Document And Entity Information
v4.2.117.0
Document And Entity Information
 9 Months Ended
Sep. 30, 2011
Nov. 07, 2011
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2011
Document Fiscal Year Focus 2011  
Document Fiscal Period Focus Q3  
Entity Registrant Name NEW PEOPLES BANKSHARES INC  
Entity Central Index Key 0001163389  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   10,010,178

Consolidated Statements Of Operations
v4.2.117.0
Consolidated Statements Of Operations (USD $)
In Thousands, except Share data
 3 Months Ended 9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2011
Sep. 30, 2010
INTEREST AND DIVIDEND INCOME        
Loans including fees $ 9,955 $ 11,527 $ 31,357 $ 36,005
Federal funds sold   10 9 31
Interest-earning deposits with banks 48 4 128 4
Investments 65 30 149 88
Dividends on equity securities (restricted) 24 23 74 65
Total Interest and Dividend Income 10,092 11,594 31,717 36,193
INTEREST EXPENSE        
Demand 37 54 126 204
Savings 75 182 399 575
Time deposits below $100,000 1,132 1,672 3,762 5,464
Time deposits above $100,000 721 920 2,295 3,257
FHLB Advances 225 266 669 790
Other borrowings 45 65 150 187
Trust Preferred Securities 115 120 315 339
Total Interest Expense 2,350 3,279 7,716 10,816
NET INTEREST INCOME 7,742 8,315 24,001 25,377
PROVISION FOR LOAN LOSSES 2,801 9,441 6,258 13,381
NET INTEREST INCOME (LOSS) AFTER PROVISION FOR LOAN LOSSES 4,941 (1,126) 17,743 11,996
NONINTEREST INCOME        
Service charges 657 694 1,816 2,007
Fees, commissions and other income 496 586 1,515 1,575
Insurance and investment fees 134 122 325 401
Life insurance investment income 77 141 253 350
Total Noninterest Income 1,364 1,543 3,909 4,333
NONINTEREST EXPENSES        
Salaries and employee benefits 3,864 3,578 11,723 11,098
Occupancy and equipment expense 1,132 1,135 3,276 3,469
Advertising and public relations 121 118 304 312
Data processing and telecommunications 420 411 1,218 1,225
FDIC insurance premiums 475 299 1,571 1,799
Other real estate owned and repossessed vehicles, net 1,986 257 4,476 559
Other operating expenses 1,115 1,444 3,775 3,802
Total Noninterest Expenses 9,113 7,242 26,343 22,264
LOSS BEFORE INCOME TAXES (2,808) (6,825) (4,691) (5,935)
INCOME TAX BENEFIT (976) (2,329) (1,733) (2,094)
NET LOSS $ (1,832) $ (4,496) $ (2,958) $ (3,841)
Earnings (Loss) Per Share        
Basic $ (0.18) $ (0.45) $ (0.30) $ (0.38)
Fully Diluted $ (0.18) $ (0.45) $ (0.30) $ (0.38)
Average Weighted Shares of Common Stock        
Basic 10,010,178 10,009,628 10,010,178 10,009,238
Fully Diluted 10,010,178 10,009,628 10,010,178 10,009,238

Consolidated Balance Sheets
v4.2.117.0
Consolidated Balance Sheets (USD $)
In Thousands
Sep. 30, 2011
Dec. 31, 2010
ASSETS    
Cash and due from banks $ 19,533 $ 14,369
Interest-bearing deposits with banks 78,746 42,549
Federal funds sold   25,611
Total Cash and Cash Equivalents 98,279 82,529
Investment securities    
Available-for-sale 17,666 4,658
Loans receivable 629,610 707,794
Allowance for loan losses (17,397) (25,014)
Net Loans 612,213 682,780
Bank premises and equipment, net 33,500 34,141
Equity securities (restricted) 3,657 3,878
Other real estate owned 10,781 12,346
Accrued interest receivable 3,168 3,700
Life insurance investments 11,264 11,011
Goodwill and other intangibles 4,267 4,346
Deferred taxes 8,279 8,037
Other assets 7,281 5,201
Total Assets 810,355 852,627
LIABILITIES    
Noninterest bearing 105,872 87,839
Interest-bearing 59,838 60,022
Savings deposits 97,502 108,119
Time deposits 468,777 510,100
Total Deposits 731,989 766,080
Federal Home Loan Bank advances 18,283 24,183
Accrued interest payable 1,896 1,720
Accrued expenses and other liabilities 1,555 1,475
Line of credit borrowing   4,900
Other borrowings 5,450 250
Trust preferred securities 16,496 16,496
Total Liabilities 775,669 815,104
STOCKHOLDERS' EQUITY    
Common stock - $2.00 par value; 50,000,000 shares authorized; 10,010,178 shares issued and outstanding 20,020 20,020
Additional paid-in-capital 21,689 21,689
Retained earnings (deficit) (7,133) (4,175)
Accumulated other comprehensive income (loss) 110 (11)
Total Stockholders' Equity 34,686 37,523
Total Liabilities and Stockholders' Equity $ 810,355 $ 852,627

Consolidated Balance Sheets (Parenthetical)
v4.2.117.0
Consolidated Balance Sheets (Parenthetical) (USD $)
Sep. 30, 2011
Dec. 31, 2010
Consolidated Balance Sheets [Abstract]    
Common stock, par value $ 2 $ 2
Common stock, shares authorized 50,000,000 50,000,000
Common stock, shares issued 10,010,178 10,010,178
Common stock, shares outstanding 10,010,178 10,010,178

Consolidated Statements Of Changes In Stockholders' Equity
v4.2.117.0
Consolidated Statements Of Changes In Stockholders' Equity (USD $)
In Thousands, except Share data
Common Stock [Member]
Additional Paid In Capital [Member]
Retained Earnings (Deficit) [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Comprehensive Income (Loss) [Member]
Total
Balance at Dec. 31, 2009 $ 20,018 $ 21,683 $ 4,890 $ 28   $ 46,619
Balance, Shares at Dec. 31, 2009 10,009          
Net Loss     (3,841)   (3,841) (3,841)
Unrealized gain (loss) on available-for-sale securities, net of tax       15 15 15
Stock Options Exercised 2 6       8
Stock Options Exercised (in shares) 1          
Balance at Sep. 30, 2010 20,020 21,689 1,049 43 (3,826) 42,801
Balance, Shares at Sep. 30, 2010 10,010          
Balance at Dec. 31, 2010 20,020 21,689 (4,175) (11)   37,523
Balance, Shares at Dec. 31, 2010 10,010         10,010,178
Net Loss     (2,958)   (2,958) (2,958)
Unrealized gain (loss) on available-for-sale securities, net of tax       121 121 121
Balance at Sep. 30, 2011 $ 20,020 $ 21,689 $ (7,133) $ 110 $ (2,837) $ 34,686
Balance, Shares at Sep. 30, 2011 10,010         10,010,178

Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical)
v4.2.117.0
Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) (USD $)
In Thousands
 9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Consolidated Statements Of Changes In Stockholders' Equity [Abstract]    
Net tax effect of unrealized gain (loss) on available- for-sale securities $ 63 $ 7

Consolidated Statements Of Cash Flows
v4.2.117.0
Consolidated Statements Of Cash Flows (USD $)
In Thousands
 9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (2,958) $ (3,841)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation 1,903 2,057
Provision for loan losses 6,258 13,381
Income (less expenses) on life insurance (253) (350)
Loss on sale of fixed assets 146  
(Gain) Loss on sale of foreclosed real estate (17) 116
Adjustment of carrying value of foreclosed real estate 3,508  
Accretion of bond premiums/discounts 16 5
Deferred tax expense (305) (1,038)
Amortization of core deposit intangible 79 139
Net change in:    
Interest receivable 532 169
Other assets (2,080) (2,511)
Accrued interest payable 176 32
Accrued expenses and other liabilities 80 (691)
Net Cash Provided by Operating Activities 7,085 7,468
CASH FLOWS FROM INVESTING ACTIVITIES    
Net decrease in loans 58,201 14,755
Purchase of securities available-for-sale (16,765) (1,654)
Proceeds from sale and maturities of securities available-for-sale 3,925 955
Sale of Federal Home Loan Bank stock 221  
Purchase of Federal Reserve Bank stock   82
Payments for the purchase of property and equipment (1,593) (1,964)
Proceeds from sales of property and equipment 185  
Proceeds from sales of other real estate owned 4,182 2,994
Net Cash Provided by Investing Activities 48,356 15,168
CASH FLOWS FROM FINANCING ACTIVITIES    
Common stock options exercised   8
Net decrease in line of credit borrowings (4,900)  
Net increase in other borrowings 5,200  
Repayments to Federal Home Loan Bank (5,900) (900)
Net change in:    
Demand deposits 17,849 24,091
Savings deposits (10,617) (2,722)
Time deposits (41,323) (25,785)
Net Cash Used in Financing Activities (39,691) (5,308)
Net increase in cash and cash equivalents 15,750 17,328
Cash and Cash Equivalents, Beginning of Period 82,529 39,560
Cash and Cash Equivalents, End of Period 98,279 56,888
Supplemental Disclosure of Cash Paid During the Period for:    
Interest 7,892 10,848
Taxes    
Supplemental Disclosure of Non Cash Transactions:    
Other real estate acquired in settlement of foreclosed loans 6,108 6,737
Loans made to finance sale of foreclosed real estate   $ 85

Nature Of Operations
v4.2.117.0
Nature Of Operations
 9 Months Ended
Sep. 30, 2011
Nature Of Operations [Abstract]  
Nature Of Operations

NOTE 1    NATURE OF OPERATIONS:

 

New Peoples Bankshares, Inc. ("The Company") is a bank holding company whose principal activity is the ownership and management of a community bank.  New Peoples Bank, Inc. ("Bank") was organized and incorporated under the laws of the Commonwealth of Virginia on December 9, 1997.  The Bank commenced operations on October 28, 1998, after receiving regulatory approval.  As a state chartered member bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions, the Federal Deposit Insurance Corporation and the Federal Reserve Bank.  The Bank provides general banking services to individuals, small and medium size businesses and the professional community of southwestern Virginia, southern West Virginia, and eastern Tennessee.  On June 9, 2003, the Company formed two wholly owned subsidiaries, NPB Financial Services, Inc. and NPB Web Services, Inc.  On July 7, 2004 the Company established NPB Capital Trust I for the purpose of issuing trust preferred securities.  On September 27, 2006, the Company established NPB Capital Trust 2 for the purpose of issuing additional trust preferred securities.  NPB Financial Services, Inc. was a subsidiary of the Company until January 1, 2009 when it became a subsidiary of the Bank.

Accounting Principles
v4.2.117.0
Accounting Principles
 9 Months Ended
Sep. 30, 2011
Accounting Principles [Abstract]  
Accounting Principles

NOTE 2    ACCOUNTING PRINCIPLES:

 

The financial statements conform to U. S. generally accepted accounting principles and to general industry practices. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position at September 30, 2011, and the results of operations for the three month and nine month periods ended September 30, 2011 and 2010. The notes included herein should be read in conjunction with the notes to financial statements included in the Company's Annual Report on Form 10-K/A Amendment No. 2 for the year ended December 31, 2010. The results of operations for the three month and nine month periods ended September 30, 2011 and 2010 are not necessarily indicative of the results to be expected for the full year.

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.

Formal Written Agreement
v4.2.117.0
Formal Written Agreement
 9 Months Ended
Sep. 30, 2011
Formal Written Agreement [Abstract]  
Formal Written Agreement

NOTE 3    FORMAL WRITTEN AGREEMENT:

 

Effective July 29, 2010, the Company and the Bank entered into a written agreement with the Federal Reserve Bank of Richmond ("Reserve Bank") and the Virginia State Corporation Commission Bureau of Financial Institutions (the "Bureau") called (the "Written Agreement").  We believe we have made good progress in our compliance efforts under the Written Agreement and all of the written plans required to date, as discussed in the following paragraphs, have been submitted on a timely basis.    

 

Under the terms of the Written Agreement, the Bank has agreed to develop and submit for approval within specified time periods written plans to: (a) strengthen board oversight of management and the Bank's operation; (b) if appropriate after review, to strengthen the Bank's management and board governance; (c) strengthen credit risk management policies; (d) enhance lending and credit administration; (e) enhance the Bank's management of commercial real estate concentrations; (f) conduct ongoing review and grading of the Bank's loan portfolio; (g) improve the Bank's position with respect to loans, relationships, or other assets in excess of $1 million which are now or in the future become past due more than 90 days, which are on the Bank's problem loan list, or which are adversely classified in any report of examination of the Bank; (h) review and revise, as appropriate, current policy and maintain sound processes for maintaining an adequate allowance for loan and lease losses; (i) enhance management of the Bank's liquidity position and funds management practices; (j) revise its contingency funding plan; (k)  revise its strategic plan; and (l)  enhance the Bank's anti-money laundering and related activities.

