Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2012

The composition of the Company’s loan portfolio as of June 30, 2012 and December 31, 2011 was as follows:


	June 30, 2012						December 31, 2011
(Dollars in thousands)	Amount			Percent			Amount			Percent
Commercial loans	$	173,637			24.5	%	$	179,305			27.2	%
Commercial real estate loans — owner occupied		158,039			22.3	%		170,960			26.0	%
Commercial real estate loans — all other		155,118			21.9	%		121,813			18.5	%
Residential mortgage loans — multi-family		74,930			10.6	%		65,545			10.0	%
Residential mortgage loans — single family		87,227			12.3	%		68,613			10.4	%
Construction loans		—			—	%		2,047			0.3	%
Land development loans		27,488			3.9	%		25,638			3.9	%
Consumer loans		31,959			4.5	%		24,358			3.7	%

Gross loans		708,398			100.0	%		658,279			100.0	%

Deferred fee (income) costs, net		(635	)					(690	)
Allowance for loan losses		(14,648	)					(15,627	)

Loans, net	$	693,115					$	641,962

Allowance for Loan Losses

Set forth below is a summary of the Company’s activity in the ALL during the following periods:


	Three Months Ended June 30, 2012			Six Months Ended June 30, 2012			Year Ended December 31, 2011
	(Dollars in thousands)
Balance, beginning of period	$	13,634		$	15,627		$	18,101
Charged off loans		(991	)		(2,661	)		(2,736	)
Recoveries on loans previously charged off		155			232			1,095
Provision for loan losses		1,850			1,450			(833	)

Balance, end of period	$	14,648		$	14,648		$	15,627

Loan Balances and Related Allowance for Loan Losses, by Portfolio Type

Set forth below is information regarding loan balances and the related allowance for loan losses, by portfolio type, for the six months ended June 30, 2012 and the year ended December 31, 2011.


(Dollars in thousands)	Commercial			Real Estate			Construction and Land Development			Consumer and Single Family Mortgages			Total
Six Months Ended June 30, 2012
Allowance for loan losses:
Balance at beginning of period	$	8,908		$	5,777		$	316		$	626		$	15,627
Charge offs		(1,668	)		(655	)		(80	)		(258	)		(2,661	)
Recoveries		221			1			0			10			232
Provision		947			(219	)		490			232			1,450

Balance at end of period	$	8,408		$	4,904		$	726		$	610		$	14,648

Three Months Ended June 30, 2012
Allowance for loan losses:
Balance at beginning of period	$	6,223		$	6,363		$	265		$	783		$	13,634
Charge offs		(948	)		—			(29	)		(14	)		(991	)
Recoveries		148			—			—			7			155
Provision		2,985			(1,459	)		490			(166	)		1,850

Balance at end of period	$	8,408		$	4,904		$	726		$	610		$	14,648

Allowance balance at June 30, 2012 related to:
Loans individually evaluated for impairment	$	4,049		$	189		$	—		$	—		$	4,238

Loans collectively evaluated for impairment	$	4,359		$	4,715		$	726		$	610		$	10,410

Loans balance at June 30, 2012:
Loans individually evaluated for impairment	$	18,761		$	16,921		$	528		$	733		$	36,943
Loans collectively evaluated for impairment		154,876			371,166			26,960			118,453			671,455

Ending Balance	$	173,637		$	388,087		$	27,488		$	119,186		$	708,398

December 31, 2011
Allowance for loan losses:
Balance at beginning of year	$	10,017		$	6,351		$	830		$	903		$	18,101
Charge offs		(1,218	)		(1,315	)		(138	)		(65	)		(2,736	)
Recoveries		1,067			3			—			25			1,095
Provision		(958	)		738			(376	)		(237	)		(833	)

Balance at end of year	$	8,908		$	5,777		$	316		$	626		$	15,627

Allowance balance at end of year related to:
Loans individually evaluated for impairment	$	1,648		$	1,135		$	—		$	—		$	2,783

Loans collectively evaluated for impairment	$	7,260		$	4,642		$	316		$	626		$	12,844

Loans balance at end of year:
Loans individually evaluated for impairment	$	5,140		$	10,088		$	2,597		$	570		$	18,395
Loans collectively evaluated for impairment		174,165			348,230			25,088			92,401			639,884

Ending Balance	$	179,305		$	358,318		$	27,685		$	92,971		$	658,279

Summary of Delinquency Status of Loans by Portfolio Type

The following table provides a summary of the delinquency status of loans by portfolio type:


(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater		Total Past Due		Current		Total Loans Outstanding		Loans >90 Days and Accruing⁽¹⁾
June 30, 2012
Commercial loans	$	8,757	$	3,482	$	4,775	$	17,014	$	156,623	$	173,637	$	—
Commercial real estate loans – owner-occupied		—		—		5,491		5,491		152,548		158,039		—
Commercial real estate loans – all other		—		—		—		—		155,118		155,118		—
Residential mortgage loans – multi-family		—		—		—		—		74,930		74,930		—
Residential mortgage loans – single family		347		—		—		347		86,880		87,227		—
Construction loans		—		—		—		—		—		—		—
Land development loans		320		—		528		848		26,640		27,488		—
Consumer loans		2		—		—		2		31,957		31,959		—

Total	$	9,426	$	3,482	$	10,794	$	23,702	$	684,696	$	708,398	$	—

December 31, 2011
Commercial loans	$	1,877	$	159	$	2,021	$	4,057	$	175,248	$	179,305	$	—
Commercial real estate loans – owner occupied		—		2,016		—		2,016		168,944		170,960		—
Commercial real estate loans – all other		—		—		—		—		121,813		121,813		—
Residential mortgage loans – multi-family		—		859		—		859		64,686		65,545		—
Residential mortgage loans – single family		80		1,050		492		1,622		66,991		68,613		—
Construction loans		—		—		2,047		2,047		—		2,047		—
Land development loans		—		—		550		550		25,088		25,638		—
Consumer loans		—		—		—		—		24,358		24,358		—

Total	$	1,957	$	4,084	$	5,110	$	11,151	$	647,128	$	658,279	$	—

(1)	At June 30, 2012 the Company did not have any loans that were past due 90 days or more and still accruing interest.

Loans on Nonaccrual Status by Portfolio Type

The following table provides information, as of June 30, 2012 and December 31, 2011, with respect to loans on nonaccrual status, by portfolio type:


	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Nonaccrual loans:
Commercial loans	$	10,280	$	4,702
Commercial real estate loans – owner occupied		5,491		2,016
Commercial real estate loans – all other		4,071		4,214
Residential mortgage loans – single family		524		570
Construction loans		—		2,047
Land development loans		528		550
Consumer loans		—		—

Total	$	20,894	$	14,099

Summary of Loans by Portfolio Type and Company's Internal Credit Quality Ratings

The Company classifies its loan portfolio using internal credit quality ratings. The following table provides a summary of loans by portfolio type and the Company’s internal credit quality ratings as of June 30, 2012 and December 31, 2011, respectively.


(Dollars in thousands)	June 30, 2012		December 31, 2011		Increase (Decrease)
Pass:
Commercial loans	$	135,717	$	149,522		(13,805	)
Commercial real estate loans – owner occupied		137,474		148,380		(10,906	)
Commercial real estate loans – all other		134,013		109,482		24,531
Residential mortgage loans – multi family		71,020		61,190		9,830
Residential mortgage loans – single family		85,418		66,631		18,787
Construction loans		—		—		—
Land development loans		12,035		16,758		(4,723	)
Consumer loans		31,959		24,358		7,601

Total pass loans	$	607,636	$	576,321	$	31,315

Special Mention:
Commercial loans	$	10,250	$	4,570	$	5,680
Commercial real estate loans – owner occupied		—		6,826		(6,826	)
Commercial real estate loans – all other		3,888		2,553		1,335
Residential mortgage loans – multi family		3,910		3,316		594
Residential mortgage loans – single family		347		1,014		(667	)
Construction loans		—		—		—
Land development loans		8,254		8,330		(76	)
Consumer loans		—		—		—

Total special mention loans	$	26,649	$	26,609	$	40

Substandard:
Commercial loans	$	27,670	$	24,551	$	3,119
Commercial real estate loans – owner occupied		20,565		15,754		4,811
Commercial real estate loans – all other		17,218		9,778		7,440
Residential mortgage loans – multi family		—		1,039		(1,039	)
Residential mortgage loans – single family		1,461		968		493
Construction loans		—		2,047		(2,047	)
Land development loans		7,199		550		6,649
Consumer loans		—		—		—

Total substandard loans	$	74,113	$	54,687	$	19,426

Doubtful:
Commercial loans	$	—	$	662	$	(662	)
Commercial real estate loans – owner occupied		—		—		—
Commercial real estate loans – all other		—		—		—
Residential mortgage loans – multi family		—		—		—
Residential mortgage loans – single family		—		—		—
Construction loans		—		—		—
Land development loans		—		—		—
Consumer loans		—		—		—

Total doubtful loans	$	—	$	662	$	(662	)

Total Outstanding Loans, gross:	$	708,398	$	658,279	$	50,119

Nonaccrual Loans and Restructured Loans

The following table sets forth information regarding nonaccrual loans and restructured loans, at June 30, 2012 and December 31, 2011:


(Dollars in thousands)	June 30, 2012		December 31, 2011
Impaired loans:
Nonaccruing loans	$	14,714	$	9,885
Nonaccruing restructured loans		6,180		4,214
Accruing restructured loans		16,180		—
Accruing impaired loans		1,282		4,296

