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Loans Receivable and Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2011
Loans Receivable and Allowance for Loan Losses [Abstract]  
Loans Receivable and Allowance for Loan Losses

Note 4. Loans Receivable and Allowance for Loan Losses

Loans receivable, net, consists of the following at December 31, 2011 and 2010:

 

                 
    December 31,     December 31,  
    2011     2010  

Real Estate:

                

Commercial

   $ 215,659,837     $ 228,842,489  

Residential

     188,108,855       187,058,318  

Construction

     12,306,922       63,889,083  

Construction-to-permanent

     10,012,022       10,331,043  

Commercial

     31,810,735       14,573,790  

Consumer home equity

     49,694,546       42,884,962  

Consumer installment

     2,164,972       1,932,763  
   

 

 

    

 

 

  

Total loans

     509,757,889       549,512,448  

Premiums on purchased loans

     231,125       242,426  

Net deferred costs

     622,955       150,440  

Allowance for loan losses

     (9,384,672 )      (15,374,101 ) 
   

 

 

    

 

 

  

Loans receivable, net

   $ 501,227,297     $ 534,531,213  
   

 

 

    

 

 

  

 

A summary of changes in the allowance for loan losses for the years ended December 31, 2011, 2010 and 2009 are as follows:

 

                         
    2011     2010     2009  

Balance, beginning of year

   $ 15,374,101     $ 15,794,118     $ 16,247,070  

Provision for loan losses

     7,464,427       7,714,000       13,089,000  

Transferred to loans held-for-sale

     (6,054,660 )      —         —    

Recoveries of loans previously charged-off

     853,578       236,262       187,647  

Loans charged-off

     (8,252,774 )      (8,370,279 )      (13,729,598 ) 
   

 

 

    

 

 

    

 

 

  

Balance, end of year

   $ 9,384,672     $ 15,374,101     $ 15,794,118  
   

 

 

    

 

 

    

 

 

  

At December 31, 2011 and 2010, the unpaid principal balances of loans 90 days or more past due, and still accruing were approximately $9,461,106 and $3,374,242, respectively, and the unpaid principal balances of loans placed on non-accrual status and considered impaired were $20,683,165 and $89,150,000, respectively. Ten of these loans totaling $4.9 million were current as to loan payments, but past the loan’s maturity dates. Three loans totaling $4.6 million were over 30 days but under 60 days past due as to payments. On March 24, 2011, the Company completed the sale of certain non-performing assets that included 21 non-accruing loans with an aggregate net book value of $52.4 million (net of related specific reserves) and 4 OREO properties with an aggregate carrying value of $14.4 million. The sale of $66.8 million of non-performing assets was consummated for a cash purchase price of $60,602,036 which represented 90.7% of the Bank’s net book value for these assets.

At December 31, 2011, there were 12 loans totaling $25.5 million that were considered “troubled debt restructurings”, as compared to 19 loans totaling $38.0 million that were considered “troubled debt restructurings” at December 31, 2010, all of which are included in impaired loans. At December 31, 2011, 6 of the 12 loans aggregating $16.1 million were accruing and 6 loans aggregating $9.4 million were non-accruing loans. Loan modifications, which resulted in these loans being considered troubled debt restructurings, are primarily in the form of rate concessions or term extensions. At December 31, 2011, there were no commitments to advance additional funds under troubled debt restructured loans, as compared to total approximately $115,000 at December 31, 2010.

If impaired loans had been performing in accordance with their original terms, the Company would have recorded $2,274,604, $6,844,986 and $5,312,327, of additional income during the years ended December 31, 2011, 2010 and 2009, respectively.

During 2011, 2010 and 2009, interest income collected and recognized on impaired loans was $464,785 $1,806,759 and $424,745, respectively. The average recorded investment in impaired loans for the years ending December 31, 2011, 2010 and 2009 were $49,758,263, $104,946,719 and $105,309,710, respectively.

 

The Company’s lending activities are conducted principally in Fairfield and New Haven Counties in Connecticut and Westchester County, New York City and Long Island, New York. The Company originates commercial real estate loans, commercial business loans and a variety of consumer loans. In addition, the Company had originated loans for the construction of residential homes, residential developments and for land development projects. A moratorium on all new speculative construction loans was instituted by management in July 2008. All residential and commercial mortgage loans are collateralized primarily by first or second mortgages on real estate. The ability and willingness of borrowers to satisfy their loan obligations is dependent in large part upon the status of the regional economy and regional real estate market. Accordingly, the ultimate collectability of a substantial portion of the loan portfolio and the recovery of a substantial portion of any resulting real estate acquired is susceptible to changes in market conditions.

The Company has established credit policies applicable to each type of lending activity in which it engages, evaluates the creditworthiness of each customer and, in most cases, extends credit of up to 75% of the market value of the collateral at the date of the credit extension depending on the Company’s evaluation of the borrowers’ creditworthiness and type of collateral. In the case of construction loans, the maximum loan-to-value was 65% of the “as completed” market value. The market value of collateral is monitored on an ongoing basis and additional collateral is obtained when warranted. Real estate is the primary form of collateral. Other important forms of collateral are accounts receivable, inventory, other business assets, marketable securities and time deposits. While collateral provides assurance as a secondary source of repayment, the Company ordinarily requires the primary source of repayment to be based on the borrower’s ability to generate continuing cash flows on all loans not related to construction.

