Quarterly report pursuant to Section 13 or 15(d)

Loans Receivable

v2.3.0.15
Loans Receivable
 9 Months Ended
Sep. 30, 2011
Receivables [Abstract]  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
Note 4 - Loans Receivable
 
   
(Dollars in thousands)
 
   
September 30, 2011
   
December 31, 2010
 
Loans secured by real estate:
           
Construction and land development
  $ 26,300     $ 46,371  
Residential, including home equity
    150,206       153,150  
Commercial real estate and other dwelling
    154,338       146,111  
Total loans secured by real estate
    330,844       345,632  
Consumer loans
    540       765  
Commercial business
    65,504       61,837  
Government and other
    10,595       10,380  
Subtotal
    407,483       418,614  
Less:
               
Net deferred loan origination fees
    (244 )     (273 )
Undisbursed loan funds
    (144 )     (108 )
Loans receivable
  $ 407,095     $ 418,233  

 
 
The Bancorp's activity in the allowance for loan losses, by loan segment, is summarized below for the nine months ended September 30, 2011:
 
                
Commercial Real
                         
               
Estate,
                         
               
Construction &
                         
   
Residential Real
         
Land Development,
   
Commercial
                   
   
Estate, Including
         
and Other
   
Participations
   
Commercial
             
(Dollars in thousands)
 
Home Equity
   
Consumer Loans
   
Dwellings
   
Purchased
   
Business Loans
   
Government
   
Total
 
For the nine months ending September 30, 2011
                                         
Allowance for loan losses:
                                         
Beginning Balance
  $ 994     $ 30     $ 2,773     $ 4,704     $ 620     $ -     $ 9,121  
Charge-offs
    (457 )     (14 )     (682 )     (2,432 )     (113 )     -       (3,698 )
Recoveries
    111       11       182       -       -       -       304  
Provisions
    543       (8 )     1,150       331       619       -       2,635  
Ending Balance
  $ 1,191     $ 19     $ 3,423     $ 2,603     $ 1,126     $ -     $ 8,362  
                                                         
The Bancorp's allowance for loan losses impairment evaluation, by loan segment, at September 30, 2011:
 
                                                         
Ending balance: individually evaluated for impairment
  $ -     $ -     $ 897     $ 470     $ 324     $ -     $ 1,691  
                                                         
Ending balance: collectively evaluated for impairment
  $ 1,191     $ 19     $ 2,526     $ 2,133     $ 802     $ -     $ 6,671  
                                                         
Ending balance: loans acquired with deteriorated credit quality
  $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                         
FINANCING RECEIVABLES
                                                       
Ending balance
  $ 149,893     $ 539     $ 147,296     $ 33,342     $ 65,430     $ 10,595     $ 407,095  
                                                         
Ending balance: individually evaluated for impairment
  $ -     $ -     $ 9,700     $ 11,734     $ 2,400     $ -     $ 23,834  
                                                         
Ending balance: collectively evaluated for impairment
  $ 149,893     $ 539     $ 137,596     $ 21,608     $ 63,030     $ 10,595     $ 383,261  
                                                         
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 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
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 are 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 credit quality indicators, by loan segment, are summarized below at September 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
  $ 27     $ 31     $ -     $ -     $ 5,940     $ 4,724     $ -     $ -  
3 Acceptable risk
    80,985       63,330       1,418       1,473       36,706       30,549       10,595       10,270  
4 Pass/monitor
    57,569       78,758       6,349       6,482       18,827       21,131       -       -  
5 Special mention (watch)
    7,123       9,817       4,811       6,419       1,313       2,517       -       -  
6 Substandard
    1,592       11,680       19,808       14,492       2,644       2,805       -       -  
7 Doubtful
    -       -       956       -       -       -       -       -  
Total
  $ 147,296     $ 163,616     $ 33,342     $ 28,866     $ 65,430     $ 61,726     $ 10,595     $ 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
  $ 147,627     $ 149,892     $ 539     $ 871  
Nonperforming
    2,266       2,989       -       3  
Total
  $ 149,893     $ 152,881     $ 539     $ 874  

 
 

The Bancorp's troubled debt restructurings are summarized below:
 
(Dollars in thousands)
 
