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Loan and allowance for loan losses | 9 Months Ended
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Sep. 30, 2011
Loans And Leases Receivable Disclosure Abstract |
Loans and leases receivable disclosure [Text Block] | NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES
|  |  |  |  |  |  | September 30, |  |  | December 31,
(In thousands) |  |  | 2011 |  |  | 2010
Commercial and industrial |  | $ | 53,888 |  | $ | 53,288
Construction and land development |  |  | 40,781 |  |  | 47,850
Commercial real estate: |  |  |  |  |  |
| Owner occupied |  |  | 71,247 |  |  | 76,252
| Other |  |  | 94,812 |  |  | 89,989
|  | Total commercial real estate |  |  | 166,059 |  |  | 166,241
Residential real estate: |  |  |  |  |  |
| Consumer mortgage |  |  | 58,935 |  |  | 57,562
| Investment property |  |  | 43,095 |  |  | 38,679
|  | Total residential real estate |  |  | 102,030 |  |  | 96,241
Consumer installment |  |  | 12,105 |  |  | 10,676
|  | Total loans |  |  | 374,863 |  |  | 374,296
Less: unearned income |  |  | (75) |  |  | (81)
|  | Loans, net of unearned income |  | $ | 374,788 |  | $ | 374,215
Loans secured by r eal estate were approximately 82.4% of the total loan portfolio at September 30, 2011. Due to declines in economic indicators and real estate values, loans secured by real estate may have a greater risk of non-collection than other loans. At September 30, 2011, the Company's geographic loan distribution was concentrated primarily in Lee County, Alabama and surrounding areas. In accordance with ASC 310, a portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for loan losses. The Company's loan portfolio is disaggregated into the following portfolio segments: commercial and industrial, construction and land development, commercial real estate, residential real estate and consumer installment. The Company's loan portfolio segments were determined based on collateral type. Where appropriate, the Company's loan portfolio segments are further disaggregated into classes. A class is generally determined based on the initial measurement attribute, risk characteristics of the loan, and an entity's method for monitoring and determining credit risk. The following describe the risk characteristics relevant to each of the portfolio segments. Commercial and i ndustrial (“C&I”) — includes loans to finance business operations, equipment purchases, or other needs for small and medium-sized commercial customers. Also included in this category are loans to finance agricultural production. Generally the primary source of repayment is the cash flow from business operations and activities of the borrower. Construction and land development (“C&D”) — includes both loans and credit lines for the purpose of purchasing, carrying and developing land into commercial developments or residential subdivisions. Also included are loans and lines for construction of residential, multi-family and commercial buildings. Generally the primary source of repayment is dependent upon the sale or refinance of the real estate collateral. Commercial real estate (“CRE”) — includes loans disaggregated into two classes: (1) owner occupied and (2) other. Owner occupied – includes loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized commercial customers. Generally the primary source of repayment is the cash flow from business operations and activities of the borrower, who owns the property. Other – primarily includes loans to finance income-producing commercial and multi-family properties. Loans in this class include loans for neighborhood retail centers, hotels, medical and professional offices, single retail stores, industrial buildings, warehouses and apartments leased generally to local businesses and residents. Generally the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates as well as the financial health of the borrower. Residential real estate (“RRE”) — includes loans disaggregated into two classes: (1) consumer mortgage and (2) investment property. Consumer mortgage – primarily include s first or second lien mortgages and home equity lines to consumers that are secured by a primary residence or second home. These loans are underwritten in accordance with the