Impaired Loans and Valuation Allowance for Loan Losses

3 Months Ended

Mar. 31, 2012

Impaired Loans and Valuation Allowance for Loan Losses [Abstract]

IMPAIRED LOANS AND VALUATION ALLOWANCE FOR LOAN LOSSES

NOTE E — IMPAIRED LOANS AND VALUATION ALLOWANCE FOR LOAN LOSSES

During the three months ending March 31, 2012, the total of newly identified TDRs was $2.9 million, of which $0.1 million were accruing construction and land development loans and $2.1 million were accruing residential real estate mortgages. Loans modified, but where full collection under the modified terms is doubtful are classified as nonaccrual loans from the date of modification and are therefore excluded from the tables below.

The Company’s TDR concessions granted generally do not include forgiveness of principal balances. Loan modifications are not reported in calendar years after modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructuring agreements.

When a loan is modified as a TDR, there is not a direct, material impact on the loans within the consolidated Balance Sheet, as principal balances are generally not forgiven. All loans prior to modification were classified as an impaired loan and the allowance for loan losses is determined in accordance with Company policy.

The following table presents loans that were modified within the three months ended March 31, 2012:

(Dollars in thousands) Troubled Debt Restructurings Modified	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserve Recorded		Valuation Allowance Recorded
Construction and land development		1	$	70	$	64	$	0	$	6
Residential real estate		10		2,054		1,966		0		88
Commercial real estate		0		0		0		0		0
Commercial and financial		1		46		44		0		2
Consumer		0		0		0		0		0
Total		12	$	2,170	$	2,074	$	0	$	96

Accruing loans that were restructured within the twelve months preceding March 31, 2012 and defaulted during the three months ended March 31, 2012 are presented in the table below. The Company considers a loan to have defaulted when it becomes 60 days or more delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to other real estate owned. A defaulted TDR is generally placed on nonaccrual and specific allowance for loan loss is assigned in accordance with the Company’s policy.

	2012
(Dollars in thousands) Troubled Debt Restructurings Defaulted	Number of Contracts		Recorded Investment
Construction and land development		1	$	37
Total		1	$	37

As of March 31, 2012 and December 31, 2011, the Company’s recorded investments in impaired loans and the related valuation allowances were as follows:

	March 31, 2012
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
Impaired Loans with No Related Allowance Recorded:
Construction and land development	$	1,571	$	2,290	$	0
Commercial real estate		8,220		13,248		0
Residential real estate		8,963		13,227		0
Commercial and financial		10		11		0
Consumer		508		557		0
Impaired Loans with an Allowance Recorded:
Construction and land development		3,848		4,177		532
Commercial real estate		46,592		47,147		3,468
Residential real estate		29,039		29,437		4,069
Commercial and financial		0		0		0
Consumer		659		667		123
Total:
Construction and land development		5,419		6,467		532
Commercial real estate		54,812		60,395		3,468
Residential real estate		38,002		42,664		4,069
Commercial and financial		10		11		0
Consumer		1,167		1,224		123
	$	99,410	$	110,761	$	8,192

	December 31, 2011
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
Impaired Loans with No Related Allowance Recorded:
Construction and land development	$	1,616	$	2,431	$	0
Commercial real estate		19,101		22,219		0
Residential real estate		9,128		13,442		0
Commercial and financial		16		16		0
Consumer		481		523		0
Impaired Loans with an Allowance Recorded:
Construction and land development		3,777		4,131		375
Commercial real estate		39,199		39,824		3,385
Residential real estate		26,140		26,940		3,099
Commercial and financial		101		101		8
Consumer		578		584		112
Total:
Construction and land development		5,393		6,562		375
Commercial real estate		58,300		62,043		3,385
Residential real estate		35,268		40,382		3,099
Commercial and financial		117		117		8
Consumer		1,059		1,107		112
	$	100,137	$	110,211	$	6,979

As of the three months ended March 31, 2012 and 2011, the Company’s recorded investments in impaired loans and the related valuation allowances were as follows:

