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Loans and Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2011
Loans and Allowance For Loan Losses [Abstract]  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 4:      Loans and Allowance for Loan Losses

 

Categories of loans at December 31 include:

 

($ in thousands)   Total Loans     Non-Accrual Loans     Non-Accrual Percentage  
    2011     2010     2011     2010     2011     2010  
Commercial   $ 78,112     $ 72,489       2,393       3,032       3.06 %     4.18 %
Commercial real estate     187,829       177,890       1,456       5,428       0.78 %     3.05 %
Agricultural     38,361       40,762       -       -       0.00 %     0.00 %
Residential real estate     87,656       84,775       2,471       3,285       2.82 %     3.87 %
Consumer     50,681       51,710       580       538       1.14 %     1.04 %
Leasing     216       194       -       -       0.00 %     0.00 %
Total loans     442,855       427,820       6,900       12,283       1.56 %     2.87 %
Less                                                
Net deferred loan fees, premiums and discounts     (301 )     (276 )                                
Loans, net of unearned income     442,554       427,544                                  
Allowance for loan losses   $ (6,529 )   $ (6,715 )                                

  

The following tables present the balance of the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2011 and 2010.

 

For the Year Ended         Commercial                                      
December 31, 2011   Commercial     RE &     Agricultural     Residential     Home Equity                    
($'s in thousands)   & Industrial     Construction     & Farmland     Real Estate     & Consumer     Other     Unallocated     Total  
                                                 
Beginning balance   $ 1,723     $ 3,774     $ 16     $ 643     $ 401     $ 128     $ 30     $ 6,715  
Charge Offs     (642 )     (2,057 )     -       (248 )     (460 )     -       -       (3,407 )
Recoveries     465       32       3       700       21       6       -       1,227  
Provision     368       1,131       32       (139 )     637     $ 5       (40 )     1,994  
Ending Balance   $ 1,914     $ 2,880     $ 51     $ 956     $ 599     $ 139     $ (10 )   $ 6,529  
                                                                 
Ending balance:                                                                
individually evaluated for impairment   $ 1,017     $ 19     $ 5     $ 280     $ 212                     $ 1,533  
Ending balance:                                                                
individually evaluated for impairment   $ 897     $ 2,861     $ 46     $ 676     $ 387     $ 139     $ (10 )   $ 4,996  
                                                                 
Loans:                                                                
Ending balance:                                                                
individually evaluated for impairment   $ 3,283     $ 2,473     $ 5     $ 2,074     $ 543                     $ 8,378  
Ending balance:                                                                
individually evaluated for impairment   $ 74,829     $ 185,356     $ 38,356     $ 85,582     $ 50,138     $ 216     $ -     $ 434,477  
 

 

For the Year Ended         Commercial                                      
December 31, 2010   Commercial     RE &     Agricultural     Residential     Home Equity                    
($'s in thousands)   & Industrial     Construction     & Farmland     Real Estate     & Consumer     Other     Unallocated     Total  
                                                 
Beginning balance   $ 2,604     $ 3,210     $ 92     $ 715     $ 255     $ 154     $ -     $ 7,030  
Charge Offs     (4,739 )     (4,748 )     -       (1,210 )     (542 )     (95 )     -       (11,334 )
Recoveries     182       171       11       53       -       14       -       431  
Provision     3,676       5,141       (87 )     1,085       688       55       30       10,588  
Ending Balance   $ 1,723     $ 3,774     $ 16     $ 643     $ 401     $ 128     $ 30     $ 6,715  
                                                                 
Ending balance:                                                                
individually evaluated for impairment   $ 684     $ 1,157     $ -     $ -     $ -                     $ 1,841  
Ending balance:                                                                
individually evaluated for impairment   $ 1,039     $ 2,617     $ 16     $ 643     $ 401     $ 128     $ 30     $ 4,874  
Loans:                                                                
Ending balance:                                                                
individually evaluated for impairment   $ 3,121     $ 3,774     $ -     $ -     $ -                     $ 6,895  
Ending balance:                                                                
individually evaluated for impairment   $ 69,368     $ 174,116     $ 40,762     $ 84,775     $ 51,710     $ 194     $ -     $ 420,925  
 

  

Credit Risk Profile

 

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. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans with an outstanding balance greater than $100 thousand and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

 

Special Mention: Assets have potential weaknesses that deserve managements close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Ordinarily, special mention credits have characteristics which corrective management action would remedy.

 

Substandard: Loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardized the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

 

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current known facts, conditions and values, highly questionable and improbable.

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

  

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category as of December 31, 2011 and 2010 (dollars in thousands).

