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Allowance for Loan Losses
 6 Months Ended
Jun. 30, 2012
Allowance for Loan Losses [Abstract]  
Allowance for loan losses

Note 4: Allowance for Loan Losses

A disaggregation of and an analysis of the change in the allowance for loan losses by segment is shown below.

Allowance for Loan Losses by Portfolio Segment

For the six months ended June 30, 2012 (unaudited)

 

                                                                                 
    Construction,
Land and
Land
Development		     Farmland     Commercial
Mortgages
(Non
Owner
Occupied)		     Commercial
Mortgages
(Owner
Occupied)		     Residential
First
Mortgages		     Residential
Junior
Mortgages		     Commercial
and
Industrial		     Consumer
Loans		     Unallocated     Total  

ALLOWANCE FOR LOAN LOSSES:

  

                                                                

Beginning Balance

   $ 190,500     $ —       $ 88,000     $ 554,318     $ 1,161,551     $ 719,121     $ 281,650     $ 185,000     $ 8,401     $ 3,188,541  
                     

(Charge-offs)

     (57,660 )      —         (283,569 )      —         (203,544 )      (32,674 )      (185,427 )      (75,381 )              (838,255 ) 
                     

Recoveries

     —         —         285,084       —         —         —         10,869       52,034               347,987  

Provision

     41,031       1,000       (515 )      (179,522 )      277,334       (76,007 )      180,740       99,557       299,067       642,685  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 173,871     $ 1,000     $ 89,000     $ 374,796     $ 1,235,341     $ 610,440     $ 287,832     $ 261,210     $ 307,468     $ 3,340,958  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Individually evaluated for impairment

   $ 117,871     $ —       $ —       $ 140,796     $ 843,341     $ 431,440     $ 176,832     $ 94,210     $ —       $ 1,804,490  

Collectively evaluated for impairment

   $ 56,000     $ 1,000     $ 89,000     $ 234,000     $ 392,000     $ 179,000     $ 111,000     $ 167,000     $ 307,468     $ 1,536,468  
                 

LOAN RECEIVABLES:

  

                                                                

Ending Balance:

                                                                                

Individually evaluated for impairment

   $ 406,378     $ —       $ —       $ 1,603,830     $ 4,025,871     $ 1,760,201     $ 513,008     $ 94,210             $ 8,403,498  

Collectively evaluated for impairment

     28,175,959       1,484,981       20,884,287       24,459,675       106,094,232       27,040,397       17,803,774       7,143,776               233,087,081  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

 

 

  

Total Gross Loans

   $ 28,582,337     $ 1,484,981     $ 20,884,287     $ 26,063,505     $ 110,120,103     $ 28,800,598     $ 18,316,782     $ 7,237,986             $ 241,490,579  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

 

 

  

Provision is negative for the Commercial Mortgages (Owner occupied) and Residential Junior Mortgages segments due mainly to a reduction in the level of individual impaired allowance required for each of these segments.

 

Allowance for Loan Losses by Portfolio Segment

For the Year Ended December 31, 2011

 

                                                                                 
    Construction,
Land and
Land
Development		     Farmland     Commercial
Mortgages
(Non
Owner
Occupied) 		    Commercial
Mortgages
(Owner
Occupied)		     Residential
First
Mortgages		     Residential
Junior
Mortgages		     Commercial
and
Industrial		     Consumer
Loans		     Unallocated     Total  

ALLOWANCE FOR LOAN LOSSES:

                                                                                

Beginning Balance

   $ 192,518     $ 3,000     $ 108,000     $ 1,270,451     $ 206,171     $ 460,648     $ 69,869     $ 210,662     $ 709,358     $ 3,230,677  

(Charge-offs)

     (35,428 )      —         (52,117 )      —         (232,904 )      (29,162 )      (16,553 )      (211,117 )      —         (577,281 ) 

Recoveries

     175       —         —         —         1,393       —         —         38,577       —         40,145  

