XML 52 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
LOANS HELD FOR INVESTMENT
 6 Months Ended
Jun. 30, 2012
Receivables [Abstract]  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE F - LOANS HELD FOR INVESTMENT

 

The following is a summary of loans at June 30, 2012 and December 31, 2011:

 

    June 30, 2012     December 31, 2011  
Commercial real estate   $ 288,633,374     $ 310,314,968  
Residential real estate     63,860,822       67,004,033  
Construction and development     58,972,695       83,929,770  
Commercial     46,816,851       39,433,800  
Home equity loans and lines of credit     46,122,971       48,940,064  
Consumer     3,943,943       3,299,958  
                 
Total loans     508,350,656       552,922,593  
                 
Less:                
Deferred loan fees     (66,151 )     (45,532 )
Allowance for loan losses     (2,113,206 )     (227,000 )
                 
Net loans   $ 506,171,299     $ 552,650,060  

 

Loans are primarily made in the Company’s market area of North Carolina, principally Wake, Johnston, Lee, Moore, and New Hanover counties. Real estate loans can be affected by the condition of the local real estate market. Commercial and consumer and other loans can be affected by the local economic conditions.

  

Purchased Credit-Impaired Loans

 

Changes in accretable yield, or income expected to be collected, related to purchased credit-impaired (“PCI”) loans in the six months ended June 30, 2012 were as follows:

 

Balance at January 1, 2012   $ 29,645,444  
New loans purchased     -  
Accretion of income     (8,354,315 )
Reclassifications from nonaccretable difference     6,995,726  
Disposals     (198,929 )
         
Balance at June 30, 2012   $ 28,087,926  

 

The accretable yield represents the excess of estimated cash flows expected to be collected over the initial fair value of the PCI loans, which is their fair value at the time of the Piedmont Investment. The accretable yield is accreted into interest income over the estimated life of the PCI loans using the level yield method. The accretable yield will change due to changes in:

 

· the estimate of the remaining life of PCI loans which may change the amount of future interest income, and possibly principal, expected to be collected;

 

· the estimate of the amount of contractually required principal and interest payments over the estimated life that will not be collected (the nonaccretable difference); and

 

· indices for PCI loans with variable rates of interest.

 

For PCI loans, the impact of loan modifications is included in the evaluation of expected cash flows for subsequent decreases or increases of cash flows. For variable rate PCI loans, expected future cash flows will be recalculated as the rates adjust over the lives of the loans. At acquisition, the expected future cash flows were based on the variable rates that were in effect at that time.

 

Allowance for Loan Losses

 

The following is a summary of changes in the allowance for loan losses and the ending recorded investment in loans by portfolio segment and based on impairment method as of and for the three and six months ended June 30, 2012 and 2011 (in thousands):

 

    Three Months Ended June 30, 2012  
          Commercial     Residential                    
    Commercial     Real Estate     Real Estate     Construction     Consumer     Total  
                                     
Allowance for loan losses:                                                
                                                 
Beginning balance   $ 178     $ 79     $ 364     $ 100     $ 16     $ 737  
Charge-offs     (90 )     -       (443 )     (46 )     (13 )     (592 )
Recoveries     -       -       -       -       -       -  
Provision for loan losses     290       547       868       264       (1 )     1,968  
Ending balance   $ 378     $ 626     $ 789     $ 318     $ 2     $ 2,113  

  

    Six Months Ended June 30, 2012  
          Commercial     Residential                    
    Commercial     Real Estate     Real Estate     Construction     Consumer     Total  
Allowance for loan losses:                                                
                                                 
Beginning balance   $ 30     $ 126     $ 47     $ 21     $ 3     $ 227  
Charge-offs     (105 )     -       (714 )     (46 )     (21 )     (886 )
Recoveries     -       -       -       -       -       -  
Provision for loan losses     453       500       1,456       343       20       2,772  
Ending balance   $ 378     $ 626     $ 789     $ 318     $ 2     $ 2,113  
                                                 
