10-K

SECURITIES AND EXCHANGE COMMISSION

100 F Street NE

Washington, D.C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2012

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission File No. 001-35684

LaPorte Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland	35-2456698
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

710 Indiana Avenue, LaPorte, Indiana	46350
(Address of Principal Executive Offices)	(Zip Code)

(219) 362-7511

(Registrant’s telephone number)

Securities Registered Pursuant to Section 12(b) of the Act:

Common Stock, $0.01 par value	The NASDAQ Stock Market, LLC
(Title of each class)	(Name of each exchange on which registered)

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ¨    NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    YES  ¨    NO  x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days.     YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

As of March 25, 2013, there were issued and outstanding 6,205,250 shares of the Registrant’s Common Stock.

As of June 30, 2012, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant was $43,579,144 ($43,587,108 after applying the exchange ratio).

DOCUMENTS INCORPORATED BY REFERENCE

Annual Report to Shareholders of the Registrant for the Fiscal Year Ended December 31, 2012 (Part II)

Proxy Statement for the Registrant’s Annual Meeting of Shareholders to be held on May 14, 2013 (Part III).

TABLE OF CONTENTS

PART I		2
Item 1.	Business	2
Item 1A.	Risk Factors	46
Item 1B.	Unresolved Staff Comments	53
Item 2.	Properties	53
Item 3.	Legal Proceedings	54
Item 4.	Mine Safety Disclosures	54
PART II		54
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	54
Item 6.	Selected Financial Data	55
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	57
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	71
Item 8.	Financial Statements and Supplementary Data	73
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	73
Item 9A.	Controls and Procedures	73
Item 9B.	Other Information	74
PART III		74
Item 10.	Directors, Executive Officers and Corporate Governance	74
Item 11.	Executive Compensation	74
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	74
Item 13.	Certain Relationships and Related Transactions, and Director Independence	74
Item 14.	Principal Accountant Fees and Services	74
PART IV		75
Item 15.	Exhibits, Financial Statement Schedules	75
SIGNATURES

PART I

Item 1. Business

Forward Looking Statements

This Annual Report (including information incorporated by reference) contains, and future oral and written statements of LaPorte Bancorp, Inc., or the Company as defined below and its management may contain, forward-looking statements as such term is defined in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of LaPorte Bancorp, Inc. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of LaPorte Bancorp, Inc.’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and LaPorte Bancorp, Inc. undertakes no obligation to update any statement in light of new information or future events. By identifying these forward-looking statements for you in this manner, we are alerting you to the possibility that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Important factors that could cause our actual results and financial condition to differ from those indicated in the forward-looking statements include those discussed under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. In addition to these risk factors, there are other factors that may impact any public company, including ours, which could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries. These additional factors include, but are not limited to: (1) changes in consumer spending, borrowing and savings habits; (2) the financial health of certain entities, including government sponsored enterprises, the securities of which are owned or acquired by the Company; (3) adverse changes in the securities market; and (4) the costs, effects and outcomes of existing or future litigation. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements after the date of this Annual Report on Form 10-K, whether as a result of new information, future events or otherwise.

LaPorte Bancorp, Inc.

On October 4, 2012, LaPorte Bancorp, Inc., a Maryland corporation (the “Company,” including as the context requires prior to October 4, 2012, LaPorte Bancorp, Inc., a federal corporation) completed its conversion and reorganization to the stock holding company form of organization. The Company became the new stock holding company for The LaPorte Savings Bank (the “Bank”), and sold 3,384,611 shares of common stock at $8.00 per share, for gross offering proceeds of $27.1 million, in its stock offering. Concurrent with the completion of the offering, shares of common stock of LaPorte Bancorp, Inc., a federal corporation owned by the public have been exchanged for 1.3190 shares of the Company’s common stock so that existing shareholders of LaPorte Bancorp, Inc., a federal corporation now own approximately the same percentage of the Company’s common stock as they owned of the common stock of LaPorte Bancorp, Inc., a federal corporation immediately prior to the conversion, as adjusted for the assets of LaPorte Savings Bank, MHC and their receipt of cash in lieu of fractional exchange shares. As a result of the offering and the exchange of shares, the Company has approximately 6,205,250 shares outstanding.

The Company’s primary business activities, apart from owning the shares of The LaPorte Savings Bank, currently consists of loaning funds to The LaPorte Savings Bank’s ESOP, investing in checking and money market accounts at The LaPorte Savings Bank and other investment securities. For parent only financial statements, see Note 20 of the Notes to Consolidated Financial Statements.

The Company, as the holding company of The LaPorte Savings Bank, is authorized to pursue other business activities permitted by applicable laws and regulations, which may include the acquisition of banking and financial services companies. See “Supervision and Regulation—Holding Company Regulation” for a discussion of the activities that are permitted for savings and loan holding companies. We currently have no specific arrangements or understandings regarding any such other activities.

2

The Company’s cash flow depends on dividends received from The LaPorte Savings Bank. The Company neither owns nor leases significant infrastructure, but instead pays a fee to The LaPorte Savings Bank for the use of its premises, equipment and furniture of The LaPorte Savings Bank. At the present time, we employ only persons who are officers of The LaPorte Savings Bank to serve as officers of the Company. We, however, use the support staff of The LaPorte Savings Bank from time to time. We pay a fee to The LaPorte Savings Bank for the time devoted to the Company by employees of The LaPorte Savings Bank. However, these persons are not separately compensated by the Company. The Company may hire additional employees, as appropriate, to the extent it expands its business in the future.

At December 31, 2012, the Company had consolidated assets of $492.8 million, deposits of $349.0 million and shareholders’ equity of $84.1 million.

The Company’s home office is located at 710 Indiana Avenue, LaPorte, Indiana 46350 and the telephone number is (219) 362-7511.

The LaPorte Savings Bank

The LaPorte Savings Bank is an Indiana-chartered savings bank that operates from eight full-service locations in LaPorte and Porter Counties, Indiana. We offer a variety of deposit and loan products to individuals and businesses, most of which are located in our primary market area of LaPorte and Porter Counties, Indiana. The Bank is subject to comprehensive regulation and examination by the Federal Deposit Insurance Corporation and the Indiana Department of Financial Institutions.

Our business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in mortgage warehouse loans, commercial real estate loans, residential loans, commercial loans, home equity loans and lines of credit and to a lesser extent, construction and land loans, automobile and other consumer loans. In addition, we invest in mortgage-backed securities, collateralized mortgage obligation securities, municipal bond securities, U.S. treasury and agency securities, corporate bond securities and interest-earning time deposits at other financial institutions. We also offer trust services through a referral agreement with a third party. For a description of our business strategy, see “Item7-Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Strategy.”

Our website address is www.laportesavingsbank.com. Information on our website is not and should not be considered a part of this Annual Report.

City Savings Bank Merger and Mutual Holding Company Reorganization

On March 8, 2007, The LaPorte Savings Bank entered into an agreement to acquire City Savings Financial Corporation and its subsidiary City Savings Bank (“City Savings Bank Merger”) for $34.00 per share with 50% to be paid in stock and 50% to be paid in cash. To support this acquisition, the Bank reorganized into the mutual holding company form of organization and completed an initial public offering of its common stock. The mutual holding company reorganization, initial public offering and City Savings Bank Merger were completed on October 12, 2007.

3

Market Area

Our primary market for both loans (with the exception of mortgage warehouse loans) and deposits is currently concentrated around the areas where our full-service banking offices are located in LaPorte and Porter Counties in Indiana. The City Savings Bank Merger increased our market presence in LaPorte and Porter Counties, particularly in Michigan City, Rolling Prairie and Chesterton, Indiana.

Because of its location at the southern tip of Lake Michigan, LaPorte County is a major access point to the Chicago market for both rail and highway. LaPorte County is the second largest county geographically in Indiana. The southern part of the county is rural and agricultural in nature. The northern part of the county is where LaPorte and Michigan City are located and the majority of the population is centered. LaPorte County has experienced a small growth in population of 1.2% from 110,106 in 2000 to 111,467 in 2010, according to the 2010 U.S. Census. The economies of LaPorte and Michigan City were once built around large manufacturing; however, both have made the transition to light industry and the service industry. Michigan City has seen growth in the tourism industry due to its location on Lake Michigan, as well as, the presence of a casino and large retail outlet mall. LaPorte County’s major employment sectors based on the 2010 census are retail trade, government and manufacturing. LaPorte County’s unemployment rate of 10.5% as of the end of 2012 was above the state’s rate of 8.5% as of the end of 2012 and the median household income in 2010 was slightly below the state’s median household income according to the United States Department of Agriculture Economic Research Service. LaPorte County ranks 36^th in the state for those with educations of college graduate or higher according to the 2010 U.S. Census. We continue to experience moderately declining property values with pockets of stability in certain areas of LaPorte County in 2012.

Porter County to the west of LaPorte County has seen higher growth because of its proximity to the Chicago market, growing in population 12.0% from 146,798 in 2000 to 164,343 in 2010 according to the 2010 U.S. Census. Porter County’s major employment sectors based on the 2010 census are manufacturing, healthcare and social services, and government. The economy of Porter County is critical to the Northwest Indiana region, which is made up of seven counties. The majority of the population is centered between Portage and Valparaiso. As a result of the acquisition of City Savings Financial Corporation we acquired a branch in Chesterton, which is between Portage and Valparaiso. The unemployment rate for Porter County of 8.5% as of the end of 2012 was equal to the state’s rate of 8.5% as of the end of 2012 and the median household income in 2010 ranked 7^th highest in the state of Indiana according to the United States Department of Agriculture Economic Research Service. It is the 10^th highest ranking county in the state for those with educations of college graduate or higher according to the 2010 U.S. Census. We continue to experience moderately declining property values with pockets of stability in certain areas of Porter County in 2012.

Competition

We face significant competition in both originating loans and attracting deposits. Both LaPorte and Porter Counties have a significant concentration of financial institutions, many of which are significantly larger than us and have greater financial resources than we do. Our competition for loans comes principally from commercial banks, mortgage banking companies, credit unions, leasing companies, insurance companies and other financial service companies. In addition, our competition in mortgage warehouse lending is nationwide often with institutions that are significantly larger than us and may offer larger loans. Our most direct competition for deposits has historically come from commercial banks, savings banks and credit unions. We face additional competition for deposits from non-depository competitors such as the mutual fund industry, securities and brokerage firms and insurance companies.

We seek to meet this competition by the convenience of our branch locations, emphasizing personalized banking and the advantage of local decision-making in our banking business. Specifically, we promote and maintain relationships and build customer loyalty within the communities we serve by focusing our marketing and community involvement on the specific needs of our local communities. As of June 30, 2012, The LaPorte Savings Bank had a market share of 18.57% in LaPorte County, Indiana, which represented the second largest deposit market share in the county. As of June 30, 2012, The LaPorte Savings Bank had a market share of 1.51% in Porter County, Indiana, which represented the ninth largest deposit market share in the county.

4

Lending Activities

Historically, our principal lending activity has been the origination of first mortgage loans for the purchase or refinancing of one- to four-family residential real property. Beginning in 2007, we changed our focus to increasing our originations of commercial real estate loans in an effort to increase interest income and reduce our one- to four-family residential loan portfolio as a percentage of our total loans. As part of this initiative, we separated our credit administration and lending departments into two units and hired additional commercial lenders. In addition, in May 2009, we introduced a new mortgage warehouse lending line of business, led by an executive with over 15 years of experience in this field. The mortgage warehouse lending department has increased our profitability in recent years.

In the future, we expect to increase our commercial real estate and commercial business lending, subject to market demand. As part of our plan to increase commercial business lending, we hired a new Executive Vice President and Chief Credit Officer, in September 2011 who has 15 years of experience with this type of lending. We intend to continue to originate fixed rate one- to four-family residential loans for sale into the secondary market, and to originate adjustable rate mortgages for our portfolio, subject to market demand. Finally, we intend to maintain and potentially increase our mortgage warehouse lending line of business.

The volume of and risk associated with our loans are affected by general economic conditions, including the continued weakness in real estate values.

Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by management and approved by the Board of Directors. The lending policy is reviewed and updated at least annually, most recently in December 2012. The Board of Directors has granted loan approval authority to certain officers or groups of officers up to prescribed limits, based on the officer’s experience and tenure. In addition, all commercial loans or lending relationships up to $500,000 may be approved by our Executive Vice President and Chief Credit Officer. Generally, all commercial loans or lending relationships greater than $500,000 but less than $1.25 million must be approved by our Officer Loan Committee, which is compromised of the Chief Executive Officer, President/Chief Financial Officer, Executive Vice President and Chief Credit Officer, Senior Vice President – Mortgage Warehousing and Senior Vice President – Commercial Lending. Individual loans or lending relationships with aggregate exposure in excess of $1.25 million but less than $3.5 million must be approved by our Board of Directors Loan Committee, which includes five outside directors. Loans or lending relationships in excess of $3.5 million must be approved by the full Board of Directors.

Our mortgage warehouse loan approval process is intended to minimize potential risk by establishing desirable relationships with experienced and well-managed mortgage companies (participants). The Bank is relying primarily upon the mortgagor to repay the loan or extension of credit, but the mortgage participant and their principal owners must guarantee the performance of those loans or extension of credits they have originated. All residential mortgage loans in excess of an individual mortgage warehouse staff member’s loan authority must be approved by two members of the Officer Loan Committee. We have also established limits on outstanding lines to each mortgage participant. A maximum limit of $30.0 million has been established for a single mortgage participant or for mortgage participants with common ownership. The Board of Directors has the authority to increase this limit up to 20%, and any temporary increase above these increased limits also requires the approval of the Board of Directors. However, each individual mortgage originated by a mortgage participant must be below our legal lending limit.

5

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio, by type of loan at the dates indicated with the exception of mortgage loans held for sale totaling $1.2 million, $3.0 million, $4.2 million, $981,000 and $124,000 at December 31, 2012, 2011, 2010, 2009 and 2008, respectively.

	At December 31,
	2012						2011						2010						2009						2008
	Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)
Real estate:
One- to four-family	$	36,996			11.64	%	$	45,576			15.25	%	$	57,144			20.64	%	$	70,126			27.08	%	$	84,706			38.10	%
Five or more family		14,284			4.49			17,719			5.93			11,586			4.18			6,743			2.61			5,200			2.34
Commercial		79,817			25.12			80,430			26.90			79,807			28.82			75,506			29.16			65,078			29.27
Construction		2,901			0.91			3,806			1.27			6,832			2.47			5,420			2.09			7,736			3.48
Land		8,857			2.79			9,634			3.22			10,795			3.90			11,753			4.54			11,016			4.95
Total real estate		142,855			44.95			157,165			52.57			166,164			60.01			169,548			65.48			173,736			78.14
Mortgage warehouse		137,467			43.26			103,864			34.74			69,600			25.13			43,765			16.90			—			—
Consumer and other loans:
Home equity		12,267			3.86			12,966			4.34			14,187			5.12			15,704			6.07			15,579			7.01
Commercial		20,179			6.35			18,017			6.03			17,977			6.49			18,122			7.00			19,390			8.72
Automobile and other loans(1)		5,018			1.58			6,942			2.32			8,985			3.25			11,790			4.55			13,622			6.13
Total consumer and other loans		37,465			11.79			37,925			12.69			41,149			14.86			45,616			17.62			48,591			21.86
Total loans	$	317,786			100.00	%	$	298,954			100.00	%	$	276,913			100.00	%	$	258,929			100.00	%	$	222,327			100.00	%
Net deferred loan costs		214						177						133						122						111
Allowance for loan losses		(4,308	)					(3,772	)					(3,943	)					(2,776	)					(2,512	)
Total loans, net	$	313,692					$	295,359					$	273,103					$	256,275					$	219,926

(1) Includes $1.2 million, $2.2 million, $3.4 million, $4.8 million and $6.0 million of indirect automobile loans at December 31, 2012, 2011, 2010, 2009 and 2008, respectively. Includes $3.9 million, $4.7 million, $5.6 million, $7.0 million and $7.6 million of direct automobile loans and other loans at December 31, 2012, 2011, 2010, 2009 and 2008, respectively.

6

Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2012. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

	One- to Four-Family					Five or More Family					Commercial Real Estate					Mortgage Warehouse
	Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate
	(Dollars in thousands)
Due During the Years Ending December 31,
2013	$	209		5.58	%	$	2,506		5.13	%	$	20,174		5.58	%	$	137,467		4.65	%
2014		1,070		5.59			2,918		5.47			11,600		5.85			—		—
2015		881		5.47			5,040		5.72			10,522		6.27			—		—
2016 to 2017		2,240		6.00			3,585		5.19			16,728		5.55			—		—
2018 to 2022		4,305		5.86			75		6.18			11,557		6.03			—		—
2023 to 2027		4,148		5.47			—		—			5,732		5.86			—		—
2028 and beyond		24,143		5.77			160		6.63			3,503		5.77			—		—
Total	$	36,996		5.75	%	$	14,284		5.45	%	$	79,816		5.80	%	$	137,467		4.65	%

	Commercial Non-Real Estate					Construction and Land					Home Equity, Automobile and Other					Total
	Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate
	(Dollars in thousands)
Due During the Years Ending December 31,
2013	$	5,407		4.39	%	$	6,062		5.60	%	$	1,877		4.12	%	$	173,702		4.79	%
2014		2,022		5.88			723		6.46			2,117		5.17			20,450		5.74
2015		3,066		5.15			2,195		5.11			2,360		5.63			24,064		5.81
2016 to 2017		8,206		4.93			1,826		5.76			5,087		4.84			37,672		5.32
2018 to 2022		1,270		5.46			559		5.33			5,115		5.37			22,881		5.80
2023 to 2027		208		7.00			213		4.00			701		6.36			11,002		5.73
2028 and beyond		—		—			180		6.00			29		5.00			28,015		5.77
Total	$	20,179		4.97	%	$	11,758		5.55	%	$	17,286		5.13	%	$	317,786		5.18	%

The following table sets forth the contractual maturities of fixed- and adjustable-rate loans at December 31, 2012 that are due after December 31, 2013.

	Due After December 31, 2013
	Fixed		Adjustable		Total
	(In thousands)
Real Estate:
One- to four-family	$	24,204	$	12,583	$	36,787
Five or more family		11,525		251		11,776
Commercial		31,429		28,214		59,643
Land		2,693		3,004		5,697
Total real estate loans		69,851		44,052		113,903
Consumer and other loans:
Home equity		2,153		8,787		10,940
Commercial		10,590		4,182		14,772
Automobile and other		4,327		142		4,469
Total consumer and other loans		17,070		13,111		30,181
Total loans	$	86,921	$	57,163	$	144,084

7

One- to Four-Family Residential Loans. At December 31, 2012, approximately $37.0 million, or 11.6% of our loan portfolio, consisted of one- to four-family residential loans. The majority of the one- to four-family residential mortgage loans we originate are conventional, but we also offer FHA and VA loans. We do not, nor have we ever engaged in subprime lending, defined as mortgage loans to borrowers who do not qualify for market interest rates because of problems with their credit history. Our one- to four-family residential mortgage loans are currently originated in amounts up to 80% of the lesser of the appraised value or purchase price of the property, although loans may be made with higher loan-to-value ratios at a higher interest rate to compensate for the increased credit risk. Private mortgage insurance is generally required on loans with a loan-to-value ratio in excess of 80%. Fixed-rate loans are generally originated for terms of 10 to 30 years. Depending on market conditions, we generally sell a majority of our fixed rate one- to four-family residential loans as part of our asset/liability management strategy. At December 31, 2012, our largest loan secured by one- to four-family real estate had a principal balance of approximately $1.9 million and was secured by a single family residence. This loan was performing in accordance with its original repayment terms at December 31, 2012. At December 31, 2012, $2.0 million of our one- to four-family residential mortgage loans were classified as non-performing.

We also offer, to a lesser extent, adjustable rate mortgage loans with fixed terms of three, five or seven years before converting to an annual adjustment schedule based on changes in the London Interbank Offered Rate designated United States Treasury index. We originated $2.2 million of adjustable rate one- to four-family residential loans during the year ended December 31, 2012. The adjustable rate mortgage loans that we originate provide for maximum rate adjustments of 200 basis points per adjustment, with a lifetime maximum adjustment of 600 basis points, and amortize over terms of up to 30 years.

Adjustable rate mortgage loans help decrease the risk associated with changes in market interest rates by periodically repricing. However, adjustable rate mortgage loans involve other risks because, as interest rates increase, the interest payments on the loan increase, which increases the potential for default by the borrower. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustment of the contractual interest rate is also limited by the maximum periodic and lifetime interest rate adjustments permitted by our loan documents, and therefore, is potentially limited in effectiveness during periods of rapidly rising interest rates. At December 31, 2012, $12.6 million, or 34.0%, of our one- to four-family residential loans contractually due after December 31, 2013 had adjustable rates of interest.

We acquired a substantial amount of our adjustable rate one- to four-family residential mortgage loans in connection with our acquisition of City Savings Bank in 2007. At December 31, 2012, $10.5 million of our one- to four-family residential loans were acquired from City Savings Bank, of which $7.6 million were adjustable rate loans. Most of City Savings Bank’s adjustable rate loans were originated with rates that were fixed for an initial term of five years and then adjust on an annual basis thereafter, pegged to the one-year United States Treasury index. These loans also provide for a maximum interest rate adjustment of 200 basis points over a one-year period and a maximum adjustment of 600 basis points over the life of the loan, and are amortized over terms up to 30 years.

All one- to four-family residential mortgage loans that we originate include “due-on-sale” clauses, which give us the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid.

Regulations guide the amount that a savings bank may lend relative to the appraised value of the real estate securing the loan, as determined by an appraisal of the property at the time the loan is originated. For all loans, we utilize outside independent appraisers and/or appraisal management companies approved by the Board. All borrowers are required to obtain title insurance. We also require fire and casualty insurance and, where circumstances warrant, flood insurance.

8

Mortgage Warehouse Lending. In May 2009, we introduced a mortgage warehousing lending line of business, headed up by an individual brought into the organization with an extensive background in mortgage warehouse lending. Under this program, we provide financing to approved mortgage companies for the origination and sale of residential mortgage loans. Each individual mortgage is assigned to us until the loan is sold to the secondary market by the mortgage company. We take possession of each original note, or in some instances a third party custodian takes possession, and forwards such note to the end investor once the mortgage company has sold the loan. These individual loans are typically sold by the mortgage company within 30 days and are seldom held more than 90 days. Interest income is accrued during this period and fee income for each loan sold is collected when the loan is sold. Agency eligible, governmental (FHA insured or VA guaranteed) and jumbo residential mortgage loans that are secured by mortgages placed on existing one- to four-family dwellings may be purchased and placed in the mortgage warehouse line.

We have established several controls intended to minimize potential risks related to the approval of potential mortgage warehouse participants. The LaPorte Savings Bank performs an on-site due diligence review of all potential participants to ensure satisfactory controls are being performed as they relate to all aspects of the mortgage business, which includes a review performed by an independent third party. We also obtain substantial reference checks on potential participants from a variety of sources to ensure these companies have a satisfactory track record. Once these reviews are completed, the Senior Vice President – Mortgage Warehousing prepares a “Request for Approval” summarizing this information. Our Commercial Credit department performs a detailed financial analysis of potential participants as well. This information is then presented to the Board of Directors for approval.

We also have established several controls to minimize potential risks as they relate to approved mortgage warehouse participants. The LaPorte Savings Bank has engaged an outside mortgage due diligence firm to perform onsite due diligence reviews of the participants. Each participant is reviewed at least every three years; however, participants with higher approved line limits are reviewed every other year and in some cases annually. We may have a special review performed on any of our participants at any time, if warranted. We maintain daily interaction with all of our participants and also continue our own on-site visits. Participants are required to maintain errors and omission insurance and fidelity bond coverage.

In an effort to minimize potential risks as they relate to the individual mortgage loans originated by the mortgage warehouse participants, we have established several controls. The LaPorte Savings Bank will not fund a mortgage loan unless there is a valid takeout commitment to purchase from an institutional secondary market investor on our approved investor list. We will only wire funds for the origination of a loan to title companies which are independent of the mortgage warehouse participant. The LaPorte Savings Bank randomly selects loans each month for internal verification purposes and results are reported monthly to the Officer Loan Committee. If a mortgage loan remains in the warehouse for more than 60 days, a principal curtailment payment is required which results in the mortgage loan being paid off within 180 days of origination.

Lastly, The LaPorte Savings Bank maintains a financial institution’s Third Party Catastrophe Blanket Bond insurance policy. The policy provides coverage for any fraudulent acts of the mortgage warehouse participants or any fraudulent acts of a third party involved in the mortgage transaction. The limit of liability for this policy is $7.5 million, with a deductible of $1.0 million at December 31, 2012.

As of December 31, 2012, we had repurchase agreements with 11 mortgage companies and held $137.5 million of mortgage warehoused loans. During the year ended December 31, 2012, we recorded interest income of $5.2 million, mortgage warehouse loan fees of $835,000 and wire transfer fees of $295,000. During the year ended December 31, 2011, we recorded interest income of $3.4 million, mortgage warehouse loan fees of $569,000 and wire transfer fees of $181,000.

Commercial Real Estate and Five or More Family Loans. At December 31, 2012, $94.1 million, or 29.6%, of our total loan portfolio consisted of commercial real estate and five or more family loans. Our commercial real estate and five or more family loans are secured by retail, industrial, warehouse, service, medical, residential apartment complexes and other commercial properties. Because, on average, our commercial real estate and five or more family loans have a shorter term to repricing and a higher yield than our residential loans, such loans can be a helpful asset/liability management tool.

9

We originate both fixed- and adjustable-rate commercial real estate and five or more family loans, including partially guaranteed U.S. Small Business Administration loans. At December 31, 2012, we had $3.2 million of U.S. Small Business Administration loans in this portfolio. Our originated fixed-rate commercial real estate and five or more family loans generally have initial terms of up to five years, with a balloon payment at the end of the term. Our originated adjustable-rate commercial real estate and five or more family loans generally have an initial term of three- to five-years and a repricing option. Our originated commercial real estate and five or more family loans generally amortize over 15 to 20 years. The maximum loan-to-value ratio of our commercial real estate and five or more family loans is generally 80%. At December 31, 2012, our largest commercial real estate loan relationship was $4.4 million and was secured by a hotel and medical complex. At December 31, 2012, this loan relationship was performing in accordance with its original repayment terms. At December 31, 2012, our largest five or more family loan relationship was $6.4 million and was secured by three residential apartment complexes. At December 31, 2012, this loan relationship was performing in accordance with its original repayment terms.

We consider a number of factors in originating commercial real estate and five or more family loans. We evaluate the qualifications and financial condition of the borrower, including credit history, cash flows and management expertise, as well as the value and condition of the mortgaged property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service) to ensure that it is at least 1.20 times the annual debt service. It is our general policy to obtain personal guarantees from commercial real estate borrowers although we may consider waiving this requirement based upon the loan-to-value ratio and the debt coverage ratio of the proposed loan. All purchase-money and mortgage refinance borrowers are required to obtain title insurance. We also require on-going financial reporting, fire and casualty insurance and, where circumstances warrant, flood insurance.

Loans secured by commercial real estate generally are considered to present greater risk than one- to four-family residential loans. Commercial real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general, including declining real estate values. Accordingly, the nature of these loans makes them more difficult for management to monitor and evaluate and more vulnerable to adverse economic conditions.

Set forth below is information regarding our commercial real estate and five or more family loans at December 31, 2012.

Industry Type	Number of Loans		Balance
			(Dollars in thousands)
Non-owner occupied real estate:
Commercial real estate		110	$	10,928
Five or more family		19		14,284
Owner occupied real estate:
Development and rental		22		5,019
Health care and social		13		4,167
Retail trade		42		8,174
Accommodation and food		33		16,698
Other services		45		5,889
Manufacturing		36		8,259
Construction		50		8,417
Arts, entertainment and recreation		13		5,723
Other miscellaneous		51		6,542
		434	$	94,100

At December 31, 2012, $3.3 million of our commercial real estate loans were classified as non-performing. At December 31, 2012, none of our five or more family loans were classified as non-performing.

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Commercial Loans. At December 31, 2012, $20.2 million, or 6.4%, of our total loan portfolio consisted of commercial loans. As part of our plan to increase commercial business lending, in September 2011, we hired a new Executive Vice President and Chief Credit Officer to lead this initiative. Commercial credit is offered primarily to business customers, usually for asset acquisition, business expansion or working capital purposes. Current term loan originations generally have a three- to five-year term with a balloon payment. Current term loan originations will not exceed 20 years without approval from the board. The maximum loan-to-value ratio of our current commercial loan originations is generally between 50% to 80% depending on the type and marketability of the loan’s underlying collateral. The extension of a commercial credit is based on the ability and stability of management, whether cash flows support the proposed debt repayment, earnings projections and the assumptions for such projections and the value and marketability of any underlying collateral. At December 31, 2012, our largest commercial loan balance was $3.9 million, and was secured by medical equipment. At December 31, 2012, this loan was performing in accordance with its original terms.

Set forth below is information regarding The LaPorte Savings Bank’s commercial business (non-real estate) loans at December 31, 2012.

Industry Type	Number of Loans		Balance
			(Dollars in thousands)
Health care and social		10	$	4,549
Retail trade		94		1,887
Accommodation and food		6		2,309
Other services		20		718
Manufacturing		27		3,950
Construction		20		248
Public Administration		14		1,914
Finance, insurance and estates		6		2,733
Other miscellaneous		38		1,871
		235	$	20,179

Commercial loans generally have a greater credit risk than residential mortgage loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial loans are generally higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself which may be highly vulnerable to changes in general economic conditions (including the recent weak economic environment). Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. We seek to minimize these risks through our underwriting standards. At December 31, 2012, $29,000 of our commercial loans were classified as nonperforming.

Home Equity Loans and Lines of Credit. We originate fixed and variable rate home equity loans and variable rate home equity lines of credit secured by a lien on the borrower’s residence. The home equity products we originate generally are limited to 80% of the property value less any other mortgages. The variable interest rates for home equity loans and lines of credit are determined by a specified margin over the Wall Street Journal prime rate and may not exceed a designated maximum over the life of the loan. Our home equity lines of credit have an interest rate floor and at December 31, 2012 a majority of these loans’ interest rates were at their floor. We currently offer home equity loans with terms of up to 10 years with principal and interest paid monthly from the closing date. Our home equity lines of credit provide for an initial draw period of up to 10 years, and payments include principal and interest calculated based on 2% of the outstanding principal balance. We offer interest-only home equity loans up to a five year term with payments of monthly interest. At the end of the initial term, the line must be paid in full or renewed.

At December 31, 2012, $12.3 million or 3.9% of our total loan portfolio consisted of home equity loans and lines of credit. At December 31, 2012, our largest home equity loan balance was $207,000 At December 31, 2012, this loan was performing in accordance with its original terms.

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Home equity lending is subject to the same risks as one- to four-family residential lending except that, since home equity loans tend to carry higher loan -to-value ratios and more household debt than one- to four-family residential loans, there is often a somewhat higher degree of credit risk, particularly in a period of economic difficulties such as is currently occurring.

At December 31, 2012, $53,000 of our home equity loans were classified as non-performing.

Construction and Land Loans. At December 31, 2012, $11.8 million, or 3.7%, of our total loan portfolio consisted of construction and land loans. We make commercial land development and residential land loans. These loans generally have an interest-only phase during construction then convert to permanent financing. The maximum loan-to-value ratio applicable to these loans is generally 80%. At December 31, 2012, our total balance of commercial land development and residential land loans was $8.9 million. At December 31, 2012, our largest commercial real estate development loan relationship was $2.2 million, and was secured by developed land. At December 31, 2012, this loan relationship was considered a nonperforming loan. We are currently in the process of foreclosure and based on our most recent collateral value assessment, in addition to judgment liens on unencumbered real estate, management believes no additional provision for loan losses will be required.

We also occasionally make loans to builders and developers for the development of one- to four-family lots in our market area. Land loans are generally made in amounts up to a maximum loan-to-value ratio of 75% based upon an independent appraisal. It is our general policy to obtain personal guarantees for our land loans.

A majority of our mortgage construction loans are for the construction of residential properties and carry fixed rates. Most of our current residential construction loan originations are structured for permanent mortgage financing once the construction is completed. At December 31, 2012, our largest residential construction loan balance was $934,000, and was secured by the construction of a one- to four-family residence. At December 31, 2012 this loan was performing in accordance with its original terms.

We also make construction loans for commercial development projects such as hospitality, apartment, small retail and office buildings. These loans generally have an interest-only phase during construction then convert to permanent financing. Disbursements of construction loan funds are at our discretion based on the progress of construction and are processed through a title company. The maximum loan-to-value ratio limit applicable to these loans is generally 80%. At December 31, 2012, we had construction loans with an outstanding aggregate balance of $1.8 million and $2.2 million of undrawn commitments which were secured by commercial property. At December 31, 2012, our largest commercial construction loan balance was $650,000, and was secured by the construction of a golf course clubhouse. At December 31, 2012, this loan was performing in accordance with its original terms.

The majority of our current construction loans are subject to our normal underwriting procedures prior to being converted to permanent financing. Most of our current construction loans, once converted to permanent financing, repay over a twenty-year period. In addition, most of our current construction loans require only the payment of interest during the construction period. Most of our current construction loans are made in amounts of up to 80% of the lesser of the appraised value of the completed property or contract price plus value of the land improvements. Funds are disbursed based on our inspections in accordance with a schedule reflecting the completion of portions of the project.

In the past, we occasionally have made loans to builders and developers “on speculation” to finance the construction of residential property where justified by an independent appraisal. Whether we are willing to provide permanent takeout financing to the purchaser of the home is determined independently of the construction loan by a separate underwriting process. At December 31, 2012, we had no construction loans outstanding secured by one- to four-family residential property built on speculation. Given the current state of the economy and overall concerns with the construction development industry, we have exited this type of lending and do not anticipate a change in this strategy in the near future.

For all construction and land loans, we utilize outside independent appraisers approved by the Officer Loan Committee. All borrowers are required to obtain title insurance. We also require builders risk insurance on construction loans and, where circumstances warrant, flood insurance on properties.

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The table below sets forth, by type of construction and land loan, the amount of our construction and land loans, including the amount of such non-performing loans at December 31, 2012, all of which are secured by properties located in our market area.

	Net Principal Balance		Non-Performing
	(In thousands)
One- to four-family construction	$	1,108	$	—
Multi-family construction		30		—
Commercial construction		1,763		—
Land		8,857		2,958
Total construction and land loans	$	11,758	$	2,958

Construction and land lending generally affords us an opportunity to receive higher origination and other loan fees. In addition, such loans are generally made for relatively short terms. Nevertheless, construction and land lending to persons other than owner-occupants generally involve a higher level of credit risk than permanent one- to four-family residential lending due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on construction projects (including the current economic slowdown), real estate developers and managers. In particular, today’s slow real estate market will likely have a very significant impact on the ability of the borrower to sell the newly constructed units. In addition, the nature of these loans is such that they are more difficult to evaluate and monitor. Our risk of loss on a construction or land loan is dependent largely upon the accuracy of the initial estimate of the property’s value upon completion of the project (which may fluctuate based on market demand) and the estimated cost (including interest) of the project. If the estimate of value proves to be inaccurate, we may be confronted, at or prior to the maturity of the loan, with a project with a value that is insufficient to assure full repayment and/or the possibility of having to make substantial investments to complete and sell the project. Because defaults in repayment may not occur during the construction period, it may be difficult to identify problem loans at an early stage. When loan payments become due, the cash flow from the property may not be adequate to service the debt. In such cases, we may be required to modify the terms of the loan.

Consumer and Other Loans. We offer a variety of loans that are either unsecured or secured by assets other than real estate. The secured loans are secured by deposits, recreational vehicles or boats, and automobiles. Our automobile loans are originated directly by us and indirectly through local automobile dealerships. At December 31, 2012, these consumer and other loans totaled $5.0 million, or 1.58%, of the total loan portfolio. At December 31, 2012, $1.2 million, or 0.36% ,of our total loan portfolio consisted of indirect automobile loans, down from $2.2 million, or 0.75%, of our total loan portfolio at December 31, 2011.

The terms of our consumer and other loans vary according to the type of collateral, length of contract, and creditworthiness of the borrower. We generally will write indirect and direct automobile loans for up to 100% of the retail value for a new automobile and up to 100% of the wholesale value for a used automobile. The repayment schedule of loans covering both new and used vehicles is consistent with the expected life and normal depreciation of the vehicle. The majority of the loans for recreational vehicles and boats were originated by City Savings Bank prior to the City Savings Bank merger and were written for no more than 80% of the estimated sales price of the collateral, for a term that is consistent with its expected life and normal depreciation.

Consumer loans may entail greater credit risk than residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are likely to be affected by adverse personal circumstances and the overall economy, including the current weak economic environment. Furthermore, the application of various state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

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Loan Originations, Purchases and Sales. Our loan origination activities have been primarily concentrated in our local market area. New loans are generated primarily from local realtors, walk-in customers, customer referrals, and other parties with whom we do business, and from the efforts of commissioned residential mortgage originators and advertising. Loan applications are underwritten and processed at our main office.

From time to time, we purchase loans from third parties to supplement loan production. In particular, we may purchase loans of a type that are not available, or that are not available with as favorable terms, in our own market area. We generally use the same underwriting standards in evaluating loan purchases as we do in originating loans. We made no loan purchases during 2012. During 2011, we purchased one U.S. Department of Agriculture guaranteed loan from a third party. At December 31, 2012, $1.8 million, or less than 1% of our loan portfolio consisted of purchased loans. At December 31, 2012, all of our purchased loans were serviced by others.

We often sell some of our originated loans in the secondary market. We generally make decisions regarding the amount of loans we wish to sell based on interest rate and/or credit risk management considerations. For instance, during fiscal 2012 and fiscal 2011, we sold most of our fixed rate residential loan production as the low rate environment made such loans attractive to consumers but unattractive to us as long-term investments. We base our decision on servicing residential mortgage loans based on customer preference and adjust the rate accordingly. If a customer desires for us to service the residential mortgage loan then we generally sell the loan to Freddie Mac with servicing retained, otherwise we generally sell the residential mortgage loan with servicing released to a private investor. At December 31, 2012, we serviced $68.5 million of loans for others, the majority of which were mortgage loans serviced for Freddie Mac. In addition, we occasionally sell participation interests in our large, multi-family and commercial real estate loans in order to diversify our risk.

14

The following table shows our loan origination, sale and principal repayment activities during the years indicated. One commercial real estate loan was purchased during the years indicated.

	For the Years Ended December 31,
	2012			2011			2010
	(In thousands)
Total loans at beginning of period	$	298,954		$	276,913		$	258,929
Loans originated:
Real estate:
One- to four-family		49,634			39,244			45,217
Five or more family		3,181			6,919			5,408
Commercial		16,745			13,602			18,778
Construction		5,482			3,127			6,549
Land		211			2,246			2,558
Mortgage warehouse		2,787,842			1,988,579			2,636,203
Consumer and other loans:
Home equity		6,775			3,669			2,194
Commercial		9,285			6,750			4,072
Automobile and other		852			1,554			2,410
Total loans originated		2,880,007			2,065,690			2,723,389
Loans purchased:
Real estate:
One- to four-family		—			—			—
Five or more family		—			—			—
Commercial		—			1,007			—
Construction		—			—			—
Land		—			—			—
Consumer and other loans:
Home equity		—			—			—
Commercial		—			—			—
Automobile and other		—			—			—
Total loans sold		—			1,007			—
Loans sold:
Real estate:
One- to four-family		(49,916	)		(39,028	)		(40,762	)
Five or more family		—			—			—
Commercial		—			—			—
Construction		—			—			—
Land		—			—			—
Consumer and other loans:
Home equity		—			—			—
Commercial		—			—			—
Automobile and other		—			—			—
Total loans sold		(49,916	)		(39,028	)		(40,762	)
Deduct:
Principal repayments		(2,811,259	)		(2,005,628	)		(2,664,643	)
Net loan activity		18,832			22,041			17,984
Total loans at end of period (excluding net deferred loan fees and costs)	$	317,786		$	298,954		$	276,913

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Nonperforming Loans and Assets. We use the accrual method of accounting for all performing loans. The accrual of interest income is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing. When a loan is placed on nonaccrual status, unpaid interest previously credited to income is reversed. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectibility of principal. Generally, loans are restored to accrual status when the obligation is brought in accordance with the contractual terms for a reasonable period of time and ultimate collectibility of total contractual principal and interest is no longer in doubt. Loans considered to be troubled debt restructurings follow the same policy for accrual of interest income as mentioned above.

In our collection efforts, we will first attempt to cure any delinquent loan. If a real estate secured loan is placed on nonaccrual status, it will be subject to transfer to the other real estate owned (“OREO”) portfolio (properties acquired by or in lieu of foreclosure), upon which our loan servicing department will pursue the sale of the real estate. Prior to this transfer, the loan balance may be reduced, with a charge-off against the allowance for loan losses if necessary, to reflect its current market value less estimated costs to sell. Write downs of OREO that occur after the initial transfer from the loan portfolio and costs of holding the property are recorded as other operating expenses, except for significant improvements which are capitalized to the extent that the carrying value does not exceed estimated net realizable value.

Fair values for determining the value of collateral are estimated from various sources, such as real estate and equipment appraisals, financial statements and from any other reliable sources of available information. For those loans deemed to be impaired, collateral value is reduced for the estimated costs to sell. Reductions of collateral value are based on historical loss experience, current market data, and any other source of reliable information specific to the collateral.

This analysis process is inherently subjective, as it requires us to make estimates that are susceptible to revisions as more information becomes available. Although we believe that we have established the allowance for loan losses at levels to absorb probable incurred losses, future additions may be necessary if economic or other conditions in the future differ from the current environment.

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The table below sets forth the amounts and categories of our nonperforming assets at the dates indicated. None of our mortgage warehouse loans have been considered nonperforming assets at the dates indicated.

	At December 31,
	2012			2011			2010			2009			2008
	(Dollars in thousands)
Nonaccrual loans:
Real estate:
One- to four- family	$	1,831		$	1,325		$	1,224		$	1,059		$	449
Five or more family		—			—			—			—			—
Commercial		2,642			1,935			2,819			3,854			3,036
Construction		—			—			—			858			1,588
Land		2,985			2,800			2,468			1,169			—
Total real estate	$	7,458		$	6,060		$	6,511		$	6,940		$	5,073
Consumer and other loans:
Home equity		53			14			377			392			121
Commercial		—			28			—			381			1,535
Automobile and other		5			8			4			3			21
Total consumer and other loans	$	58		$	50		$	381		$	776		$	1,677
Total troubled debt restructured loans(1)		842			254			—			—			—
Total nonaccrual loans	$	8,358		$	6,364		$	6,892		$	7,716		$	6,750
Loans greater than 90 days delinquent and still accruing:
Real estate:
One- to four- family	$	—		$	—		$	—		$	—		$	—
Five or more family		—			—			—			—			—
Commercial		—			—			—			—			—
Construction		—			—			—			—			—
Land		—			—			—			—			—
Total real estate	$	—		$	—		$	—		$	—		$	—
Consumer and other loans:
Home equity		—			—			—			—			—
Commercial		—			—			—			—			—
Automobile and other		—			—			—			—			—
Total consumer and other loans	$	—		$	—		$	—		$	—		$	—
Total troubled debt restructured loans still accruing		—			—			—			—			—
Total nonperforming loans	$	8,358		$	6,364		$	6,892		$	7,716		$	6,750
Foreclosed assets:
One- to four- family	$	133		$	140		$	596		$	399		$	917
Five or more family		—			—			—			—			—
Commercial		384			365			530			155			—
Construction		—			—			—			—			—
Land		385			507			390			—			4
Consumer		—			—			—			—			—
Business assets		—			—			—			—			—
Total foreclosed assets	$	902		$	1,012		$	1,516		$	554		$	921
Total nonperforming assets	$	9,260		$	7,376		$	8,408		$	8,270		$	7,671
Ratios:
Nonperforming loans to total loans		2.63	%		2.13	%		2.49	%		2.98	%		3.04	%
Nonperforming assets to total assets		1.88	%		1.55	%		1.89	%		2.04	%		2.08	%

(1) At December 31, 2012, $127,000 of one- to four-family residential loans, $648,000 commercial real estate loans, $29,000 commercial loans and $38,000 automobile and other loans were classified as troubled debt restructured loans. At December 31, 2011, $129,000 of one- to four-family residential loans, $92,000 commercial real estate loans and $33,000 commercial loans were classified as troubled debt restructured loans.

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Total nonperforming loans increased $2.0 million to $8.4 million at December 31, 2012 compared to $6.4 million at December 31, 2011. The increase in nonperforming loans was due to the addition of four relationships totaling $1.9 million which moved to nonaccrual status during 2012. The first relationship totaled $508,000 at December 31, 2012 and was secured by a strip mall in Porter County. This relationship also includes an office building located in Porter County, Indiana which was moved to other real estate owned during the fourth quarter of 2012. The Company has an agreement to sell both of these properties with an expected closing during the second quarter of 2013. Management does not anticipate any additional losses as a result of this transaction. The second relationship totaled $588,000 at December 31, 2012 and is secured by a restaurant located in Lake County, Indiana. During the fourth quarter of 2012, this relationship was restructured into an A/B note structure and is classified as a troubled debt restructuring. The A note totaled $588,000 at December 31, 2012 and will remain in nonaccrual status for at least six months before management considers moving this note back to accrual status. The B note totaled $157,000 and was immediately charged-off at the time of restructuring. The third relationship totaled $433,000 at December 31, 2012 and is secured by a hotel located in LaPorte County, Indiana. The Company holds the first lien on this property with the United States Small Business Administration holding a second lien on the property. The final relationship totaled $390,000 at December 31, 2012 and is secured by several non-owner occupied rental properties and a residential property in LaPorte County, Indiana.

Nonperforming commercial real estate and land loans totaled $5.6 million at December 31, 2012, of which $3.0 million was attributable to one loan relationship secured primarily by developed land with close proximity to Lake Michigan that was originally intended for residential use. We are currently receiving payments through a bankruptcy filing granted to this borrower just prior to the sheriff sale during the third quarter of 2012.

For the year ended December 31, 2012, contractual gross interest income of $439,000, would have been recorded on non-performing loans if those loans had been current in accordance with their original terms and been outstanding throughout the year or since origination. For the year ended December 31, 2012, gross interest income that was recorded related to such non-performing loans totaled $29,000.

Troubled Debt Restructured Loans. A loan is considered a troubled debt restructuring if we grant a concession to the borrower and the borrower is experiencing financial difficulties. According to our current loan policy, loans with a risk grade of 5 or higher which are in the process of being renewed, refinanced or modified are reviewed by the Officer Loan Committee to determine if the loan should be considered a troubled debt restructuring. All other borrower requested modifications are reviewed by the Executive Vice President and Chief Credit Officer to determine if the loan should be considered a troubled debt restructuring. These loans may also be reviewed by the Officer Loan Committee. At December 31, 2012 and December 31, 2011, we had $842,000 and $254,000 in loans classified as troubled debt restructurings. At December 31, 2012, $127,000 of our troubled debt restructurings were one- to four-family residential loans, $648,000 were commercial real estate loans, $29,000 were commercial loans and $38,000 were automobile and other loans. All of these loans were in nonaccrual status as of December 31, 2012.

For the year ended December 31, 2012 and 2011, gross interest income that would have been recorded had our troubled debt restructurings been current in accordance with their original terms was $17,000 and $31,000, respectively. For the year ended December 31, 2012 and 2011, gross interest income that was recorded related to our troubled debt restructurings totaled $0 for both time periods.

Delinquencies and Problem Assets. After a real estate secured loan becomes 15 days late, or 10 days for consumer and commercial loans, we deliver a computer generated late charge notice to the borrower and will attempt to contact the borrower by telephone to make arrangements for payment. We attempt to make satisfactory arrangements to bring the account current, including interviewing the borrower, until the loan is brought current or a determination is made to recommend foreclosure, deed-in-lieu of foreclosure or other appropriate action. After a loan becomes delinquent between 20 and 30 days or more, we will generally refer the matter to the Management Collections Committee, comprised of the Executive Vice President and Chief Credit Officer, Assistant Vice President of Mortgage Warehousing and the Collections Manager, which may authorize legal counsel to commence foreclosure proceedings.

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All delinquent loans are reviewed on a regular basis and such loans are placed on nonaccrual status when they become more than 90 days delinquent with the only exception being with matured loans in which full payment of principal and interest is expected. When loans are placed on nonaccrual status, unpaid accrued interest for the current year is fully charged-off against interest income, any prior year unpaid accrued interest is charged-off against the allowance for loan losses, and further income is recognized only to the extent received, if there is no risk of loss of principal, in which case all payments are applied to principal.

The following table sets forth certain information with respect to our loan portfolio delinquencies by type and amount at the periods indicated. None of our mortgage warehouse loans have been delinquent at the periods indicated.

	Loans Delinquent For
	30-59 Days				60-89 Days				90 Days and Over				Total
	Number		Amount		Number		Amount		Number		Amount		Number		Amount
	(Dollars in thousands)
At December 31, 2012:
Real estate:
One- to four-family		11	$	524		3	$	283		12	$	1,469		26	$	2,276
Five or more family		—		—		—		—		—		—		—		—
Commercial		5		1,019		1		24		14		2,642		20		3,685
Construction		—		—		—		—		—		—		—		—
Land		—		—		1		109		5		2,494		6		2,603
Total real estate		16		1,543		5		416		31		6,605		52		8,564
Consumer and other loans:
Home equity		2		21		—		—		2		25		4		46
Commercial		3		66		—		—		—		—		3		66
Automobile and other		3		13		—		—		3		5		6		18
Total consumer and other loans		8		100		—		—		5		30		13		130
Total		24	$	1,643		5	$	416		36	$	6,635		65	$	8,694
At December 31, 2011:
Real estate:
One- to four-family		14	$	1,292		1	$	55		9	$	1,115		24	$	2,462
Five or more family		1		43		—		—		—		—		1		43
Commercial		3		1,058		2		127		9		1,589		14		2,774
Construction		—		—		—		—		—		—		—		—
Land		1		216		—		—		3		2,248		4		2,464
Total real estate		19		2,609		3		182		21		4,952		43		7,743
Consumer and other loans:
Home equity		—		—		—		—		1		14		1		14
Commercial		—		—		—		—		2		28		2		28
Automobile and other		3		27		1		14		3		8		7		49
Total consumer and other loans		3		27		1		14		6		50		10		91
Total		22	$	2,636		4	$	196		27	$	5,002		53	$	7,834
At December 31, 2010:
Real estate:
One- to four-family		16	$	1,200		—	$	—		11	$	1,021		27	$	2,221
Five or more family		1		48		—		—		—		—		1		48
Commercial		6		1,328		—		—		9		1,580		15		2,908
Construction		—		—		—		—		—		—		—		—
Land		1		44		—		—		2		220		3		264
Total real estate		24		2,620		—		—		22		2,821		46		5,441
Consumer and other loans:
Home equity		—		—		1		377		—		—		1		377
Commercial		—		—		1		35		—		—		1		35
Automobile and other		7		184		—		—		3		4		10		188
Total consumer and other loans		7		184		2		412		3		4		12		600
Total		31	$	2,804		2	$	412		25	$	2,825		58	$	6,041

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	Loans Delinquent For
	30-59 Days				60-89 Days				90 Days and Over				Total
	Number		Amount		Number		Amount		Number		Amount		Number		Amount
	(Dollars in thousands)
At December 31, 2009:
Real estate:
One- to four-family		14	$	850		2	$	53		9	$	878		25	$	1,781
Five or more family		—		—		—		—		—		—		—		—
Commercial		6		1,374		—		—		11		3,855		17		5,229
Construction		—		—		—		—		1		858		1		858
Land		1		699		—		—		4		1,169		5		1,868
Total real estate		21		2,923		2		53		25		6,760		48		9,736
Consumer and other loans:
Home equity		7		419		—		—		2		376		9		795
Commercial		—		—		1		45		3		381		4		426
Automobile and other		13		113		1		6		3		3		17		122
Total consumer and other loans		20		532		2		51		8		760		30		1,343
Total		41	$	3,455		4	$	104		33	$	7,520		78	$	11,079
At December 31, 2008:
Real estate:
One- to four-family		14	$	1,076		2	$	118		3	$	314		19	$	1,508
Five or more family		1		57		—		—		—		—		1		57
Commercial		6		739		1		2,023		3		777		10		3,539
Construction		—		—		1		953		4		635		5		1,588
Land		—		—		1		111		—		—		1		111
Total real estate		21		1,872		5		3,205		10		1,726		36		6,803
Consumer and other loans:
Home equity		4		105		1		17		5		99		10		221
Commercial		2		68		4		1,075		4		491		10		1,634
Automobile and other		15		142		1		6		4		21		20		169
Total consumer and other loans		21		315		6		1,098		13		611		40		2,024
Total		42	$	2,187		11	$	4,303		23	$	2,337		76	$	8,827

Classified Assets. Banking regulations and our Asset Classification Policy provide that loans and other assets considered to be of lesser quality should be classified as “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. We classify an asset as “special mention” if the asset has a potential weakness that warrants management’s close attention. While such assets are not impaired, management has concluded that if the potential weakness in the asset is not addressed, the value of the asset may deteriorate, thereby adversely affecting the repayment of the asset.

An institution is required to establish specific allowances for loan losses in an amount deemed prudent by management for loans classified substandard or doubtful, as well as for other problem loans. General allowances represent loss allowances which have been established to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge off such amount. Our determination as to the classification of our assets and the amount of our valuation allowances are subject to review by the Indiana Department of Financial Institutions and the Federal Deposit Insurance Corporation which can order the establishment of additional general or specific loss allowances.

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On the basis of management’s review of our assets, at December 31, 2012, we identified approximately $11.4 million of our assets as special mention and classified and $12.7 million as substandard. Substandard loans increased $3.7 million at December 31, 2012 when compared to December 31, 2011, primarily due to a $2.5 million commercial real estate relationship moving from special mention to substandard during the year. A line of credit within this relationship was renewed during the first quarter of 2012 and the review of the relationship’s financial performance resulted in a downgrade. The global financial performance for the relationship although improving over the last several years, has continued to be stressed due to the current weak economic environment and its impact on the primary borrower’s industry, which consists of supplying materials to the construction industry. The relationship includes a corporate guarantor which strengthens the relationships global cash flow. The corporate guarantor is in the nonrelated industry of real estate leasing. Additional personal guarantees were also obtained at the renewal. The borrower has kept all obligations current and therefore the relationship remained in accrual status at December 31, 2012. Since the renewal during the first quarter of 2012, this relationship has been reduced by $507,000 primarily due to the sale of a property and the global financial performance continues to show consistent improvement, although the primary borrower’s industry remains stressed. Management also reviewed this renewal for consideration as a troubled debt restructuring. As we did not grant a concession, this relationship was not considered to be a troubled debt restructuring. At December 31, 2012, none of our assets were classified as loss.

The loan portfolio is reviewed on a regular basis to determine whether any loans require classification in accordance with applicable regulations. Not all classified assets constitute nonperforming assets.

On the basis of this review of our assets, we had classified or identified as special mention the following assets as of the date indicated:

	At December 31,
	2012		2011		2010
	(In thousands)
Special mention	$	11,404	$	17,741	$	6,593
Substandard		12,712		9,026		10,272
Doubtful		—		61		1,215
Loss		—		—		—
Total classified and special mention assets	$	24,116	$	26,828	$	18,080

Other than as provided above, there are no potential problem loans that are accruing but where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of such borrowers to comply with present loan repayment terms.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors.

A loan is impaired when full payment under the loan terms is not expected. All individually classified commercial and commercial real estate loans are evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

21

We are subject to periodic examinations by our federal and state regulatory examiners and may be required by such regulators to recognize additions to the allowance for loan losses based on their assessment of credit information available to them at the time of their examinations. The process of assessing the adequacy of the allowance for loan losses is necessarily subjective. Further, and particularly in times of economic weakness, it is reasonably possible that future credit losses may exceed historical loss levels and may also exceed management’s current estimates of incurred credit losses inherent within the loan portfolio. As such, there can be no assurance that future charge-offs will not exceed management’s current estimate of what constitutes a reasonable allowance for loan losses.

We acquired a group of loans through the acquisition of City Savings Bank on October 12, 2007. Acquired loans that showed evidence of credit deterioration since their origination were recorded at an allocated fair value, such that there is no carryover of the seller’s specific allowance for loan losses for those loans. After acquisition, incurred losses are recognized by an increase in the allowance for loan losses.

While management uses available information to recognize probable and reasonably estimable loan losses, future loss provisions may be necessary based on changing economic conditions. Payments received on impaired loans that are on nonaccrual are applied first to principal until there is no risk of loss of the principal. The allowance for loan losses is maintained at a level that represents management’s best estimate of losses inherent in the loan portfolio, and such losses were both probable and reasonably estimable.

22

The following table sets forth activity in our allowance for loan losses for the years indicated. We have not experienced any charge-offs or recoveries in our mortgage warehouse portfolio for the years indicated.

	At or For the Years Ended December 31,
	2012			2011			2010			2009			2008
	(Dollars in thousands)
Balance at beginning of period	$	3,772		$	3,943		$	2,776		$	2,512		$	1,797
Charge-offs:
Real estate:
One- to four- family		(84	)		(132	)		(172	)		(213	)		(130	)
Five or more family		—			—			—			—			—
Commercial		(370	)		(1,057	)		(1,107	)		(1	)		—
Construction		—			—			(558	)		(30	)		—
Land		—			(27	)		—			—			—
Total real estate		(454	)		(1,216	)		(1,837	)		(244	)		(130	)
Consumer and other loans:
Home equity		(35	)		(52	)		(105	)		(28	)		(35	)
Commercial		(13	)		—			(313	)		(268	)		(222	)
Automobile and other		(67	)		(62	)		(78	)		(100	)		(96	)
Total consumer and other loans		(115	)		(114	)		(496	)		(396	)		(353	)
Total charge-offs		(569	)		(1,330	)		(2,333	)		(640	)		(483	)
Recoveries:
Real estate:
One- to four- family		2			—			—			—			1
Five or more family		—			—			—			—			—
Commercial		8			—			—			—			—
Construction		—			—			—			—			—
Land		—			—			—			—			—
Total real estate		10			—			—			—			1
Consumer and other loans:
Home equity		1			2			—			1			2
Commercial		38			—			—			9			5
Automobile and other		19			20			28			43			65
Total consumer and other loans		58			22			28			53			72
Total recoveries		68			22			28			53			73
Net (charge-offs) recoveries		(501	)		(1,308	)		(2,305	)		(587	)		(410	)
Provision for loan losses		1,037			1,137			3,472			851			1,125
Allowance acquired through merger (general reserve only)		—			—			—			—			—
Balance at end of period	$	4,308		$	3,772		$	3,943		$	2,776		$	2,512
Ratios:
Net charge-offs to average loans outstanding		0.17	%		0.50	%		0.87	%		0.25	%		0.19	%
Allowance for loan losses to nonperforming loans at end of period		51.54	%		59.27	%		57.21	%		35.98	%		37.21	%
Allowance for loan losses to total loans at end of period		1.35	%		1.26	%		1.42	%		1.07	%		1.13	%

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Allocation of Allowance for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category, the total loan balances by category, and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

	At December 31,
	2012							2011
	Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Real estate:
One- to four- family	$	401	$	36,996		11.64	%	$	374	$	45,576		15.25	%
Five or more family		279		14,284		4.49			422		17,719		5.93
Commercial		1,867		79,816		25.12			1,868		80,430		26.90
Construction		36		2,901		0.91			31		3,806		1.27
Land		877		8,857		2.79			233		9,634		3.22
Total real estate		3,460		142,854		44.95			2,928		157,165		52.57
Mortgage warehouse		601		137,467		43.26			393		103,864		34.74
Consumer and other:
Home equity		130		12,267		3.86			119		12,966		4.34
Commercial		74		20,179		6.35			223		18,017		6.03
Automobile and other		43		5,019		1.58			109		6,942		2.32
Total consumer and other		247		37,465		11.79			451		37,925		12.69
Total loans (excluding net deferred loan fees and costs)	$	4,308	$	317,786		100.00	%	$	3,772	$	298,954		100.00	%
	At December 31,
	2010							2009
	Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Real estate:
One- to four- family	$	389	$	57,144		20.64	%	$	378	$	70,126		27.08	%
Five or more family		216		11,586		4.18			77		6,743		2.61
Commercial		2,311		79,807		28.82			1,300		75,506		29.16
Construction		108		6,832		2.47			46		5,420		2.09
Land		185		10,795		3.90			221		11,753		4.54
Total real estate		3,209		166,164		60.01			2,022		169,548		65.48
Mortgage warehouse		139		69,600		25.13			176		43,765		16.90
Consumer and other:
Home equity		142		14,187		5.12			215		15,704		6.07
Commercial		344		17,977		6.49			238		18,122		7.00
Automobile and other		109		8,985		3.25			125		11,790		4.55
Total consumer and other		595		41,149		14.86			578		45,616		17.62
Total loans (excluding net deferred loan fees and costs)	$	3,943	$	276,913		100.00	%	$	2,776	$	258,929		100.00	%

24

	At December 31,
	2008
	Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Real estate:
One- to four- family	$	372	$	84,706		38.10	%
Five or more family		55		5,200		2.34
Commercial		933		65,078		29.27
Construction		52		7,736		3.48
Land		138		11,016		4.95
Total real estate		1,550		173,736		78.14
Mortgage warehouse		—		—		—
Consumer and other:
Home equity		86		15,579		7.01
Commercial		747		19,390		8.72
Automobile and other		129		13,622		6.13
Total consumer and other		962		48,591		21.86
Total loans (excluding net deferred loan fees and costs)	$	2,512	$	222,327		100.00	%

Securities Activities

Our securities investment policy is established by our Board. This policy dictates that investment decisions be made based on the safety of the investment, liquidity requirements, potential returns, cash flow targets, and consistency with our interest rate risk management strategy.

