Loans

6 Months Ended

Jun. 30, 2011

Loans [Abstract]

LOANS

NOTE 3 — LOANS

Loans at June 30, 2011 and December 31, 2010 were as follows:

	June 30,			December 31,
	2011			2010
Commercial real estate	$	932,955		$	1,080,805
Residential real estate		372,320			378,783
Commercial		193,158			222,927
Consumer		74,408			75,498
Other		3,058			1,913
Unearned income		(15,396	)		(14,548	)
Loans, net of unearned income	$	1,560,503		$	1,745,378
Allowance for loan losses	$	(62,728	)	$	(66,830	)

Activity in the allowance for loan losses for the three and six months ended June 30, 2011 and 2010 is as follows:

	June 30,			June 30,
	2011			2010
Beginning balance	$	66,830		$	50,161
Add (deduct):
Provision for loan losses		28,229			8,638
Loans charged off		(33,632	)		(10,049	)
Recoveries of loans charged off		1,301			1,299
Balance, end of year	$	62,728		$	50,049

Activity in the allowance for loan losses and recorded investment in loans by segment:

3 Months Ended Allowance Rollforward:

	Commercial			Residential
	Real Estate			Real Estate			Commercial			Consumer			Other		Total
June 30, 2011
Allowance for loan losses:
Beginning balance	$	53,366		$	4,382		$	5,645		$	1,708		$	8	$	65,109
Add (deduct):
Charge-offs		(14,854	)		(506	)		(1,341	)		(524	)		—		(17,225	)
Recoveries		216			24			118			153			—		511
Provision		10,744			997			1,011			1,491			—		14,333
Ending balance	$	49,472		$	4,897		$	5,523		$	2,828		$	8	$	62,728

6 Months Ended Allowance Rollforward:

	Commercial			Residential
	Real Estate			Real Estate			Commercial			Consumer			Other		Total
June 30, 2011
Allowance for loan losses:
Beginning balance	$	54,203		$	4,431		$	5,080		$	3,108		$	8	$	66,830
Add (deduct):
Charge-offs		(29,775	)		(819	)		(2,069	)		(969	)		—		(33,632	)
Recoveries		413			53			496			339			—		1,301
Provision		24,631			1,232			2,016			350			—		28,229
Ending balance	$	49,472		$	4,897		$	5,523		$	2,828		$	8	$	62,728
As of June 30, 2011
Allowance for loan losses:
Allocation for loans individually evaluated for impairment	$	19,296		$	229		$	1,071		$	88		$	—	$	20,684
Allocation for loans collectively evaluated for impairment		30,176			4,668			4,452			2,740			8		42,044
Ending balance	$	49,472		$	4,897		$	5,523		$	2,828		$	8	$	62,728
As of December 31, 2010
Allowance for loan losses:
Allocation for loans individually evaluated for impairment	$	22,939		$	1,027		$	722		$	146		$	—	$	24,834
Allocation for loans collectively evaluated for impairment		31,264			3,404			4,358			2,962			8		41,996
Ending balance	$	54,203		$	4,431		$	5,080		$	3,108		$	8	$	66,830
As of June 30, 2011
Loans:
Ending balance: individually evaluated for impairment	$	139,240		$	9,044		$	8,036		$	988		$	—	$	157,308
Ending balance: collectively evaluated for impairment	$	793,715		$	356,800		$	185,122		$	64,500		$	3,058	$	1,403,195
As of December 31, 2010
Loans:
Ending balance: individually evaluated for impairment	$	170,175		$	8,697		$	6,149		$	970		$	—	$	185,991
Ending balance: collectively evaluated for impairment	$	910,630		$	363,506		$	216,778		$	66,470		$	1,913	$	1,559,387

Impaired loans by class are presented below as of June 30, 2011:

											3 Months Ended				6 Months Ended
	Unpaid		Recorded		Recorded		Total				Average		Interest		Average		Interest
	Principal		investment with		investment		Recorded		Related		Recorded		Income		Recorded		Income
	Balance		no allowance		with allowance		Investment		Allowance		Investment		Recognized		Investment		Recognized
Commercial Real Estate:
Speculative 1-4 Family	$	92,992	$	33,514	$	32,970		66,484	$	13,942	$	67,203	$	178	$	79,743	$	231
Construction		45,137		22,341		7,725		30,066		2,700		31,769		75		49,747		71
Owner Occupied		14,385		15,162		353		15,515		100		15,966		57		15,144		18
Non-owner Occupied		22,839		18,559		7,497		26,056		2,554		26,883		169		44,177		182
Other		1,159		1,119		—		1,119		—		1,160		—		706		—
Residential Real Estate:
HELOC		3,173		3,369		—		3,369		—		3,381		23		3,206		15
Mortgage-Prime		5,097		4,399		656		5,055		156		5,237		37		6,334		41
Mortgage-Subprime		484		—		484		484		73		474		—		562		—
Other		156		136		—		136		—		137		1		142		1
Commercial:		8,945		3,380		4,656		8,036		1,071		8,056		36		7,825		17
Other		—		—		—		—		—		—		—		—		—
Consumer:
Prime		235		225		—		225		—		234		2		235		3
Subprime		262		—		262		262		38		252		—		169		—
Auto-Subprime		501		—		501		501		50		490		—		457		—
Other:		—		—		—		—		—		—		—		—		—
Total		195,365	$	102,204	$	55,104		157,308		20,684		161,242		578		208,447		579

