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Loans | 6 Months Ended
--- | ---
Jun. 30, 2012
Loans [Abstract] |
Loans |
Note 3. | Loans
Loans at June 30, 2012 and December 31, 2011 are summarized as follows:
|  | (in thousands) |
|  | June 30, 2012 |  |  | December 31, 2011 |
Real estate loans: |  |  |  |  |  |  |  |
Construction and land development |  | $ | 47,843 |  |  | $ | 48,363 |
Secured by 1-4 family residential |  |  | 128,229 |  |  |  | 122,339 |
Other real estate loans |  |  | 174,212 |  |  |  | 181,141 |
Commercial and industrial loans |  |  | 24,937 |  |  |  | 29,446 |
Consumer and other loans |  |  | 8,914 |  |  |  | 11,151 |
Total loans |  | $ | 384,135 |  |  | $ | 392,440 |
Allowance for loan losses |  |  | 13,999 |  |  |  | 12,937 |
Loans, net |  | $ | 370,136 |  |  | $ | 379,503 |
Consumer loans included $87 thousand and $325 thousand of demand deposit overdrafts at June 30, 2012 and December 31, 2011, respectively. The Company considers the following risk characteristics of each loan portfolio class:
| • |  | Residential mortgage loans carry risks associated with the continued credit-worthiness of the borrower and changes in the value of the collateral.
| • |  | Real estate construction loans carry risks that the project may not be finished according to schedule, the project may not be finished according to budget and the value of the collateral may, at any point in time, be less than the principal amount of the loan. Construction loans also bear the risk that the general contractor, who may or may not be a loan customer, may be unable to finish the construction project as planned because of financial pressure unrelated to the project.
| • |  | Commercial real estate and commercial and industrial loans carry risks associated with the successful operation of a business or a real estate project, in addition to other risks associated with the ownership of real estate, because repayment of these loans may be dependent upon the profitability and cash flows of the business or project. In addition, there is risk associated with the value of collateral other than real estate which may depreciate over time and cannot be appraised with as much reliability.
| • |  | Consumer and other loans carry risk associated with the continued credit-worthiness of the borrower and the value of the collateral, i.e. rapidly depreciating assets such as automobiles, or lack thereof. Consumer loans are more likely than real estate loans to be immediately adversely affected by job loss, divorce, illness or personal bankruptcy, or other changes in circumstances.
The following table provides a summary of loan classes and an aging of past due loans as of June 30, 2012 and December 31, 2011:
|  | June 30, 2012 (in thousands) |
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | > 90 Days Past Due |  |  | Total Past Due |  |  | Current |  |  | Total Loans |  |  | Non-accrual Loans |  |  | 90 Days or More Past Due and Accruing |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction and land development |  | $ | 30 |  |  | $ | — |  |  | $ | 368 |  |  | $ | 398 |  |  | $ | 47,445 |  |  | $ | 47,843 |  |  | $ | 621 |  |  | $ | 343 |
1-4 family residential |  |  | 541 |  |  |  | 513 |  |  |  | 142 |  |  |  | 1,196 |  |  |  | 127,033 |  |  |  | 128,229 |  |  |  | 1,447 |  |  |  | — |
Other real estate loans |  |  | 9,483 |  |  |  | 116 |  |  |  | 2,572 |  |  |  | 12,171 |  |  |  | 162,041 |  |  |  | 174,212 |  |  |  | 8,540 |  |  |  | 886 |
Commercial and industrial |  |  | 405 |  |  |  | 271 |  |  |  | — |  |  |  | 676 |  |  |  | 24,261 |  |  |  | 24,937 |  |  |  | 16 |  |  |  | — |
Consumer and other loans |  |  | 20 |  |  |  | 53 |  |  |  | — |  |  |  | 73 |  |  |  | 8,841 |  |  |  | 8,914 |  |  |  | 15 |  |  |  | — |
Total |  | $ | 10,479 |  |  | $ | 953 |  |  | $ | 3,082 |  |  | $ | 14,514 |  |  | $ | 369,621 |  |  | $ | 384,135 |  |  | $ | 10,639 |  |  | $ | 1,229 |
|  | December 31, 2011 (in thousands) |
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | > 90 Days Past Due |  |  | Total Past Due |  |  | Current |  |  | Total Loans |  |  | Non-accrual Loans |  |  | 90 Days or More Past Due and Accruing |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction and land development |  | $ | 2,267 |  |  | $ | 1,029 |  |  | $ | 235 |  |  | $ | 3,531 |  |  | $ | 44,832 |  |  | $ | 48,363 |  |  | $ | 235 |  |  | $ | — |