Our investment policy is reviewed annually by our Board and all policy changes recommended by management must be approved by the Board. Authority to make investments under the approved guidelines are delegated to appropriate officers. While general investment strategies are developed and authorized by the Board, the execution of specific actions with respect to securities held by The LaPorte Savings Bank rests with the Chief Executive Officer and President/Chief Financial Officer. The Chief Executive Officer and President/Chief Financial Officer are authorized to execute investment transactions with respect to securities held by The LaPorte Savings Bank within the scope of the established investment policy.

We have retained an independent financial institution to provide us with portfolio accounting services, including a monthly portfolio performance analysis of our securities portfolio. These reports, together with another third party review provided quarterly, are reviewed by management in making investment decisions. The Asset/Liability Management Committee and the Board review a summary of these reports on a monthly basis. We also use this financial institution along with other third party brokers to effect security purchases and sales.

25

On October 1, 2011, The LaPorte Savings Bank formed a wholly-owned subsidiary, LSB Investments, Inc., a Nevada corporation (“LSB Investments”) after receiving approval from the Indiana Department of Financial Institutions. A significant portion of our investment securities were transferred to and held by LSB Investments, consisting of mortgage-backed securities, municipal bonds and agency securities. At December 31, 2012, the fair value of such securities held by LSB Investments was $64.0 million. In addition, at December 31, 2012, interest-earning time deposits were also held by LSB Investments. Because LSB Investments is located in Nevada and makes decisions independently from The LaPorte Savings Bank, the earnings attributable on such securities are not taxable to us for Indiana state income tax purposes. Investment decisions with respect to LSB Investments are made by a third party company based in Nevada, The Key State Companies, who have performed such services for over 20 years for other financial institutions. In general, The Key State Companies utilize investment guidelines similar to ours. The board of LSB Investments consists of two employees of The LaPorte Savings Bank and one employee of The Key State Companies to ensure effective oversight.

Our current investment policy generally permits security investments in debt securities issued by the U.S. government and U.S. agencies, municipal bonds, and corporate debt obligations, as well as investments in common stock of the Federal Home Loan Bank of Indianapolis. The policy permits investments in mortgage-backed securities, including pass-through securities issued and guaranteed by Fannie Mae, Freddie Mac, Ginnie Mae and the U.S. Small Business Administration. In addition, we may invest in Collateralized Mortgage Obligations (“CMOs”), Real Estate Mortgage Investment Conduits (“REMICs”) and other mortgage-related products, corporate debt, interest-earning time deposits and Community Reinvestment Act Qualified Investment Funds. The Company has established guidelines and limitations in certain sectors of the securities portfolio and any exceptions are reported to the Board of Directors. At December 31, 2012, there were no exceptions to these guidelines and limitations to report.

Our investment policy outlines the pre-purchase analysis, credit and interest rate risk assessment guidelines and due diligence documentation required for all permissible investments. In addition, our policy requires management to routinely monitor the investment portfolio as well as the markets for changes which may have a material, negative impact on the credit of our holdings. We engage an independent third party to review municipal and corporate securities annually.

At the time of purchase, we designate a security as held-to-maturity, available-for-sale, or trading, depending on our ability and intent. Securities available for sale or trading are reported at fair value, while securities held to maturity are reported at amortized cost. All of our securities are classified as available-for-sale.

Some of our securities are callable by the issuer. Although these securities may have a yield somewhat higher than the yield of similar securities without such features, these securities are subject to the risk that they may be redeemed by the issuer prior to maturing in the event general interest rates decline. At December 31, 2012, we had $31.2 million of securities which were subject to redemption by the issuer prior to their stated maturity.

In part as a result of their attractive after tax yields, we have increased our acquisitions of state and municipal securities. Permissible municipal investments include both general obligation and revenue issues which are rated in one of the four highest rating categories by a nationally recognized statistical rating organization and for which a pre-purchase safety and soundness banking assessment is completed. Investment in local state non-rated municipal securities are considered only after the creditworthiness of the issuer has been analyzed and determined to be a prudent, safe and sound investment as outlined in the investment policy. We also invest in taxable municipal securities. At December 31, 2012, we held $5.6 million in taxable municipal securities.

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We purchase mortgage-backed securities in order to generate positive interest rate spreads with limited administrative expense, limited credit risk and significant liquidity. We also use mortgage-backed securities to supplement our lending activities. Mortgage-backed securities are created by pooling mortgages and issuing a security collateralized by the pool of mortgages with an interest rate that is less than the interest rate on the underlying mortgages. Mortgage-backed securities typically represent a participation interest in a pool of single-family or multi-family mortgages, although most of our mortgage-backed securities are collateralized by single-family mortgages. The issuers of such securities (generally U.S. government agencies and U.S. government-sponsored enterprises, including Fannie Mae, Freddie Mac and Ginnie Mae) pool and resell the participation interests in the form of securities to investors, such as The LaPorte Savings Bank, and guarantee the payment of principal and interest to these investors. Mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements. However, mortgage-backed securities are usually more liquid than individual mortgage loans and may be used to collateralize borrowings and other liabilities.

Investments in mortgage-backed securities involve a risk that actual prepayments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments, thereby affecting the net yield on such securities. We review prepayment estimates for our mortgage-backed securities at the time of purchase to ensure that prepayment assumptions are reasonable considering the underlying collateral for the securities at issue and current interest rates, and to determine the yield and estimated maturity of the mortgage-backed securities portfolio. Periodic reviews of current prepayment speeds are performed in order to ascertain whether prepayment estimates require modification that would cause amortization or accretion adjustments.

Collateralized mortgage obligations are also backed by mortgages; however, they differ from mortgage-backed securities because the principal and interest payments of the underlying mortgages are financially engineered to be paid to the security holders of pre-determined classes or tranches of these securities at a faster or slower pace. The receipt of these principal and interest payments, which depends on the proposed average life for each class, is contingent on a prepayment speed assumption assigned to the underlying mortgages. Variances between the assumed payment speed and actual payments can significantly alter the average lives of such securities. To quantify and mitigate this risk, we undertake a high level of payment analysis before purchasing these securities. We invest in collateralized mortgage obligations classes or tranches in which the payments on the underlying mortgages are passed along at a pace fast enough to provide an average life of two to five years with no change in market interest rates. At December 31, 2012, our collateralized mortgage obligations portfolio had a fair value of $55.2 million and were issued by either a U.S. government-sponsored enterprise or the U.S. Small Business Administration.

We hold Federal Home Loan Bank of Indianapolis common stock to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the Federal Home Loan Bank of Indianapolis advance program. There is no trading market for the Federal Home Loan Bank of Indianapolis stock. The aggregate carrying value of our Federal Home Loan Bank of Indianapolis stock as of December 31, 2012 was $3.8 million based on its par value. No unrealized gains or losses have been recorded because we have determined that the par value of the Federal Home Loan Bank of Indianapolis stock represents its carrying value. However, there can be no assurance that the value of such securities will not decline in the future. We owned shares of Federal Home Loan Bank of Indianapolis stock at December 31, 2012 with a par value that was more than we were required to own to maintain our membership in the Federal Home Loan Bank System and to be eligible to obtain advances. We are required to purchase additional stock if our outstanding advances increase.

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We review equity and debt securities with significant declines in fair value on a periodic basis to determine whether they should be considered temporarily or other than temporarily impaired. In making these determinations, management considers: (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) our intent not to sell the security and whether it is more likely than not that we will be required to sell the debt security before its anticipated recovery. For fixed maturity investments with unrealized losses due to interest rates where it is not more likely than not that we will be required to sell the debt security before its anticipated recovery, declines in value below cost are not assumed to be other than temporary. If a decline in the fair value of a security is determined to be other than temporary, the amount of impairment is split into two components as follows: (1) other than temporary impairment related to credit loss, which must be recognized in the income statement and (2) other than temporary impairment related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows to be expected to be collected and the amortized cost basis. There were no charges related to other than temporary impairment on securities held by us during the year ended December 31, 2012 or the year ended December 31, 2011.

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All of our securities are classified as available-for-sale. The following table sets forth the composition of our investment securities portfolio at the dates indicated.

	At December 31,
	2012				2011				2010
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Securities available-for-sale:
U.S. Treasury and federal agency	$	8,045	$	8,405	$	12,187	$	12,601	$	20,950	$	21,080
State and municipal		42,161		45,614		40,012		43,106		39,779		39,828
Mortgage-backed securities—residential		11,819		12,385		30,946		31,789		25,009		25,430
Government agency sponsored collateralized mortgage obligations		54,070		55,156		43,491		44,478		32,943		33,009
Privately issued collateralized mortgage obligations		—		—		—		—		29		30
Corporate debt securities		3,959		4,060		—		—		—		—
Total securities available-for-sale	$	120,054	$	125,620	$	126,636	$	131,974	$	118,710	$	119,377

At December 31, 2012, all of our mortgage-backed securities were issued by U.S. government-sponsored enterprises and all of our collateralized mortgage obligations were issued by either U.S. government-sponsored enterprises or the U.S. Small Business Administration.

At December 31, 2012, we had no investments in a single entity (other than United States government or agency sponsored securities) that had an aggregate book value in excess of 10% of our shareholders’ equity.

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The composition and contractual maturities of the investment securities portfolio at December 31, 2012 are summarized in the following table. Mortgage-backed securities are anticipated to be repaid in advance of their contractual maturities as a result of projected mortgage loan prepayments. In addition, under the structure of some of our collateralized mortgage obligations, the short- and intermediate-tranche interests have repayment priority over the longer term tranches of the same underlying mortgage pool. Finally, some of our U.S. Treasury and other securities are callable at the option of the issuer.

	One Year or Less					More than One Year through Five Years					More than Five Years through Ten Years					More than Ten Years					Total Securities
	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in thousands)
Securities available-for-sale:
U.S. Treasury and federal agency	$	—		—	%	$	8,045		2.40	%	$	—		—	%	$	—		—	%	$	8,045	$	8,405		2.40	%
State and municipal		—		—			3,678		3.34			16,683		3.22			21,800		4.22			42,161		45,614		3.75
Mortgage-backed securities—residential		—		—			—		—			1,281		1.98			10,538		3.15			11,819		12,385		3.02
Government agency sponsored collateralized mortgage obligations		—		—			294		3.82			5,046		1.61			48,730		2.17			54,070		55,156		2.12
Corporate debt securities		—		—			3,959		3.09			—		—			—		—			3,959		4,060		3.09
Total securities available-for-sale	$	—		—	%	$	15,976		2.81	%	$	23,010		2.80	%	$	81,068		2.85	%	$	120,054	$	125,620		2.83	%

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The following table shows our mortgage-backed securities and collateralized mortgage obligations purchase, sale and repayment activity during the periods indicated:

	For the years ended December 31,
	2012			2011			2010
	(In thousands)
Total at beginning of year	$	74,437		$	57,981		$	56,564
Purchases of:
Mortgage-backed securities—residential		2,615			25,563			19,509
Government agency sponsored collateralized mortgage obligations		28,114			18,188			24,062
Deduct:
Principal repayments		(14,951	)		(14,016	)		(16,558	)
Sales of:
Mortgage-backed securities—residential		(16,509	)		(11,064	)		(14,548	)
Government agency sponsored collateralized mortgage obligations		(7,817	)		(2,215	)		(10,423	)
Privately issued collateralized mortgage obligations		—			—			(625	)
Net activity		(8,548	)		16,456			1,417
Total at end of year	$	65,889		$	74,437		$	57,981

Sources of Funds

General. Deposits, borrowings, repayments and prepayments of loans and securities, proceeds from maturing securities and cash flows from operations are the primary sources of our funds for use in lending, investing and for other general purposes.

Deposits. We offer a variety of deposit accounts with a range of interest rates and terms. Our deposit accounts consist of savings accounts, health savings accounts, NOW accounts, checking accounts, money market accounts, certificates of deposit and IRAs. We also provide commercial checking accounts for businesses.

At December 31, 2012, our deposits totaled $349.0 million. Interest-bearing NOW, regular and other savings and money market deposits totaled $173.2 million at December 31, 2012. At December 31, 2012, we had a total of $124.8 million in certificates of deposit and individual retirement accounts. Noninterest bearing demand deposits totaled $50.9 million. A significant portion of our deposits are liquid money market accounts ($63.8 million at December 31, 2012). We monitor activity on these accounts and, based on our historical experience and our current pricing strategy, we believe we will maintain a large portion of these accounts in the near future. However, $34.1 million of these money market accounts are public fund deposits at December 31, 2012 which may be withdrawn with little notice.

Our deposits are obtained predominantly from the areas in which our branch offices are located. We rely on our favorable locations, customer service and competitive pricing to attract and retain these deposits. While we accept certificates of deposit in excess of $100,000 for which we may provide preferential rates, we generally do not solicit such deposits as they are more difficult to retain than core deposits. At December 31, 2012, we held $20.9 million in brokered certificates of deposits through the Certificate of Deposit Registry Service (“CDARS”) program and pre-approved brokers. During the fourth quarter of 2009, we acquired $10.8 million in floating rate CDARS funds and took out a $10.3 million fixed rate interest rate swap for five years in order to address the potential for rising interest rates. During the third quarter of 2010, we acquired $5.3 million in fixed rate individual time deposit accounts through a pre-approved broker. These time deposits will mature in September 2020, however, they have the option to be called monthly beginning on September 15, 2012. We took out a $5.0 million variable rate fair value swap with matching maturity and call terms to these individual time deposits. On September 15, 2012, the fair value swap was called resulting in the Bank calling these time deposits as well. As of December 31, 2012, all of our brokered certificates of deposit were purchased through CDARS. Brokered certificates of deposits are purchased only through CDARS and pre-approved brokers.

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The following table sets forth the distribution of total deposit accounts, by account type, at and for the dates indicated.

	At or for the Year Ended December 31,
	2012								2011
	Average Balance		Balance		Percent			Weighted Average Rate	Average Balance			Balance		Percent			Weighted Average Rate
	(Dollars in thousands)
Noninterest-bearing demand	$	44,016	$	50,892		14.58	%	—  %		$	37,019	$	38,977		11.68	%		—	%
Money market/NOW accounts		111,283		116,666		33.43		0.42			100,048		109,913		32.95			0.42
Regular savings		54,058		56,581		16.21		0.05			48,660		50,395		15.11			0.05
Total transaction accounts		209,357		224,139		64.23		0.23			185,727		199,285		59.74			0.24
CDs and IRAs		135,334		124,831		35.77		1.39			143,650		134,275		40.26			1.88
Total deposits	$	344,691	$	348,970		100.00	%	0.65%		$	329,377	$	333,560		100.00	%		0.90	%

	At or for the Year Ended December 31,
	2010
	Average Balance		Balance		Percent			Weighted Average Rate
	(Dollars in thousands)
Noninterest-bearing demand	$	35,865	$	34,999		11.03	%		—	%
Money market/NOW accounts		73,119		87,271		27.50			0.74
Regular savings		45,363		46,563		14.67			0.11
Total transaction accounts		154,347		168,833		53.20			0.41
CDs and IRAs		148,585		148,505		46.80			2.38
Total deposits	$	302,932	$	317,338		100.00	%		1.33	%

As of December 31, 2012, the aggregate amount of our outstanding time certificates in amounts greater than or equal to $100,000 was approximately $47.6 million. The following table sets forth the maturity of these certificates as of December 31, 2012.

	At December 31, 2012
	(In thousands)
Three months or less	$	24,314
Over three months through six months		2,815
Over six months through one year		4,237
Over one year		16,196
Total	$	47,562

Borrowings

From time to time during recent years, we have utilized short-term borrowings to fund loan demand. We have also used borrowings where market conditions permit us to purchase securities of a similar duration in order to increase our net interest income by the amount of the spread between the asset yield and the borrowing cost. Finally, from time to time, we have obtained advances with terms of three years or more to extend the term of our liabilities.

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We may obtain advances from the Federal Home Loan Bank of Indianapolis collateralized by our capital stock in the Federal Home Loan Bank of Indianapolis and certain of our mortgage, home equity and commercial real estate loans and mortgage-backed securities. Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. To the extent such borrowings have different maturities or repricing terms than our deposits, our interest rate risk profile may change.

Our borrowings consist of advances and overnight borrowings from the Federal Home Loan Bank of Indianapolis. Based on our current Federal Home Loan Bank of Indianapolis stock ownership, at December 31, 2012 and December 31, 2011, we had access to additional Federal Home Loan Bank of Indianapolis advances of up to $26.8 million and $2.8 million, respectively, and access to additional overnight borrowings of up to $8.0 million and $10.0 million at the Federal Reserve Bank (“FRB”) discount window, and access to additional short term borrowings of up to $15.0 million and $20.0 million at First Tennessee Bank. If we increased our ownership in Federal Home Loan Bank stock to the maximum allowable and increased our pledged collateral accordingly, we could borrow an additional $2.1 million from the Federal Home Loan Bank of Indianapolis. During 2012, we entered into an agreement with Zions First National Bank to borrow federal funds up to $9.0 million. The following table sets forth information concerning balances and interest rates on our borrowings at the dates and for the periods indicated. For additional information, see Notes 9 and 10 of the Notes to our Consolidated Financial Statements.

	At or For the Years Ended December 31,
	2012			2011			2010
	(Dollars in thousands)
FHLB Advances:
Balance at end of year	$	49,009		$	72,021		$	61,675
Average balance during year		53,292			52,180			53,288
Maximum outstanding at any month end		74,510			74,688			78,946
Weighted average interest rate at end of year		1.15	%		1.18	%		1.94	%
Average interest rate during year		2.27	%		2.81	%		3.93	%
FRB Discount Window:
Balance at end of year	$	—		$	—		$	—
Average balance during year		—			—			1,457
Maximum outstanding at any month end		—			—			15,655
Weighted average interest rate at end of year		—	%		—	%		—	%
Average interest rate during year		—	%		—	%		0.74	%
FTN Borrowings:
Balance at end of year	$	—		$	—		$	—
Average balance during year		100			552			36
Maximum outstanding at any month end		8,986			11,000			4,150
Weighted average interest rate at end of year		—	%		—	%		—	%
Average interest rate during year		1.00	%		1.09	%		—	%
Zions Bank Advance:
Balance at end of year	$	—		$	—		$	—
Average balance during year		134			—			—
Maximum outstanding at any month end		9,000			—			—
Weighted average interest rate at end of year		—	%		—	%		—	%
Average interest rate during year		0.75	%		—	%		—	%

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In 2007, the Company assumed subordinated debentures as a result of the City Savings Financial Corporation acquisition. In 2003, City Savings Financial Corporation formed the City Savings Bank Statutory Trust I (the “Trust”) and the trust issued 5,000 floating Trust Preferred Securities (the “Securities”) with a liquidation amount of $1,000 per preferred security in a private placement to an offshore entity for an aggregate offering price of $5,000,000. The proceeds of the $5,000,000 were used by the Trust to purchase $5,155,000 in Floating Rate Subordinated Debentures (the “Debentures”) from City Savings Financial Corporation. The Debentures and Securities have a term of 30 years and carry an interest rate adjusted quarterly of three month LIBOR plus 3.10%. At December 31, 2012, this rate was 3.41%.

On April 15, 2009, the Company executed an interest rate swap against the $5.0 million floating rate debentures for five years at an effective fixed rate of 5.54%.

In addition, during February 2009, The LaPorte Savings Bank issued a $5.0 million note due February 15, 2012 under the FDIC Temporary Debt Guarantee Program. The note bore an interest rate of 2.74% in addition to the 100 basis point FDIC guarantee fee paid by The LaPorte Savings Bank. All legal and placement fees associated with this transaction were capitalized as debt issuance costs and were amortized to interest expense over the repayment period. This note was paid in full on February 15, 2012.

In February 2010, The LaPorte Savings Bank executed two interest rate swaps against $15.0 million in maturing FHLB advances. The first interest rate swap was against a $10.0 million adjustable rate advance tied to the three month LIBOR plus 0.25% for six years at an effective fixed rate of 3.69% and began in July 2010. The second interest rate swap was against a $5.0 million adjustable rate advance tied to the three month LIBOR plus 0.22% for five years with an effective fixed rate of 3.54% and began in September 2010.

Subsidiary Activities

The Company has two subsidiaries, The LaPorte Savings Bank and City Savings Statutory Trust I. The LaPorte Savings Bank has one subsidiary, LSB Investments, Inc. During the first quarter of 2013, the Company established LSB Real Estate, Inc. which is a subsidiary of LSB Investments, Inc.

Employees

As of December 31, 2012, we had 100 full-time employees and 12 part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good working relations with our employees.

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SUPERVISION AND REGULATION

General

The LaPorte Savings Bank is an Indiana-chartered savings bank that is regulated, examined and supervised by the Indiana Department of Financial Institutions and the Federal Deposit Insurance Corporation (the “FDIC”). This regulation and supervision establishes a comprehensive framework of activities in which an institution may engage and is intended primarily for the protection of the FDIC’s deposit insurance fund and depositors, and not for the protection of security holders. Under this system of state and federal regulation, financial institutions are periodically examined to ensure that they satisfy applicable standards with respect to their capital adequacy, assets, management, earnings, liquidity and sensitivity to market interest rates. The Bank also is regulated to a lesser extent by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) governing reserves to be maintained against deposits and other matters. The FDIC and the Indiana Department of Financial Institutions examine the Bank and prepares reports for the consideration of its Board of Directors on any operating deficiencies. The Bank’s relationship with its depositors and borrowers also is regulated to a great extent by federal law and, to a much lesser extent, state law, especially in matters concerning the ownership of deposit accounts and the form and content of the Bank’s loan documents. The Bank is also a member of and owns stock in the Federal Home Loan Bank of Indianapolis, which is one of the twelve regional banks in the Federal Home Loan Bank System.

As a savings and loan holding company, the Company is required to comply with the rules and regulations of the Federal Reserve Board. It is required to file certain reports with and is subject to examination by and the enforcement authority of the Federal Reserve Board. The Company is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Any change in applicable laws or regulations, whether by the FDIC, the Indiana Department of Financial Institutions, the Federal Reserve Board or Congress, could have a material adverse impact on the Company and the Bank and their operations.

Set forth below is a brief description of material regulatory requirements that are applicable to the Bank and the Company. The description is limited to certain material aspects of the statutes and regulations addressed and is not intended to be a complete description of such statutes and regulations and their effects on the Bank and the Company.

Dodd-Frank Act

The Dodd-Frank Act significantly changed the bank regulatory structure and is affecting the lending, investment, trading and operating activities of depository institutions and their holding companies. As of July 21, 2011, the Federal Reserve Board assumed regulatory jurisdiction from the Office of Thrift Supervision over savings and loan holding companies, such as the Company, in addition to its role of supervising bank holding companies.

The Dodd-Frank Act also created a new Consumer Financial Protection Bureau with expansive powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets, such as the Bank, will continue to be examined by their applicable federal bank regulators for compliance with such regulations. The legislation gives state attorneys general the ability to enforce applicable federal consumer protection laws.

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The Dodd-Frank Act also broadened the base for FDIC assessments for deposit insurance, permanently increased the maximum amount of deposit insurance to $250,000 per depositor and provided noninterest bearing transaction accounts with unlimited deposit insurance through December 31, 2012. The legislation also, among other things, requires originators of certain securitized loans to retain a portion of the credit risk, stipulates regulatory rate-setting for certain debit card interchange fees, repealed restrictions on the payment of interest on commercial demand deposits and contains a number of reforms related to mortgage originations. The Dodd-Frank Act increased shareholder influence over boards of directors by requiring companies to give shareholders a non-binding vote on executive compensation and so-called “golden parachute” payments. The legislation also directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to company executives, regardless of whether the company is publicly traded or not.

Many of the provisions of the Dodd-Frank Act are subject to delayed effective dates and/or require the issuance of implementing regulations. Their impact on operations cannot yet fully be assessed. However, there is a significant possibility that the Dodd-Frank Act will, in the long run, increase regulatory burden, compliance costs and interest expense for the Bank and the Company.

Savings Bank Regulation

As an Indiana-chartered savings bank, the Bank is subject to federal regulation and supervision by the FDIC and to state regulation and supervision by the Indiana Department of Financial Institutions. The Bank’s deposit accounts are insured by the Deposit Insurance Fund, which is administered by the FDIC. The Bank is not a member of the Federal Reserve System.

Both federal and Indiana law extensively regulate various aspects of the banking business such as reserve requirements, truth-in-lending and truth-in-savings disclosures, equal credit opportunity, fair credit reporting, trading in securities and other aspects of banking operations. Current federal law also requires savings banks, among other things, to make deposited funds available within specified time periods.

Under FDIC regulations, an insured state-chartered bank, such as the Bank, is prohibited from making equity investments that are not permissible for national banks. Such a savings bank is also prohibited from engaging as principal in activities that are not permitted for national banks, unless: (i) the FDIC determines that the activity would pose no significant risk to the Deposit Insurance Fund and (ii) the Bank is, and continues to be, in compliance with all applicable capital standards.

Branching and Interstate Banking

The establishment of branches by the Bank is subject to approval of the Indiana Department of Financial Institutions and FDIC and geographic limits established by state laws. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Riegle-Neal Act”), as amended by the Dodd-Frank Act, facilitates the interstate expansion and consolidation of banking organizations by permitting, among other things, (i) bank holding companies that are adequately capitalized and managed to acquire banks located in states outside their home state regardless of whether such acquisitions are authorized under the law of the host state, (ii) the interstate merger of banks, subject to the right of individual states to have “opted out” of this authority, and (iii) banks to establish new branches on an interstate basis provided that the proposed branch would be permitted for a state bank chartered in the target state.

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Loans-to-One-Borrower

We generally may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of our unimpaired capital and unimpaired surplus. An additional amount may be lent, equal to 10% of unimpaired capital and unimpaired surplus, if the loan is secured by readily marketable collateral, which is defined to include certain financial instruments and bullion, but generally does not include real estate. As of December 31, 2012, we were in compliance with our loans-to-one-borrower limitations.

Standards for Safety and Soundness

Federal law requires each federal banking agency to prescribe for insured depository institutions under its jurisdiction standards relating to, among other things, internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, employee compensation, and other operational and managerial standards as the agency deems appropriate. The federal banking agencies adopted Interagency Guidelines Prescribing Standards for Safety and Soundness to implement the safety and soundness standards required under federal law. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to submit or implement an acceptable plan, the appropriate federal banking agency may issue an enforceable order requiring correction of the deficiencies.

Capital Requirements

Under FDIC regulations, state chartered banks that are not members of the Federal Reserve System, such as the Bank, are required to maintain a minimum leverage capital requirement consisting of a ratio of Tier 1 capital to total assets of 3% if the FDIC determines that the institution is not anticipating or experiencing significant growth and has well-diversified risk, including no undue interest rate risk exposure, excellent asset quality, high liquidity, good earnings, and in general, is a strong banking organization, rated composite 1 under the Uniform Financial Institutions Rating System (the CAMELS rating system) established by the Federal Financial Institutions Examination Council. For all but the most highly rated institutions meeting the conditions set forth above, the minimum leverage capital ratio is at least 4%. Tier 1 capital is the sum of common shareholders’ equity, noncumulative perpetual preferred stock (including any related surplus) and minority interests in consolidated subsidiaries, minus all intangible assets (other than certain mortgage servicing assets, purchased credit card relationships, credit-enhancing interest-only strips and certain deferred tax assets), identified losses, investments in certain financial subsidiaries and non-financial equity investments.

In addition to the leverage capital ratio (the ratio of Tier I capital to total assets), state chartered nonmember banks must maintain a minimum ratio of qualifying total capital to risk-weighted assets of at least 8%, of which at least half must be Tier 1 capital. Qualifying total capital consists of Tier 1 capital plus Tier 2 capital (also referred to as supplementary capital) items. Tier 2 capital items include allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock and preferred stock with a maturity of over 20 years, certain other capital instruments and up to 45% of pre-tax net unrealized holding gains on equity securities. The includable amount of Tier 2 capital cannot exceed the institution’s Tier 1 capital. Qualifying total capital is further reduced by the amount of the bank’s investments in banking and finance subsidiaries that are not consolidated for regulatory capital purposes, reciprocal cross-holdings of capital securities issued by other banks, most intangible assets and certain other deductions. Under the FDIC risk-weighted system, all of a bank’s balance sheet assets and the credit equivalent amounts of certain off-balance sheet items are assigned to one of four broad risk-weight categories from 0% to 100%, based on the risks inherent in the type of assets or item. The aggregate dollar amount of each category is multiplied by the risk weight assigned to that category. The sum of these weighted values equals the bank’s risk-weighted assets.

At December 31, 2012, the Bank met each of its capital requirements.

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On June 7, 2012, the FDIC and the other federal bank regulatory agencies issued a series of proposed rules to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets, to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” (“Basel III”). The proposed rules would apply to all depository institutions, top-tier bank holding companies with total consolidated assets of $500 million or more, and top-tier savings and loan holding companies (“banking organizations”). Among other things, the proposed rules establish a new common equity tier 1 minimum capital requirement and a higher minimum tier 1 capital requirement, and assign higher risk weightings (150%) to exposures that are more than 90 days past due or are on nonaccrual status and certain commercial real estate facilities that finance the acquisition, development or construction of real property. The proposed rules also limit a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of a specified amount of common equity tier 1 capital in addition to the amount necessary to meet its minimum risk-based capital requirements. Under the proposed rules, the final rules would have become effective on January 1, 2013, and the changes set forth in the final rules would be phased in from January 1, 2013 through January 1, 2019. However on November 9, 2012, the federal banking agencies announced that the final rules would not become effective on January 1, 2013 due to the volume of comments received. It is not known when any final rules will be issued.

Prompt Corrective Regulatory Action

Under the federal prompt corrective action statute, the FDIC is required to take supervisory actions against undercapitalized savings institutions under its jurisdiction, the severity of which depends upon the institution’s level of capital. A savings institution that has total risk-based capital of less than 8% or a leverage ratio or a Tier 1 risk-based capital ratio that generally is less than 4% is considered to be undercapitalized. A savings institution that has total risk-based capital less than 6%, a Tier 1 core risk-based capital ratio of less than 3% or a leverage ratio that is less than 3% is considered to be “significantly undercapitalized.” A savings institution that has a tangible capital to assets ratio equal to or less than 2% is deemed to be “critically undercapitalized.”

Generally a receiver or conservator must be appointed for a savings institution that is “critically undercapitalized” within specific time frames. The regulations also provide that a capital restoration plan must be filed with the FDIC within 45 days of the date a savings institution receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Any holding company for the savings institution required to submit a capital restoration plan must guarantee the lesser of an amount equal to 5% of the savings institution’s assets at the time it was notified or deemed to be undercapitalized by the FDIC, or the amount necessary to restore the savings institution to adequately capitalized status. This guarantee remains in place until the FDIC notifies the savings institution that it has maintained adequately capitalized status for each of four consecutive calendar quarters, and the FDIC has the authority to require payment and collect payment under the guarantee. Various restrictions, such as on capital distributions and growth, also apply to “undercapitalized” institutions. The FDIC may also take any one of a number of discretionary supervisory actions against undercapitalized institutions, including the issuance of a capital directive and the replacement of senior executive officers and directors.

The recently proposed rules discussed above under “ — Capital Requirements” that would increase regulatory capital requirements would, if adopted, adjust the prompt corrective action categories accordingly.

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Capital Distributions

Under Indiana law, the Bank may pay capital distributions of so much of its undivided profits (generally, earnings less losses, bad debts, taxes and other operating expenses) as is considered expedient by the Bank’s board. However, the Bank must obtain the approval of the Indiana Department of Financial Institutions for the payment of a capital distribution if the total of all distributions declared by the Bank during the current year, including the proposed distribution, would exceed the sum of retained net income for the year to date plus its retained net income for the previous two years. For this purpose, “retained net income” means net income as calculated for call report purposes, less all dividends declared for the applicable period. Also, the FDIC has the authority to prohibit the Bank from paying a capital distribution if, in its opinion, the payment of the distribution would constitute an unsafe or unsound practice in light of the financial condition of the Bank. Capital distributions are also prohibited if the institution would fail any regulatory capital requirement after the distribution. In addition, as a subsidiary of a savings and loan holding company, the Bank must file a notice with the Federal Reserve Board at least 30 days before the board declares a capital distribution and receive the Federal Reserve Board’s non-objection to pay the dividend.

Transactions with Related Parties

A savings institution’s authority to engage in transactions with related parties or “affiliates” is limited by Sections 23A and 23B of the Federal Reserve Act and its implementing regulation, Federal Reserve Board Regulation W. The term “affiliate” generally means any company that controls or is under common control with an institution, including the Company and its non-savings institution subsidiaries. Applicable law limits the aggregate amount of “covered” transactions with any individual affiliate, including loans to the affiliate, to 10% of the capital and surplus of the savings institution. The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings institution’s capital and surplus. Certain covered transactions with affiliates, such as loans to or guarantees issued on behalf of affiliates, are required to be secured by specified amounts of collateral. Purchasing low quality assets from affiliates is generally prohibited. Regulation W also provides that transactions with affiliates, including covered transactions, must be on terms and under circumstances, including credit standards, that are substantially the same or at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies. In addition, savings institutions are prohibited by law from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the securities of any affiliate other than a subsidiary.

Our authority to extend credit to executive officers, directors and 10% or greater shareholders (“insiders”), as well as entities controlled by these persons, is governed by Sections 22(g) and 22(h) of the Federal Reserve Act and its implementing regulation, the Federal Reserve Board’s Regulation O. Among other things, loans to insiders must be made on terms substantially the same as those offered to unaffiliated individuals and not involve more than the normal risk of repayment. There is an exception for bank-wide lending programs that do not discriminate in favor of insiders. Regulation O also places individual and aggregate limits on the amount of loans that may be made to insiders based, in part, on the institution’s capital position, and requires that certain prior board approval procedures be followed. Extensions of credit to executive officers are subject to additional restrictions on the types and amounts of loans that may be made. At December 31, 2012, we were in compliance with these regulations.

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Enforcement

The Indiana Department of Financial Institutions has authority to take a variety of actions to enforce applicable laws and regulations and prevent unsafe or unsound practices. These include authority to issue cease and desist orders and civil penalties. The Indiana Department of Financial Institutions also has the authority to appoint a receiver or conservator for Indiana-chartered savings banks under certain circumstances. The FDIC has primary federal enforcement responsibility over Indiana-chartered savings banks, including the authority to bring enforcement action against “institution-related parties,” such as officers, directors, certain shareholders, and attorneys, appraisers and accountants, who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution, receivership, conservatorship or the termination of deposit insurance. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1.0 million per day.

Deposit Insurance

The Bank is a member of the Deposit Insurance Fund, which is administered by the FDIC. Deposit accounts in the Bank are insured up to a maximum of $250,000 for each separately insured depositor. In addition, certain noninterest-bearing transaction accounts were fully insured, regardless of the dollar amount, until December 31, 2012.

The FDIC imposes an assessment for deposit insurance on all depository institutions. Under the FDIC’s risk-based assessment system, insured institutions are assigned to risk categories based on supervisory evaluations, regulatory capital levels and certain other factors. An institution’s assessment rate depends upon the category to which it is assigned and certain adjustments specified by FDIC regulations, with less risky institutions paying lower rates. Assessment rates (inclusive of possible adjustments) currently range from 2  ¹/₂ to 45 basis points of each institution’s total assets less tangible capital. The FDIC may increase or decrease the scale uniformly, except that no adjustment can deviate more than two basis points from the base scale without notice and comment rulemaking. The FDIC’s current system represents a change, required by the Dodd-Frank Act, from its prior practice of basing the assessment on an institution’s volume of deposits.

In addition to the FDIC assessments, the Financing Corporation is authorized to impose and collect, through the FDIC, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the Financing Corporation in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the Financing Corporation are due to mature in 2017 through 2019. For the quarter ended December 31, 2012, the annualized Financing Corporation assessment was equal to 66 basis points of total assets less tangible capital.

The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits. The FDIC must seek to achieve the 1.35% ratio by September 30, 2020. Insured institutions with assets of $10 billion or more are supposed to fund the increase. The Dodd-Frank Act eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the FDIC and the FDIC has exercised that discretion by establishing a long-term fund ratio of 2%.

The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of the Bank. Management cannot predict what assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. Management of the Bank does not know of any practice, condition or violation that may lead to termination of our deposit insurance.

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Federal Home Loan Bank System

The Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions. As a member of the Federal Home Loan Bank of Indianapolis, we are required to acquire and hold a specified amount of shares of capital stock in Federal Home Loan Bank.

Community Reinvestment Act and Fair Lending Laws

Savings institutions have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. An institution’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in an inability to receive regulatory approval for certain activities such as branching and acquisitions. The Bank received a “Satisfactory” Community Reinvestment Act rating in its most recent examination.

Other Regulations

Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates. The Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:

• Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

• Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

• Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

• Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

• Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

• Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

• Truth in Savings Act; and

• Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

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The operations of the Bank also are subject to the:

• Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

• Electronic Funds Transfer Act, which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

• Check Clearing for the 21^st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

• The USA PATRIOT Act, which requires banks and savings institutions to, among other things, establish broadened anti-money laundering compliance programs and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement pre-existing compliance requirements that apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

• The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties and requires all financial institutions offering products or services to retail customers to provide such customers with the financial institution’s privacy policy and allow such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

Holding Company Regulation

The Company is a unitary savings and loan holding company subject to regulation and supervision by the Federal Reserve Board, which replaced the Office of Thrift Supervision in that capacity due to the Dodd-Frank Act regulatory restructuring. The Federal Reserve Board has enforcement authority over the Company and its non-savings institution subsidiaries. Among other things, that authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a risk to the Bank.

As a savings and loan holding company, the Company’s activities are limited to those activities permissible by law for financial holding companies, bank holding companies under section 4(c)(8) of the Bank Holding Company Act of 1956, as amended, or multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, incidental to financial activities or complementary to a financial activity. Such activities include lending activities, insurance and underwriting equity securities. A savings and loan holding company must elect such status in order to engage in activities permissible for a financial holding company, meet the qualitative requirements for a bank holding company to qualify as a financial holding company and conduct the activities in accordance with the requirements that would apply to a financial holding company’s conduct of the activity.

Federal law prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or savings and loan holding company without prior written approval of the Federal Reserve Board and from acquiring or retaining control of any depository not insured by the FDIC. In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider such things as the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors. An acquisition by a savings and loan holding company of a savings institution in another state to be held as a separate subsidiary may not be approved unless it is a supervisory acquisition under Section 13(k) of the Federal Deposit Insurance Act or the law of the state in which the target is located authorizes such acquisitions by out-of-state companies.

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To be regulated as a savings and loan holding company by the Federal Reserve Board, we are required to satisfy a qualified thrift lender (“QTL”) test, under which we either must qualify as a “domestic building and loan” association as defined by the Internal Revenue Code or maintain at least 65% of our “portfolio assets” in “qualified thrift investments.” “Qualified thrift investments” consist primarily of residential mortgages and related investments, including mortgage-backed and related securities. “Portfolio assets” generally means total assets less specified liquid assets up to 20% of total assets, goodwill and other intangible assets and the value of property used to conduct business. A savings institution that fails the QTL test must operate under specified restrictions. The Dodd-Frank Act made noncompliance with the QTL test also subject to agency enforcement action for a violation of law. As of December 31, 2012, we maintained 65.8% of our portfolio assets in qualified thrift investments and, therefore, we met the qualified thrift lender test.

Savings and loan holding companies have not historically been subjected to consolidated regulatory capital requirements. However, the Dodd-Frank Act requires the Federal Reserve Board to set for all depository institution holding companies minimum consolidated capital levels that are as stringent as those required for the insured depository subsidiaries. The components of Tier 1 capital would be restricted to capital instruments that are currently considered to be Tier 1 capital for insured depository institutions, which would exclude instruments such as trust preferred securities and cumulative preferred stock. The Dodd-Frank Act contains a grandfather provision for instruments issued before May 19, 2010 by companies of consolidated assets of $15 billion or less. Bank holding companies with assets of less than $500 million are exempt from the consolidated capital requirements. The Dodd-Frank Act provides that holding companies that were not regulated by the Federal Reserve Board as of May 19, 2010 receive a five year phase-in from the July 21, 2010 date of enactment of the Dodd-Frank Act.

The recently proposed rules discussed under “—Supervision and Regulations—Capital Requirements” that would increase regulatory capital requirements for depository institutions would apply identical regulatory consolidated capital requirements to savings and loan holding companies. The proposed rules would not extend the Dodd-Frank Act’s exemption for bank holding companies with assets of $500 million or less to savings and loan holding companies. The proposed rules do not mention the grandfather provision or the transition period set forth in the Dodd-Frank Act. It is unknown whether any final rules will contain these provisions.

The Dodd-Frank Act extends the “source of strength” doctrine to savings and loan holding companies. The regulatory agencies must promulgate regulations implementing the “source of strength” policy that requires holding companies act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

The Federal Reserve Board has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies that it has made applicable to savings and loan holding companies as well. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the company’s net income for the past four quarters, net of dividends’ previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. The policy statement also provides for regulatory consultation prior to a holding company redeeming or repurchasing regulatory capital instruments when the holding company is experiencing financial weaknesses or redeeming or repurchasing common stock or perpetual preferred stock that would result in a net reduction as of the end of a quarter in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. These regulatory policies could affect the ability of the Company to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

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Federal Securities Laws

The Company’s common stock is registered with the Securities and Exchange Commission. The Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

The registration under the Securities Act of 1933 of shares of common stock issued in the Company’s public offering does not cover the resale of those shares. Shares of common stock purchased by persons who are not affiliates of the Company may be resold without registration. Shares purchased by an affiliate of the Company will be subject to the resale restrictions of Rule 144 under the Securities Act of 1933. If the Company meets the current public information requirements of Rule 144 under the Securities Act of 1933, each affiliate of the Company that complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of the outstanding shares of the Company, or the average weekly volume of trading in the shares during the preceding four calendar weeks. In the future, the Company may permit affiliates to have their shares registered for sale under the Securities Act of 1933.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act, our Chief Executive Officer and Chief Financial Officer are required to certify that our quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain disclosures to our auditors and the audit committee of the board of directors about our internal control over financial reporting; and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting. We have existing policies, procedures and systems designed to comply with these regulations, and we are further enhancing and documenting such policies, procedures and systems to ensure continued compliance with these regulations.

Change in Control Regulations

Under the Change in Bank Control Act, no person may acquire control of a savings and loan holding company such as the Company unless the Federal Reserve Board has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition. Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or a determination by the regulator that the acquiror has the power to direct, or directly or indirectly to exercise a controlling influence over, the management or policies of the institution. Acquisition of more than 10% of any class of a savings and loan holding company’s voting stock constitutes a rebuttable determination of control under the regulations under certain circumstances including where, as is the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.

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TAXATION

The Company and the Bank are subject to income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal and state taxation is intended only to summarize certain pertinent income tax matters and is not a comprehensive description of the tax rules applicable to the Company, or the Bank.

Federal Taxation

General. The Bank’s federal tax returns are not currently under audit, and have not been audited during the past five years.

Method of Accounting. For federal income tax purposes, the Company currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal and state income tax returns.

Bad Debt Reserves. The Bank is permitted to establish a reserve for bad debts and to make annual additions to the reserve. These additions can, within specified formula limits, be deducted in arriving at our taxable income. Pursuant to the Small Business Protection Act of 1996 (the “1996 Act”), savings institutions were required to recapture any excess reserves over those established as of October 31, 1988 (base year reserve).

Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt reserves created prior to November 1, 1988 were subject to recapture into taxable income should the Bank fail to meet certain thrift asset and definitional tests. Federal legislation has eliminated these thrift related recapture rules.

At December 31, 2012, our total federal pre-1988 base year reserve was $2.7 million. However, under current law, pre-1988 base year reserves remain subject to recapture should the Bank make certain non-dividend distributions, repurchase any of its stock, pay dividends in excess of tax earnings and profits, or cease to maintain a bank charter.

Alternative Minimum Tax. The Internal Revenue Code imposes an alternative minimum tax (“AMT”) at a rate of 20% on a base of regular taxable income plus certain tax preferences (“alternative minimum taxable income” or “AMTI”). The AMT is payable to the extent such AMTI is in excess of an exemption amount and the AMT exceeds the regular income tax. Net operating losses can offset no more than 90% of AMTI. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years.

Net Operating Loss Carryovers. A financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. At December 31, 2012, the Bank had no net operating loss carryforwards for federal income tax purposes.

Capital Loss Carryovers. A financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years. At December 31, 2012, the Bank had $2.0 million in capital loss carryforwards for state income tax purposes expiring in 2014.

Corporate Dividends-Received Deduction. The Company may exclude from its income 100% of dividends received from the Bank as a member of the same affiliated group of corporations. The corporate dividends received deduction is 80% in the case of dividends received from corporations in which a corporate recipient owns more than 20% of the stock of a corporation distributing a dividend, and corporations which own less than 20% of the stock of a corporation distributing a dividend may deduct only 70% of dividends received or accrued on their behalf.

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State Taxation

The Bank is subject to Indiana’s Financial Institutions Tax (“FIT”), which is imposed at a flat rate of 8.5% on “adjusted gross income.” “Adjusted gross income,” for purposes of FIT, begins with taxable income as defined by Section 63 of the Code and, thus, incorporates federal tax law to the extent that it affects the computation of taxable income. Federal taxable income is then adjusted by several Indiana modifications. Other applicable state taxes include generally applicable sales and use taxes plus real and personal property taxes.

As a Maryland business corporation, the Company is required to file an annual report with and pay franchise taxes to the state of Maryland.

In the last five years, the Bank’s state income tax returns have not been subject to any other examination by a taxing authority.

Item 1A. Risk Factors

A significant portion of our loans are commercial loans, consisting of commercial real estate, five or more family and commercial business loans, which carry greater credit risk than loans secured by owner occupied one- to four-family real estate.

At December 31, 2012, $114.3 million, or 36.0% of our loan portfolio, consisted of commercial real estate, five or more family and commercial business loans. We intend to increase our commercial lending in future periods. Given their larger balances and the complexity of the underlying collateral, commercial real estate, five or more family and commercial business loans generally expose a lender to greater credit risk than loans secured by owner occupied one- to four-family real estate. These loans also have greater credit risk than residential real estate for the following reasons:

• commercial real estate loans—repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service.

• five or more family loans – repayment is dependent on income being generated in amounts sufficient to cover property maintenance and debt service.

• commercial business loans—repayment is generally dependent upon the successful operation of the borrower’s business.

If loans that are collateralized by real estate or other business assets become troubled and the value of the collateral has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan, which could cause us to increase our provision for loan losses and adversely affect our operating results and financial condition.

Because our mortgage warehousing line of business produces a significant portion of our interest income, the loss of such income due to increased competition, the loss of key personnel or a reduction in volume of originations would negatively affect our net income.

We operate a mortgage warehousing line of business. Under this program, we provide financing to approved mortgage companies for the origination and sale of residential mortgage loans. Each individual mortgage is assigned to us until the loan is sold to the secondary market by the mortgage company. We take possession of each original note and forward such note to the end investor once the mortgage company has sold the loan. For the year ended December 31, 2012, interest income (including fees) from mortgage warehouse lending totaled $6.0 million, or 30.5%, of total interest income.

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Competition in mortgage warehouse lending has increased on a national level as new lenders, especially community and regional banks, have begun entering the mortgage warehouse business. If increased competition occurs and our mortgage warehousing line of business declines, we would be forced to invest our funds in potentially lower yielding interest earning assets which would negatively affect our earnings. The competition for qualified personnel in the financial services industry is intense, and the loss of key personnel in our mortgage warehousing line of business, such as our Senior Vice President/Mortgage Warehouse Lending could adversely affect our business. In addition, if interest rates rise, the demand for residential mortgage loans could decline, and as a result, our mortgage warehousing line of business could decline which would adversely affect our net income.

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings will decrease.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience and we evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover probable incurred losses in our loan portfolio, resulting in additions to our allowance. While our allowance for loan losses was $4.3 million, or 1.35%, of total loans at December 31, 2012, material additions to our allowance could materially decrease our net income. In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities might have a material adverse effect on our financial condition and results of operations.

The LaPorte Savings Bank’s reliance on brokered deposits could adversely affect its liquidity and operating results.

Among other sources of funds, The LaPorte Savings Bank relies on brokered deposits to provide funds with which to make loans and provide for its other liquidity needs. On December 31, 2012, brokered deposits amounted to $20.9 million, or approximately 6.0% of total deposits. All of these deposits are from CDARS, a brokered deposit network that allows members to mitigate the liquidity risk related to brokered deposits. Generally brokered deposits may not be as stable as other types of deposits. In the future, those depositors may not replace their deposits when they mature, or The LaPorte Savings Bank may have to pay a higher rate of interest to keep those deposits or to replace them with other deposits or with funds from other sources. Not being able to maintain or replace those deposits as they mature would adversely affect The LaPorte Savings Bank’s liquidity. Paying higher deposit rates to maintain or replace those deposits would adversely affect The LaPorte Savings Bank’s net interest margin and its operating results.

Changing interest rates may hurt our profits and asset values.

Our ability to make a profit largely depends on our net interest income, which could be negatively affected by changes in interest rates. Net interest income is the difference between:

• the interest income we earn on our interest-earning assets, such as loans and securities; and

• the interest expense we pay on our interest-bearing liabilities, such as deposits and borrowings.

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Our liabilities generally have shorter maturities than our assets. This imbalance can create significant earnings volatility as market interest rates change. In periods of rising interest rates, the interest income earned on our assets may not increase as rapidly as the interest paid on our liabilities, resulting in a decline in our net interest income. In periods of declining interest rates, our net interest income is generally positively affected although such positive effects may be reduced or eliminated by prepayments of loans and redemptions of callable securities. In addition, when long-term interest rates are not significantly higher than short-term rates thus creating a “flat” yield curve, the Company’s interest rate spread may decrease thus reducing net interest income. Finally, federal initiatives designed to reduce mortgage interest rates may reduce our loan income without a corresponding reduction in funding costs, thus decreasing our spreads. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Management of Interest Rate Risk.”

Changes in interest rates also affect the current market value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. As December 31, 2012, the fair value of our securities classified as available for sale totaled $125.6 million. Unrealized net gains on available-for-sale securities totaled $5.6 million at December 31, 2012 and are reported, net of tax, as a separate component of shareholders’ equity. However, a rise in interest rates could cause a decrease in the fair value of securities available for sale in future periods which would have an adverse effect on shareholders’ equity.

Depending on market conditions, we often place more emphasis on enhancing our net interest margin rather than matching the interest rate sensitivity of our assets and liabilities. In particular, we believe that the increased net interest income resulting from a mismatch in the maturity of our asset and liability portfolios can, during periods of stable or declining interest rates provide high enough returns to justify increased exposure to sudden and unexpected increases in interest rates. As a result, our results of operations, net interest margin and the economic value of our equity will remain vulnerable to increases in interest rates and to declines in the difference between long- and short-term rates.

Income from secondary mortgage market operations is volatile, and we may incur losses or charges with respect to our secondary mortgage market operations which would negatively affect our earnings.

We generally sell in the secondary market the longer term fixed-rate residential mortgage loans that we originate, earning noninterest income in the form of gains on sale. When interest rates rise, the demand for mortgage loans tends to fall and may reduce the number of loans available for sale. In addition to interest rate levels, weak or deteriorating economic conditions also tend to reduce loan demand. Although we sell loans in the secondary market without recourse, we are required to give customary representations and warranties to the buyers. If we breach those representations and warranties, the buyers can require us to repurchase the loans and we may incur a loss on the repurchase. Because we retain the servicing rights on many loans we sell in the secondary market, we are required to record a mortgage servicing right asset, which we test quarterly for impairment. The value of mortgage servicing rights tend to increase with rising interest rates and to decrease with falling interest rates. If we are required to take an impairment charge, that would hurt our earnings.

We could potentially recognize goodwill impairment charges, which may negatively impact our results of operations.

In connection with our acquisition of City Savings Financial Corporation, we recorded goodwill equaling $8.4 million. The Company annually measures the fair value of its investment in The LaPorte Savings Bank to determine that such fair value equals or exceeds the carrying value of its investment, including goodwill. If the fair value of our investment in The LaPorte Savings Bank does not equal or exceed its carrying value, we will be required to record goodwill impairment charges which may adversely affect future earnings. The fair value of a banking franchise can fluctuate downward based on a number of factors that are beyond management’s control, (e.g. adverse trends in the general economy or interest rates). As a result of impairment testing performed as of October 31, 2012, no impairment charge was recorded by the Company. However, as our market price per share is currently trading below its tangible book value per common share, it is reasonably possible that management may conclude that goodwill is impaired in a future assessment. There can be no assurance that our banking franchise value will not decline in the future to a level necessitating goodwill impairment charges to operations that could be material to our results of operations.

48

Historically low interest rates may adversely affect our net interest income and profitability.

In recent years it has been the policy of the Federal Reserve Board to maintain interest rates at historically low levels through its targeted federal funds rate and the purchase of mortgage-backed securities. As a result, market rates on the loans we have originated and the yields on securities we have purchased have been at lower levels than available prior to 2008. This has been a significant factor in the decrease in the yield of our interest-earning assets to 4.59% for the year ended December 31, 2012 from 4.74% for the year ended December 31, 2011. As a general matter, our interest-bearing liabilities reprice or mature more quickly than our interest-earning assets, which have resulted in increases in net interest income as interest rates decreased. However, our ability to lower our interest expense is limited at these interest rate levels while the average yield on our interest-earning assets may continue to decrease. The Federal Reserve Board has indicated its intention to maintain low interest rates in the near future. Accordingly, our net interest income (the difference between interest income earned on assets and interest expense paid on liabilities) may be adversely affected and may even decrease, which may have an adverse effect on our profitability.

Negative developments in the financial industry and the domestic and international credit markets may adversely affect our operations and results.

Since the latter half of 2008, negative developments in the global credit and securitization markets have resulted in uncertainty in the financial markets and a general weak economic environment which has continued into 2012. The economic downturn was accompanied by deteriorated loan portfolio quality at many institutions, including The LaPorte Savings Bank. In addition, the value of real estate collateral supporting many home mortgages has declined and may continue to decline. Bank and bank holding company stock prices have been negatively affected, as has the ability of banks and bank holding companies to raise capital or borrow in the debt markets. These negative developments, along with the turmoil and uncertainties that have accompanied them, have heavily influenced the formulation and enactment of the Dodd-Frank Act. In addition to the many future implementing rules and regulations of the Dodd-Frank Act, the potential exists for other new federal or state laws and regulations regarding lending and funding practices, capital requirements and liquidity standards to be enacted. Bank regulatory agencies are expected to continue to be active in responding to concerns and trends identified in examinations. Negative developments in the financial industry and the domestic and international credit markets, and the impact of new legislation in response to those developments, may negatively impact our operations by increasing our costs, restricting our business operations, including our ability to originate or sell loans, and adversely impact our financial performance. In addition, these risks could affect the value of our loan portfolio as well as the value of our investment portfolio, which would also negatively affect our financial performance.

Adverse conditions in the local economy or real estate market could hurt our profits.

Our local economy may affect our future growth possibilities and operations in our primary market area. Our future growth opportunities depend on the growth and stability of our regional economy and our ability to expand in our market area. In addition, most of our loans are to customers in the State of Indiana, and particularly LaPorte and Porter Counties. Continued adverse conditions in our local economy may limit funds available for deposit and may negatively affect our borrowers’ ability to repay their loans on a timely basis, both of which could have an impact on our profitability. Also, a decline in real estate valuations in this market would lower the value of the collateral securing our loans.

49

Slow growth in our market area has adversely affected, and may continue to adversely affect, our performance.

Economic and population growth within our market area has for several decades been below the national average. Management believes that these factors have adversely affected our profitability and our ability to increase our loans and deposits. Our acquisition of City Savings Financial Corporation facilitated our entrance into the Michigan City and Chesterton, Indiana markets, which are growing more rapidly than eastern LaPorte County. However, these markets have experienced a significant decline in real estate values and economic activity as a result of the weak economic environment that began in 2008. According to the Greater Northwest Indiana Association of Realtors, the average sales price of homes in LaPorte and Porter Counties has declined 17.4% and 5.6%, respectively from 2008 to 2012. The average sales price of commercial real estate properties in the cities of LaPorte and Michigan City, Indiana has remained steady from 2008 to 2012, primarily due to one large sale in LaPorte which helped to increase the average sales prices for 2012.

Financial reform legislation has, among other things, eliminated the Office of Thrift Supervision, tightened capital standards and created a new Consumer Financial Protection Bureau, and will result in new laws and regulations that are expected to increase our costs of operations.

The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies are given significant discretion in drafting the implementing rules and regulations, and consequently many of the details and much of the impact of the Dodd-Frank Act may not be known for many months or years.

Among other things, as a result of the Dodd-Frank Act:

• the Federal Reserve Board now supervises and regulates all savings and loan holding companies that were formerly regulated by the Office of Thrift Supervision, including LaPorte Bancorp, Inc.;

• effective July 21, 2011, the federal prohibition on paying interest on demand deposits has been eliminated, thus allowing businesses to have interest-bearing checking accounts. This change has increased our interest expense;

• the Federal Reserve Board is required to set minimum capital levels for depository institution holding companies that are as stringent as those required for their insured depository subsidiaries, and the components of Tier 1 capital are required to be restricted to capital instruments that are currently considered to be Tier 1 capital for insured depository institutions. There is a five-year transition period (from the July 21, 2010 effective date of the Dodd-Frank Act) before the capital requirements will apply to savings and loan holding companies. However, recently proposed rules would not provide such a transition period for savings and loan holding companies;

• the federal banking regulators are required to implement new leverage and capital requirements that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives;

• a new Consumer Financial Protection Bureau has been established, which has broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets, like The LaPorte Savings Bank, will be examined by their applicable bank regulators; and

• federal preemption rules that have been applicable for national banks and federal savings banks have been weakened, and state attorneys general have the ability to enforce federal consumer protection laws.

50

In addition to the risks noted above, we expect that our operating and compliance costs, and possibly our interest expense, could increase as a result of the Dodd-Frank Act and the implementing rules and regulations. The need to comply with additional rules and regulations, as well as state laws and regulations to which we were not previously subject, will also divert management’s time from managing our operations. Higher capital levels would reduce our ability to grow and increase our interest-earning assets which would adversely affect our return on shareholders’ equity.

The short-term and long-term impact of the changing regulatory capital requirements and anticipated new capital rules are uncertain.

On June 7, 2012, the Federal banking agencies approved proposed rules that would substantially amend the regulatory risk-based capital rules applicable to us. The proposed rules implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. Basel III was initially intended to be implemented beginning January 1, 2013, however on November 9, 2012, the U.S. federal banking agencies announced that the proposed rules would not become effective on January 1, 2013, and it is not clear when the proposed rules will become effective.

Various provisions of the Dodd-Frank Act increase the capital requirements of financial institutions. The proposed rules include new minimum risk-based capital and leverage ratios, which would be phased in during 2013 and 2014, and would refine the definition of what constitutes “capital” for purposes of calculating these ratios. The proposed new minimum capital requirements for The LaPorte Savings Bank would be: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4% for all institutions. The proposed rules would also establish a “capital conservation buffer” of 2.5% above the new regulatory minimum capital ratios, and would result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement would be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase each year until fully implemented in January 2019. An institution would be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations would establish a maximum percentage of eligible retained income that could be utilized for such actions. While the proposed Basel III changes and other regulatory capital requirements will result in higher regulatory capital standards, it is difficult at this time to predict when or how any new standards will ultimately be applied to The LaPorte Savings Bank.

