Document And Entity Information
v4.1.217.0
Document And Entity Information
 6 Months Ended
Jun. 30, 2011
Aug. 08, 2011
Document And Entity Information    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2011
Document Fiscal Year Focus 2011  
Document Fiscal Period Focus Q2  
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 Income
v4.1.217.0
Consolidated Statements Of Income (USD $)
In Thousands, except Share data
 3 Months Ended 6 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
INTEREST AND DIVIDEND INCOME        
Loans including fees $ 10,514 $ 12,283 $ 21,402 $ 24,478
Federal funds sold   11 9 21
Interest-earning deposits with banks 54   80  
Investments 45 35 84 58
Dividends on equity securities (restricted) 28 21 50 42
Total Interest and Dividend Income 10,641 12,350 21,625 24,599
INTEREST EXPENSE        
Demand 44 77 89 150
Savings 138 193 324 393
Time deposits below $100,000 1,242 1,812 2,630 3,792
Time deposits above $100,000 769 1,118 1,574 2,337
FHLB Advances 223 263 444 524
Other borrowings 44 59 105 122
Trust Preferred Securities 92 112 200 219
Total Interest Expense 2,552 3,634 5,366 7,537
NET INTEREST INCOME 8,089 8,716 16,259 17,062
PROVISION FOR LOAN LOSSES 2,312 1,950 3,457 3,940
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,777 6,766 12,802 13,122
NONINTEREST INCOME        
Service charges 607 703 1,159 1,313
Fees, commissions and other income 445 448 1,019 989
Insurance and investment fees 93 159 191 279
Life insurance investment income 89 103 176 209
Total Noninterest Income 1,234 1,413 2,545 2,790
NONINTEREST EXPENSES        
Salaries and employee benefits 3,946 4,019 7,859 7,520
Occupancy and equipment expense 1,119 1,130 2,144 2,334
Advertising and public relations 98 116 183 194
Data processing and telecommunications 392 399 798 814
FDIC insurance premiums 421 750 1,096 1,500
Other real estate owned and repossessed vehicles, net 2,246 156 2,490 302
Other operating expenses 1,395 1,301 2,660 2,358
Total Noninterest Expenses 9,617 7,871 17,230 15,022
INCOME (LOSS) BEFORE INCOME TAXES (2,606) 308 (1,883) 890
INCOME TAX EXPENSE (BENEFIT) (931) 66 (757) 235
NET INCOME (LOSS) $ (1,675) $ 242 $ (1,126) $ 655
Earnings (Loss) Per Share        
Basic $ (0.17) $ 0.02 $ (0.11) $ 0.07
Fully Diluted $ (0.17) $ 0.02 $ (0.11) $ 0.07
Average Weighted Shares of Common Stock        
Basic 10,010,178 10,009,042 10,010,178 10,009,039
Fully Diluted 10,010,178 10,009,042 10,010,178 10,009,039

Consolidated Balance Sheets
v4.1.217.0
Consolidated Balance Sheets (USD $)
In Thousands
Jun. 30, 2011
Dec. 31, 2010
ASSETS    
Cash and due from banks $ 18,818 $ 14,369
Interest-bearing deposits with banks 69,082 42,549
Federal funds sold 1,010 25,611
Total Cash and Cash Equivalents 88,910 82,529
Investment securities    
Available-for-sale 4,383 4,658
Loans receivable 664,003 707,794
Allowance for loan losses (18,697) (25,014)
Net Loans 645,306 682,780
Bank premises and equipment, net 33,780 34,141
Equity securities (restricted) 3,733 3,878
Other real estate owned 11,137 12,346
Accrued interest receivable 3,368 3,700
Life insurance investments 11,187 11,011
Goodwill and other intangibles 4,288 4,346
Deferred taxes 7,362 8,037
Other assets 7,653 5,201
Total Assets 821,107 852,627
LIABILITIES    
Noninterest bearing 102,343 87,839
Interest-bearing 56,062 60,022
Savings deposits 99,992 108,119
Time deposits 482,756 510,100
Total Deposits 741,153 766,080
Federal Home Loan Bank advances 18,583 24,183
Accrued interest payable 1,795 1,720
Accrued expenses and other liabilities 1,150 1,475
Line of credit borrowing   4,900
Other borrowings 5,450 250
Trust preferred securities 16,496 16,496
Total Liabilities 784,627 815,104
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) (5,301) (4,175)
Accumulated other comprehensive income (loss) 72 (11)
Total Stockholders' Equity 36,480 37,523
Total Liabilities and Stockholders' Equity $ 821,107 $ 852,627

