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Loans and Allowance for Loan Losses | 12 Months Ended
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Dec. 31, 2011
Loans and Allowance for Loan Losses [Abstract] |
Loans and Allowance for Loan Losses | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note C - Loans and Allowance for Loan Losses
Loans are comprised of the following at December 31: |  |  |  |  |  |
|  | 2011 |  |  | 2010 |
Residential real estate |  | $ | 226,489 |  |  | $ | 236,878 |
Commercial real estate: |  |  |  |  |  |  |  |
Owner-occupied |  |  | 142,566 |  |  |  | 149,042 |
Nonowner-occupied |  |  | 55,419 |  |  |  | 55,989 |
Construction |  |  | 21,471 |  |  |  | 21,591 |
Commercial and industrial |  |  | 45,200 |  |  |  | 55,306 |
Consumer: |  |  |  |  |  |  |  |
Automobile |  |  | 45,702 |  |  |  | 58,271 |
Home equity |  |  | 20,507 |  |  |  | 20,527 |
Other |  |  | 40,954 |  |  |  | 43,718 |
|  |  | 598,308 |  |  |  | 641,322 |
Less: Allowance for loan losses |  |  | 7,344 |  |  |  | 9,386 |
Loans, net |  | $ | 590,964 |  |  | $ | 631,936 |
The Bank originated refund anticipation loans that contributed fee income of $561 in 2011, $655 in 2010 and $397 in 2009. As recommended by the FDIC, the Bank ceased offering refund anticipation loans effective April 19, 2011.
Activity in the allowance for loan losses was as follows: |  | 2011 |  |  | 2010 |  |  | 2009 |
Balance, beginning of year |  | $ | 9,386 |  |  | $ | 8,198 |  |  | $ | 7,799 |
Loans charged off: |  |  |  |  |  |  |  |  |  |  |  |
Residential real estate |  |  | 1,649 |  |  |  | 971 |  |  |  | 1,172 |
Commercial real estate |  |  | 2,298 |  |  |  | 2,766 |  |  |  | 59 |
Commercial and industrial |  |  | 4,725 |  |  |  | 191 |  |  |  | 568 |
Consumer |  |  | 1,750 |  |  |  | 1,951 |  |  |  | 2,532 |
Total loans charged off |  |  | 10,422 |  |  |  | 5,879 |  |  |  | 4,331 |
Recoveries of loans: |  |  |  |  |  |  |  |  |  |  |  |
Residential real estate |  |  | 198 |  |  |  | 40 |  |  |  | 41 |
Commercial real estate |  |  | 1,394 |  |  |  | 70 |  |  |  | 58 |
Commercial and industrial |  |  | 1,127 |  |  |  | 25 |  |  |  | 672 |
Consumer |  |  | 765 |  |  |  | 1,061 |  |  |  | 747 |
Total recoveries of loans |  |  | 3,484 |  |  |  | 1,196 |  |  |  | 1,518 |
Net loan charge-offs |  |  | ( 6,938 | ) |  |  | (4,683 | ) |  |  | (2,813 | )
Provision charged to operations |  |  | 4,896 |  |  |  | 5,871 |  |  |  | 3,212 |
Balance, end of year |  | $ | 7,344 |  |  | $ | 9,386 |  |  | $ | 8,198 |
As a result of management’s evaluation of the trends in the real estate market, the status of long-term, collateral dependent impaired loans and the current regulatory environment, management decided to take partial charge-offs more quickly on collateral dependent impaired loans during the second quarter of 2011. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note C - Loans and Allowance for Loan Losses (continued) The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended December 31, 2011:
|  | Residential Real Estate |  |  | Commercial Real Estate |  |  | Commercial & Industrial |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 993 |  |  | $ | 3,141 |  |  | $ | 3,795 |  |  | $ | 1,457 |  |  | $ | 9,386 |
Provision for loan losses |  |  | 2,188 |  |  |  | 1,386 |  |  |  | 439 |  |  |  | 883 |  |  |  | 4,896 |
Loans charged off |  |  | (1,649 | ) |  |  | (2,298 | ) |  |  | (4,725 | ) |  |  | (1,750 | ) |  |  | (10,422 | )
Recoveries |  |  | 198 |  |  |  | 1,394 |  |  |  | 1,127 |  |  |  | 765 |  |  |  | 3,484 |
Total ending allowance balance |  | $ | 1,730 |  |  | $ | 3,623 |  |  | $ | 636 |  |  | $ | 1,355 |  |  | $ | 7,344 |
The following table presents the balance in the allowance for loan losses and the recorded investment of loans by portfolio segment and based on impairment method as of December 31, 2011 and 2010:
