Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2011

Loans and Allowance for Loan Losses [Abstract]

Loans and Allowance for Loan Losses

(2) Loans and Allowance for Loan Losses

     A summary of loans, by major class within our Company’s loan portfolio, at June 30, 2011 and December 31, 2010 are as follows:

	June 30,		December 31,
	2011		2010
Commercial, financial, and agricultural	$	127,627,653	$	131,382,467
Real estate construction — residential		28,646,137		31,834,174
Real estate construction — commercial		50,836,737		56,052,910
Real estate mortgage — residential		203,066,932		207,834,488
Real estate mortgage — commercial		428,971,600		439,068,622
Installment and other consumer		29,475,102		32,132,336
Unamortized loan origination fees and costs, net		174,656		167,466
Total loans	$	868,798,817	$	898,472,463

     The Bank grants real estate, commercial, installment, and other consumer loans to customers located within the communities of and surrounding Jefferson City, Clinton, Warsaw, Springfield, Branson and Lee’s Summit, Missouri. As such, the Bank is susceptible to changes in the economic environment in these communities. The Bank does not have a concentration of credit in any one economic sector. Installment and other consumer loans consist primarily of the financing of vehicles.

     At June 30, 2011, loans of $439,441,000 were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit.

Allowance for loan losses

     The following table provides the balance in the allowance for loan losses at June 30, 2011 and December 31, 2010, and the related loan balance by impairment methodology. Loans evaluated under ASC 310-10-35 include loans on non-accrual status, which are individually evaluated for impairment, troubled debt restructurings, and other impaired loans deemed to have similar risk characteristics. All other loans are collectively evaluated for impairment under ASC 450-20. Although the allowance for loan losses is comprised of specific and general allocations, the entire allowance is available to absorb credit losses.

The following is a summary of the allowance for loan losses at or for the three and six months ended June 30, 2011 as follows:

	For the Three Months Ended June 30, 2011
	Commercial,			Real Estate			Real Estate			Real Estate			Real Estate			Installment
	Financial, and			Construction -			Construction -			Mortgage -			Mortgage -			Loans to
(in thousands)	Agricultural			Residential			Commercial			Residential			Commercial			Individuals			Unallocated		Total
Allowance for loan losses:
Balance, beginning of period	$	2,257		$	991		$	1,356		$	3,118		$	3,709		$	223		$	748	$	12,402
Additions:
Provision for loan losses		313			(6	)		(276	)		306			1,264			62			220		1,883
Deductions:
Loans charged off		45			—			—			466			160			138			—		809
Less recoveries on loans		(8	)		(1	)		(250	)		(32	)		(24	)		(72	)		—		(387	)
Net loans charged off		37			(1	)		(250	)		434			136			66			—		422
Balance, end of period	$	2,533		$	986		$	1,330		$	2,990		$	4,837		$	219		$	968	$	13,863

	For the Six Months Ended June 30, 2011
	Commercial,			Real Estate			Real Estate			Real Estate			Real Estate			Installment
	Financial, and			Construction -			Construction -			Mortgage -			Mortgage -			Loans to
(in thousands)	Agricultural			Residential			Commercial			Residential			Commercial			Individuals			Unallocated		Total
Allowance for loan losses:
Balance, beginning of period	$	2,931		$	2,067		$	1,339		$	3,922		$	3,458		$	231		$	617	$	14,565
Additions:
Provision for loan losses		406			404			(259	)		533			2,091			107			351		3,633
Deductions:
Loans charged off		873			1,547			—			1,539			741			247			—		4,947
Less recoveries on loans		(69	)		(62	)		(250	)		(74	)		(29	)		(128	)		—		(612	)
Net loans charged off		804			1,485			(250	)		1,465			712			119			—		4,335
Balance, end of period	$	2,533		$	986		$	1,330		$	2,990		$	4,837		$	219		$	968	$	13,863

     The tables provide other information regarding the allowance for loan losses and balance by type of allowance methodology at June 30, 2011 and December 31, 2010 as follows:

	Commercial,		Real Estate		Real Estate		Real Estate		Real Estate		Installment
	Financial, and		Construction -		Construction -		Mortgage -		Mortgage -		Loans to
(in thousands)	Agricultural		Residential		Commercial		Residential		Commercial		Individuals		Unallocated		Total
June 30, 2011
Allowance for loan losses:
Individually evaluated for impairment	$	1,465	$	45	$	274	$	515	$	3,187	$	—	$	—	$	5,486
Collectively evaluated for impairment		1,068		941		1,056		2,475		1,650		219		968		8,377
Total	$	2,533	$	986	$	1,330	$	2,990	$	4,837	$	219	$	968	$	13,863
Loans outstanding:
Individually evaluated for impairment	$	5,366	$	832	$	10,994	$	6,767	$	31,961	$	—	$	—	$	55,920
Collectively evaluated for impairment		122,261		27,814		39,843		196,300		397,011		29,650		—		812,879
Total	$	127,627	$	28,646	$	50,837	$	203,067	$	428,972	$	29,650	$	—	$	868,799
December 31, 2010
Allowance for loan losses:
Individually evaluated for impairment	$	1,737	$	1,553	$	201	$	1,117	$	1,768	$	—	$	—	$	6,376
Collectively evaluated for impairment		1,194		514		1,138		2,805		1,690		231		617		8,189
Total	$	2,931	$	2,067	$	1,339	$	3,922	$	3,458	$	231	$	617	$	14,565
Loans outstanding:
Individually evaluated for impairment	$	3,660	$	3,586	$	11,783	$	8,040	$	29,076	$	—	$	—	$	56,145
Collectively evaluated for impairment		127,722		28,248		44,270		199,795		409,993		32,299		—		842,327
Total	$	131,382	$	31,834	$	56,053	$	207,835	$	439,069	$	32,299	$	—	$	898,472