Risk characteristics of the Company’s portfolio classes include the following:

Commercial Real Estate Loans – In underwriting commercial real estate loans, the Company evaluates both the prospective borrower’s ability to make timely payments on the loan and the value of the property securing the loans. Repayment of such loans may be negatively impacted should the borrower default or should there be a substantial decline in the value of the property securing the loan or a decline in the general economic conditions. Where the owner occupies the property, the Company also evaluates the business’s ability to repay the loan on a timely basis. In addition, the Company may require personal guarantees, lease assignments and/or the guarantee of the operating company when the property is owner occupied. These types of loans may involve greater risks than other types of lending, because payments on such loans are often dependent upon the successful operation of the business involved, therefore, repayment of such loans may be negatively impacted by adverse changes in economic conditions affecting the borrowers’ business.

Construction Loans – Construction loans are short-term loans (generally up to 18 months) secured by land for both residential and commercial development. The loans are generally made for acquisition and improvements. Funds are disbursed as phases of construction are completed.

 

In the past, the Company funded construction of single family homes, when no contract of sale exists, based upon the experience of the builder, the financial strength of the owner, the type and location of the property and other factors. Construction loans are generally personally guaranteed by the principal(s). Repayment of such loans may be negatively impacted by the builders’ inability to complete construction, by a downturn in the new construction market, by a significant increase in interest rates or by a decline in general economic conditions. The Company has had a moratorium in place since mid-2008 on new speculative construction loans.

Residential Real Estate Loans – Various loans secured by residential real estate properties are offered by the Company, including 1-4 family residential mortgages, multi-family residential loans and a variety of home equity line of credit products. Repayment of such loans may be negatively impacted should the borrower default, should there be a significant decline in the value of the property securing the loan or should there be a decline in general economic conditions.

Commercial and Industrial Loans – The Company’s commercial and industrial loan portfolio consists primarily of commercial business loans and lines of credit to businesses and professionals. These loans are usually made to finance the purchase of inventory, new or used equipment or other short or long-term working capital purposes. These loans are generally secured by corporate assets, often with real estate as secondary collateral, but are also offered on an unsecured basis. In granting this type of loan, the Company primarily looks to the borrower’s cash flow as the source of repayment with collateral and personal guarantees, where obtained, as a secondary source. Commercial loans are often larger and may involve greater risks than other type of loans offered by the Company. Payments on such loans are often dependent upon the successful operation of the underlying business involved and, therefore, repayment of such loans may be negatively impacted by adverse changes in economic conditions, management’s inability to effectively manage the business, claims of others against the borrower’s assets which may take priority over the Company’s claims against assets, death or disability of the borrower or loss of market for the borrower’s products or services.

Other Loans – The Company also offers installment loans and reserve lines of credit to individuals. Repayments of such loans are often dependent on the personal income of the borrower which may be negatively impacted by adverse changes in economic conditions. The Company does not place an emphasis on originating these types of loans.

The Company does not have any lending programs commonly referred to as subprime lending. Subprime lending generally targets borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burdened ratios.

 

The following tables set forth activity in our allowance for loan losses, by loan type, for the years ended December 31, 2011 and 2010. The following tables also detail the amount of loans receivable, net, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan portfolio segment.

 

                                                                 
2011   Commercial     Commercial
Real Estate		     Construction     Construction
to Permanent		     Residential     Consumer     Unallocated     Total  

Allowance for loan losses:

                                                                

Beginning Balance

   $ 441,319     $ 7,632,355     $ 3,478,058     $ 491,446     $ 2,363,838     $ 578,612     $ 388,473     $ 15,374,101  

Charge-offs

     (374,506 )      (2,940,901 )      (3,305,318 )      —         (1,458,198 )      (173,851 )      —         (8,252,774 ) 

Transferred to loans held-for-sale

     —         (963,461 )      (1,409,701 )      —         (3,681,498 )      —         —         (6,054,660 ) 

Recoveries

     1,240       33,764       519,160       —         —         299,414       —         853,578  

Provision

     814,009       256,989       1,584,960       55,887       5,326,446       (245,413 )      (328,451 )      7,464,427  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 882,062     $ 4,018,746     $ 867,159     $ 547,333     $ 2,550,588     $ 458,762     $ 60,022     $ 9,384,672  

Ending balance: individually evaluated for impairment

   $ 61,145     $ 319,894     $ 31,520     $ 498,254     $ 197,478     $ 151,500     $ —       $ 1,259,791  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

   $ 820,917     $ 3,698,852     $ 835,639     $ 49,079     $ 2,353,110     $ 307,262     $ 60,022     $ 8,124,881  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Allowance for Loan Losses

   $ 882,062     $ 4,018,746     $ 867,159     $ 547,333     $ 2,550,588     $ 458,762     $ 60,022     $ 9,384,672  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Loans ending balance

