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Loans
 6 Months Ended
Jun. 30, 2012
Loans [Abstract]  
Loans

6.  Loans

 

The composition of the loan portfolio by segment, excluding loans held for resale, is presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

 

 

December 31, 2011

 

 

 

June 30, 2011

 

 

Dollar

Percent

 

 

Dollar

Percent

 

 

Dollar

Percent

 

 

Amount

of Total

 

 

Amount

of Total

 

 

Amount

of Total

 

 

 

(In Thousands)

 

Commercial

$

240,395

36.6

%

 

$

252,689

39.1

%

 

$

232,765

36.7

%

Real estate construction

 

 40,922

6.2

%

 

 

 40,182

6.2

%

 

 

 47,639

7.5

%

Real estate term

 

 340,530

51.8

%

 

 

 315,860

48.9

%

 

 

 314,093

49.5

%

Home equity lines and other consumer

 

 38,260

5.8

%

 

 

 39,834

6.2

%

 

 

 42,458

6.7

%

          Subtotal

$

660,107

 

 

 

$

648,565

 

 

 

$

636,955

 

 

Less: Unearned origination fee,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          net of origination costs

 

 (3,257)

(0.5)

%

 

 

 (3,003)

(0.5)

%

 

 

 (2,825)

(0.4)

%

          Total loans

$

656,850

 

 

 

$

645,562

 

 

 

$

634,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

            At June 30, 2012, approximately 19% of the portfolio was scheduled to mature over the next 12 months, and 20% was scheduled to mature between July 1, 2013, and June 30, 2017.

 

            As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends in past due and nonaccrual loans, gross and net charge offs, and movement in loan balances within the risk classifications.  The Company utilizes a risk grading matrix to assign a risk classification to each of its loans.  Loans are graded on a scale of 1 to 8.  A description of the general characteristics of the eight risk classifications are as follows:  

 

·         Risk Code 1 - Excellent:  Loans in this grade are those where the borrower has substantial financial capacity, above average profit margins, and excellent liquidity.  Cash flow has been consistent and is well in excess of debt servicing requirements.  Loans in this grade may be secured by cash and/or negotiable securities having a readily ascertainable market value and may also be fully guaranteed by the U.S. Government, and other approved government and financial institutions.  Loans in this grade have borrowers with exceptional credit ratings and would compare to AA ratings as established by Standard & Poor's. 

·         Risk Code 2 – Good:  Loans in this grade are those to borrowers who have demonstrated satisfactory asset quality, earnings history, liquidity and other adequate margins of creditor protection.  Borrowers exhibit positive fundamentals in terms of working capital, cash flow sufficient to service the debt, and debt to worth ratios.  Borrowers for loans in this grade are capable of absorbing normal economic or other setbacks without difficulty.  The borrower may exhibit some weaknesses or varying historical profitability.  Management is considered adequate in all cases.  Borrowing facilities may be unsecured or secured by customary acceptable collateral with well-defined market values.  Additional support for the loan is available from secondary repayment sources and/or adequate guarantors.

·         Risk Code 3 – Satisfactory:  Loans in this grade represent moderate credit risk due to some instability in borrower capacity and financial condition.  These loans generally require average loan officer attention.  Characteristics of assets in this classification may include: marginal debt service coverage, newly established ventures, limited or unstable earnings history, some difficulty in absorbing normal setbacks, and atypical maturities, collateral or other exceptions to established loan policies.  In all cases, such weaknesses are offset by well secured collateral positions and/or acceptable guarantors.

·         Risk Code 4 - Watch List:  Loans in this grade are acceptable, but additional attention is needed.  This is an interim classification reserved for loans that are intrinsically creditworthy but which require specific attention.  Loans may have documentation deficiencies that are deemed correctable, may be contrary to current lending policies, or may have insufficient credit or financial information.  Loans in this grade may also be characterized by borrower failure to comply with loan covenants or to provide other required information.  If such conditions are not resolved within 90 days from the date of the assignment of Risk Code 4, the loan may warrant further downgrade.