December 31, 2011 |  | Residential Real Estate |  |  | Commercial Real Estate |  |  | Commercial & Industrial |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending allowance balance attributable to loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | ---- |  |  | $ | 655 |  |  | $ | ---- |  |  | $ | ---- |  |  | $ | 655 |
Collectively evaluated for impairment |  |  | 1,730 |  |  |  | 2,968 |  |  |  | 636 |  |  |  | 1,355 |  |  |  | 6,689 |
Total ending allowance balance |  | $ | 1,730 |  |  | $ | 3,623 |  |  | $ | 636 |  |  | $ | 1,355 |  |  | $ | 7,344 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 1,085 |  |  | $ | 10,153 |  |  | $ | 334 |  |  | $ | ---- |  |  | $ | 11,572 |
Loans collectively evaluated for impairment |  |  | 225,404 |  |  |  | 209,303 |  |  |  | 44,866 |  |  |  | 107,163 |  |  |  | 586,736 |
Total ending loans balance |  | $ | 226,489 |  |  | $ | 219,456 |  |  | $ | 45,200 |  |  | $ | 107,163 |  |  | $ | 598,308 |
December 31, 2010 |  | Residential Real Estate |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending allowance balance attributable to loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 125 |  |  | $ | 1,698 |  |  | $ | 3,407 |  |  | $ | ---- |  |  | $ | 5,230 |
Collectively evaluated for impairment |  |  | 868 |  |  |  | 1,443 |  |  |  | 388 |  |  |  | 1,457 |  |  |  | 4,156 |
Total ending allowance balance |  | $ | 993 |  |  | $ | 3,141 |  |  | $ | 3,795 |  |  | $ | 1,457 |  |  | $ | 9,386 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 1,784 |  |  | $ | 13,460 |  |  | $ | 7,862 |  |  | $ | ---- |  |  | $ | 23,106 |
Loans collectively evaluated for impairment |  |  | 235,094 |  |  |  | 213,162 |  |  |  | 47,444 |  |  |  | 122,516 |  |  |  | 618,216 |
Total ending loans balance |  | $ | 236,878 |  |  | $ | 226,622 |  |  | $ | 55,306 |  |  | $ | 122,516 |  |  | $ | 641,322 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note C - Loans and Allowance for Loan Losses (continued)
Information regarding impaired loans is as follows: |  | 2011 |  |  | 2010 |  |  |  |
Year-end loans with no allocated allowance for loan losses |  | $ | 8,081 |  |  | $ | 7,884 |  |  |  |
Year-end loans with allocated allowance for loan losses |  |  | 3,491 |  |  |  | 15,222 |  |  |  |
Total impaired loans |  | $ | 11,572 |  |  | $ | 23,106 |  |  |  |
Amount of the allowance for loan losses allocated |  | $ | 655 |  |  | $ | 5,230 |  |  |  |
|  |  | 2011 |  |  |  | 2010 |  |  |  | 2009 |
Average of individually impaired loans during year |  | $ | 11,163 |  |  | $ | 24,589 |  |  | $ | 27,927 |
Interest income recognized during impairment |  | $ | 647 |  |  | $ | 1,158 |  |  | $ | 1,793 |
Cash-basis interest income recognized |  | $ | 608 |  |  | $ | 1,083 |  |  | $ | 1,690 |
The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2011:
December 31, 2011 |  | Unpaid Principal Balance |  |  | Recorded Investment |  |  | Allowance for Loan Losses Allocated |  |  | Average Impaired Loans |  |  | Interest Income Recognized |  |  | Cash Basis Interest Recognized |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential real estate |  | $ | 1,136 |  |  | $ | 1,085 |  |  | $ | ---- |  |  | $ | 748 |  |  | $ | 36 |  |  | $ | 31 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 5,713 |  |  |  | 5,470 |  |  |  | ---- |  |  |  | 5,510 |  |  |  | 325 |  |  |  | 317 |
Nonowner-occupied |  |  | 1,192 |  |  |  | 1,192 |  |  |  | ---- |  |  |  | 1,247 |  |  |  | 56 |  |  |  | 49 |
Construction |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Commercial and industrial |  |  | 614 |  |  |  | 334 |  |  |  | ---- |  |  |  | 483 |  |  |  | 40 |  |  |  | 40 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Home equity |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Other |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential real estate |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 420 |  |  |  | 420 |  |  |  | 130 |  |  |  | 84 |  |  |  | 27 |  |  |  | 22 |
