XOTC:PCBS Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 10-Q
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended March 31, 2012
   
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ______ to ______

COMMISSION FILE NUMBER 1-5735

PROVIDENT COMMUNITY BANCSHARES, INC.
(Exact name of registrant as specified in its Charter)
 
Delaware   57-1001177
(State or other Jurisdiction of   (I.R.S. Employer
Incorporation or Organization)   Identification No.)
 
2700 Celanese Road, Rock Hill, South Carolina 29732
(Address of Principal Executive Offices)
 
(803) 325-9400
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer o Accelerated filer o

Non-accelerated filer o Smaller Reporting Company x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) 
Yes o    No x

The Corporation had 1,790,599 shares, $0.01 par value, of common stock issued and outstanding as of May 1, 2012.
 
 
 

 
 
PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
 
INDEX
 
Part I.
Financial Information
Page
     
 
Item 1. Financial Statements
 
     
   
 
     
   
 
     
   
 
     
   
 
     
   
 
     
 
     
   
 
     
   
 
     
 
     
Part II.
Other Information
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
 
 

 
 
Part 1.    Financial Information
PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2012 and December 31, 2011
 
   
March 31,
 
December 31,
ASSETS
 
2012
 
2011
   
(Unaudited)
 
(Audited)
   
(DOLLARS IN THOUSANDS)
Cash and due from banks
  $ 5,598     $ 4,900  
Interest earning balances with the Federal Reserve
    3,301       4,241  
Federal funds sold
    23,635       14,752  
Cash and cash equivalents
    32,534       23,893  
                 
Investment and mortgage-backed securities-available for sale
    164,519       165,878  
                 
Loans, net of unearned fees
    150,668       160,568  
   Allowance for loan losses (ALL)
    (4,824 )     (4,549 )
Loans, net of ALL
    145,844       156,019  
                 
Real estate acquired through foreclosure
    10,161       8,398  
Office properties and equipment, net
    4,708       4,787  
Federal Home Loan Bank stock, at cost
    3,363       3,363  
Federal Reserve Bank stock, at cost
    689       689  
Accrued interest receivable
    1,159       1,340  
Cash surrender value of life insurance
    7,993       7,923  
Other assets
    4,426       4,355  
TOTAL ASSETS
  $ 375,396     $ 376,645  
                 
LIABILITIES
               
                 
Demand and savings deposits
  $ 166,473     $ 158,372  
Time deposits
    120,823       124,877  
  Total deposits
    287,296       283,249  
Advances from the Federal Home Loan Bank
    54,500       59,500  
Securities sold under agreements to repurchase
    5,770       5,268  
Floating rate junior subordinated deferrable interest debentures
    12,372       12,372  
Accrued interest payable
    1,074       1,028  
Other liabilities
    2,598       2,758  
TOTAL LIABILITIES
    363,610       364,175  
                 
Commitments and contingencies-Note 5
               
                 
SHAREHOLDERS' EQUITY
               
                 
Serial preferred stock - $0.01 par value
               
  authorized - 500, 000 shares
               
   issued and outstanding - 9,266 shares
               
  at March 31, 2012 and December 31, 2011
    9,256       9,255  
Common stock - $0.01 par value,
               
  authorized - 5,000,000 shares,
               
   issued-2,192,958 and outstanding-1,790,599 shares at March 31, 2012
               
   and December 31, 2011, respectively
    20       20  
Common stock warrant
    25       25  
Additional paid-in capital
    12,919       12,919  
Accumulated other comprehensive loss
    (987 )     (387 )
Retained deficit, substantially restricted
    (3,147 )     (3,062 )
Treasury stock, at cost
    (6,300 )     (6,300 )
TOTAL SHAREHOLDERS' EQUITY
    11,786       12,470  
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  $ 375,396     $ 376,645  
                 
See notes to consolidated financial statements.
 
