Credit Quality and Nonperforming Assets (Tables)

6 Months Ended

Jun. 30, 2012

Credit Quality Classifications for Loan Balances

Credit quality classifications for the Company’s loan balances were as follows, as of the dates indicated:

Credit Quality Classifications

(dollars in thousands, unaudited)

	June 30, 2012
	Pass		Special Mention		Substandard		Impaired		Total
Real Estate:
1-4 Family residential construction	$	3,303	$	3,523	$	-	$	1,974	$	8,800
Other construction/Land		19,247		6,439		961		11,175		37,822
1-4 Family - closed end		70,650		7,412		1,279		19,612		98,953
Equity Lines		58,387		437		2,440		770		62,034
Multi-family residential		4,825		614		-		1,780		7,219
Commercial real estate - owner occupied		142,068		20,718		9,137		9,298		181,221
Commercial real estate - non-owner occupied		67,319		5,937		2,306		23,961		99,523
Farmland		53,216		176		3,575		1,953		58,920
Total Real Estate		419,015		45,256		19,698		70,523		554,492

Agricultural		17,486		45		25		1,676		19,232
Commercial and Industrial		175,332		5,525		2,504		2,805		186,166
Small Business Administration		14,683		1,957		328		3,699		20,667
Direct finance leases		4,847		75		-		322		5,244
Consumer loans		26,661		747		213		4,178		31,799
Total Gross Loans and Leases	$	658,024	$	53,605	$	22,768	$	83,203	$	817,600

	December 31, 2011
	Pass		Special Mention		Substandard		Impaired		Total
Real Estate:
1-4 Family residential construction	$	4,240	$	2,004	$	-	$	2,244	$	8,488
Other construction/Land		18,185		8,873		1,015		11,987		40,060
1-4 Family - closed end		75,765		7,574		1,354		20,260		104,953
Equity Lines		62,867		456		1,795		1,379		66,497
Multi-family residential		4,620		618		-		2,941		8,179
Commercial real estate - owner occupied		141,245		23,289		8,878		9,658		183,070
Commercial real estate - non-owner occupied		64,746		7,463		4,514		29,120		105,843
Farmland		47,719		1,878		3,626		6,919		60,142
Total Real Estate		419,387		52,155		21,182		84,508		577,232

Agricultural		15,477		1,574		27		-		17,078
Commercial and Industrial		83,780		7,529		3,078		5,021		99,408
Small Business Administration		16,251		-		852		3,903		21,006
Direct finance leases		6,089		63		-		591		6,743
Consumer loans		30,004		1,006		808		4,306		36,124
Total Gross Loans and Leases	$	570,988	$	62,327	$	25,947	$	98,329	$	757,591

Aging of Loan Balances by Number of Days Past Due

An aging of the Company’s loan balances, by number of days past due as of the indicated dates, is presented in the following tables:

Loan Portfolio Aging

(dollars in thousands, unaudited)

	June 30, 2012
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Current		Total Financing Receivables		Non-Accrual Loans⁽¹⁾
Real Estate:
1-4 Family residential construction	$	-	$	-	$	352	$	352	$	8,448	$	8,800	$	1,974
Other construction/Land		1,101		345		3,474		4,920		32,902		37,822		4,055
1-4 Family - closed end		1,446		138		1,626		3,210		95,743		98,953		5,985
Equity Lines		673		144		66		883		61,151		62,034		488
Multi-family residential		-		-		1,780		1,780		5,439		7,219		1,780
Commercial real estate - owner occupied		653		547		4,807		6,007		175,214		181,221		5,537
Commercial real estate - non-owner occupied		877		-		6,375		7,252		92,271		99,523		10,262
Farmland		-		-		-		-		58,920		58,920		269
Total Real Estate		4,750		1,174		18,480		24,404		530,088		554,492		30,350

Agricultural		75		-		99		174		19,058		19,232		99
Commercial and Industrial		279		1,111		938		2,328		183,838		186,166		1,848
Small Business Administration		1,203		582		2,054		3,839		16,828		20,667		2,793
Direct finance leases		75		-		322		397		4,847		5,244		322
Consumer loans		383		93		156		632		31,167		31,799		1,303
Total Gross Loans and Leases	$	6,765	$	2,960	$	22,049	$	31,774	$	785,826	$	817,600	$	36,715

