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Allowance For Loan Losses
 12 Months Ended
Dec. 31, 2011
Loans And Allowance For Loan Losses [Abstract]  
Allowance For Loan Losses

6.    Allowance for Loan Losses

The Company maintains an allowance for loan losses in an amount determined by management on the basis of the character of the loans, loan performance, the financial condition of borrowers, the value of collateral securing loans and other relevant factors. The following table summarizes the changes in the Company’s allowance for loan losses for the years indicated.

An analysis of the allowance for loan losses for each of the three years ending December 31, 2011, 2010 and 2009 are as follows:

 

                         
     2011     2010     2009  
    (Dollars in thousands)  

Allowance for loan losses, beginning of year

   $ 14,053     $ 12,373     $ 11,119  

Loans charged-off

     (2,824 )      (4,443 )      (6,070 ) 

Recoveries on loans previously charged-off

     795       548       699  
   

 

 

    

 

 

    

 

 

  

Net charge-offs

     (2,029 )      (3,895 )      (5,371 ) 

Provision charged to expense

     4,550       5,575       6,625  
   

 

 

    

 

 

    

 

 

  

Allowance for loan losses, end of year

   $ 16,574     $ 14,053     $ 12,373  
   

 

 

    

 

 

    

 

 

  

 

ALLOWANCE FOR LOAN LOSSES AND AMOUNT OF INVESTMENTS IN LOANS

Further information pertaining to the allowance for loan losses at December 31, 2011 follows:

 

                                                                 
    Construction
and Land
Development		     Commercial
and
Industrial		     Commercial
Real Estate		     Residential
Real  Estate		     Consumer     Home
Equity		     Unallocated     Total  
    (Dollars in thousands)  

Allowance for Loan Losses:

                                                                

Balance at December 31, 2010

   $ 1,752     $ 3,163     $ 5,671     $ 1,718     $ 298     $ 725     $ 726     $ 14,053  

Charge-offs

     (1,200 )      (676 )      —       (337 )      (607 )      (4 )      —       (2,824 ) 

Recoveries

     —       293       6       27       467       2       —       795  

Provision

     2,341       359       889       478       198       (19 )      304       4,550  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance at December
31, 2011

   $ 2,893     $ 3,139     $ 6,566     $ 1,886     $ 356     $ 704     $ 1,030     $ 16,574  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Amount of allowance for loan losses for loans deemed to be impaired

   $ —     $ 335     $ 282     $ 124     $ —     $ —     $ —     $ 741  
                 

Amount of allowance for loan losses for loans not deemed to be impaired

   $ 2,893     $ 2,804     $ 6,284     $ 1,762     $ 356     $ 704     $ 1,030     $ 15,833  

Loans:

                                                                

Ending balance

   $ 56,819     $ 82,404     $ 487,495     $ 239,307     $ 7,681     $ 110,786     $ —     $ 984,492  

Loans deemed to be impaired

   $ 1,500     $ 1,525     $ 4,561     $ 516     $ —     $ —     $ —     $ 8,102  

Loans not deemed to be impaired

   $ 55,319     $ 80,879     $ 482,934     $ 238,791     $ 7,681     $ 110,786     $ —     $ 976,390  

Further information pertaining to the allowance for loan losses at December 31, 2010 follows:

 

                                                                 
    Construction
and Land
Development		     Commercial
and
Industrial		     Commercial
Real Estate		     Residential
Real  Estate		     Consumer     Home
Equity		     Unallocated     Total  
    (Dollars in thousands)  

Allowance for Loan Losses:

                                                                

Balance at December 31, 2009

   $ 362     $ 4,972     $ 2,983     $ 1,304     $ 1,753     $ 761     $ 238     $ 12,373  

Charge-offs

     (900 )      (1,559 )      (922 )      (515 )      (495 )      (52 )      —       (4,443 ) 

Recoveries

     —       172       —       8       368       —       —       548  

Provision

     2,290       (422 )      3,610       921       (1,328 )      16       488       5,575  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance at December 31, 2010

   $ 1,752     $ 3,163     $ 5,671     $ 1,718     $ 298     $ 725     $ 726     $ 14,053  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Amount of allowance for loan losses for loans deemed to be impaired

   $ —     $ 292     $ 25     $ —     $ —     $ —     $ —     $ 317  
                 

Amount of allowance for loan losses for loans not deemed to be impaired

   $ 1,752     $ 2,871     $ 5,646     $ 1,718     $ 298     $ 725     $ 726     $ 13,736  

Loans:

                                                                

Ending balance

   $ 53,583     $ 90,654     $ 433,337     $ 207,787     $ 6,594     $ 114,209     $ —     $ 906,164  

Loans deemed to be impaired

   $ 4,000     $ 1,471     $ 2,492     $ —     $ —     $ —     $ —     $ 7,963  

Loans not deemed to be impaired

   $ 49,583     $ 89,183     $ 430,845     $ 207,787     $ 6,594     $ 114,209     $ —     $ 898,201  

 

CREDIT QUALITY INFORMATION

The Company utilizes a six-grade internal loan rating system for commercial real estate, construction and commercial loans as follows:

Loans rated 1-3 (Pass) — Loans in this category are considered “pass” rated loans with low to average risk.