·         Risk Code 5 - Special Mention:  Loans in this grade have had a deterioration of financial condition or collateral value, but are still reasonably secured by collateral or net worth of the borrower.  Although the Company is presently protected from loss, potential weaknesses are apparent which, if not corrected, could cause future problems.  Loans in this classification warrant more than the ordinary amount of attention but have not yet reached the point of concern for loss.  Loans in this category have deteriorated sufficiently that they would have difficulty in refinancing.  Loans in this classification may show one or more of the following characteristics: inadequate loan documentation, deteriorating financial condition or control over collateral, economic or market conditions which may adversely impact the borrower in the future, unreliable or insufficient credit or collateral information, adverse trends in operations that are not yet jeopardizing repayment, or adverse trends in secondary repayment sources.

·         Risk Code 6 – Substandard:  Loans in this grade are no longer adequately protected due to declining net worth of the borrower, lack of earning capacity, or insufficient collateral.  The possibility for loss of some portion of the loan principal cannot be ruled out.  Loans in this grade exhibit well-defined weaknesses that bring normal repayment into doubt.  Some of these weaknesses may include: unprofitable or poor earnings trends of the borrower or property, declining liquidity, excessive debt, significant unfavorable industry comparisons, secondary repayment sources are not available, or there is a possibility of a protracted work-out.

·         Risk Code 7 – Doubtful:  Loans in this grade exhibit the same weaknesses as those classified Substandard, but the traits are more pronounced.  Collection in full is improbable, however the extent of the loss may be indeterminable due to pending factors which may yet occur that could salvage the loan, such as possible pledge of additional collateral, sale of assets, merger, acquisition or refinancing.  Borrowers in this grade may be on the verge of insolvency or bankruptcy, and stringent action is required on the part of the loan officer.

·         Risk Code 8 – Loss:  Loans in this grade are those that are largely non-collectible or those in which ultimate recovery is too distant in the future to warrant continuance as a bankable asset.  This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer charging the loan off even though recovery may be affected in the future.

·         A risk rating is assigned for each loan at origination.  The risk ratings for commercial, real estate construction, and real estate term loans may change throughout the life of the loan as a multitude of risk factors change.  The risk rating for consumer loans may change as loans become delinquent.  Delinquent loans are those that are thirty days or more past due. 

            The loan portfolio, segmented by risk class for the periods indicated, is shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

Real estate construction

 

Real estate term

 

 Home equity lines and other consumer

 

Total

 

 

(In Thousands)

June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Code 1 - Excellent

$

968

 

$

 -

 

$

 -

 

$

426

 

$

1,394

Risk Code 2 - Good

 

 61,999

 

 

 289

 

 

 62,521

 

 

 818

 

 

 125,627

Risk Code 3 - Satisfactory

 

 159,236

 

 

 36,769

 

 

 264,425

 

 

 34,274

 

 

 494,704

Risk Code 4 - Watch

 

 6,837

 

 

 451

 

 

 1,370

 

 

 1,909

 

 

 10,567

Risk Code 5 - Special Mention

 

 8,717

 

 

 370

 

 

 3,910

 

 

 167

 

 

 13,164

Risk Code 6 - Substandard

 

 2,215

 

 

 3,043

 

 

 8,132

 

 

 666

 

 

 14,056

Risk Code 7 - Doubtful

 

 423

 

 

 -

 

 

 172

 

 

 -

 

 

 595

   Subtotal

$

240,395

 

$

40,922

 

$

340,530

 

$

38,260

 

$

660,107

Less: Unearned origination fees, net of origination costs

 

 

 

 

 

 

 

 

 

 

 

 (3,257)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

656,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Code 1 - Excellent

$

540

 

$

 -

 

$

 -

 

$

575

 

$

1,115

Risk Code 2 - Good

 

 65,315

 

 

 -

 

