Quarterly report pursuant to Section 13 or 15(d)

Loans Receivable

v2.4.0.6
Loans Receivable
6 Months Ended
Jun. 30, 2012
Disclosure Text Block [Abstract]  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 4 - Loans Receivable

 

    (Dollars in thousands)  
    June 30, 2012     December 31, 2011  
Loans secured by real estate:                
Construction and land development   $ 20,618     $ 21,143  
Residential, including home equity     156,783       154,426  
Commercial real estate and other dwelling     177,465       153,715  
Total loans secured by real estate     354,866       329,284  
Consumer loans     482       472  
Commercial business     68,688       63,384  
Government and other     7,661       8,643  
Subtotal     431,697       401,783  
Less:                
Net deferred loan origination fees     (282 )     (264 )
Undisbursed loan funds     (59 )     (118 )
Loans receivable   $ 431,356     $ 401,401  

 

 

 

(Dollars in thousands)   Residential Real Estate, Including Home Equity     Consumer Loans     Commercial Real Estate, Construction & Land Development, and Other Dwellings     Commercial Participations Purchased     Commercial Business Loans     Government     Total  
                                           
The Bancorp's activity in the allowance for loan losses is summarized below for the six months ended June 30, 2012:
                                           
Allowance for loan losses:                                                        
Beginning Balance   $ 1,161     $ 15     $ 3,329     $ 2,399     $ 1,101     $ -     $ 8,005  
Charge-offs     (205 )     (9 )     (381 )     (484 )     -       -       (1,079 )
Recoveries     -       4       9       -       30       -       43  
Provisions     210       22       978       121       (256 )     -       1,075  
Ending Balance   $ 1,166     $ 32     $ 3,935     $ 2,036     $ 875     $ -     $ 8,044  
                                                         
The Bancorp's activity in the allowance for loan losses is summarized below for the six months ended 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 at June 30, 2012:    
                                                         
Ending balance: individually                                                        
evaluated for impairment   $ 14     $ -     $ 1,144     $ -     $ 136     $ -     $ 1,294  
                                                         
Ending balance: collectively                                                        
evaluated for impairment   $ 1,152     $ 32     $ 2,791     $ 2,036     $ 739     $ -     $ 6,750  
                                                         
Ending balance: loans acquired                                                        
with deteriorated credit quality   $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                         
FINANCING RECEIVABLES                                                        
Ending balance   $ 156,470     $ 481     $ 169,749     $ 28,334     $ 68,661     $ 7,661     $ 431,356  
                                                         
Ending balance: individually                                                        
evaluated for impairment   $ 935     $ -     $ 10,990     $ 6,632     $ 1,734     $ -     $ 20,291  
                                                         
Ending balance: collectively                                                        
evaluated for impairment   $ 155,535     $ 481     $ 158,759     $ 21,702     $ 66,927     $ 7,661     $ 411,065  
                                                         
The Bancorp's allowance for loan losses impairment evaluation at December 31, 2011:    
                                                         
Ending balance: individually                                                        
evaluated for impairment   $ 10     $ -     $ 1,043     $ 252     $ 304     $ -     $ 1,609  
                                                         
Ending balance: collectively                                                        
evaluated for impairment   $ 1,151     $ 15     $ 2,286     $ 2,147     $ 797     $ -     $ 6,396  
                                                         
Ending balance: loans acquired                                                        
with deteriorated credit quality   $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                         
FINANCING RECEIVABLES                                                        
Ending balance   $ 154,135     $ 472     $ 154,618     $ 20,240     $ 63,293     $ 8,643     $ 401,401  
                                                         
Ending balance: individually                                                        
evaluated for impairment   $ 1,282     $ -     $ 11,007     $ 7,170     $ 2,214     $ -     $ 21,673  
                                                         
Ending balance: collectively                                                        
evaluated for impairment   $ 152,853     $ 472     $ 143,611     $ 13,070     $ 61,079     $ 8,643     $ 379,728  

 

 

 

The Bancorp's credit quality indicators, are summarized below at June 30, 2012 and December 31, 2011:

 

    (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   2012     2011     2012     2011     2012     2011     2012     2011  
2   Moderate risk   $ 22     $ 25     $ -     $ -     $ 6,051     $ 4,467     $ -     $ -  
3   Acceptable risk     104,445       85,703       11,809       2,387       42,141       37,713       7,661       8,643  
4   Pass/monitor     50,835       51,429       3,400       5,903       17,011       17,532       -       -  
5   Special mention (watch)     3,348       5,509       6,493       4,780       1,371       978       -       -  
6   Substandard     11,099       11,952       6,632       7,170       2,087       2,603       -       -  
7   Doubtful     -       -       -       -       -       -       -       -  
Total   $ 169,749     $ 154,618     $ 28,334     $ 20,240     $ 68,661     $ 63,293     $ 7,661     $ 8,643  

