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Allowance for Loan Losses | 12 Months Ended
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Dec. 31, 2011
Allowance For Loan Losses [Abstract] |
Allowance for Loan Losses | Note 5: Allowance for Loan Losses, Nonperforming Assets and Impaired Loans The allowance for loan losses methodology incorporates individual evaluation of impaired loans and collective evaluation of groups of non-impaired loans. The Company performs ongoing analysis of the loan portfolio to determine credit quality and to identify impaired loans. Determination of credit quality considers the loan’s payment history, the borrower’s current financial situation and value of the underlying collateral. Impaired loans are those loans that have been modified in a troubled debt restructure (“TDR” or “restructure”) as well as larger, non-homogeneous loans that are in nonaccrual status or exhibit payment history or borrower financial positions that indicate the probability that collection will not occur according to the loan’s terms. Generally, impaired loans are risk rated “classified” or “special mention.” Impaired loans are measured at the lower of the invested amount or the fair market value. Impaired loans with an impairment loss are designated nonaccrual. Please refer to Note 1, “Summary of Significant Accounting Policies” for additional information on evaluation of impaired loans and associated specific reserves, and policies regarding nonaccruals, past due status and charge-offs. 46 Troubled debt restructurings impact the determination of the appropriate level of the allowance for loan losses. If the restructuring included forgiveness of a portion of principal or accrued interest, the charge-off is included in the historical charge-off rates applied by the collective evaluation methodology. Further, restructured loans are individually evaluated for impairment, with invested amounts that exceed fair value accrued in the allowance for loan losses. TDRs that experience a payment default are examined to determine whether the default indicates collateral dependency or cash flows below those that were included in the fair value measurement. TDRs that are determined to be collateral dependent or for which decreased cash flows indicate a decline in fair value are charged down to fair value, reduced by selling costs. The Company used a risk-based perspective to determine five major segments within the loan portfolio. Characteristics of loans within segments are further analyzed to determine sub-groups called loan classes. These characteristics include collateral type, repayment sources, and (if applicable) the borrower’s business model. Subgroups with total balances exceeding 5% of Tier I and Tier II Capital are designated as loan classes. The collective evaluation methodology is applied to the non-impaired portfolio on a class basis. The Company’s segments consist of real estate secured consumer loans, non-real estate secured consumer loans, commercial real estate, commercial and industrial loans and construction, development and land loans. Consumer real estate is composed of loans to purchase or build a primary residence as well as equity lines secured by a primary residence. Consumer non-real estate contains credit cards, automobile and other installment loans, and deposit overdrafts. Commercial real estate is composed of all commercial loans that are secured by real estate. The commercial and industrial segment is commercial loans that are not secured by real estate. Construction, development and other land loans are composed of loans to developers of residential and commercial properties. The categorization of loans used to determine the allowance for loan losses differs from the categorization of loans in the balance sheet and discussion of loans in the Management’s Discussion and Analysis (“MD&A”) section. While the categories may be similar, the balance sheet and MD&A base loan categorizations on collateral type. The allowance for loan losses methodology takes a risk-based approach to determine segments and classes for loss analysis. The Company’s segments and classes are as follows:
Consumer Real Estate Equity lines Closed-end consumer real estate Consumer construction Consumer Non-Real Estate Credit cards Consumer, general Consumer overdraft Commercial & Industrial Commercial & industrial Construction, Development and Land Residential Commercial | Commercial Real Estate College housing Office/Retail space Nursing homes Hotels Municipalities Medical professionals Religious organizations Convenience stores Entertainment and sports Nonprofits Restaurants General contractors Other commercial real estate
