Credit Quality Of Loans And Allowance For Loan Losses

9 Months Ended

Sep. 30, 2011

Credit Quality Of Loans And Allowance For Loan Losses [Abstract]

Credit Quality Of Loans And Allowance For Loan Losses

(7) Credit Quality of Loans and Allowance for Loan Losses

An analysis of the allowance for loan losses for the three and nine months ended September 30, 2011, and September 30, 2010 follows:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2011			September 30, 2010			September 30, 2011			September 30, 2010
	(Dollars in thousands)
Beginning balance	$	15,448		$	10,462		$	13,247		$	9,725
Provision for loan losses		1,028			3,863			6,231			8,643
Recoveries		88			170			234			243
Loans charged off		(4,350	)		(1,308	)		(7,498	)		(5,424	)
Ending balance	$	12,214		$	13,187		$	12,214		$	13,187

The following tables summarize the balances by loan category of the allowance for loan losses with changes arising from charge-offs, recoveries and provision expense for the nine months ending September 30, 2011, three months ending September 30, 2011 and for the year ending December 31, 2010:

Allowance for Loan Losses

As of and for the Nine Months Ended September 30, 2011

Allowance for Credit Losses	Real Estate Construction and Land Development			Real Estate Secured by Farmland			Real Estate Secured by Residential Properties			Real Estate Secured by Nonfarm Nonresidential			Consumer Installment			Credit Cards and Related Plans			Commercial and Industrial			Loans to Finance Agricultural Production		All Other Loans			General Qualitative & Quantitative Portion		Total
	(Dollars in thousands)
Beginning balance	$	6,168		$	28		$	3,450		$	1,007		$	12		$	21		$	882		$	18	$	139		$	1,522	$	13,247
Charge-offs		(4,327	)		—			(941	)		(1,594	)		(18	)		(108	)		(338	)		—		(172	)		—		(7,498	)
Recoveries		9			—			7			43			4			1			84			—		86			—		234
Provisions		2,553			(12	)		149			2,067			17			305			215			109		178			650		6,231
Ending Balance	$	4,403		$	16		$	2,665		$	1,523		$	15		$	219		$	843		$	127	$	231		$	2,172	$	12,214
Ending Balance: individually evaluated for impairment	$	940		$	—		$	1,059		$	999		$	—		$	200		$	510		$	—	$	—		$	—	$	3,708
Ending Balance: collectively evaluated for impairment	$	3,463		$	16		$	1,606		$	524		$	15		$	19		$	333		$	127	$	231		$	2,172	$	8,506
Loans
Ending Balance	$	71,174		$	31,782		$	117,824		$	211,479		$	5,354		$	2,231		$	44,201		$	20,910	$	16,671		$	—	$	521,626
Ending Balance: individually evaluated for impairment	$	12,567		$	—		$	7,678		$	9,755		$	—		$	200		$	1,363		$	—	$	—		$	—	$	31,563
Ending Balance: collectively evaluated for impairment	$	58,607		$	31,782		$	110,146		$	201,724		$	5,354		$	2,031		$	42,838		$	20,910	$	16,671		$	—	$	490,063