     Loans, or portions of loans, are charged off to the extent deemed uncollectible. Loan charge-offs reduce the allowance for loan losses, and recoveries of loans previously charged off are added back to the allowance. Once the fair value for a collateral dependent loan has been determined, any impaired amount is typically charged off unless the loan has other income streams to support repayment. For impaired loans which have other income streams to support repayment, a specific reserve is established for the amount determined to be impaired.

          Impaired loans

     Impaired loans totaled $56,091,828 and $56,270,543 at June 30, 2011 and December 31, 2010 respectively, and are comprised of loans on non-accrual status and loans which have been classified as troubled debt restructurings.

     The categories of impaired loans at June 30, 2011 and December 31, 2010 are as follows:

	June 30,		December 31,
	2011		2010
Non-accrual loans	$	49,543,857	$	50,586,887
Troubled debt restructurings continuing to accrue interest		6,547,971		5,683,656
Total impaired loans	$	56,091,828	$	56,270,543

     At June 30, 2011, loans classified as trouble debt restructurings (TDR) totaled $23,913,139, of which $17,365,168 were on non-accrual status and $6,547,971 were on accrual status. At December 31, 2010, loans classified as TDR totaled $22,080,431, of which $16,396,775 were on non-accrual status and $5,683,656 was on accrual status. Reserves allocated to troubled debt restructurings were $1,781,000 and $1,359,000 at June 30, 2011 and December 31, 2010, respectively.

     Interest income recognized on loans in non-accrual status and contractual interest that would be recorded had the loans performed in accordance with their original contractual terms is as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2011		2010			2011		2010
Contractual interest due on non-accrual loans	$	612,472	$	784,350		$	1,218,908	$	1,278,237
Interest income recognized on loans in non-accrual status		32,802		(9,134	)		32,840		4,220
Net reduction in interest income	$	579,670	$	793,484		$	1,186,068	$	1,274,017

     The specific reserve component of our Company’s allowance for loan losses at June 30, 2011 and December 31, 2010 was determined by using fair values of the underlying collateral obtained through independent appraisals and internal evaluations, or by discounting the total expected future cash flows. The recorded investment varies from the unpaid principal balance primarily due to partial charge-offs taken resulting from current appraisals received. The amount recognized as interest income on impaired loans continuing to accrue interest, primarily related to troubled debt restructurings, was $71,482 and $318,709 for the six months ended June 30, 2011 and June 30, 2010, respectively. Average recorded investment in impaired loans is calculated on a monthly basis during the period.

     The following table provides additional information about impaired loans at June 30, 2011 and December 31, 2010, respectively, segregated between loans for which an allowance has been provided and loans for which no allowance has been provided:

			Unpaid				Average		Interest Income Recognized
	Recorded		Principal		Related		Recorded		For the Period Ended
	Investment		Balance		Allowance		Investment		Three Months		Six Months
At June 30, 2011
With no related allowance recorded:
Commercial, financial and Agricultural	$	3,063,278	$	3,148,134	$	—	$	2,150,452	$	11,074	$	—
Real estate — construction residential		659,870		824,500		—		1,731,871		—		—
Real estate — construction commercial		8,235,882		9,348,798		—		8,251,242		—		—
Real estate — residential		2,488,885		3,269,889		—		3,429,353		11,698		7,014
Real estate — commercial		12,796,159		14,527,062		—		9,977,051		18,040		—
Consumer		172,191		209,667		—		203,899		1,349		—
Total	$	27,416,265	$	31,328,050	$	—	$	25,743,868	$	42,161	$	7,014
With an allowance recorded:
Commercial, financial and Agricultural	$	2,302,712	$	2,193,991	$	1,465,198	$	1,818,910	$	4,400	$	2,208
Real estate — construction residential		171,982		181,002		45,000		172,315		—		—
Real estate — construction commercial		2,758,396		4,013,396		274,000		2,067,649		—		—
Real estate — residential		4,277,926		4,385,847		514,978		3,998,773		54,472		27,140
Real estate — commercial		19,164,547		19,705,512		3,186,738		17,998,970		3,289		1,648
Total	$	28,675,563	$	30,479,748	$	5,485,914	$	26,056,617	$	62,161	$	30,996
Total impaired loans	$	56,091,828	$	61,807,798	$	5,485,914	$	51,800,485	$	104,322	$	38,010
At December 31, 2010
With no related allowance recorded:
Commercial, financial and Agricultural	$	441,861	$	629,296	$	—
Real estate — construction residential		1,769,622		2,355,936		—
Real estate — construction commercial		8,297,388		9,393,368		—
Real estate — residential		2,463,735		2,950,560		—
Real estate — commercial		12,939,973		14,869,833		—
Consumer		125,858		132,688		—
Total	$	26,038,437	$	30,331,681	$	—
With an allowance recorded:
Commercial, financial and Agricultural	$	3,217,995	$	3,260,009	$	1,737,159
Real estate — construction residential		1,816,276		1,848,593		1,552,406
Real estate — construction commercial		3,485,517		4,740,517		201,147
Real estate — residential		5,576,292		5,669,041		1,117,141
Real estate — commercial		16,136,025		16,215,862		1,767,893
Total	$	30,232,106	$	31,734,022	$	6,375,746
Total impaired loans	$	56,270,543	$	62,065,703	$	6,375,746

