SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
x
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 
For the quarterly period ended June 30, 2011 or

¨
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 
For the transition period from ______to______

 
Commission File Number: 0-26128

                NorthWest Indiana Bancorp               
(Exact name of registrant as specified in its charter)

Indiana
 
35-1927981
(State or other jurisdiction of incorporation
 
(I.R.S. Employer
or organization)
 
Identification Number)
     
9204 Columbia Avenue
   
Munster, Indiana
 
46321
(Address of principal executive offices)
  
(ZIP code)

Registrant's telephone number, including area code:  (219) 836-4400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes ¨ No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of  “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  ¨  Smaller Reporting Company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨  No x

There were 2,830,978 shares of the registrant’s Common Stock, without par value, outstanding at June 30, 2011.

 
 

 

NorthWest Indiana Bancorp
Index

   
Page
   
Number
PART I. Financial Information
   
       
Item 1. 
Unaudited Financial Statements
   
       
 
Consolidated Balance Sheets, June 30, 2011 and December 31, 2010
1
 
       
 
Consolidated Statements of Income, Three and Six Months Ended June 30, 2011 and 2010
2
 
       
 
Consolidated Statements of Changes in Stockholders' Equity, Three and Six Months Ended June 30, 2011 and 2010
3
 
       
 
Consolidated Statements of Cash Flows, Six Months Ended June 30, 2011 and 2010
  4
 
       
 
Notes to Consolidated Financial Statements
5-17
 
       
Item 2. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
18
 
       
Item 3. 
Quantitative and Qualitative Disclosures About Market Risk
29
 
       
Item 4. 
Controls and Procedures
29
 
     
PART II. Other Information
30
 
     
SIGNATURES
31
 
     
EXHIBITS
   
31.1  Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
 
 
31.2  Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
 
 
32.1  Section 1350 Certifications
 
 

 
 

 

NorthWest Indiana Bancorp
Consolidated Balance Sheets

   
June 30,
       
   
2011
   
December 31,
 
(Dollars in thousands)
 
(unaudited)
   
2010
 
             
ASSETS
           
             
Cash and non-interest bearing balances in financial institutions
  $ 9,673     $ 7,427  
Interest bearing balances in financial institutions
    4,215       90  
Federal funds sold
    4,077       3,421  
Total cash and cash equivalents
    17,965       10,938  
                 
Securities available-for-sale
    161,995       142,055  
Securities held-to-maturity
    17,431       18,397  
Loans held-for-sale
    75       422  
Loans receivable
    406,061       418,233  
Less: allowance for loan losses
    (8,138 )     (9,121 )
Net loans receivable
    397,923       409,112  
Federal Home Loan Bank stock
    3,086       3,381  
Accrued interest receivable
    2,669       2,591  
Premises and equipment
    18,621       19,293  
Foreclosed real estate
    1,275       3,298  
Cash value of bank owned life insurance
    12,653       12,452  
Prepaid FDIC insurance premium
    1,858       2,425  
Other assets
    5,733       6,689  
                 
Total assets
  $ 641,284     $ 631,053  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Deposits:
               
Non-interest bearing
  $ 53,491     $ 50,712  
Interest bearing
    464,757       469,559  
Total
    518,248       520,271  
Repurchase agreements
    21,388       16,074  
Borrowed funds
    29,336       32,544  
Accrued expenses and other liabilities
    13,154       6,075  
                 
Total liabilities
    582,126       574,964  
                 
Stockholders' Equity:
               
Preferred stock, no par or stated value; 10,000,000 shares authorized, none outstanding
    -       -  
Common stock, no par or stated value; 10,000,000 shares authorized;
               
shares issued:  June 30, 2011 - 2,888,902
    361       361  
December 31, 2010 - 2,888,902
               
shares outstanding:  June 30, 2011 - 2,830,978
               
December 31, 2010 - 2,826,796
               
Additional paid in capital
    5,158       5,140  
Accumulated other comprehensive income/(loss)
    496       (492 )
Retained earnings
    54,375       52,398  
Treasury stock, common shares at cost:  June 30, 2011 - 57,924
               
December 31, 2010 - 62,106
    (1,232 )     (1,318 )
                 
Total stockholders' equity
    59,158       56,089  
                 
Total liabilities and stockholders' equity
  $ 641,284     $ 631,053  

See accompanying notes to consolidated financial statements.