Loans rated 4 (Monitor) — These loans represent classified loans that management is closely monitoring for credit quality. These loans have had or may have minor credit quality deterioration as of December 31, 2011.

Loans rated 5 (Substandard) — Substandard loans represent classified loans that management is closely monitoring for credit quality. These loans have had more significant credit quality deterioration as of December 31, 2011.

Loans rated 6 (Doubtful) — Doubtful loans represent classified loans that management is closely monitoring for credit quality. These loans had more significant credit quality deterioration as of December 31, 2011, and are doubtful for full collection.

Impaired — Impaired loans represent classified loans that management is closely monitoring for credit quality. A loan is classified as impaired when it is probable that the Company will be unable to collect all amounts due.

The percentage of the allowance for loan losses allocated to construction and land development loans to total construction and land development loans increased from 3.3%, at December 31, 2010, to 5.1%, at December 31, 2011, mainly as a result of an increase in the historical loss factor. This factor was increased to account for the incremental risk in the portfolio.

The following table presents the Company’s loans by risk rating at December 31, 2011.

 

                         
    Construction
and Land
Development		     Commercial
and
Industrial		     Commercial
Real Estate		  
    (Dollars in thousands)  

Grade:

                        

1-3 (Pass)

   $ 48,298     $ 80,140     $ 478,186  

4 (Monitor)

     7,021       739       4,748  

5 (Substandard)

     —       —       —  

6 (Doubtful)

     —       —       —  

Impaired

     1,500       1,525       4,561  
   

 

 

    

 

 

    

 

 

  

Total

   $ 56,819     $ 82,404     $ 487,495  
   

 

 

    

 

 

    

 

 

  

 

The following table presents the Company’s loans by risk rating at December 31, 2010.

 

                         
    Construction
and Land
Development		     Commercial
and
Industrial		     Commercial
Real Estate		  
    (Dollars in thousands)  

Grade:

                        

1-3 (Pass)

   $ 42,887     $ 88,103     $ 415,528  

4 (Monitor)

     6,696       1,080       15,317  

5 (Substandard)

     —       —       —  

6 (Doubtful)

     —       —       —  

Impaired

     4,000       1,471       2,492  
   

 

 

    

 

 

    

 

 

  

Total

   $ 53,583     $ 90,654     $ 433,337  
   

 

 

    

 

 

    

 

 

  

The Company utilized payment performance as credit quality indicators for residential real state, consumer and overdrafts, and the home equity portfolio. The indicators are depicted in the table “aging of past-due loans,” below.

AGING OF PAST-DUE LOANS

Further information pertaining to the allowance for loan losses at December 31, 2011 follows:

 

                                                 
    Accruing
30-89 Days
Past Due		     Non Accrual     Accruing
Greater
Than
90 Days		     Total
Past Due		     Current
Loans		     Total  
    (Dollars in thousands)  

Construction and land development

   $ —     $ 1,500     $ —     $ 1,500     $ 55,319     $ 56,819  

Commercial and industrial

     1,417       763       18       2,198       80,206       82,404  

Commercial real estate

     2,528       736       —       3,264       484,231       487,495  

Residential real estate

     2,635       2,324       —       4,959       234,348       239,307  

Consumer and overdrafts

     519       9       —       528       7,153       7,681  

Home equity

     171       495       —       666       110,120       110,786  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 7,270     $ 5,827     $ 18     $ 13,115     $ 971,377     $ 984,492  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Further information pertaining to the allowance for loan losses at December 31, 2010 follows:

 

                                                 
    Accruing
30-89 Days
Past Due		     Non Accrual     Accruing
Greater
Than
90 Days		     Total
Past Due		     Current
Loans		     Total  
    (Dollars in thousands)  

Construction and land development

   $ —     $ 4,000     $ —     $ 4,000     $ 49,583     $ 53,583  

Commercial and industrial

     912       569       50       1,531       89,123       90,654  

Commercial real estate

     1,737       784       —       2,521       430,816       433,337  

Residential real estate

     4,172       2,487       —       6,659       201,128       207,787  

Consumer and overdrafts

     8       4       —       12       6,582       6,594  

Home equity

     574       224       —       798       113,411       114,209  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 7,403     $ 8,068     $ 50     $ 15,521     $ 890,643     $ 906,164  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

IMPAIRED LOANS

A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, the Company measures impairment based on a loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. The Company’s policy for recognizing interest income on impaired loans is contained within Note 1 of the “Notes to Consolidated Financial Statements.”