Impaired loans by class are presented below as of December 31, 2010:

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
Commercial Real Estate:
Speculative 1-4 Family	$	72,138	$	98,141	$	11,830	$	85,487	$	2,292
Construction		56,758		69,355		8,366		63,710		2,565
Owner Occupied		13,590		14,513		851		14,119		644
Non-owner Occupied		25,824		27,561		1,823		28,786		1,375
Other		1,865		2,090		69		2,278		66
Residential Real Estate:
HELOC		2,807		2,894		346		2,603		88
Mortgage-Prime		4,539		4,722		590		4,661		209
Mortgage-Subprime		370		370		57		370		—
Other		981		1,285		34		2,419		47
Commercial:		6,149		7,510		722		6,729		171
Consumer:
Prime		217		228		32		252		13
Subprime		228		228		35		228		—
Auto-Subprime		525		525		79		525		—
Other:		—		—		—		—		—
Total		185,991		229,422		24,834		212,167		7,470

The Bank manages the loan portfolio by assigning one of nine credit risk ratings based on an internal assessment of credit risk. The credit risk categories are prime, desirable, satisfactory I or pass, satisfactory II, acceptable with care, management watch, substandard, and loss.

Prime credit risk rating: Assets of this grade are the highest quality credits of the Bank. They exceed substantially all the Bank’s underwriting criteria, and provide superior protection for the Bank through the paying capacity of the borrower and value of the collateral. The Bank’s credit risk is considered to be negligible. Included in this section are well-established borrowers with significant, diversified sources of income and net worth, or borrowers with ready access to alternative financing and unquestioned ability to meet debt obligations as agreed. A loan secured by cash or other highly liquid collateral, where the Bank holds such collateral, may be assigned this grade.

Desirable credit risk rating: Assets of this grade also exceed substantially all of the Bank’s underwriting criteria; however, they may lack the consistent long-term performance of a Prime rated credit. The credit risk to the Bank is considered minimal on these assets. Paying capacity of the borrower is still very strong with favorable trends and the value of the collateral is considered more than adequate to protect the Bank. Unsecured loans to borrowers with above-average earnings, liquidity and capital may be assigned this grade.

Satisfactory I credit risk rating or pass credit rating: Assets of this grade conform to all of the Bank’s underwriting criteria and evidence a below-average level of credit risk. Borrower’s paying capacity is strong, with stable trends. If the borrower is a company, its earnings, liquidity and capitalization compare favorably to typical companies in its industry. The credit is well structured and serviced. Secondary sources of repayment are considered to be good. Payment history is good, and borrower consistently complies with all major covenants.

Satisfactory II credit risk rating: Assets of this grade conform to substantially all of the Bank’s underwriting criteria and evidence an average level of credit risk. However, such assets display more susceptibility to economic, technological or political changes since they lack the above-average financial strength of credits rated Satisfactory Tier I. Borrower’s repayment capacity is considered to be adequate. Credit is appropriately structured and serviced; payment history is satisfactory.

Acceptable with care credit risk rating: Assets of this grade conform to most of the Bank’s underwriting criteria and evidence an acceptable, though higher than average, level of credit risk. However, these loans have certain risk characteristics that could adversely affect the borrower’s ability to repay, given material adverse trends. Therefore, loans in this category require an above-average level of servicing or show more reliance on collateral and guaranties to preclude a loss to the Bank, should material adverse trends develop. If the borrower is a company, its earnings, liquidity and capitalization are slightly below average, when compared to its peers.

Management watch credit risk rating: Assets included in this category are currently protected but are potentially weak. These assets constitute an undue and unwarranted credit risk but do not presently expose the Bank to a sufficient degree of risk to warrant adverse classification. However, Management Watch assets do possess credit deficiencies deserving management’s close attention. If not corrected, such weaknesses or deficiencies may expose the Bank to an increased risk of loss in the future. Management Watch loans represent assets where the Bank’s ability to substantially affect the outcome has diminished to some degree, and thus it must closely monitor the situation to determine if and when a downgrade is warranted.

