SEC Company Response from GLACIER BANCORP, INC. (GBCI) (CIK 0000868671) (GBCI) — Feb 23, 2011
GLACIER BANCORP, INC. (GBCI) (CIK 0000868671)
Date: Feb. 23, 2011 · CIK: 0000868671 · Accession: 0000950123-11-017308
AI Filing Summary & Sentiment
Reasoning
Referenced dates: January 12, 2011, January 12, 2011
Letter
VIA EDGAR United States Securities and Exchange Commission Division of Corporation Finance Filed March 1, 2010 Form 10-Q for the Quarterly Periods Ended March 31, 2010, June 30, 2010, and September 30, 2010 File No. 0-18911
Dear Mr. Pande:
Consistent with telephone conversations of Monday, February 14 and Tuesday, February 22, 2011 with Ms. Lindsay McCord, Accountant, and you, the following response has been prepared by Glacier Bancorp, Inc. (the “Company”) to your February 9, 2011 comment letter regarding the Form 10-K filed by the Company for the fiscal year ended December 31, 2009 and Forms 10-Q for the quarterly periods ended March 31, 2010, June 30, 2010 and September 30, 2010.
For convenience and ease of review, we have reprinted below the text of the comment in your correspondence, followed by the Company’s response.
Form 10-Q for the Fiscal Quarter Ended September 30, 2010
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Additional Management’s Discussion and Analysis
Non-Performing Assets, page 42
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 2 of 12
1.
We note your response to prior comment four of our letter dated January 12, 2011, that after a partial charge-off is made on an impaired loan it could either be designated as non-accrual or accrual. In addition, we note that if a loan is in the process of collection and the loan is well-secured by collateral with sufficient fair value to pay off the debt in full you will resume the accrual of interest on the loan. It is not clear from this response whether a partially charged-off impaired loan is returned to performing status or remains as non-performing. Please tell us and revise your disclosures in future filings beginning with your 2010 Form 10-K to distinguish between when a partially charged-off impaired loan will be designated as performing versus when it would remain as non-performing. Specifically, state for partially charged-off loans how you consider the delinquency status of the loan in your accrual determination.
Response:
The following is an expanded discussion consistent with the request that will be included in future filings beginning with the Form 10-K filed by the Company for the fiscal year ended December 31, 2010, as deemed necessary:
Loans that are thirty days or more past due based on payments received and applied to the loan are considered delinquent. Loans are designated non-accrual and the accrual of interest is discontinued when the collection of the contractual principal or interest is unlikely. A loan is typically placed on non-accrual when principal or interest is due and has remained unpaid for ninety days or more. When a loan is placed on non-accrual status, interest previously accrued but not collected is reversed against current period interest income. Subsequent payments are applied to the outstanding principal balance if doubt remains as to the ultimate collectability of the loan. Interest accruals are not resumed on partially charged-off impaired loans. For other loans on non-accrual, interest accruals are resumed only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest.
2.
We note that your general allowance decreased from $123.17 million at December 31, 2009 to $115.64 million at September 30, 2010. In addition, we note from your disclosure on page 42 that the total non-accrual loans in the 1-4 family, home equity lines of credit, consumer, and other categories actually increased from $29.41 million at December 31, 2009 to $30.99 million at September 30, 2010. Please tell us and revise your disclosure in future filings beginning with your 2010 Form 10-K to more clearly bridge the gap between the decline in your credit quality in these loan portfolios with the decrease in your general allowance for loan losses.
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 3 of 12
Response:
The following is an expanded discussion consistent with the request that will be included in future filings beginning with the Form 10-K filed by the Company for the fiscal year ended December 31, 2010, as deemed necessary:
In total, the ALLL has decreased $5.8 million, or 4 percent, from a year ago. The ALLL of $137.1 million is 3.58 percent of total loans outstanding at December 31, 2010, up from 3.46 percent of total loans at the prior year end. While the overall amount of the ALLL decreased, the increase in the ALLL as a percent of loans is the result of a continuing overall upward increase in environmental factors upon each bank subsidiary’s historical loss experience. Despite the overall continuing upward increase in environmental factors upon each bank subsidiary’s historical loss experience, the general allocation of the Company’s allowance decrease by $2.9 million due to the decrease of $304.7 million, or 7 percent, in total loans at December 31, 2010 compared to the prior year end. For additional information regarding the trends and conditions impacting the environmental factors, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Presented below are select aggregated statistics that are also considered when determining the adequacy of the Company’s ALLL:
Positive Trends
•
The provision for loan losses in 2010 was $84.7 million, a decrease of $39.9 million from 2009.