   $ 31,810,735     $ 215,659,837     $ 12,306,922     $ 10,012,022     $ 188,108,855     $ 51,859,518     $ —       $ 509,757,889  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

   $ 289,560     $ 9,575,970     $ 1,378,579     $ 9,108,987     $ 14,986,243     $ 1,417,742     $ —       $ 36,757,081  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

   $ 31,521,175     $ 206,083,867     $ 10,928,343     $ 903,035     $ 173,122,612     $ 50,441,776     $ —       $ 473,000,808  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                                 
2010   Commercial     Commercial
Real Estate		     Construction     Construction
to Permanent		     Residential     Consumer     Unallocated     Total  

Allowance for loan losses:

                                                                

Beginning Balance

   $ 925,102     $ 4,987,239     $ 6,673,204     $ 497,584     $ 1,575,189     $ 750,549     $ 385,251     $ 15,794,118  

Charge-offs

     (396,300 )      (2,560,074 )      (4,726,015 )      —         (600,000 )      (87,890 )      —         (8,370,279 ) 

Recoveries

     —         67,116       157,289       —         —         11,857       —         236,262  

Provision

     (87,483 )      5,138,074       1,373,580       (6,138 )      1,388,649       (95,904 )      3,222       7,714,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 441,319     $ 7,632,355     $ 3,478,058     $ 491,446     $ 2,363,838     $ 578,612     $ 388,473     $ 15,374,101  

Ending balance: individually evaluated for impairment

   $ 76,045     $ 2,300,199     $ 1,895,326     $ 183,835     $ 1,556,077     $ —       $ —       $ 6,011,482  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

   $ 365,274     $ 5,332,156     $ 1,582,732     $ 307,611     $ 807,761     $ 578,612     $ 388,473     $ 9,362,619  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Allowance for Loan Losses

   $ 441,319     $ 7,632,355     $ 3,478,058     $ 491,446     $ 2,363,838     $ 578,612     $ 388,473     $ 15,374,101  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Loans ending balance

   $ 14,573,790     $ 228,842,489     $ 63,889,083     $ 10,331,043     $ 187,058,318     $ 44,817,725     $ —       $ 549,512,448  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

   $ 1,214,950     $ 28,466,238     $ 30,886,023     $ 1,379,835     $ 37,219,868     $ 1,516,977     $ —       $ 100,683,891  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

   $ 13,358,840     $ 200,376,251     $ 33,003,060     $ 8,951,208     $ 149,838,450     $ 43,300,748     $ —       $ 448,828,557  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The Company continuously monitors the credit quality of its loans receivable. Credit quality is monitored by reviewing certain credit quality indicators. Management has determined that loan-to-value ratios (LTVs), (at period end) and internally assigned risk ratings are the key credit quality indicators that best help management monitor the credit quality of the Company’s loans receivable. Loan-to-value ratios used by management in monitoring credit quality are based on current period loan balances and original values at time of originations (unless a current appraisal has been obtained as a result of the loan being deemed impaired or the loan is a maturing construction loan).

Appraisals on properties securing impaired loans and OREO are updated annually. Additionally, appraisals on construction loans are updated four months in advance of scheduled maturity dates. We update our impairment analysis monthly based on the most recent appraisal as well as other factors (such as senior lien positions, e.g. property taxes), and we are using published information regarding actual median home sales prices in the towns/counties where our collateral is located in CT and NY.

The majority of the Company’s impaired loans have been resolved through courses of action other than via bank liquidations of real estate collateral through OREO. These include normal loan payoffs, the traditional workout process, triggering personal guarantee obligations, and troubled debt restructurings. However, as loan workout efforts progress to a point where the bank’s liquidation of real estate collateral is the likely outcome, the impairment analysis is updated to reflect actual recent experience with bank sales of OREO properties.

A disposition discount is built into our impairment analysis and reflected in our allowance once a property is determined to be a likely OREO (e.g. foreclosure is probable). To determine the discount we compare the actual sales prices of our OREO properties to the appraised value that was obtained as of the date when we took title to the property. The difference is the bank-owned disposition discount.

The Company has a risk rating system as part of the risk assessment of its loan portfolio. The Company’s lending officers are required to assign a risk rating to each loan in their portfolio at origination. When the lender learns of important financial developments, the risk rating is reviewed accordingly, and adjusted if necessary. Similarly, the Loan Committee can adjust a risk rating. The Loan Workout Committee meets on a regular basis and reviews loans rated “special mention” or worse. In addition, the Company engages a third party independent loan reviewer that performs semi-annual reviews of a sample of loans, validating the Bank’s risk ratings assigned to such loans. The risk ratings play an important role in the establishment of the loan loss provision and to confirm the adequacy of the allowance for loan losses.

