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LOANS
 3 Months Ended
Mar. 31, 2013
Receivables [Abstract]  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
4. LOANS

 

Loans are summarized as follows:

 

    March 31,     December 31,  
(Dollars in thousands)   2013     2012  
             
Commercial   $ 17,030     $ 19,931  
Commercial Real Estate:                
Land Development     26,369       28,310  
Building Lots     1,908       2,151  
Other     279,198       287,283  
Real estate construction     3,206       3,141  
Residential mortgage     109,216       110,025  
Consumer and home equity     55,270       57,888  
Indirect consumer     13,813       16,211  
      506,010       524,940  
Less:                
Net deferred loan origination fees     (80 )     (105 )
Allowance for loan losses     (15,812 )     (17,265 )
      (15,892 )     (17,370 )
                 
Net Loans   $ 490,118     $ 507,570  

 

The following tables present the activity in the allowance for loan losses by portfolio segment for the three months ending March 31, 2013 and 2012:

 

March 31, 2013         Commercial     Real Estate     Residential     Consumer &     Indirect        
    Commercial     Real Estate     Construction     Mortgage     Home Equity     Consumer     Total  
(Dollars in thousands)                                                        
Allowance for loan losses:                                                        
Beginning Balance   $ 1,236     $ 14,755     $ 60     $ 501     $ 442     $ 271     $ 17,265  
Provision for loan losses     (262 )     (620 )     6       (130 )     37       (68 )     (1,037 )
Charge-offs     (94 )     (391 )     -       -       (47 )     (16 )     (548 )
Recoveries     34       56       -       -       6       36       132  
Total ending allowance balance   $ 914     $ 13,800     $ 66     $ 371     $ 438     $ 223     $ 15,812  

 

March 31, 2012         Commercial     Real Estate     Residential     Consumer &     Indirect        
    Commercial     Real Estate     Construction     Mortgage     Home Equity     Consumer     Total  
(Dollars in thousands)                                                        
Allowance for loan losses:                                                        
Beginning Balance   $ 1,422     $ 13,727     $ 103     $ 922     $ 610     $ 397     $ 17,181  
Provision for loan losses     477       498       -       (18 )     75       (20 )     1,012  
Allowance associated with probable branch divestiture and probable loan sale     -       -       -       8       5       -       13  
Charge-offs     (187 )     (613 )     -       (31 )     (74 )     (44 )     (949 )
Recoveries     11       16       -       1       27       17       72  
Total ending allowance balance   $ 1,723     $ 13,628     $ 103     $ 882     $ 643     $ 350     $ 17,329  

 

We did not implement any changes to our allowance related accounting policies or methodology during the current period.

 

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of March 31, 2013 and 2012 and December 31, 2012:

 

March 31, 2013         Commercial     Real Estate     Residential     Consumer &     Indirect        
    Commercial     Real Estate     Construction     Mortgage     Home Equity     Consumer     Total  
(Dollars in thousands)                                                        
Allowance for loan losses:                                                        
Ending allowance balance attributable to loans:                                                        
Individually evaluated for impairment   $ 192     $ 6,439     $ -     $ 55     $ 91     $ -     $ 6,777  
Collectively evaluated for impairment     722       7,361       66       316       347       223       9,035  
                                                         
Total ending allowance balance   $ 914     $ 13,800     $ 66     $ 371     $ 438     $ 223     $ 15,812  
                                                         
Loans:                                                        
Loans individually evaluated for impairment   $ 865     $ 36,046     $ 449     $ 3,703     $ 775     $ -     $ 41,838  
Loans collectively evaluated for impairment     16,165       271,429       2,757       105,513       54,495       13,813       464,172  
                                                         
Total ending loans balance   $ 17,030     $ 307,475     $ 3,206     $ 109,216     $ 55,270     $ 13,813     $ 506,010  

 

December 31, 2012         Commercial     Real Estate     Residential     Consumer &     Indirect        
    Commercial     Real Estate     Construction     Mortgage     Home Equity     Consumer     Total  
(Dollars in thousands)                                                        
Allowance for loan losses:                                                        
Ending allowance balance attributable to loans:                                                        
Individually evaluated for impairment   $ 252     $ 7,593     $ -     $ 86     $ 51     $ -     $ 7,982  
Collectively evaluated for impairment     984       7,162       60       415       391       271       9,283  
                                                         