The following is information pertaining to impaired loans at December 31, 2011:

 

                                         
    Carrying
Value		     Unpaid
Balance
Principal		     Required
Reserve		     Average
Carrying  Value		     Interest
Income
Recognized		  
    (Dollars in thousands)  

With no required reserve recorded:

                                        

Construction and land development

   $ 1,500     $ 3,292     $ —     $ 2,377     $ —  

Commercial and industrial

     313       537       —       404       3  

Commercial real estate

     183       203       —       368       —  

Residential real estate

     33       33       —       3       —  

Consumer

     —       —       —       —       —  

Home equity

     —       —       —       —       —  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 2,029     $ 4,065     $ —     $ 3,152     $ 3  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

With required reserve recorded:

                                        

Construction and land development

   $ —     $ —     $ —     $ 926     $ —  

Commercial and industrial

     1,212       1,240       335       1,105       18  

Commercial real estate

     4,378       4,409       282       4,894       133  

Residential real estate

     483       483       124       207       1  

Consumer

     —       —       —       —       —  

Home equity

     —       —       —       —       —  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 6,073     $ 6,132     $ 741     $ 7,132     $ 152  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

                                        

Construction and land development

   $ 1,500     $ 3,292     $ —     $ 3,303     $ —  

Commercial and industrial

     1,525       1,777       335       1,509       21  

Commercial real estate

     4,561       4,612       282       5,262       133  

Residential real estate

     516       516       124       210       1  

Consumer

     —       —       —       —       —  

Home equity

     —       —       —       —       —  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 8,102     $ 10,197     $ 741     $ 10,284     $ 155  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following is information pertaining to impaired loans at December 31, 2010:

 

                                         
    Carrying
Value		     Unpaid
Balance
Principal		     Required
Reserve		     Average
Carrying
Value		     Interest
Income
Recognized		  
    (Dollars in thousands)  

With no required reserve recorded:

                                        

Construction and land development

   $ 4,000     $ 8,504     $ —     $ 2,262     $ —  

Commercial and industrial

     893       1,092       —       826       83  

Commercial real estate

     960       969       —       2,013       122  

Residential real estate

     —       —       —       —       —  

Consumer

     —       —       —       —       —  

Home equity

     —       —       —       —       —  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 5,853     $ 10,565     $ —     $ 5,101     $ 205  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

With required reserve recorded:

                                        

Construction and land development

   $ —     $ —     $ —     $ 2,500     $ —  

Commercial and industrial

     578       588       292       842       31  

Commercial real estate

     1,532       1,532       25       1,163       20  

Residential real estate

     —       —       —       —       —  

Consumer

     —       —       —       —       —  

Home equity

     —       —       —       —       —  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 2,110     $ 2,120     $ 317     $ 4,505     $ 51  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

                                        

Construction and land development

   $ 4,000     $ 8,504     $ —     $ 4,762     $ —  

Commercial and industrial

     1,471       1,680       292       1,668       114  

Commercial real estate

     2,492       2,501       25       3,176       142  

Residential real estate

     —       —       —       —       —  

Consumer

     —       —       —       —       —  

Home equity

     —       —       —       —       —  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 7,963     $ 12,685     $ 317     $ 9,606     $ 256  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Troubled Debt Restructurings occurring during the year ended December 31, 2011:

 

                         
    Number of
Contracts		     Pre-modification
Outstanding  Recorded
Investment		     Post-modification
Outstanding
Recorded Investment		  
    (Dollars in thousands)  

Construction and land development

     1     $ 39     $ —  

Commercial and industrial

     13       960       909  

Commercial real estate

     6       3,199       3,195  
   

 

 

    

 

 

    

 

 

  

Total

     20     $ 4,198     $ 4,104  
   

 

 

    

 

 

    

 

 

  

 

There was one troubled debt restructuring, totaling $11,000, during the year ended December 31, 2011, that subsequently defaulted.

Troubled Debt Restructurings were identified as a modification where a concession was granted to a customer who is having financial difficulties. This concession may be below market rate, longer amortization/term, and a lower payment amount. The present value calculation of the modification did not result in an increase in the allowance for these loans beyond any previously established allocations. The loans were modified, for the construction, commercial and industrial, and commercial real estate loans, by reducing interest rates as well as extending terms on the loans. The financial impact of the modifications for performing commercial and industrial loans were a $38,000 reduction in principal and a $1,000 reduction in interest payments for the year ended December 31, 2011. The financial impact of the modifications for performing commercial real estate were a $30,000 reduction in principal and a $44,000 reduction in interest payments for the year ended December 31, 2011. The financial impact of the modifications for nonperforming loans was a $11,000 reduction in the carrying value of the loans as a result of payments received under the modified terms of the loans.