Loans

12 Months Ended

Dec. 31, 2011

Loans [Abstract]

Loans

Note 4. Loans

The major classifications of loans follow:

	Aggregate Principal Amount December 31,
		2011			2010
Commercial	$	63,982		$	87,226
Agricultural & AGRE		39,128			44,289
Construction, land & development		42,008			72,078
Commercial RE		288,068			342,208
1-4 family mortgages		146,767			172,666
Consumer		2,442			3,404
Total loans	$	582,395		$	721,871
Allowance for loan losses		(21,232	)		(31,511	)
Loans, net	$	561,163		$	690,360

The credit quality indicator utilized by the company to internally analyze the loan portfolio is the internal risk rating. Internal risk ratings of 0 to 5 are considered pass credits, a risk rating of a 6 is special mention, a risk rating of a 7 is substandard, and a risk rating of an 8 is doubtful. Loans classified as pass credits have no material weaknesses and are performing as agreed. Loans classified as special mention 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 of the institution's credit position at some future date. 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. 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.

The following table presents the commercial loan portfolio by internal risk rating:

Dec. 31, 2011	Commercial						Construction Land & Development		Commercial Real Estate
Internal Risk	Closed end		Lines of Credit		AG & AG RE				Owner - occupied		Non-Owner Occupied		Total
Rating
1-2	$	716	$	449	$	4,833	$	3,649	$	3,489	$	647	$	13,783
3		2,938		7,708		15,649		1,034		8,971		17,168		53,468
4		12,989		13,533		14,323		1,566		68,045		44,665		155,121
5		10,405		5,322		3,517		6,200		20,518		51,580		97,542
6		3,374		3,892		741		5,497		10,868		19,900		44,272
7		1,434		1,222		65		24,062		19,720		22,497		69,000
8		-		-		-		-		-		-		-
Total	$	31,856	$	32,126	$	39,128	$	42,008	$	131,611	$	156,457	$	433,186
Dec. 31, 2010	Commercial						Construction Land & Development		Commercial Real Estate
Internal Risk	Closed end		Lines of Credit		AG & AG RE				Owner- occupied		Non-Owner Occupied		Total
Rating
1-2	$	2,294	$	331	$	8,527	$	4,700	$	8,559	$	1,479	$	25,890
3		3,935		7,333		10,873		1,237		17,673		23,045		64,096
4		21,225		24,042		16,742		1,500		76,491		61,468		201,468
5		10,483		4,768		3,588		8,720		21,389		42,495		91,443
6		1,217		4,506		42		7,232		3,206		20,821		37,024
7		2,149		4,898		4,517		48,689		25,075		40,507		125,835
8		-		45		-		-		-		-		45
Total	$	41,303	$	45,923	$	44,289	$	72,078	$	152,393	$	189,815	$	545,801

The following table presents the Retail Residential Loan Portfolio by Internal Risk Rating:

		Residential – 1-4 family
		Senior Lien		JR Lien & Lines of Credit		Total
	Internal Risk Rating
Dec. 31, 2011
Unrated		$	83,969	$	49,498	$	133,467
Special mention			907		904		1,811
Substandard			10,013		1,161		11,174
Doubtful			315		-		315
Total		$	95,204	$	51,563	$	146,767

		Residential – 1-4 family
		Senior Lien		JR Lien & Lines of Credit		Total
	Internal Risk Rating
Dec. 31, 2010
Unrated		$	99,852	$	55,147	$	154,999
Special mention			1,034		1,769		2,803
Substandard			13,707		1,157		14,864
Total		$	114,593	$	58,073	$	172,666

The retail residential loan portfolio is generally unrated. Delinquency is a typical factor in adversely risk rating a credit to a special mention or substandard.

