Allowance for Loan Losses

6 Months Ended

Jun. 30, 2011

Allowance for Loan Losses [Abstract]

NOTE D — ALLOWANCE FOR LOAN LOSSES

In evaluating the allowance for loan losses, loans are analyzed based on the department originating the loan, which in some instances may be different than how the (commercial, mortgage or consumer) loans are categorized for regulatory reporting purposes. Required disclosures about activity in the allowance for loan losses for reporting periods subsequent to December 15, 2010 are provided below for the six months ended June 30, 2011. The following is an analysis of the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of and for the six month period ended June 30, 2011 and as of December 31, 2010, as well as summary activity in the allowance for loan losses for the quarter ended June 30, 2010 (in thousands):


	2011
										Real
	Commercial						Real Estate			Estate
June 30, 2011	including						Mortgage			Mortgage
Allowance for Loan Losses:	CRE			Consumer			1^st Lien			Junior Lien			Total			2010
Balance at January 1	$	4,239		$	86		$	1,211		$	158		$	5,694		$	6,075
Provision for loan losses		175			31			149			145			500			350
Loans charged off		(523	)		(40	)		(241	)		(105	)		(909	)		(799	)
Recoveries		101			5			8			3			117			100

Balance at June 30	$	3,992		$	82		$	1,127		$	201		$	5,402		$	5,726


Ending balance individually evaluated for impairment	$	817			—		$	232		$	13		$	1,062


Ending balance collectively evaluated for impairment	$	3,175		$	82		$	895		$	188		$	4,340


Total Loans:
Ending balance	$	216,699		$	8,512		$	67,036		$	13,374		$	305,621


Ending balance individually evaluated for impairment	$	7,071		$	39		$	3,041		$	44		$	10,195


Ending balance collectively evaluated for impairment	$	209,628		$	8,473		$	63,995		$	13,330		$	295,426

Commercial loans also include demand deposit loan account charge-offs and recoveries amounting to $78,000 and $42,000, respectively, for the six months ended June 30, 2011.


							Real
							Estate
	Commercial				Real Estate		Mortgage
December 31, 2010	including				Mortgage		Junior
Allowance for Loan Losses:	CRE		Consumer		1^st Lien		Lien		Total
Ending balance individually evaluated for impairment	$	867		—	$	300	$	4	$	1,171

Ending balance collectively evaluated for impairment	$	3,372	$	87	$	911	$	153	$	4,523


Total	$	4,239	$	87	$	1,211	$	157	$	5,694


Total Loans:
Ending balance	$	216,401	$	9,849	$	69,437	$	13,837	$	309,524


Ending balance individually evaluated for impairment	$	7,676	$	87	$	2,881	$	122	$	10,766


Ending balance collectively evaluated for impairment	$	208,725	$	9,762	$	66,556	$	13,715	$	298,758

The following tables present loans individually evaluated for impairment by class of loans as of June 30, 2011 and December 31, 2010 (in thousands):


	Unpaid		Allowance for
	Principal		Loan Losses
June 30, 2011	Balance		Allocated
With no related allowance recorded:
Commercial	$	118	$	—
Real estate — commercial		2,900		—
Real estate — construction		157		—
Consumer		39		—
Real estate mortgage		2,296		—

With an allowance recorded:
Commercial		863		157
Real estate — commercial		1,525		407
Real estate — construction		79		4
Consumer		—		—
Real estate mortgage		2,218		494


Total	$	10,195	$	1,062


	Unpaid		Allowance for
	Principal		Loan Losses
December 31, 2010	Balance		Allocated
With no related allowance recorded:
	$
Commercial		608	$	—
Real estate — commercial		2,685		—
Real estate — construction		—		—
Consumer		87		—
Real estate mortgage		2,495		—

With an allowance recorded:
Commercial		588		99
Real estate — commercial		1,823		413
Real estate — construction		583		173
Consumer		—		—
Real estate mortgage		1,897		486


Total	$	10,766	$	1,171

The following table presents the aging of the recorded investment in past due and nonaccrual loans for the year to date periods ended June 30, 2011 and December 31, 2010 by class of loans (in thousands):


					Greater than				Loans Not
			60-89		90 Days Past		Total Past		Past Due
	30-59 Days		Days Past		Due & Non		Due &Non		or Non
June 30, 2011	Past Due		Due		Accrual		Accrual		Accrual		Total
Commercial	$	57	$	—	$	436	$	493	$	55,533	$	56,026
Real estate — commercial		51		—		3,288		3,339		136,772		140,111
Real estate — construction		134		—		236		370		11,809		12,179
Consumer		65		12		40		117		8,726		8,843
Real estate mortgage		499		—		2,534		3,033		85,429		88,462


Total	$	806	$	12	$	6,534	$	7,352	$	298,269	$	305,621


					Greater than				Loans Not
			60-89		90 Days Past		Total Past		Past Due
	30-59 Days		Days Past		Due & Non		Due &Non		or Non
December 31, 2010	Past Due		Due		Accrual		Accrual		Accrual		Total
Commercial	$	277	$	20	$	217	$	514	$	58,249	$	58,763
Real estate — commercial		184		—		2,295		2,479		133,892		136,371
Real estate — construction		—		—		583		583		10,552		11,135
Consumer		62		—		87		149		10,004		10,153
Real estate mortgage		737		28		2,112		2,877		90,225		93,102


Total	$	1,260	$	48	$	5,294	$	6,602	$	302,922	$	309,524

Troubled Debt Restructurings:

The Company has allocated $311,000 and $379,000 of specific reserves to customers whose loan terms have been modified as of June 30, 2011 and December 31, 2010, respectively. The Company intends to lend no additional amounts to these customers.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all loans from the commercial loan department. This analysis is performed at least annually. The Company uses the following definitions for risk ratings:

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize 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.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

As of June 30, 2011 and December 31, 2010, based on the most recent analysis performed, the risk category of loans by class of loans was as follows (in thousands):


			Special						Not Risk
June 30, 2011	Pass		Mention		Substandard		Doubtful		Rated		Total
Commercial	$	42,916	$	8,161	$	4,949	$	—	$	—	$	56,026
Real estate — commercial		116,789		14,199		8,199		368		556		140,111
Real estate — construction		6,504		1,045		625		—		4,005		12,179
Real estate — mortgage		7,435		1,147		3,263		—		76,617		88,462
Consumer		—		—		—		—		8,843		8,843


Total	$	173,644	$	24,552	$	17,036	$	368	$	90,021	$	305,621


			Special						Not Risk
December 31, 2010	Pass		Mention		Substandard		Doubtful		Rated		Total
Commercial	$	44,819	$	12,821	$	1,123	$	—	$	—	$	58,763
Real estate — commercial		110,384		19,054		6,311		370		252		136,371
Real estate — construction		2,371		1,047		4,630		—		3,087		11,135
Real estate — mortgage		7,096		2,892		2,700		—		80,414		93,102
Consumer		—		—		—		—		10,153		10,153


Total	$	164,670	$	35,814	$	14,764	$	370	$	93,906	$	309,524