Allowance for Loan Losses

The following table presents the activity of the allowance for loan losses by portfolio segment for the three months

ended June 30.



Allowance for Loan Losses:	June 30, 2014
(Dollar amounts in thousands)	Commercial			Residential			Consumer			Unallocated			Total
Beginning balance	$	12,453		$	1,581		$	3,864		$	2,510		$	20,408
Provision for loan losses*	(1,051		)	(54		)	533			(248		)	(820		)
Loans charged -off	(710		)	(633		)	(982		)	—			(2,325		)
Recoveries	158			480			354			—			992
Ending Balance	$	10,850		$	1,374		$	3,769		$	2,262		$	18,255

* Provision before increase of $464 thousand in 2014 for decrease in FDIC indemnification asset



Allowance for Loan Losses:	June 30, 2013
(Dollar amounts in thousands)	Commercial			Residential			Consumer			Unallocated		Total
Beginning balance	$	14,144		$	5,400		$	3,481		$	2,247	$	25,272
Provision for loan losses*	1,660			303			611			126		2,700
Loans charged -off	(1,435		)	(4,127		)	(811		)	—		(6,373		)
Recoveries	162			16			356			—		534
Ending Balance	$	14,531		$	1,592		$	3,637		$	2,373	$	22,133

* Provision before increase of $260 thousand in 2013 for decrease in FDIC indemnification asset

The following table presents the activity of the allowance for loan losses by portfolio segment for the six months

ended June 30.



Allowance for Loan Losses:	June 30, 2014
(Dollar amounts in thousands)	Commercial			Residential			Consumer			Unallocated			Total
Beginning balance	$	12,450		$	1,585		$	3,650		$	2,383		$	20,068
Provision for loan losses*	(319		)	12			1,333			(121		)	905
Loans charged -off	(1,646		)	(805		)	(2,035		)				(4,486		)
Recoveries	365			582			821						1,768
Ending Balance	$	10,850		$	1,374		$	3,769		$	2,262		$	18,255

* Provision before increase of $699 thousand in 2014 for decrease in FDIC indemnification asset



Allowance for Loan Losses:	June 30, 2013
(Dollar amounts in thousands)	Commercial			Residential			Consumer			Unallocated		Total
Beginning balance	$	10,987		$	5,426		$	3,879		$	1,666	$	21,958
Provision for loan losses*	2,924			500			844			707		4,975
Loans charged -off	(1,885		)	(4,399		)	(1,837		)			(8,121		)
Recoveries	2,505			65			751					3,321
Ending Balance	$	14,531		$	1,592		$	3,637		$	2,373	$	22,133

* Provision before increase of $1.01 million in 2013 for decrease in FDIC indemnification asset

The following table presents the allocation of the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method at June 30, 2014 and December 31, 2013.



Allowance for Loan Losses	June 30, 2014
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Individually evaluated for impairment	$	2,590	$	—	$	—	$	—	$	2,590
Collectively evaluated for impairment	7,467		1,295		3,769		2,262		14,793
Acquired with deteriorated credit quality	793		79		—		—		872
Ending Balance	$	10,850	$	1,374	$	3,769	$	2,262	$	18,255



Loans:	June 30, 2014
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Total
Individually evaluated for impairment	$	15,548	$	35	$	—	$	15,583
Collectively evaluated for impairment	1,028,728		476,753		269,610		1,775,091
Acquired with deteriorated credit quality	7,665		1,872		—		9,537
Ending Balance	$	1,051,941	$	478,660	$	269,610	$	1,800,211



Allowance for Loan Losses:	December 31, 2013
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Individually evaluated for impairment	3,158		—		—		—		3,158
Collectively evaluated for impairment	8,421		1,408		3,650		2,383		15,862
Acquired with deteriorated credit quality	871		177		—		—		1,048
Ending Balance	$	12,450	$	1,585	$	3,650	$	2,383	$	20,068



Loans	December 31, 2013
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Total
Individually evaluated for impairment	18,825		37		—		18,862
Collectively evaluated for impairment	1,020,771		481,439		269,352		1,771,562
Acquired with deteriorated credit quality	8,001		2,397		—		10,398
Ending Balance	$	1,047,597	$	483,873	$	269,352	$	1,800,822

The following tables present loans individually evaluated for impairment by class of loans.