Provision

     33,235       (3,000 )      32,117       (716,133 )      1,186,891       287,635       228,334       146,878       (700,957 )      495,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 190,500     $ —       $ 88,000     $ 554,318     $ 1,161,551     $ 719,121     $ 281,650     $ 185,000     $ 8,401     $ 3,188,541  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Individually evaluated for impairment

   $ 119,500     $ —       $ —       $ 244,318     $ 726,552     $ 465,121     $ 236,650     $ —       $ —       $ 1,792,141  

Collectively evaluated for impairment

   $ 71,000     $ —       $ 88,000     $ 310,000     $ 435,000     $ 254,000     $ 45,000     $ 185,000     $ 8,401     $ 1,396,401  
                     

LOAN RECEIVABLES:

                                                                                

Ending Balance:

                                                                                

Individually evaluated for impairment

   $ 408,640     $ —       $ —       $ 1,447,278     $ 3,187,147     $ 1,790,858     $ 560,197     $ —               $ 7,394,120  

Collectively evaluated for impairment

     27,233,640       1,526,050       16,198,584       26,398,318       104,451,588       26,735,150       18,423,135       8,329,237               229,295,702  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

 

 

  

Total Gross Loans

   $ 27,642,280     $ 1,526,050     $ 16,198,584     $ 27,845,596     $ 107,638,735     $ 28,526,008     $ 18,983,332     $ 8,329,237             $ 236,689,822  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

 

 

  

Internal risk rating grades are assigned to commercial loans not secured by real estate, commercial mortgages, residential mortgages greater than $1 million, loans to real estate developers and contractors, and consumer loans greater than $250,000 with chronic delinquency, as shown in the following table. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Risk grades are evaluated as new information becomes available for each borrowing relationship or at least quarterly.

As of June 30, 2012 (unaudited)

 

                                                 
    Construction,
Land and
Land
Development		     Farmland     Commercial
Mortgages
(Non-Owner
Occupied)		     Commercial
Mortgages
(Owner
Occupied)		     Commercial
and
Industrial		     Total  

INTERNAL RISK RATING GRADES

                                                

Grade:

                                                

Pass

   $ 21,681,318     $ 1,484,982     $ 15,087,894     $ 17,044,474     $ 14,057,251     $ 69,355,919  

Watch

     4,581,011       —         2,468,359       6,261,502       3,461,592       16,772,464  

Special mention

     —         —         2,574,371       —         —         2,574,371  

Substandard

     1,977,390       —         753,663       2,757,529       284,930       5,773,512  

Doubtful

     342,618       —         —         —         513,009       855,627  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 28,582,337     $ 1,484,982     $ 20,884,287     $ 26,063,505     $ 18,316,782     $ 95,331,893  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
             

As of December 31, 2011

                                                
             
    Construction,
Land and
Land
Development		     Farmland     Commercial
Mortgages
(Non-Owner
Occupied)		     Commercial
Mortgages
(Owner
Occupied)		     Commercial
and
Industrial		     Total  

INTERNAL RISK RATING GRADES

                                                

Grade:

                                                

Pass

   $ 20,365,500     $ 1,526,050     $ 11,209,765     $ 17,875,112     $ 13,790,715     $ 64,767,142  

Watch

     2,807,742       —         1,847,911       7,079,654       3,952,068       15,687,375  

Special mention

     2,186,094       —         2,393,755       310,959       —         4,890,808  

Substandard

     1,940,326       —         681,403       2,323,122       457,698       5,402,549  

Doubtful

     342,618       —         65,750       256,749       782,851       1,447,968  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 27,642,280     $ 1,526,050     $ 16,198,584     $ 27,845,596     $ 18,983,332     $ 92,195,842  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Loans not assigned internal risk rating grades are comprised of residential mortgages and smaller consumer loans. Payment activity of these loans is reviewed monthly by management. Loans are considered to be nonperforming when they are delinquent by 90 days or more or on nonaccrual, as shown in the table below.

