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Loans
 9 Months Ended
Sep. 30, 2012
Loans [Abstract]  
Loans

Note 3. Loans

Loans at September 30, 2012 and December 31, 2011 are summarized as follows:

 

                 
    (in thousands)  
    September 30,
2012		     December 31,
2011		  

Real estate loans:

                

Construction and land development

   $ 44,725     $ 48,363  

Secured by 1-4 family residential

     128,354       122,339  

Other real estate loans

     175,122       181,141  

Commercial and industrial loans

     24,216       29,446  

Consumer and other loans

     8,335       11,151  
   

 

 

    

 

 

  

Total loans

   $ 380,752     $ 392,440  

Allowance for loan losses

     14,049       12,937  
   

 

 

    

 

 

  

Loans, net

   $ 366,703     $ 379,503  
   

 

 

    

 

 

  

Consumer loans included $109 thousand and $325 thousand of demand deposit overdrafts at September 30, 2012 and December 31, 2011, respectively.

The Company considers the following risk characteristics of each loan portfolio class:

 

  •  

1-4 family 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 and land development 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.

 

  •  

Other real estate loans 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 September 30, 2012 and December 31, 2011:

 

                                                                 
    September 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

   $ 325     $ 528     $ 2,472     $ 3,325     $ 41,400     $ 44,725     $ 621     $ 1,851  

1-4 family residential

     1,272       207       693       2,172       126,182       128,354       1,389       300  

Other real estate loans

     2,881       1,637       186       4,704       170,418       175,122       6,961       —    

Commercial and industrial

     432       220       25       677       23,539       24,216       15       25  

Consumer and other loans

     56       —         25       81       8,254       8,335       12       —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 4,966     $ 2,592     $ 3,401     $ 10,959     $ 369,793     $ 380,752     $ 8,998     $ 2,176  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
   
    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 deserve 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 September 30, 2012 and December 31, 2011:

 

                                         
    September 30, 2012
(in thousands)		  
    Pass     Special
Mention		     Substandard     Doubtful     Total  

Real estate loans:

                                        

Construction and land development

   $ 23,062     $ 4,206     $ 17,457     $ —       $ 44,725  

Secured by 1-4 family residential

     114,120       4,518       9,716       —         128,354  

Other real estate loans

     138,949       12,085       24,088       —         175,122  

Commercial and industrial

     19,766       836       3,614       —         24,216  

Consumer and other loans

     8,261       74       —         —         8,335  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 304,158     $ 21,719     $ 54,875     $ —       $ 380,752  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
   
    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