6. Loans and Related Allowance for Credit Losses

Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the outstanding unpaid principal balances, net of any deferred fees or costs and the allowance for loan losses. Interest income on all loans, other than nonaccrual loans, is accrued over the term of the loans based on the amount of principal outstanding. Unearned income is amortized to income over the life of the loans, using the interest method.

The loan portfolio is segmented into commercial and consumer loans. Commercial loans are comprised of the following classes of loans: (1) commercial, financial and agricultural, (2) commercial real estate, (3) real estate construction, a portion of (4) mortgage loans and (5) obligations of states and political subdivisions. Consumer loans are comprised of a portion of (4) mortgage loans and (6) personal loans.

Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is generally discontinued when the contractual payment of principal or interest has become 90 days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the Company’s policy to continue to accrue interest on loans over 90 days past due as long as (1) they are guaranteed or well secured and (2) there is an effective means of timely collection in process. When a loan is placed on non-accrual status, all unpaid interest credited to income in the current year is reversed against current period income, and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, accruals are resumed on loans only when the obligation is brought fully current with respect to interest and principal, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

The Company originates loans in the portfolio with the intent to hold them until maturity. At the time the Company no longer intends to hold loans to maturity based on asset/liability management practices, the Company transfers loans from its portfolio to held for sale at fair value. Any write-down recorded upon transfer is charged against the allowance for loan losses. Any write-downs recorded after the initial transfers are recorded as a charge to other non-interest expense. Gains or losses recognized upon sale are included in gains on sales of loans which is a component of non-interest income.

The Company also originates residential mortgage loans with the intent to sell. These individual loans are normally funded by the buyer immediately. The Company maintains servicing rights on these loans, and the fair value of the servicing rights is carried as a component of other assets. Servicing rights are not material to the Company’s consolidated financial statements.

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses (“allowance”) represents management’s estimate of losses inherent in the loan portfolio as of the consolidated statement of financial condition date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded lending commitments and is recorded in other liabilities on the consolidated statement of financial condition, when necessary. The amount of the reserve for unfunded lending commitments is not material to the consolidated financial statements. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

For financial reporting purposes, the provision for loan losses charged to current operating income is based on management's estimates, and actual losses may vary from estimates. These estimates are reviewed and adjusted at least quarterly and are reported in earnings in the periods in which they become known.

Loans included in any class are considered for charge-off when:

·	principal or interest has been in default for 120 days or more and for which no payment has been received during the previous four months;

·	all collateral securing the loan has been liquidated and a deficiency balance remains;

·	a bankruptcy notice is received for an unsecured loan;

·	a confirming loss event has occurred; or

·	the loan is deemed to be uncollectible for any other reason.

The allowance for loan losses is maintained at a level considered adequate to offset probable losses on the Company’s existing loans. The analysis of the allowance for loan losses relies heavily on changes in observable trends that may indicate potential credit weaknesses. Management’s periodic evaluation of the adequacy of the allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the level of the allowance for loan losses as of September 30, 2013 was adequate.

There are two components of the allowance: a specific component for loans that are deemed to be impaired; and a general component for contingencies.

A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. 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 loans and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.

The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral. For commercial loans secured with real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the current appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include the estimated costs to sell the property. For commercial loans secured by non-real estate collateral, estimated fair values are determined based on the borrower’s financial statements, inventory reports, aging accounts receivable, equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. For such loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The Company generally does not separately identify individual consumer segment loans for impairment disclosures, unless such loans are subject to a restructuring agreement.

Loans whose terms are modified are classified as troubled debt restructurings if the Company grants borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a below-market interest rate based on the loan’s risk characteristics or an extension of a loan’s stated maturity date. Nonaccrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for a sustained period of time after modification. Loans classified as troubled debt restructurings are designated as impaired.