In addition, in the current economic and regulatory environment, bank regulators may impose capital requirements that are more stringent than those required by applicable existing regulations.

The application of more stringent capital requirements for The LaPorte Savings Bank could, among other things, result in lower returns on equity, require the raising of additional capital, and result in regulatory actions if we were to be unable to comply with such requirements. Furthermore, the imposition of liquidity requirements in connection with the implementation of Basel III could result in our having to lengthen the term of our funding, restructure our business models, and/or increase our holdings of liquid assets. Implementation of changes to asset risk weightings for risk based capital calculations, items included or deducted in calculating regulatory capital or additional capital conservation buffers, could result in management modifying our business strategy and could limit our ability to make distributions, including paying dividends or buying back our shares.

51

Strong competition within our market area may limit our growth and profitability.

Competition in the banking and financial services industry within our market area is intense. In our market area we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors have substantially greater resources and lending limits than we have and offer certain services that we do not or cannot provide. Our profitability depends upon our continued ability to successfully compete in our market area. The greater resources and broader range of deposit and loan products offered by our competition may limit our ability to increase our interest-earning assets and profitability. We expect competition to remain intense in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered barriers to entry, allowed banks to expand their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks. Competition for deposits and the origination of loans could limit our ability to successfully implement our business plan, and could adversely affect our results of operations in the future.

We operate in a highly regulated environment, and changes in laws and regulations to which we are subject may adversely affect our results of operations.

The LaPorte Savings Bank is subject to extensive regulation, supervision and examination by the Indiana Department of Financial Institutions, as its chartering authority, and by the FDIC. In addition, the Federal Reserve Board regulates and oversees the Company. We also belong to the Federal Home Loan Bank system and, as a member of such system, we are subject to certain limited regulations promulgated by the Federal Home Loan Bank of Indianapolis. This regulation and supervision limits the activities in which we may engage. The purpose of regulation and supervision is primarily to protect our depositors and borrowers and, also in the case of FDIC regulation, the FDIC’s insurance fund. Regulatory authorities have extensive discretion in the exercise of their supervisory and enforcement powers. They may, among other things, impose restrictions on the operation of a banking institution, the classification of assets by such institution and such institution’s allowance for loan losses. Regulatory and law enforcement authorities also have wide discretion and extensive enforcement powers under various consumer protection and civil rights laws, including the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Housing Act, and the Real Estate Settlement Procedures Act. Any change in the laws or regulations applicable to us, or in banking regulators’ supervisory policies or examination procedures, whether by the Indiana Department of Financial Institutions, the Federal Reserve Board, the FDIC, other state or federal regulators, or the U.S. Congress could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our stock price may be volatile due to limited trading volume.

LaPorte Bancorp’s common stock is traded on the NASDAQ Capital Market. However, the average daily trading volume in the LaPorte Bancorp’s common stock has been relatively small, averaging less than approximately 13,256 shares per day during 2012. As a result, trades involving a relatively small number of shares may have a significant effect on the market price of the common stock, and it may be difficult for investors to acquire or dispose of large blocks of stock without significantly affecting the market price.

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Our information systems may experience an interruption or breach in security.

We rely heavily on communications and information systems to conduct our business. Any failure, interruption, or breach in security or operational integrity of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan, and other systems. While we have policies and procedures designed to prevent or limit the effect of the failure, interruption, or security breach of our information systems, we cannot assure you that any such failures, interruptions, or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions, or security breaches of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

As of December 31, 2012, the net book value of our properties was $8.5 million. The following is a list of our offices:

Location	Leased or Owned		Year Acquired or Leased		Square Footage		Net Book Value of Real Property
							(In thousands)
Main Office: (including land)
710 Indiana Avenue La Porte, Indiana 46350		Owned		1916		57,000	$	2,986
Full Service Branches: (including land)
6959 W. Johnson Road La Porte, Indiana 46350		Owned		1987		3,500		271
301 Boyd Blvd. La Porte, Indiana 46350		Owned		1997		4,000		1,079
1222 W. State Road #2 La Porte, Indiana 46350		Owned		1999		2,200		375
2000 Franklin Street Michigan City, Indiana 46360		Owned		2007		5,589		804
851 Indian Boundary Road Chesterton, Indiana 46304		Owned		2007		7,475		1,146
101 Michigan Street Rolling Prairie, Indiana 46371		Owned		2007		1,850		100
1 Parkman Drive Westville, Indiana 46391		Owned		2006		4,000		1,318
Lots Owned:
1201 E. Lincolnway Valparaiso, Indiana 46383		Owned		2006		N/A		385

The net book value of our furniture, fixtures and equipment (including computer software) at December 31, 2012 was $1.1 million.

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Item 3. Legal Proceedings

The Company and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Our shares of common stock are traded on the NASDAQ Capital Market under the symbol “LPSB”. The approximate number of holders of record of LaPorte Bancorp, Inc.’s common stock as of March 18, 2013 was 599. Certain shares of LaPorte Bancorp, Inc. are held in “nominee” or “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. The following table presents quarterly market and dividend information for LaPorte Bancorp, Inc.’s common stock for each quarter during 2012 and 2011, as reported on the NASDAQ Capital Market. We completed our second-step conversion on October 4, 2012 whereby each share of LaPorte Bancorp, Inc., a federal corporation was exchanged for 1.3190 shares of the Company. Accordingly, we have adjusted the share prices prior to October 4, 2012 to reflect the 1.3190 exchange rate.

	High		Low		Dividends
2012
Quarter ended March 31, 2012		7.16		5.96	$	0.03
Quarter ended June 30, 2012		7.20		5.85		0.03
Quarter ended September 30, 2012		8.26		7.01		0.03
Quarter ended December 31, 2012		9.21		7.85		0.04
2011
Quarter ended March 31, 2011		7.59		6.10		—
Quarter ended June 30, 2011		7.57		6.97		—
Quarter ended September 30, 2011		7.39		5.69		—
Quarter ended December 31, 2011		6.86		5.69	$	0.03

The Board of Directors has the authority to declare cash dividends on shares of common stock, subject to statutory and regulatory requirements. In determining whether and in what amount to pay a cash dividend, the Board takes into account a number of factors, including capital requirements, our consolidated financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions. No assurances can be given that cash dividends will continue to be paid or that, if paid, will not be reduced.

The available sources of funds for the payment of a cash dividend in the future are interest and principal payments with respect to LaPorte Bancorp, Inc.’s loan to the Employee Stock Ownership Plan, and dividends from The LaPorte Savings Bank.

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Under the rules of the FDIC and the Federal Reserve Board, The LaPorte Savings Bank is not permitted to make a capital distribution if, after making such distribution, it would be undercapitalized. For information concerning additional federal laws and regulations regarding the ability of The LaPorte Savings Bank to make capital distributions, including the payment of dividends to LaPorte Bancorp, see “Taxation—Federal Taxation” and “Supervision and Regulation—Capital Distributions.”

Unlike The LaPorte Savings Bank, the Company is not restricted by FDIC regulations on the payment of dividends to its shareholders. However, the Federal Reserve Board has issued a policy statement regarding the payment of dividends by bank holding companies that it has also made applicable to savings and loan holding companies as well. In general, the Federal Reserve Board’s policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Federal Reserve Board guidance provides for prior regulatory review of capital distributions in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect the ability of LaPorte Bancorp, Inc. to pay dividends or otherwise engage in capital distributions.

The Company did not repurchase any of its common stock during the quarter ended December 31, 2012.

Item 6. Selected Financial Data

The following tables set forth selected consolidated historical financial and other data of LaPorte Bancorp, Inc. and its subsidiaries for the years and at the dates indicated. The following is only a summary and should be read in conjunction with the consolidated financial statements of the Company and related notes to the consolidated financial statements. The information at December 31, 2012 and 2011 and for the years ended December 31, 2012 and 2011 is derived in part from the audited consolidated financial statements that appear in this Form 10-K. The information at December 31, 2010, 2009 and 2008 and for the years ended December 31, 2010, 2009 and 2008 is derived in part from audited consolidated financial statements that do not appear in this Form 10-K. The information presented prior to October 4, 2012 is of the Company’s predecessor company.

	At December 31,
	2012		2011		2010		2009		2008
	(In thousands)
Selected Financial Condition Data:
Total assets	$	492,755	$	477,145	$	444,270	$	405,827	$	368,558
Cash and cash equivalents		6,857		8,146		5,868		6,000		5,628
Investment securities		125,620		131,974		119,377		102,095		101,451
Federal Home Loan Bank stock		3,817		3,817		4,038		4,206		4,206
Loans held for sale		1,155		3,049		4,156		981		124
Loans, net		313,692		295,359		273,103		256,275		219,926
Deposits		348,970		333,560		317,338		273,408		234,814
Federal Home Loan Bank of Indianapolis advances and other long-term borrowings		54,164		82,157		71,746		62,780		83,883
Short-term borrowings		—		—		—		16,675		650
Shareholders’ equity		84,055		55,703		50,048		49,872		46,142

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	At December 31,
	2012			2011			2010			2009			2008
	(In thousands)
Selected Operating Data:
Interest and dividend income	$	19,832		$	19,391		$	20,980		$	19,272		$	19,357
Interest expense		4,392			5,871			7,268			8,265			9,432
Net interest income		15,440			13,520			13,712			11,007			9,925
Provision for loan losses		1,037			1,137			3,472			851			1,125
Net interest income after provision for loan losses		14,403			12,383			10,240			10,156			8,800
Noninterest income		3,160			2,647			3,705			3,939			879
Noninterest expense		11,782			11,052			10,809			11,158			10,621
Income (loss) before income taxes		5,781			3,978			3,136			2,937			(942	)
Income tax expense (benefit)		1,496			736			545			425			(542	)
Net income (loss)	$	4,285		$	3,242		$	2,591		$	2,512		$	(400	)
	At or For the Years Ended December 31,
	2012			2011			2010			2009			2008
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets (ratio of net income (loss) to average total assets)		0.91	%		0.72	%		0.61	%		0.65	%		(0.11	)%
Return on equity (ratio of net income (loss) to average equity)		6.91	%		6.15	%		5.12	%		5.25	%		(0.86	)%
Interest rate spread (1)		3.37	%		3.09	%		3.31	%		2.89	%		2.74	%
Net interest margin (2)		3.57	%		3.31	%		3.59	%		3.21	%		3.08	%
Efficiency ratio (3)		63.34	%		68.36	%		62.06	%		74.66	%		98.31	%
Dividend payout ratio		18.06	%		5.45	%		—			—			—
Noninterest expense to average total assets		2.50	%		2.45	%		2.56	%		2.90	%		2.91	%
Average interest-earning assets to average interest-bearing liabilities		120.06	%		115.10	%		114.97	%		113.49	%		111.72	%
Loans to deposits		91.13	%		89.68	%		87.26	%		94.75	%		94.68	%
Earnings per share (basic and diluted)	$	0.72		$	0.55		$	0.44		$	0.42		$	(0.07	)
Tangible book value per share	$	12.13		$	7.61		$	6.77		$	6.66		$	5.93
Asset Quality Ratios:
Nonperforming assets to total assets		1.88	%		1.55	%		1.89	%		2.04	%		2.08	%
Nonperforming loans to total loans		2.63	%		2.13	%		2.49	%		2.98	%		3.04	%
Allowance for loan losses to nonperforming loans		51.54	%		59.27	%		57.21	%		35.98	%		37.21	%
Allowance for loan losses to total loans		1.35	%		1.26	%		1.42	%		1.07	%		1.13	%
Capital Ratios:
Average equity to average assets		13.15	%		11.70	%		11.96	%		12.44	%		12.75	%
Equity to total assets at end of period		17.06	%		11.67	%		11.27	%		12.29	%		12.52	%
Total capital to risk-weighted assets (4)		18.9	%		14.9	%		15.2	%		15.3	%		16.5	%
Tier 1 capital to risk-weighted assets (4)		17.7	%		13.7	%		14.0	%		14.3	%		15.4	%
Tier 1 capital to average assets (4)		13.4	%		9.7	%		9.9	%		10.4	%		10.4	%
Other Data:
Number of full service offices		8			8			8			8			8

(1) Represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the year.

(2) Represents net interest income as a percent of average interest-earning assets for the year.

(3) Represents noninterest expense divided by the sum of net interest income and noninterest income. The efficiency ratio presented above includes other than temporary impairment losses on investments totaling $0, $0, $0, $0 and $1.7 million for 2012 through 2008, respectively.

(4) Represents capital ratios of The LaPorte Savings Bank.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited consolidated financial statements, which appear beginning on page 75 of this Annual Report on Form 10-K. You should read the information in this section in conjunction with the business and financial information regarding the Company provided in this Annual Report on Form 10-K.

Overview

Our results of operations depend mainly on our net interest income, which is the difference between the interest income earned on our loan and investment portfolios and interest expense paid on our deposits and borrowed funds. Results of operations are also affected by fee income from deposits, lending and mortgage banking operations, provisions for loan losses, gains (losses) on sales and other than temporary impairment charges of loans and securities and other miscellaneous income. Our noninterest expenses consist primarily of salaries and employee benefits, occupancy and equipment, data processing, advertising, bank examination fees, amortization of intangibles, collection and other real estate owned, FDIC insurance and income tax expense (benefit). Our results of operations are also significantly affected by general economic and competitive conditions, particularly with respect to changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable laws, regulations or government policies may materially affect our financial condition and results of operations. See “Item 1A-Risk Factors.”

Business Strategy

Our business strategy is intended to increase profitability by:

• Increasing Commercial Real Estate and Commercial Business Lending. In order to increase the yield of and reduce the term to repricing of our loan portfolio, we have increased our commercial real estate and commercial business loan portfolios while maintaining the practice of sound credit decisions. Our commercial real estate and commercial business loan portfolios have grown from $59.3 million and $17.4 million at December 31, 2007, respectively to $79.8 million and $20.2 million at December 31, 2012, respectively. At December 31, 2012, non-performing commercial real estate and commercial business loans totaled $3.3 million.

• Maintaining the Quality of Our Loan Portfolio. Maintaining the quality of our loan portfolio is a key factor in managing our operations, particularly during a period of economic weakness. We will continue to use customary risk management techniques, such as independent internal and external loan reviews, portfolio credit analysis and field inspections of collateral in overseeing the performance of our loan portfolio. Our asset quality remains better than many Indiana banks and thrifts with a nonperforming loans to total loans ratio of 2.63% at December 31, 2012 and a nonperforming assets to total assets ratio of 1.88% at December 31, 2012.

• Continuing Moderate Growth in Mortgage Warehouse Lending. In order to increase the yield of our loan portfolio and increase noninterest income, during 2009 we introduced the mortgage warehouse line of business. Our mortgage warehouse lending business has grown from $604.8 million originations in 2009 to $2.8 billion in originations in 2012. We intend to moderately increase the activity in this division in future years.

• Increasing Revenue with Our Mortgage Banking Strategy. Due to the low interest rate environment that has persisted since 2008 and is expected to continue for the near term, we have made the strategic decision in order to increase fee income and protect against interest rate risk, to sell virtually all of our fixed rate one- to four-family residential mortgage loans that we originate into the secondary market.

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• Maintaining Our Status As An Independent Community Oriented Institution. We intend to use our customer service and our knowledge of our local community to enhance our status as an independent community financial institution. Having employees who understand and value our clientele and their business is a key component to our success. We believe that our present staff is one of our competitive strengths and thus the retention of such persons and our ability to continue to attract quality personnel is a high priority.

• Managed Growth. We intend to use our capital to grow organically and we may use a portion of the net proceeds of the second-step conversion and offering to pursue future acquisitions of commercial banks, savings institutions, financial services companies and branch offices of such institutions if we find the right opportunity. We have no current arrangements or agreements with respect to any such acquisitions.

• Managing Interest Rate Risk. We believe that it is difficult to achieve satisfactory levels of profitability in the financial services industry without assuming some level of interest rate risk. However, we believe that such risk must be carefully managed to avoid undue exposure to changes in interest rates. Accordingly, we seek to manage to the extent practical our interest rate risk, which may include the use of interest rate swap agreements as a part of our strategy.

Critical Accounting Policies

We consider accounting policies that require management to exercise significant judgment or discretion or make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income, to be critical accounting policies. We consider the following to be our critical accounting policies:

Securities. Declines in the fair value of securities below their cost that are other than temporary are reflected as realized losses. In estimating other-than-temporary losses, management considers: (1) the length of time and extent that fair value has been less than cost and further review will be performed for all securities that have been in a loss position for greater than one year and at a current loss of 10% or more, (2) the financial condition and near term prospects of the issuer and whether it has the ability to pay all amounts due according to the contractual terms of the debt security, (3) whether the market decline was affected by macroeconomic conditions and (4) our intent not to sell the debt security and whether it is more likely than not that we will be required to sell the debt security before its anticipated recovery.

Management reviews a performance report issued by a third party on each of its mortgage-backed securities on a quarterly basis. This review includes information on each security, including the overall credit score and loan to value ratios for the underlying mortgage of these securities.

Management completes a quarterly review of its corporate bond portfolio. The third party review report includes each bond’s investment grade. We continue to closely monitor the corporate bonds due to ongoing economic concerns and spreads on these securities.

Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors.

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A loan is impaired with specific allowance amounts allocated, if applicable, when based on current information and events it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified and for which the borrower is experiencing financial difficulties are considered troubled debt restructurings and classified as impaired. Loans included for analysis for potential impairment are all commercial and commercial real estate loans classified by us as Substandard, Doubtful or Loss. Such loans are analyzed to determine if specific allowance allocations are required under either the fair value of collateral method, for all collateral dependent loans, or using the present value of estimated future cash flows method, using the loan’s existing interest rate as the discount factor. Other factors considered in the potential specific allowance allocation measurement are the timing and reliability of collateral appraisals or other collateral valuation sources, the confidence in our lien on the collateral, historical losses on similar loans, and any other factors known to management at the time of the measurement that may affect the valuation. Based on management’s consideration of these factors for each individual loan that is reviewed for potential impairment, a specific allowance allocation is assigned to the loan, if applicable, and such allocations are periodically monitored and adjusted as appropriate.

Non-specific general allowance amounts are allocated to all other loans not considered in the specific allowance allocation analysis described above. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly they are not separately identified for impairment disclosures. A minimum and maximum allowance allocation estimate is determined for each general loan category or loan pool based on the current three year historical average annual loss ratios as well as consideration of significant recent changes in annual historical loss ratios, classified loan trends by category, delinquency ratios and inherent risk factors attributable to current local and national economic conditions.

All of the allowance for loan losses is allocated under the specific and general allowance allocation methodologies described above. Management reviews its allowance allocation estimates and loan collateral values on at least a quarterly basis and adjusts the allowance for loan losses for changes in specific and general allowance allocations, as appropriate. Any differences between the estimated and actual observed loan losses are adjusted through increases or decreases to the allowance for loan losses on at least a quarterly basis and such losses are then factored into the revised historical average annual loss ratios for future quarterly allowance allocations.

The LaPorte Savings Bank is subject to periodic examinations by its federal and state regulatory examiners and may be required by such regulators to recognize additions to the allowance for loan losses based on their assessment of credit information available to them at the time of their examinations. The process of assessing the adequacy of the allowance for loan losses is necessarily subjective. In times of economic weakness, it is reasonably possible that future credit losses may exceed historical loss levels and may also exceed management’s current estimates of incurred credit losses inherent within the loan portfolio. As such, there can be no assurance that future charge-offs will not exceed management’s current estimate of what constitutes a reasonable allowance for loan losses.

The Company acquired a group of loans through the acquisition of City Savings Financial Corporation on October 12, 2007. Purchased loans that showed evidence of credit deterioration since their origination were recorded at an allocated fair value, such that there is no carryover of the seller’s specific allowance for loan losses for those loans. After acquisition, incurred losses are recognized by an increase in the allowance for loan losses. For further information about the accounting treatment of purchased loans, see Note 1 of the Notes to Consolidated Financial Statements.

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Income Taxes. Income tax expense (benefit) is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Valuation of Goodwill and Other Intangible Assets. We assess the carrying value of our goodwill at least annually in order to determine if this intangible asset is impaired. In reviewing the carrying value of our goodwill, we assess the recoverability of such assets by evaluating the fair value of the related business unit. If the carrying amount of goodwill exceeds its fair value, an impairment loss is recognized for the amount of the excess and the carrying value of goodwill is reduced accordingly. Any impairment would be required to be recorded during the period identified.

At December 31, 2012, the Company had core deposit intangibles of $363,000 subject to amortization and $8.4 million of goodwill, which is not subject to amortization. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets arising from the acquisition of City Savings Financial in 2007. Accounting standards require an annual evaluation of goodwill for potential impairment using various estimates and assumptions. The Company’s common stock at the close of business on December 31, 2012 was $8.78 per common share, compared to a book value of $13.55 per common share. Management believes the lower market price in relation to book value of The Company’s common stock is due to the overall decline in the financial industry sector and is not specific to the Company. Further, the Company engaged an independent expert in valuations to perform an impairment test of its goodwill. The impairment test was performed in February 2013 as of October 31, 2012 and resulted in an implied fair value for the Company sufficiently above the book value of its common stock to support the carrying value of goodwill. As the Company’s stock price per common share is currently less than its book value per common share, it is reasonably possible that management may conclude that goodwill, totaling $8.4 million at December 31, 2012, is impaired as a result of a future assessment. If our goodwill is determined to be impaired, the related charge to earnings could be material.

Other intangible assets consist of core deposit and acquired customer relationship intangible assets arising from a whole bank acquisition. They are initially measured at fair value and then are amortized on an accelerated method over their estimated useful lives, which range from four to 15 years. These intangible assets are also periodically evaluated for impairment. In the future, if these other intangible assets are determined to be impaired, our financial results could be materially impacted. The acquired customer relationship intangible asset was fully amortized by the end of 2011.

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Average Balance Sheet

The following table sets forth average balance sheets, average yields and costs, and certain other information for the years indicated. There were no tax-equivalent yield adjustments made. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees and costs, discounts and premiums that are amortized or accreted to interest income or expense.

	Years Ended December 31,
	2012							2011							2010
	Average Outstanding Balance		Interest		Yield/Cost			Average Outstanding Balance		Interest		Yield/Cost			Average Outstanding Balance		Interest		Yield/Cost
	(Dollars in thousands)
Assets:
Loans	$	292,882	$	16,362		5.59	%	$	260,245	$	15,406		5.92	%	$	264,594	$	17,171		6.49	%
Taxable securities		85,910		1,933		2.25			98,986		2,377		2.40			78,287		2,564		3.28
Tax exempt securities		38,189		1,374		3.60			36,493		1,486		4.07			29,320		1,155		3.94
Federal Home Loan Bank of Indianapolis stock		3,817		116		3.04			3,914		99		2.53			4,186		79		1.89
Fed funds sold and other interest-earning deposits		11,371		47		0.41			9,204		23		0.25			5,183		11		0.21
Total interest-earning assets		432,169		19,832		4.59	%		408,842		19,391		4.74	%		381,570		20,980		5.50	%
Noninterest-earning assets		39,656							41,485							41,332
Total assets	$	471,825						$	450,327						$	422,902
Liabilities and equity:
Savings deposits	$	57,587	$	29		0.05	%	$	48,660	$	42		0.09	%	$	45,363	$	51		0.11	%
Money market/NOW accounts		107,753		483		0.45			100,048		570		0.57			73,119		643		0.88
CDs and IRAs		135,334		2,350		1.74			143,650		3,304		2.30			148,585		3,985		2.68
Total interest bearing deposits		300,674		2,862		0.95			292,358		3,916		1.34			267,067		4,679		1.75
FHLB advances		53,292		1,209		2.27			52,180		1,467		2.81			53,288		2,096		3.93
Subordinated debentures		5,155		282		5.47			5,155		281		5.45			5,155		281		5.45
FDIC guaranteed unsecured borrowings		613		37		6.04			4,947		201		4.06			4,883		201		4.12
Other secured borrowings		234		2		0.85			552		6		1.09			1,493		11		0.74
Total interest-bearing liabilities		359,968		4,392		1.22			355,192		5,871		1.65			331,886		7,268		2.19	%
Noninterest-bearing demand deposits		44,016							37,019							35,865
Other liabilities		5,799							5,416							4,561
Total liabilities		409,783							397,627							372,312
Equity		62,042							52,700							50,590
Total liabilities and equity	$	471,825						$	450,327						$	422,902
Net interest income			$	15,440						$	13,520						$	13,712
Net interest rate spread						3.37	%						3.09	%						3.31	%
Net interest-earning assets	$	72,201						$	53,650						$	49,684
Net interest margin						3.57	%						3.31	%						3.59	%
Average interest-earning assets to interest-bearing liabilities						120.06	%						115.10	%						114.97	%

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Rate/Volume Analysis

The following table presents the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities for the years indicated. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

	Years Ended December 31, 2012 vs. 2011									Years Ended December 31, 2011 vs. 2010
	Increase (Decrease) Due to						Total Increase (Decrease)			Increase (Decrease) Due to						Total Increase (Decrease)
	Volume			Rate						Volume			Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	1,857		$	(901	)	$	956		$	(278	)	$	(1,487	)	$	(1,765	)
Taxable securities		(301	)		(143	)		(444	)		588			(775	)		(187	)
Tax exempt securities		67			(179	)		(112	)		291			40			331
Federal Home Loan Bank of Indianapolis stock		(3	)		20			17			(5	)		25			20
Fed funds sold and other interest-bearing deposits		6			18			24			10			2			12
Total interest-earning assets		1,626			(1,185	)		441			606			(2,195	)		(1,589	)
Interest-bearing liabilities:
Savings deposits		7			(20	)		(13	)		4			(13	)		(9	)
Money market/NOW accounts		41			(128	)		(87	)		194			(267	)		(73	)
CDs and IRAs		(182	)		(772	)		(954	)		(129	)		(552	)		(681	)
FHLB advances and federal funds purchased		31			(289	)		(258	)		(43	)		(586	)		(629	)
Subordinated debentures		—			1			1			—			—			—
Other secured borrowings		(3	)		(1	)		(4	)		(9	)		4			(5	)
FDIC guaranteed borrowings		(231	)		67			(164	)		3			(3	)		—
Total interest-bearing liabilities		(337	)		(1,142	)		(1,479	)		20			(1,417	)		(1,397	)
Change in net interest income	$	1,963		$	(43	)	$	1,920		$	586		$	(778	)	$	(192	)

Comparison of Financial Condition at December 31, 2012 and December 31, 2011

General: Total assets increased $15.6 million, or 3.3%, to $492.8 million at December 31, 2012 from $477.1 million at December 31, 2011. The increase was primarily due to an increase in net loans of $18.3 million in 2012, attributable to a continued increase in mortgage warehouse loans and an increase in commercial business loans, while all other loan balances decreased or remained relatively unchanged. The Company experienced an increase in total deposits in 2012 of $15.4 million, or 4.6%, which assisted in funding the increase in loans. We continue to see a shift in our deposit composition when comparing balances at December 31, 2012 to December 31, 2011, with a reduction in time deposits and an increase in interest-bearing and noninterest-bearing demand, savings and money market accounts. We attribute this change primarily to the continued low interest rate environment along with our strategic approach to pricing deposits and overall interest rate management. Federal Home Loan Bank of Indianapolis (“FHLBI”) advances decreased $23.0 million, or 31.9%, to $49.0 million at December 31, 2012, as we were able to replace a significant portion of matured borrowings with the increase in lower cost deposits. Total shareholders’ equity increased $28.4 million in 2012 primarily due to the net proceeds received in Company’s conversion and reorganization to a full stock holding company on October 4, 2012.

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Investment Securities and Interest-earning Time Deposits: Total securities available for sale decreased $6.4 million, or 4.8%, to $125.6 million at December 31, 2012 from $132.0 million at December 31, 2011 due to payoffs. During the same time period, interest-earning time deposits at other financial institutions increased to $7.1 million at December 31, 2012. Interest-earning time deposits were utilized as a short-term investment alternative given the low interest rate environment.

At December 31, 2012, management reviewed the securities portfolio for possible other-than-temporary impairment and determined there were no impairment charges to be recorded. The total available-for-sale securities portfolio reflected a net unrealized gain of $5.6 million at December 31, 2012 compared to a net unrealized gain of $5.3 million at December 31, 2011.

Loans Held for Sale: Loans held for sale decreased $1.9 million, or 62.1%, to $1.2 million at December 31, 2012 compared to $3.0 million at December 31, 2011 primarily due to the timing of when residential mortgage loans are originated and subsequently sold to the secondary market.

Net Loans: Net loans increased $18.3 million, or 6.2%, to $313.7 million at December 31, 2012 compared to $295.4 million at December 31, 2011. This increase was primarily due to an increase in mortgage warehouse and commercial business loans during 2012. During 2012, we continued to experience strong demand for refinancing loans, particularly in the mortgage warehouse division throughout the country.

Mortgage warehouse loans increased $33.6 million, or 32.4%, to $137.5 million at December 31, 2012 compared to $103.9 million at December 31, 2011. The volume of such loans originated by the mortgage companies increased to $2.8 billion in 2012 from $2.0 billion in 2011. The Home Affordable Refinance Program, along with historically low long term mortgage interest rates during 2012 have contributed to continued increased demand in refinancing residential mortgage loans.

Commercial business loans increased $2.2 million, or 12.0%, to $20.2 million at December 31, 2012 compared to $18.0 million at December 31, 2011. This increase was primarily due to the origination of a $4.2 million commercial loan to a customer in the health care and social assistance industry which was performing in accordance with its original repayment terms at December 31, 2012.

There was no material change in commercial real estate, construction, land or home equity loans at December 31, 2012 when compared to December 31, 2011.

One- to four-family residential loans continued to decrease 18.8% during 2012 from $45.6 million at December 31, 2011 to $37.0 million at December 31, 2012, or 18.8%. The decrease in this portfolio was primarily attributable to continued refinance activity and normal amortization of the seasoned loan portfolio during 2012. We have continued to sell the majority of our fixed rate one- to four-family residential loans originated. Management expects to continue selling the majority of the long term fixed rate one- to four-family residential loans originated in the near future to reduce interest rate risk exposure of fixed rate long term mortgages remaining on the balance sheet.

Five or more family residential loans decreased $3.4 million, or 19.2%, to $14.3 million at December 31, 2012 compared to $17.7 million at December 31, 2011. During the first quarter of 2012, a $4.7 million loan secured by a residential apartment complex was paid off.

Consumer loan demand continued to remain low during 2012 consistent with overall consumer spending patterns. Automobile and other loans decreased $1.9 million, or 27.5%, to $5.0 million at December 31, 2012 compared to $6.9 million at December 31, 2011. Indirect automobile loans decreased $1.1 million during 2012 primarily due to the competitive interest rates offered through automobile dealers on indirect loans as well as overall lack of consumer demand.

The allowance for loan losses balance increased $536,000, or 14.2%, to $4.3 million at December 31, 2012 compared to $3.8 million at December 31, 2011 primarily due to a provision for loan losses of $1.0 million offset by net charge-offs of $501,000 during 2012. Net charge-offs of $228,000 had been specifically reserved for in prior periods. The allowance for loan losses to total loans ratio was 1.35% at December 31, 2012 compared to 1.26% at December 31, 2011.

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Total nonperforming loans were $8.4 million at December 31, 2012 up from $6.4 million at December 31, 2011. Total nonperforming loans to total loans ratio was 2.63% at December 31, 2012 compared to 2.13% at December 31, 2011 attributable to the increase in total nonperforming loans in addition to the increase in total loans over the same year. The increase in nonperforming loans was due to the addition of four relationships totaling $1.9 million which moved to nonaccrual status during 2012. The first relationship totaled $508,000 at December 31, 2012 and was secured by a strip mall in Porter County. This relationship also includes an office building located in Porter County, Indiana which was moved to other real estate owned during the fourth quarter of 2012. The Company has an agreement to sell both of these properties with an expected closing during the second quarter of 2013. Management does not anticipate any additional losses as a result of this transaction. The second relationship totaled $588,000 at December 31, 2012 and is secured by a restaurant located in Lake County, Indiana. During the fourth quarter of 2012, this relationship was restructured into an A/B note structure and is classified as a troubled debt restructuring. The A note totaled $588,000 at December 31, 2012 and will remain in nonaccrual status for at least six months before management considers moving this note back to accrual status. The B note totaled $157,000 and was immediately charged-off at the time of restructuring. The third relationship totaled $433,000 at December 31, 2012 and is secured by a hotel located in LaPorte County, Indiana. The Company holds the first lien on this property with the United States Small Business Administration holding a second lien on the property. The final relationship totaled $390,000 at December 31, 2012 and is secured by several non-owner occupied rental properties and a residential property in LaPorte County, Indiana.

As of December 31, 2012, nonaccrual loans to rental, real estate and land developers totaled $4.7 million, to accommodation and food services totaled $1.0 million, to entertainment and recreation businesses totaled $379,000, to construction businesses totaled $279,000 and to all other commercial industry types totaled $88,000. One- to four-family residential loans on nonaccrual totaled $1.8 million as of December 31, 2012. All other consumer loans on nonaccrual status totaled $96,000 at December 31, 2012.

Total nonperforming assets to total assets ratio increased to 1.88% at December 31, 2012 compared to 1.55% at December 31, 2011 primarily due to the increase in nonperforming loans mentioned above which was offset by a decrease of $110,000 in other real estate owned. Six properties were sold during 2012 with a recorded fair value of $536,000, and 8 new properties were transferred into other real estate owned during the same year with a fair value of $737,000. For the year ended December 31, 2012, write-downs totaling $288,000 were recorded on other real estate owned properties. The current balance in other real estate owned includes the current market value of a property the Company acquired in its acquisition of City Savings Bank in 2007, which was held for future branch development. The current market value of this property was $305,000 at December 31, 2012. The Company anticipates listing this property for sale in the future but does not anticipate that to occur in the near future.

Goodwill and Other Intangible Assets: Our goodwill totaled $8.4 million at December 31, 2012 and 2011. Accounting standards require goodwill to be tested for impairment on an annual basis, or more frequently if circumstances indicate that an asset might be impaired. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value, which is determined through a two-step impairment test. Step 1 includes the determination of the carrying value of the reporting unit, including the existing goodwill and intangible assets, and estimating the fair value of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, we are required to perform a second step to the impairment test. The most recent annual impairment review of the $8.4 million of goodwill previously recorded was performed in February 2013 as of October 31, 2012. Based on this evaluation completed in February 2013, management determined that the fair value of the reporting unit, which is defined as LaPorte Bancorp, Inc. as a whole, exceeded the book value of the goodwill, based on the opinion of an independent expert in valuations, such that the sales price per common share would exceed our book value per common share. Accordingly, no goodwill impairment was recognized in 2012.

As the Company’s market price per common share is currently less than its tangible book value per common share, it is reasonably possible that management may conclude that goodwill, totaling $8.4 million at December 31, 2012, is impaired as a result of a future assessment. If our goodwill is determined to be impaired, the related charge to earnings could be material.

Deposits: Total deposits increased $15.4 million, or 4.6%, to $349.0 million at December 31, 2012 compared to $333.6 million at December 31, 2011, primarily due to an increase in both interest and noninterest-bearing deposits. The continued decline in interest rates offered on longer term certificates of deposit along with the addition of several commercial and personal estate deposit accounts has resulted in an increase in our transaction deposits and a decrease in our fixed rate longer term certificates of deposit.

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Noninterest bearing demand deposits increased $11.9 million, or 30.6%, to $50.9 million at December 31, 2012 compared to $39.0 million at December 31, 2011. This increase was primarily due to the increase in commercial lending relationships and their associated deposit accounts along with an increase in personal estate accounts during 2012. Savings and money market accounts increased $9.9 million, or 9.0%, to $120.4 million at December 31, 2012 from $110.4 million at December 31, 2011. Interest-bearing checking accounts increased $3.0 million, or 6.0%, to $52.9 million at December 31, 2012.

Certificates of deposit and IRA balances decreased $9.4 million, or 7.0%, to $124.8 million at December 31, 2012, primarily due to the continued low interest rate environment. Non-brokered certificates of deposit and IRA time deposits decreased $14.3 million during 2012, primarily due to the continued competitive and low interest rate environment. Although management believes the interest rates offered on certificates of deposit have remained competitive, we have positioned them at or below the average rates offered in the market due to the pricing on alternative sources of funding. Partially offsetting this decrease in non-brokered certificates of deposit and IRA time deposits was an increase of $4.8 million in brokered deposits during 2012. During the first quarter of 2012, we purchased $10.0 million of brokered deposits through CDARS to replace the repayment of a portion of higher costing FHLBI advances and the FDIC guaranteed unsecured borrowing which matured. Offsetting this increase in CDARS deposits was a decrease in other brokered deposits of $5.2 million during 2012.

Borrowed Funds: Total borrowed funds decreased $28.0 million, or 34.1%, to $54.2 million at December 31, 2012 compared to $82.2 million at December 31, 2011, as we were able to replace a significant portion of matured borrowings with the increase in lower cost deposits. During 2012, $21.0 million in long-term FHLBI advances matured and a portion of these advances were replaced by the purchase of $10.0 million in CDARS deposits, as well as by an increase in total deposits of $15.4 million. During the first quarter of 2012, the $5.0 million FDIC guaranteed unsecured borrowing which The LaPorte Savings Bank entered into in 2009 matured and was paid off. The Company has been granted unsecured lines of credit at First Tennessee Bank in the amount of $15.0 million and at Zions Bank in the amount of $9.0 million. At December 31, 2012, neither of these lines of credit were being utilized by the Company.

Total Shareholders’ Equity: Total shareholders’ equity increased $28.4 million, or 50.9%, to $84.1 million at December 31, 2012 compared to $55.7 million at December 31, 2011 due to an increase in paid in capital of $25.3 million and an increase in retained earnings of $3.5 million. The increase in paid in capital was primarily due to the net proceeds received in the Company’s conversion and reorganization to a full stock holding company on October 4, 2012. The increase in retained earnings was primarily due to 2012 net income of $4.3 million which was offset in part by $807,000 in shareholder dividends paid in 2012.

Comparison of Operating Results For the Years Ended December 31, 2012 and December 31, 2011

Net Income: Net income increased $1.0 million, or 32.2%, to $4.3 million for the year ended December 31, 2012 compared to $3.2 million for the year ended December 31, 2011. Return on average assets for 2012 was 0.91% compared to 0.72% for 2011, and return on average equity increased to 6.91% from 6.15% over the same period. The increase in net income was primarily attributable to an increase in net interest income of $1.9 million and an increase in noninterest income of $513,000 which was partially offset by an increase in noninterest expense of $730,000.

The Company experienced an increase in both mortgage warehouse and mortgage banking activity during 2012 when compared to 2011, which contributed significantly to the increase in net income. The average outstanding balance of mortgage warehouse loans increased $45.2 million for the year ended December 31, 2012 compared to the same prior year. Gains on mortgage banking activities increased $558,000 for the year ended December 31, 2012 when compared to the same prior year due to customer demand for refinancings.

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Net Interest Income: Net interest income increased $1.9 million, or 14.2%, to $15.4 million for the year ended December 31, 2012 compared to the prior year, primarily due to an increase in the net interest margin of 26 basis points to 3.57% from 3.31%, over the same year. This increase was primarily due to a decrease in interest expense on deposit accounts and borrowings. The average cost of interest-bearing liabilities decreased 43 basis points during 2012. Interest income increased primarily due to an increase in loan interest and fee income for the year ended December 31, 2012 compared to the prior year. The average balance of interest-earning assets increased $23.3 million during 2012.

Interest and Dividend Income: Interest and dividend income increased $441,000, or 2.3%, to $19.8 million for the year ended December 31, 2012 compared to the prior year, primarily due to an increase in interest and fee income on loans of $956,000, or 6.2%. The average outstanding balance of loans increased $32.6 million, while the average yield on loans decreased 33 basis points to 5.59% for 2012. Interest income on taxable securities decreased to $1.9 million in 2012 from $2.4 million in 2011. The average outstanding balance of taxable securities decreased $13.1 million and the average yield decreased 15 basis points in 2012. Interest income on tax exempt securities decreased $112,000 in 2012 primarily due to a decrease in the average yield of 47 basis points in 2012 compared to 2011. The current low interest rate environment continues to impact interest income and management anticipates this to continue in the near future.

Interest and fee income on mortgage warehouse loans increased $2.1 million, or 53.1%, to $6.0 million during 2012 when compared to 2011 due to the increase of $45.2 million in the average balance of mortgage warehouse loans during the same time period. The volume of such loans originated by the mortgage companies increased to $2.8 billion in 2012 from $2.0 billion in 2011. The Home Affordable Refinance Program, along with historically low long term mortgage interest rates during 2012 have contributed to continued increased demand in refinance activity.

Interest and fee income on commercial real estate and business loans remained relatively unchanged between the years ended December 31, 2012 and 2011.

Interest and fee income on one- to four-family residential loans decreased $723,000, or 24.0%, to $2.3 million for the year ended December 31, 2012 compared to the prior year, due to a decrease in the average outstanding balances of such loans of $11.5 million. The Bank continues to sell the majority of its fixed rate one- to four-family residential loans originated, and as a result, the continued refinance activity during 2012 contributed to the decrease in both the average outstanding balance of such loans and interest income from such loans. The average yield on one- to four-family residential loans decreased 16 basis points during 2012 when compared to the prior year.

Interest income on automobile and other consumer loans decreased $157,000, or 27.4%, to $415,000 for the year ended December 31, 2012. The average outstanding balance of these loans decreased $1.9 million during 2012 when compared to the prior year as demand for these loans remains low.

Interest income on taxable securities decreased $444,000, or 18.7%, to $1.9 million for the year ended December 31, 2012 compared to the prior year, due to a decrease in average outstanding balances of $13.1 million and a decrease in the average yield of 15 basis points. Interest income on tax exempt securities decreased $112,000 to $1.4 million for the year ended December 31, 2012, due to a decrease in the average yield of 47 basis points. Management expects that the current low interest rate environment will continue to negatively impact the yield on the investment portfolio.

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Interest Expense: Interest expense decreased $1.5 million, or 25.2%, to $4.4 million for the year ended December 31, 2012 compared to the prior year. The average cost of interest-bearing liabilities decreased 43 basis points to 1.22% during 2012 from 1.65% for the prior year, primarily due to a decrease in the average cost of certificates of deposit and IRA time deposits as well as a decrease in the average cost of borrowed funds.

Interest expense on deposits decreased $1.1 million, or 26.9%, to $2.9 million for the year ended December 31, 2012 as compared to the prior year. The average cost of certificates of deposit and IRA time deposits decreased 56 basis points to 1.74% for 2012 from 2.30% in 2011 and the average outstanding balance of these deposits decreased $8.3 million resulting in a decrease of $954,000 in interest expense on these deposits. The average cost of money market and interest-bearing checking accounts decreased 12 basis points to 0.45% in 2012 from 0.57% in 2011. The Company has continued to offer competitive interest rates on money market accounts in order to attract these relatively low cost deposits to help fund the mortgage warehouse division.

Interest expense on FHLBI advances decreased $258,000, to $1.2 million during 2012 due to a 54 basis point decrease in the average cost of FHLBI advances to 2.27% in 2012 as we were able to replace a significant portion of matured borrowings with the increase in lower cost deposits. Interest expense on the FDIC guaranteed unsecured borrowing which The LaPorte Savings Bank entered into in 2009 decreased $164,000 for the year ended December 31, 2012 when compared to the prior year, as the borrowing matured and was paid off during the first quarter of 2012.

Provision for Loan Losses: The Bank recognizes a provision for loan losses, which is charged to earnings, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management considers historical loan loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect borrowers’ ability to repay, the estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events occur. After an evaluation of these factors, management recognized a provision for loan losses of $1.0 million for the year ended December 31, 2012 compared to $1.1 million for the prior year. Net charge-offs for 2012 and 2011 were $501,000 and $1.3 million, respectively. Specific reserves of $228,000 were previously recorded for current year net charge-offs.

Noninterest Income: Noninterest income increased $513,000, or 19.4%, to $3.2 million in 2012 compared to 2011, primarily attributable to increases in gains on mortgage banking activities of $558,000 due to an increase in refinance activity when comparing 2012 to 2011. Other income increased $258,000 for the year ended December 31, 2012 compared to the prior year primarily attributable to gains of $141,000 attributable to the call of certain brokered time deposits during the third quarter, along with an increase in wire transfer fees of $118,000 resulting from the increased activity in the mortgage warehouse division.

Net gain on sales of securities decreased $249,000 for the year ended December 31, 2012 compared to the prior year. During the third quarter of 2011, based on the Federal Reserve Board’s decision to maintain the low level of interest rates through at least 2012, management made the decision to sell a number of securities and add these gains to capital permanently without a negative impact on long term earnings. Service charge income decreased $77,000, or 14.5%, to $453,000 for the year ended December 31, 2012 from $530,000 for the same prior year. The Company continues to experience a decrease in non-sufficient funds/overdraft fee income due to the regulations impacting our ability to charge for certain types of overdraft protection.

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Noninterest Expense: Noninterest expense increased $730,000, or 6.6%, to $11.8 million for the year ended December 31, 2012 compared to $11.1 million for the prior year primarily due to an increase in salaries and employee benefits expense of $539,000, or 8.8%. Payroll expenses increased $408,000, or 8.3%, during 2012 compared to the prior year as a result of an increase in staffing to our commercial credit and mortgage warehouse departments, annual merit pay and bonus accruals. Late in the third quarter of 2011, we implemented an equity incentive plan which resulted in an increase to compensation expense of $172,000 for the year ended December 31, 2012.

Other expenses increased $222,000, or 17.7%, primarily due to expenses of $95,000 incurred for the creation of a real estate investment trust company which was established in 2013. During 2012, the Company also incurred other expenses of $28,000 related to strategic planning services performed by an independent third party, $28,000 in miscellaneous services expense related to our investment subsidiary, $20,000 in settlement expenses related to a legal proceeding we assumed from our merger with City Savings Financial and $20,000 related to the hiring of a temporary commercial loan consultant.

Data processing expenses increased $80,000, or 18.0%, during 2012 due to enhancements of existing credit analyzing software for our commercial credit department and the addition of a secondary market loan pricing and tracking software.

Partially offsetting these increases was a decrease in the amortization of intangible assets of $90,000, or 44.8%, as the core deposit intangible asset recorded by us is amortized into expense and the customer intangible asset was fully amortized during the third quarter of 2011. FDIC insurance expense decreased $74,000, or 18.1%, in 2012 due to the change in the formula of the assessment and its impact on The LaPorte Savings Bank.

Income Taxes: Income tax expense increased $760,000, to $1.5 million for 2012 compared to $736,000 for 2011, primarily due to an increase in income before taxes of $1.8 million, as well as an increase in the effective tax rate. The effective tax rates for 2012 and 2011 were 25.9% and 18.5%, respectively. During the third and fourth quarters of 2012, we estimated all state net operating losses and other credits were utilized for 2012 resulting in a state income tax expense of $173,000. The Company has established a real estate investment trust company in 2013 as an additional vehicle to raise capital which will have the ancillary effect of lowering our effective state income tax rate in future years.

Liquidity and Capital Resources

We maintain liquid assets at levels we consider adequate to meet both our short- and long-term liquidity needs. We adjust our liquidity levels to fund deposit outflows, repay our borrowings and to fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives. Liquidity levels fluctuate significantly based upon the demand in the mortgage warehouse lending division.

Our primary sources of liquidity are deposits, amortization and prepayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, and earnings and funds provided from operations, as well as access to Federal Home Loan Bank advances and other borrowings. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits.

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A portion of our liquidity consists of cash and cash equivalents and borrowings, which are a product of our operating, investing and financing activities. At December 31, 2012 and December 31, 2011, $6.9 million and $8.1 million of our assets were invested in cash and cash equivalents, respectively. Our primary sources of cash are principal repayments on loans, proceeds from the maturities of securities, principal repayments of mortgage-backed securities and increases in deposit accounts. Short-term investment securities (maturing in one year or less) totaled $0 and $335,000 at December 31, 2012 and December 31, 2011, respectively, not including scheduled or pre-payments from mortgage-backed securities and CMOs. Based on our current Federal Home Loan Bank of Indianapolis stock ownership, as of December 31, 2012 and December 31, 2011, we had $49.0 million and $72.0 million, respectively in borrowings outstanding from the Federal Home Loan Bank of Indianapolis. At December 31, 2012 and December 31, 2011 we had access to additional Federal Home Loan Bank of Indianapolis advances of up to approximately $26.8 million and $2.8 million, respectively. At December 31, 2012 and 2011, if we increased our ownership in Federal Home Loan Bank of Indianapolis stock to the maximum allowable and increased our pledged collateral accordingly, we could borrow an additional $49.5 million and $38.5 million, respectively, from the Federal Home Loan Bank of Indianapolis. As of December 31, 2012 and December 31, 2011, we had $0 in borrowings from the Federal Reserve Bank discount window and access to additional borrowings of up to approximately $8.0 million at December 31, 2012 and approximately $10.0 million at December 31, 2011. During the first quarter of 2012, the Company was extended an accommodation from First Tennessee Bank National Association to borrow federal funds up to $15.0 million. During the fourth quarter of 2011, the Company was extended an accommodation from First Tennessee Bank National Association to borrow federal funds up to $20.0 million. The federal funds accommodation is not and shall not be a confirmed line or loan, and First Tennessee Bank National Association may cancel such accommodation at any time, in whole or in part, without cause or notice, at its sole discretion. At December 31, 2012 and December 31, 2011, the Company had no borrowings from First Tennessee Bank National Association. During 2012, the Company entered into an agreement with Zions First National Bank for an unsecured line of credit to borrow federal funds up to $9.0 million. This federal funds line of credit was established at the discretion of Zions First National Bank and may be terminated at any time in its sole discretion. At December 31, 2012, the Company had no borrowings from Zions First National Bank. The market value of unpledged available for sale securities which could be pledged for additional borrowing purposes was $83.5 million and $98.3 million at December 31, 2012 and December 31, 2011, respectively.

At December 31, 2012, we had $34.8 million in loan commitments outstanding, of which $18.0 million was committed to originate unused home equity lines of credit, $4.9 million was committed to originate commercial lines of credit, $1.9 million was committed to originate unused commercial standby letters of credit, $4.3 million was committed to unused overdraft lines of credit, $866,000 was committed to originate commercial real estate loans, $463,000 was committed to originate commercial loans, $3.4 million was committed to originate unused commercial construction loans and $934,000 was committed to originate unused residential construction loans. At December 31, 2011, we had $30.9 million in loan commitments outstanding, of which $17.2 million was committed to originate unused home equity lines of credit, $3.4 million was committed to originate commercial lines of credit, $2.4 million was committed to originate unused commercial standby letters of credit, $4.0 million was committed to unused overdraft lines of credit, $1.1 million was committed to originate commercial real estate loans, $1.6 million was committed to originate unused commercial construction loans and $1.2 million was committed to originate unused residential construction loans. Certificates of deposit and IRAs due within one year of December 31, 2012 and December 31, 2011 totaled $65.0 million, or 52.1% and $67.4 million, or 50.2%, respectively of certificates of deposit and IRAs. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit, IRAs and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before December 31, 2012. We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

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As reported in the Consolidated Statements of Cash Flows, our cash flows are classified for financial reporting purposes as operating, investing or financing cash flows. Net cash provided by operating activities was $8.1 million and $6.5 million for the years ended December 31, 2012 and December 31, 2011, respectively. Net cash from investing activities was $20.1 million and $30.5 million during the years ended December 31, 2012 and 2011. Investment securities cash flows had the most significant effect, as net cash from sales and maturities amounted to $48.4 million and $59.1 million for the years ended December 31, 2012 and December 31, 2011, respectively, and net cash utilized in purchases amounted to $41.4 million and $66.4 million during the years ended December 31, 2012 and December 31, 2011, respectively. During 2011, we used $134,000 to purchase 14,130 shares of our common stock, which was held as treasury stock. Net cash provided by financing activities was $10.7 million and $26.2 million for the years ended December 31, 2012 and 2011. Net proceeds from our stock offering comprised a majority of our financing activity during 2012 in addition to deposit cash flows. Deposit and borrowing cash flows comprised most of our financing activities in 2011. The net effect of our operating, investing and financing activities was to decrease our cash and cash equivalents from $8.1 million at the beginning of fiscal year 2012 to $6.9 million at December 31, 2012. The net effect of our operating, investing and financing activities was to increase our cash and cash equivalents from $5.9 million at the beginning of fiscal year 2011 to $8.1 million at December 31, 2011.

We also have obligations under our post retirement plans as described in Notes 12 and 13 of the Notes to Consolidated Financial Statements. The post retirement benefit plans will require future payments to eligible plan participants. We contributed $52,000 to our 401(k) plan in each of 2012 and 2011. In addition, as part of the second-step conversion and offering, the employee stock ownership plan trust borrowed funds from the Company and used those funds to purchase shares to be allocated to participants in our ESOP.

Off-Balance-Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, unused lines of credit and standby letters of credit. For information about our loan commitments, letters of credit and unused lines of credit, see Note 19 of the Notes to Consolidated Financial Statements.

For the years ended December 31, 2012 and 2011, we did not engage in any off-balance-sheet transactions other than loan origination commitments, unused lines of credit and standby letters of credit in the normal course of our lending activities.

Effect of Inflation and Changing Prices

The consolidated financial statements and related consolidated financial data presented herein regarding the Company have been prepared in accordance with U.S. generally accepted accounting principles, which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of the Company’s assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on the Company’s performance than does the effect of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, because such prices are affected by inflation to a larger extent than interest rates.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Management of Interest Rate Risk

Our asset/liability management strategy attempts to manage the impact of changes in interest rates on net interest income, our primary source of earnings.

Historically, we have relied on funding longer term higher interest-earning assets with shorter term lower interest-bearing deposits to earn a favorable net interest rate spread. As a result, we have been vulnerable to adverse changes in interest rates. Over the past several years, management has implemented an asset/liability strategy to manage, subject to our profitability goals, our interest rate risk. Among the techniques we are currently using to manage interest rate risk are: (i) expanding, subject to market conditions, our commercial real estate loans, commercial business loans and mortgage warehouse loans as they generally reprice more quickly than residential mortgage loans; (ii) selling on the secondary market most of our originations of long-term fixed-rate one- to four-family residential mortgage loans; (iii) subject to market conditions and consumer demand, originating residential adjustable rate mortgages for our portfolio; (iv) using interest rate swaps, caps or floors to hedge our assets and/or liabilities; and (v) reducing the amount of long term, fixed rate mortgage-backed and CMO securities, which are vulnerable to an increasing interest rate environment and will extend in duration. We have also used structured rates with redemption features to improve our yield and may consider interest rate swaps and other hedging instruments although we have not done so recently.

While this strategy has helped manage our interest rate exposure, it does pose risks. For instance, the prepayment options embedded in adjustable rate one- to four-family residential loans and the mortgage-backed securities and CMOs, which allow for early repayment at the borrower’s discretion may result in prepayment before the loan reaches the fully indexed rate. Conversely, in a falling interest rate environment, borrowers may refinance their loans and redeemable securities may be called. In addition, non-residential lending generally presents higher credit risks than residential one- to four-family lending.

Our Board of Directors is responsible for the review and oversight of management’s asset/liability strategies. Our Asset/Liability Committee is charged with developing and implementing an asset/liability management plan. This committee meets monthly to review pricing and liquidity needs and assess our interest rate risk. We currently utilize a third party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates. In addition, on a monthly basis, the committee reviews our current liquidity position, investment activity, deposit and loan repricing and terms, interest rate swap effectiveness testing, and Federal Home Loan Bank and other borrowing strategies.

Depending on market conditions, we often place more emphasis on enhancing net interest margin rather than matching the interest rate sensitivity of our assets and liabilities. In particular, we believe that the increased net interest income resulting from a mismatch in the maturity of our asset and liabilities portfolios can, during periods of stable interest rates, provide high enough returns to justify increased exposure to sudden and unexpected increases in interest rates. As a result of this philosophy, our results of operations will remain vulnerable to increases in interest rates.

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Quantitative Analysis. The table below sets forth, as of December 31, 2012, the estimated changes in the net interest margin and the economic value of equity that would result from the designated changes in the United States Treasury yield curve over a 12 month non-parallel ramp for The LaPorte Savings Bank. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.

				Estimated Increase (Decrease) in NIM								Estimated Increase (Decrease) in EVE						EVE as Percentage of Economic Value of Assets
Changes in Interest  Rates (basis points) (1)		Estimated NIM (2)		Amount			Percent			Estimated EVE (3)		Amount			Percent			EVE Ratio(4)			Changes in Basis Points
(Dollars in thousands)
	+300	$	17,047	$	1,389			8.87	%	$	76,586	$	(1,231	)		(1.58	)%		16.35	%		0.39	%
	+200		16,614		955			6.10			78,752		935			1.20			16.58			0.62
	+100		16,109		451			2.88			79,048		1,231			1.58			16.41			0.46
	0		15,658		—			—			77,817		—			—			15.96			—
	-100		15,192		(467	)		(2.98	)		74,902		(2,915	)		(3.75	)		15.22			(0.74	)

(1) Assumes changes in interest rates over a 12 month non-parallel ramp.

(2) NIM or Net Interest Margin measures The LaPorte Savings Bank’s exposure to net interest income due to changes in a forecast interest rate environment.

(3) EVE or Economic Value of Equity at Risk measures The LaPorte Savings Bank’s exposure to equity due to changes in a forecast interest rate environment.

(4) EVE Ratio represents Economic Value of Equity divided by the economic value of assets which should translate into built in stability for future earnings.

The table above indicates that at December 31, 2012, in the event of a 100 basis point decrease in interest rates over a 12 month non-parallel ramp, we would experience a 2.98% decrease in net interest margin. In the event of a 100 basis point increase in interest rates over a 12 month non-parallel ramp, the net interest margin would increase 2.88%.

The table above indicates that at December 31, 2012, in the event of a 100 basis point decrease in interest rates over a 12 month non-parallel ramp, we would experience a 3.75% decrease in economic value of equity. In the event of a 100 basis point increase in interest rates over a 12 month non-parallel ramp, the economic value would increase 1.58% in economic value of equity.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in the economic portfolio value of equity and net interest margin require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in interest rates. In this regard, the table above assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that particular changes in interest rates occur at different times and in different amounts in response to a designed change in the yield curve for U.S. Treasuries. Furthermore, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income. Finally, the above table does not take into account the changes in the credit risk of our assets which can occur in connection with changes in interest rates.

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The Company is also continuing to take steps to address its exposure to rising interest rates. For instance management executed an interest rate swap to address the exposure on its $5.0 million floating rate trust preferred debenture in April 2009, by swapping for a fixed five year effective rate of 5.54%. In October 2009, the Company executed a $10.3 million interest rate swap which took $10.3 million five year floating rate brokered certificates of deposit and swapped for a fixed five year effective rate of 3.19%. In February 2010, The LaPorte Savings Bank executed two interest rate swaps against $15.0 million in maturing FHLB advances. The first interest rate swap was against a $10.0 million adjustable rate advance tied to the three month LIBOR plus 0.25% for six years at an effective fixed rate of 3.69% and began in July 2010. The second interest rate swap was against a $5.0 million adjustable rate advance tied to the three month LIBOR plus 0.22% for five years with an effective fixed rate of 3.54% and began in September 2010. We will continue to look for opportunities to address our exposure to rising interest rates utilizing hedging strategies in the future. We are also continuing to sell most of the fixed rate one- to-four family residential real estate loans originated and continuing to originate the majority of commercial real estate loans at a variable rate with interest rate floors attached.

Item 8. Financial Statements and Supplementary Data

The information regarding financial statements is incorporated herein by reference to LaPorte Bancorp, Inc.’s 2012 Annual Report to Shareholders in the Financial Statements and the Notes thereto.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable

Item 9A. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

The Company has adopted disclosure controls and procedures designed to facilitate financial reporting. The Company’s disclosure controls currently consist of communications among the Company’s Chief Executive Officer, the Company’s Chief Financial Officer and each department head to identify any transactions, events, trends, risks or contingencies which may be material to its operations. These disclosure controls also contain certain elements of the Company’s internal controls adopted in connection with applicable accounting and regulatory guidelines. In addition, the Company’s Chief Executive Officer, Chief Financial Officer, Audit Committee and independent registered public accounting firm meet on a quarterly basis to discuss disclosure matters. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report and found them to be effective.

(b) Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, and management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012 based upon the criteria set forth in a report entitled Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, the Company’s management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2012.

