Loans And Allowance For Loan Losses

3 Months Ended

Mar. 31, 2012

Loans And Allowance For Loan Losses [Abstract]

NOTE 4.

LOANS AND ALLOWANCE FOR LOAN LOSSES

The composition of the loan portfolio at March 31, 2012 and December 31, 2011 follows.


	March 31, 2012			December 31, 2011
Commercial real estate:
Construction and development	$	54,585,016		$	61,947,478
Owner-occupied		35,429,350			36,389,057
Non owner-occupied		28,449,221			27,772,007
Residential real estate - mortgage		43,198,837			44,201,750
Other commercial, financial, and agricultural		21,932,452			22,446,349
Consumer, including credit cards		8,957,437			9,551,670

Loans, gross		192,552,313			202,308,311
Unearned income		(43,476	)		(45,166	)
Allowance for loan losses		(6,511,814	)		(6,776,601	)

Net loans	$	185,997,023		$	195,486,544

In accordance with U.S. GAAP, the loan portfolio is disaggregated into four segments and further disaggregated into classes for certain disclosures. A portfolio segment is defined as the level in which an entity develops and documents a systematic method for determining its allowance for loan losses. The segments used in the portfolio include commercial real estate; residential real estate – mortgage; other commercial, financial, agricultural; and consumer. Commercial real estate has been divided into three classes, including construction and development, owner-occupied, and non owner-occupied credits. All land and lot development loans have been included in the construction and development class, regardless of whether the underlying real estate is zoned commercial or residential. This classification of construction and development loans corresponds with definitions used by banking regulators for examination and other purposes.

Past Due and Nonaccrual Loans

In accordance with bank regulatory guidance, a loan is placed on nonaccrual status if:

•

it is maintained on a cash basis because of deterioration in the financial condition of the borrower,

•

payment in full of principal or interest is not expected, or

•

principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection.

An aging of past due loans at March 31, 2012 and December 31, 2011 is presented by segment in the following table. Balances presented are based on book balance, or recorded investment.


	Current		Accruing 30 – 89 Days Past Due		Accruing 90+ Days Past Due		Total Accruing Past Due		Nonaccrual		Total
*March 31, 2012*
Commercial real estate:
Construction and development	$	35,922,152	$	485,727	$	0	$	485,727	$	18,177,137	$	54,585,016
Owner-occupied		34,327,716		594,251		0		594,251		507,383		35,429,350
Non owner-occupied		25,852,023		2,309,519		0		2,309,519		287,679		28,449,221
Residential real estate - mortgage		36,472,947		637,898		0		637,898		6,087,992		43,198,837
Other commercial, financial, and agricultural		20,995,213		546,674		13,065		559,739		377,500		21,932,452
Consumer, including credit cards		8,503,168		223,669		8,086		231,755		222,514		8,957,437

Loans, gross	$	162,073,219	$	4,797,738	$	21,151	$	4,818,889	$	25,660,205	$	192,552,313


December 31, 2011
Commercial real estate:
Construction and development	$	37,244,104	$	1,237,685	$	15,241	$	1,252,926	$	23,450,448	$	61,947,478
Owner-occupied		35,577,301		296,252		202,945		499,197		312,559		36,389,057
Non owner-occupied		27,577,932		41,809		0		41,809		152,266		27,772,007
Residential real estate - mortgage		36,877,541		1,079,051		25,231		1,104,282		6,219,927		44,201,750
Other commercial, financial, and agricultural		21,862,254		199,638		0		199,638		384,457		22,446,349
Consumer, including credit cards		8,934,708		334,259		4,853		339,112		277,850		9,551,670

Loans, gross	$	168,073,840	$	3,188,694	$	248,270	$	3,436,964	$	30,797,507	$	202,308,311

The gross amount of interest income that would have been recorded on nonaccrual loans if all such loans had been accruing interest at their contractual rates approximated $394,000 and $410,000 in the three months ended March 31, 2012 and 2011, respectively. Cash basis interest income actually recognized on nonaccrual loans during the three months ended March 31, 2012 and 2011 totaled approximately $12,000 and $15,000, respectively. The average balance of loans on nonaccrual status during the three months ended March 31, 2012 and 2011 approximated $29,692,000 and $36,229,000, respectively.