Bank's general loan policies and procedures which require, among other things, proper documentation of each borrower's financial condition, satisfactory credit history and property value. Investment property – primarily includes loans to finance income-producing 1-4 family residential properties. Generally the primary source of repayment is dependent upon income generated from leasing the property securing the loan. The underwriting of these loans takes into consideration the rental rates as well as the financial health of the borrower. Consumer installment — includes loans to individuals both secured by personal property and unsecured. Loans include personal lines of credit, automobile loans, and other retail loans. These loans are underwritten in accordance with the Bank's general loan policies and procedures which require, among other things, proper documentation of each borrower's financial condition, satisfactory credit history, and if applicable, property value. The following is a summary of current, accruing past due and nonaccrual loans by portfolio class as of September 30, 2011, and December 31, 2010
|  |  |  |  |  |  |  |  | Accruing | Accruing | Total |  |  |  |
|  |  |  |  |  |  |  |  | 30-89 Days | Greater than | Accruing | Non- |  |  | Total
(In thousands) |  | Current | Past Due | 90 days | Loans | Accrual |  |  | Loans
September 30, 2011: |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 53,603 | 253 | — | 53,856 | 32 |  | $ | 53,888
Construction and land development |  |  | 35,452 | 173 | — | 35,625 | 5,156 |  |  | 40,781
Commercial real estate: |  |  |  |  |  |  |  |  |  |
| Owner occupied |  |  | 69,652 | — | — | 69,652 | 1,595 |  |  | 71,247
| Other |  |  | 92,791 | — | — | 92,791 | 2,021 |  |  | 94,812
|  | Total commercial real estate |  |  | 162,443 | — | — | 162,443 | 3,616 |  |  | 166,059
Residential real estate: |  |  |  |  |  |  |  |  |  |
| Consumer mortgage |  |  | 57,532 | 471 | — | 58,003 | 932 |  |  | 58,935
| Investment property |  |  | 41,845 | 623 | — | 42,468 | 627 |  |  | 43,095
|  | Total residential real estate |  |  | 99,377 | 1,094 | — | 100,471 | 1,559 |  |  | 102,030
Consumer installment |  |  | 11,937 | 25 | — | 11,962 | 143 |  |  | 12,105
|  | Total |  | $ | 362,812 | 1,545 | — | 364,357 | 10,506 |  | $ | 374,863
December 31, 2010: |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 52,643 | 124 | — | 52,767 | 521 |  | $ | 53,288
Construction and land development |  |  | 43,547 | 201 | — | 43,748 | 4,102 |  |  | 47,850
Commercial real estate: |  |  |  |  |  |  |  |  |  |
| Owner occupied |  |  | 73,419 | — | — | 73,419 | 2,833 |  |  | 76,252
| Other |  |  | 88,087 | — | — | 88,087 | 1,902 |  |  | 89,989
|  | Total commercial real estate |  |  | 161,506 | — | — | 161,506 | 4,735 |  |  | 166,241
Residential real estate: |  |  |  |  |  |  |  |  |  |
| Consumer mortgage |  |  | 53,225 | 2,219 | — | 55,444 | 2,118 |  |  | 57,562
| Investment property |  |  | 37,556 | 767 | — | 38,323 | 356 |  |  | 38,679
|  | Total residential real estate |  |  | 90,781 | 2,986 | — | 93,767 | 2,474 |  |  | 96,241
Consumer installment |  |  | 10,646 | 29 | — | 10,675 | 1 |  |  | 10,676
|  | Total |  | $ | 359,123 | 3,340 | — | 362,463 | 11,833 |  | $ | 374,296
At September 30, 2011 and December 31, 2010, no naccrual loans amounted to $10.5 and $11.8 million, respectively. At September 30, 2011 and December 31, 2010, there were no loans 90 days past due and still accruing interest. Allowance for Loan Losses The Company assesses the adequacy of its allowance for loan losses prior to the end of each calendar quarter. The level of the allowance is based upon management's evaluation of the loan portfolios, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan loss rates and other pertinent factors, including regulatory recommendations. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. Loan losses are charged off when management believes that the full collectability of the loan is unlikely. A loan may be partially charged-off after a “confirming event” has occurred which serves to validate that full repayment pursuant to the terms of the loan is unlikely. Allocation of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, is deemed to be uncollectible. The Company deems loans impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Collection of all amounts due according to the contractual terms means that both the interest and principal payments of a loan will be collected as scheduled in the loan agreement. An impairment allowance is recognized if the fair value of the loan is less than the recorded investment in the loan. The impairment is recognized through the allowance. Loans that are impaired are recorded at the present value of expected future cash flows discounted at the loan's effective interest rate, or if the loan is collateral dependent, impairment measurement is based on the fair value of the collateral, less estimated disposal costs. The level of allowance maintained is believed by management to be adequate to absorb probable losses inherent in the portfolio at the balance sheet date. The allowance is increased by provisions charged to expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. In assessing the adequacy of the allowance, the Company also considers the results of its ongoing independent loan review process. The Company's loan review process assists in determining whether there are loans in the portfolio whose credit quality has weakened over time and evaluating the risk characteristics of the entire loan portfolio. The Company's loan review process includes the judgment of management, the input from our independent loan reviewers, and reviews that may have been conducted by bank regulatory agencies as part of their examination process. The Company incorporates loan review results in the determination of whether or not it is probable that we will be able to collect all amounts due according to the contractual terms of a loan. As part of the Company's quarterly assessment of the allowance, management divides the loan portfolio into five segments: commercial and industrial loans, construction and land development loans, commercial real estate, residential real estate, and consumer installment loans. The Company analyzes each segment and estimates an allowance allocation for each loan segment. The allocation of the allowance for loan losses begins with a process of estimating the probable losses inherent for these types of loans. The estimates for these loans are established by category and based on the Company's internal system of credit risk ratings and historical loss data. The estimated loan loss allocation rate for the Company's internal system of credit risk grades is based on its experience with similarly graded loans. For loan segments where the Company believes it does not have sufficient historical loss data, the Company may make adjustments based, in part, on loss rates of peer bank groups. Consistent with prior periods, a t September 30, 2011 and December 31, 2010, the Company adjusted its historical loss rates for the commercial real estate portfolio segment based, in part, on loss rates of peer bank groups. The estimated loan loss allocation for all five loan portfolio segments is then adjusted for management's estimate of probable losses for several “qualitative and environmental” factors. The allocation for qualitative and environmental factors is particularly subjective and does not lend itself to exact mathematical calculation. This amount represents estimated probable inherent credit losses which exist, but have not yet been identified, as of the balance sheet date, and are based upon quarterly trend assessments in delinquent and nonaccrual loans, credit concentration changes, prevailing economic conditions, changes in lending personnel experience, changes in lending policies or procedures and other influencing factors. These qualitative and environmental factors are considered for each of the five loan segments and the allowance allocation, as determined by the processes noted above, is increased or decreased based on the incremental assessment of these factors. The Company maintains an unallocated amount for inherent factors that cannot be practically assigned to individual loan segments or categories that is needed due to th e imprecision in the overall measurement process. The following table details the changes in the allowance for loan losses by portfolio segment for the quarter and nine months ended September 30, 2011.