 
1

 
 
PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Three Months Ended March 31, 2012 and 2011 (unaudited)
 
   
Three Months Ended
   
March 31,
 
March 31,
   
2012
 
2011
   
(DOLLARS IN THOUSANDS EXCEPT PER SHARE)
             
Interest Income:
           
  Loans
  $ 1,976     $ 2,444  
  Deposits and federal funds sold
    3       10  
  Interest and dividends on mortgage-backed securities
    429       632  
  Interest and dividends on investment securities
    598       516  
Total interest income
    3,006       3,602  
                 
Interest Expense:
               
  Deposit accounts
    378       880  
  Floating rate junior subordinated deferrable interest debentures
    71       118  
  Advances from the FHLB and other borrowings
    606       619  
Total interest expense
    1,055       1,617  
                 
Net Interest Income
    1,951       1,985  
  Provision for loan losses
    435       --  
Net interest income after
               
   provision for loan losses
    1,516       1,985  
                 
Non-Interest Income:
               
  Fees for financial services
    612       635  
  Other fees, net
    5       11  
  Net gain (loss) on sale of investments
    239       (4 )
Total non-interest income
    856       642  
                 
Non-Interest Expense:
               
  Compensation and employee benefits
    1,089       1,063  
  Occupancy and equipment
    606       631  
  Deposit insurance premiums
    183       178  
  Professional services
    163       136  
  Advertising and public relations
    11       11  
  OREO and loan operations
    141       164  
  Items processing
    68       76  
  Telephone
    36       41  
  Other
    159       205  
Total non-interest expense
    2,456       2,505  
                 
Net (loss) income before income taxes
    (84 )     122  
Expense for income taxes
    --       11  
Net (loss) income
    (84 )     111  
Accretion of preferred stock to redemption value and preferred dividends accrued
    118       117  
Net loss to common shareholders
  $ (202 )   $ (6 )
                 
Net loss per common share (basic)
  $ (0.11 )   $ 0.00  
                 
Net loss per common share (diluted)
  $ (0.11 )   $ 0.00  
                 
Weighted average number of common shares outstanding
               
                 
Basic
    1,790,599       1,790,599  
                 
Diluted
    1,790,599       1,790,599  
                 
See notes to consolidated financial statements.
 
 
2

 
 
PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three Months Ended March 31, 2012 and 2011 (unaudited)
 
   
Three Months Ended
   
March 31,
 
March 31,
   
2012
 
2011
   
(DOLLARS IN THOUSANDS EXCEPT PER SHARE)
             
Net (loss) income
  $ (84 )   $ 111  
                 
Other comprehensive loss, net of tax:
               
     unrealized holding losses on securities available for sale
               
     arising during period
    (452 )     (788 )
                 
  Less reclassification adjustment for gains in net income
    (148 )     (2 )
                 
Comprehensive loss
  $ (684 )   $ (679 )
 
 
3

 
 
PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2012 and 2011 (unaudited)
 
   
Three Months Ended
   
March 31,
 
March 31,
   
2012
 
2011
   
(IN THOUSANDS)
             
OPERATING ACTIVITIES:
           
             
Net (loss) income
  $ (84 )   $ 111  
Adjustments to reconcile net income (loss) to
               
  net cash provided by operating activities:
               
  Provision for loan losses
    435       --  
  Amortization of securities
    259       233  
  Depreciation expense
    90       100  
  Recognition of deferred income, net of costs
    (88 )     (29 )
  Deferral of fee income, net of costs
    88       40  
 (Gain) loss on investment transactions
    (239 )     4  
  Gain on OREO sales
    --       (15 )
  OREO impairment
    120       166  
  Changes in operating assets and liabilities:
               
   Decrease in accrued interest receivable
    181       301  
   Increase in cash surrender value of life insurance
    (70 )     (90 )
   (Increase) decrease in other assets
    252       114  
   Decrease in other liabilities
    (160 )     (338 )
   Increase in accrued interest payable
    46       82  
                 
Net cash (used) provided by operating activities
    830       679  
                 
INVESTING ACTIVITIES:
               
                 
Purchase of investment and mortgage-backed securities:
               
   Available for sale
    (59,305 )     (14,488 )
Proceeds from sale of investment and mortgage-
               
    backed securities:
               
   Available for sale
    11,994       16,268  
Proceeds from maturity of investment and mortgage-
               
    backed securities:
               
   Available for sale
    43,436       1  
Principal repayments on mortgage-backed securities:
               