Allowance for Loan Losses

As of and for the Three Months Ended September 30, 2011

Allowance for Credit Losses	Real Estate Construction and Land Development			Real Estate Secured by Farmland			Real Estate Secured by Residential Properties			Real Estate Secured by Nonfarm Nonresidential			Consumer Installment			Credit Cards and Related Plans			Commercial and Industrial		Loans to Finance Agricultural Production		All Other Loans			General Qualitative & Quantitative Portion		Total
	(Dollars in thousands)
Beginning balance	$	7,467		$	33		$	4,239		$	1,132		$	30		$	188		$	622	$	15	$	174		$	1,548	$	15,448
Charge-offs		(2,410	)		—			(237	)		(1,551	)		(3	)		(99	)		—		—		(50	)		—		(4,350	)
Recoveries		3			—			5			43			2			—			6		—		29			—		88
Provisions		(657	)		(17	)		(1,342	)		1,899			(14	)		130			215		112		78			624		1,028
Ending Balance	$	4,403		$	16		$	2,665		$	1,523		$	15		$	219		$	843	$	127	$	231		$	2,172	$	12,214
Ending Balance: individually evaluated for impairment	$	940		$	—		$	1,059		$	999		$	—		$	200		$	510	$	—	$	—		$	—	$	3,708
Ending Balance: collectively evaluated for impairment	$	3,463		$	16		$	1,606		$	524		$	15		$	19		$	333	$	127	$	231		$	2,172	$	8,506
Loans
Ending Balance	$	71,174		$	31,782		$	117,824		$	211,479		$	5,354		$	2,231		$	44,201	$	20,910	$	16,671		$	—	$	521,626
Ending Balance: individually evaluated for impairment	$	12,567		$	—		$	7,678		$	9,755		$	—		$	200		$	1,363	$	—	$	—		$	—	$	31,563
Ending Balance: collectively evaluated for impairment	$	58,607		$	31,782		$	110,146		$	201,724		$	5,354		$	2,031		$	42,838	$	20,910	$	16,671		$	—	$	490,063

Allowance for Loan Losses

As of and for the Year Ended December 31, 2010

Allowance for Credit Losses	Real Estate Construction and Land Development			Real Estate Secured by Farmland		Real Estate Secured by Residential Properties			Real Estate Secured by Nonfarm Nonresidential			Consumer Installment			Credit Cards and Related Plans			Commercial and Industrial			Loans to Finance Agricultural Production		All Other Loans			General Qualitative & Quantitative Portion			Total
	(Dollars in thousands)
Beginning balance	$	4,623		$	25	$	2,383		$	541		$	23		$	13		$	523		$	16	$	169		$	1,409		$	9,725
Charge-offs		(5,977	)		—		(2,022	)		(213	)		(54	)		(11	)		(1,191	)		—		(277	)		(—	)		(9,745	)
Recoveries		111			—		19			—			7			1			19			—		130			—			287
Provisions		7,411			3		3,070			679			36			18			1,531			2		117			113			12,980
Ending Balance	$	6,168		$	28	$	3,450		$	1,007		$	12		$	21		$	882		$	18	$	139		$	1,522		$	13,247
Ending Balance: individually evaluated for impairment	$	803		$	—	$	916		$	546		$	—		$	—		$	102		$	—	$	—		$	—		$	2,367
Ending Balance: collectively evaluated for impairment	$	5,365		$	28	$	2,534		$	461		$	12		$	21		$	780		$	18	$	139		$	1,522		$	10,880
Loans
Ending Balance	$	90,145		$	26,661	$	120,278		$	217,709		$	4,209		$	2,261		$	60,238		$	28,215	$	17,915		$	—		$	567,631
Ending Balance: individually evaluated for impairment	$	15,940		$	—	$	6,103		$	3,812		$	—		$	—		$	397		$	—	$	—		$	—		$	26,252
Ending Balance: collectively evaluated for impairment	$	74,205		$	26,661	$	114,175		$	213,897		$	4,209		$	2,261		$	59,841		$	28,215	$	17,915		$	—		$	541,379

Loans are closely monitored by management for changes in quality. This monitoring includes assessing the appropriateness of the credit quality indicator in relation to the risk of the loan. Management uses the following indicators to grade the risk of each loan based on a system of eight possible ratings.

Pass: Include loans that are risk rated one through three. The primary source of repayment for pass loans is very likely to be sufficient, with secondary sources readily available; strong financial position; minimal risk; profitability, liquidity and capitalization are better than industry norms.

Weak Pass: Include loans that are risk rated four. The asset quality for weak pass assets is generally acceptable. Primary source of loan repayment is acceptable and secondary sources are likely to be realized, if needed; acceptable business credit, but borrowers operations, cash flow, or financial condition evidence more than average risk; requires above average levels of supervision and attention from Loan Officer. The source of increased risk has been identified, can be effectively managed/corrected, and the increased risk is not significant to warrant a more severe rating.