Consolidated Balance Sheets (Parenthetical)
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Consolidated Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2011
Dec. 31, 2010
Consolidated Balance Sheets    
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
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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 10,009,000          
Net Income (Loss)     655   655 655
Unrealized gain (loss) on available-for-sale securities, net of tax       4 4 4
Balance at Jun. 30, 2010 20,018 21,683 5,545 32 659 47,278
Balance, Shares at Jun. 30, 2010 10,009,000          
Balance at Dec. 31, 2010 20,020 21,689 (4,175) (11)   37,523
Balance, Shares at Dec. 31, 2010 10,010,000         10,010,178
Net Income (Loss)     (1,126)   (1,126) (1,126)
Unrealized gain (loss) on available-for-sale securities, net of tax       83 83 83
Balance at Jun. 30, 2011 $ 20,020 $ 21,689 $ (5,301) $ 72 $ (1,043) $ 36,480
Balance, Shares at Jun. 30, 2011 10,010,000         10,010,178

Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical)
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Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) (USD $)
In Thousands
 6 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Consolidated Statements Of Changes In Stockholders' Equity    
Net tax effect of unrealized gain (loss) on available- for-sale securities $ 43 $ 2

Consolidated Statements Of Cash Flows
v4.1.217.0
Consolidated Statements Of Cash Flows (USD $)
In Thousands
 6 Months Ended
Jun. 30, 2011
Jun. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES    
Net income (loss) $ (1,126) $ 655
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation 1,245 1,383
Provision for loan losses 3,457 3,940
Income (less expenses) on life insurance (176) (209)
Loss on sale of fixed assets 152  
Loss on sale of foreclosed real estate 47 36
Adjustment of carrying value of foreclosed real estate 1,869  
Accretion of bond premiums/discounts 4  
Deferred tax expense 631 735
Amortization of core deposit intangible 58 109
Net change in:    
Interest receivable 332 (71)
Other assets (2,452) (1,811)
Accrued interest payable 75 (37)
Accrued expenses and other liabilities (325) 314
Net Cash Provided by Operating Activities 3,791 5,044
CASH FLOWS FROM INVESTING ACTIVITIES    
Net decrease in loans 30,655 11,478
Purchase of securities available-for-sale (2,455) (1,654)
Proceeds from sale and maturities of securities available-for-sale 2,853 613
Sale of Federal Home Loan Bank stock 145  
Purchase of Federal Reserve Bank stock   1
Payments for the purchase of property and equipment (1,204) (1,269)
Proceeds from sales of property and equipment 168  
Proceeds from sales of other real estate owned 2,655 1,559
Net Cash Provided by Investing Activities 32,817 10,728
CASH FLOWS FROM FINANCING ACTIVITIES    
Net decrease in line of credit borrowings (4,900)  
Net increase in other borrowings 5,200  
Repayments to Federal Home Loan Bank (5,600) (600)
Net change in:    
Demand deposits 10,544 23,544
Savings deposits (8,127) (728)
Time deposits (27,344) (21,436)
Net Cash Provided by (Used in) Financing Activities (30,227) 780
Net increase in cash and cash equivalents 6,381 16,552
Cash and Cash Equivalents, Beginning of Period 82,529 39,560
Cash and Cash Equivalents, End of Period 88,910 56,112
Supplemental Disclosure of Cash Paid During the Period for:    
Interest 5,441 7,500
Taxes    
Supplemental Disclosure of Non Cash Transactions:    
Other real estate acquired in settlement of foreclosed loans 3,362 5,897
Loans made to finance sale of foreclosed real estate   $ 175

Nature Of Operations
v4.1.217.0
Nature Of Operations
 6 Months Ended
Jun. 30, 2011
Nature Of Operations  
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
v4.1.217.0
Accounting Principles
 6 Months Ended
Jun. 30, 2011
Accounting Principles  
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 June 30, 2011, and the results of operations for the three month and six month periods ended June 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 six month periods ended June 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
v4.1.217.0
Formal Written Agreement
 6 Months Ended
Jun. 30, 2011
Formal Written Agreement  
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
v4.1.217.0
Capital Requirements
 6 Months Ended
Jun. 30, 2011
Capital Requirements  
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 June 30, 2011, the Company and the Bank meet all capital adequacy requirements to which they are subject.