 

In addition, the Bank has agreed that it will: (a) not extend, renew, or restructure any credit that has been criticized by the Reserve Bank or the Bureau absent prior board of directors approval in accordance with the restrictions in the Written Agreement; (b) eliminate all assets or portions of assets classified as "loss" and thereafter charge off all assets classified as "loss" in a federal or state report of examination, unless otherwise approved by the Reserve Bank.

 

Under the terms of the Written Agreement, both the Company and the Bank have agreed to submit capital plans to maintain sufficient capital at the Company, on a consolidated basis, and the Bank, on a stand-alone basis, and to refrain from declaring or paying dividends without prior regulatory approval. The Company has agreed that it will not take any other form of payment representing a reduction in the Bank's capital or make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without prior regulatory approval. The Company may not incur, increase or guarantee any debt without prior regulatory approval and has agreed not to purchase or redeem any shares of its stock without prior regulatory approval.

 

Under the terms of the Written Agreement, the Company and the Bank have appointed a committee to monitor compliance with the Written Agreement. The directors of the Company and the Bank have recognized and unanimously agree with the common goal of financial soundness represented by the Written Agreement and have confirmed the intent of the directors and executive management to diligently seek to comply with all requirements of the Written Agreement.

Capital Requirements
v4.2.117.0
Capital Requirements
 9 Months Ended
Sep. 30, 2011
Capital Requirements [Abstract]  
Capital Requirements

NOTE 4    CAPITAL REQUIREMENTS:

 

The Company and the Bank are subject to various capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's and the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

 

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes that, as of September 30, 2011, the Company and the Bank meet all capital adequacy requirements to which they are subject.

 

As of September 30, 2011 the Bank was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables. There are no conditions or events since the notification that management believes have changed the Bank's category.

 

The Company's and the Bank's actual capital amounts and ratios are presented in the table as of September 30, 2011 and December 31, 2010, respectively.

 

 

 

 

 

Actual

 

 

 

Minimum Capital

Requirement

 

Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions

(Dollars are in thousands)

 

Amount

 

Ratio

 

Amount

 

Ratio

 

Amount

 

Ratio

September 30, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital to Risk Weighted Assets:

 

 

 

 

 

 

 

 

 

 

 

 

The Company

$

47,218

 

8.95%

$

42,220

 

8%

$

N/A

 

N/A

The Bank

 

54,507

 

10.31%

 

42,302

 

8%

 

52,878

 

10%

Tier 1 Capital Risk Weighted Assets:

 

 

 

 

 

 

 

 

 

 

 

 

The Company

 

34,591

 

6.55%

 

21,110

 

4%

 

N/A

 

N/A

The Bank

 

47,764

 

9.03%

 

21,151

 

4%

 

31,727

 

6%

Tier 1 Capital to Average Assets:

 

 

 

 

 

 

 

 

 

 

 

 

The Company

 

34,591

 

4.28%

 

32,302

 

4%

 

N/A

 

N/A

The Bank

 

47,764

 

5.94%

 

32,168

 

4%

 

40,210

 

5%

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010:

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital to Risk Weighted Assets:

 

 

 

 

 

 

 

 

 

 

 

 

The Company

$

53,020

 

8.87%

$

47,825

 

8%

$

N/A

 

N/A

The Bank

 

58,466

 

9.79%

 

47,786

 

8%

 

59,732

 

10%

Tier 1 Capital Risk Weighted Assets:

 

 

 

 

 

 

 

 

 

 

 

 

The Company

 

39,108

 

6.54%

 

23,913

 

4%

 

N/A

 

N/A

The Bank

 

50,777

 

8.50%

 

23,893

 

4%

 

35,839

 

6%

Tier 1 Capital to Average Assets:

 

 

 

 

 

 

 

 

 

 

 

 

The Company

 

39,108

 

4.62%

 

33,857

 

4%

 

N/A

 

N/A

The Bank

 

50,777

 

6.00%

 

33,857

 

4%

 

42,321

 

5%

Investment Securities
v4.2.117.0
Investment Securities
 9 Months Ended
Sep. 30, 2011
Investment Securities [Abstract]  
Investment Securities

NOTE 5    INVESTMENT SECURITIES:

 

The amortized cost and estimated fair value of securities are as follows:

 

 

Gross

 

Gross

 

Approximate

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

(Dollars are in thousands)

Cost

 

Gains

 

Losses

 

Value

September 30, 2011

Available for Sale

U.S. Government Agencies

$

9,261

$

78

$

34

$

9,305

Taxable municipals

892

83

-

975

Tax-exempt municipals

1,045

3

-

1,048

US. Govt. mortgage backed securities

6,301

49

12

6,338

Total Securities AFS

$

17,499

$

213

$

46

$

17,666

 

December 31, 2010

Available for Sale

U.S. Government Agencies

$

3,001

$

-

$

31

$

2,970

Taxable municipals

894

5

-

899

U.S. Govt. mortgage backed securities

781

8

-

789

Total Securities AFS

$

4,676

$

13

$

31

$

4,658

 

The following table details unrealized losses and related fair values in the available for sale portfolio. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2011 and December 31, 2010.

 

 

 

Less than 12 Months

 

12 Months or More

 

Total

 

 

(Dollars are in thousands)

 

Fair Value

 

Unrealized

Losses

 

Fair

Value

 

Unrealized

Losses

 

Fair

Value

 

Unrealized

Losses

 

September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Agencies

$

5,768

$

34

$

-

$

-

$

5,768

$

34

 

U.S. Govt. mtg. backed sec.

 

2,063

 

12

 

-

 

-

 

2,063

 

12

 

Total Securities AFS

$

7,831

$

46

$

-

$

-

$

7,831

$

46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Agencies

$

2,970

$

31

$

-

$

-

$

2,970

$

31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30, 2011, the available for sale portfolio included seven investments for which the fair market value was less than amortized cost. At December 31, 2010, the available for sale portfolio included four investments for which the fair market value was less than amortized cost. No securities had an other than temporary impairment.

 

The amortized cost and fair value of investment securities at September 30, 2011, by contractual maturity, are shown in the following schedule. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

Weighted

(Dollars are in thousands)

Amortized

 

Fair

 

Average

Securities Available for Sale

Cost

 

Value

 

Yield

Due in one year or less

$

-

$

-

 

-%

Due after one year through five years

202

207

2.99%

Due after five years through fifteen years

 

7,366

 

7,572

 

2.89%

Due after fifteen years

 

9,931

 

9,887

 

2.81%

Total

$

17,499

$

17,666

 

2.84%

 

Investment securities with a carrying value of $15.9 million and $892 thousand at September 30, 2011 and December 31, 2010, were pledged to secure public deposits and for other purposes required by law.

