Annual report pursuant to Section 13 and 15(d)

LOANS

v2.4.0.6
LOANS
12 Months Ended
Dec. 31, 2011
Loans [Abstract]  
LOANS
NOTE 3 – LOANS

Year-end portfolio loans were as follows (dollars in thousands):

   
2011
   
2010
 
             
Commercial and industrial
  $ 227,051     $ 264,679  
                 
Commercial real estate:
               
Residential developed
    33,829       46,835  
Unsecured to residential developers
    5,937       7,631  
Vacant and unimproved
    66,046       71,528  
Commercial development
    4,586       8,952  
Residential improved
    82,337       96,784  
Commercial improved
    304,070       355,899  
Manufacturing and industrial
    71,462       81,560  
Total commercial real estate
    568,267       669,189  
                 
Consumer
               
Residential mortgage
    156,891       135,227  
Unsecured
    1,952       2,867  
Home equity
    101,074       125,866  
Other secured
    15,740       19,368  
Total consumer
    275,657       283,328  
                 
Total loans
    1,070,975       1,217,196  
Allowance for loan losses
    (31,641 )     (47,426 )
                 
    $ 1,039,334     $ 1,169,770  

 
The following tables present the activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2011 and 2010 (dollars in thousands):

 
December 31, 2011
 
Commercial and
Industrial
   
Commercial
Real Estate
   
Consumer
   
Unallocated
   
Total
 
Beginning balance
  $ 7,012     $ 34,973     $ 5,415     $ 26     $ 47,426  
Loans charged-off
    (2,935 )     (10,981 )     (2,535 )     ---       (16,451 )
Recoveries
    1,727       3,343       296       ---       5,366  
Provision for loan losses
    509       (6,860 )     1,645       6       (4,700 )
Total ending balance
  $ 6,313     $ 20,475     $ 4,821     $ 32     $ 31,641  

 
December 31, 2010
 
Commercial and
Industrial
   
Commercial
Real Estate
   
Consumer
   
Unallocated
   
Total
 
Beginning balance
  $ 6,086     $ 45,759     $ 2,767     $ 11     $ 54,623  
Loans charged-off
    (6,822 )     (21,845 )     (3,170 )     ---       (31,837 )
Recoveries
    732       1,238       210       ---       2,180  
Provision for loan losses
    7,016       9,821       5,608       15       22,460  
Total ending balance
  $ 7,012     $ 34,973     $ 5,415     $ 26     $ 47,426  


The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2011 and 2010 (dollars in thousands):

December 31, 2011
 
Commercial and
Industrial
   
Commercial
Real Estate
   
Consumer
   
Unallocated
   
Total
 
Allowance for loan losses:
                             
Ending allowance attributable to loans:
                             
Individually reviewed for impairment
  $ 3,478     $ 4,367     $ 1,752     $ ---     $ 9,597  
Collectively evaluated for impairment
    2,835       16,108       3,069       32       22,044  
Total ending allowance balance
  $ 6,313     $ 20,475     $ 4,821     $ 32     $ 31,641  
                                         
Loans:
                                       
Individually reviewed for impairment
  $ 17,331     $ 52,195     $ 15,085     $ ---     $ 84,611  
Collectively evaluated for impairment
    209,720       516,072       260,572       ---       986,364  
Total ending loans balance
  $ 227,051     $ 568,267     $ 275,657     $ ---     $ 1,070,975  


December 31, 2010
 
Commercial and
Industrial
   
Commercial
Real Estate
   
Consumer
   
Unallocated
   
Total
 
Allowance for loan losses:
                             
Ending allowance attributable to loans:
                             
Individually reviewed for impairment
  $ 1,576     $ 5,334     $ 458     $ ---     $ 7,368  
Collectively evaluated for impairment
    5,436       29,639       4,957       26       40,058  
Total ending allowance balance
  $ 7,012     $ 34,973     $ 5,415     $ 26     $ 47,426  
                                         
Loans:
                                       
Individually reviewed for impairment
  $ 7,757     $ 70,677     $ 13,752     $ ---     $ 92,186  
Collectively evaluated for impairment
    256,922       598,512       269,576       ---       1,125,010  
Total ending loans balance
  $ 264,679     $ 669,189     $ 283,328     $ ---     $ 1,217,196  

 
Total impaired loans of $84.6 million at December 31, 2011 included the additional $26.6 million in TDRs identified upon adoption of the new accounting standard ASU 2011-02.  Since adoption of the new standard was appropriately applied only to restructurings occurring on or after January 1, 2011, the December 31, 2010 impaired loan totals do not include TDRs identified under the new standard.