The component of the allowance for contingencies relates to other loans that have been segmented into risk rated categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated quarterly or when credit deficiencies arise, such as delinquent loan payments. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans classified as special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified as substandard have one or more well-defined weaknesses that jeopardize the liquidation of the debt. Substandard loans include loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass. Specific reserves may be established for larger, individual classified loans as a result of this evaluation, as discussed above. Remaining loans are categorized into large groups of smaller balance homogeneous loans and are collectively evaluated for impairment. This computation is generally based on historical loss experience adjusted for qualitative factors. The historical loss experience is averaged over a ten-year period for each of the portfolio segments. The ten-year timeframe was selected in order to capture activity over a wide range of economic conditions and has been consistently used for the past seven years. The qualitative risk factors are reviewed for relevancy each quarter and include:

·	National, regional and local economic and business conditions, as well as the condition of various market segments, including the underlying collateral for collateral dependent loans;

·	Nature and volume of the portfolio and terms of loans;

·	Experience, ability and depth of lending and credit management and staff;

·	Volume and severity of past due, classified and nonaccrual loans, as well as other loan modifications;

·	Existence and effect of any concentrations of credit and changes in the level of such concentrations; and

·	Effect of external factors, including competition.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

Commercial, Financial and Agricultural Lending

The Company originates commercial, financial and agricultural loans primarily to businesses located in its primary market area and surrounding areas. These loans are used for various business purposes, which include short-term loans and lines of credit to finance machinery and equipment purchases, inventory and accounts receivable. Generally, the maximum term for loans extended on machinery and equipment is shorter and does not exceed the projected useful life of such machinery and equipment. Most business lines of credit are written with a five year maturity, subject to an annual credit review.

Commercial loans are generally secured with short-term assets; however, in many cases, additional collateral, such as real estate, is provided as additional security for the loan. Loan-to-value maximum values have been established by the Company and are specific to the type of collateral. Collateral values may be determined using invoices, inventory reports, accounts receivable aging reports, collateral appraisals, etc.

In underwriting commercial loans, an analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral, as well as an evaluation of conditions affecting the borrower, is performed. Analysis of the borrower’s past, present and future cash flows is also an important aspect of the Company’s analysis.

Concentration analysis assists in identifying industry specific risk inherent in commercial, financial and agricultural lending. Mitigants include the identification of secondary and tertiary sources of repayment and appropriate increases in oversight.

Commercial, financial and agricultural loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Commercial Real Estate Lending

The Company engages in commercial real estate lending in its primary market area and surrounding areas. The Company’s commercial real estate portfolio is secured primarily by residential housing, commercial buildings, raw land and hotels. Generally, commercial real estate loans have terms that do not exceed 20 years, have loan-to-value ratios of up to 80% of the appraised value of the property and are typically secured by personal guarantees of the borrowers.

As economic conditions deteriorate, the Company reduces its exposure in real estate loans with higher risk characteristics. In underwriting these loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the property securing the loan. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers.

Commercial real estate loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Real Estate Construction Lending

The Company engages in real estate construction lending in its primary market area and surrounding areas. The Company’s real estate construction lending consists of commercial and residential site development loans, as well as commercial building construction and residential housing construction loans.

The Company’s commercial real estate construction loans are generally secured with the subject property, and advances are made in conformity with a pre-determined draw schedule supported by independent inspections. Terms of construction loans depend on the specifics of the project, such as estimated absorption rates, estimated time to complete, etc.

In underwriting commercial real estate construction loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, the reliability and predictability of the cash flow generated by the project using feasibility studies, market data, etc. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers.

Real estate construction loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions. The difficulty of estimating total construction costs adds to the risk as well.

Mortgage Lending

The Company’s real estate mortgage portfolio is comprised of consumer residential mortgages and business loans secured by one-to-four family properties. One-to-four family residential mortgage loan originations, including home equity installment and home equity lines of credit loans, are generated by the Company’s marketing efforts, its present customers, walk-in customers and referrals. These loans originate primarily within the Company’s market area or with customers primarily from the market area.

