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Allowance For Loan Losses
9 Months Ended
Sep. 30, 2011
Allowance For Loan Losses [Abstract] 
Allowance For Loan Losses

NOTE 5. Allowance for Loan Losses

 

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

  

 

Nine Months Ended

  

Year Ended

  

Nine Months Ended

 

September 30, 2011

  

December 31, 2010

  

September 30, 2010

 

(in thousands)

           

Balance, beginning

 $                       7,111

 

 $                       5,970

 

 $                       5,970

     Provision charged to operating expense

                          2,850

 

                          6,325

 

                          4,150

     Recoveries added to the allowance

                             568

 

                             291

 

                             143

     Loan losses charged to the allowance

                         (2,638)

  

                         (5,475)

  

                         (2,430)

Balance, ending

 $                       7,891

 

 $                       7,111

 

 $                       7,833

 

 

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

 

   

As of September 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

  

 $        50

 

 $      197

 

 $             -

 

 $      247

 

 $   24,644

 

 $      24,891

 

 $                  -

 

 $       128

Commercial Real Estate:

                                

     Owner Occupied

  

         467

 

             -

 

           297

 

         764

 

      82,025

 

         82,789

 

                     -

 

          455

     Non-owner occupied

  

         245

 

             -

 

           244

 

         489

 

      32,382

 

         32,871

 

                     -

 

          245

Construction and Farmland:

                                

      Residential

  

             -

 

         315

 

                -

 

         315

 

        8,949

 

           9,264

 

                     -

 

               -

      Commercial

  

         464

 

             -

 

                -

 

         464

 

      22,992

 

         23,456

 

                     -

 

               -

Consumer:

                                

      Installment

  

         136

 

           41

 

               2

 

         179

 

      13,291

 

         13,470

 

                    2

 

               -

Residential:

                                

       Equity Lines

  

         225

 

             -

 

                -

 

         225

 

      33,281

 

         33,506

 

                     -

 

          180

       Single family

  

      4,742

 

      2,245

 

           910

 

      7,897

 

    169,746

 

       177,643

 

                163

 

       1,627

       Multifamily

  

             -

 

             -

 

                -

 

             -

 

        4,524

 

           4,524

 

                     -

 

               -

All Other Loans

  

             7

 

             -

 

                -

 

             7

 

        4,119

 

           4,126

 

                     -

 

               -

                                 

       Total

  

 $   6,336

 

 $   2,798

 

 $     1,453

 

 $ 10,587

 

 $ 395,953

 

 $    406,540

 

 $             165

 

 $    2,635

  

 

   

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 September 30, 2011 and December 31, 2010 were as follows:

 

 

As of and for the Nine Months Ended September 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

                      710

 

                1,053

 

                     24

 

                   572

 

                   236

 

                     43

 

                         -

 

               2,638

Recoveries

                          4

 

                   295

 

                         -

 

                    125

 

                    128

 

                      16

 

                         -

 

                   568

Provision

                  1,202

 

                   522

 

                     42

 

                1,009

 

                     65

 

                      10

 

                         -

 

               2,850

                               

Ending balance

 $              1,882

 

 $            3,221

 

 $            1,249

 

 $             1,381

 

 $                139

 

 $                  19

 

 $                     -

 

 $            7,891

                               

Ending balance: Individually

                              

evaluated for impairment

 $              1,078

 

 $            1,739

 

 $               333

 

 $               573

 

 $                     -

 

 $                     -

 

 $                     -

 

 $           3,723

                               

Ending balance: collectively

                              

evaluated for impairment

 $                 804

 

 $            1,482

 

 $                916

 

 $               808

 

 $                139

 

 $                  19

 

 $                     -

 

 $            4,168

                               
                               

Financing receivables:

                              
                               

Ending balance

 $           32,720

 

 $       215,673

 

 $        115,660

 

 $          24,891

 

 $          13,470

 

 $            4,126

 

 $                     -

 

 $      406,540

                               

Ending balance individually

                              

evaluated for impairment

 $              3,186

 

 $            8,125

 

 $           4,593

 

 $               634

 

 $                     -

 

 $                     -

 

 $                     -

 

 $          16,538

                               

Ending balance collectively evaluated

                            

for impairment

 $           29,534

 

 $      207,548

 

 $         111,067

 

 $         24,257

 

 $          13,470

 

 $            4,126

 

 $                     -

 

 $      390,002

 

 

 

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 September 30, 2011 and December 31, 2010 were as follows:

 

 

As of  September 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

  

          1,935

 

          1,928

 

                 -

 

          1,940

 

               93

     Non-owner occupied

  

          1,555

 

          1,550

 

                 -

 

          1,562

 

               41

Construction and Farmland:

                    

      Residential

  

                 -

 

                 -

 

                 -

 

