Note 8 - Allowance for Loan Losses

9 Months Ended

Sep. 30, 2011

Allowance for Credit Losses [Text Block]

Note 8 - Allowance for Loan Losses

The Company has established a systematic methodology for determining the allowance for loan losses.  This methodology is set forth in a formal policy and considers all non-covered loans in the portfolio.  Loans totaling $168.9 million that were covered under the FDIC loss-share agreements were not included in the Company’s evaluation of the adequacy of loan loss allowances since potential losses are covered up to at least 80% by the FDIC.  These covered loans were recorded at their estimated fair value at the time of the acquisition.  Management’s periodic evaluation of the allowance is consistently applied and based on inherent losses in the portfolio, past loan loss experience, risks inherent in the different types of loans, the estimated value of any underlying collateral, current economic conditions, the borrower’s financial position, and other relevant internal and external factors that may affect loan collectability. The allowance for loan losses is increased by charging provisions for loan losses against income.  As of September 30, 2011, the allowance for loan losses was $13.0 million, or 2.23% of total non-covered loans.  Management believes that this amount meets the requirement for losses on loans that management considers to be impaired, for known losses, and for losses inherent in the remaining non-covered loan portfolio.  Although management believes that it uses the best information available to make such determinations, future adjustments to the allowance for loan losses may be necessary and results of operations could be significantly adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

A reconciliation of the allowance for loan losses is as follows:

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2011			2010			2011			2010
	(Dollars in thousands)
Balance - Beginning of period	$	12,742		$	9,797		$	11,924		$	9,189
Charge-offs:
One-to-four family residential		(7	)		(45	)		(1,144	)		(46	)
Construction		-			(16	)		(42	)		(279	)
Commercial land		(1,014	)		(65	)		(2,088	)		(591	)
Residential development		(187	)		(796	)		(1,742	)		(1,942	)
Other commercial real estate		(122	)		(897	)		(378	)		(3,313	)
Consumer real estate		-			(184	)		(91	)		(1,451	)
Commercial business		(26	)		(93	)		(214	)		(153	)
Other consumer		(32	)		(9	)		(49	)		(51	)
Total charge-offs		(1,388	)		(2,105	)		(5,748	)		(7,826	)
Recoveries:
One-to-four family residential		-			-			7			3
Construction		-			-			231			48
Commercial land		-			-			66			-
Residential development		8			-			71			-
Other commercial real estate		79			51			93			231
Consumer real estate		10			3			88			33
Commercial business		151			1			163			2
Other consumer		4			5			11			22
Total recoveries		252			60			730			339
Provision for loan losses		1,350			3,000			6,050			9,050
Balance - End of period	$	12,956		$	10,752		$	12,956		$	10,752

The following tables present a disaggregated analysis of the activity in the allowance for loan losses and loan balances for non-covered loans for the three months ended September 30, 2011 and September 30, 2010.

(Dollars in thousands)	One-to-four family residential			Multifamily residential		Construction		Commercial land			Residential development			Other commercial real estate			Consumer real estate		Commercial business			Other consumer			Total
September 30, 2011
Allowance for loan losses:
Balance - July 1, 2011	$	503		$	200	$	1,014	$	2,321		$	1,778		$	2,417		$	1,476	$	2,475		$	558		$	12,742
Loan charge-offs		(7	)		-		-		(1,014	)		(187	)		(122	)		-		(26	)		(32	)		(1,388	)
Loan recoveries		-			-		-		1			8			79			10		150			4			252
Provision for loan losses		-			-		-		1,000			200			100			-		-			50			1,350
Balance - September 30, 2011	$	496		$	200	$	1,014	$	2,308		$	1,799		$	2,474		$	1,486	$	2,599		$	580		$	12,956
Loans individually evaluated for impairment	$	-		$	-	$	-	$	-		$	-		$	-		$	-	$	-		$	-		$	-
Loans collectively evaluated for impairment	$	496		$	200	$	1,014	$	2,308		$	1,799		$	2,474		$	1,486	$	2,599		$	580		$	12,956
Loans:
Loans individually evaluated for impairment	$	-		$	-	$	-	$	2,105		$	5,636		$	5,825		$	59	$	21		$	-		$	13,646
Loans collectively evaluated for impairment		115,671			18,918		19,679		27,553			15,305			221,927			104,081		40,996			5,963			570,093
Total non-covered loans	$	115,671		$	18,918	$	19,679	$	29,658		$	20,941		$	227,752		$	104,140	$	41,017		$	5,963		$	583,739

