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Loans
 3 Months Ended
Mar. 31, 2013
Loans [Abstract]  
Loans
Note 3. Loans

Loans at March 31, 2013 and December 31, 2012 are summarized as follows:

 

                 
    (in thousands)  
    March 31,
2013		     December 31,
2012		  

Real estate loans:

                

Construction and land development

   $ 45,783     $ 43,524  

Secured by 1-4 family residential

     143,765       134,964  

Other real estate loans

     162,742       174,220  

Commercial and industrial loans

     22,743       23,071  

Consumer and other loans

     7,306       7,815  
   

 

 

    

 

 

  

Total loans

   $ 382,339     $ 383,594  

Allowance for loan losses

     12,756       13,075  
   

 

 

    

 

 

  

Loans, net

   $ 369,583     $ 370,519  
   

 

 

    

 

 

  

 

Consumer and other loans included $71 thousand and $153 thousand of demand deposit overdrafts at March 31, 2013 and December 31, 2012, respectively.

Risk characteristics of each loan portfolio class that were considered by the Company include:

 

  •  

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 March 31, 2013 and December 31, 2012:

 

                                                                 
    March 31, 2013  
    (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

   $ 4,216     $ 199     $ 557     $ 4,972     $ 40,811     $ 45,783     $ 4,988     $ —    

1-4 family residential

     910       107       71       1,088       142,677       143,765       1,576       —    

Other real estate loans

     2,376       1,886       1,395       5,657       157,085       162,742       3,132       —    

Commercial and industrial

     272       131       —         403       22,340       22,743       12       —    

Consumer and other loans

     32       —         7       39       7,267       7,306       7       —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 7,806     $ 2,323     $ 2,030     $ 12,159     $ 370,180     $ 382,339     $ 9,715     $ —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                                 
    December 31, 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

   $ 77     $ 701     $ 89     $ 867     $ 42,657     $ 43,524     $ 646     $  —    

1-4 family residential

     2,741       —         476       3,217       131,747       134,964       968       129  

Other real estate loans

     1,347       686       1,476       3,509       170,711       174,220       6,752       —    

Commercial and industrial

     428       408       99       935       22,136       23,071       14       99  

Consumer and other loans

     43       5       8       56       7,759       7,815       13       —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 4,636     $ 1,800     $ 2,148     $ 8,584     $ 375,010     $ 383,594     $ 8,393     $ 228  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Credit Quality Indicators

As part of the ongoing 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 credit 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:

Pass – Loans classified as pass 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.

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 or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation 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 weaknesses 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.

Loss – Loans classified as loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted.

 

The following tables provide an analysis of the credit risk profile of each loan class as of March 31, 2013 and December 31, 2012:

 

                                         
    March 31, 2013
(in thousands)		  
    Pass     Special
Mention		     Substandard     Doubtful     Total  

Real estate loans:

                                        

Construction and land development

   $ 24,600     $ 5,184     $ 15,999     $ —       $ 45,783  

Secured by 1-4 family residential

     129,159       6,421       8,185       —         143,765  

Other real estate loans

     125,182       14,170       23,390       —         162,742  

Commercial and industrial

     18,673       839       3,231       —         22,743  

Consumer and other loans

     7,235       71       —         —         7,306  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 304,849     $ 26,685     $ 50,805     $ —       $ 382,339  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                         
    December 31, 2012
(in thousands)		  
    Pass     Special
Mention		     Substandard     Doubtful     Total  

Real estate loans:

                                        

Construction and land development

   $ 22,384     $ 5,176     $ 15,964     $ —       $ 43,524  

Secured by 1-4 family residential

     120,692       6,055       8,217       —         134,964  

Other real estate loans

     134,701       14,513       25,006       —         174,220  

Commercial and industrial

     18,831       798       3,442       —         23,071  

Consumer and other loans

     7,743       72       —         —         7,815  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 304,351     $ 26,614     $ 52,629     $ —       $ 383,594