Total impaired loans	$	38,356	$	18,395

Impaired loans less than 90 days delinquent and included in total impaired loans	$	24,163	$	13,285

Additional Information with Respect to Impaired Loans, by Portfolio Type

The table below contains additional information with respect to impaired loans, by portfolio type, for the periods ended June 30, 2012 and December 31, 2011:


	Recorded Investment		Unpaid Principal Balance		Related Allowance⁽¹⁾		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
June 30, 2012
With no related allowance recorded:
Commercial loans	$	8,082	$	10,102	$	—	$	4,170	$	164
Commercial real estate loans – owner occupied		6,919		7,400		—		5,883		12
Commercial real estate loans – all other		5,471		5,471		—		4,350		163
Residential mortgage loans – multi-family		—		—		—		45		—
Residential mortgage loans – single family		1,001		1,125		—		1,063		15
Construction loans		—		—		—		512		—
Land development loans		528		554		—		652		—
Consumer loans		—		—		—		—		—
With an allowance recorded:
Commercial loans	$	12,284	$	12,340	$	4,049	$	5,232	$	268
Commercial real estate loans – owner occupied		—		—		—		965		—
Commercial real estate loans – all other		4,071		4,772		189		4,178		98
Residential mortgage loans – multi-family		—		—		—		45		—
Residential mortgage loans – single family		—		—		—		—		—
Construction loans		—		—		—		512		—
Land development loans		—		—		—		—		—
Consumer loans		—		—		—		—		—
Total:
Commercial loans	$	20,366	$	22,442	$	4,049	$	9,402	$	432
Commercial real estate loans – owner occupied		6,919		7,400		—		6,848		12
Commercial real estate loans – all other		9,542		10,243		189		8,528		261
Residential mortgage loans – multi-family		—		—		—		90		—
Residential mortgage loans – single family		1,001		1,125		—		1,063		15
Construction loans		—		—		—		1,024		—
Land development loans		528		554		—		652		—
Consumer loans		—		—		—		—		—


	Recorded Investment		Unpaid Principal Balance		Related Allowance⁽¹⁾		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
December 31, 2011
2011 With no related allowance recorded:
Commercial loans	$	1,636	$	2,361	$	—	$	1,395	$	38
Commercial real estate loans – owner occupied		3,583		3,583		—		4,621		340
Commercial real estate loans – all other		96		96		—		3,420		3
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		570		581		—		790		15
Construction loans		2,047		2,215		—		621		—
Land development loans		550		554		—		632		11
Consumer loans		—		—		—		32		—
2011 With an allowance recorded:
Commercial loans	$	3,503	$	3,527	$	1,648	$	1,722	$	203
Commercial real estate loans – owner occupied		2,016		2,016		659		3,015		48
Commercial real estate loans – all other		4,214		4,818		347		9,281		—
Residential mortgage loans – multi-family		180		180		129		45		14
Residential mortgage loans – single family		—		—		—		273		—
Construction loans		—		—		—		1,604		—
Land development loans		—		—		—		—		—
Consumer loans		—		—		—		—		—
2011 Total:
Commercial loans	$	5,139	$	5,888	$	1,648	$	3,117	$	241
Commercial real estate loans – owner occupied		5,599		5,599		659		7,636		388
Commercial real estate loans – all other		4,310		4,914		347		12,701		3
Residential mortgage loans – multi-family		180		180		129		45		14
Residential mortgage loans – single family		570		581		—		1,063		15
Construction loans		2,047		2,215		—		2,225		—
Land development loans		550		554		—		632		11
Consumer loans		—		—		—		32		—

(1)

When the discounted cash flows and collateral value or market price equals or exceeds the recorded investment in the loan, then the loan does not require an allowance. This typically occurs when the impaired loans have been partially charged-off and/or there have been interest payments received and applied to the loan balance.

Troubled Debt Restructurings


	June 30, 2012
(Dollars in thousands)	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment		End of Period Balance
Performing
Commercial loans		3	$	9,280	$	9,280	$	9,280
Commercial real estate – all other		3		5,471		5,471		5,471
Land development loans		1		1,429		1,429		1,429

		7		16,180		16,180		16,180
Nonperforming
Commercial loans		4		2,294		2,057		2,045
Commercial real estate – all other		1		4,942		4,818		4,071
Residential mortgage loans – single family		1		171		64		64

		6		7,407		6,939		6,180
Total Troubled Debt Restructurings		13	$	23,587	$	23,119	$	22,360


	December 31, 2011
	Number of loans		Pre- Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment		End of Period Balance
Nonperforming
Commercial real estate-all other		1		4,942		4,818		4,214

Total troubled debt restructurings		1	$	4,942	$	4,818	$	4,214