 

When assigning a risk rating to a loan, management utilizes the Bank’s internal nine-point risk rating system. Loans deemed to be “acceptable quality” are rated 1 through 5, with a rating of 1 established for loans with minimal risk and borrowers exhibiting the strongest financial condition. Loans rated 1—5 are considered “Pass”. Loans that are deemed to be of “questionable quality” are rated 6 (special mention). An asset is considered “special mention” when it has a potential weakness based on objective evidence, but does not currently expose the Company to sufficient risk to warrant classification in one of the following categories. Loans with adverse classifications (substandard, doubtful or loss) are rated 7, 8 or 9, respectively. An asset is considered “substandard” if it is not adequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets have well defined weaknesses based on objective evidence, and are characterized by the “distinct possibility” that the Company will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.”

Charge-off generally commences in the month that the loan is classified “doubtful” and is fully charged off within six months of such classification. If the account is classified “loss” the full balance is charged off immediately. The full balance is charged off regardless of the potential recovery from the sale of the collateral. This amount is recognized as a recovery once the collateral is sold.

In accordance with FFIEC (“Federal Financial Institutions Examination Council”) published policies establishing uniform criteria for the classification of retail credit based on delinquency status, “Open-end” credits are charged-off when 180 days delinquent and “Closed-end” credits are charged-off when 120 days delinquent. Typically, consumer installment loans are charged off no later than 90 days past due.

 

The following table details the credit risk exposure of loans receivable, by loan type and credit quality indicator at December 31, 2011:

CREDIT RISK PROFILE BY CREDITWORTHINESS CATEGORY

 

                                                                                                                 
    Commercial     Commercial Real Estate     Construction     Construction to Permanent     Residential Real Estate     Consumer        
LTVs:   < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     Other     Total  

Internal Risk Rating

                                                                                                                

Pass

   $ 23,822,200     $ 1,737,893     $ 151,392,526     $ 11,680,310     $ —       $ —       $ 903,035     $ —       $ 129,132,494     $ 34,895,858     $ 44,969,963     $ 1,531,223       636,863     $ 400,702,365  

Special Mention

     1,544,420       170,575       22,426,235       4,585,523       9,210,344       —         —         —         5,316,201       2,400,000       274,365       3,029,362       —         48,957,025  

Substandard & Doubtful

     4,480,440       55,207       15,981,747       9,593,496       1,243,579       1,852,999       —         9,108,987       3,587,607       12,776,695       —         1,417,742       —         60,098,499  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 29,847,060     $ 1,963,675     $ 189,800,508     $ 25,859,329     $ 10,453,923     $ 1,852,999     $ 903,035     $ 9,108,987     $ 138,036,302     $ 50,072,553     $ 45,244,328     $ 5,978,327     $ 636,863     $ 509,757,889  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

CREDIT RISK PROFILE

 

                                                         
    Commercial     Commercial
Real Estate		     Construction     Construction
to Permanent		     Residential
Real Estate		     Consumer     Totals  

Performing

   $ 31,521,175     $ 206,322,032     $ 10,928,343     $ 5,808,035     $ 183,629,363     $ 50,865,776     $ 489,074,724  

Non Performing

     289,560       9,337,805       1,378,579       4,203,987       4,479,492       993,742       20,683,165  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 31,810,735     $ 215,659,837     $ 12,306,922     $ 10,012,022     $ 188,108,855     $ 51,859,518     $ 509,757,889  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table details the credit risk exposure of loans receivable, by loan type and credit quality indicator at December 31, 2010:

CREDIT RISK PROFILE BY CREDITWORTHINESS CATEGORY

 

                                                                                                                 
    Commercial     Commercial Real Estate     Construction     Construction to Permanent     Residential Real Estate     Consumer        
LTVs:   < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     Other     Total  

Internal Risk Rating

                                                                                                                

Pass

   $ 11,225,261     $ 256,296     $ 124,645,152     $ 9,449,059     $ 1,272,028     $ 350,000     $ —       $ —       $ 91,534,348     $ 51,996,851     $ 35,192,214     $ —         1,917,783     $ 327,838,992  

Special Mention

     704,053       181,600       35,253,018       4,645,738       15,059,704       4,485,209       1,709,333       —         2,088,700       2,907,285       3,146,244       2,879,621       —         73,060,505  

Substandard & Doubtful

     1,424,161       782,419       13,792,482       41,057,040       10,712,146       32,009,996       —         8,621,710       18,052,003       20,479,131       99,235       1,567,648       14,980       148,612,951  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 13,353,475     $ 1,220,315     $ 173,690,652     $ 55,151,837     $ 27,043,878     $ 36,845,205     $ 1,709,333     $ 8,621,710     $ 111,675,051     $ 75,383,267     $ 38,437,693     $ 4,447,269     $ 1,932,763     $ 549,512,448  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

CREDIT RISK PROFILE

 

                                                         
          Commercial           Construction     Residential              
    Commercial     Real Estate     Construction     to Permanent     Real Estate     Consumer     Totals  

Performing

   $ 13,358,840     $ 202,054,317     $ 33,003,060     $ 8,951,208     $ 159,270,574     $ 43,724,749     $ 460,362,748  