Nonowner-occupied |  |  | 2,396 |  |  |  | 2,396 |  |  |  | 437 |  |  |  | 2,414 |  |  |  | 128 |  |  |  | 118 |
Construction |  |  | 675 |  |  |  | 675 |  |  |  | 88 |  |  |  | 677 |  |  |  | 35 |  |  |  | 31 |
Commercial and industrial |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Home equity |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Other |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Total |  | $ | 12,146 |  |  | $ | 11,572 |  |  | $ | 655 |  |  | $ | 11,163 |  |  | $ | 647 |  |  | $ | 608 |
The recorded investment of a loan is its carrying value excluding accrued interest and deferred loan fees. The difference in the unpaid principal balance and recorded investment of the Company’s loans was not materially different at year-end 2011. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note C - Loans and Allowance for Loan Losses (continued) The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2010:
|  | Unpaid Principal Balance |  |  | Recorded Investment |  |  | Allowance for Loan Losses Allocated |
With no related allowance recorded: |  |  |  |  |  |  |  |  |
Residential real estate |  | $ | 1,284 |  |  | $ | 1,244 |  |  | $ | ---- |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 4,719 |  |  |  | 4,234 |  |  |  | ---- |
Nonowner-occupied |  |  | 2,987 |  |  |  | 992 |  |  |  | ---- |
Construction |  |  | 743 |  |  |  | 743 |  |  |  | ---- |
Commercial and industrial |  |  | 671 |  |  |  | 671 |  |  |  | ---- |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Home equity |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Other |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Residential real estate |  |  | 540 |  |  |  | 540 |  |  |  | 125 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 4,731 |  |  |  | 4,731 |  |  |  | 1,125 |
Nonowner-occupied |  |  | 2,760 |  |  |  | 2,760 |  |  |  | 573 |
Construction |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Commercial and industrial |  |  | 7,191 |  |  |  | 7,191 |  |  |  | 3,407 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Home equity |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Other |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Total |  | $ | 25,626 |  |  | $ | 23,106 |  |  | $ | 5,230 |
Nonaccrual loans and loans past due 90 days or more and still accruing were as follows:
|  | December 31, 2011 |  |  | December 31, 2010 |
Loans past due 90 days or more and still accruing |  | $ | 459 |  |  | $ | 1,714 |
Nonaccrual loans |  | $ | 2,678 |  |  | $ | 3,295 |
Nonaccrual loans and loans past due 90 days or more and still accruing include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified as impaired loans. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note C - Loans and Allowance for Loan Losses (continued) The following table presents the recorded investment of nonaccrual loans and loans past due 90 days or more and still accruing by class of loans as of December 31, 2011 and 2010:
December 31, 2011 |  | Loans Past Due 90 Days And Still Accruing |  |  | Nonaccrual |
Residential real estate |  | $ | 439 |  |  | $ | 2,450 |
Commercial real estate: |  |  |  |  |  |  |  |
Owner-occupied |  |  | ---- |  |  |  | 125 |
Nonowner-occupied |  |  | ---- |  |  |  | 86 |
Consumer: |  |  |  |  |  |  |  |
Automobile |  |  | 13 |  |  |  | 12 |
Home equity |  |  | ---- |  |  |  | 5 |
Other |  |  | 7 |  |  |  | ---- |
Total |  | $ | 459 |  |  | $ | 2,678 |
December 31, 2010 |  | Loans Past Due 90 Days And Still Accruing |  |  | Nonaccrual |
Residential real estate |  | $ | 1,487 |  |  | $ | 2,200 |
Commercial real estate: |  |  |  |  |  |  |  |
Owner-occupied |  |  | ---- |  |  |  | 428 |
Nonowner-occupied |  |  | ---- |  |  |  | 432 |
Consumer: |  |  |  |  |  |  |  |
Automobile |  |  | 114 |  |  |  | 100 |
