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Loans and Allowance for Loan Losses (Tables)
 9 Months Ended
Sep. 30, 2012
Receivables [Abstract]  
Summary of Loans
Loans are stated at the principal amount outstanding net of unearned discounts, unearned income and allowance for loan losses.  Unearned income includes deferred loan origination fees reduced by loan origination costs and is amortized to interest income over the life of the related loan using methods that approximated the effective interest rate method.  Interest on substantially all loans is credited to income based on the principal amount outstanding. A summary of loans at September 30, 2012 and December 31, 2011 follows (in thousands):

 
September 30,
2012
 
December 31,
2011
Construction and land development
$
25,117

 
$
23,136

Farm loans
83,413

 
72,586

1-4 Family residential properties
188,768

 
180,738

Multifamily residential properties
44,292

 
19,847

Commercial real estate
313,621

 
321,908

Loans secured by real estate
655,211

 
618,215

Agricultural loans
63,294

 
63,182

Commercial and industrial loans
154,190

 
150,631

Consumer loans
16,242

 
16,274

All other loans
9,370

 
11,430

Gross loans
898,307

 
859,732

Less:
 

 
 

Net deferred loan fees, premiums and discounts
330

 
704

Allowance for loan losses
11,645

 
11,120

Net loans
$
886,332

 
$
847,908
Allowance for Loan Losses and Recorded Investment in Loans
The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method for the three and nine-months ended September 30, 2012 and 2011 and for the year ended December 31, 2011 (in thousands):
 
Three months ended September 30, 2012
Commercial/ Commercial Real Estate
 
Agricultural/ Agricultural Real Estate
 
Residential 
Real Estate
 
Consumer
 
Unallocated
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
9,007

 
$
701

 
$
743

 
$
395

 
$
609

 
$
11,455

Provision charged to expense
782

 
(97
)
 
232

 
8

 
(205
)
 
720

Losses charged off
(308
)
 
—

 
(232
)
 
(45
)
 
—

 
(585
)
Recoveries
19

 
3

 
2

 
31

 
—

 
55

Balance, end of period
$
9,500

 
$
607

 
$
745

 
$
389

 
$
404

 
$
11,645

Ending balance:
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
768

 
$
—

 
$
—

 
$
—

 
$
—

 
$
768

Collectively evaluated for impairment
$
8,732

 
$
607

 
$
745

 
$
389

 
$
404

 
$
10,877

Loans acquired with deteriorated credit quality
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Three months ended September 30, 2011
 

 
 

 
 

 
 

 
 

 
 

Allowance for loan losses:
 

 
 

 
 

 
 

 
 

 
 

Balance, beginning of period
$
8,312

 
$
556

 
$
462

 
$
396

 
$
969

 
$
10,695

Provision charged to expense
866

 
70

 
139

 
50

 
(397
)
 
728

Losses charged off
(789
)
 
(50
)
 
(137
)
 
(82
)
 
—

 
(1,058
)
Recoveries
35

 
3

 
—

 
26

 
—

 
64

Balance, end of period
$
8,424

 
$
579

 
$
464

 
$
390

 
$
572

 
$
10,429

Ending balance:
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
978

 
$
—

 
$
—

 
$
—

 
$
—

 
$
978

Collectively evaluated for impairment
$
7,446

 
$
579

 
$
464

 
$
390

 
$
572

 
$
9,451

Loans acquired with deteriorated credit quality
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Nine months ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of year
$
8,791

 
$
546

 
$
636

 
$
378

 
$
769

 
$
11,120

Provision charged to expense
1,530

 
3

 
523

 
60

 
(365
)
 
1,751

Losses charged off
(906
)
 
(12
)
 
(437
)
 
(140
)
 
—

 
(1,495
)
Recoveries
85

 
70

 
23

 
91

 
—

 
269

Balance, end of period
$
9,500

 
$
607

 
$
745

 
$
389

 
$
404

 
$
11,645

Ending balance:
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
768

 
$
—

 
$
—

 
$
—

 
$
—

 
$
768

Collectively evaluated for impairment
$
8,732

 
$
607

 
$
745

 
$
389

 
$
404

 
$
10,877

Loans acquired with deteriorated credit quality
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Loans:
 