The Company offers fixed-rate and adjustable rate mortgage loans with terms up to a maximum of 25-years for both permanent structures and those under construction. The Company’s one-to-four family residential mortgage originations are secured primarily by properties located in its primary market area and surrounding areas. The majority of the Company’s residential mortgage loans originate with a loan-to-value of 80% or less. Home equity installment loans are secured by the borrower’s primary residence with a maximum loan-to-value of 80% and a maximum term of 15 years. Home equity lines of credit are secured by the borrower’s primary residence with a maximum loan-to-value of 90% and a maximum term of 20 years.

In underwriting one-to-four family residential real estate loans, the Company evaluates the borrower’s ability to make monthly payments, the borrower’s repayment history and the value of the property securing the loan. The ability to repay is determined by the borrower’s employment history, current financial conditions, and credit background. The analysis is based primarily on the customer’s ability to repay and secondarily on the collateral or security. Most properties securing real estate loans made by the Company are appraised by independent fee appraisers. The Company generally requires mortgage loan borrowers to obtain an attorney’s title opinion or title insurance, and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. The Company does not engage in sub-prime residential mortgage originations.

Residential mortgage loans and home equity loans generally present a lower level of risk than certain other types of consumer loans because they are secured by the borrower’s primary residence. Risk is increased when the Company is in a subordinate position for the loan collateral.

Obligations of States and Political Subdivisions

The Company lends to local municipalities and other tax-exempt organizations. These loans are primarily tax-anticipation notes and, as such, carry little risk. Historically, the Company has never had a loss on any loan of this type.

Personal Lending

The Company offers a variety of secured and unsecured personal loans, including vehicle loans, mobile home loans and loans secured by savings deposits as well as other types of personal loans.

Personal loan terms vary according to the type and value of collateral and creditworthiness of the borrower. In underwriting personal loans, a thorough analysis of the borrower’s willingness and financial ability to repay the loan as agreed is performed. The ability to repay is determined by the borrower’s employment history, current financial conditions and credit background.

Personal loans may entail greater credit risk than do residential mortgage loans, particularly in the case of personal loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment. In such cases, any repossessed collateral for a defaulted personal loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, personal loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of September 30, 2013 and December 31, 2012 (in thousands):


As of September 30, 2013	Pass		Special Mention		Substandard		Doubtful		Total

Commercial, financial and agricultural	$	18,695	$	5,662	$	287	$	-	$	24,644
Real estate - commercial		60,194		10,193		6,671		224		77,282
Real estate - construction		15,408		1,572		1,364		1,953		20,297
Real estate - mortgage		133,841		3,403		4,305		1,669		143,218
Obligations of states and political subdivisions		12,724		29		-		-		12,753
Personal		4,578		-		10		-		4,588
Total	$	245,440	$	20,859	$	12,637	$	3,846	$	282,782

As of December 31, 2012	Pass		Special Mention		Substandard		Doubtful		Total

Commercial, financial and agricultural	$	17,570	$	904	$	822	$	-	$	19,296
Real estate - commercial		55,198		8,939		5,010		40		69,187
Real estate - construction		14,001		1,022		867		2,202		18,092
Real estate - mortgage		144,179		3,864		2,350		2,729		153,122
Obligations of states and political subdivisions		12,769		-		-		-		12,769
Personal		5,024		10		-		-		5,034
Total	$	248,741	$	14,739	$	9,049	$	4,971	$	277,500