Non Performing

     1,214,950       26,788,172       30,886,023       1,379,835       27,787,744       1,092,976       89,149,700  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 14,573,790     $ 228,842,489     $ 63,889,083     $ 10,331,043     $ 187,058,318     $ 44,817,725     $ 549,512,448  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The recorded balance of these nonaccrual loans was $20.7 million and $89.1 million at December 31, 2011, and December 31, 2010 respectively. Generally, loans are placed on non-accruing status when they become 90 days or more delinquent, and remain on non-accrual status until they are brought current, have six months of performance under the loan terms, and factors indicating reasonable doubt about the timely collection of payments no longer exist. Therefore, loans may be current in accordance with their loan terms, or may be less than 90 days delinquent and still be on a non-accruing status. Additionally, certain loans that cannot demonstrate sufficient global cash flow to continue loan payments in the future and certain troubled debt restructures (TDRs) are placed on non-accrual status.

 

The following table sets forth the detail, and delinquency status, of non-accrual loans and past due loans at December 31, 2011:

 

                                                         
    Non-Accrual and Past Due Loans  
                                        Total Non-  
                                  >90 Days Past     Accrual and  
    31-60 Days     61-90 Days     Greater Than     Total Past           Due and     Past Due  

2011

   Past Due     Past Due     90 Days     Due     Current     Accruing     Loans  

Commercial

                                                        

Pass

   $ —       $ —       $ —       $ —       $ —       $ 44,296     $ 44,296  

Substandard

     —         —         289,560       289,560       —         947,847       1,237,407  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial

   $ —       $ —       $ 289,560     $ 289,560     $ —       $ 992,143     $ 1,281,703  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Commercial Real Estate

                                                        

Pass

   $ —       $ —       $ —       $ —       $ —       $ 402,663     $ 402,663  

Special Mention

     —         —         —         —         —         2,832,452       2,832,452  

Substandard

             443,259       6,670,730       7,113,989       2,223,816       3,515,848       12,853,653  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial Real Estate

   $ —       $ 443,259     $ 6,670,730     $ 7,113,989     $ 2,223,816     $ 6,750,963     $ 16,088,768  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction

                                                        

Substandard

   $ —       $ —       $ 135,000     $ 135,000     $ 1,243,579     $ 1,717,999     $ 3,096,578  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction

   $ —       $ —       $ 135,000     $ 135,000     $ 1,243,579     $ 1,717,999     $ 3,096,578  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction to Permanent

                                                        

Substandard

   $ —       $ —       $ —       $ —       $ 4,203,987     $ —       $ 4,203,987  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction to Permanent

   $ —       $ —       $ —       $ —       $ 4,203,987     $ —       $ 4,203,987  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Residential Real Estate

                                                        

Substandard

   $ —       $ —       $ 4,479,492     $ 4,479,492     $ —       $ —       $ 4,479,492  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Residential Real Estate

   $ —       $ —       $ 4,479,492     $ 4,479,492     $ —       $ —       $ 4,479,492  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consumer

                                                        

Substandard

   $ —       $ —       $ 993,742     $ 993,742     $ —       $ —       $ 993,742  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Consumer

   $ —       $ —       $ 993,742     $ 993,742     $ —       $ —       $ 993,742  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ —       $ 443,259     $ 12,568,524     $ 13,011,783     $ 7,671,382     $ 9,461,105     $ 30,144,270  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table sets forth the detail, and delinquency status, of non-accrual loans and past due loans at December 31, 2010:

 

                                                         
    Non-Accrual and Past Due Loans  
                                        Total Non-  
                                  >90 Days Past     Accrual and  
    31-60 Days     61-90 Days     Greater Than     Total Past           Due and     Past Due  

2010

   Past Due     Past Due     90 Days     Due     Current     Accruing     Loans  

Commercial

                                                        

Special Mention

   $ —       $ —       $ —       $ —       $ —       $ 63,289     $ 63,289  

Substandard

     350,000       100,000       698,767       1,148,767       66,183       175,000       1,389,950  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial

   $ 350,000     $ 100,000     $ 698,767     $ 1,148,767     $ 66,183     $ 238,289     $ 1,453,239  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Commercial Real Estate

                                                        

Substandard

   $ 269,672     $ 6,449,096     $ 13,521,123     $ 20,239,891     $ 6,548,281     $ —       $ 26,788,172  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial Real Estate

   $ 269,672     $ 6,449,096     $ 13,521,123     $ 20,239,891     $ 6,548,281     $ —       $ 26,788,172  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction

                                                        

Substandard

   $ 1,517,943     $ 4,059,516     $ 13,736,985     $ 19,314,444     $ 11,571,579     $ 3,135,953     $ 34,021,976  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction

   $ 1,517,943     $ 4,059,516     $ 13,736,985     $ 19,314,444     $ 11,571,579     $ 3,135,953     $ 34,021,976  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction to Permanent

                                                        

Substandard

   $ —       $ —       $ —       $ —       $ 1,379,835     $ —       $ 1,379,835  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction to Permanent

   $ —       $ —       $ —       $ —       $ 1,379,835     $ —       $ 1,379,835  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Residential Real Estate

                                                        