Ending balance:                                                
Individually evaluated for impairment   $ -     $ -     $ 95     $ -     $ -     $ 95  
Collectively evaluated for impairment   $ 190     $ 626     $ 110     $ 318     $ 2     $ 1,246  
Purchased credit-impaired   $ 188     $ -     $ 584     $ -     $ -     $ 772  
                                                 
Loans:                                                
                                                 
Ending balance:                                                
Individually evaluated for impairment   $ -     $ -     $ 1,162     $ -     $ -     $ 1,162  
Collectively evaluated for impairment     28,285       149,796       83,039       14,638       3,643       279,401  
Purchased credit-impaired     18,532       138,837       25,783       44,335       301       227,788  
Total   $ 46,817     $ 288,633     $ 109,984     $ 58,973     $ 3,944     $ 508,351  

 

    Three Months Ended June 30, 2011  
          Commercial     Residential                    
    Commercial     Real Estate     Real Estate     Construction     Consumer     Total  
                                     
Allowance for loan losses:                                                
Beginning balance   $ 2,709     $ 7,263     $ 4,365     $ 9,077     $ 71     $ 23,485  
Charge-offs     (509 )     (455 )     (667 )     (2,670 )     (8 )     (4,309 )
Recoveries     26       -       45       36       1       108  
Provision for loan losses     679       1,207       359       784       6       3,035  
Ending balance   $ 2,905     $ 8,015     $ 4,102     $ 7,227     $ 70     $ 22,319  

  

    Six Months Ended June 30, 2011  
          Commercial     Residential                    
    Commercial     Real Estate     Real Estate     Construction     Consumer     Total  
Allowance for loan losses:                                                
Beginning balance   $ 2,689     $ 5,345     $ 2,813     $ 9,775     $ 80     $ 20,702  
Charge-offs     (778 )     (671 )     (1,006 )     (6,431 )     (22 )     (8,908 )
Recoveries     62       -       55       348       1       466  
Provision for loan losses     932       3,341       2,240       3,535       11       10,059  
Ending balance   $ 2,905     $ 8,015     $ 4,102     $ 7,227     $ 70     $ 22,319  
                                                 
Ending balance:                                                
Individually evaluated for impairment   $ 1,295     $ 4,211     $ 2,223     $ 4,897     $ 34     $ 12,660  
Collectively evaluated for impairment   $ 1,610     $ 3,804     $ 1,879     $ 2,330     $ 36     $ 9,659  

 

The following is a summary of the ending allowance for loans losses and the recorded investment in loans by portfolio segment and based on impairment method at December 31, 2011 (in thousands):

 

    At December 31, 2011  
          Commercial     Residential                    
    Commercial     Real Estate     Real Estate     Construction     Consumer     Total  
Allowance for loan losses:                                                
Ending balance:                                                
Individually evaluated for impairment   $ -     $ -     $ -     $ -     $ -     $ -  
Collectively evaluated for impairment   $ 30     $ 126     $ 47     $ 21     $ 3     $ 227  
Purchased credit-impaired   $ -     $ -     $ -     $ -     $ -     $ -  
                                                 
Loans:                                                
Ending balance:                                                
Individually evaluated for impairment   $ -     $ -     $ -     $ -     $ -     $ -  
Collectively evaluated for impairment     12,426       149,654       79,588       19,315       2,850       263,833  
Purchased credit-impaired     27,008       160,661       36,356       64,615       450       289,090  
Total   $ 39,434     $ 310,315     $ 115,944     $ 83,930     $ 3,300     $ 552,923  

  

Analysis of Credit Quality

 

The Company categorizes 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. The Company analyzes loans individually by classifying the loans as to credit risk. The Company uses the following general definitions for risk ratings:

 

Pass. These loans range from superior quality with minimal credit risk to loans requiring heightened management attention but that are still an acceptable risk and continue to perform as contracted.

 

Special Mention. 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.

 

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.