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2011 (dollars in thousands):

   
Unpaid
Principal
Balance
   
Recorded
Investment
   
Allowance
Allocated
 
With no related allowance recorded:
                 
Commercial and industrial
  $ 3,485     $ 3,485     $ ---  
                         
Commercial real estate:
                       
Residential developed
    6,432       2,021       ---  
Unsecured to residential developers
    ---       ---       ---  
Vacant and unimproved
    5,226       4,265       ---  
Commercial development
    ---       ---       ---  
Residential improved
    1,943       1,858       ---  
Commercial improved
    5,428       5,162       ---  
Manufacturing and industrial
    3,997       3,997       ---  
      23,026       17,303          
Consumer:
                       
Residential mortgage
    ---       ---       ---  
Unsecured
    ---       ---       ---  
Home equity
    200       200       ---  
Other secured
    ---       ---       ---  
      200       200       ---  
    $ 26,711     $ 20,988     $ ---  

   
Unpaid
Principal
Balance
   
Recorded
Investment
   
Allowance
Allocated
 
With an allowance recorded:
                 
Commercial and industrial
    17,052       13,846       3,478  
                         
Commercial real estate:
                       
Residential developed
    4,941       4,941       1,960  
Unsecured to residential developers
    ---       ---       ---  
Vacant and unimproved
    3,378       2,462       154  
Commercial development
    220       220       17  
Residential improved
    12,312       11,809       1,176  
Commercial improved
    10,590       10,555       844  
Manufacturing and industrial
    4,905       4,905       216  
      36,346       34,892       4,367  
Consumer:
                       
Residential mortgage
    14,235       14,114       1,713  
Unsecured
    ---       ---       ---  
Home equity
    771       771       39  
Other secured
    ---       ---       ---  
      15,006       14,885       1,752  
    $ 68,404     $ 63,623     $ 9,597  
                         
Total
  $ 95,115     $ 84,611     $ 9,597  
 
 
The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2010 (dollars in thousands):

   
Unpaid
Principal
Balance
   
Recorded
Investment
   
Allowance
Allocated
 
With no related allowance recorded:
                 
Commercial and industrial
  $ 5,394     $ 4,286     $ ---  
                         
Commercial real estate:
                       
Residential developed
    28,289       8,205       ---  
Unsecured to residential developers
    315       315       ---  
Vacant and unimproved
    6,219       5,693       ---  
Commercial development
    3,176       1,055       ---  
Residential improved
    4,396       4,378       ---  
Commercial improved
    24,566       22,749       ---  
Manufacturing and industrial
    2,239       1,838       ---  
      69,200       44,233          
Consumer:
                       
Residential mortgage
    ---       ---       ---  
Unsecured
    ---       ---       ---  
Home equity
    ---       ---       ---  
Other secured
    ---       ---       ---  
      ---       ---       ---  
    $ 74,594     $ 48,519     $ ---  
                         
With an allowance recorded:
                       
Commercial and industrial
  $ 3,517     $ 3,470     $ 1,576  
Commercial real estate:
                       
Residential developed
    6,373       6,373       2,402  
Unsecured to residential developers
    2,364       609       84  
Vacant and unimproved
    266       266       44  
Commercial development
    199       199       15  
Residential improved
    4,806       4,662       1,381  
Commercial improved
    6,710       6,172       1,096  
Manufacturing and industrial
    8,163       8,164       312  
      28,881       26,445       5,334  
Consumer:
                       
Residential mortgage
    13,752       13,752       458  
Unsecured
    ---       ---       ---  
Home equity
    ---       ---       ---  
Other secured
    ---       ---       ---  
      13,752       13,752       458  
    $ 46,150     $ 43,667     $ 7,368  
                         
Total
  $ 120,744     $ 92,186     $ 7,368  


The following table presents information regarding average balances of impaired loans and interest recognized on impaired loans for the years ended December 31, 2011 and 2010 (dollars in thousands):
 
   
2011
   
2010
 
Average of impaired loans during the period:
           
Commercial and industrial
  $ 7,622     $ 9,462  
                 
Commercial real estate:
               