As of June 30, 2012 (unaudited)

 

                                 
    Residential
First
Mortgages		     Residential
Junior
Mortgages		     Consumer
Loans		     Total  

PAYMENT ACTIVITY STATUS

                                

Performing

   $ 106,866,242     $ 26,914,499     $ 7,221,800     $ 141,002,541  

Nonperforming

     3,253,860       1,886,099       16,186       5,156,145  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 110,120,102     $ 28,800,598     $ 7,237,986     $ 146,158,686  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

As of December 31, 2011

                                
         
    Residential
First
Mortgages		     Residential
Junior
Mortgages		     Consumer
Loans		     Total  

PAYMENT ACTIVITY STATUS

                                

Performing

   $ 105,971,956     $ 26,784,722     $ 8,178,214     $ 140,934,892  

Nonperforming

     1,666,779       1,741,286       151,023       3,559,088  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 107,638,735     $ 28,526,008     $ 8,329,237     $ 144,493,980  
   

 

 

    

 

 

    

 

 

    

 

 

  

The following table shows the Company’s recorded investment and the customers’ unpaid principal balances for impaired loans, with the associated allowance amount, if applicable. Also shown are the average recorded investments in impaired loans and the related amount of interest recognized and collected during the time the loans were impaired.

IMPAIRED LOANS

As of June 30, 2012 (unaudited)

 

                                                 
   

Recorded

Investment

    

Customers’ Unpaid

Principal Balance

    

Related

Allowance

    

Average

Recorded

Investment

    

Interest

Income

Recognized

    

Interest

Income

Collected

  

With no related allowance:

                                                

Construction, land & land development

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

Farmland

     —         —         —         —         —         —    

Residential First Mortgages

     2,070,907       2,070,907       —         1,660,547       41,149       24,912  

Residential Junior Mortgages (1)

     28,278       28,278       —         29,510       —         —    

Commercial Mortgages (Non-owner occupied)

     —         —         —         —         —         —    

Commercial Mortgages (Owner occupied)

     737,990       737,990       —         418,580       19,218       19,874  

Commercial & industrial

     —         —         —         —         —         —    

Consumer (2)

     —         —         —         —         —         —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 2,837,175     $ 2,837,175     $ —       $ 2,108,637     $ 60,367     $ 44,786  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

With an allowance recorded:

                                                

Construction, land & land development

   $ 406,378     $ 408,540     $ 117,871     $ 407,510     $ —       $ —    

Farmland

     —         —         —         —         —         —    

Residential First Mortgages

     1,954,964       2,125,388       843,341       1,870,295       24,129       23,564  

Residential Junior Mortgages (1)

     1,731,923       2,054,084       431,440       1,745,835       3,750       1,875  

Commercial Mortgages (Non-owner occupied)

     —         —         —         —         —         —    

Commercial Mortgages (Owner occupied)

     865,840       865,840       140,796       865,861       15,900       9,010  

Commercial & industrial

     513,008       593,740       176,832       486,690       —         316  

Consumer (2)

     94,210       94,210       94,210       62,807       4,050       4,050  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 5,566,323     $ 6,141,802     $ 1,804,490     $ 5,438,998     $ 47,829     $ 38,815  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Impaired Loans:

                                                

Construction, land & land development

   $ 406,378     $ 408,540     $ 117,871     $ 407,510     $ —       $ —    

Farmland

     —         —         —         —         —         —    

Residential First Mortgages

     4,025,871       4,196,295       843,341       3,530,842       65,278       48,476  

Residential Junior Mortgages (1)

     1,760,201       2,082,362       431,440       1,775,345       3,750       1,875  

Commercial Mortgages (Non-owner occupied)

     —         —         —         —         —         —    

Commercial Mortgages (Owner occupied)

     1,603,830       1,603,830       140,796       1,284,441       35,118       28,884  

Commercial & industrial

     513,008       593,740       176,832       486,690       —         316  

Consumer (2)

     94,210       94,210       94,210       62,807       4,050       4,050  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 8,403,498     $ 8,978,977     $ 1,804,490     $ 7,547,635     $ 108,196     $ 83,601  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) Junior mortgages include equity lines
(2) includes credit cards

 

IMPAIRED LOANS

As of December 31, 2011

 

