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Loan and Allowance for Loan Losses
 9 Months Ended
Sep. 30, 2012
Loans And Leases Receivable Disclosure  
Loans and leases receivable disclosure [Text Block]

NOTE 5: LOANS AND ALLOWANCE FOR LOAN LOSSES

 

       September 30,  December 31,
(In thousands)  2012  2011
Commercial and industrial $58,579 $54,988
Construction and land development  40,573  39,814
Commercial real estate:      
 Owner occupied  68,299  70,202
 Other  115,458  92,233
  Total commercial real estate  183,757  162,435
Residential real estate:      
 Consumer mortgage  56,992  57,958
 Investment property  46,327  43,767
  Total residential real estate  103,319  101,725
Consumer installment  11,747  11,454
  Total loans  397,975  370,416
Less: unearned income  (237)  (153)
  Loans, net of unearned income $397,738 $370,263

Loans secured by real estate were approximately 82.3% of the Company's total loan portfolio at September 30, 2012. 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, 2012, 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. As part of the Company's quarterly assessment of the allowance, the 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. 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 and classes.

 

Commercial and industrial (“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 that are not owner occupied. 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 includes first or second lien mortgages and home equity lines of credit 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 and property value, 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 segment and class as of September 30, 2012, and December 31, 2011.

         AccruingAccruingTotal    
         30-89 DaysGreater thanAccruingNon-  Total
(In thousands) CurrentPast Due90 daysLoansAccrual  Loans
September 30, 2012:          
Commercial and industrial $ 58,081 39312     58,486 93 $ 58,579
Construction and land development   36,733—    —     36,733 3,840   40,573
Commercial real estate:          
 Owner occupied   66,920—    —     66,920 1,379   68,299
 Other   109,630—    —     109,630 5,828   115,458
  Total commercial real estate   176,550—    —     176,550 7,207   183,757
Residential real estate:          
 Consumer mortgage   55,601 452—     56,053 939   56,992
 Investment property   44,505 266—     44,771 1,556   46,327
  Total residential real estate   100,106 718—     100,824 2,495   103,319
Consumer installment   11,719 271     11,747—       11,747
  Total $ 383,189 1,13813     384,340 13,635 $ 397,975

                
December 31, 2011:          
Commercial and industrial $ 53,721 1,191—     54,912 76 $ 54,988
Construction and land development   34,402 317—     34,719 5,095   39,814
Commercial real estate:          
 Owner occupied   68,551—    —     68,551 1,651   70,202
 Other   90,427—    —     90,427 1,806   92,233
  Total commercial real estate   158,978—    —     158,978 3,457   162,435
Residential real estate:          
 Consumer mortgage   56,610 400—     57,010 948   57,958
 Investment property   42,144 845—     42,989 778   43,767
  Total residential real estate   98,754 1,245—     99,999 1,726   101,725
Consumer installment   11,397 57—     11,454—       11,454
  Total $ 357,252 2,810—     360,062 10,354 $ 370,416
                
                

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 portfolio, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect a 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.

 

 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 it 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, construction and land development, 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. At September 30, 2012 and December 31, 2011, and for the periods then ended, the Company adjusted its historical loss rates for one segment, 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 periodically re-evaluates its practices in determining the allowance for loan losses. During the fourth quarter of 2011, the Company's management decided to eliminate a previously unallocated component of the allowance. As a result, the Company had no unallocated amount included in the allowance at September 30, 2012.

The following table details the changes in the allowance for loan losses by portfolio segment for the respective periods.

   September 30, 2012
(In thousands)Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment    Total
Quarter ended:               
Beginning balance$731 1,623 2,817 1,278 54   $ 6,503
Charge-offs (152) —     (1,626) (324) (35)    (2,137)
Recoveries 20 —     71 35 3     129
 Net charge-offs (132) —     (1,555) (289) (32)    (2,008)
Provision 155 (14) 1,396 (42) 55    1,550
Ending balance$ 754  1,609  2,658  947  77   $ 6,045

Nine months ended:               
Beginning balance$948 1,470 3,009 1,363 129   $ 6,919
Charge-offs (246) (231) (2,844) (435) (68)    (3,824)
Recoveries 28 1 71 85 15     200
 Net charge-offs (218) (230) (2,773) (350) (53)    (3,624)
Provision 24 369 2,422 (66) 1    2,750
Ending balance$ 754  1,609  2,658  947  77   $ 6,045

   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 (293) (1,571) (79) (59) (4) —      (2,006)
Provision 288 (50) —     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  (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

The following table presents an analysis of the allowance for loan losses and recorded investment in loans by portfolio segment and impairment methodology as of September 30, 2012 and 2011.