Substandard

   $ —       $ —       $ 15,897,248     $ 15,897,248     $ 11,890,496     $ —       $ 27,787,744  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Residential Real Estate

   $ —       $ —       $ 15,897,248     $ 15,897,248     $ 11,890,496     $ —       $ 27,787,744  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consumer

                                                        

Substandard

   $ —       $ —       $ 1,092,976     $ 1,092,976     $ —       $ —       $ 1,092,976  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Consumer

   $ —       $ —       $ 1,092,976     $ 1,092,976     $ —       $ —       $ 1,092,976  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 2,137,615     $ 10,608,612     $ 44,947,099     $ 57,693,326     $ 31,456,374     $ 3,374,242     $ 92,523,942  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

These non-accrual amounts included loans deemed to be impaired of $20.7 million and $89.1 million at December 31, 2011, and December 31, 2010, respectively. Loans past due ninety days or more, and still accruing interest were $9.5 million and $3.4 million at December 31, 2011, and December 31, 2010 respectively. Ten of these loans totaling $4.9 million were current as to loan payments, but past the loan’s maturity dates. Three loans totaling $4.6 million were over 30 days but under 60 days past due as to payments. The following table sets forth the detail and delinquency status of loans receivable, net, by performing and non-performing loans at December 31, 2011.

 

                                                         
    Performing (Accruing) Loans              
                                  Total Non-        
          Greater                       Accrual and        
    31-60 Days     Than 60     Total Past           Total Loan     Past Due     Total Loans  

2011

   Past Due     Days     Due     Current     Balances     Loans     Receivable, net  

Commercial

                                                        

Pass

   $ 10,971     $ —       $ 10,971     $ 25,504,826     $ 25,515,797     $ 44,296     $ 25,560,093  

Special Mention

     —         —         —         1,714,995       1,714,995       —         1,714,995  

Substandard

     233,781       —         233,781       3,064,459       3,298,240       1,237,407       4,535,647  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial

   $ 244,752     $ —       $ 244,752     $ 30,284,280     $ 30,529,032     $ 1,281,703     $ 31,810,735  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Commercial Real Estate

                                                        

Pass

   $ —       $ —       $ —       $ 162,670,173     $ 162,670,173     $ 402,663     $ 163,072,836  

Special Mention

     1,915,504       —         1,915,504       22,263,802       24,179,306       2,832,452       27,011,758  

Substandard

     —         —         —         12,721,590       12,721,590       12,853,653       25,575,243  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial Real Estate

   $ 1,915,504     $ —       $ 1,915,504     $ 197,655,565     $ 199,571,069     $ 16,088,768     $ 215,659,837  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction

                                                        

Special Mention

   $ —       $ —       $ —       $ 9,210,344     $ 9,210,344     $ —       $ 9,210,344  

Substandard

     —         —         —         —         —         3,096,578       3,096,578  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction

   $ —       $ —       $ —       $ 9,210,344     $ 9,210,344     $ 3,096,578     $ 12,306,922  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction to Permanent

                                                        

Pass

   $ —       $ —       $ —       $ 903,035     $ 903,035     $ —       $ 903,035  

Substandard

     —         —         —         4,905,000       4,905,000       4,203,987       9,108,987  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction to Permanent

   $ —       $ —       $ —       $ 5,808,035     $ 5,808,035     $ 4,203,987     $ 10,012,022  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Residential Real Estate

                                                        

Pass

   $ 42,181     $ —       $ 42,181     $ 163,986,171     $ 164,028,352     $ —       $ 164,028,352  

Special Mention

     4,800,000       —         4,800,000       2,916,201       7,716,201       —         7,716,201  

Substandard

     —         84,225       84,225       11,800,585       11,884,810       4,479,492       16,364,302  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Residential Real Estate

   $ 4,842,181     $ 84,225     $ 4,926,406     $ 178,702,957     $ 183,629,363     $ 4,479,492     $ 188,108,855  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consumer

                                                        

Pass

   $ 1,459     $ —       $ 1,459     $ 47,136,590     $ 47,138,049     $ —       $ 47,138,049  

Special Mention

     —         —         —         3,303,727       3,303,727       —         3,303,727  

Substandard

     —         —         —         424,000       424,000       993,742       1,417,742  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Consumer

   $ 1,459     $ —       $ 1,459     $ 50,864,317     $ 50,865,776     $ 993,742     $ 51,859,518  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 7,003,896     $ 84,225     $ 7,088,121     $ 472,525,498     $ 479,613,619     $ 30,144,270     $ 509,757,889  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table sets forth the detail and delinquency status of loans receivable, net, by performing and non-performing loans at December 31, 2010.

