Loans

12 Months Ended

Dec. 31, 2011

Loans [Abstract]

LOANS

NOTE 3 LOANS

Loans at year end were as follows:

		September 30,			September 30,
	2011			2010
Commercial real estate
Owner occupied	$	100,710		$	111,261
Non-owner occupied		80,585			76,592
Other		17,394			16,582
Commercial		74,875			76,635
Residential real estate
1-4 family residential		145,743			154,132
Home equity lines of credit		21,943			23,624
Consumer
Indirect		115,681			116,999
Direct		11,596			11,302
Other		1,520			1,485
Subtotal		570,047			588,612
Net deferred loan (fees) costs		1,759			1,755
Allowance for loan losses		(9,820	)		(9,307	)
Net loans	$	561,986		$	581,060

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

December 31, 2011

		September 30,			September 30,			September 30,			September 30,			September 30,		September 30,
	Commercial Real Estate			Commercial			Residential Real Estate			Consumer			Unallocated		Total
Allowance for loan losses
Beginning balance	$	5,780		$	1,707		$	881		$	875		$	64	$	9,307
Provision for loan losses		302			197			2,205			373			573		3,650
Loans charged off		(1,246	)		(414	)		(1,736	)		(1,125	)		0		(4,521	)
Recoveries		44			39			452			849			0		1,384
Total ending allowance balance	$	4,880		$	1,529		$	1,802		$	972		$	637	$	9,820

Activity in the allowance for loan losses for the years ending December 31, 2010 and 2009 was as follows:

		September 30,			September 30,
	2010			2009
Allowance for loan losses
Beginning balance	$	7,400		$	5,553
Provision for loan losses		8,078			6,050
Loans charged off		(6,745	)		(4,799	)
Recoveries		574			596
Ending balance	$	9,307		$	7,400

The following tables present 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 and 2010. The recorded investment in loans includes the unpaid principal balance and unamortized loan origination fees and costs, but excludes accrued interest receivable which is not considered to be material.

December 31, 2011

		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,
Allowance for loan losses:	Commercial Real Estate		Commercial		Residential Real Estate		Consumer		Unallocated		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	748	$	237	$	0	$	0	$	0	$	985
Collectively evaluated for impairment		4,132		1,292		1,802		972		637		8,835
Total ending allowance balance	$	4,880	$	1,529	$	1,802	$	972	$	637	$	9,820
Loans:
Loans individually evaluated for impairment	$	8,317	$	1,341	$	697	$	0	$	0	$	10,355
Loans collectively evaluated for impairment		189,724		73,534		166,334		131,859		0		561,451
Total ending loans balance	$	198,041	$	74,875	$	167,031	$	131,859	$	0	$	571,806

December 31, 2010

		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,
Allowance for loan losses:	Commercial Real Estate		Commercial		Residential Real Estate		Consumer		Unallocated		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	572	$	33	$	0	$	0	$	0	$	605
Collectively evaluated for impairment		5,208		1,674		881		875		64		8,702
Total ending allowance balance	$	5,780	$	1,707	$	881	$	875	$	64	$	9,307
Loans:
Loans individually evaluated for impairment	$	6,045	$	1,015	$	0	$	0	$	0	$	7,060
Loans collectively evaluated for impairment		197,849		75,620		177,067		132,771		0		583,307
Total ending loans balance	$	203,894	$	76,635	$	177,067	$	132,771	$	0	$	590,367

The following table presents information related to impaired loans by class of loans as of and for year ended December 31, 2011. The recorded investment in loans excludes accrued interest receivable due to immateriality.