  

      (Dollars in thousands)   
      Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity   
      Residential Real Estate,
Including Home Equity
    Consumer Loans   
      2012     2011     2012     2011  
  Performing     $ 154,477     $ 151,375     $ 467     $ 472  
  Nonperforming       1,993       2,760       14       -  
  Total     $ 156,470     $ 154,135     $ 481     $ 472  

 

The Bancorp has established a standard loan grading system to assist management, lenders and review personnel in their analysis and supervision of the loan portfolio. The use and application of theses grades by the Bancorp is uniform and conforms to regulatory definitions. The loan grading system is as follows:

 

2 - Moderate risk

Borrower consistently internally generates sufficient cash flow to fund debt service, working assets, and some capital expenditures. Risk of default considered low.

 

3 – Acceptable risk

Borrower generates sufficient cash flow to fund debt service, but most working asset and all capital expansion needs are provided from external sources. Profitability ratios and key balance sheet ratios are usually close to peers but one or more ratios (e.g. leverage) may be higher than peer. Earnings may be trending down over the last three years. Borrower may be able to obtain similar financing from other banks with comparable or less favorable terms. Risk of default is acceptable but requires collateral protection.

 

4 – Pass/monitor

The borrower has significant weaknesses resulting from performance trends or management concerns. The financial condition of the company has taken a negative turn and may be temporarily strained. Cash flow may be weak but cash reserves remain adequate to meet debt service. Management weaknesses are evident. Borrowers in this category will warrant more than the normal level of supervision and more frequent reporting.

 

5 – Special mention (watch)

Special mention credits are considered bankable assets with no apparent loss of principal or interest envisioned but requiring a high level of management attention. Assets in this category are currently protected but are potentially weak. These borrowers are subject to economic, industry, or management factors having an adverse impact upon their prospects for orderly service of debt. The perceived risk in continued lending is considered to have increased beyond the level where such loans would normally be granted. These assets constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of Substandard.

 

6 – Substandard

This classification consists of loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Financial statements normally reveal some or all of the following: poor trends, lack of earnings and cash flow, excessive debt, lack of liquidity, and the absence of creditor protection. Loans are still considered collectible, but due to increased risks and defined weaknesses of the credit, some loss could be incurred in collection if the deficiencies are not corrected.

 

7 – Doubtful

This classification consists of loans where the possibility of loss is high after collateral liquidation based upon existing facts, market conditions, and value. Loss is deferred until certain important and reasonably specific pending factors which may strengthen the credit can be exactly determined. These factors may include proposed acquisitions, liquidation procedures, capital injection and receipt of additional collateral, mergers or refinancing plans.

  

Performing loans are loans that are paying as agreed and are less than ninety days past due on payments of interest and principal.

 

 

The Bancorp's cumulative outstanding troubled debt restructurings are summarized below:

 

    (Dollars in thousands)  
    Number of Contracts     Pre-Modification Outstanding Recorded Investment     Post-Modification Outstanding Recorded Investment     Number of Contracts     Pre-Modification Outstanding Recorded Investment     Post-Modification Outstanding Recorded Investment  
    June 30, 2012     December 31, 2011  
Troubled debt restructurings outstanding at                                                
the end of the periods presented:                                                
Residential real estate, including home equity     9     $ 937     $ 935       14     $ 1,290     $ 1,282  
Consumer loans     -       -       -       -       -       -  
Commercial real estate, construction & land                                                
 development, and other dwellings     5       8,902       8,449       3       8,097       7,836  
Commercial participations purchased     2       7,975       5,544       2       7,975       5,635  
Commercial business loans     -       -       -       -       -       -  
Government     -       -       -       -       -       -  

 

    Number of Contracts     Recorded Investment     Number of Contracts     Recorded Investment  
    June 30, 2012     December 31, 2011  
Troubled debt restructurings that subsequently                                
defaulted during the periods presented:                                
Residential real estate, including home equity     -     $ -       -     $ -  
Consumer loans     -       -       -       -  
Commercial real estate, construction & land                                
 development, and other dwellings     -       -       1       376  
Commercial participations purchased     -       -       -       -  
Commercial business loans     -       -       -       -  
Government     -       -       -       -  

 

Troubled debt restructurings that subsequently defaulted during the period are loans that were restructured and, subsequent to restructuring, were unable perform within the guidelines of the restructured note. Troubled debt restructurings that subsequently defaulted are presented for comparison purposes and are relevant only to the period in which the subsequent default occurred.