 

As of June 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 June 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

June 30, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital to Risk Weighted Assets:

 

 

 

 

 

 

 

 

 

 

 

 

The Company

$

51,988

 

9.35%

$

44,496

 

8%

$

N/A

 

N/A

The Bank

 

56,651

 

10.21%

 

44,384

 

8%

 

55,480

 

10%

Tier 1 Capital Risk Weighted Assets:

 

 

 

 

 

 

 

 

 

 

 

 

The Company

 

39,615

 

7.12%

 

22,248

 

4%

 

N/A

 

N/A

The Bank

 

49,571

 

8.93%

 

22,192

 

4%

 

33,288

 

6%

Tier 1 Capital to Average Assets:

 

 

 

 

 

 

 

 

 

 

 

 

The Company

 

39,615

 

4.74%

 

33,409

 

4%

 

N/A

 

N/A

The Bank

 

49,571

 

5.97%

 

33,194

 

4%

 

41,492

 

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
v4.1.217.0
Investment Securities
 6 Months Ended
Jun. 30, 2011
Investment Securities  
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
June 30, 2011                
Available for Sale                
U.S. Government Agencies $ 2,707 $ 37 $ - $ 2,744
Taxable municipals   893   52   -   945
US. Government Mortgage backed                
securities   674   20   -   694
Total Securities AFS $ 4,274 $ 109 $ - $ 4,383
 
December 31, 2010                
Available for Sale                
U.S. Government Agencies $ 3,001 $ - $ 31 $ 2,970
Taxable municipals   894   5   -   899
U.S. Government 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 June 30, 2011 and December 31, 2010.

    Less than 12 Months   12 Months or More     Total  
    Fair   Unrealized   Fair   Unrealized   Fair Unrealized
(Dollars are in thousands)   Value   Losses   Value   Losses   Value   Losses
June 30, 2011                        
U.S. Government Agencies $ - $ - $ - $ - $ - $ -
 
December 31, 2010                        
U.S. Government Agencies $ 2,970 $ 31 $ - $ - $ 2,970 $ 31

 

At June 30, 2011, the available for sale portfolio had no 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 June 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   231   236 3.14 %
Due after five years through fifteen years   4,043   4,147 3.50 %
Total $ 4,274 $ 4,383 3.46 %

 

Investment securities with a carrying value of $1.2 million and $892 thousand at June 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 June 30, 2011 and December 31, 2010, respectively.

Loans
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Loans
 6 Months Ended
Jun. 30, 2011
Loans  
Loans

NOTE 6    LOANS:

 

Loans receivable outstanding are summarized as follows:

 

June 30,

 

December 31,

(Dollars are in thousands)

2011

 

2010

Commercial, financial and agricultural

$

98,365

$

109,551

Real estate-construction

44,872

52,307

Real estate-mortgages

473,814

489,314

Installment loans to individuals

46,952

56,622

Total loans

$

664,003

$

707,794

 

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

 

 

As of June 30, 2011

(Dollars are in thousands)

 

 

Average

Recorded

Investment

 

 

Interest

Income

Recognized

 

 

 

Recorded

Investment

 

 

Unpaid Principal Balance

 

 

 

Related

Allowance

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 Commercial, financial and agricultural

$

14,062

$

322

$

16,934

$

17,712

$

-

    Real estate-construction

 

13,672

 

128

 

14,768

 

23,735

 

-

    Real Estate-mortgages

 

34,413

 

857

 

40,827

 

44,103

 

-

    Installment loans to individuals

 

1

 

-

 

4

 

4

 

-

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 Commercial,financial and agricultural

 

6,104

 

90

 

3,650

 

3,824

 

1,256

    Real estate-construction

 

7,275

 

50

 

3,963

 

4,306

 

1,632

    Real Estate-mortgages

 

13,533

 

254

 

10,357

 

10,642

 

1,735

    Installment loans to individuals

 

38

 

1

 

26

 

27

 