					June 30, 2014
	Unpaid Principal		Recorded		Allowance for Loan Losses		Average Recorded		Interest Income		Cash Basis Interest
(Dollar amounts in thousands)	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial
Commercial & Industrial	$	265	$	265	$	—	$	1,359	$	—	$	—
Farmland	—		—		—		—		—		—
Non Farm, Non Residential	250		84		—		97		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	—		—		—		—		—		—
Residential
First Liens	—		—		—		—		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		—		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
With an allowance recorded:
Commercial
Commercial & Industrial	8,895		7,381		1,623		7,850		—		—
Farmland	—		—		—		—		—		—
Non Farm, Non Residential	6,518		6,518		802		6,666		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	1,384		1,384		165		1,159		—		—
Residential
First Liens	35		35		—		36		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		—		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
TOTAL	$	17,347	$	15,667	$	2,590	$	17,167	$	—	$	—



					December 31, 2013
	Unpaid Principal		Recorded		Allowance for Loan Losses		Average Recorded		Interest Income		Cash Basis Interest Income
(Dollar amounts in thousands)	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial
Commercial & Industrial	$	2,120	$	1,918	$	—	$	1,555	$	—	$	—
Farmland	—		—		—		—		—		—
Non Farm, Non Residential	271		105		—		26		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	—		—		—		—		—		—
Residential
First Liens	—		—		—		7		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		—		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
With an allowance recorded:
Commercial
Commercial & Industrial	10,134		8,620		1,612		13,029		217		217
Farmland	—		—		—		356		113		113
Non Farm, Non Residential	7,664		7,204		1,500		7,921		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	1,062		1,062		46		2,979		—		—
Residential
First Liens	37		37		—		524		—		—
Home Equity	—		—		—		113		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		2,216		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
TOTAL	$	21,288	$	18,946	$	3,158	$	28,726	$	330	$	330



	Three Months Ended June 30, 2014						Six Months Ended June 30, 2014
	Average Recorded		Interest Income		Cash Basis Interest Income		Average Recorded		Interest Income		Cash Basis Interest Income
(Dollar amounts in thousands)	Investment		Recognized		Recognized		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial
Commercial & Industrial	$	1,080	$	—	$	—	$	1,359	$	—	$	—
Farmland	—		—		—		—		—		—
Non Farm, Non Residential	93		—		—		97		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	—		—		—		—		—		—
Residential
First Liens	—		—		—		—		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		—		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
With an allowance recorded:
Commercial
Commercial & Industrial	7,466		—		—		7,850		—		—
Farmland	—		—		—		—		—		—
Non Farm, Non Residential	6,397		—		—		6,666		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	1,207		—		—		1,159		—		—
Residential
First Liens	36		—		—		36		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		—		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
TOTAL	$	16,279	$	—	$	—	$	17,167	$	—	$	—



	Three Months Ended June 30, 2013						Six Months Ended June 30, 2013
	Average Recorded		Interest Income		Cash Basis Interest Income		Average Recorded		Interest Income		Cash Basis Interest Income
(Dollar amounts in thousands)	Investment		Recognized		Recognized		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial
Commercial & Industrial	$	1,284	$	—	$	—	$	856	$	—	$	—
Farmland	—		—		—		—		—		—
Non Farm, Non Residential	1,975		—		—		2,798		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	—		—		—		—		—		—
Residential
First Liens	—		—		—		250		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		83		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
With an allowance recorded:
Commercial
Commercial & Industrial	16,669		—		—		17,068		—		—
Farmland	891		—		—		891		—		—
Non Farm, Non Residential	2,609		—		—		3,345		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	1,384		—		—		1,428		—		—
Residential
First Liens	1,213		—		—		1,213		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		293		—		—
Multifamily	—		—		—		—		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
TOTAL	$	26,025	$	—	$	—	$	28,225	$	—	$	—

The table below presents the recorded investment in non-performing loans.