Special Mention: Include loans that are risk rated five. A special mention asset is considered to be high risk due to potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Company's credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard: Include loans that are risk rated six through eight. Loans rated as substandard are considered to be very high risk. A substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Some loans that are substandard do not meet the definition of an impaired loan and therefore are not deemed impaired.

The following tables present loans as of September 30, 2011 and December 31, 2010 classified by risk type:

Credit Quality Indicators

As of September 30, 2011

	Pass		Weak Pass		Special Mention		Substandard		Total
	(Dollars in thousands)
Real Estate—Construction and Land Development Loans	$	28,042	$	23,173	$	6,289	$	13,670	$	71,174
Real Estate—Secured by Farmland		23,724		4,500		3,558		—		31,782
Real Estate—Secured by Residential Properties		61,587		36,253		10,989		8,995		117,824
Real Estate—Secured by Nonfarm Nonresidential		94,931		79,452		23,191		13,905		211,479
Consumer Installment		3,438		1,587		228		101		5,354
Credit Cards and Related Plans		1,160		670		111		290		2,231
Commercial and Industrial		22,938		17,516		1,899		1,848		44,201
Loans to Finance Agriculture Production		14,735		3,829		2,346		—		20,910
All Other Loans		5,912		10,735		22		2		16,671
Total	$	256,467	$	177,715	$	48,633	$	38,811	$	521,626

Credit Quality Indicators

As of December 31, 2010

	Pass		Weak Pass		Special Mention		Substandard		Total
	(Dollars in thousands)
Real Estate—Construction and Land Development Loans	$	35,356	$	27,978	$	9,466	$	17,345	$	90,145
Real Estate—Secured by Farmland		17,869		6,294		2,495		3		26,661
Real Estate—Secured by Residential Properties		64,457		43,364		3,469		8,988		120,278
Real Estate—Secured by Nonfarm Nonresidential		94,208		96,287		20,107		7,107		217,709
Consumer Installment		2,466		1,460		265		18		4,209
Credit Cards and Related Plans		1,211		869		89		92		2,261
Commercial and Industrial		33,416		22,805		3,292		725		60,238
Loans to Finance Agriculture Production		18,346		7,230		2,639		—		28,215
All Other Loans		8,442		9,341		119		13		17,915
Total	$	275,771	$	215,628	$	41,941	$	34,291	$	567,631

The following tables summarize the past due loans by category as of September 30, 2011 and December 31, 2010:

Past Due Loans

As of September 30, 2011

	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days		Total Past Due		Current		Total
	(Dollars in thousands)
Real Estate Construction and Land Development	$	99	$	—	$	8,537	$	8,636	$	62,538	$	71,174
Real Estate Secured by Farmland		—		—		—		—		31,782		31,782
Real Estate Secured by Residential Properties		2,248		682		1,841		4,771		113,053		117,824
Real Estate Secured by Nonfarm Nonresidential		1,490		1,850		3,492		6,832		204,647		211,479
Consumer Installment		3		6		—		9		5,345		5,354
Credit Cards and Related Plans		1		—		200		201		2,030		2,231
Commercial and Industrial		42		—		253		295		43,906		44,201
Loans to Finance Agricultural Production		—		—		—		—		20,910		20,910
All Other Loans		26		—		—		26		16,645		16,671
Total	$	3,909	$	2,538	$	14,323	$	20,770	$	500,856	$	521,626

Past Due Loans

As of December 31, 2010

	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total
	(Dollars in thousands)
Real Estate Construction and Land Development	$	2,997	$	929	$	9,627	$	13,553	$	76,592	$	90,145
Real Estate Secured by Farmland		—		—		—		—		26,661		26,661
Real Estate Secured by Residential Properties		251		389		2,526		3,166		117,112		120,278
Real Estate Secured by Nonfarm Nonresidential		545		—		919		1,464		216,245		217,709
Consumer Installment		35		6		5		46		4,163		4,209
Credit Cards and Related Plans		3		—		—		3		2,258		2,261
Commercial and Industrial		111		19		553		683		59,555		60,238
Loans to Finance Agricultural Production		—		—		—		—		28,215		28,215
All Other Loans		22		4		—		26		17,889		17,915
Total	$	3,964	$	1,347	$	13,630	$	18,941	$	548,690	$	567,631