 

 55,617

 

 

 849

 

 

 121,781

Risk Code 3 - Satisfactory

 

 164,767

 

 

 29,063

 

 

 247,330

 

 

 35,914

 

 

 477,074

Risk Code 4 - Watch

 

 8,033

 

 

 3,579

 

 

 1,102

 

 

 1,497

 

 

 14,211

Risk Code 5 - Special Mention

 

 9,671

 

 

 -

 

 

 3,339

 

 

 364

 

 

 13,374

Risk Code 6 - Substandard

 

 3,694

 

 

 7,540

 

 

 8,026

 

 

 635

 

 

 19,895

Risk Code 7 - Doubtful

 

 669

 

 

 -

 

 

 446

 

 

 -

 

 

 1,115

   Subtotal

$

252,689

 

$

40,182

 

$

315,860

 

$

39,834

 

$

648,565

Less: Unearned origination fees, net of origination costs

 

 

 

 

 

 

 

 

 

 

 

 (3,003)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

645,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Code 1 - Excellent

$

725

 

$

 -

 

$

 -

 

$

704

 

$

1,429

Risk Code 2 - Good

 

 75,285

 

 

 -

 

 

 58,182

 

 

 908

 

 

 134,375

Risk Code 3 - Satisfactory

 

 131,788

 

 

 33,918

 

 

 240,814

 

 

 37,698

 

 

 444,218

Risk Code 4 - Watch

 

 8,842

 

 

 3,431

 

 

 1,285

 

 

 2,193

 

 

 15,751

Risk Code 5 - Special Mention

 

 10,834

 

 

 -

 

 

 3,260

 

 

 496

 

 

 14,590

Risk Code 6 - Substandard

 

 4,822

 

 

 10,290

 

 

 10,552

 

 

 459

 

 

 26,123

Risk Code 7 - Doubtful

 

 469

 

 

 -

 

 

 -

 

 

 -

 

 

 469

   Subtotal

$

232,765

 

$

47,639

 

$

314,093

 

$

42,458

 

$

636,955

Less: Unearned origination fees, net of origination costs

 

 

 

 

 

 

 

 

 

 

 

 (2,825)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

634,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

            Loans are carried at their principal amount outstanding, net of charge-offs, unamortized fees and direct loan origination costs.  Loan balances are charged to the Allowance for Loan Losses (“Allowance”) when management believes that collection of principal is unlikely.  Interest income on loans is accrued and recognized on the principal amount outstanding except for loans in a nonaccrual status.  All classes of loans are placed on nonaccrual and considered impaired when management believes doubt exists as to the collectability of the interest or principal.  Cash payments received on nonaccrual loans are directly applied to the principal balance.  Generally, a loan may be returned to accrual status when the delinquent principal and interest are brought current in accordance with the terms of the loan agreement.  Additionally, certain ongoing performance criteria, which generally includes a performance period of six months, must be met in order for a loan to be returned to accrual status.  Loans are reported as past due when installment payments, interest payments, or maturity payments are past due based on contractual terms.    

 

            Nonaccrual loans totaled $5.9 million, $7.4 million and $9.6 million at June 30, 2012, December 31, 2011, and June 30, 2011, respectively.  Nonaccrual loans at the periods indicated, by segment are presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

December 31, 2011

 

June 30, 2011

 

 

(In Thousands)

Commercial

$

2,169

 

$

3,360

 

$

4,218

Real estate construction

 

 843

 

 

 2,355

 

 

 2,033

Real estate term

 

 2,602

 

 

 1,477

 

 

 3,094

Home equity lines and other consumer

 

 308

 

 

 169

 

 

 286

     Total

$

5,922

 

$

7,361

 

$

9,631

 

 

 

 

 

 

 

 

 

            Past due loans and nonaccrual loans at the periods indicated are presented below by loan class:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30-59 Days Past Due Still Accruing

 

60-89 Days Past Due Still Accruing

 