Home equity |  |  | 43 |  |  |  | 104 |
Other |  |  | 70 |  |  |  | 31 |
Total |  | $ | 1,714 |  |  | $ | 3,295 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note C - Loans and Allowance for Loan Losses (continued) The following table presents the aging of the recorded investment of past due loans by class of loans as of December 31, 2011 and 2010:
December 31, 2011 |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | 90 Days Or More Past Due |  |  | Total Past Due |  |  | Loans Not Past Due |  |  | Total |
Residential real estate |  | $ | 3,662 |  |  | $ | 1,144 |  |  | $ | 2,889 |  |  | $ | 7,695 |  |  | $ | 218,794 |  |  | $ | 226,489 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 182 |  |  |  | ---- |  |  |  | 125 |  |  |  | 307 |  |  |  | 142,259 |  |  |  | 142,566 |
Nonowner-occupied |  |  | 69 |  |  |  | 232 |  |  |  | 86 |  |  |  | 387 |  |  |  | 55,032 |  |  |  | 55,419 |
Construction |  |  | 204 |  |  |  | ---- |  |  |  | ---- |  |  |  | 204 |  |  |  | 21,267 |  |  |  | 21,471 |
Commercial and industrial |  |  | 171 |  |  |  | 14 |  |  |  | ---- |  |  |  | 185 |  |  |  | 45,015 |  |  |  | 45,200 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | 864 |  |  |  | 110 |  |  |  | 13 |  |  |  | 987 |  |  |  | 44,715 |  |  |  | 45,702 |
Home equity |  |  | 75 |  |  |  | 76 |  |  |  | 5 |  |  |  | 156 |  |  |  | 20,351 |  |  |  | 20,507 |
Other |  |  | 506 |  |  |  | 162 |  |  |  | 7 |  |  |  | 675 |  |  |  | 40,279 |  |  |  | 40,954 |
Total |  | $ | 5,733 |  |  | $ | 1,738 |  |  | $ | 3,125 |  |  | $ | 10,596 |  |  | $ | 587,712 |  |  | $ | 598,308 |
December 31, 2010 |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | 90 Days Or More Past Due |  |  | Total Past Due |  |  | Loans Not Past Due |  |  | Total |
Residential real estate |  | $ | 4,731 |  |  | $ | 1,951 |  |  | $ | 3,448 |  |  | $ | 10,130 |  |  | $ | 226,748 |  |  | $ | 236,878 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 1,564 |  |  |  | 17 |  |  |  | 428 |  |  |  | 2,009 |  |  |  | 147,033 |  |  |  | 149,042 |
Nonowner-occupied |  |  | 87 |  |  |  | ---- |  |  |  | 432 |  |  |  | 519 |  |  |  | 55,470 |  |  |  | 55,989 |
Construction |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | 21,591 |  |  |  | 21,591 |
Commercial and industrial |  |  | 15 |  |  |  | ---- |  |  |  | ---- |  |  |  | 15 |  |  |  | 55,291 |  |  |  | 55,306 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | 1,010 |  |  |  | 342 |  |  |  | 213 |  |  |  | 1,565 |  |  |  | 56,706 |  |  |  | 58,271 |
Home equity |  |  | 78 |  |  |  | 50 |  |  |  | 147 |  |  |  | 275 |  |  |  | 20,252 |  |  |  | 20,527 |
Other |  |  | 793 |  |  |  | 238 |  |  |  | 101 |  |  |  | 1,132 |  |  |  | 42,586 |  |  |  | 43,718 |
Total |  | $ | 8,278 |  |  | $ | 2,598 |  |  | $ | 4,769 |  |  | $ | 15,645 |  |  | $ | 625,677 |  |  | $ | 641,322 |
Troubled Debt Restructurings: A troubled debt restructuring (“TDR”) is where the Company has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. All TDR's are considered to be impaired. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or short-term interest-only payment terms. The Company has allocated reserves for a portion of its TDR’s to reflect the fair values of the underlying collateral or the present value of the concessionary terms granted to the customer. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note C - Loans and Allowance for Loan Losses (continued) The following table presents the types of TDR loan modifications by class of loans as of December 31, 2011 and December 31, 2010:
|  | TDR’s Performing to Modified Terms |  |  | TDR’s Not Performed to Modified Terms |  |  | Total TDR’s |
December 31, 2011 |  |  |  |  |  |  |  |  |
Residential real estate |  |  |  |  |  |  |  |  |
Interest only payments |  | $ | ---- |  |  | $ | 283 |  |  | $ | 283 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 3,619 |  |  |  | ---- |  |  |  | 3,619 |