 
1

 
 
NorthWest Indiana Bancorp
Consolidated Statements of Income
(unaudited)

   
Three Months Ended
   
Six Months Ended
 
(Dollars in thousands, except per share data)
 
June 30,
   
June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Interest income:
                       
Loans receivable
                       
Real estate loans
  $ 4,317     $ 5,083     $ 8,703     $ 10,238  
Commercial loans
    874       1,121       1,833       2,153  
Consumer loans
    11       20       25       45  
Total loan interest
    5,202       6,224       10,561       12,436  
                                 
Securities
    1,581       1,564       3,101       3,094  
Other interest earning assets
    5       7       12       13  
                                 
Total interest income
    6,788       7,795       13,674       15,543  
                                 
Interest expense:
                               
Deposits
    674       1,055       1,385       2,255  
Repurchase agreements
    29       48       57       100  
Borrowed funds
    153       234       327       504  
                                 
Total interest expense
    856       1,337       1,769       2,859  
                                 
Net interest income
    5,932       6,458       11,905       12,684  
Provision for loan losses
    955       1,270       2,065       2,505  
                                 
Net interest income after provision for loan losses
    4,977       5,188       9,840       10,179  
                                 
Noninterest income:
                               
Fees and service charges
    637       635       1,221       1,244  
Gain on foreclosed real estate, net
    728       44       788       65  
Wealth management operations
    310       253       584       534  
Gain on sale of securities, net
    237       452       500       742  
Increase in cash value of bank owned life insurance
    101       104       202       205  
Gain on sale of loans held-for-sale, net
    29       163       110       272  
Other-than-temporary impairment of securities
    -       -       -       (11 )
Portion of loss recognized in other comprehensive income
    -       -       -       (102 )
Other
    8       4       28       8  
                                 
Total noninterest income
    2,050       1,655       3,433       2,957  
                                 
Noninterest expense:
                               
Compensation and benefits
    2,546       2,458       4,911       4,867  
Occupancy and equipment
    844       808       1,691       1,593  
Federal deposit insurance premiums
    265       265       596       496  
Data processing
    249       231       501       463  
Marketing
    75       114       216       239  
Other
    957       1,005       1,922       1,899  
                                 
Total noninterest expense
    4,936       4,881       9,837       9,557  
                                 
Income before income tax expenses
    2,091       1,962       3,436       3,579  
Income tax expenses
    412       346       585       574  
                                 
Net income
  $ 1,679     $ 1,616     $ 2,851     $ 3,005  
                                 
Earnings per common share:
                               
Basic
  $ 0.59     $ 0.57     $ 1.01     $ 1.06  
Diluted
  $ 0.59     $ 0.57     $ 1.01     $ 1.06  
                                 
Dividends declared per common share
  $ 0.15     $ 0.21     $ 0.30     $ 0.42  

See accompanying notes to consolidated financial statements.

 
2

 
 
NorthWest Indiana Bancorp
Consolidated Statements of Changes in Stockholders' Equity
(unaudited)

   
Three Months Ended
   
Six Months Ended
 
(Dollars in thousands)
 
June 30,
   
June 30,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Balance at beginning of period
  $ 57,291     $ 54,319     $ 56,089     $ 53,078  
                                 
Comprehensive income:
                               
Net income
    1,679       1,616       2,851       3,005  
Net unrealized change on securities available-for-sale, net of reclassifications and tax effects
    576       919       992       1,315  
Amortization of unrecognized gain
    (2 )     (2 )     (4 )     (4 )
Comprehensive income
    2,253       2,533       3,839       4,316  
                                 
Stock based compensation expense
    9       9       18       19  
                                 
Sale of treasury stock
    30       40       61       80  
                                 
Cash dividends
    (425 )     (593 )     (849 )     (1,185 )
                                 
Balance at end of period
  $ 59,158     $ 56,308     $ 59,158     $ 56,308  

See accompanying notes to consolidated financial statements.