	June 30, 2014						December 31, 2013
	Loans Past Due Over 90 Day Still		Troubled Debt				Loans Past Due Over 90 Day Still		Troubled Debt
(Dollar amounts in thousands)	Accruing		Restructurings		Nonaccrual		Accruing		Restructurings		Nonaccrual
Commercial
Commercial & Industrial	$	—	$	5,053	$	4,606	$	240	$	6,578	$	6,861
Farmland	—		—		91		—		—		99
Non Farm, Non Residential	—		4,080		5,364		489		5,687		4,918
Agriculture	—		—		320		—		—		134
All Other Commercial	—		—		1,720		—		—		1,412
Residential
First Liens	722		4,916		4,493		1,100		4,283		4,047
Home Equity	9		—		287		40		—		195
Junior Liens	80		—		409		147		—		390
Multifamily	—		56		1		—		61		433
All Other Residential	3		—		119		1		—		130
Consumer
Motor Vehicle	108		524		385		187		626		186
All Other Consumer	—		35		611		3		17		974
TOTAL	$	922	$	14,664	$	18,406	$	2,207	$	17,252	$	19,779

There we no loans covered by loss share agreements with the FDIC included in loans past due over 90 days still on accrual at June 30, 2014 but there was $580 thousand at December 31, 2013. Covered loans included in non-accrual loans are $780 thousand at June 30, 2014 and $1.1 million at December 31, 2013. Covered loans of $84 thousand at June 30, 2014 and December 31, 2013 are deemed impaired and have no allowance for loan loss allocated to them, respectively for June 30, 2014 and December 31, 2013. Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The commercial and industrial loans and non farm, non residential loans included in restructured loans above are also on non-accrual.

Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in loans by past due category and class of loans.



	June 30, 2014
	30-59 Days		60-89 Days		Greater than 90 days		Total
(Dollar amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Total
Commercial
Commercial & Industrial	$	2,952	$	905	$	3,199	$	7,056	$	467,757	$	474,813
Farmland	—		—		—		—		92,786		92,786
Non Farm, Non Residential	452		422		565		1,439		235,586		237,025
Agriculture	111		—		151		262		120,851		121,113
All Other Commercial	41		122		188		351		125,853		126,204
Residential
First Liens	1,060		967		2,039		4,066		320,554		324,620
Home Equity	149		10		97		256		40,292		40,548
Junior Liens	245		102		277		624		31,616		32,240
Multifamily	16		—		—		16		73,717		73,733
All Other Residential	—		—		3		3		7,516		7,519
Consumer
Motor Vehicle	2,948		350		115		3,413		245,839		249,252
All Other Consumer	41		28		—		69		20,289		20,358
TOTAL	$	8,015	$	2,906	$	6,634	$	17,555	$	1,782,656	$	1,800,211



	December 31, 2013
	30-59 Days		60-89 Days		Greater than 90 days		Total
(Dollar amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Total
Commercial
Commercial & Industrial	$	1,076	$	266	$	7,900	$	9,242	$	459,076	$	468,318
Farmland	—		—		—		—		92,602		92,602
Non Farm, Non Residential	362		—		2,042		2,404		239,183		241,587
Agriculture	31		32		—		63		136,388		136,451
All Other Commercial	50		217		188		455		108,184		108,639
Residential
First Liens	5,594		1,513		1,701		8,808		324,141		332,949
Home Equity	307		7		40		354		41,350		41,704
Junior Liens	392		170		471		1,033		32,269		33,302
Multifamily	103		19		400		522		66,138		66,660
All Other Residential	88		—		1		89		9,169		9,258
Consumer
Motor Vehicle	3,579		612		227		4,418		243,146		247,564
All Other Consumer	123		22		7		152		21,636		21,788
TOTAL	$	11,705	$	2,858	$	12,977	$	27,540	$	1,773,282	$	1,800,822

During the three and six months ended June 30, 2014 and 2013, the terms of certain loans were modified as troubled debt restructurings (TDRs). The following tables present the activity for TDR's.



			2014
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Total
April 1,	9,343		4,362		620		14,325
Added	441		668		30		1,139
Charged Off	—		—		(19	)	(19	)
Payments	(578	)	(74	)	(72	)	(724	)
June 30,	9,206		4,956		559		14,721



			2013
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Total
April 1,	16,070		4,747		700		21,285
Added	—		—		90		90
Charged Off	—		(50	)	(23	)	(73	)
Payments	(1,065	)	(125	)	(74	)	(1,264	)
June 30,	15,005		4,572		693		20,270



			2014
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Total
January 1,	12,327		4,330		644		17,301
Added	441		801		98		1,340
Charged Off	(1,069	)	—		(39	)	(1,108	)
Payments	(2,493	)	(175	)	(144	)	(2,812	)
June 30,	9,206		4,956		559		14,721



			2013
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Total
January 1,	16,474		4,107		704		21,285
Added	—		780		163		943
Charged Off	—		(50	)	(32	)	(82	)
Payments	(1,469	)	(265	)	(142	)	(1,876	)
June 30,	15,005		4,572		693		20,270

Modification of the terms of such loans typically include 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. No modification in 2014 or 2013 resulted in the 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 twelve months to five years. Modifications involving an extension of the maturity date were for periods ranging from twelve months to ten years.