The Company has certain loans in its portfolio that are considered to be impaired. It is the policy of the Company to recognize income on impaired loans that have been transferred to nonaccrual status on a cash basis, only to the extent that it exceeds principal balance recovery. Until an impaired loan is placed on nonaccrual status, income is recognized on the accrual basis. Collateral analysis is performed on each impaired loan at least quarterly and results are used to determine if a specific reserve is necessary to adjust the carrying value of each individual loan down to the estimated fair value. Generally, specific reserves are carried against impaired loans based upon estimated collateral value until a confirming loss event occurs or until termination of the credit is scheduled through liquidation of the collateral or foreclosure. Charge off will occur when a confirmed loss is identified. Professional appraisals of collateral, discounted for expected selling costs, appraisal age, economic conditions and other known factors are used to determine the charge-off amount. The following tables summarize information regarding impaired loans by portfolio class as of September 30, 2013 and December 31, 2012 (in thousands):


		As of September 30, 2013						As of December 31, 2012
Impaired loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial, financial and
agricultural	$	120		120	$	-	$	160	$	160	$	-
Real estate - commercial		2,677		2,801		-		2,672		2,672		-
Real estate - construction		168		231		-		2,004		2,197		-
Real estate - mortgage		3,802		5,069		-		487		523		-

With an allowance recorded:
Real estate - construction	$	1,952	$	2,103	$	233	$	198	$	198	$	91
Real estate - mortgage		541		577		139		2,141		2,141		1,036

Total:
Commercial, financial and
agricultural	$	120	$	120	$	-	$	160	$	160	$	-
Real estate - commercial		2,677		2,801		-		2,672		2,672		-
Real estate - construction		2,120		2,334		233		2,202		2,395		91
Real estate - mortgage		4,343		5,646		139		2,628		2,664		1,036
	$	9,260	$	10,901	$	372	$	7,662	$	7,891	$	1,127


	Three Months Ended September 30, 2013						Three Months Ended September 30, 2012
Impaired loans	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income
With no related allowance recorded:
Commercial, financial and
agricultural	$	131	$	2	$	-	$	189	$	4	$	-
Real estate - commercial		2,644		21		8		2,730		10		3
Real estate - construction		169		-		3		1,297		-		-
Real estate - mortgage		3,681		27		9		452		-		-

With an allowance recorded:
Real estate - commercial	$	124	$	-	$	-	$	-	$	-	$	-
Real estate - construction		2,073		-		-		1,108		-		11
Real estate - mortgage		456		-		4		2,686		-		-

Total:
Commercial, financial and
agricultural	$	131	$	2	$	-	$	189	$	4	$	-
Real estate - commercial		2,768		21		8		2,730		10		3
Real estate - construction		2,242		-		3		2,405		-		11
Real estate - mortgage		4,137		27		13		3,138		-		-
	$	9,278	$	50	$	24	$	8,462	$	14	$	14


	Nine Months Ended September 30, 2013						Nine Months Ended September 30, 2012
Impaired loans	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income
With no related allowance recorded:
Commercial, financial and
agricultural	$	140	$	7	$	-	$	210	$	11	$	-
Real estate - commercial		2,675		63		16		2,513		91		3
Real estate - construction		1,086		-		5		1,009		-		-
Real estate - mortgage		2,145		38		21		1,308		-		-

With an allowance recorded:
Real estate - construction	$	1,075	$	-	$	-	$	1,126	$	-	$	11
Real estate - mortgage		1,341		-		7		2,592		-		-

Total:
Commercial, financial and
agricultural	$	140	$	7	$	-	$	210	$	11	$	-
Real estate - commercial		2,675		63		16		2,513		91		3
Real estate - construction		2,161		-		5		2,135		-		11
Real estate - mortgage		3,486		38		28		3,900		-		-
	$	8,462	$	108	$	49	$	8,758	$	102	$	14

The following table presents nonaccrual loans by classes of the loan portfolio as of September 30, 2013 and December 31, 2012 (in thousands):


Nonaccrual loans:		September 30, 2013		December 31, 2012
Commercial, financial and agricultural	$	12	$	20
Real estate - commercial		1,523		1,835
Real estate - construction		2,121		2,376
Real estate - mortgage		3,397		4,615
Total	$	7,053	$	8,846

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of September 30, 2013 and December 31, 2012 (in thousands):


