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Allowance for Loan Losses

12 Months Ended

Dec. 31, 2012

Allowance for Loan Losses [Abstract]

Note 4. Allowance for Loan Losses

Transactions in the allowance for loan losses for the years ended December 31, 2012, 2011 and 2010 were as follows:


				(in thousands)
	2012			2011			2010
Balance at beginning of year	$	12,937		$	16,036		$	7,106
Provision charged to operating expense		3,555			12,380			11,731
Loan recoveries		376			310			261
Loan charge-offs		(3,793	)		(15,789	)		(3,062	)

Balance at end of year	$	13,075		$	12,937		$	16,036

The following tables present, as of December 31, 2012 and 2011, the total allowance for loan losses, the allowance by impairment methodology and loans by impairment methodology.


	December 31, 2012
	(in thousands)
	Commercial and Industrial			Other Real Estate			Construction and Land Development			Secured by 1-4 Family Residential			Consumer and Other Loans			Total
Allowance for loan losses:
Beginning Balance, December 31, 2011	$	963		$	5,192		$	2,843		$	3,766		$	173		$	12,937
Charge-offs		(261	)		(2,154	)		(431	)		(761	)		(186	)		(3,793	)
Recoveries		35			64			1			68			208			376
Provision for loan losses		(129	)		3,061			68			639			(84	)		3,555

Ending Balance, December 31, 2012	$	608		$	6,163		$	2,481		$	3,712		$	111		$	13,075

Ending Balance:
Individually evaluated for impairment		35			930			567			306			—			1,838
Collectively evaluated for impairment		573			5,233			1,914			3,406			111			11,237

Loans:
Ending Balance		23,071			174,220			43,524			134,964			7,815			383,594

Individually evaluated for impairment		160			10,528			2,516			3,776			—			16,980
Collectively evaluated for impairment		22,911			163,692			41,008			131,188			7,815			366,614

	December 31, 2011
	(in thousands)
	Commercial and Industrial			Other Real Estate			Construction and Land Development			Secured by 1-4 Family Residential			Consumer and Other Loans			Total
Allowance for loan losses:
Beginning Balance, December 31, 2010	$	858		$	9,187		$	4,050		$	1,681		$	260		$	16,036
Charge-offs		(348	)		(7,551	)		(2,983	)		(4,369	)		(268	)		(15,789	)
Recoveries		3			—			50			6			251			310
Provision for loan losses		450			3,556			1,726			6,718			(70	)		12,380

Ending Balance, December 31, 2011	$	963		$	5,192		$	2,843		$	3,766		$	173		$	12,937

Ending Balance:
Individually evaluated for impairment		309			351			930			848			—			2,438
Collectively evaluated for impairment		654			4,841			1,913			2,918			173			10,499

Loans:
Ending Balance		29,446			181,141			48,363			122,339			11,151			392,440

Ending Balance:
Individually evaluated for impairment		480			10,940			7,640			6,860			—			25,920
Collectively evaluated for impairment		28,966			170,201			40,723			115,479			11,151			366,520

Impaired loans and the related allowance at December 31, 2012, 2011 and 2010, were as follows:


	December 31, 2012
	(in thousands)
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction and land development	$	2,947	$	622	$	1,894	$	2,516	$	567	$	5,691	$	99
Secured by 1-4 family		4,706		1,690		2,086		3,776		306		4,821		163
Other real estate loans		14,861		4,886		5,642		10,528		930		10,148		276
Commercial and industrial		161		—		160		160		35		330		10
Consumer and other loans		—		—		—		—		—		—		—

Total	$	22,675	$	7,198	$	9,782	$	16,980	$	1,838	$	20,990	$	548


	December 31, 2011
	(in thousands)
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction and land development	$	8,106	$	3,531	$	4,109	$	7,640	$	930	$	7,077	$	367
Secured by 1-4 family		8,566		3,495		3,365		6,860		848		6,519		301
Other real estate loans		15,165		8,135		2,805		10,940		351		23,918		396
Commercial and industrial		480		—		480		480		309		660		27
Consumer and other loans		—		—		—		—		—		—		—

Total	$	32,317	$	15,161	$	10,758	$	25,920	$	2,438	$	38,174	$	1,091


	December 31, 2010
	(in thousands)
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction and land development	$	10,440	$	1,217	$	8,492	$	9,709	$	3,006	$	2,920	$	374
Secured by 1-4 family		5,701		595		5,087		5,682		536		795		222
Other real estate loans		29,480		7,904		20,522		28,426		5,020		18,432		1,345
Commercial and industrial		48		—		48		48		36		163		4
Consumer and other loans		—		—		—		—		—		—		—

Total	$	45,669	$	9,716	$	34,149	$	43,865	$	8,597	$	22,310	$	1,945

The “Recorded Investment” amounts in the table above represent the outstanding principal balance on each loan represented in the table. The “Unpaid Principal Balance” represents the outstanding principal balance on each loan represented in the table plus any amounts that have been charged off on each loan and/or payments that have been applied towards principal on non-accrual loans.

As of December 31, 2012, loans classified as troubled debt restructurings (TDRs) and included in impaired loans in the disclosure above totaled $6.3 million. At December 31, 2012, $1.6 million of the loans classified as TDRs were performing under the restructured terms and were not considered non-performing assets. There were $11.4 million in TDRs at December 31, 2011, $4.8 million of which were performing under the restructured terms. Modified terms under TDRs may include rate reductions, extension of terms that are considered to be below market, conversion to interest only, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. The following table provides further information regarding loans modified under TDRs during the year ended December 31, 2012 and 2011:


	For the year ended December 31, 2012						For the year ended December 31, 2011
	(dollars in thousands)						(dollars in thousands)
	Number of Contracts		Pre-modification outstanding recorded investment		Post- modification outstanding recorded investment		Number of Contracts		Pre-modification outstanding recorded investment		Post- modification outstanding recorded investment
Real estate loans:
Construction		—	$	—	$	—		1	$	701	$	357
Secured by 1-4 family		1		183		183		4		2,667		2,667
Other real estate loans		1		2,426		2,426		14		12,829		12,855
Commercial and industrial		—		—		—		—		—		—
Consumer and other loans		—		—		—		—		—		—

Total		2	$	2,609	$	2,609		19	$	16,197	$	15,879

For the year ended December 31, 2012, there were no troubled debt restructurings that subsequently defaulted within twelve months of the loan modification. The table below shows troubled debt restructurings that subsequently defaulted within twelve months of the loan modification for the year ended December 31, 2011:


	December 31, 2011
	(dollars in thousands)
	Number of Contracts		Recorded investment
Real estate loans:
Construction and land development		1	$	235
Secured by 1-4 family		—		—
Other real estate loans		3		361
Commercial and industrial		—		—
Consumer and other loans		—		—

Total		4	$	596

Management defines default as over ninety days past due during the twelve month period subsequent to the modification.

Non-accrual loans excluded from impaired loan disclosure amounted to $13 thousand, $103 thousand and $2 thousand at December 31, 2012, 2011 and 2010, respectively. If interest on these loans had been accrued, such income would have approximated $1 thousand and $4 thousand for 2012 and 2011, respectively. For 2010, there was no income that would have been accrued on these loans.