Note 9 - Loans

 

Loan balances were as follows (in thousands):

		3/31/2012				12/31/2011
Commercial		$	193,536			$	193,176
Residential real estate			261,504				266,268
Nonresidential real estate			528,787				523,485
Construction			105,033				104,788
Consumer			15,992				16,618
Municipal obligations			26,844				27,066
Gross loans			1,131,696				1,131,401
Less:  Deferred loan origination fees and discount			(1,496	)			(1,447	)
Allowance for loan losses			(18,362	)			(18,288	)
Net loans		$	1,111,838			$	1,111,666

  

The following tables present the activity in the allowance for loan losses for the three months ending March 31, 2012 and the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2012 and December 31, 2011 (in thousands):

 

										Non
						Residential				Residential												Municipal
March 31, 2012		Commercial				Real estate				Real estate				Construction				Consumer				Obligations				Total
Allowance for loan losses
Beginning balance		$	3,207			$	2,591			$	7,614			$	4,701			$	162			$	13			$	18,288
Provision for loan losses			(271	)			692				57				1,018				80				224				1,800
Loans charged off			(356	)			(374	)			(904	)			(27	)			(169	)			-				(1,830	)
Recoveries			1				7				1				2				93				-				104
Total ending allowance balance		$	2,581			$	2,916			$	6,768			$	5,694			$	166			$	237			$	18,362
Ending allowance balance attributable to loans
Individually evaluated for impairment		$	177			$	588			$	2,149			$	4,699			$	-			$	-			$	7,613
Collectively evaluated for impairment			2,404				2,328				4,619				995				166				237				10,749
Total ending allowance balance		$	2,581			$	2,916			$	6,768			$	5,694			$	166			$	237			$	18,362
Loans
Loans individually evaluated for impairment		$	1,753			$	6,416			$	20,438			$	9,928			$	-			$	-			$	38,535
Loans collectively evaluated for impairment			191,783				255,088				508,349				95,105				15,992				26,844				1,093,161
Total ending loans balance		$	193,536			$	261,504			$	528,787			$	105,033			$	15,992			$	26,844			$	1,131,696
											Non
							Residential				Residential												Municipal
March 31, 2011			Commercial				Real estate				Real estate				Construction				Consumer				Obligations				Total
Allowance for loan losses
Beginning balance		$	3,440			$	2,431			$	8,126			$	3,150			$	166			$	55			$	17,368
Provision for loan losses			349				38				1,515				983				130				(15	)			3,000
Loans charged off			(532	)			(329	)			(1,252	)			(506	)			(247	)			-				(2,866	)
Recoveries			22				38				2				-				124				-				186
Total ending allowance balance		$	3,279			$	2,178			$	8,391			$	3,627			$	173			$	4			$	17,688

  

										Non
						Residential				Residential												Municipal
December 31, 2011		Commercial				Real estate				Real estate				Construction				Consumer				Obligations				Total
Ending allowance balance attributable to loans
Individually evaluated for impairment		$	224			$	477			$	2,994			$	3,748			$	-			$	-			$	7,443
Collectively evaluated for impairment			2,983				2,114				4,620				953				162				13				10,845
		$	3,207			$	2,591			$	7,614			$	4,701			$	162			$	13			$	18,288
Loans
Loans individually evaluated for impairment		$	917			$	6,100			$	20,390			$	7,854			$	-			$	-			$	35,261
Loans collectively evaluated for impairment			192,259				260,168				503,095				96,934				16,618				27,066				1,096,140
Total ending loans balance		$	193,176			$	266,268			$	523,485			$	104,788			$	16,618			$	27,066			$	1,131,401

  

The following table presents individually impaired loans by class of loans as of and for the three months ended March 31, 2012 (in thousands):

 

		Unpaid								Allowance for				Average				Interest
		Principal				Recorded				Loan Losses				Recorded				Income				Interest
		Balance				Investment				Allocated				Investment				Recognized				Received
With no related allowance recorded
Commercial		$	349			$	309			$	-			$	310			$	-			$	-
Residential real estate
Home equity lines of credit			50				50				-				50				-				-
Multifamily properties			858				527				-				533				-				-
Other			2,072				2,072				-				1,888				-				-
Nonresidential real estate
Owner occupied properties			960				960				-				1,031				-				-
Non owner occupied properties			2,994				2,742				-				2,429				-				-
Construction			-				-				-				160				-				-
With an allowance recorded
Commercial			1,669				1,444				177				1,026				1				-
Residential real estate
Home equity lines of credit			137				137				137				69				-				-
Multifamily properties			-				-				-				-				-				-
Other			3,630				3,630				451				3,720				24				23
Nonresidential real estate
Owner occupied properties			9,167				9,067				917				9,432				80				79
Non owner occupied properties			8,540				7,669				1,232				7,522				62				50
Construction			11,683				9,928				4,699				8,732				72				69
Total		$	42,109			$	38,535			$	7,613			$	36,902			$	239			$	221