(c) Changes in internal controls

There were no significant changes made in our internal control over financial reporting during the Company’s fourth quarter of the year ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Item 9B. Other Information

Not Applicable

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The “Proposal I—Election of Directors” section of the Company’s definitive proxy statement for the Company’s 2013 Annual Meeting of Shareholders (the “2013 Proxy Statement”) is incorporated herein by reference.

Item 11. Executive Compensation

The “Proposal I—Election of Directors” section of the Company’s 2013 Proxy Statement is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The “Proposal I—Election of Directors” section of the Company’s 2013 Proxy Statement is incorporated herein by reference.

The following table sets forth information as of December 31, 2012 about Company common stock that may be issued under the Company’s equity compensation plans.

Plan Category	Number of securities to be issued upon the exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders		281,841	$	6.44		16,404
Equity compensation plans not approved by security holders		—				—
Total		281,841	$	6.44		16,404

Item 13. Certain Relationships and Related Transactions, and Director Independence

The “Transactions with Certain Related Persons” section of the Company’s 2013 Proxy Statement is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The “Proposal II – Ratification of Appointment of Independent Registered Public Accounting Firm” Section of the Company’s 2013 Proxy Statement is incorporated herein by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)(1) Financial Statements

The following are filed as a part of this report by means of incorporation by reference to LaPorte Bancorp, Inc.’s 2012 Annual Report to Shareholders:

    (A) Report of Independent Registered Public Accounting Firm

    (B) Consolidated Balance Sheets—at December 31, 2012 and 2011

    (C) Consolidated Statements of Income—Years ended December 31, 2012 and 2011

    (D) Consolidated Statements of Comprehensive Income – Years ended December 31, 2012 and 2011

    (E) Consolidated Statements of Changes In Shareholders’ Equity—Years ended December 31, 2012 and 2011

    (F) Consolidated Statements of Cash Flows—Years ended December 31, 2012 and 2011

    (G) Notes to Consolidated Financial Statements.

(a)(2)  Financial Statement Schedules

    None.

(a)(3)  Exhibits

3.1 Articles of Incorporation of LaPorte Bancorp, Inc. (1)

3.2 Bylaws of LaPorte Bancorp, Inc. (2)

4 Form of Common Stock Certificate of LaPorte Bancorp, Inc. (3)

10.1 Employment Agreement by and among Lee A. Brady and The LaPorte Savings Bank effective February 26, 2008(4)

10.2 Employment Agreement by and among Michele M. Thompson and The LaPorte Savings Bank effective February 26, 2008(5)

10.3 First Amendment of Employment Agreement for Lee A. Brady dated September 23, 2008 (6)

10.4 Second Amendment to the Employment Agreement for Lee A. Brady dated July 12, 2011 (7)

10.5 First Amendment to the Employment Agreement for Michele M. Thompson dated September 23, 2008 (8)

10.6 Second Amendment to the Employment Agreement for Michele M. Thompson dated July 12, 2011 (9)

10.7 Employment Agreement by and among Patrick W. Collins and The LaPorte Savings Bank dated January 1, 2011(10)

10.8 Amended and Restated Supplemental Executive Retirement Plan by and among Lee A. Brady and The LaPorte Savings Bank dated October 26, 2010 (11)

10.9 Supplemental Executive Retirement Agreement by and among Michele M. Thompson and The LaPorte Savings Bank dated October 26, 2010 (12)

10.10 Supplemental Executive Retirement Agreement by and among Patrick W. Collins and The LaPorte Savings Bank dated December 28, 2010 (13)

75

10.11 Split Dollar Agreement by and among Patrick W. Collins and The LaPorte Savings Bank dated December 28, 2010 (14)

10.12 Split Dollar Agreement by and among Michele M. Thompson and The LaPorte Savings Bank dated October 26, 2010 (15)

10.13 Split Dollar Agreement by and among Lee A. Brady and The LaPorte Savings Bank dated January 1, 2003(16)

10.14 Deferred Compensation Agreement by and among Lee A. Brady and The LaPorte Savings Bank dated February 27, 1979 (17)

10.15 First Amendment to the Deferred Compensation Agreement by and among Lee A. Brady and The LaPorte Savings Bank dated September 23, 2008(18)

10.16 Employee Stock Ownership Plan amended and restated effective January 1, 2011(19)

10.17 LaPorte Bancorp, Inc. 2011 Equity Incentive Plan (20)

13 Consolidated Financial Statements

21 Subsidiaries of Registrant

23 Consent of Crowe Horwath LLP

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of December 31, 2012 and 2011, (ii) the Consolidated Statements of Income for the years ended December 31, 2012 and 2011, (iii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2012 and 2011, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2012 and 2011, (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011, and (vi) the notes to the Consolidated Financial Statements

(1) Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 of LaPorte Bancorp, Inc. (file no. 333-182106), originally filed with the Securities and Exchange Commission on June 13, 2012.

(2) Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 of LaPorte Bancorp, Inc. (file no. 333-182106), originally filed with the Securities and Exchange Commission on June 13, 2012.

(3) Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-1 of LaPorte Bancorp, Inc. (file no. 333-182106), originally filed with the Securities and Exchange Commission on June 13, 2012.

(4) Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1 of LaPorte Bancorp, Inc. (file no. 333-182106), originally filed with the Securities and Exchange Commission on June 13, 2012.

(5) Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 of LaPorte Bancorp, Inc. (file no. 333-182106), originally filed with the Securities and Exchange Commission on June 13, 2012.

(6) Incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K of LaPorte Bancorp, Inc. (file no. 001-33733) for the year ended December 31, 2008, filed with the Securities and Exchange Commission on March 31, 2009.

(7) Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of LaPorte Bancorp, Inc. (file no. 001-33733) filed with the Securities and Exchange Commission on July 12, 2011.

(8) Incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K of LaPorte Bancorp, Inc. (file no. 001-33733), originally filed with the Securities and Exchange Commission on March 31, 2009.

(9) Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of LaPorte Bancorp, Inc. (file no. 001-33733), originally filed with the Securities and Exchange Commission on July 12, 2011.

76

(10) Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of LaPorte Bancorp, Inc. (file no. 001-33733) filed with the Securities and Exchange Commission on December 29, 2010.

(11) Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of LaPorte Bancorp, Inc. (file no. 001-33733) filed with the Securities and Exchange Commission on October 28, 2010.

(12) Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of LaPorte Bancorp, Inc. (file no. 001-33733), originally filed with the Securities and Exchange Commission on October 28, 2010.

(13) Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of LaPorte Bancorp, Inc. (file no. 001-33733), originally filed with the Securities and Exchange Commission on December 29, 2010.

(14) Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of LaPorte Bancorp, Inc. (file no. 001-33733), originally filed with the Securities and Exchange Commission on December 29, 2010.

(15) Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of LaPorte Bancorp, Inc. (file no. 001-33733), originally filed with the Securities and Exchange Commission on October 28, 2010.

(16) Incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1 of LaPorte Bancorp, Inc. (file no. 333-182106), originally filed with the Securities and Exchange Commission on June 13, 2012.

(17) Incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-1 of LaPorte Bancorp, Inc. (file no. 333-143526), originally filed with the Securities and Exchange Commission on June 5, 2007.

(18) Incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-K of LaPorte Bancorp, Inc. (file no. 001-33733) for the year ended December 31, 2008, filed with the Securities and Exchange Commission on March 31, 2009.

(19) Incorporated by reference to Exhibit 10.16 to the Registration Statement on Form S-1 of LaPorte Bancorp, Inc. (file no. 333-182106), originally filed with the Securities and Exchange Commission on June 13, 2012.

(20) Incorporated by reference to Exhibit 10 to the Registration Statement on Form S-8 (file no. 333-177549) filed with the Securities and Exchange Commission on October 27, 2011.

77

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LAPORTE BANCORP, INC.
Date: March 27, 2013	By:	/s/ Lee A. Brady
	Lee A. Brady
	Chief Executive Officer (Duly Authorized Representative)

Pursuant to the requirements of the Securities Exchange of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ Lee A. Brady Lee A. Brady	Chief Executive Officer (Principal Executive Officer)	March 27, 2013
/s/ Michele M. Thompson Michele M. Thompson	President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 27, 2013
/s/ Paul G. Fenker Paul G. Fenker	Chairman of the Board	March 27, 2013
/s/ Mark A. Krentz Mark A. Krentz	Secretary of the Board	March 27, 2013
/s/ Ralph F. Howes Ralph F. Howes	Director	March 27, 2013
/s/ L. Charles Lukmann, III L. Charles Lukmann, III	Director	March 27, 2013
/s/ Jerry L. Mayes Jerry L. Mayes	Vice Chairman of the Board	March 27, 2013
/s/ Robert P. Rose Robert P. Rose	Director	March 27, 2013
/s/ Dale A. Parkison Dale A. Parkison	Director	March 27, 2013

EX-13

	Crowe Horwath LLP Independent Member Crowe Horwath International

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

LaPorte Bancorp, Inc.

LaPorte, Indiana

We have audited the accompanying consolidated balance sheets of LaPorte Bancorp, Inc. as of December 31, 2012 and 2011 and the related consolidated statements of income, comprehensive income changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of LaPorte Bancorp, Inc. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

Crowe Horwath LLP

South Bend, Indiana

March 26, 2013

LAPORTE BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2012 and 2011

(Dollar amounts in thousands, except per share data)

	2012			2011
ASSETS
Cash and due from financial institutions	$	6,857		$	8,146
Interest-earning time deposits in other financial institutions		7,141			—
Securities available for sale		125,620			131,974
Federal Home Loan Bank (FHLB) stock, at cost (restricted)		3,817			3,817
Loans held for sale, at fair value		1,155			3,049
Loans, net of allowance for loan losses of $4,308 at December 31, 2012 and $3,772 at December 31, 2011		313,692			295,359
Mortgage servicing rights		344			348
Other real estate owned		902			1,012
Premises and equipment, net		9,575			9,840
Goodwill		8,431			8,431
Other intangible assets		363			474
Bank owned life insurance		11,263			10,876
Accrued interest receivable and other assets		3,595			3,819
Total assets	$	492,755		$	477,145
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Non-interest bearing	$	50,892		$	38,977
Interest bearing		298,078			294,583
Total deposits		348,970			333,560
Federal Home Loan Bank advances		49,009			72,021
Subordinated debentures		5,155			5,155
Federal Deposit Insurance Corporation guaranteed unsecured borrowings		—			4,981
Accrued interest payable and other liabilities		5,566			5,725
Total liabilities		408,700			421,442
Loan commitments and other related activities (Note 19)
Shareholders’ equity
Preferred stock, no par value; 1,000,000 shares authorized; none issued		—			—
Common stock, $0.01 par value; 100,000,000 and 25,061,000 shares authorized at December 31, 2012 and 2011; 6,205,250 and 6,425,905 shares issued at December 31, 2012 and 2011; and 6,205,250 and 6,147,689 shares outstanding at December 31, 2012 and 2011		62			49
Additional paid-in capital		46,532			21,221
Surplus		770			770
Retained earnings		37,745			34,267
Accumulated other comprehensive income, net of tax of $1,218 and $1,046 at December 31, 2012 and 2011		2,364			2,031
Treasury stock, at cost (2012–0 shares, 2011–278,216 shares)		—			(1,278	)
Unearned Employee Stock Ownership Plan (ESOP) shares		(3,418	)		(1,357	)
Total shareholders’ equity		84,055			55,703
Total liabilities and shareholders’ equity	$	492,755		$	477,145

See accompanying notes to consolidated financial statements.

1.

LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2012 and 2011

(Dollar amounts in thousands, except per share data)

	2012			2011
Interest and dividend income
Loans, including fees	$	16,362		$	15,406
Taxable securities		1,933			2,377
Tax exempt securities		1,374			1,486
FHLB stock		116			99
Other interest income		47			23
Total interest and dividend income		19,832			19,391
Interest expense
Deposits		2,862			3,916
Federal Home Loan Bank advances		1,209			1,467
Subordinated debentures		282			281
FDIC guaranteed unsecured borrowings		37			201
Federal funds purchased and other short-term borrowings		2			6
Total interest expense		4,392			5,871
Net interest income		15,440			13,520
Provision for loan losses		1,037			1,137
Net interest income after provision for loan losses		14,403			12,383
Noninterest income
Service charges on deposits		453			530
ATM and debit card fees		413			391
Earnings on life insurance, net		387			397
Net gains on mortgage banking activities		1,234			676
Loan servicing fees, net		(26	)		26
Net gains on securities		378			627
Net losses on sales of other assets		(311	)		(374	)
Other income		632			374
Total noninterest income		3,160			2,647
Noninterest expense
Salaries and employee benefits		6,642			6,103
Occupancy and equipment		1,825			1,789
Data processing		525			445
Advertising		231			219
Bank examination fees		433			479
Amortization of intangibles		111			201
Collection and other real estate owned		204			153
FDIC insurance		336			410
Other expenses		1,475			1,253
Total noninterest expense		11,782			11,052
Income before income taxes		5,781			3,978
Income tax expense		1,496			736
Net income	$	4,285		$	3,242
Earnings per share (Note 21):
Basic	$	0.72		$	0.55
Diluted		0.72			0.55

See accompanying notes to consolidated financial statements.

2.

LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2012 and 2011

(Dollar amounts in thousands, except per share data)

	2012			2011
Net income	$	4,285		$	3,242
Other comprehensive income:
Unrealized gains/losses on securities
Unrealized holding gain arising during the period		606			5,298
Reclassification adjustment for gains included in net income		(378	)		(627	)
Net unrealized gains		228			4,671
Tax effect		(77	)		(1,588	)
Net of tax		151			3,083
Unrealized gains/losses on cash flow hedges
Unrealized holding gain/loss arising during period		277			(761	)
Net unrealized gains/losses		277			(761	)
Tax effect		(95	)		259
Net of tax		182			(502	)
Total other comprehensive income		333			2,581
Comprehensive income	$	4,618		$	5,823

See accompanying notes to consolidated financial statements.

3.

LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Years ended December 31, 2012 and 2011

(Dollar amounts in thousands, except per share data)

	Common Stock		Additional Paid-In Capital			Surplus		Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Tax			Treasury Stock			Unearned ESOP Shares			Total
Balance at January 1, 2011	$	48	$	21,160		$	770	$	31,211		$	(550	)	$	(1,144	)	$	(1,447	)	$	50,048
Net income		—		—			—		3,242			—			—			—			3,242
Other comprehensive income		—		—			—		—			2,581			—			—			2,581
Cash dividends on common stock ($0.03 per share)		—		—			—		(186	)		—			—			—			(186	)
Treasury shares purchased, 18,637 shares		—		—			—		—			—			(134	)		—			(134	)
ESOP shares earned, 11,930 shares		—		(9	)		—		—			—			—			90			81
Issuance of restricted stock awards		1		(1	)		—		—			—			—			—			—
Stock awards and option expense		—		71			—		—			—			—			—			71
Balance at December 31, 2011	$	49	$	21,221		$	770	$	34,267		$	2,031		$	(1,278	)	$	(1,357	)	$	55,703

(Continued)

4 ..

LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Years ended December 31, 2012 and 2011

(Dollar amounts in thousands, except per share data)

	Common Stock			Additional Paid-In Capital			Surplus		Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Tax		Treasury Stock			Unearned ESOP Shares			Total
Balance at January 1, 2012	$	49		$	21,221		$	770	$	34,267		$	2,031	$	(1,278	)	$	(1,357	)	$	55,703
Net income		—			—			—		4,285			—		—			—			4,285
Other comprehensive income		—			—			—		—			333		—			—			333
Cash dividends on common stock ($0.13 per share)		—			—			—		(807	)		—		—			—			(807	)
Items related to Conversion and stock offering:
Treasury stock retired pursuant to reorganization		(2	)		(1,276	)		—		—			—		1,278			—			—
Cancellation of LaPorte Savings Bank, Mutual Holding Company shares and fractional shares		(47	)		47			—		—			—		—			—			—
Proceeds from stock offering 3,384,611 shares, net of expense of $1,267		62			26,282			—		—			—		—			—			26,344
Purchase of 270,768 shares by ESOP pursuant to reorganization		—			—			—		—			—		—			(2,241	)		(2,241	)
ESOP shares earned, 22,486 shares		—			15			—		—			—		—			180			195
Stock awards and option expense		—			243			—		—			—		—			—			243
Balance at December 31, 2012	$	62		$	46,532		$	770	$	37,745		$	2,364	$	—		$	(3,418	)	$	84,055

See accompanying notes to consolidated financial statements.

5.

LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2012 and 2011

(Dollar amounts in thousands, except per share data)

	2012			2011
Cash flows from operating activities
Net income	$	4,285		$	3,242
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		577			646
Provision for loan losses		1,037			1,137
Net gains on securities		(378	)		(627	)
Net gains on sales of loans		(1,059	)		(610	)
Originations of loans held for sale		(46,963	)		(37,311	)
Proceeds from sales of loans held for sale		49,916			39,028
Recognition of mortgage servicing rights		(174	)		(66	)
Amortization of mortgage servicing rights		139			105
Net change in mortgage servicing rights valuation allowance		39			27
Loss on sales of other real estate owned		31			193
Write down of other real estate owned		280			185
Earnings on life insurance, net		(387	)		(397	)
Amortization of intangible assets		111			201
ESOP compensation expense		195			81
Stock award and option expense		243			71
Amortization of issuance costs of unsecured borrowing		19			65
Changes in assets and liabilities:
Accrued interest receivable and other assets		52			733
Accrued interest payable and other liabilities		118			(174	)
Net cash from operating activities		8,081			6,529
Cash flows from investing activities
Net change in loans		(20,107	)		(24,582	)
Proceeds from sales of other real estate owned		536			1,315
Proceeds from maturities, calls and principal repayments of securities available for sale		20,326			19,236
Proceeds from sales of securities available for sale		28,059			39,873
Proceeds from redemption of FHLB stock		—			221
Net change in interest-bearing time deposits at other financial institutions		(7,141	)		—
Purchases of securities available for sale		(41,425	)		(66,408	)
Premises and equipment expenditures, net		(312	)		(154	)
Net cash from investing activities		(20,064	)		(30,499	)

(Continued)

6 ..

LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2012 and 2011

(Dollar amounts in thousands, except per share data)

	2012			2011
Cash flows from financing activities
Net change in deposits	$	15,410		$	16,222
Proceeds from FHLB long-term advances		32,500			27,500
Repayment of FHLB long-term advances		(51,524	)		(12,297	)
Net change in FHLB short-term advances		(3,988	)		(4,857	)
Repayment of FDIC guaranteed unsecured borrowing		(5,000	)		—
Net proceeds from stock offering		26,344			—
Purchase of shares by ESOP pursuant to reorganization		(2,241	)		—
Dividends paid on common stock		(807	)		(186	)
Purchase of treasury stock		—			(134	)
Net cash from financing activities		10,694			26,248
Net change in cash and cash equivalents		(1,289	)		2,278
Cash and cash equivalents at beginning of year		8,146			5,868
Cash and cash equivalents at end of year	$	6,857		$	8,146
Supplemental cash flow information:
Cash paid during the period for:
Interest paid	$	4,590		$	5,882
Income taxes paid		1,661			300
Supplemental noncash disclosures:
Transfers from loans receivable to other real estate owned	$	737		$	1,189

See accompanying notes to consolidated financial statements.

7.

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: The consolidated financial statements included herein include the accounts of LaPorte Bancorp, Inc., a Maryland corporation (“New LaPorte”), successor to LaPorte Bancorp, Inc., a Federal corporation (“LaPorte-Federal”), its wholly owned subsidiary, The LaPorte Savings Bank (“the Bank”) and the Bank’s wholly owned subsidiary, LSB Investments Inc., Nevada (“LSB Inc.”), together referred to as “the Company”. LaPorte-Federal was formed on October 12, 2007. LSB Inc. was formed on October 1, 2011 to manage a portion of the Bank’s investment portfolio. LaPorte-Federal was a majority owned (54.11%) subsidiary of LaPorte Savings Bank, MHC through September of 2012. These financial statements do not include the transactions and balances of LaPorte Savings Bank, MHC. Intercompany transactions and balances are eliminated in consolidation.

On October 4, 2012, the Company completed its conversion and reorganization to the stock holding company form of organization. New LaPorte, the new stock holding company for the Bank, sold 3,384,611 shares of common stock at $8.00 per share, for gross offering proceeds of $27.1 million, in its stock offering. Concurrent with the completion of the offering, shares of common stock of LaPorte-Federal owned by the public have been exchanged for 1.3190 shares of New LaPorte’s common stock so that LaPorte-Federal’s existing shareholders now own approximately the same percentage of New LaPorte’s common stock as they owned of LaPorte-Federal’s common stock immediately prior to the conversion, as adjusted for the assets of LaPorte Savings Bank, MHC and their receipt of cash in lieu of fractional exchange shares. As a result of the offering and the exchange of shares, New LaPorte has approximately 6,205,250 shares outstanding. All share and per share information in this report for periods prior to conversion has been revised to reflect the 1.3190:1 conversion ratio on shares outstanding, including shares of LaPorte-Federal held by the former mutual holding company that were not publicly traded.

The Company provides financial services through its offices in LaPorte and Porter counties of Indiana. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. There are no significant concentrations of loans to any one industry or customer. However, the customers’ ability to repay their loans is dependent on the real estate and general economic conditions in the area. The Company established LSB Inc., a wholly owned subsidiary of the Bank incorporated in Nevada to manage a portion of the Bank’s investment portfolio beginning October 1, 2011. On January 4, 2013, the Company established LSB Real Estate, Inc. (“LSB Real Estate”), a real estate investment trust, which is a wholly owned subsidiary of LSB Inc., and is incorporated in Maryland.

Use of Estimates: To prepare financial statements in conformity with United States generally accepted accounting principles management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan losses, mortgage servicing rights, consideration of other than temporary declines in fair values of securities, the fair values of securities and other financial instruments, consideration of impairment of goodwill and other intangible assets, and the need for a deferred tax asset valuation allowance are particularly subject to change.

Cash Flows: Cash and cash equivalents includes cash, deposits with other financial institutions with original maturities under 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, federal funds purchased, Federal Home Loan Bank advances and Federal Reserve Bank discount window borrowings.

(Continued)

8 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Interest-Earning Time Deposits in Other Financial Institutions: Interest-earning time deposits in other financial institutions mature between one and four years and are carried at cost.

Securities: Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax, as a separate component of shareholders’ equity. Trading securities are carried at fair value, with changes in unrealized holding gains and losses included in income.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities and collateralized mortgage obligations where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at fair value, as determined by outstanding commitments from investors. The fair value includes the servicing value of the loans.

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Interest income on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Consumer loans are typically charged off no later than 120 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. A loan is moved to non-accrual status in accordance with the Company’s policy, typically after 90 days of non-payment. The Company follows the same nonaccrual policy for troubled debt restructurings.

(Continued)

9 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The recorded investment in loans is the loan balance plus unamortized net deferred loan costs less unamortized net deferred loan fees. The total amount of accrued interest on loans as of December 31, 2012 and 2011 was $677 and $654, respectively.

Concentration of Credit Risk: Most of the Company’s business activity is with customers located within La Porte County. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in the La Porte County area.

Mortgage Warehouse Loans: During the month of May 2009, a mortgage warehouse lending division was established at the Bank. This division has approved specific mortgage companies through which individual mortgage loans are originated by the mortgage company and funded by the Bank as a secured borrowing with the pledge of collateral under the Bank’s agreement with the mortgage company. The individual mortgage loans are held between the time of origination and subsequent repurchase by the mortgage company for sale of the loan into the secondary market. Each individual mortgage is assigned to the Bank until the loan is repurchased and sold to the secondary market by the mortgage company. Also, the Bank takes possession of each original note and forwards such note to the end investor once the mortgage company has sold the loan. The individual loans are typically sold by the mortgage company within 30 days of origination and are seldom held more than 90 days. Interest income is accrued by the Bank during this period and fee income for each loan sold is collected when the sale has been completed.

Purchased Loans: The Company purchased a group of loans through the acquisition of City Savings Financial Corporation on October 12, 2007. Purchased loans that showed evidence of credit deterioration since their origination are recorded at an allocated fair value, such that there is no carryover of the seller’s allowance for loan losses. After acquisition, incurred losses are recognized by an increase in the allowance for loan losses.

Purchased loans are accounted for individually or aggregated into pools of loans based on common risk characteristics (e.g., credit score, loan type, and date of origination). The Company estimates the amount and timing of expected cash flows for each purchased loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan’s or pool’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan or pool, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

(Continued)

10 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired.

A loan is impaired when based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the principal and interest owed.

All individually classified commercial and commercial real estate loans are evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over certain time periods. Prior to the fourth quarter of 2012, the historical loss experience was based on the actual loss history experienced over the last 18 months for the commercial portfolio segment and over the last year for all other portfolio segments. For the fourth quarter of 2012, the historical loss experience was based on the actual loss history experienced over the last 24 months for the commercial portfolio segment and over the last three years for all other portfolio segments. Management determined this change in assumption better represents potential losses related to non-impaired loans as of December 31, 2012. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other change in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

(Continued)

11 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The following portfolio segments have been identified: Commercial, Mortgage, Mortgage Warehouse, Residential Construction, Indirect Auto, Home Equity and Consumer and Other. The risk characteristics of each of the identified portfolio segments are as follows:

Commercial – Subject to decreases in demand for certain products or services; increasing production costs; increases in interest rates on adjustable rate loans may impact borrowers’ ability to continue payments; adverse market conditions which may cause a decrease in the value of underlying collateral.

Mortgage – Subject to adverse market conditions which may cause a decrease in the value of underlying collateral; adverse employment conditions in the local economy which may lead to an increase in default rates; incremental rate increases on adjustable rate mortgages may impact borrowers’ ability to continue payments.

Mortgage Warehouse – Subject to higher fraud risk than our other lending areas; decreased market values in real estate throughout the country.

Residential Construction – Subject to adverse market conditions which may cause a decrease in the value of underlying collateral; adverse employment conditions in the local economy which may lead to an increase in default rates.

Indirect Auto – Subject to higher fraud risk than our other lending areas; adverse employment conditions in the local economy which may lead to an increase in default rates; decreased value of the underlying collateral.

Home Equity – Subject to adverse employment conditions in the local economy which may lead to an increase in default rates; decreased market values due to adverse real estate market conditions.

Consumer and Other – Subject to adverse employment conditions in the local economy which may lead to an increase in default rates; decreased value of the underlying collateral.

The Bank is subject to periodic examinations by its federal and state regulatory examiners, and may be required by such regulators to recognize additions to the allowance for loan losses based on their assessment of credit information available to them at the time of their examinations. The process of assessing the allowance for loan losses is necessarily subjective. Further, and particularly in times of economic downturns, it is reasonably possible that future credit losses may exceed historical loss levels and may also exceed management’s current estimates of incurred credit losses inherent within the loan portfolio. As such, there can be no assurance that future charge-offs will not exceed management’s current estimate of what constitutes a reasonable allowance for loan losses.

Mortgage Servicing Rights: When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in net gains on mortgage banking activities. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. The Company compares the valuation model inputs and results to published industry data in order to validate the model results and assumptions. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

(Continued)

12 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported with loan servicing fees, net on the consolidated statements of income. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.

Servicing fee income, which is reported on the consolidated statements of income as loan servicing fees, net, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal; or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income. Loan servicing fees, net totaled $(26) and $26 for the years ended December 2012 and 2011. Late fees and ancillary fees related to loan servicing are not material.

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value, less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight line method with useful lives ranging from 5 to 30 years. Furniture, fixtures and equipment are depreciated on an accelerated or straight line method with useful lives ranging from 3 to 10 years.

Federal Home Loan Bank (FHLB) Stock: The Bank is a member of the FHLB system. Members are required to own a certain amount of FHLB stock based on the level of FHLB borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Bank Owned Life Insurance: The Bank has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

(Continued)

13 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Goodwill and Other Intangible Assets: All goodwill on the Company’s balance sheet resulted from business combinations prior to January 1, 2009 and represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected October 31st as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance sheet.

Other intangible assets consist of core deposit intangible assets arising from a whole bank acquisition. They are initially measured at fair value and then are amortized on an accelerated method over their estimated useful lives, which range from 4 to 15 years.

Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Derivatives: At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or (3) an instrument with no hedging designation (“stand-alone derivative”). As of December 31, 2012, the Company had entered into four cash flow hedge transactions. As of December 31, 2011, the Company had also entered into a fair value hedge. For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For both types of hedges, changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as noninterest income.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.

(Continued)

14 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as noninterest income. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income (loss) are amortized into earnings over the same periods which the hedged transactions will affect earnings.

Mortgage Banking Derivatives: Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest rate on the loan is locked. The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to hedge the change in interest rates resulting from its commitments to fund the loans. Changes in the fair values of these derivatives are included in net gains on mortgage banking activities on the consolidated statements of income.

Stock-Based Compensation: Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards.

Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Retirement Plans: Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Split-dollar life insurance plan expense and supplemental retirement plan expense allocates the benefits over years of service.

Employee Stock Ownership Plan: The cost of shares issued to the ESOP, but not yet allocated to participants, is shown as a reduction of shareholders’ equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce debt and accrued interest.

(Continued)

15 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings Per Common Share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. ESOP shares are considered outstanding for this calculation unless unearned. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options.

Surplus: Surplus has been established in reference to Indiana State Banking Statute 28-6-1-28. This statute required State Savings Banks to reserve and set aside from the gross amount of gains and profits of the institution not less than one quarter of one percent (1/4%) per annum on the deposits, to be held and invested as a surplus fund to meet any contingency in its business, until the surplus fund shall equal up to ten percent (10%) upon the amount of deposits, however, a surplus fund up to twenty-five percent (25%) upon the amount of deposits was allowed. This statute has since been repealed, however, the fund will remain as a part of the Company’s total equity.

Comprehensive Income: Comprehensive income, net of tax, consists of net income and other comprehensive income (loss), net of tax. Other comprehensive income (loss), net of tax, includes net changes in net unrealized gains and losses on securities available for sale, net of tax, reclassification adjustments and unrealized gains and losses on cash flow hedges, which are also recognized as a separate component of shareholders’ equity.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the consolidated financial statements.

Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank was required to meet regulatory reserve and clearing requirements.

Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the Bancorp or by the Bancorp to shareholders.

Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Operating Segments: While the chief decision-makers monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.

(Continued)

16 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Adoption of New Accounting Standards:

In September 2011, the FASB amended existing guidance relating to goodwill impairment testing. The amendment permits an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing these events or circumstances, it is concluded that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The amendments in this guidance are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The effect of adopting this standard did not have a material effect on the Company’s operating results or financial condition.

In June 2011, the FASB amended existing guidance and eliminated the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. The amendment requires that comprehensive income be presented in either a single continuous statement or in two separate consecutive statements. The amendments in this guidance are effective as of the beginning of a fiscal reporting year, and interim periods within that year, that begins after December 15, 2011. Early adoption was permitted. The adoption of this amendment changed the presentation of the statement of comprehensive income for the Company to two consecutive statements instead of presented as part of the consolidated statement of shareholders’ equity.

In May 2011, the FASB issued an amendment to achieve common fair value measurement and disclosure requirements between U.S. and International accounting principles. Overall, the guidance is consistent with existing U.S. accounting principles; however, there are some amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this guidance are effective for interim and annual reporting periods beginning after December 15, 2011. The effect of adopting this standard did not have a material effect on the Company’s operating results or financial condition, but the additional disclosures are included in Note 4.

(Continued)

17 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 2 – SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at December 31, 2012 and 2011 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2012
U.S. federal agency	$	8,045	$	360	$	—		$	8,405
State and municipal		42,161		3,479		(26	)		45,614
Mortgage-backed securities – residential		11,819		572		(6	)		12,385
Government agency sponsored collateralized mortgage obligations		54,070		1,198		(112	)		55,156
Corporate debt securities		3,959		110		(9	)		4,060
Total	$	120,054	$	5,719	$	(153	)	$	125,620

	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2011
U.S. federal agency	$	12,187	$	414	$	—		$	12,601
State and municipal		40,012		3,094		—			43,106
Mortgage-backed securities – residential		30,946		872		(29	)		31,789
Government agency sponsored collateralized mortgage obligations		43,491		1,001		(14	)		44,478
Total	$	126,636	$	5,381	$	(43	)	$	131,974

At December 31, 2012 and 2011, all of our mortgage backed securities were issued by U.S. government-sponsored enterprises and all of our collateralized mortgage obligations were issued by either U.S. government-sponsored enterprises or the U.S. Small Business Administration.

The proceeds from sales of securities available-for-sale were as follows:

	2012			2011
Proceeds	$	28,059		$	39,873
Gross gains		526			687
Gross losses		(152	)		(60	)

Proceeds from calls of securities available for sale during the years ended December 31, 2012 and 2011 were $5,495 and $5,045 with gross gains of $4 and $0 and gross losses of $0 and $0.

(Continued)

18 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 2 – SECURITIES (Continued)

The amortized cost and fair value of the investment securities portfolio are shown by expected maturity. Securities not due at a single maturity date, primarily mortgage-backed securities and CMOs, are shown separately.

	December 31, 2012
	Amortized Cost		Fair Value
Due in one year or less	$	—	$	—
Due from one to five years		15,682		16,385
Due from five to ten years		16,683		17,853
Due after ten years		21,800		23,841
Subtotal		54,165		58,079
Mortgage-backed securities and CMOs		65,889		67,541
Total	$	120,054	$	125,620

Securities pledged at year-end 2012 and 2011 had a carrying amount of approximately $42,151 and $33,661 and were pledged to secure public deposits, FHLB advances, short-term borrowings through the Federal Reserve Bank discount window, treasury tax and loan payments and cash flow hedges.

At year-end 2012 and 2011, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

Securities with unrealized losses at year-end 2012, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

December 31, 2012	Continuing Unrealized Loss For Less Than 12 Months					Continuing Unrealized Loss For 12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
State and municipal	$	1,611	$	(26	)	$	—	$	—	$	1,611	$	(26	)
Mortgage-backed securities – residential		1,012		(6	)		—		—		1,012		(6	)
Government agency sponsored collateralized mortgage obligations		12,392		(112	)						12,392		(112	)
Corporate debt securities		1,489		(9	)		—		—		1,489		(9	)
Total temporarily impaired	$	16,504	$	(153	)	$	—	$	—	$	16,504	$	(153	)

(Continued)

19 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 2 – SECURITIES (Continued)

Securities with unrealized losses at year-end 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

December 31, 2011	Continuing Unrealized Loss For Less Than 12 Months					Continuing Unrealized Loss For 12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Mortgage-backed securities – residential	$	5,646	$	(29	)	$	—	$	—	$	5,646	$	(29	)
Government agency sponsored collateralized mortgage obligations		2,147		(14	)		—		—		2,147		(14	)
Total temporarily impaired	$	7,793	$	(43	)	$	—	$	—	$	7,793	$	(43	)

At December 31, 2012, the Company held 18 investments in debt securities which were in an unrealized loss position of which all were in an unrealized loss position for less than twelve months. Management periodically evaluates each investment security for potential other than temporary impairment, relying primarily on industry analyst reports and observation of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities and that the noted declines in fair value are considered temporary and due only to normal market interest rate fluctuations. The Company does not intend to sell the securities and it is not more likely than not it will be required to sell these debt securities before their anticipated recovery.

(Continued)

20 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS

Loans at year end were as follows:

	2012			2011
Commercial	$	124,563		$	126,559
Mortgage		36,996			45,576
Mortgage warehouse		137,467			103,864
Residential construction		1,475			3,047
Indirect auto		1,154			2,249
Home equity		12,267			12,966
Consumer and other		3,864			4,693
Subtotal		317,786			298,954
Less: Net deferred loan (fees) costs		214			177
Allowance for loan losses		(4,308	)		(3,772	)
Loans, net	$	313,692		$	295,359

As of December 31, 2012 and 2011, the Bank’s mortgage warehouse division had repurchase agreements with 11 and nine mortgage companies. For the year ended December 31, 2012, the mortgage companies originated $2,787,842 in mortgage loans and sold $2,755,204 in mortgage loans. The Bank recorded interest income of $5,205, mortgage warehouse loan fees of $835 and wire transfer fees of $295 for the year ended December 31, 2012. For the year ended December 31, 2011, the mortgage companies originated $1,988,579 in mortgage loans and sold $1,958,332 in mortgage loans. The Bank recorded interest income of $3,376, mortgage warehouse loan fees of $569 and wire transfer fees of $181 for the year ended December 31, 2011.

(Continued)

21 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ending December 31, 2012 and 2011:

	Commercial			Mortgage			Mortgage Warehouse		Residential Construction			Indirect Auto			Home Equity			Consumer and Other			Unallocated		Total
December 31, 2012
Allowance for loan losses:
Beginning balance	$	2,774		$	374		$	393	$	3		$	19		$	119		$	90		$	—	$	3,772
Charge-offs		(383	)		(84	)		—		—			(3	)		(35	)		(64	)		—		(569	)
Recoveries		46			2			—		—			4			1			15			—		68
Provision		694			109			208		(1	)		(13	)		45			(5	)		—		1,037
Ending balance	$	3,131		$	401		$	601	$	2		$	7		$	130		$	36		$	—	$	4,308

	Commercial			Mortgage			Mortgage Warehouse		Residential Construction			Indirect Auto			Home Equity			Consumer and Other			Unallocated		Total
December 31, 2011
Allowance for loan losses:
Beginning balance	$	3,147		$	389		$	139	$	17		$	28		$	142		$	81		$	—	$	3,943
Charge-offs		(1,084	)		(132	)		—		—			(14	)		(52	)		(48	)		—		(1,330	)
Recoveries		—			—			—		—			4			2			16			—		22
Provision		711			117			254		(14	)		1			27			41			—		1,137
Ending balance	$	2,774		$	374		$	393	$	3		$	19		$	119		$	90		$	—	$	3,772

(Continued)

22 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2012:

	Commercial		Mortgage		Mortgage Warehouse		Residential Construction		Indirect Auto		Home Equity		Consumer and Other		Unallocated		Total
December 31, 2012
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,137	$	132	$	—	$	—	$	—	$	22	$	—	$	—	$	1,291
Collectively evaluated for impairment		1,994		269		601		2		7		108		36		—		3,017
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—		—
Total ending allowance	$	3,131	$	401	$	601	$	2	$	7	$	130	$	36	$	—	$	4,308
Loans:
Loans individually evaluated for impairment	$	6,337	$	2,125	$	—	$	—	$	—	$	53	$	—	$	—	$	8,515
Loans collectively evaluated for impairment		117,682		34,731		137,467		1,466		1,154		12,267		3,867		—		308,634
Loans acquired with deteriorated credit quality		712		139		—		—		—		—		—		—		851
Total ending loan balance	$	124,731	$	36,995	$	137,467	$	1,466	$	1,154	$	12,320	$	3,867	$	—	$	318,000

The recorded investment in loans does not include accrued interest.

(Continued)

23 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2011:

	Commercial		Mortgage		Mortgage Warehouse		Residential Construction		Indirect Auto		Home Equity		Consumer and Other		Unallocated		Total
December 31, 2011
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	112	$	128	$	—	$	—	$	—	$	11	$	—	$	—	$	251
Collectively evaluated for impairment		2,662		246		393		3		19		108		90		—		3,521
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—		—
Total ending allowance	$	2,774	$	374	$	393	$	3	$	19	$	119	$	90	$	—	$	3,772
Loans:
Loans individually evaluated for impairment	$	4,630	$	1,630	$	—	$	—	$	—	$	14	$	—	$	—	$	6,274
Loans collectively evaluated for impairment		121,236		43,788		103,864		3,045		2,249		13,002		4,697		—		291,881
Loans acquired with deteriorated credit quality		824		152		—		—		—		—		—		—		976
Total ending loan balance	$	126,690	$	45,570	$	103,864	$	3,045	$	2,249	$	13,016	$	4,697	$	—	$	299,131

The recorded investment in loans does not include accrued interest.

(Continued)

24 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

The following table presents information related to impaired loans by class of loans as of and for the year ended December 31, 2012:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Commercial:
Commercial and other	$	—	$	—	$	—	$	6	$	—	$	—
Real estate		2,150		2,152		—		1,348		10		—
Land		214		214		—		1,411		3		—
Mortgage		1,296		1,296		—		967		16		—
Home equity		31		31		—		21		—		—
Subtotal		3,691		3,693		—		3,753		29		—
With an allowance recorded:
Commercial:
Real estate		1,461		1,199		365		1,681		—		—
Land		2,772		2,772		772		1,640		—		—
Mortgage		829		829		132		826		—		—
Home equity		22		22		22		15		—		—
Subtotal		5,084		4,822		1,291		4,162		—		—
Total	$	8,775	$	8,515	$	1,291	$	7,915	$	—	$	—

The recorded investment in loans does not include accrued interest.

(Continued)

25 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

The following table presents information related to impaired loans by class of loans as of and for the year ended December 31, 2011:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Commercial:
Real estate	$	1,299	$	1,298	$	—	$	1,246	$	4	$	—
Land		2,248		2,248		—		2,248		12		—
Mortgage		945		945		—		762		26		—
Residential construction:
Land		—		—		—		43		—		—
Subtotal		4,492		4,491		—		4,299		42		—
With an allowance recorded:
Commercial:
Commercial and other		28		29		6		40		—		—
Real estate		502		503		29		1,061		6		—
Land		552		552		77		683		—		—
Mortgage		685		685		128		617		—		—
Home equity		14		14		11		209		—		—
Subtotal		1,781		1,783		251		2,610		6		—
Total	$	6,273	$	6,274	$	251	$	6,909	$	48	$	—

The recorded investment in loans does not include accrued interest.

(Continued)

26 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still on accrual by class of loans as of December 31, 2012 and December 31, 2011:

	Nonaccrual				Loans Past Due Over 90 Days Still Accruing
	2012		2011		2012		2011
Commercial:
Commercial and other	$	29	$	62	$	—	$	—
Real estate		3,292		2,027		—		—
Land		2,985		2,800		—		—
Mortgage		1,958		1,454		—		—
Residential construction:
Land		—		—		—		—
Indirect auto		5		8		—
Home equity		53		14		—		—
Consumer and other		39		—		—		—
Total	$	8,361	$	6,365	$	—	$	—

The recorded investment in loans does not include accrued interest.

(Continued)

27 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

The following table presents the aging of the recorded investment in past due loans as of December 31, 2012 and 2011 by class of loans:

	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
December 31, 2012
Commercial:
Commercial and other	$	67	$	—	$	—	$	67	$	20,208	$	20,275
Real estate		1,019		24		2,644		3,687		76,193		79,880
Five or more family		—		—		—		—		14,286		14,286
Construction		—		—		—		—		1,795		1,795
Land		—		109		2,494		2,603		5,892		8,495
Mortgage		523		283		1,469		2,275		34,720		36,995
Mortgage warehouse		—		—		—		—		137,467		137,467
Residential construction:
Construction		—		—		—		—		1,099		1,099
Land		—		—		—		—		367		367
Indirect auto		10		—		5		15		1,139		1,154
Home equity		21		—		25		46		12,274		12,320
Consumer and other		3		—		—		3		3,864		3,867
Total	$	1,643	$	416	$	6,637	$	8,696	$	309,304	$	318,000

	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
December 31, 2011
Commercial:
Commercial and other	$	—	$	—	$	29	$	29	$	18,077	$	18,106
Real estate		1,057		128		1,589		2,774		77,702		80,476
Five or more family		43		—		—		43		17,670		17,713
Construction		—		—		—		—		1,172		1,172
Land		216		—		2,248		2,464		6,759		9,223
Mortgage		1,293		55		1,115		2,463		43,107		45,570
Mortgage warehouse		—		—		—		—		103,864		103,864
Residential construction:
Construction		—		—		—		—		2,629		2,629
Land		—		—		—		—		416		416
Indirect auto		27		—		8		35		2,214		2,249
Home equity		—		—		14		14		13,002		13,016
Consumer and other		—		14		—		14		4,683		4,697
Total	$	2,636	$	197	$	5,003	$	7,836	$	291,295	$	299,131

The recorded investment in loans does not include accrued interest.

(Continued)

28 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

Troubled Debt Restructurings:

A loan modification is considered a troubled debt restructuring when a borrower is experiencing financial difficulty and the Company grants a concession it would not otherwise consider but for the borrower’s financial difficulties. At December 31, 2012 and 2011, the outstanding balance of loans that were modified as troubled debt restructurings totaled $842 and $254, respectively. All of these loans were considered nonperforming troubled debt restructurings. The Company has allocated $0 and $13 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2012 and 2011. The Company has not committed to lend additional amounts as of December 31, 2012 to customers with outstanding loans that are classified as troubled debt restructurings.

During the year ending December 31, 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ending December 31, 2012:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial:
Real estate		2	$	726	$	589
Consumer and other		1		130		—
Total		3	$	856	$	589

The recorded investment in loans does not include accrued interest.

The troubled debt restructurings described above increased the allowance for loan losses by $166 and resulted in charge offs of $166 during the year ending December 31, 2012.

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ending December 31, 2011:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial:
Commercial and other		1	$	33	$	33
Real estate		2		431		429
Mortgage		1		131		131
Total		4	$	595	$	593

The recorded investment in loans does not include accrued interest.

(Continued)

29 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

The troubled debt restructurings described above increased the allowance for loan losses by $13 and resulted in charge offs of $300 during the year ending December 31, 2011.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ending December 31, 2012:

Troubled Debt Restructurings
That Subsequently Defaulted:	Number of Loans		Recorded Investment
Mortgage		1	$	127
Total		1	$	127

The recorded investment in loans does not include accrued interest.

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $0 and resulted in charge offs of $0 during the year ending December 31, 2012.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ending December 31, 2011:

Troubled Debt Restructurings
That Subsequently Defaulted:	Number of Loans		Recorded Investment
Commercial:
Real estate		1	$	25
Total		1	$	25

The recorded investment in loans does not include accrued interest.

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $13 and resulted in charge offs of $300 during the year ending December 31, 2011.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s management loan committee.

(Continued)

30 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. The analysis includes loans with risk ratings of Special Mention, Substandard and Doubtful. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. The Bank monitors credit quality on loans not rated through the loan’s individual payment performance.

(Continued)

31 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

As of December 31, 2012 and 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Not Rated		Pass		Special Mention		Substandard		Doubtful
December 31, 2012
Commercial:
Commercial and other	$	11	$	19,945	$	319	$	—	$	—
Real estate		—		66,427		6,131		7,322		—
Five or more family		203		10,410		3,673		—		—
Construction		—		1,795		—		—		—
Land		—		4,754		755		2,986		—
Mortgage		30,121		4,077		447		2,350		—
Mortgage warehouse		137,467		—		—		—		—
Residential construction:
Construction		1,099		—		—		—		—
Land		367		—		—		—		—
Indirect auto		1,154		—		—		—		—
Home equity		12,060		115		86		59		—
Consumer and other		3,036		831		—		—		—
Total	$	185,518	$	108,354	$	11,411	$	12,717	$	—

	Not Rated		Pass		Special Mention		Substandard		Doubtful
December 31, 2011
Commercial:
Commercial and other	$	67	$	17,500	$	510	$	29	$	—
Real estate		16		65,136		11,658		3,605		61
Five or more family		208		13,520		3,985		—		—
Construction		—		1,079		93		—		—
Land		—		5,447		694		3,082		—
Mortgage		37,769		4,946		722		2,133		—
Mortgage warehouse		103,864		—		—		—		—
Residential construction:
Construction		2,629		—		—		—		—
Land		416		—		—		—		—
Indirect auto		2,249		—		—		—		—
Home equity		12,623		121		92		180		—
Consumer and other		3,776		921		—		—		—
Total	$	163,617	$	108,670	$	17,754	$	9,029	$	61

The recorded investment in loans does not include accrued interest.

(Continued)

32 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 3 – LOANS (Continued)

Purchased Loans:

The Company purchased loans during 2007, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The outstanding balance and carrying amount of those loans is as follows at year end:

	2012		2011
Commercial:
Commercial and other	$	29	$	36
Real estate		714		923
Mortgage		139		154
Outstanding balance	$	882	$	1,113
Carrying amount, net of allowance of $0	$	851	$	977

Accretable yield, or income expected to be collected, is as follows:

	2012			2011
Beginning balance	$	193		$	250
New loans purchased		—			—
Reclassification from nonaccretable yield		7			30
Accretion of income		(69	)		(87	)
Disposals		(3	)		—
Ending balance	$	128		$	193

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during 2012 or 2011. No allowances for loan losses were reversed for the purchased loans disclosed above during 2012 or 2011.

There were no such loans purchased during 2012 or 2011.

Income is not recognized on certain purchased loans if the Company cannot reasonably estimate cash flows expected to be collected. The carrying amounts of such loans were $50 and $50 at December 31, 2012 and 2011.

(Continued)

33 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 4 – FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial asset:

Investment Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

Loans Held for Sale and Loan Commitment Derivatives: The fair value of loans held for sale and residential mortgage loan commitments are determined by obtaining quoted prices for similar loans and commitments with similar interest rates and maturities from major secondary markets (Level 2).

Derivatives-Interest Rate Swaps: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2).

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals performed by qualified independent third-party appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including cost, comparable sales and the income approach. The cost approach is based on the cost to replace the existing property. The comparable sales approach evaluates the sales prices of comparable properties within the same market area. The income approach considers net operating income generated by the property and the rate of return required by an investor. Adjustments are routinely made in the appraisal process by the independent third-party appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

(Continued)

34 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 4 – FAIR VALUE (Continued)

Other Real Estate Owned: Assets acquired through or instead of loan foreclosures are initially recorded at fair value less cost to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals performed by qualified independent third-party appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including cost, comparable sales and the income approach. The cost approach is based on the cost to replace the existing property. The comparable sales approach evaluates the sales prices of comparable properties within the same market area. The income approach considers net operating income generated by the property and the rate of return required by an investor. Adjustments are routinely made in the appraisal process by the independent third-party appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

The President/Chief Financial Officer (“President/CFO”) and Executive Vice President – Credit (“EVP – Credit”) are responsible for determining the valuation processes and procedures for the fair value measurement of impaired loans and other real estate owned properties. The President/CFO and EVP – Credit review impaired loans and other real estate owned properties on a quarterly basis to determine the accuracy of third party appraisals, auction values, values derived from trade publications and any additional data received from the borrower, and the appropriateness of unobservable inputs, generally discounts due to collection issues and current market conditions which are utilized in determining the fair value. The EVP – Credit determines discounts based on the valuation source and asset type for impaired loans. These discounts are reviewed periodically, annually at a minimum, for appropriateness. Current trends in market values and gains and losses on sales of similar assets are also considered when determining discounts of asset categories.

The table below presents the valuation methodology and unobservable inputs for impaired loans and other real estate owned at December 31, 2012.

	Valuation Methodology	Unobservable Inputs	Range of Inputs	Average of Inputs
Impaired loans
Commercial:
Real Estate	Appraisals	Discounts for collection issues and changes in market conditions	10-30%		20%
Land	Appraisals	Discounts for collection issues and changes in market conditions	0-40%		17%
Mortgage	Appraisals	Discounts for collection issues and changes in market conditions	0-20%		11%
Other real estate owned, net
Commercial:
Real Estate	Appraisals	Discount for changes in market conditions	40%		40%
Land	Appraisals	Discount for changes in market conditions	6%-17%		11%
Mortgage	Appraisals	Discount for changes in market conditions	7%-29%		18%

(Continued)

35 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 4 – FAIR VALUE (Continued)

Mortgage Servicing Rights: On a quarterly basis, loan servicing rights are evaluated for impairment based on the fair value of the rights as compared to the carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value. Fair value is determined at a tranche level, based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data (Level 2). Fair value at December 31, 2012 was determined using a discount rate of 10.0%, prepayment speeds ranging from 14.9% to 30.3%, depending on the stratification of the specific right, and a weighted average default rate of approximately 0.5%. Fair value at December 31, 2011 was determined using a discount rate of 9.0%, prepayment speeds ranging from 14.3% to 23.8%, depending on the stratification of the specific right, and a weighted average default rate of approximately 0.5%.

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:

				Fair Value Measurements at December 31, 2012 using:
	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets
Investment securities available-for-sale
U.S. federal agency	$	8,405		$	—	$	8,405		$	—
State and municipal		45,614			—		45,614			—
Mortgage-backed securities – residential		12,385			—		12,385			—
Corporate debt securities		4,060					4,060
Government agency sponsored collateralized mortgage obligations		55,156			—		55,156			—
Total investment securities available-for-sale	$	125,620		$	—	$	125,620		$	—
Loans held for sale	$	1,155		$	—	$	1,155		$	—
Derivatives – residential mortgage loan commitments	$	79		$	—	$	79		$	—
Financial Liabilities
Derivatives – interest rate swaps	$	(1,984	)	$	—	$	(1,984	)	$	—

(Continued)

36 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 4 – FAIR VALUE (Continued)

				Fair Value Measurements at December 31, 2011 using:
	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets
Investment securities available-for-sale
U.S. treasury and federal agency	$	12,601		$	—	$	12,601		$	—
State and municipal		43,106			—		43,106			—
Mortgage-backed securities – residential		31,789			—		31,789			—
Government agency sponsored collateralized mortgage obligations		44,478			—		44,478			—
Total investment securities available-for-sale	$	131,974		$	—	$	131,974		$	—
Loans held for sale	$	3,049		$	—	$	3,049		$	—
Derivatives – residential mortgage loan commitments	$	57		$	—	$	57		$	—
Financial Liabilities
Derivatives – interest rate swaps	$	(2,283	)	$	—	$	(2,283	)	$	—

There were no transfers between Level 1 and Level 2 during 2012 or 2011.

Loans held for sale were carried at the fair value of $1,155 which is made up of the outstanding balance of $1,121, net of a valuation of $34 at December 31, 2012, resulting in income of $(10) for the year ending December 31, 2012. At December 31, 2011, loans held for sale were carried at the fair value of $3,049, which is made up of the outstanding balance of $3,006, net of a valuation of $43 at December 31, 2011, resulting in income of $(3) for the year ending December 31, 2011.

(Continued)

37 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 4 – FAIR VALUE (Continued)

For items for which the fair value option has been elected, interest income is recorded within the consolidated statements of income and comprehensive income based on the contractual amount of interest income earned on financial assets (none were delinquent or in nonaccrual status).

Assets measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at December 31, 2012 using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial:
Real estate	$	833	$	—	$	—	$	833
Land		2,000		—		—		2,000
Mortgage		697		—		—		697
Other real estate owned, net:
Commercial:
Real estate		102		—		—		102
Land		385		—		—		385
Mortgage		133		—		—		133
Mortgage servicing rights		273		—		273		—

			Fair Value Measurements at December 31, 2011 using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial:
Commercial	$	22	$	—	$	—	$	22
Real estate		473		—		—		473
Land		475		—		—		475
Mortgage		557		—		—		557
Home equity		3		—		—		3
Other real estate owned, net:
Commercial:
Real estate		365		—		—		365
Mortgage		93		—		—		93
Mortgage servicing right		271		—		271		—

(Continued)

38 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 4 – FAIR VALUE (Continued)

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $3,530, with a valuation allowance of $1,291 at December 31, 2012, resulting in an additional provision for loan losses of $1,346 for the year ending December 31, 2012. At December 31, 2011, impaired loans had a carrying amount of $1,781, with a valuation allowance of $251, resulting in an additional provision for loan losses of $604 for the year ending December 31, 2011.

Other real estate owned, which is measured at the lower of carrying or fair value less costs to sell, had a net carrying amount of $620, which is made up of the outstanding balance of $873, net of a valuation allowance of $253 at December 31, 2012, resulting in a write-down of $280 for the year ending December 31, 2012. At December 31, 2011, other real estate owned had a net carrying amount of $458, which is made up of the outstanding balance of $531, net of a valuation allowance of $73 at December 31, 2011, resulting in a write-down of $185 for the year ending December 31, 2011.

Mortgage servicing rights, which are carried at lower of cost or fair value, were carried at their fair value of $273, which is made up of the outstanding balance of $431, net of a valuation allowance of $158 at December 31, 2012, resulting in a charge of $40 for the year ending December 31, 2012. At December 31, 2011, mortgage servicing rights were carried at their fair value of $271, which is made up of the outstanding balance of $390, net of a valuation allowance of $119, resulting in a charge of $27 for the year ended December 31, 2011.

The Company has elected the fair value option for loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due nor on nonaccrual as of December 31, 2012 and 2011.

The aggregate fair value, contractual principal and gain or loss for loans held for sale was as follows:

	December 31, 2012
	Aggregate Fair Value		Gain (Loss)		Contractual Principal
Loans held for sale	$	1,155	$	34	$	1,121

	December 31, 2011
	Aggregate Fair Value		Gain (Loss)		Contractual Principal
Loans held for sale	$	3,049	$	43	$	3,006

(Continued)

39 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 4 – FAIR VALUE (Continued)

The following table presents the amount of gains and losses from fair value changes included in income before income taxes for financial assets carried at fair value for the years ended December 31, 2012 and 2011:

	Changes in Fair Values for the years ended December 31, 2012 and 2011, for the Items Measured at Fair Value Pursuant to Election of the Fair Value Option
	Other Gains and Losses			Interest Income		Interest Expense		Total Changes in Fair Values Included in Current Period Earnings
Year Ended December 31, 2012
Assets:
Loans held for sale	$	(9	)	$	31	$	—	$	20
Year Ended December 31, 2011
Assets:
Loans held for sale	$	(3	)	$	29	$	—	$	26

The carrying amounts and estimated fair values of financial instruments, at December 31, 2012 are as follows:

				Fair Value Measurements at December 31, 2012 using:
	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial assets
Cash and due from financial institutions	$	6,857		$	6,857	$	—		$	—
Interest-earning time deposits at other financial institutions		7,141			—		7,197			—
Securities available for sale		125,620			—		125,620			—
Federal Home Loan Bank stock		3,817			N/A		N/A			N/A
Loans held for sale		1,155			—		1,155			—
Loans, net		313,692			—		—			318,534
Accrued interest receivable		1,481			2		802			677
Financial liabilities
Deposits		(348,970	)		—		(347,348	)		—
Federal Home Loan Bank advances		(49,009	)		—		(51,059	)		—
Subordinated debentures		(5,155	)		—		—			(5,188	)
Accrued interest payable		(198	)		—		(196	)		(2	)
Derivatives – interest rate swaps		(1,984	)		—		(1,984	)		—

(Continued)

40 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 4 – FAIR VALUE (Continued)

The carrying amounts and estimated fair values of financial instruments, at December 31, 2011 are as follows:

December 31, 2011	Carrying			Fair
	Amount			Value
Financial assets
Cash and due from financial institutions	$	8,146		$	8,146
Securities available-for-sale		131,974			131,974
Federal Home Loan Bank stock		3,817			N/A
Loans held for sale		3,049			3,049
Loans, net		295,359			301,293
Accrued interest receivable		1,518			1,518
Financial liabilities
Deposits	$	(333,560	)	$	(331,486	)
Federal Home Loan Bank advances		(72,021	)		(74,307	)
Subordinated debentures		(5,155	)		(4,582	)
FDIC guaranteed unsecured borrowings		(4,981	)		(4,989	)
Accrued interest payable		(396	)		(396	)
Derivatives – interest rate swaps		(2,283	)		(2,283	)

The methods and assumptions, not previously presented, used to estimate fair value are described as follows:

Cash and due from financial institutions: The carrying amounts of cash and due from financial institutions approximate fair values and are classified as Level 1.

Interest-earning time deposits at other financial institutions: The fair values of the Company’s interest-earning time deposits at other financial institutions are estimated using discounted cash flow analyses based on current rates for similar types of interest-earning time deposits and are classified as Level 2.

Federal Home Loan Bank stock: It is not practical to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability.

Loans: The fair values of loans is based on discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

Loans held for sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

Deposits: The fair values disclosed for demand deposits are estimated using a cash flow calculation reduced by decay rate assumptions. These cash flows are discounted to the current market rate and a functional cost to recognize the inherent costs of servicing these accounts. This results in a Level 2 classification. Fair value of fixed rate certificates of deposit are estimated using a cash flow calculation reduced by known maturities, estimated principal payments and estimated early withdrawal amounts. These cash flows are discounted to the current market rate. This results in a Level 2 classification.

(Continued)

41 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 4 – FAIR VALUE (Continued)

Federal Home Loan Bank Advances: The fair values of the Company’s Federal Home Loan Bank advances are estimated using discounted cash flow analyses based on current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Subordinated Debentures: The fair value of the Company’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

Short-term borrowings: The carrying amounts of short-term borrowings approximate fair values and are classified Level 2.