•
Non-accrual construction loans (i.e., residential construction and land, lot and other construction) was $117.7 million, or 61 percent, of the $192.5 million of non-accrual loans at year end 2010, a decrease of $9.7 million from the prior year end. Non-accrual construction loans at year end 2009 accounted for 64 percent of the $198.3 million of non-accrual loans.
•
The allowance as a percent of non-performing loans was 70 percent at year ends 2010 and 2009.
•
Early stage delinquencies (accruing loans 30-89 days past due) decreased to $45.5 million at year end 2010 from $87.5 million at prior year end.
Negative Trends
•
The $37.3 million total of non-accrual loans in the agriculture, 1-4 family, home equity lines of credit, consumer, and other loans at year end 2010 increased by $7.9 million from the year end 2009.
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 4 of 12
•
Charge-offs, net of recoveries, in 2010 was $90.5 million, an increase of $32.1 million from 2009.
•
Net charge-offs of construction loans was $58.7 million, or 65 percent, of the $90.5 million of net charge-offs in 2010, compared to net-charge-offs of construction loans of $41.8 million, or 71 percent, of the $58.4 million of net charge-offs in 2009.
•
Impaired loans as a percent of total loans increased to 5.88 percent at year end 2010 as compared to 5.30 percent at year end 2009.
•
Non-performing loans as a percent of total loans increased to 5.15 percent at year end 2010 as compared to 4.93 percent at year end 2009.
3.
We note your earnings release dated January 27, 2011, on your website that states unaudited net charge-offs and provision for loan losses for 2010 were $90.51 million and $84.69 million. In addition, we note that net charge-offs for 2009 totaled $58.43 million. Given the significant increase in net charge-offs from 2009 to 2010 and the higher net charge-offs than provision for loan losses in 2010, please tell us and provide enhanced disclosures in future filings beginning with your 2010 Form 10-K, that bridge the gap between observed changes in asset quality and resulting period end allowance and recorded provision for loan losses.
Response:
The following is an expanded discussion consistent with the request that will be included in future filings beginning with the Form 10-K filed by the Company for the fiscal year ended December 31, 2010, as deemed necessary:
Presented below are select aggregated statistics that are also considered when determining the adequacy of the Company’s ALLL:
Positive Trends
•
The provision for loan losses in 2010 was $84.7 million, a decrease of $39.9 million from 2009.
•
Non-accrual construction loans (i.e., residential construction and land, lot and other construction) was $117.7 million, or 61 percent, of the $192.5 million of non-accrual loans at year end 2010, a decrease of $9.7 million from the prior year end. Non-accrual construction loans at year end 2009 accounted for 64 percent of the $198.3 million of non-accrual loans.
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 5 of 12
•
The allowance as a percent of non-performing loans was 70 percent at year ends 2010 and 2009.
•
Early stage delinquencies (accruing loans 30-89 days past due) decreased to $45.5 million at year end 2010 from $87.5 million at prior year end.
Negative Trends
•
The $37.3 million total of non-accrual loans in the agriculture, 1-4 family, home equity lines of credit, consumer, and other loans at year end 2010 increased by $7.9 million from the year end 2009.
•
Charge-offs, net of recoveries, in 2010 was $90.5 million, an increase of $32.1 million from 2009.
•
Net charge-offs of construction loans was $58.7 million, or 65 percent, of the $90.5 million of net charge-offs in 2010, compared to net-charge-offs of construction loans of $41.8 million, or 71 percent, of the $58.4 million of net charge-offs in 2009.
•
Impaired loans as a percent of total loans increased to 5.88 percent at year end 2010 as compared to 5.30 percent at year end 2009.
•
Non-performing loans as a percent of total loans increased to 5.15 percent at year end 2010 as compared to 4.93 percent at year end 2009.