 

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

 

          Special                    
    Pass     Mention     Substandard     Doubtful     Total  
June 30, 2012                                        
                                         
Acquired loans                                        
Commercial:                                        
Real estate   $ 200,028     $ 44,679     $ 13,830     $ -     $ 258,537  
Construction     24,059       19,403       6,605       381       50,448  
Commercial and industrial     25,944       1,579       1,911       -       29,434  
Lines of credit     330       12       -       -       342  
Consumer:                                        
Residential real estate     45,007       4,773       5,445       135       55,360  
Construction     2,997       440       342       -       3,779  
Home equity     39,641       1,679       2,657       -       43,977  
Consumer     2,375       325       116       -       2,816  
                                         
Total   $ 340,381     $ 72,890     $ 30,906     $ 516     $ 444,693  

 

          Special                    
  Pass     Mention     Substandard     Doubtful     Total  
June 30, 2012                                        
                                         
Loans originated by the Successor Company                                        
Commercial:                                        
Real estate   $ 30,096     $ -     $ -     $ -     $ 30,096  
Construction     2,981       -       82       -       3,063  
Commercial and industrial     17,011       -       -       -       17,011  
Lines of credit     30       -       -       -       30  
Consumer:                                        
Residential real estate     8,501       -       -       -       8,501  
Construction     1,683       -       -       -       1,683  
Home equity     2,146       -       -       -       2,146  
Consumer     1,128       -       -       -       1,128  
                                         
Total   $ 63,576     $ -     $ 82     $ -     $ 63,658  

 

          Special                    
    Pass     Mention     Substandard     Doubtful     Total  
December 31, 2011                                        
                                         
Acquired loans                                        
Commercial:                                        
Real estate   $ 253,505     $ 34,877     $ 13,907     $ 379     $ 302,668  
Construction     39,927       22,482       12,402       519       75,330  
Commercial and industrial     33,566       2,212       2,258       -       38,036  
Lines of credit     403       1       1       -       405  
Consumer:                                        
Residential real estate     51,665       5,155       8,300       145       65,265  
Construction     7,332       176       758       -       8,266  
Home equity     42,766       2,064       3,684       -       48,514  
Loans to individuals     2,795       336       43       -       3,174  
                                         
Total   $ 431,959     $ 67,303     $ 41,353     $ 1,043     $ 541,658  
                                         
Loans originated by the Successor Company                                        
Commercial:                                        
Real estate   $ 7,647     $ -     $ -     $ -     $ 7,647  
Construction     138       -       -       -       138  
Commercial and industrial     894       99       -       -       993  
Lines of credit     -       -       -       -       -  
Consumer:                                        
Residential real estate     1,739       -       -       -       1,739  
Construction     196       -       -       -       196  
Home equity     426       -       -       -       426  
Loans to individuals     126       -       -       -       126  
                                         
Total   $ 11,166     $ 99     $ -     $ -     $ 11,265  

  

The following table presents the aging and accrual status of the loan portfolio at June 30, 2012 and December 31, 2011 by class of loans (in thousands):

 

          Greater than                          
    30 - 89     89 Days                          
    Days     Past Due           Total     Loans Not        
    Past Due     Accruing     Non-accrual     Past Due     Past Due     Total  
June 30, 2012                                                
                                                 
Acquired loans                                                
Commercial:                                                
Real estate   $ 799     $ 5,110     $ -     $ 5,909     $ 252,628     $ 258,537  
Construction     388       5,313       30       5,731       44,717       50,448  
Commercial and industrial     265       633       24       922       28,512       29,434  
Lines of credit     7       -       -       7       335       342  
Consumer:                                                
Residential real estate     392       2,982       -       3,374       51,986       55,360  
Construction     67       62       -       129       3,650       3,779  
Home equity     1,569       -       507       2,076       41,901       43,977  
Loans to individuals     29       -       101       130       2,686       2,816  
                                                 