 

 

       Collectively evaluated (1) Individually evaluated (2) Total
       AllowanceRecorded AllowanceRecorded AllowanceRecorded
       for loaninvestment for loaninvestment for loaninvestment
(In thousands) lossesin loans lossesin loans lossesin loans
September 30, 2012:         
Commercial and industrial$ 754 58,395 —     184  754 58,579
Construction and land development  1,468 36,817  141 3,756  1,609 40,573
Commercial real estate  2,519 175,733  139 8,024  2,658 183,757
Residential real estate  915 101,297  32 2,022  947 103,319
Consumer installment  77 11,747 —    —      77 11,747
  Total$ 5,733 383,989  312 13,986  6,045 397,975

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
               
(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, 2012
(In thousands)  Pass  Special Mention Substandard Accruing Nonaccrual  Total loans
Commercial and industrial$ 57,787  196  503  93 $ 58,579
Construction and land development  35,311  570  852  3,840   40,573
Commercial real estate:           
 Owner occupied  60,793  4,588  1,539  1,379   68,299
 Other  107,810  606  1,214  5,828   115,458
  Total commercial real estate  168,603  5,194  2,753  7,207   183,757
Residential real estate:           
 Consumer mortgage  48,711  1,369  5,973  939   56,992
 Investment property  41,481  1,241  2,049  1,556   46,327
  Total residential real estate  90,192  2,610  8,022  2,495   103,319
Consumer installment  11,355  186  206 —       11,747
  Total$ 363,248  8,756  12,336  13,635 $ 397,975

         December 31, 2011
(In thousands)  Pass  Special Mention Substandard Accruing Nonaccrual  Total loans
Commercial and industrial$ 52,834  1,359  719  76 $ 54,988
Construction and land development  33,373  266  1,080  5,095   39,814
Commercial real estate:           
 Owner occupied  62,543  4,951  1,057  1,651   70,202
 Other  81,584  622  8,221  1,806   92,233
  Total commercial real estate  144,127  5,573  9,278  3,457   162,435
Residential real estate:           
 Consumer mortgage  50,156  1,575  5,279  948   57,958
 Investment property  38,732  2,225  2,032  778   43,767
  Total residential real estate  88,888  3,800  7,311  1,726   101,725
Consumer installment  11,078  248  128 —       11,454
  Total$ 330,300  11,246  18,516  10,354 $ 370,416

Impaired loans

 

The following tables 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 installment loans).

 

The following tables set forth certain information regarding the Company's impaired loans that were individually evaluated for impairment at September 30, 2012 and December 31, 2011.

             
       September 30, 2012
(In thousands) Unpaid principal balance (1)Charge-offs and payments applied (2)Recorded investment (3)  Related allowance
With no allowance recorded:
Commercial and industrial$184—    184   
Construction and land development 5,187(1,869)3,318   
Commercial real estate:       
 Owner occupied 790(46)744   
 Other 7,922(1,546)6,376   
  Total commercial real estate 8,712(1,592)7,120   
Residential real estate:       
 Consumer mortgages —    —    —       
 Investment property 1,488(304)1,184   
  Total residential real estate 1,488(304)1,184   
Consumer installment —    —    —       
  Total $ 15,571 (3,765) 11,806 
With allowance recorded: 
Commercial and industrial$—    —    —     $—    
Construction and land development 477(39)438  141
Commercial real estate:       
 Owner occupied 904—    904  139
 Other —    —    —      —    
  Total commercial real estate 904—    904  139
Residential real estate:       
 Consumer mortgages 976(138)838  32
 Investment property —    —    —      —    
  Total residential real estate 976(138)838  32
Consumer installment —    —    —      —    
  Total $ 2,357 (177) 2,180 $ 312
  Total impaired loans$ 17,928 (3,942) 13,986 $ 312
             
(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 subsequent to the loans being placed on nonaccrual status.
(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, 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$216—    216   
Construction and land development 3,958(1,572)2,386   
Commercial real estate:       
 Owner occupied 361(11)350   
 Other 655(50)605   
  Total commercial real estate 1,016(61)955   
Residential real estate:       
 Consumer mortgages —    —    —       
 Investment property —    —    —       
  Total residential real estate —    —    —       
Consumer installment —    —    —       
  Total $ 5,190 (1,633) 3,557 
With allowance recorded: 
Commercial and industrial$—    —    —     $—    
Construction and land development 2,882(173)2,709  147
Commercial real estate:       
 Owner occupied 2,255(29)2,226  544
 Other 1,242(41)1,201  264
  Total commercial real estate 3,497(70)3,427  808
Residential real estate:       
 Consumer mortgages 1,707(797)910  103
 Investment property 390(7)383  163
  Total residential real estate 2,097(804)1,293  266
Consumer installment —    —    —      —    
  Total $ 8,476 (1,047) 7,429 $ 1,221
  Total impaired loans$ 13,666 (2,680) 10,986 $ 1,221
             
(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 subsequent to the loans being placed on nonaccrual status.
(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 during the respective periods.

 

       Quarter ended September 30, 2012 Nine months ended September 30, 2012
       Average Total interest Average Total interest
       recorded income recorded income
(In thousands) investment recognized investment recognized
Impaired loans:
Commercial and industrial$189 3 200 11
Construction and land development 3,801 —     4,357 —    
Commercial real estate:        
 Owner occupied 2,468 14 2,537 49
 Other 2,211 —     1,713 —    
  Total commercial real estate 4,679 14 4,250 49
Residential real estate:        
 Consumer mortgages 846 —     870 —    
 Investment property 855 —     650 —    
  Total residential real estate 1,701 —     1,520 —    
Consumer installment —     —     —     —    
  Total $ 10,370  17  10,327  60

       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 include troubled debt restructurings (“TDRs”). In the normal course of business, management grants concessions to borrowers, which would not otherwise be considered where the borrowers are experiencing financial difficulty. A concession may include, but is not limited to, permitting delays in required payments of principal and/or interest, reduction of the stated 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.