Accrued Interest Receivable/Payable: The carrying amounts of accrued interest approximate fair value resulting in a Level 1, Level 2 or Level 3 classification based on the underlying asset or liability.

NOTE 5 – LOAN SERVICING

Mortgage loans serviced for others are not reported as assets. The principal balances of these loans at year end are as follows:

	2012		2011
Mortgage loan portfolios serviced for:
FHLMC	$	67,429	$	60,733
FHLB		1,058		173
Total	$	68,487	$	60,906

Custodial escrow balances maintained in connection with serviced loans were $281 and $249 at year-end 2012 and 2011.

Activity for capitalized mortgage servicing rights was as follows:

	2012			2011
Servicing rights:
Beginning of year	$	348		$	414
Additions		174			66
Amortized to expense		(139	)		(105	)
Change in valuation allowance		(39	)		(27	)
End of year	$	344		$	348

	2012			2011
Valuation allowance:
Beginning of year	$	119		$	92
Additions expensed		44			48
Reductions credited to expense		(5	)		(21	)
Direct write-downs		—			—
End of year	$	158		$	119

(Continued)

42 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 5 – LOAN SERVICING (Continued)

The fair value of mortgage servicing rights was $352 and $359 at year-end 2012 and 2011. At year-end 2012, $71 of the mortgage servicing rights were carried at book value and $273 of the mortgage servicing rights were carried at their fair value, which is made up of the outstanding balance of $431, net of a valuation allowance of $158. Fair value at year-end 2012 was determined using a discount rate of 10.0%, prepayment speeds ranging from 14.9% to 30.3%, depending on the stratification of the specific right, and a weighted average default rate of approximately 0.5%. At year-end 2011, $77 of the mortgage servicing rights were carried at book value and $271 of the mortgage servicing rights were carried at their fair value, which was made up of the outstanding balance of $390, net of a valuation allowance of $119. Fair value at year-end 2011 was determined using a discount rate of 9.0%, prepayment speeds ranging from 14.3% to 23.8%, depending on stratification of the specific right, and a weighted average default rate of approximately 0.5%.

The weighted average amortization period is 3.61 years.

NOTE 6 – PREMISES AND EQUIPMENT

Year-end premises and equipment were as follows:

	2012			2011
Land	$	2,772		$	2,772
Buildings		9,929			9,902
Furniture, fixtures and equipment		5,249			5,365
Construction in progress		66			3
		18,016			18,042
Less: Accumulated depreciation		(8,441	)		(8,202	)
	$	9,575		$	9,840

Depreciation expense was $577 and $646 for 2012 and 2011.

(Continued)

43 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 7 – GOODWILL AND INTANGIBLE ASSETS

Goodwill: The change in goodwill during the year is as follows:

	2012		2011
Beginning of year	$	8,431	$	8,431
Acquired goodwill		—		—
Impairment		—		—
End of year	$	8,431	$	8,431

Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value, which is determined through a two-step impairment test. Step 1 includes the determination of the carrying value of our single reporting unit, including the existing goodwill and intangible assets, and estimating the fair value of the reporting unit. We determined the fair value of our reporting unit and compared it to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, we are required to perform a second step to the impairment test.

Our annual impairment analysis as of October 31, 2012, indicated that the Step 2 analysis was not necessary. The estimate of the fair value of the reporting unit was higher than the carrying value of our reporting unit, including the existing goodwill and intangible assets, as of October 31, 2012. The Company did not record an impairment charge during 2012 or 2011.

Acquired Intangible Assets

Acquired intangible assets were as follows at year end:

	2012
	Gross Carrying Amount		Gross Accumulated Amortization		Net Carrying Value
Amortized intangible assets:
Core deposit intangibles	$	1,534	$	1,171	$	363
Total	$	1,534	$	1,171	$	363

	2011
	Gross Carrying Amount		Gross Accumulated Amortization		Net Carrying Value
Amortized intangible assets:
Core deposit intangibles	$	1,534	$	1,060	$	474
Total	$	1,534	$	1,060	$	474

Aggregate amortization expense for 2012 and 2011 was $111 and $201, respectively.

(Continued)

44 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 7 – GOODWILL AND INTANGIBLE ASSETS (Continued)

Estimated amortization expense for each of the next five years is as follows:

2013	$	85
2014		66
2015		51
2016		40
2017		34

NOTE 8 – DEPOSITS

Time deposits of $100 thousand or more were $47,562 and $40,869 at year-end 2012 and 2011.

Scheduled maturities of time deposits for the next five years were as follows:

2013	$	64,989
2014		29,910
2015		23,954
2016		2,684
2017		2,728
Thereafter		566
	$	124,831

`

NOTE 9 – FEDERAL HOME LOAN BANK ADVANCES

The advance type, balances and interest rate ranges at December 31, 2012 and 2011 are as follows:

December 31, 2012
Advance Type	Balance			Interest Rate Range	Weighted Average Rate			Maturity Date Range
Fixed Rate Bullet	$	20,000		0.61% to 3.22%		1.43	%	October 2014 through August 2017
Putable		5,000		2.95%		2.95	%	January 2013
Mortgage		23		3.00%		3.00	%	July 2013
Variable Rate		8,988		0.50%		0.50	%	January 2013
LIBOR Adjustable		15,000		0.53% to 0.57%		0.56	%	September 2015 through July 2016
Total advances		49,011
Yield adjustment on acquired FHLB advances		(2	)
Total	$	49,009

(Continued)

45 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 9 – FEDERAL HOME LOAN BANK ADVANCES (Continued)

December 31, 2011
Advance Type	Balance			Interest Rate Range	Weighted Average Rate			Maturity Date Range
Fixed Rate Bullet	$	39,000		0.28% to 4.90%		1.39	%	February 2012 through January 2015
Putable		5,000		2.95%		2.95	%	January 2013
Mortgage		52		3.00%		3.00	%	July 2013
Variable Rate		12,975		0.40%		0.40	%	January 2012 through June 2012
LIBOR Adjustable		15,000		0.66% to 0.78%		0.70	%	September 2015 through July 2016
Total advances		72,027
Yield adjustment on acquired FHLB advances		(6	)
Total	$	72,021

The Bank was authorized to borrow up to $75,829 from the Federal Home Loan Bank (FHLB) at December 31, 2012 and up to $74,864 at December 31, 2011. At December 31, 2012 and 2011 the Bank had indebtedness to the FHLB totaling $49,011 and $72,027. The FHLB advances held by the Bank consisted of five different types as of December 31, 2012 and 2011. Fixed Rate Bullet Advances carry a fixed interest rate throughout the life of the advance and may not be prepaid prior to maturity without a fee being assessed by the FHLB. Putable Advances have stated interest adjustment dates on which the FHLB will have the option to adjust the interest rate and will continue to have this option quarterly thereafter. These advances may not be prepaid by the Bank prior to the FHLB exercising its option to adjust the interest rate. Mortgage Advances carry a fixed interest rate and require annual payments of the remaining principal balance. These advances may not be prepaid by the Bank prior to maturity without a fee being assessed by the FHLB. Variable Rate Advances carry a variable rate throughout the life of the advance. All of the Variable Rate Advances held by the Bank as of December 31, 2012 were short-term advances and may be prepaid at any time. LIBOR Adjustable Advances carry an adjustable interest rate which reset quarterly based on the 3 Month LIBOR rate at the reset date, plus a spread. These advances may be called by the FHLB on a quarterly basis.

The required payments over the next five years are as follows:

2013	$	14,011
2014		5,000
2015		15,000
2016		10,000
2017		5,000

At December 31, 2012, in addition to FHLB stock, the Bank pledged mortgage, home equity and commercial real estate loans totaling approximately $86,882 to the FHLB to secure advances outstanding. At December 31, 2011, the Bank pledged mortgage, home equity and commercial real estate loans totaling approximately $99,771 to the FHLB to secure advances outstanding. At December 31, 2012 and 2011, the Bank also pledged U.S. government sponsored agency securities totaling $31,036 and $18,601 to the FHLB to secure advances outstanding.

(Continued)

46 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 10 – OTHER BORROWINGS

On February 11, 2009, the Bank issued a $5,000 note due on February 15, 2012 under the FDIC Temporary Debt Guarantee Program. The note bears an interest rate of 2.74% in addition to the 100 basis point FDIC guarantee fee paid by the Bank. Interest payments are required to be made semiannually in arrears on February 15 and August 15 in each year commencing on August 15, 2009 through the maturity date. All legal and placement fees associated with this transaction were capitalized as debt issuance costs and will be amortized to interest expense over the repayment period on a straight-line basis. This note matured on February 15, 2012 and was paid in full by the Bank.

During 2012 and 2011, the Company was extended an accommodation from First Tennessee Bank National Association to borrow federal funds up to the amount of $15,000 and $20,000. This federal funds accommodation is not and shall not be a confirmed line or loan, and First Tennessee Bank National Association may cancel such accommodation at any time, in whole or in part, without cause or notice, in its sole discretion. The outstanding balance on this accommodation was $0 as of December 31, 2012 and 2011.

During 2012, the Company entered into an agreement with Zions First National Bank to borrow federal funds up to the amount of $9,000. This federal funds line amount was established at the discretion of Zions First National Bank and may be terminated at any time in its sole discretion. The outstanding balance on this federal funds line was $0 at December 31, 2012.

NOTE 11 – SUBORDINATED DEBENTURES

In June 2003, City Savings Statutory Trust I, a trust formed by City Savings Financial Corporation, closed a pooled private offering of 5,000 trust preferred securities with a liquidation amount of $1 per security. City Savings Financial Corporation issued $5,155 of subordinated debentures to the trust in exchange for ownership of all of the common security of the trust and the proceeds of the preferred securities sold by the trust. On October 12, 2007, the Company purchased the ownership of the common securities of the trust as a result of its acquisition of City Savings Financial Corporation. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. The Company’s investment in the common stock of the trust was $155 and is included in other assets in the December 31, 2012 and 2011 consolidated balance sheets.

The Company may redeem the subordinated debentures, in whole or in part, in a principal amount with integral multiples of $1, on or after June 26, 2008 at 100% of the principal amount, plus accrued and unpaid interest. The subordinated debentures mature on June 26, 2033.

The Company has the right to defer interest payments by extending the interest payment period during the term of the subordinated debentures for up to 20 consecutive quarterly periods.

The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the trust indenture.

The subordinated debentures may be included in Tier I capital (with certain limitations applicable) under current regulatory guidelines and interpretations. The subordinated debentures have a variable rate of interest equal to the three month London Interbank Offered Rate (LIBOR) plus 3.10% which was 3.41% and 3.67% at year-end 2012 and 2011.

(Continued)

47 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 12 – EMPLOYEE BENEFIT PLANS

401(k) Plan: The Bank maintains a defined contribution 401(k) plan for all employees. Employees must be 21 years of age to participate in the plan. As of February 1, 2010, employees are eligible to enter the 401(k) Plan during the first quarter following one year of employment. Prior to February 1, 2010, there was no minimum service requirement to enter the 401(k) Plan. Basic contributions may be made by the Bank in the range of 1% to 6% of employee compensation. Voluntary participant contributions may be made in the range of 1% to 75% of employee compensation. The employer will make matching employer contributions equal to 25% of the participant’s voluntary contributions on the first 6% of the participant’s voluntary contributions. Employee contributions are 100% vested. Employer basic and matching contributions are vested over 5 years. Employer basic and matching contributions totaled approximately $52 and $52 for the years ended December 31, 2012 and 2011.

Supplemental Employee Retirement Plan: Effective August 1, 2002, a supplemental retirement plan covers selective officers. The Bank is recording an expense equal to the projected present value of payments due at retirement based on the projected remaining years of service. The obligation under the plans was approximately $2,162 and $1,958 for the years ended December 31, 2012 and 2011 and is included in other liabilities in the consolidated balance sheets. The expense attributable to the plan, included in salaries and employee benefits, was approximately $288 and $292 for the years ended December 31, 2012 and 2011.

Split-Dollar Life Insurance Plans: Effective January 1, 2003, life insurance plans were provided for certain officers on a split-dollar basis. The officer’s designated beneficiary(s) is entitled to a percentage of the death proceeds from the split-dollar policies. The Bank is entitled to the remainder of the death proceeds less any loans on the policies and unpaid interest or cash withdrawals previously incurred by the Bank. The cash surrender value of these life insurance policies related to the Bank’s supplemental employee retirement plan totaled $11,263 and $10,876 at December 31, 2012 and 2011. The Bank is the owner of the split-dollar policies.

(Continued)

48 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 13 – EMPLOYEE STOCK OWNERSHIP PLAN

During 2007, the Bank implemented an Employee Stock Ownership Plan (“ESOP”), which covers substantially all of its employees. In connection with the second step stock offering on October 4, 2012 the Company issued 270,768 shares of common stock which were added to 59,650 allocated converted shares and 178,949 unallocated converted shares from the original ESOP for a total of 509,367 shares. The 449,717 unallocated shares of common stock are eligible for allocation under the ESOP in exchange for a twenty-year note in the amount of $3.6 million. The $3.6 million for the ESOP purchase was borrowed from the Company with the ESOP shares being pledged as collateral for the loan.

The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Bank’s contributions to the ESOP and earnings on ESOP assets. The Company makes discretionary contributions to the ESOP, as well as paying dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation and expense is recorded. Dividends on allocated shares increase participant accounts.

Participants receive the shares at the end of employment.

Contributions to the ESOP during 2012 and 2011 were $201 and $114. ESOP related expenses totaled $195 and $81 during 2012 and 2011.

Shares held by the ESOP were as follows at year-end:

	2012		2011
Allocated to participants		82,136		59,650
Unearned		427,231		178,949
Total ESOP shares		509,367		238,599
Fair value of unearned shares	$	3,751	$	1,085

(Continued)

49 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 14 – INCOME TAXES

Income tax expense (benefit) was as follows:

	2012			2011
Current expense (benefit)
Federal	$	1,355		$	734
State		172			—
		1,527			734
Deferred expense
Federal		(31	)		1
State		63			136
		32			137
Change in valuation allowance related to realization of net state deferred tax asset		(63	)		(135	)
Total	$	1,496		$	736

The net deferred tax assets at December 31, 2012 and 2011 are as follows:

	2012			2011
Deferred tax assets
Deferred officer compensation	$	834		$	758
Bad debt expense		1,662			1,461
Indiana net operating loss carryforwards		—			38
Tax credit carryforwards		—			509
Write downs of other real estate owned		144			57
Capital loss carryforwards		90			102
Nonaccrual loan interest		345			176
Market value adjustment on acquired assets and liabilities		54			87
Net unrealized losses on interest rate swaps		674			769
Other		100			106
		3,903			4,063
Deferred tax liabilities
Mortgage servicing rights		(133	)		(135	)
Accretion		(4	)		(3	)
FHLB stock dividends		(137	)		(137	)
Deferred loan fees		(83	)		(69	)
Prepaid expenses		(116	)		(111	)
Depreciation		(348	)		(355	)
Net unrealized gains on securities available for sale		(1,892	)		(1,815	)
Amortization of other intangible assets		(140	)		(184	)
		(2,853	)		(2,809	)
Valuation allowance		(356	)		(419	)
	$	694		$	835

(Continued)

50 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 14 – INCOME TAXES (Continued)

The valuation allowance has been established against the portion of the Company’s net state tax deferred tax asset that management feels is not realizable as of December 31, 2012 and 2011. The Company has an Indiana net operating loss carryforward of approximately $0 and $682 at December 31, 2012 and 2011 which will expire in 2022, if not used. The Company also has Indiana enterprise zone credit carryforwards of approximately $0 and $118 at December 31, 2012 and 2011 which will expire in 2013 through 2017, if not used. The Company has a federal capital loss carryforward of $0 and $24 at December 31, 2012 and 2011, which will expire in 2012. The Company also has a state capital loss carryforward of $1,964 and $1,988 at December 31, 2012 and 2011 which will expire in 2014. Additionally, the Bank also has federal AMT credit carryforwards of approximately $0 and $431 at December 31, 2012 and 2011 which has no expiration date.

Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 34% to income (loss) before income taxes as a result of the following:

	2012			2011
Expected income tax expense at
Federal tax rate	$	1,966		$	1,353
State tax expense, net of federal benefit		114
Increase (decrease) resulting from:
Effect of tax exempt income (net)		(626	)		(617	)
Other, net		42			—
Total income tax expense	$	1,496		$	736
Effective tax rate		25.87	%		18.50	%

Unrecognized Tax Benefits

The Company has no unrecognized tax positions at December 31, 2012 or 2011 not already addressed by the deferred tax asset valuation allowance.

Federal income tax laws provided savings banks with additional bad debt deductions through 1995, totaling $2,659 for the Company. Accounting standards do not require a deferred tax liability to be recorded on this amount, which liability would otherwise total $904 at December 31, 2012 and 2011. If the Company were liquidated or otherwise ceases to be a bank or if tax laws change, the $904 would be recorded as expense.

(Continued)

51 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 15 – RELATED-PARTY TRANSACTIONS

Loans to principal officers, directors, and their affiliates were as follows:

	2012			2011
Beginning balance	$	1,081		$	1,468
New loans		115			196
Effect of changes in composition of related parties		(73	)		(62	)
Repayments		(294	)		(521	)
Ending balance	$	829		$	1,081

Deposits from principal officers, directors, and their affiliates at year-end 2012 and 2011 were $1,769 and $2,559.

NOTE 16 – STOCK-BASED COMPENSATION

During the month of September 2011, the Company implemented the 2011 Equity Incentive Plan (the “Plan”) which was approved by shareholders on May 10, 2011. The Plan provides for issuance of stock options or restricted share awards to employees and directors. Total shares authorized for issuance under the Plan is 417,543 which is further discussed below. Total compensation cost that has been charged against income for those plans totaled $243 and $71 for the years ended December 31, 2012 and December 31, 2011.

Stock-Based Compensation

Compensation cost is recognized for stock options and restricted stock awards issued to employees or directors, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards.

Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Stock Options

The Plan permits the grant of stock options to its employees or directors for up to 298,246 shares of common stock. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant; those option awards have vesting periods of 5 years and have 10-year contractual terms. Options granted generally vest 20% annually.

(Continued)

52 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 16 – STOCK-BASED COMPENSATION (Continued)

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of companies within La Porte Bancorp, Inc.’s peer group. The expected term of options granted represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The fair value of options granted was determined using the following weighted-average assumptions as of the grant date.

	2011
Risk-free interest rate		1.42	%
Expected term		7 1/2 Years
Expected stock price volatility		27.34	%
Dividend yield		1.60	%

A summary of the activity in the stock option plan for 2012 follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at beginning of year		281,829	$	6.44		9.7 years		—
Granted		—		—
Exercised		—		—
Forfeited or expired		—		—
Outstanding at December 31, 2012		281,829	$	6.44		8.7 years	$	2,474
Fully vested and expected to vest		281,829	$	6.44		8.7 years	$	2,474
Exercisable at end of year		56,366	$	6.44		8.7 years	$	132

Information related to the stock option plan for 2011 follows:

	2011
Weighted average fair value of options granted	$2.16

There were no options exercised during the year ended December 31, 2012. As of December 31, 2012, there was $343 of total unrecognized compensation cost related to nonvested stock options granted under the Plan. The cost is expected to be recognized over a weighted-average period of 3.7 years.

(Continued)

53 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 16 – STOCK-BASED COMPENSATION (Continued)

Restricted Share Awards

The Plan provides for the issuance of up to 119,298 of restricted shares to directors and employees. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. The fair value of the stock was determined by obtaining the listed price of the Company’s stock on the grant date. Shares vest 20% annually over five years. 2,388 shares are available for future grants at December 31, 2012.

A summary of changes in the Company’s nonvested shares for the year follows:

Nonvested Shares	Shares			Weighted-Average Grant-Date Fair  Value
Nonvested at January 1, 2012		116,910		$	6.44
Granted		—			—
Vested		(23,382	)		6.44
Forfeited		—			—
Nonvested at December 31, 2012		93,528		$	6.44

As of December 31, 2012, there was $559 of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 5 years. There were 23,382 shares vested during the year ended December 31, 2012. The total fair value of shares vested during the year ended December 31, 2012 was $205. There were no shares vested during the year ended December 31, 2011.

NOTE 17 – REGULATORY CAPITAL MATTERS

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believes as of December 31, 2012, the Bank met all capital adequacy requirements to which it is subject. Companies under $500 million in consolidated assets at the beginning of the year are not required to report consolidated regulatory capital ratios.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2012 and 2011, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

(Continued)

54 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 17 – REGULATORY CAPITAL MATTERS (Continued)

Actual and required Bank capital amounts (in millions) and ratios are presented below at year end.

	Actual					Required For Capital Adequacy  Purposes					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2012
Total Capital to risk weighted assets Bank	$	67.3		18.9	%	$	28.4		8.0	%	$	35.6		10.0	%
Tier 1 (Core) Capital to risk weighted assets Bank		63.0		17.7			14.2		4.0			21.3		6.0
Tier 1 (Core) Capital to average assets Bank		63.0		13.4			18.8		4.0			23.5		5.0
2011
Total Capital to risk weighted assets Bank	$	48.7		14.9	%	$	26.2		8.0	%	$	32.8		10.0	%
Tier 1 (Core) Capital to risk weighted assets Bank		45.0		13.7			13.1		4.0			19.7		6.0
Tier 1 (Core) Capital to average assets Bank		45.0		9.7			18.5		4.0			23.1		5.0

The Qualified Thrift Lender test requires at least 65% of assets be maintained in housing-related finance and other specified areas. If this test is not met, limits are placed on growth, branching, new investments, FHLB advances and dividends, or the Bank must convert to a commercial bank charter. Management believes that this test is met.

Dividend Restrictions – The Bancorp’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. During 2013, the Company could, without prior approval, declare dividends of approximately $6,534 plus any 2013 net profits retained to the date of the dividend declaration.

(Continued)

55 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 18 – DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

Interest Rate Swaps Designated as Cash Flow Hedges: Interest rate swaps with notional amounts of $30.25 million as of December 31, 2012 and 2011, were designated as cash flow hedges of subordinated debentures, certain CDARS deposits and FHLB advances and were determined to be fully effective during all periods presented. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets (liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The hedge would no longer be considered effective if a portion of the hedge becomes ineffective, the item hedged is no longer in existence or the Company discontinues hedge accounting. The Company expects the hedges to remain fully effective during the remaining terms of the swaps. The Company does not expect any amounts to be reclassed from other comprehensive income over the next 12 months.

Information related to the interest-rate swaps designated as cash flow hedges as of year-end is as follows:

	2012			2011
Subordinated debentures
Notional amount	$	5,000		$	5,000
Fixed interest rate payable		5.54	%		5.54	%
Variable interest rate receivable (Three month LIBOR plus 3.10%)		3.41	%		3.67	%
Unrealized gains (losses)		(131	)		(192	)
Maturity date		March 26, 2014
CDARS deposits
Notional amount	$	10,250		$	10,250
Fixed interest rate payable		3.19	%		3.19	%
Variable interest rate receivable (One month LIBOR plus 0.55%)		0.76	%		0.84	%
Unrealized gains (losses)		(428	)		(569	)
Maturity date		October 9, 2014

(Continued)

56 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 18 – DERIVATIVES (Continued)

	2012			2011
FHLB Advance
Notional amount	$	5,000		$	5,000
Fixed interest rate payable		3.54	%		3.54	%
Variable interest rate receivable (Three month LIBOR plus 0.22%)		0.53	%		0.78	%
Unrealized gains (losses)		(395	)		(443	)
Maturity date		September 20, 2015
FHLB Advance
Notional amount	$	10,000		$	10,000
Fixed interest rate payable		3.69	%		3.69	%
Variable interest rate receivable (Three month LIBOR plus 0.25%)		0.57	%		0.66	%
Unrealized gains (losses)		(1,030	)		(1,057	)
Maturity date		July 19, 2016

Interest expense recorded on these swap transactions totaled $(976) and $(998) during 2012 and 2011 and is reported as a component of interest expense on subordinated debentures, deposits and FHLB advances.

The following table presents the net gains (losses) recorded in accumulated other comprehensive income (loss) and the Consolidated Statements of Income relating to the cash flow derivative instruments for the year ended December 31:

	Net amount of gain (loss) recognized in OCI (Effective Portion) 2012		Net amount of gain  (loss) reclassified from OCI to interest income 2012		Net amount of gain (loss) recognized in other non interest  income (Ineffective Portion) 2012
Interest rate contracts	$	182	$	—	$	—

	Net amount of gain (loss) recognized in OCI (Effective Portion) 2011			Net amount of gain (loss) reclassified from OCI to interest income 2011		Net amount of gain (loss) recognized in other non interest  income (Ineffective Portion) 2011
Interest rate contracts	$	(502	)	$	—	$	—

(Continued)

57 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 18 – DERIVATIVES (Continued)

The following table reflects the cash flow hedges included in the consolidated balance sheets as of December 31:

	2012
	Notional Amount			Fair Value
Included in other liabilities:
Interest rate swaps related to	$	(5,000	)	$	(131	)
Subordinated debentures
CDARS deposits		(10,250	)		(428	)
FHLB advances		(15,000	)		(1,425	)
Total included in other liabilities				$	(1,984	)

	2011
	Notional Amount			Fair Value
Included in other liabilities:
Interest rate swaps related to	$	(5,000	)	$	(192	)
Subordinated debentures
CDARS deposits		(10,250	)		(569	)
FHLB advances		(15,000	)		(1,500	)
Total included in other liabilities				$	(2,261	)

Interest Rate Swaps Designated as Fair Value Hedges: An interest rate swap with a notional amount of $5,000 as of December 31, 2011 was designated as a fair value hedge of certain brokered deposits. On September 15, 2012, this fair value hedge of certain brokered deposits was called by the counterparty. Information related to the interest-rate swap designated as a fair value hedge as of December 31, 2011 is as follows:

	2011
Brokered deposits
Notional amount	$	5,000
Variable interest rate payable (One month LIBOR less 0.25%)		0.03	%
Fixed interest rate receivable		1.25	%
Maturity date		September 15, 2020

Interest income (expense) recorded on this swap transaction totaled $44 and $62 for the years ended December 31, 2012 and 2011 and is reported as a component of interest expense on deposits. Gains (losses) on the fair market value hedge are recorded in other noninterest income and totaled $3 and $(14) for the years ended December 31, 2012 and 2011.

(Continued)

58 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 18 – DERIVATIVES (Continued)

The following table reflects the fair value hedge included in the consolidated balance sheets as of December 31, 2011:

	2011
	Notional Amount			Fair Value
Included in other liabilities:
Interest rate swaps related to brokered deposits	$	(5,000	)	$	(22	)
Total included in other liabilities				$	(22	)

The counterparty to the Company’s derivatives is exposed to credit risk whenever the derivative is in a liability position. As a result, the Company has collateralized the liability with cash and security collateral held in safekeeping by Bank of New York. At December 31, 2012 and 2011, the Company had $220, respectively, in cash and securities with fair market values of $2,586 and $3,761, respectively, posted as collateral for these derivatives.

NOTE 19 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amounts of financial instruments with off-balance-sheet risk at year end were as follows:

	2012				2011
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	777	$	1,852	$	93	$	981
Unused lines of credit		4,787		25,484		6,367		21,037
Standby letters of credit		213		1,692		286		2,109
Total	$	5,777	$	29,028	$	6,746	$	24,127

Commitments to make loans are generally made for periods of 60 days or less. The fixed rate loan commitments have interest rates from 5.30% to 5.95% and maturities of 60 months at December 31, 2012. The fixed rate loan commitment has an interest rate of 6.25% and a maturity of 60 months at December 31, 2011.

(Continued)

59 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 20 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial information of LaPorte Bancorp, Inc. at December 31, 2012 and 2011 and for the years ended December 31, 2012 and 2011 is as follows:

CONDENSED BALANCE SHEETS

December 31, 2012 and 2011

	2012		2011
ASSETS
Cash and cash equivalents	$	2,656	$	2,032
Interest-earning time deposits in other financial institutions		2,976		—
Securities available for sale		4,823		—
ESOP loan receivable		3,402		1,415
Investment in banking subsidiary		74,291		56,071
Investment in statutory trust		155		155
Accrued interest receivable and other assets		1,049		1,402
Total assets	$	89,352	$	61,075
LIABILITIES AND SHAREHOLDERS’ EQUITY
Subordinated debentures	$	5,155	$	5,155
Accrued interest payable and other liabilities		142		217
Shareholders’ equity		84,055		55,703
Total liabilities and shareholders’ equity	$	89,352	$	61,075

CONDENSED STATEMENTS OF INCOME

Years ended December 31, 2012 and 2011

	2012			2011
Dividends from banking subsidiary	$	—		$	2,265
Interest income		75			50
Interest expense		(282	)		(281	)
Other expense		(223	)		(197	)
Income (loss) before income tax and undistributed subsidiary income		(430	)		1,837
Income tax benefit		(146	)		(146	)
Equity in undistributed income or net income of banking subsidiary		4,569			1,259
Net income	$	4,285		$	3,242

(Continued)

60 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 20 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)

CONDENSED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2012 and 2011

	2012			2011
Cash flows from operating activities
Net income	$	4,285		$	3,242
Adjustments to reconcile net income to net cash from operating activities:
Amortization of net premiums on securities available for sale		4			—
Equity in undistributed income or net income of banking subsidiary		(4,569	)		(1,259	)
Change in other assets		339			(385	)
Change in other liabilities		(14	)		11
Net cash from operating activities		45			1,609
Cash flows from investing activities
Net change in ESOP loan receivable		(1,987	)		73
Net change in interest-earning time deposits at other financial institutions		(2,976	)		—
Purchase of securities available for sale		(4,849	)		—
Net cash from investing activities		(9,812	)		73
Cash flows from financing activities
Capital contribution to the bank		(12,905	)		—
Net proceeds from stock offering		26,344			—
Purchase of shares by ESOP pursuant to reorganization		(2,241	)		—
Purchase of treasury stock		—			(134	)
Dividends paid on common stock		(807	)		(186	)
Net cash from financing activities		10,391			(320	)
Net change in cash and cash equivalents		624			1,362
Beginning cash and cash equivalents		2,032			670
Ending cash and cash equivalents	$	2,656		$	2,032

(Continued)

61 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 21 – EARNINGS PER SHARE

The factors used in the earnings per common share computation follow:

	2012			2011
Basic
Net income	$	4,285		$	3,242
Weighted average common shares outstanding		6,161,686			6,076,249
Less: Average unallocated ESOP shares		(239,440	)		(184,898	)
Average shares		5,922,246			5,891,351
Basic earnings per common share	$	0.72		$	0.55
Diluted
Net income	$	4,285		$	3,242
Weighted average common shares outstanding for basic earnings per common share		5,922,246			5,891,351
Add: Dilutive effects of assumed exercises of stock options		1,678			2,189
Average shares and dilutive potential common shares		5,923,924			5,893,793
Diluted earnings per common share	$	0.72		$	0.55

(Continued)

62 ..

LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

NOTE 22 – QUARTERLY FINANCIAL DATA (UNAUDITED)

	Interest Income		Net Interest Income		Net Income		Earnings Per Share Basic and Diluted
2012
First quarter	$	4,997	$	3,769	$	927	$	0.16
Second quarter		4,876		3,734		1,042		0.17
Third quarter		5,096		4,026		1,371		0.23
Fourth quarter		4,863		3,911		945		0.16
2011
First quarter	$	4,874	$	3,277	$	778	$	0.14
Second quarter		4,610		3,075		487		0.08
Third quarter		4,922		3,482		1,146		0.20
Fourth quarter		4,985		3,686		831		0.14

63.

EX-21

Exhibit 21

Subsidiaries of the Registrant

Name	State/Location of Incorporation	% Owned
The LaPorte Savings Bank	Indiana	100% (Direct)
LSB Investments, Inc.	Nevada	100% (Indirect)1
LSB Real Estate, Inc.	Maryland	100% (Indirect)2

¹  Wholly owned subsidiary of The LaPorte Savings Bank

²  Wholly owned subsidiary of LSB Investments, Inc.

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-148709 and 333-177549 on Form S-8 of our report dated March 26, 2013 relating to the consolidated financial statements, appearing in this Annual Report on Form 10-K.

Crowe Horwath LLP

South Bend, Indiana

March 26, 2013

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Lee A. Brady, certify that:

1. I have reviewed this annual report on Form 10-K of LaPorte Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15)(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 27, 2013	/s/ Lee A. Brady
	Lee A. Brady
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Michele M. Thompson, certify that:

1. I have reviewed this annual report on Form 10-K of LaPorte Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15)(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 27, 2013	/s/ Michele M. Thompson
	Michele M. Thompson
	President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Lee A. Brady, Chief Executive Officer and Michele M. Thompson, President and Chief Financial Officer of LaPorte Bancorp, Inc. (the “Company”) each certify in their capacity as an officer of the Company that they have reviewed the annual report of the Company on Form 10-K for the fiscal year ended December 31, 2012 and that to the best of their knowledge:

(1) the report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The purpose of this statement is solely to comply with Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002.

Date: March 27, 2013	/s/ Lee A. Brady
	Lee A. Brady
	Chief Executive Officer

Date: March 27, 2013	/s/ Michele M. Thompson
	Michele M. Thompson
	President and Chief Financial Officer

XML

Federal Home Loan Bank Advances (Tables)

12 Months Ended

Dec. 31, 2012

Deposits/Federal Home Loan Bank Advances/Regulatory Capital Matters [Abstract]

Advance type, balances and interest rate ranges

December 31, 2012
Advance Type	Balance			Interest Rate Range	Weighted Average Rate			Maturity Date Range
Fixed Rate Bullet	$	20,000		0.61% to 3.22%		1.43	%	October 2014 through August 2017
Putable		5,000		2.95%		2.95	%	January 2013
Mortgage		23		3.00%		3.00	%	July 2013
Variable Rate		8,988		0.50%		0.50	%	January 2013
LIBOR Adjustable		15,000		0.53% to 0.57%		0.56	%	September 2015 through July 2016
Total advances		49,011
Yield adjustment on acquired FHLB advances		(2	)
Total	$	49,009

December 31, 2011
Advance Type	Balance			Interest Rate Range	Weighted Average Rate			Maturity Date Range
Fixed Rate Bullet	$	39,000		0.28% to 4.90%		1.39	%	February 2012 through January 2015
Putable		5,000		2.95%		2.95	%	January 2013
Mortgage		52		3.00%		3.00	%	July 2013
Variable Rate		12,975		0.40%		0.40	%	January 2012 through June 2012
LIBOR Adjustable		15,000		0.66% to 0.78%		0.70	%	September 2015 through July 2016
Total advances		72,027
Yield adjustment on acquired FHLB advances		(6	)
Total	$	72,021

Schedule of repayments advances from Federal Home Loan Banks

2013	$	14,011
2014		5,000
2015		15,000
2016		10,000
2017		5,000

XML

Loan Commitments and Other Related Activities (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Fixed Rate [Member]
Contractual amounts of financial instruments with off-balance-sheet risk
Contractual amounts of financial instruments with off-balance-sheet risk, Total	$ 5,777	$ 6,746
Variable Rate [Member]
Contractual amounts of financial instruments with off-balance-sheet risk
Contractual amounts of financial instruments with off-balance-sheet risk, Total	29,028	24,127
Commitments to make loans [Member] | Fixed Rate [Member]
Contractual amounts of financial instruments with off-balance-sheet risk
Contractual amounts of financial instruments with off-balance-sheet risk, Total	777	93
Commitments to make loans [Member] | Variable Rate [Member]
Contractual amounts of financial instruments with off-balance-sheet risk
Contractual amounts of financial instruments with off-balance-sheet risk, Total	1,852	981
Unused lines of credit [Member] | Fixed Rate [Member]
Contractual amounts of financial instruments with off-balance-sheet risk
Contractual amounts of financial instruments with off-balance-sheet risk, Total	4,787	6,367
Unused lines of credit [Member] | Variable Rate [Member]
Contractual amounts of financial instruments with off-balance-sheet risk
Contractual amounts of financial instruments with off-balance-sheet risk, Total	25,484	21,037
Standby letters of credit [Member] | Fixed Rate [Member]
Contractual amounts of financial instruments with off-balance-sheet risk
Contractual amounts of financial instruments with off-balance-sheet risk, Total	213	286
Standby letters of credit [Member] | Variable Rate [Member]
Contractual amounts of financial instruments with off-balance-sheet risk
Contractual amounts of financial instruments with off-balance-sheet risk, Total	$ 1,692	$ 2,109

XML

Securities (Details 3) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Fair value of securities with unrealized losses, aggregated by investment category and length of time
Continuing Unrealized Loss For Less Than 12 Months Fair Value	$ 16,504	$ 7,793
Continuing Unrealized Loss For Less Than 12 Months, Unrealized Loss	(153)	(43)
Continuing Unrealized Loss For 12 Months or More Fair Value
Continuing Unrealized Loss For 12 Months or More, Unrealized Loss
Total Fair Value	16,504	7,793
Total Unrealized Loss	(153)	(43)
State and municipal [Member]
Fair value of securities with unrealized losses, aggregated by investment category and length of time
Continuing Unrealized Loss For Less Than 12 Months Fair Value	1,611
Continuing Unrealized Loss For Less Than 12 Months, Unrealized Loss	(26)
Continuing Unrealized Loss For 12 Months or More Fair Value
Continuing Unrealized Loss For 12 Months or More, Unrealized Loss
Total Fair Value	1,611
Total Unrealized Loss	(26)
Mortgage-backed securities - residential [Member]
Fair value of securities with unrealized losses, aggregated by investment category and length of time
Continuing Unrealized Loss For Less Than 12 Months Fair Value	1,012	5,646
Continuing Unrealized Loss For Less Than 12 Months, Unrealized Loss	(6)	(29)
Continuing Unrealized Loss For 12 Months or More Fair Value
Continuing Unrealized Loss For 12 Months or More, Unrealized Loss
Total Fair Value	1,012	5,646
Total Unrealized Loss	(6)	(29)
Government agency sponsored collateralized mortgage obligations [Member]
Fair value of securities with unrealized losses, aggregated by investment category and length of time
Continuing Unrealized Loss For Less Than 12 Months Fair Value	12,392	2,147
Continuing Unrealized Loss For Less Than 12 Months, Unrealized Loss	(112)	(14)
Continuing Unrealized Loss For 12 Months or More Fair Value
Continuing Unrealized Loss For 12 Months or More, Unrealized Loss
Total Fair Value	12,392	2,147
Total Unrealized Loss	(112)	(14)
Corporate debt securities [Member]
Fair value of securities with unrealized losses, aggregated by investment category and length of time
Continuing Unrealized Loss For Less Than 12 Months Fair Value	1,489
Continuing Unrealized Loss For Less Than 12 Months, Unrealized Loss	(9)
Continuing Unrealized Loss For 12 Months or More Fair Value
Continuing Unrealized Loss For 12 Months or More, Unrealized Loss
Total Fair Value	1,489
Total Unrealized Loss	$ (9)

XML

Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2012

Earnings Per Share [Abstract]

Factors used in the earnings per common share computation

	2012			2011
Basic
Net income	$	4,285		$	3,242
Weighted average common shares outstanding		6,161,686			6,076,249
Less: Average unallocated ESOP shares		(239,440	)		(184,898	)
Average shares		5,922,246			5,891,351
Basic earnings per common share	$	0.72		$	0.55
Diluted
Net income	$	4,285		$	3,242
Weighted average common shares outstanding for basic earnings per common share		5,922,246			5,891,351
Add: Dilutive effects of assumed exercises of stock options		1,678			2,189
Average shares and dilutive potential common shares		5,923,924			5,893,793
Diluted earnings per common share	$	0.72		$	0.55

XML

Fair Value (Details 2) (Fair Value Measurements Nonrecurring [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Impaired loans [Member] | Commercial and other [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis		$ 22
Impaired loans [Member] | Commercial: Real Estate [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	833	473
Impaired loans [Member] | Commercial: Land [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	2,000	475
Impaired loans [Member] | Commercial Mortgage [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	697	557
Impaired loans [Member] | Commercial: Home Equity [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis		3
Other real estate owned, net [Member] | Commercial: Real Estate [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	102	365
Other real estate owned, net [Member] | Commercial: Land [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	385
Other real estate owned, net [Member] | Commercial Mortgage [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	133	93
Mortgage servicing rights [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	273	271
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired loans [Member] | Commercial and other [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired loans [Member] | Commercial: Real Estate [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired loans [Member] | Commercial: Land [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired loans [Member] | Commercial Mortgage [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired loans [Member] | Commercial: Home Equity [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other real estate owned, net [Member] | Commercial: Real Estate [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other real estate owned, net [Member] | Commercial: Land [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other real estate owned, net [Member] | Commercial Mortgage [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Mortgage servicing rights [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis
Significant Other Observable Inputs (Level 2) [Member] | Mortgage servicing rights [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	273	271
Significant Unobservable Inputs (Level 3) [Member] | Impaired loans [Member] | Commercial and other [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis		22
Significant Unobservable Inputs (Level 3) [Member] | Impaired loans [Member] | Commercial: Real Estate [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	833	473
Significant Unobservable Inputs (Level 3) [Member] | Impaired loans [Member] | Commercial: Land [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	2,000	475
Significant Unobservable Inputs (Level 3) [Member] | Impaired loans [Member] | Commercial Mortgage [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	697	557
Significant Unobservable Inputs (Level 3) [Member] | Impaired loans [Member] | Commercial: Home Equity [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis		3
Significant Unobservable Inputs (Level 3) [Member] | Other real estate owned, net [Member] | Commercial: Real Estate [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	102	365
Significant Unobservable Inputs (Level 3) [Member] | Other real estate owned, net [Member] | Commercial: Land [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	385
Significant Unobservable Inputs (Level 3) [Member] | Other real estate owned, net [Member] | Commercial Mortgage [Member]
Assets measured at fair value on a non-recurring basis
Assets measured at fair value on a non-recurring basis	$ 133	$ 93

XML

Securities (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 Investment	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Proceeds from maturities, calls and principal	$ 20,326	$ 19,236
Gross gains	526	687
Gross losses	(152)	(60)
Securities (Textual) [Abstract]
Securities pledged, carrying amount	42,151	33,661
Holding of securities	0	0
Percentage of equity	10.00%	10.00%
Investment in debt securities which were in an unrealized loss position	18
Unrealized loss position	less than twelve months
Calls of securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Proceeds from maturities, calls and principal	5,495	5,045
Gross gains	4	0
Gross losses	$ 0	$ 0

XML

Premises and Equipment (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Premises and equipment
Premises and equipment, gross	$ 18,016	$ 18,042
Less: Accumulated depreciation	(8,441)	(8,202)
Premises and equipment, net	9,575	9,840
Land [Member]
Premises and equipment
Premises and equipment, gross	2,772	2,772
Building [Member]
Premises and equipment
Premises and equipment, gross	9,929	9,902
Furniture, fixtures and equipment [Member]
Premises and equipment
Premises and equipment, gross	5,249	5,365
Construction in progress [Member]
Premises and equipment
Premises and equipment, gross	$ 66	$ 3

XML

Regulatory Capital Matters (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Actual and required Bank capital amounts
Total Capital to risk weighted assets Bank, Actual	$ 67.3	$ 48.7
Total Capital to risk weighted assets Bank, Actual, Ratio	18.90%	14.90%
Total Capital to risk weighted assets Bank, Required For Capital Adequacy Purposes	28.4	26.2
Total Capital to risk weighted assets Bank, Required For Capital Adequacy Purposes, Ratio	8.00%	8.00%
Total Capital to risk weighted assets Bank, Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations	35.6	32.8
Total Capital to risk weighted assets Bank, Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations, Ratio	10.00%	10.00%
Tier 1 (Core) Capital to risk weighted assets Bank, Actual	63.0	45.0
Tier 1 (Core) Capital to risk weighted assets Bank, Actual, Ratio	17.70%	13.70%
Tier 1 (Core) Capital to risk weighted assets Bank, Required For Capital Adequacy Purposes	14.2	13.1
Tier 1 (Core) Capital to risk weighted assets Bank, Required For Capital Adequacy Purposes, Ratio	4.00%	4.00%
Tier 1 (Core) Capital to risk weighted assets Bank, Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations	21.3	19.7
Tier 1 (Core) Capital to risk weighted assets Bank, Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations, Ratio	6.00%	6.00%
Tier 1 (Core) Capital to average assets Bank	63.0	45.0
Tier 1 (Core) Capital to average assets Bank, Ratio	13.40%	9.70%
Tier 1 (Core) Capital to average assets Bank, Required For Capital Adequacy Purposes	18.8	18.5
Tier 1 (Core) Capital to average assets Bank, Required For Capital Adequacy Purposes, Ratio	4.00%	4.00%
Tier 1 (Core) Capital to average assets Bank, Required For Capital Adequacy Purposes, Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations	$ 23.5	$ 23.1
Tier 1 (Core) Capital to average assets Bank, Required For Capital Adequacy Purposes, Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations, Ratio	5.00%	5.00%

XML

Loan Commitments and Other Related Activities (Tables)

12 Months Ended

Dec. 31, 2012

Loan Commitments and Other Related Activities [Abstract]

Contractual amounts of financial instruments with off-balance-sheet risk

	2012				2011
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	777	$	1,852	$	93	$	981
Unused lines of credit		4,787		25,484		6,367		21,037
Standby letters of credit		213		1,692		286		2,109
Total	$	5,777	$	29,028	$	6,746	$	24,127

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Loans (Tables)

12 Months Ended

Dec. 31, 2012

Loans [Abstract]

Loans and allowances for loans losses

	2012			2011
Commercial	$	124,563		$	126,559
Mortgage		36,996			45,576
Mortgage warehouse		137,467			103,864
Residential construction		1,475			3,047
Indirect auto		1,154			2,249
Home equity		12,267			12,966
Consumer and other		3,864			4,693
Subtotal		317,786			298,954
Less: Net deferred loan (fees) costs		214			177
Allowance for loan losses		(4,308	)		(3,772	)
Loans, net	$	313,692		$	295,359

Allowance for loan losses by portfolio segment

	Commercial			Mortgage			Mortgage Warehouse		Residential Construction			Indirect Auto			Home Equity			Consumer and Other			Unallocated		Total
December 31, 2012
Allowance for loan losses:
Beginning balance	$	2,774		$	374		$	393	$	3		$	19		$	119		$	90		$	—	$	3,772
Charge-offs		(383	)		(84	)		—		—			(3	)		(35	)		(64	)		—		(569	)
Recoveries		46			2			—		—			4			1			15			—		68
Provision		694			109			208		(1	)		(13	)		45			(5	)		—		1,037
Ending balance	$	3,131		$	401		$	601	$	2		$	7		$	130		$	36		$	—	$	4,308

	Commercial			Mortgage			Mortgage Warehouse		Residential Construction			Indirect Auto			Home Equity			Consumer and Other			Unallocated		Total
December 31, 2011
Allowance for loan losses:
Beginning balance	$	3,147		$	389		$	139	$	17		$	28		$	142		$	81		$	—	$	3,943
Charge-offs		(1,084	)		(132	)		—		—			(14	)		(52	)		(48	)		—		(1,330	)
Recoveries		—			—			—		—			4			2			16			—		22
Provision		711			117			254		(14	)		1			27			41			—		1,137
Ending balance	$	2,774		$	374		$	393	$	3		$	19		$	119		$	90		$	—	$	3,772

Allowance for loan losses and recorded investment in loans by portfolio segment and impairment method

	Commercial		Mortgage		Mortgage Warehouse		Residential Construction		Indirect Auto		Home Equity		Consumer and Other		Unallocated		Total
December 31, 2012
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,137	$	132	$	—	$	—	$	—	$	22	$	—	$	—	$	1,291
Collectively evaluated for impairment		1,994		269		601		2		7		108		36		—		3,017
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—		—
Total ending allowance	$	3,131	$	401	$	601	$	2	$	7	$	130	$	36	$	—	$	4,308
Loans:
Loans individually evaluated for impairment	$	6,337	$	2,125	$	—	$	—	$	—	$	53	$	—	$	—	$	8,515
Loans collectively evaluated for impairment		117,682		34,731		137,467		1,466		1,154		12,267		3,867		—		308,634
Loans acquired with deteriorated credit quality		712		139		—		—		—		—		—		—		851
Total ending loan balance	$	124,731	$	36,995	$	137,467	$	1,466	$	1,154	$	12,320	$	3,867	$	—	$	318,000

	Commercial		Mortgage		Mortgage Warehouse		Residential Construction		Indirect Auto		Home Equity		Consumer and Other		Unallocated		Total
December 31, 2011
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	112	$	128	$	—	$	—	$	—	$	11	$	—	$	—	$	251
Collectively evaluated for impairment		2,662		246		393		3		19		108		90		—		3,521
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—		—
Total ending allowance	$	2,774	$	374	$	393	$	3	$	19	$	119	$	90	$	—	$	3,772
Loans:
Loans individually evaluated for impairment	$	4,630	$	1,630	$	—	$	—	$	—	$	14	$	—	$	—	$	6,274
Loans collectively evaluated for impairment		121,236		43,788		103,864		3,045		2,249		13,002		4,697		—		291,881
Loans acquired with deteriorated credit quality		824		152		—		—		—		—		—		—		976
Total ending loan balance	$	126,690	$	45,570	$	103,864	$	3,045	$	2,249	$	13,016	$	4,697	$	—	$	299,131

Information related to impaired loans by class of loans

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Commercial:
Commercial and other	$	—	$	—	$	—	$	6	$	—	$	—
Real estate		2,150		2,152		—		1,348		10		—
Land		214		214		—		1,411		3		—
Mortgage		1,296		1,296		—		967		16		—
Home equity		31		31		—		21		—		—
Subtotal		3,691		3,693		—		3,753		29		—
With an allowance recorded:
Commercial:
Real estate		1,461		1,199		365		1,681		—		—
Land		2,772		2,772		772		1,640		—		—
Mortgage		829		829		132		826		—		—
Home equity		22		22		22		15		—		—
Subtotal		5,084		4,822		1,291		4,162		—		—
Total	$	8,775	$	8,515	$	1,291	$	7,915	$	—	$	—

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Commercial:
Real estate	$	1,299	$	1,298	$	—	$	1,246	$	4	$	—
Land		2,248		2,248		—		2,248		12		—
Mortgage		945		945		—		762		26		—
Residential construction:
Land		—		—		—		43		—		—
Subtotal		4,492		4,491		—		4,299		42		—
With an allowance recorded:
Commercial:
Commercial and other		28		29		6		40		—		—
Real estate		502		503		29		1,061		6		—
Land		552		552		77		683		—		—
Mortgage		685		685		128		617		—		—
Home equity		14		14		11		209		—		—
Subtotal		1,781		1,783		251		2,610		6		—
Total	$	6,273	$	6,274	$	251	$	6,909	$	48	$	—

Investment in nonaccrual loans

	Nonaccrual				Loans Past Due Over 90 Days Still Accruing
	2012		2011		2012		2011
Commercial:
Commercial and other	$	29	$	62	$	—	$	—
Real estate		3,292		2,027		—		—
Land		2,985		2,800		—		—
Mortgage		1,958		1,454		—		—
Residential construction:
Land		—		—		—		—
Indirect auto		5		8		—
Home equity		53		14		—		—
Consumer and other		39		—		—		—
Total	$	8,361	$	6,365	$	—	$	—

Aging of the recorded investment in past due loans

	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
December 31, 2012
Commercial:
Commercial and other	$	67	$	—	$	—	$	67	$	20,208	$	20,275
Real estate		1,019		24		2,644		3,687		76,193		79,880
Five or more family		—		—		—		—		14,286		14,286
Construction		—		—		—		—		1,795		1,795
Land		—		109		2,494		2,603		5,892		8,495
Mortgage		523		283		1,469		2,275		34,720		36,995
Mortgage warehouse		—		—		—		—		137,467		137,467
Residential construction:
Construction		—		—		—		—		1,099		1,099
Land		—		—		—		—		367		367
Indirect auto		10		—		5		15		1,139		1,154
Home equity		21		—		25		46		12,274		12,320
Consumer and other		3		—		—		3		3,864		3,867
Total	$	1,643	$	416	$	6,637	$	8,696	$	309,304	$	318,000

	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
December 31, 2011
Commercial:
Commercial and other	$	—	$	—	$	29	$	29	$	18,077	$	18,106
Real estate		1,057		128		1,589		2,774		77,702		80,476
Five or more family		43		—		—		43		17,670		17,713
Construction		—		—		—		—		1,172		1,172
Land		216		—		2,248		2,464		6,759		9,223
Mortgage		1,293		55		1,115		2,463		43,107		45,570
Mortgage warehouse		—		—		—		—		103,864		103,864
Residential construction:
Construction		—		—		—		—		2,629		2,629
Land		—		—		—		—		416		416
Indirect auto		27		—		8		35		2,214		2,249
Home equity		—		—		14		14		13,002		13,016
Consumer and other		—		14		—		14		4,683		4,697
Total	$	2,636	$	197	$	5,003	$	7,836	$	291,295	$	299,131

Loans by class modified as troubled debt restructurings

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial:
Real estate		2	$	726	$	589
Consumer and other		1		130		—
Total		3	$	856	$	589

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial:
Commercial and other		1	$	33	$	33
Real estate		2		431		429
Mortgage		1		131		131
Total		4	$	595	$	593

Loans by class modified as troubled debt restructurings, payment default

Troubled Debt Restructurings
That Subsequently Defaulted:	Number of Loans		Recorded Investment
Mortgage		1	$	127
Total		1	$	127

Troubled Debt Restructurings
That Subsequently Defaulted:	Number of Loans		Recorded Investment
Commercial:
Real estate		1	$	25
Total		1	$	25

Recent analysis performed for risk category of loans

	Not Rated		Pass		Special Mention		Substandard		Doubtful
December 31, 2012
Commercial:
Commercial and other	$	11	$	19,945	$	319	$	—	$	—
Real estate		—		66,427		6,131		7,322		—
Five or more family		203		10,410		3,673		—		—
Construction		—		1,795		—		—		—
Land		—		4,754		755		2,986		—
Mortgage		30,121		4,077		447		2,350		—
Mortgage warehouse		137,467		—		—		—		—
Residential construction:
Construction		1,099		—		—		—		—
Land		367		—		—		—		—
Indirect auto		1,154		—		—		—		—
Home equity		12,060		115		86		59		—
Consumer and other		3,036		831		—		—		—
Total	$	185,518	$	108,354	$	11,411	$	12,717	$	—

	Not Rated		Pass		Special Mention		Substandard		Doubtful
December 31, 2011
Commercial:
Commercial and other	$	67	$	17,500	$	510	$	29	$	—
Real estate		16		65,136		11,658		3,605		61
Five or more family		208		13,520		3,985		—		—
Construction		—		1,079		93		—		—
Land		—		5,447		694		3,082		—
Mortgage		37,769		4,946		722		2,133		—
Mortgage warehouse		103,864		—		—		—		—
Residential construction:
Construction		2,629		—		—		—		—
Land		416		—		—		—		—
Indirect auto		2,249		—		—		—		—
Home equity		12,623		121		92		180		—
Consumer and other		3,776		921		—		—		—
Total	$	163,617	$	108,670	$	17,754	$	9,029	$	61

Outstanding balance and carrying amount of purchased loans

	2012		2011
Commercial:
Commercial and other	$	29	$	36
Real estate		714		923
Mortgage		139		154
Outstanding balance	$	882	$	1,113
Carrying amount, net of allowance of $0	$	851	$	977

Accretable yield, or income expected to be collected on purchased loans

	2012			2011
Beginning balance	$	193		$	250
New loans purchased		—			—
Reclassification from nonaccretable yield		7			30
Accretion of income		(69	)		(87	)
Disposals		(3	)		—
Ending balance	$	128		$	193

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Premises and Equipment (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Premises and Equipment (Textual) [Abstract]
Depreciation expense	$ 577	$ 646

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Quarterly Financial Data (Unaudited) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Quarterly Financial Data
Interest income	$ 4,863	$ 5,096	$ 4,876	$ 4,997	$ 4,985	$ 4,922	$ 4,610	$ 4,874
Net interest income	3,911	4,026	3,734	3,769	3,686	3,482	3,075	3,277	15,440	13,520
Net income	$ 945	$ 1,371	$ 1,042	$ 927	$ 831	$ 1,146	$ 487	$ 778	$ 4,285	$ 3,242
Earnings per share, basic and diluted	$ 0.16	$ 0.23	$ 0.17	$ 0.16	$ 0.14	$ 0.20	$ 0.08	$ 0.14

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Fair Value (Details 5) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Financial assets
Loans held for sale, at fair value	$ 1,155	$ 3,049
Financial liabilities
Subordinated Debentures	(5,155)	(5,155)
Carrying Value [Member]
Financial assets
Cash and due from financial institutions	6,857	8,146
Interest-earning time deposits at other financial institutions	7,141
Securities available for sale	125,620	131,974
Federal Home Loan Bank stock	3,817	3,817
Loans held for sale	1,155	3,049
Loans, net	313,692	295,359
Accrued interest receivable	1,481	1,518
Financial liabilities
Deposits	(348,970)	(333,560)
Federal Home Loan Bank advances	(49,009)	(72,021)
Subordinated Debentures	(5,155)	(5,155)
FDIC guaranteed unsecured borrowings		(4,981)
Accrued interest payable	(198)	(396)
Derivatives - interest rate swaps	(1,984)	(2,283)
Fair Value [Member]
Financial assets
Cash and due from financial institutions		8,146
Securities available for sale		131,974
Loans held for sale, at fair value		3,049
Loans held for sale	1,155	3,049
Loans, net		301,293
Accrued interest receivable		1,518
Financial liabilities
Deposits		(331,486)
Federal Home Loan Bank advances		(74,307)
Subordinated Debentures		(4,582)
FDIC guaranteed unsecured borrowings		(4,989)
Accrued interest payable		(396)
Derivatives - interest rate swaps		(2,283)
Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets
Cash and due from financial institutions	6,857
Interest-earning time deposits at other financial institutions
Securities available for sale
Loans held for sale, at fair value
Loans, net
Accrued interest receivable	2
Financial liabilities
Deposits
Federal Home Loan Bank advances
Subordinated Debentures
Accrued interest payable
Derivatives - interest rate swaps
Fair Value [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets
Cash and due from financial institutions
Interest-earning time deposits at other financial institutions	7,197
Securities available for sale	125,620
Loans held for sale, at fair value	1,155
Loans, net
Accrued interest receivable	802
Financial liabilities
Deposits	(347,348)
Federal Home Loan Bank advances	(51,059)
Subordinated Debentures
Accrued interest payable	(196)
Derivatives - interest rate swaps	(1,984)
Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets
Cash and due from financial institutions
Interest-earning time deposits at other financial institutions
Securities available for sale
Loans held for sale, at fair value
Loans, net	318,534
Accrued interest receivable	677
Financial liabilities
Deposits
Federal Home Loan Bank advances
Subordinated Debentures	(5,188)
Accrued interest payable	(2)
Derivatives - interest rate swaps

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Other Borrowings (Details) (USD $) In Thousands, unless otherwise specified	1 Months Ended	12 Months Ended
	Feb. 11, 2009	Dec. 31, 2012	Dec. 31, 2012 First Tennessee Bank National Association [Member]	Dec. 31, 2011 First Tennessee Bank National Association [Member]	Dec. 31, 2012 Zions First National Bank [Member]
Extinguishment Of Debt [Line Items]
Borrowed federal funds			$ 15,000	$ 20,000	$ 9,000
Outstanding balance on accommodation			0	0	0
Other Borrowings (Textual) [Abstract]
Bank issued note	$ 5,000
Due date of note		Feb. 15, 2012
Interest rate of note	2.74%
Basis point of FDIC guarantee fee paid	1.00%

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Loans (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Allowance for loan losses:
Beginning balance	$ 3,772	$ 3,943
Charge-offs	(569)	(1,330)
Recoveries	68	22
Provision	1,037	1,137
Ending balance	4,308	3,772
Commercial [Member]
Allowance for loan losses:
Beginning balance	2,774	3,147
Charge-offs	(383)	(1,084)
Recoveries	46
Provision	694	711
Ending balance	3,131	2,774
Commercial Mortgage [Member]
Allowance for loan losses:
Beginning balance	374	389
Charge-offs	(84)	(132)
Recoveries	2
Provision	109	117
Ending balance	401	374
Mortgage Warehouse [Member]
Allowance for loan losses:
Beginning balance	393	139
Charge-offs
Recoveries
Provision	208	254
Ending balance	601	393
Residential Construction [Member]
Allowance for loan losses:
Beginning balance	3	17
Charge-offs
Recoveries
Provision	(1)	(14)
Ending balance	2	3
Indirect Auto [Member]
Allowance for loan losses:
Beginning balance	19	28
Charge-offs	(3)	(14)
Recoveries	4	4
Provision	(13)	1
Ending balance	7	19
Commercial: Home Equity [Member]
Allowance for loan losses:
Beginning balance	119	142
Charge-offs	(35)	(52)
Recoveries	1	2
Provision	45	27
Ending balance	130	119
Consumer and Other [Member]
Allowance for loan losses:
Beginning balance	90	81
Charge-offs	(64)	(48)
Recoveries	15	16
Provision	(5)	41
Ending balance	36	90
Unallocated [Member]
Allowance for loan losses:
Beginning balance
Charge-offs
Recoveries
Provision
Ending balance

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Derivatives (Details 3) (Brokered deposits [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011
Interest Rate Swaps Designated as Fair Value Hedges
Notional amount	$ 5,000
Fixed interest rate receivable	1.25%
Maturity date	Sep. 15, 2020
One month LIBOR less 0.25% [Member]
Interest Rate Swaps Designated as Fair Value Hedges
Variable interest rate payable	0.03%

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Loan Servicing (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Servicing rights:
Beginning of year	$ 348	$ 414
Additions	174	66
Amortized to expense	(139)	(105)
Change in valuation allowance	(39)	(27)
End of year	344	348
Valuation allowance:
Beginning of year	119	92
Additions expensed	44	48
Reductions credited to expense	(5)	(21)
Direct write-downs
End of year	$ 158	$ 119

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Federal Home Loan Bank Advances (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Advance type, balances and interest rate ranges
Total advances	$ 49,011	$ 72,027
Yield adjustment on acquired FHLB advances	(2)	(6)
Total	49,009	72,021
Fixed Rate Bullet [Member]
Advance type, balances and interest rate ranges
Total advances	20,000	39,000
Interest Rate Range, Minimum	0.61%	0.28%
Interest Rate Range, Maximum	3.22%	4.90%
Weighted Average Rate	1.43%	1.39%
Maturity Date Rage	October 2014 through August 2017	February 2012 through January 2015
Putable [Member]
Advance type, balances and interest rate ranges
Total advances	5,000	5,000
Interest Rate Range	2.95%	2.95%
Weighted Average Rate	2.95%	2.95%
Maturity Date Rage	January 2013	January 2013
Mortgage [Member]
Advance type, balances and interest rate ranges
Total advances	23	52
Interest Rate Range	3.00%	3.00%
Weighted Average Rate	3.00%	3.00%
Maturity Date Rage	July 2013	July 2013
Variable Rate [Member]
Advance type, balances and interest rate ranges
Total advances	8,988	12,975
Interest Rate Range	0.50%	0.40%
Weighted Average Rate	0.50%	0.40%
Maturity Date Rage	January 2013	January 2012 through June 2012
LIBOR Adjustable [Member]
Advance type, balances and interest rate ranges
Total advances	$ 15,000	$ 15,000
Interest Rate Range, Minimum	0.53%	0.66%
Interest Rate Range, Maximum	0.57%	0.78%
Weighted Average Rate	0.56%	0.70%
Maturity Date Rage	September 2015 through July 2016	September 2015 through July 2016

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Goodwill and Intangible Assets (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Amortized intangible assets:
Amortized intangible assets, Gross Carrying Amount	$ 1,534	$ 1,534
Amortized intangible assets, Gross Accumulated Amortization	1,171	1,060
Amortized intangible assets, Net Carrying Value	363	474
Core deposit intangibles [Member]
Amortized intangible assets:
Amortized intangible assets, Gross Carrying Amount	1,534	1,534
Amortized intangible assets, Gross Accumulated Amortization	1,171	1,060
Amortized intangible assets, Net Carrying Value	$ 363	$ 474

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Federal Home Loan Bank Advances (Details1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Required payments over the next five years
2013	$ 14,011
2014	5,000
2015	15,000
2016	10,000
2017	$ 5,000

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Loan Servicing (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Loan servicing (Textual) [Abstract]
Custodial escrow balances	$ 281	$ 249
Fair value of mortgage servicing rights	352	359
Mortgage servicing rights carried at book value	71	77
Mortgage servicing rights carried at fair value	273	271
Outstanding balance	431	390
Valuation allowance	$ 158	$ 119	$ 92
Fair value at a discount rate	10.00%	9.00%
Weighted average default rate	0.50%	0.50%
Weighted average amortization period	3 years 7 months 10 days
Maximum [Member]
Servicing Assets at Fair Value [Line Items]
Prepayment speeds	30.30%	23.80%
Minimum [Member]
Servicing Assets at Fair Value [Line Items]
Prepayment speeds	14.90%	14.30%

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Fair Value (Details 3) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Aggregate Fair Value [Member]
Difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding for loans held for sale
Loans held for sale	$ 1,155	$ 3,049
Gain (Loss) [Member]
Difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding for loans held for sale
Loans held for sale	34	43
Contractual Principal [Member]
Difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding for loans held for sale
Loans held for sale	$ 1,121	$ 3,006

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Regulatory Capital Matters

12 Months Ended

Dec. 31, 2012

Deposits/Federal Home Loan Bank Advances/Regulatory Capital Matters [Abstract]

REGULATORY CAPITAL MATTERS

NOTE 17 – REGULATORY CAPITAL MATTERS

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believes as of December 31, 2012, the Bank met all capital adequacy requirements to which it is subject. Companies under $500 million in consolidated assets at the beginning of the year are not required to report consolidated regulatory capital ratios.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2012 and 2011, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

Actual and required Bank capital amounts (in millions) and ratios are presented below at year end.

