NOTE 5 – LOANS

The following table details the Company’s loans at March 31, 2012 and December 31, 2011:

The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan loss portfolio segments and classes. These categories are utilized to develop the associated allowance for loan losses using historical losses adjusted for current economic conditions defined as follows:

Loans by credit quality indicator as of March 31, 2012 and December 31, 2011 were as follows: 

Loans by performance status as of March 31, 2012 and December 31, 2011 were as follows: 

Loans by past due status as of March 31, 2012 and December 31, 2011 were as follows:

The Company assesses the adequacy of its allowance for loan losses prior to the end of each calendar quarter. The level of the allowance is based on management’s evaluation of the loan portfolios, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. Loan losses are charged off when management believes that the full collectability of the loan is unlikely. A loan may be partially charged-off after a “confirming event” has occurred which serves to validate that full repayment pursuant to the terms of the loan is unlikely. Allocation of the allowance is made for specific loans, but the entire allowance is available for any loan that in management’s judgment deteriorates and is uncollectible. The unallocated portion of the reserve is management’s evaluation of potential future losses that would arise in the loan portfolio should management’s assumption about qualitative and environmental conditions materialize. The unallocated portion of the allowance for loan losses is based on management’s judgment regarding various external and internal factors including macroeconomic trends, management’s assessment of the Company’s loan growth prospects, and evaluations of internal risk controls.

The following table presents an analysis of the allowance for loan losses by portfolio segment as of March 31, 2012 and December 31, 2011. The total allowance for loan losses is disaggregated into those amounts associated with loans individually evaluated and those associated with loans collectively evaluated.

The following table presents details of the Company’s impaired loans as of March 31, 2012 and December 31, 2011, respectively. Loans which have been fully charged off do not appear in the table.

Troubled Debt Restructurings (“TDR”) at March 31, 2012, December 31, 2011 and March 31, 2011 totaled $8.3 million, $4.5 million and $6.7 million, respectively. At March 31, 2012, the Company had a related allowance for loan losses of $858,000 allocated to these TDRs, compared to $439,000 at December 31, 2011 and $564,000 at March 31, 2011. The Company had 3 TDR loans to one borrower in the amount of $2.8 million enter into payment default status during the first quarter of 2012. All other loans classified as TDRs as of March 31, 2012 are performing as agreed under the terms of their restructured plans. The following table presents an analysis of TDRs as of March 31, 2012 and March 31, 2011.