Rate reduction |  |  | 869 |  |  |  | ---- |  |  |  | 869 |
Maturity extension at lower stated rate than market rate |  |  | 219 |  |  |  | ---- |  |  |  | 219 |
Nonowner-occupied |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 3,357 |  |  |  | ---- |  |  |  | 3,357 |
Construction |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 674 |  |  |  | ---- |  |  |  | 674 |
Commercial and industrial |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 334 |  |  |  | ---- |  |  |  | 334 |
Total TDR’s |  | $ | 9,072 |  |  | $ | 283 |  |  | $ | 9,355 |
|  | TDR’s Performing to Modified Terms |  |  | TDR’s Not Performed to Modified Terms |  |  | Total TDR’s |
December 31, 2010 |  |  |  |  |  |  |  |  |
Residential real estate |  |  |  |  |  |  |  |  |
Interest only payments |  | $ | 456 |  |  | $ | ---- |  |  | $ | 456 |
Rate reduction |  |  | 584 |  |  |  | ---- |  |  |  | 584 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 3,886 |  |  |  | ---- |  |  |  | 3,886 |
Rate reduction |  |  | 887 |  |  |  | ---- |  |  |  | 887 |
Nonowner-occupied |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 2,983 |  |  |  | ---- |  |  |  | 2,983 |
Construction |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 679 |  |  |  | ---- |  |  |  | 679 |
Commercial and industrial |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 671 |  |  |  | ---- |  |  |  | 671 |
Rate reduction |  |  | 6,668 |  |  |  | ---- |  |  |  | 6,668 |
Total TDR’s |  | $ | 16,814 |  |  | $ | ---- |  |  | $ | 16,814 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note C - Loans and Allowance for Loan Losses (continued) At December 31, 2011, the balance in TDR loans decreased $7,459, or 44.4%, from year-end 2010. This was largely impacted by partial charge-offs and subsequent payoffs recorded on one impaired commercial and industrial loan relationship totaling $6,668 during the first and fourth quarters of 2011. At December 31, 2011 and December 31, 2010, 97% and 100% of the Company’s TDR’s were performing according to their modified terms. The Company allocated $655 and $3,791 in reserves to customers whose loan terms have been modified in TDR’s as of December 31, 2011 and December 31, 2010, respectively. At December 31, 2011, the Company had $81 in commitments to lend additional amounts to customers with outstanding loans that are classified as TDR’s as compared to none at December 31, 2010. At The following table presents the post-modification balances of TDR loan modifications by class of loans that occurred during year ended December 31, 2011:
|  | TDR’s Performing to Modified Terms |  |  | TDR’s Not Performing to Modified Terms |  |  | Total TDR’s |
December 31, 2011 |  |  |  |  |  |  |  |  |
Residential real estate |  | $ | ---- |  |  | $ | ---- |  |  | $ | ---- |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  |  |  |  |  |  |  |  |  |  |
Rate reduction |  |  | 1,515 |  |  |  | ---- |  |  |  | 1,515 |
Maturity extension at lower stated rate than market rate |  |  | 226 |  |  |  | ---- |  |  |  | 226 |
Nonowner-occupied |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 400 |  |  |  | ---- |  |  |  | 400 |
Maturity extension at lower stated rate than market rate |  |  | 1,927 |  |  |  | ---- |  |  |  | 1,927 |
Construction |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Commercial and industrial |  |  | ---- |  |  |  | ---- |  |  |  | ---- |
Total TDR’s |  | $ | 4,068 |  |  | $ | ---- |  |  | $ | 4,068 |