Greater Than 90 Days Still Accruing

 

Nonaccrual

 

Total Past Due

 

Current

 

Total Financing Receivables

 

 

(In Thousands)

June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Code 1 - Excellent

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

 1,394

 

$

 1,394

Risk Code 2 - Good

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 125,627

 

 

 125,627

Risk Code 3 - Satisfactory

 

 111

 

 

 -

 

 

 -

 

 

 -

 

 

 111

 

 

 494,593

 

 

 494,704

Risk Code 4 - Watch

 

 3,037

 

 

 -

 

 

 -

 

 

 -

 

 

 3,037

 

 

 7,530

 

 

 10,567

Risk Code 5 - Special Mention

 

 -

 

 

 -

 

 

 -

 

 

 148

 

 

 148

 

 

 13,016

 

 

 13,164

Risk Code 6 - Substandard

 

 54

 

 

 -

 

 

 91

 

 

 5,179

 

 

 5,324

 

 

 8,732

 

 

 14,056

Risk Code 7 - Doubtful

 

 -

 

 

 -

 

 

 -

 

 

 595

 

 

 595

 

 

 -

 

 

 595

   Subtotal

$

3,202

 

$

 -

 

$

91

 

$

5,922

 

$

9,215

 

$

650,892

 

$

660,107

Less: Unearned origination fees,  net of origination costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (3,257)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

656,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Code 1 - Excellent

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

 1,115

 

$

 1,115

Risk Code 2 - Good

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 121,781

 

 

 121,781

Risk Code 3 - Satisfactory

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 477,074

 

 

 477,074

Risk Code 4 - Watch

 

 387

 

 

 170

 

 

 -

 

 

 -

 

 

 557

 

 

 13,654

 

 

 14,211

Risk Code 5 - Special Mention

 

 86

 

 

 -

 

 

 -

 

 

 170

 

 

 256

 

 

 13,118

 

 

 13,374

Risk Code 6 - Substandard

 

 -

 

 

 21

 

 

 -

 

 

 6,076

 

 

 6,097

 

 

 13,798

 

 

 19,895

Risk Code 7 - Doubtful

 

 2

 

 

 -

 

 

 -

 

 

 1,115

 

 

 1,117

 

 

 (2)

 

 

 1,115

   Subtotal

$

475

 

$

191

 

$

 -

 

$

7,361

 

$

8,027

 

$

640,538

 

$

648,565

Less: Unearned origination fees,  net of origination costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (3,003)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

645,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Code 1 - Excellent

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

1,429

 

$

1,429

Risk Code 2 - Good

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 134,375

 

 

 134,375

Risk Code 3 - Satisfactory

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 444,218

 

 

 444,218

Risk Code 4 - Watch

 

 99

 

 

 22

 

 

 -

 

 

 -

 

 

 121

 

 

 15,630

 

 

 15,751

Risk Code 5 - Special Mention

 

 240

 

 

 443

 

 

 225

 

 

 -

 

 

 908

 

 

 13,682

 

 

 14,590

Risk Code 6 - Substandard

 

 1,247

 

 

 -

 

 

 -

 

 

 9,163

 

 

 10,410

 

 

 15,713

 

 

 26,123

Risk Code 7 - Doubtful

 

 -

 

 

 -

 

 

 -

 

 

 468

 

 

 468

 

 

 1

 

 

 469

   Subtotal

$

1,586

 

$

465

 

$

225

 

$

9,631

 

$

11,907

 

$

625,048

 

$

636,955

Less: Unearned origination fees,  net of origination costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (2,825)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

634,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

            The Company considers a loan to be impaired when it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Once a loan is determined to be impaired, the impairment is measured based on the present value of the expected future cash flows discounted at the loan’s effective interest rate, except that if the loan is collateral dependent, the impairment is measured by using the fair value of the loan’s collateral.  Nonperforming loans greater than $50,000 are individually evaluated for impairment based upon the borrower’s overall financial condition, resources, and payment record, and the prospects for support from any financially responsible guarantors.

