639 |  |  |  | 245 |  |  |  | 6 |  |  |  | 11,058 |
Total |  | $ | 3,560 |  |  | $ | 641 |  |  | $ | 1,734 |  |  | $ | 3,656 |  |  | $ | 7,078 |  |  | $ | 245 |  |  | $ | 6 |  |  | $ | 16,920 |
Loans outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 5,676 |  |  | $ | 2,540 |  |  | $ | 7,890 |  |  | $ | 5,307 |  |  | $ | 20,585 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 41,998 |
Collectively evaluated for impairment |  |  | 119,300 |  |  |  | 19,534 |  |  |  | 36,861 |  |  |  | 216,817 |  |  |  | 382,385 |  |  |  | 26,203 |  |  |  | 0 |  |  |  | 801,100 |
Total |  | $ | 124,976 |  |  | $ | 22,074 |  |  | $ | 44,751 |  |  | $ | 222,124 |  |  | $ | 402,970 |  |  | $ | 26,203 |  |  | $ | 0 |  |  | $ | 843,098 |
December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 239 |  |  | $ | 167 |  |  | $ | 380 |  |  | $ | 653 |  |  | $ | 2,309 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 3,748 |
Collectively evaluated for impairment |  |  | 1,565 |  |  |  | 1,021 |  |  |  | 1,182 |  |  |  | 2,598 |  |  |  | 3,425 |  |  |  | 267 |  |  |  | 3 |  |  |  | 10,061 |
Total |  | $ | 1,804 |  |  | $ | 1,188 |  |  | $ | 1,562 |  |  | $ | 3,251 |  |  | $ | 5,734 |  |  | $ | 267 |  |  | $ | 3 |  |  | $ | 13,809 |
Loans outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 4,428 |  |  | $ | 1,147 |  |  | $ | 7,867 |  |  | $ | 6,569 |  |  | $ | 33,440 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 53,451 |
Collectively evaluated for impairment |  |  | 124,127 |  |  |  | 29,054 |  |  |  | 39,830 |  |  |  | 196,885 |  |  |  | 369,520 |  |  |  | 30,063 |  |  |  | 0 |  |  |  | 789,479 |
Total |  | $ | 128,555 |  |  | $ | 30,201 |  |  | $ | 47,697 |  |  | $ | 203,454 |  |  | $ | 402,960 |  |  | $ | 30,063 |  |  | $ | 0 |  |  | $ | 842,930 |
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 $42,200,000 and $53,620,000 at September 30, 2012 and December 31, 2011 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, 2012 and December 31, 2011 are as follows:
(in thousands) |  | September 30, 2012 |  |  | December 31, 2011 |
Non-accrual loans |  | $ | 34,233 |  |  | $ | 46,403 |
Troubled debt restructurings continuing to accrue interest |  |  | 7,967 |  |  |  | 7,217 |
Total impaired loans |  | $ | 42,200 |  |  | $ | 53,620 |
The following tables provide additional information about impaired loans at September 30, 2012 and December 31, 2011, respectively, segregated between loans for which an allowance has been provided and loans for which no allowance has been provided:
(in thousands) |  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |
At September 30, 2012 |  |  |  |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and Agricultural |  | $ | 2,849 |  |  | $ | 2,955 |  |  | $ | 0 |
Real estate - construction residential |  |  | 2,350 |  |  |  | 2,379 |  |  |  | 0 |
Real estate - construction commercial |  |  | 1,879 |  |  |  | 2,110 |  |  |  | 0 |
Real estate - residential |  |  | 2,138 |  |  |  | 2,501 |  |  |  | 0 |
Real estate - commercial |  |  | 3,538 |  |  |  | 3,409 |  |  |  | 0 |
Consumer |  |  | 202 |  |  |  | 233 |  |  |  | 0 |
Total |  | $ | 12,956 |  |  | $ | 13,587 |  |  | $ | 0 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and Agricultural |  | $ | 2,828 |  |  | $ | 2,877 |  |  | $ | 1,952 |
Real estate - construction residential |  |  | 189 |  |  |  | 189 |  |  |  | 60 |
Real estate - construction commercial |  |  | 6,011 |  |  |  | 6,115 |  |  |  | 553 |
Real estate - residential |  |  | 3,169 |  |  |  | 3,324 |  |  |  | 858 |
Real estate - commercial |  |  | 17,047 |  |  |  | 17,602 |  |  |  | 2,439 |
Total |  | $ | 29,244 |  |  | $ | 30,107 |  |  | $ | 5,862 |
Total impaired loans |  | $ | 42,200 |  |  | $ | 43,694 |  |  | $ | 5,862 |
(in thousands) |  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |
At December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and Agricultural |  | $ | 3,546 |  |  | $ | 3,625 |  |  | $ | 0 |
Real estate - construction residential |  |  | 584 |  |  |  | 788 |  |  |  | 0 |
Real estate - construction commercial |  |  | 1,459 |  |  |  | 1,756 |  |  |  | 0 |
Real estate - residential |  |  | 2,315 |  |  |  | 2,654 |  |  |  | 0 |
Real estate - commercial |  |  | 15,151 |  |  |  | 21,190 |  |  |  | 0 |
Consumer |  |  | 168 |  |  |  | 177 |  |  |  | 0 |
Total |  | $ | 23,223 |  |  | $ | 30,190 |  |  | $ | 0 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and Agricultural |  | $ | 882 |  |  | $ | 904 |  |  | $ | 239 |
Real estate - construction residential |  |  | 563 |  |  |  | 563 |  |  |  | 167 |
Real estate - construction commercial |  |  | 6,409 |  |  |  | 6,448 |  |  |  | 380 |
Real estate - residential |  |  | 4,254 |  |  |  | 4,265 |  |  |  | 653 |
Real estate - commercial |  |  | 18,289 |  |  |  | 18,780 |  |  |  | 2,309 |
Total |  | $ | 30,397 |  |  | $ | 30,960 |  |  | $ | 3,748 |
Total impaired loans |  | $ | 53,620 |  |  | $ | 61,150 |  |  | $ | 3,748 |
The following table presents by class, information related to the average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2012 and 2011:
|  | For the Three Months Ended September 30, |  |  | For the Nine Months Ended September 30, |
|  | 2012 |  |  | 2011 |  |  | 2012 |  |  | 2011 |
(in thousands) |  | Average Recorded Investment |  |  | Interest Recognized For the Period Ended |  |  | Average Recorded Investment |  |  | Interest Recognized For the Period Ended |  |  | Average Recorded Investment |  |  | Interest Recognized For the Period Ended |  |  | Average Recorded Investment |  |  | Interest Recognized For the Period Ended |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and Agricultural |  | $ | 3,074 |  |  | $ | 23 |  |  | $ | 3,638 |  |  | $ | 19 |  |  | $ | 3,315 |  |  | $ | 66 |  |  | $ | 3,517 |  |  | $ | 30 |
Real estate - construction residential |  |  | 1,589 |  |  |  | 0 |  |  |  | 656 |  |  |  | 0 |  |  |  | 737 |  |  |  | 7 |  |  |  | 1,488 |  |  |  | 0 |
Real estate - construction commercial |  |  | 1,879 |  |  |  | 0 |  |  |  | 8,899 |  |  |  | 0 |  |  |  | 1,653 |  |  |  | 0 |  |  |  | 9,818 |  |  |  | 0 |
Real estate - residential |  |  | 2,299 |  |  |  | 5 |  |  |  | 2,583 |  |  |  | 7 |  |  |  | 3,333 |  |  |  | 47 |  |  |  | 3,631 |  |  |  | 19 |
Real estate - commercial |  |  | 3,598 |  |  |  | 28 |  |  |  | 14,035 |  |  |  | 23 |  |  |  | 10,582 |  |  |  | 87 |  |  |  | 11,844 |  |  |  | 41 |
Consumer |  |  | 181 |  |  |  | 0 |  |  |  | 179 |  |  |  | 2 |  |  |  | 162 |  |  |  | 1 |  |  |  | 195 |  |  |  | 3 |
Total |  | $ | 12,620 |  |  | $ | 56 |  |  | $ | 29,990 |  |  | $ | 51 |  |  | $ | 19,782 |  |  | $ | 208 |  |  | $ | 30,493 |  |  | $ | 93 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and Agricultural |  | $ | 2,890 |  |  | $ | 7 |  |  | $ | 963 |  |  | $ | 5 |  |  | $ | 2,615 |  |  | $ | 21 |  |  | $ | 661 |  |  | $ | 10 |
Real estate - construction residential |  |  | 189 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 189 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate - construction commercial |  |  | 6,192 |  |  |  | 0 |  |  |  | 186 |  |  |  | 0 |  |  |  | 6,180 |  |  |  | 0 |  |  |  | 83 |  |  |  | 0 |
Real estate - residential |  |  | 3,037 |  |  |  | 4 |  |  |  | 3,664 |  |  |  | 28 |  |  |  | 2,566 |  |  |  | 11 |  |  |  | 3,286 |  |  |  | 83 |
Real estate - commercial |  |  | 15,072 |  |  |  | 2 |  |  |  | 18,961 |  |  |  | 2 |  |  |  | 14,209 |  |  |  | 1 |  |  |  | 17,686 |  |  |  | 5 |
Total |  | $ | 27,380 |  |  | $ | 13 |  |  | $ | 23,774 |  |  | $ | 35 |  |  | $ | 25,759 |  |  | $ | 33 |  |  | $ | 21,716 |  |  | $ | 98 |