Credit Quality Indicators

Internal risk-ratings, or grades, are assigned to each loan at origination (and renewal as applicable) based on an analysis of the financial strength, collateral, and other credit attributes underlying each loan. Subsequent to origination (and renewal), management periodically analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the portfolio balances. Loans with a risk-rating of Special Mention (Grade 5) or worse and a balance of $100,000 or more are reviewed at least annually for grading accuracy. The rating methodology complies with the asset classification system promulgated by the federal banking agencies.

Loan grades range from one to eight, with one-graded loans having the least credit risk, as defined as follows:

Pass (Grades 1 -4): Loans included in or migrating towards a "pass" grade of one to four carry the lowest risk of loss. Such loans are well-protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less selling costs, of underlying collateral.

Special Mention (Grade 5): Loans in this category have potential weaknesses requiring additional monitoring. These loans are not adversely classified and do not currently have sufficient risk to warrant adverse classification. Substantially all special mention loans are performing.

Substandard (Grade 6): These loans are inadequately supported by the current worth and paying capacity of the obligor or collateral pledged, if any. A distinct possibility of loss exists if the underlying deficiencies are not corrected. At March 31, 2012 and December 31, 2011, all nonaccrual loans were graded substandard.

Doubtful (Grade 7): These loans have all the weaknesses of a substandard loan with the added detriment that full collection or liquidation is highly questionable and improbable on the basis of currently known facts, conditions, and values.

Loss (Grade 8): These loans are deemed uncollectible and have, at best, nominal value. Maintaining these loans on the books, without establishment of specific valuation allowances, is not warranted.

Loans considered doubtful or loss are normally charged-off upon such determination and hence, no balances apply to these categories.

A summary of the loan portfolio by loan risk grade at March 31, 2012 and December 31, 2011 follows.


	Pass (1 – 4)		Special Mention (5)		Substandard (6)		Doubtful (7)		Loss (8)		Total
*March 31, 2012*
Commercial real estate:
Construction and development	$	27,107,196	$	3,979,384	$	23,498,436	$	0	$	0	$	54,585,016
Owner-occupied		31,623,726		2,552,395		1,253,229		0		0		35,429,350
Non owner-occupied		19,322,806		5,620,172		3,506,243		0		0		28,449,221
Residential real estate - mortgage		35,249,541		938,425		7,010,871		0		0		43,198,837
Other commercial, financial, and agricultural		18,858,212		673,654		2,400,586		0		0		21,932,452
Consumer, including credit cards		8,420,752		197,713		338,972		0		0		8,957,437

Loans, gross	$	140,582,233	$	13,961,743	$	38,008,337	$	0	$	0	$	192,552,313


December 31, 2011
Commercial real estate:
Construction and development	$	28,144,755	$	4,783,547	$	29,019,176	$	0	$	0	$	61,947,478
Owner-occupied		32,314,164		2,803,772		1,271,121		0		0		36,389,057
Non owner-occupied		15,730,741		8,655,785		3,385,481		0		0		27,772,007
Residential real estate - mortgage		34,213,755		2,157,630		7,830,365		0		0		44,201,750
Other commercial, financial, and agricultural		19,096,155		740,654		2,609,540		0		0		22,446,349
Consumer, including credit cards		9,053,857		145,613		352,200		0		0		9,551,670

Loans, gross	$	138,553,427	$	19,287,001	$	44,467,883	$	0	$	0	$	202,308,311

Impaired Loans

A loan is considered impaired when it is probable, based on current information and events, the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. Impaired loans include loans placed on nonaccrual status as well as troubled debt restructurings ("TDRs"), loans past due 90 days or more and still accruing, and other accruing loans individually evaluated for impairment. All of the Company's impaired loans have a valuation allowance. Impaired loans comprised the following at March 31, 2012 and December 31, 2011:


	March 31, 2012		December 31, 2011
Nonaccrual loans	$	25,660,205	$	30,797,507
Troubled debt restructurings not included above		10,150,434		9,777,841
Loans past due 90 days or more and still accruing		21,151		248,270
Other accruing loans individually evaluated for impairment		3,029,092		4,138,142

Total impaired loans	$	38,860,882	$	44,961,760


Valuation allowance related to total impaired loans	$	2,458,249	$	2,378,113

Total impaired loans are disaggregated by segment and class at March 31, 2012 and December 31, 2011 below:


	Recorded Investment		Unpaid Principal Balance		Related Allowance
*As of March 31, 2012*
Impaired loans with a valuation allowance:
Commercial real estate:
Construction and development	$	23,767,592	$	36,563,856	$	1,587,389
Owner-occupied		2,156,970		2,372,607		243,861
Non owner-occupied		3,506,243		3,614,308		116,796
Residential real estate - mortgage		6,784,513		9,697,931		408,418
Other commercial, financial, and agricultural		2,412,968		2,533,191		90,882
Consumer, including credit cards		232,596		349,235		10,903