 
 

 
 

 
 

 
 

 
 

Ending balance
$
556,026

 
$
144,883

 
$
182,234

 
$
16,014

 
$
210

 
$
899,367

Ending balance:
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
5,627

 
$
899

 
$
—

 
$
—

 
$
—

 
$
6,526

Collectively evaluated for impairment
$
550,399

 
$
143,984

 
$
182,234

 
$
16,014

 
$
210

 
$
892,841

Loans acquired with deteriorated credit quality
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 

Nine months ended September 30, 2011
Commercial/ Commercial Real Estate
 
Agricultural/ Agricultural Real Estate
 
Residential  Real Estate
 
Consumer
 
Unallocated
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of year
$
8,307

 
$
404

 
$
440

 
$
392

 
$
850

 
$
10,393

Provision charged to expense
2,334

 
222

 
223

 
83

 
(278
)
 
2,584

Losses charged off
(2,358
)
 
(50
)
 
(200
)
 
(158
)
 
—

 
(2,766
)
Recoveries
141

 
3

 
1

 
73

 
—

 
218

Balance, end of period
$
8,424

 
$
579

 
$
464

 
$
390

 
$
572

 
$
10,429

Ending balance:
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
978

 
$
—

 
$
—

 
$
—

 
$
—

 
$
978

Collectively evaluated for impairment
$
7,446

 
$
579

 
$
464

 
$
390

 
$
572

 
$
9,451

Loans acquired with deteriorated credit quality
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Loans:
 

 
 

 
 

 
 

 
 

 
 

Ending balance
$
485,504

 
$
125,220

 
$
187,361

 
$
17,001

 
$
405

 
$
815,491

Ending balance:
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
6,925

 
$
1,149

 
$
—

 
$
—

 
$
—

 
$
8,074

Collectively evaluated for impairment
$
478,579

 
$
124,071

 
$
187,361

 
$
17,001

 
$
405

 
$
807,417

Loans acquired with deteriorated credit quality
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Year ended December 31, 2011
 

 
 

 
 

 
 

 
 

 
 

Allowance for loan losses:
 

 
 

 
 

 
 

 
 

 
 

Balance, beginning of year
$
8,307

 
$
404

 
$
440

 
$
392

 
$
850

 
$
10,393

Provision charged to expense
2,309

 
205

 
546

 
122

 
(81
)
 
3,101

Losses charged off
(3,077
)
 
(66
)
 
(363
)
 
(254
)
 
—

 
(3,760
)
Recoveries
1,252

 
3

 
13

 
118

 
—

 
1,386

Balance, end of year
$
8,791

 
$
546

 
$
636

 
$
378

 
$
769

 
$
11,120

Ending balance:
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
575

 
$
—

 
$
—

 
$
—

 
$
—

 
$
575

Collectively evaluated for impairment
$
8,216

 
$
546

 
$
636

 
$
378

 
$
769

 
$
10,545

Loans acquired with deteriorated credit quality
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Loans:
 

 
 

 
 

 
 

 
 

 
 

Ending balance
$
505,693

 
$
130,595

 
$
185,151

 
$
16,270

 
$
22,365

 
$
860,074

Ending balance:
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
4,719

 
$
1,149

 
$
—

 
$
—

 
$
—

 
$
5,868

Collectively evaluated for impairment
$
500,974

 
$
129,446

 
$
185,151

 
$
16,270

 
$
22,365

 
$
854,206

Loans acquired with deteriorated credit quality
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—
Credit Risk Profile of the Company's Loan Portfolio
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered pass rated loans. The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of September 30, 2012 and December 31, 2011 (in thousands):


 
Construction &
Land Development
 
Farm Loans
 
1-4 Family Residential
Properties
 
Multifamily Residential
Properties
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Pass
$
20,949

