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Loans and Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2013
Loans and Allowance for Loan Losses [Abstract]  
Loans and Allowance for Loan Losses
(2) Loans and Allowance for Loan Losses

Loans

A summary of loans, by major class within the Company’s loan portfolio, at March 31, 2013 and December 31, 2012 is as follows:

 

                 

(in thousands)

   March 31,
2013		     December 31,
2012		  

Commercial, financial, and agricultural

   $ 127,014     $ 130,040  

Real estate construction – residential

     22,568       22,177  

Real estate construction – commercial

     46,367       43,486  

Real estate mortgage – residential

     215,919       221,223  

Real estate mortgage – commercial

     398,555       405,092  

Installment and other consumer

     23,833       24,966  
   

 

 

    

 

 

  

Total loans

   $ 834,256     $ 846,984  
   

 

 

    

 

 

  

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 March 31, 2013, loans with a carrying value of $422,524,000 were pledged to the 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 months ended March 31, 2013, and 2012:

 

                                                                 

(in thousands)

   Commercial,
Financial, &
Agricultural		     Real Estate
Construction -
Residential		     Real Estate
Construction -
Commercial		     Real Estate
Mortgage -
Residential		     Real Estate
Mortgage -
Commercial		     Installment
Loans to
Individuals		     Un-
allocated		     Total  

Balance at December 31, 2012

   $ 1,937     $ 732     $ 1,711     $ 3,387     $ 6,834     $ 239     $ 2     $ 14,842  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Additions:

                                                                

Provision for loan losses

     (90 )      287       100       (189 )      844       47       1       1,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Deductions:

                                                                

Loans charged off

     61       120       0       292       999       109       0       1,581  

Less recoveries on loans

     (42 )      0       0       (15 )      (161 )      (66 )      0       (284 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loans charged off

     19       120       0       277       838       43       0       1,297  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at March 31, 2013

   $ 1,828     $ 899     $ 1,811     $ 2,921     $ 6,840     $ 243     $ 3     $ 14,545  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at December 31, 2011

   $ 1,804     $ 1,188     $ 1,562     $ 3,251     $ 5,734     $ 267     $ 3     $ 13,809  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Additions:

                                                                

Provision for loan losses

     867       (493 )      (152 )      415       1,027       34       2       1,700  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Deductions:

                                                                

Loans charged off

     35       0       0       155       862       139       0       1,191  

Less recoveries on loans

     (86 )      (32 )      0       (52 )      (77 )      (75 )      0       (322 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loans charged off

     (51 )      (32 )      0       103       785       64       0       869  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at March 31, 2012

   $ 2,722     $ 727     $ 1,410     $ 3,563     $ 5,976     $ 237     $ 5     $ 14,640  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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. If management determines that it is probable that all amounts due on a loan will not be collected under the original terms of the loan agreement, the loan is considered to be impaired. These loans are evaluated individually for impairment, and in conjunction with current economic conditions and loss experience, specific reserves are estimated as further discussed below. Loans not individually evaluated are aggregated and reserves are recorded using a consistent methodology that considers historical loan loss experience by loan type, delinquencies, current economic conditions, loan risk ratings and industry concentration. Although the allowance for loan losses is comprised of specific and general allocations, the entire allowance is available to absorb credit losses.

The following table provides the balance in the allowance for loan losses at March 31, 2013 and December 31, 2012, and the related loan balance by impairment methodology.

 

                                                                 

(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		     Un -
allocated		     Total  

March 31, 2013

                                                                

Allowance for loan losses:

                                                                

Individually evaluated for impairment

   $ 229     $ 294     $ 534     $ 1,133     $ 1,896     $ 6     $ 0     $ 4,092  

Collectively evaluated for impairment

     1,599       605       1,277       1,788       4,944       237       3       10,453  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 1,828     $ 899     $ 1,811     $ 2,921     $ 6,840     $ 243     $ 3     $ 14,545  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans outstanding:

                                                                

Individually evaluated for impairment

   $ 3,743     $ 2,589     $ 8,689     $ 5,980     $ 17,418     $ 44     $ 0     $ 38,463  

Collectively evaluated for impairment

     123,271       19,979       37,678       209,939       381,137       23,789       0       795,793  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 127,014     $ 22,568     $ 46,367     $ 215,919     $ 398,555     $ 23,833     $ 0     $ 834,256  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2012