7

Total

$

89,098

$

1,702

$

90,529

$

104,353

$

4,630

 

 

As of December 31, 2010

(Dollars are in thousands)

 

 

 

Recorded

Investment

 

 

 

Unpaid Principal Balance

 

 

 

Related

Allowance

 

With no related allowance recorded:

 

 

 

 

 

 

 

    Commercial, financial and agricultural

$

9,264

$

9,785

$

-

 

    Real estate-construction

 

8,585

 

12,594

 

-

 

    Real Estate-mortgages

 

27,138

 

27,997

 

-

 

    Installment loans to individuals

 

-

 

-

 

-

 

With an allowance recorded:

 

 

 

 

 

 

 

    Commercial, financial and agricultural

 

11,729

 

11,729

 

4,042

 

    Real estate-construction

 

14,913

 

16,253

 

3,926

 

    Real Estate-mortgages

 

18,973

 

19,142

 

4,842

 

    Installment loans to individuals

 

46

 

46

 

23

 

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.

 

Loans receivable on nonaccrual status are summarized as follows:

 

June 30,

 

December 31,

(Dollars are in thousands)

2011

 

2010

Commercial, financial and agricultural

$

11,544

$

5,970

Real estate-construction

12,239

15,460

Real estate-mortgages

18,889

22,986

Installment loans to individuals

324

1,365

Total loans receivable on nonaccrual status

$

42,996

$

45,781

 

Total interest income not recognized on nonaccrual loans for six months ended June 30, 2011 and 2010 was $1.1 million and $309 thousand, respectively.

 

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

 

 

 

 

 

As of June 30, 2011

(Dollars are in thousands)

 

 

 

Loans

30-89

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

Commercial, financial and agricultural

$

4,257

$

9,855

$

14,112

$

84,253

$

98,365

$

446

Real estate-construction

 

3,628

 

9,394

 

13,022

 

31,850

 

44,872

 

-

Real Estate-mortgages

 

19,305

 

11,355

 

30,660

 

443,154

 

473,814

 

1,598

Installment loans to individuals

 

1,276

 

533

 

1,809

 

45,143

 

46,952

 

309

Total

$

28,466

$

31,137

$

59,603

$

604,400

$

664,003

$

2,353

 

 

 

 

 

 

As of December 31, 2010

(Dollars are in thousands)

 

 

 

Loans

30-89

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

Commercial, financial and agricultural

$

5,622

$

2,690

$

8,312

$

101,239

$

109,551

$

90

Real estate-construction

 

2,079

 

8,150

 

10,229

 

42,078

 

52,307

 

-

Real Estate-mortgages

 

22,251

 

12,227

 

34,478

 

454,836

 

489,314

 

1,332

Installment loans to individuals

 

2,584

 

337

 

2,921

 

53,701

 

56,622

 

270

Total

$

32,536

$

23,404

$

55,940

$

651,854

$

707,794

$

1,692

 

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 June 30, 2011

(Dollars are in thousands)

 

 

 

Pass

 

 

Special

Mention

 

 

 

Substandard

 

 

 

 

 

Doubtful

 

 

 

Total

Commercial, financial and agricultural

$

68,631

$

8,906

$

18,304

$

2,524

$

98,365

Real estate-construction

 

25,638

 

4,158

 

15,076

 

-

 

44,872

Real Estate-mortgages

 

375,388

 

30,728

 

63,560

 

4,138

 

473,814

Installment loans to individuals

 

44,720

 

632

 

1,560

 

40

 

46,952

Total

$

514,377

$

44,424

$

98,500

$

6,702

$

664,003

 

As of December 31, 2010

(Dollars are in thousands)

 

 

 

Pass

 

 

Special

Mention

 

 

 

Substandard

 

 

 

 

 

Doubtful

 

 

 

Total

Commercial, financial and agricultural

$

83,482

$

5,561

$

18,619

$

1,889

$

109,551

Real estate-construction

 

28,802

 

4,095

 

19,410

 

-

 

52,307

Real Estate-mortgages

 

418,166

 

20,113

 

47,389

 

3,646

 

489,314

Installment loans to individuals

 

56,037

 

122

 

434

 

29

 

56,622

Total

$

586,487

$

29,891

$

85,852

$

5,564

$

707,794

 

At June 30, 2011 there were $19.2 million in loans that are classified as troubled debt restructurings compared to $13.9 million at December 31, 2010.