The loan portfolio is segmented based on risk characteristics. Particular characteristics associated with each segment are detailed below: Consumer Real Estate: Consumer real estate loans carry risks associated with the continued creditworthiness of the borrower and changes in the value of the collateral. Consumer Non-Real Estate: Consumer non-real estate loans carry risks associated with the continued credit-worthiness of the borrower and the value of the collateral, such as automobiles which may depreciate more rapidly than other assets. In addition, these loans may be unsecured. Consumer loans are more likely than real estate loans to be immediately affected in an adverse manner by job loss, divorce, illness or personal bankruptcy. Commercial & Industrial (non-real estate): Commercial loans not secured by real estate carry risks associated with the successful operation of a business, and the repayments of these loans depend on the profitability and cash flows of the business. Additional risk relates to the value of collateral where depreciation occurs and the valuation is less precise. Commercial Real Estate: Loans secured by commercial real estate also carry risks associated with the success of the business and ability to generate a positive cash flow sufficient to service debts. Real estate security diminishes risks only to the extent that a market exists for the subject collateral. 47 Construction, Development and Land: Real estate secured construction loans carry risks that a project will not be completed as scheduled and budgeted and that the value of the collateral may, at any point, be less than the principal amount of the loan. Additional risks may occur if the general contractor, who may not be a loan customer, is unable to finish the project as planned due to financial pressures unrelated to the project. Risk factors are analyzed for each class to estimate collective reserves. Factors include allocations for the historical charge-off percentage and changes in national and local economic and business conditions, in the nature and volume of the portfolio, in loan officers’ experience and in loan quality. Increased allocations for the risk factors applied to each class are made for special mention and classified loans. The Company allocates additional reserves for “high risk” loans, determined to be junior lien mortgages, high loan-to-value loans and interest-only loans. The Company collects and discloses data in compliance with accounting guidance in effect for the year disclosed. In December 2010, the Company adopted accounting guidance for disclosures on the allowance for loan losses. Information for periods prior to December 31, 2010 is presented according to guidance in effect for those periods, while disclosures required by the 2010 guidance are made for periods ending December 31, 2010 and forward. An analysis of the allowance for loan losses follows:
|  | Years ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Balance at beginning of year |  | $ | 7,664 |  |  | $ | 6,926 |  |  | $ | 5,858 |
Loans charged off |  |  | (2,628 | ) |  |  | (2,810 | ) |  |  | (647 | )
Recoveries of loans previously charged off |  |  | 83 |  |  |  | 139 |  |  |  | 81 |
Provision for loan losses |  |  | 2,949 |  |  |  | 3,409 |  |  |  | 1,634 |
Balance at end of year |  | $ | 8,068 |  |  | $ | 7,664 |  |  | $ | 6,926 |
A detailed analysis showing the allowance roll-forward by portfolio segment and related loan balance by segment follows:
|  | Activity in the Allowance for Loan Losses by Segment for the year ended December 31, 2011 |
|  | Consumer Real Estate |  |  | Consumer Non-Real Estate |  |  | Commercial Real Estate |  |  | Commercial & Industrial |  |  | Construction, Development & Other Land |  |  | Unallocated |  |  | Total |
Balance, December 31, 2010 |  | $ | 1,059 |  |  | $ | 586 |  |  | $ | 4,033 |  |  | $ | 1,108 |  |  | $ | 749 |  |  | $ | 129 |  |  | $ | 7,664 |
Charge-offs |  |  | (461 | ) |  |  | (266 | ) |  |  | (457 | ) |  |  | (655 | ) |  |  | (789 | ) |  |  | --- |  |  |  | (2,628 | )
Recoveries |  |  | 14 |  |  |  | 68 |  |  |  | --- |  |  |  | 1 |  |  |  | --- |  |  |  | --- |  |  |  | 83 |
Provision for loan losses |  |  | 440 |  |  |  | 13 |  |  |  | 935 |  |  |  | 581 |  |  |  | 988 |  |  |  | (8 | ) |  |  | 2,949 |
Balance, December 31, 2011 |  | $ | 1,052 |  |  | $ | 401 |  |  | $ | 4,511 |  |  | $ | 1,035 |  |  | $ | 948 |  |  | $ | 121 |  |  | $ | 8,068 |
|  | Activity in the Allowance for Loan Losses by Segment for the year ended December 31, 2010 |
|  | Consumer Real Estate |  |  | Consumer Non-Real Estate |  |  | Commercial Real Estate |  |  | Commercial & Industrial |  |  | Construction, Development & Other Land |  |  | Unallocated |  |  | Total |