During the three months ended June 30, 2014 and 2013 the Corporation modified 13 and 8 loans respectively. During the six months ended June 30, 2014 and 2013 the Corporation modified 25 and 16 loans respectively. In 2014 one of these loans was a commercial loan for $441 thousand. The remainder of the 2014 loans and all of the 2013 loans modified were smaller balance consumer and residential loans.

The Corporation has allocated $1.2 million and $3.7 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings at both June 30, 2014 and 2013, respectively. Specific reserves of $2.6 million were allocated to customers whose loan terms have been modified in troubled debt restructurings at December 31, 2013. The Corporation has not committed to lend additional amounts as of June 30, 2014 and 2013 to customers with outstanding loans that are classified as troubled debt restructurings. As of June 30, 2014 and 2013 there have been no loans that have been modified in troubled debt in the past 12 months that were charged off.

Credit Quality Indicators:

The Corporation 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 Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial loans, with an outstanding balance greater than $100 thousand. Any consumer loans outstanding to a borrower who had commercial loans analyzed will be similarly risk rated. This analysis is performed on a quarterly basis. The Corporation 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 debt service capacity of the borrower or of any pledged collateral. These loans have a well-defined weakness or weaknesses which have clearly jeopardized repayment of principal and interest as originally intended. They are characterized by the distinct possibility that the institution will sustain some future loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those graded substandard, with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values.

Furthermore, non-homogeneous loans which were not individually analyzed, but are 90+ days past due or on non-accrual are classified as substandard. Loans included in homogeneous pools, such as residential or consumer may be classified as substandard due to 90+ days delinquency, non-accrual status, bankruptcy, or loan restructuring.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are either less than $100 thousand or are included in groups of homogeneous loans. As of June 30, 2014 and December 31, 2013, and based on the most recent analysis performed, the risk category of loans by class of loans are as follows:



	June 30, 2014
(Dollar amounts in thousands)	Pass		Special Mention		Substandard		Doubtful		Not Rated		Total
Commercial
Commercial & Industrial	$	417,190	$	29,830	$	19,433	$	3,628	$	3,478	$	473,559
Farmland	85,730		5,386		368		—		19		91,503
Non Farm, Non Residential	190,004		20,980		25,427		114		—		236,525
Agriculture	111,137		7,439		849		—		423		119,848
All Other Commercial	105,137		7,756		9,663		38		2,854		125,448
Residential
First Liens	112,178		4,452		8,434		1,070		197,425		323,559
Home Equity	12,014		422		1,452		100		26,497		40,485
Junior Liens	8,284		99		573		65		23,117		32,138
Multifamily	68,865		3,614		1,104		—		—		73,583
All Other Residential	1,287		195		427		—		5,591		7,500
Consumer
Motor Vehicle	11,083		213		339		17		236,521		248,173
All Other Consumer	3,296		47		70		10		16,807		20,230
TOTAL	$	1,126,205	$	80,433	$	68,139	$	5,042	$	512,732	$	1,792,551



	December 31, 2013
(Dollar amounts in thousands)	Pass		Special Mention		Substandard		Doubtful		Not Rated		Total
Commercial
Commercial & Industrial	$	406,650	$	18,968	$	30,986	$	4,069	$	6,426	$	467,099
Farmland	86,633		3,631		347		—		445		91,056
Non Farm, Non Residential	207,115		13,408		19,719		809		—		241,051
Agriculture	128,137		6,482		105		—		71		134,795
All Other Commercial	93,515		2,297		10,038		44		2,243		108,137
Residential
First Liens	114,074		3,834		8,498		995		204,416		331,817
Home Equity	12,883		274		1,071		113		27,295		41,636
Junior Liens	8,858		60		550		67		23,654		33,189
Multifamily	63,073		1,908		1,482		48		—		66,511
All Other Residential	3,643		—		31		—		5,550		9,224
Consumer
Motor Vehicle	11,447		219		510		9		234,210		246,395
All Other Consumer	3,507		46		79		22		17,984		21,638
TOTAL	$	1,139,535	$	51,127	$	73,416	$	6,176	$	522,294	$	1,792,548