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Loan and Allowance for Loan Losses
 6 Months Ended
Jun. 30, 2013
Loans And Leases Receivable Disclosure  
Loans and leases receivable disclosure [Text Block]

NOTE 5: LOANS AND ALLOWANCE FOR LOAN LOSSES

 

       June 30,  December 31,
(In thousands)  2013  2012
Commercial and industrial $56,030 $59,334
Construction and land development  45,886  37,631
Commercial real estate:      
 Owner occupied  60,140  64,368
 Other  117,151  119,243
  Total commercial real estate  177,291  183,611
Residential real estate:      
 Consumer mortgage  55,192  58,087
 Investment property  43,829  47,544
  Total residential real estate  99,021  105,631
Consumer installment  12,747  12,219
  Total loans  390,975  398,426
Less: unearned income  (249)  (233)
  Loans, net of unearned income $390,726 $398,193

Loans secured by real estate were approximately 82.4% of the Company's total loan portfolio at June 30, 2013. At June 30, 2013, 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 June 30, 2013, and December 31, 2012.

         AccruingAccruingTotal    
         30-89 DaysGreater thanAccruingNon-  Total
(In thousands) CurrentPast Due90 daysLoansAccrual  Loans
June 30, 2013:          
Commercial and industrial $ 55,644 329 — 55,973 57 $ 56,030
Construction and land development   44,285 — — 44,285 1,601   45,886
Commercial real estate:          
 Owner occupied   59,035 50 — 59,085 1,055   60,140
 Other   115,274 1,448 — 116,722 429   117,151
  Total commercial real estate   174,309 1,498 — 175,807 1,484   177,291
Residential real estate:          
 Consumer mortgage   53,742 325 — 54,067 1,125   55,192
 Investment property   43,258 176 — 43,434 395   43,829
  Total residential real estate   97,000 501 — 97,501 1,520   99,021
Consumer installment   12,598 147 — 12,745 2   12,747
  Total $ 383,836 2,475 — 386,311 4,664 $ 390,975

                
December 31, 2012:          
Commercial and industrial $ 59,101 173 — 59,274 60 $ 59,334
Construction and land development   35,917 8 — 35,925 1,706   37,631
Commercial real estate:          
 Owner occupied   63,323 — — 63,323 1,045   64,368
 Other   113,344 230 — 113,574 5,669   119,243
  Total commercial real estate   176,667 230 — 176,897 6,714   183,611
Residential real estate:          
 Consumer mortgage   55,521 1,202 58 56,781 1,306   58,087
 Investment property   46,460 335 — 46,795 749   47,544
  Total residential real estate   101,981 1,537 58 103,576 2,055   105,631
Consumer installment   12,157 62 — 12,219 —   12,219
  Total $ 385,823 2,010 58 387,891 10,535 $ 398,426
                
                

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. Loans are charged off, in whole or in part, 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 internal and independent loan review processes. 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 June 30, 2013 and December 31, 2012, and for the periods then ended, 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 regularly re-evaluates its practices in determining the allowance for loan losses. During the quarter ended June 30, 2013, the Company implemented certain refinements to its allowance for loan losses methodology, specifically the way that historical loss factors are calculated. Prior to June 30, 2013, the Company calculated average losses for all loan segments using a rolling 6 quarter historical period. In order to better capture the effect of current economic conditions on the Company's loan loss experience, the Company calculated average losses for all loan segments (except for the commercial real estate loan segment) using a rolling 8 quarter historical period for the quarter ended June 30, 2013. Based upon management's review of charge-off trends for each loan segment, the Company continued to calculate average losses for the commercial real estate loan segment using a rolling 6 quarter historical period for the quarter ended June 30, 2013. If the Company continued to calculate average losses for all loan segments using a rolling 6 quarter historical period, the Company's calculated allowance for loan loss allocation would have decreased by approximately $1.1 million at June 30, 2013. Other than the changes discussed above, the Company has not made any changes to its calculation of historical loss periods that would impact the calculation of the allowance for loan losses or provision for loan losses for the periods included in the accompanying consolidated balance sheets and statements of earnings.

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

   June 30, 2013
(In thousands)Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment   Total
Quarter ended:              
Beginning balance$569 1,619 3,571 885 125  $ 6,769
Charge-offs  —  —  (118) (189) (45)   (352)
Recoveries 5  2  — 28 5    40
 Net (charge-offs) recoveries 5 2 (118) (161) (40)   (312)
Provision 101 (167) (342) 401 7    —
Ending balance$ 675  1,454  3,111  1,125  92  $ 6,457

Six months ended:              
Beginning balance$812 1,545 3,137 1,126 103  $ 6,723
Charge-offs (68) (39) (118) (455) (62)   (742)
Recoveries 17 3 4 41 11    76
 Net charge-offs (51) (36) (114) (414) (51)   (666)
Provision (86) (55) 88 413 40   400
Ending balance$ 675  1,454  3,111  1,125  92  $ 6,457