 

The Bank, as a member of the Federal Reserve Bank and the Federal Home Loan Bank, is required to hold stock in each. These equity securities are restricted from trading and are recorded at a cost of $3.7 million and $3.9 million as of September 30, 2011 and December 31, 2010, respectively.


Loans
v4.2.117.0
Loans
 9 Months Ended
Sep. 30, 2011
Loans [Abstract]  
Loans

NOTE 6    LOANS:

 

Loans receivable outstanding are summarized as follows:

 

September 30,

 

December 31,

(Dollars are in thousands)

2011

 

2010

Real estate secured:

 

 

 

 

Commercial

$

179,482

$

198,259

Construction and land development

 

38,157

 

52,307

Residential 1-4 family

 

260,013

 

274,396

Multifamily

 

15,649

 

16,659

Farmland

 

45,702

 

49,323

Total real estate loans

 

539,003

 

590,944

Commercial

 

40,342

 

50,358

Agriculture

 

6,851

 

9,488

Consumer installment loans

 

43,187

 

56,755

All other loans

227

249

Total loans

$

629,610

$

707,794

 

Loans receivable on nonaccrual status are summarized as follows:

 

 

September 30,

 

December 31,

(Dollars are in thousands)

2011

 

2010

Real estate secured:

 

 

 

 

Commercial

$

17,132

$

19,655

Construction and land development

 

9,074

 

15,460

Residential 1-4 family

 

3,892

 

3,165

Multifamily

 

504

 

166

Farmland

 

8,941

 

1,909

Total real estate loans

 

39,543

 

40,355

Commercial

 

5,031

 

4,061

Agriculture

 

192

 

1,352

Consumer installment loans

23

13

All other loans

-

-

Total loans receivable on nonaccrual status

$

44,789

$

45,781

 

Total interest income not recognized on nonaccrual loans for nine months ended September 30, 2011 and 2010 was $1.3 million and $1.1 million, respectively.

 

The following table presents information concerning the Company's investment in loans considered impaired as of September 30, 2011 and December 31, 2010:

 

 

As of September 30, 2011

(Dollars are in thousands)

 

 

Average

Recorded

Investment

 

 

Interest

Income

Recognized

 

 

 

Recorded

Investment

 

 

Unpaid Principal Balance

 

 

 

Related

Allowance

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

Real estate secured:

 

 

 

 

 

 

 

 

 

 

Commercial

$

30,024

$

985

$

31,682

$

33,534

$

-

Construction and land development

 

13,225

 

156

 

11,884

 

22,367

 

-

Residential 1-4 family

 

5,169

 

293

 

6,865

 

6,942

 

-

Multifamily

 

466

 

39

 

849

 

849

 

-

Farmland

 

12,270

 

380

 

13,857

 

14,084

 

-

Commercial

 

2,352

 

8

 

2,711

 

3,085

 

-

Agriculture

 

192

 

1

 

502

 

799

 

-

Consumer installment loans

 

2

 

-

 

4

 

4

 

-

All other loans

 

-

 

-

 

-

 

-

 

-

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

Real estate secured:

 

 

 

 

 

 

 

 

 

 

Commercial

 

9,603

 

375

 

10,919

 

11,361

 

1,703

Construction and land development

 

6,068

 

82

 

2,447

 

2,467

 

471

Residential 1-4 family

 

4,576

 

198

 

5,709

 

6,000

 

1,235

Multifamily

 

128

 

-

 

-

 

-

 

-

Farmland

 

3,055

 

94

 

3,380

 

3,380

 

445

Commercial

 

2,331

 

71

 

3,081

 

3,256

 

1,118

Agriculture

 

968

 

20

 

640

 

640

 

447

Consumer installment loans

 

42

 

3

 

52

 

52

 

26

All other loans

 

-

 

-

 

-

 

-

 

-

Total

$

90,471

$

2,705

$

94,582

$

108,820

$

5,445

 

 

As of December 31, 2010

(Dollars are in thousands)

 

 

 

Recorded

Investment

 

 

 

Unpaid Principal Balance

 

 

 

Related

Allowance

With no related allowance recorded:

 

 

 

 

 

 

Real estate secured:

 

 

 

 

 

 

Commercial

$

23,791

 

24,645

 

-

Construction and land development

 

8,585

 

12,594

 

-

Residential 1-4 family

 

3,347

 

3,352

 

-

Multifamily

 

-

 

-

 

-

Farmland

 

7,615

 

7,615

 

-

Commercial

 

1,646

 

2,167

 

-

Agriculture

 

3

 

3

 

-

Consumer installment loans

 

-

 

-

 

-

All other loans

 

-

 

-

 

-

With an allowance recorded:

 

 

 

 

 

 

Real estate secured:

 

 

 

 

 

 

Commercial

 

13,837

 

14,006

 

3,847

Construction and land development

 

14,913

 

16,253

 

3,926

Residential 1-4 family

 

4,626

 

4,626

 

953

Multifamily

 

510

 

510

 

42

Farmland

 

6,993

 

6,993

 

627

Commercial

 

3,254

 

3,254

 

2,295

Agriculture

 

1,482

 

1,482

 

1,120

Consumer installment loans

 

46

 

46

 

23

All other loans

 

-

 

-

 

-

Total

$

90,648

$

97,546

$

12,833

                             

 

The average recorded investment in impaired loans was $63.4 million for the year ended December 31, 2010.

  

An age analysis of past due loans receivable was as follows:

 

 

 

 

 

 

As of September 30, 2011

(Dollars are in thousands)

 

 

 

Loans

30-59

Days

Past

Due

 

 

 

Loans

60-89

Days

Past

Due

 

 

 

Loans

90 or

More

Days

Past

Due

 

 

 

 

Total

Past

Due

Loans

 

 

 

 

 

 

Current

Loans

 

 

 

 

 

 

Total

Loans

 

Accruing

Loans

90 or

More

Days

Past

Due

Real estate secured:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

$

2,355

$

2,641

$

7,704

$

12,700

$

166,782

$

179,482

$

-

Construction and  land

   development

 

128

 

-

 

9,011

 

9,139

 

29,018

 

38,157

 

846

Residential 1-4 family

 

6,001

 

1,387

 

3,613

 

11,001

 

249,012

 

260,013

 

1,122

Multifamily

 

2,354

 

-

 

344

 

2,698

 

12,951

 

15,649

 

-

Farmland

 

1,253

 

-

 

6,330

 

7,583

 

38,119

 

45,702

 

32

Total real estate loans

 

12,091

 

4,028

 

27,002

 

43,121

 

