10-Q 1 v230736_10q.htm Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
 
(Mark One)
x  Quarterly report under section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2011

or

¨  Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the Transition Period from            _________to_________
 
Commission File Number 33-76644
 
COMMUNITYCORP

 
(Exact name of registrant as specified in its charter)

South Carolina
57-1019001
(State or other jurisdiction of incorporation)
(I.R.S. Employer Identification No.)

1100 N. Jefferies Boulevard
Walterboro, SC 29488
(Address of principal executive offices, including zip code)

(843) 549-2265
(Issuer’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES  NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o
Accelerated filer o
   
Non-accelerated filer ¨
Smaller reporting company x
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES NO x

 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

233,003 shares of common stock, $5.00 par value, as of July 31, 2011
 
 
 

 

COMMUNITYCORP

Index

   
Page No.
PART I. - FINANCIAL INFORMATION
 
   
Item 1. Financial Statements (Unaudited)
 
     
 
Condensed Consolidated Balance Sheets – June 30, 2011 and December 31, 2010
3
     
 
Condensed Consolidated Statements of Operations - Three and six months ended June 30, 2011 and 2010
4
     
 
Condensed Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income - Six months ended June 30, 2011 and 2010
5
     
 
Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2011 and 2010
6
     
 
Notes to Condensed Consolidated Financial Statements
7
     
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
19
   
Item 3. Quantitative and Qualitative Disclosure About Market Risk
27
   
Item 4. Controls and Procedures
27
   
PART II. - OTHER INFORMATION
 
   
Item 1. Legal Proceedings
27
   
Item 1A. Risk Factors
27
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
27
   
Item 3. Defaults Under Senior Securities
28
   
Item 4. Removed and Reserved
28
   
Item 5. Other Information
28
   
Item 6. Exhibits
28

 
 

 

COMMUNITYCORP
Condensed Consolidated Balance Sheets

   
June 30,
   
December 31,
 
   
2011
   
2010
 
   
(Unaudited)
   
(Audited)
 
Assets:
           
Cash and cash equivalents:
           
Cash and due from banks
  $ 3,748,668     $ 4,206,974  
Interest bearing deposits
    12,900,487       9,966,826  
Federal funds sold
    1,775,000       2,004,000  
Total cash and cash equivalents
    18,424,155       16,177,800  
                 
Time deposits with other banks
    750,000       1,000,000  
                 
Investment securities:
               
Securities available-for-sale
    31,273,755       26,955,350  
Securities held-to-maturity (estimated fair value of $309,287 in 2011 and $309,023 in 2010)
    299,903       299,885  
Nonmarketable equity securities
    292,200       302,300  
Total investment securities
    31,865,858       27,557,535  
                 
Loans receivable
    100,357,304       105,297,684  
Less allowance for loan losses
    (1,913,210 )     (2,019,497 )
                 
Loans receivable, net
    98,444,094       103,278,187  
                 
Premises and equipment, net
    2,824,224       2,903,212  
Accrued interest receivable
    799,733       785,859  
Other real estate owned
    2,985,528       2,764,189  
Other assets
    953,947       1,361,893  
                 
Total assets
  $ 157,047,539     $ 155,828,675  
                 
Liabilities:
               
Deposits:
               
Noninterest-bearing transaction accounts
  $ 12,673,102     $ 14,077,860  
Interest-bearing transaction accounts
    21,931,962       21,295,198  
Money market savings accounts
    4,411,096       4,116,167  
Savings
    15,693,014       14,452,567  
Time deposits $100,000 and over
    46,465,066       46,142,153  
Other time deposits
    37,016,957       37,499,876  
Total deposits
    138,191,197       137,583,821  
                 
Accrued interest payable
    354,301       451,331  
Other liabilities
    154,896       154,686  
                 
Total liabilities
    138,700,394       138,189,838  
                 
Shareholders’ Equity:
               
Preferred stock, $5 par value, 3,000,000 shares authorized and unissued                
Common stock, $5 par value, 3,000,000 shares authorized; 300,000 shares issued
    1,500,000       1,500,000  
Capital surplus
    1,737,924       1,737,924  
Retained earnings
    19,036,777       18,782,807  
Accumulated other comprehensive income (loss)
    389,586       (64,752 )
Treasury Stock (66,997 shares at cost)
    (4,317,142 )     (4,317,142 )
                 
Total shareholders’ equity
    18,347,145       17,638,837  
                 
Total liabilities and shareholders’ equity
  $ 157,047,539     $ 155,828,675  
See notes to condensed consolidated financial statements.
 