Total impaired loans |  | $ | 40,000 |  |  | $ | 69 |  |  | $ | 53,764 |  |  | $ | 86 |  |  | $ | 45,541 |  |  | $ | 241 |  |  | $ | 52,209 |  |  | $ | 191 |
The specific reserve component of our Company’s allowance for loan losses at September 30, 2012 and December 31, 2011 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 $69,000 and $86,000, for the three months ended September 30, 2012 and 2011, respectively, and $241,000 and $191,000 for the nine months ended September 30, 2012 and 2011, respectively. The average recorded investment in impaired loans is calculated on a monthly basis during the periods reported. Contractual interest due on loans in non-accrual status was $966,000 at September 30, 2012 compared to $1,751,000 at September 30, 2011. Interest income recognized on loans in non-accrual status was $8,000 and $41,000 for the three and nine months ended September 30, 2011. During the three and nine months ended September 30, 2012 there was no significant interest collected on loans in non-accrual status. Contractual interest due on non-accrual loans decreased from $1,110,000 at June 30, 2012 to $966,000 at September 30, 2012 due to several significant loans that went to foreclosure during the third quarter of 2012. Delinquent and Non-Accrual Loans The delinquency status of loans is determined based on the contractual terms of the notes. Borrowers are generally classified as delinquent once payments become 30 days or more past due. The following table provides aging information for our Company’s past due and non-accrual loans at September 30, 2012 and December 31, 2011.
(in thousands) |  | 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, 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, Financial, and Agricultural |  | $ | 121,195 |  |  | $ | 555 |  |  | $ | 0 |  |  | $ | 3,227 |  |  | $ | 124,977 |
Real Estate Construction - Residential |  |  | 19,534 |  |  |  | 0 |  |  |  | 0 |  |  |  | 2,540 |  |  |  | 22,074 |
Real Estate Construction - Commercial |  |  | 36,803 |  |  |  | 58 |  |  |  | 0 |  |  |  | 7,890 |  |  |  | 44,751 |
Real Estate Mortgage - Residential |  |  | 214,390 |  |  |  | 3,012 |  |  |  | 0 |  |  |  | 4,722 |  |  |  | 222,124 |
Real Estate Mortgage - Commercial |  |  | 386,438 |  |  |  | 879 |  |  |  | 0 |  |  |  | 15,652 |  |  |  | 402,969 |
Installment and Other Consumer |  |  | 25,596 |  |  |  | 400 |  |  |  | 5 |  |  |  | 202 |  |  |  | 26,203 |
Total |  | $ | 803,956 |  |  | $ | 4,904 |  |  | $ | 5 |  |  | $ | 34,233 |  |  | $ | 843,098 |
December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, Financial, and Agricultural |  | $ | 126,244 |  |  | $ | 243 |  |  | $ | 0 |  |  | $ | 2,068 |  |  | $ | 128,555 |
Real Estate Construction - Residential |  |  | 29,054 |  |  |  | 0 |  |  |  | 0 |  |  |  | 1,147 |  |  |  | 30,201 |
Real Estate Construction - Commercial |  |  | 39,822 |  |  |  | 0 |  |  |  | 8 |  |  |  | 7,867 |  |  |  | 47,697 |
Real Estate Mortgage - Residential |  |  | 195,779 |  |  |  | 3,513 |  |  |  | 9 |  |  |  | 4,153 |  |  |  | 203,454 |
Real Estate Mortgage - Commercial |  |  | 371,000 |  |  |  | 924 |  |  |  | 36 |  |  |  | 31,000 |  |  |  | 402,960 |
Installment and Other Consumer |  |  | 29,282 |  |  |  | 612 |  |  |  | 1 |  |  |  | 168 |  |  |  | 30,063 |
Total |  | $ | 791,181 |  |  | $ | 5,292 |  |  | $ | 54 |  |  | $ | 46,403 |  |  | $ | 842,930 |
Credit Quality 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 by 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. It is our Company’s policy to discontinue the accrual of interest income on loans when management believes that the collection of interest or principal is doubtful. Loans are placed on non-accrual status when (1) deterioration in the financial condition of the borrower exists for which 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. 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.