Allowance For Loan Losses
v4.1.217.0
Allowance For Loan Losses
 6 Months Ended
Jun. 30, 2011
Allowance For Loan Losses  
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 Six Months Ended

 

 

 

June 30,

 

June 30,

(Dollar are in thousands)

 

 

2011

 

2010

Balance, beginning of year

 

 

$

25,014

$

18,588

Provision for loan losses

 

3,457

3,940

Advances made on loans with off balance sheet provision

 

153

-

Recoveries of loans charged off

 

1,059

66

Loans charged off

 

(10,986)

(6,167)

Balance, End of period

 

 

$

18,697

$

16,427

Percentage of Loans

 

2.82%

2.22%

 

The following table details activity in the allowance for loan losses by portfolio segment for the periods ended June 30, 2011 and 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 June 30, 2011

(Dollars are in thousands)

 

Commercial, Financial and Agricultural

 

Real Estate Construction

 

Real Estate Mortgages

 

Installment Loans to Individuals

 

Unallocated

 

Total

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

5,323

$

4,913

$

6,882

$

1,733

$

6,163

$

25,014

Charge offs

 

(2,208)

 

(3,965)

 

(3,480)

 

(1,333)

 

-

 

(10,986)

Recoveries

 

39

 

707

 

217

 

96

 

-

 

1,059

Advances

 

-

 

153

 

-

 

-

 

-

 

153

Provisions

 

190

 

1,011

 

2,261

 

492

 

(497)

 

3,457

Ending balance

$

3,344

$

2,819

$

5,880

$

988

$

5,666

$

18,697

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance allocated to:

 

 

 

 

 

 

 

 

 

 

 

 

    Individually evaluated for

    impairment

$

1,256

$

1,632

$

1,735

$

7

$

-

$

4,630

    Collectively evaluated for

    impairment

 

2,088

 

1,187

 

4,145

 

981

 

5,666

 

14,067

      Ending balance

$

3,344

$

2,819

$

5,880

$

988

$

5,666

$

18,697

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans ending balances:

 

 

 

 

 

 

 

 

 

 

 

 

    Individually evaluated for

    impairment

$

20,584

$

18,731

$

51,184

$

30

$

-

$

90,529

    Collectively evaluated for

    impairment

 

77,781

 

26,141

 

422,630

 

46,922

 

-

 

573,474

      Total

$

98,365

$

44,872

$

473,814

$

46,952

$

-

$

664,003

 

As of December 31, 2010 (Dollars are in thousands)

 

Commercial, Financial and Agricultural

 

Real Estate Construction

 

Real Estate Mortgages

 

Installment Loans to Individuals

 

Unallocated

 

Total

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

1,710

$

8,036

$

3,525

$

1,501

$

3,816

$

18,588

Charge offs

 

(1,425)

 

(10,002)

 

(3,867)

 

(1,214)

 

-

 

(16,508)

Recoveries

 

509

 

-

 

7

 

90

 

-

 

606

Provisions

 

4,529

 

6,879

 

7,217

 

1,356

 

2,347

 

22,328

Ending balance

$

5,323

$

4,913

$

6,882

$

1,733

$

6,163

$

25,014

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance allocated to:

 

 

 

 

 

 

 

 

 

 

 

 

    Individually evaluated for

    impairment

$

4,042

$

3,926

$

4,842

$

23

$

-

$

12,833

    Collectively evaluated for

    impairment

 

1,281

 

987

 

2,040

 

1,710

 

6,163

 

12,181

      Ending balance

$

5,323

$

4,913

$

6,882

$

1,733

$

6,163

$

25,014

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans ending balances:

 

 

 

 

 

 

 

 

 

 

 

 

    Individually evaluated for

    impairment

$

20,993

$

23,497

$

46,112

$

46

$

-

$

90,648

    Collectively evaluated for

    impairment

 

88,558

 

28,810

 

443,202

 

56,576

 

-

 

617,146

      Total

$

109,551

$

52,307

$

489,314

$

56,622

$

-

$

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.