Substandard credit risk rating: Substandard assets are inadequately protected by the current net worth and financial capacity of the borrower or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as Substandard.

Loss credit rating: These assets are considered uncollectible and of such little value that their continuance as assets is not warranted. This classification does not mean that an asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off a basically worthless asset even though partial recovery may be affected in the future. Losses should be taken in the period in which they are identified as uncollectible.

Credit quality indicators by class are presented below as of June 30, 2011:

	Speculative 1-4				Owner		Non-Owner
	Family		Construction		Occupied		Occupied		Other
Commercial Real Estate Credit Exposure
Prime	$	—	$	—	$	—	$	—	$	—
Desirable		—		1,585		905		168		—
Satisfactory tier I		2,535		910		24,776		26,888		654
Satisfactory tier II		12,294		19,052		101,512		155,877		6,171
Acceptable with care		57,686		42,313		58,237		172,882		6,005
Management Watch		24,454		14,637		7,535		35,457		2,024
Substandard		73,833		32,509		16,645		32,427		2,984
Loss		—		—		—		—		—
Total		170,802		111,006		209,610		423,699		17,838

Credit quality indicators by class are presented below as of December 31, 2010:

	Speculative 1-4				Owner		Non-Owner
	Family		Construction		Occupied		Occupied		Other
Commercial Real Estate Credit Exposure
Prime	$	—	$	—	$	—	$	—	$	—
Desirable		—		1,573		968		177		—
Satisfactory tier I		2,836		978		38,623		56,221		4,246
Satisfactory tier II		14,010		34,239		102,383		130,850		17,999
Acceptable with care		69,902		47,093		62,198		159,216		45,597
Management Watch		27,383		15,259		5,298		26,415		2,965
Substandard		91,845		61,388		16,289		38,037		6,817
Loss		—		—		—		—		—
Total		205,976		160,530		225,759		410,916		77,624

	June 30,		December 31,
	2011		2010
	Commercial		Commercial
Commercial Credit Exposure
Prime	$	1,421	$	1,236
Desirable		4,595		7,951
Satisfactory tier I		29,006		33,859
Satisfactory tier II		76,894		91,505
Acceptable with care		63,420		72,286
Management Watch		5,077		8,511
Substandard		12,745		7,579
Loss		—		—
Total		193,158		222,927

As of June 30, 2011

					Mortgage –
	HELOC		Mortgage		Subprime		Other
Consumer Real Estate Credit Exposure
Pass	$	192,875	$	147,183	$	11,682	$	3,304
Management Watch		797		2,076		—		—
Substandard		3,055		4,750		—		122
Total		196,727		154,009		11,682		3,426

As of December 31, 2010

					Mortgage –
	HELOC		Mortgage		Subprime		Other
Consumer Real Estate Credit Exposure
Pass	$	188,086	$	131,845	$	11,692	$	29,833
Management Watch		1,017		317		—		—
Substandard		2,807		5,117		50		1,529
Total		191,910		137,279		11,742		31,362

			Consumer –		Consumer Auto
As of June 30, 2011	Consumer – Prime		Subprime		– Subprime
Consumer Credit Exposure
Pass	$	32,195	$	13,515	$	19,453
Management Watch		—		—		—
Substandard		225		8		92
Total		32,420		13,523		19,545

			Consumer –		Consumer Auto
As of December 31, 2010	Consumer – Prime		Subprime		– Subprime
Consumer Credit Exposure
Pass	$	35,029	$	13,093	$	18,588
Management Watch		—		—		—
Substandard		217		39		474
Total		35,246		13,132		19,062

A substantial portion of commercial real estate loans are secured by real estate in markets in which the Company is located. These loans are often restructured with interest reserves to fund interest costs during the construction and development period. Additionally, certain of these loans are structured with interest-only terms. A portion of the consumer mortgage and commercial real estate portfolios were originated through the permanent financing of construction, acquisition and development loans. The prolonged economic downturn has negatively impacted many borrower’s and guarantors’ ability to make payments under the terms of the loans as their liquidity has been depleted. Accordingly, the ultimate collectability of a substantial portion of these loans and the recovery of a substantial portion of the carrying amount of other real estate owned are susceptible to changes in real estate values in these areas. Continued economic distress could negatively impact additional borrowers’ and guarantors’ ability to repay their debt which will make more of the Company’s loans collateral dependent.