	Actual					Required For Capital Adequacy  Purposes					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2012
Total Capital to risk weighted assets Bank	$	67.3		18.9	%	$	28.4		8.0	%	$	35.6		10.0	%
Tier 1 (Core) Capital to risk weighted assets Bank		63.0		17.7			14.2		4.0			21.3		6.0
Tier 1 (Core) Capital to average assets Bank		63.0		13.4			18.8		4.0			23.5		5.0
2011
Total Capital to risk weighted assets Bank	$	48.7		14.9	%	$	26.2		8.0	%	$	32.8		10.0	%
Tier 1 (Core) Capital to risk weighted assets Bank		45.0		13.7			13.1		4.0			19.7		6.0
Tier 1 (Core) Capital to average assets Bank		45.0		9.7			18.5		4.0			23.1		5.0

The Qualified Thrift Lender test requires at least 65% of assets be maintained in housing-related finance and other specified areas. If this test is not met, limits are placed on growth, branching, new investments, FHLB advances and dividends, or the Bank must convert to a commercial bank charter. Management believes that this test is met.

Dividend Restrictions – The Bancorp’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. During 2013, the Company could, without prior approval, declare dividends of approximately $6,534 plus any 2013 net profits retained to the date of the dividend declaration.

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Summary of Significant Accounting Policies (Details) (USD $)	1 Months Ended	9 Months Ended	12 Months Ended
	Oct. 31, 2012	Sep. 30, 2012	Dec. 31, 2012	Dec. 31, 2011	Oct. 04, 2012
Summary of Significant Accounting Policies (Textual) [Abstract]
Ownership interest				54.11%
Common stock sold			6,205,250	6,425,905	3,384,611
Price of share					$ 8.00
Proceeds from sale of common stock	$ 27,100,000
Number of share exchanged					1.3190
Common stock, shares outstanding			6,205,250	6,147,689	6,205,250
Conversion ratio			1.3190
Cash and cash equivalents with original maturities			90 days
Interest income on mortgage and commercial loans discontinued, period			90 days
Consumer loans are charged off			120 days
Nonaccrual loans and loans past due			90 days
Accrued interest on loans			677,000	654,000
Non-accrual Loans status non-payment period			90 days
Commercial portfolio segments		18 months	24 months
Actual loss history experiencing period for all other portfolio segments			3 years
Loan servicing fees, net			(26,000)	26,000
Tax benefit percentage			50.00%
Income tax expense benefit for tax positions			$ 0
Gross amount of gains and profits on the deposit, percentage			25.00%
Surplus fund compared to the amount of deposits, percentage			10.00%
Surplus fund compared to the amount of deposits allowed, percentage			25.00%
Maximum [Member]
Property, Plant and Equipment [Line Items]
Period of individual loans are sold by the mortgage company			90 days
Estimated useful lives initially measured at fair value			15 years
Interest-earning time deposits maturity period			4 years
Minimum [Member]
Property, Plant and Equipment [Line Items]
Period of individual loans are sold by the mortgage company			30 days
Estimated useful lives initially measured at fair value			4 years
Interest-earning time deposits maturity period			1 year
Building [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Useful lives of computing depreciation of buildings and related components			30 years
Building [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Useful lives of computing depreciation of buildings and related components			5 years
Furniture, fixtures and equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Useful lives of computing depreciation of buildings and related components			10 years
Furniture, fixtures and equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Useful lives of computing depreciation of buildings and related components			3 years

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2012

Related Party Transactions [Abstract]

Loans to principal officers, directors, and their affiliates

	2012			2011
Beginning balance	$	1,081		$	1,468
New loans		115			196
Effect of changes in composition of related parties		(73	)		(62	)
Repayments		(294	)		(521	)
Ending balance	$	829		$	1,081

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Loan Servicing (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Participating Mortgage Loan Arrangements
Mortgage loan portfolios serviced, Total	$ 68,487	$ 60,906
FHLMC [Member]
Participating Mortgage Loan Arrangements
Mortgage loan portfolios serviced, Total	67,429	60,733
FHLB [Member]
Participating Mortgage Loan Arrangements
Mortgage loan portfolios serviced, Total	$ 1,058	$ 173

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Income Taxes (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Income Taxes (Textual) [Abstract]
Federal AMT credit carryforwards	$ 0	$ 431
U.S. Federal income tax rate	34.00%
Unrecognized tax positions	0	0
Additional bad debt deductions	2,659
Total deferred tax liability	904	904
Recorded expense	904
Internal revenue service (IRS) [Member]
Operating Loss Carryforwards [Line Items]
Federal capital loss carryforward expiration year	expire in 2012
Capital loss carryforward	0	24
State and municipal [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforward expires	expire in 2022
Net operating loss carryforward	0	682
Indiana enterprise zone credit carryforwards	0	118
Enterprise zone tax credit carryforward period	2013 through 2017
State capital loss carryforward expiration year	expire in 2014
Capital loss carryforward	$ 1,964	$ 1,988

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets [Abstract]

Goodwill

	2012		2011
Beginning of year	$	8,431	$	8,431
Acquired goodwill		—		—
Impairment		—		—
End of year	$	8,431	$	8,431

Acquired intangible assets

	2012
	Gross Carrying Amount		Gross Accumulated Amortization		Net Carrying Value
Amortized intangible assets:
Core deposit intangibles	$	1,534	$	1,171	$	363
Total	$	1,534	$	1,171	$	363

	2011
	Gross Carrying Amount		Gross Accumulated Amortization		Net Carrying Value
Amortized intangible assets:
Core deposit intangibles	$	1,534	$	1,060	$	474
Total	$	1,534	$	1,060	$	474

Estimated amortization expense

2013	$	85
2014		66
2015		51
2016		40
2017		34

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Securities (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Sales of securities available for sale
Proceeds	$ 28,059	$ 39,873
Gross gains	526	687
Gross losses	$ (152)	$ (60)

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Loans (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 Company	Dec. 31, 2011 Company
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, including fees	$ 16,362	$ 15,406
Loans (Textual) [Abstract]
Number of mortgage companies	11	9
Increased in allowance for loan losses	166	13
Troubled debt restructurings previously disclosed resulted in charge offs	166	300
Troubled debt restructurings, subsequently defaulted increased in allowance for loan losses	0	13
Troubled debt restructurings, subsequently defaulted resulted in charge offs	0	300
Carrying amount, net of allowance	0	0
Allowance for loan losses reversed	0	0
Carrying amounts of loans	50	50
Troubled Debt Restructurings [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Outstanding balance of loans, modified	842	254
Specific reserves, loan term modified	0	13
Performing Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan payment default	90 days
Mortgage Warehouse [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage warehouse loans, originated	2,787,842	1,988,579
Mortgage warehouse loans, sold	2,755,204	1,958,332
Loans, including fees	5,205	3,376
Mortgage warehouse loan fees	835	569
Wire transfer fees	$ 295	$ 181

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Derivatives (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Derivatives (Textual) [Abstract]
Interest expense									$ (976)	$ (998)
Interest income	4,863	5,096	4,876	4,997	4,985	4,922	4,610	4,874
Derivatives (Additional Textual) [Abstract]
Amounts to be re-classed from other comprehensive income (loss)	0								0
Subordinated debentures [Member]
Derivatives (Textual) [Abstract]
Notional Amount	(5,000)				(5,000)				(5,000)	(5,000)
Variable interest rate receivable, Three/One month LIBOR plus or less	3.10%								3.10%
CDARS deposits [Member]
Derivatives (Textual) [Abstract]
Notional Amount	(10,250)				(10,250)				(10,250)	(10,250)
Variable interest rate receivable, Three/One month LIBOR plus or less	0.55%								0.55%
FHLB advance (Sep 20, 2015) [Member]
Derivatives (Textual) [Abstract]
Notional Amount	(5,000)				(5,000)				(5,000)	(5,000)
Variable interest rate receivable, Three/One month LIBOR plus or less	0.22%								0.22%
FHLB advance (Jul 19, 2016) [Member]
Derivatives (Textual) [Abstract]
Notional Amount	(10,000)				(10,000)				(10,000)	(10,000)
Variable interest rate receivable, Three/One month LIBOR plus or less	0.25%								0.25%
Security collateral held in safekeeping by Bank of New York [Member]
Derivatives (Textual) [Abstract]
Collateralized the liability with cash and security	220				220				220	220
Cash and securities fair value	2,586				3,761				2,586	3,761
Interest rate swap [Member]
Derivatives (Textual) [Abstract]
Interest income									44	62
Gains (losses) on the fair market value hedge									3	(14)
Interest Rate Swaps Designated as Cash Flow Hedges [Member]
Derivatives (Textual) [Abstract]
Notional Amount	(30,250)				(30,250)				(30,250)	(30,250)
Interest Rate Swaps Designated as Cash Flow Hedges [Member] | Subordinated debentures [Member]
Derivatives (Textual) [Abstract]
Notional Amount	(5,000)				(5,000)				(5,000)	(5,000)
Interest Rate Swaps Designated as Cash Flow Hedges [Member] | CDARS deposits [Member]
Derivatives (Textual) [Abstract]
Notional Amount	(10,250)				(10,250)				(10,250)	(10,250)
Interest Rate Swaps Designated as Fair Value Hedges [Member] | Interest rate swap [Member]
Derivatives (Textual) [Abstract]
Notional Amount					$ (5,000)					$ (5,000)

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Loans (Details 5) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Aging of recorded investment in past due loans
30-59 Days Past Due	$ 1,643	$ 2,636
60-89 Days Past Due	416	197
Greater than 90 Days Past Due	6,637	5,003
Total Past Due	8,696	7,836
Loans Not Past Due	309,304	291,295
Total ending loan balance	318,000	299,131
Commercial and other [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due	67
60-89 Days Past Due
Greater than 90 Days Past Due		29
Total Past Due	67	29
Loans Not Past Due	20,208	18,077
Total ending loan balance	20,275	18,106
Commercial: Real Estate [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due	1,019	1,057
60-89 Days Past Due	24	128
Greater than 90 Days Past Due	2,644	1,589
Total Past Due	3,687	2,774
Loans Not Past Due	76,193	77,702
Total ending loan balance	79,880	80,476
Commercial: Five or more family [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due		43
60-89 Days Past Due
Greater than 90 Days Past Due
Total Past Due		43
Loans Not Past Due	14,286	17,670
Total ending loan balance	14,286	17,713
Commercial: Construction [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due
60-89 Days Past Due
Greater than 90 Days Past Due
Total Past Due
Loans Not Past Due	1,795	1,172
Total ending loan balance	1,795	1,172
Commercial: Land [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due		216
60-89 Days Past Due	109
Greater than 90 Days Past Due	2,494	2,248
Total Past Due	2,603	2,464
Loans Not Past Due	5,892	6,759
Total ending loan balance	8,495	9,223
Commercial Mortgage [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due	523	1,293
60-89 Days Past Due	283	55
Greater than 90 Days Past Due	1,469	1,115
Total Past Due	2,275	2,463
Loans Not Past Due	34,720	43,107
Total ending loan balance	36,995	45,570
Mortgage Warehouse [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due
60-89 Days Past Due
Greater than 90 Days Past Due
Total Past Due
Loans Not Past Due	137,467	103,864
Total ending loan balance	137,467	103,864
Construction [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due
60-89 Days Past Due
Greater than 90 Days Past Due
Total Past Due
Loans Not Past Due	1,099	2,629
Total ending loan balance	1,099	2,629
Residential construction: Land [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due
60-89 Days Past Due
Greater than 90 Days Past Due
Total Past Due
Loans Not Past Due	367	416
Total ending loan balance	367	416
Residential construction: Indirect auto [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due	10	27
60-89 Days Past Due
Greater than 90 Days Past Due	5	8
Total Past Due	15	35
Loans Not Past Due	1,139	2,214
Total ending loan balance	1,154	2,249
Commercial: Home Equity [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due	21
60-89 Days Past Due
Greater than 90 Days Past Due	25	14
Total Past Due	46	14
Loans Not Past Due	12,274	13,002
Total ending loan balance	12,320	13,016
Consumer and Other [Member]
Aging of recorded investment in past due loans
30-59 Days Past Due	3
60-89 Days Past Due		14
Greater than 90 Days Past Due
Total Past Due	3	14
Loans Not Past Due	3,864	4,683
Total ending loan balance	$ 3,867	$ 4,697

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Parent Company Only Condensed Financial Information (Tables)

12 Months Ended

Dec. 31, 2012

Parent Company Only Condensed Financial Information [Abstract]

CONDENSED BALANCE SHEETS

	2012		2011
ASSETS
Cash and cash equivalents	$	2,656	$	2,032
Interest-earning time deposits in other financial institutions		2,976		—
Securities available for sale		4,823		—
ESOP loan receivable		3,402		1,415
Investment in banking subsidiary		74,291		56,071
Investment in statutory trust		155		155
Accrued interest receivable and other assets		1,049		1,402
Total assets	$	89,352	$	61,075
LIABILITIES AND SHAREHOLDERS’ EQUITY
Subordinated debentures	$	5,155	$	5,155
Accrued interest payable and other liabilities		142		217
Shareholders’ equity		84,055		55,703
Total liabilities and shareholders’ equity	$	89,352	$	61,075

CONDENSED STATEMENTS OF INCOME

	2012			2011
Dividends from banking subsidiary	$	—		$	2,265
Interest income		75			50
Interest expense		(282	)		(281	)
Other expense		(223	)		(197	)
Income (loss) before income tax and undistributed subsidiary income		(430	)		1,837
Income tax benefit		(146	)		(146	)
Equity in undistributed income or net income of banking subsidiary		4,569			1,259
Net income	$	4,285		$	3,242

CONDENSED STATEMENTS OF CASH FLOWS

	2012			2011
Cash flows from operating activities
Net income	$	4,285		$	3,242
Adjustments to reconcile net income to net cash from operating activities:
Amortization of net premiums on securities available for sale		4			—
Equity in undistributed income or net income of banking subsidiary		(4,569	)		(1,259	)
Change in other assets		339			(385	)
Change in other liabilities		(14	)		11
Net cash from operating activities		45			1,609
Cash flows from investing activities
Net change in ESOP loan receivable		(1,987	)		73
Net change in interest-earning time deposits at other financial institutions		(2,976	)		—
Purchase of securities available for sale		(4,849	)		—
Net cash from investing activities		(9,812	)		73
Cash flows from financing activities
Capital contribution to the bank		(12,905	)		—
Net proceeds from stock offering		26,344			—
Purchase of shares by ESOP pursuant to reorganization		(2,241	)		—
Purchase of treasury stock		—			(134	)
Dividends paid on common stock		(807	)		(186	)
Net cash from financing activities		10,391			(320	)
Net change in cash and cash equivalents		624			1,362
Beginning cash and cash equivalents		2,032			670
Ending cash and cash equivalents	$	2,656		$	2,032

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: The consolidated financial statements included herein include the accounts of LaPorte Bancorp, Inc., a Maryland corporation (“New LaPorte”), successor to LaPorte Bancorp, Inc., a Federal corporation (“LaPorte-Federal”), its wholly owned subsidiary, The LaPorte Savings Bank (“the Bank”) and the Bank’s wholly owned subsidiary, LSB Investments Inc., Nevada (“LSB Inc.”), together referred to as “the Company”. LaPorte-Federal was formed on October 12, 2007. LSB Inc. was formed on October 1, 2011 to manage a portion of the Bank’s investment portfolio. LaPorte-Federal was a majority owned (54.11%) subsidiary of LaPorte Savings Bank, MHC through September of 2012. These financial statements do not include the transactions and balances of LaPorte Savings Bank, MHC. Intercompany transactions and balances are eliminated in consolidation.

On October 4, 2012, the Company completed its conversion and reorganization to the stock holding company form of organization. New LaPorte, the new stock holding company for the Bank, sold 3,384,611 shares of common stock at $8.00 per share, for gross offering proceeds of $27.1 million, in its stock offering. Concurrent with the completion of the offering, shares of common stock of LaPorte-Federal owned by the public have been exchanged for 1.3190 shares of New LaPorte’s common stock so that LaPorte-Federal’s existing shareholders now own approximately the same percentage of New LaPorte’s common stock as they owned of LaPorte-Federal’s common stock immediately prior to the conversion, as adjusted for the assets of LaPorte Savings Bank, MHC and their receipt of cash in lieu of fractional exchange shares. As a result of the offering and the exchange of shares, New LaPorte has approximately 6,205,250 shares outstanding. All share and per share information in this report for periods prior to conversion has been revised to reflect the 1.3190:1 conversion ratio on shares outstanding, including shares of LaPorte-Federal held by the former mutual holding company that were not publicly traded.

The Company provides financial services through its offices in LaPorte and Porter counties of Indiana. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. There are no significant concentrations of loans to any one industry or customer. However, the customers’ ability to repay their loans is dependent on the real estate and general economic conditions in the area. The Company established LSB Inc., a wholly owned subsidiary of the Bank incorporated in Nevada to manage a portion of the Bank’s investment portfolio beginning October 1, 2011. On January 4, 2013, the Company established LSB Real Estate, Inc. (“LSB Real Estate”), a real estate investment trust, which is a wholly owned subsidiary of LSB Inc., and is incorporated in Maryland.

Use of Estimates: To prepare financial statements in conformity with United States generally accepted accounting principles management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan losses, mortgage servicing rights, consideration of other than temporary declines in fair values of securities, the fair values of securities and other financial instruments, consideration of impairment of goodwill and other intangible assets, and the need for a deferred tax asset valuation allowance are particularly subject to change.

Cash Flows: Cash and cash equivalents includes cash, deposits with other financial institutions with original maturities under 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, federal funds purchased, Federal Home Loan Bank advances and Federal Reserve Bank discount window borrowings.

Interest-Earning Time Deposits in Other Financial Institutions: Interest-earning time deposits in other financial institutions mature between one and four years and are carried at cost.

Securities: Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax, as a separate component of shareholders’ equity. Trading securities are carried at fair value, with changes in unrealized holding gains and losses included in income.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities and collateralized mortgage obligations where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at fair value, as determined by outstanding commitments from investors. The fair value includes the servicing value of the loans.

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Interest income on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Consumer loans are typically charged off no later than 120 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. A loan is moved to non-accrual status in accordance with the Company’s policy, typically after 90 days of non-payment. The Company follows the same nonaccrual policy for troubled debt restructurings.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The recorded investment in loans is the loan balance plus unamortized net deferred loan costs less unamortized net deferred loan fees. The total amount of accrued interest on loans as of December 31, 2012 and 2011 was $677 and $654, respectively.

Concentration of Credit Risk: Most of the Company’s business activity is with customers located within La Porte County. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in the La Porte County area.

Mortgage Warehouse Loans: During the month of May 2009, a mortgage warehouse lending division was established at the Bank. This division has approved specific mortgage companies through which individual mortgage loans are originated by the mortgage company and funded by the Bank as a secured borrowing with the pledge of collateral under the Bank’s agreement with the mortgage company. The individual mortgage loans are held between the time of origination and subsequent repurchase by the mortgage company for sale of the loan into the secondary market. Each individual mortgage is assigned to the Bank until the loan is repurchased and sold to the secondary market by the mortgage company. Also, the Bank takes possession of each original note and forwards such note to the end investor once the mortgage company has sold the loan. The individual loans are typically sold by the mortgage company within 30 days of origination and are seldom held more than 90 days. Interest income is accrued by the Bank during this period and fee income for each loan sold is collected when the sale has been completed.

Purchased Loans: The Company purchased a group of loans through the acquisition of City Savings Financial Corporation on October 12, 2007. Purchased loans that showed evidence of credit deterioration since their origination are recorded at an allocated fair value, such that there is no carryover of the seller’s allowance for loan losses. After acquisition, incurred losses are recognized by an increase in the allowance for loan losses.

Purchased loans are accounted for individually or aggregated into pools of loans based on common risk characteristics (e.g., credit score, loan type, and date of origination). The Company estimates the amount and timing of expected cash flows for each purchased loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan’s or pool’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan or pool, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired.

A loan is impaired when based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the principal and interest owed.

All individually classified commercial and commercial real estate loans are evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over certain time periods. Prior to the fourth quarter of 2012, the historical loss experience was based on the actual loss history experienced over the last 18 months for the commercial portfolio segment and over the last year for all other portfolio segments. For the fourth quarter of 2012, the historical loss experience was based on the actual loss history experienced over the last 24 months for the commercial portfolio segment and over the last three years for all other portfolio segments. Management determined this change in assumption better represents potential losses related to non-impaired loans as of December 31, 2012. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other change in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

The following portfolio segments have been identified: Commercial, Mortgage, Mortgage Warehouse, Residential Construction, Indirect Auto, Home Equity and Consumer and Other. The risk characteristics of each of the identified portfolio segments are as follows:

Commercial – Subject to decreases in demand for certain products or services; increasing production costs; increases in interest rates on adjustable rate loans may impact borrowers’ ability to continue payments; adverse market conditions which may cause a decrease in the value of underlying collateral.

Mortgage – Subject to adverse market conditions which may cause a decrease in the value of underlying collateral; adverse employment conditions in the local economy which may lead to an increase in default rates; incremental rate increases on adjustable rate mortgages may impact borrowers’ ability to continue payments.

Mortgage Warehouse – Subject to higher fraud risk than our other lending areas; decreased market values in real estate throughout the country.

Residential Construction – Subject to adverse market conditions which may cause a decrease in the value of underlying collateral; adverse employment conditions in the local economy which may lead to an increase in default rates.

Indirect Auto – Subject to higher fraud risk than our other lending areas; adverse employment conditions in the local economy which may lead to an increase in default rates; decreased value of the underlying collateral.

Home Equity – Subject to adverse employment conditions in the local economy which may lead to an increase in default rates; decreased market values due to adverse real estate market conditions.

Consumer and Other – Subject to adverse employment conditions in the local economy which may lead to an increase in default rates; decreased value of the underlying collateral.

The Bank is subject to periodic examinations by its federal and state regulatory examiners, and may be required by such regulators to recognize additions to the allowance for loan losses based on their assessment of credit information available to them at the time of their examinations. The process of assessing the allowance for loan losses is necessarily subjective. Further, and particularly in times of economic downturns, it is reasonably possible that future credit losses may exceed historical loss levels and may also exceed management’s current estimates of incurred credit losses inherent within the loan portfolio. As such, there can be no assurance that future charge-offs will not exceed management’s current estimate of what constitutes a reasonable allowance for loan losses.

Mortgage Servicing Rights: When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in net gains on mortgage banking activities. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. The Company compares the valuation model inputs and results to published industry data in order to validate the model results and assumptions. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported with loan servicing fees, net on the consolidated statements of income. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.

Servicing fee income, which is reported on the consolidated statements of income as loan servicing fees, net, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal; or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income. Loan servicing fees, net totaled $(26) and $26 for the years ended December 2012 and 2011. Late fees and ancillary fees related to loan servicing are not material.

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value, less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight line method with useful lives ranging from 5 to 30 years. Furniture, fixtures and equipment are depreciated on an accelerated or straight line method with useful lives ranging from 3 to 10 years.

Federal Home Loan Bank (FHLB) Stock: The Bank is a member of the FHLB system. Members are required to own a certain amount of FHLB stock based on the level of FHLB borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Bank Owned Life Insurance: The Bank has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Goodwill and Other Intangible Assets: All goodwill on the Company’s balance sheet resulted from business combinations prior to January 1, 2009 and represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected October 31st as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance sheet.

Other intangible assets consist of core deposit intangible assets arising from a whole bank acquisition. They are initially measured at fair value and then are amortized on an accelerated method over their estimated useful lives, which range from 4 to 15 years.

Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Derivatives: At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or (3) an instrument with no hedging designation (“stand-alone derivative”). As of December 31, 2012, the Company had entered into four cash flow hedge transactions. As of December 31, 2011, the Company had also entered into a fair value hedge. For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For both types of hedges, changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as noninterest income.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as noninterest income. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income (loss) are amortized into earnings over the same periods which the hedged transactions will affect earnings.

Mortgage Banking Derivatives: Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest rate on the loan is locked. The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to hedge the change in interest rates resulting from its commitments to fund the loans. Changes in the fair values of these derivatives are included in net gains on mortgage banking activities on the consolidated statements of income.

Stock-Based Compensation: Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards.

Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Retirement Plans: Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Split-dollar life insurance plan expense and supplemental retirement plan expense allocates the benefits over years of service.

Employee Stock Ownership Plan: The cost of shares issued to the ESOP, but not yet allocated to participants, is shown as a reduction of shareholders’ equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce debt and accrued interest.

Earnings Per Common Share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. ESOP shares are considered outstanding for this calculation unless unearned. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options.

Surplus: Surplus has been established in reference to Indiana State Banking Statute 28-6-1-28. This statute required State Savings Banks to reserve and set aside from the gross amount of gains and profits of the institution not less than one quarter of one percent (1/4%) per annum on the deposits, to be held and invested as a surplus fund to meet any contingency in its business, until the surplus fund shall equal up to ten percent (10%) upon the amount of deposits, however, a surplus fund up to twenty-five percent (25%) upon the amount of deposits was allowed. This statute has since been repealed, however, the fund will remain as a part of the Company’s total equity.

Comprehensive Income: Comprehensive income, net of tax, consists of net income and other comprehensive income (loss), net of tax. Other comprehensive income (loss), net of tax, includes net changes in net unrealized gains and losses on securities available for sale, net of tax, reclassification adjustments and unrealized gains and losses on cash flow hedges, which are also recognized as a separate component of shareholders’ equity.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the consolidated financial statements.

Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank was required to meet regulatory reserve and clearing requirements.

Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the Bancorp or by the Bancorp to shareholders.

Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Operating Segments: While the chief decision-makers monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.

Adoption of New Accounting Standards:

In September 2011, the FASB amended existing guidance relating to goodwill impairment testing. The amendment permits an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing these events or circumstances, it is concluded that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The amendments in this guidance are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The effect of adopting this standard did not have a material effect on the Company’s operating results or financial condition.

In June 2011, the FASB amended existing guidance and eliminated the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. The amendment requires that comprehensive income be presented in either a single continuous statement or in two separate consecutive statements. The amendments in this guidance are effective as of the beginning of a fiscal reporting year, and interim periods within that year, that begins after December 15, 2011. Early adoption was permitted. The adoption of this amendment changed the presentation of the statement of comprehensive income for the Company to two consecutive statements instead of presented as part of the consolidated statement of shareholders’ equity.

In May 2011, the FASB issued an amendment to achieve common fair value measurement and disclosure requirements between U.S. and International accounting principles. Overall, the guidance is consistent with existing U.S. accounting principles; however, there are some amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this guidance are effective for interim and annual reporting periods beginning after December 15, 2011. The effect of adopting this standard did not have a material effect on the Company’s operating results or financial condition, but the additional disclosures are included in Note 4.

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Parent Company Only Condensed Financial Information (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Cash flows from operating activities
Net income	$ 945	$ 1,371	$ 1,042	$ 927	$ 831	$ 1,146	$ 487	$ 778	$ 4,285	$ 3,242
Adjustments to reconcile net income to net cash from operating activities:
Accrued interest receivable and other assets									52	733
Change in other liabilities									118	(174)
Net cash from operating activities									8,081	6,529
Cash flows from investing activities
Net change in interest-earning time deposits at other financial institutions									(7,141)
Purchases of securities available for sale									(41,425)	(66,408)
Net cash from investing activities									(20,064)	(30,499)
Cash flows from financing activities
Net proceeds from stock offering									26,344
Purchase of shares by ESOP pursuant to reorganization									(2,241)
Purchase of treasury stock										(134)
Dividends paid on common stock									(807)	(186)
Net cash from financing activities									10,694	26,248
Net change in cash and cash equivalents									(1,289)	2,278
Cash and cash equivalents at beginning of year				8,146				5,868	8,146	5,868
Cash and cash equivalents at end of year	6,857				8,146				6,857	8,146
Parent Company [Member]
Cash flows from operating activities
Net income									4,285	3,242
Adjustments to reconcile net income to net cash from operating activities:
Amortization of net premiums on securities available for sale									4
Equity in undistributed income or net income of banking subsidiary									(4,569)	(1,259)
Accrued interest receivable and other assets									339	(385)
Change in other liabilities									(14)	11
Net cash from operating activities									45	1,609
Cash flows from investing activities
Net change in ESOP loan receivable									(1,987)	73
Net change in interest-earning time deposits at other financial institutions									(2,976)
Purchases of securities available for sale									(4,849)
Net cash from investing activities									(9,812)	73
Cash flows from financing activities
Capital contribution to the bank									(12,905)
Net proceeds from stock offering									26,344
Purchase of treasury stock										(134)
Dividends paid on common stock									(807)	(186)
Net cash from financing activities									10,391	(320)
Net change in cash and cash equivalents									624	1,362
Cash and cash equivalents at beginning of year				2,032				670	2,032	670
Cash and cash equivalents at end of year	$ 2,656				$ 2,032				$ 2,656	$ 2,032

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Loans (Details 6) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 Loan	Dec. 31, 2011 Loan
Loans by class modified as troubled debt restructurings
Number of Loans	3	4
Pre-Modification outstanding recorded investment	$ 856	$ 595
Post-modification outstanding recorded investment	589	593
Commercial: Real Estate [Member]
Loans by class modified as troubled debt restructurings
Number of Loans	2	2
Pre-Modification outstanding recorded investment	726	431
Post-modification outstanding recorded investment	589	429
Commercial and other [Member]
Loans by class modified as troubled debt restructurings
Number of Loans	1	1
Pre-Modification outstanding recorded investment	130	33
Post-modification outstanding recorded investment		33
Commercial Mortgage [Member]
Loans by class modified as troubled debt restructurings
Number of Loans		1
Pre-Modification outstanding recorded investment		131
Post-modification outstanding recorded investment		$ 131

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2012

Employee Stock Ownership Plan/Stock-Based Compensation [Abstract]

Summary of weighted-average assumptions used to determined fair value of stock option award

	2011
Risk-free interest rate		1.42	%
Expected term		7 1/ 2 Years
Expected stock price volatility		27.34	%
Dividend yield		1.60	%

Summary of activity in the stock option plan

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at beginning of year		281,829	$	6.44		9.7 years		—
Granted		—		—
Exercised		—		—
Forfeited or expired		—		—
Outstanding at December 31, 2012		281,829	$	6.44		8.7 years	$	2,474
Fully vested and expected to vest		281,829	$	6.44		8.7 years	$	2,474
Exercisable at end of year		56,366	$	6.44		8.7 years	$	132

	2011
Weighted average fair value of options granted	$2.16

Summary of changes in the Company's nonvested shares

Nonvested Shares	Shares			Weighted-Average Grant-Date Fair  Value
Nonvested at January 1, 2012		116,910		$	6.44
Granted		—			—
Vested		(23,382	)		6.44
Forfeited		—			—
Nonvested at December 31, 2012		93,528		$	6.44

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Earnings Per Share

12 Months Ended

Dec. 31, 2012

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 21 – EARNINGS PER SHARE

The factors used in the earnings per common share computation follow:

	2012			2011
Basic
Net income	$	4,285		$	3,242
Weighted average common shares outstanding		6,161,686			6,076,249
Less: Average unallocated ESOP shares		(239,440	)		(184,898	)
Average shares		5,922,246			5,891,351
Basic earnings per common share	$	0.72		$	0.55
Diluted
Net income	$	4,285		$	3,242
Weighted average common shares outstanding for basic earnings per common share		5,922,246			5,891,351
Add: Dilutive effects of assumed exercises of stock options		1,678			2,189
Average shares and dilutive potential common shares		5,923,924			5,893,793
Diluted earnings per common share	$	0.72		$	0.55

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Parent Company Only Condensed Financial Information

12 Months Ended

Dec. 31, 2012

Parent Company Only Condensed Financial Information [Abstract]

PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

NOTE 20 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial information of LaPorte Bancorp, Inc. at December 31, 2012 and 2011 and for the years ended December 31, 2012 and 2011 is as follows:

CONDENSED BALANCE SHEETS

December 31, 2012 and 2011

	2012		2011
ASSETS
Cash and cash equivalents	$	2,656	$	2,032
Interest-earning time deposits in other financial institutions		2,976		—
Securities available for sale		4,823		—
ESOP loan receivable		3,402		1,415
Investment in banking subsidiary		74,291		56,071
Investment in statutory trust		155		155
Accrued interest receivable and other assets		1,049		1,402
Total assets	$	89,352	$	61,075
LIABILITIES AND SHAREHOLDERS’ EQUITY
Subordinated debentures	$	5,155	$	5,155
Accrued interest payable and other liabilities		142		217
Shareholders’ equity		84,055		55,703
Total liabilities and shareholders’ equity	$	89,352	$	61,075

CONDENSED STATEMENTS OF INCOME

Years ended December 31, 2012 and 2011

	2012			2011
Dividends from banking subsidiary	$	—		$	2,265
Interest income		75			50
Interest expense		(282	)		(281	)
Other expense		(223	)		(197	)
Income (loss) before income tax and undistributed subsidiary income		(430	)		1,837
Income tax benefit		(146	)		(146	)
Equity in undistributed income or net income of banking subsidiary		4,569			1,259
Net income	$	4,285		$	3,242

CONDENSED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2012 and 2011

	2012			2011
Cash flows from operating activities
Net income	$	4,285		$	3,242
Adjustments to reconcile net income to net cash from operating activities:
Amortization of net premiums on securities available for sale		4			—
Equity in undistributed income or net income of banking subsidiary		(4,569	)		(1,259	)
Change in other assets		339			(385	)
Change in other liabilities		(14	)		11
Net cash from operating activities		45			1,609
Cash flows from investing activities
Net change in ESOP loan receivable		(1,987	)		73
Net change in interest-earning time deposits at other financial institutions		(2,976	)		—
Purchase of securities available for sale		(4,849	)		—
Net cash from investing activities		(9,812	)		73
Cash flows from financing activities
Capital contribution to the bank		(12,905	)		—
Net proceeds from stock offering		26,344			—
Purchase of shares by ESOP pursuant to reorganization		(2,241	)		—
Purchase of treasury stock		—			(134	)
Dividends paid on common stock		(807	)		(186	)
Net cash from financing activities		10,391			(320	)
Net change in cash and cash equivalents		624			1,362
Beginning cash and cash equivalents		2,032			670
Ending cash and cash equivalents	$	2,656		$	2,032

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Stock-Based Compensation (Details)	12 Months Ended
	Dec. 31, 2011
Summary of weighted-average assumptions used to determined fair value of stock option award
Risk-free interest rate	1.42%
Expected term	7 years 6 months
Expected stock price volatility	27.34%
Dividend yield	1.60%

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Loans (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Loans and allowances for loans losses
Subtotal	$ 317,786	$ 298,954
Less: Net deferred loan (fees) costs	214	177
Allowance for loan losses	(4,308)	(3,772)	(3,943)
Loans, net	313,692	295,359
Commercial [Member]
Loans and allowances for loans losses
Subtotal	124,563	126,559
Allowance for loan losses	(3,131)	(2,774)	(3,147)
Mortgage [Member]
Loans and allowances for loans losses
Subtotal	36,996	45,576
Allowance for loan losses	(401)	(374)	(389)
Mortgage Warehouse [Member]
Loans and allowances for loans losses
Subtotal	137,467	103,864
Allowance for loan losses	(601)	(393)	(139)
Residential Construction [Member]
Loans and allowances for loans losses
Subtotal	1,475	3,047
Allowance for loan losses	(2)	(3)	(17)
Indirect Auto [Member]
Loans and allowances for loans losses
Subtotal	1,154	2,249
Allowance for loan losses	(7)	(19)	(28)
Commercial: Home Equity [Member]
Loans and allowances for loans losses
Subtotal	12,267	12,966
Allowance for loan losses	(130)	(119)	(142)
Consumer and Other [Member]
Loans and allowances for loans losses
Subtotal	3,864	4,693
Allowance for loan losses	$ (36)	$ (90)	$ (81)

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Regulatory Capital Matters (Tables)

12 Months Ended

Dec. 31, 2012

Deposits/Federal Home Loan Bank Advances/Regulatory Capital Matters [Abstract]

Actual and required Bank capital amounts

	Actual					Required For Capital Adequacy  Purposes					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2012
Total Capital to risk weighted assets Bank	$	67.3		18.9	%	$	28.4		8.0	%	$	35.6		10.0	%
Tier 1 (Core) Capital to risk weighted assets Bank		63.0		17.7			14.2		4.0			21.3		6.0
Tier 1 (Core) Capital to average assets Bank		63.0		13.4			18.8		4.0			23.5		5.0
2011
Total Capital to risk weighted assets Bank	$	48.7		14.9	%	$	26.2		8.0	%	$	32.8		10.0	%
Tier 1 (Core) Capital to risk weighted assets Bank		45.0		13.7			13.1		4.0			19.7		6.0
Tier 1 (Core) Capital to average assets Bank		45.0		9.7			18.5		4.0			23.1		5.0

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Data (Unaudited) [Abstract]

QUARTERLY FINANCIAL DATA (UNAUDITED)

NOTE 22 – QUARTERLY FINANCIAL DATA (UNAUDITED)

	Interest Income		Net Interest Income		Net Income		Earnings Per Share Basic and Diluted
2012
First quarter	$	4,997	$	3,769	$	927	$	0.16
Second quarter		4,876		3,734		1,042		0.17
Third quarter		5,096		4,026		1,371		0.23
Fourth quarter		4,863		3,911		945		0.16
2011
First quarter	$	4,874	$	3,277	$	778	$	0.14
Second quarter		4,610		3,075		487		0.08
Third quarter		4,922		3,482		1,146		0.20
Fourth quarter		4,985		3,686		831		0.14

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2012

Financing Receivable, Allowance for Credit Losses [Line Items]

Allowance for Loan Losses

Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired.

A loan is impaired when based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the principal and interest owed.

All individually classified commercial and commercial real estate loans are evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over certain time periods. Prior to the fourth quarter of 2012, the historical loss experience was based on the actual loss history experienced over the last 18 months for the commercial portfolio segment and over the last year for all other portfolio segments. For the fourth quarter of 2012, the historical loss experience was based on the actual loss history experienced over the last 24 months for the commercial portfolio segment and over the last three years for all other portfolio segments. Management determined this change in assumption better represents potential losses related to non-impaired loans as of December 31, 2012. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other change in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

The following portfolio segments have been identified: Commercial, Mortgage, Mortgage Warehouse, Residential Construction, Indirect Auto, Home Equity and Consumer and Other. The risk characteristics of each of the identified portfolio segments are as follows:

Nature of Operations and Principles of Consolidation

Nature of Operations and Principles of Consolidation: The consolidated financial statements included herein include the accounts of LaPorte Bancorp, Inc., a Maryland corporation (“New LaPorte”), successor to LaPorte Bancorp, Inc., a Federal corporation (“LaPorte-Federal”), its wholly owned subsidiary, The LaPorte Savings Bank (“the Bank”) and the Bank’s wholly owned subsidiary, LSB Investments Inc., Nevada (“LSB Inc.”), together referred to as “the Company”. LaPorte-Federal was formed on October 12, 2007. LSB Inc. was formed on October 1, 2011 to manage a portion of the Bank’s investment portfolio. LaPorte-Federal was a majority owned (54.11%) subsidiary of LaPorte Savings Bank, MHC through September of 2012. These financial statements do not include the transactions and balances of LaPorte Savings Bank, MHC. Intercompany transactions and balances are eliminated in consolidation.

On October 4, 2012, the Company completed its conversion and reorganization to the stock holding company form of organization. New LaPorte, the new stock holding company for the Bank, sold 3,384,611 shares of common stock at $8.00 per share, for gross offering proceeds of $27.1 million, in its stock offering. Concurrent with the completion of the offering, shares of common stock of LaPorte-Federal owned by the public have been exchanged for 1.3190 shares of New LaPorte’s common stock so that LaPorte-Federal’s existing shareholders now own approximately the same percentage of New LaPorte’s common stock as they owned of LaPorte-Federal’s common stock immediately prior to the conversion, as adjusted for the assets of LaPorte Savings Bank, MHC and their receipt of cash in lieu of fractional exchange shares. As a result of the offering and the exchange of shares, New LaPorte has approximately 6,205,250 shares outstanding. All share and per share information in this report for periods prior to conversion has been revised to reflect the 1.3190:1 conversion ratio on shares outstanding, including shares of LaPorte-Federal held by the former mutual holding company that were not publicly traded.

The Company provides financial services through its offices in LaPorte and Porter counties of Indiana. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. There are no significant concentrations of loans to any one industry or customer. However, the customers’ ability to repay their loans is dependent on the real estate and general economic conditions in the area. The Company established LSB Inc., a wholly owned subsidiary of the Bank incorporated in Nevada to manage a portion of the Bank’s investment portfolio beginning October 1, 2011. On January 4, 2013, the Company established LSB Real Estate, Inc. (“LSB Real Estate”), a real estate investment trust, which is a wholly owned subsidiary of LSB Inc., and is incorporated in Maryland.

Use of Estimates

Use of Estimates: To prepare financial statements in conformity with United States generally accepted accounting principles management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan losses, mortgage servicing rights, consideration of other than temporary declines in fair values of securities, the fair values of securities and other financial instruments, consideration of impairment of goodwill and other intangible assets, and the need for a deferred tax asset valuation allowance are particularly subject to change.

Cash Flows

Cash Flows: Cash and cash equivalents includes cash, deposits with other financial institutions with original maturities under 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, federal funds purchased, Federal Home Loan Bank advances and Federal Reserve Bank discount window borrowings.

Interest-Earning Time Deposits in Other Financial Institutions

Interest-Earning Time Deposits in Other Financial Institutions: Interest-earning time deposits in other financial institutions mature between one and four years and are carried at cost.

Securities

Securities: Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax, as a separate component of shareholders’ equity. Trading securities are carried at fair value, with changes in unrealized holding gains and losses included in income.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities and collateralized mortgage obligations where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans Held for Sale

Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at fair value, as determined by outstanding commitments from investors. The fair value includes the servicing value of the loans.

Loans

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Interest income on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Consumer loans are typically charged off no later than 120 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. A loan is moved to non-accrual status in accordance with the Company’s policy, typically after 90 days of non-payment. The Company follows the same nonaccrual policy for troubled debt restructurings.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The recorded investment in loans is the loan balance plus unamortized net deferred loan costs less unamortized net deferred loan fees. The total amount of accrued interest on loans as of December 31, 2012 and 2011 was $677 and $654, respectively.

Concentration of Credit Risk

Concentration of Credit Risk: Most of the Company’s business activity is with customers located within La Porte County. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in the La Porte County area.

Mortgage Warehouse Loans

Mortgage Warehouse Loans: During the month of May 2009, a mortgage warehouse lending division was established at the Bank. This division has approved specific mortgage companies through which individual mortgage loans are originated by the mortgage company and funded by the Bank as a secured borrowing with the pledge of collateral under the Bank’s agreement with the mortgage company. The individual mortgage loans are held between the time of origination and subsequent repurchase by the mortgage company for sale of the loan into the secondary market. Each individual mortgage is assigned to the Bank until the loan is repurchased and sold to the secondary market by the mortgage company. Also, the Bank takes possession of each original note and forwards such note to the end investor once the mortgage company has sold the loan. The individual loans are typically sold by the mortgage company within 30 days of origination and are seldom held more than 90 days. Interest income is accrued by the Bank during this period and fee income for each loan sold is collected when the sale has been completed.

Purchased Loans

Purchased Loans: The Company purchased a group of loans through the acquisition of City Savings Financial Corporation on October 12, 2007. Purchased loans that showed evidence of credit deterioration since their origination are recorded at an allocated fair value, such that there is no carryover of the seller’s allowance for loan losses. After acquisition, incurred losses are recognized by an increase in the allowance for loan losses.

Purchased loans are accounted for individually or aggregated into pools of loans based on common risk characteristics (e.g., credit score, loan type, and date of origination). The Company estimates the amount and timing of expected cash flows for each purchased loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan’s or pool’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan or pool, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

Mortgage Servicing Rights

Mortgage Servicing Rights: When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in net gains on mortgage banking activities. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. The Company compares the valuation model inputs and results to published industry data in order to validate the model results and assumptions. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported with loan servicing fees, net on the consolidated statements of income. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.

Servicing fee income, which is reported on the consolidated statements of income as loan servicing fees, net, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal; or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income. Loan servicing fees, net totaled $(26) and $26 for the years ended December 2012 and 2011. Late fees and ancillary fees related to loan servicing are not material.

Transfers of Financial Assets

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Other Real Estate Owned

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value, less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Premises and Equipment

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight line method with useful lives ranging from 5 to 30 years. Furniture, fixtures and equipment are depreciated on an accelerated or straight line method with useful lives ranging from 3 to 10 years.

Federal Home Loan Bank (FHLB) Stock

Federal Home Loan Bank (FHLB) Stock: The Bank is a member of the FHLB system. Members are required to own a certain amount of FHLB stock based on the level of FHLB borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Bank Owned Life Insurance

Bank Owned Life Insurance: The Bank has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets: All goodwill on the Company’s balance sheet resulted from business combinations prior to January 1, 2009 and represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected October 31st as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance sheet.

Other intangible assets consist of core deposit intangible assets arising from a whole bank acquisition. They are initially measured at fair value and then are amortized on an accelerated method over their estimated useful lives, which range from 4 to 15 years.

Loan Commitments and Related Financial Instruments

Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Derivatives

Derivatives: At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or (3) an instrument with no hedging designation (“stand-alone derivative”). As of December 31, 2012, the Company had entered into four cash flow hedge transactions. As of December 31, 2011, the Company had also entered into a fair value hedge. For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For both types of hedges, changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as noninterest income.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as noninterest income. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income (loss) are amortized into earnings over the same periods which the hedged transactions will affect earnings.

Mortgage Banking Derivatives

Mortgage Banking Derivatives: Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest rate on the loan is locked. The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to hedge the change in interest rates resulting from its commitments to fund the loans. Changes in the fair values of these derivatives are included in net gains on mortgage banking activities on the consolidated statements of income.

Stock-Based Compensation

Stock-Based Compensation: Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards.

Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Income Taxes

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Retirement Plans

Retirement Plans: Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Split-dollar life insurance plan expense and supplemental retirement plan expense allocates the benefits over years of service.

Employee Stock Ownership Plan

Employee Stock Ownership Plan: The cost of shares issued to the ESOP, but not yet allocated to participants, is shown as a reduction of shareholders’ equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce debt and accrued interest.

Earnings Per Common Share

Earnings Per Common Share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. ESOP shares are considered outstanding for this calculation unless unearned. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options.

Surplus

Surplus: Surplus has been established in reference to Indiana State Banking Statute 28-6-1-28. This statute required State Savings Banks to reserve and set aside from the gross amount of gains and profits of the institution not less than one quarter of one percent (1/4%) per annum on the deposits, to be held and invested as a surplus fund to meet any contingency in its business, until the surplus fund shall equal up to ten percent (10%) upon the amount of deposits, however, a surplus fund up to twenty-five percent (25%) upon the amount of deposits was allowed. This statute has since been repealed, however, the fund will remain as a part of the Company’s total equity.

Comprehensive Income

Comprehensive Income: Comprehensive income, net of tax, consists of net income and other comprehensive income (loss), net of tax. Other comprehensive income (loss), net of tax, includes net changes in net unrealized gains and losses on securities available for sale, net of tax, reclassification adjustments and unrealized gains and losses on cash flow hedges, which are also recognized as a separate component of shareholders’ equity.

Loss Contingencies

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the consolidated financial statements.

Restrictions on Cash

Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank was required to meet regulatory reserve and clearing requirements.

Dividend Restriction

Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the Bancorp or by the Bancorp to shareholders.

Fair Value of Financial Instruments

Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Operating Segments

Operating Segments: While the chief decision-makers monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Reclassifications

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.

Adoption of New Accounting Standards

Adoption of New Accounting Standards:

In September 2011, the FASB amended existing guidance relating to goodwill impairment testing. The amendment permits an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing these events or circumstances, it is concluded that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The amendments in this guidance are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The effect of adopting this standard did not have a material effect on the Company’s operating results or financial condition.

In June 2011, the FASB amended existing guidance and eliminated the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. The amendment requires that comprehensive income be presented in either a single continuous statement or in two separate consecutive statements. The amendments in this guidance are effective as of the beginning of a fiscal reporting year, and interim periods within that year, that begins after December 15, 2011. Early adoption was permitted. The adoption of this amendment changed the presentation of the statement of comprehensive income for the Company to two consecutive statements instead of presented as part of the consolidated statement of shareholders’ equity.

In May 2011, the FASB issued an amendment to achieve common fair value measurement and disclosure requirements between U.S. and International accounting principles. Overall, the guidance is consistent with existing U.S. accounting principles; however, there are some amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this guidance are effective for interim and annual reporting periods beginning after December 15, 2011. The effect of adopting this standard did not have a material effect on the Company’s operating results or financial condition, but the additional disclosures are included in Note 4.

Commercial [Member]

Financing Receivable, Allowance for Credit Losses [Line Items]

Allowance for Loan Losses

Commercial – Subject to decreases in demand for certain products or services; increasing production costs; increases in interest rates on adjustable rate loans may impact borrowers’ ability to continue payments; adverse market conditions which may cause a decrease in the value of underlying collateral.

Mortgage [Member]

Financing Receivable, Allowance for Credit Losses [Line Items]

Allowance for Loan Losses

Mortgage – Subject to adverse market conditions which may cause a decrease in the value of underlying collateral; adverse employment conditions in the local economy which may lead to an increase in default rates; incremental rate increases on adjustable rate mortgages may impact borrowers’ ability to continue payments.

Mortgage Warehouse [Member]

Financing Receivable, Allowance for Credit Losses [Line Items]

Allowance for Loan Losses

Mortgage Warehouse – Subject to higher fraud risk than our other lending areas; decreased market values in real estate throughout the country.

Residential Construction [Member]

Financing Receivable, Allowance for Credit Losses [Line Items]

Allowance for Loan Losses

Residential Construction – Subject to adverse market conditions which may cause a decrease in the value of underlying collateral; adverse employment conditions in the local economy which may lead to an increase in default rates.

Indirect Auto [Member]

Financing Receivable, Allowance for Credit Losses [Line Items]

Allowance for Loan Losses

Indirect Auto – Subject to higher fraud risk than our other lending areas; adverse employment conditions in the local economy which may lead to an increase in default rates; decreased value of the underlying collateral.

Residential construction: Home Equity [Member]

Financing Receivable, Allowance for Credit Losses [Line Items]

Allowance for Loan Losses

Home Equity – Subject to adverse employment conditions in the local economy which may lead to an increase in default rates; decreased market values due to adverse real estate market conditions.

Consumer and Other [Member]

Financing Receivable, Allowance for Credit Losses [Line Items]

Allowance for Loan Losses

Consumer and Other – Subject to adverse employment conditions in the local economy which may lead to an increase in default rates; decreased value of the underlying collateral.

The Bank is subject to periodic examinations by its federal and state regulatory examiners, and may be required by such regulators to recognize additions to the allowance for loan losses based on their assessment of credit information available to them at the time of their examinations. The process of assessing the allowance for loan losses is necessarily subjective. Further, and particularly in times of economic downturns, it is reasonably possible that future credit losses may exceed historical loss levels and may also exceed management’s current estimates of incurred credit losses inherent within the loan portfolio. As such, there can be no assurance that future charge-offs will not exceed management’s current estimate of what constitutes a reasonable allowance for loan losses.