Total ending allowance balance   $ 1,236     $ 14,755     $ 60     $ 501     $ 442     $ 271     $ 17,265  
                                                         
Loans:                                                        
Loans individually evaluated for impairment   $ 1,071     $ 43,065     $ 448     $ 213     $ 188     $ -     $ 44,985  
Loans collectively evaluated for impairment     18,860       274,679       2,693       109,812       57,700       16,211       479,955  
                                                         
Total ending loans balance   $ 19,931     $ 317,744     $ 3,141     $ 110,025     $ 57,888     $ 16,211     $ 524,940  

 

March 31, 2012         Commercial     Real Estate     Residential     Consumer &     Indirect        
    Commercial     Real Estate     Construction     Mortgage     Home Equity     Consumer     Total  
(Dollars in thousands)                                                        
Allowance for loan losses:                                                        
Ending allowance balance attributable to loans:                                                        
Individually evaluated for impairment   $ 359     $ 3,708       -     $ 453     $ 183     $ 10     $ 4,713  
Collectively evaluated for impairment     1,364       9,919       104       429       460       340       12,616  
Loans held for sale     -       -       -       -       -       -       -  
                                                         
Total ending allowance balance   $ 1,723     $ 13,627       104     $ 882     $ 643     $ 350     $ 17,329  
                                                         
Loans:                                                        
Loans individually evaluated for impairment   $ 1,444     $ 52,447     $ -     $ 1,872     $ 361     $ 53     $ 56,177  
Loans collectively evaluated for impairment     26,325       370,484       4,607       145,992       66,451       20,842       634,701  
Loans held for sale     (14 )     (4,932 )     -       (28,571 )     (4,516 )     -       (38,033 )
                                                         
Total ending loans balance   $ 27,755     $ 417,999     $ 4,607     $ 119,293     $ 62,296     $ 20,895     $ 652,845  

  

The following tables present loans individually evaluated for impairment by class of loans as of March 31, 2013 and 2012 and December 31, 2012. The difference between the unpaid principal balance and recorded investment represents partial write downs/charge offs taken on individual impaired credits. The recorded investment and average recorded investment in loans excludes accrued interest receivable and loan origination fees.

 

March 31, 2013   Unpaid           Allowance for     Average     Interest     Cash Basis  
    Principal     Recorded     Loan Losses     Recorded     Income     Interest  
(Dollars in thousands)   Balance     Investment     Allocated     Investment     Recognized     Recognized  
                                     
With no related allowance recorded:                                                
Commercial   $ 878     $ 672     $ -     $ 630     $ 4     $ 4  
Commercial Real Estate:                                                
Land Development     3,868       3,120       -       3,997       49       49  
Building Lots     477       212       -       212       -       -  
Other     10,883       9,740       -       12,896       132       132  
Real Estate Construction     542       449       -       449       -       -  
Residential Mortgage     3,382       3,382       -       1,691       9       9  
Consumer and Home Equity     419       419       -       210       2       2  
Indirect Consumer     -       -       -       -       -       -  
                                                 
With an allowance recorded:                                                
Commercial     193       193       192       338       2       2  
Commercial Real Estate:                                                
Land Development     2,674       2,674       899       2,674       32       32  
Building Lots     -       -       -       -       -       -  
Other     22,395       20,301       5,540       19,778       202       202  
Real Estate Construction     -       -       -       -       -       -  
Residential Mortgage     321       321       55       267       1       1  
Consumer and Home Equity     355       355       91       272       2       2  
Indirect Consumer     -       -       -       -       -       -  
                                                 
Total   $ 46,387     $ 41,838     $ 6,777     $ 43,414     $ 435     $ 435  

 

December 31, 2012   Unpaid           Allowance for     Average     Interest     Cash Basis  
    Principal     Recorded     Loan Losses     Recorded     Income     Interest  
(Dollars in thousands)   Balance     Investment     Allocated     Investment     Recognized     Recognized  
                                     