 
3

 
 
NorthWest Indiana Bancorp
Consolidated Statements of Cash Flows
(unaudited)

   
Six Months Ended
 
(Dollars in thousands)
 
June 30,
 
   
2011
   
2010
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 2,851     $ 3,005  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Origination of loans for sale
    (3,866 )     (10,466 )
Sale of loans originated for sale
    4,286       11,253  
Depreciation and amortization, net of accretion
    1,076       1,005  
Amortization of mortgage servicing rights
    75       56  
Stock based compensation expense
    18       19  
Gain on sale of securities, net
    (500 )     (742 )
Gain on sale of loans held-for-sale, net
    (110 )     (272 )
Net losses due to other-than-temporary impairment of securities
    -       113  
Gain/(loss) on foreclosed real estate, net
    (788 )     (65 )
Provision for loan losses
    2,065       2,505  
Net change in:
               
Interest receivable
    (78 )     130  
Other assets
    957       995  
Cash value of bank owned life insurance
    (202 )     (205 )
Accrued expenses and other liabilities
    7,079       5,101  
Total adjustments
    10,012       9,427  
Net cash - operating activities
    12,863       12,432  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Proceeds from maturities and pay downs of securities available-for-sale
    18,679       11,931  
Proceeds from sales of securities available-for-sale
    10,267       13,962  
Purchases of securities available-for-sale
    (47,154 )     (30,330 )
Proceeds from maturities and pay downs of securities held-to-maturity
    960       933  
Proceeds from sale of Federal Home Loan Bank Stock
    296       -  
Net change in loans receivable
    9,789       10,803  
Proceeds from sales of foreclosed real estate
    2,146       932  
Purchase of premises and equipment, net
    (114 )     (442 )
Net cash - investing activities
    (5,131 )     7,789  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Change in deposits
    (2,023 )     29,631  
Proceeds from  FHLB advances
    3,000       9,000  
Repayment of FHLB advances
    (3,000 )     (15,000 )
Change in other borrowed funds
    2,106       (3,757 )
Proceeds from sale of treasury stock
    61       80  
Dividends paid
    (849 )     (1,185 )
Net cash - financing activities
    (705 )     18,769  
Net change in cash and cash equivalents
    7,027       38,990  
Cash and cash equivalents at beginning of period
    10,938       13,222  
Cash and cash equivalents at end of period
  $ 17,965     $ 52,212  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
               
Cash paid during the period for:
               
Interest
  $ 1,784     $ 2,885  
Income taxes
  $ 738     $ 1,010  
SUPPLEMENTAL NONCASH INFORMATION:
               
Transfers from loans to foreclosed real estate
  $ 120     $ 3,442  

See accompanying notes to consolidated financial statements.

 
4

 
 
NorthWest Indiana Bancorp
 
Notes to Consolidated Financial Statements

Note 1 - Basis of Presentation
The consolidated financial statements include the accounts of NorthWest Indiana Bancorp (the “Bancorp”), its wholly-owned subsidiary, Peoples Bank SB (the “Bank”), and the Bank’s wholly-owned subsidiaries, Peoples Service Corporation, NWIN, LLC and NWIN Funding, Inc. The Bancorp has no other business activity other than being a holding company for the Bank. The Bancorp’s earnings are dependent upon the earnings of the Bank. The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures required by U.S. generally accepted accounting principles for complete presentation of financial statements. In the opinion of management, the consolidated financial statements contain all adjustments necessary to present fairly the consolidated balance sheets of the Bancorp as of June 30, 2011 and December 31, 2010, and the consolidated statements of income, changes in stockholders’ equity, for the three and six months ended June 30, 2011 and 2010, and cash flows for the six months ended June 30, 2011 and 2010. The income reported for the six month period ended June 30, 2011 is not necessarily indicative of the results to be expected for the full year.