 
3

 

COMMUNITYCORP
Condensed Consolidated Statements of Operations
(Unaudited)

   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Interest income:
                       
Loans, including fees
  $ 1,574,644     $ 1,685,719     $ 3,138,627     $ 3,521,176  
Securities
    212,624       199,274       410,532       413,857  
Other interest income
    10,106       23,725       20,909       36,583  
Total
    1,797,374       1,908,718       3,570,068       3,971,616  
                                 
Interest expense:
                               
Deposit accounts
    376,233       559,978       780,820       1,165,237  
Other interest expense
    -       -       -       1  
Total
    376,233       559,978       780,820       1,165,238  
                                 
Net interest income
    1,421,141       1,348,740       2,789,248       2,806,378  
                                 
Provision for loan losses
    313,000       846,000       538,000       1,211,000  
                                 
Net interest income after provision for loan losses
    1,108,141       502,740       2,251,248       1,595,378  
                                 
Noninterest income:
                               
Service charges
    102,076       111,161       205,720       210,473  
Other income
    32,126       29,083       64,432       70,524  
Total
    134,202       140,244       270,152       280,997  
                                 
Noninterest expenses:
                               
Salaries and benefits
    484,380       516,696       982,578       1,010,799  
Net occupancy expense
    81,274       62,314       146,262       125,245  
Equipment expense
    91,448       87,612       182,228       180,993  
Other operating expenses
    325,367       310,292       740,061       613,163  
Total
    982,469       976,914       2,051,129       1,930,200  
                                 
Income (loss) before taxes
    259,874       (333,930 )     470,271       (53,825 )
                                 
Income tax provision
    66,300       (97,250 )     99,800       (22,250 )
                                 
Net income (loss)
  $ 193,574     $ (236,680 )   $ 370,471     $ (31,575 )
                                 
Earnings (loss) per share:
                               
                                 
Weighted average common shares outstanding
    233,003       233,033       233,003       233,504  
                                 
Net income (loss) per common share
  $ 0.83     $ (1.02 )   $ 1.59     $ (0.14 )

See notes to condensed consolidated financial statements.
 
 
4

 

COMMUNITYCORP
Condensed Consolidated Statement of Shareholders’ Equity and Comprehensive Income
For The Six Months Ended June 30, 2011 and 2010
(Unaudited)

                      
Accumulated
                   
                     
Other
                   
                     
Comprehensive
                   
   
Common stock
   
Capital
   
Income
   
Retained
   
Treasury
       
   
Shares
   
Amount
   
Surplus
   
(Loss)
   
Earnings
   
Stock
   
Total
 
Balance, December 31, 2010
    300,000     $ 1,500,000     $ 1,737,924     $ (64,752 )   $ 18,782,807     $ (4,317,142 )   $ 17,638,837  
                                                         
Cash dividends paid ($ .50 per share)
                                    (116,501 )             (116,501 )
                                                         
Net income for the period
                                    370,471               370,471  
                                                         
Other comprehensive income, net of tax expense of $239,308
                            454,338                       454,338  
                                                         
Comprehensive income
                                                    824,809  
                                                         
Balance, June 30, 2011
    300,000     $ 1,500,000     $ 1,737,924     $ 389,586     $ 19,036,777     $ (4,317,142 )   $ 18,347,145  
                                                         
Balance, December 31, 2009
    300,000     $ 1,500,000     $ 1,737,924     $ 286,072     $ 18,440,398     $ (4,218,741 )   $ 17,745,653  
                                                         
Cash dividends paid ($ .50 per share)
                                    (117,001 )             (117,001 )
                                                         
Net loss for the period
                                    (31,575 )             (31,575 )
                                                         
Other comprehensive income, net of tax expense of $53,060
                            100,737                       100,737  
                                                         
Comprehensive income
                                                    69,162  
                                                         
Purchase of treasury stock
                                            (98,401 )     (98,401 )
                                                         
Balance, June 30, 2010
    300,000     $ 1,500,000     $ 1,737,924     $ 386,809     $ 18,291,822     $ (4,317,142 )   $ 17,599,413  

See notes to condensed consolidated financial statements.
 