As of September 30, 2013		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans Past Due greater than 90 Days and Accruing

Commercial, financial and agricultural	$	10	$	22	$	165	$	197	$	24,447	$	24,644	$	153
Real estate - commercial		-		610		1,137		1,747		75,535		77,282		61
Real estate - construction		661		170		1,919		2,750		17,547		20,297		-
Real estate - mortgage		834		1,478		3,201		5,513		137,705		143,218		569
Obligations of states and political subdivisions		-		-		-		-		12,753		12,753		-
Personal		55		4		2		61		4,527		4,588		2
Total	$	1,560	$	2,284	$	6,424	$	10,268	$	272,514	$	282,782	$	785

As of December 31, 2012		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans Past Due greater than 90 Days and Accruing

Commercial, financial and agricultural	$	30	$	-	$	191	$	221	$	19,075	$	19,296	$	171
Real estate - commercial		295		819		1,928		3,042		66,145		69,187		93
Real estate - construction		9		136		2,335		2,480		15,612		18,092		156
Real estate - mortgage		1,359		3,131		4,428		8,918		144,204		153,122		320
Obligations of states and political subdivisions		-		-		-		-		12,769		12,769		-
Personal		29		25		2		56		4,978		5,034		2
Total	$	1,722	$	4,111	$	8,884	$	14,717	$	262,783	$	277,500	$	742

The following table summarizes information regarding troubled debt restructurings by loan portfolio class at September 30, 2013, in thousands of dollars. There were no loans identified as troubled debt restructurings during 2012.


	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
As of September 30, 2013
Accruing troubled debt restructurings:
Real estate - commercial	1	$	64	$	61	$	61
Real estate - mortgage	5		558		569		569
	6	$	622	$	630	$	630

The Company’s troubled debt restructurings are also impaired loans, which may result in a specific allocation and subsequent charge-off if appropriate. As of September 30, 2013, there were no specific reserves or charge-offs relating to the troubled debt restructurings. The amended terms of the restructured loans vary, whereby interest rates have been reduced, principal payments have been reduced or deferred for a period of time and/or maturity dates have been extended. One restructured loan was delinquent in excess of 90 days with respect to the terms of the restructuring as of September 30, 2013. This loan has a balance of $61,000 and is in the process of foreclosure.

The following table summarizes loans whose terms have been modified resulting in troubled debt restructurings during the three and nine months ended September 30, 2013, in thousands of dollars:


	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Three months ended September 30, 2013
Accruing troubled debt restructurings:
Real estate - mortgage	1	$	46	$	50	$	50
	1	$	46	$	50	$	50

Nine months ended September 30, 2013
Accruing troubled debt restructurings:
Real estate - commercial	1	$	64	$	61	$	61
Real estate - mortgage	5		558		569		569
	6	$	622	$	630	$	630

There were no loans modified resulting in troubled debt restructurings during the three and nine months ended September 30, 2012. There have been no defaults of troubled debt restructuring that took place during the three and nine months ended September 30, 2013 and 2012 within 12 months of restructure.

The following tables summarize the activity in the allowance for loan losses and recorded investments in loans receivable (in thousands):

As of, and for the periods ended September 30, 2013


Allowance for loan losses:	Commercial, financial and agricultural		Real estate - commercial		Real estate - construction		Real estate - mortgage		Obligations of states and political subdivisions		Personal		Total
Beginning Balance, July 1, 2013	$	200	$	554	$	258	$	1,317	$	-	$	46	$	2,375
Charge-offs		-		-		-		(21)		-		(3)		(24)
Recoveries		14		-		-		-		-		2		16
Provisions		28		(39)		87		24		-		-		100
Ending balance, September 30, 2013	$	242	$	515	$	345	$	1,320	$	-	$	45	$	2,467