Balance, December 31, 2009 |  | $ | 249 |  |  | $ | 1,049 |  |  | $ | 4,321 |  |  | $ | 459 |  |  | $ | 562 |  |  | $ | 286 |  |  | $ | 6,926 |
Charge-offs |  |  | (89 | ) |  |  | (358 | ) |  |  | (1,021 | ) |  |  | (927 | ) |  |  | (415 | ) |  |  | --- |  |  |  | (2,810 | )
Recoveries |  |  | 10 |  |  |  | 67 |  |  |  | 61 |  |  |  | 1 |  |  |  | --- |  |  |  | --- |  |  |  | 139 |
Provision for loan losses |  |  | 889 |  |  |  | (172 | ) |  |  | 672 |  |  |  | 1,575 |  |  |  | 602 |  |  |  | (157 | ) |  |  | 3,409 |
Balance, December 31, 2010 |  | $ | 1,059 |  |  | $ | 586 |  |  | $ | 4,033 |  |  | $ | 1,108 |  |  | $ | 749 |  |  | $ | 129 |  |  | $ | 7,664 |
48
| Allowance for Loan Losses by Segment and Evaluation Method as of |
| December 31, 2011 |
| Consumer Real Estate |  | Consumer Non-Real Estate |  | Commercial Real Estate |  | Commercial & Industrial |  | Construction, Development & Other Land |  | Unallocated |  |  | Total |
Individually evaluated for impairment |  | $ | --- |  |  | $ | --- |  |  | $ | 1,014 |  |  | $ | 62 |  |  | $ | 47 |  |  | $ | --- |  |  | $ | 1,123 |
Collectively evaluated for impairment |  |  | 1,052 |  |  |  | 401 |  |  |  | 3,497 |  |  |  | 973 |  |  |  | 901 |  |  |  | 121 |  |  |  | 6,945 |
Total |  | $ | 1,052 |  |  | $ | 401 |  |  | $ | 4,511 |  |  | $ | 1,035 |  |  | $ | 948 |  |  | $ | 121 |  |  | $ | 8,068 |
| Loans by Segment and Evaluation Method as of |
| December 31, 2011 |
| Consumer Real Estate |  | Consumer Non-Real Estate |  | Commercial Real Estate |  | Commercial & Industrial |  | Construction, Development & Other Land |  | Unallocated |  |  | Total |
Individually evaluated for impairment |  | $ | 238 |  |  | $ | --- |  |  | $ | 9,067 |  |  | $ | 139 |  |  | $ | 3,152 |  |  | $ | --- |  |  | $ | 12,596 |
Collectively evaluated for impairment |  |  | 109,843 |  |  |  | 29,707 |  |  |  | 357,507 |  |  |  | 37,584 |  |  |  | 41,233 |  |  |  | --- |  |  |  | 575,874 |
Total |  | $ | 110,081 |  |  | $ | 29,707 |  |  | $ | 366,574 |  |  | $ | 37,723 |  |  | $ | 44,385 |  |  | $ | --- |  |  | $ | 588,470 |
| Allowance for Loan Losses by Segment and Evaluation Method as of |
| December 31, 2010 |
| Consumer Real Estate |  | Consumer Non-Real Estate |  | Commercial Real Estate |  | Commercial & Industrial |  | Construction, Development & Other Land |  | Unallocated |  |  | Total |
Individually evaluated for impairment |  | $ | 27 |  |  | $ | --- |  |  | $ | 565 |  |  | $ | 508 |  |  | $ | 100 |  |  | $ | --- |  |  | $ | 1,200 |
Collectively evaluated for impairment |  |  | 1,032 |  |  |  | 586 |  |  |  | 3,468 |  |  |  | 600 |  |  |  | 649 |  |  |  | 129 |  |  |  | 6,464 |
Total |  | $ | 1,059 |  |  | $ | 586 |  |  | $ | 4,033 |  |  | $ | 1,108 |  |  | $ | 749 |  |  | $ | 129 |  |  | $ | 7,664 |
| Loans by Segment and Evaluation Method as of |
| December 31, 2010 |
| Consumer Real Estate |  | Consumer Non-Real Estate |  | Commercial Real Estate |  | Commercial & Industrial |  | Construction, Development & Other Land |  | Unallocated |  |  | Total |
Individually evaluated for impairment |  | $ | 505 |  |  | $ | --- |  |  | $ | 5,151 |  |  | $ | 698 |  |  | $ | 2,437 |  |  | $ | --- |  |  | $ | 8,791 |
Collectively evaluated for impairment |  |  | 108,855 |  |  |  | 35,679 |  |  |  | 343,780 |  |  |  | 36,374 |  |  |  | 42,964 |  |  |  | --- |  |  |  | 567,652 |
Total |  | $ | 109,360 |  |  | $ | 35,679 |  |  | $ | 348,931 |  |  | $ | 37,072 |  |  | $ | 45,401 |  |  | $ | --- |  |  | $ | 576,443 |
49 A summary of ratios for the allowance for loan losses follows:
|  | Year ended December 31,
|  | 2011 |  | 2010 |  | 2009 |
Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees |  |  | 1.37 | % |  | 1.33 | % |  | 1.17 | %
Ratio of net charge-offs to average loans, net of unearned income and deferred fees |  |  | 0.43 | % |  | 0.46 | % |  | 0.10 | %
A summary of nonperforming assets follows:
|  | December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Nonperforming assets: |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 1,398 |  |  | $ | 1,938 |  |  | $ | 4,098 |
Restructured loans in nonaccrual |  |  | 3,806 |  |  |  | 6,133 |  |  |  | --- |
Total nonperforming loans |  |  | 5,204 |  |  |  | 8,071 |  |  |  | 4,098 |
Other real estate owned, net |  |  | 1,489 |  |  |  | 1,723 |  |  |  | 2,126 |
Total nonperforming assets |  | $ | 6,693 |  |  | $ | 9,794 |  |  | $ | 6,224 |
Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned |  |  | 1.13 | % |  |  | 1.69 | % |  |  | 1.05 | %
Ratio of allowance for loan losses to nonperforming loans(1) |  |  | 155.03 | % |  |  | 94.96 | % |  |  | 168.99 | %
| (1) | The Company defines nonperforming loans as total nonaccrual and restructured loans that are nonaccrual. Loans 90 days past due and still accruing and accruing restructured loans are excluded.