 

The following is a summary of accruing and nonaccrual TDRs and the related allowance for loan losses, by portfolio segment and class as of September 30, 2012, and December 31, 2011.

 

Troubled Debt Restructurings

 

Impaired loans also include troubled debt restructurings (“TDRs”). In the normal course of business, management grants concessions to borrowers, which would not otherwise be considered where the borrowers are experiencing financial difficulty. A concession may include, but is not limited to, permitting delays in required payments of principal and/or interest, reduction of the stated 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.

 

The following is a summary of accruing and nonaccrual TDRs and the related allowance for loan losses, by portfolio segment and class as of September 30, 2012, and December 31, 2011.

 

       TDRs
            Related
(In thousands) AccruingNonaccrualTotal  Allowance
September 30, 2012       
Commercial and industrial$184—    184 $—    
Construction and land development —    3,7563,756  141
Commercial real estate:       
 Owner occupied 9041,3792,283  139
 Other —    441441  —    
  Total commercial real estate 9041,8202,724  139
Residential real estate:       
 Consumer mortgages —    838838  32
 Investment property —    194194  —    
  Total residential real estate —    1,0321,032  32
Consumer installment —    —    —      —    
  Total $ 1,088 6,608 7,696 $ 312

December 31, 2011  
Commercial and industrial$216—    216 $—    
Construction and land development —    5,0955,095  147
Commercial real estate:       
 Owner occupied 9251,1722,097  420
 Other —    1,8061,806  264
  Total commercial real estate 9252,9783,903  684
Residential real estate:       
 Consumer mortgages —    —    —      —    
 Investment property —    383383  163
  Total residential real estate —    383383  163
Consumer installment —    —    —      —    
  Total $1,1418,4569,597 $994

At September 30, 2012, there were no significant outstanding commitments to advance additional funds to customers whose loans had been restructured.

 

The following table summarizes loans modified in a TDR during the respective periods both before and after their modification.

      Quarter ended  Nine months ended
         Pre- Post -     Pre- Post -
         modification modification     modification modification
      Number  outstanding outstanding  Number  outstanding outstanding
      of  recorded recorded  of  recorded recorded
(Dollars in thousands)contracts  investment investment  contracts  investment investment
September 30, 2012 
Commercial and industrial—     $—     —      —     $—     —    
Construction and land development1  2,138 2,119  3  4,981 3,873
Commercial real estate:              
 Owner occupied—      —     —      4  3,167 2,225
 Other—      —     —      2  1,804 1,657
  Total commercial real estate—      —     —      6  4,971 3,882
Residential real estate:              
 Consumer mortgages—      —     —      2  863 857
 Investment property1  375 373  1  375 373
  Total residential real estate1  375 373  3  1,238 1,230
Consumer installment—      —     —      —      —     —    
  Total 2 $ 2,513  2,492   12 $ 11,190  8,985
September 30, 2011 
Commercial and industrial1 $283 283  2 $791 523
Construction and land development2  4,432 4,419  3  4,925 4,894
Commercial real estate:              
 Owner occupied1  256 256  4  2,202 1,915
 Other—      —     —      1  1,229 1,229
  Total commercial real estate1  256 256  5  3,431 3,144
Residential real estate:              
 Consumer mortgages—      —     —      —      —     —    
 Investment property1  391 391  1  391 391
  Total residential real estate1  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 quarters ended September 30, 2012 and 2011, respectively, included permitting 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 considered to be less than a market rate.

 

For the nine months ended September 30, 2012, decreases in the post modification outstanding recorded investment were primarily due to principal payments made by borrowers at the date of modification for construction and land development loans and A/B note restructurings for two owner occupied commercial real estate loans. Total charge-offs related to B notes were $0.9 million for the nine months ended September 30, 2012. For the nine months ended September 30, 2011, decreases in the post modification outstanding recorded investment were primarily due to A/B note restructurings for one owner occupied commercial real estate loan and one commercial and industrial loan. Total charge-offs related to B notes were $0.6 million for the nine months ended September 30, 2011.

 

The following table summarizes the recorded investment in loans modified in a TDR within the previous 12 months for which there was a payment default (defined as 90 days or more past due) during the respective periods.

       Quarter ended   Nine months ended
       Number of  Recorded   Number of  Recorded
(Dollars in thousands) Contracts  investment(1)   Contracts  investment(1)
September 30, 2012
Construction and land development—     $—       1 $2,386
  Total —     $—        1 $ 2,386
                  
September 30, 2011
Residential real estate:           
 Consumer mortgages—     $—       1 $204
  Total residential real estate—      —       1  204
  Total —     $—        1 $ 204
                  
(1) Amount as of applicable month end during the respective period for which there was a payment default.