Quarterly report pursuant to Section 13 or 15(d)

LOANS

v2.3.0.15
LOANS
 9 Months Ended
Sep. 30, 2011
LOANS [Abstract]  
LOANS
NOTE 3 - LOANS

Loan Composition.  The composition of the Company's loan portfolio was as follows:

(Dollars in Thousands)
  
September 30, 2011
    
December 31, 2010
  
Commercial, Financial and Agricultural
  
$
142,511
    
$
157,394
  
Real Estate-Construction
    
31,991
      
43,239
  
Real Estate-Commercial
    
644,128
      
671,702
  
Real Estate-Residential(1)
    
393,624
      
424,229
  
Real Estate-Home Equity
    
245,438
      
251,565
  
Real Estate-Loans Held-for-Sale
    
8,782
      
6,312
  
Consumer
    
191,225
      
204,230
  
Loans, Net of Unearned Interest
  
$
1,657,699
    
$
1,758,671
  

(1)  
Includes loans in process with outstanding balances of $14.5 million and $10.2 million for September 30, 2011 and December 31, 2010, respectively.

Net deferred fees included in loans at September 30, 2011 and December 31, 2010 were $1.6 million and $1.8 million, respectively.

Past Due Loans. A loan is defined as a past due loan when one full payment is past due or a contractual maturity is over 30 days past due ("DPD").

The following table presents the aging of the recorded investment in past due loans as of September 30, 2011 and December 31, 2010 by class of loans:

September 30, 2011
(Dollars in Thousands)
  
30-59
DPD
    
60-89
DPD
    
90 +
DPD
    
Total
Past Due
    
Total
Current
    
Total
Loans
  
Commercial, Financial and Agricultural
   $ 320       140       -       460       141,010     $ 142,511  
Real Estate - Construction
     148       -       -       148       30,704       31,991  
Real Estate - Commercial Mortgage
     1,712       3,847       -       5,559       612,337       644,128  
Real Estate -  Residential
     3,771       2,957       26       6,754       374,377       388,686  
Real Estate - Home Equity
     1,460       446       -       1,906       240,758       245,438  
Consumer
     1,986       265       -       2,251       188,039       204,945  
Total Past Due Loans
   $ 9,397       7,655       26       17,078       1,587,225     $ 1,657,699  

December 31, 2010
(Dollars in Thousands)
30-59
DPD
60-89
DPD
90 +
DPD
Total
Past Due
Total
Current
  
Total
Loans
  
Commercial, Financial and Agricultural
 
 $
645
      
193
    
-
    
838
    
155,497
    
$
157,394
  
Real Estate - Construction
    
314
      
129
    
-
    
443
    
40,890
      
43,239
  
Real Estate - Commercial Mortgage
    
5,577
      
840
    
-
    
6,417
    
638,411
      
671,702
  
Real Estate -  Residential
    
7,171
      
3,958
    
120
    
11,249
    
389,103
      
430,541
  
Real Estate - Home Equity
    
1,445
      
698
    
39
    
2,182
    
244,579
      
251,565
  
Consumer
    
2,867
      
356
    
-
    
3,223
    
200,139
      
204,230
  
Total Past Due Loans
 
 $
18,019
      
6,174
    
159
    
24,352
    
1,668,619
    
$
1,758,671
  

Nonaccrual Loans.  Loans are generally placed on non-accrual status if principal or interest payments become 90 days past due and/or management deems the collectability of the principal and/or interest to be doubtful.  Loans are returned to accrual status when the principal and interest amounts contractually due are brought current or when future payments are reasonably assured.

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days and still on accrual by class of loans as of September 30, 2011 and December 31, 2010:

   
September 30, 2011
    
December 31, 2010
(Dollars in Thousands)
  
Nonaccrual
    
90 + DPD
    
Nonaccrual
     90+ DPD
Commercial, Financial and Agricultural
   $ 1,041       -     $ 1,059     $ -  
Real Estate - Construction
     1,140       -       1,907       -  
Real Estate - Commercial Mortgage
     26,230       -       26,874       -  
Real Estate -  Residential
     21,276       26       30,189       120  
Real Estate - Home Equity
     2,773       -       4,803       39  
Consumer
     936       -       868       -  
Total Nonaccrual Loans
   $ 53,396       26     $ 65,700     $ 159  

Restructured Loans ("TDR's").  The restructuring of a loan is considered a "troubled debt restructuring" if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession.  Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.  Effective July 1, 2011, the Company adopted the provisions of Accounting Standards Update ("ASU") No. 2011-02, "Receivables (Topic 310) - A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring."  As such, the Company reassessed all loan modifications occurring since January 1, 2011 for identification as troubled debt restructurings.