		September 30,		September 30,		September 30,		September 30,
December 31, 2011	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment
With no related allowance recorded:
Commercial real estate
Owner occupied	$	759	$	762	$	0	$	844
Non-owner occupied		339		340		0		443
Other		589		590		0		767
Commercial		1,062		1,063		0		1,203
Residential real estate
1-4 family residential		695		697		0		697
Home equity lines of credit		0		0		0		0
Consumer
Indirect		0		0		0		0
Direct		0		0		0		0
Other		0		0		0		0
Subtotal		3,444		3,452		0		3,954
With an allowance recorded:
Commercial real estate
Owner occupied		4,164		4,169		309		4,316
Non-owner occupied		2,455		2,456		439		2,883
Other		0		0		0		0
Commercial		278		278		237		296
Residential real estate
1-4 family residential		0		0		0		0
Home equity lines of credit		0		0		0		0
Consumer
Indirect		0		0		0		0
Direct		0		0		0		0
Other		0		0		0		0
Subtotal		6,897		6,903		985		7,495
Total	$	10,341	$	10,355	$	985	$	11,449

Interest income recognized during impairment was immaterial.

The following table presents information related to impaired loans by class of loans as of and for the year ended December 31, 2010. The recorded investment in loans excludes accrued interest receivable due to immateriality.

		September 30,		September 30,		September 30,
December 31, 2010	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Commercial real estate
Owner occupied	$	821	$	818	$	0
Non-owner occupied		466		465		0
Other		365		364		0
Commercial		800		798		0
Residential real estate
1-4 family residential		0		0		0
Home equity lines of credit		0		0		0
Consumer
Indirect		0		0		0
Direct		0		0		0
Other		0		0		0
Subtotal		2,452		2,445		0
With an allowance recorded:
Commercial real estate
Owner occupied		3,147		3,141		134
Non-owner occupied		167		167		3
Other		1,097		1,090		435
Commercial		219		217		33
Residential real estate
1-4 family residential		0		0		0
Home equity lines of credit		0		0		0
Consumer
Indirect		0		0		0
Direct		0		0		0
Other		0		0		0
Subtotal		4,630		4,615		605
Total	$	7,082	$	7,060	$	605

The following table presents information for impaired loans as of December 31:

		September 30,		September 30,
	2010		2009
Average of individually impaired loans during year	$	7,755	$	11,407

Interest income recognized during impairment for both periods was immaterial.

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 and loans past due over 90 days still on accrual by class of loans as of December 31, 2011 and December 31, 2010:

		September 30,		September 30,		September 30,		September 30,
	Nonaccrual				Loans Past Due over 90 Days Still Accruing
	2011		2010		2011		2010
Commercial real estate
Owner occupied	$	2,640	$	1,960	$	0	$	0
Non-owner occupied		2,795		550		0		0
Other		590		1,462		0		0
Commercial		527		400		0		0
Residential real estate
1-4 family residential		3,897		3,362		121		190
Home equity lines of credit		299		815		0		10
Consumer
Indirect		12		27		114		53
Direct		0		0		13		48
Other		0		0		2		24
Total	$	10,760	$	8,576	$	250	$	325

The following table presents the aging of the recorded investment in past due loans as of December 31, 2011 and 2010 by class of loans:

		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,
December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due and Nonaccrual		Total Past Due		Loans Not Past Due		Total
Commercial real estate
Owner occupied	$	111	$	0	$	2,640	$	2,751	$	97,630	$	100,381
Non-owner occupied		13		0		2,795		2,808		77,515		80,323
Other		0		0		590		590		16,747		17,337
Commercial		26		0		527		553		74,322		74,875
Residential real estate
1-4 family residential		973		361		4,018		5,352		139,736		145,088
Home equity lines of credit		128		0		299		427		21,516		21,943
Consumer
Indirect		1,458		218		126		1,802		116,941		118,743
Direct		120		41		13		174		11,422		11,596
Other		19		3		2		24		1,496		1,520
Total	$	2,848	$	623	$	11,010	$	14,481	$	557,325	$	571,806

		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,
December 31, 2010	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due and Nonaccrual		Total Past Due		Loans Not Past Due		Total
Commercial real estate
Owner occupied	$	407	$	91	$	1,960	$	2,458	$	108,509	$	110,967
Non-owner occupied		499		59		550		1,108		75,281		76,389
Other		0		0		1,462		1,462		15,076		16,538
Commercial		286		275		400		961		75,674		76,635
Residential real estate
1-4 family residential		2,981		435		3,552		6,968		146,475		153,443
Home equity lines of credit		334		16		825		1,175		22,449		23,624
Consumer
Indirect		1,668		519		80		2,267		117,716		119,983
Direct		253		91		48		392		10,911		11,303
Other		9		1		24		34		1,451		1,485
Total	$	6,437	$	1,487	$	8,901	$	16,825	$	573,542	$	590,367