All of the Company’s TDR’s that occurred during the year ended December 31, 2011 were performing in accordance with their modified terms and did not experience any payment defaults within twelve months following the loan modification. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual. TDR loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The TDR’s described above increased the allowance for losses by $544 and resulted in charge-offs of $414 during the year ended December 31, 2011. As of December 31, 2011, the Company had allocated $130 of reserves to customers whose loan terms have been modified during the year ended December 31, 2011. Credit Quality Indicators: The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. These risk categories are represented by a loan grading scale from 1 through 10. The Company analyzes loans individually with a higher credit risk rating and groups these loans into categories called “criticized” and "classified" assets. The Company considers its criticized assets to be loans that are graded 8 and its classified assets to be loans that are graded 9 through 10. The Company's risk categories are reviewed at least annually on loans that have aggregate borrowing amounts that meet or exceed $500. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note C - Loans and Allowance for Loan Losses (continued) The Company uses the following definitions for its criticized loan risk ratings:
Special Mention (Loan Grade 8). Loans classified as special mention indicate considerable risk due to deterioration of repayment (in the earliest stages) due to potential weak primary repayment source, or payment delinquency. These loans will be under constant supervision, are not classified and do not expose the institution to sufficient risks to warrant classification. These deficiencies should be correctable within the normal course of business, although significant changes in company structure or policy may be necessary to correct the deficiencies. These loans are considered bankable assets with no apparent loss of principal or interest envisioned. The perceived risk in continued lending is considered to have increased beyond the level where such loans would normally be granted. Credits that are defined as a troubled debt restructuring should be graded no higher than special mention until they have been reported as performing over one year after restructuring.
The Company uses the following definitions for its classified loan risk ratings:
Substandard (Loan Grade 9). Loans classified as substandard represent very high risk, serious delinquency, nonaccrual, or unacceptable credit. Repayment through the primary source of repayment is in jeopardy due to the existence of one or more well defined weaknesses and the collateral pledged may inadequately protect collection of the loans. Loss of principal is not likely if weaknesses are corrected, although financial statements normally reveal significant weakness. Loans are still considered collectible, although loss of principal is more likely than with special mention loan grade 8 loans. Collateral liquidation is considered likely to satisfy debt.
Doubtful (Loan Grade 10). Loans classified as doubtful display a high probability of loss, although the amount of actual loss at the time of classification is undetermined. This should be a temporary category until such time that actual loss can be identified, or improvements made to reduce the seriousness of the classification. These loans exhibit all substandard characteristics with the addition that weaknesses make collection or liquidation in full highly questionable and improbable. This classification consists of loans where the possibility of loss is high after collateral liquidation based upon existing facts, market conditions, and value. Loss is deferred until certain important and reasonable specific pending factors which may strengthen the credit can be more accurately determined. These factors may include proposed acquisitions, liquidation procedures, capital injection, receipt of additional collateral, mergers, or refinancing plans. A doubtful classification for an entire credit should be avoided when collection of a specific portion appears highly probable with the adequately secured portion graded substandard.