  

The following table presents individually impaired loans by class of loans as of and for the three months ended March 31, 2011 (in thousands):

 

		Unpaid								Allowance for				Average				Interest
		Principal				Recorded				Loan Losses				Recorded				Income				Interest
		Balance				Investment				Allocated				Investment				Recognized				Received
With no related allowance recorded
Commercial		$	310			$	310			$	-			$	310			$	-			$	-
Residential real estate
Home equity lines of credit			-				-				-				-				-				-
Multifamily properties			34				34				-				34				-				-
Other			145				145				-				202				-				-
Nonresidential real estate
Owner occupied properties			67				67				-				781				-				-
Non owner occupied properties			544				544				-				635				-				-
Construction			-				-				-				305				-				-
With an allowance recorded
Commercial			1,098				1,098				503				1,279				3				-
Residential real estate
Home equity lines of credit			-				-				-				-				-				-
Multifamily properties			872				872				134				1,026				14				14
Other			2,560				2,560				310				1,958				17				17
Nonresidential real estate
Owner occupied properties			2,108				2,108				312				2,027				-				-
Non owner occupied properties			10,592				10,592				2,810				11,005				46				46
Construction			8,467				8,467				2,296				6,817				49				43
Total		$	26,797			$	26,797			$	6,365			$	26,379			$	129			$	120

   

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2011 (in thousands):

 

		Unpaid								Allowance for
		Principal				Recorded				Loan Losses
		Balance				Investment				Allocated
With no related allowance recorded
Commercial		$	350			$	310			$	-
Residential real estate
Home equity lines of credit			50				50				-
Multifamily properties			538				538				-
Other			1,703				1,703				-
Nonresidential real estate
Owner occupied properties			1,101				1,101				-
Non owner occupied properties			2,122				2,116				-
Construction			356				319				-
With an allowance recorded
Commercial			733				607				224
Residential real estate
Home equity lines of credit			-				-				-
Multifamily properties			-				-				-
Other			3,859				3,809				477
Nonresidential real estate
Owner occupied properties			10,771				9,797				1,477
Non owner occupied properties			8,476				7,375				3,748
Construction			8,267				7,535				3,748
Total		$	38,326			$	35,260			$	7,443

  

The following table presents the aging of the recorded investment in past due loans by class of loans as of March 31, 2012 and December 31, 2011 (in thousands):

 

		Loans				Loans over
		30-90 days				90 days								Loans not
		past due				past due				Nonaccrual				past due				Total
March 31, 2012
Commercial		$	335			$	43			$	2,013			$	191,145			$	193,536
Residential real estate
Home equity lines of credit			469				-				1,206				89,616				91,291
Multifamily properties			-				-				-				38,749				38,749
Other residential real estate			5,381				153				4,249				121,681				131,464
Nonresidential real estate
Owner occupied properties			1,153				61				2,042				257,308				260,564
Non owner occupied properties			972				407				4,654				262,190				268,223
Construction			219				-				1,991				102,823				105,033
Consumer
Credit card balances			65				14				-				6,219				6,298
Other consumer			53				2				624				9,015				9,694
Municipal obligations			-				-				-				26,844				26,844
Total		$	8,647			$	680			$	16,779			$	1,105,590			$	1,131,696

 

		Loans				Loans over
		30-90 days				90 days								Loans not
		past due				past due				Nonaccrual				past due				Total
December 31, 2011
Commercial		$	692			$	74			$	1,175			$	191,235			$	193,176
Residential real estate
Home equity lines of credit			1,094				-				910				92,676				94,680
Multifamily properties			-				-				-				36,756				36,756
Other residential real estate			5,854				112				4,415				124,451				134,832
Nonresidential real estate
Owner occupied properties			2,623				-				2,270				247,875				252,768
Non owner occupied properties			3,942				-				4,358				262,417				270,717
Construction			265				-				1,897				102,626				104,788
Consumer
Credit card balances			60				32				-				6,400				6,492
Other consumer			37				1				626				9,462				10,126
Municipal obligations			-				-				-				27,066				27,066
Total		$	14,567			$	219			$	15,651			$	1,100,964			$	1,131,401

  

Troubled Debt Restructurings:

 

The Company has allocated $2,391,000 and $2,074,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2012 and December 31, 2011. Troubled debt restructurings totaled $17,765,000 and $15,229,000 as of March 31, 2012 and December 31, 2011, respectively.The Company has not committed to lend additional amounts as of March 31, 2012 and December 31, 2011 to customers with outstanding loans that are classified as troubled debt restructurings.