Total impaired loans	$	38,860,882	$	55,131,128	$	2,458,249


As of December 31, 2011
Impaired loans with a valuation allowance:
Commercial real estate:
Construction and development	$	29,137,602	$	41,439,776	$	1,560,695
Owner-occupied		2,175,425		2,376,712		251,506
Non owner-occupied		3,385,481		3,386,699		119,603
Residential real estate - mortgage		7,557,085		10,455,670		337,994
Other commercial, financial, and agricultural		2,421,126		2,535,378		90,425
Consumer, including credit cards		285,041		406,508		17,890

Total impaired loans	$	44,961,760	$	60,600,743	$	2,378,113

The average investment in impaired loans for the three months ended March 31, 2012 and 2011 was $43,515,387 and $40,690,240, respectively.

Impaired loans with a valuation allowance include pools of impaired loans. At March 31, 2012, these pools had a recorded investment, or book balance, of $3,051,373, unpaid principal balance of $4,031,632, and related allowance of $114,505. The recorded investment, unpaid principal and related allowance in such pools totaled $3,028,009, $3,939,653, and $117,618, respectively, at December 31, 2011.

Troubled Debt Restructurings

The following table summarizes the carrying balances of TDRs as of March 31, 2012 and December 31, 2011.


	March 31, 2012		December 31, 2011
Performing	$	10,150,434	$	9,777,841
Nonperforming		9,665,864		9,304,350

Total troubled debt restructurings	$	19,816,298	$	19,082,191


Unfunded commitments to borrowers whose loans were modified in troubled debt restructurings	$	0	$	0

The following table summarizes loans that were modified and recognized as TDRs during the three months ended March 31, 2012.


	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial real estate:
Construction and development		4	$	800,521	$	800,521
Owner-occupied		0		0		0
Non owner-occupied		0		0		0
Residential real estate - mortgage		1		75,031		75,031
Other commercial, financial, and agricultural		0		0		0
Consumer, including credit cards		0		0		0

Total loans modified and recognized as TDRs during the first quarter of 2012		5	$	875,552	$	875,552

There was one construction and development loan in the amount of $271,435 modified as a troubled debt restructuring during the prior twelve-month period ended March 31, 2012 for which there was a subsequent payment default. At the time of default, there was a $50,222 impact on the allowance for loan losses as a result of the default on this loan.

Allowance for Loan Losses

Changes in the allowance for loan losses for the three months ended March 31, 2012 and 2011 are summarized by loan segment below:


	Commercial Real Estate			Residential Real Estate			Other Commercial, Financial, & Agricultural			Consumer			Unallocated			Total
*As of and for the Three Months Ended March 31, 2012*
Allowance for loan losses:
Balance, beginning of year	$	4,775,449		$	1,484,763		$	331,024		$	133,748		$	51,617		$	6,776,601
Provision for loan losses		350,065			316,822			(18,043	)		(19,488	)		(29,356	)		600,000
Charge-offs		(595,365	)		(289,265	)		(5,597	)		(22,954	)		0			(913,181	)
Recoveries		2,418			22,480			3,241			20,255			0			48,394

Ending balance	$	4,532,567		$	1,534,800		$	310,625		$	111,561		$	22,261		$	6,511,814


Ending balance, individually evaluated for impairment	$	1,881,790		$	374,195		$	85,763		$	1,996			n/a		$	2,343,744


Ending balance, collectively evaluated for impairment	$	2,650,777		$	1,160,605		$	224,862		$	109,565		$	22,261		$	4,168,070


Loans, gross:
Ending balance	$	118,463,587		$	43,198,837		$	21,932,452		$	8,957,437			n/a		$	192,552,313


Ending balance, individually evaluated for impairment	$	28,096,745		$	5,664,872		$	2,045,896		$	1,996			n/a		$	35,809,509


Ending balance, collectively evaluated for impairment	$	90,366,842		$	37,533,965		$	19,886,556		$	8,955,441			n/a		$	156,742,804


As of and for the Three Months Ended March 31, 2011
Allowance for loan losses:
Balance, beginning of year	$	7,442,941		$	1,747,843		$	405,830		$	262,223		$	56,722		$	9,915,559
Provision for loan losses		211,790			445,255			(49,913	)		(52,295	)		105,163			660,000
Charge-offs		(2,016,469	)		(180,426	)		(12,849	)		(36,111	)		0			(2,245,855	)
Recoveries		287			7,081			4,394			28,725			0			40,487