495,882

 

539,003

 

2,000

Commercial

 

269

 

454

 

3,557

 

4,280

 

36,062

 

40,342

 

50

Agriculture

 

710

 

60

 

62

 

832

 

6,019

 

6,851

 

3

Consumer installment

   Loans

 

767

 

206

 

161

 

1,134

 

42,053

 

43,187

 

148

All other loans

 

12

 

4

 

2

 

18

 

209

 

227

 

2

Total loans

$

13,849

$

4,752

$

30,784

$

49,385

$

580,225

$

629,610

$

2,203

 

 

 

 

 

 

As of December 31, 2010

(Dollars are in thousands)

 

 

 

Loans

30-59

Days

Past

Due

 

 

 

Loans

60-89

Days

Past

Due

 

 

 

Loans

90 or

More

Days

Past

Due

 

 

 

 

Total

Past

Due

Loans

 

 

 

 

 

 

Current

Loans

 

 

 

 

 

 

Total

Loans

 

Accruing

Loans

90 or

More

Days

Past

Due

Real estate secured:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

$

6,331

$

1,878

$

9,673

$

17,882

$

180,377

$

198,259

$

6

Construction and  land

   development

 

556

 

1,523

 

8,150

 

10,229

 

42,078

 

52,307

 

-

Residential 1-4 family

 

9,445

 

4,374

 

2,554

 

16,373

 

258,023

 

274,396

 

1,326

Multifamily

 

61

 

162

 

-

 

223

 

16,436

 

16,659

 

-

Farmland

 

2,512

 

244

 

810

 

3,566

 

45,757

 

49,323

 

-

Total real estate loans

 

18,905

 

8,181

 

21,187

 

48,273

 

542,671

 

590,994

 

1,332

Commercial

 

1,851

 

1,015

 

1,880

 

4,746

 

45,612

 

50,358

 

90

Agriculture

 

244

 

327

 

127

 

698

 

8,790

 

9,488

 

73

Consumer installment

   Loans

 

1,394

 

572

 

207

 

2,173

 

54,582

 

56,755

 

195

All other loans

 

32

 

15

 

3

 

50

 

199

 

249

 

3

Total loans

$

22,426

$

10,110

$

23,404

$

55,940

$

651,854

$

707,794

$

1,693

 

The Company categorizes loans receivable 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 and leases individually by classifying the loans receivable as to credit risk. The Company uses the following definitions for risk ratings:

 

Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors.

 

Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower's operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances.  Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company's credit position at some future date.

 

Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must 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 Doubtful have all the weaknesses inherent in loans classified Substandard, plus 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.

 

Based on the most recent analysis performed, the risk category of loans receivable was as follows:

As of September 30, 2011

(Dollars are in thousands)

Pass

Special

Mention

Substandard

Doubtful

Total

Real estate secured:

Commercial

$

124,273

$

21,626

$

32,397

$

1,186

$

179,482

Construction and land development

24,456

1,989

11,712

-

38,157

Residential 1-4 family

214,564

16,741

26,902

1,806

260,013

Multifamily

12,401

2,671

577

-

15,649

Farmland

23,585

4,488

16,350

1,279

45,702

Total real estate loans

399,279

47,515

87,938

4,271

539,003

Commercial

31,926

2,762

4,039

1,615

40,342

Agriculture

5,245

961

645

-

6,851

Consumer installment loans

40,391

1,025

1,694

77

43,187

All other loans

227

-

-

-

227

Total

$

477,068

$

52,263

$

94,316

$

5,963

$

629,610

As of December 31, 2010

(Dollars are in thousands)

Pass

Special

Mention

Substandard

Doubtful

Total

Real estate secured:

Commercial

$

147,549

$

14,550

$

33,808

$

2,352

$

198,259

Construction and land development

28,802

4,095

19,410

-

52,307

Residential 1-4 family

254,884

5,204

13,014

1,294

274,396

Multifamily

15,733

359

567

-

16,659

Farmland

30,748

4,308

14,062

205

49,323

Total real estate loans

477,716

28,516

80,861

3,851

590,944

Commercial

44,261

1,092

4,325

680

50,358

Agriculture

8,091

161

232

1,004

9,488

Consumer installment loans

56,170

122

434

29

56,755

All other loans

249

-

-

-

249

Total

$

586,487

$

29,891

$

85,852

$

5,564

$

707,794

Allowance For Loan Losses
v4.2.117.0
Allowance For Loan Losses
 9 Months Ended
Sep. 30, 2011
Allowance For Loan Losses [Abstract]  
Allowance For Loan Losses

NOTE 7    ALLOWANCE FOR LOAN LOSSES:

 

A summary of transactions in the allowance for loan losses is as follows:

 

 

 

For the Nine Months Ended

 

 

 

September 30,

 

September 30,

(Dollar are in thousands)

 

 

2011

 

2010

Balance, beginning of year

 

 

$

25,014

$

18,588

Provision for loan losses

 

6,258

13,381

Advances made on loans with off balance sheet provision

 

153

-

Recoveries of loans charged off

 

1,593

85

Loans charged off

 

(15,621)

(9,954)

Balance, End of period

 

 

$

17,397

$

22,100

Percentage of Loans

 

2.76%

3.02%

 

The following table details activity in the allowance for loan losses by portfolio segment for the period ended September 30, 2011. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

 

As of September 30, 2011

(Dollars are in thousands)

 

Beginning

Balance

 

Charge

Offs

 

 

Recoveries

 

 

Advances

 

 

Provisions

 

Ending Balance

Real estate secured:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

$

5,141

$

(3,724)

$

579

$

-

$

1,615

$

3,611

Construction and land development

 

4,913

 

(6,940)

 

721

 

153

 

4,125

 

2,972

Residential 1-4 family

 

1,699

 

(943)

 

137

 

-

 

1,326

 

2,219

Multifamily

 

42

 

-

 

-

 

-

 

(4)

 

38

Farmland

 

922

 

(436)

 

28

 

-

 

23

 

537

Total real estate loans

 

12,717

 

(12,043)

 

1,465

 

153

 

7,085

 

9,377

Commercial

 

3,281

 

(1,984)

 

14

 

-

 

813

 

2,124

Agriculture

 

1,120

 

(1,023)

 

10

 

-

 

340

 

447

Consumer installment loans

 

1,733

 

(571)

 

104

 

-

 

(736)

 

530

All other loans

 

-

 

-

 

-

 

-

 

-

 

-

Unallocated

 

6,163

 

-

 

-

 

-

 

(1,244)

 

4,919

Total

$

25,014

$

(15,621)