A summary of loans past due 90 days or more and impaired loans follows:
|  | December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Loans past due 90 days or more and still accruing |  | $ | 481 |  |  | $ | 1,336 |  |  | $ | 1,697 |
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees |  |  | 0.08 | % |  |  | 0.23 | % |  |  | 0.29 | %
Accruing restructured loans |  | $ | 3,756 |  |  | $ | 350 |  |  | $ | 2,652 |
Impaired loans: |  |  |  |  |  |  |  |  |  |  |  |
Total impaired loans |  | $ | 12,596 |  |  | $ | 8,791 |  |  | $ | 7,680 |
Impaired loans with no valuation allowance |  | $ | 5,505 |  |  | $ | 1,115 |  |  | $ | 50 |
Impaired loans with a valuation allowance |  | $ | 7,091 |  |  | $ | 7,676 |  |  | $ | 7,630 |
Valuation allowance |  |  | (1,123 | ) |  |  | (1,200 | ) |  |  | (2,495 | )
Impaired loans, net of allowance |  | $ | 11,473 |  |  | $ | 7,591 |  |  | $ | 5,185 |
Average recorded investment in impaired loans(1) |  | $ | 8,734 |  |  | $ | 7,526 |  |  | $ | 7,851 |
Income recognized on impaired loans, after designation as impaired |  | $ | 141 |  |  | $ | 17 |  |  | $ | 169 |
Amount of income recognized on a cash basis |  | $ | --- |  |  | $ | --- |  |  | $ | --- |
| (1) | Recorded investment includes principal and accrued interest.
Total nonaccrual loans at December 31, 2011 amount to $5,204 compared with $8,071 at December 31, 2010. As of December 31, 2009 nonaccruals totaled $4,098. No interest income was recognized on nonaccrual loans for the years ended December 31, 2011, 2010 or 2009. Nonaccrual loans that meet the Company’s balance thresholds are designated as impaired. Loans past due greater than 90 days that continue to accrue interest totaled $481 at December 31, 2011, compared with $1,336 at December 31, 2010, and $1,697 at December 31, 2009. 50 A detailed analysis of investment in impaired loans, associated reserves and interest income recognized, segregated by loan class follows:
|  | Impaired Loans as of December 31, 2011 |
|  | Unpaid Principal Balance |  |  | (A) Total Recorded Investment(1) |  |  | Recorded Investment(1) in (A) for Which There is No Related Allowance |  |  | Recorded Investment(1) in (A) for Which There is a Related Allowance |  |  | Related Allowance |
Consumer Real Estate(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Closed-end Consumer Real Estate |  | $ | 237 |  |  | $ | 237 |  |  | $ | 237 |  |  | $ | --- |  |  | $ | --- |
Commercial Real Estate(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
College Housing |  |  | 366 |  |  |  | 366 |  |  |  | 366 |  |  |  | --- |  |  |  | --- |
Office and Retail |  |  | 3,500 |  |  |  | 3,500 |  |  |  | --- |  |  |  | 3,500 |  |  |  | 57 |
Hotels |  |  | 3,319 |  |  |  | 3,320 |  |  |  | 2,794 |  |  |  | 526 |  |  |  | 16 |
Medical Professionals |  |  | 66 |  |  |  | 67 |  |  |  | --- |  |  |  | 67 |  |  |  | 66 |
General Contractors |  |  | 703 |  |  |  | 703 |  |  |  | 176 |  |  |  | 527 |  |  |  | 402 |
Other Commercial Real Estate |  |  | 1,113 |  |  |  | 1,112 |  |  |  | 425 |  |  |  | 687 |  |  |  | 474 |
Commercial & Industrial(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial & Industrial |  |  | 139 |  |  |  | 139 |  |  |  | --- |  |  |  | 139 |  |  |  | 62 |
Construction, Development and Land(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  |  | 2,901 |  |  |  | 2,912 |  |  |  | 1,256 |  |  |  | 1,656 |  |  |  | 46 |
Commercial |  |  | 252 |  |  |  | 252 |  |  |  | 252 |  |  |  | --- |  |  |  | --- |
Total |  | $ | 12,596 |  |  | $ | 12,608 |  |  | $ | 5,506 |  |  | $ | 7,102 |  |  | $ | 1,123 |
| (1) | Recorded investment includes the unpaid principal balance and any accrued interest and deferred fees.
| (2) | Only classes with impaired loans are shown.