Note 2 - Use of Estimates
Preparing financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period, as well as the disclosures provided. Actual results could differ from those estimates. Estimates associated with the allowance for loan losses, fair values of foreclosed real estate, loan servicing rights, investment securities, and the status of contingencies are particularly susceptible to material change in the near term.

Note 3 - Securities
The fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

   
(Dollars in thousands)
 
         
Gross
   
Gross
   
Estimated
 
   
Cost
   
Unrealized
   
Unrealized
   
Fair
 
   
Basis
   
Gains
   
Losses
   
Value
 
June 30, 2011
                       
U.S. government sponsored entities
  $ 8,942     $ 26     $ (16 )   $ 8,952  
Collateralized mortgage obligations and residential mortgage-backed securities
    110,166       3,146       (55 )     113,257  
Municipal securities
    36,968       1,363       (190 )     38,141  
Collateralized debt obligations
    5,215       -       (3,570 )     1,645  
Total securities available-for-sale
  $ 161,291     $ 4,535     $ (3,831 )   $ 161,995  
                                 
December 31, 2010
                               
U.S. government sponsored entities
  $ 4,172     $ -     $ (3 )   $ 4,169  
Collateralized mortgage obligations and residential mortgage-backed securities
    94,930       2,372       (160 )     97,142  
Municipal securities
    38,549       1,027       (211 )     39,365  
Collateralized debt obligations
    5,215       -       (3,836 )     1,379  
Total securities available-for-sale
  $ 142,866     $ 3,399     $ (4,210 )   $ 142,055  

 
5

 
The carrying amount (cost basis), unrecognized gains and losses, and fair value of securities held-to-maturity were as follows:

   
(Dollars in thousands)
 
         
Gross
   
Gross
   
Estimated
 
   
Cost
   
Unrecognized
   
Unrecognized
   
Fair
 
   
Basis
   
Gains
   
Losses
   
Value
 
June 30, 2011
                       
Municipal securities
  $ 16,726     $ 736     $ (5 )   $ 17,457  
Residential mortgage-backed securities
    705       27       -       732  
Total securities held-to-maturity
  $ 17,431     $ 763     $ (5 )   $ 18,189  
                                 
December 31, 2010
                               
Municipal securities
  $ 17,573     $ 613     $ -     $ 18,186  
Residential mortgage-backed securities
    824       29       (1 )     852  
Total securities held-to-maturity
  $ 18,397     $ 642     $ (1 )   $ 19,038  

The fair value of debt securities and carrying amount, if different, at June 30, 2011 by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

   
(Dollars in thousands)
 
   
Available-for-sale
    Held-to-maturity  
   
Estimated
               
Estimated
       
   
Fair
   
Tax-Equivalent
   
Cost
   
Fair
   
Tax-Equivalent
 
   
Value
   
Yield (%)
   
Basis
   
Value
   
Yield (%)
 
Due in one year or less
  $ 194       7.07     $ -     $ -       -  
Due from one to five years
    9,052       2.81       1,875       1,948       6.34  
Due from five years to ten years
    11,371       5.27       11,142       11,710       6.05  
Due over ten years
    28,121       5.89       3,709       3,799       6.09  
Collateralized mortgage obligations and residential mortgage-backed securities
    113,257       3.72       705       732       4.55  
Total
  $ 161,995       4.16     $ 17,431     $ 18,189       6.03  

Sales of available-for-sale securities were as follows:

   
(Dollars in thousands)
 
