Credit Quality and Nonperforming Assets (Tables)

6 Months Ended

Jun. 30, 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)

	June 30, 2013
	Pass		Special Mention		Substandard		Impaired		Total
Real Estate:
1-4 Family residential construction	$	1,226	$	258	$	131	$	-	$	1,615
Other construction/Land		14,273		740		370		7,411		22,794
1-4 Family - closed end		67,551		1,329		830		21,775		91,485
Equity Lines		54,288		83		1,896		1,089		57,356
Multi-family residential		5,944		429		-		-		6,373
Commercial real estate - owner occupied		138,154		19,053		6,462		9,627		173,296
Commercial real estate - non-owner occupied		80,269		4,212		409		13,944		98,834
Farmland		99,137		2,080		2,457		456		104,130
Total Real Estate		460,842		28,184		12,555		54,302		555,883

Agricultural		23,005		420		-		20		23,445
Commercial and Industrial		175,595		2,671		323		4,253		182,842
Small Business Administration		14,342		995		1,129		3,027		19,493
Direct finance leases		3,400		27		2		60		3,489
Consumer loans		20,578		299		211		3,954		25,042
Total Gross Loans and Leases	$	697,762	$	32,596	$	14,220	$	65,616	$	810,194

	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		73,003		2,484		1,208		23,222		99,917
Equity Lines		58,160		96		1,949		1,258		61,463
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		248,157		5,020		1,845		3,656		258,678
Small Business Administration		15,002		1,551		743		3,227		20,523
Direct finance leases		4,076		22		-		135		4,233
Consumer loans		23,099		445		198		4,348		28,090
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 surfaces with regard to the ability of the Company to collect all principal and interest. 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)

	June 30, 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	$	-	$	-	$	-	$	-	$	1,615	$	1,615	$	-
Other construction/Land		263		159		103		525		22,269		22,794		6,160
1-4 Family - closed end		372		514		1,199		2,085		89,400		91,485		15,162
Equity Lines		22		-		401		423		56,933		57,356		887
Multi-family residential		-		-		-		-		6,373		6,373		-
Commercial real estate - owner occupied		4,276		1,022		2,710		8,008		165,288		173,296		6,844
Commercial real estate - non- owner occupied		197		3,424		7,291		10,912		87,922		98,834		7,713
Farmland		122		-		-		122		104,008		104,130		455
Total Real Estate		5,252		5,119		11,704		22,075		533,808		555,883		37,221

Agricultural		248		-		-		248		23,197		23,445		21
Commercial and Industrial		842		218		900		1,960		180,882		182,842		1,836
Small Business Administration		939		116		1,363		2,418		17,075		19,493		1,996
Direct finance leases		27		60		2		89		3,400		3,489		60
Consumer loans		134		80		92		306		24,736		25,042		1,175
Total Gross Loans and Leases	$	7,442	$	5,593	$	14,061	$	27,096	$	783,098	$	810,194	$	42,309

⁽¹⁾ Included in Total Financing Receivables

⁽²⁾ Includes finance lease loans over 90 days past due and still accruing in the amount of $2,122.

	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		98,118		99,917		15,381
Equity Lines		473		40		66		579		60,884		61,463		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		256,734		258,678		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		27,576		28,090		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 Six Months Ended June 30, 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		-		3,338		-		30		-		-		-		3,368
Commercial real estate - owner occupied		-		-		-		-		-		-		-		-
Commercial real estate - non- owner occupied		-		-		-		-		-		-		-		-
Total Real Estate Loans		-		3,585		-		30		-		-		-		3,615
Commercial and Industrial		-		1,507		-		-		-		-		-		1,507
Consumer loans		-		284		-		-		-		-		-		284
Small Business Administration Loans		-		-		-		-		-		-		-		-
	$	-	$	5,376	$	-	$	30	$	-	$	-	$	-	$	5,406

	For the Year Ended December 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	$	-	$	458	$	-	$	375	$	-	$	-	$	-	$	833
1-4 family - closed-end		-		313		-		200		-		222		616		1,351
Equity Lines		-		29		-		-		-		-		-		29
Commercial real estate - owner occupied		-		1,006		-		1,184		-		-		-		2,190
Commercial real estate - non- owner occupied		-		330		-		60		-		-		-		390
Total Real Estate Loans		-		2,136		-		1,819		-		222		616		4,793
Commercial and Industrial		-		625		2		658		-		-		-		1,285
Consumer loans		-		1,328		-		269		-		-		117		1,714
Small Business Administration Loans		-		200		-		475		-		-		-		675
	$	-	$	4,289	$	2	$	3,221	$	-	$	222	$	733	$	8,467

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 Three Months Ended June 30, 2013
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Reserve Difference⁽¹⁾		Reserve
Real Estate:
Other Construction/Land	-	$	-	$	-	$	-	$	-
1-4 family - closed-end	2		129		129		17		17
Commercial RE- owner occupied	-		-		-		-		-
Commercial RE- non-owner occupied	-		-		-		-		-
Total Real Estate Loans			129		129		17		17

Commercial and Industrial	1		50		50		18		20
Small Business Administration Loans	-		-		-		-		-
Consumer loans	2		20		20		2		6
		$	199	$	199	$	37	$	43

⁽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, 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	$	-
1-4 family - closed-end	3		3,369		3,368		17		17
Commercial RE- owner occupied	-		-		-		-		-
Commercial RE- non-owner occupied	-		-		-		-		-
Total Real Estate Loans			3,618		3,615		23		17

Commercial and Industrial	4		1,507		1,507		(20)		69
Small Business Administration Loans	-		-		-		-		-
Consumer loans	7		284		284		33		38
		$	5,409	$	5,406	$	36	$	124

⁽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.

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 June 30, 2013
	Number of Loans	Recorded Investment		Charge-Offs
Real Estate:
Other Construction/Land	-	$	-	$	-
1-4 family - closed-end	2		779		94
Equity Lines	-		-		-
Commercial real estate- owner occupied	1		308		210
Total Real Estate Loans			1,087		304

Commercial and Industrial	2		65		-
Small Business Administration Loans	-		-		-
Consumer Loans	3		65		64
		$	1,217	$	368

	Subsequent default six months ended June 30, 2013
	Number of Loans	Recorded Investment		Charge-Offs
Real Estate:
Other Construction/Land	1	$	152	$	47
1-4 family - closed-end	2		779		94
Equity Lines	-		-		-
Commercial real estate- owner occupied	1		308		210
Total Real Estate Loans			1,239		351

Commercial and Industrial	5		239		174
Small Business Administration Loans	-		-		-
Consumer Loans	4		67		66
		$	1,545	$	591