1-4 family residential |  |  | 4,179 |  |  |  | 471 |  |  |  | 688 |  |  |  | 5,338 |  |  |  | 117,001 |  |  |  | 122,339 |  |  |  | 3,043 |  |  |  | 98 |
Other real estate loans |  |  | 3,863 |  |  |  | 562 |  |  |  | 722 |  |  |  | 5,147 |  |  |  | 175,994 |  |  |  | 181,141 |  |  |  | 8,367 |  |  |  | 361 |
Commercial and industrial |  |  | 950 |  |  |  | 93 |  |  |  | 5 |  |  |  | 1,048 |  |  |  | 28,398 |  |  |  | 29,446 |  |  |  | 163 |  |  |  | — |
Consumer and other loans |  |  | 94 |  |  |  | 19 |  |  |  | 14 |  |  |  | 127 |  |  |  | 11,024 |  |  |  | 11,151 |  |  |  | 33 |  |  |  | — |
Total |  | $ | 11,353 |  |  | $ | 2,174 |  |  | $ | 1,664 |  |  | $ | 15,191 |  |  | $ | 377,249 |  |  | $ | 392,440 |  |  | $ | 11,841 |  |  | $ | 459 |
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grading of specified classes of loans. The Company utilizes a risk grading matrix to assign a rating to each of its loans. The loan ratings are summarized into the following categories: pass, special mention, substandard, doubtful and loss. Pass rated loans include all risk rated credits other than those included in special mention, substandard or doubtful. Loans classified as loss are charged-off. Loan officers assign risk grades to loans at origination and as renewals arise. The Bank’s Credit Administration department reviews risk grades for accuracy on a quarterly basis and as delinquency issues arise. In addition, a certain amount of loans are reviewed each year through the Company’s internal and external loan review process. A description of the general characteristics of the loan grading categories is as follows: Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the Bank’s credit position at some future date. Substandard – Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor and/or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation in full of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful – Loans classified as doubtful have all the weakness inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The Company considers all doubtful loans to be impaired and places the loan on non-accrual status. The following tables provide an analysis of the credit risk profile of each loan class as of June 30, 2012 and December 31, 2011:
|  | June 30, 2012 (in thousands) |
|  | Pass |  |  | Special Mention |  |  | Substandard |  |  | Doubtful |  |  | Total |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction and land development |  | $ | 25,618 |  |  | $ | 3,775 |  |  | $ | 18,450 |  |  | $ | — |  |  | $ | 47,843 |
Secured by 1-4 family residential |  |  | 114,040 |  |  |  | 3,997 |  |  |  | 10,192 |  |  |  | — |  |  |  | 128,229 |
Other real estate loans |  |  | 134,795 |  |  |  | 8,016 |  |  |  | 31,401 |  |  |  | — |  |  |  | 174,212 |
Commercial and industrial |  |  | 20,413 |  |  |  | 572 |  |  |  | 3,908 |  |  |  | 44 |  |  |  | 24,937 |
Consumer and other loans |  |  | 8,836 |  |  |  | 78 |  |  |  | — |  |  |  | — |  |  |  | 8,914 |
Total |  | $ | 303,702 |  |  | $ | 16,438 |  |  | $ | 63,951 |  |  | $ | 44 |  |  | $ | 384,135 |
|  | December 31, 2011 (in thousands) |
|  | Pass |  |  | Special Mention |  |  | Substandard |  |  | Doubtful |  |  | Total |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction and land development |  | $ | 23,172 |  |  | $ | 7,504 |  |  | $ | 17,452 |  |  | $ | 235 |  |  | $ | 48,363 |
Secured by 1-4 family residential |  |  | 108,240 |  |  |  | 5,645 |  |  |  | 8,266 |  |  |  | 188 |  |  |  | 122,339 |
Other real estate loans |  |  | 138,255 |  |  |  | 17,123 |  |  |  | 22,348 |  |  |  | 3,415 |  |  |  | 181,141 |
Commercial and industrial |  |  | 23,451 |  |  |  | 949 |  |  |  | 4,976 |  |  |  | 70 |  |  |  | 29,446 |
Consumer and other loans |  |  | 11,058 |  |  |  | 79 |  |  |  | — |  |  |  | 14 |  |  |  | 11,151 |
Total |  | $ | 304,176 |  |  | $ | 31,300 |  |  | $ | 53,042 |  |  | $ | 3,922 |  |  | $ | 392,440 |

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