An analysis of activity in the allowance for loan losses follows:

	Commercial			AG & AGRE			Construction, Land & Development			Commercial RE			1-4 Family Residential			Consumer			Total
December 31, 2011
Beginning Balance	$	1,634		$	337		$	12,500		$	13,721		$	3,273		$	46		$	31,511
Charge-offs		(713	)		(674	)		(10,610	)		(9,349	)		(1,835	)		(97	)		(23,278	)
Recoveries		49			26			755			305			465			24			1,624
Provision		620			316			2,166			7,003			1,187			83			11,375
Ending Balance	$	1,590		$	5		$	4,811		$	11,680		$	3,090		$	56		$	21,232
																				Total
December 31, 2010
Beginning Balance																			$	40,909
Charge-offs																				(44,409	)
Recoveries																				411
Provision																				34,600
Ending Balance																			$	31,511
																				Total
December 31, 2009
Beginning Balance																			$	15,018
Charge-offs																				(26,804	)
Recoveries																				646
Provision																				52,049
Ending Balance																			$	40,909
	Commercial			AG & AGRE			Construction, Land & Development			Commercial RE			1-4 Family Residential			Consumer			Total
Dec. 31, 2011
Allowance for loan losses:
Loans individually evaluated
for impairment	$	715		$	-		$	2,228		$	5,211		$	1,591		$	5		$	9,750
Loans collectively evaluated
for impairment		875			5			2,583			6,469			1,499			51			11,482
Total ending allowance
balance	$	1,590		$	5		$	4,811		$	11,680		$	3,090		$	56		$	21,232
Loan balances:
Loans individually evaluated
for impairment	$	2,463		$	65		$	24,062		$	36,141		$	10,563		$	5		$	73,299
Loans collectively evaluated
for impairment		61,519			39,063			17,946			251,927			136,204			2,437			509,096
Loans with an allowance
recorded:	$	63,982		$	39,128		$	42,008		$	288,068		$	146,767		$	2,442		$	582,395

						Construction,
						Land &		Commercial		1-4 Family
Dec. 31, 2010		Commercial		AG & AGRE		Development		RE		Residential		Consumer		Total
Allowance for loan losses:
Loans individually evaluated
for impairment	$	1,175	$	328	$	8,174	$	6,487	$	1,500	$	-	$	17,664
Loans collectively evaluated
for impairment		459		9		4,326		7,234		1,773		46		13,847
Total ending allowance
balance	$	1,634	$	337	$	12,500	$	13,721	$	3,273	$	46	$	31,511
Loan balances:
Loans individually evaluated
for impairment	$	6,858	$	4,516	$	48,535	$	51,652	$	14,602	$	1	$	126,164
Loans collectively evaluated
for impairment		80,368		39,773		23,543		290,556		158,064		3,403		595,707
Loans with an allowance
recorded:	$	87,226	$	44,289	$	72,078	$	342,208	$	172,666	$	3,404	$	721,871

Troubled Debt Restructurings:

The Company had troubled debt restructurings ("TDRs") of $7.1 million and $5.3 million as of December 31, 2011 and December 31, 2010, respectively. Specific reserves of $0.95 million and $0.4 million were allocated to TDRs as of December 31, 2011 and December 31, 2010, respectively. At December 31, 2011, nonaccrual TDR loans were $6.0 million, as compared to $5.0 million at December 31, 2010. At December 31, 2011 and December 31, 2010, $1.1 million and $0.3 million of TDRs were on accrual status. The Company has not committed to lend any additional amounts to customers with outstanding loans that are classified as TDRs as of December 31, 2011.

During the period ending December 31, 2011, 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 to a below market rate or the payment modification to interest only. Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from 6 months to 16 months.

The following table presents loans by class modified as troubled debt restructurings that occurred during the twelve month period ending December 31, 2011:

	For the Twelve Months Ended December 31, 2011
	Number of Loans	Pre- Modification Recorded Investment		Post - Modification Recorded Investment		Specific Reserves
Commercial
Closed End	-	$	-	$	-	$	-
Line of Credit	-		-		-		-
Agricultural & AGRE	-		-		-		-
Construction, land & development	2		72		72		35
CRE – all other
Owner Occupied	2		1,726		1,726		890
Non-Owner Occupied	-		-		-		-
1-4 family residential
Senior lien	3		57		57		23
Junior lien & lines or credit	1		8		8		-
Consumer	-		-		-		-
Total	8	$	1,863	$	1,863	$	948

The troubled debt restructurings described increased the allowance for loan losses by $0.6 million and resulted in no charge offs during the twelve month period ending December 31, 2011.

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 twelve month period ending December 31, 2011.