⁽¹⁾ Included in Total Financing Receivables

	December 31, 2011
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due⁽²⁾		Total Past Due		Current		Total Financing Receivables		Non-Accrual Loans⁽¹⁾
Real Estate:
1-4 Family residential construction	$	-	$	-	$	-	$	-	$	8,488	$	8,488	$	2,244
Other construction/Land		1,354		-		1,417		2,771		37,289		40,060		4,083
1-4 Family - closed end		1,777		1,835		1,661		5,273		99,680		104,953		7,605
Equity Lines		253		511		640		1,404		65,093		66,497		1,309
Multi-family residential		-		-		2,941		2,941		5,238		8,179		2,941
Commercial real estate - owner occupied		3,070		1,038		5,581		9,689		173,381		183,070		7,086
Commercial real estate - non-owner occupied		1,031		577		7,128		8,736		97,107		105,843		13,958
Farmland		6,436		-		188		6,624		53,518		60,142		6,919
Total Real Estate		13,921		3,961		19,556		37,438		539,794		577,232		46,145

Agricultural		-		-		-		-		17,078		17,078		-
Commercial and Industrial		701		386		3,160		4,247		95,161		99,408		3,778
Small Business Administration		828		917		2,715		4,460		16,546		21,006		3,452
Direct finance leases		63		-		591		654		6,089		6,743		591
Consumer loans		520		619		838		1,977		34,147		36,124		2,144
Total Gross Loans and Leases	$	16,033	$	5,883	$	26,860	$	48,776	$	708,815	$	757,591	$	56,110

⁽¹⁾ Included in Total Financing Receivables

⁽²⁾ Includes Small Business Administration loans over 90 days past due and still accruing in the amount of $48,000.

Troubled Debt Restructurings, by Type of Loan Modification

The table below summarizes TDR’s which were modified during the noted period, by type of concession:

Troubled Debt Restructurings, by Type of Loan Modification

(dollars in thousands, unaudited)

	For the Six Months-Ended June 30, 2012
	Rate Modification		Term Modification		Interest Only Modification		Rate & Term Modification		Rate & Interest Only Modification		Term & Interest Only Modification		Rate, Term & Interest Only Modification		Total
Trouble Debt Restructurings
Real Estate:
Other construction/Land	$	-	$	59	$	-	$	53	$	-	$	-	$	-	$	112
1-4 family - closed-end		-		109		-		-		-		222		-		331
Equity Lines		-		29		-		-		-		-		-		29
Commercial RE - owner occupied		-		2,305		-		295		-		-		-		2,600
Commercial RE - non owner occupied		-		329		-		-		-		-		-		329
Total Real Estate Loans		-		2,831		-		348		-		222		-		3,401
Agricultural Products		-		-		-		-		-		-		-		-
Commercial and Industrial		-		173		-		228		-		-		-		401
Consumer loans		-		662		-		149		-		-		47		858
Small Business Administration Loans		-		-		-		475		-		-		-		475
	$	-	$	3,666	$	-	$	1,200	$	-	$	222	$	47	$	5,135

	For the Year-Ended December 31, 2011
	Rate Modification		Term Modification		Interest Only Modification		Rate & Term Modification		Rate & Interest Only Modification		Term & Interest Only Modification		Rate, Term & Interest Only Modification		Total
Trouble Debt Restructurings
Real Estate:
Other construction/Land	$	-	$	555	$	-	$	754	$	-	$	6,188	$	-	$	7,497
1-4 family - closed-end		-		6,419		-		151		561		48		421		7,600
Equity Lines		-		71		426		-		78		-		-		575
Commercial RE - owner occupied		-		1,893		1,231		297		542		-		-		3,963
Commercial RE - non owner occupied		7,400		-		-		1,069		6,420		-		-		14,889
Total Real Estate Loans		7,400		8,938		1,657		2,271		7,601		6,236		421		34,524
Agricultural Products		-		-		-		-		-		-		12		12
Commercial and Industrial		19		342		23		1,188		-		384		-		1,956
Consumer loans		278		495		-		2,069		282		-		85		3,209
Small Business Administration Loans		-		621		106		46		-		-		-		773
	$	7,697	$	10,396	$	1,786	$	5,574	$	7,883	$	6,620	$	518	$	40,474