                 -

 

                 -

      Commercial

  

                 -

 

                 -

 

                 -

 

                 -

 

                 -

Residential

                    

      Equity lines

  

                 -

 

                 -

 

                 -

 

                 -

 

                 -

      Single family

  

          2,525

 

          2,520

 

                 -

 

          2,570

 

               78

      Multifamily

  

                 -

 

                 -

 

                 -

 

                 -

 

                 -

Other Loans

  

                 -

 

                 -

 

                 -

 

                 -

 

                 -

   

 $       6,015

 

 $       5,998

 

 $              -

 

 $       6,072

 

 $          212

                     

With an allowance recorded:

                    

Commercial - Non Real Estate:

                    

    Commercial & Industrial

  

 $          647

 

 $          634

 

 $          573

 

 $          640

 

 $            20

Commercial Real Estate:

                    

     Owner Occupied

  

             332

 

             297

 

             111

 

             334

 

                 -

     Non-owner occupied

  

             820

 

             818

 

             222

 

             826

 

               42

Construction and Farmland:

                    

      Residential

  

          1,628

 

          1,622

 

             444

 

          1,632

 

               48

      Commercial

  

          1,581

 

          1,564

 

             634

 

          1,581

 

               62

Residential

                    

      Equity lines

  

             404

 

             402

 

             330

 

             404

 

               10

      Single family

  

          4,489

 

          4,717

 

          1,409

 

          5,028

 

             135

      Multifamily

  

                 -

 

                 -

 

                 -

 

                 -

 

                 -

Other Loans

  

                 -

 

                 -

 

                 -

 

                 -

 

                 -

                     
   

 $       9,901

 

 $     10,054

 

 $       3,723

 

 $     10,445

 

 $          317

                     

Total:

                    

Commercial

  

 $          647

 

 $          634

 

 $          573

 

 $          640

 

 $            20

Commercial Real Estate

  

          4,642

 

          4,593

 

             333

 

          4,662

 

             176

Construction and Farmland

  

          3,209

 

          3,186

 

          1,078

 

          3,213

 

             110

Residential

  

          7,418

 

          7,639

 

          1,739

 

          8,002

 

             223

Other

  

                 -

 

                 -

 

                 -

 

                 -

 

                 -

Total

  

 $     15,916

 

 $     16,052

 

 $       3,723

 

 $     16,517

 

 $          529

 

 

The average recorded investment of impaired loans for the three month period ended September 30, 2011 was $16,475,000. The interest income recognized on impaired loans for the three months ended September 30, 2011 was $58,500.

 

  

 

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 $10,069,000 at September 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 September 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 September 30, 2011 and December 31, 2010 was as follows:

  

   

As of September 30, 2011

   

(in thousands)

           

Special

                

INTERNAL RISK RATING GRADES

  

Pass

  

Watch

  

Mention

  

Substandard

  

Doubtful

  

Loss

  

Total

                             

Commercial - Non Real Estate:

                            

    Commercial & Industrial

  

 $         19,967

 

 $                 587

 

 $            1,946

 

 $            2,231

 

 $               160

 

 $                    -

 

 $          24,891

Commercial Real Estate:

                            

     Owner Occupied

  

             63,122

 

                  7,298

 

               6,797

 

               5,275

 

                  297

 

                        -

 

             82,789

     Non-owner occupied

  

             21,260

 

                  4,354

 

               2,636

 

               4,377

 

                  244

 

                        -

 

              32,871

Construction and Farmland:

                            

      Residential

  

               7,428

 

                        94

 

                  306

 

                  899

 

                        -

 

                        -

 

               8,727

      Commercial

  

              16,125

 

                   1,825

 

               3,960

 

               2,083

 

                        -

 

                        -

 

             23,993

Consumer:

                            

      Installment

  

                        -

 

                          5

 

                     25

 

                      16

 

                       7

 

                        -

 

                     53

Residential:

                            

       Equity Lines

  

            39,392

 

                     378

 

                  209

 

                  826

 

                   149

 

                        -

 

             40,954

       Single family

  

           144,463

 

                    3,115

 

               8,854

 

              10,176

 

               3,550

 

                        -

 

            170,158

       Multifamily

  

               2,006

 

                    1,581

 

                  937

 

                        -

 

                        -

 

                        -

 

               4,524

All other loans

  

               3,470

 

                           -

 

                  693

 

                        -

 

                        -

 

                        -

 

                4,163

                             

       Total

  

 $       317,233

 

 $            19,237

 

 $        26,363

 

 $        25,883

 

 $           4,407

 

 $                    -

 

 $       393,123

                             
                             
   

Performing

  

Nonperforming

                    

Consumer Credit Exposure by

                           

   Payment Activity

  

 $          13,417

 

 $                       -

                   

 

  

   

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