 

Modifications involving a reduction of the stated interest rate of the loan were for periods up to three years. Modifications involving an extension of the maturity date were for periods ranging from eight months to twelve months.

 

The following table presents loans by class modified as troubled debt restructurings that occurred during the period ending March 31, 2012:

 

						Pre-Modification				Post-Modification
						Outstanding Recorded				Outstanding Recorded
		Number of Loans				Investment				Investment
Troubled Debt Restructurings:
Commercial			2			$	349,870			$	309,439
Residential real estate
Home equity lines of credit			-				-				-
Multifamily properties
Other residential real estate			6				4,036,448				3,942,661
Nonresidential real estate
Owner occupied properties			3				8,137,536				7,924,474
Non owner occupied properties			4				3,661,111				3,330,160
Construction			1				2,258,504				2,258,504
Consumer
Credit card balances			-				-				-
Other consumer			-				-				-
Municipal obligations			-				-				-
Total			16			$	18,443,469			$	17,765,238

 

The troubled debt restructurings described above increased the allowance for loan losses by $891,292 and resulted in charge-offs of $150,000 during the first quarter ending March 31, 2012.

 

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the period ending March 31, 2012: 

 

Troubled Debt Restructurings
That Subsequently Defaulted:		Number of Loans				Recorded Investment
Commercial			2			$	309,439
Residential real estate
Home equity lines of credit
Multifamily properties
Other residential real estate			1				694,293
Nonresidential real estate
Owner occupied properties			1				7,714,655
Non owner occupied properties			2				742,326
Construction
Consumer
Credit card balances
Other consumer
Municipal obligations			-				-
Total			6			$	9,460,713

 

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

 

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $20,050 and resulted in charge-offs of $150,000 during the first quarter ending March 31, 2012.

 

Credit Quality Indicators:

 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including: 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. This analysis includes loans with an outstanding balance greater than $100,000 and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. Loans with balances below $100,000 and homogenous loans, such as residential real estate and consumer loans, are analyzed for credit quality based on aging status, which was previously presented. The Company uses the following definitions for risk ratings:

 

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
March 31, 2012		Pass				Mention				Substandard				Doubtful				Not Rated(1)				Total
Commercial		$	173,996			$	14,331			$	5,209			$	-			$	-			$	193,536
Residential real estate
Home equity lines of credit			-				935				979				90				89,287				91,291
Multifamily properties			36,771				1,451				527				-				-				38,749
Other residential real estate			37,882				960				10,793				-				81,829				131,464
Nonresidential real estate
Owner occupied properties			231,212				9,633				19,719				-				-				260,564
Non owner occupied properties			243,891				5,542				18,790				-				-				268,223
Construction			88,394				5,649				10,990				-				-				105,033
Consumer
Credit card balances			-				-				-				-				6,298				6,298
Other consumer			-				-				22				-				9,672				9,694
Municipal obligations			26,844				-				-				-				-				26,844
Total		$	838,990			$	38,501			$	67,029			$	90			$	187,086			$	1,131,696

   

(1) Not rated loans represent the homogenous pools risk category.  

 

						Special
December 31, 2011		Pass				Mention				Substandard				Doubtful				Not Rated(1)				Total
Commercial		$	170,394			$	9,684			$	13,098			$	-			$	-			$	193,176
Residential real estate
Home equity lines of credit			-				712				976				84				92,908				94,680
Multifamily properties			36,115				103				538				-				-				36,756
Other residential real estate			38,725				1,357				10,843				-				83,907				134,832
Nonresidential real estate
Owner occupied properties			221,941				7,754				23,073				-				-				252,768
Non owner occupied properties			246,614				8,902				15,201				-				-				270,717
Construction			90,297				3,398				11,093				-				-				104,788
Consumer
Credit card balances			-				-				-				-				6,492				6,492
Other consumer			-				-				22				-				10,104				10,126
Municipal obligations			27,066				-				-				-				-				27,066
Total		$	831,152			$	31,910			$	74,844			$	84			$	193,411			$	1,131,401

  

(1) Not rated loans represent the homogenous pools risk category. These loans are evaluated primarily based on payment status, which is disclosed elsewhere.