 
$
19,708

 
$
78,781

 
$
67,637

 
$
187,434

 
$
180,247

 
$
44,085

 
$
19,638

Watch
2,147

 
2,168

 
2,472

 
2,496

 
430

 
497

 
—

 
—

Substandard
2,021

 
1,260

 
2,172

 
2,452

 
2,375

 
1,105

 
207

 
208

Doubtful
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total
$
25,117

 
$
23,136

 
$
83,425

 
$
72,585

 
$
190,239

 
$
181,849

 
$
44,292

 
$
19,846


 
Commercial Real Estate (Nonfarm/Nonresidential)
 
Agricultural Loans
 
Commercial & Industrial Loans
 
Consumer Loans
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Pass
$
283,605

 
$
288,539

 
$
57,912

 
$
58,133

 
$
150,578

 
$
147,591

 
$
16,213

 
$
16,271

Watch
24,465

 
24,664

 
1,542

 
1,840

 
1,953

 
280

 
15

 
—

Substandard
4,960

 
7,798

 
3,911

 
3,284

 
1,770

 
2,845

 
14

 
—

Doubtful
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total
$
313,030

 
$
321,001

 
$
63,365

 
$
63,257

 
$
154,301

 
$
150,716

 
$
16,242

 
$
16,271


 
All Other Loans
 
Total Loans
 
2012
 
2011
 
2012
 
2011
Pass
$
9,356

 
$
11,413

 
$
848,913

 
$
809,177

Watch
—

 
—

 
33,024

 
31,945

Substandard
—

 
—

 
17,430

 
18,952

Doubtful
—

 
—

 
—

 
—

Total
$
9,356

 
$
11,413

 
$
899,367

 
$
860,074
Loan Portfolio Aging Analysis
The following table presents the Company’s loan portfolio aging analysis at September 30, 2012 and December 31, 2011 (in thousands): 
September 30, 2012
30-59 days Past Due
 
60-89 days Past Due
 
90 Days
or More Past Due
 
Total
Past Due
 
Current
 
Total Loans Receivable
 
Total Loans > 90 days & Accruing
Construction and land development
$
758

 
$
—

 
$
—

 
$
758

 
$
24,359

 
$
25,117

 
$
—

Farm loans
493

 
—

 
70

 
563

 
82,862

 
83,425

 
—

1-4 Family residential properties
391

 
240

 
1,345

 
1,976

 
188,263

 
190,239

 
—

Multifamily residential properties
207

 
—

 
—

 
207

 
44,085

 
44,292

 
—

Commercial real estate
223

 
478

 
238

 
939

 
312,091

 
313,030

 
—

Loans secured by real estate
2,072

 
718

 
1,653

 
4,443

 
651,660

 
656,103

 
—

Agricultural loans
242

 
—

 
704

 
946

 
62,419

 
63,365

 
—

Commercial and industrial loans
148

 
155

 
218

 
521

 
153,780

 
154,301

 
—

Consumer loans
80

 
70

 
15

 
165

 
16,077

 
16,242

 
—

All other loans
—

 
—

 
—

 
—

 
9,356

 
9,356

 
—

Total loans
$
2,542

 
$
943

 
$
2,590

 
$
6,075

 
$
893,292

 
$
899,367

 
$
—

December 31, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

Construction and land development
$
—

 
$
—

 
$
—

 
$
—

 
$
23,136

 
$
23,136

 
$
—

Farm loans
377

 
111

 
737

 
1,225

 
71,360

 
72,585

 
—

1-4 Family residential properties
1,079

 
200

 
1,033

 
2,312

 
179,537

 
181,849

 
—

Multifamily residential properties
—

 
—

 
—

 
—

 
19,846

 
19,846

 
—

Commercial real estate
399

 
101

 
228

 
728

 
320,273

 
321,001

 
—

Loans secured by real estate
1,855

 
412

 
1,998

 
4,265

 
614,152

 
618,417

 
—

Agricultural loans
—

 
—

 
673

 
673

 
62,584

 
63,257

 
—

Commercial and industrial loans
950

 
73

 
585

 
1,608

 
149,108

 
150,716

 
—

Consumer loans
94

 
36

 
7

 
137

 
16,134

 
16,271

 
—

All other loans
—

 
—

 
—

 
—

 
11,413

 
11,413

 
—

Total loans
$
2,899

 
$
521

 
$
3,263

 
$
6,683

 
$
853,391

 
$
860,074

 
$
—
Impaired Loans
The following tables present impaired loans as of September 30, 2012 and December 31, 2011 (in thousands):