When applied to each bank subsidiary’s historical loss experience, the environmental factors result in the provision for loan losses being recorded in the period in which the loss has probably occurred. When the loss is confirmed at a later date, a charge-off is recorded. The occurrence of confirming events in 2010 for previously recognized provision for loan losses resulted in loan charge-offs, net of recoveries, exceeding the provision for loan losses by $5.8 million. During 2009, the provision for loan losses exceeded loan charge-offs, net of recoveries, by $66.2 million.
4.
In addition, in the future please file within the prescribed time limits a Form 8-K under Item 2.02 — Results of Operations and Financial Condition when you make a public announcement or release regarding your results of operations or financial condition for a completed quarterly or annual fiscal period.
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 6 of 12
Response:
The Company’s Form 8-K reporting its net earnings for the quarter and for the year ended December 31, 2010 was filed on Thursday, February 10, 2010.
5.
We note from your response to prior comment five of our letter dated January 12, 2011, that you consider TDR (troubled debt restructuring) loans as impaired loans and that at least quarterly you perform an updated and comprehensive assessment of the willingness and capacity of the borrower(s) to timely and ultimately repay their total debt obligations. Please tell us and revise future filings beginning with your 2010 Form 10-K to disclose whether the total debt obligations due from a single or related party group of borrowers, where at least one of the loans was is considered a TDR, is classified as impaired and evaluated under the guidance of ASC 310-10-35.
Response:
The Company has evaluated its evaluation and accounting for the subject matter in the above comment and has determined that such is in accord with the guidance of ASC 310-10-35.
The following is an expanded discussion consistent with the request that will be included in future filings beginning with the Form 10-K filed by the Company for the fiscal year ended December 31, 2010, as deemed necessary:
The Company recognizes that while borrowers may experience deterioration in their financial condition, many continue to be creditworthy customers who have the willingness and capacity for debt repayment. In determining whether non-restructured or unimpaired loans issued to a single or related party group of borrowers should continue to accrue interest when the borrower has other loans that are impaired or troubled debt restructurings, the Company on a quarterly or more frequent basis performs an updated and comprehensive assessment of the willingness and capacity of the borrowers to timely and ultimately repay their total debt obligations, including contingent obligations. Such analysis takes into account current financial information about the borrowers and financially responsible guarantors, if any, including for example:
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 7 of 12
•
analysis of global, i.e., aggregate debt service for total debt obligations;
•
assessment of the value and security protection of collateral pledged using current market conditions and alternative market assumptions across a variety of potential future situations; and
•
loan structures and related covenants.
Following is an example for illustrative purposes only and will not be included in future filings including the Form 10-K filed by the Company for the fiscal year ended December 31, 2010.
For example, assume a borrower (or a related party group of borrowers) has two loans with a subsidiary bank of the Company. One loan is for a land acquisition and development project (“Real Estate Project”) and the other loan is to finance a commercial real estate office building (“CRE Loan”) with a nationally recognized tenant. These loans are not cross-collateralized and the loans do not guarantee each other. Assume further that the real estate project has stalled and the borrower (or related party group of borrowers) does not have the resources to keep contractual principal and interest current and the value of the collateral property is insufficient to repay the loan. In such circumstance, the Real Estate Project loan is placed on non-accrual status with concessions made by the bank resulting in the loan designated as a TDR. Provided the lease income assigned to the bank covers the CRE Loan’s debt service requirements and the collateral value supports the full and timely repayment of the principal and interest, the CRE Loan would remain an accruing, performing loan.
6.
We note your response to prior comment six of our letter dated January 12, 2011, and also note in your “Credit Quality Summary” tabular disclosures in your news release dated January 27, 2011, on your website that the categories residential construction and land, lot and other construction loans account for 61% or $117.68 million of your total unaudited non-accrual loans at December 31, 2010. In addition, we note these same categories accounted for $58.73 million of 65% of your total unaudited non-accrual loans at December 31, 2010. In addition, we note these same categories accounted for $58.73 million or 65% of your total unaudited net charge-offs for 2010. Given the concent
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VIA EDGAR
February 23, 2011
Mr. Amit Pande
Accounting Branch Chief
United States Securities and Exchange Commission
Division of Corporation Finance
100 F. Street N.E.
Washington, D.C. 20549
Re:
Glacier Bancorp, Inc.