 

 

The Bancorp's individually evaluated impaired loans are summarized below:          

 

    As of June 30, 2012     For the six months ended
June 30, 2012
 
(Dollars in thousands)   Recorded Investment     Unpaid Principal Balance     Related Allowance     Average Recorded Investment     Interest Income Recognized  
With no related allowance recorded:                                        
                                         
Residential real estate, including home equity   $ -     $ -     $ -     $ -     $ -  
Commercial real estate, construction & land                                        
 development, and other dwellings     1,095       1,221       -       708       5  
Commercial participations purchased     6,632       12,792       -       3,501       90  
Commercial business loans     1,039       1,164       -       645       31  
With an allowance recorded:                                        
Residential real estate, including home equity     935       1,213       14       596       6  
Commercial real estate, construction & land                                        
 development, and other dwellings     9,895       9,914       1,144       9,817       356  
Commercial participations purchased     -       -       -       5,406       -  
Commercial business loans     695       696       136       1,103       28  
Total:                                        
Residential real estate, including home equity   $ 935     $ 1,213     $ 14     $ 596     $ 6  
Commercial real estate, construction & land                                        
 development, and other dwellings   $ 10,990     $ 11,135     $ 1,144     $ 10,525     $ 361  
Commercial participations purchased   $ 6,632     $ 12,792     $ -     $ 8,907     $ 90  
Commercial business loans   $ 1,734     $ 1,860     $ 136     $ 1,748     $ 59  

 

    As of December 31, 2011     For the six months ended
June 30, 2011
 
(Dollars in thousands)   Recorded investment     Unpaid principal balance     Related allowance     Average Recorded Investment     Interest Income Recognized  
With no related allowance recorded:                                        
                                         
Residential real estate, including home equity   $ -     $ -     $ -     $ -     $ -  
Commercial real estate, construction & land                                        
 development, and other dwellings     690       880       -       746       12  
Commercial participations purchased     2,483       8,158       -       3,473       128  
Commercial business loans     793       818       -       177       -  
With an allowance recorded:                                        
Residential real estate, including home equity     1,282       1,282       10       -       -  
Commercial real estate, construction & land                                        
 development, and other dwellings     10,317       12,662       1,043       9,685       358  
Commercial participations purchased     4,687       4,687       252       9,718       216  
Commercial business loans     1,421       1,421       304       260       9  
Total:                                        
Residential real estate, including home equity   $ 1,282     $ 1,282     $ 10     $ -     $ -  
Commercial real estate, construction & land                                        
 development, and other dwellings   $ 11,007     $ 13,542     $ 1,043     $ 10,431     $ 370  
Commercial participations purchased   $ 7,170     $ 12,845     $ 252     $ 13,191     $ 344  
Commercial business loans   $ 2,214     $ 2,239     $ 304     $ 437     $ 9  

 

 

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

 

(Dollars in thousands)
    30-59 Days Past Due     60-89 Days Past Due     Greater Than 90 Days Past Due     Total Past Due     Current     Total Financing Receivables     Recorded Investments Greater than 90 Days and Accruing  
June 30, 2012                                                        
Residential real estate, including home equity   $ 3,246     $ 866     $ 1,589     $ 5,701     $ 150,769     $ 156,470     $ 7  
Consumer loans     -       14       -       14       467       481       -  
Commercial real estate, construction & land                                                        
 development, and other dwellings     1,158       495       2,686       4,339       165,410       169,749       -  
Commercial participations purchased     -       6       6,633       6,639       21,695       28,334       -  
Commercial business loans     528       -       507       1,035       67,626       68,661       -  
Government     -       -       -       -       7,661       7,661       -  
Total   $ 4,932     $ 1,381     $ 11,415     $ 17,728     $ 413,628     $ 431,356     $ 7  
                                                         
December 31, 2011                                                        
Residential real estate, including home equity   $ 3,413     $ 874     $ 2,663     $ 6,950     $ 147,185     $ 154,135     $ 279  
Consumer loans     7       -       -       7       465       472       -  
Commercial real estate, construction & land                                                        
 development, and other dwellings     604       238       1,616       2,458       152,160       154,618       -  
Commercial participations purchased     7       -       7,169       7,176       13,064       20,240       -  
Commercial business loans     458       323       717       1,498       61,795       63,293       -  
Government     -       -       -       -       8,643       8,643       -  
Total   $ 4,489     $ 1,435     $ 12,165     $ 18,089     $ 383,312     $ 401,401     $ 279  

 

The Bancorp's financing receivables on nonaccrual status are summarized below:

 

    (Dollars in thousands)  
    June 30,
2012
    December 31,
2011
 
Residential real estate, including home equity   $ 1,993     $ 2,481  
Consumer loans     -       -  
Commercial real estate, construction & land                
development, and other dwellings     2,686       3,433  
Commercial participations purchased     6,633       7,170  
Commercial business loans     507       926  
Government     -       -  
Total   $ 11,819     $ 14,010