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Allowance For Loan Losses
 6 Months Ended
Jun. 30, 2011
Allowance For Loan Losses  
Allowance For Loan Losses

NOTE 5.  Allowance for Loan Losses

 

Changes in the allowance for loan losses for the six months ended June 30, 2011 and 2010 and the year ended December 31, 2010 were as follows:

 

 

 

 

Six Months Ended

Year Ended

Six Months Ended

June 30, 2011

December 31, 2010

June 30, 2010

(in thousands)

Balance, beginning

 $                       7,111

 $                       5,970

 $                       5,970

     Provision charged to operating expense

                          1,800

                          6,325

                          1,300

     Recoveries added to the allowance

                             452

                             291

                               85

     Loan losses charged to the allowance

                         (1,529)

                         (5,475)

                            (813)

Balance, ending

 $                       7,834

 $                       7,111

 $                       6,542

 

 

Nonaccrual and past due loans by class at June 30, 2011 and December 31, 2010 were as follows:

 

As of June 30, 2011

(in thousands)

30 - 59

60 - 89

90 or More

90 or More

Days

Days

Days

Total Past

Days Past Due

Nonaccrual

Past Due

Past Due

Past Due

Due

Current

Total Loans

Still Accruing

Loans

Commercial - Non Real Estate:

    Commercial & Industrial

 $      234

 $        82

 $             -

 $      316

 $   26,507

 $      26,823

 $                -  

 $       132

Commercial Real Estate:

     Owner Occupied

         186

         813

           298

      1,297

      80,734

         82,031

                   -  

          462

     Non-owner occupied

         688

             -

                -

         688

      31,501

         32,189

                   -  

          249

Construction and Farmland:

      Residential

         420

             -

                -

         420

        8,969

           9,389

                   -  

               -

      Commercial

             -

             -

                -

             -

      21,914

         21,914

                   -  

               -

Consumer:

      Installment

         114

           25

             59

         198

      13,394

         13,592

                  60

               -

Residential:

       Equity Lines

         426

           20

             48

         494

      28,267

         28,761

                  48

               -

       Single family

      3,164

         525

        2,592

      6,281

    172,878

       179,159

                384

       3,202

       Multifamily

             -

             -

                -

             -

        4,578

           4,578

                   -  

               -

All Other Loans

             -

           31

           342

         373

        3,665

           4,038

                   -  

          342

       Total

 $   5,232

 $   1,496

 $     3,339

 $ 10,067

 $ 392,407

 $    402,474

 $             492

 $    4,387

 

 

 

As of December 31, 2010

(in thousands)

30 - 59

 

60 - 89

 

90 or More

 

 

 

 

 

 

 

90 or More

 

 

Days

Days

Days

Total Past

Past Due

Nonaccrual

Past Due

Past Due

Past Due

Due

Current

Total Loans

Still Accruing

Loans

Commercial - Non Real Estate:

    Commercial & Industrial

 $        91

 $      129

 $            7

 $      227

 $   24,222

 $      24,449

 $                 7

 $       267

Commercial Real Estate:

     Owner Occupied

      1,100

         938

           177

      2,215

      81,176

         83,391

                   -  

       1,071

     Non-owner occupied

         248

             -

           294

         542

      32,448

         32,990

                   -  

               -

Construction and Farmland:

      Residential

           63

           70

        1,122

      1,255

        9,042

         10,297

                   -  

       3,808

      Commercial

      1,222

             -

           911

      2,133

      23,462

         25,595

                   -  

               -

Consumer:

      Installment

         181

           72

               3

         256

      14,262

         14,518

                    3

               -

Residential:

       Equity Lines

         781

           60

                -

         841

      41,848

         42,689

                   -  

          190

       Single family

      1,814

         490

           502

      2,806

    162,176

       164,982

                   -   

       3,041

       Multifamily

             -

             -

                -

             -

        4,908

           4,908

                   -  

               -

All Other Loans

             -

         696

                -

         696

        3,934

           4,630

                   -  

               -

       Total

 $   5,500

 $   2,455

 $     3,016

 $ 10,971

 $ 397,478

 $    408,449

 $               10

 $    8,377

 

 

Allowance for loan losses by segment at June 30, 2011 and December 31, 2010 were as follows:

 

As of and for the Six Months Ended June 30, 2011

(in thousands)