   Available for sale
    4,291       3,339  
Net decrease in loans
    7,736       10,883  
Proceeds from sales of foreclosed assets, net of costs and improvements
    121       1,896  
Purchase of office properties and equipment
    (11 )     (3 )
                 
Net cash provided by investing activities
    8,262       17,896  
                 
FINANCING ACTIVITIES:
               
                 
Decrease in other borrowings
    (4,498 )     (2,721 )
Increase (decrease) in deposit accounts
    4,047       (4,799 )
                 
Net cash used by financing activities
    (451 )     (7,520 )
                 
NET INCREASE IN CASH
               
   AND CASH EQUIVALENTS
    8,641       11,055  
                 
CASH AND CASH EQUIVALENTS
               
   AT BEGINNING OF PERIOD
    23,893       24,865  
                 
CASH AND CASH EQUIVALENTS
               
   AT END OF PERIOD
  $ 32,534     $ 35,920  
                 
SUPPLEMENTAL DISCLOSURES:
               
                 
Cash paid for:
               
  Income taxes
  $ --     $ --  
  Interest
    1,009       1,535  
                 
Non-cash transactions:
               
  Loans foreclosed
  $ 2,004     $ 479  
 Unrealized loss on securities available for sale, net of income tax
    (600 )     (786 )
See notes to consolidated financial statements.
 
 
4

 
 
PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE LOSS
Three Months Ended March 31, 2012 and 2011 (Unaudited)
 
                                       
Retained
 
Accumulated
           
                                 
Additional
 
Earnings,
 
Other
       
Total
   
Preferred Stock
 
Common Stock
       
Paid-in
 
Substantially
 
Comprehensive
 
Treasury Stock
 
Shareholders'
   
Shares
 
Amount
 
Shares
 
Amount
 
Warrants
 
Capital
 
Restricted
 
Income (loss)
 
at Cost
 
Equity
    (Dollars in Thousands, Except Share Data)
BALANCE AT DECEMBER 31, 2010
    9,266     $ 9,250       1,790,599     $ 20     $ 25     $ 12,919     $ (2,867 )   $ (2,778 )   $ (6,300 )   $ 10,269  
                                                                                 
Net income
                                                    111                       111  
                                                                                 
Other comprehensive loss, net of tax of $276 on unrealized holding losses on securities available for sale arising during period
                                                            (788 )             (788 )
                                                                                 
Less reclassification adjustment for gains in net income
                                                            (2 )             (2 )
                                                                                 
Accretion of Preferred Stock to redemption value
            1                                       (1 )                     --  
                                                                                 
BALANCE AT MARCH 31, 2011
    9,266     $ 9,251       1,790,599     $ 20     $ 25     $ 12,919     $ (2,757 )   $ (3,568 )   $ (6,300 )   $ 9,590  
                                                                                 
BALANCE AT DECEMBER 31, 2011
    9,266     $ 9,255       1,790,599     $ 20     $ 25     $ 12,919     $ (3,062 )   $ (387 )   $ (6,300 )   $ 12,470  
                                                                                 
Net loss
                                                    (84 )                     (84 )
                                                                                 
Other comprehensive loss, net of tax of $158 on unrealized holding losses on securities available for sale arising during period
                                                            (452 )             (452 )
                                                                                 
Less reclassification adjustment for gains in net income
                                                            (148 )             (148 )
                                                                                 
Accretion of Preferred Stock to redemption value
            1                                       (1 )                     --  
                                                                                 
BALANCE AT MARCH 31, 2012
    9,266     $ 9,256       1,790,599     $ 20     $ 25     $ 12,919     $ (3,147 )   $ (987 )   $ (6,300 )   $ 11,786  
                                                                                 
See notes to consolidated financial statements
                                               
 
 
5

 
 
PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.  Presentation of Consolidated Financial Statements

The accompanying unaudited consolidated financial statements of Provident Community Bancshares, Inc. (the “Corporation”) and Provident Community Bank, N.A. (the “Bank”) were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of consolidated financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments which are, in the opinion of management, necessary for the fair presentation of the interim consolidated financial statements have been included. All such adjustments are of a normal and recurring nature. The results of operations for the three months ended March 31, 2012 are not necessarily indicative of the results which may be expected for the entire calendar year or for any other period. This quarterly report should be read in conjunction with the Corporation’s annual report on Form 10-K for the year ended December 31, 2011. Certain amounts in the prior year’s financial statements have been reclassified to conform to current year classifications.