                                                 
    Recorded
Investment		     Customers’
Unpaid
Principal
Balance 		    Related
Allowance		     Average
Recorded
Investment		     Interest
Income
Recognized		     Interest
Income
Collected		  

With no related allowance:

                                                

Construction, land & land development

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

Farmland

     —         —         —         —         —         —    

Residential First Mortgages

     901,132       901,132       —         726,266       52,293       52,378  

Residential Junior Mortgages

     131,226       131,226       —         66,245       7,325       6,208  

Commercial Mortgages (Non-owner occupied)

     —         —         —         —         —         —    

Commercial Mortgages (Owner occupied)

     258,875       258,875       —         208,153       14,311       14,309  

Commercial & industrial

     —         —         —         —         —         —    

Consumer

     —         —         —         —         —         —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 1,291,233     $ 1,291,233     $ —       $ 1,000,665     $ 73,929     $ 72,895  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

With an allowance recorded:

                                                

Construction, land & land development

   $ 408,640     $ 408,640     $ 119,500     $ 355,822     $ 3,865     $ 3,260  

Farmland

     —         —         —         —         —         —    

Residential First Mortgages

     2,286,015       2,303,167       726,552       1,254,593       100,550       95,208  

Residential Junior Mortgages

     1,659,632       1,961,728       465,121       1,451,332       14,483       9,846  

Commercial Mortgages (Non-owner occupied)

     —         —         —         —         —         —    

Commercial Mortgages (Owner occupied)

     1,188,403       1,191,301       244,318       891,128       48,600       44,593  

Commercial & industrial

     560,197       610,822       236,650       356,905       15,982       14,548  

Consumer

     —         —         —         —         —         —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 6,102,887     $ 6,475,658     $ 1,792,141     $ 4,309,779     $ 183,480     $ 167,455  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Impaired Loans:

                                                

Construction, land & land development

   $ 408,640     $ 408,640     $ 119,500     $ 355,822     $ 3,865     $ 3,260  

Farmland

     —         —         —         —         —         —    

Residential First Mortgages

     3,187,147       3,204,299       726,552       1,980,859       152,843       147,586  

Residential Junior Mortgages

     1,790,858       2,092,954       465,121       1,517,577       21,808       16,054  

Commercial Mortgages (Non-owner occupied)

     —         —         —         —         —         —    

Commercial Mortgages (Owner occupied)

     1,447,278       1,450,176       244,318       1,099,281       62,911       58,902  

Commercial & industrial

     560,197       610,822       236,650       356,905       15,982       14,548  

Consumer

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    $ 7,394,120     $ 7,766,891     $ 1,792,141     $ 5,310,444     $ 257,409     $ 240,350  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

At June 30, 2012, the Bank had five relationships that constitute troubled debt restructurings (“TDR”), totaling $3.8 million. One relationship involves seven loans totaling $1.8 million, which is included above in the commercial and industrial segment; the construction, land and land development segment; and the residential junior mortgages segment. These loans had defaulted and have been nonaccruing since October of 2010, and were modified during the second quarter of 2011 to provide cross-collateralization between loans and reduced payments. Three relationships each involved residential first mortgages for a total of $1.5 million in principal balances. Two of these three with balances of $804,064 as of June 30, 2012, were restructured during 2011. The third relationship was added in 2012, which involved a residential first mortgage totaling $649,485, and a consumer loan totaling $94,210. In the second quarter of 2012, a commercial owner occupied mortgage was added totaling $479,115. Of these five relationships, two are non-accruing related to bankruptcies, one is non-accruing due to default, and two are performing according to modified terms.

At December 31, 2011, the Bank had four relationships that constituted TDRs, totaling $3.3 million. One of these relationships, with a balance of $451,755, was dispensed via foreclosure in the second quarter of 2012, resulting in a charge-off of $188,122.

At June 30, 2012 and December 31, 2011, nonaccruing loans excluded from impaired loan disclosure totaled $453,210 and $681,592, respectively. If interest on these nonaccruing loans had been accrued, such income would have approximated $4,056 during the six months ended June 30, 2012 and $32,560 during the year ended December 31, 2011.