Construction

Residential

Commercial

All Other

and Farmland

Real Estate

Real Estate

Commercial

Consumer

Loans

Unallocated

Total

Allowance for credit losses:

Beginning Balance

 $              1,386

 $           3,457

 $             1,231

 $                819

 $                182

 $                 36

 $                     -

 $              7,111

Charge-Offs

                     684

                   409

                       11

                    184

                    214

                     27

                         -

                1,529

Recoveries

                          3

                   257

                         -

                     68

                     112

                      12

                         -

                   452

Provision

                     377

                   113

                   233

                    194

                     101

                   329

                   453

                1,800

Ending balance

 $              1,082

 $            3,418

 $            1,453

 $               897

 $                 181

 $               350

 $               453

 $           7,834

Ending balance: Individually

evaluated for impairment

 $                   55

 $            1,743

 $               334

 $                137

 $                   -  

 $               342

 $                   -  

 $             2,611

Ending balance: collectively

evaluated for impairment

 $              1,027

 $            1,675

 $              1,119

 $               760

 $                 181

 $                    8

 $               453

 $           5,223

Financing receivables:

Ending balance

 $            31,303

 $       212,498

 $        114,220

 $         26,823

 $          13,592

 $           4,038

 $                     -

 $      402,474

Ending balance individually

evaluated for impairment

 $              1,938

 $           6,920

 $           4,607

 $                 211

 $                   -  

 $               342

 $                   -  

 $           14,018

Ending balance collectively evaluated

for impairment

 $           29,365

 $      205,578

 $        109,613

 $          26,612

 $          13,592

 $           3,696

 $                   -  

 $      388,456

 

As of December 31, 2010

(in thousands)

Construction

Residential

Commercial

All Other

and Farmland

Real Estate

Real Estate

Commercial

Consumer

Loans

Unallocated

Total

Allowance for credit losses:

Ending balance

 $              1,386

 $           3,457

 $             1,231

 $                819

 $                182

 $                 36

 $                     -

 $              7,111

Ending balance: Individually

evaluated for impairment

 $                 622

 $            1,623

 $               273

 $                139

 $                   -  

 $                   -  

 $                   -  

 $           2,657

Ending balance: collectively

evaluated for impairment

 $                 764

 $            1,834

 $               958

 $               680

 $                182

 $                 36

 $                     -

 $           4,454

Financing receivables:

Ending balance

 $           35,892

 $       212,579

 $         116,381

 $         24,449

 $           14,518

 $           4,630

 $                     -

 $      408,449

Ending balance individually

evaluated for impairment

 $             3,549

 $            11,172

 $             5,141

 $                319

 $                   -  

 $                   -  

 $                   -  

 $           20,181

Ending balance collectively evaluated

for impairment

 $           32,343

 $       201,407

 $         111,240

 $          24,130

 $           14,518

 $           4,630

 $                   -  

 $      388,268

 

Impaired loans by class at June 30, 2011 and December 31, 2010 were as follows:

 

As of  June 30, 2011

(in thousands)

Unpaid

Average

Interest

Principal

Recorded

Related

Recorded

Income

Balance

Investment

Allowance

Investment

Recognized

With no related allowance:

Commercial - Non Real Estate:

    Commercial & Industrial

 $              -

 $              -

 $              -

 $              -

 $              -

Commercial Real Estate:

     Owner Occupied

          1,941

          1,933

                 -

          1,943

               61

     Non-owner occupied

          1,560

          1,554

                 -

          1,564

               44

Construction and Farmland:

      Residential

          1,849

          1,839

                 -

          1,853

               37

      Commercial

                 -

                 -

                 -

                 -

                 -

Residential

      Equity lines

                 -

                 -

                 -

                 -

                 -

      Single family

          1,658

          1,649

                 -

          1,660

               40

      Multifamily

                 -

                 -

                 -

                 -

                 -

Other Loans

                 -

                 -

                 -

                 -

                 -

 $       7,008

 $       6,975

 $              -

 $       7,020

 $          182

With an allowance recorded:

Commercial - Non Real Estate:

    Commercial & Industrial

 $          221

 $          211

 $          137

 $          214

 $              8

Commercial Real Estate:

     Owner Occupied

             331

             298

             111

             333

                 -

     Non-owner occupied

             824

             822

             223

             826

               28

Construction and Farmland:

      Residential

               99

               99

               55

               99

                 2

      Commercial

                 -

                 -

                 -

                 -

                 -

Residential

      Equity lines

             405

             403

             330

             405

                 7

      Single family

          5,005

          4,868

          1,413

          4,976

             118

      Multifamily

                 -

                 -

                 -

                 -

                 -

Other Loans

             359

             342

             342

             358

                 -

 $       7,244

 

 $       7,043

 $       2,611

 $       7,211

 $          163

Total:

Commercial

 $          221

 $          211

 $          137

 $          214

 $              8

Commercial Real Estate

          4,656

          4,607

             334

          4,666

             133

Construction and Farmland

          1,948

          1,938

               55

          1,952

               39

Residential

          7,068

          6,920

          1,743

          7,041

             165

Other

             359

             342

             342

             358

                 -

Total

 $     14,252

 $     14,018

 $       2,611

 $     14,231

 $          345

 

 

The average recorded investment of impaired loans for the three month period ended June 30, 2011 was $14,039,000.  The interest income recognized on impaired loans for the three months ended June 30, 2011 was $185,000.

 

 

 

As of December 31, 2010

(in thousands)

Unpaid

Average

Interest

Principal

Recorded

Related

Recorded

Income

Balance

Investment

Allowance

Investment

Recognized

With no related allowance:

Commercial - Non Real Estate:

    Commercial & Industrial

 $              -

 $              -

 $              -

 $              -

 $              -

Commercial Real Estate:

     Owner Occupied

          2,143

          2,151

                 -

          2,164

             131

     Non-owner occupied

          2,144

          2,153

                 -

          2,153

               34

Construction and Farmland:

      Residential

                 -

                 -

                 -

                 -

                 -

      Commercial

          2,447

          2,447

                 -

          2,451

               70

Residential

      Equity lines

             685

             689

                 -

             690

               33

      Single family

          4,432

          4,450

                 -

          4,736

               90

      Multifamily

                 -

                 -

                 -

                 -

                 -

 $     11,851

 $     11,890

 $              -

 $     12,194

 $          358

With an allowance recorded:

Commercial - Non Real Estate:

    Commercial & Industrial

 $          319

 $          319

 $          139

 $          695

 $            29

Commercial Real Estate:

     Owner Occupied

             306

             306

             122

             406

                 -

     Non-owner occupied

             548

             549

             151

             202

               23

Construction and Farmland:

      Residential

                 -

                 -

                 -

                 -

                 -

      Commercial

          1,102

          1,102

             622

          1,259

               68

Residential

      Equity lines

                 -

                 -

                 -

                 -

                 -

      Single family

          6,055

          6,093

          1,623

          3,653

             319

      Multifamily

                 -

                 -

                 -

                 -

                 -

 $       8,330

 $       8,369

 

 $       2,657

 

 $       6,215

 

 $          439

Total:

Commercial

 $          319

 $          319

 $          139

 $          695

 $            29

Commercial Real Estate

          5,141

          5,159

             273

          4,925

             188

Construction and Farmland

          3,549

          3,549

             622

          3,710

             138

Residential

        11,172

        11,232

          1,623

          9,079

             442

 $     20,181

 $     20,259

 $       2,657

 $     18,409

 $          797

 

 

 

When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is in nonaccrual status, all payments are applied to principal under the cost-recovery method. For financial statement purposes, the recorded investment in nonaccrual loans is the actual principal balance reduced by payments that would otherwise have been applied to interest. When reporting information on these loans to the applicable customers, the unpaid principal balance is reported as if payments were applied to principal and interest under the original terms of the loan agreements. Therefore, the unpaid principal balance reported to the customer would be higher than the recorded investment in the loan for financial statement purposes. When the ultimate collectability of the total principal of the impaired loan is not in doubt and the loan is in nonaccrual status, contractual interest is credited to interest income when received under the cash-basis method.

 

There were twenty-three (23) troubled debt restructured loans totaling $8,770,000 at June 30, 2011.  At December 31, 2010 there were thirty-one (31) troubled debt restructured loans totaling $8,469,000.  There were no outstanding commitments to lend additional amounts to troubled debt restructured borrowers at June 30, 2011. 

 

The Company uses a rating system for evaluating the risks associated with non-consumer loans.  Consumer loans are not evaluated for risk unless the characteristics of the loan fall within classified categories.  Descriptions of these ratings are as follows:

 

 

 

Pass

Pass loans exhibit acceptable operating trends, balance sheet trends, and liquidity.  Sufficient cash flow exists to service the loan.  All obligations have been paid by the borrower in an as agreed manner.