                         
Pre-
   
Post-
 
         
Pre-Modification
   
Post-Modification
         
Modification
   
Modification
 
         
Outstanding
   
Outstanding
         
Outstanding
   
Outstanding
 
   
Number of
   
Recorded
   
Recorded
   
Number of
   
Recorded
   
Recorded
 
   
Contracts
   
Investment
   
Investment
   
Contracts
   
Investment
   
Investment
 
   
September 30, 2011
   
December 31, 2010
 
Troubled Debt Restructurings
                                   
Residential real estate, including home equity
    -     $ -     $ -       -     $ -     $ -  
Consumer loans
    -     $ -     $ -       -     $ -     $ -  
Commercial real estate, construction & land development, and other dwellings
    3     $ 8,097     $ 7,811       3     $ 6,093     $ 5,909  
Commercial participations purchased
    2     $ 7,975     $ 5,824       2     $ 7,975     $ 6,186  
Commercial business loans
    -     $ -     $ -       -     $ -     $ -  
Government
    -     $ -     $ -       -     $ -     $ -  
 
   
Number of
   
Recorded
     
Number of
   
Recorded
   
   
Contracts
   
Investment
     
Contracts
   
Investment
   
   
September 30, 2011
     
December 31, 2010
   
Troubled Debt Restructurings That
                           
Subsequently Defaulted
                           
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
    -     $ -         -     $ -    


The Bancorp's individually evaluated impaired loans are summarized below:
 
         
For the nine months ended
 
   
As of September 30, 2011
   
September 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
  $ -     $ -     $ -     $ 32     $ -  
Commercial real estate, construction & land
development, and other dwellings
    791       871       -       923       16  
Commercial participations purchased
    2,606       8,123       -       2,651       182  
Commercial business loans
    782       101       -       568       11  
With an allowance recorded:
                                       
Residential real estate, including home equity
    -       -       -       -       -  
Commercial real estate, construction & land
development, and other dwellings
    8,909       8,605       897       9,415       445  
Commercial participations purchased
    9,128       11,486       470       10,463       216  
Commercial business loans
    1,618       306       324       873       2  
Total:
                                       
Residential real estate, including home equity
  $ -     $ -     $ -     $ 32     $ -  
Commercial real estate, construction & land
development, and other dwellings
  $ 9,700     $ 9,476     $ 897     $ 10,338     $ 461  
Commercial participations purchased
  $ 11,734     $ 19,609     $ 470     $ 13,114     $ 398  
Commercial business loans
  $ 2,400     $ 407     $ 324     $ 1,441     $ 13  
 
   
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
    -       -       -   
Commercial real estate, construction & land
development, and other dwellings
    9,920       10,361       876  
Commercial participations purchased
    11,797       11,797       1,897  
Commercial business loans
    128       128       21  
Total:
                       
Residential real estate, including home equity
  $ 64     $ 103     $ -   
Commercial real estate, construction & land
development, and other dwellings
  $ 10,974     $ 11,706     $ 876  
Commercial participations purchased
  $ 14,493     $ 19,937     $ 1,897  
Commercial business loans
  $ 482     $ 482     $ 21  


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 Past Due
   
Total Past Due
   
Current
   
Receivables
   
Accruing
 
September 30, 2011
                                         
Residential real estate, including home equity
  $ 5,222     $ 933     $ 1,546     $ 7,701     $ 142,192     $ 149,893     $ 187  
Consumer loans
    -       -       -       -       539       539       -  
Commercial real estate, construction & land development, and other dwellings
    425       131       1,859       2,415       144,881       147,296       -  
Commercial participations purchased
    -       -       11,734       11,734       21,608       33,342       -  
Commercial business loans
    369       151       736       1,256       64,174       65,430       -  
Government
    -       -       -       -       10,595       10,595       -  
Total
  $ 6,016     $ 1,215     $ 15,875     $ 23,106     $ 383,989     $ 407,095     $ 187  
                                                         
December 31, 2010
                                                       
Residential real estate, including home equity
  $ 5,832     $ 2,423     $ 2,859     $ 11,114     $ 141,767     $ 152,881     $ 145  
Consumer loans
    29       -       3       32       842       874       3  
Commercial real estate, construction & land development, and other dwellings
    410       2,573       3,747       6,730       156,886       163,616       -  
Commercial participations purchased
    -       -       14,492       14,492       14,374       28,866       -  
Commercial business loans
    408       18       354     $ 780       60,946       61,726       -  
Government
    -       -       -       -       10,270       10,270       -  
Total
  $ 6,679     $ 5,014     $ 21,455     $ 33,148     $ 385,085     $ 418,233     $ 148  
 
The Bancorp's financing receivables on nonaccrual status are summarized below:
 
   
(Dollars in thousands)
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
Residential real estate, including home equity
  $ 2,079     $ 2,843  
Consumer loans
    -       -  
Commercial real estate, construction & land development, and other dwellings
    4,626       6,150  
Commercial participations purchased
    11,734       14,492  
Commercial business loans
    1,069       482  
Government
    -       -  
Total
  $ 19,508     $ 23,967