Troubled Debt Restructurings:

Total troubled debt restructurings were $4.3 million and $3.0 million at December 31, 2011 and 2010 respectively. The Company has allocated $48 thousand and $40 thousand of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2011 and 2010. There are no commitments to lend additional amounts to borrowers with loans that are classified as troubled debt restructurings at December 31, 2011 and December 31, 2010.

During the year ending December 31, 2011, 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.

Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from 18 to 79 months. Modifications involving an extension of the maturity date were for periods ranging from 24 months to 30 years.

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

		September 30,		September 30,		September 30,
	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial real estate
Owner occupied		4	$	2,333	$	2,333
Non-owner occupied		0		0		0
Other		0		0		0
Commercial		1		272		278
Residential real estate
1-4 family residential		2		316		324
Home equity lines of credit		0		0		0
Consumer
Indirect		0		0		0
Direct		0		0		0
Other		0		0		0
Total		7	$	2,921	$	2,935

The troubled debt restructurings described above had an immaterial affect on the allowance for loan losses at December 31, 2011. There were no charge offs as a result of the allowance adjustment.

There was a single loan that was modified as a troubled debt restructuring for which there was a payment default within twelve months following the modification during the year ending December 31, 2011. The default was the result of the borrower’s death during 2011. This troubled debt restructuring increased the allowance for loan losses by an immaterial amount during the year ending December 31, 2011.

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

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 establishes a risk rating at origination for all commercial loan and commercial real estate relationships. For relationships over $300 thousand management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt. Management also affirms the risk ratings for the loans and leases in their respective portfolios on an annual 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. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

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.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,
December 31, 2011	Pass		Special Mention		Sub- standard		Doubtful		Not Rated		Total
Commercial real estate
Owner occupied	$	80,770	$	6,359	$	13,201	$	51	$	0	$	100,381
Non-owner occupied		68,806		2,575		8,942		0		0		80,323
Other		14,491		301		2,545		0		0		17,337
Commercial		65,198		5,963		3,454		260		0		74,875
Total	$	229,265	$	15,198	$	28,142	$	311	$	0	$	272,916

		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,
December 31, 2010	Pass		Special Mention		Sub- standard		Doubtful		Not Rated		Total
Commercial real estate
Owner occupied	$	91,976	$	3,893	$	15,098	$	0	$	0	$	110,967
Non-owner occupied		63,502		1,075		11,812		0		0		76,389
Other		12,005		786		3,747		0		0		16,538
Commercial		65,358		4,076		7,201		0		0		76,635
Total	$	232,841	$	9,830	$	37,858	$	0	$	0	$	280,529

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential, consumer and indirect loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in residential, consumer and indirect auto loans based on payment activity. Nonperforming loans are loans past due 90 days and still accruing interest and nonaccrual loans.

December 31, 2011

		September 30,		September 30,		September 30,		September 30,		September 30,
	Residential Real Estate				Consumer
	1-4 Family Residential		Home Equity Lines of Credit		Indirect		Direct		Other
Performing	$	140,070	$	21,644	$	118,617	$	11,583	$	1,518
Nonperforming		4,018		299		126		13		2
Total	$	145,088	$	21,943	$	118,743	$	11,596	$	1,520

December 31, 2010

		September 30,		September 30,		September 30,		September 30,		September 30,
	Residential Real Estate				Consumer
	1-4 Family Residential		Home Equity Lines of Credit		Indirect		Direct		Other
Performing	$	149,891	$	22,799	$	119,903	$	11,255	$	1,461
Nonperforming		3,552		825		80		48		24
Total	$	153,443	$	23,624	$	119,983	$	11,303	$	1,485

The Company sold residential real estate financing receivables during the year end period December 31, 2011 in the amount of $5.3 million.