 
September 30, 2012
 
December 31, 2011
 
Recorded
Balance
 
Unpaid Principal Balance
 
Specific Allowance
 
Recorded
Balance
 
Unpaid Principal Balance
 
Specific Allowance
Loans with a specific allowance:
 
 
 
 
 
 
 
 
 
 
 
Construction and land development
$
397

 
$
812

 
$
206

 
$
833

 
$
1,070

 
$
295

Farm loans
—

 
—

 
—

 
—

 
—

 
—

1-4 Family residential properties
489

 
489

 
58

 
71

 
71

 
27

Multifamily residential properties
—

 
—

 
—

 
—

 
—

 
—

Commercial real estate
592

 
592

 
119

 
1,414

 
1,693

 
183

Loans secured by real estate
1,478

 
1,893

 
383

 
2,318

 
2,834

 
505

Agricultural loans
—

 
—

 
—

 
—

 
—

 
—

Commercial and industrial loans
749

 
749

 
385

 
382

 
382

 
70

Consumer loans
—

 
—

 
—

 
—

 
—

 
—

All other loans
—

 
—

 
—

 
—

 
—

 
—

Total loans
$
2,227

 
$
2,642

 
$
768

 
$
2,700

 
$
3,216

 
$
575

Loans without a specific allowance:
 

 
 

 
 

 
 

 
 

 
 

Construction and land development
$
1,156

 
$
1,257

 
$
—

 
$
—

 
$
—

 
$
—

Farm loans
199

 
210

 
—

 
532

 
532

 
—

1-4 Family residential properties
1,459

 
1,790

 
—

 
1,641

 
1,818

 
—

Multifamily residential properties
—

 
—

 
—

 
—

 
—

 
—

Commercial real estate
1,699

 
1,720

 
—

 
1,226

 
1,256

 
—

Loans secured by real estate
4,513

 
4,977

 
—

 
3,399

 
3,606

 
—

Agricultural loans
822

 
822

 
—

 
673

 
673

 
—

Commercial and industrial loans
253

 
421

 
—

 
660

 
1,255

 
—

Consumer loans
29

 
35

 
—

 
8

 
20

 
—

All other loans
—

 
—

 
—

 
—

 
—

 
—

Total loans
$
5,617

 
$
6,255

 
$
—

 
$
4,740

 
$
5,554

 
$
—

Total loans:
 

 
 

 
 

 
 

 
 

 
 

Construction and land development
$
1,553

 
$
2,069

 
$
206

 
$
833

 
$
1,070

 
$
295

Farm loans
199

 
210

 
—

 
532

 
532

 
—

1-4 Family residential properties
1,948

 
2,279

 
58

 
1,712

 
1,889

 
27

Multifamily residential properties
—

 
—

 
—

 
—

 
—

 
—

Commercial real estate
2,291

 
2,312

 
119

 
2,640

 
2,949

 
183

Loans secured by real estate
5,991

 
6,870

 
383

 
5,717

 
6,440

 
505

Agricultural loans
822

 
822

 
—

 
673

 
673

 
—

Commercial and industrial loans
1,002

 
1,170

 
385

 
1,042

 
1,637

 
70

Consumer loans
29

 
35

 
—

 
8

 
20

 
—

All other loans
—

 
—

 
—

 
—

 
—

 
—

Total loans
$
7,844

 
$
8,897

 
$
768

 
$
7,440

 
$
8,770

 
$
575
Impaired loans by portfolio class
The following tables present average recorded investment and interest income recognized on impaired loans for the three and nine- month periods ended September 30, 2012 and 2011 (in thousands):