Recently Issued Accounting Standards
 
The following is a summary of recent authoritative pronouncements that may affect accounting, reporting, and disclosure of financial information by the Corporation.

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 were effective for the Corporation beginning January 1, 2012 and did not 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 were effective for the Corporation beginning January 1, 2012 and are  reflected in Note 7.

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 were applied retrospectively. In December 2011, the topic was further amended to defer the effective date of presenting reclassification adjustments from other comprehensive income to net income on the face of the financial statements.

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 Corporation’s financial position, results of operations or cash flows.

 
6

 
 
2.  Loss Per Common Share
Basic loss per common share amounts for the three months ended March 31, 2012 and 2011 were computed based on the weighted average number of common shares outstanding during the period. Diluted loss per share adjusts for the dilutive effect of outstanding common stock options  and warrants during the periods utilizing the treasury stock method. There were no common stock equivalents included in the diluted loss per share calculation for the three months ended March 31, 2012 and 2011 as all outstanding options and warrants had a higher average exercise price than the average market price and were therefore anti-dilutive. Anti-dilutive common stock equivalents that were excluded in the diluted loss per common share calculation for the three months ended March 31, 2012 and 2011 were 236,130 and 265,543, respectively.

3.  Assets Pledged
 
Approximately $83.0 million and $85.1 million of debt securities at March 31, 2012 and December 31, 2011, respectively, were pledged by the Bank as collateral to secure deposits of the State of South Carolina, and Union, Laurens and York counties along with additional borrowings and repurchase agreements. The Bank pledges as collateral for Federal Home Loan Bank (the “FHLB”) advances commercial and residential real estate mortgage loans under a collateral agreement with the FHLB whereby the Bank maintains, free of other encumbrances, qualifying mortgages (as defined) with unpaid principal balances equal to, when discounted at 75% of the unpaid principal balances, 100% of total advances. As part of the total assets pledged, the Bank will also pledge securities to cover additional advances from the FHLB that exceed the qualifying mortgages balance along with security repurchase lines with various brokerage houses.
 
 
7

 
 
4.  Loans, net

Loans receivable consisted of the following (dollars in thousands):
                                                                                                                                              
    March 31,   December 31,
    2012   2011
                 
Mortgage loans:
               
Fixed-rate residential
  $ 7,610     $ 8,063  
Adjustable-rate residential
    3,876       3,967  
Commercial real estate
    91,477       97,547  
Construction
      --        308  
Total mortgage loans
     102,963        109,885  
Commercial non-real estate
     11,469        12,939  
Consumer loans:
               
Home equity
    14,217       14,590  
Consumer and installment
    21,794       22,939  
Consumer lines of credit
     289        300  
Total consumer loans
     36,300        37,829  
Total loans
    150,732       160,653  
Less:
               
Unamortized loan discount
    (222 )     (231 )
Allowance for loan losses
    (4,824 )     (4,549 )
Net deferred loan origination costs
     158        146  
Total, net
  $ 145,844     $ 156,019  
Weighted-average interest rate of loans
    5.13 %     5.08 %
 
Information about impaired loans for the periods ended March 31, 2012 and December 31, 2011 is as follows (in thousands):
 
    March 31,  
 December 31,
   
2012
 
2011
             
Loans receivable for which there is a related allowance for credit losses determined in accordance with ASC 310-10/Statement No. 114
  $   1,639     $   1,923  
Other impaired loans                                                                  
    28,437       25,550  
        Total impaired loans                                                                  
  $ 30,076     $ 27,473  
Average monthly balance of impaired loans
  $ 33,669     $ 29,916  
Specific allowance for credit losses                                                                   
  $ 453     $ 439  
 
 
8

 
 
Impaired Loans
For the Periods Ended March 31, 2012 and December 31, 2011
(in thousands)
 