                                                                

Allowance for loan losses:

                                                                

Individually evaluated for impairment

   $ 213     $ 125     $ 542     $ 1,069     $ 2,071     $ 0     $ 0     $ 4,020  

Collectively evaluated for impairment

     1,724       607       1,169       2,318       4,763       239       2       10,822  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 1,937     $ 732     $ 1,711     $ 3,387     $ 6,834     $ 239     $ 2     $ 14,842  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans outstanding:

                                                                

Individually evaluated for impairment

   $ 4,157     $ 2,496     $ 7,762     $ 5,771     $ 18,959     $ 44     $ 0     $ 39,189  

Collectively evaluated for impairment

     125,883       19,681       35,724       215,452       386,133       24,922       0       807,795  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 130,040     $ 22,177     $ 43,486     $ 221,223     $ 405,092     $ 24,966     $ 0     $ 846,984  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Impaired loans

Loans evaluated under ASC 310-10-35 include loans which are individually evaluated for impairment. All other loans are collectively evaluated for impairment under ASC 450-20. Impaired loans totaled $38,622,000 and $39,363,000 at March 31, 2013 and December 31, 2012 respectively, and are comprised of loans on non-accrual status and loans which have been classified as troubled debt restructurings. Total impaired loans of $38,622,000 at March 31, 2013, includes $38,463,000 of impaired loans individually evaluated for impairment and $159,000 of non-accrual consumer loans that were collectively evaluated for impairment. Total impaired loans of $39,363,000 at December 31, 2012, includes $39,189,000 of impaired loans individually evaluated for impairment and $174,000 of non-accrual consumer loans that were collectively evaluated for impairment.

The specific reserve component applies to loans evaluated individually for impairment. The net carrying value of impaired loans is generally based on the fair values of collateral obtained through independent appraisals or internal evaluations, or by discounting the total expected future cash flows. Once the impairment amount is calculated, a specific reserve allocation is recorded. At March 31, 2013, $4,092,000 of the Company’s allowance for loan losses was allocated to impaired loans totaling approximately $38,622,000 compared to $4,020,000 of the Company’s allowance for loan losses allocated to impaired loans totaling approximately $39,363,000 at December 31, 2012. Management determined that $12,892,000, or 33%, of total impaired loans required no reserve allocation at March 31, 2013 compared to $14,733,000, or 37%, at December 31, 2012 primarily due to adequate collateral values, acceptable payment history and adequate cash flow ability.

 

The incurred loss component of the general reserve, or loans collectively evaluated for impairment, is determined by applying percentages to pools of loans by asset type. Loans not individually evaluated are aggregated based on similar risk characteristics. Historical loss rates for each risk group, which is updated quarterly, are quantified using all recorded loan charge-offs. Management determined that the previous twelve quarters were reflective of the loss characteristics of the Company’s loan portfolio during the recent three year economic environment. These historical loss rates for each risk group are used as the starting point to determine allowance provisions. The Company’s methodology includes factors that allow management to adjust its estimates of losses based on the most recent information available. The rates are then adjusted to reflect actual changes and anticipated changes such as changes in specific allowances on loans and real estate acquired through foreclosure, any gains and losses on final disposition of real estate acquired through foreclosure, changes in national and local economic conditions and developments, including general economic and business conditions affecting the Company’s key lending areas, credit quality trends, specific industry conditions within portfolio segments, bank regulatory examination results, and findings of the internal loan review department. These risk factors are generally reviewed and updated quarterly, as appropriate.

The categories of impaired loans at March 31, 2013 and December 31, 2012 are as follows:

 

                 

(in thousands)

   March 31,
2013		     December 31,
2012		  

Non-accrual loans

   $ 30,650     $ 31,081  

Troubled debt restructurings continuing to accrue interest

     7,972       8,282  
   

 

 

    

 

 

  

Total impaired loans

   $ 38,622     $ 39,363  
   

 

 

    

 

 

  

The following tables provide additional information about impaired loans at March 31, 2013 and December 31, 2012, 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		     Specific
Reserves		  

March 31, 2013

                        

With no related allowance recorded:

                        