 

            At June 30, 2012, December 31, 2011 and June 30, 2011, the recorded investment in loans that are considered to be impaired was $14.2 million, $9.5 million, and $12.7 million, respectively.  The following table presents information about impaired loans by class as of the periods indicated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recorded Investment

 

Unpaid Principal Balance

 

Related Allowance

 

Average Recorded Investment

 

Interest Income Recognized

 

 

(In Thousands)

June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Commercial - risk code 4 watch

$

 192

 

$

 192

 

$

 -

 

$

 260

 

$

 7

     Commercial - risk code 5 special mention

 

 294

 

 

 294

 

 

 -

 

 

 285

 

 

 11

     Commercial - risk code 6 substandard

 

 1,559

 

 

 2,203

 

 

 -

 

 

 1,822

 

 

 6

     Commercial - risk code 8 loss

 

 -

 

 

 224

 

 

 -

 

 

 112

 

 

 -

     Real estate construction - risk code 3 satisfactory

 

 2,827

 

 

 2,827

 

 

 -

 

 

 2,900

 

 

 134

     Real estate term - risk code 5 special mention

 

 1,074

 

 

 1,152

 

 

 -

 

 

 1,068

 

 

 32

     Real estate term - risk code 6 substandard

 

 4,035

 

 

 4,035

 

 

 -

 

 

 4,071

 

 

 163

     Home equity lines and other consumer - risk code 4 watch

 

 94

 

 

 94

 

 

 -

 

 

 96

 

 

 3

     Home equity lines and other consumer - risk code 6 substandard

 

 113

 

 

 113

 

 

 -

 

 

 118

 

 

 4

 

$

 10,188

 

$

11,134

 

$

 -

 

$

10,732

 

$

360

With an allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Commercial - risk code 6 substandard

$

 265

 

$

 265

 

$

 141

 

$

 280

 

$

 -

     Commercial - risk code 7 doubtful

 

 423

 

 

 423

 

 

 401

 

 

 434

 

 

 -

     Real estate construction - risk code 6 substandard

 

 843

 

 

 843

 

 

 263

 

 

 924

 

 

 -

     Real estate term - risk code 6 substandard

 

 2,078

 

 

 2,358

 

 

 61

 

 

 2,398

 

 

 -

     Real estate term - risk code 7 doubtful

 

 172

 

 

 446

 

 

 6

 

 

 309

 

 

 -

     Home equity lines and other consumer - risk code 6 substandard

 

 227

 

 

 227

 

 

 49

 

 

 228

 

 

 -

 

$

 4,008

 

$

 4,562

 

$

 921

 

$

 4,573

 

$

 -

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Commercial - risk code 4 watch

$

 192

 

$

 192

 

$

 -

 

$

 260

 

$

 7

     Commercial - risk code 5 special mention

 

 294

 

 

 294

 

 

 -

 

 

 285

 

 

 11

     Commercial - risk code 6 substandard

 

 1,824

 

 

 2,468

 

 

 141

 

 

 2,102

 

 

 6

     Commercial - risk code 7 doubtful

 

 423

 

 

 423

 

 

 401

 

 

 434

 

 

 -

     Commercial - risk code 8 loss

 

 -

 

 

 224

 

 

 -

 

 

 112

 

 

 -

     Real estate construction - risk code 3 satisfactory

 

 2,827

 

 

 2,827

 

 

 -

 

 

 2,900

 

 

 134

     Real estate construction - risk code 6 substandard

 

 843

 

 

 843

 

 

 263

 

 

 924

 

 

 -

     Real estate term - risk code 5 special mention

 

 1,074

 

 

 1,152

 

 

 -

 

 

 1,068

 

 

 32

     Real estate term - risk code 6 substandard

 

 6,113

 

 

 6,393

 

 

 61

 

 

 6,469

 

 

 163

     Real estate term - risk code 7 doubtful

 