|  |  | September 30, 2011
(In thousands) |  | Commercial and industrial |  | Construction and land development |  | Commercial real estate |  | Residential real estate |  | Consumer installment |  | Unallocated |  |  | Total
Quarter ended: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 767 |  | 2,759 |  | 2,722 |  | 1,104 |  | 190 |  | 204 |  | $ | 7,746
Charge-offs |  | (298) |  | (1,572) |  | (79) |  | (73) |  | (7) |  | — |  |  | (2,029)
Recoveries |  | 5 |  | 1 |  | — |  | 14 |  | 3 |  | — |  |  | 23
| Net (charge-offs) recoveries | (293) |  | (1,571) |  | (79) |  | (59) |  | (4) |  | — |  |  | (2,006)
Provision |  | 288 |  | (50) |  | 0 |  | 359 |  | (8) |  | 11 |  |  | 600
Ending balance | $ | 762 |  | 1,138 |  | 2,643 |  | 1,404 |  | 178 |  | 215 |  | $ | 6,340
Nine months ended: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 972 |  | 2,223 |  | 2,893 |  | 1,336 |  | 141 |  | 111 |  | $ | 7,676
Charge-offs |  | (659) |  | (1,717) |  | (419) |  | (519) |  | (11) |  | — |  |  | (3,325)
Recoveries |  | 28 |  | 2 |  | — |  | 149 |  | 10 |  | — |  |  | 189
| Net (charge-offs) recoveries | (631) |  | (1,715) |  | (419) |  | (370) |  | (1) |  | — |  |  | (3,136)
Provision |  | 421 |  | 630 |  | 169 |  | 438 |  | 38 |  | 104 |  |  | 1,800
Ending balance | $ | 762 |  | 1,138 |  | 2,643 |  | 1,404 |  | 178 |  | 215 |  | $ | 6,340
|  |  |  |  |  |  | Collectively evaluated (1) |  | Individually evaluated (2) |  | Total
|  |  |  |  |  |  | Allowance | Recorded |  | Allowance | Recorded |  | Allowance | Recorded
|  |  |  |  |  |  | for loan | investment |  | for loan | investment |  | for loan | investment
(In thousands) |  | losses | in loans |  | losses | in loans |  | losses | in loans
September 30, 2011: |  |  |  |  |  |  |  |  |
Commercial and industrial | $ | 762 | 53,661 |  | — | 227 |  | 762 | 53,888
Construction and land development |  | 929 | 35,625 |  | 209 | 5,156 |  | 1,138 | 40,781
Commercial real estate |  | 2,221 | 162,374 |  | 422 | 3,685 |  | 2,643 | 166,059
Residential real estate |  | 1,163 | 100,713 |  | 241 | 1,317 |  | 1,404 | 102,030
Consumer installment |  | 178 | 12,105 |  | — | — |  | 178 | 12,105
Unallocated |  | 215 | — |  | — | — |  | 215 | —
|  | Total | $ | 5,468 | 364,478 |  | 872 | 10,385 |  | 6,340 | 374,863
December 31, 2010: |  |  |  |  |  |  |  |  |
Commercial and industrial | $ | 695 | 52,767 |  | 277 | 521 |  | 972 | 53,288
Construction and land development |  | 2,100 | 43,748 |  | 123 | 4,102 |  | 2,223 | 47,850
Commercial real estate |  | 2,128 | 161,611 |  | 765 | 4,630 |  | 2,893 | 166,241
Residential real estate |  | 1,192 | 93,823 |  | 144 | 2,418 |  | 1,336 | 96,241
Consumer installment |  | 141 | 10,676 |  | — | — |  | 141 | 10,676
Unallocated |  | 111 | — |  | — | — |  | 111 | —
|  | Total | $ | 6,367 | 362,625 |  | 1,309 | 11,671 |  | 7,676 | 374,296
(1) | Represents loans collectively evaluated for impairment in accordance with ASC 450-20, Loss Contingencies (formerly FAS 5), and
| pursuant to amendments by ASU 2010-20 regarding allowance for unimpaired loans.
(2) | Represents loans individually evaluated for impairment in accordance with ASC 310-30, Receivables (formerly FAS 114), and
| pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.
Credit Quality Indicators The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan portfolio segments and classes. These categories are utilized to develop the associated allowance for loan losses using historical losses adjusted for current economic conditions and are defined as follows: Pass – loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral. Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company's position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification. Substandard Accruing – loans that exhibit a well-defined weakness which presently jeopardizes debt repayment, even though they are currently performing. These loans are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected; Nonaccrual – includes loans where management has determined that full payment of principal and interest is in doubt.