 
5

 

COMMUNITYCORP
Condensed Consolidated Statements of Cash Flows
(Unaudited)

   
Six Months Ended
 
   
June 30,
 
   
2011
   
2010
 
Cash flows from operating activities:
           
Net income (loss)
  $ 370,471     $ (31,575 )
Adjustments to reconcile net income to net cash Provided (used) by operating activities:
               
Provision for loan losses
    538,000       1,211,000  
Depreciation expense
    112,270       118,895  
Loss on sale of other real estate owned
    21,432       -  
Net premium amortization of investment securities
    13,838       32,825  
(Increase) decrease in accrued interest receivable
    (13,874 )     13,569  
Decrease in accrued interest payable
    (97,030 )     (117,789 )
Decrease in other assets
    168,638       214,112  
Increase in other liabilities
    210       33,676  
Net cash provided by operating activities
    1,113,955       1,474,713  
                 
Cash flows from investing activities:
               
Proceeds from maturities of securities available-for-sale
    1,844,296       4,854,116  
Purchases of securities available-for-sale
    (5,482,911 )     (1,599,200 )
Proceeds from maturities of securities held-to-maturity
    -       265,000  
(Increase) decrease of nonmarketable equity securities
    10,100       (100 )
Net decrease in loans to customers
    3,758,104       3,474,217  
Net decrease in time deposits in other banks
    250,000       250,000  
Proceeds from sales of other real estate owned
    295,218       -  
Purchases of premises and equipment
    (33,282 )     (24,828 )
Net cash provided by investing activities
    641,525       7,219,205  
                 
Cash flows from financing activities:
               
Net increase (decrease) in demand deposits, interest-bearing transaction accounts and savings accounts
    767,382       (2,317,817 )
Net decrease  in time deposits
    (160,006 )     (1,088,673 )
Cash dividends paid
    (116,501 )     (117,001 )
Purchase of treasury stock
    -       (98,401 )
Net cash provided (used) by financing activities
    490,875       (3,621,892 )
                 
Net increase in cash and cash equivalents
    2,246,355       5,072,026  
                 
Cash and cash equivalents, beginning of period
    16,177,800       17,694,266  
                 
Cash and cash equivalents, end of period
  $ 18,424,155     $ 22,766,292  
                 
Cash paid during the period for:
               
Income taxes
  $ 50,000     $ -  
Interest
  $ 877,850     $ 1,283,027  
                 
Supplemental noncash investing and financing activities
               
Foreclosures on loans
  $ 537,989     $ -  
Net change in valuation allowance - available-for-sale
  $ 454,338     $ 100,737  

See notes to condensed consolidated financial statements.
 
 
6

 

Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in accordance with the requirements for interim financial statements and, accordingly, they are condensed and omit disclosures, which would substantially duplicate those contained in the most recent annual report to shareholders.  The financial statements as of June 30, 2011 and for the interim periods ended June 30, 2011 and 2010 are unaudited and, in our opinion, include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation.  The results of operations for the six months ended June 30, 2011 are not necessarily indicative of the results which may be expected for the entire calendar year.  The financial information as of December 31, 2010 has been derived from the audited financial statements as of that date.  For further information, refer to the financial statements and the notes included in Communitycorp’s 2010 Annual Report.

NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS

The following is a summary of recent authoritative pronouncements that could impact the accounting, reporting, and / or disclosure of financial information by the Company.

In July 2010, the Receivables topic of the Accounting Standards Codification (“ASC”) was amended by Accounting Standards Update (“ASU”) 2010-20 to require expanded disclosures related to a company’s allowance for credit losses and the credit quality of its financing receivables. The amendments require the allowance disclosures to be provided on a disaggregated basis.  The Company is required to include these disclosures in its interim and annual financial statements.  See Note. 6.

Disclosures about Troubled Debt Restructurings (“TDRs”) required by ASU 2010-20 were deferred by the Financial Accounting Standards Board (“FASB”) in ASU 2011-01 issued in January 2011. In April 2011 the FASB issued ASU 2011-02 to assist creditors with their determination of when a restructuring is a TDR.   The determination is based on whether the restructuring constitutes a concession and whether the debtor is experiencing financial difficulties as both events must be present.