 

                                                         
    Performing (Accruing) Loans              
                                  Total Non-        
          Greater                       Accrual and        
    31-60 Days     Than 60     Total Past           Total Loan     Past Due     Total Loans  

2010

   Past Due     Days     Due     Current     Balances     Loans     Receivable, net  

Commercial

                                                        

Pass

   $ —       $ —       $ —       $ 11,481,557     $ 11,481,557     $ —       $ 11,481,557  

Special Mention

     —         —         —         822,364       822,364       63,289       885,653  

Substandard

     —         —         —         816,630       816,630       1,389,950       2,206,580  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial

   $ —       $ —       $ —       $ 13,120,551     $ 13,120,551     $ 1,453,239     $ 14,573,790  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Commercial Real Estate

                                                        

Pass

   $ —       $ —       $ —       $ 134,094,210     $ 134,094,210     $ —       $ 134,094,210  

Special Mention

     —         —         —         39,898,756       39,898,756       —         39,898,756  

Substandard

     —         —         —         28,061,351       28,061,351       26,788,172       54,849,523  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial Real Estate

   $ —       $ —       $ —       $ 202,054,317     $ 202,054,317     $ 26,788,172     $ 228,842,489  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction

                                                        

Pass

   $ —       $ —       $ —       $ 1,622,029     $ 1,622,029     $ —       $ 1,622,029  

Special Mention

     —         —         —         19,544,913       19,544,913       —         19,544,913  

Substandard

     —         —         —         8,700,165       8,700,165       34,021,976       42,722,141  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction

   $ —       $ —       $ —       $ 29,867,107     $ 29,867,107     $ 34,021,976     $ 63,889,083  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction to Permanent

                                                        

Pass

   $ —       $ —       $ —       $ —       $ —       $ —       $ —    

Special Mention

     —         —         —         1,709,333       1,709,333       —         1,709,333  

Substandard

     1,127,875       —         1,127,875       6,114,000       7,241,875       1,379,835       8,621,710  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction to Permanent

   $ 1,127,875     $ —       $ 1,127,875     $ 7,823,333     $ 8,951,208     $ 1,379,835     $ 10,331,043  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Residential Real Estate

                                                        

Pass

   $ 198,357     $ —       $ 198,357     $ 143,332,842     $ 143,531,199     $ —       $ 143,531,199  

Special Mention

     2,907,285       —         2,907,285       2,088,700       4,995,985       —         4,995,985  

Substandard

     —         —         —         10,743,390       10,743,390       27,787,744       38,531,134  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Residential Real Estate

   $ 3,105,642     $ —       $ 3,105,642     $ 156,164,932     $ 159,270,574     $ 27,787,744     $ 187,058,318  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consumer

                                                        

Pass

   $ —       $ —       $ —       $ 37,109,997     $ 37,109,997     $ —       $ 37,109,997  

Special Mention

     168,589       —         168,589       5,857,276       6,025,865       —         6,025,865  

Substandard

     —         —         —         588,887       588,887       1,092,976       1,681,863  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Consumer

   $ 168,589     $ —       $ 168,589     $ 43,556,160     $ 43,724,749     $ 1,092,976     $ 44,817,725  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 4,402,106     $ —       $ 4,402,106     $ 452,586,400     $ 456,988,506     $ 92,523,942     $ 549,512,448  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table summarizes impaired loans as of December 31, 2011:

 

                         
    Recorded     Unpaid Principal     Related  
    Investment     Balance     Allowance  

2011

                        

With no related allowance recorded:

                        

Commercial

   $ 210,091     $ 581,974     $ —    

Commercial Real Estate

     4,444,315       5,174,124       —    

Construction

     1,243,579       1,247,627       —    

Construction to Permanent

     6,614,333       6,614,333          

Residential

     9,789,727       9,789,727       —    

Consumer

     993,742       1,038,640       —    
   

 

 

    

 

 

    

 

 

  

Total:

   $ 23,295,787     $ 24,446,425     $ —    
       

With an allowance recorded:

                        

Commercial

   $ 79,469     $ 130,137     $ 61,145  

Commercial Real Estate

     5,131,655       5,354,025       319,894  

Construction

     135,000       286,625       31,520  

Construction to Permanent

     2,494,654       2,634,000       498,254  

Residential

     5,196,516       5,196,516       197,478  

Consumer

     424,000       424,000       151,500  
   

 

 

    

 

 

    

 

 

  

Total:

   $ 13,461,294     $ 14,025,303     $ 1,259,791  
       

Commercial

   $ 289,560     $ 712,111     $ 61,145  

Commercial Real Estate

     9,575,970       10,528,149       319,894  

Construction

     1,378,579       1,534,252       31,520  

Construction to Permanent

     9,108,987       9,248,333       498,254  

Residential

     14,986,243       14,986,243       197,478  

Consumer

     1,417,742       1,462,640       151,500  
   

 

 

    

 

 

    

 

 

  

Total:

   $ 36,757,081     $ 38,471,728     $ 1,259,791  
   

 

 

    

 

 

    

 

 

  

The following table summarizes impaired loans as of December 31, 2010:

 

                         
    Recorded     Unpaid Principal     Related  
    Investment     Balance     Allowance  

2010

                        

With no related allowance recorded:

                        

Commercial

   $ 1,077,512     $ 1,828,917     $ —    

Commercial Real Estate

     12,770,033       13,052,924       —    

Construction

     14,060,251       15,133,253       —    

Construction to Permanent

     —         —            

Residential

     24,513,106       24,737,293       —    

Consumer

     1,516,977       1,883,585       —    
   

 