|  |  |  |  |  |  |  |  | September 30, 2011
(In thousands) |  | Pass |  | Special Mention |  | Substandard Accruing |  | Nonaccrual |  |  | Total loans
Commercial and industrial | $ | 51,602 |  | 1,460 |  | 794 |  | 32 |  | $ | 53,888
Construction and land development |  | 34,233 |  | 279 |  | 1,113 |  | 5,156 |  |  | 40,781
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |
| Owner occupied |  | 63,149 |  | 4,996 |  | 1,507 |  | 1,595 |  |  | 71,247
| Other |  | 83,956 |  | 627 |  | 8,208 |  | 2,021 |  |  | 94,812
|  | Total commercial real estate |  | 147,105 |  | 5,623 |  | 9,715 |  | 3,616 |  |  | 166,059
Residential real estate: |  |  |  |  |  |  |  |  |  |  |
| Consumer mortgage |  | 50,977 |  | 2,335 |  | 4,691 |  | 932 |  |  | 58,935
| Investment property |  | 38,675 |  | 2,246 |  | 1,547 |  | 627 |  |  | 43,095
|  | Total residential real estate |  | 89,652 |  | 4,581 |  | 6,238 |  | 1,559 |  |  | 102,030
Consumer installment |  | 11,741 |  | 115 |  | 106 |  | 143 |  |  | 12,105
|  | Total | $ | 334,333 |  | 12,058 |  | 17,966 |  | 10,506 |  | $ | 374,863
|  |  |  |  |  |  |  |  | December 31, 2010
(In thousands) |  | Pass |  | Special Mention |  | Substandard Accruing |  | Nonaccrual |  |  | Total loans
Commercial and industrial | $ | 51,632 |  | 722 |  | 413 |  | 521 |  | $ | 53,288
Construction and land development |  | 38,301 |  | 4,372 |  | 1,075 |  | 4,102 |  |  | 47,850
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |
| Owner occupied |  | 67,702 |  | 716 |  | 5,001 |  | 2,833 |  |  | 76,252
| Other |  | 84,354 |  | 3,718 |  | 15 |  | 1,902 |  |  | 89,989
|  | Total commercial real estate |  | 152,056 |  | 4,434 |  | 5,016 |  | 4,735 |  |  | 166,241
Residential real estate: |  |  |  |  |  |  |  |  |  |  |
| Consumer mortgage |  | 48,620 |  | 2,700 |  | 4,124 |  | 2,118 |  |  | 57,562
| Investment property |  | 34,221 |  | 1,626 |  | 2,476 |  | 356 |  |  | 38,679
|  | Total residential real estate |  | 82,841 |  | 4,326 |  | 6,600 |  | 2,474 |  |  | 96,241
Consumer installment |  | 10,426 |  | 133 |  | 116 |  | 1 |  |  | 10,676
|  | Total | $ | 335,256 |  | 13,987 |  | 13,220 |  | 11,833 |  | $ | 374,296
Impaired loans The following table s present details related to the Company's impaired loans. Loans which have been fully charged-off do not appear in the following table. The related allowance generally represents the following components which correspond to impaired loans: Individually evaluated impaired loans equal to or greater than $500,000 secured by real estate (nonaccrual construction and land development, commercial real estate, and residential real estate loans). Individually evaluated impaired loans equal to or greater than $250,000 not secured by real estate (nonaccrual commercial and industrial and consumer loans). The following table s set forth certain information regarding the Company's impaired loans that were individually evaluated for impairment at September 30, 2011 and December 31, 2010.