(Dollars in thousands)	One-to-four family residential			Multifamily residential		Construction			Commercial land			Residential development			Other commercial real estate			Consumer real estate			Commercial business			Other consumer			Total
September 30, 2010
Allowance for loan losses:
Balance - July 1, 2010	$	265		$	200	$	1,685		$	1,379		$	1,602		$	1,725		$	1,450		$	993		$	498		$	9,797
Loan charge-offs		(45	)		-		(16	)		(65	)		(796	)		(897	)		(184	)		(93	)		(9	)		(2,105	)
Loan recoveries		-			-		-			-			-			51			-			1			8			60
Provision for loan losses		50			-		25			275			1,250			1,000			250			100			50			3,000
Balance - September 30, 2010	$	270		$	200	$	1,694		$	1,589		$	2,056		$	1,879		$	1,516		$	1,001		$	547		$	10,752
Loans individually evaluated for impairment	$	-		$	-	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-
Loans collectively evaluated for impairment	$	270		$	200	$	1,694		$	1,589		$	2,056		$	1,879		$	1,516		$	1,001		$	547		$	10,752
Loans:
Loans individually evaluated for impairment	$	1,084		$	-	$	-		$	-		$	-		$	3,550		$	-		$	-		$	-		$	4,634
Loans collectively evaluated for impairment		101,120			23,769		11,252			40,739			26,189			238,738			110,064			34,876			5,276			592,023
Total non-covered loans	$	102,204		$	23,769	$	11,252		$	40,739		$	26,189		$	242,288		$	110,064		$	34,876		$	5,276		$	596,657

The following tables present a disaggregated analysis of the activity in the allowance for loan losses and loan balances for non-covered loans for the nine months ended September 30, 2011 and September 30, 2010.

(Dollars in thousands)	One-to-four family residential			Multifamily residential		Construction			Commercial land			Residential development			Other commercial real estate			Consumer real estate			Commercial business			Other consumer			Total
September 30, 2011
Allowance for loan losses:
Balance - January 1, 2011	$	500		$	200	$	1,000		$	2,000		$	1,500		$	2,224		$	1,500		$	2,500		$	500		$	11,924
Loan charge-offs		(1,144	)		-		(42	)		(2,088	)		(1,742	)		(378	)		(91	)		(214	)		(49	)		(5,748	)
Loan recoveries		7			-		231			66			71			93			88			163			11			730
Provision for loan losses		1,000			-		250			2,000			1,500			500			500			250			50			6,050
Balance - September 30, 2011	$	363		$	200	$	1,439		$	1,978		$	1,329		$	2,439		$	1,997		$	2,699		$	512		$	12,956
Loans individually evaluated for impairment	$	-		$	-	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-
Loans collectively evaluated for impairment	$	363		$	200	$	1,439		$	1,978		$	1,329		$	2,439		$	1,997		$	2,699		$	512		$	12,956
Loans:
Loans individually evaluated for impairment	$	-		$	-	$	-		$	2,105		$	5,636		$	5,825		$	59		$	21		$	-		$	13,646
Loans collectively evaluated for impairment		115,671			18,918		19,679			27,553			15,305			221,927			104,081			40,996			5,963			570,093
Total non-covered loans	$	115,671		$	18,918	$	19,679		$	29,658		$	20,941		$	227,752		$	104,140		$	41,017		$	5,963		$	583,739

(Dollars in thousands)	One-to-four family residential			Multifamily residential		Construction			Commercial land			Residential development			Other commercial real estate			Consumer real estate			Commercial business			Other consumer			Total
September 30, 2010
Allowance for loan losses:
Balance - January 1, 2010	$	250		$	200	$	1,775		$	1,000		$	1,000		$	1,964		$	1,500		$	1,000		$	500		$	9,189
Loan charge-offs		(46	)		-		(278	)		(592	)		(1,952	)		(3,312	)		(1,320	)		(153	)		(183	)		(7,836	)
Loan recoveries		3			-		49			-			-			242			30			2			23			349
Provision for loan losses		50			-		250			3,000			2,450			2,000			1,000			250			50			9,050
Balance - September 30, 2010	$	257		$	200	$	1,796		$	3,408		$	1,498		$	894		$	1,210		$	1,099		$	390		$	10,752
Loans individually evaluated for impairment	$	-		$	-	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-
Loans collectively evaluated for impairment	$	257		$	200	$	1,796		$	3,408		$	1,498		$	894		$	1,210		$	1,099		$	390		$	10,752
Loans:
Loans individually evaluated for impairment	$	1,084		$	-	$	-		$	-		$	-		$	3,550		$	-		$	-		$	-		$	4,634
Loans collectively evaluated for impairment		101,120			23,769		11,252			40,739			26,189			238,738			110,064			34,876			5,276			592,023
Total non-covered loans	$	102,204		$	23,769	$	11,252		$	40,739		$	26,189		$	242,288		$	110,064		$	34,876		$	5,276		$	596,657