Ending balance	$	5,638,549		$	2,019,753		$	347,462		$	202,542		$	161,885		$	8,370,191


Ending balance, individually evaluated for impairment	$	1,123,722		$	1,277,339		$	562		$	0			n/a		$	2,401,623


Ending balance, collectively evaluated for impairment	$	4,514,827		$	742,414		$	346,900		$	202,542		$	161,885		$	5,968,568


Loans, gross:
Ending balance	$	145,534,917		$	47,971,601		$	31,380,986		$	10,816,136			n/a		$	235,703,640


Ending balance, individually evaluated for impairment	$	28,221,913		$	6,362,967		$	18,741		$	26,610			n/a		$	34,630,231


Ending balance, collectively evaluated for impairment	$	117,313,004		$	41,608,634		$	31,362,245		$	10,789,526			n/a		$	201,073,409

Changes in the allowance for loan losses for the three months ended March 31, 2012 and 2011 within the commercial real estate loan segment are summarized below:


	Construction & Development			Owner- Occupied			Non Owner- Occupied			Total Commercial Real Estate
*As of and for the Three Months Ended March 31, 2012*
Allowance for loan losses:
Balance, beginning of year	$	4,226,536		$	368,114		$	180,799		$	4,775,449
Provision for loan losses		240,819			(20,564	)		129,810			350,065
Charge-offs		(490,804	)		0			(104,561	)		(595,365	)
Recoveries		1,118			1,300			0			2,418

Ending balance	$	3,977,669		$	348,850		$	206,048		$	4,532,567


Ending balance, individually evaluated for impairment	$	1,522,675		$	242,856		$	116,259		$	1,881,790


Ending balance, collectively evaluated for impairment	$	2,454,994		$	105,994		$	89,789		$	2,650,777


Loans, gross:
Ending balance	$	54,585,016		$	35,429,350		$	28,449,221		$	118,463,587


Ending balance, individually evaluated for impairment	$	22,901,908		$	1,838,573		$	3,356,264		$	28,096,745


Ending balance, collectively evaluated for impairment	$	31,683,108		$	33,590,777		$	25,092,957		$	90,366,842


As of and for the Three Months Ended March 31, 2011
Allowance for loan losses:
Balance, beginning of year	$	7,133,461		$	124,729		$	184,751		$	7,442,941
Provision for loan losses		(4,043	)		51,372			164,461			211,790
Charge-offs		(1,852,280	)		0			(164,189	)		(2,016,469	)
Recoveries		287			0			0			287

Ending balance	$	5,277,425		$	176,101		$	185,023		$	5,638,549


Ending balance, individually evaluated for impairment	$	966,023		$	55,106		$	102,593		$	1,123,722


Ending balance, collectively evaluated for impairment	$	4,311,402		$	120,995		$	82,430		$	4,514,827


Loans, gross:
Ending balance	$	80,361,545		$	36,197,929		$	28,975,443		$	145,534,917


Ending balance, individually evaluated for impairment	$	23,538,459		$	1,263,690		$	3,419,764		$	28,221,913


Ending balance, collectively evaluated for impairment	$	56,823,086		$	34,934,239		$	25,555,679		$	117,313,004

- Definition

The entire disclosure for claims held for amounts due a company. Examples include trade accounts receivables, notes receivables, loans receivables.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 310

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=6965416&loc=d3e5066-111524

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 03

-Paragraph 7

-Article 9

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Statement of Position (SOP)

-Number 01-6

-Paragraph 13

-Subparagraph d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 310

-SubTopic 10

-Section 50

-Paragraph 11

-URI http://asc.fasb.org/extlink&oid=6965416&loc=d3e5162-111524

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 02

-Paragraph 3, 4

-Article 5

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 235

-SubTopic 10

-Section S99

-Paragraph 1

-Subparagraph (SX 210.4-08.(k))

-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 210

-SubTopic 10

-Section S99

-Paragraph 1

-Subparagraph (SX 210.5-02.3,4)

-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Article 4

-Section 08

-Paragraph k

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 310

-SubTopic 10

-Section 50

-Paragraph 4

-URI http://asc.fasb.org/extlink&oid=6965416&loc=d3e5074-111524

+ Details

SOUTHEASTERN BANKING CORP 10-Q