v2.4.0.6
LOANS
12 Months Ended
Dec. 31, 2011
LOANS

NOTE 3 - LOANS

Year-end loans were as follows:

 

    2011     2010  
             
Commercial   $ 193,176     $ 216,660  
Residential real estate     266,268       260,625  
Nonresidential real estate     523,485       482,173  
Construction     104,788       107,611  
Consumer     16,618       16,546  
Municipal obligations     27,066       23,573  
Gross loans     1,131,401       1,107,188  
Less:    Deferred loan origination fees                
and discount     (1,447 )     (1,179 )
Allowance for loan losses     (18,288 )     (17,368 )
                 
Net loans   $ 1,111,666     $ 1,088,641  

 

Certain of the Company’s directors are loan customers of the Bank. A schedule of the aggregate activity in these loans follows:

 

    2011  
       
Beginning balance   $ 2,415  
Effect of change in composition of board     122  
New loans and advances on lines of credit     14,452  
Loan payments     (13,016 )
         
Ending balance   $ 3,973  

    

The following Table presents the activity in the allowance for loan losses by portfolio segment for the year ending December 31 2011:

 

                Non                          
          Residential     Residential                 Municipal        
    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     1,919       1,330       3,400       3,400       527       (42 )     10,750  
Loans charged off     (2,236 )     (1,214 )     (4,076 )     (2,066 )     (908 )     -       (10,500 )
Recoveries     84       44       164       1       377       -       670  
                                                         
Total ending allowance balance   $ 3,207     $ 2,591     $ 7,614     $ 4,701     $ 162     $ 13     $ 18,288  

 

Activity in the allowance for loan losses was as follows:

 

    2010     2009  
             
Beginning balance   $ 15,153     $ 9,910  
Provision charged to operations     15,500       12,825  
Loans charged off     (14,006 )     (8,033 )
Recoveries     721       451  
                 
Ending balance   $ 17,368     $ 15,153  

   

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2011 and 2010.

 

                Non                          
          Residential     Residential                 Municipal        
    Commercial     Real estate     Real estate     Construction     Consumer     Obligations     Total  
Allowance for loan losses                                                        
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 loan balance   $ 193,176     $ 266,268     $ 523,485     $ 104,788     $ 16,618     $ 27,066     $ 1,131,401  

   

                Non                          
          Residential     Residential                 Municipal        
December 31, 2010   Commercial     Real estate     Real estate     Construction     Consumer     Obligations     Total  
Allowance for loan losses                                                        
Ending allowance balance attributable to loans                                                        
Individually evaluated for impairment   $ 595     $ 399     $ 3,365     $ 1,385     $ -     $ -     $ 5,744  
Collectively evaluated for impairment     2,845       2,032       4,761       1,765       166       55       11,624  
                                                         
Total ending allowance balance   $ 3,440     $ 2,431     $ 8,126     $ 3,150     $ 166     $ 55     $ 17,368  
                                                         
Loans                                                        
Loans individually evaluated for impairment   $ 1,769     $ 2,828     $ 15,583     $ 5,776     $ -     $ -     $ 25,956  
Loans collectively evaluated for impairment     214,891       257,797       466,590       101,835       16,546       23,573       1,081,232  
                                                         
Total ending loans balance   $ 216,660     $ 260,625     $ 482,173     $ 107,611     $ 16,546     $ 23,573     $ 1,107,188  

   

Nonperforming and impaired loans were as follows

 

    2011     2010     2009  
Nonaccrual loans at year end   $ 15,651     $ 20,648     $ 23,826  
Loans past due over 90 days, still accruing at year-end     219       414       1,736  
Accruing restructured loans     13,306       6,135       3,568  
Average impaired loans during the year     31,692       30,076       28,244  
Interest income recognized during impairment     866       640       738  
Cash basis interest recognized during impairment     742       728       742  
Loans designated as impaired at year end with allowance allocated     29,123       22,524       32,142  
Impaired loans with no allowance allocated     6,137       3,432       3,922  
Allowance allocated to impaired loans at year end     7,443       5,744       5,916  

 

Nonperforming loans includes both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans that are not performing.