$

1,593

$

153

$

6,258

$

17,397

 

 

 

Allowance for Loan Losses

 

Recorded Investment in Loans

 

As of September 30, 2011

(Dollars are in thousands)

 

Individually

Evaluated for Impairment

 

Collectively Evaluated for Impairment

 

 

 

Total

 

Individually

Evaluated for Impairment

 

Collectively Evaluated for Impairment

 

 

 

Total

Real estate secured:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

$

1,703

$

1,908

$

3,611

$

42,601

$

136,881

$

179,482

Construction and land

  development

 

471

 

2,501

 

2,972

 

14,331

 

23,826

 

38,157

Residential 1-4 family

 

1,235

 

984

 

2,219

 

12,574

 

247,439

 

260,013

Multifamily

 

-

 

38

 

38

 

849

 

14,800

 

15,649

Farmland

 

445

 

92

 

537

 

17,237

 

28,465

 

45,702

Total real estate loans

 

3,854

 

5,523

 

9,377

 

87,592

 

451,411

 

539,003

Commercial

 

1,118

 

1,006

 

2,124

 

5,792

 

34,550

 

40,342

Agriculture

 

447

 

-

 

447

 

1,142

 

5,709

 

6,851

Consumer installment loans

 

26

 

504

 

530

 

56

 

43,131

 

43,187

All other loans

 

-

 

-

 

-

 

-

 

227

 

227

Unallocated

 

-

 

4,919

 

4,919

 

-

 

-

 

-

Total

$

5,445

$

11,952

$

17,397

$

94,582

$

535,028

$

629,610

  

The following table details activity in the allowance for loan losses by portfolio segment for the period ended December 31, 2010. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

 

As of December 31, 2010

(Dollars are in thousands)

 

Beginning

Balance

 

Charge

Offs

 

 

Recoveries

 

 

Advances

 

 

Provisions

 

Ending Balance

Real estate secured:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

$

2,153

$

(2,083)

$

5

$

-

$

5,066

$

5,141

Construction and land development

 

8,036

 

(10,002)

 

-

 

-

 

6,879

 

4,913

Residential 1-4 family

 

1,372

 

(1,719)

 

1

 

-

 

2,045

 

1,699

Multifamily

 

-

 

(65)

 

-

 

-

 

107

 

42

Farmland

 

344

 

(55)

 

-

 

-

 

633

 

922

Total real estate loans

 

11,905

 

(13,924)

 

6

 

-

 

14,730

 

12,717

Commercial

 

1,366

 

(1,370)

 

509

 

-

 

2,776

 

3,281

Agriculture

 

-

 

(486)

 

21

 

-

 

1,585

 

1,120

Consumer installment loans

 

1,501

 

(728)

 

70

 

-

 

890

 

1,733

All other loans

 

-

 

-

 

-

 

-

 

-

 

-

Unallocated

 

3,816

 

-

 

-

 

-

 

2,347

 

6,163

Total

$

18,588

$

(16,508)

$

606

$

-

$

22,328

$

25,014

 

 

 

Allowance for Loan Losses

 

Recorded Investment in Loans

 

As of December 31, 2010

(Dollars are in thousands)

 

Individually

Evaluated for Impairment

 

Collectively Evaluated for Impairment

 

 

 

Total

 

Individually

Evaluated for Impairment

 

Collectively Evaluated for Impairment

 

 

 

Total

Real estate secured:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

$

3,847

$

1,294

$

5,141

$

37,628

$

160,631

$

198,259

Construction and land

  development

 

3,926

 

987

 

4,913

 

23,498

 

28,809

 

52,307

Residential 1-4 family

 

953

 

746

 

1,699

 

7,973

 

266,423

 

274,396

Multifamily

 

42

 

-

 

42

 

510

 

16,149

 

16,659

Farmland

 

627

 

295

 

922

 

14,608

 

34,715

 

49,323

Total real estate loans

 

9,395

 

3,322

 

12,717

 

84,217

 

506,727

 

590,944

Commercial

 

2,295

 

986

 

3,281

 

4,900

 

45,458

 

50,358

Agriculture

 

1,120

 

-

 

1,120

 

1,485

 

8,003

 

9,488

Consumer installment loans

 

23

 

1,710

 

1,733

 

46

 

56,709

 

56,755

All other loans

 

-

 

-

 

-

 

-

 

249

 

249

Unallocated

 

-

 

6,163

 

6,163

 

-

 

-

 

-

Total

$

12,833

$

12,181

$

25,014

$

90,648

$

617,146

$

707,794

 

In determining the amount of our allowance, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions, as well as the requirements of the written agreement and other regulatory input. If our assumptions prove to be incorrect, our current allowance may not be sufficient to cover future loan losses and we may experience significant increases to our provision.

Troubled Debt Restructurings
v4.2.117.0
Troubled Debt Restructurings
 9 Months Ended
Sep. 30, 2011
Troubled Debt Restructurings [Abstract]  
Troubled Debt Restructurings

NOTE 8    TROUBLED DEBT RESTRUCTURINGS:

 

As a result of adopting the amendments in ASU 2011-02, the Company reassessed all restructurings that occurred on or after the beginning of the fiscal year of adoption (January 1, 2011) to determine whether they are considered troubled debt restructurings (TDRs) under the amended guidance. The determination is based on whether the restructuring constitutes a concession and whether the debtor is experiencing financial difficulties as both events must be present. The following table presents information related to loans modified as troubled debt restructurings during the three and nine months ended September 30, 2011.

 

 

For the three months ended

 

For the nine months ended

 

September 30, 2011

 

September 30, 2011

 

Troubled Debt Restructurings

(Dollars are in thousands)

 

# of

Loans

 

Pre-Mod. Recorded Investment

 

Post-Mod.

Recorded

Investment

 

 

# of

Loans

 

Pre-Mod.

Recorded Investment

 

Post-Mod.

Recorded

Investment

Real estate secured:

 

 

 

 

 

 

 

 

 

 

 

   Commercial

4

$

3,585

$

3,577

 

8

$

6,956

$

6,928

   Construction and land development

-

 

-

 

-

 

1

 

29

 

28

   Residential 1-4 family

4

 

312

 

298

 

8

 

641

 

626

   Multifamily

1

 

342

 

342

 

1

 

342

 

342

   Farmland

-

 

-

 

-

 

-

 

-

 

-

      Total real estate loans

9

 

4,239

 

4,217

 

18

 

7,968

 

7,924

Commercial

5

 

1,074

 

1,063

 

6

 

1,111

 

1,096

Agriculture

1

 

90

 

90

 

2

 

390

 

390

Consumer installment loans

4

 

92

 

91

 

8

 

159

 

152

All other loans

-

 

-

 

-

 

-

 

-

 

-

Total

19

$

5,495

$

5,461

 

34

$

9,628

$

9,562

 

 

 

 

 

 

 

 

 

 

 

 

During the three months ended September 30, 2011, the Company modified 18 loans that were considered to be troubled debt restructurings.  We extended the terms for 7 of these loans and the interest rate was lowered for 8 of these loans.  During the nine months ended September 30, 2011, the Company modified 33 loans that were considered to be troubled debt restructurings.   We extended the terms for 17 of these loans and the interest rate was lowered for 15 of these loans.