|  |  |  |  |  |  | September 30, 2011
(In thousands) |  | Unpaid principal balance (1) | Charge-offs and payments applied (2) | Recorded investment (3) |  |  | Related allowance
With no allowance recorded:
Commercial and industrial | $ | 227 | — | 227 |  |  |
Construction and land development |  | 3,958 | (1,572) | 2,386 |  |  |
Commercial real estate: |  |  |  |  |  |  |
| Owner occupied |  | 811 | (11) | 800 |  |  |
| Other |  | 655 | (44) | 611 |  |  |
|  | Total commercial real estate |  | 1,466 | (55) | 1,411 |  |  |
Residential real estate: |  |  |  |  |  |  |
| Consumer mortgages |  | — | — | — |  |  |
| Investment property |  | — | — | — |  |  |
|  | Total residential real estate |  | — | — | — |  |  |
Consumer installment |  | — | — | — |  |  |
|  | Total | $ | 5,651 | (1,627) | 4,024 |
With allowance recorded: |
Commercial and industrial | $ | — | — | — |  | $ | —
Construction and land development |  | 2,913 | (143) | 2,770 |  |  | 209
Commercial real estate: |  |  |  |  |  |  |
| Owner occupied |  | 1,104 | (24) | 1,080 |  |  | 204
| Other |  | 1,240 | (46) | 1,194 |  |  | 218
|  | Total commercial real estate |  | 2,344 | (70) | 2,274 |  |  | 422
Residential real estate: |  |  |  |  |  |  |
| Consumer mortgages |  | 1,005 | (79) | 926 |  |  | 71
| Investment property |  | 391 | — | 391 |  |  | 170
|  | Total residential real estate |  | 1,396 | (79) | 1,317 |  |  | 241
Consumer installment |  | — | — | — |  |  | —
|  | Total | $ | 6,653 | (292) | 6,361 |  | $ | 872
|  | Total impaired loans | $ | 12,304 | (1,919) | 10,385 |  | $ | 872
(1) Unpaid principal balance represents the contractual obligation due from the customer.
(2) Charge-offs and payments applied represents cumulative charge-offs taken, as well as interest payments that have been
| applied against the outstanding principal balance.
(3) Recorded investment represents the unpaid principal balance less charge-offs and payments applied; it is shown before
| any related allowance for loan losses.
|  |  |  |  |  |  | December 31, 2010
(In thousands) |  | Unpaid principal balance (1) | Charge-offs and payments applied (2) | Recorded investment (3) |  |  | Related allowance
With no allowance recorded:
Commercial and industrial | $ | — | — | — |  |  |
Construction and land development |  | 2,538 | (54) | 2,484 |  |  |
Commercial real estate: |  |  |  |  |  |  |
| Owner occupied |  | — | — | — |  |  |
| Other |  | 1,592 | (51) | 1,541 |  |  |
|  | Total commercial real estate |  | 1,592 | (51) | 1,541 |  |  |
Residential real estate: |  |  |  |  |  |  |
| Consumer mortgages |  | 1,072 | (27) | 1,045 |  |  |
| Investment property |  | 356 | — | 356 |  |  |
|  | Total residential real estate |  | 1,428 | (27) | 1,401 |  |  |
Consumer installment |  | — | — | — |  |  |
|  | Total | $ | 5,558 | (132) | 5,426 |
With allowance recorded: |
Commercial and industrial | $ | 528 | (7) | 521 |  | $ | 277
Construction and land development |  | 1,618 | — | 1,618 |  |  | 123
Commercial real estate: |  |  |  |  |  |  |
| Owner occupied |  | 3,124 | (35) | 3,089 |  |  | 765
| Other |  | — | — | — |  |  | —
|  | Total commercial real estate |  | 3,124 | (35) | 3,089 |  |  | 765
Residential real estate: |  |  |  |  |  |  |
| Consumer mortgages |  | 1,073 | (56) | 1,017 |  |  | 144
| Investment property |  | — | — | — |  |  | —
|  | Total residential real estate |  | 1,073 | (56) | 1,017 |  |  | 144
Consumer installment |  | — | — | — |  |  | —
|  | Total | $ | 6,343 | (98) | 6,245 |  | $ | 1,309
|  | Total impaired loans | $ | 11,901 | (230) | 11,671 |  | $ | 1,309
(1) Unpaid principal balance represents the contractual obligation due from the customer.
(2) Charge-offs and payments applied represents cumulative charge-offs taken, as well as interest payments that have been
| applied against the outstanding principal balance.
(3) Recorded investment represents the unpaid principal balance less charge-offs and payments applied; it is shown before
| any related allowance for loan losses.