Form 10-K for Fiscal Year Ended December 31, 2009
Filed March 1, 2010
Form 10-Q for the Quarterly Periods Ended March 31, 2010,
June 30, 2010, and September 30, 2010
File No. 0-18911
Dear Mr. Pande:
Consistent with telephone conversations of Monday, February 14 and Tuesday, February 22, 2011 with
Ms. Lindsay McCord, Accountant, and you, the following response has been prepared by Glacier
Bancorp, Inc. (the “Company”) to your February 9, 2011 comment letter regarding the Form 10-K filed
by the Company for the fiscal year ended December 31, 2009 and Forms 10-Q for the quarterly periods
ended March 31, 2010, June 30, 2010 and September 30, 2010.
For convenience and ease of review, we have reprinted below the text of the comment in your
correspondence, followed by the Company’s response.
Form 10-Q for the Fiscal Quarter Ended September 30, 2010
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Additional Management’s Discussion and Analysis
Non-Performing Assets, page 42
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 2 of 12
1.
We note your response to prior comment four of our letter dated January 12,
2011, that after a partial charge-off is made on an impaired loan it could either be
designated as non-accrual or accrual. In addition, we note that if a loan is in the
process of collection and the loan is well-secured by collateral with sufficient fair
value to pay off the debt in full you will resume the accrual of interest on the loan.
It is not clear from this response whether a partially charged-off impaired loan is
returned to performing status or remains as non-performing. Please tell us and revise
your disclosures in future filings beginning with your 2010 Form 10-K to distinguish
between when a partially charged-off impaired loan will be designated as performing
versus when it would remain as non-performing. Specifically, state for partially
charged-off loans how you consider the delinquency status of the loan in your accrual
determination.
Response:
The following is an expanded discussion consistent with the request that will be included in
future filings beginning with the Form 10-K filed by the Company for the fiscal year ended
December 31, 2010, as deemed necessary:
Loans that are thirty days or more past due based on payments received and applied to the
loan are considered delinquent. Loans are designated non-accrual and the accrual of
interest is discontinued when the collection of the contractual principal or interest is
unlikely. A loan is typically placed on non-accrual when principal or interest is due and
has remained unpaid for ninety days or more. When a loan is placed on non-accrual status,
interest previously accrued but not collected is reversed against current period interest
income. Subsequent payments are applied to the outstanding principal balance if doubt
remains as to the ultimate collectability of the loan. Interest accruals are not resumed on
partially charged-off impaired loans. For other loans on non-accrual, interest accruals are
resumed only when they are brought fully current with respect to interest and principal and
when, in the judgment of management, the loans are estimated to be fully collectible as to
both principal and interest.
2.
We note that your general allowance decreased from $123.17 million at December 31, 2009
to $115.64 million at September 30, 2010. In addition, we note from your disclosure on
page 42 that the total non-accrual loans in the 1-4 family, home equity lines of credit,
consumer, and other categories actually increased from $29.41 million at December 31, 2009
to $30.99 million at September 30, 2010. Please tell us and revise your disclosure in
future filings beginning with your 2010 Form 10-K to more clearly bridge the gap between
the decline in your credit quality in these loan portfolios with the decrease in your
general allowance for loan losses.
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 3 of 12
Response:
The following is an expanded discussion consistent with the request that will be included in
future filings beginning with the Form 10-K filed by the Company for the fiscal year ended
December 31, 2010, as deemed necessary:
In total, the ALLL has decreased $5.8 million, or 4 percent, from a year ago. The ALLL of
$137.1 million is 3.58 percent of total loans outstanding at December 31, 2010, up from 3.46
percent of total loans at the prior year end. While the overall amount of the ALLL
decreased, the increase in the ALLL as a percent of loans is the result of a continuing
overall upward increase in environmental factors upon each bank subsidiary’s historical loss
experience. Despite the overall continuing upward increase in environmental factors upon
each bank subsidiary’s historical loss experience, the general allocation of the Company’s
allowance decrease by $2.9 million due to the decrease of $304.7 million, or 7 percent, in
total loans at December 31, 2010 compared to the prior year end. For additional information
regarding the trends and conditions impacting the environmental factors, see “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Presented below are select aggregated statistics that are also considered when determining
the adequacy of the Company’s ALLL:
Positive Trends
•
The provision for loan losses in 2010 was $84.7 million, a decrease of
$39.9 million from 2009.