	For the Twelve Months Ended
	December 31, 2011
	Number of Loans		Recorded Investment
Commercial
Closed End		-	$	-
Line of Credit		-		-
Agricultural & AGRE		-		-
Construction, land & development		-		-
CRE – all other
Owner Occupied		1		664
Non-Owner Occupied		-		-
1-4 family residential
Senior lien		-		-
Junior lien & lines or credit		-		-
Consumer		-		-
Total		1	$	664

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. The troubled debt restructurings that subsequently defaulted described above was modified to become a troubled debt restructure in 2010 and did not default until 2011. This default did not increase the allowance for loan losses and resulted in charge off's of $0.4 million for the twelve month period ended December 31, 2011.

The Company evaluates loan modifications to determine if the modification constitutes a troubled debt restructure. A loan modification constitutes a troubled debt restructure if the borrower is experiencing financial difficulty and the Company grants a concession it would not otherwise consider. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its loans with the Company's debt in the foreseeable future without the modification. This evaluation is performed under the company's internal underwriting guidelines. TDRs are separately identified for impairment disclosures. If a loan is considered to be collateral dependent loan, the TDR is reported, net, at the fair value of the collateral.

The following tables present data on impaired loans:

				Unpaid				Average		Interest		Cash Basis
	Recorded			Principal		Related		Recorded		Income		Interest
Dec. 31, 2011	Investment			Balance		Allowance		Investment		Recognized		Recognized
Loans with no related allowance recorded:
Commercial
Closed End	$	28	$	28	$	-	$	53	$	1		$	1
Line of Credit		45		308		-		550		-			-
Agricultural & AGRE		65		682		-		62		3			3
Construction, land & development		4,453		14,583		-		10,066		58			58
CRE – all other
Owner Occupied		4,738		5,417		-		6,284		44			41
Non-Owner Occupied		7,749		8,656		-		11,933		442			416
1-4 family residential
Senior lien		1,108		1,576		-		2,198		37			37
Junior lien & lines or credit		683		799		-		697		17			16
Consumer		-		-		-		-		-			-
Subtotal		18,869		32,049		-		31,843		602			572
Loans with an allowance recorded:
Commercial
Closed End	$	1,213	$	1,213	$	449	$	1,380	$	84		$	84
Line of Credit		1,177		1,177		266		2,337		25			14
Agricultural & AGRE		-		-		-		1,039		-			-
Construction, land & development		19,609		30,053		2,228		19,749		(26	)		(27	)
CRE – all other
Owner Occupied		14,851		15,204		3,678		13,152		850			773
Non-owner occupied		8,803		11,142		1,533		11,632		383			353
1-4 family residential
Senior lien		8,396		8,580		1,391		8,062		693			677
Junior lien & lines of credit		375		482		200		386		9			9
Consumer		6		6		5		4		-			-
Subtotal		54,430		67,857		9,750		57,741		2,018			1,883
Total	$	73,299	$	99,906	$	9,750	$	89,584	$	2,620		$	2,455
Commercial	$	62,731	$	88,462	$	8,154	$	78,237	$	1,864		$	1,716
Residential	$	10,562	$	11,438	$	1,591	$	11,343	$	756		$	739
Consumer	$	6	$	6	$	5	$	4	$	-		$	-

				Unpaid				Average		Interest
		Recorded		Principal		Related		Recorded		Income
Dec. 31, 2010		Investment		Balance		Allowance		Investment		Recognized
Loans with no related allowance recorded:
Commercial
Closed End	$	151	$	832	$	-	$	63	$	2
Lines of Credit		3,817		4,973		-		1,575		131
Agricultural & AGRE		68		685		-		143		86
Construction, land & development		8,695		23,949		-		8,188		(395	)
CRE – all other
Owner Occupied		6,575		6,784		-		4,693		196
Non-Owner Occupied		15,554		19,797		-		11,102		117
1-4 family residential
Senior lien		2,391		2,477		-		2,585		94
Junior lien & lines of credit		447		476		-		484		10
Consumer		1		1		-		-		-
Subtotal		37,699		59,974		-		28,833		241
Loans with an allowance recorded:
Commercial
Closed End	$	1,764	$	1,764	$	1,170	$	4,208	$	86
Lines of Credit		1,126		1,126		5		20		54
Agricultural & AGRE		4,448		4,448		328		3,849		155
Construction, land & development		39,840		51,001		8,174		40,972		914
CRE – all other
Owner Occupied		15,982		16,889		3,982		14,818		648
Non-Owner Occupied		13,541		17,806		2,505		13,625		(13	)
1-4 family residential
Senior lien		11,205		11,334		1,200		11,192		957
Junior lien & lines of credit		559		1,478		300		289		(101	)
Consumer		-		-		-		11		-
Subtotal		88,465		105,846		17,664		88,984		2,700
Total	$	126,164	$	165,820	$	17,664	$	117,817	$	2,941
Commercial	$	111,561	$	150,054	$	16,164	$	103,256	$	1,981
Residential	$	14,602	$	15,765	$	1,500	$	14,550	$	960
Consumer	$	1	$	1	$	-	$	11	$	-