Residential developed
    12,509       23,847  
Unsecured to residential developers
    559       1,797  
Vacant and unimproved
    5,710       4,735  
Commercial development
    407       2,222  
Residential improved
    9,721       13,254  
Commercial improved
    18,195       29,385  
Manufacturing and industrial
    7,335       7,244  
                 
Consumer
    12,433       10,263  
                 
Interest income recognized during impairment:
               
Commercial and industrial
  $ 464     $ 291  
Commercial real estate
    2,039       913  
Consumer
    413       427  
                 
Cash-basis interest income recognized:
               
Commercial and industrial
  $ 536     $ 636  
Commercial real estate
    1,997       1,333  
Consumer
    406       463  
 
 
The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of December 31, 2011 and 2010:

   
December 31, 2011
   
December 31, 2010
 
   
Nonaccrual
   
Over 90 days
Accruing
   
Nonaccrual
   
Over 90 days
Accruing
 
                         
Commercial and industrial
  $ 9,270     $ 290     $ 11,583     $ ---  
                                 
Commercial real estate:
                               
Residential developed
    3,577       126       10,848       ---  
Unsecured to residential developers
    ---       ---       925       390  
Vacant and unimproved
    3,715       ---       7,517       ---  
Commercial development
    49       ---       1,652       ---  
Residential improved
    5,144       286       9,858       ---  
Commercial improved
    2,654       1,255       27,816       ---  
Manufacturing and industrial
    134       ---       1,570       197  
      15,273       1,667       60,186       587  
Consumer:
                               
Residential mortgage
    1,777       111       1,830       ---  
Unsecured
    22       ---       25       ---  
Home equity
    534       ---       1,127       13  
Other secured
    ---       2       10       ---  
      2,333       113       2,992       13  
                                 
Total
  $ 26,876     $ 2,070     $ 74,761     $ 600  

Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of December 31, 2011 by class of loans (dollars in thousands):

   
30-90
Days
   
Greater Than
90 Days
   
Total
Past Due
   
Loans Not
Past Due
   
Total
 
                               
Commercial and industrial
  $ 218     $ 1,230     $ 1,448     $ 225,603     $ 227,051  
                                         
Commercial real estate:
                                       
Residential developed
    472       613       1,085       32,744       33,829  
Unsecured to residential developers
    ---       ---       ---       5,937       5,937  
Vacant and unimproved
    442       388       830       65,216       66,046  
Commercial development
    ---       49       49       4,537       4,586  
Residential improved
    549       1,343       1,892       80,445       82,337  
Commercial improved
    1,355       3,266       4,621       299,449       304,070  
Manufacturing and industrial
    ---       134       134       71,328       71,462  
      2,818       5,793       8,611       559,656       568,267  
Consumer:
                                       
Residential mortgage
    313       1,517       1,830       155,061       156,891  
Unsecured
    35       ---       35       1,917       1,952  
Home equity
    663       498       1,161       99,913       101,074  
Other secured
    51       2       53       15,687       15,740  
      1,062       2,017       3,079       272,578       275,657  
Total
  $ 4,098     $ 9,040     $ 13,138     $ 1,057,837     $ 1,070,975  

 
The following table presents the aging of the recorded investment in past due loans as of December 31, 2010 by class of loans (dollars in thousands):

   
30-90
Days
   
Greater Than
90 Days
   
Total
Past Due
   
Loans Not
Past Due
   
Total
 
                               
Commercial and industrial
  $ 825     $ 5,389     $ 6,214     $ 258,465     $ 264,679  
                                         
Commercial real estate:
                                       
Residential developed
    438       4,568       5,006       41,829       46,835  
Unsecured to residential developers
    ---       999       999       6,632       7,631  
Vacant and unimproved
    670       4,367       5,037       66,491       71,528  
Commercial development
    ---       1,144       1,144       7,808       8,952  
Residential improved
    1,929       6,353       8,282       88,502       96,784  
Commercial improved
    901       21,440       22,341       333,558       355,899  
Manufacturing and industrial
    1,084       613       1,697       79,863       81,560  
      5,022       39,484       44,506       624,683       669,189  
Consumer:
                                       
Residential mortgage
    1,293       1,489       2,782       132,445       135,227  
Unsecured
    45       ---       45       2,822       2,867  
Home equity
    1,207       927       2,134       123,732       125,866  
Other secured
    57       10       67       19,301       19,368  
      2,602       2,426       5,028       278,300       283,328  
Total
  $ 8,449     $ 47,299     $ 55,748     $ 1,161,448     $ 1,217,196  

