Credit Quality of Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2012

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

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 six months ending June 30, 2012 and 2011, and the three months ending June 30, 2012 and 2011:

Allowance for Loan Losses

As of and for the Six Months Ended June 30, 2012

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	$	3,655		$	15		$	2,418		$	1,740		$	46		$	18		$	555		$	115		$	26		$	3,504		$	12,092
Charge-offs		(913	)		—			(278	)		(892	)		(43	)		(17	)		(421	)		—			(99	)		—			(2,663	)
Recoveries		337			—			47			2			13			3			12			—			71			—			485
Provisions		176			(2	)		202			200			134			65			505			(14	)		41			(441	)		866
Ending Balance	$	3,255		$	13		$	2,389		$	1,050		$	150		$	69		$	651		$	101		$	39		$	3,063		$	10,780
Ending Balance: individually evaluated for impairment	$	575		$	—		$	617		$	180		$	—		$	—		$	20		$	—		$	—		$	—		$	1,392
Ending Balance: collectively evaluated for impairment	$	2,680		$	13		$	1,772		$	870		$	150		$	69		$	631		$	101		$	39		$	3,063		$	9,388
Loans
Ending Balance	$	62,944		$	27,627		$	107,695		$	198,007		$	6,160		$	1,723		$	55,005		$	36,856		$	10,240		$	—		$	506,257
Ending Balance: individually evaluated for impairment	$	8,797		$	356		$	7,614		$	15,093		$	—		$	—		$	417		$	—		$	—		$	—		$	32,277
Ending Balance: collectively evaluated for impairment	$	54,147		$	27,271		$	100,081		$	182,914		$	6,160		$	1,723		$	54,588		$	36,856		$	10,240		$	—		$	473,980

Allowance for Loan Losses

As of and for the Three Months Ended June 30, 2012

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	$	3,100		$	15		$	2,486		$	1,565		$	150		$	68		$	505		$	122		$	28		$	3,346		$	11,385
Charge-offs		(694	)		—			(176	)		(654	)		(2	)		(14	)		(64	)		—			(47	)		—			(1,651	)
Recoveries		111			—			20			1			12			3			2			—			31			—			180
Provisions		738			(2	)		59			138			(10	)		12			208			(21	)		27			(283	)		866
Ending Balance	$	3,255		$	13		$	2,389		$	1,050		$	150		$	69		$	651		$	101		$	39		$	3,063		$	10,780
Ending Balance: individually evaluated for impairment	$	575		$	—		$	617		$	180		$	—		$	—		$	20		$	—		$	—		$	—		$	1,392
Ending Balance: collectively evaluated for impairment	$	2,680		$	13		$	1,772		$	870		$	150		$	69		$	631		$	101		$	39		$	3,063		$	9,388
Loans
Ending Balance	$	62,944		$	27,627		$	107,695		$	198,007		$	6,160		$	1,723		$	55,005		$	36,856		$	10,240		$	—		$	506,257
Ending Balance: individually evaluated for impairment	$	8,797		$	356		$	7,614		$	15,093		$	—		$	—		$	417		$	—		$	—		$	—		$	32,277
Ending Balance: collectively evaluated for impairment	$	54,147		$	27,271		$	100,081		$	182,914		$	6,160		$	1,723		$	54,588		$	36,856		$	10,240		$	—		$	473,980

Allowance for Loan Losses

As of and for the Six Months Ended June 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		(1,917	)		—		(704	)		(43	)		(15	)		(9	)		(338	)		—			(122	)		—		(3,148	)
Recoveries		6			—		2			—			2			1			78			—			57			—		146
Provisions		3,210			5		1,491			168			31			175			—			(3	)		100			26		5,203
Ending Balance	$	7,467		$	33	$	4,239		$	1,132		$	30		$	188		$	622		$	15		$	174		$	1,548	$	15,448
Ending Balance: individually evaluated for impairment	$	1,931		$	—	$	1,124		$	585		$	—		$	170		$	249		$	—		$	—		$	—	$	4,059
Ending Balance: collectively evaluated for impairment	$	5,536		$	33	$	3,115		$	547		$	30		$	18		$	373		$	15		$	174		$	1,548	$	11,389
Loans
Ending Balance	$	84,291		$	33,641	$	117,458		$	211,556		$	5,191		$	2,422		$	47,780		$	23,715		$	16,633		$	—	$	542,687
Ending Balance: individually evaluated for impairment	$	16,331		$	—	$	8,762		$	5,508		$	—		$	200		$	511		$	—		$	—		$	—	$	31,312
Ending Balance: collectively evaluated for impairment	$	67,960		$	33,641	$	108,696		$	206,048		$	5,191		$	2,222		$	47,269		$	23,715		$	16,633		$	—	$	511,375