     It is our Company’s policy to discontinue the accrual of interest income on loans when management believes that the borrower’s financial condition, after consideration of business conditions and collection efforts, is such that the collection of interest is doubtful, or upon which principal or interest has been in default for a period of 90 days or more and the asset is not both well secured and in the process of collection. Subsequent interest payments received on such loans are applied to principal if any doubt exists as to the collectability of such principal; otherwise, such receipts are recorded as interest income on a cash basis.

     Age Analysis of Past Due and Non-Accrual Loans

	Current or				90 Days
	Less Than				Past Due
	30 Days		30 - 89 Days		And Still
	Past Due		Past Due		Accruing		Non-Accrual		Total
June 30, 2011
Commercial, Financial, and Agricultural	$	123,586,765	$	737,482	$	—	$	3,303,406	$	127,627,653
Real Estate Construction — Residential		27,814,284		—		—		831,853		28,646,137
Real Estate Construction — Commercial		39,833,780		8,679		—		10,994,278		50,836,737
Real Estate Mortgage — Residential		197,059,787		1,391,903		98,631		4,516,611		203,066,932
Real Estate Mortgage — Commercial		398,975,412		270,671		—		29,725,518		428,971,601
Installment and Other Consumer		28,977,502		499,973		91		172,191		29,649,757
Total	$	816,247,530	$	2,908,708	$	98,722	$	49,543,857	$	868,798,817
December 31, 2010
Commercial, Financial, and Agricultural	$	127,315,586	$	534,865	$	—	$	3,532,016	$	131,382,467
Real Estate Construction — Residential		28,200,876		47,400		—		3,585,898		31,834,174
Real Estate Construction — Commercial		45,511,088		474,934		—		10,066,888		56,052,910
Real Estate Mortgage — Residential		199,386,784		2,775,654		—		5,672,050		207,834,488
Real Estate Mortgage — Commercial		409,906,845		1,557,599		—		27,604,178		439,068,622
Installment and Other Consumer		31,784,217		356,812		32,916		125,857		32,299,802
Total	$	842,105,396	$	5,747,264	$	32,916	$	50,586,887	$	898,472,463

     The following table provides information about the credit quality of the loan portfolio using our Company’s internal rating system reflecting management’s risk assessment. Loans are placed on watch status when (1) one or more weaknesses which could jeopardize timely liquidation exits; or (2) the margin or liquidity of an asset is sufficiently tenuous that adverse trends could result in a collection problem. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified may have a well defined weakness or weaknesses that jeopardize the repayment of the debt. Such loans are characterized by the distinct possibility that our Company may sustain some loss if the deficiencies are not corrected. Loans are placed on non-accrual status when (1) deterioration in the financial condition of the borrower exists such that payment of full principal and interest is not expected, or (2) payment of principal or interest has been in default for a period of 90 days or more and the asset is not both well secured and in the process of collection.

			Real Estate		Real Estate		Real Estate		Real Estate
			Construction -		Construction -		Mortgage -		Mortgage -		Installment and
	Commercial		Residential		Commercial		Residential		Commercial		other Consumer		Total
At June 30, 2011
Watch	$	22,626,495	$	8,109,338	$	9,392,484	$	13,097,712	$	30,453,623	$	419,571	$	84,099,223
Substandard		4,412,920		829,405		1,991,878		4,163,925		14,582,568		411,775		26,392,471
Non-accrual		3,303,406		831,853		10,994,278		4,516,611		29,725,518		172,191		49,543,857
Total	$	30,342,821	$	9,770,596	$	22,378,640	$	21,778,248	$	74,761,709	$	1,003,537	$	160,035,551
At December 31, 2010
Watch	$	21,981,367	$	7,519,394	$	9,400,584	$	9,184,659	$	35,050,206	$	564,489	$	83,700,699
Substandard		2,840,703		757,637		4,242,934		4,423,219		12,635,163		441,514		25,341,170
Non-accrual		3,532,016		3,585,898		10,066,888		5,672,050		27,604,178		125,857		50,586,887
Total	$	28,354,086	$	11,862,929	$	23,710,406	$	19,279,928	$	75,289,547	$	1,131,860	$	159,628,756