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Cash flows from operating activities
Net income	$ 4,285	$ 3,242
Adjustments to reconcile net income to net cash from operating activities:
Depreciation	577	646
Provision for loan losses	1,037	1,137
Net gains on securities	(378)	(627)
Net gains on sales of loans	(1,059)	(610)
Originations of loans held for sale	(46,963)	(37,311)
Proceeds from sales of loans held for sale	49,916	39,028
Recognition of mortgage servicing rights	(174)	(66)
Amortization of mortgage servicing rights	139	105
Net change in mortgage servicing rights valuation allowance	39	27
Loss on sales of other real estate owned	31	193
Write down of other real estate owned	280	185
Earnings on life insurance, net	(387)	(397)
Amortization of intangible assets	111	201
ESOP compensation expense	195	81
Stock award and option expense	243	71
Amortization of issuance costs of unsecured borrowing	19	65
Changes in assets and liabilities:
Accrued interest receivable and other assets	52	733
Accrued interest payable and other liabilities	118	(174)
Net cash from operating activities	8,081	6,529
Cash flows from investing activities
Net change in loans	(20,107)	(24,582)
Proceeds from sales of other real estate owned	536	1,315
Proceeds from maturities, calls and principal repayments of securities available for sale	20,326	19,236
Proceeds from sales of securities available for sale	28,059	39,873
Proceeds from redemption of FHLB stock		221
Net change in interest-bearing time deposits at other financial institutions	(7,141)
Purchases of securities available for sale	(41,425)	(66,408)
Premises and equipment expenditures, net	(312)	(154)
Net cash from investing activities	(20,064)	(30,499)
Cash flows from financing activities
Net change in deposits	15,410	16,222
Proceeds from FHLB long-term advances	32,500	27,500
Repayment of FHLB long-term advances	(51,524)	(12,297)
Net change in FHLB short-term advances	(3,988)	(4,857)
Repayment of FDIC guaranteed unsecured borrowing	(5,000)
Net proceeds from stock offering	26,344
Purchase of shares by ESOP pursuant to reorganization	(2,241)
Dividends paid on common stock	(807)	(186)
Purchase of treasury stock		(134)
Net cash from financing activities	10,694	26,248
Net change in cash and cash equivalents	(1,289)	2,278
Cash and cash equivalents at beginning of year	8,146	5,868
Cash and cash equivalents at end of year	6,857	8,146
Cash paid during the period for:
Interest paid	4,590	5,882
Income taxes paid	1,661	300
Supplemental noncash disclosures:
Transfers from loans receivable to other real estate owned	$ 737	$ 1,189

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Securities (Tables)

12 Months Ended

Dec. 31, 2012

Securities [Abstract]

Summarizes the amortized cost and fair value of the available-for-sale securities portfolio

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2012
U.S. federal agency	$	8,045	$	360	$	—		$	8,405
State and municipal		42,161		3,479		(26	)		45,614
Mortgage-backed securities – residential		11,819		572		(6	)		12,385
Government agency sponsored collateralized mortgage obligations		54,070		1,198		(112	)		55,156
Corporate debt securities		3,959		110		(9	)		4,060
Total	$	120,054	$	5,719	$	(153	)	$	125,620

	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2011
U.S. federal agency	$	12,187	$	414	$	—		$	12,601
State and municipal		40,012		3,094		—			43,106
Mortgage-backed securities – residential		30,946		872		(29	)		31,789
Government agency sponsored collateralized mortgage obligations		43,491		1,001		(14	)		44,478
Total	$	126,636	$	5,381	$	(43	)	$	131,974

Sales of securities available for sale

	2012			2011
Proceeds	$	28,059		$	39,873
Gross gains		526			687
Gross losses		(152	)		(60	)

Amortized cost and fair value of debt securities by contractual maturity

	December 31, 2012
	Amortized Cost		Fair Value
Due in one year or less	$	—	$	—
Due from one to five years		15,682		16,385
Due from five to ten years		16,683		17,853
Due after ten years		21,800		23,841
Subtotal		54,165		58,079
Mortgage-backed securities and CMOs		65,889		67,541
Total	$	120,054	$	125,620

Fair value of securities with unrealized losses, aggregated by investment category and length of time

December 31, 2012	Continuing Unrealized Loss For Less Than 12 Months					Continuing Unrealized Loss For 12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
State and municipal	$	1,611	$	(26	)	$	—	$	—	$	1,611	$	(26	)
Mortgage-backed securities – residential		1,012		(6	)		—		—		1,012		(6	)
Government agency sponsored collateralized mortgage obligations		12,392		(112	)						12,392		(112	)
Corporate debt securities		1,489		(9	)		—		—		1,489		(9	)
Total temporarily impaired	$	16,504	$	(153	)	$	—	$	—	$	16,504	$	(153	)

December 31, 2011	Continuing Unrealized Loss For Less Than 12 Months					Continuing Unrealized Loss For 12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Mortgage-backed securities – residential	$	5,646	$	(29	)	$	—	$	—	$	5,646	$	(29	)
Government agency sponsored collateralized mortgage obligations		2,147		(14	)		—		—		2,147		(14	)
Total temporarily impaired	$	7,793	$	(43	)	$	—	$	—	$	7,793	$	(43	)

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Goodwill and Intangible Assets (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Goodwill and Intangible Assets (Textual) [Abstract]
Impairment charges during period	$ 0	$ 0
Amortization of intangibles	$ 111	$ 201

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Parent Company Only Condensed Financial Information (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
ASSETS
Interest-earning time deposits in other financial institutions	$ 7,141
Securities available for sale	125,620	131,974
Accrued interest receivable and other assets	3,595	3,819
Total assets	492,755	477,145
LIABILITIES AND SHAREHOLDERS' EQUITY
Subordinated debentures	5,155	5,155
Accrued interest payable and other liabilities	5,566	5,725
Shareholders' equity	84,055	55,703	50,048
Total liabilities and shareholders' equity	492,755	477,145
Parent Company [Member]
ASSETS
Cash and cash equivalents	2,656	2,032
Interest-earning time deposits in other financial institutions	2,976
Securities available for sale	4,823
ESOP loan receivable	3,402	1,415
Investment in banking subsidiary	74,291	56,071
Investment in statutory trust	155	155
Accrued interest receivable and other assets	1,049	1,402
Total assets	89,352	61,075
LIABILITIES AND SHAREHOLDERS' EQUITY
Subordinated debentures	5,155	5,155
Accrued interest payable and other liabilities	142	217
Shareholders' equity	84,055	55,703
Total liabilities and shareholders' equity	$ 89,352	$ 61,075

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Employee Stock Ownership Plan (Tables)

12 Months Ended

Dec. 31, 2012

Employee Stock Ownership Plan/Stock-Based Compensation [Abstract]

Shares held by the ESOP at year-end

	2012		2011
Allocated to participants		82,136		59,650
Unearned		427,231		178,949
Total ESOP shares		509,367		238,599
Fair value of unearned shares	$	3,751	$	1,085

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Securities (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Amortized cost and fair value of debt securities by contractual maturity
Due in one year or less, Amortized Cost
Due from more than one to five years, Amortized Cost	15,682
Due from more than five to ten years, Amortized Cost	16,683
Due after ten years, Amortized Cost	21,800
Subtotal, Amortized Cost	54,165
Mortgage-backed securities and CMOs, Amortized Cost	65,889
Total, Amortized Cost Basis	120,054
Due in one year or less, Fair Value
Due from more than one to five years, Fair Value	16,385
Due from more than five to ten years, Fair Value	17,853
Due after ten years, Fair Value	23,841
Subtotal, Fair Value	58,079
Mortgage-backed securities and CMOs, Fair Value	67,541
Total, Fair Value	$ 125,620

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Fair Value (Details 4) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Amount of gains and losses from fair value changes
Interest Expense Earnings	$ 4,392	$ 5,871
Loans held for sale [Member]
Amount of gains and losses from fair value changes
Other Gains and Losses	(9)	(3)
Interest Income	31	29
Interest Expense Earnings
Total Changes in Fair Values Included in Current Period Earnings	$ 20	$ 26

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
ASSETS
Cash and due from financial institutions	$ 6,857	$ 8,146
Interest-earning time deposits in other financial institutions	7,141
Securities available for sale	125,620	131,974
Federal Home Loan Bank (FHLB) stock, at cost (restricted)	3,817	3,817
Loans held for sale, at fair value	1,155	3,049
Loans, net of allowance for loan losses of $4,308 at December 31, 2012 and $3,772 at December 31, 2011	313,692	295,359
Mortgage servicing rights	344	348
Other real estate owned	902	1,012
Premises and equipment, net	9,575	9,840
Goodwill	8,431	8,431
Other intangible assets	363	474
Bank owned life insurance	11,263	10,876
Accrued interest receivable and other assets	3,595	3,819
Total assets	492,755	477,145
Deposits
Non-interest bearing	50,892	38,977
Interest bearing	298,078	294,583
Total deposits	348,970	333,560
Federal Home Loan Bank advances	49,009	72,021
Subordinated debentures	5,155	5,155
Federal Deposit Insurance Corporation guaranteed unsecured borrowings		4,981
Accrued interest payable and other liabilities	5,566	5,725
Total liabilities	408,700	421,442
Loan commitments and other related activities (Note 19)
Shareholders' equity
Preferred stock, no par value; 1,000,000 shares authorized; none issued
Common stock, $0.01 par value; 100,000,000 and 25,061,000 shares authorized at December 31, 2012 and 2011; 6,205,250 and 6,425,905 shares issued at December 31, 2012 and 2011; and 6,205,250 and 6,147,689 shares outstanding at December 31, 2012 and 2011	62	49
Additional paid-in capital	46,532	21,221
Surplus	770	770
Retained earnings	37,745	34,267
Accumulated other comprehensive income, net of tax of $1,218 and $1,046 at December 31, 2012 and 2011	2,364	2,031
Treasury stock, at cost (2012-0 shares, 2011-278,216 shares)		(1,278)
Unearned Employee Stock Ownership Plan (ESOP) shares	(3,418)	(1,357)
Total shareholders' equity	84,055	55,703
Total liabilities and shareholders' equity	$ 492,755	$ 477,145

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Derivatives (Tables)

12 Months Ended

Dec. 31, 2012

Derivatives [Abstract]

Interest-rate swaps designated as cash flow hedges

	2012			2011
Subordinated debentures
Notional amount	$	5,000		$	5,000
Fixed interest rate payable		5.54	%		5.54	%
Variable interest rate receivable (Three month LIBOR plus 3.10%)		3.41	%		3.67	%
Unrealized gains (losses)		(131	)		(192	)
Maturity date		March 26, 2014
CDARS deposits
Notional amount	$	10,250		$	10,250
Fixed interest rate payable		3.19	%		3.19	%
Variable interest rate receivable (One month LIBOR plus 0.55%)		0.76	%		0.84	%
Unrealized gains (losses)		(428	)		(569	)
Maturity date		October 9, 2014

	2012			2011
FHLB Advance
Notional amount	$	5,000		$	5,000
Fixed interest rate payable		3.54	%		3.54	%
Variable interest rate receivable (Three month LIBOR plus 0.22%)		0.53	%		0.78	%
Unrealized gains (losses)		(395	)		(443	)
Maturity date		September 20, 2015
FHLB Advance
Notional amount	$	10,000		$	10,000
Fixed interest rate payable		3.69	%		3.69	%
Variable interest rate receivable (Three month LIBOR plus 0.25%)		0.57	%		0.66	%
Unrealized gains (losses)		(1,030	)		(1,057	)
Maturity date		July 19, 2016

Net gains (losses) recorded in accumulated other comprehensive income (loss) and Income relating to the cash flow derivative

	Net amount of gain (loss) recognized in OCI (Effective Portion) 2012		Net amount of gain  (loss) reclassified from OCI to interest income 2012		Net amount of gain (loss) recognized in other non interest  income (Ineffective Portion) 2012
Interest rate contracts	$	182	$	—	$	—

	Net amount of gain (loss) recognized in OCI (Effective Portion) 2011			Net amount of gain (loss) reclassified from OCI to interest income 2011		Net amount of gain (loss) recognized in other non interest  income (Ineffective Portion) 2011
Interest rate contracts	$	(502	)	$	—	$	—

Cash flow hedges included in Consolidated Balance Sheets

	2012
	Notional Amount			Fair Value
Included in other liabilities:
Interest rate swaps related to	$	(5,000	)	$	(131	)
Subordinated debentures
CDARS deposits		(10,250	)		(428	)
FHLB advances		(15,000	)		(1,425	)
Total included in other liabilities				$	(1,984	)

	2011
	Notional Amount			Fair Value
Included in other liabilities:
Interest rate swaps related to	$	(5,000	)	$	(192	)
Subordinated debentures
CDARS deposits		(10,250	)		(569	)
FHLB advances		(15,000	)		(1,500	)
Total included in other liabilities				$	(2,261	)

Interest Rate Swaps Designated as Fair Value Hedges

	2011
Brokered deposits
Notional amount	$	5,000
Variable interest rate payable (One month LIBOR less 0.25%)		0.03	%
Fixed interest rate receivable		1.25	%
Maturity date		September 15, 2020

Fair value hedge included in the Consolidated Balance Sheets

	2011
	Notional Amount			Fair Value
Included in other liabilities:
Interest rate swaps related to brokered deposits	$	(5,000	)	$	(22	)
Total included in other liabilities				$	(22	)

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Income Taxes (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate
Expected income tax expense at Federal tax rate	$ 1,966	$ 1,353
State tax expense, net of federal benefit	114
Increase (decrease) resulting from:
Effect of tax exempt income (net)	(626)	(617)
Other, net	42
Total	$ 1,496	$ 736
Effective tax rate	25.87%	18.50%

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Loan Commitments and Other Related Activities (Details Textual)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Loan Commitments and Other Related Activities (Textual) [Abstract]
Commitments to make loans	60 days or less
Fixed rate loan commitment interest rate		6.25%
Fixed rate loan commitment interest rate maximum	5.95%
Fixed rate loan commitment interest rate minimum	5.30%
Commitments maturity	60 months	60 months

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Consolidated Statements of Changes in Shareholders' Equity (USD $) In Thousands, unless otherwise specified	Total	Unearned ESOP Shares	Common Stock	Additional Paid-In Capital	Surplus	Retained Earnings	Accumulated Other Comprehensive Income (Loss), Net of Tax	Treasury Stock
Beginning Balance at Dec. 31, 2010	$ 50,048	$ (1,447)	$ 48	$ 21,160	$ 770	$ 31,211	$ (550)	$ (1,144)
Net income	3,242					3,242
Other comprehensive income	2,581						2,581
Cash dividends on common stock ($0.13 and $0.03 per share for December 31, 2012 and 2011 respectively)	(186)					(186)
Treasury shares purchased, 18,637 shares	(134)							(134)
Items related to Conversion and stock offering:
ESOP shares earned, 22,486 and 11,930 shares for December 31, 2012 and 2011 respectively	81	90		(9)
Issuance of restricted stock awards			1	(1)
Stock awards and option expense	71			71
Ending Balance at Dec. 31, 2011	55,703	(1,357)	49	21,221	770	34,267	2,031	(1,278)
Net income	4,285					4,285
Other comprehensive income	333						333
Cash dividends on common stock ($0.13 and $0.03 per share for December 31, 2012 and 2011 respectively)	(807)					(807)
Items related to Conversion and stock offering:
Treasury stock retired pursuant to reorganization			(2)	(1,276)				1,278
Cancellation of LaPorte Savings Bank, Mutual Holding Company shares and fractional shares			(47)	47
Proceeds from stock offering 3,384,611 shares, net of expense of $1,267	26,344		62	26,282
Purchase of 270,768 shares by ESOP pursuant to reorganization	(2,241)	(2,241)
ESOP shares earned, 22,486 and 11,930 shares for December 31, 2012 and 2011 respectively	195	180		15
Stock awards and option expense	243			243
Ending Balance at Dec. 31, 2012	$ 84,055	$ (3,418)	$ 62	$ 46,532	$ 770	$ 37,745	$ 2,364

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Current expense (benefit)
Federal	$ 1,355	$ 734
State	172
Current expense Total	1,527	734
Deferred expense
Federal	(31)	1
State	63	136
Deferred expense Total	32	137
Change in valuation allowance related to realization of net state deferred tax asset	(63)	(135)
Total	$ 1,496	$ 736

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Loans (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Information Related to Impaired Loans by Class of Loans
With no related allowance recorded, Unpaid Principal Balance	$ 3,691	$ 4,492
With an allowance recorded, Unpaid Principal Balance	5,084	1,781
Subtotal	8,775	6,273
With no related allowance recorded, Recorded Investment	3,693	4,491
With an allowance recorded, Recorded Investment	4,822	1,783
Subtotal	8,515	6,274
With no related allowance recorded, allowance For Loan Losses Allocated
With an allowance recorded, allowance For Loan Losses Allocated	1,291	251
Subtotal	1,291	251
With no related allowance recorded, Average Recorded Investment	3,753	4,299
With an allowance recorded, Average Recorded Investment	4,162	2,610
Subtotal	7,915	6,909
With no related allowance recorded, Interest Income Recognized	29	42
With an allowance recorded, Interest Income Recognized		6
Subtotal		48
With no related allowance recorded, Cash Basis Interest Recognized
With an allowance recorded, Cash Basis Interest Recognized
Subtotal
Commercial and other [Member]
Information Related to Impaired Loans by Class of Loans
With no related allowance recorded, Unpaid Principal Balance
With an allowance recorded, Unpaid Principal Balance		28
With no related allowance recorded, Recorded Investment
With an allowance recorded, Recorded Investment		29
With no related allowance recorded, allowance For Loan Losses Allocated
With an allowance recorded, allowance For Loan Losses Allocated		6
With no related allowance recorded, Average Recorded Investment	6
With an allowance recorded, Average Recorded Investment		40
With no related allowance recorded, Interest Income Recognized
With no related allowance recorded, Cash Basis Interest Recognized
With an allowance recorded, Cash Basis Interest Recognized
Commercial: Real Estate [Member]
Information Related to Impaired Loans by Class of Loans
With no related allowance recorded, Unpaid Principal Balance	2,150	1,299
With an allowance recorded, Unpaid Principal Balance	1,461	502
With no related allowance recorded, Recorded Investment	2,152	1,298
With an allowance recorded, Recorded Investment	1,199	503
With no related allowance recorded, allowance For Loan Losses Allocated
With an allowance recorded, allowance For Loan Losses Allocated	365	29
With no related allowance recorded, Average Recorded Investment	1,348	1,246
With an allowance recorded, Average Recorded Investment	1,681	1,061
With no related allowance recorded, Interest Income Recognized	10	4
With an allowance recorded, Interest Income Recognized		6
With no related allowance recorded, Cash Basis Interest Recognized
With an allowance recorded, Cash Basis Interest Recognized
Commercial: Land [Member]
Information Related to Impaired Loans by Class of Loans
With no related allowance recorded, Unpaid Principal Balance	214	2,248
With an allowance recorded, Unpaid Principal Balance	2,772	552
With no related allowance recorded, Recorded Investment	214	2,248
With an allowance recorded, Recorded Investment	2,772	552
With no related allowance recorded, allowance For Loan Losses Allocated
With an allowance recorded, allowance For Loan Losses Allocated	772	77
With no related allowance recorded, Average Recorded Investment	1,411	2,248
With an allowance recorded, Average Recorded Investment	1,640	683
With no related allowance recorded, Interest Income Recognized	3	12
With an allowance recorded, Interest Income Recognized
With no related allowance recorded, Cash Basis Interest Recognized
With an allowance recorded, Cash Basis Interest Recognized
Commercial Mortgage [Member]
Information Related to Impaired Loans by Class of Loans
With no related allowance recorded, Unpaid Principal Balance	1,296	945
With an allowance recorded, Unpaid Principal Balance	829	685
With no related allowance recorded, Recorded Investment	1,296	945
With an allowance recorded, Recorded Investment	829	685
With no related allowance recorded, allowance For Loan Losses Allocated
With an allowance recorded, allowance For Loan Losses Allocated	132	128
With no related allowance recorded, Average Recorded Investment	967	762
With an allowance recorded, Average Recorded Investment	826	617
With no related allowance recorded, Interest Income Recognized	16	26
With an allowance recorded, Interest Income Recognized
With no related allowance recorded, Cash Basis Interest Recognized
With an allowance recorded, Cash Basis Interest Recognized
Commercial: Home Equity [Member]
Information Related to Impaired Loans by Class of Loans
With no related allowance recorded, Unpaid Principal Balance	31
With an allowance recorded, Unpaid Principal Balance	22	14
With no related allowance recorded, Recorded Investment	31
With an allowance recorded, Recorded Investment	22	14
With no related allowance recorded, allowance For Loan Losses Allocated
With an allowance recorded, allowance For Loan Losses Allocated	22	11
With no related allowance recorded, Average Recorded Investment	21
With an allowance recorded, Average Recorded Investment	15	209
With no related allowance recorded, Interest Income Recognized
With an allowance recorded, Interest Income Recognized
With no related allowance recorded, Cash Basis Interest Recognized
With an allowance recorded, Cash Basis Interest Recognized
Residential construction: Land [Member]
Information Related to Impaired Loans by Class of Loans
With no related allowance recorded, allowance For Loan Losses Allocated
With no related allowance recorded, Average Recorded Investment		43
With no related allowance recorded, Cash Basis Interest Recognized

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Related Party Transactions (Details Textual) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Related Party Transactions (Textual) [Abstract]
Deposits from principal officers, directors, and their affiliates	$ 1,769	$ 2,559

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Loan Servicing (Tables)

12 Months Ended

Dec. 31, 2012

Loan Servicing [Abstract]

Principal balances of mortgage loans

	2012		2011
Mortgage loan portfolios serviced for:
FHLMC	$	67,429	$	60,733
FHLB		1,058		173
Total	$	68,487	$	60,906

Activity in capitalized mortgage servicing rights

	2012			2011
Servicing rights:
Beginning of year	$	348		$	414
Additions		174			66
Amortized to expense		(139	)		(105	)
Change in valuation allowance		(39	)		(27	)
End of year	$	344		$	348

	2012			2011
Valuation allowance:
Beginning of year	$	119		$	92
Additions expensed		44			48
Reductions credited to expense		(5	)		(21	)
Direct write-downs		—			—
End of year	$	158		$	119

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Loans (Details 9) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Outstanding balance and carrying amount of purchased loans
Outstanding balance	$ 882	$ 1,113
Carrying amount, net of allowance of $0	851	977
Commercial and other [Member]
Outstanding balance and carrying amount of purchased loans
Outstanding balance	29	36
Commercial: Real Estate [Member]
Outstanding balance and carrying amount of purchased loans
Outstanding balance	714	923
Commercial Mortgage [Member]
Outstanding balance and carrying amount of purchased loans
Outstanding balance	$ 139	$ 154

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Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

INCOME TAXES

NOTE 14 – INCOME TAXES

Income tax expense (benefit) was as follows:

	2012			2011
Current expense (benefit)
Federal	$	1,355		$	734
State		172			—
		1,527			734
Deferred expense
Federal		(31	)		1
State		63			136
		32			137
Change in valuation allowance related to realization of net state deferred tax asset		(63	)		(135	)
Total	$	1,496		$	736

The net deferred tax assets at December 31, 2012 and 2011 are as follows:

	2012			2011
Deferred tax assets
Deferred officer compensation	$	834		$	758
Bad debt expense		1,662			1,461
Indiana net operating loss carryforwards		—			38
Tax credit carryforwards		—			509
Write downs of other real estate owned		144			57
Capital loss carryforwards		90			102
Nonaccrual loan interest		345			176
Market value adjustment on acquired assets and liabilities		54			87
Net unrealized losses on interest rate swaps		674			769
Other		100			106
		3,903			4,063
Deferred tax liabilities
Mortgage servicing rights		(133	)		(135	)
Accretion		(4	)		(3	)
FHLB stock dividends		(137	)		(137	)
Deferred loan fees		(83	)		(69	)
Prepaid expenses		(116	)		(111	)
Depreciation		(348	)		(355	)
Net unrealized gains on securities available for sale		(1,892	)		(1,815	)
Amortization of other intangible assets		(140	)		(184	)
		(2,853	)		(2,809	)
Valuation allowance		(356	)		(419	)
	$	694		$	835

The valuation allowance has been established against the portion of the Company’s net state tax deferred tax asset that management feels is not realizable as of December 31, 2012 and 2011. The Company has an Indiana net operating loss carryforward of approximately $0 and $682 at December 31, 2012 and 2011 which will expire in 2022, if not used. The Company also has Indiana enterprise zone credit carryforwards of approximately $0 and $118 at December 31, 2012 and 2011 which will expire in 2013 through 2017, if not used. The Company has a federal capital loss carryforward of $0 and $24 at December 31, 2012 and 2011, which will expire in 2012. The Company also has a state capital loss carryforward of $1,964 and $1,988 at December 31, 2012 and 2011 which will expire in 2014. Additionally, the Bank also has federal AMT credit carryforwards of approximately $0 and $431 at December 31, 2012 and 2011 which has no expiration date.

Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 34% to income (loss) before income taxes as a result of the following:

	2012			2011
Expected income tax expense at
Federal tax rate	$	1,966		$	1,353
State tax expense, net of federal benefit		114
Increase (decrease) resulting from:
Effect of tax exempt income (net)		(626	)		(617	)
Other, net		42			—
Total income tax expense	$	1,496		$	736
Effective tax rate		25.87	%		18.50	%

Unrecognized Tax Benefits

The Company has no unrecognized tax positions at December 31, 2012 or 2011 not already addressed by the deferred tax asset valuation allowance.

Federal income tax laws provided savings banks with additional bad debt deductions through 1995, totaling $2,659 for the Company. Accounting standards do not require a deferred tax liability to be recorded on this amount, which liability would otherwise total $904 at December 31, 2012 and 2011. If the Company were liquidated or otherwise ceases to be a bank or if tax laws change, the $904 would be recorded as expense.

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2012

Premises and Equipment [Abstract]

Premises and equipment

	2012			2011
Land	$	2,772		$	2,772
Buildings		9,929			9,902
Furniture, fixtures and equipment		5,249			5,365
Construction in progress		66			3
		18,016			18,042
Less: Accumulated depreciation		(8,441	)		(8,202	)
	$	9,575		$	9,840

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Related Party Transactions (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Loans to principal officers, directors, and their affiliates
Beginning Balance	$ 1,081	$ 1,468
New loans	115	196
Effect of changes in composition of related parties	(73)	(62)
Repayments	(294)	(521)
Ending Balance	$ 829	$ 1,081

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2012

Employee Stock Ownership Plan/Stock-Based Compensation [Abstract]

STOCK-BASED COMPENSATION

NOTE 16 – STOCK-BASED COMPENSATION

During the month of September 2011, the Company implemented the 2011 Equity Incentive Plan (the “Plan”) which was approved by shareholders on May 10, 2011. The Plan provides for issuance of stock options or restricted share awards to employees and directors. Total shares authorized for issuance under the Plan is 417,543 which is further discussed below. Total compensation cost that has been charged against income for those plans totaled $243 and $71 for the years ended December 31, 2012 and December 31, 2011.

Stock-Based Compensation

Compensation cost is recognized for stock options and restricted stock awards issued to employees or directors, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards.

Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Stock Options

The Plan permits the grant of stock options to its employees or directors for up to 298,246 shares of common stock. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant; those option awards have vesting periods of 5 years and have 10-year contractual terms. Options granted generally vest 20% annually.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of companies within La Porte Bancorp, Inc.’s peer group. The expected term of options granted represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The fair value of options granted was determined using the following weighted-average assumptions as of the grant date.

	2011
Risk-free interest rate		1.42	%
Expected term		7 1/ 2 Years
Expected stock price volatility		27.34	%
Dividend yield		1.60	%

A summary of the activity in the stock option plan for 2012 follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at beginning of year		281,829	$	6.44		9.7 years		—
Granted		—		—
Exercised		—		—
Forfeited or expired		—		—
Outstanding at December 31, 2012		281,829	$	6.44		8.7 years	$	2,474
Fully vested and expected to vest		281,829	$	6.44		8.7 years	$	2,474
Exercisable at end of year		56,366	$	6.44		8.7 years	$	132

Information related to the stock option plan for 2011 follows:

	2011
Weighted average fair value of options granted	$2.16

There were no options exercised during the year ended December 31, 2012. As of December 31, 2012, there was $343 of total unrecognized compensation cost related to nonvested stock options granted under the Plan. The cost is expected to be recognized over a weighted-average period of 3.7 years.

Restricted Share Awards

The Plan provides for the issuance of up to 119,298 of restricted shares to directors and employees. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. The fair value of the stock was determined by obtaining the listed price of the Company’s stock on the grant date. Shares vest 20% annually over five years. 2,388 shares are available for future grants at December 31, 2012.

A summary of changes in the Company’s nonvested shares for the year follows:

Nonvested Shares	Shares			Weighted-Average Grant-Date Fair  Value
Nonvested at January 1, 2012		116,910		$	6.44
Granted		—			—
Vested		(23,382	)		6.44
Forfeited		—			—
Nonvested at December 31, 2012		93,528		$	6.44

As of December 31, 2012, there was $559 of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 5 years. There were 23,382 shares vested during the year ended December 31, 2012. The total fair value of shares vested during the year ended December 31, 2012 was $205. There were no shares vested during the year ended December 31, 2011.

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Fair Value (Details)	12 Months Ended
	Dec. 31, 2012
Impaired loans [Member] | Commercial: Real Estate [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Average of Inputs	20.00%
Impaired loans [Member] | Commercial: Real Estate [Member] | Maximum [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Range of Inputs	30.00%
Impaired loans [Member] | Commercial: Real Estate [Member] | Minimum [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Range of Inputs	10.00%
Impaired loans [Member] | Commercial: Land [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Average of Inputs	17.00%
Impaired loans [Member] | Commercial: Land [Member] | Maximum [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Range of Inputs	40.00%
Impaired loans [Member] | Commercial: Land [Member] | Minimum [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Range of Inputs	0.00%
Impaired loans [Member] | Commercial Mortgage [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Average of Inputs	11.00%
Impaired loans [Member] | Commercial Mortgage [Member] | Maximum [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Range of Inputs	20.00%
Impaired loans [Member] | Commercial Mortgage [Member] | Minimum [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Range of Inputs	0.00%
Other real estate owned, net [Member] | Commercial: Real Estate [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Range of Inputs	40.00%
Fair Value, Average of Inputs	40.00%
Other real estate owned, net [Member] | Commercial: Land [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Average of Inputs	11.00%
Other real estate owned, net [Member] | Commercial: Land [Member] | Maximum [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Range of Inputs	17.00%
Other real estate owned, net [Member] | Commercial: Land [Member] | Minimum [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Range of Inputs	6.00%
Other real estate owned, net [Member] | Commercial Mortgage [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Average of Inputs	18.00%
Other real estate owned, net [Member] | Commercial Mortgage [Member] | Maximum [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Range of Inputs	29.00%
Other real estate owned, net [Member] | Commercial Mortgage [Member] | Minimum [Member]
Valuation methodology and unobservable inputs for impaired loans and other real estate owned
Fair Value, Range of Inputs	7.00%

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Derivatives (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Cash flow hedges [Member]
Included in other liabilities:
Notional Amount	$ (30,250)	$ (30,250)
Fair Value	(1,984)	(2,261)
Subordinated debentures [Member]
Included in other liabilities:
Notional Amount	(5,000)	(5,000)
Subordinated debentures [Member] | Cash flow hedges [Member]
Included in other liabilities:
Notional Amount	(5,000)	(5,000)
Fair Value	(131)	(192)
CDARS deposits [Member]
Included in other liabilities:
Notional Amount	(10,250)	(10,250)
CDARS deposits [Member] | Cash flow hedges [Member]
Included in other liabilities:
Notional Amount	(10,250)	(10,250)
Fair Value	(428)	(569)
FHLB advances [Member] | Cash flow hedges [Member]
Included in other liabilities:
Notional Amount	(15,000)	(15,000)
Fair Value	$ (1,425)	$ (1,500)

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Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Cash dividends, per share	$ 0.13	$ 0.03
Treasury shares purchased		18,637
ESOP shares	22,486	11,930
Stock offering expense	$ 1,267
Stock offering, shares	3,384,611
Purchase of ESOP shares	270,768
Unearned ESOP Shares
ESOP shares	22,486	11,930
Purchase of ESOP shares	270,768
Common Stock
Stock offering expense	1,267
Stock offering, shares	3,384,611
Additional Paid-In Capital
ESOP shares	22,486	11,930
Stock offering expense	$ 1,267
Stock offering, shares	3,384,611
Retained Earnings
Cash dividends, per share	$ 0.13	$ 0.03
Treasury Stock
Treasury shares purchased		18,637

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Allowance for loan losses	$ 4,308	$ 3,772
Preferred stock, par value
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	25,061,000
Common stock, shares issued	6,205,250	6,425,905
Common stock, shares outstanding	6,205,250	6,147,689
Accumulated other comprehensive income, net of tax	$ 1,218	$ 1,046
Treasury stock, shares	0	278,216

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Federal Home Loan Bank Advances

12 Months Ended

Dec. 31, 2012

Deposits/Federal Home Loan Bank Advances/Regulatory Capital Matters [Abstract]

FEDERAL HOME LOAN BANK ADVANCES

NOTE 9 – FEDERAL HOME LOAN BANK ADVANCES

The advance type, balances and interest rate ranges at December 31, 2012 and 2011 are as follows:

December 31, 2012
Advance Type	Balance			Interest Rate Range	Weighted Average Rate			Maturity Date Range
Fixed Rate Bullet	$	20,000		0.61% to 3.22%		1.43	%	October 2014 through August 2017
Putable		5,000		2.95%		2.95	%	January 2013
Mortgage		23		3.00%		3.00	%	July 2013
Variable Rate		8,988		0.50%		0.50	%	January 2013
LIBOR Adjustable		15,000		0.53% to 0.57%		0.56	%	September 2015 through July 2016
Total advances		49,011
Yield adjustment on acquired FHLB advances		(2	)
Total	$	49,009

December 31, 2011
Advance Type	Balance			Interest Rate Range	Weighted Average Rate			Maturity Date Range
Fixed Rate Bullet	$	39,000		0.28% to 4.90%		1.39	%	February 2012 through January 2015
Putable		5,000		2.95%		2.95	%	January 2013
Mortgage		52		3.00%		3.00	%	July 2013
Variable Rate		12,975		0.40%		0.40	%	January 2012 through June 2012
LIBOR Adjustable		15,000		0.66% to 0.78%		0.70	%	September 2015 through July 2016
Total advances		72,027
Yield adjustment on acquired FHLB advances		(6	)
Total	$	72,021

The Bank was authorized to borrow up to $75,829 from the Federal Home Loan Bank (FHLB) at December 31, 2012 and up to $74,864 at December 31, 2011. At December 31, 2012 and 2011 the Bank had indebtedness to the FHLB totaling $49,011 and $72,027. The FHLB advances held by the Bank consisted of five different types as of December 31, 2012 and 2011. Fixed Rate Bullet Advances carry a fixed interest rate throughout the life of the advance and may not be prepaid prior to maturity without a fee being assessed by the FHLB. Putable Advances have stated interest adjustment dates on which the FHLB will have the option to adjust the interest rate and will continue to have this option quarterly thereafter. These advances may not be prepaid by the Bank prior to the FHLB exercising its option to adjust the interest rate. Mortgage Advances carry a fixed interest rate and require annual payments of the remaining principal balance. These advances may not be prepaid by the Bank prior to maturity without a fee being assessed by the FHLB. Variable Rate Advances carry a variable rate throughout the life of the advance. All of the Variable Rate Advances held by the Bank as of December 31, 2012 were short-term advances and may be prepaid at any time. LIBOR Adjustable Advances carry an adjustable interest rate which reset quarterly based on the 3 Month LIBOR rate at the reset date, plus a spread. These advances may be called by the FHLB on a quarterly basis.

The required payments over the next five years are as follows:

2013	$	14,011
2014		5,000
2015		15,000
2016		10,000
2017		5,000

At December 31, 2012, in addition to FHLB stock, the Bank pledged mortgage, home equity and commercial real estate loans totaling approximately $86,882 to the FHLB to secure advances outstanding. At December 31, 2011, the Bank pledged mortgage, home equity and commercial real estate loans totaling approximately $99,771 to the FHLB to secure advances outstanding. At December 31, 2012 and 2011, the Bank also pledged U.S. government sponsored agency securities totaling $31,036 and $18,601 to the FHLB to secure advances outstanding.

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Stock-Based Compensation (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Sep. 30, 2011
Stock-Based Compensation (Textual) [Abstract]
Options exercised during period
Shares vested during the period	23,382
Total fair value of shares vested during the year	$ 205
Equity Incentive Plan [Member]
Stock-Based Compensation (Textual) [Abstract]
Issuance of shares to employees and directors			417,543
Total compensation cost charged against income	243	71
Equity Incentive Plan [Member] | Stock Options [Member]
Stock-Based Compensation (Textual) [Abstract]
Issuance of shares to employees and directors	298,246
Option awards, vesting periods	5 years
Option awards, contractual terms	10 years
Option awards, annual percentage, vesting	20.00%
Options exercised during period	0
Unrecognized compensation cost related to nonvested stock options granted under the Plan	343
Cost recognized over a weighted-average period, expected	3 years 8 months 12 days
Equity Incentive Plan [Member] | Restricted Stock [Member]
Stock-Based Compensation (Textual) [Abstract]
Issuance of shares to employees and directors	119,298
Option awards, vesting periods	5 years
Option awards, annual percentage, vesting	20.00%
Unrecognized compensation cost related to nonvested stock options granted under the Plan	$ 559
Cost recognized over a weighted-average period, expected	5 years
Available shares for future grants	2,388
Shares vested during the period	23,382	0

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Employee Stock Ownership Plan (Details Textual) (USD $) Share data in Thousands, unless otherwise specified	1 Months Ended	12 Months Ended
	Oct. 04, 2012	Dec. 31, 2012	Dec. 31, 2011
Employee Stock Ownership Plan (Textual) [Abstract]
Contributions to the ESOP		$ 201,000	$ 114,000
ESOP related expenses totaled		195,000	81,000
Total of ESOP	509,367	509,367	238,599
Borrowed amount for ESOP purchase		$ 3,600,000
Allocated converted shares from ESOP	59,650	82,136	59,650
Unallocated converted shares from ESOP	178,949
Allocation of eligible common stock under the ESOP	449,717	427,231	178,949
Common stock shares issued	270,768	22,486	11,930
Period for allocated stock under ESOP		20 years

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Employee Benefit Plans (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 Age	Dec. 31, 2011	Feb. 01, 2010
Defined Benefit Plan Disclosure [Line Items]
Expense attributable to plan	$ 6,642	$ 6,103
Employee Benefit Plans (Textual) [Abstract]
Age to participate in the plan	21
Minimum requirement to enter the Plan	1 year		0 years
Employer basic and matching contributions	5 years
Vested Employee contributions	100.00%
Obligation under the plans	2,162	1,958
Bank's supplemental employee retirement plan	11,263	10,876
Employer basic and matching contributions totaled	52	52
Supplemental Employee Retirement Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Expense attributable to plan	$ 288	$ 292
Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Basic contributions rate	25.00%
Maximum [Member] | Basic Contributions [Member]
Defined Benefit Plan Disclosure [Line Items]
Basic contributions rate	6.00%
Maximum [Member] | Voluntary Contributions [Member]
Defined Benefit Plan Disclosure [Line Items]
Basic contributions rate	75.00%
Minimum [Member]
Defined Benefit Plan Disclosure [Line Items]
Basic contributions rate	6.00%
Minimum [Member] | Basic Contributions [Member]
Defined Benefit Plan Disclosure [Line Items]
Basic contributions rate	1.00%
Minimum [Member] | Voluntary Contributions [Member]
Defined Benefit Plan Disclosure [Line Items]
Basic contributions rate	1.00%

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2012	Mar. 25, 2013	Jun. 30, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	LaPorte Bancorp, Inc.
Entity Central Index Key	0001549276
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	FY
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 43,587,108
Entity Common Stock, Shares Outstanding		6,205,250

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Other Borrowings

12 Months Ended

Dec. 31, 2012

Other Borrowings/Subordinated Debentures [Abstract]

OTHER BORROWINGS

NOTE 10 – OTHER BORROWINGS

On February 11, 2009, the Bank issued a $5,000 note due on February 15, 2012 under the FDIC Temporary Debt Guarantee Program. The note bears an interest rate of 2.74% in addition to the 100 basis point FDIC guarantee fee paid by the Bank. Interest payments are required to be made semiannually in arrears on February 15 and August 15 in each year commencing on August 15, 2009 through the maturity date. All legal and placement fees associated with this transaction were capitalized as debt issuance costs and will be amortized to interest expense over the repayment period on a straight-line basis. This note matured on February 15, 2012 and was paid in full by the Bank.

During 2012 and 2011, the Company was extended an accommodation from First Tennessee Bank National Association to borrow federal funds up to the amount of $15,000 and $20,000. This federal funds accommodation is not and shall not be a confirmed line or loan, and First Tennessee Bank National Association may cancel such accommodation at any time, in whole or in part, without cause or notice, in its sole discretion. The outstanding balance on this accommodation was $0 as of December 31, 2012 and 2011.

During 2012, the Company entered into an agreement with Zions First National Bank to borrow federal funds up to the amount of $9,000. This federal funds line amount was established at the discretion of Zions First National Bank and may be terminated at any time in its sole discretion. The outstanding balance on this federal funds line was $0 at December 31, 2012.

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Goodwill and Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Goodwill
Beginning of Year	$ 8,431	$ 8,431
Acquired goodwill
Impairment
Ending of Year	$ 8,431	$ 8,431

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Subordinated Debentures (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items]
Preferred securities
Subordinated Debentures (Textual) [Abstract]
Liquidation amount per security	$ 1
Subordinated debentures	$ 5,155	$ 5,155
Common stock held in trust	155
Preferred stock, redemption premium	$ 1
Principal amount, plus accrued and unpaid interest	100.00%
Subordinated debentures, maturity date	Jun. 26, 2033
Right of defer interest payments	Up to 20 consecutive quarterly periods
Subordinated debentures, interest rate	3.10%
Variable rate of interest	3.41%	3.67%
Trust Preferred Securities Subject to Mandatory Redemption [Member]
Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items]
Preferred securities	5,000

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Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Interest and dividend income
Loans, including fees	$ 16,362	$ 15,406
Taxable securities	1,933	2,377
Tax exempt securities	1,374	1,486
FHLB stock	116	99
Other interest income	47	23
Total interest and dividend income	19,832	19,391
Interest expense
Deposits	2,862	3,916
Federal Home Loan Bank advances	1,209	1,467
Subordinated debentures	282	281
FDIC guaranteed unsecured borrowings	37	201
Federal funds purchased and other short-term borrowings	2	6
Total interest expense	4,392	5,871
Net interest income	15,440	13,520
Provision for loan losses	1,037	1,137
Net interest income after provision for loan losses	14,403	12,383
Noninterest income
Service charges on deposits	453	530
ATM and debit card fees	413	391
Earnings on life insurance, net	387	397
Net gains on mortgage banking activities	1,234	676
Loan servicing fees, net	(26)	26
Net gains on securities	378	627
Net losses on sales of other assets	(311)	(374)
Other income	632	374
Total noninterest income	3,160	2,647
Noninterest expense
Salaries and employee benefits	6,642	6,103
Occupancy and equipment	1,825	1,789
Data processing	525	445
Advertising	231	219
Bank examination fees	433	479
Amortization of intangibles	111	201
Collection and other real estate owned	204	153
FDIC insurance	336	410
Other expenses	1,475	1,253
Total noninterest expense	11,782	11,052
Income before income taxes	5,781	3,978
Income tax expense	1,496	736
Net income	$ 4,285	$ 3,242
Earnings per share (Note 21):
Basic	$ 0.72	$ 0.55
Diluted	$ 0.72	$ 0.55

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Fair Value

12 Months Ended

Dec. 31, 2012

Fair Value [Abstract]

FAIR VALUE

NOTE 4 – FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial asset:

Investment Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

Loans Held for Sale and Loan Commitment Derivatives: The fair value of loans held for sale and residential mortgage loan commitments are determined by obtaining quoted prices for similar loans and commitments with similar interest rates and maturities from major secondary markets (Level 2).

Derivatives-Interest Rate Swaps: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2).

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals performed by qualified independent third-party appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including cost, comparable sales and the income approach. The cost approach is based on the cost to replace the existing property. The comparable sales approach evaluates the sales prices of comparable properties within the same market area. The income approach considers net operating income generated by the property and the rate of return required by an investor. Adjustments are routinely made in the appraisal process by the independent third-party appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosures are initially recorded at fair value less cost to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals performed by qualified independent third-party appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including cost, comparable sales and the income approach. The cost approach is based on the cost to replace the existing property. The comparable sales approach evaluates the sales prices of comparable properties within the same market area. The income approach considers net operating income generated by the property and the rate of return required by an investor. Adjustments are routinely made in the appraisal process by the independent third-party appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

The President/Chief Financial Officer (“President/CFO”) and Executive Vice President – Credit (“EVP – Credit”) are responsible for determining the valuation processes and procedures for the fair value measurement of impaired loans and other real estate owned properties. The President/CFO and EVP – Credit review impaired loans and other real estate owned properties on a quarterly basis to determine the accuracy of third party appraisals, auction values, values derived from trade publications and any additional data received from the borrower, and the appropriateness of unobservable inputs, generally discounts due to collection issues and current market conditions which are utilized in determining the fair value. The EVP – Credit determines discounts based on the valuation source and asset type for impaired loans. These discounts are reviewed periodically, annually at a minimum, for appropriateness. Current trends in market values and gains and losses on sales of similar assets are also considered when determining discounts of asset categories.

The table below presents the valuation methodology and unobservable inputs for impaired loans and other real estate owned at December 31, 2012.

	Valuation Methodology	Unobservable Inputs	Range of Inputs	Average of Inputs
Impaired loans
Commercial:
Real Estate	Appraisals	Discounts for collection issues and changes in market conditions	10-30%		20%
Land	Appraisals	Discounts for collection issues and changes in market conditions	0-40%		17%
Mortgage	Appraisals	Discounts for collection issues and changes in market conditions	0-20%		11%
Other real estate owned, net
Commercial:
Real Estate	Appraisals	Discount for changes in market conditions	40%		40%
Land	Appraisals	Discount for changes in market conditions	6%-17%		11%
Mortgage	Appraisals	Discount for changes in market conditions	7%-29%		18%

Mortgage Servicing Rights: On a quarterly basis, loan servicing rights are evaluated for impairment based on the fair value of the rights as compared to the carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value. Fair value is determined at a tranche level, based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data (Level 2). Fair value at December 31, 2012 was determined using a discount rate of 10.0%, prepayment speeds ranging from 14.9% to 30.3%, depending on the stratification of the specific right, and a weighted average default rate of approximately 0.5%. Fair value at December 31, 2011 was determined using a discount rate of 9.0%, prepayment speeds ranging from 14.3% to 23.8%, depending on the stratification of the specific right, and a weighted average default rate of approximately 0.5%.

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:

				Fair Value Measurements at December 31, 2012 using:
	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets
Investment securities available-for-sale
U.S. federal agency	$	8,405		$	—	$	8,405		$	—
State and municipal		45,614			—		45,614			—
Mortgage-backed securities – residential		12,385			—		12,385			—
Corporate debt securities		4,060					4,060
Government agency sponsored collateralized mortgage obligations		55,156			—		55,156			—
Total investment securities available-for-sale	$	125,620		$	—	$	125,620		$	—
Loans held for sale	$	1,155		$	—	$	1,155		$	—
Derivatives – residential mortgage loan commitments	$	79		$	—	$	79		$	—
Financial Liabilities
Derivatives – interest rate swaps	$	(1,984	)	$	—	$	(1,984	)	$	—

				Fair Value Measurements at December 31, 2011 using:
	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets
Investment securities available-for-sale
U.S. treasury and federal agency	$	12,601		$	—	$	12,601		$	—
State and municipal		43,106			—		43,106			—
Mortgage-backed securities – residential		31,789			—		31,789			—
Government agency sponsored collateralized mortgage obligations		44,478			—		44,478			—
Total investment securities available-for-sale	$	131,974		$	—	$	131,974		$	—
Loans held for sale	$	3,049		$	—	$	3,049		$	—
Derivatives – residential mortgage loan commitments	$	57		$	—	$	57		$	—
Financial Liabilities
Derivatives – interest rate swaps	$	(2,283	)	$	—	$	(2,283	)	$	—

There were no transfers between Level 1 and Level 2 during 2012 or 2011.

Loans held for sale were carried at the fair value of $1,155 which is made up of the outstanding balance of $1,121, net of a valuation of $34 at December 31, 2012, resulting in income of $(10) for the year ending December 31, 2012. At December 31, 2011, loans held for sale were carried at the fair value of $3,049, which is made up of the outstanding balance of $3,006, net of a valuation of $43 at December 31, 2011, resulting in income of $(3) for the year ending December 31, 2011.

For items for which the fair value option has been elected, interest income is recorded within the consolidated statements of income and comprehensive income based on the contractual amount of interest income earned on financial assets (none were delinquent or in nonaccrual status).

Assets measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at December 31, 2012 using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial:
Real estate	$	833	$	—	$	—	$	833
Land		2,000		—		—		2,000
Mortgage		697		—		—		697
Other real estate owned, net:
Commercial:
Real estate		102		—		—		102
Land		385		—		—		385
Mortgage		133		—		—		133
Mortgage servicing rights		273		—		273		—

			Fair Value Measurements at December 31, 2011 using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial:
Commercial	$	22	$	—	$	—	$	22
Real estate		473		—		—		473
Land		475		—		—		475
Mortgage		557		—		—		557
Home equity		3		—		—		3
Other real estate owned, net:
Commercial:
Real estate		365		—		—		365
Mortgage		93		—		—		93
Mortgage servicing right		271		—		271		—

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $3,530, with a valuation allowance of $1,291 at December 31, 2012, resulting in an additional provision for loan losses of $1,346 for the year ending December 31, 2012. At December 31, 2011, impaired loans had a carrying amount of $1,781, with a valuation allowance of $251, resulting in an additional provision for loan losses of $604 for the year ending December 31, 2011.

Other real estate owned, which is measured at the lower of carrying or fair value less costs to sell, had a net carrying amount of $620, which is made up of the outstanding balance of $873, net of a valuation allowance of $253 at December 31, 2012, resulting in a write-down of $280 for the year ending December 31, 2012. At December 31, 2011, other real estate owned had a net carrying amount of $458, which is made up of the outstanding balance of $531, net of a valuation allowance of $73 at December 31, 2011, resulting in a write-down of $185 for the year ending December 31, 2011.

Mortgage servicing rights, which are carried at lower of cost or fair value, were carried at their fair value of $273, which is made up of the outstanding balance of $431, net of a valuation allowance of $158 at December 31, 2012, resulting in a charge of $40 for the year ending December 31, 2012. At December 31, 2011, mortgage servicing rights were carried at their fair value of $271, which is made up of the outstanding balance of $390, net of a valuation allowance of $119, resulting in a charge of $27 for the year ended December 31, 2011.

The Company has elected the fair value option for loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due nor on nonaccrual as of December 31, 2012 and 2011.

The aggregate fair value, contractual principal and gain or loss for loans held for sale was as follows:

	December 31, 2012
	Aggregate Fair Value		Gain (Loss)		Contractual Principal
Loans held for sale	$	1,155	$	34	$	1,121

	December 31, 2011
	Aggregate Fair Value		Gain (Loss)		Contractual Principal
Loans held for sale	$	3,049	$	43	$	3,006

The following table presents the amount of gains and losses from fair value changes included in income before income taxes for financial assets carried at fair value for the years ended December 31, 2012 and 2011:

	Changes in Fair Values for the years ended December 31, 2012 and 2011, for the Items Measured at Fair Value Pursuant to Election of the Fair Value Option
	Other Gains and Losses			Interest Income		Interest Expense		Total Changes in Fair Values Included in Current Period Earnings
Year Ended December 31, 2012
Assets:
Loans held for sale	$	(9	)	$	31	$	—	$	20
Year Ended December 31, 2011
Assets:
Loans held for sale	$	(3	)	$	29	$	—	$	26

The carrying amounts and estimated fair values of financial instruments, at December 31, 2012 are as follows:

				Fair Value Measurements at December 31, 2012 using:
	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial assets
Cash and due from financial institutions	$	6,857		$	6,857	$	—		$	—
Interest-earning time deposits at other financial institutions		7,141			—		7,197			—
Securities available for sale		125,620			—		125,620			—
Federal Home Loan Bank stock		3,817			N/A		N/A			N/A
Loans held for sale		1,155			—		1,155			—
Loans, net		313,692			—		—			318,534
Accrued interest receivable		1,481			2		802			677
Financial liabilities
Deposits		(348,970	)		—		(347,348	)		—
Federal Home Loan Bank advances		(49,009	)		—		(51,059	)		—
Subordinated debentures		(5,155	)		—		—			(5,188	)
Accrued interest payable		(198	)		—		(196	)		(2	)
Derivatives – interest rate swaps		(1,984	)		—		(1,984	)		—

The carrying amounts and estimated fair values of financial instruments, at December 31, 2011 are as follows:

December 31, 2011	Carrying			Fair
	Amount			Value
Financial assets
Cash and due from financial institutions	$	8,146		$	8,146
Securities available-for-sale		131,974			131,974
Federal Home Loan Bank stock		3,817			N/A
Loans held for sale		3,049			3,049
Loans, net		295,359			301,293
Accrued interest receivable		1,518			1,518
Financial liabilities
Deposits	$	(333,560	)	$	(331,486	)
Federal Home Loan Bank advances		(72,021	)		(74,307	)
Subordinated debentures		(5,155	)		(4,582	)
FDIC guaranteed unsecured borrowings		(4,981	)		(4,989	)
Accrued interest payable		(396	)		(396	)
Derivatives – interest rate swaps		(2,283	)		(2,283	)

The methods and assumptions, not previously presented, used to estimate fair value are described as follows:

Cash and due from financial institutions: The carrying amounts of cash and due from financial institutions approximate fair values and are classified as Level 1.

Interest-earning time deposits at other financial institutions: The fair values of the Company’s interest-earning time deposits at other financial institutions are estimated using discounted cash flow analyses based on current rates for similar types of interest-earning time deposits and are classified as Level 2.

Federal Home Loan Bank stock: It is not practical to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability.

Loans: The fair values of loans is based on discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

Loans held for sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

Deposits: The fair values disclosed for demand deposits are estimated using a cash flow calculation reduced by decay rate assumptions. These cash flows are discounted to the current market rate and a functional cost to recognize the inherent costs of servicing these accounts. This results in a Level 2 classification. Fair value of fixed rate certificates of deposit are estimated using a cash flow calculation reduced by known maturities, estimated principal payments and estimated early withdrawal amounts. These cash flows are discounted to the current market rate. This results in a Level 2 classification.

Federal Home Loan Bank Advances: The fair values of the Company’s Federal Home Loan Bank advances are estimated using discounted cash flow analyses based on current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Subordinated Debentures: The fair value of the Company’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

Short-term borrowings: The carrying amounts of short-term borrowings approximate fair values and are classified Level 2.

Accrued Interest Receivable/Payable: The carrying amounts of accrued interest approximate fair value resulting in a Level 1, Level 2 or Level 3 classification based on the underlying asset or liability.

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Loans

12 Months Ended

Dec. 31, 2012

Loans [Abstract]

LOANS

NOTE 3 – LOANS

Loans at year end were as follows:

	2012			2011
Commercial	$	124,563		$	126,559
Mortgage		36,996			45,576
Mortgage warehouse		137,467			103,864
Residential construction		1,475			3,047
Indirect auto		1,154			2,249
Home equity		12,267			12,966
Consumer and other		3,864			4,693
Subtotal		317,786			298,954
Less: Net deferred loan (fees) costs		214			177
Allowance for loan losses		(4,308	)		(3,772	)
Loans, net	$	313,692		$	295,359

As of December 31, 2012 and 2011, the Bank’s mortgage warehouse division had repurchase agreements with 11 and nine mortgage companies. For the year ended December 31, 2012, the mortgage companies originated $2,787,842 in mortgage loans and sold $2,755,204 in mortgage loans. The Bank recorded interest income of $5,205, mortgage warehouse loan fees of $835 and wire transfer fees of $295 for the year ended December 31, 2012. For the year ended December 31, 2011, the mortgage companies originated $1,988,579 in mortgage loans and sold $1,958,332 in mortgage loans. The Bank recorded interest income of $3,376, mortgage warehouse loan fees of $569 and wire transfer fees of $181 for the year ended December 31, 2011.

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ending December 31, 2012 and 2011:

	Commercial			Mortgage			Mortgage Warehouse		Residential Construction			Indirect Auto			Home Equity			Consumer and Other			Unallocated		Total
December 31, 2012
Allowance for loan losses:
Beginning balance	$	2,774		$	374		$	393	$	3		$	19		$	119		$	90		$	—	$	3,772
Charge-offs		(383	)		(84	)		—		—			(3	)		(35	)		(64	)		—		(569	)
Recoveries		46			2			—		—			4			1			15			—		68
Provision		694			109			208		(1	)		(13	)		45			(5	)		—		1,037
Ending balance	$	3,131		$	401		$	601	$	2		$	7		$	130		$	36		$	—	$	4,308

	Commercial			Mortgage			Mortgage Warehouse		Residential Construction			Indirect Auto			Home Equity			Consumer and Other			Unallocated		Total
December 31, 2011
Allowance for loan losses:
Beginning balance	$	3,147		$	389		$	139	$	17		$	28		$	142		$	81		$	—	$	3,943
Charge-offs		(1,084	)		(132	)		—		—			(14	)		(52	)		(48	)		—		(1,330	)
Recoveries		—			—			—		—			4			2			16			—		22
Provision		711			117			254		(14	)		1			27			41			—		1,137
Ending balance	$	2,774		$	374		$	393	$	3		$	19		$	119		$	90		$	—	$	3,772

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2012:

	Commercial		Mortgage		Mortgage Warehouse		Residential Construction		Indirect Auto		Home Equity		Consumer and Other		Unallocated		Total
December 31, 2012
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,137	$	132	$	—	$	—	$	—	$	22	$	—	$	—	$	1,291
Collectively evaluated for impairment		1,994		269		601		2		7		108		36		—		3,017
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—		—
Total ending allowance	$	3,131	$	401	$	601	$	2	$	7	$	130	$	36	$	—	$	4,308
Loans:
Loans individually evaluated for impairment	$	6,337	$	2,125	$	—	$	—	$	—	$	53	$	—	$	—	$	8,515
Loans collectively evaluated for impairment		117,682		34,731		137,467		1,466		1,154		12,267		3,867		—		308,634
Loans acquired with deteriorated credit quality		712		139		—		—		—		—		—		—		851
Total ending loan balance	$	124,731	$	36,995	$	137,467	$	1,466	$	1,154	$	12,320	$	3,867	$	—	$	318,000

The recorded investment in loans does not include accrued interest.

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2011:

	Commercial		Mortgage		Mortgage Warehouse		Residential Construction		Indirect Auto		Home Equity		Consumer and Other		Unallocated		Total
December 31, 2011
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	112	$	128	$	—	$	—	$	—	$	11	$	—	$	—	$	251
Collectively evaluated for impairment		2,662		246		393		3		19		108		90		—		3,521
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—		—
Total ending allowance	$	2,774	$	374	$	393	$	3	$	19	$	119	$	90	$	—	$	3,772
Loans:
Loans individually evaluated for impairment	$	4,630	$	1,630	$	—	$	—	$	—	$	14	$	—	$	—	$	6,274
Loans collectively evaluated for impairment		121,236		43,788		103,864		3,045		2,249		13,002		4,697		—		291,881
Loans acquired with deteriorated credit quality		824		152		—		—		—		—		—		—		976
Total ending loan balance	$	126,690	$	45,570	$	103,864	$	3,045	$	2,249	$	13,016	$	4,697	$	—	$	299,131

The recorded investment in loans does not include accrued interest.

The following table presents information related to impaired loans by class of loans as of and for the year ended December 31, 2012:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Commercial:
Commercial and other	$	—	$	—	$	—	$	6	$	—	$	—
Real estate		2,150		2,152		—		1,348		10		—
Land		214		214		—		1,411		3		—
Mortgage		1,296		1,296		—		967		16		—
Home equity		31		31		—		21		—		—
Subtotal		3,691		3,693		—		3,753		29		—
With an allowance recorded:
Commercial:
Real estate		1,461		1,199		365		1,681		—		—
Land		2,772		2,772		772		1,640		—		—
Mortgage		829		829		132		826		—		—
Home equity		22		22		22		15		—		—
Subtotal		5,084		4,822		1,291		4,162		—		—
Total	$	8,775	$	8,515	$	1,291	$	7,915	$	—	$	—

The recorded investment in loans does not include accrued interest.

The following table presents information related to impaired loans by class of loans as of and for the year ended December 31, 2011:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Commercial:
Real estate	$	1,299	$	1,298	$	—	$	1,246	$	4	$	—
Land		2,248		2,248		—		2,248		12		—
Mortgage		945		945		—		762		26		—
Residential construction:
Land		—		—		—		43		—		—
Subtotal		4,492		4,491		—		4,299		42		—
With an allowance recorded:
Commercial:
Commercial and other		28		29		6		40		—		—
Real estate		502		503		29		1,061		6		—
Land		552		552		77		683		—		—
Mortgage		685		685		128		617		—		—
Home equity		14		14		11		209		—		—
Subtotal		1,781		1,783		251		2,610		6		—
Total	$	6,273	$	6,274	$	251	$	6,909	$	48	$	—

The recorded investment in loans does not include accrued interest.

Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still on accrual by class of loans as of December 31, 2012 and December 31, 2011:

	Nonaccrual				Loans Past Due Over 90 Days Still Accruing
	2012		2011		2012		2011
Commercial:
Commercial and other	$	29	$	62	$	—	$	—
Real estate		3,292		2,027		—		—
Land		2,985		2,800		—		—
Mortgage		1,958		1,454		—		—
Residential construction:
Land		—		—		—		—
Indirect auto		5		8		—
Home equity		53		14		—		—
Consumer and other		39		—		—		—
Total	$	8,361	$	6,365	$	—	$	—

The recorded investment in loans does not include accrued interest.

The following table presents the aging of the recorded investment in past due loans as of December 31, 2012 and 2011 by class of loans:

	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
December 31, 2012
Commercial:
Commercial and other	$	67	$	—	$	—	$	67	$	20,208	$	20,275
Real estate		1,019		24		2,644		3,687		76,193		79,880
Five or more family		—		—		—		—		14,286		14,286
Construction		—		—		—		—		1,795		1,795
Land		—		109		2,494		2,603		5,892		8,495
Mortgage		523		283		1,469		2,275		34,720		36,995
Mortgage warehouse		—		—		—		—		137,467		137,467
Residential construction:
Construction		—		—		—		—		1,099		1,099
Land		—		—		—		—		367		367
Indirect auto		10		—		5		15		1,139		1,154
Home equity		21		—		25		46		12,274		12,320
Consumer and other		3		—		—		3		3,864		3,867
Total	$	1,643	$	416	$	6,637	$	8,696	$	309,304	$	318,000

	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
December 31, 2011
Commercial:
Commercial and other	$	—	$	—	$	29	$	29	$	18,077	$	18,106
Real estate		1,057		128		1,589		2,774		77,702		80,476
Five or more family		43		—		—		43		17,670		17,713
Construction		—		—		—		—		1,172		1,172
Land		216		—		2,248		2,464		6,759		9,223
Mortgage		1,293		55		1,115		2,463		43,107		45,570
Mortgage warehouse		—		—		—		—		103,864		103,864
Residential construction:
Construction		—		—		—		—		2,629		2,629
Land		—		—		—		—		416		416
Indirect auto		27		—		8		35		2,214		2,249
Home equity		—		—		14		14		13,002		13,016
Consumer and other		—		14		—		14		4,683		4,697
Total	$	2,636	$	197	$	5,003	$	7,836	$	291,295	$	299,131

The recorded investment in loans does not include accrued interest.

Troubled Debt Restructurings:

A loan modification is considered a troubled debt restructuring when a borrower is experiencing financial difficulty and the Company grants a concession it would not otherwise consider but for the borrower’s financial difficulties. At December 31, 2012 and 2011, the outstanding balance of loans that were modified as troubled debt restructurings totaled $842 and $254, respectively. All of these loans were considered nonperforming troubled debt restructurings. The Company has allocated $0 and $13 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2012 and 2011. The Company has not committed to lend additional amounts as of December 31, 2012 to customers with outstanding loans that are classified as troubled debt restructurings.