The Company had allocated $2,118,000 and $1,361,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings (“TDRs”) as of December 31, 2011 and 2010, respectively.  These loans involved the restructuring of terms to allow customers to mitigate the risk of foreclosure by meeting a lower loan payment requirement based upon their current cash flow.  These may also include loans that renewed at existing contractual rates, but below market rates for comparable credit.  The Company has been active at utilizing these programs and working with its customers to reduce the risk of foreclosure.  For commercial loans, these modifications typically include an interest only period and, in some cases, a lowering of the interest rate on the loan.  In some cases, the modification will include separating the note into two notes with the first note structured to be supported by current cash flows and collateral, and the second note made for the remaining unsecured debt.  The second note is charged off immediately and collected only after the first note is paid in full.  This modification type is commonly referred to as an A-B note structure.  For consumer mortgage loans, the restructuring typically includes a lowering of the interest rate to provide payment and cash flow relief.  For each restructuring, a comprehensive credit underwriting analysis of the borrower's financial condition and prospects of repayment under the revised terms is performed to assess whether the structure can be successful and that cash flows will be sufficient to support the restructured debt.  An analysis is also performed to determine whether the restructured loan should be on accrual status.  Generally if the loan is on accrual at the time of restructure, it will remain on accrual after the restructuring.  In some cases, a nonaccrual loan may be placed on accrual at restructuring if the loan's actual payment history demonstrates it would have cash flowed under the restructured terms.  After six consecutive payments under the restructured terms, a nonaccrual restructured loan is reviewed for possible upgrade to accruing status.

Typically, once a loan is identified as a TDR, it will retain that designation until it is paid off, since the restructured loans generally are not at market rates at the time of restructuring.  An exception to this would be a loan that is modified under an A-B note structure.  If the remaining “A” note is at a market rate at the time of restructuring (taking into account the borrower's credit risk and prevailing market conditions), the loan can be removed from TDR designation in a subsequent calendar year after six months of performance in accordance with the new terms.  The market rate relative to the borrower's credit risk is determined through analysis of market pricing information gathered from peers and use of a loan pricing model.  The general objective of the model is to achieve a consistent return on equity from one credit to the next, taking into consideration their differences in credit risk.  In the model, credits with higher risk receive a higher potential loss allocation, and therefore require a higher interest rate to achieve the target return on equity.  In general, when a loan is removed from TDR status it would no longer be considered impaired.  As a result, allowance allocations for loans removed from TDR status would be based on the historical based allocation for the applicable loan grade and loan class.  During 2011, no loans were removed from TDR status.  Given the nature of the TDRs outstanding at December 31, 2011, it is unlikely that any such loans will be removed from TDR status in 2012.
 
As with other impaired loans, an allowance for loan loss is estimated for each TDR based on the most likely source of repayment for each loan.  For impaired commercial real estate loans that are collateral dependent, the allowance is computed based on the fair value of the underlying collateral.  For impaired commercial loans where repayment is expected from cash flows from business operations, the allowance is computed based on a discounted cash flow computation.  Certain groups of TDRs, such as residential mortgages, have common characteristics and for them the allowance is computed based on a discounted cash flow computation on the change in weighted rate for the pool.  The allowance allocations for commercial TDRs where we have reduced the contractual interest rate are computed by measuring cash flows using the new payment terms discounted at the original contractual rate.

Total TDRs of $77.2 million at December 31, 2011 included the additional $26.6 million in TDRs identified upon adoption of the new accounting standard ASU 2011-02, A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring.  Since adoption of the new standard was appropriately applied only to restructurings occurring on or after January 1, 2011, the December 31, 2010 TDR total does not include TDRs identified under the new standard.