	December 31, 2009
Year-end impaired loans for which an allowance has been provided	$	129,655
Year-end impaired loans for which no allowance has been provided		35,923
Total impaired loans	$	165,578
Allowance for loan loss allocated to impaired loans	$	26,717
Average recorded investment in impaired loans		116,260
Interest income recognized from impaired loans		11,376
Cash basis interest income recognized from impaired loans		9,322

Due to the economic conditions facing many of its customers, the Company determined that there were $28.6 million of loans that were classified as impaired but were considered to be performing loans at December 31, 2011 compared to $56.5 million at December 31, 2010.

The following table represents activity related to loan portfolio aging:

														Recorded
		30– 59		60 -89		90 days past								Investment
		days		days		due or		Total Past				Total		90 days
Dec. 31, 2011		past due		past due		nonaccrual		Due		Current		Loans		accruing
Commercial
Closed end	$	1,183	$	-	$	95	$	1,278	$	30,578	$	31,856	$	-
Line of credit		-		43		1,222		1,265		30,861		32,126		-
Agricultural & AGRE		-		-		65		65		39,063		39,128		-
CRE – construction, land &
develop		-		472		23,738		24,210		17,798		42,008		-
CRE – all other
Owner occupied		2,477		1,357		8,633		12,467		119,144		131,611		-
Non-owner occupied		3,207		3,000		6,572		12,779		143,678		156,457		-
Residential – 1-4 family
Senior lien		2,832		691		3,588		7,111		88,093		95,204		-
Junior lien & lines of credit		738		151		806		1,695		49,868		51,563		-
Consumer		10		-		4		14		2,428		2,442		-
Total	$	10,447	$	5,714	$	44,723	$	60,884	$	521,511	$	582,395	$	-
														Recorded
		30– 59		60 -89		90 days past								Investment
		days		days		due or		Total Past				Total		90 days
Dec. 31, 2010		past due		past due		nonaccrual		Due		Current		Loans		accruing
Commercial
Closed end	$	225	$	1	$	321	$	547	$	40,756	$	41,303	$	-
Line of credit		-		-		4,089		4,089		41,834		45,923		-
Agricultural & AGRE		58		-		89		147		44,142		44,289		-
CRE – construction, land &
develop		1,856		2,664		36,355		40,875		31,203		72,078		-
CRE – all other
Owner occupied		633		217		12,361		13,211		139,182		152,393		-
Non-owner occupied		1,194		-		12,765		13,959		175,856		189,815
Residential – 1-4 family
Senior lien		2,111		866		3,143		6,120		108,473		114,593		58
Junior lien & lines of credit		862		300		566		1,728		56,345		58,073		-
Consumer		2		2		-		4		3,400		3,404		-
Total	$	6,941	$	4,050	$	69,689	$	80,680	$	641,191	$	721,871	$	58

The following tables represent data for nonperforming loans:

	Year Ended December 31,
		2011		2010
Commercial
Closed end	$	95	$	321
Line of credit		1,222		4,088
Agricultural & AGRE		65		89
CRE – construction, land & development		23,738		36,355
CRE – all other
Owner occupied		8,633		12,361
Non-owner occupied		6,572		12,765
Residential – 1-4 family
Senior lien		3,588		3,085
Junior lien & lines of credit		806		567
Consumer		4		-
Total	$	44,723	$	69,631

		December 31,
		2009
Loans past due over 90 days still on accrual	$	-
Nonaccrual loans		80,121
Trouble Debt Restructuring		743
Total Nonperforming Loans	$	80,864

Nonperforming loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

Loans made to executive officers, directors, and their affiliates during 2011 were as follows:

Balance at December 31, 2010	$	2,665
New loans, extensions, and modification		22
Repayments		(683	)
Effect of changes in composition of related parties		(87	)
Balance at December 31, 2011	$	1,917