The following table presents loans classified as TDR's as of September 30, 2011 and December 31, 2010:

(Dollars in Thousands)
  
September 30, 2011
    
December 31, 2010
  
Commercial, Financial and Agricultural
  
$
623
    
$
768
  
Real Estate-Construction
    
1,352
      
660
  
Real Estate-Commercial
    
14,116
      
10,635
  
Real Estate-Residential
    
11,547
      
8,884
  
Real Estate-Home Equity
    
766
      
648
  
Consumer
    
-
      
54
  
Loans, Net of Unearned Interest
  
$
28,404
    
$
21,649
  

Loans classified as TDR's during the three and nine months ended September 30, 2011 are presented in the table below:

 
   
Three Months Ended,
    
Nine Months Ended,
  
   
September 30, 2011
    
September 30, 2011
  
(Dollars in Thousands)
  
 
Number of Contracts
    
Pre-Modify
Recorded
Investment
    
Post-Modify
Recorded
Investment
    
 
Number of Contracts
      
Pre-Modify
Recorded
Investment
    
Post-Modify
Recorded
Investment
  
Commercial, Financial and Agricultural
  
3
    
$
338
    
$
318
    
7
    
$
568
  
$
547
  
Real Estate-Construction
  
2
      
1,176
      
1,175
    
3
      
1,352
    
1,330
  
Real Estate-Commercial
  
16
      
5,094
      
5,347
    
39
      
13,658
    
13,768
  
Real Estate-Residential
  
22
      
5,355
      
5,325
    
70
      
10,540
    
10,824
  
Real Estate-Home Equity
  
5
      
461
      
472
    
9
      
639
    
660
  
Consumer
  
-
      
-
      
-
    
2
      
24
    
23
  
Total
  
48
    
$
12,424
    
$
12,637
    
130
    
$
26,781
  
$
27,152
  
 
Loan modifications made within the last 12 months that were classified as TDR's that have subsequently defaulted are presented in the table below:
(Dollars in Thousands)
 
Number of
Contracts
  
Post-Modify
Recorded
Investment
  
Commercial, Financial and Agricultural
2
  
$
161
  
Real Estate-Construction
-
    
-
  
Real Estate-Commercial
7
    
2,323
  
Real Estate-Residential
9
    
1,967
  
Real Estate-Home Equity
-
    
-
  
Consumer
-
    
-
  
Total
18
  
$
4,451
  

Credit Quality Indicators. As part of the ongoing monitoring of the Company's loan portfolio quality, management 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 performance, credit documentation, and current economic/market trends, among other factors.  Risk ratings are assigned to each loan and revised as needed through established monitoring procedures for individual loan relationships over a predetermined amount and review of smaller balance homogenous loan pools.  The Company uses the definitions noted below for categorizing and managing its criticized loans.  Loans categorized as "Pass" do not meet the criteria set forth for the Special Mention, Substandard, or Doubtful categories and are not considered criticized.

Special Mention - Loans in this category are presently protected from loss, but weaknesses are apparent which, if not corrected, could cause future problems.  Loans in this category may not meet required underwriting criteria and have no mitigating factors.  More than the ordinary amount of attention is warranted for these loans.

Substandard - Loans in this category exhibit well-defined weaknesses that would typically bring normal repayment into jeopardy. These loans are no longer adequately protected due to well-defined weaknesses that affect the repayment capacity of the borrower.  The possibility of loss is much more evident and above average supervision is required for these loans.

Doubtful - Loans in this category have all the weaknesses inherent in a loan categorized as Substandard, with the characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following table presents the risk category of loans by segment as of September 30, 2011 and December 31, 2010:

 
 September 30, 2011
(Dollars in Thousands)
  
Commercial,
Financial,
Agriculture
    
 
Real Estate
    
 
Consumer
    
 
Total
  
Special Mention
   $ 6,882     $ 47,532     $ 33     $ 54,447  
Substandard
     10,196       191,395       1,517       203,108  
Doubtful
     16       5,280       -        5,296  
Total Loans
   $ 17,094     $ 244,207     $ 1,550     $ 262,851  

December 31, 2010
(Dollars in Thousands)
  
Commercial,
Financial,
Agriculture
    
 
Real Estate
    
 
Consumer
    
 
Total
  
Special Mention
   $ 20,539     $ 100,008     $ 102     $ 120,649  
Substandard
     11,540       221,671       1,584       234,795  
Doubtful
     119       7,245       2       7,366  
Total Loans
   $ 32,198     $ 328,924     $ 1,688     $ 362,810  

During the third quarter of 2011, the Company performed a review of its Special Mention loan portfolio to determine proper alignment of its loan grading practices with the regulatory definition of loans for this category.  As a result of this review, a new loan risk category was added to reflect loans that currently meet existing credit underwriting guidelines, but warrant a greater level of monitoring due to certain manageable credit policy exceptions or exposure to an industry segment that is experiencing higher than normal risk levels.  Loans of this nature were reflected as Pass Watch loans within the Pass category as of September 30, 2011 and are not considered criticized.  The decline in the balance of Special Mention loans from December 31, 2010 to September 30, 2011, reflects the impact of this reclassification process.