Disclosures related to TDRs under ASU 2010-20 will be effective for reporting periods beginning after June 15, 2011.

In April 2011, the criteria used to determine effective control of transferred assets in the Transfers and Servicing topic of the ASC was amended by ASU 2011-03.  The requirement for the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms and the collateral maintenance implementation guidance related to that criterion were removed from the assessment of effective control.  The other criteria to assess effective control were not changed.  The amendments are effective for the Company beginning January 1, 2012 but are not expected to have a material effect on the financial statements.

ASU 2011-04 was issued in May 2011 to amend the Fair Value Measurement topic of the ASC by clarifying the application of existing fair value measurement and disclosure requirements and by changing particular principles or requirements for measuring fair value or for disclosing information about fair value measurements.  The amendments will be effective for the Company beginning January 1, 2012 but are not expected to have a material effect on the financial statements.

The Comprehensive Income topic of the ASC was amended in June 2011.  The amendment eliminates the option to present other comprehensive income as a part of the statement of changes in stockholders’ equity.  The amendment requires consecutive presentation of the statement of net income and other comprehensive income and requires an entity to present reclassification adjustments from other comprehensive income to net income on the face of the financial statements.  The amendments will be applicable to the Company on January 1, 2012 and will be applied retrospectively.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

NOTE 3 - RECLASSIFICATIONS

Certain captions and amounts in the financial statements in the Company’s Form 10-Q for the quarter ended June 30, 2010 and Form 10-K for the year ended December 31, 2010 were reclassified to conform to the June 30, 2011 presentation.
 
 
7

 

NOTE 4 - COMPREHENSIVE INCOME

Accounting principles generally require that recognized income, expenses, gains, and losses be included in net income.  Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.

The components of other comprehensive income and related tax effects are as follows:

         
Tax
       
   
Pre-tax
   
(Expense)
   
Net-of-tax
 
   
Amount
   
Benefit
   
Amount
 
For the Three Months Ended June 30, 2011:
                 
Unrealized gains on securities available-for-sale
  $ 573,632     $ (197,903 )   $ 375,729  
Reclassification adjustment for gains (losses) in net income
    -       -       -  
Other Comprehensive income
  $ 573,632     $ (197,903 )   $ 375,729  
                         
For the Three Months Ended June 30, 2010:
                       
Unrealized gains on securities available-for-sale
  $ 96,016     $ (33,126 )   $ 62,890  
Reclassification adjustment for gains (losses) in net income
    -       -       -  
Other Comprehensive income
  $ 96,016     $ (33,126 )   $ 62,890  
                         
For the Six Months Ended June 30, 2011:
                       
Unrealized gains on securities available-for-sale
  $ 693,646     $ (239,308 )   $ 454,338  
Reclassification adjustment for gains (losses) in net income
    -       -       -  
Other Comprehensive income
  $ 693,646     $ (239,308 )   $ 454,338  
                         
For the Six Months Ended June 30, 2010:
                       
Unrealized gains on securities available-for-sale
  $ 153,797     $ (53,060 )   $ 100,737  
Reclassification adjustment for gains (losses) in net income
    -       -       -  
Other Comprehensive income
  $ 153,797     $ (53,060 )   $ 100,737  

Accumulated other comprehensive income consists of the net unrealized gains and (losses) on securities available-for sale, net of the deferred tax effects.

NOTE 5 - INVESTMENT SECURITIES

Securities Available-for-Sale

The amortized cost and estimated fair values of securities available-for-sale at June 30, 2011 and December 31, 2010 were:

   
Amortized
   
Gross Unrealized
   
Estimated
 
   
Cost
   
Gains
   
Losses
   
Fair Value
 
June 30, 2011
                       
U.S. Government agencies
  $ 16,991,360     $ 50,450     $ 16,648     $ 17,025,162  
Mortgage-backed securities
    2,981,397       67,448       77       3,048,768  
Municipals
    10,506,211       505,542       11,928       10,999,825  
Other
    200,000       -       -       200,000  
Total
  $ 30,678,968     $ 623,440     $ 28,653     $ 31,273,755  