   
June 30,
   
June 30,
 
   
2011
   
2010
 
             
Proceeds
  $ 10,267     $ 13,962  
Gross gains
    509       742  
Gross losses
    (9 )     -  
 
The change in net unrealized gain/(loss) on available-for-sale securities included in other comprehensive income is as follows:
 
   
(Dollars in thousands)
 
   
Unrealized
 
   
gain/(loss)
 
Beginning balance, December 31, 2010
  $ (561 )
Current period change
    992  
Ending balance, June 30, 2011
  $ 431  
 
Securities with carrying values of $71,326,000 and $24,484,000 were pledged as of June 30, 2011 and December 31, 2010, respectively, as collateral for repurchase agreements, public funds, and for other purposes as permitted or required by law. The increase in pledged securities was the result of new pledging requirements for Indiana public funds deposits.

 
6

 

Securities with unrealized losses at June 30, 2011 and December 31, 2010 not recognized in income are as follows:
   
(Dollars in thousands)
 
   
Less than 12 months
   
12 months or longer
   
Total
 
   
Estimated
         
Estimated
         
Estimated
       
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
June 30, 2011
                                   
U.S. government sponsored entities
  $ 1,288     $ (16 )   $ -     $ -     $ 1,288     $ (16 )
Collateralized mortgage obligations and residential mortgage-backed securities
    7,663       (55 )     -       -       7,663       (55 )
Municipal securities
    5,890       (195 )     -       -       5,890       (195 )
Collateralized debt obligations
    195       -       1,645       (3,570 )     1,840       (3,570 )
Total temporarily impaired
  $ 15,036     $ (266 )   $ 1,645     $ (3,570 )   $ 16,681     $ (3,836 )
Number of securities
            20               4               24  

    
(Dollars in thousands)
 
   
Less than 12 months
   
12 months or longer
   
Total
 
   
Estimated
         
Estimated
         
Estimated
       
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
December 31, 2010
                                   
U.S. government sponsored entities
  $ 2,513     $ (3 )   $ -     $ -     $ 2,513     $ (3 )
Collateralized mortgage obligations and residential mortgage-backed securities
    13,767       (161 )     -       -       13,767       (161 )
Municipal securities
    7,496       (194 )     398       (17 )     7,894       (211 )
Collateralized debt obligations
    -       -       1,379       (3,836 )     1,379       (3,836 )
Total temporarily impaired
  $ 23,776     $ (358 )   $ 1,777     $ (3,853 )   $ 25,553     $ (4,211 )
Number of securities
            27               5               32  
 
Unrealized losses on securities have not been recognized into income because the securities are of high credit quality or have undisrupted cash flows. Management has the intent and ability to hold for the foreseeable future, and the decline in fair value is largely due to changes in interest rates and volatility in securities. The fair value is expected to recover as the securities approach maturity.

Note 4 - Loans Receivable
 
   
(Dollars in thousands)
 
   
June 30, 2011
   
December 31, 2010
 
Loans secured by real estate:
           
Construction and land development
  $ 30,141     $ 46,371  
Residential, including home equity
    149,552       153,150  
Commercial real estate and other dwelling
    153,249       146,111  
Total loans secured by real estate
    332,942       345,632  
Consumer loans
    594       765  
Commercial business
    63,027       61,837  
Government and other
    9,881       10,380  
Subtotal
    406,444       418,614  
Less:
               
Net deferred loan origination fees
    (249 )     (273 )
Undisbursed loan funds
    (134 )     (108 )
Loans receivable
  $ 406,061     $ 418,233  
 
 
7

 
 
The Bancorp's activity in the allowance for loan losses, by loan segment, is summarized below for the six months ended June 30, 2011:

               
Commercial Real
                         
               
Estate,
                         
               
Construction &
                         
   
Residential Real
         
Land
   
Commercial
                   
   
Estate, Including
         
Development, and
   
Participations
   
Commercial
             
(Dollars in thousands)
 