The following table presents information regarding troubled debt restructurings as of December 31, 2011 and December 31, 2010 (dollars in thousands):
 
   
December 31, 2011
   
December 31, 2010
 
   
Number of
Loans
   
Outstanding
Recorded Balance
   
Number of
Loans
   
Outstanding
Recorded Balance
 
Commercial and industrial
    98     $ 15,395       20     $ 2,616  
Commercial real estate
    120       46,414       50       26,447  
Consumer
    90       15,373       80       13,765  
      308     $ 77,182       150     $ 42,828  
 
The following table presents information regarding troubled debt restructurings executed during the twelve months ended December 31, 2011 (dollars in thousands):

   
Number of
Loans
   
Pre-Modification
Outstanding
Recorded Balance
   
Principal
Writedown upon Modification
 
Commercial and industrial
    95     $ 9,726     $ 570  
Commercial real estate
    106       44,122       961  
Consumer
    16       2,509       ---  
      217     $ 56,357     $ 1,531  


According to the accounting standards, not all loan modifications are TDRs.  TDRs are modifications or renewals where the Company has granted a concession to a borrower in financial distress.  The Company reviews all modifications and renewals for determination of TDR status.  In some situations a borrower may be experiencing financial distress, but the Company does not provide a concession.  These modifications are not considered TDRs.  In other cases, the Company might provide a concession, such as a reduction in interest rate, but the borrower is not experiencing financial distress.  This could be the case if the Company is matching a competitor's interest rate.  These modifications would also not be considered TDRs.  Finally, any renewals at existing terms for borrowers not experiencing financial distress would not be considered TDRs.  The following table presents information regarding modifications and renewals executed during the twelve months ended December 31, 2011 that are not considered TDRs (dollars in thousands):

 
 
Number of
Loans
 
Outstanding
Recorded Balance
 
Commercial and industrial
584
 
$
88,196
 
Commercial real estate
436
   
129,002
 
Consumer
112
   
4,626
 
 
1,132
 
$
221,824
 

 
The table below presents by class, information regarding troubled debt restructured loans which had payment defaults during the twelve month period ended December 31, 2011 (dollars in thousands).  Included are loans that became delinquent more than 90 days past due or transferred to nonaccrual within 12 months of restructuring.

   
Number of
Loans
   
Outstanding
Recorded Balance
 
Commercial and industrial
    5     $ 871  
Commercial real estate
    11       2,806  
Consumer
    2       402  
      18     $ 4,079  
 
Credit Quality Indicators: The Company categorizes loans into risk categories based on relevant information about the ability of the 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 commercial loans individually and classifies these relationships by credit risk grading.  The Company uses an eight point grading system, with grades 5 through 8 being considered classified, or watch, credits.  All commercial loans are assigned a grade at origination, at each renewal or any amendment.  When a credit is first downgraded to a watch credit (either through renewal, amendment, lender identification or the loan review process), an Administrative Loan Review (“ALR”) is generated by credit and the lender.  All watch credits have an ALR completed monthly which analyzes the collateral position and cash flow of the borrower and its guarantors.  The lender is required to complete both a short term and long term plan to rehabilitate or exit the credit and to give monthly comments on the progress to these plans.  Management meets quarterly with lenders to discuss each of these credits in detail and to help formulate solutions where progress has stalled.  When necessary, the loan officer proposes changes to the assigned loan grade as part of the ALR.  Additionally, Loan Review reviews all loan grades upon origination, renewal or amendment and again as loans are selected though the loan review process.  The credit will stay on the ALR until either its grade has improved to a 4 or the credit relationship is at a zero balance.  The Company uses the following definitions for the risk grades:

1. Excellent - Borrowings supported by extremely strong financial condition or secured by the Bank's own deposits. Minimal risk to the Bank and the probability of serious rapid financial deterioration is extremely small.

2. Above Average - Borrowings supported by sound financial statements that indicate the ability to repay or borrowings secured (and margined properly) with marketable securities. Nominal risk to the Bank and probability of serious financial deterioration is highly unlikely. The overall quality of these credits is very high.

3. Good Quality - Average borrowings supported by satisfactory asset quality and liquidity, good debt capacity coverage, and good management in all critical positions. Loans are secured by acceptable collateral with adequate margins. There is a slight risk of deterioration if adverse market conditions prevail.

4. Acceptable Risk - This is an acceptable risk to the Bank, which may be slightly below average quality. The borrower has limited financial strength with considerable leverage. There is some probability of deterioration if adverse market conditions prevail. These credits should be monitored closely by the Relationship Manager.

5. Marginally Acceptable - Loans are of marginal quality with above normal risk to the Bank. The borrower shows acceptable asset quality but very little liquidity with high leverage. There is inconsistent earning performance without the ability to sustain adverse market conditions. The primary source of repayment is questionable, but the secondary source of repayment still remains an option. Very close attention by the Relationship Manager and management is needed.
 