The following table provides the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class.
|  |  |  |  |  |  | Quarter ended September 30, 2011 |  | Nine months ended September 30, 2011
|  |  |  |  |  |  | Average |  | Total interest |  | Average |  | Total interest
|  |  |  |  |  |  | recorded |  | income |  | recorded |  | income
(In thousands) |  | investment |  | recognized |  | investment |  | recognized
Impaired loans:
Commercial and industrial | $ | 229 |  | 3 |  | 345 |  | 5
Construction and land development |  | 3,589 |  | — |  | 3,843 |  | —
Commercial real estate: |  |  |  |  |  | — |  | —
| Owner occupied |  | 1,886 |  | 10 |  | 1,769 |  | 17
| Other |  | 2,096 |  | — |  | 2,545 |  | —
|  | Total commercial real estate |  | 3,982 |  | 10 |  | 4,314 |  | 17
Residential real estate: |  |  |  |  |  |  |  |
| Consumer mortgages |  | 934 |  | — |  | 1,514 |  | —
| Investment property |  | 130 |  | — |  | 75 |  | —
|  | Total residential real estate |  | 1,064 |  | — |  | 1,589 |  | —
Consumer installment |  | — |  | — |  | — |  | —
|  | Total | $ | 8,864 |  | 13 |  | 10,091 |  | 22
Troubled Debt Restructurings Impaired loans also included TDRs. In the normal course of business, management grants concessions to borrowers, which would not otherwise be considered where the borrowers are experiencing financial difficult y. A concession may include, but is not limited to, reduction of the state d interest rate of the loan, reduction of accrued interest, extension of the maturity date or reduction of the face amount or maturity amount of the debt. A concession has been granted when, as a result of the restructuring, the Bank does not expect to collect all amounts due, including interest at the original stated rate. A concession may have also been granted if the debtor is not able to access funds elsewhere at a market rate for debt with similar risk characteristics as the restructured debt. The Company's determination of whether a loan modification is a TDR considers the individual facts and circumstances surrounding each modification. As part of the credit approval process, the restructured loans are evaluated for adequate collateral protection in determining the appropriate accrual status at the time of restructure. Similar to other impaired loans, TDRs are measured for impairment based on the present value of expected payments using the loan's original effective interest rate as the discount rate, or the fair value of the collateral, less selling costs if the loan is collateral dependent. If the recorded investment in the loan exceeds the measure of fair value, impairment is recognized by establishing a valuation allowance as part of the allowance for loan losses or a charge-off to the allowance for loan losses. In periods subsequent to the modification, all TDRs are evaluated, including those that have payment defaults, for possible impairment. At September 30, 2011 and December 31, 2010, the Company had impaired loans classified as TDRs of $9.5 million and $7.6 million, respectively. At September 30, 2011 the C ompany had $0.7 million in accruing TDR s. The Company had no accruing TDRs at December 31, 2010. For impaired loans classified as TDRs, the related allowance for loan losses w as approximately $0.8 million and $1.0 million a t September 30, 2011 and December 31, 2010, respectively. At September 30, 2011, there were no significant outstanding commitments to advance additional funds to customers whose loans had been restructured. Effective July 1, 2011, the Company adopted ASU 2011-02, A Creditor's Determination of Whet h er a Restructuring is a Troubled Debt Restructuring. See Note 1. As such, the Company reassessed all restructurings that occurred on or after January 1, 2011 for identification and disclosure as TDRs. The following table summarizes the recorded investment in loans modified in a TDR both before and after their modification during the respective period. Troubled Debt Restructurings Impaired loans also included TDRs. In the normal course of business, management grants concessions to borrowers, which would not otherwise be considered where the borrowers are experiencing financial difficult y. A concession may include, but is not limited to, reduction of the state d interest rate of the loan, reduction of accrued interest, extension of the maturity date or reduction of the face amount or maturity amount of the debt. A concession has been granted when, as a result of the restructuring, the Bank does not expect to collect all amounts due, including interest at the