51
|  | Impaired Loans as of December 31, 2010 |
|  | Unpaid Principal Balance |  |  | (A) Total Recorded Investment(1) |  |  | Recorded Investment(1) in (A) for Which There is No Related Allowance |  |  | Recorded Investment(1) in (A) for Which There is a Related Allowance |  |  | Related Allowance |
Consumer Real Estate(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Closed-end Consumer Real Estate |  | $ | 505 |  |  | $ | 505 |  |  | $ | --- |  |  | $ | 505 |  |  | $ | 26 |
Commercial Real Estate(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Office & Retail |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Hotel |  |  | 3,509 |  |  |  | 3,509 |  |  |  | 287 |  |  |  | 3,222 |  |  |  | 267 |
Convenience stores |  |  | 577 |  |  |  | 592 |  |  |  | 592 |  |  |  | --- |  |  |  | --- |
Other commercial real estate |  |  | 1,065 |  |  |  | 1,066 |  |  |  | --- |  |  |  | 1,066 |  |  |  | 299 |
Commercial & Industrial(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial & Industrial |  |  | 698 |  |  |  | 698 |  |  |  | --- |  |  |  | 698 |  |  |  | 508 |
Construction, Development and Land(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  |  | 2,185 |  |  |  | 2,185 |  |  |  | --- |  |  |  | 2,185 |  |  |  | 100 |
Commercial |  |  | 252 |  |  |  | 253 |  |  |  | 253 |  |  |  | --- |  |  |  | --- |
Total |  | $ | 8,791 |  |  | $ | 8,808 |  |  | $ | 1,132 |  |  | $ | 7,676 |  |  | $ | 1,200 |
(1) | Recorded investment includes the unpaid principal balance and any accrued interest and deferred fees.
(2) | Only classes with impaired loans are shown.
52
|  | Average Investment and Interest Income for Impaired Loans |
|  | For the Year Ended December 31, 2011 |  |  | For the Year Ended December 31, 2010 |
|  | Average Recorded Investment(1) |  |  | Interest Income Recognized |  |  | Average Recorded Investment(1) |  |  | Interest Income Recognized |
Consumer Real Estate(2) |  |  |  |  |  |  |  |  |  |  |  |
Closed-end Consumer Real Estate |  | $ | 450 |  |  | $ | 3 |  |  | $ | 337 |  |  | $ | --- |
Commercial Real Estate(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
College Housing |  |  | 281 |  |  |  | 7 |  |  |  | --- |  |  |  | --- |
Office and Retail |  |  | 292 |  |  |  | --- |  |  |  | 253 |  |  |  | --- |
Hotels |  |  | 3,445 |  |  |  | 41 |  |  |  | 2,767 |  |  |  | --- |
Medical Professionals |  |  | 67 |  |  |  | 5 |  |  |  | --- |  |  |  | --- |
Convenience Stores |  |  | --- |  |  |  | --- |  |  |  | 49 |  |  |  | 15 |
General Contractors |  |  | 112 |  |  |  | 4 |  |  |  | --- |  |  |  | --- |
Other Commercial Real Estate |  |  | 1,139 |  |  |  | 24 |  |  |  | 337 |  |  |  | 1 |
Commercial & Industrial(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial & Industrial |  |  | 553 |  |  |  | --- |  |  |  | 1,183 |  |  |  | --- |
Construction, Development and Land(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  |  | 2,143 |  |  |  | 49 |  |  |  | 2,579 |  |  |  | --- |
Commercial |  |  | 252 |  |  |  | 8 |  |  |  | 21 |  |  |  | 1 |
Total |  | $ | 8,734 |  |  | $ | 141 |  |  | $ | 7,526 |  |  | $ | 17 |
(1) | Recorded investment includes the unpaid principal balance and any accrued interest and deferred fees.
(2) | Only classes with impaired loans are shown.