(in thousands) |  | 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, 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Watch |  | $ | 21,571 |  |  | $ | 4,006 |  |  | $ | 7,485 |  |  | $ | 24,617 |  |  | $ | 27,189 |  |  | $ | 648 |  |  | $ | 85,516 |
Substandard |  |  | 6,051 |  |  |  | 390 |  |  |  | 748 |  |  |  | 4,172 |  |  |  | 12,358 |  |  |  | 442 |  |  |  | 24,161 |
Non-accrual |  |  | 3,227 |  |  |  | 2,540 |  |  |  | 7,890 |  |  |  | 4,722 |  |  |  | 15,652 |  |  |  | 202 |  |  |  | 34,233 |
Total |  | $ | 30,849 |  |  | $ | 6,936 |  |  | $ | 16,123 |  |  | $ | 33,511 |  |  | $ | 55,199 |  |  | $ | 1,292 |  |  | $ | 143,910 |
At December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Watch |  | $ | 22,206 |  |  | $ | 9,644 |  |  | $ | 9,338 |  |  | $ | 13,231 |  |  | $ | 24,392 |  |  | $ | 557 |  |  | $ | 79,368 |
Substandard |  |  | 4,142 |  |  |  | 842 |  |  |  | 1,189 |  |  |  | 4,269 |  |  |  | 8,004 |  |  |  | 444 |  |  |  | 18,890 |
Non-accrual |  |  | 2,068 |  |  |  | 1,147 |  |  |  | 7,867 |  |  |  | 4,153 |  |  |  | 31,000 |  |  |  | 168 |  |  |  | 46,403 |
Total |  | $ | 28,416 |  |  | $ | 11,633 |  |  | $ | 18,394 |  |  | $ | 21,653 |  |  | $ | 63,396 |  |  | $ | 1,169 |  |  | $ | 144,661 |
Troubled Debt Restructurings At September 30, 2012, loans classified as troubled debt restructurings (TDRs) totaled $21,711,000, of which $13,744,000 was on non-accrual status and $7,967,000 was on accrual status. At December 31, 2011, loans classified as TDRs totaled $32,165,000, of which $24,948,000 was on non-accrual status and $7,217,000 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 $1,576,000 and $1,522,000 were allocated to the allowance for loan losses at September 30, 2012 and December 31, 2011, respectively. The following table summarizes loans that were modified as TDRs during the nine months ended September 30, 2012:
|  | The Nine Months Ended September 30, 2012 |
|  | Recorded Investment (1) |
(in thousands) |  | Number of Contracts |  |  | Pre- Modification |  |  | Post- Modification |
Troubled Debt Restructurings |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  |  | 3 |  |  | $ | 297 |  |  | $ | 280 |
Real estate construction - commercial |  |  | 1 |  |  |  | 43 |  |  |  | 42 |
Real estate mortgage - commercial |  |  | 2 |  |  |  | 644 |  |  |  | 644 |
Total |  |  | 6 |  |  | $ | 984 |  |  | $ | 966 |
(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 borrower’s 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 the collateral for the loan is foreclosed and sold. Our Company considers a loan in TDR status in default when the borrower’s payment according to the modified terms is at least 90 days past due or has defaulted due to expiration of the loan’s maturity date. During the three months ended September 30, 2012 there were no new loans meeting the TDR criteria. During the nine months ended September 30, 2012, six loans meeting the TDR criteria were modified. There were no loans modified as a TDR that defaulted during the three and nine months ended September 30, 2012, and within twelve months of their modification date.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(k)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 3, 4 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7512638&loc=d3e5074-111524 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=7512638&loc=d3e5162-111524 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.3,4) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph k -Article 4 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 01-6 -Paragraph 13 -Subparagraph d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7512638&loc=d3e5066-111524 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 7 -Article 9 + Details
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