original stated rate. A concession may have also been granted if the debtor is not able to access funds elsewhere at a market rate for debt with similar risk characteristics as the restructured debt. The Company's determination of whether a loan modification is a TDR considers the individual facts and circumstances surrounding each modification. As part of the credit approval process, the restructured loans are evaluated for adequate collateral protection in determining the appropriate accrual status at the time of restructure. Similar to other impaired loans, TDRs are measured for impairment based on the present value of expected payments using the loan's original effective interest rate as the discount rate, or the fair value of the collateral, less selling costs if the loan is collateral dependent. If the recorded investment in the loan exceeds the measure of fair value, impairment is recognized by establishing a valuation allowance as part of the allowance for loan losses or a charge-off to the allowance for loan losses. In periods subsequent to the modification, all TDRs are evaluated, including those that have payment defaults, for possible impairment. At September 30, 2011 and December 31, 2010, the Company had impaired loans classified as TDRs of $9.5 million and $7.6 million, respectively. At September 30, 2011 the C ompany had $0.7 million in accruing TDR s. The Company had no accruing TDRs at December 31, 2010. For impaired loans classified as TDRs, the related allowance for loan losses w as approximately $0.8 million and $1.0 million a t September 30, 2011 and December 31, 2010, respectively. At September 30, 2011, there were no significant outstanding commitments to advance additional funds to customers whose loans had been restructured. Effective July 1, 2011, the Company adopted ASU 2011-02, A Creditor's Determination of Whet h er a Restructuring is a Troubled Debt Restructuring. See Note 1. As such, the Company reassessed all restructurings that occurred on or after January 1, 2011 for identification and disclosure as TDRs. The following table summarizes the recorded investment in loans modified in a TDR both before and after their modification during the respective period.
|  |  |  |  |  | Quarter ended September 30, 2011 |  |  | Nine months ended September 30, 2011
|  |  |  |  |  |  |  |  | Pre- |  | Post - |  |  |  |  |  | Pre- |  | Post -
|  |  |  |  |  |  |  |  | modification |  | modification |  |  |  |  |  | modification |  | modification
|  |  |  |  |  | Number |  |  | outstanding |  | outstanding |  |  | Number |  |  | outstanding |  | outstanding
|  |  |  |  |  | of |  |  | recorded |  | recorded |  |  | of |  |  | recorded |  | recorded
($ in thousands) | contracts |  |  | investment |  | investment |  |  | contracts |  |  | investment |  | investment
TDRs: |
Commercial and industrial | 1 |  | $ | 283 |  | 283 |  |  | 2 |  | $ | 791 |  | 523
Construction and land development | 2 |  |  | 4,432 |  | 4,419 |  |  | 3 |  |  | 4,925 |  | 4,894
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Owner occupied | 1 |  |  | 256 |  | 256 |  |  | 4 |  |  | 2,202 |  | 1,915
| Other | — |  |  | — |  | — |  |  | 1 |  |  | 1,229 |  | 1,229
|  | Total commercial real estate | 1 |  |  | 256 |  | 256 |  |  | 5 |  |  | 3,431 |  | 3,144
Residential real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Consumer mortgages | — |  |  | — |  | — |  |  | — |  |  | — |  | —
| Investment property | 1 |  |  | 391 |  | 391 |  |  | 1 |  |  | 391 |  | 391
|  | Total residential real estate | 1 |  |  | 391 |  | 391 |  |  | 1 |  |  | 391 |  | 391
Consumer installment | — |  |  | — |  | — |  |  | — |  |  |  |  | —
|  | Total | 5 |  | $ | 5,362 |  | 5,349 |  |  | 11 |  | $ | 9,538 |  | 8,952
The majority of the loans modified in a TDR during the quarter and nine months ended September 30, 2011 included delays in required payments of principal and/or interest or where the only concession granted by the Company was that the interest rate at renewal was not considered to be a market rate. Only two modifications during the nine months ended September 30, 2011 were A/B note restructurings, where the B note was charged off. Total charge-offs related to B notes during the nine months ended September 30, 2011 w ere approximately $0.6 million. As of September 30, 2011, there were no loans modified in a TDR within the previous 12 months for which there was a payment default (defined as more than 90 days past due) and an outstanding loan balance.

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