	Three Months Ended March 31, 2012				Three Months Ended March 31, 2011
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired Loans with No Related Allowance Recorded:
Construction and land development	$	1,601	$	1	$	3,601	$	10
Commercial real estate		15,474		13		23,639		95
Residential real estate		9,073		2		9,348		4
Commercial and financial		14		0		3,071		0
Consumer		490		0		172		0
Impaired Loans with an Allowance Recorded:
Construction and land development		3,801		31		28,499		38
Commercial real estate		41,663		399		40,715		484
Residential real estate		27,106		216		27,227		235
Commercial and financial		67		0		169		1
Consumer		605		7		1,038		7
Total:
Construction and land development		5,402		32		32,100		48
Commercial real estate		57,137		412		64,354		579
Residential real estate		36,179		218		36,575		239
Commercial and financial		81		0		3,240		1
Consumer		1,095		7		1,210		7
	$	99,894	$	669	$	137,479	$	874

Impaired loans also include loans that have been modified in troubled debt restructurings (“TDRs”) where concessions to borrowers who experienced financial difficulties have been granted. At March 31, 2012 and December 31, 2011, accruing TDRs totaled $57.7 million and $71.6 million, respectively.

Interest payments received on impaired loans are recorded as interest income unless collection of the remaining recorded investment is doubtful at which time payments received are recorded as reductions to principal. For the quarter ended March 31, 2012 and 2011, the Company recorded $669,000 and $874,000, respectively, in interest income on impaired loans.

Transactions in the allowance for loan losses for the three months ended March 31, 2012 and 2011 are summarized as follows:

	March 31, 2012
(Dollars in thousands)	Beginning Balance		Provision for Loan Losses			Charge- Offs			Recoveries		Net Charge- Offs			Ending Balance
Construction & land development	$	1,883	$	(159	)	$	(230	)	$	15	$	(215	)	$	1,509
Commercial real estate		11,477		1,645			(2,287	)		76		(2,211	)		10,911
Residential real estate		10,966		864			(1,054	)		50		(1,004	)		10,826
Commercial and financial		402		78			(97	)		34		(63	)		417
Consumer		837		(123	)		(13	)		91		78			792
	$	25,565	$	2,305		$	(3,681	)	$	266	$	(3,415	)	$	24,455

	March 31, 2011
(Dollars in thousands)	Beginning Balance		Provision for Loan Losses			Charge- Offs			Recoveries		Net Charge- Offs			Ending Balance
Construction & land development	$	7,214	$	(1,558	)	$	(1,850	)	$	306	$	(1,544	)	$	4,112
Commercial real estate		18,563		(1,226	)		(581	)		11		(570	)		16,767
Residential real estate		10,102		3,275			(1,923	)		76		(1,847	)		11,530
Commercial and financial		480		172			0			87		87			739
Consumer		1,385		(23	)		(182	)		25		(157	)		1,205
	$	37,744	$	640		$	(4,536	)	$	505	$	(4,031	)	$	34,353

The allowance for loan losses is composed of specific allowances for certain impaired loans and general allowances grouped into loan pools based on similar characteristics. The Company’s loan portfolio and related allowance as of March 31, 2012 and 2011 is shown in the table below:

	March 31, 2012
	Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Total
(Dollars in thousands)	Carrying Value		Associated Allowance		Carrying Value		Associated Allowance		Carrying Value		Associated Allowance
Construction & land development	$	5,419	$	532	$	48,599	$	977	$	54,018	$	1,509
Commercial real estate		54,812		3,468		451,748		7,443		506,560		10,911
Residential real estate		38,002		4,069		512,261		6,757		550,263		10,826
Commercial and financial		10		0		54,551		417		54,561		417
Consumer		1 167		123		49,823		669		50,990		792
	$	99,410	$	8,192	$	1,116,982	$	16,263	$	1,216,392	$	24,455
	March 31, 2011
	Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Total
(Dollars in thousands)	Carrying Value		Associated Allowance		Carrying Value		Associated Allowance		Carrying Value		Associated Allowance
Construction & land development	$	29,799	$	2,068	$	45,919	$	2,044	$	75,718	$	4,112
Commercial real estate		75,488		5,380		451,732		11,387		527,220		16,767
Residential real estate		36,489		4,142		483,764		7,388		520,253		11,530
Commercial and financial		300		199		51,220		540		51,520		739
Consumer		1,092		87		49,580		1,118		50,672		1,205
	$	143,168	$	11,876	$	1,082,215	$	22,477	$	1,225,383	$	34,353