With no related allowance recorded:                                                
Commercial   $ 588     $ 588     $ -     $ 1,070     $ 39     $ 39  
Commercial Real Estate:                                                
Land Development     5,595       4,873       -       5,728       237       237  
Building Lots     477       212       -       810       14       14  
Other     21,673       16,052       -       24,961       961       961  
Real Estate Construction     448       448       -       90       -       -  
Residential Mortgage     -       -       -       -       -       -  
Consumer and Home Equity     -       -       -       -       -       -  
Indirect Consumer     -       -       -       -       -       -  
                                                 
With an allowance recorded:                                                
Commercial     483       483       252       564       21       21  
Commercial Real Estate:                                                
Land Development     2,674       2,674       899       2,436       101       101  
Building Lots     -       -       -       191       3       3  
Other     19,254       19,254       6,694       20,075       772       772  
Real Estate Construction     -       -       -       -       -       -  
Residential Mortgage     213       213       86       1,191       24       24  
Consumer and Home Equity     188       188       51       260       6       6  
Indirect Consumer     -       -       -       54       1       1  
                                                 
Total   $ 51,593     $ 44,985     $ 7,982     $ 57,430     $ 2,179     $ 2,179  

 

 

March 31, 2012   Unpaid           Allowance for     Average     Interest     Cash Basis  
    Principal     Recorded     Loan Losses     Recorded     Income     Interest  
(Dollars in thousands)   Balance     Investment     Allocated     Investment     Recognized     Recognized  
                                     
With no related allowance recorded:                                                
Commercial   $ 1,016     $ 896     $ -     $ 1,525     $ 16     $ 16  
Commercial Real Estate:                                                
Land Development     10,175       4,580       -       5,852       50       50  
Building Lots     849       818       -       1,062       3       3  
Other     35,478       31,781       -       32,059       300       300  
Real Estate Construction     -       -       -       -       -       -  
Residential Mortgage     -       -       -       -       -       -  
Consumer and Home Equity     -       -       -       -       -       -  
Indirect Consumer     -       -       -       -       -       -  
                                                 
With an allowance recorded:                                                
Commercial     550       548       359       812       9       9  
Commercial Real Estate:                                                
Land Development     3,866       3,866       394       3,409       29       29  
Building Lots     476       476       265       477       1       1  
Other     11,294       10,926       3,049       14,038       131       131  
Real Estate Construction     -       -       -       -       -       -  
Residential Mortgage     1,993       1,872       453       1,777       15       15  
Consumer and Home Equity     383       361       183       277       1       1  
Indirect Consumer     53       53       10       88       -       -  
                                                 
Total   $ 66,133     $ 56,177     $ 4,713     $ 61,376     $ 555     $ 555  

 

The following tables present the recorded investment in restructured, nonaccrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2013 and December 31, 2012.

 

                Loans Past Due        
March 31, 2013               Over 90 Days     Non-Accrual  
    Restructured on     Restructured on     Still     Excluding  
(Dollars in thousands)   Non-Accrual Status     Accrual Status     Accruing     Restructured  
                         
Commercial   $ -     $ 211     $ -     $ 496  
Commercial Real Estate:                                
Land Development     533       2,970       -       436  
Building Lots     -       -       -       212  
Other     8,566        -       1,950        6,002  
Real Estate Construction     -       20,897       -       449  
Residential Mortgage     -       303       -       1,621  
Consumer and Home Equity     -       24       -       370  
Indirect Consumer     -       -       -       10  
                                 
Total   $ 9,099     $ 24,405     $ 1,950     $ 9,596  

 

                Loans Past Due        
December 31, 2012               Over 90 Days     Non-Accrual  
    Restructured on     Restructured on     Still     Excluding  
(Dollars in thousands)   Non-Accrual Status     Accrual Status     Accruing     Restructured  
                         
Commercial   $ 31     $ 221     $ -     $ 562  
Commercial Real Estate:                                
Land Development     675       3,053       -       695  
Building Lots     -       170       -       212  
Other     9,047       19,080       -        8,908  
Real Estate Construction     -       -       -       448  
Residential Mortgage     -       303       -       827  
Consumer and Home Equity     -       24       -       37  
Indirect Consumer     -       -       -       13  
                                 
Total   $ 9,753     $ 22,851     $ -     $ 11,702  

  

  

The following table presents the aging of the unpaid principal in past due loans as of March 31, 2013 and December 31, 2012 by class of loans:

 