   
Amortized
   
Gross Unrealized
   
Estimated
 
   
Cost
   
Gains
   
Losses
   
Fair Value
 
December 31, 2010
                       
Government-sponsored enterprises
  $ 13,891,989     $ 11,473     $ 312,020     $ 13,591,442  
Mortgage-backed securities
    1,842,249       24,286       15,269       1,851,266  
Obligations of state and local governments
    11,119,970       247,905       55,233       11,312,642  
Other
    200,000       -       -       200,000  
Total
  $ 27,054,208     $ 283,664     $ 382,522     $ 26,955,350  
 
 
8

 

The following is a summary of maturities of securities available-for-sale as of June 30, 2011.  The amortized cost and estimated fair values are based on the contractual maturity dates.  Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.

   
Securities
 
   
Available-For-Sale
 
   
Amortized
   
Estimated
 
   
Cost
   
Fair Value
 
Due in one year or less
  $ -       -  
Due after one year but within five years
    1,831,797       1,883,346  
Due after five years but within ten years
    18,120,927       18,515,613  
Due after ten years
    7,744,847       7,826,028  
      27,697,571       28,224,987  
Mortgage-backed securities
    2,981,397       3,048,768  
Total
  $ 30,678,968     $ 31,273,755  

The following table shows gross unrealized losses and fair value, aggregated by investment category, and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2011 and December 31, 2010.

   
June 30, 2011
   
December 31, 2010
 
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Losses
   
Value
   
Losses
 
Less Than 12 Months
                       
Government-sponsored enterprises
  $ 3,479,060     $ 16,648     $ 12,379,970     $ 312,020  
Mortgaged-backed Securities
    63,216       77       964,073       15,269  
Obligations of state and local governments
    -       -       2,151,511       55,233  
      3,542,276       16,725       15,495,554       382,522  
                                 
12 Months or More
                               
Obligations of state and local governments
    240,000       11,928       -       -  
      240,000       11,928       -       -  
                                 
Total
  $ 3,782,276     $ 28,653     $ 15,495,554     $ 382,522  

A total of ten available-for-sale securities were in a loss position at June 30, 2011, including one security that had been in a continuous loss position for twelve months or more.  The Company believes, based on industry analyst reports and credit ratings, that the deterioration in value is attributable to changes in market interest rates and not in credit quality and considers these losses temporary.  The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities before recovery of their amortized costs.  Management evaluates investment securities in a loss position based on length of impairment, severity of impairment and other factors.

Securities Held-to-Maturity

The amortized cost and estimated fair values of securities held-to-maturity at June 30, 2011 and December 31, 2010 were:

   
Amortized
   
Gross Unrealized
   
Estimated
 
   
Cost
   
Gains
   
Losses
   
Fair Value
 
June 30, 2011
                       
Obligations of state and local governments
  $ 299,903     $ 9,384     $ -     $ 309,287  
                                 
December 31, 2010
                               
Obligations of state and local governments
  $ 299,885     $ 9,138     $ -     $ 309,023  

The following is a summary of maturities of securities held-to-maturity as of June 30, 2011.  The amortized cost and estimated fair values are based on the contractual maturity dates.  Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.
 
 
9

 

   
Securities
 
   
Held-to-Maturity
 
   
Amortized
   
Estimated
 
   
Cost
   
Fair Value
 
Due after one year but within five years
  $ 99,903     $ 100,651  
Due after five years but within ten years
    200,000       208,636  
Total
  $ 299,903     $ 309,287  

NOTE 6 - LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

Major classifications of loans receivable are summarized as follows:

   
June 30,
   
December 31,
 
   
2011
   
2010
 
Real estate – construction
  $ 13,654,980     $ 12,674,197  
Real estate – mortgage
    73,318,790       76,149,357  
Commercial and industrial
    8,293,690       11,602,305  
Consumer and other
    5,089,844       4,871,825  
Total gross loans
  $ 100,357,304     $ 105,297,684  

The loan portfolio consisted of loans having                                                                           :

   
June 30,
   
December 31,
 
   
2011
   
2010
 
Variable rates loans
  $ 2,018,931     $ 1,556,700  
Fixed rates
    98,338,373       103,740,984  
Total gross loans
  $ 100,357,304     $ 105,297,684  

A summary of the allowance for loan losses for the six months ended June 30, 2011 and year ended December 31, 2010 is as follows:

   
June 30,
   
December 31,
 
   
2011
   
2010
 
Balance, beginning of year
  $ 2,019,497     $ 2,053,340  
Provision charged to operations
    538,000       1,866,000  
Recoveries on loans previously charged-off
    6,188       11,932  
Loans charged-off
    (650,475 )     (1,911,775 )
Balance, end of period
  $ 1,913,210     $ 2,019,497  

The following is an analysis of the allowance for loan losses by class of loans for the six months ended June 30, 2011 and the year ended December 31, 2010

June 30, 2011
         
Real Estate Loans
             
               
 
   
Total
             
               
 
   
Real
             
               
 
   
Estate
         
Consumer
 
(Dollars in Thousands)
 
Total
   
Construction
   
Mortgage
   
Loans
   
Commercial
   
and Other
 
Beginning Balance
  $ 2,019     $ 807     $ 404     $ 1,211     $ 606     $ 202  
Provisions
    538       412       64       476       50       12  
Recoveries
    6       -       3       3       -       3  
Charge-offs
    (650 )     (498 )     (77 )     (575 )     (60 )     (15 )
Ending balance
  $ 1,913     $ 721     $ 394     $ 1,115     $ 596     $ 202  
 
 
10

 
 
December 31, 2010
         
Real Estate Loans
             
                     
Total
             
                     
Real
             
(Dollars in Thousands)
                   
Estate
         
Consumer
 
   
Total
   
Construction
   
Mortgage
   
Loans
   
Commercial
   
And Other
 
Beginning Balance
  $ 2,053     $ 826     $ 413     $ 1,239     $ 616     $ 198  
Provisions
    1,866       746       373       1,119       560       187  
Recoveries
    12       -       -       -       4       8  
Charge-offs
    (1,912 )     (765 )     (382 )     (1,147 )     (574 )     (191 )
Ending balance
  $ 2,019     $ 807     $ 404     $ 1,211     $ 606     $ 202  

At June 30, 2011 and December 31, 2010 the allocation of the allowance for loan losses and the recorded investment in loans summarized on the basis of the Company’s impairment methodology was as follows:

June 30, 2011
         
Real Estate Loans
             
                     
Total
             
                     
Real
             
(Dollars in Thousands)
                   
Estate
         
Consumer
 
   
Total
   
Construction
   
Mortgage
   
Loans
   
Commercial
   
and Other
 
Allowance for Loan Losses
                                   
                                     
Examined for Impairment
                                   
Individually
  $ 411     $ 30     $ 35     $ 65     $ 326     $ 20  
Collectively
    1,502       691       359       1050       270       182  
Allowance for Loan Losses
  $ 1,913     $ 721     $ 394     $ 1,115     $ 596     $ 202  
                                                 
Total Loans
                                               
                                                 
Examined for Impairment
                                               
Individually
  $ 8,338     $ 1,708     $ 1,141     $ 2,849     $ 5,311     $ 178  
Collectively
    92,019       11,947       72,178       84,125       2,982       4,912  
Total Loans
  $ 100,357     $ 13,655     $ 73,319     $ 86,974     $ 8,293     $ 5,090  

December 31, 2010
         
Real Estate Loans
             
                     
Total
             
                     
Real
             
(Dollars in Thousands)
                   
Estate
         
Consumer
 
   
Total
   
Construction
   
Mortgage
   
Loans
   
Commercial
   
and Other
 
Allowance for Loan Losses
                                   
                                     
Examined for Impairment
                                   
Individually
  $ 373     $ 296     $ 25     $ 321     $ 40     $ 12  
Collectively
    1,646       511       379       890       566       190  
Allowance for Loan Losses
  $ 2,019     $ 807     $ 404     $ 1,211     $ 606     $ 202  
                                                 
Total Loans
                                               
                                                 
Examined for Impairment
                                               
Individually
  $ 7,703     $ 3,162     $ 4,121     $ 7,283     $ 303     $ 117  
Collectively
    97,595       9,512       72,029       81,541       11,299       4,755  
Total Loans
  $ 105,298       12,674       76,150       88,824       11,602       4,872  

The Company identifies impaired loans through its normal internal loan review process.  Loans on the Company’s problem loan watch list are considered potentially impaired loans.  These loans are evaluated in determining whether all outstanding principal and interest are expected to be collected.  Loans are not considered impaired if a minimal delay occurs and all amounts due including accrued interest at the contractual interest rate for the period of delay are expected to be collected.

