Allowance for Loan Losses

6 Months Ended

Jun. 30, 2012

Allowance for Loan Losses [Abstract]

Allowance for Loan Losses

Note 6 – Allowance for Loan Losses

The following table shows the change in the allowance for loss losses by loan segment for the three and six month periods ended June 30, 2012 and 2011, respectively:

Commercial

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
				(dollars in thousands)
Balance, beginning of period	$	2,823		$	4,697		$	2,904		$	5,363
Provision (recovery) charged to operations		(138	)		381			52			814
Charge-offs		(42	)		(1,419	)		(354	)		(2,520	)
Recoveries		7			3			48			5
Net (charge-offs)		(35	)		(1,416	)		(306	)		(2,515	)
Balance at end of period	$	2,650		$	3,662		$	2,650		$	3,662

Non-Commercial

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
				(dollars in thousands)
Balance, beginning of period	$	3,951		$	4,333		$	3,911		$	3,704
Provision (recovery) charged to operations		501			(221	)		651			715
Charge-offs		(49	)		(538	)		(171	)		(876	)
Recoveries		16			38			28			69
Net (charge-offs)		(33	)		(500	)		(143	)		(807	)
Balance at end of period	$	4,419		$	3,612		$	4,419		$	3,612

The following table shows period-end loans and reserve balances by loan segment both individually and collectively evaluated for impairment at June 30, 2012 and December 31, 2011:

June 30, 2012

	Individually Evaluated				Collectively Evaluated				Total
	Reserve		Loans		Reserve		Loans		Reserve		Loans
			(dollars in thousands)
Commercial	$	1,136	$	17,742	$	1,514	$	157,643	$	2,650	$	175,385
Non-Commercial		1,758		15,592		2,661		152,022		4,419		167,614
Total	$	2,894	$	33,334	$	4,175	$	309,665	$	7,069	$	342,999
December 31, 2011
	Individually Evaluated				Collectively Evaluated				Total
	Reserve		Loans		Reserve		Loans		Reserve		Loans
			(dollars in thousands)
Commercial	$	1,137	$	18,882	$	1,767	$	173,570	$	2,904	$	192,452
Non-Commercial		1,446		14,207		2,465		159,908		3,911		174,115
Total	$	2,583	$	33,089	$	4,232	$	333,478	$	6,815	$	366,567

Past due loan information is used by management when assessing the adequacy of the allowance for loan losses. The following table summarizes the past due information of the loan portfolio by class:

June 30, 2012
	Loans 30-89 Days Past Due		Loans 90 Days or More Past due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
			(dollars in thousands)
Commercial	$	254	$	172	$	426	$	39,711	$	40,137	$	—
Real estate – commercial		979		2,385		3,364		104,610		107,974		—
Other real estate construction		141		2,430		2,571		24,703		27,274		—
Real estate 1-4 family construction		—		—		—		2,756		2,756		—
Real estate – residential		2,557		2,358		4,915		94,417		99,332		—
Home equity		340		247		587		50,255		50,842		—
Consumer loans		75		98		173		13,625		13,798		—
Other loans		—		—		—		886		886		—
Total	$	4,346	$	7,690	$	12,036	$	330,963	$	342,999	$	—
December 31, 2011
	Loans 30-89 Days Past Due		Loans 90 Days or More Past due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
			(dollars in thousands)
Commercial	$	212	$	329	$	541	$	45,366	$	45,907	$	—
Real estate – commercial		2,396		2,742		5,138		109,806		114,944		—
Other real estate construction		358		2,084		2,442		29,159		31,601		—
Real estate construction		—		—		—		5,543		5,543		—
Real estate – residential		2,341		2,441		4,782		97,065		101,847		—
Home equity		298		255		553		50,860		51,413		—
Consumer loan		208		11		219		14,491		14,710		—
Other loans		—		—		—		602		602		—
Total	$	5,813	$	7,862	$	13,675	$	352,892	$	366,567	$	—

Once a loan becomes 90 days past due, the loan is automatically transferred to a nonaccrual status. The exception to this policy is credit card loans that remain in accruing 90 days or more until they are paid current or charged off. Also, mortgage loans that were originated for sale but were not sold and are being held in the loan portfolio remain in an accruing status until they are foreclosed.

The composition of nonaccrual loans by class as of June 30, 2012 and December 31, 2011 is as follows:

	June 30, 2012		December 31, 2011
	(dollars in thousands)
Commercial	$	172	$	329
Real estate – commercial		2,385		2,742
Other real estate construction		2,430		2,084
Real estate 1-4 family construction		—		—
Real estate – residential		2,358		2,441
Home equity		247		255
Consumer loans		98		11
Other loans		—		—
	$	7,690	$	7,862

Management uses a risk-grading program to facilitate the evaluation of probable inherent loan losses and to measure the adequacy of the allowance for loan losses. In this program, risk grades are initially assigned by the loan officers and reviewed and monitored by the lenders and credit administration. The program has eight risk grades summarized in five categories as follows:

Pass: Loans that are pass grade credits include loans that are fundamentally sound and risk factors are reasonable and acceptable. They generally conform to policy with only minor exceptions and any major exceptions are clearly mitigated by other economic factors.

Watch: Loans that are watch credits include loans on management’s watch list where a risk concern may be anticipated in the near future.

Substandard: Loans that are considered substandard are loans that are inadequately protected by current sound net worth, paying capacity of the obligor or the value of the collateral pledged. All nonaccrual loans are graded as substandard.