 

During the three and nine months ended September 30, 2011, there were no loans modified as troubled debt restructurings that subsequently defaulted (i.e., Pre-Foreclosure Letter or Notice of Right to Cure Default issued).

 

In the determination of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these restructurings in its estimate. If the loan is over $100 thousand, the Company evaluates the loan for possible further impairment. As a result, the allowance may be increased, adjustments may be made in the allocation of the allowance, or charge-offs may be taken to further write-down the carrying value of the loan.

 

At September 30, 2011 there were $23.0 million in loans that are classified as troubled debt restructurings compared to $13.9 million at December 31, 2010.

Earnings Per Share
v4.2.117.0
Earnings Per Share
 9 Months Ended
Sep. 30, 2011
Earnings Per Share [Abstract]  
Earnings Per Share

NOTE 9    EARNINGS PER SHARE:

 

Basic earnings per share computations are based on the weighted average number of shares outstanding during each year. Dilutive earnings per share reflect the additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued relate to outstanding options and are determined by the Treasury method. For the three and nine month periods ended September 30, 2011 and 2010, potential common shares were anti-dilutive and were not included in the calculation. Basic and diluted net income per common share calculations follows:

 

(Amounts in Thousands, Except

Share and Per Share Data)

 

For the three months

ended September 30,

 

For the nine months

ended September 30,

 

 

2011

 

2010

 

2011

 

2010

Net loss

$

(1,832)

$

(4,496)

$

(2,958)

$

(3,841)

Weighted average shares outstanding

 

10,010,178

 

10,009,628

 

10,010,178

 

10,009,238

Dilutive shares for stock options

 

-

 

-

 

-

 

-

Weighted average dilutive shares outstanding

 

10,010,178

 

10,009,628

 

10,010,178

 

10,009,238

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

$

(0.18)

$

(0.45)

$

(0.30)

$

(0.38)

Diluted earnings (loss) per share

$

(0.18)

$

(0.45)

$

(0.30)

$

(0.38)

Fair Values
v4.2.117.0
Fair Values
 9 Months Ended
Sep. 30, 2011
Fair Values [Abstract]  
Fair Values

NOTE 10 FAIR VALUES:

 

ASC 820,"Fair Value Measurements and Disclosures"   provides a framework for measuring fair value under generally accepted accounting principles and requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available for sale investment securities) or on a nonrecurring basis (for example, impaired loans and other real estate acquired through foreclosure).

 

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair Value Measurements and Disclosures also establishes fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

Level 1: Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an exchange market, as well as U. S. Treasury, other U. S. Government and agency mortgage-backed debt securities that are highly liquid and are actively traded in over-the-counter markets.

 

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

 

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. For example, this category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly structured or long-term derivative contracts.

 

Investment Securities Available for Sale – Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. The Company's available for sale securities, totaling $17.7 million and $4.7 million at September 30, 2011 and December 31, 2010, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 and Level 3 inputs from an independent pricing service.

 

Loans - The Company does not record loans at fair value on a recurring basis. The Company is predominantly an asset based lender with real estate serving as collateral on a substantial majority of loans. From time to time a loan is considered impaired and an allowance for loan losses is established. Loans which are deemed to be impaired are primarily valued on a non-recurring basis at the fair values of the underlying real estate collateral. Such fair values are obtained using independent appraisals, which management used to determine the current value of the collateral. If further impairment below the appraised value is warranted based on changes in market conditions and there is no observable market price, or an appraised value does not include estimated costs of disposition, then management must make an estimate of these costs. In that case, the Company records the impaired loan as nonrecurring Level 3. The aggregate carrying amounts of impaired loans were $94.6 million and $90.6 million at September 30, 2011 and December 31, 2010, respectively.

Foreclosed Assets - Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets.  Foreclosed assets are carried at the lower of the carrying value or fair value.  Fair value is based upon independent observable market prices or appraised values of the collateral with a third party estimate of disposition costs, which the Company considers to be level 2 inputs. When the appraised value is not available, management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, or an appraised value does not include estimated costs of disposition and management must make an estimate, the Company records the foreclosed asset as nonrecurring Level 3.

Assets and liabilities measured at fair value are as follows as of September 30, 2011:

 

 

 

 

(Dollars are in thousands)

 

 

Quoted market price in active markets

(Level 1)

 

 

 

Significant other observable inputs

(Level 2)

 

 

 

Significant unobservable inputs

(Level 3)

(On a recurring basis)

Available for sale investments

 

 

 

 

 

 

    U.S. Government Agencies

$

-

$

9,305

$

-

    Taxable municipals

 

-

 

975

 

-

    Tax-exempt municipals

 

-

 

1,048

 

-

    Mortgage backed securities

 

-

 

5,319

 

1,019

(On a non-recurring basis)

Other real estate owned

 

-

 

-

 

10,781

Impaired loans

 

 

 

 

 

 

Real estate secured:

 

 

 

 

 

 

    Commercial

 

-

 

-

 

42,601

    Construction and land development

 

-

 

-

 

14,331

    Residential 1-4 family

 

-

 

-

 

12,574

    Multifamily

 

-

 

-

 

849

    Farmland

 

-

 

-

 

17,237

Commercial

 

-

 

-

 

5,792

Agriculture

 

-

 

-

 

1,142

Consumer installment loans

 

-

 

-

 

56

All other loans

 

-

 

-

 

-

Total

$

-

$

16,647

$

106,382

 

Assets and liabilities measured at fair value are as follows as of December 31, 2010:

 

 

 

 

(Dollars are in thousands)

 

 

Quoted market price in active markets

(Level 1)

 

 

 

Significant other observable inputs

(Level 2)

 

 

 

Significant unobservable inputs

(Level 3)

(On a recurring basis)

Available for sale investments

 

 

 

 

 

 

    U.S. Government Agencies

$

-

$

2,970

$

-

    Taxable municipals

 

-

 

899

 

-

    Mortgage backed securities

 

-

 

789

 