The following tables summarize impaired loans as of September 30, 2011 and December 31, 2010. The recorded investment balance includes the loan balance, deferred fees that have yet to be recognized and accrued interest. The deferred fees that have yet to be recognized are not material amounts. At September 30, 2011, $14.0 million of the recorded investment in impaired loans were loans that were written down through partial charge-offs of $8.9 million. At December 31, 2010, $11.8 million of the recorded investment in impaired loans were loans that were written down through partial charge-offs of $7.3 million.

Impaired Loans

	Balance at September 30, 2011						Nine Months Ended September 30, 2011				Three Months Ended September 30, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
With no related allowance recorded:
Real Estate Construction and Land Development	$	9,766	$	15,847	$	—	$	8,009	$	98	$	8,389	$	32
Real Estate Secured by Farmland		—		—		—		—		—		—		—
Real Estate Secured by Residential Properties		3,546		3,880		—		3,858		58		3,881		21
Real Estate Secured by Nonfarm Nonresidential		5,779		7,245		—		2,220		47		3,626		25
Consumer Installment		—		—		—				—				—
Credit Cards and Related Plans		—		—		—		—		—		—		—
Commercial and Industrial		413		650		—		359		10		344		3
Loans to Finance Agricultural Production		—		—		—		—		—		—		—
All Other Loans		—		—		—		—		—		—		—
Total impaired loans with no related allowance	$	19,504	$	27,622	$	—	$	14,446	$	213	$	16,240	$	81
With an allowance recorded:
Real Estate Construction and Land Development	$	2,807	$	3,478	$	940	$	7,449	$	91	$	5,935	$	22
Real Estate Secured by Farmland		—		—		—		—		—		—		—
Real Estate Secured by Residential Properties		4,138		4,135		1,059		4,064		62		4,367		24
Real Estate Secured by Nonfarm Nonresidential		3,983		4,046		999		3,889		82		5,178		35
Consumer Installment		—		—		—		—		—		—		—
Credit Cards and Related Plans		200		200		200		200		7		200		2
Commercial and Industrial		958		951		510		601		17		995		9
Loans to Finance Agricultural Production		—		—		—		—		—		—		—
All Other Loans		—		—		—		—		—		—		—
Total impaired loans with related allowance recorded	$	12,086	$	12,810	$	3,708	$	16,203	$	259	$	16,675	$	92
Total
Construction and Land Development	$	12,573	$	19,325	$	940	$	15,458	$	189	$	14,324	$	54
Residential		7,684		8,015		1,059		7,922		120		8,248		45
Commercial		11,133		12,892		1,509		7,069		156		10,143		72
Consumer		200		200		200		200		7		200		2
Total impaired loans	$	31,590	$	40,432	$	3,708	$	30,649	$	472	$	32,915	$	173

Impaired Loans

As of December 31, 2010

	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded:
Real Estate Construction and Land Development	$	9,212	$	13,354	$	—
Real Estate Secured by Farmland		—		—		—
Real Estate Secured by Residential Properties		2,700		2,972		—
Real Estate Secured by Nonfarm Nonresidential		1,029		1,097		—
Consumer Installment		—		—		—
Credit Cards and Related Plans		—		—		—
Commercial and Industrial		218		217		—
Loans to Finance Agricultural Production		—		—		—
All Other Loans		—		—		—
Total impaired loans with no related allowance	$	13,159	$	17,640	$	—
With an allowance recorded:
Real Estate Construction and Land Development	$	6,771	$	9,497	$	803
Real Estate Secured by Farmland		—		—		—
Real Estate Secured by Residential Properties		3,411		3,405		915
Real Estate Secured by Nonfarm Nonresidential		2,794		2,784		546
Consumer Installment		—		—		—
Credit Cards and Related Plans		—		—		—
Commercial and Industrial		179		199		102
Loans to Finance Agricultural Production		—		—		—
All Other Loans		—		—		—
Total impaired loans with related allowance recorded	$	13,155	$	15,885	$	2,366
Total
Construction and Land Development	$	15,983	$	22,851	$	803
Residential		6,111		6,377		915
Commercial		4,220		4,297		648
Consumer		—		—		—
Total impaired loans	$	26,314	$	33,525	$	2,366