53 An analysis of past due and nonaccrual loans follows:
December 31, 2011 |  |  |  |  |  |  |  |  |  |
|  | 30 – 89 Days Past Due |  |  | 90 or More Days Past Due |  |  | 90 Days Past Due and Still Accruing |  |  | Nonaccruals (Including Impaired Nonaccruals) |
Consumer Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Equity Lines |  | $ | --- |  |  | $ | --- |  |  | $ | --- |  |  | $ | --- |
Closed-ended Consumer Real Estate |  |  | 1,735 |  |  |  | 658 |  |  |  | 346 |  |  |  | 313 |
Consumer Construction |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Consumer Non-Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit Cards |  |  | 26 |  |  |  | 8 |  |  |  | 8 |  |  |  | --- |
Consumer General |  |  | 270 |  |  |  | 38 |  |  |  | 38 |  |  |  | --- |
Consumer Overdraft |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
College Housing |  |  | 452 |  |  |  | 250 |  |  |  | --- |  |  |  | 250 |
Office/Retail |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Nursing Homes |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Hotels |  |  | 616 |  |  |  | 526 |  |  |  | --- |  |  |  | 1,397 |
Municipalities |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Medical Professionals |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Religious Organizations |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Convenience Stores |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Entertainment and Sports |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Nonprofits |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Restaurants |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
General Contractors |  |  | 103 |  |  |  | --- |  |  |  | --- |  |  |  | 703 |
Other Commercial Real Estate |  |  | 815 |  |  |  | 488 |  |  |  | 63 |  |  |  | 1,112 |
Commercial and Industrial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 31 |  |  |  | 26 |  |  |  | 26 |  |  |  | 139 |
Construction, Development and Land |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  |  | --- |  |  |  | 1,290 |  |  |  | --- |  |  |  | 1,290 |
Commercial |  |  | 252 |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Total |  | $ | 4,300 |  |  | $ | 3,284 |  |  | $ | 481 |  |  | $ | 5,204 |
54
December 31, 2010 |  |  |  |  |  |  |  |  |  |
|  | 30 – 89 Days Past Due |  |  | 90 or More Days Past Due |  |  | 90 Days Past Due and Still Accruing |  |  | Nonaccruals (Including Impaired Nonaccruals) |
Consumer Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Equity Lines |  | $ | 69 |  |  | $ | --- |  |  | $ | --- |  |  | $ | --- |
Closed-ended Consumer Real Estate |  |  | 1,868 |  |  |  | 1,178 |  |  |  | 612 |  |  |  | 783 |
Consumer Construction |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Consumer Non-Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit Cards |  |  | 67 |  |  |  | 42 |  |  |  | 29 |  |  |  | --- |
Consumer General |  |  | 518 |  |  |  | 45 |  |  |  | 37 |  |  |  | --- |
Consumer Overdraft |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
College Housing |  |  | 224 |  |  |  | 262 |  |  |  | --- |  |  |  | --- |
Office/Retail |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Nursing Homes |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Hotels |  |  | --- |  |  |  | 802 |  |  |  | --- |  |  |  | 3,509 |
Municipalities |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Medical Professionals |  |  | --- |  |  |  | 181 |  |  |  | --- |  |  |  | --- |
Religious Organizations |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Convenience Stores |  |  | 9 |  |  |  | 577 |  |  |  | 577 |  |  |  | --- |
Entertainment and Sports |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Nonprofits |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Restaurants |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
General Contractors |  |  | --- |  |  |  | 85 |  |  |  | --- |  |  |  | --- |
Other Commercial Real Estate |  |  | 792 |  |  |  | 136 |  |  |  | --- |  |  |  | 715 |
Commercial and Industrial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 740 |  |  |  | 609 |  |  |  | 81 |  |  |  | 879 |
Construction, Development and Land |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  |  | --- |  |  |  | 2,185 |  |  |  | --- |  |  |  | 2,185 |
Commercial |  |  | 25 |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Total |  | $ | 4,312 |  |  | $ | 6,102 |  |  | $ | 1,336 |  |  | $ | 8,071 |
The estimate of credit risk for non-impaired loans is obtained by applying allocations for internal and external factors. The allocations are increased for loans that exhibit greater credit quality risk. Credit quality indicators, which the Company terms risk grades, are assigned through the Company’s credit review function for larger loans and selective review of loans that fall below credit review thresholds. Loans that do not indicate heightened risk are graded as “pass.” Loans that appear to have elevated credit risk because of frequent or persistent past due status, which is less than 75 days, or that show weakness in the borrower’s financial condition are risk graded “special mention.” Loans with frequent or persistent delinquency exceeding 75 days or that have a higher level of weakness in the borrower’s financial condition are graded “classified.” Classified loans have regulatory risk ratings of “substandard” and “doubtful.” Allocations are increased by 50% and by 100% for loans with grades of “special mention” and “classified,” respectively. Determination of risk grades was completed for the portfolio as of December 31, 2011, 2010 and 2009. 55 The following displays non-impaired loans by credit quality indicator:
December 31, 2011 |  |  |  |  |  |  |  |  |
|  | Pass |  |  | Special Mention |  |  | Classified (Excluding Impaired) |
Consumer Real Estate |  |  |  |  |  |  |  |  |
Equity Lines |  | $ | 17,971 |  |  | $ | --- |  |  | $ | 14 |
Closed-end Consumer Real Estate |  |  | 87,882 |  |  |  | 595 |  |  |  | 1,332 |
Consumer Construction |  |  | 2,050 |  |  |  | --- |  |  |  | --- |
Consumer Non-Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Credit Cards |  |  | 6,594 |  |  |  | --- |  |  |  | 1 |
Consumer General |  |  | 22,679 |  |  |  | 42 |  |  |  | 105 |
Consumer Overdraft |  |  | 285 |  |  |  | --- |  |  |  | 1 |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |
College Housing |  |  | 88,157 |  |  |  | 452 |  |  |  | 215 |
Office/Retail |  |  | 73,106 |  |  |  | 420 |  |  |  | 267 |
Nursing Homes |  |  | 16,173 |  |  |  | --- |  |  |  | --- |
Hotels |  |  | 24,498 |  |  |  | --- |  |  |  | 616 |
Municipalities |  |  | 19,230 |  |  |  | --- |  |  |  | --- |
Medical Professionals |  |  | 18,577 |  |  |  | --- |  |  |  | --- |
Religious Organizations |  |  | 15,852 |  |  |  | --- |  |  |  | --- |
Convenience Stores |  |  | 10,519 |  |  |  | --- |  |  |  | --- |
Entertainment and Sports |  |  | 7,346 |  |  |  | --- |  |  |  | --- |
Nonprofits |  |  | 3,265 |  |  |  | 3,170 |  |  |  | --- |
Restaurants |  |  | 6,138 |  |  |  | --- |  |  |  | 387 |
General Contractors |  |  | 4,550 |  |  |  | 109 |  |  |  | 247 |
Other Commercial Real Estate |  |  | 63,422 |  |  |  | --- |  |  |  | 790 |
Commercial and Industrial |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 37,252 |  |  |  | 196 |  |  |  | 137 |
Construction, Development and Land |  |  |  |  |  |  |  |  |  |  |  |
Residential |  |  | 15,732 |  |  |  | --- |  |  |  | --- |
Commercial |  |  | 22,409 |  |  |  | 2,961 |  |  |  | 130 |
Total |  | $ | 563,687 |  |  | $ | 7,945 |  |  | $ | 4,242 |
56
December 31, 2010 |  |  |  |  |  |  |  |  |
|  | Pass |  |  | Special Mention |  |  | Classified (Excluding Impaired) |
Consumer Real Estate |  |  |  |  |  |  |  |  |
Equity Lines |  | $ | 15,735 |  |  | $ | --- |  |  | $ | 119 |
Closed-ended Consumer Real Estate |  |  | 85,313 |  |  |  | 731 |  |  |  | 2,969 |
Consumer Construction |  |  | 3,988 |  |  |  | --- |  |  |  | --- |
Consumer Non-Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Credit Cards |  |  | 6,446 |  |  |  | --- |  |  |  | 14 |
Consumer General |  |  | 28,730 |  |  |  | 392 |  |  |  | 94 |
Consumer Overdraft |  |  | 3 |  |  |  | --- |  |  |  | --- |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |
College Housing |  |  | 88,110 |  |  |  | 461 |  |  |  | 1,016 |
Office/Retail |  |  | 60,540 |  |  |  | 3,500 |  |  |  | 848 |
Nursing Homes |  |  | 28,018 |  |  |  | --- |  |  |  | --- |
Hotel |  |  | 10,689 |  |  |  | 1,878 |  |  |  | 625 |
Municipalities |  |  | 16,979 |  |  |  | --- |  |  |  | --- |
Medical Professionals |  |  | 17,111 |  |  |  | --- |  |  |  | 181 |
Religious Organizations |  |  | 12,643 |  |  |  | --- |  |  |  | --- |
Convenience Stores |  |  | 9,010 |  |  |  | 9 |  |  |  | --- |
Entertainment and Sports |  |  | 7,694 |  |  |  | --- |  |  |  | --- |
Nonprofit |  |  | 6,421 |  |  |  | --- |  |  |  | --- |
Restaurants |  |  | 6,740 |  |  |  | --- |  |  |  | 153 |
General Contractors |  |  | 6,175 |  |  |  | --- |  |  |  | 240 |
Other Commercial Real Estate |  |  | 63,679 |  |  |  | 111 |  |  |  | 951 |
Commercial and Industrial |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 34,826 |  |  |  | 129 |  |  |  | 1,419 |
Construction, Development and Land |  |  |  |  |  |  |  |  |  |  |  |
Residential |  |  | 25,760 |  |  |  | --- |  |  |  | 2,633 |
Commercial |  |  | 14,405 |  |  |  | --- |  |  |  | 164 |
Total |  | $ | 549,015 |  |  | $ | 7,211 |  |  | $ | 11,426 |
Sales, Purchases and Reclassification of Loans The Company finances mortgages under “best efforts” contracts with mortgage purchasers. The mortgages are designated as held for sale upon initiation. There have been no major reclassifications from portfolio loans to held for sale. Occasionally, the Company purchases or sells participations in loans. All participation loans purchased met the Company’s normal underwriting standards at the time the participation was entered. Participation loans are included in the appropriate portfolio balances to which the allowance methodology is applied. 57 Troubled Debt Restructurings The Company modified loans that were classified troubled debt restructurings during the year ended December 31, 2011. The following table presents restructurings by class that occurred during the year ended December 31, 2011. Note: only classes with restructured loans are presented.
