Credit Quality and Nonperforming Assets (Tables)

3 Months Ended

Mar. 31, 2013

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)

	March 31, 2013
	Pass		Special Mention		Substandard		Impaired		Total
Real Estate:
1-4 Family residential construction	$	988	$	324	$	-	$	-	$	1,312
Other construction/Land		13,442		900		915		12,018		27,275
1-4 Family - closed end		69,821		2,237		792		23,291		96,141
Equity Lines		55,518		55		2,075		931		58,579
Multi-family residential		5,681		607		-		-		6,288
Commercial real estate - owner occupied		138,525		23,867		7,237		8,417		178,046
Commercial real estate - non-owner occupied		74,174		6,800		244		16,542		97,760
Farmland		82,583		2,205		3,499		1,923		90,210
Total Real Estate		440,732		36,995		14,762		63,122		555,611

Agricultural		25,659		449		-		659		26,767
Commercial and Industrial		183,516		4,570		371		4,850		193,307
Small Business Administration		15,176		1,624		731		3,146		20,677
Direct finance leases		3,743		4		-		150		3,897
Consumer loans		22,230		378		321		4,113		27,042
Total Gross Loans and Leases	$	691,056	$	44,020	$	16,185	$	76,040	$	827,301

	December 31, 2012
	Pass		Special Mention		Substandard		Impaired		Total
Real Estate:
1-4 Family residential construction	$	1,599	$	1,333	$	89	$	153	$	3,174
Other construction/Land		13,270		952		1,132		12,648		28,002
1-4 Family - closed end		73,002		2,484		1,208		23,222		99,916
Equity Lines		58,161		96		1,949		1,258		61,464
Multi-family residential		5,351		609		-		-		5,960
Commercial real estate - owner occupied		144,207		22,895		6,562		8,950		182,614
Commercial real estate - non-owner occupied		67,407		6,864		568		17,969		92,808
Farmland		64,176		2,216		3,526		1,933		71,851
Total Real Estate		427,173		37,449		15,034		66,133		545,789

Agricultural		21,333		462		24		663		22,482
Commercial and Industrial		247,375		5,020		1,845		3,656		257,896
Small Business Administration		15,002		1,551		743		3,227		20,523
Direct finance leases		4,076		22		-		135		4,233
Consumer loans		23,881		445		198		4,348		28,872
Total Gross Loans and Leases	$	738,840	$	44,949	$	17,844	$	78,162	$	879,795

Aging of Loan Balances by Number of Days Past Due

Nonperforming assets are comprised of loans for which the Company is no longer accruing interest, and foreclosed assets, including mobile homes and other real estate owned (“OREO”). OREO consists of properties acquired by foreclosure or similar means, which the Company is offering or will offer for sale. Nonperforming loans and leases result when reasonable doubt exists with regard to the ability of the Company to collect all principal and interest on a loan or lease. At that point, we stop accruing interest on the loan or lease in question, and reverse any previously-recognized interest to the extent that it is uncollected or associated with interest-reserve loans. Any asset for which principal or interest has been in default for 90 days or more is also placed on non-accrual status, even if interest is still being received, unless the asset is both well secured and in the process of collection. 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)

	March 31, 2013
	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	$	-	$	-	$	-	$	-	$	1,312	$	1,312	$	-
Other construction/Land		11		27		105		143		27,132		27,275		10,556
1-4 Family - closed end		1,656		-		806		2,462		93,679		96,141		15,493
Equity Lines		25		311		41		377		58,202		58,579		728
Multi-family residential		-		-		-		-		6,288		6,288		-
Commercial real estate - owner occupied		1,009		-		1,810		2,819		175,227		178,046		5,301
Commercial real estate - non-owner occupied		248		-		7,291		7,539		90,221		97,760		10,229
Farmland		925		230		1,679		2,834		87,376		90,210		1,923
Total Real Estate		3,874		568		11,732		16,174		539,437		555,611		44,230

Agricultural		-		-		659		659		26,108		26,767		659
Commercial and Industrial		671		391		1,018		2,080		191,227		193,307		2,388
Small Business Administration		521		3		1,433		1,957		18,720		20,677		2,094
Direct finance leases		-		4		150		154		3,743		3,897		150
Consumer loans		230		30		-		260		26,782		27,042		1,045
Total Gross Loans and Leases	$	5,296	$	996	$	14,992	$	21,284	$	806,017	$	827,301	$	50,566

⁽¹⁾ Included in Total Financing Receivables

⁽²⁾ As of March 31, 2013 there were no loans over 90 days past due and still accruing.