 172

 

 

 446

 

 

 6

 

 

 309

 

 

 -

     Home equity lines and other consumer - risk code 4 watch

 

 94

 

 

 94

 

 

 -

 

 

 96

 

 

 3

     Home equity lines and other consumer - risk code 6 substandard

 

 340

 

 

 340

 

 

 49

 

 

 346

 

 

 4

 

$

 14,196

 

$

 15,696

 

$

 921

 

$

 15,305

 

$

 360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Commercial - risk code 5 special mention

$

 327

 

$

 327

 

$

 -

 

$

 430

 

$

 23

     Commercial - risk code 6 substandard

 

 2,166

 

 

 2,810

 

 

 -

 

 

 2,380

 

 

 5

     Real estate construction - risk code 6 substandard

 

 1,349

 

 

 1,527

 

 

 -

 

 

 1,463

 

 

 -

     Real estate term - risk code 5 special mention

 

 170

 

 

 248

 

 

 -

 

 

 193

 

 

 -

     Real estate term - risk code 6 substandard

 

 2,455

 

 

 2,545

 

 

 -

 

 

 2,371

 

 

 102

     Home equity lines and other consumer - risk code 5 special mention

 

 97

 

 

 97

 

 

 -

 

 

 49

 

 

 5

     Home equity lines and other consumer - risk code 6 substandard

 

 52

 

 

 52

 

 

 -

 

 

 53

 

 

 -

 

$

 6,616

 

$

 7,606

 

$

 -

 

$

 6,939

 

$

 135

With an allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Commercial - risk code 6 substandard

$

 511

 

$

 511

 

$

 44

 

$

 687

 

$

 -

     Commercial - risk code 7 doubtful

 

 669

 

 

 669

 

 

 576

 

 

 707

 

 

 -

     Real estate construction - risk code 6 substandard

 

 1,006

 

 

 1,006

 

 

 494

 

 

 1,024

 

 

 -

     Real estate term - risk code 6 substandard

 

 204

 

 

 204

 

 

 5

 

 

 215

 

 

 -

     Real estate term - risk code 7 doubtful

 

 446

 

 

 446

 

 

 62

 

 

 447

 

 

 -

 

$

 2,836

 

$

 2,836

 

$

 1,181

 

$

 3,080

 

$

 -

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Commercial - risk code 5 special mention

$

 327

 

$

 327

 

$

 -

 

$

 430

 

$

 23

     Commercial - risk code 6 substandard

 

 2,677

 

 

 3,321

 

 

 44

 

 

 3,067

 

 

 5

     Commercial - risk code 7 doubtful

 

 669

 

 

 669

 

 

 576

 

 

 707

 

 

 -

     Real estate construction - risk code 6 substandard

 

 2,355

 

 

 2,533

 

 

 494

 

 

 2,487

 

 

 -

     Real estate term - risk code 5 special mention

 

 170

 

 

 248

 

 

 -

 

 

 193

 

 

 -

     Real estate term - risk code 6 substandard

 

 2,659

 

 

 2,749

 

 

 5

 

 

 2,586

 

 

 102

     Real estate term - risk code 7 doubtful

 

 446

 

 

 446

 

 

 62

 

 

 447

 

 

 -

     Home equity lines and other consumer - risk code 5 special mention

 

 97

 

 

 97

 

 

 -

 

 

 49

 

 

 5

     Home equity lines and other consumer - risk code 6 substandard

 

 52

 

 

 52

 

 

 -

 

 

 53

 

 

 -

 

$

 9,452

 

$

 10,442

 

$

 1,181

 

$

 10,019

 

$

 135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Commercial - risk code 5 special mention

$

 3,327

 

$

 3,925

 

$

 -

 

$

 3,423

 

$

 17

     Commercial - risk code 6 substandard

 

 552

 

 

 552

 

 

 -

 

 

 596

 

 

 19

     Real estate construction - risk code 6 substandard

 