The following table presents nonaccrual loans as of September 30, 2011 and December 31, 2010 by loan category:

Nonaccrual Loans

	September 30, 2011		December 31, 2010
	(Dollars in thousands)
Real Estate Construction and Land Development	$	9,817	$	10,839
Real Estate Secured by Farmland		—		—
Real Estate Secured by Residential Properties		4,630		3,268
Real Estate Secured by Nonfarm Nonresidential		5,797		1,231
Consumer Installment		—		5
Credit Cards and Related Plans		200		—
Commercial and Industrial		297		553
Loans to Finance Agricultural Production		—		—
All Other Loans		—		—
Total	$	20,741	$	15,896

For the three and nine months ended September 30, 2011 the following table presents a breakdown of the types of concessions made by loan class. The recorded investment balances presented are balances at the time of concessions.

Troubled Debt Restructurings

	Three Months ended September 30, 2011						Nine Months ended September 30, 2011
	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
					(Dollars in thousands)
Below market interest rate:
Real Estate Secured by Residential Properties		—	$	—	$	—		1	$	219	$	219
Real Estate Secured by Nonfarm Nonresidential		—		—		—		1		1,145		1,145
Credit Cards and Related Plans		—		—		—		1		33		33
Total below market interest rate		—	$	—	$	—		3	$	1,397	$	1,397
Extended payment terms:
Real Estate Construction and Land Development		—	$	—	$	—		1	$	56	$	56
Real Estate Secured by Residential Properties		—		—		—		3		1,549		1,549
Real Estate Secured by Nonfarm Nonresidential		3		918		918		3		918		918
Commercial and Industrial		2		227		227		2		227		227
Total Extended Payment Terms		5	$	1,145	$	1,145		9	$	2,750	$	2,750
Forgiveness of principal:
Real Estate Construction and Land Development		—	$	—	$	—		10	$	925	$	860
Total forgiveness of principal		—	$	—	$	—		10	$	925	$	860
Total		5	$	1,145	$	1,145		22	$	5,072	$	5,007

The following table presents the successes and failures of the types of modifications within the previous nine months as of September 30, 2011. The recorded investment balances presented are as of September 30, 2011.

	Paid in Full				Paying as Restructured				Converted to Non-accrual				Foreclosure/Default
	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment		Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
	(Dollars in thousands)
Below market interest rate		—	$	—		3	$	1,395		—	$	—		—	$	—
Extended payment terms		—		—		8		2,588		1		166		—		—
Forgiveness of principal		—		—		—		—		10		828		—		—
Total		—		—		11	$	3,983		11		994		—		—

Of the loans listed above only one loan in the amount of $166 thousand converted to non-accrual during the three months ended September 30, 2011. There were no loans that were restructured during the three or nine months ending on September 30, 2011 that were ninety days or more past due and therefore had a payment default.

Loans which management identifies as impaired generally will be nonperforming loans or restructured loans (also known as "troubled debt restructurings" or "TDR's"). As a result of adopting the amendments in ASU 2011-02, the Company reassessed all restructurings that occurred on or after the beginning of the fiscal year of adoption (January 1, 2011) to determine whether they are considered troubled debt restructurings (TDRs) under the amended guidance. The Company identified no loans as TDRs which the allowance for loan losses had previously been measured under a general allowance methodology.