Watch

Watch loans exhibit income volatility, negative operating trends, and a highly leveraged balance sheet.  A higher level of supervision is required for these loans as the potential for a negative event could impact the borrower's ability to repay the loan.

Special mention

Special mention loans exhibit a potential weakness, if left uncorrected, may negatively affect the borrower's ability to repay its debt obligation.  The risk of default is not imminent and the borrower still demonstrates sufficient cash flow to support the loan.

 

Substandard

Substandard loans exhibit well defined weaknesses and have a potential of default.  The borrowers exhibit adverse financial trends but still have the ability to service debt obligations.

Doubtful

Doubtful loans exhibit all of the characteristics inherent in substandard loans but the weaknesses make collection or full liquidation highly questionable.

Loss

Loss loans are considered uncollectible and of such little value that its continuance as a bankable asset is not warranted. 

 

Credit quality information by class at June 30, 2011 and December 31, 2010 was as follows:

 

 

As of June 30, 2011

(in thousands)

Special

INTERNAL RISK RATING GRADES

Pass

Watch

Mention

Substandard

Doubtful

Loss

Total

Commercial - Non Real Estate:

    Commercial & Industrial

 $         22,716

 $                 328

 $            1,762

 $            1,885

 $               132

 $                  -  

 $         26,823

Commercial Real Estate:

     Owner Occupied

             65,416

                  4,748

               6,767

               4,802

                  298

                      -  

              82,031

     Non-owner occupied

            22,809

                  3,270

               3,353

               2,508

                  249

                      -  

              32,189

Construction and Farmland:

      Residential

               7,903

                         -  

                1,486

                      -  

                      -  

                      -  

               9,389

      Commercial

              17,001

                     899

                1,925

               2,089

                      -  

                      -  

               21,914

Consumer:

      Installment

                      -  

                          5

                     27

                      18

                       7

                      -  

                     57

Residential:

       Equity Lines

            27,722

                         21

                   144

                  724

                   150

                      -  

              28,761

       Single family

           158,260

                  3,866

               4,546

              11,035

                1,452

                      -  

            179,159

       Multifamily

               2,978

                   1,600

                      -  

                      -  

                      -  

                      -  

               4,578

All other loans

               3,696

                         -  

                      -  

                      -  

                  342

                      -  

               4,038

       Total

 $       328,501

 $            14,737

 $         20,010

 $         23,061

 $           2,630

 $                    -

 $      388,939

Performing

Nonperforming

Consumer Credit Exposure by

   Payment Activity

 $         13,535

 $                       -

 

 

 

 

As of December 31, 2010

(in thousands)

Special

INTERNAL RISK RATING GRADES

Pass

Watch

Mention

Substandard

Doubtful

Loss

Total

Commercial - Non Real Estate:

    Commercial & Industrial

 $         19,990

 $                 845

 $            1,535

 $             1,812

 $              267

 $                  -  

 $         24,449

Commercial Real Estate:

                       -  

     Owner Occupied

            65,983

                  5,686

               8,823

               2,899

                      -  

                      -  

              83,391

     Non-owner occupied

            25,569

                  3,322

                 3,113

                  986

                      -  

                      -  

             32,990

Construction and Farmland:

                       -  

      Residential

               7,875

                   1,556

                      -  

                      -  

                      -  

                      -  

                9,431

      Commercial

             17,492

                     790

               2,378

               2,672

                3,129

                      -  

              26,461

Consumer:

      Installment

                      -  

                        23

                      -  

                      10

                      -  

                      -  

                     33

Residential:

                       -  

       Equity Lines

             41,430

                      182

                     67

                  860

                   150

                      -  

             42,689

       Single family

           147,445

                  3,674

               2,229

                9,132

               2,502

                      -  

           164,982

       Multifamily

               3,272

                   1,636

                      -  

                      -  

                      -  

                      -  

               4,908

All other loans

                4,581

                        49

                      -  

                      -  

                      -  

                      -  

               4,630

       Total

 $      333,637

 $            17,763

 $          18,145

 $          18,371

 $           6,048

 $                    -

 $      393,964

Performing

Nonperforming

Consumer Credit Exposure by

   Payment Activity

 $         14,237

 $                 248