Allowance for Loan Losses

As of and for the Three Months Ended June 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	$	7,587		$	29	$	4,002		$	1,118		$	16		$	189		$	1,132		$	15	$	130		$	1,001	$	15,219
Charge-offs		(644	)		—		(255	)		(43	)		(6	)		—			(84	)		—		(56	)		—		(1,088	)
Recoveries		6			—		1			—			—			1			15			—		21			—		44
Provisions		518			4		491			57			20			(2	)		(441	)		—		79			547		1,273
Ending Balance	$	7,467		$	33	$	4,239		$	1,132		$	30		$	188		$	622		$	15	$	174		$	1,548	$	15,448
Ending Balance: individually evaluated for impairment	$	1,931		$	—	$	1,124		$	585		$	—		$	170		$	249		$	—	$	—		$	—	$	4,059
Ending Balance: collectively evaluated for impairment	$	5,536		$	33	$	3,115		$	547		$	30		$	18		$	373		$	15	$	174		$	1,548	$	11,389
Loans
Ending Balance	$	84,291		$	33,641	$	117,458		$	211,556		$	5,191		$	2,422		$	47,780		$	23,715	$	16,633		$	—	$	542,687
Ending Balance: individually evaluated for impairment	$	16,331		$	—	$	8,762		$	5,508		$	—		$	200		$	511		$	—	$	—		$	—	$	31,312
Ending Balance: collectively evaluated for impairment	$	67,960		$	33,641	$	108,696		$	206,048		$	5,191		$	2,222		$	47,269		$	23,715	$	16,633		$	—	$	511,375

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. These indicators are included in the Company’s loan policy which is reviewed and updated at least annually.

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.

The following tables present loans as of June 30, 2012 and December 31, 2011 classified by risk type:

Credit Quality Indicators

As of June 30, 2012

	Pass		Weak Pass		Special Mention		Substandard		Total
	(Dollars in thousands)
Real Estate—Construction and Land Development Loans	$	27,929	$	19,992	$	5,682	$	9,341	$	62,944
Real Estate—Secured by Farmland		21,265		3,326		2,680		356		27,627
Real Estate—Secured by Residential Properties		59,344		29,079		10,488		8,784		107,695
Real Estate—Secured by Nonfarm Nonresidential		87,857		71,532		19,611		19,007		198,007
Consumer Installment		4,071		1,741		284		64		6,160
Credit Cards and Related Plans		871		580		270		2		1,723
Commercial and Industrial		29,978		19,737		3,627		1,663		55,005
Loans to Finance Agriculture Production		28,582		7,917		357		—		36,856
All Other Loans		5,826		4,390		24		—		10,240
Total	$	265,723	$	158,294	$	43,023	$	39,217	$	506,257

Credit Quality Indicators

As of December 31, 2011

	Pass		Weak Pass		Special Mention		Substandard		Total
	(Dollars in thousands)
Real Estate—Construction and Land Development Loans	$	27,833	$	23,237	$	4,853	$	11,204	$	67,127
Real Estate—Secured by Farmland		22,008		4,430		3,452		—		29,890
Real Estate—Secured by Residential Properties		60,121		31,146		12,302		6,805		110,374
Real Estate—Secured by Nonfarm Nonresidential		90,099		75,384		18,663		18,917		203,063
Consumer Installment		4,025		2,212		254		129		6,620
Credit Cards and Related Plans		850		529		279		3		1,661
Commercial and Industrial		25,133		16,146		2,686		1,714		45,679
Loans to Finance Agriculture Production		16,473		3,290		584		1,192		21,539
All Other Loans		3,171		7,393		25		—		10,589
Total	$	249,713	$	163,767	$	43,098	$	39,964	$	496,542

The following tables summarize the past due loans by category as of June 30, 2012 and December 31, 2011:

Past Due Loans

As of June 30, 2012

	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	$	178	$	76	$	5,271	$	5,525	$	57,419	$	62,944
Real Estate Secured by Farmland		—		156		200		356		27,271		27,627
Real Estate Secured by Residential Properties		211		222		2,312		2,745		104,950		107,695
Real Estate Secured by Nonfarm Nonresidential		2,430		210		6,401		9,041		188,966		198,007
Consumer Installment		20		2		7		29		6,131		6,160
Credit Cards and Related Plans		2		—		—		2		1,721		1,723
Commercial and Industrial		101		—		151		252		54,753		55,005
Loans to Finance Agricultural Production		—		—		—		—		36,856		36,856
All Other Loans		—		—		—		—		10,240		10,240
Total	$	2,942	$	666	$	14,342	$	17,950	$	488,307	$	506,257
Non-Accrual Loans Included in above Total	$	1,941	$	529	$	14,342	$	16,812	$	1,392	$	18,204