   
Unpaid
              Average
   
Principal
  Recorded   Related   Recorded
March 31, 2012
 
Balance
 
Investment
  Allowance   Investment
                         
With no related allowance recorded:
                       
                         
Commercial
                       
Commercial Real Estate
  $ 21,255     $ 18,010     $ --     $ 19,633  
Commercial Non Real Estate
    3,111       2,782       --       2,946  
                                 
Consumer
                               
Consumer – other
    5,653       4,908       --       5,281  
Consumer – home equity
    510       487       --       498  
                                 
Residential Real Estate
                               
1-4 family
    2,335       2,250       --       2,293  
 
                               
With an allowance recorded:
                               
                                 
Commercial
                               
Commercial Real Estate
  $ 1,564     $ 1,402     $ 380     $ 1,483  
                                 
Consumer
                               
Consumer – other
    237       237       73       237  
 
                               
Residential Real Estate
                               
1-4 family
    --       --       --       --  
                                 
Total:
  $ 34,665     $ 30,076     $ 453     $ 32,371  
Commercial
    25,930       22,194       380       24,062  
    Consumer
    6,400       5,632        73       6,016  
    Residential
    2,335        2,250       --       2,293  
 
 
9

 
 
December 31, 2011
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Related
Allowance
 
Average
Recorded
Investment
                         
With no related allowance recorded:
                       
                         
Commercial
                       
Commercial Real Estate
  $ 22,454     $ 16,949     $ --     $ 19,702  
Commercial Non Real Estate
    2,376       2,075       --       2,225  
 
                               
Consumer
                               
Consumer - other
    5,135       4,203       --       4,669  
Consumer - home equity
    511       491       --       501  
                                 
Residential Real Estate
                               
1-4 Family
    1,891       1,832       --       1,862  
                                 
With a related allowance recorded:
                               
                                 
Commercial
                               
Commercial Real Estate
  $ 1,564     $ 1,403     $ 306     $ 1,483  
Commercial Non Real Estate
    282       281       60       282  
 
                               
Consumer
                               
Consumer - other
    239       239       73       239  
                                 
Total:
  $ 34,452     $ 27,473     $ 439     $ 30,963  
  Commercial
    26,676       20,708       366       23,692  
  Consumer
    5,885       4,933       73       5,409  
  Residential
    1,891       1,832       --       1,862  
 
At March 31, 2012 and December 31, 2011, loans which are accounted for on a non-accrual basis:
 
Loans Receivable on Non-accrual Status
As of March 31, 2012 and December 31, 2011
(in thousands)
 
   
March 31,
 
December 31,
    2012  
2011
 
           
Commercial
           
Commercial real estate
  $ 10,297     $ 11,338  
Commercial non real estate     1,552       1,340  
                 
Consumer
               
Consumer – other
    2,245       2,536  
Consumer – automobile
    55       65  
Consumer – home equity
    346       307  
         
               
Residential Real Estate
               
1-4 family
    1,431       1,220  
Total
  $ 15,928     $ 16,806  
 
 
10

 
 
Allowance for Loan Losses and Recorded Investment in Loans Receivable
(in thousands)

The following tables present the activity in the allowance for loan losses by portfolio segment as of March 31, 2012 and March 31, 2011.
 
        Commercial            
    Commercial   Real Estate  
Consumer
 
Residential
 
Total
                               
March 31, 2012
                             
                               
Allowance for loan losses:
                             
                               
Beginning balance
  $ 1,887     $ 1,920     $ 484     $ 258     $ 4,549  
Charge-offs
    (3 )     (88 )     (98 )     --       (189 )
Recoveries
    1       26       2       --       29  
Provisions
    185       188       54       8       435  
Ending balance
  $ 2,070     $ 2,046     $ 442     $ 266     $ 4,824  
                                         
March 31, 2011
                                       
                                         
Allowance for loan losses:
                                       
                                         
Beginning balance
  $ 2,166     $ 4,602     $ 335     $ 276     $ 7,379  
Charge-offs
    (167 )     (279 )     (133 )     --       (579 )
Recoveries
    31       53       4       61       149  
Provisions
    --       --       --       --       --  
Ending balance
  $ 2,030     $ 4,376     $ 206     $ 337     $ 6,949  
 
The following tables present the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2012 and December 31, 2011.
 