 

    

 

 

    

 

 

  

Total:

   $ 53,937,879     $ 56,635,972     $ —    
       

With an allowance recorded:

                        

Commercial

   $ 137,438     $ 151,633     $ 76,045  

Commercial Real Estate

     15,696,205       19,509,247       2,300,199  

Construction

     16,825,772       19,368,468       1,895,326  

Construction to Permanent

     1,379,835       1,425,000       183,835  

Residential

     12,706,762       12,826,248       1,556,077  

Consumer

     —         —         —    
   

 

 

    

 

 

    

 

 

  

Total:

   $ 46,746,012     $ 53,280,596     $ 6,011,482  
       

Commercial

   $ 1,214,950     $ 1,980,550     $ 76,045  

Commercial Real Estate

     28,466,238       32,562,171       2,300,199  

Construction

     30,886,023       34,501,721       1,895,326  

Construction to Permanent

     1,379,835       1,425,000       183,835  

Residential

     37,219,868       37,563,541       1,556,077  

Consumer

     1,516,977       1,883,585       —    
   

 

 

    

 

 

    

 

 

  

Total:

   $ 100,683,891     $ 109,916,568     $ 6,011,482  
   

 

 

    

 

 

    

 

 

  

At December 31, 2011 and 2010, the recorded investment of impaired loans was $36.8 million and $100.7 million, with related allowances of $1.3 million and $6.0 million, respectively.

Included in the tables above at December 31, 2011 and 2010, are loans with carrying balances of $23.3 million and $53.9 million respectively that required no specific reserves in our allowance for loan losses. Loans that did not require specific reserves have sufficient collateral values, less costs to sell, supporting the carrying balances of the loans. In some cases, there may be no specific reserves because the Company already charged-off the specific impairment. Once a borrower is in default, the Company is under no obligation to advance additional funds on unused commitments.

 

On a case-by-case basis, the Company may agree to modify the contractual terms of a borrower’s loan to remain competitive and assist customers who may be experiencing financial difficulty, as well as preserve the Company’s position in the loan. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan.

As a result of the adoption of ASU 2011-02, the Company reassessed all restructurings occurred on or after January 1, 2011 for identification as TDRs and has concluded that there were no additional TDRs identified that have not been previously disclosed.

The following table presents the total troubled debt restructured loans as of December 31, 2011:

 

                                                 
    Accrual     Non-accrual     Total  
    # of           # of           # of        
    Loans     Amount     Loans     Amount     Loans     Amount  

Commercial Real Estate

     1     $ 238,165       3     $ 5,666,882       4     $ 5,905,047  

Residential Real Estate

     3       10,506,751       —         —         3       10,506,751  

Construction

     —         —         1       1,243,579       1       1,243,579  

Construction to permanent

     1       4,905,000       2       2,494,654       3       7,399,654  

Consumer home equity

     1       424,000       —         —         1       424,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Troubled Debt Restructurings

     6     $ 16,073,916       6     $ 9,405,115       12     $ 25,479,031  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The following table summarizes loans that were modified in a troubled debt restructuring during the year ended December 31, 2011.

 

                                 
    Twelve months ended December 31, 2011  
          Pre-Modification           Post-Modification  
    Number of     Outstanding Recorded     Number of     Outstanding Recorded  
    Relationships     Investment     Relationships     Investment  

Troubled Debt Restructurings

                                

Commercial Real Estate

     2     $ 3,579,149       2     $ 2,461,981  

Residential Real Estate

     1       2,884,141       1       2,884,141  

Construction to permanent

     5       12,560,969       3       7,399,654  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total Troubled Debt Restructurings

     8     $ 19,024,259       6     $ 12,745,776  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

The eight loans represented above have been reclassified as troubled debt restructurings during the year ended December 31, 2011.

Substantially all of our troubled debt restructured loan modifications involve lowering the monthly payments on such loans through either a reduction in interest rate below market rate, an extension of the term of the loan, or a combination of these two methods. These modifications rarely result in the forgiveness of principal or accrued interest. In addition, we frequently obtain additional collateral or guarantor support when modifying commercial loans. If the borrower had demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

In addition to the above, during the year ended December 31, 2011, there was one commercial real estate loan modified on March 31, 2011 for $3.3 million that released a guarantor having financial difficulty to allow the borrower to recapitalize and provide additional time in which to develop an exit plan to pay off the debt. The loan was reduced by a $1.0 million paydown that was applied to the specific reserve established in the second quarter. The impairment was eliminated and the $1.0 million was taken as a credit to the loan loss provision.

During the year ended December 31, 2011, two of the troubled debt restructurings modified had a payment default. One default was a residential loan for $3.5 million and was subsequently sold as an OREO. The other default was a commercial construction loan for $1.1 million, and is currently an OREO, after a charge-off of $255,000 in November 2011.

All troubled debt restructurings are impaired loans, which are individually evaluated for impairment, as discussed above, and were included in the allowance for loan losses.