During the year ending December 31, 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ending December 31, 2012:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial:
Real estate		2	$	726	$	589
Consumer and other		1		130		—
Total		3	$	856	$	589

The recorded investment in loans does not include accrued interest.

The troubled debt restructurings described above increased the allowance for loan losses by $166 and resulted in charge offs of $166 during the year ending December 31, 2012.

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ending December 31, 2011:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial:
Commercial and other		1	$	33	$	33
Real estate		2		431		429
Mortgage		1		131		131
Total		4	$	595	$	593

The recorded investment in loans does not include accrued interest.

The troubled debt restructurings described above increased the allowance for loan losses by $13 and resulted in charge offs of $300 during the year ending December 31, 2011.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ending December 31, 2012:

Troubled Debt Restructurings
That Subsequently Defaulted:	Number of Loans		Recorded Investment
Mortgage		1	$	127
Total		1	$	127

The recorded investment in loans does not include accrued interest.

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $0 and resulted in charge offs of $0 during the year ending December 31, 2012.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ending December 31, 2011:

Troubled Debt Restructurings
That Subsequently Defaulted:	Number of Loans		Recorded Investment
Commercial:
Real estate		1	$	25
Total		1	$	25

The recorded investment in loans does not include accrued interest.

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $13 and resulted in charge offs of $300 during the year ending December 31, 2011.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s management loan committee.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. The analysis includes loans with risk ratings of Special Mention, Substandard and Doubtful. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. The Bank monitors credit quality on loans not rated through the loan’s individual payment performance.

As of December 31, 2012 and 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Not Rated		Pass		Special Mention		Substandard		Doubtful
December 31, 2012
Commercial:
Commercial and other	$	11	$	19,945	$	319	$	—	$	—
Real estate		—		66,427		6,131		7,322		—
Five or more family		203		10,410		3,673		—		—
Construction		—		1,795		—		—		—
Land		—		4,754		755		2,986		—
Mortgage		30,121		4,077		447		2,350		—
Mortgage warehouse		137,467		—		—		—		—
Residential construction:
Construction		1,099		—		—		—		—
Land		367		—		—		—		—
Indirect auto		1,154		—		—		—		—
Home equity		12,060		115		86		59		—
Consumer and other		3,036		831		—		—		—
Total	$	185,518	$	108,354	$	11,411	$	12,717	$	—

	Not Rated		Pass		Special Mention		Substandard		Doubtful
December 31, 2011
Commercial:
Commercial and other	$	67	$	17,500	$	510	$	29	$	—
Real estate		16		65,136		11,658		3,605		61
Five or more family		208		13,520		3,985		—		—
Construction		—		1,079		93		—		—
Land		—		5,447		694		3,082		—
Mortgage		37,769		4,946		722		2,133		—
Mortgage warehouse		103,864		—		—		—		—
Residential construction:
Construction		2,629		—		—		—		—
Land		416		—		—		—		—
Indirect auto		2,249		—		—		—		—
Home equity		12,623		121		92		180		—
Consumer and other		3,776		921		—		—		—
Total	$	163,617	$	108,670	$	17,754	$	9,029	$	61

The recorded investment in loans does not include accrued interest.

Purchased Loans:

The Company purchased loans during 2007, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The outstanding balance and carrying amount of those loans is as follows at year end:

	2012		2011
Commercial:
Commercial and other	$	29	$	36
Real estate		714		923
Mortgage		139		154
Outstanding balance	$	882	$	1,113
Carrying amount, net of allowance of $0	$	851	$	977

Accretable yield, or income expected to be collected, is as follows:

	2012			2011
Beginning balance	$	193		$	250
New loans purchased		—			—
Reclassification from nonaccretable yield		7			30
Accretion of income		(69	)		(87	)
Disposals		(3	)		—
Ending balance	$	128		$	193

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during 2012 or 2011. No allowances for loan losses were reversed for the purchased loans disclosed above during 2012 or 2011.

There were no such loans purchased during 2012 or 2011.

Income is not recognized on certain purchased loans if the Company cannot reasonably estimate cash flows expected to be collected. The carrying amounts of such loans were $50 and $50 at December 31, 2012 and 2011.

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Related-Party Transactions

12 Months Ended

Dec. 31, 2012

Related Party Transactions [Abstract]

RELATED-PARTY TRANSACTIONS

NOTE 15 – RELATED-PARTY TRANSACTIONS

Loans to principal officers, directors, and their affiliates were as follows:

	2012			2011
Beginning balance	$	1,081		$	1,468
New loans		115			196
Effect of changes in composition of related parties		(73	)		(62	)
Repayments		(294	)		(521	)
Ending balance	$	829		$	1,081

Deposits from principal officers, directors, and their affiliates at year-end 2012 and 2011 were $1,769 and $2,559.

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Subordinated Debentures

12 Months Ended

Dec. 31, 2012

Other Borrowings/Subordinated Debentures [Abstract]

SUBORDINATED DEBENTURES

NOTE 11 – SUBORDINATED DEBENTURES

In June 2003, City Savings Statutory Trust I, a trust formed by City Savings Financial Corporation, closed a pooled private offering of 5,000 trust preferred securities with a liquidation amount of $1 per security. City Savings Financial Corporation issued $5,155 of subordinated debentures to the trust in exchange for ownership of all of the common security of the trust and the proceeds of the preferred securities sold by the trust. On October 12, 2007, the Company purchased the ownership of the common securities of the trust as a result of its acquisition of City Savings Financial Corporation. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. The Company’s investment in the common stock of the trust was $155 and is included in other assets in the December 31, 2012 and 2011 consolidated balance sheets.

The Company may redeem the subordinated debentures, in whole or in part, in a principal amount with integral multiples of $1, on or after June 26, 2008 at 100% of the principal amount, plus accrued and unpaid interest. The subordinated debentures mature on June 26, 2033.

The Company has the right to defer interest payments by extending the interest payment period during the term of the subordinated debentures for up to 20 consecutive quarterly periods.

The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the trust indenture.

The subordinated debentures may be included in Tier I capital (with certain limitations applicable) under current regulatory guidelines and interpretations. The subordinated debentures have a variable rate of interest equal to the three month London Interbank Offered Rate (LIBOR) plus 3.10% which was 3.41% and 3.67% at year-end 2012 and 2011.

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Deposits (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Scheduled maturities of time deposits
2013	$ 64,989
2014	29,910
2015	23,954
2016	2,684
2017	2,728
Thereafter	566
Time Deposits, Total	$ 124,831

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Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets [Abstract]

GOODWILL AND INTANGIBLE ASSETS

NOTE 7 – GOODWILL AND INTANGIBLE ASSETS

Goodwill: The change in goodwill during the year is as follows:

	2012		2011
Beginning of year	$	8,431	$	8,431
Acquired goodwill		—		—
Impairment		—		—
End of year	$	8,431	$	8,431

Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value, which is determined through a two-step impairment test. Step 1 includes the determination of the carrying value of our single reporting unit, including the existing goodwill and intangible assets, and estimating the fair value of the reporting unit. We determined the fair value of our reporting unit and compared it to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, we are required to perform a second step to the impairment test.

Our annual impairment analysis as of October 31, 2012, indicated that the Step 2 analysis was not necessary. The estimate of the fair value of the reporting unit was higher than the carrying value of our reporting unit, including the existing goodwill and intangible assets, as of October 31, 2012. The Company did not record an impairment charge during 2012 or 2011.

Acquired Intangible Assets

Acquired intangible assets were as follows at year end:

	2012
	Gross Carrying Amount		Gross Accumulated Amortization		Net Carrying Value
Amortized intangible assets:
Core deposit intangibles	$	1,534	$	1,171	$	363
Total	$	1,534	$	1,171	$	363

	2011
	Gross Carrying Amount		Gross Accumulated Amortization		Net Carrying Value
Amortized intangible assets:
Core deposit intangibles	$	1,534	$	1,060	$	474
Total	$	1,534	$	1,060	$	474

Aggregate amortization expense for 2012 and 2011 was $111 and $201, respectively.

Estimated amortization expense for each of the next five years is as follows:

2013	$	85
2014		66
2015		51
2016		40
2017		34

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Loans (Details 4) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Investment in nonaccrual loans and loans past due
Nonaccrual	$ 8,361	$ 6,365
Loans Past Due Over 90 Days Still Accruing
Commercial and other [Member]
Investment in nonaccrual loans and loans past due
Nonaccrual	29	62
Loans Past Due Over 90 Days Still Accruing
Commercial: Real Estate [Member]
Investment in nonaccrual loans and loans past due
Nonaccrual	3,292	2,027
Loans Past Due Over 90 Days Still Accruing
Commercial: Land [Member]
Investment in nonaccrual loans and loans past due
Nonaccrual	2,985	2,800
Loans Past Due Over 90 Days Still Accruing
Commercial Mortgage [Member]
Investment in nonaccrual loans and loans past due
Nonaccrual	1,958	1,454
Loans Past Due Over 90 Days Still Accruing
Residential construction: Land [Member]
Investment in nonaccrual loans and loans past due
Nonaccrual
Loans Past Due Over 90 Days Still Accruing
Residential construction: Indirect auto [Member]
Investment in nonaccrual loans and loans past due
Nonaccrual	5	8
Loans Past Due Over 90 Days Still Accruing
Residential construction: Home Equity [Member]
Investment in nonaccrual loans and loans past due
Nonaccrual	53	14
Loans Past Due Over 90 Days Still Accruing
Consumer and Other [Member]
Investment in nonaccrual loans and loans past due
Nonaccrual	39
Loans Past Due Over 90 Days Still Accruing

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Derivatives (Details 4) (Fair value hedge [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2011
Fair value hedge included in the Consolidated Balance Sheets
Fair value	$ (22)
Interest rate swaps related to brokered deposits [Member]
Fair value hedge included in the Consolidated Balance Sheets
Notional Amount	(5,000)
Fair value	$ (22)

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Loan Servicing

12 Months Ended

Dec. 31, 2012

Loan Servicing [Abstract]

LOAN SERVICING

NOTE 5 – LOAN SERVICING

Mortgage loans serviced for others are not reported as assets. The principal balances of these loans at year end are as follows:

	2012		2011
Mortgage loan portfolios serviced for:
FHLMC	$	67,429	$	60,733
FHLB		1,058		173
Total	$	68,487	$	60,906

Custodial escrow balances maintained in connection with serviced loans were $281 and $249 at year-end 2012 and 2011.

Activity for capitalized mortgage servicing rights was as follows:

	2012			2011
Servicing rights:
Beginning of year	$	348		$	414
Additions		174			66
Amortized to expense		(139	)		(105	)
Change in valuation allowance		(39	)		(27	)
End of year	$	344		$	348

	2012			2011
Valuation allowance:
Beginning of year	$	119		$	92
Additions expensed		44			48
Reductions credited to expense		(5	)		(21	)
Direct write-downs		—			—
End of year	$	158		$	119

The fair value of mortgage servicing rights was $352 and $359 at year-end 2012 and 2011. At year-end 2012, $71 of the mortgage servicing rights were carried at book value and $273 of the mortgage servicing rights were carried at their fair value, which is made up of the outstanding balance of $431, net of a valuation allowance of $158. Fair value at year-end 2012 was determined using a discount rate of 10.0%, prepayment speeds ranging from 14.9% to 30.3%, depending on the stratification of the specific right, and a weighted average default rate of approximately 0.5%. At year-end 2011, $77 of the mortgage servicing rights were carried at book value and $271 of the mortgage servicing rights were carried at their fair value, which was made up of the outstanding balance of $390, net of a valuation allowance of $119. Fair value at year-end 2011 was determined using a discount rate of 9.0%, prepayment speeds ranging from 14.3% to 23.8%, depending on stratification of the specific right, and a weighted average default rate of approximately 0.5%.

The weighted average amortization period is 3.61 years.

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Premises and Equipment

12 Months Ended

Dec. 31, 2012

Premises and Equipment [Abstract]

PREMISES AND EQUIPMENT

NOTE 6 – PREMISES AND EQUIPMENT

Year-end premises and equipment were as follows:

	2012			2011
Land	$	2,772		$	2,772
Buildings		9,929			9,902
Furniture, fixtures and equipment		5,249			5,365
Construction in progress		66			3
		18,016			18,042
Less: Accumulated depreciation		(8,441	)		(8,202	)
	$	9,575		$	9,840

Depreciation expense was $577 and $646 for 2012 and 2011.

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Deposits

12 Months Ended

Dec. 31, 2012

Deposits/Federal Home Loan Bank Advances/Regulatory Capital Matters [Abstract]

DEPOSITS

NOTE 8 – DEPOSITS

Time deposits of $100 thousand or more were $47,562 and $40,869 at year-end 2012 and 2011.

Scheduled maturities of time deposits for the next five years were as follows:

2013	$	64,989
2014		29,910
2015		23,954
2016		2,684
2017		2,728
Thereafter		566
	$	124,831

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Loans (Details 8) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Not Rated [Member]
Recent analysis performed for risk category of loans
Total	$ 185,518	$ 163,617
Not Rated [Member] | Commercial and other [Member]
Recent analysis performed for risk category of loans
Total	11	67
Not Rated [Member] | Commercial: Real Estate [Member]
Recent analysis performed for risk category of loans
Total		16
Not Rated [Member] | Commercial: Five or more family [Member]
Recent analysis performed for risk category of loans
Total	203	208
Not Rated [Member] | Commercial: Construction [Member]
Recent analysis performed for risk category of loans
Total
Not Rated [Member] | Commercial: Land [Member]
Recent analysis performed for risk category of loans
Total
Not Rated [Member] | Commercial Mortgage [Member]
Recent analysis performed for risk category of loans
Total	30,121	37,769
Not Rated [Member] | Commercial: Mortgage Warehouse [Member]
Recent analysis performed for risk category of loans
Total	137,467	103,864
Not Rated [Member] | Residential construction: Construction [Member]
Recent analysis performed for risk category of loans
Total	1,099	2,629
Not Rated [Member] | Residential construction: Land [Member]
Recent analysis performed for risk category of loans
Total	367	416
Not Rated [Member] | Residential construction: Indirect auto [Member]
Recent analysis performed for risk category of loans
Total	1,154	2,249
Not Rated [Member] | Residential construction: Home Equity [Member]
Recent analysis performed for risk category of loans
Total	12,060	12,623
Not Rated [Member] | Residential construction: Consumer and other [Member]
Recent analysis performed for risk category of loans
Total	3,036	3,776
Pass [Member]
Recent analysis performed for risk category of loans
Total	108,354	108,670
Pass [Member] | Commercial and other [Member]
Recent analysis performed for risk category of loans
Total	19,945	17,500
Pass [Member] | Commercial: Real Estate [Member]
Recent analysis performed for risk category of loans
Total	66,427	65,136
Pass [Member] | Commercial: Five or more family [Member]
Recent analysis performed for risk category of loans
Total	10,410	13,520
Pass [Member] | Commercial: Construction [Member]
Recent analysis performed for risk category of loans
Total	1,795	1,079
Pass [Member] | Commercial: Land [Member]
Recent analysis performed for risk category of loans
Total	4,754	5,447
Pass [Member] | Commercial Mortgage [Member]
Recent analysis performed for risk category of loans
Total	4,077	4,946
Pass [Member] | Commercial: Mortgage Warehouse [Member]
Recent analysis performed for risk category of loans
Total
Pass [Member] | Residential construction: Construction [Member]
Recent analysis performed for risk category of loans
Total
Pass [Member] | Residential construction: Land [Member]
Recent analysis performed for risk category of loans
Total
Pass [Member] | Residential construction: Indirect auto [Member]
Recent analysis performed for risk category of loans
Total
Pass [Member] | Residential construction: Home Equity [Member]
Recent analysis performed for risk category of loans
Total	115	121
Pass [Member] | Residential construction: Consumer and other [Member]
Recent analysis performed for risk category of loans
Total	831	921
Special Mention [Member]
Recent analysis performed for risk category of loans
Total	11,411	17,754
Special Mention [Member] | Commercial and other [Member]
Recent analysis performed for risk category of loans
Total	319	510
Special Mention [Member] | Commercial: Real Estate [Member]
Recent analysis performed for risk category of loans
Total	6,131	11,658
Special Mention [Member] | Commercial: Five or more family [Member]
Recent analysis performed for risk category of loans
Total	3,673	3,985
Special Mention [Member] | Commercial: Construction [Member]
Recent analysis performed for risk category of loans
Total		93
Special Mention [Member] | Commercial: Land [Member]
Recent analysis performed for risk category of loans
Total	755	694
Special Mention [Member] | Commercial Mortgage [Member]
Recent analysis performed for risk category of loans
Total	447	722
Special Mention [Member] | Commercial: Mortgage Warehouse [Member]
Recent analysis performed for risk category of loans
Total
Special Mention [Member] | Residential construction: Construction [Member]
Recent analysis performed for risk category of loans
Total
Special Mention [Member] | Residential construction: Land [Member]
Recent analysis performed for risk category of loans
Total
Special Mention [Member] | Residential construction: Indirect auto [Member]
Recent analysis performed for risk category of loans
Total
Special Mention [Member] | Residential construction: Home Equity [Member]
Recent analysis performed for risk category of loans
Total	86	92
Special Mention [Member] | Residential construction: Consumer and other [Member]
Recent analysis performed for risk category of loans
Total
Substandard [Member]
Recent analysis performed for risk category of loans
Total	12,717	9,029
Substandard [Member] | Commercial and other [Member]
Recent analysis performed for risk category of loans
Total		29
Substandard [Member] | Commercial: Real Estate [Member]
Recent analysis performed for risk category of loans
Total	7,322	3,605
Substandard [Member] | Commercial: Five or more family [Member]
Recent analysis performed for risk category of loans
Total
Substandard [Member] | Commercial: Construction [Member]
Recent analysis performed for risk category of loans
Total
Substandard [Member] | Commercial: Land [Member]
Recent analysis performed for risk category of loans
Total	2,986	3,082
Substandard [Member] | Commercial Mortgage [Member]
Recent analysis performed for risk category of loans
Total	2,350	2,133
Substandard [Member] | Commercial: Mortgage Warehouse [Member]
Recent analysis performed for risk category of loans
Total
Substandard [Member] | Residential construction: Construction [Member]
Recent analysis performed for risk category of loans
Total
Substandard [Member] | Residential construction: Land [Member]
Recent analysis performed for risk category of loans
Total
Substandard [Member] | Residential construction: Indirect auto [Member]
Recent analysis performed for risk category of loans
Total
Substandard [Member] | Residential construction: Home Equity [Member]
Recent analysis performed for risk category of loans
Total	59	180
Substandard [Member] | Residential construction: Consumer and other [Member]
Recent analysis performed for risk category of loans
Total
Doubtful [Member]
Recent analysis performed for risk category of loans
Total		61
Doubtful [Member] | Commercial and other [Member]
Recent analysis performed for risk category of loans
Total
Doubtful [Member] | Commercial: Real Estate [Member]
Recent analysis performed for risk category of loans
Total		61
Doubtful [Member] | Commercial: Five or more family [Member]
Recent analysis performed for risk category of loans
Total
Doubtful [Member] | Commercial: Construction [Member]
Recent analysis performed for risk category of loans
Total
Doubtful [Member] | Commercial: Land [Member]
Recent analysis performed for risk category of loans
Total
Doubtful [Member] | Commercial Mortgage [Member]
Recent analysis performed for risk category of loans
Total
Doubtful [Member] | Commercial: Mortgage Warehouse [Member]
Recent analysis performed for risk category of loans
Total
Doubtful [Member] | Residential construction: Construction [Member]
Recent analysis performed for risk category of loans
Total
Doubtful [Member] | Residential construction: Land [Member]
Recent analysis performed for risk category of loans
Total
Doubtful [Member] | Residential construction: Indirect auto [Member]
Recent analysis performed for risk category of loans
Total
Doubtful [Member] | Residential construction: Home Equity [Member]
Recent analysis performed for risk category of loans
Total
Doubtful [Member] | Residential construction: Consumer and other [Member]
Recent analysis performed for risk category of loans
Total

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Deposits (Details Textual) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Deposits (Textual) [Abstract]
Time deposits of $100 thousand or more	$ 47,562	$ 40,869

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Loans (Details 10) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Accretable yield, or income expected to be collected on purchased loans
Beginning balance	$ 193	$ 250
New loans purchased
Reclassification from non-accretable yield	7	30
Accretion of income	(69)	(87)
Disposals	(3)
Ending balance	$ 128	$ 193

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Stock-Based Compensation (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Summary of changes in the Company's nonvested shares
Nonvested, Shares, beginning balance	116,910
Granted, Shares
Vested, Shares	(23,382)
Forfeited, Shares
Nonvested, Shares, ending balance	93,528	116,910
Nonvested, Weighted-Average Grant-Date Fair Value, beginning balance	$ 6.44
Granted, Weighted-Average Grant-Date Fair Value		$ 2.16
Vested, Weighted-Average Grant-Date Fair Value	$ 6.44
Forfeited, Weighted-Average Grant-Date Fair Value
Nonvested, Weighted-Average Grant-Date Fair Value, ending balance	$ 6.44	$ 6.44

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Loans (Details 7) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012 Loan	Dec. 31, 2011 Loan
Loans by class modified as troubled debt restructurings, payment default
Number of Loans, Subsequent default	1	1
Recorded Investment, Subsequent default	$ 127	$ 25
Commercial: Real Estate [Member]
Loans by class modified as troubled debt restructurings, payment default
Number of Loans, Subsequent default		1
Recorded Investment, Subsequent default		25
Commercial Mortgage [Member]
Loans by class modified as troubled debt restructurings, payment default
Number of Loans, Subsequent default	1
Recorded Investment, Subsequent default	$ 127

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Employee Stock Ownership Plan (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Oct. 04, 2012	Dec. 31, 2011
Shares held by the ESOP at year end
Allocated to participants	82,136	59,650	59,650
Unearned	427,231	449,717	178,949
Total ESOP shares	509,367	509,367	238,599
Fair value of unearned shares	$ 3,751		$ 1,085

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Fair Value (Tables)

12 Months Ended

Dec. 31, 2012

Fair Value [Abstract]

Valuation methodology and unobservable inputs for impaired loans and other real estate owned

	Valuation Methodology	Unobservable Inputs	Range of Inputs	Average of Inputs
Impaired loans
Commercial:
Real Estate	Appraisals	Discounts for collection issues and changes in market conditions	10-30%		20%
Land	Appraisals	Discounts for collection issues and changes in market conditions	0-40%		17%
Mortgage	Appraisals	Discounts for collection issues and changes in market conditions	0-20%		11%
Other real estate owned, net
Commercial:
Real Estate	Appraisals	Discount for changes in market conditions	40%		40%
Land	Appraisals	Discount for changes in market conditions	6%-17%		11%
Mortgage	Appraisals	Discount for changes in market conditions	7%-29%		18%

Assets and liabilities measured at fair value on a recurring basis

				Fair Value Measurements at December 31, 2012 using:
	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets
Investment securities available-for-sale
U.S. federal agency	$	8,405		$	—	$	8,405		$	—
State and municipal		45,614			—		45,614			—
Mortgage-backed securities – residential		12,385			—		12,385			—
Corporate debt securities		4,060					4,060
Government agency sponsored collateralized mortgage obligations		55,156			—		55,156			—
Total investment securities available-for-sale	$	125,620		$	—	$	125,620		$	—
Loans held for sale	$	1,155		$	—	$	1,155		$	—
Derivatives – residential mortgage loan commitments	$	79		$	—	$	79		$	—
Financial Liabilities
Derivatives – interest rate swaps	$	(1,984	)	$	—	$	(1,984	)	$	—

				Fair Value Measurements at December 31, 2011 using:
	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets
Investment securities available-for-sale
U.S. treasury and federal agency	$	12,601		$	—	$	12,601		$	—
State and municipal		43,106			—		43,106			—
Mortgage-backed securities – residential		31,789			—		31,789			—
Government agency sponsored collateralized mortgage obligations		44,478			—		44,478			—
Total investment securities available-for-sale	$	131,974		$	—	$	131,974		$	—
Loans held for sale	$	3,049		$	—	$	3,049		$	—
Derivatives – residential mortgage loan commitments	$	57		$	—	$	57		$	—
Financial Liabilities
Derivatives – interest rate swaps	$	(2,283	)	$	—	$	(2,283	)	$	—

Assets measured at fair value on a non-recurring basis

			Fair Value Measurements at December 31, 2012 using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial:
Real estate	$	833	$	—	$	—	$	833
Land		2,000		—		—		2,000
Mortgage		697		—		—		697
Other real estate owned, net:
Commercial:
Real estate		102		—		—		102
Land		385		—		—		385
Mortgage		133		—		—		133
Mortgage servicing rights		273		—		273		—

			Fair Value Measurements at December 31, 2011 using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial:
Commercial	$	22	$	—	$	—	$	22
Real estate		473		—		—		473
Land		475		—		—		475
Mortgage		557		—		—		557
Home equity		3		—		—		3
Other real estate owned, net:
Commercial:
Real estate		365		—		—		365
Mortgage		93		—		—		93
Mortgage servicing right		271		—		271		—

Difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding for loans held for sale

	December 31, 2012
	Aggregate Fair Value		Gain (Loss)		Contractual Principal
Loans held for sale	$	1,155	$	34	$	1,121

	December 31, 2011
	Aggregate Fair Value		Gain (Loss)		Contractual Principal
Loans held for sale	$	3,049	$	43	$	3,006

Amount of gains and losses from fair value changes

	Changes in Fair Values for the years ended December 31, 2012 and 2011, for the Items Measured at Fair Value Pursuant to Election of the Fair Value Option
	Other Gains and Losses			Interest Income		Interest Expense		Total Changes in Fair Values Included in Current Period Earnings
Year Ended December 31, 2012
Assets:
Loans held for sale	$	(9	)	$	31	$	—	$	20
Year Ended December 31, 2011
Assets:
Loans held for sale	$	(3	)	$	29	$	—	$	26

Carrying amounts and estimated fair values of financial instruments

				Fair Value Measurements at December 31, 2012 using:
	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial assets
Cash and due from financial institutions	$	6,857		$	6,857	$	—		$	—
Interest-earning time deposits at other financial institutions		7,141			—		7,197			—
Securities available for sale		125,620			—		125,620			—
Federal Home Loan Bank stock		3,817			N/A		N/A			N/A
Loans held for sale		1,155			—		1,155			—
Loans, net		313,692			—		—			318,534
Accrued interest receivable		1,481			2		802			677
Financial liabilities
Deposits		(348,970	)		—		(347,348	)		—
Federal Home Loan Bank advances		(49,009	)		—		(51,059	)		—
Subordinated debentures		(5,155	)		—		—			(5,188	)
Accrued interest payable		(198	)		—		(196	)		(2	)
Derivatives – interest rate swaps		(1,984	)		—		(1,984	)		—

December 31, 2011	Carrying			Fair
	Amount			Value
Financial assets
Cash and due from financial institutions	$	8,146		$	8,146
Securities available-for-sale		131,974			131,974
Federal Home Loan Bank stock		3,817			N/A
Loans held for sale		3,049			3,049
Loans, net		295,359			301,293
Accrued interest receivable		1,518			1,518
Financial liabilities
Deposits	$	(333,560	)	$	(331,486	)
Federal Home Loan Bank advances		(72,021	)		(74,307	)
Subordinated debentures		(5,155	)		(4,582	)
FDIC guaranteed unsecured borrowings		(4,981	)		(4,989	)
Accrued interest payable		(396	)		(396	)
Derivatives – interest rate swaps		(2,283	)		(2,283	)

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Securities (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Summarizes the amortized cost and fair value of the available-for-sale securities portfolio
Amortized Cost	$ 120,054	$ 126,636
Gross Unrealized Gains	5,719	5,381
Gross Unrealized Losses	(153)	(43)
Fair Value	125,620	131,974
U.S. federal agency [Member]
Summarizes the amortized cost and fair value of the available-for-sale securities portfolio
Amortized Cost	8,045	12,187
Gross Unrealized Gains	360	414
Gross Unrealized Losses
Fair Value	8,405	12,601
State and municipal [Member]
Summarizes the amortized cost and fair value of the available-for-sale securities portfolio
Amortized Cost	42,161	40,012
Gross Unrealized Gains	3,479	3,094
Gross Unrealized Losses	(26)
Fair Value	45,614	43,106
Mortgage-backed securities - residential [Member]
Summarizes the amortized cost and fair value of the available-for-sale securities portfolio
Amortized Cost	11,819	30,946
Gross Unrealized Gains	572	872
Gross Unrealized Losses	(6)	(29)
Fair Value	12,385	31,789
Government agency sponsored collateralized mortgage obligations [Member]
Summarizes the amortized cost and fair value of the available-for-sale securities portfolio
Amortized Cost	54,070	43,491
Gross Unrealized Gains	1,198	1,001
Gross Unrealized Losses	(112)	(14)
Fair Value	55,156	44,478
Corporate debt securities [Member]
Summarizes the amortized cost and fair value of the available-for-sale securities portfolio
Amortized Cost	3,959
Gross Unrealized Gains	110
Gross Unrealized Losses	(9)
Fair Value	$ 4,060

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Employee Stock Ownership Plan

12 Months Ended

Dec. 31, 2012

Employee Stock Ownership Plan/Stock-Based Compensation [Abstract]

EMPLOYEE STOCK OWNERSHIP PLAN

NOTE 13 – EMPLOYEE STOCK OWNERSHIP PLAN

During 2007, the Bank implemented an Employee Stock Ownership Plan (“ESOP”), which covers substantially all of its employees. In connection with the second step stock offering on October 4, 2012 the Company issued 270,768 shares of common stock which were added to 59,650 allocated converted shares and 178,949 unallocated converted shares from the original ESOP for a total of 509,367 shares. The 449,717 unallocated shares of common stock are eligible for allocation under the ESOP in exchange for a twenty-year note in the amount of $3.6 million. The $3.6 million for the ESOP purchase was borrowed from the Company with the ESOP shares being pledged as collateral for the loan.

The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Bank’s contributions to the ESOP and earnings on ESOP assets. The Company makes discretionary contributions to the ESOP, as well as paying dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation and expense is recorded. Dividends on allocated shares increase participant accounts.

Participants receive the shares at the end of employment.

Contributions to the ESOP during 2012 and 2011 were $201 and $114. ESOP related expenses totaled $195 and $81 during 2012 and 2011.

Shares held by the ESOP were as follows at year-end:

	2012		2011
Allocated to participants		82,136		59,650
Unearned		427,231		178,949
Total ESOP shares		509,367		238,599
Fair value of unearned shares	$	3,751	$	1,085

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Parent Company Only Condensed Financial Information (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
CONDENSED STATEMENTS OF INCOME
Interest income	$ 4,863	$ 5,096	$ 4,876	$ 4,997	$ 4,985	$ 4,922	$ 4,610	$ 4,874
Interest expense									(4,392)	(5,871)
Other expenses									(1,475)	(1,253)
Income tax benefit									(1,496)	(736)
Net income	945	1,371	1,042	927	831	1,146	487	778	4,285	3,242
Parent Company [Member]
CONDENSED STATEMENTS OF INCOME
Dividends from banking subsidiary										2,265
Interest income									75	50
Interest expense									(282)	(281)
Other expenses									(223)	(197)
Income (loss) before income tax and undistributed subsidiary income									(430)	1,837
Income tax benefit									(146)	(146)
Equity in undistributed income or net income of banking subsidiary									4,569	1,259
Net income									$ 4,285	$ 3,242

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Derivatives

12 Months Ended

Dec. 31, 2012

Derivatives [Abstract]

DERIVATIVES

NOTE 18 – DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

Interest Rate Swaps Designated as Cash Flow Hedges: Interest rate swaps with notional amounts of $30.25 million as of December 31, 2012 and 2011, were designated as cash flow hedges of subordinated debentures, certain CDARS deposits and FHLB advances and were determined to be fully effective during all periods presented. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets (liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The hedge would no longer be considered effective if a portion of the hedge becomes ineffective, the item hedged is no longer in existence or the Company discontinues hedge accounting. The Company expects the hedges to remain fully effective during the remaining terms of the swaps. The Company does not expect any amounts to be reclassed from other comprehensive income over the next 12 months.

Information related to the interest-rate swaps designated as cash flow hedges as of year-end is as follows:

	2012			2011
Subordinated debentures
Notional amount	$	5,000		$	5,000
Fixed interest rate payable		5.54	%		5.54	%
Variable interest rate receivable (Three month LIBOR plus 3.10%)		3.41	%		3.67	%
Unrealized gains (losses)		(131	)		(192	)
Maturity date		March 26, 2014
CDARS deposits
Notional amount	$	10,250		$	10,250
Fixed interest rate payable		3.19	%		3.19	%
Variable interest rate receivable (One month LIBOR plus 0.55%)		0.76	%		0.84	%
Unrealized gains (losses)		(428	)		(569	)
Maturity date		October 9, 2014

	2012			2011
FHLB Advance
Notional amount	$	5,000		$	5,000
Fixed interest rate payable		3.54	%		3.54	%
Variable interest rate receivable (Three month LIBOR plus 0.22%)		0.53	%		0.78	%
Unrealized gains (losses)		(395	)		(443	)
Maturity date		September 20, 2015
FHLB Advance
Notional amount	$	10,000		$	10,000
Fixed interest rate payable		3.69	%		3.69	%
Variable interest rate receivable (Three month LIBOR plus 0.25%)		0.57	%		0.66	%
Unrealized gains (losses)		(1,030	)		(1,057	)
Maturity date		July 19, 2016

Interest expense recorded on these swap transactions totaled $(976) and $(998) during 2012 and 2011 and is reported as a component of interest expense on subordinated debentures, deposits and FHLB advances.

The following table presents the net gains (losses) recorded in accumulated other comprehensive income (loss) and the Consolidated Statements of Income relating to the cash flow derivative instruments for the year ended December 31:

	Net amount of gain (loss) recognized in OCI (Effective Portion) 2012		Net amount of gain  (loss) reclassified from OCI to interest income 2012		Net amount of gain (loss) recognized in other non interest  income (Ineffective Portion) 2012
Interest rate contracts	$	182	$	—	$	—

	Net amount of gain (loss) recognized in OCI (Effective Portion) 2011			Net amount of gain (loss) reclassified from OCI to interest income 2011		Net amount of gain (loss) recognized in other non interest  income (Ineffective Portion) 2011
Interest rate contracts	$	(502	)	$	—	$	—

The following table reflects the cash flow hedges included in the consolidated balance sheets as of December 31:

	2012
	Notional Amount			Fair Value
Included in other liabilities:
Interest rate swaps related to	$	(5,000	)	$	(131	)
Subordinated debentures
CDARS deposits		(10,250	)		(428	)
FHLB advances		(15,000	)		(1,425	)
Total included in other liabilities				$	(1,984	)

	2011
	Notional Amount			Fair Value
Included in other liabilities:
Interest rate swaps related to	$	(5,000	)	$	(192	)
Subordinated debentures
CDARS deposits		(10,250	)		(569	)
FHLB advances		(15,000	)		(1,500	)
Total included in other liabilities				$	(2,261	)

Interest Rate Swaps Designated as Fair Value Hedges: An interest rate swap with a notional amount of $5,000 as of December 31, 2011 was designated as a fair value hedge of certain brokered deposits. On September 15, 2012, this fair value hedge of certain brokered deposits was called by the counterparty. Information related to the interest-rate swap designated as a fair value hedge as of December 31, 2011 is as follows:

	2011
Brokered deposits
Notional amount	$	5,000
Variable interest rate payable (One month LIBOR less 0.25%)		0.03	%
Fixed interest rate receivable		1.25	%
Maturity date		September 15, 2020

Interest income (expense) recorded on this swap transaction totaled $44 and $62 for the years ended December 31, 2012 and 2011 and is reported as a component of interest expense on deposits. Gains (losses) on the fair market value hedge are recorded in other noninterest income and totaled $3 and $(14) for the years ended December 31, 2012 and 2011.

The following table reflects the fair value hedge included in the consolidated balance sheets as of December 31, 2011:

	2011
	Notional Amount			Fair Value
Included in other liabilities:
Interest rate swaps related to brokered deposits	$	(5,000	)	$	(22	)
Total included in other liabilities				$	(22	)

The counterparty to the Company’s derivatives is exposed to credit risk whenever the derivative is in a liability position. As a result, the Company has collateralized the liability with cash and security collateral held in safekeeping by Bank of New York. At December 31, 2012 and 2011, the Company had $220, respectively, in cash and securities with fair market values of $2,586 and $3,761, respectively, posted as collateral for these derivatives.

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Income Taxes (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Deferred tax assets
Deferred officer compensation	$ 834	$ 758
Bad debt expense	1,662	1,461
Indiana net operating loss carryforwards		38
Tax credit carryforwards		509
Write downs of other real estate owned	144	57
Capital loss carryforwards	90	102
Nonaccrual loan interest	345	176
Market value adjustment on acquired assets and liabilities	54	87
Net unrealized losses on interest rate swaps	674	769
Other	100	106
Deferred tax assets gross	3,903	4,063
Deferred tax liabilities
Mortgage servicing rights	(133)	(135)
Accretion	(4)	(3)
FHLB stock dividends	(137)	(137)
Deferred loan fees	(83)	(69)
Prepaid expenses	(116)	(111)
Depreciation	(348)	(355)
Net unrealized gains on securities available for sale	(1,892)	(1,815)
Amortization of other intangible assets	(140)	(184)
Deferred income tax liabilities	(2,853)	(2,809)
Valuation allowance	(356)	(419)
Deferred tax assets liabilities net	$ 694	$ 835

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Data (Unaudited) [Abstract]

Quarterly Financial Data

	Interest Income		Net Interest Income		Net Income		Earnings Per Share Basic and Diluted
2012
First quarter	$	4,997	$	3,769	$	927	$	0.16
Second quarter		4,876		3,734		1,042		0.17
Third quarter		5,096		4,026		1,371		0.23
Fourth quarter		4,863		3,911		945		0.16
2011
First quarter	$	4,874	$	3,277	$	778	$	0.14
Second quarter		4,610		3,075		487		0.08
Third quarter		4,922		3,482		1,146		0.20
Fourth quarter		4,985		3,686		831		0.14

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Regulatory Capital Matters (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012
Regulatory Capital Matters (Textual) [Abstract]
Consolidated regulatory capital	$ 500,000,000
House finance	65.00%
Dividends	$ 6,534,000

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Income tax expense (benefit)

	2012			2011
Current expense (benefit)
Federal	$	1,355		$	734
State		172			—
		1,527			734
Deferred expense
Federal		(31	)		1
State		63			136
		32			137
Change in valuation allowance related to realization of net state deferred tax asset		(63	)		(135	)
Total	$	1,496		$	736

The net deferred tax assets

	2012			2011
Deferred tax assets
Deferred officer compensation	$	834		$	758
Bad debt expense		1,662			1,461
Indiana net operating loss carryforwards		—			38
Tax credit carryforwards		—			509
Write downs of other real estate owned		144			57
Capital loss carryforwards		90			102
Nonaccrual loan interest		345			176
Market value adjustment on acquired assets and liabilities		54			87
Net unrealized losses on interest rate swaps		674			769
Other		100			106
		3,903			4,063
Deferred tax liabilities
Mortgage servicing rights		(133	)		(135	)
Accretion		(4	)		(3	)
FHLB stock dividends		(137	)		(137	)
Deferred loan fees		(83	)		(69	)
Prepaid expenses		(116	)		(111	)
Depreciation		(348	)		(355	)
Net unrealized gains on securities available for sale		(1,892	)		(1,815	)
Amortization of other intangible assets		(140	)		(184	)
		(2,853	)		(2,809	)
Valuation allowance		(356	)		(419	)
	$	694		$	835

Income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate

	2012			2011
Expected income tax expense at
Federal tax rate	$	1,966		$	1,353
State tax expense, net of federal benefit		114
Increase (decrease) resulting from:
Effect of tax exempt income (net)		(626	)		(617	)
Other, net		42			—
Total income tax expense	$	1,496		$	736
Effective tax rate		25.87	%		18.50	%

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Derivatives (Details 1) (Interest rate contracts [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Interest rate contracts [Member]
Net losses recorded in accumulated other comprehensive income (loss) and Income relating to the cash flow derivative
Net amount of gain (loss) recognized in OCI (Effective Portion)	$ 182	$ (502)
Net amount of gain (loss) reclassified from OCI to interest income
Net amount of gain (loss) recognized in other non interest income (Ineffective Portion)

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 4,285	$ 3,242
Other comprehensive income: Unrealized gains/losses on securities
Unrealized holding gain arising during the period	606	5,298
Reclassification adjustment for gains included in net income	(378)	(627)
Net unrealized gains	228	4,671
Tax effect	(77)	(1,588)
Net of tax	151	3,083
Unrealized gains/losses on cash flow hedges
Unrealized holding gain/loss arising during period	277	(761)
Net unrealized gains/losses	277	(761)
Tax effect	(95)	259
Net of tax	182	(502)
Total other comprehensive income	333	2,581
Comprehensive income	$ 4,618	$ 5,823

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Federal Home Loan Bank Advances (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Borrowed amount for ESOP purchase	$ 86,882	$ 99,771
Federal Home Loan Bank Advances (Textual) [Abstract]
Authorized to borrow from Federal Home Loan Bank	75,829	74,864
Bank's indebtedness to the FHLB	49,011	72,027
LIBOR Adjustable interest rate, reset period	3 Month LIBOR rate
U.S. federal agency [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Borrowed amount for ESOP purchase	$ 31,036	$ 18,601

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Securities

12 Months Ended

Dec. 31, 2012

Securities [Abstract]

SECURITIES

NOTE 2 – SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at December 31, 2012 and 2011 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2012
U.S. federal agency	$	8,045	$	360	$	—		$	8,405
State and municipal		42,161		3,479		(26	)		45,614
Mortgage-backed securities – residential		11,819		572		(6	)		12,385
Government agency sponsored collateralized mortgage obligations		54,070		1,198		(112	)		55,156
Corporate debt securities		3,959		110		(9	)		4,060
Total	$	120,054	$	5,719	$	(153	)	$	125,620

	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
2011
U.S. federal agency	$	12,187	$	414	$	—		$	12,601
State and municipal		40,012		3,094		—			43,106
Mortgage-backed securities – residential		30,946		872		(29	)		31,789
Government agency sponsored collateralized mortgage obligations		43,491		1,001		(14	)		44,478
Total	$	126,636	$	5,381	$	(43	)	$	131,974

At December 31, 2012 and 2011, all of our mortgage backed securities were issued by U.S. government-sponsored enterprises and all of our collateralized mortgage obligations were issued by either U.S. government-sponsored enterprises or the U.S. Small Business Administration.

The proceeds from sales of securities available-for-sale were as follows:

	2012			2011
Proceeds	$	28,059		$	39,873
Gross gains		526			687
Gross losses		(152	)		(60	)

Proceeds from calls of securities available for sale during the years ended December 31, 2012 and 2011 were $5,495 and $5,045 with gross gains of $4 and $0 and gross losses of $0 and $0.

The amortized cost and fair value of the investment securities portfolio are shown by expected maturity. Securities not due at a single maturity date, primarily mortgage-backed securities and CMOs, are shown separately.

	December 31, 2012
	Amortized Cost		Fair Value
Due in one year or less	$	—	$	—
Due from one to five years		15,682		16,385
Due from five to ten years		16,683		17,853
Due after ten years		21,800		23,841
Subtotal		54,165		58,079
Mortgage-backed securities and CMOs		65,889		67,541
Total	$	120,054	$	125,620

Securities pledged at year-end 2012 and 2011 had a carrying amount of approximately $42,151 and $33,661 and were pledged to secure public deposits, FHLB advances, short-term borrowings through the Federal Reserve Bank discount window, treasury tax and loan payments and cash flow hedges.

At year-end 2012 and 2011, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

Securities with unrealized losses at year-end 2012, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

December 31, 2012	Continuing Unrealized Loss For Less Than 12 Months					Continuing Unrealized Loss For 12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
State and municipal	$	1,611	$	(26	)	$	—	$	—	$	1,611	$	(26	)
Mortgage-backed securities – residential		1,012		(6	)		—		—		1,012		(6	)
Government agency sponsored collateralized mortgage obligations		12,392		(112	)						12,392		(112	)
Corporate debt securities		1,489		(9	)		—		—		1,489		(9	)
Total temporarily impaired	$	16,504	$	(153	)	$	—	$	—	$	16,504	$	(153	)

Securities with unrealized losses at year-end 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

December 31, 2011	Continuing Unrealized Loss For Less Than 12 Months					Continuing Unrealized Loss For 12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Mortgage-backed securities – residential	$	5,646	$	(29	)	$	—	$	—	$	5,646	$	(29	)
Government agency sponsored collateralized mortgage obligations		2,147		(14	)		—		—		2,147		(14	)
Total temporarily impaired	$	7,793	$	(43	)	$	—	$	—	$	7,793	$	(43	)

At December 31, 2012, the Company held 18 investments in debt securities which were in an unrealized loss position of which all were in an unrealized loss position for less than twelve months. Management periodically evaluates each investment security for potential other than temporary impairment, relying primarily on industry analyst reports and observation of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities and that the noted declines in fair value are considered temporary and due only to normal market interest rate fluctuations. The Company does not intend to sell the securities and it is not more likely than not it will be required to sell these debt securities before their anticipated recovery.

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Loans (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$ 1,291	$ 251
Collectively evaluated for impairment	3,017	3,521
Acquired with deteriorated credit quality
Total ending allowance	4,308	3,772
Loans:
Loans individually evaluated for impairment	8,515	6,274
Loans collectively evaluated for impairment	308,634	291,881
Loans acquired with deteriorated credit quality	851	976
Total ending loan balance	318,000	299,131
Commercial [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	1,137	112
Collectively evaluated for impairment	1,994	2,662
Acquired with deteriorated credit quality
Total ending allowance	3,131	2,774
Loans:
Loans individually evaluated for impairment	6,337	4,630
Loans collectively evaluated for impairment	117,682	121,236
Loans acquired with deteriorated credit quality	712	824
Total ending loan balance	124,731	126,690
Commercial Mortgage [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	132	128
Collectively evaluated for impairment	269	246
Acquired with deteriorated credit quality
Total ending allowance	401	374
Loans:
Loans individually evaluated for impairment	2,125	1,630
Loans collectively evaluated for impairment	34,731	43,788
Loans acquired with deteriorated credit quality	139	152
Total ending loan balance	36,995	45,570
Mortgage Warehouse [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment
Collectively evaluated for impairment	601	393
Acquired with deteriorated credit quality
Total ending allowance	601	393
Loans:
Loans individually evaluated for impairment
Loans collectively evaluated for impairment	137,467	103,864
Loans acquired with deteriorated credit quality
Total ending loan balance	137,467	103,864
Residential Construction [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment
Collectively evaluated for impairment	2	3
Acquired with deteriorated credit quality
Total ending allowance	2	3
Loans:
Loans individually evaluated for impairment
Loans collectively evaluated for impairment	1,466	3,045
Loans acquired with deteriorated credit quality
Total ending loan balance	1,466	3,045
Indirect Auto [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment
Collectively evaluated for impairment	7	19
Acquired with deteriorated credit quality
Total ending allowance	7	19
Loans:
Loans individually evaluated for impairment
Loans collectively evaluated for impairment	1,154	2,249
Loans acquired with deteriorated credit quality
Total ending loan balance	1,154	2,249
Commercial: Home Equity [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	22	11
Collectively evaluated for impairment	108	108
Acquired with deteriorated credit quality
Total ending allowance	130	119
Loans:
Loans individually evaluated for impairment	53	14
Loans collectively evaluated for impairment	12,267	13,002
Loans acquired with deteriorated credit quality
Total ending loan balance	12,320	13,016
Consumer and Other [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment
Collectively evaluated for impairment	36	90
Acquired with deteriorated credit quality
Total ending allowance	36	90
Loans:
Loans individually evaluated for impairment
Loans collectively evaluated for impairment	3,867	4,697
Loans acquired with deteriorated credit quality
Total ending loan balance	3,867	4,697
Unallocated [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment
Collectively evaluated for impairment
Acquired with deteriorated credit quality
Total ending allowance
Loans:
Loans individually evaluated for impairment
Loans collectively evaluated for impairment
Loans acquired with deteriorated credit quality
Total ending loan balance

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Goodwill and Intangible Assets (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Estimated amortization expense
2013	$ 85
2014	66
2015	51
2016	40
2017	$ 34

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Derivatives (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Subordinated debentures [Member]
Interest-rate swaps designated as cash flow hedges
Notional amount	$ 5,000	$ 5,000
Fixed interest rate payable	5.54%	5.54%
Unrealized gains (losses)	(131)	(192)
Maturity date	Mar. 26, 2014
Subordinated debentures [Member] | Three month LIBOR plus 3.10% [Member]
Interest-rate swaps designated as cash flow hedges
Variable interest rate receivable	3.41%	3.67%
CDARS deposits [Member]
Interest-rate swaps designated as cash flow hedges
Notional amount	10,250	10,250
Fixed interest rate payable	3.19%	3.19%
Unrealized gains (losses)	(428)	(569)
Maturity date	Oct. 09, 2014
CDARS deposits [Member] | One month LIBOR plus 0.55% [Member]
Interest-rate swaps designated as cash flow hedges
Variable interest rate receivable	0.76%	0.84%
FHLB advance (Sep 20, 2015) [Member]
Interest-rate swaps designated as cash flow hedges
Notional amount	5,000	5,000
Fixed interest rate payable	3.54%	3.54%
Unrealized gains (losses)	(395)	(443)
Maturity date	Sep. 20, 2015
FHLB advance (Sep 20, 2015) [Member] | Three month LIBOR plus 0.22% [Member]
Interest-rate swaps designated as cash flow hedges
Variable interest rate receivable	0.53%	0.78%
FHLB advance (Jul 19, 2016) [Member]
Interest-rate swaps designated as cash flow hedges
Notional amount	10,000	10,000
Fixed interest rate payable	3.69%	3.69%
Unrealized gains (losses)	$ (1,030)	$ (1,057)
Maturity date	Jul. 19, 2016
FHLB advance (Jul 19, 2016) [Member] | Three month LIBOR plus 0.25% [Member]
Interest-rate swaps designated as cash flow hedges
Variable interest rate receivable	0.57%	0.66%

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Fair Value (Details 1) (Fair Value Measurements Recurring [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Financial Assets
Total investment securities available-for-sale	$ 125,620	$ 131,974
Loans held for sale	1,155	3,049
Derivatives - residential mortgage loan commitments	79	57
Financial Liabilities
Derivatives - interest rate swaps	(1,984)	(2,283)
U.S. federal agency [Member]
Financial Assets
Total investment securities available-for-sale	8,405	12,601
State and municipal [Member]
Financial Assets
Total investment securities available-for-sale	45,614	43,106
Mortgage-backed securities - residential [Member]
Financial Assets
Total investment securities available-for-sale	12,385	31,789
Corporate debt securities [Member]
Financial Assets
Total investment securities available-for-sale	4,060
Government agency sponsored collateralized mortgage obligations [Member]
Financial Assets
Total investment securities available-for-sale	55,156	44,478
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial Assets
Total investment securities available-for-sale
Loans held for sale
Derivatives - residential mortgage loan commitments
Financial Liabilities
Derivatives - interest rate swaps
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. federal agency [Member]
Financial Assets
Total investment securities available-for-sale
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | State and municipal [Member]
Financial Assets
Total investment securities available-for-sale
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Mortgage-backed securities - residential [Member]
Financial Assets
Total investment securities available-for-sale
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate debt securities [Member]
Financial Assets
Total investment securities available-for-sale
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Government agency sponsored collateralized mortgage obligations [Member]
Financial Assets
Total investment securities available-for-sale
Significant Other Observable Inputs (Level 2) [Member]
Financial Assets
Total investment securities available-for-sale	125,620	131,974
Loans held for sale	1,155	3,049
Derivatives - residential mortgage loan commitments	79	57
Financial Liabilities
Derivatives - interest rate swaps	(1,984)	(2,283)
Significant Other Observable Inputs (Level 2) [Member] | U.S. federal agency [Member]
Financial Assets
Total investment securities available-for-sale	8,405	12,601
Significant Other Observable Inputs (Level 2) [Member] | State and municipal [Member]
Financial Assets
Total investment securities available-for-sale	45,614	43,106
Significant Other Observable Inputs (Level 2) [Member] | Mortgage-backed securities - residential [Member]
Financial Assets
Total investment securities available-for-sale	12,385	31,789
Significant Other Observable Inputs (Level 2) [Member] | Corporate debt securities [Member]
Financial Assets
Total investment securities available-for-sale	4,060
Significant Other Observable Inputs (Level 2) [Member] | Government agency sponsored collateralized mortgage obligations [Member]
Financial Assets
Total investment securities available-for-sale	55,156	44,478
Significant Unobservable Inputs (Level 3) [Member]
Financial Assets
Total investment securities available-for-sale
Loans held for sale
Derivatives - residential mortgage loan commitments
Financial Liabilities
Derivatives - interest rate swaps
Significant Unobservable Inputs (Level 3) [Member] | U.S. federal agency [Member]
Financial Assets
Total investment securities available-for-sale
Significant Unobservable Inputs (Level 3) [Member] | State and municipal [Member]
Financial Assets
Total investment securities available-for-sale
Significant Unobservable Inputs (Level 3) [Member] | Mortgage-backed securities - residential [Member]
Financial Assets
Total investment securities available-for-sale
Significant Unobservable Inputs (Level 3) [Member] | Corporate debt securities [Member]
Financial Assets
Total investment securities available-for-sale
Significant Unobservable Inputs (Level 3) [Member] | Government agency sponsored collateralized mortgage obligations [Member]
Financial Assets
Total investment securities available-for-sale

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Loan Commitments and Other Related Activities

12 Months Ended

Dec. 31, 2012

Loan Commitments and Other Related Activities [Abstract]

LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

NOTE 19 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amounts of financial instruments with off-balance-sheet risk at year end were as follows:

	2012				2011
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	777	$	1,852	$	93	$	981
Unused lines of credit		4,787		25,484		6,367		21,037
Standby letters of credit		213		1,692		286		2,109
Total	$	5,777	$	29,028	$	6,746	$	24,127

Commitments to make loans are generally made for periods of 60 days or less. The fixed rate loan commitments have interest rates from 5.30% to 5.95% and maturities of 60 months at December 31, 2012. The fixed rate loan commitment has an interest rate of 6.25% and a maturity of 60 months at December 31, 2011.

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Basic
Net income	$ 4,285	$ 3,242
Weighted average common shares outstanding	6,161,686	6,076,249
Less: Average unallocated ESOP shares	(239,440)	(184,898)
Average shares	5,922,246	5,891,351
Basic earnings per common share	$ 0.72	$ 0.55
Diluted
Net income	$ 4,285	$ 3,242
Weighted average common shares outstanding for basic earnings per common share	5,922,246	5,891,351
Add: Dilutive effects of assumed exercises of stock options	1,678	2,189
Average shares and dilutive potential common shares	5,923,924	5,893,793
Diluted earnings per common share	$ 0.72	$ 0.55

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Fair Value (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Fair Value (Textual) [Abstract]
Discount rate	10.00%	9.00%
Outstanding balance	$ 873	$ 531
Valuation allowance	253	73
Fair Value (Additional Textual) [Abstract]
Impaired loans, collateral dependent	3,530	1,781
Valuation allowance, impaired loans	1,291	251
Additional provision for loan losses impaired loan	1,346	604
Other real estate owned, carrying value	620	458
Write-down amount, other real estate owned	280	185
Carrying amount, mortgage servicing rights	273	271
Loan held for sale outstanding balance	1,121	3,006
Change of unrealized gains on loans held for sale	(10)	(3)
Due period of loan	90 days or more	90 days or more
Loans held for sale [Member]
Fair Value (Textual) [Abstract]
Valuation allowance	34	43
Loan held for sale carrying amount	1,155	3,049
Mortgage servicing rights [Member]
Fair Value (Textual) [Abstract]
Discount rate	10.00%	9.00%
Default rate approximately	0.50%	0.50%
Outstanding balance	431	390
Valuation allowance	158	119
Charge on mortgage servicing rights	$ 40	$ 27
Maximum [Member]
Fair Value (Textual) [Abstract]
Prepayment rate	30.30%	23.80%
Maximum [Member] | Mortgage servicing rights [Member]
Fair Value (Textual) [Abstract]
Prepayment rate	30.30%	23.80%
Minimum [Member]
Fair Value (Textual) [Abstract]
Prepayment rate	14.90%	14.30%
Minimum [Member] | Mortgage servicing rights [Member]
Fair Value (Textual) [Abstract]
Prepayment rate	14.90%	14.30%

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Deposits (Tables)

12 Months Ended

Dec. 31, 2012

Deposits/Federal Home Loan Bank Advances/Regulatory Capital Matters [Abstract]

Scheduled maturities of time deposits

2013	$	64,989
2014		29,910
2015		23,954
2016		2,684
2017		2,728
Thereafter		566
	$	124,831

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2012

Employee Benefit Plans [Abstract]

EMPLOYEE BENEFIT PLANS

NOTE 12 – EMPLOYEE BENEFIT PLANS

401(k) Plan: The Bank maintains a defined contribution 401(k) plan for all employees. Employees must be 21 years of age to participate in the plan. As of February 1, 2010, employees are eligible to enter the 401(k) Plan during the first quarter following one year of employment. Prior to February 1, 2010, there was no minimum service requirement to enter the 401(k) Plan. Basic contributions may be made by the Bank in the range of 1% to 6% of employee compensation. Voluntary participant contributions may be made in the range of 1% to 75% of employee compensation. The employer will make matching employer contributions equal to 25% of the participant’s voluntary contributions on the first 6% of the participant’s voluntary contributions. Employee contributions are 100% vested. Employer basic and matching contributions are vested over 5 years. Employer basic and matching contributions totaled approximately $52 and $52 for the years ended December 31, 2012 and 2011.

Supplemental Employee Retirement Plan: Effective August 1, 2002, a supplemental retirement plan covers selective officers. The Bank is recording an expense equal to the projected present value of payments due at retirement based on the projected remaining years of service. The obligation under the plans was approximately $2,162 and $1,958 for the years ended December 31, 2012 and 2011 and is included in other liabilities in the consolidated balance sheets. The expense attributable to the plan, included in salaries and employee benefits, was approximately $288 and $292 for the years ended December 31, 2012 and 2011.

Split-Dollar Life Insurance Plans: Effective January 1, 2003, life insurance plans were provided for certain officers on a split-dollar basis. The officer’s designated beneficiary(s) is entitled to a percentage of the death proceeds from the split-dollar policies. The Bank is entitled to the remainder of the death proceeds less any loans on the policies and unpaid interest or cash withdrawals previously incurred by the Bank. The cash surrender value of these life insurance policies related to the Bank’s supplemental employee retirement plan totaled $11,263 and $10,876 at December 31, 2012 and 2011. The Bank is the owner of the split-dollar policies.

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Stock-Based Compensation (Details 1) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Summary of activity in the stock option plan
Outstanding, Shares, beginning balance	281,829
Granted, Shares
Exercised, Shares
Forfeited or expired, Shares
Outstanding, Shares, ending balance	281,829	281,829
Outstanding, Weighted Average Exercise Price, beginning balance	$ 6.44
Outstanding, Weighted Average Remaining Contractual Term, beginning balance	9 years 8 months 12 days
Granted, Weighted Average Exercise Price
Exercised, Weighted Average Exercise Price
Forfeited or expired, Weighted Average Exercise Price
Outstanding, Weighted Average Exercise Price, ending balance	$ 6.44	$ 6.44
Outstanding, Weighted Average Remaining Contractual Term, ending balance	8 years 8 months 12 days	9 years 8 months 12 days
Outstanding, Aggregate Intrinsic Value, beginning balance
Outstanding, Aggregate Intrinsic Value, Ending balance	2,474
Fully vested and expected to vest, Shares	281,829
Fully vested and expected to vest, Weighted Average Exercise Price	$ 6.44
Fully vested and expected to vest, Weighted Average Remaining Contractual Term	8 years 8 months 12 days
Fully vested and expected to vest, Aggregate Intrinsic Value	2,474
Exercisable at end of period, Shares	56,366
Exercisable at end of period, Weighted Average Exercise Price	$ 6.44
Exercisable at end of period, Weighted Average Remaining Contractual Term	8 years 8 months 12 days
Exercisable at end of period, Aggregate Intrinsic Value	$ 132
Information related to the stock option plan
Weighted average fair value of options granted		$ 2.16