Beginning Balance, January 1, 2013	$	179	$	463	$	202	$	2,387	$	-	$	50	$	3,281
Charge-offs		(4)		-		-		(1,080)		-		(16)		(1,100)
Recoveries		14		-		-		-		-		6		20
Provisions		53		52		143		13		-		5		266
Ending balance, September 30, 2013	$	242	$	515	$	345	$	1,320	$	-	$	45	$	2,467


	Commercial, financial and agricultural		Real estate - commercial		Real estate - construction		Real estate - mortgage		Obligations of states and political subdivisions		Personal		Total
Allowance for loan losses:
Ending balance	$	242	$	515	$	345	$	1,320	$	-	$	45	$	2,467
evaluated for impairment
individually	$	-	$	-	$	233	$	139	$	-	$	-	$	372
collectively	$	242	$	515	$	112	$	1,181	$	-	$	45	$	2,095


Loans:
Ending balance	$	24,644	$	77,282	$	20,297	$	143,218	$	12,753	$	4,588	$	282,782
evaluated for impairment
individually	$	120	$	2,677	$	2,120	$	4,343	$	-	$	-	$	9,260
collectively	$	24,524	$	74,605	$	18,177	$	138,875	$	12,753	$	4,588	$	273,522

As of, and for the periods ended September 30, 2012


Allowance for loan losses:	Commercial, financial and agricultural		Real estate - commercial		Real estate - construction		Real estate - mortgage		Obligations of states and political subdivisions		Personal		Total
Beginning Balance, July 1, 2012	$	203	$	432	$	364	$	2,873	$	-	$	61	$	3,933
Charge-offs		(5)		-		-		(569)		-		-		(574)
Recoveries		1		-		-		-		-		-		1
Provisions		(7)		6		(1)		67		-		(5)		60
Ending balance,September 30, 2012	$	192	$	438	$	363	$	2,371	$	-	$	56	$	3,420

Beginning Balance, January 1, 2012	$	195	$	455	$	442	$	1,771	$	-	$	68	$	2,931
Charge-offs		(9)		-		-		(745)		-		(1)		(755)
Recoveries		6		-		-		-		-		1		7
Provisions		-		(17)		(79)		1,345		-		(12)		1,237
Ending balance,September 30, 2012	$	192	$	438	$	363	$	2,371	$	-	$	56	$	3,420


	Commercial, financial and agricultural		Real estate - commercial		Real estate - construction		Real estate - mortgage		Obligations of states and political subdivisions		Personal		Total
Allowance for loan losses:
Ending balance	$	192	$	438	$	363	$	2,371	$	-	$	56	$	3,420
evaluated for impairment
individually	$	-	$	-	$	284	$	1,072	$	-	$	-	$	1,356
collectively	$	192	$	438	$	79	$	1,299	$	-	$	56	$	2,064


Loans:
Ending balance	$	19,223	$	66,259	$	14,751	$	158,336	$	14,303	$	5,475	$	278,347
evaluated for impairment
individually	$	181	$	2,713	$	2,399	$	2,681	$	-	$	-	$	7,974
collectively		19,042	$	63,546	$	12,352	$	155,655	$	14,303	$	5,475	$	270,373

As of December 31, 2012


As of December 31, 2012	Commercial, financial and agricultural		Real estate - commercial		Real estate - construction		Real estate - mortgage		Obligations of states and political subdivisions		Personal		Total
Allowance for loan losses:
Ending balance	$	179	$	463	$	202	$	2,387	$	-	$	50	$	3,281
evaluated for impairment
individually	$	-	$	-	$	91	$	1,036	$	-	$	-	$	1,127
collectively	$	179	$	463	$	111	$	1,351	$	-	$	50	$	2,154


Loans:
Ending balance	$	19,296	$	69,187	$	18,092	$	153,122	$	12,769	$	5,034	$	277,500
evaluated for impairment
individually	$	160	$	2,672	$	2,202	$	2,628	$	-	$	-	$	7,662
collectively	$	19,136	$	66,515	$	15,890	$	150,494	$	12,769	$	5,034	$	269,838