Past Due Loans

As of December 31, 2011

	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	$	447	$	198	$	6,142	$	6,787	$	60,340	$	67,127
Real Estate Secured by Farmland		—		—		—		—		29,890		29,890
Real Estate Secured by Residential Properties		1,055		993		1,278		3,326		107,048		110,374
Real Estate Secured by Nonfarm Nonresidential		2,357		—		4,446		6,803		196,260		203,063
Consumer Installment		65		—		22		87		6,533		6,620
Credit Cards and Related Plans		2		2		—		4		1,657		1,661
Commercial and Industrial		294		—		205		499		45,180		45,679
Loans to Finance Agricultural Production		—		—		—		—		21,539		21,539
All Other Loans		—		—		—		—		10,589		10,589
Total	$	4,220	$	1,193	$	12,093	$	17,506	$	479,036	$	496,542
Non-Accrual Loans Included in above Total	$	1,426	$	588	$	12,093	$	14,107	$	1,866	$	15,973

The following tables summarize impaired loans as of June 30, 2012, June 30, 2011 and December 31, 2011. 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.

Impaired Loans

	Balance at June 30, 2012						Six Months Ended June 30, 2012				Three Months Ended June 30, 2012
	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	$	5,750	$	7,219	$	—	$	5,791	$	49	$	5,552	$	22
Real Estate Secured by Farmland		356		356		—		119		3		237		2
Real Estate Secured by Residential Properties		2,180		2,329		—		1,830		28		2,074		14
Real Estate Secured by Nonfarm Nonresidential		11,682		12,835		—		8,227		93		9,303		40
Consumer Installment		—		—		—		—		—		—		—
Credit Cards and Related Plans		—		—		—		—		—		—		—
Commercial and Industrial		219		217		—		300		12		296		9
Loans to Finance Agricultural Production		—		—		—		293		9		—		—
All Other Loans		—		—		—		—		—		—		—
Total impaired loans with no related allowance	$	20,187	$	22,956	$	—	$	16,560	$	194	$	17,462	$	87
With an allowance recorded:
Real Estate Construction and Land Development	$	3,055	$	3,472	$	575	$	3,321	$	28	$	2,738	$	11
Real Estate Secured by Farmland		—		—		—		—		—		—		—
Real Estate Secured by Residential Properties		5,444		5,431		617		5,286		80		5,441		38
Real Estate Secured by Nonfarm Nonresidential		3,430		3,423		180		7,622		87		6,468		27
Consumer Installment		—		—		—		—		—		—		—
Credit Cards and Related Plans		—		—		—		—		—		—		—
Commercial and Industrial		199		199		20		124		5		67		2
Loans to Finance Agricultural Production		—		—		—		—		—		—		—
All Other Loans		—		—		—		—		—		—		—
Total impaired loans with related allowance recorded	$	12,128	$	12,525	$	1,392	$	16,353	$	200	$	14,714	$	78
Total
Construction and Land Development	$	8,805	$	10,691	$	575	$	9,112	$	77	$	8,290	$	33
Residential		7,624		7,760		617		7,116		108		7,515		52
Commercial		15,886		17,030		200		16,685		209		16,371		80
Consumer		—		—		—		—		—		—		—
Total impaired loans	$	32,315	$	35,481	$	1,392	$	32,913	$	394	$	32,176	$	165

Impaired Loans

	Balance at June 30, 2011						Six Months Ended June 30, 2011				Three Months Ended June 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	$	7,995	$	11,610	$	—	$	7,819	$	82	$	7,105	$	33
Real Estate Secured by Farmland		—		—		—		—		—		—		—
Real Estate Secured by Residential Properties		3,860		4,222		—		3,846		38		3,855		22
Real Estate Secured by Nonfarm Nonresidential		2,501		2,544		—		1,517		24		2,183		17
Consumer Installment		—		—		—				—				—
Credit Cards and Related Plans		—		—		—		—		—		—		—
Commercial and Industrial		175		449		—		366		7		298		2
Loans to Finance Agricultural Production		—		—		—		—		—		—		—
All Other Loans		—		—		—		—		—		—		—
Total impaired loans with no related allowance	$	14,531	$	18,825	$	—	$	13,548	$	151	$	13,441	$	74
With an allowance recorded:
Real Estate Construction and Land Development	$	8,267	$	9,996	$	1,931	$	8,206	$	86	$	8,791	$	40
Real Estate Secured by Farmland		—		—		—		—		—		—		—
Real Estate Secured by Residential Properties		5,042		4,901		1,124		3,912		39		4,904		28
Real Estate Secured by Nonfarm Nonresidential		3,011		3,076		585		3,245		51		3,089		24
Consumer Installment		—		—		—		—		—		—		—
Credit Cards and Related Plans		201		200		170		200		6		200		3
Commercial and Industrial		301		300		249		404		8		358		2
Loans to Finance Agricultural Production		—		—		—		—		—		—		—
All Other Loans		—		—		—		—		—		—		—
Total impaired loans with related allowance recorded	$	16,822	$	18,473	$	4,059	$	15,967	$	190	$	17,342	$	97
Total
Construction and Land Development	$	16,262	$	21,606	$	1,931	$	16,025	$	168	$	15,896	$	73
Residential		8,902		9,123		1,124		7,758		77		8,759		50
Commercial		5,988		6,369		834		5,532		90		5,928		45
Consumer		201		200		170		200		6		200		3
Total impaired loans	$	31,353	$	37,298	$	4,059	$	29,515	$	341	$	30,783	$	171