March 31, 2013   30-59     60-89     Greater than                    
    Days     Days     90 Days     Total     Loans Not        
(Dollars in thousands)   Past Due     Past Due     Past Due     Past Due     Past Due     Total  
                                     
Commercial   $ -     $ 35     $ 496     $ 531     $ 16,499     $ 17,030  
Commercial Real Estate:                                                
Land Development     -       -       969       969       25,400       26,369  
Building Lots     -       -       212       212       1,696       1,908  
Other     7,666       208       16,518       24,392       254,806       279,198  
Real Estate Construction     -       -       449       449       2,757       3,206  
Residential Mortgage     679       88       1,621       2,388       106,828       109,216  
Consumer and Home Equity     237       97       370       704       54,566       55,270  
Indirect Consumer     199       18       10       227       13,586       13,813  
                                                 
Total   $ 8,781     $ 446     $ 20,645     $ 29,872     $ 476,138     $ 506,010  

 

December 31, 2012   30-59     60-89     Greater than                    
    Days     Days     90 Days     Total     Loans Not        
(Dollars in thousands)   Past Due     Past Due     Past Due     Past Due     Past Due     Total  
                                     
Commercial   $ -     $ 95     $ 562     $ 657     $ 19,274     $ 19,931  
Commercial Real Estate:                                                
Land Development     361       -       1,228       1,589       26,721       28,310  
Building Lots     -       -       212       212       1,939       2,151  
Other     1,264       1,239       13,001       15,504       271,779       287,283  
Real Estate Construction     -       -       448       448       2,693       3,141  
Residential Mortgage     3,588       995       827       5,410       104,615       110,025  
Consumer and Home Equity     351       255       45       651       57,237       57,888  
Indirect Consumer     246       130       13       389       15,822       16,211  
                                                 
Total   $ 5,810     $ 2,714     $ 16,336     $ 24,860     $ 500,080     $ 524,940  

 

Troubled Debt Restructurings:

 

We have allocated $2.7 million and $3.1 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2013 and December 31, 2012. We are not committed to lend additional funds to debtors whose loans have been modified in a troubled debt restructuring. Specific reserves are generally assessed prior to loans being modified as a TDR, as most of these loans migrate from our internal watch list and have been specifically reserved for as part of our normal reserving methodology.

 

During the period ending March 31, 2013, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

 

Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from six months to one year. Modifications involving an extension of the maturity date were for periods ranging from three to six months.

 

The following table presents loans by class modified as troubled debt restructurings that occurred during the periods ending March 31, 2013 and 2012:

 

  Three Months Ended   Three Months Ended  
  March 31, 2013   March 31, 2012  
          Pre-Modification     Post-Modification           Pre-Modification     Post-Modification  
          Outstanding     Outstanding           Outstanding     Outstanding  
    Number     Recorded     Recorded     Number     Recorded     Recorded  
(Dollars in thousands)   of Loans     Investment     Investment     of Loans     Investment     Investment  
                                     
Troubled Debt Restructurings:                                                
Commercial     -     $ -     $ -       2     $ 1,237     $ 1,237  
Commercial Real Estate:                                                
Land Development     -       -       -       2       1,398       1,398  
Building Lots     -       -       -       -       -       -  
Other     3       2,154       2,154       2       70       70  
Real Estate Construction     -       -       -       -       -       -  
Residential Mortgage     -       -       -       -       -       -  
Consumer and Home Equity     1       24       24       -       -       -  
Indirect Consumer     -       -       -       -       -       -  
                                                 
Total     4     $ 2,178     $ 2,178       6     $ 2,705     $ 2,705  

 

The troubled debt restructurings described above increased the allowance for loan losses allocated to troubled debt restructurings by $63,000 and $189,000 for the three months ended March 31, 2013 and 2012. Typically, these loans had allocated allowance prior to their formal modification. There were no charge-offs recorded on the troubled debt restructurings described above for the 2013 and 2012 periods.