         
Commercial
                 
   
Commercial
 
Real Estate
 
Consumer
 
Residential
 
Total
                               
Allowance for loan losses:
                             
                               
March 31, 2012
                             
                               
Ending balances attributable to loans:
                             
  Individually evaluated for impairment
  $ --     $ 380     $ 73     $ --     $ 453  
                                         
Collectively evaluated for impairment
    2,070       1,666       369       266       4,371  
                                         
Ending balance                               
  $ 2,070     $ 2,046     $ 442     $ 266     $ 4,824  
                                         
Loans receivable:                                        
                                         
Ending balance - total                                           
  $ 11,469     $ 91,477     $ 36,300     $ 11,486     $ 150,732  
                                         
Ending balances:                                        
Individually evaluated for impairment                             
  $ 2,782     $ 19,412     $ 5,632     $ 2,250     $ 30,076  
                                         
Collectively evaluated for impairment                             
  $ 8,687     $ 72,065     $ 30,668     $ 9,236     $ 120,656  
 
 
11

 
 
         
Commercial
                 
   
Commercial
 
Real Estate
 
Consumer
 
Residential
 
Total
                               
Allowance for loan losses:
                             
                               
December 31, 2011
                             
                               
Ending balances attributable to loans:
                             
  Individually evaluated for impairment
  $ 60     $ 306     $ 73     $ --     $ 439  
                                         
Collectively evaluated for impairment                
    1,827       1,614       411       258       4,110  
                                         
Ending balance                               
  $ 1,887     $ 1,920     $ 484     $ 258     $ 4,549  
                                         
Loans receivable:                                        
Ending balance - total                                           
  $ 12,939     $ 97,547     $ 37,829     $ 12,338     $ 160,653  
                                         
Ending balances:                                        
Individually evaluated for impairment                             
  $ 2,356     $ 18,352     $ 4,933     $ 1,832     $ 27,473  
                                         
Collectively evaluated for impairment                     
  $ 10,583     $ 79,195     $ 32,896     $ 10,506     $ 133,180  
 
 
12

 
 
Credit Quality Indicators
As of March 31, 2012 and December 31, 2011
(in thousands)

Credit Quality Indicators: The Corporation regularly monitors the credit quality of its loan portfolio. Credit quality refers to the current and expected ability of borrowers to repay their obligations according to the contractual terms of such loans. Credit quality is evaluated through assignment of individual loan grades, as well as past-due and performing status analysis. Credit quality indicators allow the Corporation to assess the inherent loss on certain individual and pools of loans.

Commercial Credit Exposure (1)
Credit Risk Profile by Creditworthiness Category
 
   
Commercial Non Real
Estate
 
Commercial Real
Estate
   
March 31,
 
December 31,
 
March 31,
 
December 31,
   
2012
 
2011
 
2012
 
2011
Grade 1 Minimal Risk
  $ 58     $ 52     $ --     $ --  
Grade 2 Low Risk
    --       223       --       --  
Grade 3 Moderate Risk
    565       363       8,503       9,242  
Grade 4 Acceptable Risk
    5,550       6,458       36,295       39,168  
Grade 5 Watch
    942       1,778       19,794       21,263  
Grade 6 Special Mention
    1,572       1,933       8,195       9,890  
Grade 7 Substandard
    2,782       1,926       17,440       17,984  
Grade 8 Doubtful
    --       206       1,250       --  
Total
  $ 11,469     $ 12,939     $ 91,477     $ 97,547  
 
The Corporation uses an internal risk rating system to classify and monitor the credit quality of loans. Loan risk ratings are based on a graduated scale representing increasing likelihood of loss. Primary responsibility for the assignment of risk ratings of loans is with the individual loan officer assigned to each loan, subject of verification by the Credit Administration department. Risk ratings are also reviewed periodically by an independent third party loan review firm that reports directly to the Board of Directors.

Consumer Credit Exposure (1)
Credit Risk Profile by Internally Assigned Grade
 
   
Residential
 
Consumer
   
March 31,
 
December 31,
 
March 31,
 
December 31,
   
2012