Criticized and classified loans will mostly consist of commercial and industrial and commercial real estate loans. The Company considers its loans that do not meet the criteria for a criticized and classified asset rating as pass rated loans, which will include loans graded from 1 (Prime) to 7 (Watch). All commercial loans are categorized into a risk category either at the time of origination or reevaluation date. As of December 31, 2011 and December 31, 2010, and based on the most recent analysis performed, the risk category of commercial loans by class of loans is as follows:
December 31, 2011 |  | Pass |  |  | Criticized |  |  | Classified |  |  | Total |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  | $ | 113,118 |  |  | $ | 15,664 |  |  | $ | 13,784 |  |  | $ | 142,566 |
Nonowner-occupied |  |  | 31,697 |  |  |  | 12,815 |  |  |  | 10,907 |  |  |  | 55,419 |
Construction |  |  | 19,519 |  |  |  | ---- |  |  |  | 1,952 |  |  |  | 21,471 |
Commercial and industrial |  |  | 36,633 |  |  |  | 3,250 |  |  |  | 5,317 |  |  |  | 45,200 |
Total |  | $ | 200,967 |  |  | $ | 31,729 |  |  | $ | 31,960 |  |  | $ | 264,656 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note C - Loans and Allowance for Loan Losses (continued)
December 31, 2010 |  | Pass |  |  | Criticized |  |  | Classified |  |  | Total |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  | $ | 122,726 |  |  | $ | 15,764 |  |  | $ | 10,552 |  |  | $ | 149,042 |
Nonowner-occupied |  |  | 48,569 |  |  |  | 1,550 |  |  |  | 5,870 |  |  |  | 55,989 |
Construction |  |  | 15,487 |  |  |  | 63 |  |  |  | 6,041 |  |  |  | 21,591 |
Commercial and industrial |  |  | 39,725 |  |  |  | 3,943 |  |  |  | 11,638 |  |  |  | 55,306 |
Total |  | $ | 226,507 |  |  | $ | 21,320 |  |  | $ | 34,101 |  |  | $ | 281,928 |
The Company also obtains the credit scores of its borrowers upon origination (if available by the credit bureau), but the scores are not updated. The Company focuses mostly on the performance and repayment ability of the borrower as an indicator of credit risk and does not consider a borrower's credit score to be a significant influence in the determination of a loan's credit risk grading. The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment of residential and consumer loans by class of loans based on payment activity as of December 31, 2011 and December 31, 2010:
December 31, 2011 |  | Consumer |  |  |  |  |  |  |
|  | Automobile |  |  | Home Equity |  |  | Other |  |  | Residential Real Estate |  |  | Total |
Performing |  | $ | 45,677 |  |  | $ | 20,502 |  |  | $ | 40,947 |  |  | $ | 223,600 |  |  | $ | 330,726 |
Nonperforming |  |  | 25 |  |  |  | 5 |  |  |  | 7 |  |  |  | 2,889 |  |  |  | 2,926 |
Total |  | $ | 45,702 |  |  | $ | 20,507 |  |  | $ | 40,954 |  |  | $ | 226,489 |  |  | $ | 333,652 |
December 31, 2010 |  | Consumer |  |  |  |  |  |  |
|  | Automobile |  |  | Home Equity |  |  | Other |  |  | Residential Real Estate |  |  | Total |
Performing |  | $ | 58,057 |  |  | $ | 20,380 |  |  | $ | 43,617 |  |  | $ | 233,191 |  |  | $ | 355,245 |
Nonperforming |  |  | 214 |  |  |  | 147 |  |  |  | 101 |  |  |  | 3,687 |  |  |  | 4,149 |
Total |  | $ | 58,271 |  |  | $ | 20,527 |  |  | $ | 43,718 |  |  | $ | 236,878 |  |  | $ | 359,394 |
The Company, through its subsidiaries, grants residential, consumer, and commercial loans to customers located primarily in the southeastern area of Ohio as well as the western counties of West Virginia. Approximately 3.98% of total loans were unsecured at December 31, 2011, up from 3.93% at December 31, 2010

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