Impaired Loans

As of December 31, 2011

	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded:
Real Estate Construction and Land Development	$	6,280	$	11,137	$	—
Real Estate Secured by Farmland		—		—		—
Real Estate Secured by Residential Properties		2,135		2,611		—
Real Estate Secured by Nonfarm Nonresidential		7,075		7,484		—
Consumer Installment		—		—		—
Credit Cards and Related Plans		—		—		—
Commercial and Industrial		379		500		—
Loans to Finance Agricultural Production		1,109		1,110		—
All Other Loans		—		—		—
Total impaired loans with no related allowance	$	16,978	$	22,842	$	—
With an allowance recorded:
Real Estate Construction and Land Development	$	3,806	$	3,794	$	637
Real Estate Secured by Farmland		—		—		—
Real Estate Secured by Residential Properties		3,391		3,382		480
Real Estate Secured by Nonfarm Nonresidential		6,976		6,957		1,181
Consumer Installment		—		—		—
Credit Cards and Related Plans		—		—		—
Commercial and Industrial		186		186		165
Loans to Finance Agricultural Production		—		—		—
All Other Loans		—		—		—
Total impaired loans with related allowance recorded	$	14,359	$	14,319	$	2,463
Total
Construction and Land Development	$	10,086	$	14,931	$	637
Residential		5,526		5,993		480
Commercial		15,725		16,237		1,346
Consumer		—		—		—
Total impaired loans	$	31,337	$	37,161	$	2,463

The following table presents nonaccrual loans as of June 30, 2012 and December 31, 2011 by loan category:

Nonaccrual Loans

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Real Estate Construction and Land Development	$	5,716	$	6,795
Real Estate Secured by Farmland		356		—
Real Estate Secured by Residential Properties		2,620		2,113
Real Estate Secured by Nonfarm Nonresidential		9,328		6,767
Consumer Installment		7		22
Credit Cards and Related Plans		—		—
Commercial and Industrial		177		276
Loans to Finance Agricultural Production		—		—
All Other Loans		—		—
Total	$	18,204	$	15,973

Interest income not recognized due to loans being on nonaccrual status during the three and six month period ended June 30, 2012 was approximately $250 thousand and $451 thousand, respectively. Interest income not recognized due to loans being on nonaccrual status during the three and six month period ended June 30, 2011 was approximately $217 thousand and $408 thousand, respectively.

Troubled Debt Restructurings

Loans which management identifies as impaired generally will be nonperforming loans or restructured loans (also known as “troubled debt restructurings” or “TDRs”). 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 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. TDRs are treated as impaired loans in determining the adequacy of the allowance for loan loss.

For the three and six months ended June 30, 2012 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.

	Three Months ended June 30, 2012						Six Months ended June 30, 2012
	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	$	1,943	$	1,943
Total below market interest rate		—	$	—	$	—		1	$	1,943	$	1,943
Extended payment terms:
Real Estate construction and land development		1	$	503	$	503		1	$	503	$	503
Commercial and Industrial		1		18		18		1		18		18
Total Extended Payment Terms		2	$	521	$	521		2	$	521	$	521
Total		2	$	521	$	521		3	$	2,464	$	2,464

The following table presents the successes and failures of the types of modifications within the previous twelve months as of June 30, 2012. The recorded investment balances presented are as of June 30, 2012.

	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	$	3,202		1	$	617		—	$	—
Extended payment terms		—		—		8		1,858		—		—		—		—
Forgiveness of principal		—		—		—		—		—		—		—		—
Total		—		—		11	$	5,060		1		617		—		—

There was one loan with a recorded investment of $617 thousand that is included in the table above that was placed on non-accrual in a prior period. While the loan was not ninety days past due, it was moved into nonaccrual status due to payment concerns. There were no loans that were restructured during the twelve months ending on June 30, 2012 as a result of payment default.