-

(On a non-recurring basis)

Other real estate owned

 

-

 

-

 

12,346

Impaired loans

 

 

 

 

 

 

Real estate secured:

 

 

 

 

 

 

    Commercial

 

-

 

-

 

37,628

    Construction and land development

 

-

 

-

 

23,498

    Residential 1-4 family

 

-

 

-

 

7,973

    Multifamily

 

-

 

-

 

510

    Farmland

 

-

 

-

 

14,608

Commercial

 

-

 

-

 

4,900

Agriculture

 

-

 

-

 

1,485

Consumer installment loans

 

-

 

-

 

46

All other loans

 

-

 

-

 

-

Total

$

-

$

4,658

$

102,994

For the nine months ended September 30, 2011 and 2010, the changes in other real estate owned Level 3 assets measured at fair value on a nonrecurring basis are summarized as follows (dollars in thousands):

 

 

September 30, 2011

 

September 30, 2010

 

(Dollars are in thousands)

 

Other Real

Estate Owned

 

Other Real

Estate Owned

Balance, January 1

$

12,346

$

3,675

    Acquired in settlement of loans

 

6,108

 

3,649

    Proceeds from sale of other real estate owned

 

(4,182)

 

(2,994)

    Gain (Loss) on sale of other real estate owned

 

17

 

(49)

    Adjustments to carrying value

 

(3,508)

 

-

Balance, September 30

$

10,781

$

4,281

 

 

Fair Value of Financial Instruments

 

Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument.

 

The following summary presents the methodologies and assumptions used to estimate the fair value of the Company's financial instruments presented below. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.

 

The carrying value of cash and due from banks, federal funds sold, interest-bearing deposits, deposits with no stated maturities, trust preferred securities and accrued interest approximates fair value. The estimated fair value of investment securities was based on closing market prices. The remaining financial instruments were valued based on the present value of estimated future cash flows, discounted at various rates in effect for similar instruments during the months of September 2011 and December 2010.

 

 

 

September 30, 2011

 

December 31, 2010

 

(Dollars are in thousands)

 

Estimated Fair Value

 

Carrying Value

 

Estimated Fair Value

 

Carrying Value

Financial Assets

 

 

 

 

 

 

 

 

Cash and due from bank

$

19,533

$

19,533

$

14,369

$

14,369

Interest bearing deposits with banks

 

78,746

 

78,746

 

42,549

 

42,549

Federal funds sold

 

-

 

-

 

25,611

 

25,611

Investment securities

 

17,666

 

17,666

 

4,658

 

4,658

Equity securities (restricted)

 

3,657

 

3,657

 

3,878

 

3,878

Net Loans

 

616,864

 

612,213

 

700,420

 

682,780

Accrued Interest receivable

 

3,168

 

3,168

 

3,700

 

3,700

Life insurance investments

 

11,264

 

11,264

 

11,011

 

11,011

 

 

 

 

 

 

 

 

 

Financial Liabilities

 

 

 

 

 

 

 

 

Demand Deposits

 

 

 

 

 

 

 

 

    Non-interest bearing

$

105,872

$

105,872

$

87,839

$

87,839

    Interest-bearing

 

59,838

 

59,838

 

60,022

 

60,022

    Savings deposits

 

97,502

 

97,502

 

108,119

 

108,119

Time deposits

 

475,452

 

468,777

 

513,090

 

510,100

FHLB advances

 

17,959

 

18,283

 

23,611

 

24,183

Accrued interest payable

 

1,896

 

1,896

 

1,720

 

1,720

Line of credit borrowing

 

-

 

-

 

4,900

 

4,900

Other borrowings

 

5,450

 

5,450

 

250

 

250

Trust preferred securities

 

16,496

 

16,496

 

16,496

 

16,496

Recent Accounting Developments
v4.2.117.0
Recent Accounting Developments
 9 Months Ended
Sep. 30, 2011
Recent Accounting Developments [Abstract]  
Recent Accounting Developments

NOTE 11 RECENT ACCOUNTING DEVELOPMENTS:

 

The following is a summary of recent authoritative announcements:

 

In July 2010, the Receivables topic of the Accounting Standards Codification ("ASC") was amended by Accounting Standards Update ("ASU") 2010-20 to require expanded disclosures related to a company's allowance for credit losses and the credit quality of its financing receivables. The amendments require the allowance disclosures to be provided on a disaggregated basis. The Company is required to include these disclosures in their interim and annual financial statements. See Notes 6 and 7 to the consolidated financial statements for the required disclosures.

 

Disclosures about Troubled Debt Restructurings ("TDRs") required by ASU 2010-20 were deferred by the Financial Accounting Standards Board ("FASB") in ASU 2011-01 issued in January 2011. In April 2011 the FASB issued ASU 2011-02 to assist creditors with their determination of when a restructuring is a TDR.   The determination is based on whether the restructuring constitutes a concession and whether the debtor is experiencing financial difficulties as both events must be present.  Disclosures related to TDRs under ASU 2010-20 have been presented in Note 8 to the consolidated financial statements.

In December 2010, the Intangibles topic of the ASC was amended to modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings upon adoption. Impairments occurring subsequent to adoption should be included in earnings. The amendment was effective for the Company on January 1, 2011 and did not have a material effect on the financial statements.

In September 2011, the Intangibles topic was again amended to permit an entity to consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. These amendments will be effective for the Company on January 1, 2012 but are not expected to have a material effect on the financial statements.

In April 2011, the criteria used to determine effective control of transferred assets in the Transfers and Servicing topic of the ASC was amended by ASU 2011-03. The requirement for the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms and the collateral maintenance implementation guidance related to that criterion were removed from the assessment of effective control. The other criteria to assess effective control were not changed. The amendments are effective for the Company beginning January 1, 2012 but are not expected to have a material effect on the financial statements.

 

ASU 2011-04 was issued in May 2011 to amend the Fair Value Measurement topic of the ASC by clarifying the application of existing fair value measurement and disclosure requirements and by changing particular principles or requirements for measuring fair value or for disclosing information about fair value measurements. The amendments will be effective for the Company beginning January 1, 2012 but are not expected to have a material effect on the financial statements.

 

The Comprehensive Income topic of the ASC was amended in June 2011. The amendment eliminates the option to present other comprehensive income as a part of the statement of changes in stockholders' equity. The amendment requires consecutive presentation of the statement of net income and other comprehensive income and requires an entity to present reclassification adjustments from other comprehensive income to net income on the face of the financial statements. The amendments will be applicable to the Company on January 1, 2012 and will be applied retrospectively.

 

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company's financial position, results of operations or cash flows.