 
11

 
 
The following summarizes the Company’s impaired loans by class as of June 30, 2011 and December 31, 2010.

June 30, 2011
                 
         
Unpaid
       
(Dollars in Thousands)
 
Recorded
   
Principal
   
Related
 
   
Investment
   
Balance
   
Allowance
 
With no related allowance recorded:
                 
Real estate
                 
Construction
  $ 1,578     $ 1,578     $ -  
Mortgage
    829       865       -  
Total real estate loans
    2,407       2,443       -  
Commercial
    3,686       4,486       -  
Consumer and other
    126       126       -  
      6,219       7,055       -  
                         
With an allowance recorded:
                       
Real estate
                       
Construction
    130       315       30  
Mortgage
    312       466       35  
Total real estate loans
    442       781       65  
Commercial
    1,625       4,080       326  
Consumer and other
    52       52       20  
      2,119       4,913       411  
                         
Total
                       
Real estate
                       
Construction
    1,708       1,893       30  
Mortgage
    1,141       1,331       35  
Total real estate loans
    2,849       3,224       65  
Commercial
    5,311       8,566       326  
Consumer and other
    178       178       20  
Total
  $ 8,338     $ 11,968     $ 411  

December 31, 2010
                 
         
Unpaid
       
(Dollars in Thousands)
 
Recorded
   
Principal
   
Related
 
   
Investment
   
Balance
   
Allowance
 
With no related allowance recorded:
                 
                   
Real estate
                 
Construction
  $ 1,326     $ 1,294     $ -  
Mortgage
    4,016       4,196       -  
Total real estate loans
    5,342       5,490       -  
Commercial
    218       249       -  
Consumer and other
    62       61       -  
      5,622       5,800       -  
With an allowance recorded:
                       
                         
Real estate
                       
Construction
    1,836       1,879       296  
Mortgage
    105       103       25  
Total real estate loans
    1,941       1,982       321  
Commercial
    85       741       40  
Consumer and other
    55       53       12  
      2,081       2,776       373  

 
12

 

         
Unpaid
       
(Dollars in Thousands)
 
Recorded
   
Principal
   
Related
 
 
 
Investment
   
Balance
   
Allowance
 
                   
Total
                 
                   
Real estate
                 
Construction
  $ 3,162     $ 3,173     $ 296  
Mortgage
    4,121       4,299       25  
Total real estate loans
    7,283       7,472       321  
Commercial
    303       990       40  
Consumer and other
    117       114       12  
Total
  $ 7,703     $ 8,576       373  

The average recorded investment in impaired loans for the six months and year ended June 30, 2011 and December 31, 2010, was $7,787,247 and $8,512,074, respectively.

Nonaccrual loans were $4,403,484 and $4,805,658 at June 30, 2011 and December 31, 2010, respectively.

Interest income on impaired loans other than nonaccrual loans is recognized on an accrual basis. Interest income on nonaccrual loans is recognized only as collected.  During the six months ended June 30, 2011 and for the year ended December 31, 2010, interest income recognized on nonaccrual loans was $16,913 and $30,674, respectively.  If the nonaccrual loans had been accruing interest at their original contracted rates, related income would have been $147,828 and $275,415 for the six months ended June 30, 2011 and for the year ended December 31, 2010, respectively.

A summary of current, past due and nonaccrual loans as of June 30, 2011 and December 31, 2010 were as follows:

June 30, 2011
                                   
   
Past Due
   
Past Due Over 90 days
                   
(Dollars in Thousands)
  30-89    
And
   
Non-
   
Total
         
Total
 
   
Days
   
Accruing
   
Accruing
   
Past Due
   
Current
   
Loans
 
Real estate
                                     
Construction
  $ 749     $ -     $ 2,364     $ 3,113     $ 10,542     $ 13,655  
Mortgage
    823       -       1,912       2,735       70,584       73,319  
Total real estate loans
    1,572       -       4,276       5,848       81,126       86,974  
Commercial
    166       -       68       234       8,059       8,293  
Consumer and other