 

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the periods ending March 31, 2013 and 2012:

 

    Three Months Ended     Three Months Ended  
    March 31, 2013     March 31, 2012  
    Number     Recorded     Number     Recorded  
(Dollars in thousands)   of Loans     Investment     of Loans     Investment  
                         
Troubled Debt Restructurings:                                
Commercial     -     $ -       -     $ -  
Commercial Real Estate:                                
Land Development     -       -       1       1,639  
Building Lots     -       -       -       -  
Other     -       -       -       -  
Real Estate Construction     -       -       -       -  
Residential Mortgage     -       -       -       -  
Consumer and Home Equity     -       -       -       -  
Indirect Consumer     -       -       -       -  
                                 
Total     -     $ -       1     $ 1,639  

 

For disclosure purposes, a loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. The troubled debt restructuring that subsequently defaulted described above did not increase the allowance for loan losses for the three months ended March 31, 2012. There were no charge-offs recorded on the troubled debt restructurings described above for the 2013 and 2012 periods.

 

Credit Quality Indicators:

 

We categorize 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. We analyze loans individually by classifying the loans as to credit risk. This analysis includes commercial and commercial real estate loans. We also evaluate credit quality on residential mortgage, consumer and home equity and indirect consumer loans based on the aging status and payment activity of the loan. This analysis is performed on a monthly basis. We use the following definitions for risk ratings:

Criticized: Loans classified as criticized 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 in our 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 institution 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.

 

Loss: Loans classified as loss are considered non-collectible and their continuance as bankable assets is not warranted.

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are included in groups of homogeneous loans. For our residential mortgage, consumer and home equity, and indirect consumer homogeneous loans, we also evaluate credit quality based on the aging status of the loan, which was previously presented, and by payment activity.

 

As of March 31, 2013and December 31, 2012, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

March 31, 2013                                          
(Dollars in thousands)   Not Rated     Pass     Criticized     Substandard     Doubtful     Loss     Total  
                                           
Commercial   $ -     $ 15,297     $ 868     $ 865     $ -     $ -     $ 17,030  
Commercial Real Estate:                                                        
Land Development     -       17,676       2,899       5,794       -       -       26,369  
Building Lots     -       1,218       478       212       -       -       1,908  
Other     -       227,324       21,792       30,082       -       -       279,198  
Real Estate Construction     -       2,757       -       449       -       -       3,206  
Residential Mortgage     104,874       -       639       3,703       -       -       109,216  
Consumer and Home Equity     54,020       -       387       863       -       -       55,270  
Indirect Consumer     13,733       -       5       75       -       -       13,813  
                                                         
Total   $ 172,627     $ 264,272     $ 27,068     $ 42,043     $ -     $ -     $ 506,010  

 

December 31, 2012                                          
(Dollars in thousands)   Not Rated     Pass     Criticized     Substandard     Doubtful     Loss     Total  
                                           
Commercial   $ -     $ 16,736     $ 2,000     $ 1,195     $ -     $ -     $ 19,931  
Commercial Real Estate:                                                        
Land Development     -       17,744       3,059       7,507       -       -       28,310  
Building Lots     -       1,447       492       212       -       -       2,151  
Other     -       233,261       18,297       35,725       -       -       287,283  
Real Estate Construction     -       2,693       -       448       -       -       3,141  
Residential Mortgage     105,148       -       442       4,435       -       -       110,025  
Consumer and Home Equity     56,593       -       569       726       -       -       57,888  
Indirect Consumer     16,129       -       10       72       -       -       16,211  
                                                         
Total   $ 177,870     $ 271,881     $ 24,869     $ 50,320     $ -     $ -     $ 524,940  

 

The following table presents the unpaid principal balance in residential mortgage, consumer and home equity and indirect consumer loans based on payment activity as of March 31, 2013 and December 31, 2012:

 

March 31, 2013   Residential     Consumer &     Indirect  
(Dollars in thousands)   Mortgage     Home Equity     Consumer  
                   
Performing   $ 107,595     $ 54,900     $ 13,803  
Restructured on non-accrual     -       -       -  
Non-accrual     1,621       370       10  
                         
Total   $ 109,216     $ 55,270     $ 13,813  

 

December 31, 2012   Residential     Consumer &     Indirect  
(Dollars in thousands)   Mortgage     Home Equity     Consumer  
                   
Performing   $ 109,198     $ 57,843     $ 16,198  
Restructured on non-accrual     -       -       -  
Non-accrual     827       45       13  
                         
Total   $ 110,025     $ 57,888     $ 16,211