•
Non-accrual construction loans (i.e., residential construction and
land, lot and other construction) was $117.7 million, or 61 percent, of the $192.5
million of non-accrual loans at year end 2010, a decrease of $9.7 million from the
prior year end. Non-accrual construction loans at year end 2009 accounted for 64
percent of the $198.3 million of non-accrual loans.
•
The allowance as a percent of non-performing loans was 70 percent at
year ends 2010 and 2009.
•
Early stage delinquencies (accruing loans 30-89 days past due)
decreased to $45.5 million at year end 2010 from $87.5 million at prior year end.
Negative Trends
•
The $37.3 million total of non-accrual loans in the agriculture, 1-4
family, home equity lines of credit, consumer, and other loans at year end 2010
increased by $7.9 million from the year end 2009.
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 4 of 12
•
Charge-offs, net of recoveries, in 2010 was $90.5 million, an increase
of $32.1 million from 2009.
•
Net charge-offs of construction loans was $58.7 million, or 65 percent,
of the $90.5 million of net charge-offs in 2010, compared to net-charge-offs of
construction loans of $41.8 million, or 71 percent, of the $58.4 million of net
charge-offs in 2009.
•
Impaired loans as a percent of total loans increased to 5.88 percent at
year end 2010 as compared to 5.30 percent at year end 2009.
•
Non-performing loans as a percent of total loans increased to 5.15
percent at year end 2010 as compared to 4.93 percent at year end 2009.
3.
We note your earnings release dated January 27, 2011, on your website that states
unaudited net charge-offs and provision for loan losses for 2010 were $90.51 million and
$84.69 million. In addition, we note that net charge-offs for 2009 totaled $58.43 million.
Given the significant increase in net charge-offs from 2009 to 2010 and the higher net
charge-offs than provision for loan losses in 2010, please tell us and provide enhanced
disclosures in future filings beginning with your 2010 Form 10-K, that bridge the gap
between observed changes in asset quality and resulting period end allowance and recorded
provision for loan losses.
Response:
The following is an expanded discussion consistent with the request that will be included in
future filings beginning with the Form 10-K filed by the Company for the fiscal year ended
December 31, 2010, as deemed necessary:
Presented below are select aggregated statistics that are also considered when determining
the adequacy of the Company’s ALLL:
Positive Trends
•
The provision for loan losses in 2010 was $84.7 million, a decrease of
$39.9 million from 2009.
•
Non-accrual construction loans (i.e., residential construction and
land, lot and other construction) was $117.7 million, or 61 percent, of the $192.5
million of non-accrual loans at year end 2010, a decrease of $9.7 million from the
prior year end. Non-accrual construction loans at year end 2009 accounted for 64
percent of the $198.3 million of non-accrual loans.
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 5 of 12
•
The allowance as a percent of non-performing loans was 70 percent at
year ends 2010 and 2009.
•
Early stage delinquencies (accruing loans 30-89 days past due)
decreased to $45.5 million at year end 2010 from $87.5 million at prior year end.
Negative Trends
•
The $37.3 million total of non-accrual loans in the agriculture, 1-4
family, home equity lines of credit, consumer, and other loans at year end 2010
increased by $7.9 million from the year end 2009.
•
Charge-offs, net of recoveries, in 2010 was $90.5 million, an increase
of $32.1 million from 2009.
•
Net charge-offs of construction loans was $58.7 million, or 65 percent,
of the $90.5 million of net charge-offs in 2010, compared to net-charge-offs of
construction loans of $41.8 million, or 71 percent, of the $58.4 million of net
charge-offs in 2009.
•
Impaired loans as a percent of total loans increased to 5.88 percent at
year end 2010 as compared to 5.30 percent at year end 2009.
•
Non-performing loans as a percent of total loans increased to 5.15
percent at year end 2010 as compared to 4.93 percent at year end 2009.