Commercial, financial and agricultural

   $ 2,777     $ 2,887     $ 0  

Real estate – construction residential

     336       369       0  

Real estate – construction commercial

     2,393       2,616       0  

Real estate – residential

     2,073       2,731       0  

Real estate – commercial

     5,154       5,470       0  

Consumer

     159       182       0  
   

 

 

    

 

 

    

 

 

  

Total

   $ 12,892     $ 14,255     $ 0  
   

 

 

    

 

 

    

 

 

  

With an allowance recorded:

                        

Commercial, financial and agricultural

   $ 966     $ 985     $ 229  

Real estate – construction residential

     2,253       2,273       294  

Real estate – construction commercial

     6,296       6,444       534  

Real estate – residential

     3,907       4,053       1,133  

Real estate – commercial

     12,264       13,298       1,896  

Consumer

     44       45       6  
   

 

 

    

 

 

    

 

 

  

Total

   $ 25,730     $ 27,098     $ 4,092  
   

 

 

    

 

 

    

 

 

  

Total impaired loans

   $ 38,622     $ 41,353     $ 4,092  
   

 

 

    

 

 

    

 

 

  

 

 

                         

(in thousands)

   Recorded
Investment		     Unpaid
Principal
Balance		     Specific
Reserves		  

December 31, 2012

                        

With no related allowance recorded:

                        

Commercial, financial and agricultural

   $ 3,272     $ 4,009     $ 0  

Real estate – construction residential

     2,307       2,339       0  

Real estate – construction commercial

     1,879       2,102       0  

Real estate – residential

     1,939       2,393       0  

Real estate – commercial

     5,162       5,565       0  

Consumer

     174       186       0  
   

 

 

    

 

 

    

 

 

  

Total

   $ 14,733     $ 16,594     $ 0  
   

 

 

    

 

 

    

 

 

  

With an allowance recorded:

                        

Commercial, financial and agricultural

   $ 885     $ 898     $ 213  

Real estate – construction residential

     189       189       125  

Real estate – construction commercial

     5,883       6,011       542  

Real estate – residential

     3,832       3,999       1,069  

Real estate – commercial

     13,797       14,167       2,071  

Consumer

     44       44       0  
   

 

 

    

 

 

    

 

 

  

Total

   $ 24,630     $ 25,308     $ 4,020  
   

 

 

    

 

 

    

 

 

  

Total impaired loans

   $ 39,363     $ 41,902     $ 4,020  
   

 

 

    

 

 

    

 

 

  

The following table presents by class, information related to the average recorded investment and interest income recognized on impaired loans for the three months ended March 31, 2013 and 2012.

 

                                 
    Three Months Ended March 31,  
    2013     2012  

(in thousands)

   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

   $ 2,937     $ 25     $ 3,594     $ 22  

Real estate – construction residential

     369       0       417       7  

Real estate – construction commercial

     2,616       0       1,440       0  

Real estate – residential

     2,736       0       2,349       2  

Real estate – commercial

     5,480       29       11,918       32  

Consumer

     189       0       160       0  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 14,327     $ 54     $ 19,878     $ 63  
   

 

 

    

 

 

    

 

 

    

 

 

  

With an allowance recorded:

                                

Commercial, financial and agricultural

   $ 990     $ 7     $ 1,752     $ 7  

Real estate – construction residential

     2,273       0       189       0  

Real estate – construction commercial

     6,475       1       6,330       0  

Real estate – residential

     4,082       20       4,729       30  

Real estate – commercial

     13,634       26       16,575       0  

Consumer

     45       0       0       0  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 27,499     $ 54     $ 29,575     $ 37  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total impaired loans

   $ 41,826     $ 108     $ 49,453     $ 100  
   

 

 

    

 

 

    

 

 

    

 

 

  

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 $108,000 and $100,000, for the three months ended March 31, 2013 and 2012, 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 $350,000 at March 31, 2013 compared to $626,000 at March 31, 2012. During the three months ended March 31, 2013, $7,000 in interest was recognized on loans in non-accrual status on a cash basis. During the three months ended March 31, 2012, there was no significant interest recognized on loans in non-accrual status.

 

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 the Company’s past due and non-accrual loans at March 31, 2013 and December 31, 2012.