   June 30, 2012
(In thousands)Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment   Total
Quarter ended:              
Beginning balance$845 1,439 3,816 1,332 64    7,496
Charge-offs  (95)  (231)  (1,218) (78) (26)  $(1,648)
Recoveries 5  1  — 45 4  $55
 Net charge-offs (90)  (230)  (1,218) (33) (22)   (1,593)
Provision (24) 414 219 (21) 12  $600
Ending balance$731 1,623 2,817 1,278 54  $ 6,503

Six months ended:            
Beginning balance$948 1,470 3,009 1,363 129  $ 6,919
Charge-offs (95) (231) (1,218) (111) (32)   (1,687)
Recoveries 8 1  — 51 11    71
 Net charge-offs  (87) (230) (1,218) (60) (21)   (1,616)
Provision (130) 383 1,026 (25) (54)   1,200
Ending balance$ 731  1,623  2,817  1,278  54  $ 6,503

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 June 30, 2013 and 2012.

 

 

       Collectively evaluated (1) Individually evaluated (2) Total
       AllowanceRecorded AllowanceRecorded AllowanceRecorded
       for loaninvestment for loaninvestment for loaninvestment
(In thousands) lossesin loans lossesin loans lossesin loans
June 30, 2013:         
Commercial and industrial$ 675 55,882  — 148  675 56,030
Construction and land development  1,347 44,285  107 1,601  1,454 45,886
Commercial real estate  2,991 174,922  120 2,369  3,111 177,291
Residential real estate  1,069 97,732  56 1,289  1,125 99,021
Consumer installment  92 12,747  — —  92 12,747
  Total$ 6,174 385,568  283 5,407  6,457 390,975

June 30, 2012:         
Commercial and industrial$ 731 59,223  — 195  731 59,418
Construction and land development  1,257 35,110  366 3,858  1,623 38,968
Commercial real estate  2,666 182,817  151 3,029  2,817 185,846
Residential real estate  953 102,678  325 1,549  1,278 104,227
Consumer installment  54 11,133  — —  54 11,133
  Total$ 5,661 390,961  842 8,631  6,503 399,592
               
(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 qualitative and environmental factors 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.

 

(In thousands)  Pass  Special Mention Substandard Accruing Nonaccrual  Total loans
June 30, 2013:           
Commercial and industrial$ 55,087  2  884  57 $ 56,030
Construction and land development  42,710  374  1,201  1,601   45,886
Commercial real estate:           
 Owner occupied  56,834  760  1,491  1,055   60,140
 Other  113,552  2,828  342  429   117,151
  Total commercial real estate  170,386  3,588  1,833  1,484   177,291
Residential real estate:           
 Consumer mortgage  47,619  793  5,655  1,125   55,192
 Investment property  40,384  933  2,117  395   43,829
  Total residential real estate  88,003  1,726  7,772  1,520   99,021
Consumer installment  12,579  20  146  2   12,747
  Total$ 368,765  5,710  11,836  4,664 $ 390,975

December 31, 2012:           
Commercial and industrial$ 58,487  224  563  60 $ 59,334
Construction and land development  34,490  310  1,125  1,706   37,631
Commercial real estate:           
 Owner occupied  59,270  2,528  1,525  1,045   64,368
 Other  111,719  653  1,202  5,669   119,243
  Total commercial real estate  170,989  3,181  2,727  6,714   183,611
Residential real estate:           
 Consumer mortgage  49,462  1,544  5,775  1,306   58,087
 Investment property  43,559  1,033  2,203  749   47,544
  Total residential real estate  93,021  2,577  7,978  2,055   105,631
Consumer installment  11,850  155  214  —   12,219
  Total$ 368,837  6,447  12,607  10,535 $ 398,426

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 June 30, 2013 and December 31, 2012.

             
       June 30, 2013
(In thousands) Unpaid principal balance (1)Charge-offs and payments applied (2)Recorded investment (3)  Related allowance
With no allowance recorded:
Commercial and industrial$148 —148   
Construction and land development 2,878(1,681)1,197   
Commercial real estate:       
 Owner occupied 350(51)299   
 Other 515(86)429   
  Total commercial real estate 865(137)728   
Residential real estate:       
 Consumer mortgages 960(177)783   
 Investment property 210(29)181   
  Total residential real estate 1,170(206)964   
  Total $ 5,061 (2,024) 3,037 
With allowance recorded: 
Construction and land development$461(57)404 $107
Commercial real estate:       
 Owner occupied 1,759 (118)1,641  120
  Total commercial real estate 1,759 (118)1,641  120
Residential real estate:       
 Investment property 412(87)325  56
  Total residential real estate 412(87)325  56
  Total $ 2,632 (262) 2,370 $ 283
  Total impaired loans$ 7,693 (2,286) 5,407 $ 283
             
