Asset Quality and Provisions For Loan Losses
Total non-performing assets and loans 90+ days past due declined $9.3 million sequentially from $59.5 million at September 30, 2012, to $50.2 million at December 31, 2012, and increased from $47.8 million at December 31, 2011. As a percentage of total assets, non-performing assets decreased from 1.98% at September 30, 2012, to 1.78% at December 31, 2012, while increasing from 1.63% at December 31, 2011. As of December 31, 2012, the allowance for loan losses represented 1.95% of total loans, compared to 1.92% and 2.24%, at September 30, 2012, and December 31, 2011, respectively. The allowance for loan losses covered 112.8% of total non-performing loans as of December 31, 2012, compared to 90.8% and 125.4%, at September 30, 2012, and December 31, 2011, respectively.
Non-performing loans continue to be concentrated in residential and commercial construction and land development loans in outer sub-markets hardest hit by the residential downturn and commercial and consumer credits experiencing the after shocks in sub-contracting businesses and unemployment levels. Overall, as of December 31, 2012, $22.8 million, or 60.2%, of non-performing loans represented acquisition, development and construction (“ADC”) loans, $5.7 million, or 14.9%, represented non-farm, non-residential loans, $6.1 million, or 16.1%, represented loans on one-to-four family residential properties, and $3.3 million, or 8.7%, represented commercial and industrial (“C&I”) loans. As of December 31, 2012, specific reserves of $16.4 million have been established for non-performing loans and other loans determined to be impaired. The Company continues to pursue an aggressive campaign to reduce non-performing and other impaired loans and is implementing and executing various disposition strategies on an ongoing basis. However, the majority of remaining non-performing loans represent situations which require longer term workout strategies to obtain optimal principal recovery. These strategies are dependent upon project completion, permitting, satisfaction of contract contingencies and other factors.