Doubtful: Loans that are considered to be doubtful have all weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make the collection or liquidation in full on the basis of current existing facts, conditions and values highly questionable and improbable.

Loss: Loans that are considered to be a loss are considered to be uncollectible and of such little value that their continuance as bankable assets is not warranted.

The tables below summarize risk grades of the loan portfolio by class at June 30, 2012 and December 31 2011:

June 30, 2012
	Pass		Watch		Sub-standard		Doubtful		Total
			(dollars in thousands)
Commercial	$	38,474	$	836	$	827	$	—	$	40,137
Real estate – commercial		88,910		8,700		10,364		—		107,974
Other real estate construction		21,687		499		5,088		—		27,274
Real estate 1-4 family construction		2,756		—		—		—		2,756
Real estate – residential		83,750		6,546		9,036		—		99,332
Home equity		48,907		732		1,203		—		50,842
Consumer loans		13,100		390		308		—		13,798
Other loans		886		—		—		—		886
Total	$	298,470	$	17,703	$	26,826	$	—	$	342,999
December 31, 2011
	Pass		Watch		Sub-standard		Doubtful		Total
			(dollars in thousands)
Commercial	$	42,892	$	1,670	$	1,345	$	—	$	45,907
Real estate – commercial		95,699		7,971		11,274		—		114,944
Other real estate construction		26,256		745		4,600		—		31,601
Real estate 1-4 family construction		5,538		5		—		—		5,543
Real estate – residential		89,209		4,269		8,369		—		101,847
Home equity		49,743		861		809		—		51,413
Consumer loans		13,970		332		408		—		14,710
Other loans		602		—		—		—		602
Total	$	323,909	$	15,853	$	26,805	$	—	$	366,567

Loans that are in nonaccrual status or 90 days past due and still accruing are considered to be nonperforming. The following tables show the breakdown between performing and nonperforming loans by class at June 30, 2012 and December 31, 2011:

June 30, 2012

	Performing		Non-Performing		Total
	(dollars in thousands)
Commercial	$	39,965	$	172	$	40,137
Real estate – commercial		105,589		2,385		107,974
Other real estate construction		24,844		2,430		27,274
Real estate 1-4 family construction		2,756		—		2,756
Real estate – residential		96,974		2,358		99,332
Home equity		50,595		247		50,842
Consumer loans		13,700		98		13,798
Other loans		886		—		886
Total	$	335,309	$	7,690	$	342,999

December 31, 2011

	Performing		Non- Performing		Total
	(dollars in thousands)
Commercial	$	45,578	$	329	$	45,907
Real estate – commercial		112,202		2,742		114,944
Other real estate construction		29,517		2,084		31,601
Real estate 1 – 4 family construction		5,543		—		5,543
Real estate – residential		99,406		2,441		101,847
Home equity		51,158		255		51,413
Consumer loans		14,699		11		14,710
Other loans		602		—		602
Total	$	358,705	$	7,862	$	366,567

Loans are considered impaired when, based on current information and events; it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement. If a loan is deemed impaired, a specific calculation is performed and a specific reserve is allocated, if necessary. The tables below summarize the loans deemed impaired and the amount of specific reserves allocated by class at June 30, 2012 and December 31, 2011:

June 30, 2012

	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Related Allowance
	(dollars in thousands)
Commercial	$	1,240	$	823	$	298	$	153
Real estate – commercial		14,511		8,053		4,395		817
Other real estate construction		4,175		2,718		1,455		166
Real estate 1 – 4 family construction		1,308		714		594		235
Real estate – residential		12,664		6,932		5,732		1,075
Home equity		1,262		550		712		277
Consumer loans		358		49		309		171
Other loans		—		—		—		—
Total	$	35,518	$	19,839	$	13,495	$	2,894

December 31, 2011

	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Related Allowance
	(dollars in thousands)
Commercial	$	2,099	$	889	$	1,091	$	578
Real estate – commercial		14,951		11,365		1,523		452
Other real estate construction		4,016		2,644		1,370		107
Real estate 1 – 4 family construction		1,095		501		594		202
Real estate – residential		11,877		7,231		4,646		1,001
Home equity		993		753		240		124
Consumer loans		242		49		193		119
Other loans		—		—		—		—
Total	$	35,273	$	23,432	$	9,657	$	2,583

	Three Months ended June 30, 2012				Three Months ended June 30, 2011
	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
	(dollars in thousands)
Commercial	$	1,401	$	13	$	1,339	$	29
Real estate – commercial		12,575		155		16,436		93
Other real estate construction		4,087		73		8,308		27
Real estate 1 – 4 family construction		1,326		10		1,474		4
Real estate – residential		12,043		174		9,893		210
Home equity		1,163		14		1,358		10
Consumer loans		334		6		320		7
Other loans		—		—		—		—
Total	$	32,929	$	445	$	39,128	$	380
	Six Months ended June 30, 2012				Six Months ended June 30, 2011
	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
	(dollars in thousands)
Commercial	$	1,551	$	27	$	1,373	$	43
Real estate – commercial		12,668		340		17,731		263
Other real estate construction		4,093		125		8,990		31
Real estate 1 – 4 family construction		1,202		16		1,300		26
Real estate – residential		12,270		311		9,557		325
Home equity		1,128		24		1,260		22
Consumer loans		299		10		293		10
Other loans		—		—		—		—
Total	$	33,211	$	853	$	40,504	$	720