(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, 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$169 —169   
Construction and land development 2,879(1,682)1,197   
Commercial real estate:       
 Owner occupied 787(212)575   
 Other 7,914(1,862)6,052   
  Total commercial real estate 8,701(2,074)6,627   
Residential real estate:       
 Consumer mortgages 971(152)819   
 Investment property 508(110)398   
  Total residential real estate 1,479(262)1,217   
  Total $13,228(4,018)9,210 
With allowance recorded: 
Construction and land development$471(45)426 $129
Commercial real estate:       
 Owner occupied 899 —899  134
  Total commercial real estate 899 —899  134
  Total $ 1,370 (45) 1,325 $ 263
  Total impaired loans$ 14,598 (4,063) 10,535 $ 263
             
(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 June 30, 2013 Six months ened June 30, 2013
       Average Total interest Average Total interest
       recorded income recorded income
(In thousands) investment recognized investment recognized
Impaired loans:
Commercial and industrial$150 2 158 5
Construction and land development 1,607  — 1,614  —
Commercial real estate:        
 Owner occupied 1,984 14 2,019 29
 Other 430  — 1,902  —
  Total commercial real estate 2,414 14 3,921 29
Residential real estate:        
 Consumer mortgages 789  — 801  —
 Investment property 348  — 323  —
  Total residential real estate 1,137  — 1,124  —
  Total $ 5,308  16  6,817  34

       Quarter ended June 30, 2012 Six months ended June 30, 2012
       Average Total interest Average Total interest
       recorded income recorded income
(In thousands) investment recognized investment recognized
Impaired loans:
Commercial and industrial$197 4 205 8
Construction and land development 4,185  — 4,595  —
Commercial real estate:        
 Owner occupied 2,561 18 2,566 35
 Other 1,245  — 1,500  —
  Total commercial real estate 3,806 18 4,066 35
Residential real estate:        
 Consumer mortgages 863  — 881  —
 Investment property 695  — 562  —
  Total residential real estate 1,558  — 1,443  —
  Total $ 9,746  22  10,309  43

Troubled Debt Restructurings

 

Impaired loans also include troubled debt restructurings (“TDRs”). In the normal course of business, management may grant concessions to borrowers that are experiencing financial difficulty. A concession may include, but is not limited to, delays in required payments of principal and interest for a specified period, 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, the Company 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, which are included in impaired loan totals, and the related allowance for loan losses, by portfolio segment and class as of June 30, 2013, and December 31, 2012.

 

       TDRs
            Related
(In thousands) AccruingNonaccrualTotal  Allowance
June 30, 2013       
Commercial and industrial$148 —148 $ —
Construction and land development  —1,6011,601  107
Commercial real estate:       
 Owner occupied 8852991,184  120
 Other  —429429   —
  Total commercial real estate 8857281,613  120
Residential real estate:       
 Consumer mortgages  —783783   —
 Investment property  —225225   —
  Total residential real estate  —1,0081,008   —
  Total $ 1,033 3,337 4,370 $ 227

December 31, 2012  
Commercial and industrial$169 —169 $ —
Construction and land development  —1,6231,623  129
Commercial real estate:       
 Owner occupied 8991,0451,944  134
 Other  —432432   —
  Total commercial real estate 8991,4772,376  134
Residential real estate:       
 Consumer mortgages  —819819   —
 Investment property  —188188   —
  Total residential real estate  —1,0071,007   —
  Total $1,0684,1075,175 $263

At June 30, 2013, 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 June 30,  Six Months ended June 30,
         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
2013:             
 Other — $ —  —  1 $431 431
  Total commercial real estate —   —  —  1  431 431
 Consumer mortgages —   —  —  1  131 131
  Total residential real estate —   —  —  1  131 131
  Total — $ —  —   2 $ 562  562
2012:             
Construction and land development — $ —  —  2 $2,842 1,753
Commercial real estate:              
 Owner occupied3  2,349 1,406  4  3,167 2,225
 Other —   —  —  2  1,804 1,657
  Total commercial real estate3  2,349 1,406  6  4,971 3,882
Residential real estate:              
 Consumer mortgages2  863 857  2  863 857
  Total residential real estate2  863 857  2  863 857
  Total 5 $ 3,212  2,263   10 $ 8,676  6,492

The majority of the loans modified in a TDR during the quarters and six months ended June 30, 2013 and 2012, 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 quarter ended June 30, 2012, the decrease in the post modification outstanding recorded investment was primarily due to A/B note restructurings, where the B note was charged off. Total charge-offs related to B notes were $0.9 million for the quarter ended June 30, 2012.

 

For the six months ended June 30, 2012, the decrease in the post modification outstanding recorded investment was 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 six months ended June 30, 2012.

 

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 June 30,  Six months ended June 30,
      Number of  Recorded   Number of  Recorded 
(Dollars in thousands)Contracts  investment(1)   Contracts  investment(1) 
2013:            
Construction and land development — $ —    1 $ 1,197 
  Total — $ —    1 $ 1,197 
2012:            
Construction and land development — $ —    1 $ 2,386 
  Total — $ —    1 $ 2,386 
                  
(1) Amount as of applicable month end during the respective period for which there was a payment default.