Total   $ 3,516     $ 14,100     $ 662     $ 18,278     $ 426,415     $ 444,693  
                                                 
Loans originated by the Successor Company                                                
Commercial:                                                
Real estate   $ -     $ -     $ -     $ -     $ 30,096     $ 30,096  
Construction     -       -       -       -       3,063       3,063  
Commercial and industrial     -       -       -       -       17,011       17,011  
Lines of credit     -       -       -       -       30       30  
Consumer:                                                
Residential real estate     -       -       -       -       8,501       8,501  
Construction     -       -       -       -       1,683       1,683  
Home equity     -       -       -       -       2,146       2,146  
Loans to individuals     -       -       -       -       1,128       1,128  
                                                 
Total   $ -     $ -     $ -     $ -     $ 63,658     $ 63,658  

 

        Greater than                           
    30 - 89     89 Days                          
    Days     Past Due         Total     Loans Not         
    Past Due     Accruing     Non-accrual     Past Due     Past Due     Total  
December 31, 2011                                                
                                                 
Acquired loans                                                
Commercial:                                                
Real estate   $ 3,878     $ 6,101     $ -     $ 9,979     $ 292,689     $ 302,668  
Construction     4,809       10,328       -       15,137       60,193       75,330  
Commercial and industrial     925       797       -       1,722       36,314       38,036  
Lines of credit     -       1       -       1       404       405  
Consumer:                                                
Residential real estate     2,289       4,148       -       6,437       58,828       65,265  
Construction     652       382       -       1,034       7,232       8,266  
Home equity     740       1,128       -       1,868       46,646       48,514  
Loans to individuals     3       3       -       6       3,168       3,174  
                                                 
Total   $ 13,296     $ 22,888     $ -     $ 36,184     $ 505,474     $ 541,658  

  

          Greater than                          
    30 - 89     89 Days                          
    Days     Past Due         Total     Loans Not         
    Past Due     Accruing     Non-accrual     Past Due     Past Due     Total  
December 31, 2011                                                
                                                 
Loans originated by the Successor Company:                                                
Commercial:                                                
Real estate   $ -     $ -     $ -     $ -     $ 7,647     $ 7,647  
Construction     -       -       -       -       138       138  
Commercial and industrial     -       -       -       -       993       993  
Lines of credit     -       -       -       -       -       -  
Consumer:                                                
Residential real estate     -       -       -       -       1,739       1,739  
Construction     -       -       -       -       196       196  
Home equity     -       -       -       -       426       426  
Loans to individuals     -       -       -       -       126       126  
                                                 
Total   $ -     $ -     $ -     $ -     $ 11,265     $ 11,265  

 

Non-accrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. Loans past due 90 days or more and still accruing primarily include purchased credit-impaired loans which are accreting interest at a pool level yield. No loans originated by the Successor Company or purchased non-impaired loans had been restructured in a troubled debt restructuring at June 30, 2012.

 

The following table is a summary of impaired loans, which exclude purchased credit-impaired loans, including the related allowance for loan losses at June 30, 2012 (in thousands):

 

          Unpaid           Average     Interest  
    Recorded     Principal     Related     Recorded     Income  
    Investment     Balance     Allowance     Investment     Recognized  
With no related allowance recorded:                                        
Commercial real estate   $ -     $ -     $ -     $ -     $ -  
Residential real estate     -       -       -       -       -  
Construction and development     -       -       -       -       -  
Commercial     -       -       -       -       -  
Home equity loans and lines     209       218       -       207       -  
Consumer     -       -       -       -       -  
                                         
      209       218       -       207       -  
With an allowance recorded:                                        
Commercial real estate     -       -       -       -       -  
Residential real estate     -       -       -       -       -  
Construction and development     -       -       -       -       -  
Commercial     -       -       -       -       -  
Home equity lines and loans     953       1,487       95       934       -  
Consumer     -       -       -       -       -  
                                         
      953       1,487       95       934       -  
Totals:                                        
Commercial     -       -       -       -       -  
Residential     1,162       1,705       95       1,141       -  
Consumer     -       -       -       -       -  
                                         
Total   $ 1,162     $ 1,705     $ 95     $ 1,141     $ -  

 

The Company had no impaired loans at December 31, 2011.