Additional Details Related to Loans Classified as TDR's

The following tables present, by class, additional details related to loans classified as TDR’s during the three and six months ended June 30, 2012, including the recorded investment in the loan both before and after modification and balances that were modified during the period:

Troubled Debt Restructurings

(dollars in thousands, unaudited)

	For the Three Months-Ended June 30, 2012
			Pre-Modification		Post-Modification
	Number of Loans		Outstanding Recorded Investment		Outstanding Recorded Investment		Reserve Difference(1)			Reserve
Real Estate:
Other Construction/Land		1	$	59	$	59	$	10		$	12
1-4 family - closed-end		1		233		222		20			39
Equity Lines		1		29		29		13			29
Commercial RE- owner occupied		1		227		227		5			5
Commercial RE- non-owner occupied		0		-		-		-			-
Total Real Estate Loans				548		537		48			85

Agricultural products		0		-		-		-			-
Commercial and Industrial		5		376		375		(16	)		45
Consumer loans		9		633		631		(193	)		129
Small Business Administration Loans		0		-		-		-			-
			$	1,557	$	1,543	$	(161	)	$	259

⁽¹⁾ This represents the change in the ALL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology.

	For the Six Months-Ended June 30, 2012
			Pre-Modification		Post-Modification
	Number of Loans		Outstanding Recorded Investment		Outstanding Recorded Investment		Reserve Difference⁽¹⁾			Reserve
Real Estate:
Other Construction/Land		2	$	112	$	112	$	11		$	12
1-4 family - closed-end		3		344		331		27			47
Equity Lines		1		29		29		13			29
Commercial RE- owner occupied		3		2,600		2,600		(71	)		97
Commercial RE- non-owner occupied		2		330		329		(45	)		6
Total Real Estate Loans				3,415		3,401		(65	)		191

Agricultural products		0		-		-		-			-
Commercial and Industrial		7		407		401		(28	)		49
Consumer loans		13		861		858		(207	)		141
Small Business Administration Loans		1		468		475		2			119
			$	5,151	$	5,135	$	(298	)	$	500

⁽¹⁾ This represents the change in the ALLL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology.

Troubled Debt Restructurings Defaulted During Period

The table below summarizes TDR’s that defaulted during the period noted, and any charge-offs on those TDR’s resulting from such default.

Troubled Debt Restructurings⁽¹⁾

(dollars in thousands, unaudited)

	Subsequent default three months-ended June 30, 2012
	Number of Loans		Recorded Investment		Charge-Offs
Real Estate:
Other Construction/Land		1	$	69	$	-
1-4 family - closed-end		0		-		-
Equity Lines		0		-		-
Commercial RE- owner occupied		0		-		-
Commercial RE- non owner occupied		0		-		-
Total Real Estate Loans				69		-

Agricultural products		0		-		-
Commercial and Industrial		1		108		108
Consumer loans		0		-		-
Small Business Administration Loans		1		106		-
			$	283	$	108

	Subsequent default six months-ended June 30, 2012
	Number of Loans		Recorded Investment		Charge-Offs
Real Estate:
Other Construction/Land		1	$	69	$	-
1-4 family - closed-end		1		95		95
Equity Lines		0		-		-
Commercial RE- owner occupied		0		-		-
Commercial RE- non owner occupied		0		-		-
Total Real Estate Loans				164		95

Agricultural products		0		-		-
Commercial and Industrial		1		108		108
Consumer Loans		1		192		192
Small Business Administration Loans		1		106		-
			$	570	$	395

⁽¹⁾ Troubled Debt Restructurings within the previous 12 months for which there was a payment default in the periods noted.