Included in the loan portfolio at December 31, 2012, are loans classified as troubled debt restructurings (“TDRs”), totaling $43.5 million, a 16.9% decrease from $52.3 million at December 31, 2011. Sequentially, TDRs decreased $1.4 million from $44.9 million at September 30, 2012. TDRs are performing, accruing loans that represent relationships for which a modification to the contractual interest rate or repayment structure has been granted to address a financial hardship. Over 91% of TDRs in the Company’s loan portfolio at December 31, 2012, were performing prior to modification. TDRs make up 2.0% of the total loan portfolio and represent $7.0 million in ADC loans, $25.3 million in non-farm, non-residential real estate loans, $6.9 million in C&I loans and $4.3 million in one-to-four family residential loans. At December 31, 2012, 45.7% of the Company’s TDRs were reviewable TDRs and 54.3% were permanent TDRs. Reviewable TDRs are loans that have been restructured at or will return to a market rate of interest and can include a temporary interest rate modification, partial deferral of interest or principal or an extension of term. They can return to performing status upon six months of on-time payments following the return to a market rate of interest, but only in the fiscal year following the year of restructure. Permanent TDRs are loans that have been restructured and include a permanent interest rate reduction. They remain in a TDR status until the loan is paid off.
Classified loans were $160.6 million for the quarter ended December 31, 2012, a $30.3 million decrease from $190.9 million at December 31, 2011. Sequentially, classified loans declined $21.9 million from $182.5 million at September 30, 2012. The quarterly decline in classified loans was largely due to upgrades to loans to a paving contractor, residential real estate developer and commercial real estate owner in the combined total of $9.1 million, loan payoffs resulting from residential real estate sales of $6.8 million, and loans refinanced by other banks of $1.7 million, partially offset by a $3.9 million downgrade for loans to a utilities and public improvements contractor.
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