	December 31, 2012
	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	$	-	$	-	$	153	$	153	$	3,021	$	3,174	$	153
Other construction/Land		374		211		-		585		27,417		28,002		11,163
1-4 Family - closed end		1,335		88		376		1,799		98,117		99,916		15,381
Equity Lines		473		40		66		579		60,885		61,464		1,026
Multi-family residential		177		-		-		177		5,783		5,960		-
Commercial real estate - owner occupied		1,372		813		1,289		3,474		179,140		182,614		5,314
Commercial real estate - non-owner occupied		7,831		-		1,499		9,330		83,478		92,808		11,642
Farmland		231		-		1,679		1,910		69,941		71,851		1,933
Total Real Estate		11,793		1,152		5,062		18,007		527,782		545,789		46,612

Agricultural		24		157		506		687		21,795		22,482		664
Commercial and Industrial		1,419		518		7		1,944		255,952		257,896		2,386
Small Business Administration		905		-		1,574		2,479		18,044		20,523		2,159
Direct finance leases		-		34		123		157		4,076		4,233		135
Consumer loans		238		189		87		514		28,358		28,872		1,138
Total Gross Loans and Leases	$	14,379	$	2,050	$	7,359	$	23,788	$	856,007	$	879,795	$	53,094

⁽¹⁾ Included in Total Financing Receivables

⁽²⁾ As of December 31, 2012 there were no loans over 90 days past due and still accruing.

Troubled Debt Restructurings, by Type of Loan Modification

The Company may agree to different types of concessions when modifying a loan or lease. The tables below summarize TDR’s which were modified during the noted periods, by type of concession:

Troubled Debt Restructurings, by Type of Loan Modification

(dollars in thousands, unaudited)

	For the Quarter Ended March 31, 2013
	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	$	-	$	247	$	-	$	-	$	-	$	-	$	-	$	247
1-4 family - closed-end		-		3,240		-		-		-		-		-		3,240
Commercial RE - owner occupied		-		-		-		-		-		-		-		-
Commercial RE - non owner occupied		-		-		-		-		-		-		-		-
Total Real Estate Loans		-		3,487		-		-		-		-		-		3,487
Commercial and Industrial		-		1,457		-		-		-		-		-		1,457
Consumer loans		-		263		-		-		-		-		-		263
Small Business Administration Loans		-		-		-		-		-		-		-		-
	$	-	$	5,207	$	-	$	-	$	-	$	-	$	-	$	5,207

	For the Quarter Ended March 31, 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	$	-	$	-	$	-	$	53	$	-	$	-	$	-	$	53
1-4 family - closed-end		-		110		-		-		-		-		-		110
Commercial RE - owner occupied		-		779		-		318		-		-		-		1,097
Commercial RE - non owner occupied		-		74		-		-		-		-		-		74
Total Real Estate Loans		-		963		-		371		-		-		-		1,334
Commercial and Industrial		-		25		-		-		-		-		-		25
Consumer loans		-		109		-		118		-		-		-		227
Small Business Administration Loans		-		-		-		475		-		-		-		475
	$	-	$	1,097	$	-	$	964	$	-	$	-	$	-	$	2,061

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 referenced periods, 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 Quarter Ended March 31, 2013
	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Reserve Difference⁽¹⁾		Reserve
Real Estate:
Other Construction/Land		1	$	249	$	247	$	6	$	4
1-4 family - closed-end		1		3,240		3,240		-		-
Commercial RE- owner occupied		-		-		-		-		-
Commercial RE- non-owner occupied		-		-		-		-		-
Total Real Estate Loans				3,489		3,487		6		4

Commercial and Industrial		3		1,457		1,457		(38)		57
Small Business Administration Loans		5		263		263		31		39
Consumer loans		-		-		-		-		-
			$	5,209	$	5,207	$	(1)	$	100

⁽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 Quarter Ended March 31, 2012
	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Reserve Difference⁽¹⁾		Reserve
Real Estate:
Other Construction/Land		1	$	53	$	53	$	-	$	-
1-4 family - closed-end		2		110		110		6		8
Commercial RE- owner occupied		2		747		1,097		(71)		-
Commercial RE- non-owner occupied		1		74		74		6		6
Total Real Estate Loans				984		1,334		(59)		14

Commercial and Industrial		2		25		25		(11)		2
Small Business Administration Loans		1		468		475		2		118
Consumer loans		4		228		227		(14)		12
			$	1,705	$	2,061	$	(82)	$	146

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

(dollars in thousands, unaudited)

	Subsequent default three-months ended March 31, 2013
	Number of Loans		Recorded Investment		Charge-Offs
Real Estate:
1-4 family – closed-end		-	$	-	$	-
Equity Lines		-		-		-
Commercial RE- owner occupied		-		-		-
Total Real Estate Loans				-		-

Agricultural products		-		-		-
Commercial and Industrial		2		173		96
Small Business Administration Loans		-		-		-
Consumer loans		1		2		2
			$	175	$	98

	Subsequent default three-months ended March 31, 2012
	Number of Loans		Recorded Investment		Charge-Offs
Real Estate:
1-4 family - closed-end		1	$	93	$	-
Equity Lines		1		213		-
Commercial RE- owner occupied		2		1,773		-
Total Real Estate Loans				2,079		-

Agricultural products		-		-		-
Commercial and Industrial		-		-		-
Small Business Administration Loans		-		-		-
Consumer Loans		3		488		-
			$	2,567	$	-