6. Substandard - Loans are inadequately protected by the net worth and paying capacity of the borrower or the collateral pledged. The primary and secondary sources of repayment are questionable. Heavy debt condition may be
evident and volume and earnings deterioration may be underway. It is possible that the Bank will sustain some loss if the deficiencies are not immediately addressed and corrected.

7. Doubtful - Borrowings supported by weak or no financial statements, as well as the ability to repay the entire loan, are questionable. Loans in this category are normally characterized less than adequate collateral, insolvent, or extremely weak financial condition. A loan classified doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses makes collection or liquidation in full highly questionable. The possibility of loss is extremely high, however, activity may be underway to minimize the loss or maximize the recovery.

8. Loss - Loan are considered uncollectible and of little or no value as a bank asset.


As of December 31, 2011, the risk grade category of loans by class of loans is as follows (dollars in thousands):

      1       2       3       4       5       6       7       8  
                                                                 
Commercial and industrial
  $ 595     $ 8,447     $ 56,457     $ 117,015     $ 27,674     $ 7,593     $ 9,270     $ ---  
                                                                 
Commercial real estate:
                                                               
Residential developed
    ---       ---       283       9,688       11,410       8,725       3,723       ---  
Unsecured to residential developers
    ---       ---       4,773       647       177       340       ---       ---  
Vacant and unimproved
    ---               14,707       24,344       21,362       1,918       3,715       ---  
Commercial development
    ---       ---       60       2,261       1,109       1,107       49       ---  
Residential improved
    ---       121       2,650       45,813       18,642       9,968       5,143       ---  
Commercial improved
    ---       5       62,510       173,697       43,493       21,712       2,653       ---  
Manufacturing and industrial
    ---       2,242       12,209       38,533       11,344       7,000       134       ---  
                                                                 
    $ 595     $ 10,815     $ 153,649     $ 411,998     $ 135,211     $ 58,363     $ 24,687     $ ---  
 

As of December 31, 2010, the risk grade category of loans by class of loans is as follows (dollars in thousands):

      1       2       3       4       5       6       7       8  
                                                                 
Commercial and industrial
  $ 442     $ 1,583     $ 51,558     $ 148,880     $ 41,467     $ 9,165     $ 11,584     $ ---  
                                                                 
Commercial real estate:
                                                               
Residential developed
    ---       ---       240       6,682       14,705       14,360       10,848       ---  
Unsecured to residential developers
    ---       ---       4,784       907       500       515       925       ---  
Vacant and unimproved
    ---       794       5,450       38,808       14,978       3,982       7,516       ---  
Commercial development
    ---       ---       ---       4,240       2,765       295       1,652       ---  
Residential improved
    ---       ---       3,321       49,905       18,715       14,985       9,858       ---  
Commercial improved
    ---       ---       71,622       191,772       41,490       23,199       27,816       ---  
Manufacturing and industrial
    ---       246       14,299       37,487       22,261       5,697       1,570       ---  
                                                                 
    $ 442     $ 2,623     $ 151,274     $ 478,681     $ 156,881     $ 72,198     $ 71,769     $ ---  

 
Loans rated a 6 or worse per the Company's internal risk rating system are considered substandard, doubtful or loss.  Loans classified as substandard or worse were as follows at year-end (dollars in thousands):

   
2011
   
2010
 
             
Not classified as impaired
  $ 29,687     $ 65,533  
Classified as impaired
    53,363       78,434  
Total loans classified substandard or worse
  $ 83,050     $ 143,967  

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses.  For consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.  The following tables present the recorded investment in consumer loans based on payment activity as of December 31, 2011 and 2010 (dollars in thousands):

 
December 31, 2011
 
Residential
Mortgage
   
Consumer
Unsecured
   
Home
Equity
   
Consumer
Other
 
Performing
  $ 155,374     $ 1,952     $ 100,576     $ 15,738  
Nonperforming
    1,517       ---       498       2  
Total
  $ 156,891     $ 1,952     $ 101,074     $ 15,740  

 
December 31, 2010
 
Residential
Mortgage
   
Consumer
Unsecured
   
Home
Equity
   
Consumer
Other
 
Performing
  $ 133,738     $ 2,867     $ 124,939     $ 19,358  
Nonperforming
    1,489       ---       927       10  
Total
  $ 135,227     $ 2,867     $ 125,866     $ 19,368