 

Dec. 31, 2011   Commercial     Comm. RE     Agricultural     Residential     Home Equity              
Loan Grade   & Industrial     & Construction     & Farmland     Real Estate     & Consumer     Other     Total  
1-2   $ 909     $ 188     $ 152     $ 1,548     $ 127     $ 140     $ 3,064  
   3     24,375       62,506       13,203       78,122       43,814       -       222,020  
   4     48,004       110,633       24,950       1,576       6,095       76       191,334  
Total Pass     73,288       173,327       38,305       81,246       50,036       216       416,418  
                                                         
Special Mention     610       9,703       5       1,666       72       -       12,056  
Substandard     2,037       3,358       51       1,834       92       -       7,372  
Doubtful     2,177       1,441       -       2,910       481       -       7,009  
Loss     -       -       -       -       -       -       -  
Total   $ 78,112     $ 187,829     $ 38,361     $ 87,656     $ 50,681     $ 216     $ 442,855  
 

 

Dec. 31, 2010   Commercial     Commercial     Agricultural     Residential     Home Equity              
Loan Grade   & Industrial     Real Estate     & Farmland     Real Estate     & Consumer     Other     Total  
1-2   $ 903     $ 735     $ 180     $ 3,861     $ 444     $ 127     $ 6,250  
   3     25,101       63,789       15,883       68,979       47,650       -       221,402  
   4     40,159       97,307       24,204       5,535       2,589       67       169,861  
Total Pass     66,163       161,831       40,267       78,375       50,683       194       397,513  
                                                         
Special Mention     1,021       7,141       6       2,465       217       -       10,850  
Substandard     2,739       3,176       489       2,605       450       -       9,459  
Doubtful     2,566       5,742       -       1,330       360       -       9,998  
Loss     -       -       -       -       -       -       -  
Total   $ 72,489     $ 177,890     $ 40,762     $ 84,775     $ 51,710     $ 194     $ 427,820  
 

  

The following tables present the Company’s loan portfolio aging analysis as of December 21, 2011 and December 31, 2010 (dollars in thousands).

 

    30-59 Days     60-89 Days     Greater Than     Total Past           Total Loans  
December 31, 2011   Past Due     Past Due     90 Days     Due     Current     Receivable  
                                     
Commercial & Industrial   $ 58     $ -     $ 2,334     $ 2,392     $ 75,720     $ 78,112  
Commercial RE     67       -       1,656       1,723       186,106       187,829  
Agricultural & Farmland     -       -       -       -       38,361       38,361  
Residential Real Estate     412       784       569       1,765       85,891       87,656  
Home Equity & Consumer     465       194       505       1,164       49,517       50,681  
Other     -       -       -       -       216       216  
Loans     1,002       978       5,064       7,044       435,811       442,855  
Loans held for Sale     -       -       -       -       5,238       5,238  
                                                 
Total   $ 1,002     $ 978     $ 5,064     $ 7,044     $ 441,049     $ 448,093  
 

 

    30-59 Days     60-89 Days     Greater Than     Total Past           Total Loans  
December 31, 2010   Past Due     Past Due     90 Days     Due     Current     Receivable  
                                     
Commercial & Industrial   $ 242     $ 73     $ 2,744     $ 3,059     $ 69,430     $ 72,489  
Commercial RE     148       10       5,617       5,775       172,115       177,890  
Agricultural & Farmland     -       88       -       88       40,674       40,762  
Residential Real Estate     427       372       1,584       2,383       82,392       84,775  
Home Equity & Consumer     255       25       547       827       50,883       51,710  
Other     -       -       -       -       194       194  
Loans     1,072       568       10,492       12,132       415,688       427,820  
Loans held for Sale     -       -       -       -       9,055       9,055  
                                                 
Total   $ 1,072     $ 568     $ 10,492     $ 12,132     $ 424,743     $ 436,875  
 

 

All loans past due 90 days are systematically placed on nonaccrual status.

  

The following tables present impaired loan activity for the twelve months ended December 31, 2011 and 2010.

 

Twelve Months Ended                              
December 31, 2011         Unpaid           Average     Interest  
($'s in thousands)   Recorded     Principal     Related     Recorded     Income  
    Investment     Balance     Allowance     Investment     Recognized  
With no related allowance recorded:                                        
Commercial & Industrial   $ 1,206     $ 1,856     $ -     $ 1,737     $ 89  
Commercial RE & Construction     1,061       2,149       -       2,264       4  
Agricultural & Farmland     -       -       -       -       -  
Residential Real Estate     581       581       -       678       42  
Home Equity & Consumer     189       217       -       191       2  
All Impaired Loans < $100,000     1,065       1,065       -       1,065       -  
With a specific allowance recorded:                                        
Commercial & Industrial     2,077       3,787       1,017       2,528       -  
Commercial RE & Construction     1,412       2,827       19       2,029       21  
Agricultural & Farmland     5       5       5       5       1  
Residential Real Estate     1,493       1,596       280       1,655       66  
Home Equity & Consumer     354       354       212       365       8  
All Impaired Loans < $100,000     -       -       -       -       -  
Totals:                                        
Commercial & Industrial   $ 3,283     $ 5,643     $ 1,017     $ 4,265     $ 89  
Commercial RE & Construction   $ 2,473     $ 4,976     $ 19     $ 4,293     $ 25  
Agricultural & Farmland   $ 5     $ 5     $ 5     $ 5     $ 1  
Residential Real Estate   $ 2,074     $ 2,177     $ 280     $ 2,333     $ 108  
Home Equity & Consumer   $ 543     $ 571     $ 212     $ 556     $ 10  
All Impaired Loans < $100,000     1,065       1,065       -       1,065       -  
 