 

                                         

(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  

March 31, 2013

                                        

Commercial, Financial, and Agricultural

   $ 125,064     $ 752     $ 0     $ 1,198     $ 127,014  

Real Estate Construction – Residential

     19,979       0       0       2,589       22,568  

Real Estate Construction – Commercial

     37,054       624       0       8,689       46,367  

Real Estate Mortgage – Residential

     208,611       2,384       0       4,924       215,919  

Real Estate Mortgage – Commercial

     383,485       2,023       0       13,047       398,555  

Installment and Other Consumer

     23,215       414       1       203       23,833  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 797,408     $ 6,197     $ 1     $ 30,650     $ 834,256  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2012

                                        

Commercial, Financial, and Agricultural

   $ 126,884     $ 1,821     $ 0     $ 1,335     $ 130,040  

Real Estate Construction – Residential

     19,390       290       0       2,497       22,177  

Real Estate Construction – Commercial

     35,117       607       0       7,762       43,486  

Real Estate Mortgage – Residential

     213,694       2,199       0       5,330       221,223  

Real Estate Mortgage – Commercial

     390,032       1,122       0       13,938       405,092  

Installment and Other Consumer

     24,221       520       6       219       24,966  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 809,338     $ 6,559     $ 6     $ 31,081     $ 846,984  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Credit Quality

The Company categorizes loans into risk categories based upon an internal rating system reflecting management’s risk assessment. Loans are placed on watch status when (1) one or more weaknesses that 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 the Company may sustain some loss if the deficiencies are not corrected. It is the 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.

 

The following table presents the risk categories by class at March 31, 2013 and December 31, 2012.

 

                                                         

(in thousands)

   Commercial,
Financial, &
Agricultural		     Real Estate
Construction -
Residential		     Real Estate
Construction -
Commercial		     Real Estate
Mortgage -
Residential		     Real Estate
Mortgage -
Commercial		     Installment
and other
Consumer		     Total  

At March 31, 2013

                                                        

Watch

   $ 16,294     $ 4,435     $ 5,742     $ 25,618     $ 28,429     $ 606     $ 81,124  

Substandard

     7,315       93       2,353       5,678       9,797       606       25,842  

Non-accrual

     1,198       2,589       8,689       4,924       13,047       203       30,650  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 24,807     $ 7,117     $ 16,784     $ 36,220     $ 51,273     $ 1,415     $ 137,616  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
               

At December 31, 2012

                                                        

Watch

   $ 14,814     $ 4,580     $ 6,459     $ 26,063     $ 29,753     $ 672     $ 82,341  

Substandard

     6,485       396       2,035       5,472       11,027       423       25,838  

Non-accrual

     1,335       2,497       7,762       5,330       13,938       219       31,081  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 22,634     $ 7,473     $ 16,256     $ 36,865     $ 54,718     $ 1,314     $ 139,260  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Troubled Debt Restructurings

At March 31, 2013, loans classified as troubled debt restructurings (TDRs) totaled $22,314,000, of which $14,341,000 was on non-accrual status and $7,973,000 was on accrual status. At December 31, 2012, loans classified as TDRs totaled $22,363,000, of which $14,081,000 was on non-accrual status and $8,282,000 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 $1,718,000 and $1,544,000 related to TDRs were allocated to the allowance for loan losses at March 31, 2013 and December 31, 2012, respectively.

The following table summarizes loans that were modified as TDRs during the three months ended March 31, 2013 and 2012.

 

                                                 
    Three Months Ended March 31,  
    2013     2012  
    Recorded Investment(1)     Recorded Investment(1)  

(in thousands)

   Number of
Contracts		     Pre-
Modification		     Post-
Modification		     Number of
Contracts		     Pre-
Modification		     Post-
Modification		  

Troubled Debt Restructurings

                                                

Commercial, financial and agricultural

     0     $ 0     $ 0       1     $ 196     $ 196  

Real estate construction – commercial

     0       0       0       1       43       43  

Real estate mortgage – residential

     1       619       619       0       0       0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

     1     $ 619     $ 619       2     $ 239     $ 239  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(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.

The 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. The 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 March 31, 2013, one loan meeting the TDR criteria was modified. There were no loans modified as a TDR that defaulted during the three months ended March 31, 2013, and within twelve months of their modification date. No loans modified as a TDR during the three months ended March 31, 2012 defaulted.