When applied to each bank subsidiary’s historical loss experience, the environmental factors
result in the provision for loan losses being recorded in the period in which the loss has
probably occurred. When the loss is confirmed at a later date, a charge-off is recorded.
The occurrence of confirming events in 2010 for previously recognized provision for loan
losses resulted in loan charge-offs, net of recoveries, exceeding the provision for loan
losses by $5.8 million. During 2009, the provision for loan losses exceeded loan
charge-offs, net of recoveries, by $66.2 million.
4.
In addition, in the future please file within the prescribed time limits a Form 8-K
under Item 2.02 — Results of Operations and Financial Condition when you make a public
announcement or release regarding your results of operations or financial condition for a
completed quarterly or annual fiscal period.
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 6 of 12
Response:
The Company’s Form 8-K reporting its net earnings for the quarter and for the year ended
December 31, 2010 was filed on Thursday, February 10, 2010.
5.
We note from your response to prior comment five of our letter dated January 12, 2011,
that you consider TDR (troubled debt restructuring) loans as impaired loans and that at
least quarterly you perform an updated and comprehensive assessment of the willingness and
capacity of the borrower(s) to timely and ultimately repay their total debt obligations.
Please tell us and revise future filings beginning with your 2010 Form 10-K to disclose
whether the total debt obligations due from a single or related party group of borrowers,
where at least one of the loans was is considered a TDR, is classified as impaired and
evaluated under the guidance of ASC 310-10-35.
Response:
The Company has evaluated its evaluation and accounting for the subject matter in the above
comment and has determined that such is in accord with the guidance of ASC 310-10-35.
The following is an expanded discussion consistent with the request that will be included in
future filings beginning with the Form 10-K filed by the Company for the fiscal year ended
December 31, 2010, as deemed necessary:
The Company recognizes that while borrowers may experience deterioration in their financial
condition, many continue to be creditworthy customers who have the willingness and capacity
for debt repayment. In determining whether non-restructured or unimpaired loans issued to a
single or related party group of borrowers should continue to accrue interest when the
borrower has other loans that are impaired or troubled debt restructurings, the Company on a
quarterly or more frequent basis performs an updated and comprehensive assessment of the
willingness and capacity of the borrowers to timely and ultimately repay their total debt
obligations, including contingent obligations. Such analysis takes into account current
financial information about the borrowers and financially responsible guarantors, if any,
including for example:
February 23, 2011
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 7 of 12
•
analysis of global, i.e., aggregate debt service for total debt obligations;
•
assessment of the value and security protection of collateral pledged
using current market conditions and alternative market assumptions across a variety
of potential future situations; and
•
loan structures and related covenants.
Following is an example for illustrative purposes only and will not be included in
future filings including the Form 10-K filed by the Company for the fiscal year ended
December 31, 2010.
For example, assume a borrower (or a related party group of borrowers) has two loans with a
subsidiary bank of the Company. One loan is for a land acquisition and development project
(“Real Estate Project”) and the other loan is to finance a commercial real estate office
building (“CRE Loan”) with a nationally recognized tenant. These loans are not
cross-collateralized and the loans do not guarantee each other. Assume further that the
real estate project has stalled and the borrower (or related party group of borrowers) does
not have the resources to keep contractual principal and interest current and the value of
the collateral property is insufficient to repay the loan. In such circumstance, the Real
Estate Project loan is placed on non-accrual status with concessions made by the bank
resulting in the loan designated as a TDR. Provided the lease income assigned to the bank
covers the CRE Loan’s debt service requirements and the collateral value supports the full
and timely repayment of the principal and interest, the CRE Loan would remain an accruing,
performing loan.
6.
We note your response to prior comment six of our letter dated January 12, 2011, and
also note in your “Credit Quality Summary” tabular disclosures in your news release dated
January 27, 2011, on your website that the categories residential construction and land,
lot and other construction loans account for 61% or $117.68 million of your total unaudited
non-accrual loans at December 31, 2010. In addition, we note these same categories
accounted for $58.73 million of 65% of your total unaudited non-accrual loans at December
31, 2010. In addition, we note these same categories accounted for $58.73 million or 65%
of your total unaudited net charge-offs for 2010. Given the concent