Earnings Per Share
v4.1.217.0
Earnings Per Share
 6 Months Ended
Jun. 30, 2011
Earnings Per Share  
Earnings Per Share

NOTE 8    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 six month periods ended June 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 June 30,

 

For the six months

ended June 30,

 

 

2011

 

2010

 

2011

 

2010

Net income (loss)

$

(1,675)

$

242

$

(1,126)

$

655

Weighted average shares outstanding

 

10,010,178

 

10,009,042

 

10,010,178

 

10,009,039

Dilutive shares for stock options

 

-

 

-

 

-

 

-

Weighted average dilutive shares outstanding

 

10,010,178

 

10,009,042

 

10,010,178

 

10,009,039

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

$

(0.17)

$

0.02

$

(0.11)

$

0.07

Diluted earnings (loss) per share

$

(0.17)

$

0.02

$

(0.11)

$

0.07

Fair Values
v4.1.217.0
Fair Values
 6 Months Ended
Jun. 30, 2011
Fair Values  
Fair Values

NOTE 9

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 $4.4 million and $4.7 million at June 30, 2011 and December 31, 2010, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 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 $90.5 million and $90.6 million at June 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 June 30, 2011:

             
    Quoted market       Significant
    price in active   Significant other   unobservable
    markets   observable inputs   inputs
(Dollars are in thousands)   (Level 1)   (Level 2)   (Level 3)
(On a recurring basis)            
Available for sale investments            
U.S. Government Agencies $ - $ 2,744 $ -
Taxable municipals   -   945   -
Mortgage backed securities   -   694   -
(On a non-recurring basis)            
Other real estate owned   -   -   11,137
Impaired loans            
Commercial, financial and agricultural   -   -   20,584
Real estate-construction   -   -   18,731
Real estate-mortgages   -   -   51,184
Installment loans to individuals   -   -   30
Total $ - $ 4,383 $ 101,666

 

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

             
    Quoted market       Significant
    price in active   Significant other   unobservable
    markets   observable inputs   inputs
(Dollars are in thousands)   (Level 1)   (Level 2)   (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            
Commercial, financial and agricultural   -   -   20,993
Real estate-construction   -   -   23,497
Real estate-mortgages   -   -   46,112
Installment loans to individuals   -   -   46
Total $ - $ 4,658 $ 102,994

 

For the six months ended June 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):

             
    June 30, 2011     June 30, 2010  
    Other Real     Other Real  
(Dollars are in thousands)   Estate Owned     Estate Owned  
Balance, January 1 $ 12,346   $ 3,675  
Acquired in settlement of loans   3,362     5,861  
Proceeds from sale of other real estate owned   (2,655 )   (1,559 )
Gain (Loss) on sale of other real estate owned   (47 )   (36 )
Adjustments to carrying value   (1,869 )   -  
Balance, June 30 $ 11,137   $ 7,941  


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 June 2011 and December 2010.

                 
    June 30, 2011   December 31, 2010
    Estimated   Carrying   Estimated   Carrying
(Dollars are in thousands)   Fair Value   Value   Fair Value   Value
Financial Assets                
Cash and due from bank $ 18,818 $ 18,818 $ 14,369 $ 14,369
Interest bearing deposits with banks   69,082   69,082   42,549   42,549
Federal funds sold   1,010   1,010   25,611   25,611
Investment securities   4,383   4,383   4,658   4,658
Equity securities (restricted)   3,733   3,733   3,878   3,878
Net Loans   648,980   645,306   700,420   682,780
Accrued Interest receivable   3,368   3,368   3,700   3,700
Life insurance investments   11,187   11,187   11,011   11,011
 
Financial Liabilities                
Demand Deposits                
Non-interest bearing   102,343   102,343   87,839   87,839
Interest-bearing   56,062   56,062   60,022   60,022
Savings deposits   99,992   99,992   108,119   108,119
Time deposits   485,889   482,756   513,090   510,100
FHLB advances   18,156   18,583   23,611   24,183
Accrued interest payable   1,795   1,795   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
v4.1.217.0
Recent Accounting Developments
 6 Months Ended
Jun. 30, 2011
Recent Accounting Developments  
Recent Accounting Developments

NOTE 10  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 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 will be effective for reporting periods beginning after June 15, 2011, but are not expected to have a material effect on the 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 is effective for the Company beginning January 1, 2011, but is not expected to have a material effect on the financial statements.  Early adoption is not permitted.

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.