Home Equity
   
Consumer Loans
   
Other Dwellings
   
Purchased
   
Business Loans
   
Government
   
Total
 
For the six months ending June 30, 2011
                                         
Allowance for loan losses:
                                         
Beginning Balance
  $ 994     $ 30     $ 2,773     $ 4,704     $ 620     $ -       9,121  
Charge-offs
    (235 )     (4 )     (567 )     (2,417 )     (111 )     -       (3,334 )
Recoveries
    102       10       174       -       -       -       286  
Provisions
    245       (18 )     682       950       206       -       2,065  
Ending Balance
  $ 1,106     $ 18     $ 3,062     $ 3,237     $ 715     $ -     $ 8,138  

The Bancorp's allowance for loan losses impairment evaluation, by loan segment, at June 30, 2011:

Ending balance: individually evaluated for impairment
  $ -     $ -     $ 932     $ 494     $ 130     $ -     $ 1,556  
                                                         
Ending balance: collectively evaluated for impairment
  $ 1,106     $ 18     $ 2,130     $ 2,743     $ 585     $ -     $ 6,582  
                                                         
Ending balance: loans acquired with deteriorated credit quality
  $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                         
FINANCING RECEIVABLES Ending balance
  $ 149,248     $ 591     $ 158,348     $ 25,043     $ 62,950     $ 9,881     $ 406,061  
                                                         
Ending balance: individually evaluated for impairment
  $ 55     $ -     $ 9,887     $ 11,887     $ 392     $ -     $ 22,221  
                                                         
Ending balance: collectively evaluated for impairment
  $ 149,193     $ 591     $ 148,461     $ 13,156     $ 62,558     $ 9,881     $ 383,840  
                                                         
Ending balance: loans acquired with deteriorated credit quality
  $ -     $ -     $ -     $ -     $ -     $ -     $ -  

The Bancorp's allowance for loan losses impairment evaluation, by loan segment, at December 31, 2010:

Ending balance: individually evaluated for impairment
  $ 1     $ -     $ 875     $ 1,897     $ 21     $ -     $ 2,794  
                                                         
Ending balance: collectively evaluated for impairment
  $ 993     $ 30     $ 1,898     $ 2,807     $ 599     $ -     $ 6,327  
                                                         
Ending balance: loans acquired with deteriorated credit quality
  $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                         
FINANCING RECEIVABLES Ending balance
  $ 152,881     $ 874     $ 163,616     $ 28,866     $ 61,726     $ 10,270     $ 418,233  
                                                         
Ending balance: individually evaluated for impairment
  $ 64     $ -     $ 10,974     $ 14,493     $ 482     $ -     $ 26,013  
                                                         
Ending balance: collectively evaluated for impairment
  $ 152,817     $ 874     $ 152,642     $ 14,373     $ 61,244     $ 10,270     $ 392,220  
                                                         
Ending balance: loans acquired with deteriorated credit quality
  $ -     $ -     $ -     $ -     $ -     $ -     $ -  

The Bancorp's credit quality indicators by loan segment are summarized below at June 30, 2011 and December 31, 2010:

   
(Dollars in thousands)
 
   
Corporate Credit Exposure - Credit Risk Portfolio By Creditworthiness Category
 
   
Commercial Real Estate, Construction
                                     
   
& Land Development, and Other Dwellings
   
Commercial Participations Purchased
   
Commercial Business Loans
   
Government
 
Loan Grades
 
2011
   
2010
   
2011
   
2010
   
2011
   
2010
   
2011
   
2010
 
2 Modest risk
  $ 28     $ 31     $ -     $ -     $ 4,460     $ 4,724     $ -     $ -  
3 Acceptable risk
    80,384       63,330       1,431       1,473       34,705       30,549       9,881       10,270  
4 Pass/monitor
    57,485       78,758       5,971       6,482       19,381       21,131       -       -  
5 Special mention (watch)
    10,298       9,817       5,754       6,419       2,956       2,517       -       -  
6 Substandard
    10,153       11,680       11,887       14,492       1,448       2,805       -       -  
7 Doubtful
    -       -       -       -       -       -       -       -  
Total
  $ 158,348     $ 163,616     $ 25,043     $ 28,866     $ 62,950     $ 61,726     $ 9,881     $ 10,270  