   

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

 

    Unpaid           Allowance for     Average     Interest     Cash Basis  
    Principal     Recorded     Loan Losses     Recorded     Income     Interest  
    Balance     Investment     Allocated     Investment     Recognized     Recognized  
                                     
With no related allowance recorded
Commercial
  $ 350     $ 310     $ -     $ 341     $ -     $ -  
                                                 
Residential real estate                                                
Home equity lines of credit     50       50       -       6       -       -  
Multifamily properties     538       538       -       80       -       -  
Other     1,703       1,703       -       1,444       -       -  
                                                 
Nonresidential real estate                                                
Owner occupied properties     1,101       1,101       -       635       -       -  
Non owner occupied properties     2,122       2,116       -       1,013       -       -  
                                                 
Construction     356       319       -       570       -       -  
                                                 
      6,220       6,137       -       4,089       -       -  
                                                 
With an allowance recorded                                                
Commercial     733       607       224       1,718       18       10  
                                                 
Residential real estate                                                
Home equity lines of credit     -       -       -       -       -       -  
Multifamily properties     -       -       -       800       42       28  
Other     3,859       3,809       477       2,663       78       73  
                                                 
Nonresidential real estate                                                
Owner occupied properties     10,771       9,798       1,477       4,556       166       106  
Non owner occupied properties     8,476       7,375       1,517       9,933       284       263  
                                                 
Construction     8,267       7,535       3,748       7,934       278       262  
                                                 
      32,106       29,123       7,443       27,604       866       742  
                                                 
Total   $ 38,326     $ 35,261     $ 7,443     $ 31,692     $ 866     $ 742  

   

The following table presents individually impaired loans by class of loans as of December 31, 2010:

 

    Unpaid           Allowance for  
    Principal     Recorded     Loan Losses  
    Balance     Investment     Allocated  
                   
With no related allowance recorded                        
Commercial   $ 310     $ 310     $  
                         
Residential real estate                        
Home equity lines of credit     -       -       -  
Multifamily properties     34       34          
Other     259       259       -  
                         
Nonresidential real estate                        
Owner occupied properties     725       725       -  
Non owner occupied properties     1,495       1,495       -  
                         
      3,432       3,432       -  
Construction     609       609       -  
                         
With an allowance recorded                        
Commercial     1,459       1,459       595  
                         
Residential real estate                        
Home equity lines of credit     -       -       -  
Multifamily properties     1,180       1,180       57  
Other     1,355       1,355       342  
                         
Nonresidential real estate                        
Owner occupied properties     1,946       1,946       460  
Non owner occupied properties     11,417       11,417       2,905  
                         
Construction     5,167       5,167       1,385  
                         
      22,524       22,524       5,744  
                         
Total   $ 25,956     $ 25,956     $ 5,744  

     

The following table presents the aging of the recorded investment in past due loans as of December 31, 2011 by class of loans:

 

    Loans     Loans over                    
    30-90 days     90 days           Loans Not        
    past due     past due     Nonaccrual     past due     Total  
                               
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  

   

  Loans     Loans over                     
    30-90 days     90 days         Loans not         
    past due     past due     Nonaccrual     past due     Total  
December 31, 2010                                        
Commercial   $ 1,836     $ -     $ 4,749     $ 210,075     $ 216,660  
Residential real estate                                        
Home equity lines of credit     141       -       728       93,317       94,186  
Multifamily properties     -       -       34       37,663       37,697  
Other residential real estate     3,571       263       3,446       121,462       128,742  
                                         
Nonresidential real estate                                        
Owner occupied properties     1,352       68       984       231,870       234,274  
Non owner occupied properties     4,525       -       5,327       238,047       247,899  
Construction     220       -       5,329       102,062       107,611  
                                         