|  | Restructurings that occurred during the year ended December 31, 2011 |
|  | Number of Contracts |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment(1) |  |  | Impairment Accrued as of 12/31/2011 |
Consumer Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Closed-end Consumer Real Estate |  |  | 2 |  |  | $ | 290 |  |  | $ | 92 |  |  | $ | --- |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
College housing |  |  | 2 |  |  |  | 419 |  |  |  | 332 |  |  |  | --- |
Medical professionals |  |  | 3 |  |  |  | 79 |  |  |  | 79 |  |  |  | 66 |
General contractors |  |  | 2 |  |  |  | 128 |  |  |  | 128 |  |  |  | 128 |
Other commercial real estate |  |  | 3 |  |  |  | 680 |  |  |  | 726 |  |  |  | 474 |
Commercial and Industrial |  |  | 1 |  |  |  | 50 |  |  |  | 50 |  |  |  | 50 |
Construction, Development and Land |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  |  | 3 |  |  |  | 2,474 |  |  |  | 1,645 |  |  |  | 47 |
Total |  |  | 16 |  |  | $ | 4,120 |  |  | $ | 3,052 |  |  | $ | 765 |
| (1)Post-modification outstanding recorded investment considers amounts immediately following the modification. Amounts do not reflect balances at the end of the period.
The restructurings that occurred in 2011 and 2010 resulted in partial forgiveness of principal, providing payment relief by temporarily changing amortizing loans to interest only payments, extending the maturity, changing a letter of credit to a single-payment note, or a combination of these modifications. Of the loans that were restructured in 2011, five received partial charge-offs totaling $1,143. The bulk of the partial charge offs stemmed from one construction loan for which $789 was charged off. Of the loans that were restructured in 2010, four received partial charge-offs totaling $916. The bulk of the partial charge offs stemmed from one commercial loan for which $501 was charged off. Partial charge-offs are included in the loss ratios applied in the determination of the allowance for collectively-evaluated loans. Restructured loans are designated impaired and measured for impairment. The impairment measurement for restructured loans that occurred in 2011 resulted in an accrual to the allowance for loan losses of $765 and $459 at December 31, 2011 and December 31, 2010 respectively. The impairment for restructured secured loans is based upon the fair value (reduced by selling costs) of the underlying real estate or other collateral. The full amount of unsecured restructured loans is accrued to the allowance for loan losses. 58 The following table presents restructured loans that were modified during 2011 and that subsequently experienced payment default. The company defines default as one or more payments that occur more than 30 days past the due date.
|  | Restructurings that occurred and subsequently defaulted during the year ended December 31, 2011 |
|  | Number of Contracts |  |  | Recorded Investment |  |  | Impairment Accrued |
Consumer Real Estate |  |  |  |  |  |  |  |  |
Closed-end Consumer Real Estate |  |  | 2 |  |  | $ | 92 |  |  | $ | --- |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |
College housing |  |  | 1 |  |  |  | 250 |  |  |  | --- |
General contractors |  |  | 2 |  |  |  | 128 |  |  |  | 128 |
Other commercial real estate |  |  | 3 |  |  |  | 687 |  |  |  | 474 |
Commercial and Industrial |  |  | 1 |  |  |  | 50 |  |  |  | 50 |
Construction, Development and Land |  |  |  |  |  |  |  |  |  |  |  |
Residential |  |  | 3 |  |  |  | 1,645 |  |  |  | 46 |
Total |  |  | 12 |  |  | $ | 2,852 |  |  | $ | 698 |
Most of the above restructured loans that experienced a payment default are secured by real estate, for which the impairment measurement is based upon the fair value of the underlying collateral (reduced by selling costs). The amount of the loan balance that exceeds the collateral value is accrued in the allowance for loan losses. One loan reported above is unsecured and is fully accrued in the allowance for loan losses. Because fair value measurements of the above restructured loans are based upon fair value of collateral, the payment default did not significantly impact the measurement of impairment. Restructured loans that become more than 90 days past due are designated nonaccrual. Nonaccrual levels are factored into allowance methodology for collectively-evaluated loans.

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