   
(Dollars in thousands)
 
   
Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity
 
   
Residential Real Estate,
       
   
Including Home Equity
   
Consumer Loans
 
   
2011
   
2010
   
2011
   
2010
 
Performing
  $ 146,220     $ 149,892     $ 591     $ 871  
Nonperforming
    3,028       2,989       -       3  
Total
  $ 149,248     $ 152,881     $ 591     $ 874  

 
8

 

The Bancorp's impaired loans are summarized below:

                     
For the six months ended
 
   
As of June 30, 2011
   
June 30, 2011
 
                     
Average
   
Interest
 
(Dollars in thousands)
 
Recorded
   
Unpaid Principal
   
Related
   
Recorded
   
Income
 
   
Investment
   
Balance
   
Allowance
   
Investment
   
Recognized
 
With no related allowance recorded:
                             
Residential real estate, including home equity
  $ 55     $ 55     $ -     $ -     $ -  
Commercial real estate, construction & land development, and other dwellings
    437       813       -       746       12  
Commercial participations purchased
    4,249       10,566       -       3,473       128  
Commercial business loans
    -       -       -       177       -  
With an allowance recorded:
                                       
Residential real estate, including home equity...
    -       -       -       -       -  
Commercial real estate, construction & land development, and other dwellings
    9,450       9,722       932       9,685       358  
Commercial participations purchased
    7,638       9,180       494       9,718       216  
Commercial business loans
    392       417       130       260       9  
Total:
                                       
Residential real estate, including home equity...
  $ 55     $ 55     $ -     $ -     $ -  
Commercial real estate, construction & land development, and other dwellings
  $ 9,887     $ 10,535     $ 932     $ 10,431     $ 370  
Commercial participations purchased
  $ 11,887     $ 19,746     $ 494     $ 13,191     $ 344  
Commercial business loans
  $ 392     $ 417     $ 130     $ 437     $ 9  

   
As of December 31, 2010
 
(Dollars in thousands)
 
Recorded
   
Unpaid principal
   
Related
 
   
investment
   
balance
   
allowance
 
With no related allowance recorded:
                 
Residential real estate, including home equity
  $ 64     $ 103     $ -  
Commercial real estate, construction & land development, and other dwellings
    1,054       1,345       -  
Commercial participations purchased
    2,696       8,140       -  
Commercial business loans
    354       354       -  
With an allowance recorded:
                       
Residential real estate, including home equity
    -       -       1  
Commercial real estate, construction & land development, and other dwellings
    9,920       10,361       875  
Commercial participations purchased
    11,797       11,797       1,897  
Commercial business loans
    128       128       21  
Total:
                       
Residential real estate, including home equity
  $ 64     $ 103     $ 1  
Commercial real estate, construction & land development, and other dwellings
  $ 10,974     $ 11,706     $ 875  
Commercial participations purchased
  $ 14,493     $ 19,937     $ 1,897  
Commercial business loans
  $ 482     $ 482     $ 21  

 
9

 

The Bancorp's age analysis of past due financing receivables are summarized below:

         
(Dollars in thousands)
                         
                                       
Recorded
 
                                       
Investments
 
                                 
Total
   
Greater than
 
   
30-59 Days Past
   
60-89 Days Past
   
Greater Than 90
               
Financing
   
90 Days and
 
   
Due
   
Due
   
Days
   
Total Past Due
   
Current
   
Receivables
   
Accruing
 
June 30, 2011