Consumer                                        
Credit card balances     102       83       -       5,852       6,037  
Other consumer     67       -       51       10,391       10,509  
                                         
Municipal obligations     -       -       -       23,573       23,573  
                                         
Total   $ 11,814     $ 414     $ 20,648     $ 1,074,312     $ 1,107,188  

 

Troubled Debt Restructurings:

 

The Company has allocated $2,074 and $1,436 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2011 and December 31, 2010. Troubled debt restructurings totaled $15,229 and $8,321 as of December 31, 2011 and December 31, 2010, respectively. The Company has not committed to lend additional amounts as of December 31, 2011 and December 31, 2010 to customers with outstanding loans that are classified as troubled debt restructurings.

 

During the year ending December 31, 2011, the terms of certain loans were modified 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 December 31, 2011:

 

          Pre-Modification     Post-Modification  
          Outstanding Recorded     Outstanding  Recorded  
    Number of  Loans     Investment     Investment  
Troubled Debt Restructurings:
                       
                         
Commercial     2     $ 349,870     $ 310,439  
Residential real estate
                       
Home equity lines of credit     -       -       -  
Multifamily properties
                       
Other residential real estate     4       3,498,821       3,421,120  
Nonresidential real estate
                 
Owner occupied properties     3       8,137,536       7,989,080  
Non owner occupied properties     4       3,661,111       3,496,046  
Construction     1        437,380        12,500  
Consumer                        
Credit card balances     -       -       -  
Other consumer     -       -       -  
                         
Municipal obligations
    -       -       -  
                         
Total     14     $ 16,084,718     $ 15,229,185  

 

The troubled debt restructurings described above increased the allowance for loan losses by $0 and resulted in charge-offs of $919,927 as of December 31, 2011.

 

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 December 31, 2011:

 

Troubled Debt Restructurings            
That Subsequently Defaulted:   Number of Loans     Recorded Investment  
             
Commercial     2     $ 310,439  
Residential real estate
               
Home equity lines of credit                
Multifamily properties                
Other residential real estate     1       700,093  
Nonresidential real estate                
Owner occupied properties     1       7,779,219  
Non owner occupied properties     2       900,481  
Construction     1       12,500  
Consumer
               
Credit card balances                
Other consumer                
Municipal obligations     -       -  
                 
Total     7     $ 9,702,732  

  

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 $0 and resulted in $399,574 for the twelve months ending December 31, 2011.

 

Credit Quality Indicators:

 

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. This analysis includes loans with an outstanding balance greater than $100 and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. 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.

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are either less than $100 or are included in group of homogeneous loans.

 

As of December 31, 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

          Special                          
    Pass     Mention     Substandard     Doubtful     Not Rated     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       10843       -       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  

  

December 31, 2010         Special                          
    Pass     Mention     Substandard     Doubtful     Not Rated     Total  
                                     
Commercial   $ 191,690     $ 9,415     $ 15,555     $ -       -     $ 216,660  
Residential real estate
                                               
Home equity lines of credit     -       -       871       6       93,309       94,186  
Multifamily properties     35,483       1,303       911       -       -       37,697  
Other residential real estate     40,975       137       9,186       -       78,444       128,742  
                                                 
Nonresidential real estate
                                               
Owner occupied properties     207,137       5,052       22,085       -       -       234,274  
Non owner occupied properties     224,111       5,117       18,671       -       -       247,899  
Construction     86,524       4,350       16,737       -       -       107,611  
                                                 
Consumer                                                
Credit card balances     -       -       -       -       6,037       6,037  
Other consumer     -       -       14       2       10,493       10,509  
Municipal obligations     23,573       -       -       -               23,573  
Total   $ 809,493     $ 25,374     $ 84,030     $ 8     $ 188,283     $ 1,107,188  

 

Loans listed as not rated are included in groups of homogeneous loans. These loans are evaluated based on delinquency status.