 

Twelve Months Ended                              
December 31, 2010         Unpaid           Average     Interest  
($'s in thousands)   Recorded     Principal     Related     Recorded     Income  
    Investment     Balance     Allowance     Investment     Recognized  
With no related allowance recorded:                                        
Commercial & Industrial   $ 436     $ 786     $ -     $ 2,075     $ 4  
Commercial RE & Construction     2,744       4,040       -       4,195       52  
Agricultural & Farmland     -       -       -       -       10  
Residential Real Estate     616       741       -       1,045       2  
Home Equity & Consumer     43       43       -       72       -  
All Impaired Loans < $100,000     1,062       1,062       -       1,062       -  
With a specific allowance recorded:                                        
Commercial & Industrial     2,438       3,938       684       2,147       (48 )
Commercial RE & Construction     3,202       3,202       1,187       3,147       44  
Agricultural & Farmland     -       -       -       -       -  
Residential Real Estate     -       -       -       -       -  
Home Equity & Consumer     -       -       -       -       -  
All Impaired Loans < $100,000     -       -       -       -       -  
Totals:                                        
Commercial & Industrial   $ 2,874     $ 4,724     $ 684     $ 4,222     $ (44 )
Commercial RE & Construction   $ 5,946     $ 7,242     $ 1,187     $ 7,342     $ 96  
Agricultural & Farmland   $ -     $ -     $ -     $ -     $ 10  
Residential Real Estate   $ 616     $ 741     $ -     $ 1,045     $ 2  
Home Equity & Consumer   $ 43     $ 43     $ -     $ 72     $ -  
All Impaired Loans < $100,000   $ 1,062     $ 1,062     $ -     $ 1,062     $ -  
 

  

Impaired loans less than $100,000 are included in groups of homogenous loans. These loans are evaluated based on delinquency status.

 

Interest income recognized on a cash basis does not materially differ from interest income recognized on an accrual basis.

 

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable State Bank will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include non-performing commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

 

Troubled Debt Restructured (TDR) Loans

 

TDR’s are modified loans where a concession was provided to a borrower experiencing financial difficulties. Loan modifications are considered TDR’s when the concessions provided are not available to the borrower through either normal channels or other sources. However, not all loan modifications are TDR’s.

 

TDR Concession Types

 

The Company’s standards relating to loan modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations. Each potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower’s specific circumstances at a point in time. All loan modifications, including those classified as TDR’s, are reviewed and approved. The types of concessions provided to borrowers include:

 

· Interest rate reduction: A reduction of the stated interest rate to a nonmarket rate for the remaining original life of the debt. The Company also may grant interest rate concessions for a limited timeframe on a case by case basis.
· Amortization or maturity date change beyond what the collateral supports, including any of the following:

 

(1) Lengthens the amortization period of the amortized principal beyond market terms. This concession reduces the minimum monthly payment and increases the amount of the balloon payment at the end of the term of the loan. Principal is generally not forgiven.

 

(2) Reduces the amount of loan principal to be amortized. This concession also reduces the minimum monthly payment and increases the amount of the balloon payment at the end of the term of the loan. Principal is generally not forgiven.

 

(3) Extends the maturity date or dates of the debt beyond what the collateral supports. This concession generally applies to loans without a balloon payment at the end of the term of the loan. In addition, there may be instances where renewing loans potentially require non-market terms and would then be reclassified as TDRs.

  

· Other: A concession that is not categorized as one of the concessions described above. These concessions include, but are not limited to: principal forgiveness, collateral concessions, covenant concessions, and reduction of accrued interest. Principal forgiveness may result from any TDR modification of any concession type.

 

The table below presents the activity of TDR’s during the prior year.

 

    Twelve Months Ended December 31, 2011  
          Pre-Modification     Post-Modification  
    Number of     Recorded     Recorded  
    Contracts     Investment     Investment  
                   
Residential Real Estate     14     $ 1,011     $ 1,011  

 

Of the troubled debt restructurings entered into during 2011, none had subsequently defaulted as of December 31, 2011. Redefaults are defined as loans that were performing troubled debt restructurings that became 90 days or more past due post restructuring. The Company has specifically allocated $1.2 million of the $6.5 million in loan loss allowance to all troubled debt restructured loans. All troubled debt restructures resulted from a reduction to a borrowers rate. No principal reductions have been granted.