Age analysis of past due loans by class are presented below as of June 30, 2011:

													Recorded
													Investment
					Greater								> 90 Days
	30-59 Days		60-89 Days		Than 90		Total Past						and
	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial real estate:
Speculative 1-4 Family	$	6,221	$	331	$	38,835	$	45,387	$	125,415	$	170,802	$	—
Construction		19		18,225		3,332		21,576		89,430		111,006		—
Owner Occupied		1,262		1,865		9,374		12,501		197,109		209,610		—
Non-owner Occupied		4,293		3,411		6,495		14,199		409,500		423,699		—
Other		232		507		114		853		16,985		17,838		160
Residential real estate:
HELOC		1,264		221		612		2,097		194,630		196,727		—
Mortgage-Prime		2,773		930		2,270		5,973		148,036		154,009		—
Mortgage-Subprime		75		—		—		75		11,607		11,682		—
Other		148		46		115		309		3,117		3,426		—
Commercial		4,330		42		3,401		7,773		185,385		193,158		248
Consumer:
Prime		153		39		31		223		32,196		32,419		—
Subprime		164		62		10		236		13,287		13,523		—
Auto-Subprime		572		139		134		845		18,701		19,546
Other		—		—		—		—		3,058		3,058		—
Total		21,506		25,818		64,723		112,047		1,448,456		1,560,503		408

Age analysis of past due loans by class are presented below for December 31, 2010:

													Recorded
													Investment
					Greater								> 90 Days
	30-59 Days		60-89 Days		Than 90		Total Past						and
	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial real estate:
Speculative 1-4 Family	$	22,267	$	1,777	$	30,802	$	54,846	$	151,130	$	205,976	$	1,758
Construction		14,541		—		26,915		41,456		119,074		160,530		—
Owner Occupied		8,114		1,633		4,137		13,884		211,875		225,759		—
Non-owner Occupied		4,014		5,961		8,814		18,789		392,127		410,916		170
Other		116		865		1,491		2,472		75,152		77,624		18
Residential real estate:
HELOC		747		358		644		1,749		190,161		191,910		—
Mortgage-Prime		1,359		915		1,779		4,053		133,226		137,279		8
Mortgage-Subprime		100		51		98		249		11,493		11,742		—
Other		403		176		566		1,145		30,217		31,362		19
Commercial		2,422		593		3,922		6,937		215,990		222,927		92
Consumer:
Prime		315		86		108		509		34,737		35,246		29
Subprime		155		64		6		225		12,907		13,132		—
Auto-Subprime		476		166		101		743		18,319		19,062		18
Other		73		—		—		73		1,840		1,913		—
Total		55,102		12,645		79,383		147,130		1,598,248		1,745,378		2,112

Non-accrual loans by class are presented below:

	June 30, 2011		December 31, 2010
Commercial real estate:
Speculative 1-4 Family	$	61,521	$	63,298
Construction		29,550		41,789
Owner Occupied		12,808		5,511
Non-owner Occupied		12,747		18,772
Other		1,119		1,865
Residential real estate:
HELOC		1,797		1,668
Mortgage-Prime		3,355		3,350
Mortgage-Subprime		275		254
Other		115		957
Commercial		7,754		5,813
Consumer:
Prime		126		130
Subprime		167		107
Auto-Subprime		215		193
Other		—		—
Total		131,549		143,707

Nonperforming loans were as follows:

	June 30, 2011		December 31, 2010
Loans past due 90 days still on accrual	$	408	$	2,112
Nonaccrual loans		131,549		143,707
Total	$	131,957	$	145,819

Nonperforming loans and impaired loans are defined differently. Nonperforming loans are loans that are 90 days past due and still accruing interest and nonaccrual loans. Impaired loans are loans that based upon current information and events it is considered probable that the Company will be unable to collect all amounts of contractual interest and principal as scheduled in the loan agreement. Some loans may be included in both categories, whereas other loans may only be included in one category.

The Company may elect to formally restructure a loan due to the weakening credit status of a borrower so that the restructuring may facilitate a repayment plan that minimizes the potential losses that the Company may have to otherwise incur. At June 30, 2011, the Company had $44,580 of restructured loans of which $23,183 was classified as non-accrual and the remaining were performing. The Company had taken charge-offs of $3,181 on the restructured non-accrual loans as of June 30, 2011. At December 31, 2010, the Company had $49,537 of restructured loans of which $9,597 was classified as non-accrual and the remaining were performing. The Company had taken charge-offs of $843 on the restructured non-accrual loans as of December 31, 2010.

The aggregate amount of loans to executive officers and directors of the Company and their related interests was approximately $6,784 and $7,848 at June 30, 2011 and December 31, 2010, respectively.