 1,381

 

 

 1,460

 

 

 -

 

 

 1,407

 

 

 9

     Real estate term - risk code 6 substandard

 

 4,688

 

 

 4,778

 

 

 -

 

 

 4,718

 

 

 42

     Home equity lines and other consumer - risk code 6 substandard

 

 209

 

 

 209

 

 

 -

 

 

 163

 

 

 2

 

$

 10,157

 

$

 10,924

 

$

 -

 

$

 10,307

 

$

 89

With an allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Commercial - risk code 6 Substandard

$

 499

 

$

 499

 

$

 183

 

$

 678

 

$

 -

     Commercial - risk code 7 doubtful

 

 465

 

 

 465

 

 

 456

 

 

 475

 

 

 -

     Real estate construction - risk code 6 substandard

 

 1,568

 

 

 1,613

 

 

 57

 

 

 1,573

 

 

 -

     Real estate term - risk code 6 Substandard

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

     Home equity lines and other consumer - risk code 6 Substandard

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

$

 2,532

 

$

 2,577

 

$

 696

 

$

 2,726

 

$

 -

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Commercial - risk code 5 special mention

$

 3,327

 

$

 3,925

 

$

 -

 

$

 3,423

 

$

 17

     Commercial - risk code 6 substandard

 

 1,051

 

 

 1,051

 

 

 183

 

 

 1,274

 

 

 19

     Commercial - risk code 7 doubtful

 

 465

 

 -

 465

 

 -

 456

 

 -

 475

 

 -

 -

     Real estate construction - risk code 6 substandard

 

 2,949

 

 

 3,073

 

 

 57

 

 

 2,980

 

 

 9

     Real estate term - risk code 6 substandard

 

 4,688

 

 

 4,778

 

 

 -

 

 

 4,718

 

 

 42

     Home equity lines and other consumer - risk code 6 substandard

 

 209

 

 

 209

 

 

 -

 

 

 163

 

 

 2

 

$

 12,689

 

$

 13,501

 

$

 696

 

$

 13,033

 

$

 89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

            The unpaid principal balance included in the table above represents the recorded investment at the dates indicated, plus amounts charged off for book purposes.  

 

            Loans classified as troubled debt restructurings totaled $12.1 million, $4.5 million, and $3.7 million at June 30, 2012, December 31, 2011, and June 30, 2011, respectively.  A troubled debt restructuring is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company is granting the borrower a concession of some kind.  The Company has granted a variety of concessions to borrowers in the form of loan modifications.  The modifications granted can generally be described in the following categories:

 

Rate Modification:  A modification in which the interest rate is changed.

Term Modification:  A modification in which the maturity date, timing of payments, or frequency of payments is changed.

Payment Modification:  A modification in which the dollar amount of the payment is changed, or in which a loan is converted to interest only payments for a period of time are included in this category.

Combination Modification:  Any other type of modification, including the use of multiple categories above. 

            The following table presents newly restructured loans that occurred during the six months ended June 30, 2012:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

 

Accrual

 

Nonaccrual

 

Total

 

 

Status

 

Status

 

Modifications

New Troubled Debt Restructurings

 

 

(In Thousands)

     Commercial risk code 5 - special mention

 

$

 107

 

$

 -

 

$

 107

     Commercial risk code 6 - substandard

 

 

 85

 

 

 -

 

 

 85

     Real estate construction risk code 3 - satisfactory

 

 

 2,827

 

 

 -

 

 

 2,827

     Real estate construction risk code 6 - substandard

 

 

 

 

 

 843

 

 

 843

     Real estate term risk code 5 - special mention

 

 

 397

 

 

 -

 

 

 397

     Real estate term risk code 6 - substandard

 

 

 1,886

 

 

 2,077

 

 

 3,963

                    Subtotal

 

$

 5,302

 

$

 2,920

 

$

 8,222

 

 

 

 

 

 

 

 

 

 