 
For the three months ended
 
September 30, 2012
 
September 30, 2011
 
Average Investment
in Impaired Loans
 
Interest Income Recognized
 
Average Investment
in Impaired Loans
 
Interest Income Recognized
Construction and land development
$
1,750

 
$
—

 
$
1,174

 
$
—

Farm loans
199

 
—

 
533

 
—

1-4 Family residential properties
1,972

 
—

 
2,231

 
—

Multifamily residential properties
—

 
—

 
—

 
—

Commercial real estate
2,299

 
7

 
3,934

 
7

Loans secured by real estate
6,220

 
7

 
7,872

 
7

Agricultural loans
837

 
—

 
695

 
—

Commercial and industrial loans
1,019

 
3

 
1,242

 
3

Consumer loans
30

 
—

 
5

 
—

All other loans
—

 
—

 
—

 
—

Total loans
$
8,106

 
$
10

 
$
9,814

 
$
10

 
 
For the nine months ended
 
September 30, 2012
 
September 30, 2011
 
Average Investment
in Impaired Loans
 
Interest Income Recognized
 
Average Investment
in Impaired Loans
 
Interest Income Recognized
Construction and land development
$
1,736

 
$
—

 
$
1,179

 
$
—

Farm loans
199

 
—

 
534

 
—

1-4 Family residential properties
1,982

 
—

 
2,242

 
—

Multifamily residential properties
—

 
—

 
—

 
—

Commercial real estate
2,319

 
21

 
3,968

 
15

Loans secured by real estate
6,236

 
21

 
7,923

 
15

Agricultural loans
867

 
—

 
695

 
—

Commercial and industrial loans
1,063

 
10

 
1,382

 
11

Consumer loans
32

 
1

 
5

 
—

All other loans
—

 
—

 
—

 
—

Total loans
$
8,198

 
$
32

 
$
10,005

 
$
26



The amount of interest income recognized by the Company within the periods stated above was due to loans modified in a troubled debt restructuring that remained on accrual status.  The balance of loans modified in a troubled debt restructuring included in the impaired loans stated above that were still accruing was $6,000 of 1-4 Family residential properties, $388,000 of commercial real estate, $304,000 of commercial and industrial and $14,000 of consumer loans at September 30, 2012 and $396,000 of commercial real estate at September 30, 2011. For the nine months ended September 30, 2012 and 2011, the amount of interest income recognized using a cash-basis method of accounting during the period that the loans were impaired was not material.
Nonaccrual Loans
The following table presents the Company’s recorded balance of nonaccrual loans as September 30, 2012 and December 31, 2011 (in thousands). This table excludes purchased impaired loans and performing troubled debt restructurings.

 
September 30,
2012
 
December 31,
2011
Construction and land development
$
1,553

 
$
833

Farm loans
199

 
532

1-4 Family residential properties
1,941

 
1,712

Multifamily residential properties
—

 
—

Commercial real estate
1,903

 
2,245

Loans secured by real estate
5,596

 
5,322

Agricultural loans
823

 
673

Commercial and industrial loans
698

 
720

Consumer loans
15

 
8

All other loans
—

 
—

Total loans
$
7,132

 
$
6,723
Recorded Balance of Troubled Debt Restructurings
The following table presents the Company’s recorded balance of troubled debt restructurings at September 30, 2012 and December 31, 2011 (in thousands).

Troubled debt restructurings:
September 30,
2012
 
December 31,
2011
Construction and land development
$
1,554

 
$
—

1-4 Family residential properties
462

 
393

Commercial real estate
1,011

 
952

Loans secured by real estate
3,027

 
1,345

Commercial and industrial loans
489

 
489

Consumer Loans
14

 
—

Total
$
3,530

 
$
1,834

Performing troubled debt restructurings:
 

 
 

1-4 Family residential properties
$
6

 
$
—

Commercial real estate
388

 
395

Loans secured by real estate
394

 
395

Commercial and industrial loans
304

 
322

Consumer Loans
14

 
—

Total
$
712

 
$
717