Existing Troubled Debt Restructurings

 

 

 2,840

 

 

 1,067

 

 

 3,907

                    Total

 

$

 8,142

 

$

 3,987

 

$

 12,129

 

 

 

 

 

 

 

 

 

 

            The following table presents newly restructured loans that occurred during the six months ended June 30, 2012 by concession (terms modified): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

Number

 

Rate

 

Term

 

Payment

 

Combination

 

Total

 

of Contracts

 

Modification

 

Modification

 

Modification

 

Modification

 

Modifications

Pre-Modification Outstanding Recorded Investment:

 

 

 

(In Thousands)

     Commercial risk code 5 - special mention

1

 

$

 -

 

$

 108

 

$

 -

 

$

 -

 

$

 108

     Commercial risk code 6 - substandard

1

 

 

 -

 

 

 86

 

 

 -

 

 

 -

 

 

 86

     Real estate construction risk code 3 - satisfactory

1

 

 

 -

 

 

 -

 

 

 

 

 

 2,827

 

 

 2,827

     Real estate construction risk code 6 - substandard

1

 

 

 -

 

 

 1,015

 

 

 -

 

 

 -

 

 

 1,015

     Real estate term risk code 5 - special mention

1

 

 

 -

 

 

 -

 

 

 -

 

 

 403

 

 

 403

     Real estate term risk code 6 - substandard

3

 

 

 -

 

 

 -

 

 

 2,589

 

 

 1,886

 

 

 4,475

                    Total

8

 

$

 -

 

$

 1,209

 

$

 2,589

 

$

 5,116

 

$

 8,914

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Post-Modification Outstanding Recorded Investment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Commercial risk code 5 - special mention

1

 

$

 -

 

$

 107

 

$

 -

 

$

 -

 

$

 107

     Commercial risk code 6 - substandard

1

 

 

 -

 

 

 85

 

 

 -

 

 

 -

 

 

 85

     Real estate construction risk code 3 - satisfactory

1

 

 

 -

 

 

 -

 

 

 -

 

 

 2,827

 

 

 2,827

     Real estate construction risk code 6 - substandard

1

 

 

 -

 

 

 843

 

 

 -

 

 

 -

 

 

 843

     Real estate term risk code 5 - special mention

1

 

 

 -

 

 

 -

 

 

 -

 

 

 397

 

 

 397

     Real estate term risk code 6 - substandard

3

 

 

 -

 

 

 -

 

 

 2,077

 

 

 1,886

 

 

 3,963

                    Total

8

 

$

 -

 

$

 1,035

 

$

 2,077

 

$

 5,110

 

$

 8,222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

            The following table presents TDRs that occurred during the last twelve months that have defaulted in 2012.  These loans are past due, and they are nonaccrual loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

June 30, 2011

 

Number

Recorded

 

Recorded

 

of Contracts

Investment

 

Investment

Troubled Debt Restructurings that Subsequently Defaulted:

(In Thousands)

     Commercial risk code 5 - special mention

1

$

 192

 

$

 -

     Commercial risk code 6 - substandard

2

 

 478

 

 

 -

     Commercial risk code 7 - doubtful

1

 

 216

 

 

 -

     Real estate construction risk code 6 - substandard

1

 

 842

 

 

 -

     Real estate term risk code 6 - substandard

1

 

 881

 

 

 -

     Home equity lines and other consumer risk code 5 - special mention

1

 

 94

 

 

 -

                    Total

7

$

 2,703

 

$

 -

 

 

 

 

 

 

 
                The Company had no commitments to extend additional credit to borrowers owing receivables whose terms have been modified in troubled debt restructurings.  All troubled debt restructurings are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the Allowance.  There were two charge offs totaling $280,000 in the six months ended June 30, 2012 on loans that were later classified as troubled debt restructurings in the real estate term category.  Six troubled debt restructurings with a total recorded investment of $3.5 million had a specific impairment amount totaling $815,000 at June 30, 2012.